Ladies and gentlemen, thank you for standing by. Welcome to the Scripps Quarter Three Earnings Conference Call. At this time your telephone lines are in a listen-only mode. [Operator Instructions] As a reminder, your call today is being recorded. I’ll now turn the conference call over to your host, Head of Investor Relations, Carolyn Micheli. Please go ahead.

Thank you, Alan. Good morning, everyone, and thank you for joining us for a discussion of The E.W. Scripps Company’s financial results and business strategies. 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, and actual results may differ. 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. Included on this call will be a discussion of certain non-GAAP financial measures that are provided a supplement to assist management and the public in their analysis and valuation of the company. 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. Included in our earnings release are the reconciliations of non-GAAP financial measures to the GAAP measures reported in our financial statements. We’ll hear this morning from Scripps’ President and CEO Adam Symson; and Chief Financial Officer, Jason Combs; Local Media President, Brian Lawlor; and Scripps Networks President, Lisa Knutson. Also on the call is Controller, Dan Perschke. Here’s Adam.

Thanks, Carolyn. Good morning, everybody. Thanks for joining us on this midterm election day. If you haven’t already, please make sure to take the time to vote. I want to start with the obvious. Political revenue did not meet our very high expectations this year. Early on, things were lining up in a way that led us to believe our portfolio for the midterm would attract spending that would beat our record revenue in 2020’s presidential election. But despite a very strong start to the year with record spending for the first half, dynamics suddenly changed. Brian will be along shortly with the detail you’re looking for. But let me make one thing clear. Scripps’ performance this year breaks our last record level midterm election revenue in Local Media, raising the bar for midterm election spending. It wasn’t as much as we expected, but in no way should investors have existential questions about political on broadcast. The Scripps Networks division delivered a solid beat to our revenue expectation, at 4% above last year. This comes from a stronger performance in general market advertising and directly as a result of our execution on connected TV. Lisa will share details on the quarter. Given the comparative results of our peers in the national advertising marketplace and despite the very obvious macroeconomic factors, our performance is a testament to our profit building growth strategies and the strength of our portfolio with both audiences and advertisers. Let me say more. Much is being written and said about linear television. But I’m afraid that the term linear is being thrown about without enough definition. It’s certainly true that consumers are taking full advantage of on-demand platforms for media and entertainment, spending less time on the traditional platforms. But all linear is not created equal. Programmers,…

Thanks, Adam, and good morning. The E.W. Scripps Company delivered $612 million in revenue and $145 million in segment profit for the third quarter. Those were year-over-year increases of 10% and 13%, respectively. We saw growth in local media, political advertising and retransmission revenues as well as in Scripps Networks revenue. Local Media revenue was up 14%, driven by political advertising as well as retransmission revenue. Core advertising revenue was down 12%, in line with our guidance as we compare it against revenue last Q3 for the NBA finals, the Summer Olympics and sports betting launch campaigns. We were the only local broadcaster at that time to outperform our 2019 third quarter number. Local Media political ad revenue in the quarter was $63 million. That compares to $56 million in Q3 of 2018. For the year we expect to report, $200 million of political advertising revenue a record midterm election performance. Retransmission revenue was up to 7% to $165 million. Local Media expenses increased less than 5% from the year ago quarter. Excluding programming costs, expenses were actually down about 0.5%. Local Media segment profit was about $100 million. Turning to the Scripps Networks division. Revenue for the third quarter of 2022 was $235 million, up 4% from the prior year quarter due to connected TV and general market advertising performance. Networks segment expenses rose only 14% over Q3 2021. As of fourth quarter, we have cycled through the investments we made to launch Newsy, Defy TV and TrueReal over-the-air. Segment profit for the networks was $72 million. In other segment results, we reported a loss of $7 million, which includes the spend for our national marketing campaign from a consumer digital TV antenna use. Shared services and corporate expenses came in at $19.6 million. The company realized Q3 income…

