Q3 2025 The E.W. Scripps Co Earnings Call
Speaker #2: Good day and thank you for standing by . Welcome to the third quarter 2025 E.W. Scripps Company Earnings conference Call . At this time , all participants are in a listen only mode .
Speaker #2: After the speaker's presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one one on your telephone .
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Speaker #2: Please be advised that today's conference is being recorded . I would now like to hand the conference over to your speaker today , Carolyn Micheli Head of Investor Relations .
Speaker #2: Please go ahead .
Speaker #3: Thank you . Good morning , everyone , and thank you for joining us for a discussion of the Scripps Company's financial results and business strategies .
Speaker #3: You can visit Scripps . Com for more information and a link to the replay of this call . A reminder that our conference call and webcast include forward looking statements based on management's current outlook and actual results , may differ materially .
Speaker #3: Factors that may cause them to differ are outlined in our SEC filings . We do not intend to update any forward looking statements we make today .
Speaker #3: Included on this call will be a discussion of certain non-GAAP financial measures that are provided as supplements to assist management and the public in their analysis and valuation of the company.
Speaker #3: These metrics are not formulated in accordance with GAAP and are not meant to replace GAAP financial measures and may differ from other companies uses or formulations .
Speaker #3: Reconciliations of these measures are included in our earnings release . We'll hear this morning from Chief Financial Officer Jason Combs , and then Scripps President and CEO Adam Simpson .
Speaker #3: Here's Jason .
Speaker #4: Good morning , everyone , and thank you for joining us . We are pleased to be reporting a third consecutive quarter of results that met or exceeded expectations on nearly every reporting line , fueled by our script sports strategy and strong sales execution , as well as tight expense controls on the M&A front .
Speaker #4: We've been moving ahead with our plans for our station swaps with gray and the sale of Fox affiliate Wftx in Fort Myers , Florida .
Speaker #4: And last week , we announced the sale of RTV in Indianapolis . We were very pleased with evaluations . We received on the Fort Myers and Indianapolis stations , both sale prices represent multiples well above current local broadcast station transactions 9.2 times two year blended EBITDA for Wftx and 8.5 times for WRTV in Indy , and actually 9.2 times if you adjust for the impact of the Pacers finals run last June .
Speaker #4: These two cash sales will total $123 million , creating significant cash inflow that will improve the health of our balance sheet and provide for some modest delevering during the quarter .
Speaker #4: We closed on the placement of $750 million in new senior secured second lien notes . We locked in a very good rate of nine and 7/8 percent .
Speaker #4: Proceeds were used to pay off our senior notes, set to mature in 2027, to pay down more than $200 million of our 2028 term loan, and to pay off part of our revolving credit facilities.
Speaker #4: We have since paid off the remaining balance on the revolver . A full quarter ahead of our guidance . We'll get back to debt reduction in a moment , but first , let's review third quarter financial results and fourth quarter guidance .
Speaker #4: During the third quarter , our local media division revenue was down 27% due to the absence of political advertising revenue compared to the prior year .
Speaker #4: Core advertising revenue was up nearly 2% . We grew national advertising revenue , driven by an increase in our largest category , services .
Speaker #4: Our sports strategy helped drive that Q3 performance as well . Local media distribution revenue was flat . Expenses for the division were down more than 4% year over year , aided by lower employee related costs .
Speaker #4: Local media segment profit was nearly $53 million, compared to $161 million in Q3 of last year's political cycle. For the fourth quarter, we expect local media division revenue to be down about 30%.
Speaker #4: We expect core revenue to be up about 10% , bolstered by our sports strategy , specifically our newest NHL partnership with the Tampa Bay lightning , as well as the comparison to last year's political advertising displacement of Core .
Speaker #4: We expect local media expenses to be flat to down low, single digits, inclusive of the new sports rights expense for the Lightning.
Speaker #4: Now let's review the highlights for the Scripps Networks division . Third quarter results and fourth quarter guidance . In the third quarter , Scripps Networks revenue was $201 million .
Speaker #4: About flat compared to the year ago quarter . Along with other companies in the national networks , business , we dealt with economic uncertainty , and yet we look to have delivered significantly better results than others .
Speaker #4: Connected TV revenue was up 41% year over year. Just a reminder that our Networks division, CTV revenue comes from the extensive streaming distribution of our national networks.
Speaker #4: Advertising demand continues to be strong for our quality networks . Programming . In addition , inventory for both WNBA and national Women's Soccer League games commands premium advertising rates .
Speaker #4: The division's expenses for the quarter were down 7.5% due to lower employee related costs and operational reductions . We made last fall at Scripps News Scripps Networks segment profit was $53 million , and the segment margin was 27% .
