Carolyn Micheli – Vice President, Corporate Communications and IR Richard Boehne – Chief Executive Officer Timothy Wesolowski – Senior Vice President and Chief Financial Officer Brian Lawlor – Senior Vice President, Television Adam Symson – Senior Vice President, Digital Steve Wexler – Vice President, Radio.

Marci Ryvicker – Wells Fargo Daniel Kurnos – Benchmark Company Craig Huber – Huber Research Partners Michael Kupinski – Noble Financial Tracy Young – Evercore ISI Barry Lucas – Gabelli Research John Hall – Wells Fargo.

Ladies and gentlemen, thank you for standing by and welcome to the Q2 2015 Earnings Call. At this time, all participants are in a listen only mode and later we will conduct a question-and-answer session, instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded.

And I would now like to turn the conference over to our host, Ms. Carolyn Micheli. Please go ahead..

Thanks, Julie. Good morning. Thanks for joining us for a recap of The E.W. Scripps Company’s Second Quarter Results. A reminder that this conference call and webcast includes forward-looking statements and actual results may differ. Factors that may cause them to differ are outlined in our SEC filings.

You can visit scripps.com for more information, such as today’s release and financial tables. You also can sign up to receive e-mails anytime we disclose financial information, and you can listen to an audio replay of this call. The link to the replay will be up there this afternoon and available for a week.

We’ll hear first this morning from Scripps’ CEO, Rich Boehne CFO Tim Wesolowski, will recap our second quarter results for television, radio and digital as Scripps. Then you’ll hear from Brian Lawlor, who heads our broadcast division and finally from Adam Symson, the head of our digital division.

Also in the room are radio chief Steve Wexler and Controller and Treasurer Doug Lyons. Now here’s Rich.

Good morning everybody. Thanks for joining us.

We had a terrific quarter both in financial performance where our results came through as expected and in our efforts to build a surface value for shareholders through managing our portfolio of media businesses, expanding into new marketplaces that offer organic growth and at the same time using our strong balance sheet to return cash to our owners through stock repurchase and special dividends.

If you think about it all between April and July, we radically altered our structures, sending out and merging our newspapers into an attractive standalone company and merging info scripts to journal, TV and radio stations, all add what we believe were terrific value creating valuations.

And with a little cash kicks of special dividend to further sweeten the deal. While the Journal transaction was closing and the business is being integrated, we also found time to craft a transaction in a fast growing segment of digital media, podcasting.

Adam will talk more about Midroll in a few minutes along with the traction we’re getting with our over-the-top television and mobile news brand, Newsy. Now behind the scenes over the past several months, we secured a new CBS network agreement, we saw our local news strategy pay off in higher ratings.

We continue to benefit from rising retransmission rates and we worked on strategies that we’re confident would advantage us for the upcoming Spectrum auction and beyond.

As we’ve discussed in the past, we are determined to capitalize in 2016 on the Presidential election search in advertising and the flow through to the bottom-line of our strong move-up in retransmission revenue. As Tim will discuss in a moment, there’s a lot of noise in the numbers and we’ve done our very best to create apples-to-apples comparisons.

But behind the noise is an enterprise with a much stronger momentum, an opportunity for building value over the next few years. Now here’s Tim. .

Good morning, everyone. On April 1st, we closed our transaction with Journal communications and we’ve now completed our first full quarter of operating those TV and radio stations. And our former newspaper operations are now part of Journal Media Group so we’re reporting newspapers as discontinued operations.

Our operating results were very much in line with our guidance. We are off to a good start assimilating the journal properties and we are affirming our full year revenue and expense guidance. In the second quarter, excluding acquisition and integration costs for the journal transaction, we earned $0.04 per share.

Our net loss from continuing operations was $13 million or $0.15 per share on a GAAP basis. And as I talk about our second quarter results, I’ll be comparing them to our 2014 adjusted combined numbers to help you better understand the underlying trends in our business.

Remember back in May, we gave out those 2013 and 2014 numbers and called them adjusted combined results. They give a picture of our last two years as though we had merged in the Journal and Granite broadcast assets at the beginning of 2013. The 2014 adjusted combined results are repeated again in today’s earnings release tables.

So again, today, we’ll use those to make comparisons on an apples-to-apples basis and meanwhile you can find the as reported results in today’s press release. Most of the year-over-year changes in the as reported results are of course driven by the addition of the Journal and Granite properties.

And after I discuss those results, I’ll spend a few minutes on our cash position, debt status and the share buyback program. And finally, I’ll share third quarter guidance. So first let’s start with second quarter operating results in comparison to the adjusted combined results for the second quarter of 2014.

Operating revenues increased 3% to $198 million, this was mainly due to a rise in retransmission revenue. Costs and expenses for segments shared services and corporate were $166 million, up 6% over the 2014 quarter.

