E. W. Scripps Company Class A Stock

Good day, and thank you for standing by. Welcome to the Third Quarter 2026 E.W. Scripps Company Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Carolyn Micheli, head of Investor Relations. Please go ahead.

Thanks, Didi. 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 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 first from Scripps Chief Financial Officer, Jason Combs, and then President and CEO, Adam Symson. Here's Jason.

Good morning, everyone, and thank you for joining us. We are now 3 days past the midterm election, and I'm pleased to report that we ended the cycle above even our guidance from last week and 44% above our record 2022 midterm political revenue level at $284 million. Cash from this year's political ad revenue will go towards paying down debt. In addition, we continue to make progress on our EBITDA improvement plan. As you know, our company transformation plan includes both expense reductions and revenue growth initiatives. We expect to generate between $125 million and $150 million in benefits to the bottom line. We're on track, as discussed last quarter, to deliver $100 million of that in run rate savings by year-end. We've completed workforce reductions this year impacting about 20% of our employees. And just a reminder that while the majority of this impact will show up next year, you'll begin seeing the transformation run rate savings in the fourth quarter as reflected in the guidance I'll give you this morning.

Now let's talk about the quarterly results. I will present our third quarter Local Media division results on a same station or adjusted combined basis, removing the third quarter 2025 results of the 2 TV stations we've now sold and reflecting the addition of our Lexington ABC affiliate.

During the third quarter, our Local Media division revenue was $373 million, up 19% from the third quarter of 2025. Core advertising revenue decreased 13%, reflecting displacement from our large amount of political advertising revenue. Local Media political advertising revenue was $81 million, a record midterm third quarter for us. Local Media distribution revenue was flat from the prior year period at $178 million. 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 $118 million compared to $50 million in the year ago quarter. For the fourth quarter, on an adjusted combined or same-station basis, we expect Local Media division revenue to be up in the low to mid-40% range. We expect core advertising to be down high single digits driven primarily by crowd out from record midterm election revenue. And again, we can now say our full year Local Media political advertising revenue came in Tuesday at $284 million. That is 44% above the 2022 midterm when we took in $198 million. Adam will give more color on this in a moment.

We expect fourth quarter local media distribution revenue to be up about 4%, driven by our recent contract renewals. We expect fourth quarter Local Media expenses to be about flat to the 2025 quarter. Excluding new cost tied to Pistons and Predators contracts, Q4 expenses would be down mid- to high single digits.

Now let's review the Scripps Networks division third quarter results and fourth 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 February. In the third quarter, Scripps Networks revenue was $173 million, down 11% from the prior year quarter. Our results include the benefit of Nielsen's September 1 ratings methodology changes as well as continued growth in Networks connected TV revenue, up 37% for the quarter, but we also experienced pressure from low consumer confidence in the economy, especially in the direct response market.

The division's third quarter expenses were up 0.9% year-over-year at $140 million. But if you factor out the first year impact of our new WNBA contract, networks expenses would be down year-over-year. For the fourth quarter, we expect to report division's expenses that are down and will continue to trend down next year as transformation cost savings initiatives take effect. Scripps Networks Q3 segment profit was $33 million. For the fourth quarter, we expect Scripps Networks division revenue to be down in the high single-digit percent range, mainly because of the soft direct response advertising market. For the full year, we expect Networks connected TV revenue to be at least $155 million, 36% above 2025. We expect Scripps Networks Q4 expenses to be down in the low single digits.

For the segment labeled Other in the third quarter, we reported a loss of $6.4 million. Shared services and corporate expenses were $25.9 million. For the fourth quarter, we expect that to be about $27 million. For the third quarter, the company is reporting income attributable to Scripps shareholders of $21 million or $0.21 per share. The current year quarter included $18.8 million in restructuring costs which decreased the income attributable to shareholders by $0.14 per share. In the prior year quarter, loss attributable to shareholders of Scripps was $49 million or $0.55 per share.

In addition, the preferred stock dividend has a negative impact on earnings per share even when we don't pay it. This quarter, it reduced EPS by $0.17. We ended the third quarter with $83.4 million in cash and nothing drawn on our revolving credit facility. Net debt was $2.2 billion as defined in our credit agreement. We expect to pay down at least $150 million in debt during the fourth quarter. Net leverage at the end of the quarter was 5.2x, according to the terms of our credit agreement, which includes certain pro forma adjustments related to our transformation efforts.

And now here's Adam.

Thanks, Jason, and good morning, everybody. We're very pleased to be reporting another election year where Scripps has set a record for midterm advertising revenue, finishing 44% above our last midterm cycle. And as Jason said, these high-margin dollars will go directly to reducing our quantum of debt. AdImpact tells us broadcasters are receiving more than half of all TV political ad spending. And this cycle, that half is even more significant because national political spending levels were a record not just for midterms but measured against presidential years as well.

We're not surprised. Broadcast television is a trustworthy, reliable platform for candidates and campaigns to reach prospective voters. That's been true for decades, and it remains true today. And increasingly, it is true on our local and national streaming platforms as well. We expect that relationship with political advertisers to endure and deepen as we grow our streaming reach.

Our performance came down to 2 factors. First, of course, is our footprint, which once again lined up exceptionally well with some of the most hotly contested races. You won't be surprised to hear that we saw strong spending in Ohio and Michigan, both of which were Red states in 2024 but came back squarely into the toss-up column for this cycle driving tremendous national party dollars there.

We also saw strong results across Arizona, Florida, Tennessee, Wisconsin and Virginia. While our footprint ensured the revenue opportunity was in our markets, our sales strategy and execution are what really allowed us to take full advantage of this year's significant demand and outpace our past record performance. And one differentiator that is instructive for how you should model this company going forward is the way our political revenue yield was boosted by the Scripps Sports strategy.

In many of our most competitive political markets, our sports inventory added meaningful value. For example, in Detroit, we leveraged the opening games of the Pistons season to create inventory that we monetized at premium political rates. This is the sports strategy working exactly as designed. New, high-value local inventory that serves multiple categories of demand simultaneously, sports advertisers, political campaigns and local retail. And as we look ahead to 2028, we intend to build even more of that inventory in more of our markets.

Last week was difficult across Scripps. We notified 431 employees that their roles were being eliminated, bringing the total employees impacted in 2026 to approximately 850, nearly 20% of our employee count from the beginning of the year. I want to speak directly about this because 2026 has seen one of the most significant structural resets in this company's history. And it hasn't been easy. The people of Scripps who are navigating this transformation while simultaneously managing a frenetic record political cycle, new distribution agreements, new sports rights launches and measurement disruption at our networks, they deserve enormous credit.

But here's what I want investors to truly understand. This transformation is not just a cost reduction story. It's the story about what we are building in place of the old model to drive growth with a setup for greater economic durability. Our local stations are changing along with the American consumer. To do this, we had to upend more than 50 years of legacy newsroom workflow. Now we are putting more journalists in the field to report more stories throughout the day for distribution across the broadcast, streaming, digital and social platforms where consumers are spending the most time. We are responsibly taking advantage of new technology, including AI, automation and centralization to care for some of the traditionally more labor-intensive elements of television news production and put more journalists out in the community, developing relationships, gathering information and reporting the news.

Local news is the most important product for this company both in terms of our mission and in terms of our financial viability. We're making decisions in service to our intent to thrive and fulfill our commitments to our country and to our shareholders. We are transforming into a faster, more agile and more deeply local company, one that can sustain the public interest work that has defined Scripps since 1878.

The early results on streaming platforms are encouraging. Across stations, our new workflows are producing a truly local 24-hour stream, and we're seeing hours of viewing jump an average of 23% before we've even begun to market the product. Four of our first stations to launch are averaging nearly 70% growth in hours of viewing after just 8 weeks. And it's not at the expense of our linear TV performance. Traditional time period ratings have remained stable. It's very early, and the growth is off of a small base, but I'm encouraged by the consumer demand for local news. I expect that growth to turn into revenue and bottom line value as we mature the initiatives.

And that's the point. There is opportunity ahead to serve new audiences on new platforms and has taken a bold commitment to change the way we do our work. Our local media streaming strategy draws directly from what has worked at Scripps Networks. We recognized early the value of streaming rights for our networks content. Shortly after forming the Networks division, we gathered the rights to run programming across streaming services, formed agreements with CTV distributors and built what is now our ubiquitous reach on that platform. That work has taken our Networks CTV revenue from 0 to a projected $155 million for the full year 2026. That will be 36% above 2025. The scale and revenue potential of what we are building here is real and it's accelerating because our focus is on the consumer.

Let me now address our Scripps Networks financial performance brought on by the challenges we saw earlier this year created by an inaccurate reflection of our viewership. Nielsen's sudden change to methodology last winter altered our measured audience supply overnight. We worked with Nielsen to address it, and I'm pleased to tell you that work is now bearing out in the numbers. As we wound down the third quarter, we began seeing the results and the data demonstrates what we always knew. Our audiences didn't go anywhere. The measurement framework introduced September 1 is now a much better reflection of our true ratings.

The biggest driver for us in Nielsen's update is its larger antenna household universe. Antenna homes make up a sizable portion of our core audience, and getting that count right gave our networks a meaningful and deserved ratings lift. At ION, viewership among the key demographic of adults 25 to 54 grew 7% in September over the 2 months before the change. And all Scripps networks' viewing in that demo grew an average of 23%. That performance has been sustained into October, is now built into our forward-looking statements and as a tailwind as we head into 2027.

During the third quarter, the Scripps Networks closed out a successful upfront buoyed by our Scripps Sports strategy that's made ION the home of women's sports. The team sold out more than 75% of our sports inventory, propelling Scripps to buck the industry trends and beat peer performance. Our networks team went into this year's upfront season with one of the most compelling sales stories in the industry, and they delivered. The linchpin of that story is women's sports on ION and our network's unparalleled reach on every television platform.

ION sports inventory is commanding advertising rates that are more than 2x its nonsports inventory. And we saw many new clients transition from scatter to the upfront, concerned that our sports inventory would either sell out or command even more premium prices in scatter. We saw particularly high demand across the WNBA and the NWSL. We successfully sold key sponsored partnerships across many of our major opportunities, but we also strategically preserved several high-value assets and opportunities for the scatter marketplace. That represents meaningful upside in our pipeline as we move into 2027.

One last note before I close out networks. Although we have faced secular challenges throughout 2026, what I will tell you is that Scripps is focused on the levers within our control, particularly as we shift to higher yield sports and CTV inventory, which provides us meaningful insulation from external factors.

Let me close my remarks with the frame I want investors to carry into 2027. Scripps' transformation is necessary as are the hard decisions we made in 2026. Investors will see this work begin to flow through operating results in the fourth quarter and into next year. The EBITDA improvement plan was designed to enhance margins across the enterprise, improve the balance sheet and support durability. But it's very important for you to understand that cost cutting was never the destination. While we expect to continue the repositioning of the company, as we move into 2027, the teams at Scripps now turn more of our attention to growth.

We are advancing dozens of initiatives to grow revenue with bottom line benefit yielding more dollars from businesses we run today as we do with Scripps Sports and pursuing adjacent opportunities that double down on our focus of creating connection in our local markets. And doing all of this is in service to building a solid foundation from which we can execute future M&A and transformation at this company.

Ultimately, we are guided in this work by our vision of creating connection within our audiences and communities. The journalists we are investing in, the reporters we are adding back to the field, the community relationships we are deepening, those build brand equity that make every other revenue line possible. This will benefit us in 2027 and be the setup for what I expect will be an outstanding 2028. We are ready for what comes next, and I look forward to showing you quarter-by-quarter exactly what that looks like in our results.

Didi, we are now ready for questions.

[Operator Instructions] Our first question comes from Dan Kurnos of StoneX.

Adam, Jason, really appreciate all the incremental color. Just one housekeeping, Jason, because I think I just missed it. Did you say distribution up 4% in Q4?

That is correct. Yes.

Okay. Got it. Adam, I just want to kind of go off of the commentary that you provided. I know we always ask you sort of for more color on the growth initiatives. And I know you're not going to give us the exact playbook, clearly appreciate what you've done with sort of the push into sports, all the benefits that you're seeing there and the tailwinds that you're seeing from that. You talked about some adjacent opportunities. Is there any other kind of directional color areas that you can give us on sort of things that you think are either low-hanging fruit or attackable from a growth perspective as we head into '27?

Well, I think there's actually meaningful growth to be found inside the core business, both through some optimization of yield management and the way we approach sales execution in networks and local. From an adjacency perspective, I think there's a lot of opportunity for us to extend the value of the IP that we both own and that we partner with, including in the sports ecosystem, to create additional revenue in the local markets as well as in the networks. And beyond that, there's the work we're doing with EdgeBeam and the value of our spectrum along with some other, I think, really interesting ways we think we can create value through the use of our inventory that are a little nontraditional. And I'm sure as we move through 2027 and begin to see those materially impact results, we'll share more.

Got it. That's really helpful color. And then maybe just one for Jason. Look, obviously, you guys executed super well. Everyone's flushed with political money, came in big. We all kind of think that this is the new normal now. So unfortunate for those of us trying to watch football on Sunday, but that's the way of the world. Great for all you guys. So as you think about the balance sheet going into next year, Jason, you've done a great job kind of managing the maturities here. We have to think about the prefs and all the rest of that stuff. You're in a pretty decent spot now given the end of the year and some of these initiatives that you've got going on. So just help us think through maybe your high-level thoughts going into next year from a balance sheet perspective.

Yes. So first, I would say is, given the guidance we gave on political and the expectation for fourth quarter, I think from a leverage perspective, I think you'll see leverage move down sequentially from Q3 to Q4. And we'll have a pretty material amount of cash that we'll be able to direct towards debt paydown at the end of the year. You kind of referenced there sort of maturity risk. And from our perspective, we're most focused on the near-term maturity risk. And so I would expect us to direct the cash flow we have through the remainder of the year towards our B2 term loan, which is our nearest term maturity that is set for -- or sorry, that comes due in 2028. And I think that will be the case as we move into the beginning of next year as well.

The other question we do get asked a lot is whether we would consider buying back bonds, particularly 2031s, that are trading at a discount in the open market. As I mentioned, right now, we believe the highest and best use is to focus on those near-term maturities. We have sort of earned our way into having a bucket available that we could apply to the bonds. And I think as we move through next year, we'll continue to sort of weigh our options, consider whether a bond repurchases later next year makes sense and kind of just look sort of across the cap structure at our, I would say, our broader deleveraging priorities.

And our next question comes from Craig Huber of Huber Research Partners.

Great. A few questions. I'll just go one by one and make it easy for everyone. Talk a little bit further, if you would, please, in Scripps Networks about the ad revenue trends? I'm curious for the DR -- what is DR right now, I guess, last quarter as a percent of ad revenue within Scripps Networks? I mean how does that track? If you can give a little more granular on that, I appreciate that. And I'll have some follow-ups.

Yes. So we don't disclose the specific breakdown between DR and general market. But what I can tell you is when you kind of look at the performance in Q3, the Q3 performance was largely driven off of the Nielsen change and impacts to general market, which, as Adam said in his prepared remarks, we did see some improvements upon the change on September 1, but at the beginning part of the quarter, certainly, that weighed pretty heavy on the revenue performance. From a direct -- as you kind of turn the page to Q4 and you look at the guide we gave for Q4, I would say we continue to be pleased with what we're seeing from a ratings perspective and how that is flowing through the general market. The guide that you're seeing for Q4 would be more indicative of the direct response marketplace and some of the challenges we see there tied to kind of the macro and the impacts in terms of consumer confidence and how that's impacting the consumer pocketbook.

Okay. My next question, on the local TV station front, what is news right now as a percentage of ad revenues for you guys right now?

We don't break that out either, but I would say it is by far the biggest bucket of core ad revenue.

Okay. And when you guys said that ratings within your local TV stations are stable, does that mean the trends are similar to what they've been in recent years?

Yes, exactly. I mean I think the comment was meant to certainly allay any concerns or fears that the work we're doing to incrementally create value on new platforms like streaming, social and digital would, in some way, negatively impact linear ratings, and they have not at all.

And maybe just, Craig, to give just a little finer point on my comment on news. While we don't disclose a specific number, I mean, news is by far the biggest category of core revenue. Sports is growing and it's sort of the second biggest, and there's a significant gap in size between the size of the core ad revenue generated during news versus sports.

Okay. Appreciate that. Also want to ask you, the 20% layoff of employees this year, it sounds like that's going to all be wrapped up very soon by the end of the year, for sure, it sounds like was a full benefit for next year. Just talk, Adam or Jason, about I mean taking out that amount of employees, I mean, that's, as you mentioned, it's very difficult and stuff. But what's the risk here that it could potentially hurt the operations? Maybe touch on that. Obviously, I'm sure you were very methodical on how you did that and stuff. I mean this is not just a run-of-the-mill 5% layoff in a recession. That's a pretty big number. But do you feel there's any risk here to -- that you upset the operations, the revenues, et cetera, if you can just touch on that?

Thanks for the question, Craig. I mean we're executing a really comprehensive plan to rethink the way we're doing things. And so no, this is not a 5% annual cut in order to just trim expenses, this is in service to true transformation. We have fundamentally changed the way we are operating and servicing our audiences and we're doing so using technology, centralization and some non-generative AI. I don't see -- as I described with the linear ratings, I don't see risk -- top line risk associated with this move. If anything, I see top line upside because we're beginning to see the traction of what happens when you take your content, add to it because we're putting more reporters in the field, covering more communities across our footprint and distribute it in earnest on to more platforms where consumers are already going. So this is not a story about risking the core. This is a story about transforming in order to actually create upside beyond the core and to do so with a backdrop of greater durability.

I appreciate that. One more question, if I could. Jason, maybe more of a housekeeping question. Putting aside the 20% head count layoff, can you talk about what investors should expect for your other expense category next year in each of your segments? I mean, it's obviously very difficult to take out all those employees. But how much have you guys tackled taking out expenses in this other expense category, not the program, but the other expense line in each segment? And how should we think about that line for next year, please?

Yes. And so without really guiding to 2027, what I can say is the transformation efforts that Adam has talked about are -- encompass the entire P&L. And so certainly, when you think of both the impacts in that other expense line of having a smaller employee base and that having implications down into things like technology licenses, all of those sorts of things. But also, we have a very strong focus on identifying within that other bucket where there is opportunity to drive year-over-year declines. And so when we talk about declining expense year-over-year, I think that is really across the P&L, not just in the employee cost line.

Craig, I want to also just provide a little bit of context because I want to make sure it's clear. This is a 3-year transformation strategy. We started it this year. And so while the most comprehensive employee reductions are behind us, and investors will see that impact flow through in '27 and '28, there will be other initiatives that will impact head count. So I think we have to recognize this is a continued focus on transformation. While at the same time, as I mentioned in my prepared remarks, we're turning our attention to some very specific growth initiatives that we think will enhance the yield on the business.