Thanks, Jason. Good morning, everybody. As the 2022 election season winds down today, we are pleased to report Local Media has taken in a record amount of midterm political advertising at $200 million. That compares to our last record of $194 million in the 2018 midterm elections. We did not reach the 2020 presidential election level as we had hoped for reasons mostly related to our political market footprint and where money was spent on competitive races across the country. Back on our August earnings call, all signs still pointed to meeting our 2020 revenue number, but then we began to see signs of shifting spending patterns, especially in three key states. The first was Florida, where we have projected a close race for Senator Marco Rubio, but the polls began to show his lead was widening. And then Montana, which has been a significant political player for us in recent elections, redistricting resulted less competitive races in a couple of those markets. To scale these Florida and Montana alone accounted for a decline of about $40 million and we’ve seen about $10 million less spent in Nashville as Republicans have gained a solid hold on that state. In addition, $20 million less was spent on valid issues in our footprint. More broadly across the industry, election ad spending was dampened by lower-than-projected fundraising. Early estimates were for $9 billion to be spent in the 2022 cycle. But now it looks like spending will be closer to $8 billion. Within that $8 billion, we do believe we’ll see that local broadcasters grew their share because campaigns continue to turn to us as their primary way to reach likely voters. Turning to core advertising revenue. We landed right where we had expected for the quarter. Keep in mind, our Q3 guidance…

Thanks, Brian and good morning everyone. Scripps Networks delivered Q3 revenue results today that beat our guidance coming in at 4% above last year’s third quarter, despite the macroeconomic challenges to the national ad marketplace. We’ve been launching nearly all of our networks across the largest connected TV platform, and those drove our total revenue with nearly 60% increase in connected TV revenue. I want to reiterate Adam’s comments that we’re expecting to exit this year with an annual connected TV revenue run rate of more than a $100 million. I’ll discuss more in a moment about our connected TV distribution. But first, I’d like to continue with another bright spot in the quarter, general market advertising revenue. We grew our general market ad revenue by 7%, commanding higher ad rates as a result of growing or maintaining viewership levels across our network. The Scripps Networks audience, as measured by Nielsen grew 5% among total viewers this quarter. Both our 4% year-over-year growth in Q3 revenue and our viewership performance outpaced our peer group. Most of the other national networks were below or barely above last year’s Q3 ad revenue. Meanwhile, linear TV viewing is down 11%. So, we’re proud to have turned in best-in-class performance again this quarter. Because of our growth against the linear trends, the Scripps Networks now account for more than 4% of all linear viewing and 26% of over-the-air households. As you know, OTA households is an area we’re working to grow, and our steady and loyal viewership positions us to rebound quickly along with the national economy. Last quarter, I told you about our experiment to create the technical capacity to test local political advertising on our ION stations. We were pleased to have fully launched our sales effort in the third quarter. And…

[Operator Instructions] We’ll first go to the line of Dan Kurnos with Benchmark Company. Go ahead please.

I appreciate all the color you guys gave us. Pretty actually solid national results, everything considered – maybe just first, Brian, if we just double click on political for a second, you guys have sort of a unique perspective. I know it was early and initial, but just any thoughts on how sort of the consortium with Magnite performs because I know you guys did a sort of a good job explaining the shift and what you thought was sort of more of a fundraising challenge. It would be helpful to hear, what you’re seeing on sort of a cross-platform.

Hey Dan, it’s Adam. I’ll take the question on our connected TV efforts for political. We definitely think that connected TV increased its share. I don’t think it increased its share nearly as much as I think folks thought it would. But we use this year primarily as sort of a test and learn opportunity for us. And I think, first and foremost, the technical and sales execution that we learn this year will really benefit us in 2024. So, I think there’s some things that we’re going to change about the way we approach this moving forward, I think we’re going to continue to see more dollars flow into CTV. And I think our sales apparatus will be certainly more fine-tuned in the coming cycles to be able to take advantage of that shift.