Speaker #4: For the fourth quarter, we expect Scripps Networks division revenue to be down in the low double-digit range. This is being driven by a number of factors.
Speaker #4: We have more than 10 million of networks , political revenue in last Q4 . We have a lower percentage of upfront advertising compared to the year ago quarter .
Speaker #4: And our usual Q4 Medicare open enrollment advertising is lower right now , partially due to the government shutdown . We expect Scripps Networks expenses to be down low double digits .
Speaker #4: Turning to the segment labeled other in the third quarter , we reported a loss of $7.6 million . About the same loss as Q3 2020 .
Speaker #4: For shared services and corporate expenses were $21.4 million for the fourth quarter . We expect that line to be about $21 million . For the third quarter .
Speaker #4: We reported a loss of $0.55 per share . The quarter included a $7.6 million loss on extinguishment of debt , $6.5 million of financing , transaction costs , a $1.4 million write off of deferred financing costs , and $2.7 million in restructuring costs .
Speaker #4: Those items increased the loss by a total of $0.15 per share . In addition , the preferred stock dividend has a negative impact on earnings per share .
Speaker #4: Even when we don't pay it this quarter, it reduced EPS by $0.18. I have an update to a full year guidance number that shows improvement over our previous guidance.
Speaker #4: We now expect our cash interest paid to be between 165 and $170 million . This reduces the projected cash we need for interest , coupled with the improvements we announced last quarter to lower the cash we need for taxes and CapEx .
Speaker #4: This will drive significantly better cash flow this year than originally anticipated . Turning to our two financing transactions this year , we were able to refinance all of our 2026 and 2027 maturities , and a portion of our 2028 debt , while limiting the increase in our cost of capital to only 1% .
Speaker #4: Despite the current elevated rate , environment , we expect to pay off the remaining reduced 2028 term loan balance through cash flow before it comes due , leaving us with no other bond or term loan financings to address until our 2029 senior notes at September 30th , we had no borrowings outstanding on our revolving credit facility and cash and cash equivalents totaled $55 million .
Speaker #4: Net leverage at the end of Q3 was 4.6 times a significant improvement from six times in Q2 of last year . Our capital allocation priorities remain the same .
Speaker #4: We're focused on using cash flow to reduce the amount of our debt , and we place our highest priority on the reduction of our debt and lowering of our leverage ratio .
Speaker #4: And now here's Adam . Thanks , Jason . Good morning everybody .
Speaker #5: Thanks for joining us. If you've been waiting for proof that our strategies are working, our strong third quarter results, our fourth quarter guidance, and the full year performance.
Speaker #5: They signal should make it abundantly clear we are seeing real , measurable progress at Scripps . We're delivering exactly what we have promised in recent years .
Speaker #5: We're growing our sports and connected TV revenue streams . We are closely managing expenses , resulting in improved margins . We are executing swaps and station sales to improve our local station group margins and pay down debt with more likely to come .
Speaker #5: And we have been using cash flow to reduce our debt and improve our leverage ratio with more certain to come . We're delivering an outsized ad sales performance compared to local and network peers , and we can credit two Scripps growth strategies in particular .
Speaker #5: These strategies reflect how our mission of deepening our connections with audiences and advertisers is driving business value . First was our decision unique among local broadcasters to launch Scripps Sports over the last three years , we have charged full speed into partnerships with the WNBA , the National Women's Soccer League , and a host of sports teams and other leagues ahead of the market .
Speaker #5: We saw the opportunity in women's sports and we carved out a leadership position there for iron at the same time , we developed a new model for local broadcasting and sports rights in both cases , we saw where the momentum was building because we understood the passion sports fans have for their teams and because we recognize the value of that authentic connection for our brands and for our advertisers .
Speaker #5: As you can see from our results , this strategy has been a tremendous success on the national network side , revenue from the WNBA on ion nearly doubled this season , which is an amazing pace , especially when you consider Caitlin Clark was off the court for much of the season .
Speaker #5: The WNBA is a big draw for our clients in the advertising upfront , commanding premium ad rates and increasing volume by about 90% this year over the previous upfront .
Speaker #5: With Total sports volume up over 30% . Advertisers aren't just taking notice of women's sports , they are competing for this inventory because they understand the demographic and cultural moment we're capturing the WNBA , the NWSL , our recent successful premiere of the Women's Professional Track competition and the upcoming Women's college basketball Fort Myers Tip-Off are helping to differentiate ion and the Scripps networks in the ad market on the local station side , we now have full season agreements with four National Hockey League teams the WNBA champion Las Vegas Aces and NWSL team , and the big Sky College Conference .