Our next question comes from Avi Steiner of JPMorgan.

And I apologize if I missed this already. But you gave distribution up 4% in the fourth quarter. I'm wondering if you could talk about core post-election, how that looks at the local side? And again, if you gave it already, I apologize, then I've got a couple more.

Yes. Avi, it's Jason. So in regards to maybe 2 things. One, in regards to your question on core. We put out a guide that is heavily influenced by the amount of political crowd-out in a record midterm for us. It's early to kind of talk about trends post-election. It can take a little bit of time for displaced advertisers to kind of work their way back in the system. But I would say, overall, we're pleased with the way things are pacing kind of coming out of the election. And I think as we look at that pacing, there's a nice bump as you move from October core up to November core, 30% growth really as you kind of get past all of that displacement. So overall, I'd say we're pleased with how core is trending, but it's also early.

The other thing that I wanted to kind of mention is because you did bring up distribution being up 4%. I think that another question we've gotten some is, "We know your distribution story is for this year, what does it look like as you look towards 2027?" And so from a sub churn perspective, we've seen some slight improvement in sub churn recently. You see traditional MVPDs improving. You see some slowing in virtual growth, but the net is a slight improvement, still down mid-single digits, but a modestly better mid-single digit.

And when you put the combination of some churn improvement and our recent MVPD renewals, I think that has us pretty optimistic as we look forward to next year, I would expect to see kind of low to mid-single-digit growth in gross next year and double-digit growth in net. So certainly something that would provide a lift to our P&L as we look to -- and a reason for optimism as we look towards 2027.

That's great. And you tackled another question I had. I don't want to beat this cost-saving question to death, so to speak. But when we come to the end of this year and we come to the end of next year, if we keep everything else flat, the expense base is down $100 million, $125 million. I'm just trying to figure out the size as I think about next year's model, at least on my end, how to think about expenses?

Yes. I mean, I think -- so we haven't specifically said where we'll be at the end of next year. We said we'd have a run rate achieved of $100 million by the end of this year as we alluded to. The transformation target, the $125 million to $150 million is both some combination of cost and revenue. I think in February, we'll give more guidance, I'd say, more concrete guidance in terms of sort of what to expect from P&L perspective. But based on that guidance or the run rate we said we achieved by the end of this year, I think you would expect a pretty material year-over-year decline in most expense line items.

Very, very helpful. And then -- just on the CTV side and your strategies, I think Fox closed on Roku today or will be closing on it today. Given your assets and how you've interacted with it in the past, how do you think about that merger and the impact to Scripps?

Well, we have a terrific relationship with Roku and with Tubi, and I expect it to continue. We have actually a fairly long-term relationship with Roku. It's probably fair to say we're one of their most important partners, given the hours of viewing we see on our networks. And we have a very good relationship more broadly with Fox given the relationship we have in the local business. So I don't expect any headwinds in the relationship with Roku. If anything, I actually think Roku being a part of a traditional linear media company could potentially open up additional opportunity for us because it will provide them, I think, insight into the way or new ways to drive audience and monetize it.

That's terrific. I appreciate that. I wasn't suggesting there was a concern, I wanted your perspective. My very last question, just back to the debt, I'd love a quick clarification, if I can. Jason, did you say all of the $150 million is going to the term loan? Does it have to go to the term loan? Or do you have some flexibility? I think you said you earned a basket but I didn't hear the size of that. If you just clarify those things would be great.

Yes. And so it doesn't all have to go to the B2 term loan. I think we are tracking it there because we are addressing our near-term maturity risk and trying to reduce the quantum of that debt going into 2027 by as much as we can. We have a basket of around $30 million or so that we could use to buy back bonds in the open market. And as I said, that is not the plan as we exit this quarter. But I think as you think ahead to next year, that gives us some optionality as we see how cash flow comes through next year, and we make determinations in -- on 2027 cash flow and how to apply it to that.

And our next question comes from Steven Cahall of Wells Fargo.

Adam, I want to ask you about M&A and just to preface, I certainly understand the importance of the transformation program. I know you've said that you're not counting on or relying on strategic M&A. So I don't want to kind of underweight the focus on transformation, but we've talked a lot about it on the call. So with that, here's the M&A question. You've got really good political numbers. The balance sheet is in a better place, but it is still a little bit strained. I'd say for some of your peers, it's a similar story. And if we get to the end of this FCC, which is pretty favorable to broadcast, it would seem like there could be a big missed opportunity if there isn't some strategic M&A.

So I'm wondering, as you focus on the transformation program, will you be kind of redoubling efforts for industry conversations around M&A? Or is that something that you're kind of more waiting to come to you?

And then, Jason, just a housekeeping one. Thank you for the outlook on distribution. I think you had a blackout in the numbers in 2026. Is there a good way to think about organic distribution growth in '27? And does it encapsulate the Cox Charter merger and any impact you've got there?

Thanks, Steven. Well, I think if you know me, you would know that I don't sit around and wait for anything to come my way, but I'm fairly proactive. And we'll continue to explore all options that we think are in the best interest of shareholders. The regulatory environment may appear to be favorable at the FCC. But Tuesdays -- from my perspective, Tuesday's blue wave injects a little bit of more uncertainty into the prospect of like a mega merger because they have that many overlaps. I mean, I think we have to see what happens with the Nexstar TEGNA deal. I don't know if it's clear yet what the courts and how the state attorneys general will react.

And so from my perspective, we're just totally focused on doing what we can in order to optimize our portfolio. We've been really active with M&A from the outset. And every deal that we've announced has either put cash in our pocket or is going to increase segment profit to benefit the company and investors. And some of those deals are -- have done both. That's the divestitures of the stations in Fort Myers and Indianapolis, both at really premium sellers' multiples, the Gray swap and our sale of Court TV. And I don't think we're finished with that work.

And I can answer real quick on the distribution question. Steve, you are correct, we do have the impact of the blackout, which is -- which certainly impacts the numbers I gave. If you wanted to exclude the impact of the blackout, I think you'd see growth that will be closer to flattish, which wouldn't be uncommon in a year where we're only renewing 5% of our subs. But you would still -- we would still anticipate double-digit growth in net even when you factor in the impact of the blackouts.

This concludes our question-and-answer session and also today's conference call. Thank you for participating, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the Second Quarter 2026 E.W. Scripps Company Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Carolyn Micheli, Head of Investor Relations. Please go ahead.

Thanks, Steve. 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 Simpson; and Chief Financial Officer, Jason Holmes. Here 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 count. 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, but they were put in place well before the digital revolution, well before consumers have 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 buy for audience and advertiser retention. I'm pleased that yesterday's actions should support our ability to pursue business models that will allow scripts 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, and 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 to $150 million in incremental enterprise EBITDA by 2028. And 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 script sports strategy, signing our first NBA agreement with the roses 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 4 station to create a duopoly in Licensing, Kentucky. We completed a station swap with Gray media across 5 midsized and small markets that expand our presence in the Mountain West. And 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 3 major distribution agreements, covering the majority of our pay TV subscriber households renewing this year. As you know, both Comcast and DIRECTV temporarily dropped strip stations, which affected our distribution and core advertising revenue for the second quarter, but 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 2 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% and tied to factors, including broader economic uncertainty, political crowd out and the impact of our carriage dispute. Global Media political amortizing revenue was $28 million, a record second quarter for us and 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 to $250 million. We are 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 in pass with Comcast, which ran from March 31 to May 5 and with DirecTV, which lasted from May 31 to July 10. 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 revenues to be up in the mid- to high single digits. We expect third quarter local net expenses to be down low single digits in comparison to Q3 of 2025.

Now let's review the Scripps Networks division's 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 core 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 networks 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. Connected TV revenue continues to be a strong growth driver for us, up 28% over the same quarter last year.

The division's second quarter expenses were $146 million, up 3.7%. Scripps Networks Q2 segment profit was $26 million compared to $57 million in the year ago quarter. For the third quarter, we expect Scripps Networks division revenue to be down in the mid-teens percent range as we work through the impact of the Nielsen measurement changes and continuing soft direct response advertising market conditions driven by the macroeconomic environment.

We expect Scripps Networks expenses to be up in the low single digits. For the segment label other, in the second quarter, we reported a loss of $4.5 million. Shared services and corporate expenses were $27.5 million due to higher medical claims and increased insurance premiums. For the third quarter, we expect that line to be about $25 million. To update to our full year guidance. We now expect to receive a net tax refund of approximately $5 million, and we brought down our forecast for CapEx to a range of $50 million to $60 million.

As I mentioned at the beginning of my remarks, we now expect our company transformation plan activities to produce an annualized run rate of $100 million by year-end. You can see the benefits of this work begin to roll through into our third quarter guidance and that benefit will grow as we move into the fourth quarter. Let me size that up for you with a comparison for each division of third quarter and fourth quarter expense guidance.

In the Local Media division, backing out the impact of new sports-related costs, we expect expenses to move from a low single-digit decline in Q3 to mid- to high single-digit decline in Q4. In the Networks division, we expect expenses to move from up low single digits in Q3 and to down low to mid-single digits in Q4. For the second quarter, the company is reporting a loss of $12.68 per share. Due to the current outlook for national linear advertising revenue, driven by economic and secular pressures, we reported a $1.1 billion noncash goodwill and other intangible asset impairment charge for the Scripps Networks business.

The quarter also included $36 million in restructuring costs coming out of our company transformation plan and a $9 million gain from our swaps with Gray Media. These 3 items together increased the loss attributable to shareholders by $11.83 per share. In addition, the preferred stock dividend has a negative impact on earnings per share even when we don't pay it. This quarter, it reduced EPS by $0.18.

We ended the quarter with $13 million in cash and nothing drawn on our revolving credit facility. Net debt was $2.2 billion as defined in our credit agreement. Following the successful refinancing of our 2026, '27, '28 debt last year, we achieved another major milestone in the second quarter by extending our corporate revolving line of credit through July of 2029. We secured commitments for a total credit capacity of $200 million with this extension finalized, the company has no near-term debt deadlines.

Net leverage at the end of the quarter was 4.9x as compared to 4.4x at the end of Q1 when calculated on the same basis according to the terms of our credit agreement, which includes certain pro forma adjustments related to our transformation efforts. And now here's Adam.

Thank you, Jason. Good morning, everybody. We're reporting a second quarter during which we significantly advanced Scripps' strategic priorities on every front: live sports, distribution value, top line and net political advertising, M&A and operational efficiency through transformation. Our financial performance for the quarter didn't meet my expectations. We faced challenges on a number of fronts, including sudden changes to Nielsen's measurement methodology that impacted our networks, continued declines in linear viewing, uncertainty in the economy and the advertising market and blackouts with legacy pay-TV providers.

The second quarter's results don't reflect the hard work performed by hundreds of our colleagues across the company. They have been creating more efficient ways of working to drive profitable top line growth that you'll begin to see as permanent benefits to our results starting in third quarter and into next year. I'm pleased to share that through this work on our company transformation plan, we've lifted our guidance for the year-end run rate savings twice now to $100 million.

In a moment, I'll discuss more details about our transformation plan, including how we are leveraging AI, automation and technology to remake the business and better serve our consumers. But first, let me discuss some operational and financial highlights that are setting up the company for growth. Nearly 4 years ago, we created scripts Sports to seize the opportunity caused by the implosion of the RSN model and capitalize on the tower of our broadcast reach.

During the second quarter, we expanded upon our leadership, signing 2 new teams to multiyear full-season partnerships. Our fifth NHL team, the Nashville Predators and our first NBA team, the Detroit pistons. As you saw in our financial results last season, these partnerships add material gains to our core advertising revenue and meaningful organic growth in core revenue year after year. You'll see that reflected again this year starting in the fourth quarter on top of the benefit of political.

When we flip an ion station to an independent carrying local sports, we create a platform for new core revenue and new distribution revenue, creating a local duopoly without having to deploy capital to buy a station. It's a clear example of how we are optimizing our spectrum for its best and most profitable use. We have now converted 5 ION stations to build local duopolies and we'll continue to look for opportunities to maximize the productivity of our assets.

On the national side, we have seized upon the importance of live sports and linear broadcast. Scripps Sports has established Ion as the home of women's sports. That leadership is why the women's volleyball World Cup announced in July that it would make Ion its U.S. home for next year's tournament leading up to L28. The women's volleyball World Cup joins the WNBA, the National Women's Soccer League, professional women's hockey and Women's college basketball, track, Prochir and rodeo on ION.

In this tough television marketplace, live sports is 1 of the most valuable ways to drive advertiser demand and premium rates. During our national advertising upfront negotiations this summer sports has helped differentiate Scripps' program offerings and created opportunities to capture advertiser investments across our networks, broadcast, connected TV and broader portfolio. I expect we'll continue to see more growth in our sports revenue performance as we turn even more focus to this growing part of our business.

With respect to distribution revenue, we are leveraging the power of our network affiliations, news and premium live sports to maximize our opportunity with the MVPDs. The blackouts are now behind us, and I'm very pleased with the results of our new distribution agreements. We successfully renewed 70% of our subs with agreements that will contribute to margin expansion and our ability to serve local audiences for years to come. And you can see from our local media programming expense line, we also are bringing down network compensation costs across the board.

We are realizing these savings on the expense side while driving new value on the revenue side, allowing us to capture and keep much more of what we deserve for our programming. Second quarter also set a new record for our company in political revenue, foreshadowing what we expect in the back half of the year. No other medium delivers a political message as powerfully and reliably as broadcast television, and our multi-platform approach allows candidates and campaigns to reach voters anywhere they watch TV.

Ad impact recently raised its estimate for this year's spending to a record $11.6 billion, and they are projecting local television to once again capture nearly half of that as it has in recent election cycles. As Jason mentioned, Scripps expects a record midterm cycle between $225 million and $250 million. We are seeing strong election spending in our markets across Arizona, California, Colorado, Florida, Michigan, Montana, Nevada, Ohio, Virginia and Wisconsin.

The recent Supreme Court decision on coordinated candidate and party spending has raised some investor questions. We see this ruling creating significant upside for political volume encouraging more investment into the political ad ecosystem. The ruling has clearly not dampened our political revenue outlook. We are committed to capitalizing on changes in the federal regulatory environment to create value through our recent M&A activity. We have sold stations for cash, swapped others strategically and acquired some to create high-margin duopolies.

Station M&A will continue to be a meaningful tool to optimize our portfolio enabling our public service mission. And while I'm bullish on the future of M&A for our industry and recognize the opportunity for financial engineering, it will not be the only arrow in our quiver. That's why scripts through our company transformation plan is proactively making fundamental changes to the way we produce our most important and costliest product, local news.

Our strategy will address a few simple truths. First, our audiences expect us to deliver the news when and where they wanted. And to meet that expectation, we're rolling out 24/7 local news streams to distribute stories as they happen to social, digital and streaming platforms. Second, consumers expect us to report on the full texture of life and their communities down to the neighborhood, so we're doubling down on our commitment to having more reporters covering geographic feeds. And third, making these changes requires an entirely different approach to resource allocation. So we're leaning into AI, automation, technology and the centralization of some roles.

This revolution and that's really what it is, a revolution in the way local news is created and distributed has been developed and built by members of Scripps' news and technology teams who have been working together for the last year because they believe our mission is too important the role we play in our community is too critical for us not to evolve to meet the moment. This work makes Scripps local media a technology-forward AI-powered broadcast journalism company, dedicated to serving our communities with the same high-quality stack-based reporting for which they've relied on us for nearly 150 years.

Let me be clear, we are making use of technology to improve our operating model and better serve our audiences. We are not wavering from our commitment to quality journalism. Because we are adopting more efficient ways of working across the entire enterprise, our transformation work has resulted in a reduction in our workforce. This week, we notified 268 employees that their jobs would be eliminated. Since the beginning of the year, we have eliminated 432 employee positions and 126 open positions. 12% of our total.

The coming quarters will see additional savings. Parting ways with colleagues is a painful process, full of difficult decisions. but we make them knowing they are financially necessary to fulfill our commitments to our communities, our nation and our shareholders. Just as we have been making significant changes in our local media business, so are we applying our transformation lens to the Scripps Networks business.

We realized the headwinds there require us to rethink our strategies. And that's 1 of the reasons why I've asked Dean Littleton to oversee the networks business as well as local media in his new role as President of Media. We believe the Networks business can benefit from his holistic view of our opportunity, his industry expertise and his growth mindset.

I'm energized knowing that hundreds of Scripps colleagues are invested in our transformation plan, so invested in the company's future that they've been willing to set aside conventions about how things have always been done in order to invent what's next. At a time when many in our industry will respond to economic pressure with cuts alone Scripps is differentiating itself with a goal to build a better product under a more sustainable model for serving our audiences and advertisers.

Our work is what separates cost reduction from transformation. One protects an ineffective status quo, the other builds something new and powerful with tremendous value to the enterprise. This is the word positioning Scripps for durable growth and creating meaningful shareholder value.

I'm going to close where I started, and quote Chairman Car's remarks yesterday because between the regulatory changes and our own transformation, this is exactly how I feel. He said "we should learn from our mistakes with the local newspaper industry, and we should not let the same thing happen to the local broadcast TV industry. Trusted sources of local reporting broadcast over the public airwaves are worth protecting and worth fighting for."

Operator, we're now ready for questions.

[Operator Instructions] And our first question comes from Dan Kurnos of StoneX.

I appreciate all the additional color guys and sort of the progress on the transformation plan. I have to housekeeping-ish questions and then 2 kind of larger questions. The first housekeeping question is, Jason, I just want to double-click on. Did you say core was pacing down low doubles in Q3?

Yes, low doubles in Q3, driven by the political product you would expect. It's pretty -- it's right in line with what we saw in core in Q3 of 2022. But I would...

Rising, I guess, well, go ahead, Adam. If you're going to say something .

No, I would also point even ahead though to that because the onset of the NBA and NHL seasons will just start in third quarter and then really come into their own in the fourth quarter when we will expect to see significant outperformance above political.

Yes. No, that makes sense. I mean we have Q4 a little bit better, I think, than Q3 on that. And that's that's something I do want to get into in a second. But just I just want to make sure I get this right, Jason, because I'm just trying to sort of back into the up 20 and your retrans guide seems pretty clear now given the noise is behind you. So it kind of implies political in the mid-70s in Q3. Is that the right figure?

Based on the full year guide we gave and the core guide we gave in Q3, I can see where you'd end up in that range.

And then just the other piece of that is -- I appreciate the color in the release on the impact of, obviously, Comcast and direct, is there a way directionally, I don't expect a specific number, but is there any directionally to think about net retrans in '27 now? Because obviously, we started it. I think mid-teens net retrans growth this year. And obviously, the blackout clearly impacted that, but you'll get the full benefit of that next year. And I don't think you have any major network renewals and your programming costs are coming down anyway. So just any way to think about into next year, the trajectory for that?