And that increase is mostly due to higher network compensation and the timing of our annual restricted stock grants which move from March to May and comes with a merger close date on April 1. Now turning to our three reporting segments.

Television division revenues nearly 3% in the second quarter 2015 over the adjusted combined results to $167 million. Retransmission revenues was up nearly 60% to $36 million, that reflects the renewal last year of retransmission agreements which covered about a quarter of our subscribers.

Local advertising revenues were down about 5%, national revenue was up modestly and political revenue was $2 million versus $7 million last year. Expenses for the Television division increased 6.5% driven by an increase in network compensation. We renewed our ABC affiliation agreements covering 10 of our stations last December.

Television segment profit was $45 million, down nearly 7% reflecting the tough year-over-year comps for political advertising and at this transition year in which we’re paying higher network compensation but still waiting for the reset of 3 million of our cable households to full market retrans rates early next year.

Just a reminder, we fully anticipate that the increase in network comps will be more than offset by rising retransmission revenue so this will turn into a good story in 2016 when we expect a retrans increases to flow through. And we are still expecting a 50% increase in both gross and net retrans in 2016 and 2016 growth retrans of about $220 million.

Radio operating revenues of $19 million were about flat with the second quarter of 2014 on an adjusted combined basis. Radio expenses were also about flat at $14.5 million. Segment profited nearly $5 million for the quarter which was slightly above prior year.

Now of course radio was a new business for us and while digital is not a new business, it is a new segment. In the past, Scripps accounted for digital revenue in the Newspaper segment and TV segment and some in the syndication and other segment, some digital expenses were in the segments and there was also some in corporate.

Now we’ve collected all the digital revenue and expense into one reporting segment. The new segment includes revenue from our local markets as well as national brands such as Newsy, Weather Sphere and starting new quarter our net podcasting business, Midroll.

Digital revenue for the quarter was nearly $9 million, that’s up about 16% over the adjusted combined results for Q2 2014. Performance in the core drove that increase including higher revenue from local digital brands in our TV markets and increased revenue from programmatic advertising.

As we’ve told you, the core local digital businesses make up the bulk of revenue in the digital reporting segment. Digital expenses were up $700,000 to $13.5 million, that’s about a 5% increase, significantly lower than our guidance last quarter of mid-teens to slower than expected hiring and spending.

The segment loss for digital was just under $5 million. That concludes our second quarter results, just a reminder, that the adjusted combined results assumptions and disclosures are included again in the supplemental information that begins on E7 of today’s press release tables. I encourage to read those very carefully.

And now I’d like to share our guidance. First, we’re reaffirming the full year guidance we gave in May for TV and Radio. For the third quarter, again in comparison to our adjusted combined results, we expect television revenue to be down mid single digit, largely driven by tough political comps. Last year we booked $21 million in political advertising.

TV expenses are expected to increase high single digits mostly due to higher network compensation fees. We expect radio revenue to be flat to down low single digits and radio expense to be up low single digits. Our digital reporting segment results going forward will be impacted by the acquisition of Midroll in late July.

For the full year, we now believe digital revenue including Midroll will be up more than 30% and digital expense will be up about 20%. And for the third quarter including Midroll, we expect digital revenue to be up more than 40% and digital expenses to be up in the mid-20% range. Adam will give you more color on Midroll in a few minutes.

And we expect expenses for shared services and corporate to be about $10 million. And finally, I’d like to cover a few capital allocation matters. We closed the quarter with $101 million in cash, down $57 million from the end of 2014, primarily due to the dividend of about $1 per share paid at the closing of the Journal transaction.

We paid $50 million for Midroll when we close in the third quarter so that amount is not reflected in the $101 million number. Our total debt was 407 million so that’s net debt of just over 300 million or net leverage of about two times at the end of the second quarter.

We reinstituted our share repurchase program, halfway through the quarter and during the second quarter we spent $3 million to repurchase shares and we have $97 million of remaining authorization.

To put our allocation activity into perspective, we added two stations to our TV portfolio at a cost of $110 million, one created a duopoly in Detroit, the other was an ABC in Buffalo. We also paid $60 million dividend on April 1st and we spent $50 million on Midroll in July. We did all that and still have the strongest balance sheet in the industry.

That concludes our financial review. And now here’s Brian Lawlor who heads up our broadcast division. .

Good morning, everybody. As Tim mentioned, we have a full quarter now behind us operating the Journal, TV and radio stations and we are very pleased with our performance so far.

As a whole, we met or exceeded our guidance for the quarter, meanwhile the former journal employees are engaged and enthusiastic about the mission in hand to grow ratings and position our stations to fully capture the political dollars at stake in 2016.

