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Media, broadcasting, and digital services company E.W. Scripps (NASDAQ:SSP) beat analysts' expectations in Q4 FY2023, with revenue down 9.6% year on year to $615.8 million. It made a GAAP loss of $3.17 per share, down from its profit of $0.84 per share in the same quarter last year.
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E.W. Scripps (SSP) Q4 FY2023 Highlights:
- Revenue: $615.8 million vs analyst estimates of $602 million (2.3% beat)
- EPS: -$3.17 vs analyst estimates of $0.01 (-$3.18 miss)
- Free Cash Flow of $45.13 million is up from -$8.78 million in the previous quarter
- Gross Margin (GAAP): 18.4%, down from 53.7% in the same quarter last year
- Market Capitalization: $456.1 million
BroadcastingBroadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.
Sales GrowthA company's long-term performance can indicate its business quality. Any business can enjoy short-lived success, but best-in-class ones sustain growth over many years. E.W. Scripps's annualized revenue growth rate of 13.7% over the last five years was decent for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. E.W. Scripps's recent history shines a dimmer light on the company as its revenue was flat over the last two years.
This quarter, E.W. Scripps's revenue fell 9.6% year on year to $615.8 million but beat Wall Street's estimates by 2.3%. Looking ahead, Wall Street expects sales to grow 10% over the next 12 months, an acceleration from this quarter.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, E.W. Scripps has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 8.2%, subpar for a consumer discretionary business.
E.W. Scripps's free cash flow came in at $45.13 million in Q4, equivalent to a 7.3% margin and down 70.6% year on year. Over the next year, analysts predict E.W. Scripps's cash profitability will improve. Their consensus estimates imply its LTM free cash flow margin of 3.3% will increase to 8.6%.
Key Takeaways from E.W. Scripps's Q4 Results It was good to see E.W. Scripps beat analysts' revenue expectations this quarter, driven by better-than-expected performance in its Scripps Networks segment (national news). That stood out as a positive in these results. On the other hand, its operating margin and EPS fell short of Wall Street's estimates as it had a significant one-time, non-cash goodwill impairment charge affecting the results. Overall, this was a mixed quarter for E.W. Scripps. The stock is up 9.1% after reporting and currently trades at $5.89 per share.