Certainly, we're going to get a year-over-year benefit from the impact of the blackout. We're not going to give any guidance now. We do have about 20% of our subs resetting next year. And then obviously, we have the full year impact of the step-ups we have this year. And so I do think both gross and net will be a victory for us next year, but I don't think we're going to be any more specific than that right now.

And Dan, just to reiterate what you said, we have locked in all of our affiliation agreements. And so that -- we have that expense visibility here into the foreseeable future.

Okay. Perfect. And then the 2 big things that I wanted to hit. First, just on Nielsen, if you can just talk about any progress that you've made on the sort of the big panel stuff, which seems -- I mean, like you can see the numbers, they're ridiculous. I don't know why they'd be bearing their heads in the sand. So any progress on that front? And then subsequently, it sounds like there may be some benefit on the local side from Nielsen. So I mean, how are you guys thinking about sort of the broader impact from any Nielsen changes in the coming quarters?

Yes. So it's the same changes that you're talking about that are meant to rebalance things and more accurately measure our Networks business and that we are told will improve or benefit local broadcast. The same round of changes, so to speak. Right now, just for investors reference, I would say our performance softness, I'd attribute about 50% of that the sudden change in Nielsen. We've been in conversations with the very highest levels at Nielsen on the process that they're working on to correct this for this fall.

But as you know, I'm leery to sort of take anything to the bank. None of the upside of a fix is baked into our guide. And so I'm just a little gun shy of assuming anything until things go into production. We -- just as a reminder, we were on track in the first quarter and really sort of seeing everything as it should have been until Nielsen made that set and sort of inexplicable update to its measurement methodology that finished the broadcast networks and benefited cable.

By the way, it's also underrepresenting multicultural audiences, something else they say they're going to address. And all of this has been negatively impacting both streaming and broadcast, which is not at all a reflection of what we know is actually happening in the video ecosystem as it relates to the consumer habits and cord cutting. So I expect changes to begin sometime in September, but I'm unclear on what the benefit will be. And so we're just taking a more I think, sober approach and would hope to recognize upside.

Okay. No, that's very helpful, Adam. And I think that's probably prudent given that it's Nielsen. And then the last thing I want to ask you is just big picture, Adam, on the transformation plan. So I appreciate the color on the 24/7 new streams. Clearly, we've got the momentum on the local side. You've got -- in you've got in switching to Indies. The growth on local actually kind of puts now and local is obviously twice as big as networks. .

The color that you just gave on Nielsen was super helpful. Is there anything else that we can think about outside of maybe CTV on the network side that can help just kind of get the rest of the balance of the equation even though I think local growing something could probably offset even modest declines in network and Producer Plus.

Yes. I think, first of all, you should recall that we have been very proactive in managing the P&L and managing the networks for growth. As last year, we beat our expectation on improving the margin for networks. And we're very, very dedicated to getting back to that place. continuing we're focused on continuing to expand in sports and to drive revenue growth and profit. We want to address some of the opportunities with our programming and distribution strategies, continue to expand and fast, and this is also 1 of the reasons I recently made a leadership change at the networks.

We now have brought the operation together under Dan Littleton's leadership. We're sort of looking at the portfolio as the largest portfolio of broadcast stations and how we use that spectrum for its best and highest use through both network, television and local. Dean will, I think, be optimizing the business from that perspective. He's done a great job leading in transforming the local business and its cost structure, and I think it's going to bring the same opportunity to the network side and get it quickly back on track.

There's no question in my mind that the story of the networks and our, I guess, cumulative collection of the largest nationwide broadcast platform isn't complete yet, and we'll continue to look at ways to use this platform to drive greater shareholder value.

And our next question comes from Craig Huber of Huber Research Partners.

Great I guess, sorry for the directness of this question. But I mean, given all the changes you guys are making here and given what's happened outside of your control here, does this any of this make you and the family any more likely or less likely to sell the company? I mean, obviously, you had a bid here not too long ago for the company and so forth, you guys turned it down. I understand why. But does any of the change you guys have put in place to make you feel like you really don't need to go down that road and you can just you get through all this successfully?

Well, first of all, it's important to note, Craig, that I don't speak for our controlling shareholder, but I can reiterate what I've said many times before and what you've seen over the long history of the company. The family has always acted in the best interest of all shareholders and is committed to doing what's best for the company to create the greatest shareholder value. Now I'll speak for myself and maybe management's perspective.

We believe greater scale nationally and greater depth in market are helpful. for our assets to perform their very best for shareholders and continue in service to the communities where we operate. from a journalism, local programming and local sports perspective. So I expect we'll continue to do everything in our power to take advantage of this moment. I mean I expect the greatest opportunities will be ahead for us, whether that is continuing to transform the business or identifying opportunities for us to engage in swaps, select divestitures or acquisitions to improve our portfolio.

Okay. I appreciate that. And my second question, the Nielsen change here, did I hear you right saying you thought roughly 50% of the pressure on revenue the IronScripts networks came from that? I mean just talk about that a little bit more, please?

Yes, that's correct. I mean there has been no softness in the demand for our products. But overnight, at the end of February, the inventory, the supply actually changed as a result of the methodology change, especially when we think about the demand for our premium sports products. So our sales team is doing a terrific job of monetizing what we have. But Nielsen changed the picture on what we have or what we are, the amount of audience we serve overnight negatively impacting about 50% of the revenue.

So it's been significant. It's been a significant blow. They tell us they are fixing that this fall. But like I said, I've been reticent to adjust up our forecast, and I'm sharing this in the interest of transparency, that's upside to our plan. And so the Nielsen challenges have impacted the general market side of the business, the other sort of piece of the equation he is the direct response piece, which direct response, we say this often, is heavily driven off of consumer sentiment.

And right now, with the current state of inflation and interest rates, that's negatively impacting that sentiment and therefore, DR demand. We also talk about direct response being a leading indicator and 1 that can turn quickly. So I'll point you back to the government shutdown in Q4 of last year. We saw a material drop in our direct response revenue during that shutdown. And when the shutdown ended, we saw a quick snapback or rebound as consumer sentiment improves.

I appreciate that. And then further on the Nielsen side, just talk a little bit further about changes there on the local TV side of the business and stuff. What would you expect?

Sure. On the local side, first of all, a lot of the changes they make that impact the makeup of the audience will benefit. The changes they made back in February began to underrepresent the multicultural audience, so beginning to reintegrate multicultural audiences back into the sample or to better statistically measure them should theoretically improve both network and local television. .

At the same time, we understand they're going to be moving to a different way of measuring local broadcast after all these years, the measurement will give credit to local broadcasters for a cumulative minute of viewing rather than what historically was a longer period and that required a longer period. And that, too, should better reflect the way people's viewing habits have actually evolved and improve what you see on the local front.

Real quick. I also wanted to just correct something I said earlier when I was asked about distribution. I said we had 20% renewing next year. I was getting my years mixed up, that's actually in 2028. Next year is only 5%. So for the transcript, I wanted that updated.

Great. Appreciate it. Sorry, if I could ask a little bit further on this Nielsen thing. Are you -- is it possible that you could share with us to quantify for us the impact to the viewership as they count it, as they calculate it -- is that...

Yes. I mean they have shared with me those estimates. I do not feel comfortable sharing them with the market or the Street because today, they are measuring I would say in a nonproduction environment and when they move to production, it will become live, and that's when we'll see it. So again, we've given a guide based on what we believe we see using today's methodology. When the methodology changes again, there is a good chance that there could be upside to it. But we don't control Nielsen's currency or the methodology. And so I'm reticent to share anything that I don't have any influence over.

Yes, I can certainly sense the frustration there. It's been a nightmare for your industry for decades here with this Nielsen Company. I'll say that sympathetically. -- take my to say the least. One last question, please. I appreciate your time here. The cash cost to get to this new $100 million annual run rate of cost savings, I think you said by the end of this year, are you willing to talk with that publicly? How much we...

So we have talked about that previously. We had guided to $40 million to $50 million in cash restructuring costs tied to the transformation plan. This quarter, you saw a very large restructuring number come through a good portion of that was noncash. And so just so we're talking kind of apples-to-apples, there of the $36 million in restructuring that flowed through this quarter, about $12 million of that is actually cash restructuring this quarter. About $9 million is accrued and will be paid in subsequent quarters. In the balance of it, roughly $15 million would be noncash items. And so we're still -- we still believe the $40 million to $50 million in cash restructuring is the estimate for the transformation.

And that's still good even though you moved up the cost savings number.

We did move up our total number. We just pulled forward the number to achieve it sooner. We still -- the net number is still $125 million to $150 million. We just think we'll have executed on more of that by the end of this year than we originally anticipated. .

[Operator Instructions] And our next question comes from Steven Cahall of Wells Fargo.

Jason, just wanted to talk through a little bit how we think about the $100 million run rate for '27 is it kind of as simple as just thinking about consolidated costs being down about that much year-on-year in '27 versus '26. I know there's probably a little bit of underlying cost growth like sports rights. So just wanted to kind of start to think about 2027. And then you've done a lot of work on margin improvement at Networks. You've got this new headwind from the Nielsen measurement. I think you're giving some of the good margin that you expanded last year back. I was just wondering if you could specifically talk about your expectations for network margins for this year and next year through the transformation.

Yes. So first on your question about the $100 million and how it applies to 2027. It would not be a full $100 million adjustment to your current view of 2027 because some of that is being realized in the year. And that was 1 of the reasons why we gave not just the Q3 expense guide, but also Q4 expense guide. You're certainly in the local media starting to see some of that transformation benefit flow through in the third quarter. Adam talked about some of the head count reductions that have happened recently.

And then the guidance we gave for fourth quarter expense trends, would indicate we're starting to realize even more of the benefit this year. So our year-over-year view of '26 to '27, you would have of that built into your '26 run rate, but there would be a large incremental piece from the Q4 activities and getting the full year benefit of that. In terms of network margins, I think that Adam alluded to it before. We continue to believe that this business should be closer to 30% margin. We saw some significant headwinds in 2024, and we set a very aggressive plan to grow margins by 400 to 600 basis points, and we actually ended up north of 600 basis points last year. We now have some new challenges, and we intend to chart the path forward to see a similar rebound to what we saw previously.

Great. And then, Adam, I wanted to ask you about spectrum a little bit. So I think Scripps significantly over-indexes on spectrum due to Ion. I think that was part of the original thinking when you purchased it. It's a topic I've written a lot about recently. And if I've learned 1 thing, it's that the broadcast industry has no consensus on how spectrum should be used, how to create value, whether lease it or another auction or the next-gen business model.

I'm wondering how you think about best way to monetize your spectrum, whether it's more station conversions with local sports or something that's a little more kind of wholesale since you do have so much spectrum?

Yes. Thanks for the question, Stephen. There's no question in my mind that we're sitting on a gold mine of spectrum, 1 that actually has proven to be increasing in value over time. And there's also no question that none of that value is reflected in our stock price. As you described, Scripps is 1 of the largest holders of broadcast spectrum. It was 1 of the reasons why we found the ION acquisition so interesting. We are always looking at what the best and highest uses of our spectrum, and we'll continue to do so. As you described, it's 1 of the reasons why we've turned ION stations into sports duopolies.

Adam, I'm sorry, I hear noise on the call, Steve, I don't know if you're -- you maybe need to mute. Okay. I'm sorry.

Yes. I mean, like I said, we're always looking for the best and highest use of our spectrum. And I think whether that's turning stations that are ion sticks into local stations in order to create high-margin duopolies, we will continue to look for the greatest opportunity. When there is an opportunity to monetize our spectrum, either through an incentive auction, as Chairman Car referenced yesterday, which he, I think he referenced maybe as early as 2028 or otherwise. I am absolutely sure we will take full advantage to benefit our shareholders, our employees and the company's ability to continue to serve its mission.

Great. And then lastly, do you feel like there is an M&A shot clock with this administration? Or do you think after the changes the SEC enacted yesterday that there's going to be a lot of opportunity that runs even past 2028?

Well, I mean, I don't think there's a shot clock per se, but I do think there is potentially a balance that has to be struck right now between the opportunity to take advantage of the changes in the regulatory environment and some uncertainty that we see, obviously being held up in courts. It's important to note that we have already been active in the M&A marketplace from the outset to improve the performance of the portfolio and the balance sheet. .

Every deal we have announced has either put cash in our pockets or increase segment profit to benefit the company and investors, and some are doing both. And I'm referencing the divestitures of the stations in Fort Myers, Indianapolis, which went for premium sellers multiples, the gray swap, the sale of Core TV, the acquisition we announced of more than 12 stations from Ino that will be accretive and that will fold into our networks portfolio and add to segment profit margins and add to our spectrum holdings.

I definitely don't think we're finished with this work. I do think there's continued opportunities for swaps ahead with opportunity for us to get deeper in the markets where we operate, opportunity for us to improve our operating performance and margin expansion. As I said earlier, I'm also a believer that national scale is beneficial. It's helpful. I don't think it's the only thing necessary for this industry, and that's why we're also equally aggressively pursuing a transformation plan.

At the end of the day, consolidation is going to be helpful. But for us to continue to be able to serve out our mission, we have to do things that address our consumer. Buying more TV stations in a market doesn't get anybody more to watch the 5, 6 and 11:00 news. Transforming so that we serve audiences across multiple platforms and deliver our journalism so that we remain relevant in the local markets where we operate. That's going to require more than just consolidation. And while we'll take advantage of consolidation in order to improve our economics, we have to take it a step further and transform the business. And that's what you see scripting.

Thank you. This concludes our question-and-answer session and today's conference call. Thank you for participating, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the First Quarter 2026 E.W. Scripps Company Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Becca McCarter, Senior Director, External Communications. Please go ahead.

Thank you, Didi, and 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 Chief Financial Officer, Jason Combs and then Scripps' President and CEO, Adam Symson. Here's Jason.

Good morning, everyone, and thank you for joining us. We are coming into this morning's call with strong momentum and good news about our financial performance and other activity. Here are a few of the highlights.

We are progressing rapidly on executing our comprehensive transformation strategy, which has helped drive significant improvement in our first quarter net leverage to under 4x. Our Local Media division delivered a strong performance with industry-leading 7% core advertising revenue growth driven by our unique live sports strategy. We launched the Scripps Sports Network, a premium free streaming channel, we are entering a midterm election cycle with strategic market exposure in key battleground states, and we continue to optimize our portfolio through its strategic asset transactions, generating $123 million in gross proceeds from recent sales of 2 stations.

We also continue to work towards the closing of our station swaps with Gray and pursue additional M&A activity to support debt reduction and enhanced operating performance. In addition to those recent highlights, we are pleased to have just successfully completed a new affiliation agreement with our largest network partner, ABC, covering 17 ABC affiliates. With that overview as a backdrop, I'd like to review our first quarter financial results, and then I'll discuss second quarter guidance, followed by details on our improving debt position. I'll conclude with a review of our EBITDA improvement plan.

I will present our first quarter Local Media division results on a same station or adjusted combined basis, removing the Q1, 2025, results of the 2 TV stations that we've now sold and reflecting our addition of the Lexington ABC affiliate. During the first quarter, our Local Media division revenue was $331 million, up 5.8% from first quarter 2025. Core advertising increased 7%. Our services, automotive and gambling categories all grew in the quarter. Local core advertising year-over-year growth was largely driven by advertising sales tied to our National Hockey League telecast. We saw a strong contribution from the addition of our newest rights agreement with the Tampa Bay Lightning. And beyond this new partnership, we also saw strong growth in our existing NHL deals with the Vegas Golden Knights, Utah Mammoth and Florida Panthers.

Our strategy is designed to drive year-over-year growth across both our existing deals and new partnerships. And last month, we announced a fifth full season NHL sports rights agreement with the Nashville Predators to start this fall. The Winter Olympics and the Super Bowl also contributed to our Q1 core advertising growth.

Political advertising revenue was nearly $9 million as we begin what's expected to be a record-breaking spending cycle for the midterm elections. This year, we forecast strong spending in our markets due to U.S. Senate and gubernatorial races in Arizona, Colorado, Michigan, Nevada, Ohio and Wisconsin. We also are watching growing competitive situations in Florida and in Montana.

Local Media distribution revenue increased 2%, again on a same-station basis. Expenses for the division increased about 2.4% year-over-year. Excluding the impact of our expenses tied to our new NHL team deal, expenses were flat. Local Media segment profit was $44 million compared to $32 million in Q1 2025. For the second quarter, we expect Local Media division revenue to be up low single digits. We expect core advertising to be down low single digits without the benefit of FLY Sports for most of the quarter. We expect Q2 Local Media gross distribution revenue to be impacted by our impasse with Comcast, which ran from March 31 to May 5. Based on that timing, we still expect full year gross distribution revenue to grow in the low single-digit range, but now expect net distribution revenue to grow in the low double-digit range, a slight change from our previous guidance. We expect second quarter Local Media expenses to be flat to Q2 of 2025.

Now let's review the Scripps Networks division first quarter results and second quarter guidance. Once again, I'll be presenting results on an adjusted combined basis, in this case, adjusting for the impact of the Court TV sale. In the first quarter, Scripps Networks revenue was $174 million, down 9.5% from Q1 2025. Connected TV revenue was up 26% from the same quarter last year. The division's expenses for the quarter were $126 million, up 1%. The Scripps Networks segment profit was $47.5 million compared to $66.8 million in the year ago quarter.

For the second quarter, we expect Scripps Networks division revenue to be down about 10%. The networks are facing a softer market from macroeconomic conditions impacting the direct response marketplace and external measurement pressure from Nielsen from recent Nielsen methodology changes. Adam will talk more about this in a moment. We expect Scripps Networks Q2 expenses to be up in the low single digits.

Turning to the segment labeled other. In the first quarter, we reported a loss of $6 million. Shared services and corporate expenses were $26.6 million. For the second quarter, we again expect that line to be about $27 million. Higher medical claims and increased insurance premiums are causing that line to go higher than usual. For the first quarter, the company is reporting a loss of $0.20 per share. The loss included a $30 million gain on the sales of Court TV and 2 television stations, WFTX in Fort Myers, Florida and WRTV in Indianapolis.

These sale transactions decreased the loss attributable to shareholders by $0.25 per share. In addition, the preferred stock dividend has a negative impact on earnings per share even when we don't pay it. This quarter, it reduced EPS by $0.18. We had $20 million outstanding on our revolving credit facility at the end of the quarter. On April 30, we entered into an agreement to extend the July 7, 2027, maturity date of our revolving credit facility to July 7, 2029, with commitments of $200 million.

For the first quarter, cash and cash equivalents totaled $84 million. Net debt was $2.2 billion as defined in our credit agreement. Also during the quarter, we paid down $10.2 million on our B2 term loan. In addition, we paid down $20.4 million on our B3 term loan. Since the end of the quarter, we've paid down an additional $30 million on the B2 term loan for a total of just over $60 million in term loan paydown since the beginning of this year.