Speaker #5: These partnerships are driving up core advertising revenue by several percentage points , a quarter . Again , real measurable growth given the successes at Scripps Sports and with sales execution , we expect to get bolder in our pursuit of sports following the framework that has paid off so well for us .
Speaker #5: Affordable and sometimes overlooked national professional leagues , women's sports and other local teams that need to reach their full geographic markets . This has been our winning formula and we plan to continue to build on it with the same discipline that got us here .
Speaker #5: We won't chase rights we can't afford , but where we see opportunity to create value will be aggressive . The second strategy we can credit as important as sports was our aggressive pursuit of distribution on streaming services for our networks .
Speaker #5: Audiences are turning to ion ion mystery , bounce , grit , Laff , court TV and Scripps News on nearly all of the major streaming and virtual mvpd services and platforms that distribution has given given us an advertising revenue stream that went from zero to a projected 2020 2025 amount of more than $120 million in just a few years .
Speaker #5: Think about that . We created a nine figure revenue line by being early and aggressive in securing connected TV distribution . Streaming now constitutes 20% of all Scripps networks viewing , and we continue to increase our offerings with more streaming content .
Speaker #5: We're building upon our beachhead with new fast channels and new distribution like the partnership we announced last quarter that integrates the Scripps Networks and to Peacock , we have plenty of room for ongoing double digit growth in connected TV revenue .
Speaker #5: While you can track the impact of our revenue growth strategies and the results , our focus on expense management and transformation should be just as plain to see .
Speaker #5: With a consistent downward trend . This quarter , even including incremental sports rights , which benefit us with revenue growth on the local side .
Speaker #5: Importantly , network fees are flat and reflect the important change in the network affiliate dynamic . We've been foreshadowing for some time . A trend we expect to continue in the right direction .
Speaker #5: Going forward . On the Scripps network side , we expect to deliver a 400 to 600 basis point year over year margin improvement through efficiency initiatives and a leaner expense base fiscal discipline is a key part of the financial improvement plan , and you can expect it to continue as we balance expense management with strategic growth in investments .
Speaker #5: But expense control only gets you so far , the Scripps Transformation office , led by Laura Tomlin , is spearheading significant initiatives that will make a sustained and measurable impact across the enterprise .
Speaker #5: We're leaning hard into technology and AI in pursuit of meaningful return on investment , both in the back office and in our operating units .
Speaker #5: Early results are pointing to real value in our newsrooms . We're already leveraging automation and AI to strengthen our core mission of local journalism .
Speaker #5: While improving the economics . These workflow tools allow our journalists to spend more time out in our communities , developing relationships , gathering information , and reporting the news .
Speaker #5: Likewise, automation and AI are helping our sales teams more efficiently identify new prospects and advertising categories, allowing them to spend more time building relationships.
Speaker #5: This is just the beginning . I expect to share a lot more on the important work of our transformation office early next year .
Speaker #5: Finally , I'll close with some commentary on our M&A strategy . As I've said from the start , we are totally focused on optimizing our portfolio of stations to structurally enhance performance and economic durability in service to our vision to create connection , we're meeting the moment with a bold plan that will remake our portfolio for the future and improve our balance sheet .
Speaker #5: Given the premium sales multiples we've commanded , we've already announced a station swap deal with gray , where we are exchanging two Scripps stations for five gray stations , a transaction that improves our market positioning and creates immediate efficiency opportunities .
Speaker #5: We also announced station sales in Fort Myers , Florida , and Indianapolis for cash . The sale prices represent premium multiples for the industry .
Speaker #5: These are quality stations . We agreed to sell only at strong valuations , and the cash we receive will go directly to Delevering .
Speaker #5: And I'm committed to continuing this work. So you can see that we're realizing strong success in executing our ongoing plan to balance fiscal discipline with revenue growth to the benefit of shareholders.
Speaker #5: We're not just talking about improvement . We're delivering it quarter after quarter . The connections we're building with audiences through sports , news and strategic distribution are translating directly into advertising revenue growth .
Speaker #5: The operational discipline we're exercising is expanding margins and the capital allocation decisions we're making are strengthening our balance sheet . We are heading into 2026 with significant momentum .
Speaker #5: The midterm election looks to . Yield record spending across the advertising ecosystem . We will capitalize on our growing portfolio of revenue , driving sports assets and our strategic streaming distribution agreements position us well to .
Speaker #5: Capture expanding revenue in the CTV marketplace. Our strategies, our results, and the opportunities ahead give you every reason to believe in the Scripps Company.
Speaker #5: Its management team and its future. Operator, we're now ready for questions.
Speaker #2: Thank you . As a reminder to ask a question , please press Star One on your telephone and wait for your name to be announced .
Speaker #2: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A roster . And our first question comes from Dan Kurnos of the Benchmark Company .
Speaker #2: Your line is open .
