SSP

Good day, thank you for standing by. Welcome to the first quarter 2026 E.W. Scripps Company earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. 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, DeeDee. 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 two 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 enhance 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 two 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 telecasts. We saw a strong contribution from the addition of our newest rights agreement with the Tampa Bay Lightning. Beyond this new partnership, we also saw strong growth in our existing NHL deals with the Vegas Golden Knights, the Utah Mammoth, and Florida Panthers. Our strategy is designed to drive year-over-year growth across both our existing deals and new partnerships. 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 live 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 31st to May 5th. 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 the 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%. 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 or 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 two 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 30th, we entered into an agreement to extend the July 7th, 2027 maturity date of a revolving credit facility to July 7th, 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 B-3 term loan. Since the end of the quarter, we've paid down an additional $30 million on the B-2 term loan for a total of just over $60 million in term loan pay down 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-$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-$30 million and an annualized run rate of about $75 million as we move into next year. 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. I'm pleased to report that we're right on track. I 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. E.W. was fiercely protective of his newsroom's journalism and editorial independence. He was entirely committed to serving the people in the communities where he 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, E.W. 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's 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 one example at Scripps of how we are upending 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 Scripps 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're 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. 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 25th was ION's most-watched preseason game ever. Tonight, the WNBA regular season tips off with a double header on ION, with tremendous excitement about the return of Caitlin 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 League's Walter Cup finals will begin on ION. We're very pleased to bring this to national television for the first time and to have Amica serving as our presenting sponsor and Discover as an additional sponsor. They are just two of the hundreds of blue-chip advertisers we've brought onto 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. 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 we'll 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 weighting 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. 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 a 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 three important national organizations. We were honored with six nominations for National News and Documentary Emmy Awards, including five for Scripps News and one for WEWS in Cleveland. Scripps News also was recognized with three prestigious National Headliner Awards, including a Best in Show honor and two Deadline Club finalist nominations. While our local station, KNXV in Phoenix, also received three National Headliner Awards, and WTMJ in Milwaukee received one.

We're proud of the recognition of our commitment to journalism that improves the lives of those we serve, holds 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 bountiful chapter of Scripps's long history. Now, operator, we're ready for questions.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile a Q&A roster. Our first question comes from Dan Kurnos of StoneX. Your line is open.

Great. Thanks. Good morning. First and foremost, I guess, Jason, thanks for the recast. Super helpful on that stuff. Just wanna make sure, housekeeping question, the guide that you gave for Q2, that is relative to the as-reported from Q2 last year, not the recast, correct?

No. That is off of the adjusted combined recast that we provided.

Okay. All right. That is helpful. Thank you. Adam, Scripps Sports Network, super smart. You've been kinda 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 market's soft, we all get the macro, but as we look ahead, you know, commits, what advertisers are saying, just help us think through, you know, the feedback you're getting. You've been very clever with rights acquisition in an inexpensive manner. 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. Just help us think through kind of that equation here.

First and foremost, Dan, well, I like to think that we have embraced women's sports, not put it into a stranglehold, but I appreciate what 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. 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. 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.

As an example, you know, right now you can watch many of the PWHL games on the Scripps Sports Network, Major League Volleyball, and then the finals end up being broadcast on ION. 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. We went to the marketplace knowing that there was already demand for the assets we were acquiring. I think that's gonna benefit us both in linear, it's gonna benefit us in the streaming space.

I think we'll continue to be 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, you know, when you look at our performance relative to like general market, cable and broadcast networks, you see the benefit of our sports strategy. We're just now moving into the second quarter where we have that benefit going on into the summertime. 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.

Yeah. Thanks, Adam. You know, we did give a guide of down 10%, that is really being driven by a couple of things. You know, 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 it's created a little bit of a weaker marketplace for national advertising. You know, 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 that over-index on over-the-air carriage versus cable networks who are generally seeing significant ratings increases. 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 heavily on the American consumer, and geopolitical instability has created some hesitation in the marketplace and some ripple effects. You know, from a longer-term perspective, you know, in the short term, that has created a little bit of a drag on revenue and on margin in our segment.

We've worked really hard to get the network's 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. You know, 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. You know, Q4 also brings in seasonal healthcare ad dollars. You'll start to see some impact from the transformation efforts start to roll in the second half as well.

You know, we can remain committed that this, that the networks business is a 30% margin business. While we may have seen a bit of a setback here in the current quarter, we remain committed to driving the business to a long-term 30% margin.