Of course capturing those dollars was really the key work here as we so often tell you that we believe Scripps is well positioned to do so. We have a dedicated Washington sales office, poised to respond quickly to campaigns.

We have a terrific footprint in key states such as Florida, Nevada, Colorado, Wisconsin and Ohio and in case you didn’t see it, The New York Times recently said it may all come down to Ohio. So with big ABC stations in Cleveland and Cincinnati, Scripps provides the path for reaching voters in the two most important Ohio election cities.

Like to turn next briefly to some of our other ad categories, local spending was down about 5%. This was largely attributed to a decline in auto of nearly 10% on a same station basis.

Our large ABC footprint and the tough comps against the World Cup are response from much of this decline along with the change in several other auto manufacturers funding their local dealer associations in some of our markets. Fortunately, record new business with an emphasis on the service category offset most of the auto decline.

Services to cast auto as our top category, growing 14% with big increases in insurance, medical and in legal subcategories.

National ad spending was up in the quarter, due impart to the NBA finals, the Cleveland Cavaliers and Golden State Warriors match up was one of the highest rated finals in NBA history and we were helped by our footprint of large market ABC stations, along with being the proud home of the Cleveland Cavaliers.

Looking ahead to the third quarter, we see continued growth in the services category and improvement in auto without the World Cup comparison. Since our last call, we’ve announced good news in network affiliation front. We signed our renewal agreement with CBS in Nashville.

As we’ve mentioned before, this is one of the highest rated CBS affiliates in the country and we were thrilled to acquire it as part of the Journal merger. The deal with CBS includes partnership in its CBS all access over-the-top product and we’re looking forward to reaping the benefits of this new relationship with CBS.

We have one other CBS station in Omaha and they will renew its agreement next summer. But first, we expect to renew an agreement with NBC at the end of this year that will cover three of our three stations.

In addition to the market leading performance from Nashville and our NBC in West Palm, which each one every single major news guest in their May sweeps, we’re seeing continued strong waitings improvement in several other key markets including Phoenix, San Diego, Cincinnati, Las Vegas and Tulsa.

I assure you, we did not take our foot off the gas during the summer and we expect to build off that growth in the second half of the year. A final note on the TV division, we continue to be very pleased with its success of our home grown programming.

Right This Minute continues to perform well in syndication, currently cleared in more than 90% of the U.S. TV markets. Our infotainment program, The List is turning out to be a big success as well. In the rankings of the top 50 syndicated shows in the U.S., The List broke into the Top 10 with its May household rating from across strips markets.

We are thrilled with the performance of The List and are now fielding calls from other broadcasters interested in bringing the program to their markets. We believe the show is now ready for distribution beyond Scripps and we will be working with advance step strategy in the coming months.

Finally, our news program The NOW, continues to build an audience at 4 PM in the eight markets where we run it. In May, The NOW grew its aggregated share across those stations over its Feb performance so we are pleased with the trajectory of the show. And now let’s talk about our new radio division.

We made a big move in Milwaukee last quarter, switching our big FM station from variety hits to a new country format. We are already reaping the benefits of that move with a boost in rating and look forward to competing in leadership in the Country genre.

And in spite of the top season on the field, our Milwaukee radio team has had very successful season of sales of the Brewers radio network. Other highlights for our ratings this quarter include Knoxville, where our combined cluster of radio stations is number one for the first time in recent memory.

And Tulsa our lead station mix FM was number one among all women listeners. We also see excellent results in Omaha and Wichita. So this division is already showing steady results and has a talented group of people who we’re really enjoying having onboard. Adam, over to you. .

Thanks, Brian. Hello everybody. I’m pleased to be with you today to talk about our first quarter of results with digital as its own reporting segment. This is a segment made of different businesses that are delivered on common digital platforms.

The majority of the revenue today comes from the products and services tied to the digital business in our local markets with the remainder coming from the national media products. The segment saw nice growth in revenue in the second quarter, up 16% and slower than expected expense growth.

We guided to up mid-teens on expense and ended up just over 5% in comparison to last year’s adjusted combined numbers. The reason for the lower expense growth was slower than expected hiring of sales associates for the former journal stations. We’re looking for strong talent and that’s taken a little longer than expected.

Across the entire network of local digital properties, we are seeing that the focus we’ve placed on national programmatic advertising is paying off. As a reminder, programmatic advertising is nearly real-time auction we use for the sale of our digital advertising to mostly national and regional advertisers.

We use programmatic advertising to monetize the display advertising that we haven’t sold to local clients directly. Our digital products attract a large, high quality audience, the kind that engage consumers with whom big brands want to connect.

Over the course of the year, we’ve been able to carefully increase rates for national advertising by more than 40%, while expanding our available inventory as a result of the audience growth we are seeing.