Net leverage at the end of the quarter was 3.9x per the calculations in our credit agreement, which includes certain pro forma adjustments relating to our transformation efforts. As we announced in February, our company transformation plan includes growing enterprise EBITDA by $125 million to $150 million. Our EBITDA improvement plan balances rightsizing our current expense structure with implementing new ways to grow revenue and profitability. You'll start to see the financial benefits of our plan in the second half of this year. We expect total in-year EBITDA impact of $20 million to $30 million and an annualized run rate of about $75 million as we move into next year. And now here's Adam.

Thanks, Jason, and good morning, everybody. At Scripps, we're in the midst of executing a significant transformation, moving now from the detailed planning stage into execution, and I'm pleased to report that we're right on track. I'd like to say that this transformation is a refounding of the company where we're bringing the values, ethics and mission of our founder, Edward Willis Scripps, forward 150 years to set the company up in a way, I'd like to think he would were he here today.

I've been doing a lot of research on our founder. EW was fiercely protective of his newsrooms journalism and editorial independence. He was entirely committed to serving the people in the communities where we operated. And he was well known, maybe even notorious for his dedication to operating with efficiency to ensure he would have the margin to carry out the mission. 150 years ago, EW focused on his consumers' problems and commercialized the solution. The assets that make up our company may be different today, but our transformation is grounded in the same customer-first focus.

Here is an example of what this is looking like. In our newsrooms, we've already been changing the model. We're moving from a broadcast-centric operation that has historically served our audiences during defined time periods to news operations that leverage automation, AI and technology to serve consumers when and where they expect to get their local news, especially as they've moved to streaming. Leveraging technology has allowed us to deepen our commitment to local news, getting more of our teams out of the newsroom and into the community, putting more reporters in the field to live in the geographic areas where they cover.

All of it in service to our vision, we create connection. This isn't incremental change. It's a complete realignment of our newsroom operations. Our business models and our culture around the opportunities we see clearly, streaming platforms, productivity-enabling technologies and our unrivaled ability to create connection for the people and the businesses in the communities we serve. This is just 1 example at Scipps of how we are up ending what needs to be changed, fueling the fire where we see the top line growth as we see in streaming and going farther and faster with what's working well, like our sports strategy.

Let's talk about sports. In Local Media, our live sports helped Scipps deliver an industry-leading core advertising performance in the first quarter, up 7%. As Jason said, this came from new partnerships and from the organic growth in every one of the markets where we're executing this strategy, and we are far from done. Just a few weeks ago, we announced the new full season local broadcast agreement with the NHL's Nashville Predators, and I expect more core growth fueling opportunity to come.

Now for the second quarter, the live sports action shifts to our Scripps Networks and the WNBA and the NWSL. The WNBA's preseason game between the Indiana Fever and the New York Liberty on April 25 was ION's most watched preseason game ever. Tonight, the WNBA regular season kicks off with a double header on ION, with tremendous excitement about the return of Catlin Clark and this year's class of exceptionally talented draft picks. Scripps Sports will once again broadcast the most WNBA games of any network bringing a WNBA double header every Friday night all season long to fans nationwide.

Advertiser demand is high for women's basketball as well as for our full slate of women's sports. It's now clear that Scripps is the leader in women's sports, showcasing women's athletic achievement with rights for the WNBA, NWSL professional soccer, PWHL hockey MLV volleyball, Athlos Track College Basketball Pro Cheer and our newest partner, PBR's Premier Women's Rodeo, which we'll be bringing to our networks, Grit and ION.

We recognized early that Americans were embracing the quality and professionalism of women's sports, and we're pleased to have become the go-to platform for the brands that want to connect with fans. Next week, the professional women's hockey leagues Walter Cup Finals will begin on ION. We're very pleased to bring this to national television for the first time and to have Amika serving as our presenting sponsor, and Discover as an additional sponsor. They are just 2 of the hundreds of blue chip advertisers we brought on to our platform through our sports strategy.

In March, to capitalize on the marketplace growth and our success in Connected TV revenue, we launched the Scripps Sports Network, a new streaming channel that leverages our existing sports rights, some efficiently acquired new rights and sports themed programming. We're streaming more than 100 live games a year, along with original sports programming, documentaries and talk shows and we've secured broad distribution across the major streaming platforms, including Roku, LG and Samsung, making it easy for fans to find the sports, teams and players they love.

Connected TV continues to be a growth driver for Scripps, up 26% in the first quarter, and I expect will continue to leverage our premium programming and live sports to make this a differentiator for us among our peers and competitors.

While we expect to capitalize on live sports on ION in Q2, just as we have with our local division in Q1, we're navigating some external challenges with national advertising revenue. As Jason mentioned, we're seeing some market softness due to the volatile economy. Networks direct response ad spending, in particular, has been impacted as consumers feel the pain of higher prices, especially now at the pump. We've also been affected by a recent Nielsen audience measurement change that has artificially shifted household viewership waiting in favor of cable networks.

Because all Scripps networks are distributed over the air, this change has negatively impacted audience delivery. Nielsen's new methodology is inexplicably resulting in frustratingly inaccurate reports of ratings declines for over-the-air viewing and streaming. This disproportionately impacts the measurement of our multicast networks viewers who are most vulnerable to affordability issues, including those in rural communities, people of color and older Americans. The fact is that we have seen no letup in the demand for our advertising products in the general market, and sales execution is on point, but Nielsen's overnight change suddenly impacted our supply of impressions. -- impacting our revenue.

We began seeing a revenue impact from Nielsen's methodology change in March and since then, our team has been advocating aggressively for Nielsen to make a public disclosure outlining the magnitude of the discrepancy in their data.

Of course, I can't end the discussion on advertising without at least a nod to what we expect to be this year's political revenue windfall as a result of our excellent station footprint. Our focus on sales execution and the record amount of money expected to be spent on the upcoming midterms. We're off to a good start and expect political to be a great story on top of this year's industry-leading core revenue performance we're putting up this year.

I'd like to take a moment now to celebrate some important recognition of the work we do on behalf of our viewers and communities. Scripps has received recent awards and recognitions from 3 important national organizations. We were honored with 6 nominations for national news and documentary Emmy awards, including 5 for Scripps news and 1 for WEWS in Cleveland. Scripps News also is recognized with 3 prestigious National Headliner Awards including a Best in Show honor and 2 deadline club finalist nominations, while our local station, KNXV in Phoenix also received 3 National Headliner Awards and WTMJ in Milwaukee received wine.

We're proud of the recognition of our commitment to journalism that improves the lives of those we serve, hold to the powerful accountable and upholds the tenets of our democracy. Serving our democracy is one of the things Scripps has done best for nearly 150 years.

There's a lot of uncertainty in the world today from macroeconomic to the media sector. At Scripps, we're acting with urgency on what we can control by employing new technologies to create operational efficiencies, capitalizing on accessible growth areas such as sports and CTV and improving our balance sheet. This is the essence of our transformation plan, and you're beginning to see how this plan will carry us into the next mountable chapter of Scripps' long history.

And now operator, we're ready for questions.

[Operator Instructions] And our first question comes from Dan Kurnos of StoneX.

First and foremost, I guess, Jason, thanks for the recast, super helpful on that stuff. Just want to make sure, housekeeping question, the guide that you gave for Q2, that is relative to the as reported from 2Q last year, not the recast, correct?

So that is off of the adjusted combined recast that we provided.

Okay. All right. That is helpful. Adam, Scipps Sports Network, supersmart, you've been kind of leading the charge in CTV here. You had your upfront in late March. Obviously, you launched it before then. You've picked up PWHL, PBR, Women's PBR now, you've got a real stranglehold on kind of the women's side of the equation. Can you just give us thoughts, understand the DR markets soft, we all get the macro? But as we look ahead, commits what advertisers are saying, just help us think through the feedback you're getting, and you've been very clever with rights acquisition in an inexpensive manner. So sometimes there's a little bit of confusion between what you can show on streaming and what you can show on kind of on traditional broadcast. So just help us think through kind of that equation here.

Yes. First and foremost, Dan, well, I like to think that we have embraced women's sports, not put it into a strangle hold but I appreciate where you're getting at. We've been very intentional in the way we've been acquiring sports, both on the local side and the national side and see our opportunity as recognizing the value of the distribution we bring to the table. So whether it was with our initial deal with the WNBA, the NWSL or any of these other sports deals we've done, I think we've been looking for partners who recognize that we bring to the table the opportunity to showcase their league, their games, their athletes on the most ubiquitous platform available.

Because ION is uniquely positioned to be available on OTA, on Pay TV and on streaming. The launch of Scripps Sports Network, I think, is a continuation of that strategy because it not only positions certain parts of our broadcast in additional new real estate in the streaming space through simulcasts, allowing us to take some of Ion's most premium time periods, and now simulcast them in a couple of different tiers on streaming platforms, essentially expanding the reach of those platforms or expanding the reach of those games and expanding the reach of our network.

It also allows us to carefully and efficiently acquire new rights for insurgent or ascendant leagues looking at getting distribution for their games and allows us to test and learn. So as an example, right now, you can watch the -- many of the PWHL games on the Scipps streaming sports network, Major League Volleyball, and then the finals end up being broadcast on ION. And our move to put all of that on ION has been all about trying to really appease the advertising environment. We see significant demand from advertisers looking to invest behind women's sports.

And so we went to the marketplace knowing that there was already demand for the assets we were acquiring. And I think that's going to benefit us both in linear and it's going to benefit us in the streaming space. And I think we'll continue to be really, really careful and efficient in the way we acquire rights but also really aggressive in the way we demonstrate the value of our distribution.

Relative to the ad marketplace, there's been no letup in that demand for live sports. In fact, I would say, when you look at our performance relative to like general market cable and broadcast networks, you see the benefit of our sports strategy. And we're just now moving into the second quarter where we have that benefit going on into the summer time. We didn't see that in the first quarter. Nevertheless, there has been some softness in the national ad market. I think Jason can provide you a little bit more color on the national ad marketplace, the networks and even maybe a longer term or a midterm view of what we expect from Networks margins.

Yes. Thanks, Adam. So we did give a guide of down 10%, and that is really being driven by a couple of things. The ratings declines tied to changes in Nielsen methodology that Adam talked about in the script, as well as macroeconomic and geopolitical conditions that are driving uncertainty and has created a little bit of a weaker marketplace for national advertising. So on the ratings front, I think, Adam, did a pretty good job summarizing the changes that have happened there and how that is impacting networks at overindex on over-the-air carriage versus cable networks who are generally seeing significant ratings increases, and we'll continue to engage there because we do believe that, that methodology is flawed.

Beyond that, the current macroeconomic environment is having an impact on performance-driven advertisers in the direct response space. Inflationary pressure and higher fuel costs continue to weigh on heavily in the American consumer and geopolitical and stability has created some hesitation in the marketplace and some ripple effects. And so from a longer-term perspective -- in the short term, that has created a little bit of a drag on revenue and on margin in our segment. And we worked really hard to get the Networks margin back to a 30% margin business. I think as you look at the implied guide for Q2 and our results for Q1, I would expect that our second half margin is higher than our first half margin.

Q3 is the heaviest sports quarter in terms of inventory. And Adam talked about the excitement we've continued to see in terms of premium sports inventory. Q4 also brings in seasonal health care ad dollars, and you'll start to see some impact from the transformation efforts start to roll in the second half as well. And so we remain committed that this -- that the Networks business is a 30% margin business. And while we may have seen a bit of a step back here in the current quarter, we remain committed to driving the business to a long-term 30% margin.

Adam, just 1 follow-up on that or Jason, too, as we think about monetization, obviously, we're continuing to see more live sports move towards programmatic. And obviously, CTV in particular, is moving towards programmatic. I know you've got a lot of direct response and traditional sales and it's probably not as applicable to the broadcast component of this. But I mean, how do you guys think about pushing deeper into DSP relationships, leading into the ad tech ecosystem and getting better fill even if CPMs come under pressure, you still ultimately get better monetization out of that?

Yes. I mean I would argue we are operating right now a best-in-class CTV platform actually. Dan, going all the way back to sort of the earliest years of digital and CTV. We've been very focused on ensuring that we're maximizing the opportunity with direct sales and programmatic. The leadership we have at the networks level, focused on monetizing our CTV across the enterprise, I think, is second to none. And I think we're very well invested in that space. And I expect -- you can see that in the 26% growth following last year's significant growth following the year before, significant growth on the CTV side.

We haven't just been riding growth in the marketplace, I would say we have been catalyzing the revenue opportunity for ourselves by both taking advantage of some of the natural growth but also doing everything from taking advantage of the ad tech relationships and improving the programmatic stack, but also leveraging our significant leverage in the marketplace with the distributors. I mean the fact is that we represent among some of the most watched premium channels in the Connected TV marketplace. And that gives us, I think, significant leverage to ensure that we negotiate terms that benefit us and partnerships that benefit both us and the platforms. And so far, it's working exceptionally well.

Certainly wasn't trying to imply you're leaving money on the table, Adam. I was just trying to understand if there was incremental opportunity as the market continues to shift, but you've got -- you've done a great job with CTV.

Yes. No, look, I do think there's incremental opportunity. And that's why, like Dan, even in my prepared remarks, I talked about continuing to lean into those things that we see as accessible growth areas like Connected TV. Launching scripts sports -- the Scripps Sports Network is an example of that, but I think there are going to be many more opportunities for us to leverage technology, to improve monetization in CTV, to improve monetization in local CTV. I think there's significant opportunity ahead with political in CTV. We're already seeing the beginning of that this year, allowing us to sell connected TV advertising out of our political office, outside of the markets that we've traditionally been in because, of course, we've traditionally only been able to sell in markets where we had local stations.

Today, we sell nationwide. In fact, a fair amount of the advertising that we saw on Connected -- in political in the first quarter came from outside of our markets. So we're off to a really good start there, and I expect that we'll continue to keep the pressure on.

And our next question comes from Craig Huber of Huber Research Partners.

Can you just give us an update, if you would, a little bit further on the $125 million to $150 million restructuring transformation program you're working on, I guess, by 2028? Just update us, if you would, first, where you think the annualized run rate will be at the end of this year? Any changes on that front?

Yes. So last quarter, we gave an annualized run rate of $60 million to $75 million, which as we exit this year, we adjusted that during this most recent earnings cycle up to $75 million. And so I think we would say we're making good progress on it, and Adam, in a second, can give some sort of higher level thoughts on it. I'll also point out the move we had in leverage this quarter and maybe just explain that a bit. So last quarter, when we announced the large transformation initiative and as you referenced, $125 million to $150 million, we recently -- we've been doing a lot of work to sort of lock down our bankable plan of initiatives expected to be implemented over the next 12 months.

And per the terms of our credit agreement, we're able to reflect those sort of retroactively back into our trailing 8-quarter EBITDA for purposes of leverage calculation. And so that is the driver behind the big move you see in leverage this quarter, down to 3.9x. And that's really tied to not all of the initiatives, but the initiatives that we think will have fully implemented by the end of Q1 of next year. Adam, do you want to talk a little bit more about bigger picture on transformation?

Yes. I mean we're executing a comprehensive plan that's allowing us to rethink everything about how we deliver service to the customer. When I think about our customer, I think about our audience and our advertisers. We spent months examining the opportunity to remake the company across every corner of the business, the front office and the back office, and now we're moving into implementation. And I got a lot of comments about how confident I sounded last quarter when I said take it to the bank.

I'll tell you, I'm as confident today as I sounded last quarter that we're going to improve EBITDA by more than 30% to emerge a stronger, more nimble and more aggressive company oriented for growth. It's all about our customer, and it's all being done through the lens of the company's vision, we create connection. A lot of it has to do with technology, the use of AI and automation. It's very much oriented towards growth. But the most important thing I think investors have to hear is we are on track to achieve exactly what we set out to do.

I appreciate that. And then talking about AI, can you give us a little more flavor of how you're using AI to help your services, but also help on the efficiency side? Is it possible to maybe quantify how much you think out of the $125 million to $150 million improvement in EBITDA comes from AI? Is that possible?

Yes. I mean I can't quantify that at this point. I would expect that as we roll out different initiatives, when they're in the rearview mirror, we can provide a little bit more color. I would say, broadly, Craig, there's been a shift with technology that opens up an opportunity for all companies in every industry to be more effective and efficient. I'd say traditionally, the broadcast industry has been too slow to adopt these technologies and probably as a result of this being a business that has been in consolidation, we haven't taken advantage of stepping back and rebuilding companies in the front office and the back office.

And so now that's what we're doing at Scripps. Several years ago, we pioneered a new way of producing newscasts, for example, that leveraged technology that allowed us to reallocate resources so that we could put more reporters in the field and even give higher wages to those reporters. We call that then the news initiative. And that was the basis for our neighborhood news strategy. Now the geographic beats that I referenced in my earlier comments, we continue to have more reporters in the field covering the community than our competitors.

That's really what our consumers care about, and we're leveraging AI and automation to facilitate that process. We also see significant top line upside from implementing technology and revenue yield management. Improvements to account executive productivity, our account executives, I think, could be made much more productive by leveraging tools that you see in other industries in order to allow them to spend more time in the field, from the prospecting all the way to the closing of business than doing administrative work.

And then I would say look, these -- you have to recognize, and like I said, I'm happy to get into more details in the future. These aren't themes or broad brush sort of ideas. These are plans with real business cases that have been developed by our employees who have taken a great sense of agency in evolving this business. As I said before, even the cost savings opportunities will actually improve our product, both content and advertising, improving our service to audiences and advertisers and generating additional top line and bottom line value.

My last question, if I may. Just talk a little bit further, if you would, please, about the macro environment. Is it letting up at all for you here? Is it feeling like it's getting worse? Is there any other categories other than DR that you'd want to call out that's impacting? And I guess, if we think back on the first quarter, did you really start to see it tied into when the Iran War started at the very end of February, was it tied in directly with that? And is it just continued at that same level what happened in March? Or has it gotten worse? Just couch that for us, if you would, please?

Yes. I mean I think on the network side, we talked a bit earlier in this call about the impact we are seeing and the fact that we would point it back to both sort of macroeconomic conditions and the geopolitical conditions, inflation, gas prices, all those things. And that is creating what I would say is some headwinds in the national ad marketplace. We really haven't talked about the local ad marketplace yet. But as you saw in Q1, from a local ad perspective, we were up 7%. That was the best in the industry.

And for Q2, we guided to down low single digits again, better than all of our peers guided. Unlike Q1, where we saw a lot of growth tied to our sports inventory, Q2 doesn't have the same level of premium sports inventory, and we are seeing maybe a little bit of noise in some of our categories in macroeconomic state. But all in all, I would say, from a local core perspective, things are pretty stable.

