E.w. Scripps Company (the) · NASDAQ:SSP
E.w. Scripps Company (the) — Debt Investor Presentation (December 2020)
37 slides from E.w. Scripps Company (the)'s debt investor presentation, Dec 9, 2020
Slide 1: The E.W. Scripps Company Lender Presentation December 2020
1 The E.W. Scripps Company Lender Presentation December 2020
Slide 2: Forward-Looking Statements
2 Forward-Looking Statements This document contains certain forward-looking statements related to the company’s businesses that are based on management’s current expectations. Forward -looking statements are subject to certain risks, trends and uncertainties, including changes in advertising demand
Slide 3: Special Notice Regarding Publicly Available Information
3 Special Notice Regarding Publicly Available Information THE COMPANY HAS REPRESENTED THAT THE INFORMATION CONTAINED IN THIS LENDER PRESENTATION IS EITHER PUBLICLY AVAILABLE OR DOES NOT CONSTITUTE MATERIAL NON-PUBLIC INFORMATION WITH RESPECT TO THE COMPANY OR ITS SECURITIES. THE RECIPIENT OF THIS LE
Slide 4: Lender Presentation notice and undertaking
4 This Lender Presentation (the "Lender Presentation") has been prepared solely for informational purposes from information supplied by or on behalf of The E.W. Scripps Company (the "Company"), and is being furnished by Morgan Stanley Senior Funding, Inc. (the "Arranger") to you in your capacity as
Slide 5: Today’s Presenters
5 Today’s Presenters Adam Symson President & CEO Lisa Knutson Executive VP & CFO Rebecca Riegelsberger Treasurer, VP of Tax
Slide 6: Agenda
6 AGENDA • Transaction Overview • Scripps Overview • ION Investment Highlights • Pro Forma Financials • Key Terms & Timeline
Slide 7: Transaction Summary
7 Transaction Summary The E.W. Scripps Company is one of the nation’s largest independent TV station owners, serving audiences and businesses through a portfolio of local and national media brands Scripps generated $1,636mm in LTM 9/30/2020 revenue and $362mm in L8QA(1) 9/30/2020 Adj. EBITDA (2)
Slide 8: Financing Structure
8 Financing Structure Sources Value ($MM) New Preferred Equity 600 New Term Loan B-3 650 Other transaction debt 1,200 Cash from the balance sheet 336 Total Sources 2,786 Uses Value ($MM) Purchase Price in Cash 1,298 Repayment of Ion TLB 1,352 Transaction Costs, Fees & Expenses 136 Total Uses 2,786 T
Slide 9: Preferred Equity
9 Preferred Equity Issuer: The E.W. Scripps Company (the “Company” or the “Borrower”) Use of Proceeds: Finance the acquisition of Ion Media Networks and pay associated fees and expenses Ranking: Senior to common equity; junior to all indebtedness Size: $600MM Maturity: Perpetual Dividend Rate: 8% if
Slide 10: Scripps Overview
w= ai Scripps Overview
Slide 11: Our Local And National Media Businesses Are Built On Durable Economics and Operating Excellence
11 Our Local And National Media Businesses Are Built On Durable Economics and Operating Excellence
Slide 12: Recent Business Highlights
12 Recent Business Highlights • Scripps’ Local Media segment and 2020 free cash flow has significantly benefited from political advertising driven by the 2020 election • Third-quarter Local Media retransmission revenue was $152 million, up 39% from Q3 2019 on a same-station basis. Scripps resolved a
Slide 13: Our Recent Acquisitions Have Positioned Us Well To Grow Revenue And Increase Cash Flow
13 Our Recent Acquisitions Have Positioned Us Well To Grow Revenue And Increase Cash Flow $221 $259 $301 $383 $432 2016 2017 2018 2019 Through Q3 2020 Gross Retransmission Revenue Trajectory 2 stations Network and MVPD Renewals 20222020 2021 11 stations 6 stations 3 stations 4 stations 5 stations 16
