Scripps(US:SSP)2021-05-07 17:31Financial Data and Key Metrics Changes - The E.W. Scripps Company reported a Q1 2021 loss from continuing operations of $8 million or $0.10 per share, with a non-cash adjustment of $67 million due to the increase in the fair value of outstanding common stock warrants [17][18] - The company expects to deliver 2021 free cash flow of between $210 million to $240 million, significantly exceeding what would have been generated in a non-election year prior to recent transformations [20][28] - Cash and cash equivalents totaled $538 million, with net debt at $3.3 billion, and a net leverage ratio of 4.7 times at the end of Q1 [18][19] Business Line Data and Key Metrics Changes - Local media revenue increased by 2.2% from Q1 2020, driven by a 2.3% rise in core advertising revenue, which was above prior year expectations [15][19] - Scripps Networks revenue for Q1 2021 was $220 million, slightly down from the prior year, but segment profit was $95 million, delivering a margin of 43% [16][19] - Local media retransmission revenue rose by 15% in Q1, reflecting the annualized reset of about half of the Pay TV households during 2020 [15] Market Data and Key Metrics Changes - Over-the-air (OTA) viewing grew by 10% from 2019 to 2020, with projections indicating that 65 million households will be watching OTA by 2025 [11][12] - The company anticipates that the return of advertisers and the reopening of businesses will continue to drive growth in local media advertising [6][21] - The travel and leisure advertising category saw nearly 100% growth in Q1 compared to the previous year, driven by the reopening of states and increased consumer spending [22] Company Strategy and Development Direction - The company is focused on leveraging the growth in the OTA marketplace, aiming to capture new audiences and advertiser bases [12][28] - Scripps is integrating its new networks and optimizing its advertising yield, with expectations of double-digit revenue growth and division margins exceeding 40% [28][29] - The strategy includes expanding distribution across all TV viewing platforms, not just OTA but also OTT and Pay TV [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the advertising market, reinstating financial guidance based on strong Q1 results and positive momentum heading into Q2 [5][19] - The company expects local media revenue for Q2 to be up in the high teens percent range, with core ad revenue projected to rise in the mid-40% range [19] - Management highlighted the importance of political advertising, anticipating spending in key races and a strong political spending year ahead [24] Other Important Information - The company completed acquisitions and divestitures aimed at maximizing shareholder value, including the acquisition of the ION Network [8][12] - Scripps is actively working on launching new networks and integrating existing ones to enhance operational efficiency and audience reach [27][28] Q&A Session Summary Question: Contribution of new advertisers and outlook for automotive advertising - Management noted that over 800 new TV advertisers contributed positively to segment ad revenue, with a strong focus on service categories during the pandemic [35] - Automotive advertising showed sequential growth, with expectations for continued positive performance despite supply chain issues [35] Question: Limitations on adding new stations and growth drivers - Management indicated that while there are opportunities for growth in both OTA and OTT, the focus remains on maximizing advertising yield and managing expenses effectively [41][42] Question: Monetization comparison between local media and networks division - Management highlighted that both divisions have growth opportunities, with expectations for increased viewer value as the OTA marketplace expands [59][60] Question: Pricing power and CPM trends - Management reported rising rates due to demand, with expectations for strong upfront pricing as advertisers return [61]