Scripps Reports Record Political Ad Revenue and Debt Reduction

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Scripps Reports Record Political Ad Revenue and Debt Reduction

Recently, Scripps (NASDAQ: SSP) reported a record political advertising revenue for the year, indicating a significant increase compared to the previous presidential cycle. CFO Jason Combs announced that this revenue growth enables the company to make substantial debt repayments and reduce its leverage ratio.

CEO Adam Symson emphasized that the company is focusing on operational improvements and cost management, particularly in its Local Media and Scripps Networks divisions. Despite a decline in core advertising revenues and retransmission revenues, Scripps anticipates a recovery in local advertising and is exploring refinancing opportunities to address upcoming debt maturities.

Key Points:

  • Scripps achieved a record political advertising revenue of over $340 million for the year, approximately 30% above the 2020 presidential cycle.
  • The company reduced its leverage ratio from 6x to 5.1x, planning to lower it to the high 4x range by year-end.
  • Local Media revenue rose by 26% in Q3 2024 due to the impact of political advertising, although core advertising revenue fell by 9%.
  • Scripps Networks experienced a 6% decline in revenue but anticipates margin improvements by 2025.
  • The company is divesting non-strategic assets and focusing on cost management and operational improvements.

Company Outlook: Scripps expects sequential improvements in local advertising as political displacement decreases. The company is preparing for refinancing opportunities to address secured debt. Scripps continues to emphasize enhancing operational performance and debt management for future growth.

Negative Aspects:

  • Declines were observed in local core advertising revenue and Scripps Networks revenue.
  • Retransmission revenue decreased by 6% year-over-year.
  • Yearly growth in core advertising does not appear likely immediately following the election.

Positive Aspects:

  • Scripps has raised its political revenue forecast several times throughout the year.
  • The company is restructuring Scripps News to sustain quality journalism at a lower cost.
  • Annual net savings of $35 million are expected from the streamlined Scripps News operations starting in 2025.

Shortcomings:

  • The company did not provide detailed core revenue metrics during the earnings call.

Q&A Highlights:

  • The company plans to repay revolving credit facilities by the end of 2023.
  • Scripps is focused on refinancing its B2 term loan exceeding $720 million.
  • Executives discussed securing local sports rights and partnerships with the Florida Panthers.

Scripps (NASDAQ: SSP) has marked a significant turning point for the company by reporting record political advertising revenue. The earnings call, led by CFO Jason Combs and CEO Adam Symson, outlined the company's financial successes, the significant reduction in its leverage ratio, and a focus on operational improvements and cost management. Scripps also highlighted its strategy to address upcoming debt maturities and its commitment to positioning itself for future growth in a stable macroeconomic environment.

InvestingPro Insights: Scripps’ recent earnings disclosures are further illuminated by significant data from InvestingPro. The company's market capitalization stands at $303.13 million, reflecting its current position within the media sector. Despite record political advertising revenue, Scripps is facing challenges, as indicated by a negative P/E ratio of -6.57 over the last twelve months as of Q2 2024, reflecting recent profitability issues.

InvestingPro tips underscore that Scripps is trading at a low Price-to-Debt ratio of 0.4, aligning with the company's focus on debt reduction and operational improvements. This suggests that the stock may be undervalued relative to its assets and could present a potential opportunity for investors believing in the company's recovery strategy.

The stock has experienced significant volatility, with InvestingPro data showing a 46.84% price drop over the last six months. This volatility is consistent with challenges in core advertising revenue and the cyclical nature of political advertising. However, an InvestingPro tip notes that analysts predict the company will be profitable this year, indicating a potential for recovery in line with management's expectations for improvements in local advertising and operational efficiency.

For investors seeking a more comprehensive analysis, InvestingPro provides 12 additional tips for Scripps, offering deeper insights into the company's financial health and market position.