Slide 14: After Historically Strong 2020 Political Advertising Revenue, Our 2022 Footprint Looks Strong
14 After Historically Strong 2020 Political Advertising Revenue, Our 2022 Footprint Looks Strong 2021-22 political market highlights: • 2021 governor’s race in Virginia • Seventeen governor’s races in 2022, including Arizona, Colorado, California, Florida, Kansas, Nebraska, Nevada, Ohio, Texas and W
Slide 15: Scripps Is Well-Positioned To Thrive Because Of Our Growth Initiatives And Trusted Brands
15 Scripps Is Well-Positioned To Thrive Because Of Our Growth Initiatives And Trusted Brands • We have seen continued ad market recovery since this summer, as states reopened businesses and consumers came out of quarantine. • Scripps is well-positioned for this recovery because of its durable local
Slide 16: ION Investment Highlights
16 ION Investment Highlights
Slide 17: ION Accelerates Scripps’ Near-Term and Long-Term Strategies
17 ION’s significant cash flow generation is accretive to our cash flow profile Diversifies our revenue Adjacent to our largest business, television, with potential future synergies Consistent with our view on the need for scale in media Mitigates Katz’s business model risk of carriage fee
Slide 18: ION Media Investment Highlights
18 ION Media Investment Highlights • ION reaches more than 100 million homes through over-the-air and pay TV platforms and has consistently achieved annual revenue growth and EBITDA margins well beyond industry averages. • Today, it owns 71 broadcast television stations in 62 DMAs and reaches nearly
Slide 19: ION Media Is A Popular Broadcast Network That Reaches 96% Of The U.S.
19 ION Media Is A Popular Broadcast Network That Reaches 96% Of The U.S. Through Over-The-Air Distribution
Slide 20: ION Has Seen Steady Revenue Growth And Generates Superior Margins
20 • Revenue has grown 6% annually between 2017-2019, with margins between 53-57% • In 2019, ION generated $587 million in revenue and about $335 million in Adjusted EBITDA • ION’s revenue has declined roughly 12% year-over-year through Q3 2020 due to the impact of the coronavirus pandemic. The comp
Slide 21: ION, In and of Itself, is a Great Business
21 $226 $263 $265 $318 $324 2015 2016 2017 2018 2019 48% 51% 51% 56% 55% ION HAS GROWN REVENUE ABOVE $580 MILLION, WITH MARGINS BETWEEN 51-56% $ in millions $ in millions $471 $519 $521 $565 $587 2015 2016 2017 2018 2019 ION, In and of Itself, is a Great Business Note: 1. EBITDA does not reflect SBC
Slide 22: Katz Networks and ION Media
22 KATZ NETWORKS • The Katz networks operate on multicast digital subchannels, leasing space from broadcasters across the nation to mesh together a national network. Long-term lease payments to broadcasters represent one of the Katz networks’ largest expenses, diluting margins. • The Katz networks a
Slide 23: Summary Of Synergies
23 Net Synergies L8QA EBITDA Adjustment A Total Distribution Synergies $27.2 B Corporate Synergies $16.4 C Other Synergies $4.7 One-Time Cost to Achieve ($6.7) Total Synergies $41.6 Summary Of Synergies A. Distribution synergies: Scripps currently pays significant carriage fees to air their Katz net
Slide 24: Driven By Popular Syndicated Programming, ION Is Engaging Viewers, Growing Ratings
24 ION consistently ranks in the top 10 for network and cable audiences and yet is ranked only 25th in advertising revenue yield, indicating additional revenue growth opportunity. BROADCAST NETWORKS’ AVERAGE PRIMETIME AUDIENCES 2019 Five-Year Change 5.3 million (8.3%) 5.1 million (6.0%) 4.0 million
Slide 25: ION Capitalizes On The Growing Over-The-Air Viewing Trends
