The E.W. Scripps Company 2026 Q2 Earnings Call

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 based on management's current outlook and actual results may differ materially. 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 as supplements 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.

Reconciliations of these measures are included in our earnings release. We'll hear this morning from Scripps President and CEO, Adam Symson, and Chief Financial Officer, Jason Combs.

Here's Adam. Thanks, Carolyn. Good morning, everybody.

Before Jason reviews our financial results, I'd like to make a few brief comments on yesterday's vote at the FCC to lift the broadcast ownership cap. We're very pleased that the commission has made the decision in the direction of further leveling the playing field in the media business by finally addressing some of the arcane rules that have significantly impaired the broadcast industry. These regulations once served an important purpose. They were put in place well before the digital revolution, well before consumers had the kind of choices they do today. Over the last 20 years, these regulations have put us at an unfair disadvantage to the nationally scaled big tech companies and streaming platforms that vie for audience and advertiser attention.

I'm pleased that yesterday's actions should support our ability to pursue business models that will allow Scripps and broadcasters like us to maintain our commitment to the communities we serve, both as a result of M&A and through Scripps' transformation, which I'll discuss further in a few moments.

First, here's Jason. Good morning, everyone, and thank you for joining us.

This morning, we're looking forward to discussing highlights from the second quarter that demonstrate our commitment to transforming Scripps operations and creating new value in our current businesses through sports, through TV station M&A, and through our network and distributor relationships. I will discuss the financial details of these business highlights. Then Adam will provide more color on our strategic progress. This morning, we also plan to share some new third quarter and full year guidance that will help you quantify where we will soon realize these benefits. We continue to move forward on our company transformation plan, which includes both expense reduction and revenue growth components.

As we have said previously, we're targeting $125 million-$150 million in incremental enterprise EBITDA by 2028. We now expect to have executed on $100 million in annual run rate savings by the end of this year. That's up 33% from the guidance we gave you on our first quarter earnings call. During the second quarter, we made further gains in our Scripps Sports strategy, signing our first NBA agreement with the Detroit Pistons in our local media division and another marquee national women's sports agreement with the Women's Volleyball World Cup tournament in 2027 on ION. These agreements join a robust portfolio of local and national sports that are adding material value to our core advertising revenue, our Scripps networks revenue, and our traction in the national advertising upfront this summer.

On the M&A front, we have executed a number of accretive local station transactions, including acquiring a second Big Four station to create a duopoly in Lexington, Kentucky. We completed a station swap with Gray Media across five mid-size and small markets that expand our presence in the Mountain West. Just a reminder that we completed the sales of stations in Fort Myers, Florida and Indianapolis in the spring, putting that cash towards debt paydown. One more highlight I want to mention from the second quarter. We completed the last of three major distribution agreements, covering the majority of our paid TV subscriber households renewing this year. As you know, both Comcast and DirecTV temporarily dropped Scripps stations, which affected our distribution and core advertising revenue for the second quarter.

We held firm with them in order to attain our fair share of the value our programming provides to them. We are pleased with the outcome of those negotiations. With those highlights in mind, let's now turn to a review of our financial results for second quarter 2026 and guidance for the back half of this year. I will present our second quarter local media division results on the same station or adjusted combined basis, removing the Q2 2025 results of the two TV stations that we've now sold and reflecting our addition of the Lexington ABC affiliate. During the second quarter, our local media division revenue was $317 million, down 1% from the second quarter of 2025. Core advertising decreased 4.8%, tied to factors including broader economic uncertainty, political crowd out, and the impact of our carriage disputes.

Local media political advertising revenue was $28 million, a record second quarter for us in what's expected to be a record spending cycle for the midterm election. Local media distribution revenue declined 13% to $161 million. The service blackout periods during the contract negotiations with Comcast and DirecTV accounted for the decline. Expenses for the division were down 3% year-over-year, driven by lower network affiliation fees and lower employee costs. Local media segment profit was $56 million, compared to $51 million in the year ago quarter. For the third quarter, on an adjusted, combined or same station basis, we expect local media division revenue to be up about 20%. We expect core advertising to be down low double digits, in line with the core revenue decline in the third quarter of the 2022 midterms.

We expect our political advertising revenue for the full year to reach a range of $225 million-$250 million. We're carefully watching spending for a number of federal races that will determine where we land, and Adam will give more color on that in a moment. For comparison, in the 2022 midterm, we took in $198 million. As I mentioned, local media distribution revenue has been impacted by our impasse with Comcast, which ran from March 31st to May 5th, and with DirecTV, which lasted from May 31st to July 10th. Based on those events, we now expect full year gross distribution revenue to be down in the low single-digit percent range, but net distribution revenue to be up in the mid-to-high single digits. We expect third quarter local media expenses to be down low single-digits in comparison to Q3 of 2025.

Let's review the Scripps Networks division second quarter results and third quarter guidance. Once again, I'll be presenting the results on an adjusted combined basis, in this case, adjusting for the impact of the Court TV sale. In the second quarter, Scripps Networks revenue was $172 million, down 13% from Q2 of 2025. The decline was driven by linear TV viewing trends and changes in Nielsen's measurement methodology. Nielsen has told us they are developing some forthcoming adjustments to their methodology that will better reflect our true audience size. As you know, this is a bit of a black box for those of us in the industry. Nevertheless, we are aggressively pursuing strategies to improve the network's revenue and overall operating results. Our networks results also were impacted by a softer direct response advertising market, which is susceptible to consumer spending trends.