Hey Dan, it’s Brian. I’ll just add that we’ve been doing a lot of reconnaissance talking to a lot of the leads at the political shops. And from what we’re learning, CTV obviously did pick up a couple of share points in the cycle. We believe broadcast – local broadcast picked up a couple of share points in the cycle. I think the area that probably saw the biggest decline was in digital, it looks like it lost a few points and radio declined as well. So, I think, as I said in the prepared remarks, we feel good that local more than held its share of the ad dollars.

Got it. That’s really helpful. And interesting to see how it develops Adam, I guess your CTV portfolio expands. The other sort of top of mind question, I’ll ask Adam, so I’m sure Brian will answer this one. On retrans, it’s a little bit light, obviously, with some incremental sub-declines. You guys clearly have strong footprint coming up. I think it’s about evenly split on 1Q, 2Q next year. Any updated thoughts on net given just kind of the broader conversation that’s being had in the case right now?

We’re going to really throw off. This is Jason. So, I’m going to answer this one. So from a net retrans perspective, I think the messaging is pretty much in line with what we’ve said the last couple of calls that when you look at this year, based on the cadence of pay TV renewals and affiliate renewals, we’re going to see net retrans from a margin perspective, a little bit of a headwind, but dollars that are pretty flat. But when you look to that 75% renewing that Adam referenced earlier next year that we expect some really nice margin and dollar expansion in 2023.

Okay. So no impact from any other economic scenario. And then I’ll try Lisa, and I’m sure I’ll get Adam. Lisa, just on the network sort of evolution here, I think it’s – you guys really have expanded distribution quite nicely. I guess I’m just trying to get a sense of how you’re cross-selling your thoughts on sort of evolving your go-to-market strategy here and into Q4, I think we had said that we referred pretty consistently that pro forma [ph] been very strong. I don’t know if that’s receded some and has typically driven DR. But just how that might be sort of a leading or a contributing factor to what you guys are seeing?

Yes. It’s definitely, Dan. I think of all the categories in fourth quarter and our guide the latest is probably in DR and in particular, DR is hit, I think from a recession perspective because, again, it’s a call to action, the 1800 number dial. I also think third quarter DR was light for the quarter, made up for it with political dollars as well as general market advertising and CTV revenue – and so our approach to selling our portfolio is not changing. We’re cross-platform and cross portfolio, which we think is really compelling. Our story is all about reach. As Adam said in his comments, we reached $70 million viewer’s a month across our portfolio, which is really, really compelling to advertisers.

All right, great. Thanks very much. Appreciate the color everyone.

Thanks, Dan.

We’ll move next to the line of Steven Cahall with Wells Fargo. Go ahead please.

Maybe first for Adam or for Lisa, just on Scripps Network. I think we’re seeing margins now that are kind of well below where they were when you acquired ION pro forma for the other bits in there. I know you’ve invested a lot between the content and the marketing and the distribution. So, I was just wondering if there’s any good way for us to think about kind of where those segment margins head from here. And Lisa, with YouTube TV, I think there may 7% or 8% of Pay TV subs. Do you expect an immediate revenue pickup from the launch on those services? Or do you have any sense of kind of what the demo that subscribes to YouTube TV? Does that cross-sell pretty well against your demo for those networks? Thank you.

Hey Steven, I’ll take the first question. I continue to see the business as a 35% to 40% margin business. I think we’ve now cycled past the increased expense that we put in as investment with the launch of three networks last year, as Jason referenced. I also think that when you account for the dislocation, which we think is sort of natural as part of what’s going on, on the macroeconomic level, we’re back at a 35% to 40% margin business. So, I would expect us to continue to drive towards that zone. Look, I think we have to wait and see based on what happens to the national ad marketplace, but our thoughts are exactly in the same place as they’ve been.

