For Scripps, Political Displacement Yields 2% Core Ad Revenue Dip

The second quarter earnings report parade marched onward early Friday, with The E.W. Scripps Co. the latest broadcast media company to unveil its fiscal health review for the three-month period ending June 30.

How did Scripps perform? Like its free-to-air TV peers, political advertising surged. As such, core advertising was impacted, falling 2% year-over-year, as Scripps swung to net income from a Q2 2021 net loss.

Retransmission consent revenue was also a big factor for Local Media. Meanwhile, Scripps Networks revenue growth is slowing.

The E.W. Scripps Co. of today is a company that owns and operates such broadcast heavyweights as WPTV-5 in West Palm Beach; KSBY-6 in San Luis Obispo, Calif.; and flagship WCPO-9 in Cincinnati but also such digital multicast networks as Court TV and ION.

As such, Local Media and the Scripps Networks entities are segmented for investors to fully understand how Scripps’s growth is transpiring since its ION Media merger, which closed in the first weeks of 2021.

Here’s how Scripps performed in each segment during Q2 2022, compared to the same period in 2021:

As shown above, both local media and Scripps Networks revenue increased. But, the momentum slowed at networks division while Local Media dollars surged by 9.5%.

Why? A jump in Political ad revenue to $24 million from $3.19 million is a big reason for the gain. Services, and Travel and Leisure, helped keep core ad dollars from declining further than it did.

That said, a 9.4% jump in Retransmission and Carriage Fees to $171.3 million from $156.36 million will undoubtedly raise the ire of pro-MVPD groups such as the ATVA and ACA Connects. Thanks to political ad displacement, Retrans topped Core with respect to Q2 ’22 revenue by segment.

Speaking at the start of Scripps’ earnings call for investors and analysts on Friday morning, Scripps CFO Jason Combs touched on the strong retrans and political ad revenue, which offset softness in National. He said Scripps is “very pleased” to be delivering the results, showing that the company is “resilient … even in the face of macroeconomic challenges.”

THE BIG PICTURE

• The E.W. Scripps Co. saw its revenue grow to $594.47 million from $565.08 million
• Net income attributable to the shareholders of The E.W. Scripps Co. of $29.16 million ($0.32 per diluted share) was seen, swinging from a Q2 ’21 net loss of $6.93 million (-$0.09)
• Operating income in Q2 ’22 came in at $88.98 million, dipping from $104.26 million
• Scripps Networks income was challenged in Q2 ’22, falling 32% to $73.3 million from $107.32 million

Net income of $0.32 per diluted share fell short of the consensus estimate of $0.37, with five analysts offering estimates ranging from $0.50 on the high side to $0.30 on the low side.

Scripps’ Local Media segment is comprised of 18 ABC affiliates, 11 NBC affiliates, nine CBS affiliates, four FOX affiliates and 12 affiliates of The CW Network. The company also owns five independent stations and 10 low-power TV stations.

Looking ahead to Q3 2022, Network revenue is expected to be flat as expenses rise, with Q4 moving them closer to flat, Combs said.

Comparisons for Scripps’ segments are to the same period in 2021.

Combs also shared full-year 2022 guidance updates on the earnings call. Some $90 million in political ad dollars are expected this year, President of Local Media Brian Lawlor shared on the earnings call.

As of 9:50am Eastern on Friday Scripps shares were down 15 cents to $14.25. This compares to a 1-year low of $12.50 seen in mid-June, and a $22.21 peak seen on February 7.