And our next question comes from Avi Steiner of JPMorgan.

A couple of questions here. Just on the environment, and I apologize if I missed this, I was a couple of minutes that was off. But can you just refresh us on the exposure to direct response to advertising? And remind us maybe how quickly that came back in kind of prior down cycles? Is it leading into bidding? How should we think about it?

So from a DR perspective, it really varies by network, but we certainly do have a material portion of our networks revenue, which is tied to DR advertising. What you see DR advertising is very tied into broader macroeconomic trends and can both downturn quickly, but also bounced back pretty quickly as well. And so we are seeing some noise right now that's part of. I know you think you said you missed the beginning of the call. But the guide we gave for Q2 is both tied to some of those macroeconomic and geopolitical implications on direct response as well as impacts we're seeing on ratings tied to some recent Nielsen methodology changes.

I would say from a speed perspective, it snaps around pretty darn quickly. And 1 good example of that is what we saw in fourth quarter. The beginning of fourth quarter, we were a little soft with DR as a result of the government shutdown. Its impact on employment and its impact on Medicare enrollment. When the government shutdown ended, it snapped back. And so I think the bottom line here is uncertainty is not good for the American economy. Uncertainty is not good for the American consumer because they hold on to their dollars. And so the greater level of certainty that we can have, the easier things will be in the ad marketplace.

That's super helpful. And then on the enterprise value growth that you're putting in being the cost savings and revenue growth initiatives. Just on the cost savings side, and apologies again if I missed this as well. What is the cost of the company, if any, for some of the transformation initiatives you're undertaking and maybe timing of any of those costs?

Are you asking specifically cost to achieve?

Yes.

Yes. Yes. So we guided to the lift in EBITDA of $125 million to $150 million. We would estimate $40 million to $50 million of cost to achieve with the largest portion of that falling in the back half of this year.

Super helpful. And then if I could sneak 1 more in quad housekeeping, just cause understanding. The recap financials being the supplemental part of the disclosure was very helpful. So I'm wondering if you could provide the LAQ EBITDA for the same base of assets that is underlying? Again, that disclosure, which was helpful. And then refresh us if you can, what's left to close and dollars in and dollars out?

So the LQA that supports that 3.9 calculation on leverage is $568 million. What's left to close is -- I think was the other part of your question. We are awaiting closure of our swaps with Gray and sort of getting that final process done. We also have a transaction with Hineo to that is before the SEC and right now as well.

And do you have the dollars for those -- I know there's no dollars in the swap. Remind us of the dollars of HIneo. And do you have the 568 without the cost saves, if you have?

I don't have that number readily available, but it is a little over $100 million of cost savings that is reflected backwards into that. The LQA number, from an annual perspective, it was -- it is in the kind of mid $50 million range. It's somewhat dependent on timing. I think in our most recent announcement on that, we said $53 million.

Our next question comes from Shanna Qiu of Barclays.

I know you touched on this a little bit earlier, but could you give us a sense of how much the Scripps Networks' top line guide, the decline in 2Q is related to the overall macro and ad environment versus what you called out on the Nielsen methodology change?

So I don't think we're breaking it down specifically. I would say both are driving a material impact to the revenue guide that we provided.

Yes. I mean I think it's important to recognize that on the network side, we sell impressions and the impressions are determined by your currency. So mid-February, overnight, Nielsen's methodology changed, didn't impact sales execution, and it didn't impact the demand we have in the marketplace, it impacted how many impressions we had to sell. And so we're working right now with Nielsen to right that ship. But we're also not just sort of letting it go. I mean we're doing what we can to make changes both on the marketing side as well as on the programming side to bolster the programming strategy so that we can see an increase in impressions.

Because we have the customer demand, we have the advertiser. We just need to see the impressions come back. I would say that's separate and aside from some of the macro stuff on the DR side. But the general marketplace has actually held up pretty nicely relative to the demand we're seeing. And that's probably as a result of our sports strategy and I think the strength of our sales execution performance.

All right. That's really helpful color. And then I think earlier on the call, you mentioned that you expect full year gross distribution revenue growth of low single digits. I was just curious on your thoughts on the pending charter Comcast merger. Is that reflected in that gross distribution guide that you highlighted?

So, we don't generally talk about specific contracts, but I would say is we feel pretty good about that guide. And the fact that we went through an impasse in the second quarter and with Comcast, and we're able to maintain our guide on gross and only make a small change in our net guide from low teens to low double digits. I think that, that was something that we were pleased with the outcome of that deal. And while it does create a very short-term blip in our Q2 financials, really pleased with what that deal means in the midterm and long term for us.

And we have a follow-up from Craig Huber of Huber Research Partners.

Curious to the Nielsen change you're talking about. Are you willing or able to talk about what percent hit that was to your impressions or how you sort of view it in also curious anything about it on that front?

Yes, I don't think that benefits us. But to be honest, you heard a similar reference on some other companies' earnings calls that have national broadcast network exposure. This is just something that all of the broadcast networks and streamers inexplicably are dealing with. And so we're working with our colleagues at Nielsen to try and right this, so that the advertising marketplace is able to make decisions on their buys with a methodology that actually reflects what's going on in the television marketplace. It's obviously not the case that cable is growing and streaming and OTA are declining, okay?

That's obviously not the case. So at the end of the day, I think everybody recognizes that some changes have to be put back into the system in order to address this for there to be more accuracy.

And just to be clear, Nielsen has not been able or willing to put out recast numbers on this new methodology over the last 12 months or so?

I can't speak for Nielsen what they're willing to do or not.

But they haven't so far in the public domain, right?

I don't know that they would recast. I mean we're only talking about February -- something that went back to sort of mid- to late February.

Yes, it just would have been helpful, obviously, from their vantage point, if they were willing to put that number -- those numbers out there.

there's a lot that would have.

I can tell how upset you guys are, I don't blame you. You're not the only ones, of course.

Our next question comes from Steven Cahall of Wells Fargo.

Sorry, I had a little trouble getting into the queue. So Jason, I just wanted to understand the sequential change in core ad growth at local. There's a lot in there, I think, going from plus 7 to the down low single digit. I know there's a change in local sports. There's the Comcast blackout. Can you help us kind of think about what the underlying sort of core sequential change looks like within that? I know it's a lot less than the 9 percentage points of deceleration. So how do we kind of think about that within?

Yes. So from a core perspective, the Q1 number, the up 7%, had a significant benefit tied to our NHL deals as well as you had the Olympics in there as well. I would view it as you take out sort of the sports impact and the overall core marketplace is pretty consistent with what we've been seeing and not significantly impacted by what's going on sort of more broadly in the economy. And I think that down low singles that we put out there is also better than most everybody else I've seen in our industry was kind of down more low to mid-singles. And so from app standpoint, I actually see our core as a strength right now.

Yes. I mean I just hope -- this is Adam. I just hope that investors and analysts recognize that our performance in first quarter is cause to celebrate because we're executing a strategy that is putting significant growth opportunity in front of us cyclical as it may be. And now, of course, we move towards that opportunity on the network side. But obviously, when you're running a strategy that allows you to vacuum up more core revenue in a local market, you do so recognizing that it's going to be with the sports opportunity.

Yes. And then kind of a related question on Networks growth. I know Q3 is the biggest for sports networks. But I think just sequentially 1Q to 2Q has more sports as well, like WNBA restarting. So I guess what I'm trying to figure out is like if the market hasn't changed as we get past Q3, do you see a big drop-off in the rate of decline? Or are there other kind of levers that you'll have to pull in either programming or pricing with upfront or other things as we get into the back half of the year, kind of continuation of the trends?

Yes. So I think -- and we touched on these a little bit earlier. I mean I think there -- from a margin perspective, we expect the second half to be higher than the first half. I mean we do have some sports in Q2, yes, but those ramp up sort of the full quarter in Q3. And so when you look at sort of the revenue trend line, I would expect to see the year-over-year changes improve when you get into the back half of the year. You also start to pull in health care.

And I think I also alluded to some of the transformation benefits that will roll through here as well. And so I do think you'll see a better picture in the back half of the year than you do the first half of the year for the Networks business. And even though that's trending right now below the 30% target, we remain committed to as we manage through this year and into next year, making decisions we need to make to get this business back to a 30% margin.

Yes, Steven, I would also say it's obviously way too early to be talking about anything from a volume or pricing perspective on the upfront. And while Nielsen's measurement change may have negatively impacted impressions for OTA and streaming, the fact is the ad marketplace is responding very well the message that we have out there in the marketplace for the upfront. Our focus is continuing to be on our distribution platform, which grows OTA and streaming and the differentiated programming we have, live sports, specifically women's sports.

And that's our messaging that, especially that OTA opportunity continues to be, I think, really well received by advertisers in the marketplace who recognize what's going on in the cable industry and are looking to shift dollars from general market cable into more premium products. That's what has been behind some of the significant new advertisers coming on to our platform. I mentioned Amika coming in as the title sponsor, presenting sponsor for the Walter Cup finals here on ION.

These are the kind of advertisers historically that haven't been advertisers on our platform and are moving over now to spend with us because we have the product and the distribution they're looking for to reach the people they want.

And then just a last one for me. So if I understand what's going on in leverage, you're able to take advantage in your credit agreements of the transformation initiatives, which I think just gives you a little bit of breathing room versus covenants versus net leverage calculations. Does that mean you can start to devote this year's free cash flow towards the accumulated pref dividends or otherwise kind of negotiating the pref? Or do you think the pref is kind of better left to maybe be part of like a longer-term strategic M&A transaction? I would just love to know how you're thinking about it.

Yes. So first of all, on the covenants sort of cushion. I mean we already were sort of well with under -- well under all of our covenants. And so while the transformation does provide a benefit into our leverage calculation, like there was already significant coverage there. From a Berkshire dividend perspective, based on the refinancing that we did last year, the large refinancings we did, we cannot pay the dividend until 2027 until our leverage is below 4.25, which obviously, we're under and is -- and we have less than $50 million outstanding on the B2 term loan.

So when you think about the pref, I would think of it this way. Those are the requirements for us to begin paying the dividend. Once we meet those, we would intend to start paying a dividend again. Once we get leverage into the low to mid 3x, we would begin looking to address the principal, not all at once, but likely in increments. We can do that in $60 million increments. And so I think that is kind of the way we think about the pref.

This concludes our question-and-answer session and also today's conference call. Thank you for participating, and you may now disconnect.

Thank you for standing by, and welcome to The E.W. Scripps Company Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. I would now like to hand the call over to Carolyn Micheli, Head of Investor Relations. Please go ahead.

Thank you, Latif. 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 Chief Financial Officer, Jason Combs; and then Scripps President and CEO, Adam Simpson. Here's Jason.

Good morning, everyone, and thank you for joining us. This marks our fourth consecutive quarter of reporting financial results that met or exceeded expectation on nearly every reporting line. Our growth strategies around network streaming distribution and Scripps Sports are helping us outpace loan national peer companies supported by strong sales execution and disciplined expense management. I'll recap our fourth quarter 2025 results in a moment, but first, I wanted to touch on a few important activities we've undertaken since our last reporting period. On February 11, we announced the transformation plan to grow enterprise EBITDA by $125 million to $150 million by 2028.

Our planned balance is rightsizing our current expense structure with implementing new ways to grow revenue and profitability. The EBITDA improvement is one aspect of our larger company transformation plan, which Adam will discuss in a few minutes. You'll start to see the financial benefits of our plan in the second half of this year. We expect total in-year EBITDA impact of $20 million to $30 million and to go into 2027 with an annualized run rate of $60 million to $75 million. We expect the benefits to contribute to a significantly improved leverage ratio by year-end. This plan builds on the work we've already done to improve our division margins in recent years. In fact, for 2025, we exceeded our guidance for margin performance in the Scripps Networks division. We guided to 400 to 600 basis points of expansion over 2024 and delivered nearly 700 basis points.

In the Local Media division, we kept expenses down despite new partnerships in valuable and growth-driving sports rights. In another strategic move to improve margins, we are exercising our option to reacquire 23 TV stations affiliated with Ion that we had to divest when we bought the network 5 years ago. We anticipate the aggregate purchase price to be about $54 million. The transaction allows us to expand our already sizable spectrum holdings. After close, we will no longer be paying the owner of those stations affiliate fees -- so acquiring these station assets will be immediately accretive to the Scripps Networks division segment profit and margins.

We will seek waivers for the transaction under the FCC's current television station ownership rules. On February 9, we announced the sale for TV, which did not require regulatory approval and closed on that date. This transaction reflects our disciplined approach to capital allocation. We've monetized an asset while also securing a multiyear spectrum lease that instantly improves our operating performance. The transaction is immediately accretive to the Scripps Networks segment profit and division margin. The divestiture reflects Scripps practice of growing businesses and then making strategic decisions about how we unlock the greatest value. We also were pleased to find a fitting owner in long prime founded and run by ABC News Chief Legal analyst, Dan Abrams.

On the local media M&A front, we are progressing towards closing on our station swaps with Gray and the sales of W FTX in Fort Myers, Florida and W RTV in Indianapolis. Gross proceeds from the Fort Myers and Indianapolis sales will be $123 million. We expect Fort Myers to close in the coming weeks in Indianapolis to follow soon after pending SEC approval. We're also optimistic about closing in the coming months for the Gray stations transaction. All of this acquisition and divestiture activity with the stations, the Ion affiliates and the sale of core TV support our strategy of evaluating and maximizing the value of our assets, improving margins while reducing our debt and leverage ratios.

Now let's review fourth quarter financial results, and then I'll share some guidance for the first quarter and the full year. During the fourth quarter, our Local Media division revenue was $360 million, down 30% due to the absence of political advertising revenue compared to the prior year. Core advertising, however, was up 12% for the quarter. Let me repeat that core was up 12% in the quarter. All 5 of our top categories grew year-over-year, including our largest services at 19%. The Gambling was up 32%. Our local sports strategy is a key contributor to our core advertising growth, and it's not just the addition of the Tampa Bay Lightning this year, we also saw continued strong revenue growth during Q4 in our existing local sports markets, Las Vegas, Salt Lake City and South Florida.

Local Media distribution revenue was down 1.6%. Expenses for the division were down about 1% year-over-year. Local Media segment profit was $50 million compared to $199 million in Q4 of last year's political cycle. For the first quarter, we expect Local Media division revenue to be up low to mid-single digits. The big story here, again, is growth in core advertising revenue, which we expect to be up in the mid-single-digit range. In addition to live 4 strategy that also helped drive fourth quarter growth, we have the benefit in Q1 of the Winter Olympics and the Super Bowl on our 11 NBC stations.

In the back half we expect Local Media division revenue to grow through record midterm election spending. In the 2022 midterm election, we took in about $200 million. This year, we're expecting strong spending in our markets due to U.S. Senate and gubernatorial races in Arizona, Colorado, Michigan, Nevada, Ohio and Wisconsin. We also are encouraged by ad impact reports showing local broadcasters and related media will retain about half of the projected record spending. We expect local media distribution to benefit from about 70% of our pay-TV subscriber households renewing this year. For the year, we expect low single-digit growth in gross revenue and low teens percent growth in net distribution revenue as a result of both the top line growth and declining affiliate fees.

Turning back to the first quarter guidance, we expect local media expenses to be up low single digits. Backing out the new expense of the Lightning, local media expenses are down. Now let's review highlights for the Scripps Networks division fourth quarter results and first quarter guidance. In the fourth quarter, Scripps Networks revenue was $199 million, down less than 8% compared to Q4 2024 and well ahead of guidance and the marketplace. Connected TV revenue was up nearly 10% for the same quarter last year and 30% for the full year. The division's expenses for the quarter were down 13% due to lower employee-related costs and operational expense reductions.

Scripps Networks segment profit was $64 million, and the segment margin was 32%. For the first quarter, we expect Scripps Networks division revenue to be down in the high single-digit range. We expect Scripps Networks expenses to be down in the low single digits for Q1. Turning to the segment labeled other. In the fourth quarter, we reported a loss of $8 million. Shared services and corporate expenses were $22 million, for the first quarter, we expect that line to be about $27 million. The expected increase is due to higher medical claims and increased insurance premiums.

For the fourth quarter, we reported a loss of $0.51 per share. The quarter included a $19.5 million noncash charge for our held-for-sale core TV assets, $2.4 million in restructuring costs and a $2.4 million loss on extinguishment of debt. These items increased the loss attributable to shareholders by $0.20 per share. In addition, the preferred stock dividend has a negative impact on earnings per share even when we don't pay it. This quarter, it reduced EPS by $0.18. We -- now I'd like to share our full year guidance for a few below-the-line items.

For 2026, we expect to pay cash interest of between $180 million and $190 million, cash taxes of $15 million to $20 million, capital expenditures of $60 million to $70 million and depreciation and amortization of $140 million to $150 million. We also required to make a minimum contribution of $4.5 million to our pension plan this year. On December 31, we had no borrowings outstanding on our revolving credit facilities. Cash and cash equivalents totaled $28 million and net debt was $2.3 billion.

Also during the quarter, we paid down $55 million on our B2 term loan. Net leverage at the end -- at year-end was 4.8x per the calculations in our credit agreements. Looking ahead to the end of 2026, I expect a meaningful reduction on our -- in net leverage ratio as we execute our plan to improve EBITDA and reap the benefits of a robot midterm election cycle, our scripts port strategy and accretive M&A and pay down debt. Improving the balance sheet and reducing both our debt and leverage ratio remain our highest capital allocation priorities. And now here's Adam.

Thank you, Jason. Good morning, everybody. We were very pleased to close out 2025 with strong financial results that have again met or exceeded expectations across the board. We delivered these results by doing exactly what we said we'd do, getting more from the assets we have, our local stations and our networks and executing with focus and discipline. What does that look like? Well, in the Scripps Network division, we exceeded our full year 2025 guidance by delivering nearly 700 basis points of year-over-year margin improvement. This success was driven by our live sports strategy, our streaming revenue initiatives and disciplined expense management. .

In Local Media, expenses remained flat for the year even as we brought on new growth driving local sports rights. We've kept expenses down partly by driving down network affiliate fees, reflecting a fundamental shift in the network affiliate dynamic that we expect will continue working in our favor. Now we're building significant momentum for 2026. This year, we expect our financial performance to be buoyed by record midterm election spending, local sports partnerships that are driving industry-leading core advertising performance, national professional sports on Ion, the Winter Olympics and the World Cup continued Connected TV revenue growth that outperforms the market and accretive M&A.

Two weeks ago, we announced an enterprise-wide transformation plan designed to improve operating performance and unlock new value. As part of that plan, we will grow our enterprise EBITDA run rate by $125 million to $150 million by 2028. We'll achieve this improved EBITDA through cost savings and just as importantly, through revenue growth initiatives. We're leaning hard into the opportunities that technology, AI and automation can deliver to how we operate, the tools we use in our work and the revenue we generate. But we also are being thoughtful. After much research, experimentation and testing in the space, I can confidently say that this shift will enhance revenue and not diminish the quality nor the quantity of our work. On the contrary, making full use of technology is exactly what is necessary to modernize and improve it and to ensure we can stay committed to American audiences and advertisers.