Speaker #6: Yeah , great . Thanks . Good morning . Obviously a good print from you guys . Good execution across the board . Adam .
Speaker #6: Maybe just more of a higher level and obviously , Jason , you could pitch in to you guys have done really well with kind of what you said on some of the , non-core asset sales , but some of the TV stations stuff that you've gotten for really high multiples here , how much more would do you guys think there is to chop there ?
Speaker #6: Obviously there's got to be some sort of level where you think , you know , portfolio still needs scale , but you're finding good value in the marketplace and subsequently , you know , there are still other people out there in the marketplace potentially looking for dance partners .
Speaker #6: So do you think that's still an option ? That's on the table . And then I have a follow up . Thanks .
Speaker #5: Yeah . I mean , broadly speaking , I do think there's significant opportunity there still for us to identify accretive opportunities for us to , you know , buy , sell and swap stations .
Speaker #5: We've been engaged in discussions around these opportunities to optimize our portfolio , we think opportunities that are going to continue to be available to us and that we'll continue to pursue , you know , relative to sort of I think the larger question around transformational opportunities , I'll say sort of what I've said many times before , we are absolutely committed to doing the work necessary to unlock and maximize shareholder value .
Speaker #5: Period . I just don't think I could I could be any clearer . There . There's no question that transformational M&A at this moment can be really accretive .
Speaker #5: In addition to the work we're doing with optimizing our portfolio, we'll continue to operate in that marketplace.
Speaker #6: Very helpful color . And then just on the network side , appreciate the political call out . So that sounds like that's about four and a half points of the growth delta .
Speaker #6: You know , look Adam , you obviously talked about CTV ramping . I know it's still a relatively smaller portion , but growing very rapidly .
Speaker #6: So can you guys just kind of parse out the impact of the government shutdown ? What's going on with scatter ? What's going on in doctor ?
Speaker #6: And then also what you're seeing trends near term in the CTV component , just so we have a better understanding of the mix .
Speaker #6: Thank you .
Speaker #4: Yeah . So I can try to unpack that a little bit . So we guided the down low double digits a lot of different things factoring into that .
Speaker #4: You alluded to one of the meaningful ones in there . The political more than 10 million last year . That's not going to occur again this year .
Speaker #4: I will say we also have seen some weakness in doctor pricing as we entered the quarter . You know , tariffs continue to really impact that revenue category .
Speaker #4: And the uncertainty around that or just the impact that that many companies are seeing from them . Pharma is a little volatile right now given some of the ongoing regulatory discussions .
Speaker #4: That's creating what I would say is an increasingly fluid marketplace within pharma . And I think this is the first quarter where you're really seeing sort of the new upfronts roll through the PNL and generally outside of sports programming , this wasn't as strong as upfront as we had the prior year .
Speaker #5: Yeah , relative to the upfront , Dan , just , you know , obviously , because it's impacting the fourth quarter guide , the story was , you know , was a little bit mixed .
Speaker #5: I mean , between the power of sports to drive demand and premium CPMs , you know , we saw significant wins across our networks group in the upfront on linear and CTV .
Speaker #5: As I said in my prepared remarks , you know , Total sports volume up 30% , WNBA in particular , saw significant increases of 90% .
Speaker #5: All of that drove our upfront CPMs to modest growth for the overall upfront . But there's there was . Generally some softness related to macro uncertainty , you know , including with pharma .
Speaker #5: As Jason said , I think a lot of advertisers still holding back some of their spend from the upfront and allocating to scatter , which may have may have accounted for some of the softness in volume .
Speaker #4: And maybe just add on , because you specifically asked about CTV outlook as well . You know , really strong growth year to date .
Speaker #4: You know , I think we're looking to be for the full year , you know , greater than 35% growth for the full year .
Speaker #4: We kind of alluded to the to the whole number there in the script . You know , I think there continue to be new entrants in there that does put some pressures and move forward .
Speaker #4: You know , we continue to identify new ways to unlock value in that space . And I think as we said in the script , we think it's going to continue to be a double digit growth engine for us .
Speaker #4: I will just remind people , as you look at the way that falls because of the value we see in CTV tied to our sports assets .
Speaker #4: Generally , you're going to see more growth in the middle part of the year . Tide to the WNBA and NWSL than in a quarter like Q1 or Q4 that have very little sports .
Speaker #6: Got it . Super helpful . Thanks for all the color and nice quarter guys .
Speaker #5: Thanks , Dan .
Speaker #2: Thank you . And our next question comes from Steven Cahall of Wells Fargo . Your line is open .
Speaker #7: Thanks . So first to just follow on , on on networks . You've got that really strong margin improvement in 2025 . My guess is based on some of what you just talked about with the upfront and some uncertainty in the market revenues probably implied down next year .