Finally, within those core local businesses, our video views across the Scripps legacy markets were 28 million for the quarter, up 32% over second quarter of 2014. Revenue tied to video advertising was up 65% year-over-year, driven by that increase in inventory, greater sell-through and $4 increase in our average pre-roll rate.

Our news rooms are working hard to produce high quality video for our digital platforms and our sales teams are capitalizing on the opportunity. Turning now to the national digital businesses, we’ve hit several milestones with Newsy in recent months.

When we bought Newsy a year and a half ago, we knew it could evolve from a B2B news video supplier, to a consumer brand. But what we couldn’t have forecasted was how the over-the-top TV landscape would evolve at such a short time, presenting real opportunity to reach millennial[ph] consumers on a platform Scripps knows well, Television.

The reception Newsy has received from consumers on Roku and Amazon Fire, has shown us it has great resonance with those lean backed audiences. In fact, viewing times on Roku have been averaging about 22 minutes, that’s a long time in digital world.

That early success led us to create Newsy Live, a constantly updated live stream that’s filed after the headline news format you may recall. Every 30 minutes, includes nine minutes of dynamically inserted digital video advertising.

Now, Newsy’s OTT products serve us video-on demand for the consumer seeking to pick or choose, along with a live stream for the consumer dipping in for a nightly round up. Newsy Live and on-demand is available across all of our owned and operated consumer products and we’re working diligently to expand distribution much more broadly.

We’ve also added a significant new member to our national digital portfolio. On July 22nd, we announced that we bought Midroll Media, a five year old Los Angeles based company that creates original podcasts and operates a network that generates revenue for more than 200 shows, including StartUp and Nerdist.

As a reminder, podcasts are audio shows that can be downloaded or streamed most often to a smartphone. Think over the top radio but not music spoken word. Podcasts are monetized through the live reads of advertising, this kind of advertising is high touch which means it’s not easily commoditized and it derives great results for advertisers.

We saw Midroll as a great fit for us and a way to get into another one of those high growth digital media marketplaces. More and more people are literally physically connected to their mobile device at all times, usually by a little white ear buds.

At the same time, more and more cars are rolling off the lot with connected car infotainment systems that make listening to streaming audio like podcasting, really easy. Scripps and Midroll are both content creation companies and they share a mission of reaching expanding audiences with content that informs and entertains.

About 45 million Americans of all ages listen to podcasts every month according to a recent Edison research study. Midroll provides Scripps with an opportunity to expand its audience reach by capitalizing on this growing number of people seeking out podcasts.

In addition, podcasts audiences tend to be educated, affluent and engaged, which is obviously an attractive set for advertisers. Midroll’s owned and operated podcasts generate more than 8 million downloads monthly and the entire network for which the Midroll sells advertising generates more than a billion downloads per year across the world.

That all equates to about 2.5 billion available annual impressions to sell in this expanding market place to brands. This deal marks an important entry into this rapidly growing media platform and is expected to be a significant contributor to Scripps’ national media partner portfolio. Rich, back to you. .

Thanks, Adam. As I said in the beginning, we just completed a terrific quarter and we have reaffirmed our previously released guidance for the remainder of the year. And looking ahead, we think we are very much on track to take full advantage of opportunities that are coming our way in 2016. Operator, we are ready to take questions. .

Thank you. [Operator Instructions]. Our first question comes from the line of Marci Ryvicker of Wells Fargo. .

Thanks. You guys had really nice results in the second quarter, but your local is still down and the rest of your peers’ up. If you could remind us why that is, that would be great? That’s the first question.

The second question is have you noticed any change at all in your pay TV sub base when it comes to retrans and reverse? And then the third question is Rich you mentioned, or some of your comments at the beginning made me think about M&A.

So just curious as to your thoughts on station M&A given that we have the incentive option coming up and then the election, would activity be on hold or are there actually active discussions? Thank you. .

It’s Rich. I’ll let Brian start with the local and work the way around. .

Hey, good morning, Marci. Yeah, obviously we’re not thrilled with the performance of the local, I think there were couple of factors in there that affected the quarter. We really broke out automotive as a big part of being down 10 we certainly see that was a bit below our peers.

And I think if we look at our profile certainly a year ago big ABC stations, we knew the world – it’s going to be a big opportunity, we really tried to seize that and we got some good sponsorship money out of automotive. That wound up -- you enjoy the success when you get it, but then the year-to-year comps are little bit challenging.

I will just tell you that automotive is pacing much better in this quarter. So I do think that without those comps, you’ll see a better quarter out of us in the third quarter with the automotive.