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

Yeah. I mean, I would argue we are operating right now a best-in-class CTV platform, actually. You know, 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, you know, second to none. I think we're very well invested in that space, and I expect, you know, 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, you know, 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. So far, it's working exceptionally well.

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

Yeah. No, look, I do think there's incremental opportunity and that's why, you know, 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 Scripps Sports, the Scripps Sports Network is an example of that. I think there are gonna 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 and 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, 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. We're off to a really good start there, and I expect that we'll continue to keep the pressure on.

Super helpful, guys. Thank you so much.

Thanks, Dan.

Thank you. Our next question comes from Craig Huber of Huber Research Partners. Your line is open.

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

Last quarter, we gave an annualized run rate of $60 million-$75 million, which will be ex this year. We adjusted that during this most recent earnings cycle up to $75 million. I think we would say we're making good progress on it. Adam, in a second, can give some sort of higher level thoughts on it. I'll also point out, you know, the move we had in leverage this quarter, maybe just explain that a bit.

Last quarter when we announced the large transformation initiative, and as you referenced, $125 million-$150 million, you know, 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 eight-quarter EBITDA for purposes of leverage calculation. That is, you know, that is the driver behind the big move you see in leverage this quarter, down to 3.9x. That's really tied to not all of the initiatives, but the initiatives that we think we'll have fully implemented by the end of Q1 of next year.

Adam, do you wanna talk a little bit more about bigger picture on transformation?

Yeah, I mean, you know, we're executing a comprehensive plan that's allowing us to rethink everything about how we deliver service to the customer. You know, when I think about our customer, I think about our audience and our advertiser. You know, we spent months examining the opportunity to remake the company across every corner of the business, the front office and the back office. Now we're moving into implementation. You know, I got a lot of comments about how confident I sounded last 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 gonna 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. You know, a lot of it has to do with technology, the use of AI and automation. It's very much oriented towards growth. 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. You know, talking about AI, can you give us a little more flavor of how you're using AI to help your services but also to help on the efficiency side? Is it possible that maybe quantify how much you think, out of the $125 million-$150 million improvement in EBITDA comes from AI? Is that possible?

Yeah. 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, you know, 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. 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 called 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. You know, 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 an 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. I would say, you know, look, 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? Do you feel like it's getting worse? Is there any other categories other than DR that you'd wanna call out that's impacting? I guess as 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 has 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.

Yeah. I mean, I think, you know, on the network side, you know, 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, you know, inflation, gas prices, all those things. 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. You know, as you saw in Q1, from a local ad perspective, we were up 7%. That was best in the industry.

For Q2, we guided to down low single digits, again, better than all of our peers guided. You know, 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. You know, we are seeing maybe a little bit of noise in some of our categories from macroeconomic state. All in all, I would say from a local core perspective, things are pretty stable.

Great. Thank you.

Thanks, Craig.

Thank you. Our next question comes from Avi Steiner of JPMorgan.

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

From a DR perspective, it really varies by network, but we certainly do have, you know, a material portion of our network's revenue, which is tied to DR advertising. What you see, you know, DR advertising is very tied into broader macroeconomic trends and can both, you know, downturn quickly, but also bounce back pretty quickly as well. We are seeing some noise right now that's sort of part of I know you said you missed the beginning of the call, but, you know, 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. One 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. You know, I think that 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. The greater level of certainty that we can have, the easier things will be in the ad marketplace.

That's super helpful. On the enterprise value growth that you're putting in via the cost savings and revenue growth initiatives. Just on the cost-saving 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 the cost to achieve?

Yes.

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

Super helpful. If I could sneak one more in, quasi housekeeping, just quasi understanding. The recap financials, in the supplemental part of the disclosure was very helpful. Thank you.

Yep.

I'm wondering if you could provide the LAQ EBITDA for the same base of assets you own that is underlying, again, that disclosure, which was helpful. Then refresh us, if you can, what's left to close and dollars in and dollars out. Thank you all for the time.

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. You know, we are awaiting closure of our swaps with Gray, and sort of that getting that final process done. We also have a transaction with INYO that is before the FCC and DOJ right now as well.

Do you have the dollars for those? I know there's no dollars in the swap. Remind us on the dollars of INYO, and do you have the $568 without the cost savings, if you have? Thank you again for the time.

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. That the LAQ number from an INYO perspective, it is in the kind of mid $50 million range. It's somewhat dependent on timing.

Super helpful.

I think in our most recent announcement on that, we said $53 million.

Thank you so much.

Yep.

Thank you. Our next question comes from Shanna Qiu of Barclays. Your line is open.