Speaker #7: Do you think you can still expand margins and kind of continue on this cost journey that you've been on at , at networks ?
Speaker #7: And then , Adam , just on M&A , kind of a strange question , but I think one things investors are trying to figure out is with the family trust as kind of the the voter on strategic M&A .
Speaker #7: How do those processes come together . Does management lead . Does the board lead ? Does the family lead ? You know , just trying to get a sense of like what the level of engagement and activism is and how it works .
Speaker #7: Since there is this kind of seems like once in a decade opportunity for transformational M&A , which , as you say , could be really accretive .
Speaker #7: Thank you .
Speaker #5: Yeah , sure . Steven , I'll take both of those questions . So first , as you pointed out , I , I'm really happy with the progress our team is making with networks , revenue and margins in a really difficult advertising and economic environment .
Speaker #5: You know , we are absolutely set to deliver on our promise to increase the margin this year by 400 to 600 basis points .
Speaker #5: But I would tell you , our work isn't complete . You know , we're really focused on continuing to expand in sports to drive revenue growth and profit .
Speaker #5: And we're addressing some opportunities with our programming and our distribution . We're we expect to expand our leadership in fast and connected TV to fuel revenue growth .
Speaker #5: And identifying new ways to run the business with greater efficiency . So to sort of boil that down , all of this really leads me to be confident that we'll continue to see growth in the margins for Scripps Networks .
Speaker #5: We're not done yet with Scripps Networks and margin expansion relative to the family . You know , look , I don't I don't speak for our controlling shareholders .
Speaker #5: This is a management led process . Obviously , our board of directors is very , very involved . And then from there , we bring the Scripps family in .
Speaker #5: I can reiterate what I've said before over the long history of this company . The family has always acted in the best interests of all shareholders and is committed to doing what is best for the company that creates the greatest shareholder value .
Speaker #5: Look , just to be very , very clear , this isn't some kind of hobby for the Scripps family . This is a business .
Speaker #5: It's an investment and it's their American legacy . And I know they are committed to doing what creates the greatest value for all shareholders .
Speaker #7: Great . Thank you .
Speaker #2: Thank you . And our next question comes from Avi Steiner of JP Morgan . Your line is open .
Speaker #8: Thank you . Good morning . Two questions here . Maybe to start . Would love your thoughts on the YouTube TV Disney dispute .
Speaker #8: What it might mean for the local affiliate group more broadly . And can you remind us what is coming due on the distribution front in 26 and how I don't know , can't size it , obviously , but any color there would be great .
Speaker #8: And then I've got one more for Jason and thank you .
Speaker #5: Yeah , sure . I'll start with the YouTube TV Disney dispute and then Jason can talk to you about what's ahead for next year .
Speaker #5: You know , like all ABC stations , we remain dark as a result of the YouTube TV Disney dispute . I think there's a lot of economic value for Scripps and ABC ahead .
Speaker #5: When that gets resolved . But with that said , the protracted disruption is one of the reasons why we as local broadcasters believe strongly that we need a seat at the table .
Speaker #5: We need to be directly negotiating with the virtual mvpds in order for us to ensure that our local audiences are able to access sports and news .
Speaker #5: It's just it's just that clear for us . There's already been some softness . I would say , in the in the ratings as a result of the YouTube TV Disney dispute , not necessarily .
Speaker #5: We're seeing that in local , but you can see that in some of the national reports . That's obviously got trickled down , trickle down impact .
Speaker #5: But , you know , the reality is , because of fragmentation , YouTube TV is only one way our consumers actually consume our content , especially our linear content .
Speaker #5: And so , you know , we're not seeing direct evidence of it impacting our our revenue performance or our bottom line .
Speaker #4: Avi , on the the affiliate renewal . So we have three of our nine CBS up at the end of this year . And then in 26 we have ABC up at the end of Q2 .
Speaker #4: So that's 18 . That's our largest affiliate partner , 18 stations .
Speaker #8: And thank you . How about on the distribution side . Any any meaningful retrans potential revenue potential next year .
Speaker #4: We have 70% of our Retrans traditional Mvpd subscriber base renewing mostly in the first half next year . There's a little bit in third quarter , but mostly kind of split between end of Q1 and end of Q2 .
Speaker #8: That's very helpful . And then one more maybe for you , I think the word premium asset sale multiples was kind of thrown around a couple of times , which is great to hear .
Speaker #8: Is that the same on an after tax basis or any after tax proceeds ? You can help us think through . And if you could remind us how the proceeds have to be applied to the term loan tranches , that would be much appreciated .
Speaker #8: And thank you all for the time .