Steven, to answer your question about YouTube, we’re really excited about YouTube TV, because I think the demographics skew younger on YouTube. So, we’re excited about that our ION, Bounce and also reintroducing Scripps News into YouTube. So, we do know that it takes time to build revenue and people to find you that we’re applying some advertising dollars against that to make sure that audiences find us on YouTube as they have found us quite nicely on the rest of the connected TV devices.

Thank you. And then, Jason, I know you’re not guiding to free cash flow or EBITDA for next year, yet there’s a lot going on. You’ve got the higher cash interest, some weaker ad trends. It’s a big year for retrans. So, I think what we’re trying to figure out is between free cash flow dynamics and EBITDA dynamics. Do you feel you’ll be able to delever next year from that mid-4s [ph] where expect to end that the end of this year? I think that’s a big one where we think the stock is going to be sensitive to kind of to the up and down based on that. So would love any color there. Thank you.

Yes. So, I guess I’ll start by saying the 4.6% we’re at right now, and we’re really pleased that’s actually ahead of where we thought we’d be. At this point in time when we did the ION Media acquisition. And by the end of this year, we’ll pay down $800 million in debt since we closed on the ION acquisition. So again pleased with that progress. To your point, we’re not giving guidance right now. We’re still finalizing up our budgets for 2023. But I would say we remain committed to debt pay down as in pushing towards deleveraging as our number one capital allocation priority.

Thanks, Steven.

We’ll go next to the line of Nick Zangler with Stephens. Go ahead please.

Yes. Hey guys. I’m curious about core revenues. They were in line in the quarter, but I’m curious for the expectation for 4Q because it’s obviously falls within that Local Media guide of mid-20% growth. I think if I kind of take your political revenues that you mentioned as of today and trended out some retrans coming to a core growth of down 12% year-over-year in 4Q, which would obviously be similar to what you just did in 3Q. So curious if that kind of sounds right. Obviously, if so, it would imply an uptick from 3Q to 4Q as we typically see and actually similar to last year, so that obviously wouldn’t be implying too much caution in 4Q. But given some of the more weaker sauce we’ve heard going into 4Q from others. But maybe you can just kind of unpack core expectations as we move into the holiday season.

Hey Nick, it’s Brian. I think you’re your math is good. That’s the right range for – to be thinking about us. Look, I think the biggest factor in a down, I’d call it, low double-digit analysis would be the heavy political that we had obviously, for the first five weeks. There are some markets where we, I don’t feel like I’ve seen too many regular advertisers on the air, certainly limit in Ohio that’s been the case. But we have other markets that have been very saturated. And so there’s been significant core displacement. That will open up starting at 7 o’clock tonight or so. But I think we’ll remain open for business. There’s a lot of in November and December still a business to be booked. Many of the markets that we’re not saturating by political have been having good core performance. And so we think that will continue. But I think when you crowd out so much over five weeks, you can’t get much more momentum than what we have.

That’s fair. And then – can you the Florida and Montana commentary, were you saying that the softness in those states from the political aspect impacted revenues in the quarter by $40 million? Or was it $40 million across both 3Q and 4Q?

Yes, it really was over the whole cycle. So, when we had done our early modeling Montana, which has been a very significant political state for us. We had expected two very competitive house districts, redistricting, reset Montana and really softened. I would tell you though that doesn’t change how we look at Montana in the next two cycles with Senate and Governor up, but it will be very competitive there. And then Florida, as I mentioned in my prepared remarks, we thought Rubio would be a little bit more competitive. I think one of the things that we started to recognize in kind of talking with pollsters and others there, that while it might have only looked like he was running three or four points ahead, there have been several million Republicans that have moved to Florida in the last two years and once you factor them into the modeling, the belief was that the lead was much greater since they weren’t in that sample. So in addition to that, we had hoped and expected that Florida will put sports betting on its ballot for this year that didn’t happen. And so all those things rolled up to why Florida and Montana would be two of the places that are fairly significant and kept us from getting to our early optimistic targets.