In addition to that, the other factor in automotive as I said was, there was seen a bit of a shift of some of the factories moving around the money, the tier-2 money to fund the dealer groups and money is coming later, it’s been cut by a couple of percentages a car.

And so we’ve seen a couple of dealer groups kind of go by the way side or we – their money. So we’re kind of managing through that and that was a bit of a factor there as well. Other than that, I don’t see any categories that are really troubling, got a couple of that lateral off a point or two, as I said, services was a terrific category for us.

We generated a bunch of new business there, legal was up almost 50% there. Our insurance category was up $1 million. So I think it was not a great quarter -- there was also some internal accounting that moved as we brought the journal stations in. So I think we’ve applied all of that and I’m hoping that we’ll have a much better third quarter. .

And then what was the second quarter Marci?.

How your pay TV subs have been trending for retrans and reverse as we know all the stocks has been down of core cutting, but it sounds to us like in broadcast land, the pay TV universe seems to be pretty stable.

So just want to see that if that’s what you are seeing as well?.

Brian can talk about that. I can tell you that just in general, if anybody’s concerned with core cutting and the math of that is probably overblown particularly in the short term.

But if anybody is concerned broadcasters and particular Scripps is to behave and the place to go, in addition to the retransmission revenues that we enjoy, we also have the long-term hedge of over-the-air distribution system. The value of which is going to be strongly backed in the auction I think.

But we have both and we have the long-term hedge and then Scripps, in addition to that, we have the lagging retransmission fees that are coming on any core cutting will be lost and overwhelmed in our numbers over the next couple of years.

So we watch that you have the concern over the past couple of days and feel like – if there’s really any concern [indiscernible] place and move your money, but go ahead Brian. General fact. .

Yes, that’s a fact. Marci we haven’t seen any dramatic change in any decline of subcount at this point. It’s not unusual to see some of our carriers lose a few hear, but somebody else in the market pick up a few. So, we haven’t really seen much deterioration there.

I just want to remind you, we’re probably a company even if there is some shifting going on there, we can really benefit because we have all those households that have been below market that we now are on the verge of trying to capture at full market and add significant value to shareholder.

So, I think even if there is a little bit of shifting around because of some of the challenges we’ve had in the past. We’re actually well positioned to kind of blow right through that and live up to the pretty aggressive numbers that Tim put out there as we look toward next year. .

And finally Marci, you had a question on M&A, the coming auction has really slowed down the M&A market, but now as the auction comes more and more end of focus, anybody who has started to spend a lot of time has noticed that the results of the auction will be very focused and very specific places.

And there won’t be opportunity in lot of markets for people to take advantage of the auction that’s I think going to encourage more people, more owners especially small owners come back into the market and decide that well I guess the auction is not going to be the pay day that we had hoped for many years and it’s probably an opportunity for people like us to do important fill-ins, increase duopolies.

So I think the market will probably eat back up as the realities of the auction become more apparent over the next certainly 12 months and probably closer to than that. .

Thank you very much. .

And our next question will come from the line of Dan Kurnos from Benchmark Company. Please go ahead. .

Close enough on the last name, good morning guys. Just a few questions for you, going back to the prepared remarks, may be you want to talk about early political signs you’re seeing, actually stronger in 2Q than we were expecting although obviously not meaningful yet and how early that political can come in? Number one.

Number two, you touched on the fact that CBS all access was included in the Nashville negotiation with – from an OTT perspective, little surprised as CBS kind of did a one-off there, although obviously Nashville being a strong market I can’t say it’s a huge surprise.

But just your thoughts on how that conversation went, whether or not you got sort of fair value for where you think that trends and how you think about dealing with the networks in terms of OTT going forward, understanding that it’s still very early days? And then last question, in terms of Midroll, if they were on the reporter call, just may be talk a little bit about the synergies, the fact that there is very little overlap.

Your thoughts on how that integrates with radio and then if you could – if you don’t want to get too granular, if you could just sort of parse out kind of growth rates you’re expecting between separate our core TV websites and sort of the ancillary properties that you own and how that gets you to your growth number and the margin trends would be great.

Thanks. .

Hey, Dan, it’s Brian. You threw a lot at us, so let’s go one at a time here. So you want to talk about 2015 political, I think you mentioned that, second quarter results better than you expected. Yeah, second quarter was beyond our own pjs.

We had a pretty aggressive Mayoral Race in Nashville which wound up being pretty lucrative and some other local races that wound up over-delivering for us. But I think that’s the beginning of what you’ll see momentum building.

In the third and fourth quarter, you’ll see some local spending, the Kentucky gubernatorial race is going to be a big race and at levels that we had modelled and it’s good to see that it’s remaining, open and aggressive. So I think we’ll be able to capitalize on that.

