It’s a story that’s unfolding at several publicly traded broadcast television companies, and the tale is one that will likely raise the ire of pro-MVPD advocacy groups including ACA Connects and the American Television Alliance (ATVA).
With year-over-year analyses marred by record 2022 political advertising and varying degrees of core advertising softness, “subscription” or “distribution” revenue is buffeting the bottom line for TEGNA, Gray Television and, now, The E.W. Scripps Co.
Second quarter revenue for Scripps slipped by 1%, even though core ad revenue dipped by 5.2%. One big reason: a 14% rise in dollars linked to retransmission consent fees.
In Scripps Local Media segment, revenue slipped to $352.22 million, falling from $355.82 million. However, the Local Media unit enjoyed a profit, with dollars inching ahead to $81.02 million from $80.74 million — statistically flat performance.
There’s one glaring reason as to why this was possible for Scripps.
As shown above, Core Advertising revenue decreased 5.2% to $149.45 million, dropping from $157.67 million.
And, to illustrate just how much of an impact political advertising made in the second quarter of 2022, election-oriented dollars in Q2 2023 came in at $3.85 million, down from $24.01 million a year ago.
Then, there’s Distribution Revenue, which increased 14% to $195.27 million, from $171.13 million.
Scripps’ Local Media segment is comprised of 18 ABC affiliates, 11 NBC affiliates, nine CBS affiliates, four FOX affiliates, 12 CW affiliates (four on full power stations and eight on multicast channels), five independent stations and 10 additional low power stations.
OVERCOMING ANEMIC MACRO CONDITIONS
While the Local Media story is fueled by retransmission consent fees, which comprise the Distribution dollars for Scripps, the Scripps Networks segment saw its operating revenues decline to $231.23 million, from $238.93 million. At the same time, employee compensation and benefits increased by 12.6%, to $33.58 million, and programming costs widened by 3.3% to $90.68 million.
As such, segment profit for Scripps Networks slid to $60.34 million, from $73.3 million, a 17.7% dip Scripps CEO Adam Symson addressed in his opening remarks on the company’s earnings call held Friday morning.
“Linear advertising remains a large and lucrative marketplace — enormous even in anemic macroeconomic conditions,” Symson said as he revealed the company recognized an impairment in Scripps Networks business, and expects growth and profitability to rebound when the economy improves.
The pre-tax costs for the quarter included a non-cash goodwill impairment charge for Scripps Networks of $686 million. This, along with an $8 million restructuring charge, had a major impact on the overall results.
THE E.W. SCRIPPS CO. OVERALL Q2 2023 RESULTS
- Operating revenue declined to $582.84 million, from $594.47 million. This easily surpassed the high estimate of $581.35 million offered by one of 4 analysts polled by Yahoo! Finance.
- Operating expenses ballooned to $1.204 billion, from $505.49 million
- The net loss attributable to The E.W. Scripps Co. was $682.41 million (-$8.10 per diluted share), shifting from net income of $29.16 million ($0.32) in Q2 2022. Analysts polled by Yahoo! Finance predicted an EPS loss of -$0.12
- Free Cash Flow fell to $39.27 million, from $49.33 million
- Total liabilities and equity came in at $5.702 billion, from $6.43 billion
LOCAL MEDIA SALES TRENDS
Scripps Chief Operations Officer Lisa Knutson, who was promoted to the post in January, offered some highlights on key ad category trends for the company.
- Automotive was up 13% in Q2.
- Home improvement was up 8%.
- Scripps’ largest category, services, was down 12% due to what Knutson said were inflationary concerns.
Looking ahead, Symson and Knutson hyped Scripps Sports’ future riches, thanks to snagging the in-market rights to the 2023 Stanley Cup Champion Las Vegas Golden Knights and Ion Networks’ Friday night WNBA prime-time contract, which began with the 2023 season.
“We will not irrationally invest,” Symson told Dan Kurnos, an Equity Research Analyst at Benchmark Companies, on the Scripps call during its Q&A session when asked about live sports and the position Scripps has taken. “We will play aggressively, but we will also play prudently,” Symson said.
Meanwhile, sunsetting a “low-margin” Connected TV programmatic ad platform is a topic that Symson and Knutson discussed on the earnings call.
As of 10:09am Eastern, Scripps, which trades as “SSP” on the Nasdaq, was up 19 cents to $9.73 in light trading. By 3:32pm Eastern, Scripps shares were up by 12.5%, to $10.73. SSP is trading ahead of a year-to-date low of $7.40, seen on May 4. However, in early February SSP was trading in the low-$15 range.