Speaker #4: Yeah . So so the the multiples we announced were sort of on a gross basis from a tax perspective . There was a $6 million tax payment tied to the four will be tied to the Fort Myers sale .
Speaker #4: And 13 million tied to RTV and Indy from a proceeds perspective . So we have a 12 month reinvestment period , after which time those cash proceeds will be split 70 over 30 between our B2 and our B three term loans .
Speaker #4: You know , we intend to use those proceeds to pay down debt . We also do have the ability to allocate a portion of them to M&A .
Speaker #4: If that opportunity were available . But I think what you've seen so far and what you saw with our real estate sales we had last year , was , was that we were very focused on driving those towards debt pay down in delevering of the balance sheet .
Speaker #8: Perfect . Thank you so much .
Speaker #5: Thanks , Abby .
Speaker #2: Thank you . And our next question comes from Shana Queue of Barclays . Your line is open .
Speaker #9: Hey good morning guys . Thanks for taking my questions . I was wondering if you guys could give any kind of early indicators on how you guys are thinking about political in 2026 , relative to 2022 ?
Speaker #9: Midterms , and then just to clarifying question on the asset sales , the two that you announced , the stations , could you give a little bit more color on how they came up to be ?
Speaker #9: I guess , were those marketed through a competitive process after you guys look through your portfolio optimization , or did you get inbound from buyers there ?
Speaker #5: Thanks , Jenna . I'll talk a little bit about political first . This is Adam . You know , I think next year is going to be a compelling year for us .
Speaker #5: Relative to political revenue . We've got seven governors races , seven states with high stakes House races and a Senate race that all look to be very competitive right now .
Speaker #5: We have a really deep footprint in Arizona , Colorado , Michigan , Nevada , Ohio and Wisconsin and Tennessee all all markets with I think , significant elections ahead .
Speaker #5: I , you know , obviously absolutely expect broadcasting to take the lion's share of the ad revenue spending for the midterms . And , you know , I think our portfolio is very well positioned .
Speaker #5: So I'm looking forward to next year . I think it's going to be a very good year . You know , part of why I referenced the momentum , the tailwinds that I see as we head into 2026 .
Speaker #4: So from an M&A perspective , you know , we've talked about our strategy , our buy-sell-swap strategy and the fact that we've identified certain assets that that we would view as as less strategic , you know , from a process perspective .
Speaker #4: I mean , I think generally there are inbounds and there is a proactive approach as well . We know our markets , we know who potential buyers are of of our markets .
Speaker #4: And so I can't say definitively , you know , it's one or the other . I think , you know , it's probably a bit more nuanced than that .
Speaker #4: Right .
Speaker #9: Thank you .
Speaker #4: I mean , I think I think the big takeaway there , Shana , is just the prices , those multiples , you know , pushing nine times in Fort Myers and North of nine times in Indy .
Speaker #4: When you back out the NBA lift, I think that's one question we've gotten before: Is there a way to really drive a premium on those individual station sales?
Speaker #4: Multiple . And I think we have two deals now that clearly show that we can .
Speaker #9: Great . Just one more clarifying question for me on the Disney YouTube TV for the for Q guidance , any impact from that blackout in the guidance that you put out .
Speaker #5: There is not in fact , I mean , if you look at our our core , if you sort of think about our core guide , it's , you know , we're crushing it .
Speaker #5: So I'm , I'm really happy about where we see local revenue as we head into the end of the year .
Speaker #9: Thank you guys .
Speaker #2: Thank you . And our next question comes from Craig Huber , Huber Research Partners . Your line is open .
Speaker #10: Great . Thank you Jason . Or Adam , can you just comment a little bit further on the advertising environment right now ? How you're feeling about it versus say , six months ago ?
Speaker #10: Obviously , roughly six months ago , we were in the midst of tariffs . And so forth . People seem like they're more comfortable with it now .
Speaker #10: What's going on on that front ? But you did allude to a tough environment . Just just what's your overall sense now versus how you felt six months ago ?
Speaker #10: Say yeah .
Speaker #4: So I'll maybe kind of segment this out and I'll talk about the local core space first . And you know , I think that as you look at the results we had for Q3 up , you know , nearly 2% , the guide we gave plus 10% , we're seeing some strength in some momentum there .
Speaker #4: We saw , you know , our categories build as the third quarter progressed and we continue to both see a nice snapback from the political crowd out continued benefits from our sports strategy .
Speaker #4: Driving growth within our local brands . And just excellent sales execution . That is really driving I mean , those numbers that I just quoted there , you know , up 2% and up 10% in the fourth quarter .
Speaker #4: Those dramatically beat all of our peers . And so I think from that standpoint , we're seeing momentum on the local side . You know , I think on the network side , I talked about this a bit earlier .