We’ve seen an early bump on some Iran nuclear deal spending which has been nice in some of our markets as well as in some of our Tulsa senate races, U.S. Chamber of Commerce is spending some early money. So, I think that will be kind of the field that you’ll see as we build through the third quarter.

As we get through the fourth quarter, our wild car is the early primaries in the Journal acquisition, we picked up Omaha, which has couple of counties in Iowa and of course, Nevada with Las Vegas and both of them have early February primary. So, we already have candidate orders on the books for December in both those markets.

We expect that we’ll see more, I guess it really depends on what candidate is still hanging around at that point. But we’ve got some money laid in on some early favourites who people think that will still be there.

And then the big question is, just how many super packs will start an early and start contributing in those markets? So, I think you’ll see a continuous build through us for the year but I think this year is going to be good and we think next year is going to be really good.

So, on the CBS all-access, probably as you were saying I realized, I wasn’t as clear as I should have been in my prepared remarks. So we just renewed our CBS affiliation the complete affiliation in Nashville, and when we did that, we also did a CBS all-access deal for Nashville and our only other CBS station which is Omaha.

So, they didn’t went off that, they included all of our CBSs but of course, that’s only two.

We feel really good about that, we’re excited to have an economic relationship with the network that we provide our live stream of our local programming which we think is really appealing in the cord cutter space and we look forward to sharing in the economics of that.

But, I think we feel really good about our new relationship and us having a financial space in the OTT space as a partner to our networks. .

Thanks, Brian. Good morning, Dan. On the question about Midroll and synergies, from a synergies perspective, Scripps is already giving Midroll assets to a much wider distribution, platform for its shows and I’ll give you an example of that in second, as well as opening doors for advertisers.

We’ve had all these long standing relationships both in the broadcast space and on the digital side with national advertisers that today already are beginning to connect with our sales team over at Midroll with great success. Podcasting is in the news every day, everybody is hearing about it.

Quite frankly, the transaction has opened the door for us to connect to advertisers to the podcast community.

On the synergy side from a distribution perspective, even just yesterday we dropped the show in which one of our podcast shows did an exclusive interview with U2 the band, and we leveraged the network of our radio stations and in fact our television stations to do a little bit of a contact promotion about that podcast in addition to even working with our internal PR team here at Scripps and drove it to a much higher download number than the show normally gets.

And I think they are very, very beckoning – we do that very quickly right after the close. So we think there is a lot of great synergy ahead there. On the analytics around the business, when we look at the revenue, the vast majority of the revenue and the expense today is dedicated to the core business.

And if I look back at second quarter, our core local business saw nearly 20% revenue growth and much of that was fuelled by growth in local sales by both our digital sales team as well as the relationships our integrated sales teams have with our clients and that programmatic advertising that I mentioned earlier.

So, while we’re looking ahead to building businesses on the national side with great value, today we are seeing 20% growth in the core on the revenue side. .

And just on the margin front, as that sort of progresses back towards breakeven or better?.

Yeah, everything is moving exactly in the right direction as we continue to describe in our previous communications. .

All right. Great. Thanks for all the color guys. Appreciate it. .

Thank you. We’ll go to the line of Craig Huber with Huber Research Partners. .

Yes, hi. Good morning. Few questions if I could, I wanted to better understand if I could, the underlying outlook here for your digital segments excluding Midroll.

Are you expecting third and fourth quarters digital revenue for example be up mid-teens similar to was in the second quarter year-over-year? And then also costs excluding Midroll, should they ramp up a little faster than mid sing-digits to may be say 10% the backhalf of the year?.

I would say that had we not acquired Midroll, we would have confirmed guidance just like we did on the TV and radio side, we would have a firm exact same guidance that we had previously given last time around for third quarter and full year.

So things are exactly on track as we had said they were in our last call and things will continue in that direction.

Does that answer your question, Craig?.

Yeah, that’s very helpful. Thank you.

And then also, -- Brian on the TV side, can you just talk a little bit further Brian, on what you’re seeing on the advertising TV frontier? And how did July do year-over-year for your TV stations? And then you said auto is trending better does that mean it was down less severe or was it actually up? I have a follow up. Thank you. .

Hey, Craig, it’s Brian. Well, it’s August 7th so we still got what’s six seven weeks left in the quarter to write auto business and we already got better to finish number for third quarter than we actually finish in the second quarter.

And we still got all those September new models and come out so unless there are some rash of cancelations or anything that we don’t see coming, I think we are going to be in pretty good shape.

I expect we’ll still write a bunch of business so, kind of early to call whether that should be or up or down less, but I think you’ll see significant improvement in the auto space.

The rest of that – we’re having another quarter on services and between those two as you know, it’s almost 50% of our business, so if we have a stable auto environment and then the momentum that we’re seeing in services that gives us a lot of color and we’re having another great quarter just like last quarter in services.