Got it. Got it. Very helpful. Last one for me. You mentioned that the digital space loss political ad dollars. Specifically, when you refer to digital, do you mean maybe more like the social media players just because I would still expect like CTV as a digital platform to gain share, but just a clarification, like maybe where specifically within digital you think political ad spend shifted out of?

Yes, Nick. Look, I agree – CTV, I think we look at separately and we’ve broken that out and as we said, that did pick up a couple of share points. I think as when we think about digital specifically, what we’re seeing is Google and Facebook. And to some people we’ve talked to, it looks like they may have been down as much as 50% in the money that was allocated to those platforms.

Wow. Okay. Great. All right. Thanks so much guys. Appreciate it. Good luck.

Thanks Nick.

We’ll go next to the line of Pat McCann with NOBLE Capital Markets. Go ahead please.

Good morning. I just had a question or two on behalf of Mike Kupinski. Could you guys, just given the shift in political spending and kind of what you mentioned earlier, does that have any implications, I guess, for what will be the battleground markets in 2024 and kind of how we should look at that going forward?

Look, I think we’re – it’s Adam, Pat. I think we’re obviously going to do the same kind of analysis we do ahead of every cycle to determine where the races are tight, where the issues will be on and what the opportunity will be for us first for 2023 and then for 2024. I don’t think we’ve seen any secular change to political spending that give us any pause relative to broadcasters takes. In fact, as we’ve said a couple of times, we actually think the broadcast space will have gained share during the cycle. But we will, as we always do, assess our footprint for the opportunity as we move into the next year.

Hey Pat, it’s Brian. I would just add, we’re sitting here on election morning, but now that we’re already looking ahead and 2024, 33 senate races, we’ll have 17 of them, a couple of them we would expect at this time to be pretty competitive. Cruz in Texas, Tester in Montana, we think we’ll be very aggressive. Sinema in Arizona, Ohio, with Brown and then a couple of big governor’s races. We think are Gianforte in Montana will be another big race. So, we know where the races will be. As we get closer, we’ll see how competitive they are and where the money shifts? I mean, I think that’s certainly what we dealt with here. The money is in the system, you just got to be where the races are close and tight and then a lot of money moves there. And that’s certainly what we have seen now in the last couple of weeks. And unfortunately, that last run of spending here over the last couple of weeks. Heavy money when it’s a Pennsylvania, New Hampshire, Washington, New Mexico, Georgia, North Carolina, we don’t have stations in any of those places. So, I mean, there are other places that money kept going, and we benefited from that, but a lot of money moved to those that maybe would have been earmarked to our markets, but our markets weren’t as competitive as we would have hoped down the stretch.

Got you. Thank you. And then one other just kind of you mentioned some Q4 pacing guidance. But just kind of on an ex-political basis, sort of thinking ahead to say December, is there kind of a – how should we look at revenues sort of ex-political in Q4?

Look, I think, as I said, there’s still a lot of business to be written December, we expect a lot of points still to be written there. So, I wouldn’t move beyond our guidance other than to say that we do have some momentum in a couple of categories. I’ll speak to I’m sure somebody is going to ask about automotive anyway. But we spoke about the fact that automotive was up 5%, that’s the first quarter in years that we’ve seen quarter-to-quarter growth. And it built through the quarter in third quarter. Automotive was down 12% in July, up 4% in August, up 25% in September. And I’ll tell you that in October and November, we continue to see more than 20% growth in automotive. So that’s one key category that’s now coming back fairly strongly. And I would guess I would just also add that I think we’re starting to feel like the biggest pressure from supply chain is behind us because not only do we see automotive now gaining momentum, but other categories or subcategories that last year were held back by supply chain issues, like appliances, hot tubs, all of the categories are up. They’re up double digits. So, we feel like finally the supply is catching up and providing an opportunity.

Excellent. Thank you so much.

We’ll go next to the line of Craig Huber with Huber Research Partners. Go ahead please.