Yeah. Thanks for taking my questions. I know you touched on this a little bit earlier, but could you give us a sense of how much, you know, the Scripps Networks top line guide, the decline in Q2 related to the overall macro and ad environment versus what you called out on the Nielsen methodology change?

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.

I mean, I think it's important to recognize that on the network side, we sell impressions, the impressions are determined by your currency. Mid-February, overnight, Nielsen's methodology change didn't impact sales execution, it didn't impact the demand we have in the marketplace. It impacted how many impressions we had to sell. We're working right now with Nielsen to right that ship, 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, to bolster the programming strategy so that we, you know, 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. The general marketplace has actually held up pretty nicely relative to the demand we're seeing. That's probably as a result of our sports strategy and I think the strength of our sales execution performance.

Got it. That's really helpful color. I think earlier on the call you mentioned that you expect full year gross distribution revenue growth of low single digits. I'm just curious on your thoughts on the pending Charter-Cox merger. Is that reflected in that gross distribution guide that you highlighted?

We don't generally talk about specific contracts, but I would say is, we feel pretty good about that guide. You know, the fact that we, you know, we went through an impasse in the second quarter with Comcast, 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. While it does create a very short term blip in our Q2 financials, we are really pleased with what that deal means in the midterm and the long term for us.

Great. Thank you.

Thank you. One moment. We have a follow-up from Craig Huber of Huber Research Partners.

Thank you. Curious the Nielsen change you're talking about, are you willing or able to talk about what percent hit that was to your impressions, how you sort of view it? I'm also curious, you know.

No, I don't.

Anything about on that front?

I don't think that benefits us. You know, 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. You know, 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, you know, 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. That's obviously not the case.

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.

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's, what they're willing to do or not.

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 something that went back to sort of mid to late February.

Yeah, it just would've been helpful, obviously, from their advantage point if they would've willing to put that numbers out, those numbers out there.

Yes, it would've been helpful. [crosstalk] There's a lot that would've...

I can tell how upset you guys are. I don't blame you, frankly.

Yeah. There's a lot that.

You're not the only ones, of course.

Yeah.

I shake my head, but thank you guys.

Yeah. Thanks, Craig.

Thank you. Our next question comes from Steven Cahall of Wells Fargo. Your line is open.

Thanks for fitting me in. Sorry, I had a little trouble getting into the queue. 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 seven to the down low single-digit. I know there's a change in local sports. You know, 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. How do we kind of think about that within?

From a core perspective, the Q1 number, the up 7%, had a significant benefit tied to our NHL deals as well as, you know, 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, you know, with what we've been seeing and not significantly impacted by what's going on sort of more broadly in the economy. I think, you know, that down low singles that we put out there is also better than, and most everybody else I've seen in our industry, you know, was kind of down more low to mid-singles. From that standpoint, I actually see our core as a strength right now.

I mean, I just hope, this is Adam. I just hope that, you know, investors and analysts recognize that our performance in first quarter is cause to celebrate because we're executing a strategy that is putting, you know, significant growth opportunity in front of us, cyclical as it may be. Now, of course, we move towards that opportunity on the network side. Obviously, you know, when you are 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 cyclical with the sports opportunity.

Yeah. Kind of a related question on Networks growth. I know Q3 is the biggest for sports at Networks, but I think just sequentially, Q1 to Q2 has more sports as well, like WNBA, you know, restarting. I guess what I'm trying to figure out is, like, if the market hasn't changed as we get past Q3, you know, 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, you know, as we get into the back half of the year, yeah, kind of continuation of the trends?

I think we touched on these a little bit earlier. I mean, I think 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. 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 healthcare. I think I also alluded to some of the transformation benefit that will roll through here as well.

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. Even though, you know, that's trending right now below the 30% target, we remain committed to, you know, 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.

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. While Nielsen's measurement change may have negatively impacted impressions for OTA and streaming, the fact is the ad marketplace is responding very well to 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. 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 onto our platform. You know, like I mentioned Amica, coming in as the title sponsor, presenting sponsor for the Walter Cup finals here on ION. You know, 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.

Thanks. Just the last one for me. You know, 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, you know, versus covenants versus, you know, net leverage calculations. Does that mean you can start to devote this year's free cash flow towards the accumulated pref dividends or otherwise kinda negotiating the pref? Or do you think the pref is kinda better left to, you know, maybe be part of, like, a longer-term strategic M&A transaction? Would just love to know how you're thinking about it.