So, I think with that foundation laid in, retail we don’t see down, we see it flat to up and some of our other key categories kind of similar to performance in the second quarter. So, I think we’re seeing pretty stable environment right now, Craig. .

Okay.

And also Brian if I could ask, if you think about all the journal stations, TV stations that you took on, I’m just curious from big picture standpoint, anything significant that you can point out to us, their TV stations, their best practices are actually better than how you guys run your stations, actually learned a lot or something from those station help applied to your existing core base of stations.

Anything that stands out to you?.

I think probably on the news gathering side, every station approaches – every group approaches it differently. They were a little bit more autonomous than we were so we have great stations, like I mentioned, in Nashville, in Milwaukee.

I think there’s things that we can pick up from those stations that allow us to be better with already being able to integrate them into some of our scaling of some of our content and been able to pull some great content out of that.

May be the other big thing is just on the local programming side, these guys have really adapted, having local programs in many cases that are news for advertisers to have some paid segments away from news that showcase whether it’s non-profits or advertisers in a different way.

It’s good, it’s local, it’s creative and most importantly it’s a real genuine advertising stream that kind of stays away from national agencies. This is really kind of done on a person to person basis on a local level. So I think we probably learnt a good bit from them and trying to figure out how to scale that across the Scripps group. .

Great. Thank you. .

Thanks, Craig. .

We’ll go next with the line of Michael Kupinski with Noble Financial. .

Thank you and thanks for actually reading my cash flow number, it makes life a lot easier. In terms of – I don’t want to exhaust Midroll but, Midroll appears to substantially improve the profitability profile of your digital segment.

And I was wondering do you anticipate that their investments that will need to be made in Midroll or do we have some visibility towards profits for this segment going forward?.

Yeah, we invested in Midroll and we’ve talked in the past about continuing to be on the hunt for businesses that operate on this platform whoever seems the greatest organic growth, Mike. And Midroll have exception, we expect Midroll to be a fast growing business.

I’m certain we will need to invest in Midroll, but we’ve modelled that during the acquisition, so we know exactly what we’re putting and what we intend to be able to take out. At the end of the day, we always look for businesses where returns exceeds our cost of capital so we were pretty comfortable with the investment there. .

I guess my question too is just more on a general basis, I think the company has brought may be the digital businesses can turn towards to contributing towards cash flow in 2017 and I was just wondering if this accelerates that prospect or are we still on target with that or the company can reaffirm that prospect?.

17 Mike?.

Yes, 2017. .

One thing – if you look at that segment, it’s a collection of different businesses in different places along the curve. The local businesses continue to be much further along and contributors versus the other businesses that we’re putting in there today the national businesses.

But, generally speaking, the addition of something like Midroll does improve the profitability of the segment. .

Mike, the other thing I would say is, in many cases on the national business side, it can be sort of a binary decision. If we see that we are hitting the metrics that we want to hit relative to high growth, revenue growth and user growth, where we feel we’re on track everything is in good shape, we’ll continue to plough forward.

If we feel like if things aren’t – things aren’t progressing as we expect, we know our job here and we’ll scale way back and drive that profitability even faster. .

And can you talk a little bit about the M&A pipeline on this segment, in the digital segment?.

Sure. I think I have said a number of times that we’re absolutely looking for businesses that gets Scripps deeper into those platforms where we see the highest organic growth and the marketplaces where we really see that evolving too. And for us, I think that’s really the OTT video, OTT audio and mobile space.

So we are absolutely looking to build and buy businesses in that space as we identify that younger audiences are developing around those platforms. .

Mike, if you think about that M&A pipeline, we don’t show up at many auctions especially high profile auctions.

Midroll was a good strap company, they built it very successfully and so much quietly and I was kind of pleased when we made the announcement, some people were not familiar with the business that – they had told me that we had not covered something that’s been off the radar screen, but yet has great growth.

Newsy was the same thing, sitting out there in Columbia, Missouri, built by a team and funded by a large part of some Missouri investors.

So to be successful, I think making these investments you’ve got to stay away from the high profile auctions, you’ve got to stay off the coasts, to some degree and look for opportunities where you’ve got people who are building real businesses and the evaluations are really attracted. .

The teams like on the Spectrum auction side you guys have downplayed your participation in the past and the teams like – your tone kind of indicated that you might be able to bit more of the participator in the auction process.

So I was just wondering without identifying markets that the company may participate in terms of the Spectrum auctions, has the company determined how many markets they may participate in and if you can give us some flavour of your level of participation in the auctions coming up?.

I’ll let Brian talk about it also, but if we do, we certainly not going to tell you. The one thing we’ve learnt over the past couple of months through a pretty deep process is that this is a real chess game.