Speaker #4: I think you have a bit of a mixed bag where you continue to see growth through our sports strategy . You continue to see growth through our connected TV strategy .
Speaker #4: But you do see in net national ad marketplace some challenges right now across a variety of fronts . Direct response , pricing is weak .
Speaker #4: As we started this quarter , pharmaceuticals are a little weaker given the uncertainty in regulatory . And so I think that's sort of why if you look at kind of our Q4 guide , you have a little bit of a , you know , a different story between local and and networks right now .
Speaker #10: Okay . Thank you for that second question . I don't know if you have this at your fingertips , but just curious , what's your sense on how the viewership is breaking down right now in your local markets and also your Scripps Networks between over-the-air streaming , etc.
Speaker #10: ?
Speaker #5: And I don't think this is Adam. I mean, Jason might be looking up some of the local stuff, but I did say in my remarks that about 20% of our viewing for networks is now through streaming, and we have been very, very focused on monetizing that 20%.
Speaker #5: And that's what's also powering the the revenue growth there . So we're really pleased with the the share of audience that we're driving in the connected TV marketplace .
Speaker #5: I think it's a testament to the value of our brands and the value of our programming strategy . And , you know , the reality is we probably represent one of the very few platforms that brings premium live sports into the streaming or the free ad supported television marketplace .
Speaker #5: And that's helping to drive significant , significant CPMs . Also from our our streaming , we saw that play out in the upfronts as well .
Speaker #5: Significant , significant growth in upfront opportunity with connected TV . For us , Jason .
Speaker #4: Yeah , the only thing I'd add on to that specific to kind of you pointed out OTA there , I mean , I think that from an OTA perspective , you know , Adam gave that 20% is CTV and networks , the other 80 being linear .
Speaker #4: We've seen growth in the OTA only percentage of that 25% watched one of our networks during Prime through OTA . During the most recent quarter .
Speaker #4: And so I think we're seeing that , you know , some some momentum there . I think the other thing to point out on the local side , and I just like to give this reminder because I think sometimes people get very focused on Prime and how much that contributes to our core .
Speaker #4: I'd like to remind people 50% of our revenue in in local comes through our news product and an ever growing through sports . And I would say both of those viewing genres continue to be extremely durable from a from a ratings in a , in a delivery perspective .
Speaker #5: In fact , I mean , I think powering our continued ability to attract teams and leagues that want more reach , is there acknowledgement and recognition that with distribution through script sports locally and on networks , they reach more fans than ever before , especially
Speaker #5: given the declines in the cable only marketplace ? With us , they're reaching them on percentage comes OTA , pay-TV and fast , and that's significant .
Speaker #5: Additional reach for those leagues and teams .
Speaker #10: I appreciate that you don't happen to have the breakdown for the over-the-air what percent that is roughly for both segments .
Speaker #5: We don't .
Speaker #4: Yeah , we don't right now . And and within networks , it does vary greatly from one network , one channel to the next .
Speaker #4: Yeah okay .
Speaker #10: Understood . And then also you guys are pretty plugged in in Washington on the on the regulatory front . Obviously the government shutdowns delaying things here .
Speaker #10: But what's your sense on the timing of dealing with this? There is a 39% ownership cap out there. And how do you think they'll get resolved?
Speaker #10: And do you think the whole thing will get pushed aside here . So so it's no longer in place here , but how long do you think it might take to get that through ?
Speaker #10: Assuming the government shutdown ends fairly soon ?
Speaker #5: Well , I don't know that the government shutdown ends fairly soon , Craig . I mean , to be perfectly frank , I would have thought that two weeks ago , once the government shutdown ends , I fully expect that the FCC will take action on the prohibition against groups like ours owning two stations and two big fours in one market that now should be fairly simple and quick .
Speaker #5: And then the the FCC will move forward . I believe , on eliminating the national cap .
Speaker #10: Would you be surprised if it took beyond the middle of next year to get rid of the ownership cap again, assuming the shutdown does end?
Speaker #10: I know it's .
Speaker #5: Yeah , I would be very surprised if it took beyond the middle of next year . I think Chairman Carr , Chairman Carr is is committed and doesn't waste a lot of time .
Speaker #10: Very good . Thanks a lot guys .
Speaker #2: Thank you . And our next question comes from Michael Kupinski of Noble Capital Markets . Your line is open .
Speaker #11: Thank you . Just a couple of quick questions . I just want to clarify . You mentioned that the Scripps Networks declined in Q4 somewhat related to the government shutdown .
Speaker #11: Was just wondering if you can clarify what that revenue decline , what if you can quantify that revenue impact ?
Speaker #5: Yeah , I mean , it's a it's a smaller piece . It's a part of the the puzzle . I mean , you've got the , the political crowd out from , from last year .
