E.W. SCRIPPS Q2 FY26 earnings call SSP

The FCC's recent decision to lift the broadcast ownership count was welcomed by management, who view it as a crucial step to level the playing field against nationally scaled big tech companies and streaming platforms. This regulatory change is expected to support Scripps' ability to pursue business models, including M&A, that will help maintain its commitment to communities and facilitate the company's ongoing transformation. Management believes this will unlock opportunities for the industry.

Scripps is actively executing its company transformation plan, targeting $125 million to $150 million in incremental enterprise EBITDA by 2028. The company now anticipates achieving $100 million in annual run rate savings by the end of 2026, a 33% increase from previous guidance. This plan involves both expense reduction and revenue growth components, leveraging AI, automation, and technology to create more efficient operations and better serve consumers.

The Scripps Sports strategy continues to expand, with new multi-year partnerships signed in Q2 FY26, including the first NBA agreement with the Detroit Pistons and the fifth NHL team, the Nashville Predators. Ion has also been established as the home of women's sports, securing the Women's Volleyball World Cup tournament for 2027. These sports partnerships are expected to add material gains to core advertising revenue and drive organic growth, differentiating Scripps' program offerings in the national advertising upfront.

The company successfully renewed 70% of its pay TV subscriber agreements after resolving blackouts with Comcast and DIRECTV. These new agreements are expected to contribute to margin expansion and ensure continued service to local audiences. Management noted that network compensation costs are also being reduced across the board, allowing Scripps to capture more value from its programming despite the temporary impact on Q2 distribution revenue.

Q2 FY26 set a new record for political revenue, foreshadowing a strong second half of the year. Scripps expects full-year political advertising revenue for the 2026 midterm cycle to range from $225 million to $250 million, a significant increase from $198 million in the 2022 midterms. Strong election spending is observed across key markets, and a recent Supreme Court decision on coordinated candidate and party spending is seen as creating significant upside for political volume.

Scripps Networks revenue was significantly impacted by sudden changes in Nielsen's measurement methodology, which management estimates accounted for approximately 50% of the division's Q2 softness. These changes are believed to underrepresent true audience size, particularly multicultural audiences. While Nielsen has indicated forthcoming adjustments, management remains cautious, not baking potential upside into current guidance. The Networks division also faced headwinds from continued linear viewing declines and a soft direct response advertising market.

As part of its transformation, Scripps has reduced its workforce by eliminating 432 employee positions and 126 open positions since the beginning of the year, representing 12% of its total workforce. The company is leveraging AI, automation, and technology to fundamentally change how local news is created and distributed, aiming to improve operating models and better serve audiences across multiple platforms while maintaining quality journalism.

Scripps continues to use M&A as a tool to optimize its portfolio and improve its balance sheet. Recent activities include station swaps with Gray Media, the acquisition of a second big 4 station to create a duopoly in Lexington, Kentucky, and the sales of stations in Fort Myers and Indianapolis for debt paydown. The company also announced the acquisition of over 12 stations from Ino, which are expected to be accretive and enhance its networks portfolio and spectrum holdings.