While we're now unveiling our plan for investors and sharing quantifiable targets for financial models, we actually launched this effort a year ago. Last summer, we consolidated and centralized every technology engineering and IT function in the company to enhance efficiency and efficacy. We knew those changes had to be a precursor to this plan, given the role AI, automation and technology will play in our future. The plan we are now executing will improve EBITDA by nearly 1/3, taking full advantage of opportunities for efficiency. But make no mistake about it, this is not about contraction. It's about growth. For Scripps, it has always been about growth.

This company was founded nearly 150 years ago. Our founder, E.W. Scripps, was a savvy capitalist who understood from the outset that doing well and doing good weren't in conflict at all rather, they were critical to each other. EW's entrepreneurial spirit has often driven this company to take a contrarian approach to the marketplace and investors have benefited. For the entirety of our history, we have leaned into opportunities others overlooked. Starting with the company's founding, when EW built a newspaper empire directed at the working class, a segment of the population that have been mostly ignored by other newspaper bearings of his time. That customer-first approach has continued into more modern times, such as when we were laying coax cable in the ground, even as skeptics said no one would pay for television.

And when we built HGTV and the original Scripps Lifestyle cable networks, while peers focused on their high-margin newspapers. More recently, combining the Katz networks and Ion allowed us to diversify away from retransmission revenue, increase the revenue yield on our spectrum and move into the burgeoning marketplace of streaming. The networks business has allowed us to use ION stations to capitalize on our unparalleled reach with the collapse of the regional sports networks and to carve out a leadership position in women's sports, all of which is fueling the revenue growth performance differentiating us today.

Now you are witnessing yet another Scripps inflection point that builds upon this recent success. Whereas in EW. Scripps' Day, information, news and entertainment were scarce. Today, they are abundant. What is scarce is real human connection. Scripps is uniquely positioned to create value through a fundamental reorientation around what is becoming our company's greatest role in society today. That is during the time of political polarization, disinformation and discord, when Americans feel report feeling increasingly isolated in the loan, we see an open line for economic value creation by embracing the mission to help Americans make authentic personal connections.

Today, Scripps operates in the parts of media where the opportunity for connection is real and shared, local communities, live sports, trusted journalism and entertainment brands that still gather audiences across generations. These are environments that drive engagement deliver measurable outcomes for advertisers and create durable customer and consumer relationships. Because of our company's long-standing reputation for independence and community stewardship, we are uniquely positioned at this moment to deliver what Americans need most, a coalescing sense of purpose and connection.

Through our local neighborhood news strategy, we are connecting people to one another and to the communities where they live. Our sports and entertainment programming is connecting people to their passions, to their favorite teams and to one another through meaningful experiences. Our advertising products are moving past aggregating eyeballs to connecting brands and businesses with the valuable customers they seek and we're both growing and identifying new business opportunities similarly centered on the consumer and connection. Our transformation strategy has 2 major elements. First, we're going even further to improve our operating results. This is the EBITDA growth that I discussed earlier. It's the accretive M&A and portfolio optimization we've been undertaking as a result of the long overdue changes in the regulatory environment, and it's the continued focus on improving our balance sheet.

Becoming more efficient, leveraging technology, AI and automation and consolidation driven M&A are crucial to creating share held holder value, but they're not path to organic growth. In some cases, they're merely short-term financial engineering. And so the second aspect of our transformation, we grow organically. Our new company vision, we create connection is opening up opportunities that are both adjacent to our current businesses and outside of them, where we have a right to win. We expect both adjacencies and greenfield opportunities to produce benefits to the bottom line. For a good example of this strategy, look of what we're already doing with Scripps Sports. I defy you to come up with anything in this country that connects people to each other and to their communities right now more than live sports.

When audiences, advertisers, teams and leagues all told us that they were navigating distinct challenges in the fragmented media marketplace, we leveraged our unparalleled reach with linear television and streaming to solve their problems, moving us into an entirely new marketplace that is creating the revenue growth in our earnings that you're not seeing with our peers. That's a straight line between our focus on connection, the customers' problems to be solved and economic value for Scripps shareholders. Our company is palpably energized by the opportunity. Several weeks ago, we gathered more than 200 Scripps employees together to begin executing this transformation plan. And in the week since the circle has been steadily expanding.

Our colleagues across the country are engaged in this work and are excited by the opportunity to drive this important company further, faster and into the future. And so am I. The next few years will be pivotal as we accelerate our momentum. So I'm grateful that the Scripps board has decided to extend my contract until the end of 2029. I have the collective creativity and talent of nearly 5,000 colleagues behind me. I believe deeply in our ability to execute yet another scripts transformation, and I am committed to seeing it through. And now operator, we're ready for questions.

[Operator Instructions] Our first question comes from the line of Dan Kurnos of Benchmark StoneX.

Great. Thanks. First, Adam, let me just say congrats on your extension. You've obviously shepherded the company through a lot of turbulent times, so I think well deserved for you. So with that, I guess 2 questions. First, just on the broader environment. Adam, you've always said and you clearly have demonstrated so far that you're open to unlocking value for shareholders, a lot of moving pieces here with both acquisitions and divestitures. Do things change? Like how are you contemplating in sort of the -- we're running tangent here. We've got a transformation plan. But if the FCC eliminates the cap and then we see Nexstar, TEGNA close, does that change the landscape and the way that you think things will maybe fall into place or other opportunity sets that could come about? And then I have a follow-up. .

Yes. Thanks, Dan, and I appreciate the kind words. From my perspective, transformation actually positions us better for the possibility of participating in M&A. But as I said earlier, consolidation, which I absolutely think is an opportunity and necessary is financial engineering. And what we're after, what even a post-consolidation scripts would have to be after is organic growth. Relative to M&A, it's important to note, we've been active in the M&A marketplace from the outset, executing our plan to improve the performance of our portfolio and to improve the balance sheet. Every deal that we have announced has either put cash in our pocket or it will increase segment profit and some benefit both. .

I'm referencing the announced sales of the 2 stations at premium sellers multiples, the gray swap, the sale of Port TV, the acquisition we announced today of more than 20 stations from Ino that will fold into our networks portfolio and increased segment profit margins and honestly, I don't think this work is finished. I think we'll continue to look for opportunities to optimize our portfolio and take advantage of changes to the regulatory environment.

So with that said, Adam, I think you gave a couple of examples of how you plan on driving organic growth, but mean where will we see that? How long will it take to achieve? You've done great things with CTV, for example, an Ion. Obviously, local sports and women's sports has been a driver. I assume you're not going to give us the road map on some of the adjacencies or even sort of some of the tangents given tie reasons, but is there any way for you to help us speak through when we start to see some of these changes and to what degree? And any other incremental examples you could give us besides the one you gave in your prepared remarks.

Yes, absolutely. I mean, look, I think the growth is going to come from both work that we're doing to enhance the yield on our current businesses and from new opportunities we're seeing in extensions and adjacencies to the businesses we're in now as well as new marketplaces of opportunity where we have the right to win. The platforms we have that we own today are so powerful. We see massive opportunities to leverage them to grow enterprise value, significant opportunities ahead. I would also say there's significant top line upside from things like revenue yield management, improvements to seller productivity and accountability and additional centralized decision-making. This business has traditionally been, I would say, slow to adopt technology in the back office and the front office, this industry. .

And there's been a fundamental shift in the way technology opens up that opportunity, and we're going to change that tradition at Scripps. We're going to really lean into that opportunity to both improve the efficiency of the business, but also improve the yield that we drive from our current assets while we explore and then move after other growth opportunities that we expect to be focused on bottom line improvement.

Our next question come from the line of Michael Kupinski of Noble Capital Markets.

A couple of questions. You mentioned some key advertising categories were driving core and congratulations on a very strong quarter in the fourth quarter. I was wondering how some of the more interest-sensitive categories are performing like auto and some of the housing categories are performing in the first quarter? If you can just kind of give us a sense of how that's performing in the first quarter.

Yes. And so we guided to core up mid-single digits in the first quarter, and we saw January start pretty strong, 4 of our top 5 categories were up in January, 2 of them actually up more than 10%. And so there are some categories you mentioned, for example, home services type categories that maybe is a little bit weaker right now. But services, our largest category continues to be strong, gambling has been strong, and automotive has showed some relative strength as well.

I would also add, Mike, besides the category level view, first quarter, particularly in local is starting off very strong as a result of the sports partnerships that we have and the upside we have to continue the growth we saw in the fourth quarter with those partnerships.

Yes. And I think an important point there, we mentioned the script, but I want to reiterate it. It's not just the addition of the Tampa Bay Lightning, which is a new contract for us. Every one of our NHL deals in local is growing in the first quarter versus the prior year. So we're not only winning the deals, but we're continuing to grow them -- once we win them. .

Got you. And then in terms of political, I know that in the last cycle, we had such strong political that political is being booked in advanced. And so I was just wondering how much visibility do you have in Q2 and Q3 in political advertising at this point?

Thanks, Mike. Yes, I mean, we're looking at the races. The portfolio -- our portfolio lines up quite nicely. We have 16 governor races, 7 of them, I expect to be highly competitive. There are 6 states and 26 U.S. congressional house races that are expected to be pretty competitive. As it relates to the U.S. Senate, I'd say we have a couple of very competitive races, notably in Kentucky to replace Mitch McConnell and the special election that will be taking place in Ohio to replace J.D. Vance. The good news is broadcast is going to take the lion's share with projections of about 51% of total political spend going to broadcast. But I think it's also really important to point out that Scripps is not built like other local broadcasters because of our network business and the success we have in connected TV.

So we're also competing in a really meaningful way with our CTV inventory and that's also going to benefit us during political years. For example, during January, we already saw significant activity in political on CTV with the bulk of that spend concentrated in Texas, Kentucky, North Carolina and Illinois. So we're taking dollars out of some of the markets today that we don't even have local broadcast in. So when you think about our opportunity in political, it is going to be reflected both in linear with local broadcast and a very strong year with linear political as well as TV.

Got you. And then in terms of your targeted $125 million to $150 million in annualized EBITDA growth, can you break down how much of that is expected to cost savings versus revenue initiatives? And then also, can you break down that between the segments? .

Yes. So Mike, we are looking across each and every revenue and expense line. I don't think we're going to provide a breakdown of exactly how that's going to hit, but I will tell you, you're going to see an impact across the enterprise, each segment, corporate, there's a focus both on the revenue side, as you said, revenue growth, improving our yield, identifying adjacencies, identifying greenfield opportunities, but also looking at operational efficiencies within our workforce, third-party spend, all those sorts of things. I mean, we are turning over every rock here.

Yes. Just a little additional commentary, that number, $125 million to $150 million that's a bankable plan. I think you can take that to the bank as far as I'm concerned. And that should give you a sense as to what the split looks like. I do think there's going to be significant top line opportunity and growth. as a result of this transformation, as I talked about, this is a growth-oriented transformation as we reorg the company towards our new vision of we create connection but the EBITDA improvement will absolutely be bankable.

Got you. And so Adam, if I hear you correctly, then if there were let's say, other disruption and things like that, that you would then look at further cost reductions to achieve that target. Is that what I'm hearing?

I'm not sure I understand .

Like in other words, like if there were -- if we did go through, let's say, some disruptions in the economy and things like that, that you're saying that the $125 million to $150 million is bankable in terms of achieving that goal that you would look at other cost reductions to achieve that?

I am very confident in the $125 million to $150 million target. Just like sort of frame it up, we've spent months examining every opportunity in every corner of the business and the company, the front office, the back office, as I said, I'm confident we'll deliver on the EBITDA targets and be a stronger, more nimble and more aggressive company. This is not some sort of notional plan. This is a well laid out and executed plan. .

Our next question comes from the line of Steven Cahall of Wells Fargo.

A few more on the transformation plan. Maybe first, Jason, the $20 million to $30 million that you talked about for [indiscernible]. Is that a run rate number? Or do we think about as that is the actual contribution of EBITDA dollars that are additive to like a base case for 2026. And Adam, I mean, this is a massive undertaking. It's very ambitious. I think it's like 30% additive to EBITDA, and you talked about how it's bankable. How do you just think about some of the risk of revenue impact? I mean, I imagine a lot of these things either touch current employees, maybe even spook sometimes a little bit of employees in this age of AI disruption. So how do you go about managing the employee base to make sure that everyone is able to execute against this and you don't face any of that? And then I just have a quick follow-up on M&A.

Steve, I'll go first. So the $20 million to $30 million is the in-year impact. So it's additive to '26 and any baseline model you have there. The run rate annualized savings we would expect as we exit the year this year is $60 million to $75 million.

Yes, Stephen, I mean there's no question this is a really ambitious undertaking. But I'll tell you, we have engaged employees across the company in the process. This is not a top-down process, this is a bottoms-up process that has really given many of our employees a tremendous sense of agency and so there's a lot of energy in the company to get this done. Does that mean everybody is on board with the changes? Of course, not. But I think the vast majority of our employees recognize that this company is just really, really important to our stakeholders, not only our shareholders, but the communities that we serve as well as, frankly, our democracy at this time. And they are bought into this role that we can play in our society. .

Over the last couple of years, we have already been aggressively upskilling our employees relative to the use of automation, technology and AI, on nearly every town hall I'm on, I talk about the importance of employees upskilling and the role that technology is going to have not only in this company and not only in this industry but more broadly in the environment the workplace environment overall. And that's really a part of, I would say, the consistent approach we've taken to working with our employees to communicate with them with [indiscernible] and with compassion.

And so I feel really good about the behavioral change that will come as a result of this transformation. This isn't just the transformation of workflows, processes. This is actually a transformation that will see us evolve a much more nimble, aggressive and competitive company where our employees are both combining a level of accountability and performance orientation as well as sort of the mission approach that Scripps has always been known for. So I feel really great about our employees and their engagement in this process.

Great. And then just on the M&A front, I mean, I know we don't like to talk about sort of theoretical things that may or may not happen. You had a very specific situation over the last few months. I get the impression that the way Sinclair came, wasn't necessarily the way that the Board or management like to engage. But I get the impression that after a proposal, things have kind of now ended. So I guess, is that correct that they've ended? And can you talk about maybe why there isn't scope for more engagement around that potential transaction?

Yes. Look, back last year, the Scripps' Board of Directors made it clear that Sinclair's proposal wasn't in the interest of Allscripts' stakeholders nor shareholders, and they rejected the Sinclair acquisition proposal. Nothing new has happened since, and I really don't expect it to. .

Our next question comes from the line of Craig Huber of Huber Research Partners. Your line is open, Craig.

Great. My first question, when you talk about the cost savings planning or you have. Can you talk -- give me some examples if you would, please, about how AI is going to help you save costs, improve your product, et cetera? Just give us some examples on that front, please.

Sure, Craig. So look, there are both significant top line and expense side opportunities using technology and AI. On the expense side, I think opportunities include additional centralization and automation, leveraging cloud computing for production workflows, enhancing news gathering, marketing operations and enhancing external spend. Again, 2 important points to be made about these examples, these aren't broad themes or a broad brush sort of ideas, their plans with real business cases. And that's how I have the confidence to know that we're going to execute on that $125 million to $150 million in EBITDA improvement.

Second, I believe strongly that the cost savings will actually improve our products because I think we're going to bring greater efficacy, more agility to the company, both content and advertising will be improved. And I think it's going to improve our service to audiences and advertisers and, of course, improve our opportunity for top line value. Going back to Steven's question, I make sure I answered it clearly. I don't see this in any way as diminishing top line value. I see this as actually enhancing top line value.

And then when you say helping with the news gathering just go a little bit deeper on that, please, and the content. Just how AI is specifically going to help you on that front, please? .

Yes, look, over the last couple of -- yes, sure over the last couple of years, as fragmentation has proliferated and people have turned to more and more platforms for their news and information. We have continued to ask our employees to do more with less, and that has diminished the quality of our product. AI opens up the opportunity for us to actually ensure that our reporters, our field journalists are spending their time doing that which they got into the business to do, actually report to ensure that they are connecting with the communities that they serve to ensure that they are speaking directly to our consumer to ensure that they're actually able to attend the news events and not have to rush off in order to then post something on the web and then immediately put something on social media and then do 4 live shots.

And -- so using AI in order to care for some of those things is already opening up opportunity for our journalists to spend more time doing journalism and less time doing what I would characterize as some of the performative aspects or the distribution or production aspects of their job. We want them creating the content. That's where the value is, that's what differentiates us from the commodity news and information that's out there. We don't want them spending their time rewriting broadcast scripts into an AP style story that can go on the web. There's technology that can care for that, and we are already using it.

Great. I appreciate that. And then talk to us, if you would, please, about your expectations maybe for the timing of possibly getting rid of the 39% ownership cap and maybe also maybe touch on -- where do you think things are at now in terms of down the road here being able to negotiate with the virtual MVPDs on your own behalf as a local TV station operators as opposed to relying on the networks. What do you think the path is to get that fixed to get it resolved? Do you have to go through Congress? Or can the FCC deal it on that second point. .

Yes. Well, I mean, I think that you asked two different things. I'll talk first about maybe my view on the cap. Look, I think the FCC recognizes that local news, local sports and local programming. Now entirely depends on the durability of local television, right? The newspapers are just a shell of what they are. And standing in the way of that durability are the rules that essentially prevent consolidation, both in market and nationally. So we think the lifting of the cap and consolidation is necessary to compete on an equal playing field with the national diversified media companies, frankly, to give us the leverage necessary with the networks that are already using their leverage essentially to impair our ability to serve local communities. .

And I think the Chairman rightly recognizes that using their economic leverage to control the local airwaves is a de facto violation of the Communications Act. And so I believe that the Chairman and the FCC will ultimately rectify that by both allowing limited in-market consolidation as well as lifting of the cap. You heard us announce today that we're acquiring the rest of the stations that we divested when we acquired ION, the in-use stations, that will require a waiver or a lifting of the cap to get done, and I have a lot of confidence that we'll be able to see that through.

I believe this commission is acting in a way that will rebalance the marketplace. I don't think it's about favoring one platform or another. I think it's just in a way that's trying to make things more fair so that the American people know that they can rely on local television for generations to come. At the same time, I'm now more optimistic that the DOJ has come to recognize that its approach to the local market that definition should evolve because I think the evidence is fairly obvious to anyone who examined it. The net effect should be that the FCC will adopt the court's ruling that strikes down the prohibition against owning two big 4s and then the DOJ will recognize what Chairman Car already has. We don't just compete against local TV stations. We compete for ad dollars in a crowded and a complex video marketplace and some in-market consolidation is not only okay, it's actually going to benefit consumers because it's going to safeguard journalism in the markets that we serve.