Speaker #5: You've got the general softness and doctor and then you've got the impact of the government shutdown on processing the open enrollment for the Medicare Advantage , which is impacting demand and buying from our networks a little bit .
Speaker #11: Okay . And in terms of changes in advertising categories , can you just kind of talk a little bit about any ad categories that might be sensitive to interest rates and the fed action ?
Speaker #11: You know , maybe from the third quarter to the fourth quarter , maybe even from the first quarter , particularly , you know , categories like auto homebuilders , real estate and so forth .
Speaker #11: Any particular changes as we in from third , fourth , maybe even as the pacings into the first quarter ?
Speaker #4: Yeah . So so first thing I'd say there is it's really hard to really take a lot of the trends right now because of the amount of political crowd out , like everything is up significantly as you kind of exited Q3 and as you get into the beginning of of that , that political crowd out , certainly there are some categories more materially impact that , you know , automotive has been category that's , you know , not just interest rate .
Speaker #4: Q4 because
Speaker #4: Also sort of inflationary and tariff-related has been a struggle for us the last, you know, call it 4 to 6 quarters.
Speaker #4: You know , Q3 was it was a little bit stronger than it's been , you know , probably the the , the smallest year over year decline we've seen in a while .
Speaker #4: You know , I think other categories around retail and you know , around services , which includes things like mortgage based services , certainly can be impacted depending on sort , the outcome of the next rate cut .
Speaker #11: This is just more of a more of a macro question . You know , typically ,
Speaker #11: you know , for for someone who's been following , you know , several decades in the industry that , you know , the industry for several decades , I was just curious , you know , the fed rate cuts typically have kind of spurred , you know , some national and network advertising .
Speaker #11: And , you know , some in some cases , you know , six months in advance of a fed rate action . And and of course , you know , the fed rate actions only been pretty modest .
Speaker #11: You know , cuts . But notwithstanding those small rate cuts , you would think that there would be a lot more active advertising environment .
Speaker #11: And I was just wondering , do you feel like advertising , you know , would have been a little bit more robust and given the , you know , an economy that's been , you know , a pretty decent economy , do you think that there might be more of a secular issue or is there some sort of anomaly here , or why isn't there much more of a robust advertising environment ?
Speaker #11: Certainly on a national front .
Speaker #4: So I think a couple of things . I mean , absolutely , there's there's some secular component that is why we're leaning into certain growth strategies around sports and connected TV , because we're looking for growth opportunities to to offset and drive growth as we see some secular challenges .
Speaker #4: I also do think , you know , frankly , the pace of rate cut has not matched up with most people's expectation kind of coming into the year .
Speaker #4: And I think that that has negatively impacted the ad markets . And I do think if we had seen more aggressive rate cuts , that we would see a better ad marketplace right now .
Speaker #5: Yeah , I would add also , uncertainty is not the ad market's friend uncertainty . And economic uncertainty doesn't help consumers . And when things are difficult for consumers , it doesn't help doctor advertising .
Speaker #5: It makes brands and agencies hold on to their dollars for longer because they're unsure of what's next . You know , now we've got a government shutdown where we're unclear on what the job job numbers are like .
Speaker #5: We're not sure what the fed is going to do . The Fed's actions thus far have been relatively weak and , you know , so I think we've got to get past this period of uncertainty .
Speaker #5: And once we do , I think we'll begin to get a better a clearer sense of , you know , how the advertising market comes back as brands and agencies drive sales .
Speaker #11: Gotcha . Well , hopefully we have a building building environment in 2026 . Thank you . That's all I got .
Speaker #5: Thanks , Mike .
Speaker #2: Thank you. And now we have a follow-up from Craig Hooper, Huber Research Partners. Your line is open.
Speaker #10: Great . Thank you . I know you guys talked about AI to some degree , but can you just talk a little bit further ?
Speaker #10: There about when you might start seeing material benefit ? Maybe on the cost side of things in the operations of your company and then also , I guess , Jason , you guys are always turning over every stone here for years to try and make your company more and more efficient .
Speaker #10: On the cost side , do you feel at this stage that you have a lot more to go in each year ? Segments from taking out costs here to help the margins ?
Speaker #10: Thank you guys .
Speaker #5: Yeah , I'll take both of those questions . Craig . And they're really the same . I mean , I think we're going to be in a really good position next year to provide you with more information on how a transformation driven by other technology really allows us to operate as a much more efficient , effective and growth oriented company .
Speaker #5: And I would expect to have more to say about that . You come February .
Speaker #12: Very good . Thank you .
Speaker #2: Thank you . I'm showing no further questions at this time . So this concludes the question and answer session . And today's conference call .