Great. Thank you. Brian, I guess my first question is, your retrans subs, what was the year-over-year percent change in those that affected your retrans revenues in the third quarter?

Hey Craig, it’s Jason. So, we were down on a trailing 12-months, mid-single digits after talking the last couple of quarters being down in the low single-digits. So this slight change in subscriber churn really from our perspective just brings that trailing 12-month trend back in line with our modeling assumption that we’ve had for a while now of down mid-single digits.

How are you thinking about that number as you think about next year in your budgets? Do you think that’s reasonable range to be in for next year? Or do you think it’s going to be worse, better? What do you think of?

I think we’ve thought that was a reasonable range for a while now, and we’ll continue to think that mid-single digits is a reasonable range.

Okay. My next question, please. Net retrans for this year, where are you expecting that to be as a percent change versus last year?

So net retrans this year based on timing of pay TV and affiliate renewals is down a bit for us this year, but the net dollars are flat. But when you look at head to next year, with 75% renewing, we expect some nice margin and dollar expansion.

Okay. And then, Brian is there anything else you can tell us about the core advertising? I know you’ve talked about this a bit here post the election, some of the other categories. I mean, I guess my bottom line is I’m asking is, from the macro perspective, are you seeing a significant change from the headwinds on macro side in your core advertisers? It’s just too hard to break that out in your mind right now.

Look, I don’t think it’s too hard to break down. You always have the inconsistency of a fourth quarter where you have political that dominates five or six weeks. And so you have the markets that are just completely consumed by it. You also have markets that you expected to be fully consumed by it and then suddenly want it a little bit lighter. But I do expect a lot of momentum now in the next couple of weeks. I mean I spoke to auto there, Craig. A lot of momentum there. We talked about the travel and leisure being up, home improvement up. So, we do have some categories that are up, but we are also seeing the effects of the economy and some of the prices, implications that are having an impact on some services or grocery and other subcategories. But look, overall, I think we feel good about some of the build that’s happening, especially in categories that were dominated by supply chain challenges over the last two years.

And then back on your political comments, and I appreciate what you’ve given us so far. I mean every one of your TV pure-play peers out there, seemly they’ve reported disappointing political numbers for the third quarter and outlook for the fourth quarter here. I mean it sounds looks like you’re part of what you’re saying here is the overall fundraising that was meaningfully lower, not the $9 billion, but roughly about $8 billion in total. That sounds like that was a big part of it in your mind of the shortfall. You also talked about political dollars shifting to markets at Scripps is not in. You mentioned Washington, Georgia and North Carolina, but all of your other peers have just like you guys had a shortfall here in political. Where do those dollars go when you say that on a net basis? I mean who’s really benefiting here at the end of the day? Was it just the top 20 markets that the pure-play guys are not in it’s all the network guys owning those stations?

No. Look, I think hey – Craig, it’s Adam. A couple of things. First post primary, there were some candidates that won, that were very popular with the electric, but we’re not popular with the big donors. And those candidates probably led, those candidates winning the primaries probably led to some of the shortfall in fundraising. Second of all, the widening of the races in certain markets allowed dominant candidates to build war chests and hold on to their dollars and not necessarily spend them, okay? And then you have the effect of the portfolio or the footprint. So, I don’t really believe that this resolved itself in any way, in any sort of negative way for broadcasters. I mean in reality, we broke our last record for the midterms. If anything, I think it just didn’t meet our expectations of surpassing the presidential cycle, which has got a different dynamic working for it. The American people are very entrenched where they stand. And I think early in the summer, the spending didn’t necessarily move people off their positions and races widened. So I don’t think there’s an existential question out there around political revenue in broadcasting.

Okay. Great. Thanks guys.

Thanks, Craig.

We have no further questions in queue at this time.

Great. Thank you so much, Alan. Thanks, everyone for joining us today. Take care.

Ladies and gentlemen, that will conclude your conference call for today. Thank you for your participation and for using AT&T Event Teleconferencing. You may now disconnect.