As far as the virtual MVPDs I'm not sure that, that's top of anybody's priority list right now from a government regulatory perspective. Clearly, we would be better off, and we think that both the networks and the local affiliates would be better off if we were to negotiate directly with the virtual MVPDs. In fact, in some cases, I think the virtual MVPDs and the network relationship is compromised because of cross-ownership. So I would expect us to continue beating that drum. And I know that there are folks in Congress that agree I do think it probably takes a reclassification of the virtual MVPDs as MVPDs. But you just saw that happen in Europe. And frankly, I don't think there's any reason why we should differentiate between the delivery of our product over WiFi or coax or broadcast. To me, all the same rules apply, the same copyright rules apply and frankly, so should the same business dynamics.

So just a quick follow-up there. So what do you think the timing is to lift or eliminate the 39% ownership cap, you might get done here in the next, say, two months? .

I mean honestly, Craig, there are people far smarter than I am who or better connected than I am who might know that answer? Any answer I gave you would be pure speculation. I think it's in the offering -- I think it's in the offering. I think it's coming, whether it's within two months, I don't know. My job is to run this company in a way that adheres to the rules of our regulator and we will continue to do that while recognizing that we have a regulator who is certainly open to doing the things that are necessary in order to benefit the business and rebalance the ecosystem.

Sorry, one last question. Just can you give us a little more meat on the potatoes view? What about this ion transaction you're looking to do to pick up these additional TV stations here? What it means for your company? Why you're excited about it? Maybe financial metrics. I don't know you can go in that detail or not...

Yes, Craig. So just a reminder that we had to divest these stations to comply with the FCC rules back in 2021. And with current regulatory environment, we think it's the right time to reacquire them. The ownership of these stations is immediately accretive from the segment profit and a margin perspective, plus we also get some favorable tax benefits. So we have -- this transaction will ultimately relieve a significant onetime tax liability we've been carrying on our balance sheet. So when you kind of put all of that together, it just seemed like the right thing to do.

There is some regulatory approval, as we said. But ultimately, this deal allows us to see an immediate lift because right now, we're paying an affiliate fee to the annual party for these stations, which goes away as soon as this transaction is closed.

Our next question comes from the line of Shanshan of Barclays.

I realize it could be smaller, but could you provide any additional color on the proceeds from the Court TV sale and maybe any economics in terms of multiples there? And then I guess, are you guys looking to sell any other assets like core TV? .

Yes. Thanks, Jana. So we were really pleased, as we said, to buy a fund buyer for such a great and distinctive brand like Core TV. We are not disclosing any specific financial terms. But I will point out the transaction includes both a cash consideration upfront as well as a long-term distribution agreement. So that kind of ultimately created the economic package that we felt was in our best interest to go ahead and execute. .

And Shannon, I guess, I'd say broadly, we will continue to look at opportunities in the M&A marketplace, particularly in our Local Media division where we have the opportunity to get premium multiples for noncore assets that we think can both improve the operating performance of our portfolio and help us improve the balance sheet. .

And then just on Scripps Networks. I know in 4Q and 1Q, when you guys don't have the WNBA, there tends to be a bit more pressure on Scripps Networks, top line. I think the guide was a little softer than expected, even under the seasonality. So just you guys talked about positive commentary on political and CTV and growth in advertising in that channel. I guess, is the guidance based on heavy live sports and Super Bowl and Olympics in 1Q that converted some ad dollars in that channel? Or are you seeing increased competition on the CTV side with more and more players adding kind of SaaS channels? .

Yes, I can take that. So from a Q1 guide perspective, you are correct that network because of the sports franchises we have there typically sees a bit more strength in the summer months when we have the WBA and WSL and so as such, I think we would we would be looking to have probably a more favorable guidance comp in second and third quarter. When you kind of unpack the guide of down high single, there's a couple of things. And one of which I just talked about on my the last question is core TV. -- core TV is going to create a negative comp for us as we move forward through the rest of this year. So the guide we gave had 5 weeks of revenue for core TV in it versus the prior year, which had obviously the entire quarter. So -- you have the core TV comp issue there. You also -- we did see some weakness in DR pricing as we entered the quarter tied to kind of just some of the macroeconomic factors that would impact the DR category. And then the last thing is, and it ties back to my comment on sports, we talked quite a bit last year about the upfronts.

And the fact that the upfront from last year, which is currently rolling through our P&L, generally outside of sports programming was a weaker upfront. And so we saw that reflected in our Q4 results in our Q1 guide. But we are -- we did do really well in the upfront last year tied to our sports properties. So we hope to see that we'll see that benefit as we move into the second quarter.

On the fast front, I would say, yes, there are more fast channels out there than ever. But Frankly, our channels are among the most premium channels in the marketplace. We have terrific partnerships with the distributors. And so we don't expect to see growth abate. I mean, I think we've forecasted double-digit growth, and I expect to continue to see that. .

Our next question comes from the line of Ken Silver of Stifel. Ken. .

Just 2 topics. First, on the core advertising guide that you gave for the first quarter, I think you said up mid-single digits. I just want to clarify, does that include the Super Bowl and the Olympics .

Yes, it does. Yes, it includes the Super on Olympics. We have 11 NBC affiliates. So we did see some benefit tied to those as well as a lift tied to all of our local sports rights or NHL deals we have. .

Got it. So I guess, I don't know if you want to -- if you want to parse it a little bit, like if you excluded the Olympics and Super Bowl, any sense of how much it will be up? .

So I don't think we're kind of breaking that out. We did see strong performance in our Olympics revenue. We were up about 13% versus where we were back in 2022. And saw a bit of a lift on the Super Bowl as well, switching from Fox last year to NBC. But I don't think we're breaking out beyond that level of detail. .

I think you also said that our partnerships with live sports on the local level was already seeing significant growth in the first quarter...

Also, which each of our NHL contracts. I mean Tampa Bay is obviously new in the first quarter, but all of the rest of our NHL contracts are showing nice growth year-over-year in their second and third year with us. .

Hopefully, you've got a bigger lift now after the gold medal. So hope that goes well. And then just -- I wanted to just ask you one thing. You mentioned in your prepared remarks about lower reverse comp to the networks and maybe this is a review. But can you just talk about that, why you expect it to be down? .

Yes. So we've been talking about that for the last couple of years. I feel like where we -- there was a paradigm shift from affiliate fees from increasing to flattish over the last, call it, 2 to 3 years. And now as we see continued pressure on top line with subscriber churn and frankly, in terms of the product where there's less exclusivity, more take the MBA example with NBC where a lot of that product is available on Peacock. We've been able to successfully rearenegotiate decreases as we move forward on the affiliate fees. And so while we do expect to see some continued growth on our top line retrans revenue, and we guided to kind of up low singles, I think the bigger story is the expectation for declining affiliate fees this year.

Okay. And you mentioned NBC talk, but is it with the other networks, too? .

Yes. Yes. .

We have a follow-up question from the line of Craig Huber of Huber Research Partners. .

Just a couple of follow-ups, if I could. Adam, how would you describe the advertising environment right now, say, versus a year or 2 years ago? Do you feel it's any better out there, the environment that you're operating in, both on the Scripps network side as well as the local TV station side? Just give us some puts and takes on how you're feeling broadly on that front.

I'd say probably the same, and I chalk it up to macro uncertainty. In the same way that Wall Street has its days in which uncertainty drives it up and drives it down. I think on the local and the network side, that level of uncertainty, an unclear picture on what tariffs are going to be has had an impact on marketers' willingness to spend and has often resulted in buys being placed later and a little bit more of a murky environment for media. .

I don't see [indiscernible]. I don't see advertising recession as much as I see just general softness. I will say, our strategy in sports has been all about acquiring the premium inventory for the must-watch programming that advertisers still flock to. And so when I look at what we've got with respect to Ion and women's sports and the way we've been able to leverage that inventory in order to drive value across our portfolio in networks, I think that's been a huge driver of success for us. Likewise -- and you can see that when you compare us to our peers and networks. And likewise, in local, sport has opened up entirely new categories of advertisers and new advertisers that weren't necessarily local television advertisers that come to the table for us with our local sports franchises.

So again, while we have seen what I would characterize as sort of a sideways environment, we have been excelling at opening up new opportunity for us and expanding the number of advertisers and the kinds of advertisers we serve because of the strategies we're executing.

Thank you. Ladies and gentlemen, that is all the time we have for Q&A and does conclude today's conference call. Thank you for participating. You may now disconnect.

Good day and thank you for standing by. Welcome to the Third Quarter 2025 E.W. Scripps Company Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Carolyn Micheli, Head of Investor Relations. Please go ahead.

Thank you, Dede. 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 Chief Financial Officer, Jason Combs; and then Scripps' President and CEO, Adam Symson. Here's Jason.

Good morning, everyone, and thank you for joining us. We are pleased to be reporting a third consecutive quarter of results that [ met or ] exceeded expectations on nearly every reporting line, fueled by our Scripps Sports strategy and strong sales execution as well as tight expense controls.

On the [ NA ] front, we've been moving ahead with our plans for our station swaps with Gray and the sale of Fox affiliate WFTX in Fort Myers, Florida. And last week, we announced the sale of WRTV in Indianapolis. We were very pleased with the valuations we received on the Fort Myers in Indianapolis stations. Both sale prices represent multiples well above current local broadcast station transactions, 9.2x 2-year blended EBITDA for WFTX and 8.5x for WRTV in Indi and actually 9.2x if you adjust for the impact of the [indiscernible] last June. These 2 cash sales will total $123 million creating significant cash inflow that will improve the health of our balance sheet and provide for some modest delevering.

During the quarter, we closed on the placement of $750 million in new senior secured second-lien notes. We locked in a very good rate of 9.875%. Proceeds were used to pay off our senior notes set to mature in 2027 to pay down more than $200 million of our 2028 term loan and to pay off part of our revolving credit facilities. We have since paid off the remaining balance on the revolver, a full quarter ahead of our guidance. We'll get back to that reduction in a moment. But first, let's review third quarter financial results and fourth quarter guidance.

During the quarter, our Local Media division revenue was down 27% due to the absence of political advertising revenue compared to the prior year. Core advertising revenue was up nearly 2%. We grew national advertising revenue, driven by an increase in our largest category, services. Our sports strategy helped drive that Q3 performance as well. Local Media distribution revenue was flat. Expenses for the division were down more than 4% year-over-year, aided by lower employee-related costs. Local Media segment profit was nearly $53 million compared to $161 million in Q3 of last year's political cycle.

For the fourth quarter, we expect Local Media division revenue to be down about 30%. We expect core revenue to be up about 10%, bolstered by our sports strategy, specifically our newest NHL partnership with the Tampa Bay Lightning, as well as the comparison to last year's political advertising displacement of core. We expect Local Media expenses to be flat to down low single digits, inclusive of the new sports rights expense for the Lightning.

Now let's review the highlights for the Scripps Networks division third quarter results and fourth quarter guidance. In the third quarter, Scripps Networks revenue was $201 million, about flat compared to the year ago quarter. Along with other companies in the National Networks business, we dealt with economic uncertainty. And yet we look to have delivered significantly better results than others. Connected TV revenue was up 41% year-over-year. Just a reminder that our Networks division TV revenue comes from the extensive streaming distribution of our national networks. Advertising demand continues to be strong for our quality networks programming. In addition, inventory for both WNBA and National Women's Soccer League games commands premium advertising rates. The division's expenses for the quarter were down 7.5% due to lower employee-related costs and operational reductions we made last fall at Scripps News.

Scripps Networks segment profit was $53 million, and the segment margin was 27%. For the fourth quarter, we expect Scripps Networks division revenue to be down in the low double-digit range. This is being driven by a number of factors. We have more than $10 million of networks political revenue in last Q4. We we have a lower percentage of upfront advertising compared to the year ago quarter, and our usual Q4 Medicare open enrollment advertising is lower right now, partially due to the government shutdown. We expect Scripps Networks expenses to be down low double digits.

Turning to the segment labeled other. In the third quarter, we reported a loss of $7.6 million, about the same loss as Q3 2024. Shared services and corporate expenses were $21.4 million. For the fourth quarter, we expect that line to be about $21 million. For the third quarter, we reported a loss of $0.55 per share. The quarter included a $7.6 million loss on extinguishment debt, $6.5 million of financing transaction costs, a $1.4 million write-off of deferred financing costs and $2.7 million in restructuring costs. Those items increased the loss by a total of $0.15 per share. In addition, the preferred stock dividend has a negative impact on earnings per share even when we don't pay it. This quarter, it reduced EPS by $0.18.

I have an update to a full year guidance number that shows improvement over our previous guidance. We now expect our cash interest paid to be between $165 million and $170 million. This reduces the projected cash we need for interest, coupled with the improvements we announced last quarter to lower the cash we need for taxes and CapEx, this will address significantly better cash flow this year than originally anticipated.

Turning to our 2 financing transactions this year. We were able to refinance all of our 2026 and 2027 maturities and a portion of our 2028 debt, while limiting the increase in our cost of capital to only 1% despite the current elevated rate environment. We expect to pay off the remaining reduced 2028 term loan balance through cash flow before it comes due, leaving us with no other bond or term loan financings to address until our 2029 senior notes.

At September 30, we had no borrowings outstanding on our revolving credit facility and cash and cash equivalents totaled $55 million. Net leverage at the end of Q3 was 4.6x, a significant improvement from 6x in Q2 of last year. Our capital allocation priorities remain the same. We're focused on using cash flow to reduce the amount of our debt and we place our highest priority on the reduction of our debt and the lowering of our leverage ratio.

And now here's Adam.

Thanks, Jason. Good morning, everybody. Thanks for joining us. If you've been waiting for proof that our strategies are working, our strong third quarter results, our fourth quarter guide and the full year performance they signal should make it abundantly clear, we are seeing real measurable progress at Scripps. We're delivering exactly what we have promised in recent years. We're growing our sports and connected TV revenue streams.

We are closely managing expenses resulting in improved margins. we are executing swaps in station sales to improve our local station group margins and pay down debt with more likely to come, and we have been using cash flow to reduce our debt and improve our leverage ratio with more certain to come. We're delivering an outsized ad sales performance compared to local and network peers, and we can credit 2 Scripps' growth strategies in particular. These strategies reflect how our mission of deepening our connections with audiences and advertisers is driving business value. First was our decision, unique among local broadcasters to launch Scripps Sports.

Over the last 3 years, we have charged full speed into partnerships with the WNBA, the National Women's Soccer League and a host of sports teams and other leagues. Ahead of the market, we saw the opportunity in women's sports, and we carved out a leadership position there for Ion. At the same time, we developed a new model for local broadcasting and sports rights. In both cases, we saw where the momentum was building because we understood the passion sport fans have for their teams and because we recognize the value of that authentic connection for our brands and for our advertisers. As you can see from our results, this strategy has been a tremendous success.

On the national network side, revenue from the WNBA on ION nearly doubled this season which is an amazing pace, especially when you consider Caitlin Clark was off the court for much of the season. The WNBA is a big draw for our clients in the advertising upfront, commanding premium ad rates and increasing volume by about 90% this year over the previous upfront with total sports volume up over 30%. Advertisers aren't just taking notice of women's sports. They are competing for this inventory because they understand the demographic and cultural moment we are capturing. The WNBA, the NWSL, our recent successful premiere of the women's professional track competition, Athlos and the upcoming women's college basketball Fort Myers tip off are helping to differentiate Ion and the Scripps Networks in the ad market.

On the local station side, we now have full season agreements with 4 national hockey league teams, the WNBA champion Las Vegas ACIS, and NWSL team and the Big Sky College Conference. These partnerships are driving up core advertising revenue by several percentage points a quarter again, real measurable growth. Given the successes at Scripps Sports and with sales execution, we expect to get bolder in our pursuit of sports, following the framework that has paid off so well for us. Affordable and sometimes overlooked national professional leagues, women's sports and other local teams that need to reach their full geographic markets. This has been our winning formula, and we plan to continue to build on it with the same discipline that got us here. We won't chase rights we can't afford, but where we see opportunity to create value will be aggressive.

The second strategy we can credit as important as sports was our aggressive pursuit of distribution on streaming services for our networks. Audiences are turning to ION, ION mystery, Bounce, Grit, lag, Court TV and Scripps News are nearly all of the major streaming and virtual MVPD services and platforms. That distribution has given us an advertising revenue stream that went from 0 to a projected 2025 amount of more than $120 million in just a few years. Think about that. We created a 9-figure revenue line by being early and aggressive in securing connected TV distribution. Streaming now constitutes 20% of all Scripps networks viewing and we continue to increase our offerings with more streaming content. We're building upon our beachhead with new fast channels and new distribution, like the partnership we announced last quarter that integrates the Scripps networks into Peacock. We have plenty of room for ongoing double-digit growth in Connected TV revenue. While you can track the impact of our revenue growth strategies and the results, our focus on expense management and transformation should be just as plain to see. With a consistent downward trend this quarter, even including incremental sports rights, which benefit us with revenue growth.

On the local side, importantly, network fees are flat and reflect the important change in the network affiliate dynamic we've been foreshadowing for some time, a trend we expect to continue in the right direction going forward. On the Scripps Network side, we expect to deliver a 400 to 600 basis point year-over-year margin improvement through efficiency initiatives and a leaner expense base. Fiscal discipline is a key part of the financial improvement plan, and you can expect it to continue as we balance expense management with strategic growth in the investments. But expense control only gets you so far. The Scripps transformation office led by Laura Tomlin is spearheading significant initiatives that will make a sustained and measurable impact across the enterprise. We're leaning hard into technology and AI in pursuit of meaningful return on investment, both in the back office and in our operating units. Early results are pointing to real value.

In our newsrooms, we're already leveraging automation and AI to strengthen our core mission of local journalism while improving the economics. These workflow tools allow our journalists to spend more time out in our communities developing relationships, gathering information and reporting the news. Likewise, automation and AI are helping our sales teams more efficiently identify new prospects and advertising categories. allowing them to spend more time building relationships. This is just the beginning. I expect to share a lot more on the important work of our transformation office early next year.

Finally, I'll close with some commentary on our M&A strategy. As I've said from the start, we are totally focused on optimizing our portfolio of stations to structurally enhance performance and economic durability in service to our vision to create connection. We're meeting the moment with a bold plan that will remake our portfolio for the future and improve our balance sheet given the premium sales multiples we've commanded. We've already announced a station swap deal with Gray where we are exchanging 2 Scripps stations for 5 Gray stations, a transaction that improves our market positioning and creates immediate efficiency opportunities. We also announced station sales in Fort Myers, Florida and Indianapolis for cash. The sale prices represent premium multiples for the industry. These are quality stations we agreed to sell only at strong valuations, and the cash we receive will go directly to delevering, and I'm committed to continuing this work.