First of all, on the comments we've been pushing. I mean, we already were sort of well under all of our covenants. While the transformation does provide a benefit into our leverage calculation, like, there was already significant coverage there. You know, from a Berkshire dividend perspective, based on the refinancing that we did last year, the large refinancings we did, we cannot pay dividend until 2027, until our leverage is below four and a quarter, which obviously we're under, and is, and we have less than $50 million outstanding on the B-2 term loan. 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 the dividend again. Once we get leverage into the low to mid three times, we would begin looking to address the principal, not all at once, but likely in increments. We can do that in $60 million increments. I think that is kind of the way we think about the pref.

Thanks.

Thank you. 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's 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 Symson. 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 expectations on nearly every reporting line. Our growth strategies around network streaming distribution and Scripps Sports are helping us outpace local and 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 a transformation plan to grow enterprise EBITDA by $125 million to $150 million by 2028. Our plan balances 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. 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 of Court 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 Law&Crime, 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 WFTX in Fort Myers, Florida and WRTV 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 and Indianapolis to follow soon after, pending FCC 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 Court 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%. 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 the live sports 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 of 2026, 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 for 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 Court 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. 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 are 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 in our net leverage ratio as we execute our plan to improve EBITDA and reap the benefits of a robust midterm election cycle, our Scripps Sport 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. E.W.'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 E.W. built a newspaper empire directed at the working class, a segment of the population that had been mostly ignored by other newspaper, [ barons ] of its 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 E.W. 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 a time of political polarization, disinformation and discord, when Americans feel -- report feeling increasingly isolated and alone, we see an open lane 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 shareholder value, but they're not paths 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 at 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 and 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 weeks 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 Scripps 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.

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 you think it's 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 in 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 Scripps 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 Court TV, the acquisition we announced today of more than 20 stations from INYO that will fold into our networks portfolio and increase 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 where will we see that? How long will it take to achieve? You've done great things with CTV, for example, and 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 for competitive reasons, but is there any way for you to help us think 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 comes 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 core 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, and we mentioned in 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 they -- 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 governors' 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 JD 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 businesses 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 CTV.

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 sort of 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 of 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 reorient 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 disruptions 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 understood.

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 to 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 '26, is that a run rate number? Or do we think about that as 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, Steven, 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 candor 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 a 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 would 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 all Scripps 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.

My first question, can you talk about the cost savings plan here you have. Can you talk about -- 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 broad brush sort of ideas. They're 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 product 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 operator as opposed to relying on the networks. What do you think the path is to get that fixed to get it resolved? Does it have to go through Congress or can the FCC do it on that second point?

Yes. Well, I mean, I think that you asked 2 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 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 INYO 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 definition should evolve because I think the evidence is fairly obvious to anyone who examines it. The net effect should be that the FCC will adopt the courts ruling that strikes down the prohibition against owning 2 big 4s and then the DOJ will recognize what Chairman Carr already has that 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 Wi-Fi 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? Do you think it might get done here in the next, say, 2 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 coming, whether it's within 2 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 and 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 some financial metrics, I don't know if you can go into 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 both 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 INYO party for these stations, which goes away as soon as this transaction is closed.

Our next question comes from the line of [ Shanna Chung ] 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 Court TV?

Yes. Thanks, Shanna. So we were really pleased, as we said, to find buyer for such a great and distinctive brand like Court 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 Shanna, 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 on CTV and growth in advertising in that channel. I guess, is the guidance based on heavy live sports in the Super Bowl and Olympics in 1Q that diverted some ad dollars in that channel? Or are you seeing increased competition on the CTV side with more and more players adding kind of FAST channels?

Yes, I can take that. So from a Q1 guide perspective, you are correct that networks because of the sports franchises we have there, typically sees a bit more strength in the summer months when we have the WNBA and NWSL. And so as such, I think we would be looking to have probably more favorable guide and comp in second and third quarter. When you kind of unpack the guide of down high singles, there's a couple of things. And one of which I just talked about on 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, and 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.

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 Bowl and 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 parse it a little bit, like if you excluded the Olympics and Super Bowl, any sense of how much it would be up?

So I don't think we're kind of breaking that out. We did see a 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.

All right. Well, hopefully, you get a bigger lift now after the gold metal. So I hope that goes well. And then just -- I want to just ask you one thing. You mentioned in your prepared remarks about lower reverse comp to the networks. And maybe this is 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 we receive where there's less exclusivity, more -- take the NBA example with NBC, where a lot of that product is available on Peacock, we've been able to successfully negotiate 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 Peacock, 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'd 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 travesty. 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 in networks. And likewise, in local, sports 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.