25 67% A Parks & Associates report from 2019 showed 67% growth in over-the-air viewing, to 25% of U.S. TV households, from 2018-Q3 2019. Parks’ report says the pandemic is expected to have accelerated this trend. *204/14- 2019/20 Sources: TVB Local Media Marketing Solutions; The Delta Partners; 2014
Slide 26: Free Over-The-Air Television Is Even More Compelling to Consumers
26 OVER-THE-AIR IS A KEY COMPONENT OF THE NEW CONSUMER BUNDLE. The New Cord Cutter Bundle FREE 2015 Pay-TV Subscriber $$$$ 2018 Cord Cutter Bundle $$ $$$$ As The TV Marketplace Fragments, Free Over-The-Air Television is Even More Compelling to Consumers
Slide 27: ION Accelerates Scripps’ Near-Term And Long-Term Strategies
27 ION Accelerates Scripps’ Near-Term And Long-Term Strategies • Immediately accretive to Scripps’ revenue growth, margins and cash flow generation • Diversifies Scripps’ revenue and cash flow • Attractive economics: sustained revenue growth and high margins • Exposure to a growing television platfo
Slide 28: Pro Forma Financials
w= ai Pro Forma Financials
Slide 29: Pro Forma and Historical Financial Performance
29 Revenue Adjusted EBITDA Scripps ION Media Capex Unlevered Free Cash Flow (3) (2) 846 1,157 1,548 1,636 521 565 587 534 1,367 1,723 2,134 2,170 2017 2018 2019 LTM Historical Scripps and ION(1) 102 232 337 391 275 323 335 320 377 555 672 711 2017 2018 2019 L8QA 17 47 61 5711 40 55 30 28 87 116 87 2
Slide 30: Station divestitures for national cap and in-market compliance
30 DMA Market Pop % UHF Discount In-Market Regulations 11 Phoenix 1.8% 0.9% 14 Detroit 1.6% 0.8% 17 Denver 1.4% 0.7% 19 Cleveland-Akron (Canton) 1.3% 0.6% 25 Indianapolis 1.0% 0.5% 32 Kansas City 0.8% 0.4% 36 West Palm Beach-Ft. Pierce 0.8% 0.4% 42 Norfolk-Portsmth-Newpt Nws 0.6% 0.3% 45 Grand Rapid
Slide 31: Financial Policy: Leverage, Liquidity and Distributions
31 Leverage • Scripps plans to use the cash flow generated from the pro forma company to pay down debt • Target of mid-3’s net leverage over time Liquidity • $400MM revolver, unfunded at close, will be utilized for ongoing working capital needs • The company anticipates maintaining an average cash b
Slide 32: Bridge to Pro Forma L8QA Adj. EBITDA
32 $341 $711 $18 $320 $42 $10 Standalone L8QA Adj. EBITDA as of 9/30/2020 Stitcher and WPIX EBITDA Adjustment Faraday Pro Forma Adj. EBITDA Faraday Pro Forma Synergies Faraday Pro Forma Divestitures Pro Forma Adjusted Consolidated EBITDA Bridge to Pro Forma QE 9/30/20 L8QA Adj. EBITDA o Divestiture
Slide 33: Key Terms & Timeline
w= ai Key Terms & Timeline
Slide 34: Summary of Key Terms – Senior Secured Credit Facilities
34 Summary of Key Terms – Senior Secured Credit Facilities Term Loan B-3 Borrower: The E.W. Scripps Company (the “Company” or the “Borrower”) Facility Tranche Amount Maturity Indicative Pricing Floor OID Amortization RCF $400 5 years(1) L+250(2) 0.00% Par None Term Loan B-3 $650 7 years TBD 0.75% TB
Slide 35: Transaction Timeline
35 Transaction Timeline December 2020 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 Key Dates: Event: Launch Amendment + New Term Loan B-3 December 9th Lender Call (12PM ET) Amendment Signature Pages + Commitments to New TLB-3 due December 17th P
Slide 36: Covenant Summary
36 Senior Secured Credit Facilities Incremental: • $360mm plus unlimited subject to: • 4x 1st lien net leverage for 1st lien debt • 5.5x secured net leverage for secured debt Indebtedness: • Ratio tests: • 4x 1st lien net leverage ratio for pari debt • 5.5x secured net leverage ratio for secured deb
Slide 37: Scripps
w= fae SCRIPPS
E.W. SCRIPPS — Debt Investor Presentation (December 2020) on 6ix