It was a frustrating Friday for The E.W. Scripps Co. A morning conference call was held following the late Thursday release of its Q1 2024 earnings results, which CFO Jason Combs noted beat profit estimates “driven by tight cost controls.”
While CEO Adam Symson shared that Scripps is “off to a pretty good start for the year,” shares tumbled in Friday trading following the earnings call, during which the Managing Director and Senior Analyst covering media and cable at Wells Fargo Securities sought clarity on the company’s Q2 revenue guidance for its shaky Networks arm.
As Combs discussed on the Friday morning earnings call, Scripps Networks’ revenue was challenged in the first three months of 2024.
The segment, comprised of national news outlet Scripps News and Court TV, and entertainment brands ION, Defy TV, Grit, ION Mystery and Laff, in addition to on-the-market Bounce TV, experienced a 3.3% revenue decline to $209.28 million, from $216.47 million.
Combs noted in his comments that “low margin programmatic products” Scripps began to sunset in the Q2 2023 impacted the results within Scripps Networks. Excluding those products, Scripps Networks revenue “decreased by less than 1% year-over-year.”
With segment profit of $49.7 million, Combs shared that for Q2 2024, Scripps Networks division revenue is expected to be down in the mid single-digit range from one year earlier as Networks expenses are anticipated to be up in the low single-digit range.
Wells Fargo’s Steven Cahall, during Scripps’ live Q&A session, admitted he’s “having a little trouble understanding the Networks revenue guide” for Q2. At the same time, he wanted to know what Scripps is doing differently in response to Combs’ comment about cost controls. Cahall also inquired about any guidance on Scripps’s Free Cash Flow, as this could offer a better understanding on debt paydown opportunities later in the year for the company.
Symson responded to Cahall’s revenue guide query by noting, “We are seeing some nice, I would say, rebound momentum in Direct Response and in the scatter market, but we also still have to contend with the Upfront from last year, which laid in a fair bit of inventory at lower rates.”
The good news, Symson said, is that scatter market rates today are 40% above the rates seen in 2023. Plus, Direct Response makes up “a very big chunk of our inventory” at Scripps Networks. Nevertheless, the impact of 2023 is still a factor.
“I would expect, if the rebound continues on track, that what we would see by the fourth quarter would be indicative of the strength of this year’s upfront and hopefully, consistent with the rebound we’re seeing in scatter and direct response,” Symson said.
Combs responded to the question regarding “tight cost controls” by noting Scripps is looking “in a variety of places,” whether it is “employee costs,” or trying to manage open positions while trying to identify areas of opportunity.
Regarding Scripps’ FCF guidance, Combs had nothing to offer Cahall.
“We’re not giving out any kind of specific number for the year,” he said, adding, “There are still a lot of variables, including a wide political range we gave and a variety of other factors in there. But what I would say is we believe we have the opportunity through political, through a rebounding advertising marketplace, through things like the asset sales we talked about, to generate a significant amount of cash this year and direct all of that to debt paydown as we’ve done in the last couple of years and make a meaningful improvement in leverage by year-end.”
By the time Scripps’ Q1 2024 earnings call ended, its stock, which trades on the Nasdaq GlobalSelect market, began a sharp and steady daylong decline. By 2:30pm Eastern, “SSP” had shed some 23% in value and was trading at $3.56. While the 52-week low for Scripps shares is $2.93, “SSP” was trading at $8.23 as recently as late January.