So you can see that we are realizing strong success in executing our ongoing plan to balance fiscal discipline with revenue growth to the benefit of shareholders. We are not just talking about improvement, we're delivering it quarter after quarter. The connections we're building with audiences through sports, news and strategic distribution are translating directly into advertising revenue growth. The operational discipline we're exercising is expanding margins. and the capital allocation decisions we're making are strengthening our balance sheet. We are heading into 2026 with significant momentum. The midterm election looks to yield record spending across the advertising ecosystem.

We will capitalize on our growing portfolio of revenue-driving sports assets and our strategic streaming distribution agreements position us well to capture expanding revenue in the CTV marketplace. Our strategies, our results and the opportunities ahead give you every reason to believe in the Scripps company its management team and its future.

Operator, we're now ready for questions.

[Operator Instructions] And our first question comes from Dan Kurnos of the Benchmark Company.

Yes. Obviously, a good print from you guys good execution across the board. Adam, maybe just more of a higher level, and obviously, Jason, you can pitch in. Two, you guys have done really well with kind of what you said on some of the -- I mean you call them noncore asset sales, but some of the TV station stuff that you've gotten for really high multiples here. How much more would do you guys think there is to chop there? Obviously, there's got to be some sort of level where you think the portfolio still needs scale, but you're finding good value in the marketplace. And subsequently, there are still other people out there in the marketplace potentially looking for dance partners. So do you think that's still an option that's on the table? And then I have a follow-up.

Yes. I mean, broadly speaking, I do think there's significant opportunity there still for us to identify accretive opportunities for us to buy, sell and swap stations. We've been engaged in discussions around these opportunities to optimize our portfolio. We think opportunities that are going to continue to be available to us and that we'll continue to pursue. Relative to sort of, I think, the larger question around transformational opportunities, I'll say sort of what I've said many times before, we are absolutely committed to doing the work necessary to unlock and maximize shareholder value, period. I just don't think I could be any clear there. There's no question that transformational M&A at this moment can be really accretive in addition to the work we're doing with optimizing our portfolio, and we'll continue to operate in that marketplace.

Very helpful color. And then just on the network side, I appreciate the political call out. So it sounds like that's about 4.5 points of the growth delta. Look Adam, you obviously talked about CTV ramping. I know it's still a relatively smaller portion but growing very rapidly. So can you guys just kind of parse out the impact of the government shutdown, what's going on with scatter, what's going on in DR and then also what you're seeing trends near term in the CTV component just so we have a better understanding of the mix?

Yes. So I can try to unpack that a little bit. So we guided to down low double digits, a lot of different things factoring into that. You alluded to one of the meaningful ones in there, the political more than $10 million last year that's not going to occur again this year. I will say we also have seen some weakness in DR pricing as we entered the quarter. Tariffs continue to really impact that revenue category and the uncertainty around that or just the impact that many companies are seeing from them. Pharma is a little volatile right now given some of the ongoing regulatory discussions. That's creating what I would say is an increasingly fluid marketplace within pharma. And I think this is the first quarter where you're really seeing sort of the new upfront roll through the P&L and generally outside the sports programming, this wasn't as strong as an upfront as we had the prior year.

Yes. Relative to the upfront, Dan, just obviously, because it's impacting the fourth quarter guide. The story was a little bit mixed. I mean between the power of sports to drive demand and premium CPMs, we saw significant wins across our networks group in the upfront on linear and CTV. As I said in my prepared remarks, total sports volume up 30%, WNBA, in particular, saw significant increases of 90%. All of that drove our upfront CPMs to modest growth for the overall upfront. But there was generally some softness related to macro uncertainty, including pharmas, as Jason said, I think a lot of advertisers still holding back some of their spend from the upfront and allocating to scatter, which may have accounted for some of the softness in volume.

And maybe just to add on because you typically asked about the CTV outlook as well. Really strong growth year-to-date. I think we're looking to [indiscernible] for the full year, greater than 35% growth for the full year. We kind of alluded to the whole number there in the script. I think there continue to be new entrants in there that does put some pressure as we move forward. We continue to identify new ways to unlock value in that space. And I think as we said in the script, we think it's going to continue to be a double-digit growth engine for us. I will just remind people, as you look at the way that falls because of the value we see in CTV tied to our sports assets generally, you're going to see more growth in the middle part of the year tied to WMA and NWSL then in a quarter like Q1 or Q4 that have very little sports.

And our next question comes from Steven Cahall of Wells Fargo.

So first, just a follow-on on networks. You've got that really strong margin improvement in 2025. I guess is based on some of what you talked about with the upfront and some uncertainty in the market revenues probably implied down next year. Do you think you can still expand margins and kind of continue on this cost journey that you've been on at networks. And then, Adam, just on M&A, kind of a strange question, but I think one thing investors are trying to figure out is, with the family trust as kind of the voter on strategic M&A. How do those processes come together? Is management lead? Does the Board lead? Does the family lead? Just trying to get a sense of like what the level of engagement and proactivism is and how it works since there is this kind of seems like once in a decade opportunity for transformational M&A which, as you say, could be really accretive.

Yes. Sure, Steven. I'll take both of those questions. So first, as you pointed out, I'm really happy with the progress our team is making with Networks revenue and margins in a really difficult advertising and economic environment. We are absolutely set to deliver on our promise to increase the margin this year by 400 to 600 basis points. But I would tell you, our work isn't complete. We're really focused on continuing to expand in sports to drive revenue growth and profit. And we're addressing some opportunities with our programming and our distribution, we expect to expand our leadership in fast and connected TV to fuel revenue growth and identifying new ways to run the business with greater efficiency. So to sort of boil that down, all of this really leads me to be confident that we'll continue to see growth in the margins for networks. We're not done yet with Scripps Networks and margin expansion. .

Relative to the family, look, I don't speak for our controlling shareholders. This is a management-led process Obviously, our Board of Directors is very, very involved. And then from there, we bring the Scripps family in I can reiterate what I've said before, over the long history of this company, the family has always acted in the best interest of all shareholders and is committed to doing what is best for the company that creates the greatest shareholder value. Look, just to be very, very clear, this isn't some kind of hobby for the Scripps family. This is a business. It's an investment, and it's their American legacy, and I know they are committed to doing what creates the greatest value for all shareholders.

And our next question comes from Avi Steiner of JPMorgan.

Two questions here. Maybe to start, would love your thoughts on the Youtube TV, Disney dispute, what it might mean for the locals site group more broadly. And can you remind us what is coming due on the distribution front in '26? And how -- I don't know you can't size it obviously, but any help color there would be great. And then I've got one more for Jason.

Yes, sure. I'll start with the YouTube TV, Disney dispute and then Jason can talk to you about what I had for next year. Like all ABC stations, we remain dark as a results of the YouTube TV, Disney dispute. I think there's a lot of economic value for Scripps and ABC ahead when that gets resolved. But with that said, the protracted disruption is one of the reasons why we, as local broadcasters believe strongly that we need to see that the [indiscernible]. We need to directly negotiating with the virtual MVPDs in order for us to ensure that our local audiences are able to access sports and news. It's just that clear for us. There's already been some softness, I would say, in the ratings as a result of the YouTube TV, Disney dispute. Not necessarily, we're seeing that in local, but you can see that in some of the national reports. That's obviously got trickle-down impact. But the reality is because of fragmentation, YouTube TV is only one way our consumers actually consume our content, especially our linear content. And so we're not seeing direct evidence of it impacting our revenue performance or our bottom line.

Avi, on the affiliate renewals. So we have 3 of our 9 CBS is up at the end of this year. And then in '26, we have ABC up at the end of Q2. So that's 18. That's our largest affiliate partner, 18 stations.

How about on the distribution side, any meaningful retrans potential sub Q revenue potential next year?

We have 70% of our retrans traditional MVPD subscriber base renewing mostly in the first half next year. There's a little bit in third quarter, but mostly going to slip between end of Q1 and end of Q2.

That's very helpful. And then one more maybe for you. I think that were premium asset sale multiples was kind of thrown around a couple of times, which is great here. Is that the same on an after-tax basis or any after-tax proceeds you can help us think through? And if you could remind us how the proceeds have to be applied to the term loan tranches that would be much appreciated.

Yes. So -- so the multiples we announced were on a gross basis from a tax perspective, there was a $6 million tax payment tied to the -- will be tied to the Fort Myers sale and $13 million tied to RTV in Indi. From a proceeds perspective, so we have a 12-month reinvestment period, after which time those cash proceeds will be split 70-30 between our B2 and our B3 term loans. We intend to use those proceeds to pay down debt. We also do have the ability to allocate a portion of them to M&A if that opportunity were available. I think what you've seen so far and what you saw with our real estate sales we had last year was that we were very focused on driving this towards debt paydown and delevering of the balance sheet.

Our next question comes from Shanna Qiu of Barclays.

I was wondering if you guys could give any kind of early indicators on how you guys are thinking about political in 2026 relative to 2022 midterm? And then just a clarifying question on the asset sales. The 2 that you announced the stations, could you give a little bit more color on how they came to be, I guess, were those marketed through a competitive process after you guys look through your portfolio optimization? Or did you get inbounds from buyers there?

Thanks, Shanna. I'll talk a little bit about political first. This is Adam. I think next year is going to be a compelling year for us relative to political revenue. We've got 7 governor's races, 7 states with high stakes, house races and a Senate race that all look to be very competitive right now. We have a really deep footprint in Arizona, Colorado, Michigan, Nevada, Ohio and Wisconsin and Tennessee, all markets with, I think, significant elections ahead I obviously absolutely expect broadcasting to take the lion's share of the ad revenue spending for the midterm and I think our portfolio is very well positioned. So I'm looking forward to next year. I think it's going to be a very good year. It's part of why I referenced the momentum, the tailwinds that I see as we head into 2026.

So from an M&A perspective, we've talked about our strategy, our buy-sell swap strategy and the fact that we've identified certain assets that we would view as as less strategic. From a process perspective, I mean, I think generally, there are inbounds and there is a proactive approach as well. We know our markets. We know who potential buyers are of our markets. And so I can't say definitively, it's one or the other I think, it's probably a little bit more nuanced than that. I think the big takeaway there, Shanna, is just the prices, those multiples, pushing 9x in Fort Myers and north of 9x in Indi when you back out the MDA lift. I think that's one question we've gotten before is on those individual station sales, can you really drive it from a multiple. And I think we have 2 deals now that clearly show that we can. .

Great. Just one more clarifying question for me on the Disney, YouTube TV. For the 4Q guidance, any impact from that blackout in the guidance that you put out?

There is not. In fact, I mean, if you look at our core -- if you sort of think about our core guide, it's -- we're crushing. So I'm really happy about where we see local revenue as we head into the end of the year.

And our next question comes from Craig Huber of Huber Research Partners.

Jason or Adam, can you just comment a little bit further on the advertising environment right now, how you're feeling about it versus, say, 6 months ago? Obviously, roughly 6 months ago, we were in the midst of tariffs and so forth. People seem like they're more comfortable with it now. What's going on in that front, but you did allude to a tough environment. Just what should overall sense now versus how you felt 6 months ago, say?

Yes. So I'll maybe kind of segment this out and I'll talk about the local core space first. And I think that, as you look at the results we had for Q3, up nearly 2%, the guide we gave, plus 10%. We're seeing some strength and some momentum there. We saw our categories build as the third quarter progress, and we continue to both see a nice snapback in the political crowd out. continued benefits from our sports strategy, driving growth within our local brand and just excellent sales execution, that is really driving, I mean, those numbers that I just quoted there, up 2% and up 10% in the fourth quarter. Those dramatically beat all of our peers. And so I think from that standpoint, we're seeing momentum on the local side. .

I think on the network side, I talked about this a bit earlier. I think you have a bit of a mixed bag where you continue to see growth through our sports strategy. You continue to see growth through our Connected TV strategy. But you do see in that national ad marketplace, some challenges right now across a variety of fronts, direct response pricing is weak as we started this quarter, Pharmaceuticals are a little weaker, given the uncertainty in regulatory. And so I think that's sort of why if you look at kind of our Q4 guide, you have a little bit of a different story between local and networks right now.

Okay. And second question, I don't know if you have this at your fingertips, but just curious, what's your sense on how the viewership is breaking down right now in your local markets and also your Scripps networks between all the air streaming, et cetera?

I don't -- this is Adam. I mean Jason might be looking up some of the little stuff, but I did say in my remarks that about 20% of our viewing for networks is now through streaming. And we have been very, very focused on monetizing that 20%, and that's what's also powering the revenue growth there. So we're really pleased with the share of audience that we're driving in the connected TV marketplace. I think it's a testament to the value of our brands and the value of our programming strategy. And the reality is we probably represent one of the very few platforms that brings premium live sports into the streaming or the free ad board of television marketplace and that's helping to drive significant CPMs also from our streaming. We saw that play out in the upfront as well. significant growth in upfront opportunity with connected TV for us. Jason?

Yes. The only thing I'd add on to that, specific to kind of you pointed out OTA there, I mean, I think that from an OTA perspective, Adam gave that 20% is CTV and networks, the other 80% being linear. We've seen growth in sort of the OTA only percentage of that, 25% watched one of our networks during Prime through OTA during the most recent quarter. And so I think we're seeing that some momentum there. I think the other thing to point out on the local side, and I'd just like to give this reminder because I think sometimes people get very focused on prime and how much that contributes to our core. I'd like to remind people, 50% of our revenue in local comes through our news product and an ever-growing percentage comes through sports, and I would say both of those viewing genres continue to be extremely durable from a ratings and a delivery perspective.

And that, I mean, I think powering our continued ability to attract teams leagues that want more reach is their acknowledgment and recognition that with distribution through scripts sports locally and on networks they reach more fans than ever before, especially given the declines in the cable only marketplace. With us, they're reaching them on OTA, paid TV and fast, and that's significant additional reach for those leagues and teams.

I appreciate that. You don't happen to have the breakdown for the over the air, what percent that is roughly for both segments?

We don't.

We don't right now within networks, it does vary greatly from one -- one channel to the next.

Yes.

Okay. Understood. And then also, you guys are pretty plugged in Washington on the regulatory front. Obviously, the government shutdown to landing here. But what's your sense on timing of dealing with this ownership cap out there? And how do you think that will get resolved? And do you think the whole thing will get pushed aside here. So it's no longer in place here, but how long you think it might take to get that through assuming the [indiscernible] gets things fairly soon.

Well, I don't know that the government shutdown in early soon, Craig. I mean, to be perfectly frank, I would have thought that 2 weeks ago, once the government shutdown ends, I fully expect that the FCC will take action on the prohibition against groups like ours owning 2 stations in big force in 1 market. that now should be fairly simple and quick. And then the FCC will move forward, I believe, on eliminating the national cap.

And would you be surprised if it took beyond the middle of next year to get rid of the ownership cap, again, I assume the shutdown does end? I know it's...

Yes. I would be very surprised if it took beyond the middle of next year. I think, Chairman Car is committed and doesn't waste a lot of time. .

And our next question comes from Michael Kupinski of Noble Capital Markets.

Just a couple of quick questions. I just want to clarify, you mentioned that the Scripps Networks declined in Q4, somewhat related to the government shutdown. I was just wondering if you can clarify what that revenue decline -- if you can quantify that revenue impact?

Yes. I mean it's a smaller piece. It's a part of the puzzle. I mean you've got the political crowd out from last year. You've got the general softness in DR, and then you've got the impact of the government shutdown on processing the open enrollment for the Medicare Advantage which is impacting demand and buying from our networks a little bit.

Okay. In terms of changes in the advertising categories, can you just kind of talk a little bit about any ad categories that might be sensitive to interest rates and the Fed action, maybe from the third quarter to the fourth quarter, maybe even from the first quarter, particularly categories like auto, home builders, real estate and so forth. Any particular changes as we -- from third, fourth, maybe even as the pacings into the first quarter?

Yes. So the first thing I'd say there is it's really hard to really take a lot out of the trends right now because of the amount of political crowd out like everything is up significantly as you kind of exited Q3 and as you get into the beginning of Q4 because of that political crowd out. Certainly, there are some categories more materially impacted that. Automotive, has been a category that's not just interest rate also sort of inflationary and tariff-related has been a struggle for us the last, call it, 4 to 6 quarters. Q3 was -- it was a little bit stronger than it's been probably the smallest year-over-year decline we've seen in a while. I think other categories around retail and around services, which includes things like mortgage-based services certainly can be impacted depending on sort of the outcome of the next freight cut.

This is just more of a macro question. Typically, for someone who's been following several decades in the industry that the industry for several days. I was just curious, the Fed rate cuts typically have kind of spurred some national network advertising and in some cases, 6 months advance of the Fed rate action. And of course, the Fed rate action has only been pretty modest cuts. But notwithstanding those small rate cuts you would think that there would be a lot more active advertising environment. And I was just wondering, do you feel like advertising would have been a little bit more robust and given the economy that's been a pretty decent economy, do you think that there might be more of a secular issue? Or is there some sort of anomaly here or why isn't there much more of a robust advertising environment, certainly on a national front?

So I think a couple of things. I mean, absolutely, there's some secular component. That is why we are leaning into certain growth strategies around sports and Connected TV because we're looking for growth opportunities to offset and drive growth as we see some secular challenges. I also do think frankly, the pace of rate cut is not matched up with most people's expectations kind of coming into the year. And I think that, that has negatively impacted the ad markets. And I do think if we've seen more aggressive rate cuts, that we would see a better ad marketplace right now.

Yes. I would add, although uncertainty is not the end market trend. Uncertainty and economic uncertainty doesn't help consumers. And when things are difficult for consumers, it doesn't help the R advertising. It makes brands and agencies hold on to their dollars for longer because they're unsure of what's next. Now we've got a government shutdown where we're unclear on what the job numbers are like. We're not sure what the Fed is going to do. The Fed's actions thus far have been relatively weak. And so I think we've got to get past this period of uncertainty and once we do, I think we'll begin to get a better -- a clear sense of how the advertising market comes back as brands and agencies drive sales.

Got it. Well, hopefully, we have a building environment in 2026.

And now we have a follow-up from Craig Huber of Huber Research Partners.

I know you guys talked about AI to some degree. But can you just talk a little bit further there about when you might start seeing material benefit maybe on the cost side of things in the operations at your company? And then also, I guess, Jason, you guys are always turned over every stone here for years to try and make the company more and more efficient on the cost side. Do you feel at this stage that you have a lot more to go in each of your segments and taking out costs here to help the margins?

Yes. I'll take both of those questions, Craig. And they're really the same. I mean, I think we're going to be in a really good position next year to provide you with more information on how a transformation driven by technology really allows us to operate as a much more efficient, effective and growth-oriented company. And I would expect to have more to say about that come February.

I'm showing no further questions at this time. So this concludes the question-and-answer session and today's conference call. Thank you for participating, and you may now disconnect.