And it’s going to affect many, many, many markets either if you’re direct participant or if you’re one of its – think about how to optimize the market going forward.

So bottom line where I sit today is the auction is going to create an awful lot of opportunity not just for those in end markets where people choose to take some cash, but in the way it restructures the industry and starts to build out the broadcast system for the future.

I think we have gained a lot of enthusiasm for the long term benefits, the auction well beyond what we’re going to see in the first quarter of next year.

Brian, want to add specifics about it?.

I think you did a nice job kind of just framing it. We are spending a lot of time on this Mike and as you would expect, we’re looking at our own market by market basis but understand that I think Rich just kind of – our thinking isn’t just what’s our opportunity by participating in a channel share or some other thing in dealing with the government.

We think that as we look at markets and work through some areas of ways things can play out, you’ve got affiliations that potentially others could be getting out that we may be able to pick up and you may certainly be able to get too big network of affiliates in a market and I think that could provide great long-term opportunity for us as we as mentioned earlier, that there is markets now that people thought that may be a big pay day was coming, some independent owners.

But now it’s pretty obvious that the government doesn’t have a need for Spectrum so this provides an opportunity for us to potentially double down and serve the markets or pick up stations where people who have been holding out for the auction now, may be available for acquisition.

And we spend a lot of time looking at the ATSC 3.0 standard and we think there’s tremendous opportunity in the future to build businesses well beyond just over-the-air broadcasting.

And we think the option the actual physical auction, the event of the auction is only a small part of the true opportunity that exists for broadcasters as we look at the whole thing in totality. .

And Brian, just as a follow up on your auto comments, in terms of the auto category coming back in the third quarter, is it the dealerships that are stepping up or is it the co-op money that’s coming back?.

Probably more the dealerships, we had a couple of – it’s two things, Mike, it’s factory and it’s dealerships. We had a great quarter last quarter with individual dealers we’re up over 20%.

As I said, really our challenge last quarter was in the dealer groups and there’s still some of those funding issues that exists that I don’t think we have broken out of yet, but there was also some of the factory money that it moved either cable into other places that we’re now seeing that budgets are coming back and in the third quarter they are picking up in the backhalf of the quarter.

So, I think the dealer group funding is still a little bit of an issue, but individual dealers is really healthy and factory appears to be pretty healthy as well. .

Great. That’s all I had. Thanks guys. .

Thanks, Michael. .

Thanks, Michael. Nice to hear from you. .

Our next question comes from the line of Tracy Young with Evercore ISI. .

Hi. Just following up on that auto question, were there any specific manufacturers that were holding back on club money? Second question is, could you give us some sense of how your station [indiscernible] or markets? And the third question is could you remind us for the CapEx for the quarter and the full year? Thanks. .

Hey, Tracy, it’s Brian. I’ll take the auto question first, a year ago Honda changed a little bit of strategy moved some money over to cable and I think on year-to-year basis they’ve been down a little bit. Toyota saw some softness in the quarter, Ford was down a little bit. So, also some of the foreign stuff, Atria, Hyundai, we saw some declines.

The domestic stuff is actually pretty healthy excluding some declines in couple of our markets with Ford. I’m going to throw it over to Steve Wexler now who runs our radio group, he’ll give you a little color on radio’s performance against the market. .

Thanks. .

Thanks, Brian. Hi, Tracy. We’re very pleased in the quarter on our performance versus the market particularly locally, markets were down about 2% and we were flat. And the total revenue significant proven in our NTR and non-traditional events revenue markets were down about a percent and we were able to grow a little bit better than half a percent.

So good performance versus our markets in radio. .

Hey, Tracy this is Tim, regarding CapEx, in the second quarter we had about $6.5 million of CapEx with the lion share of that in the TV division. And the guidance that we gave last quarter for CapEx for the year was about $30 million. .

Okay. Thank you. .

And we’ll go next to the line of Barry Lucas with Gabelli. .

Thanks and good morning. Two areas, just wanted to come back to Midroll ifyou could Rich, 50 million is a fairly healthy size of acquisition for the company.

Just wondering how do you compute a evaluation for that? How does it add value down the line, that sort of thing, if you could? And then one more for Brian on Spectrum side as a member of Pearl, you touched on ATSC 3.0, are there any milestones that we should looking for or expecting with regard to adoption broadcast standard and if so, when are we going to see that?.

I’ll start with Midroll Barry, it’s Rich. Even though it’s audio, people might say you guys are mostly a video company, television company, Midroll that’s an over the top play it’s well under that same marketplace.

We model something like Midroll just like any other business, we’re looking for fairly rapid revenue growth and we’re looking for it to be a contributor to add value into the segment. You’ll see it as it flows through the segment. You’ll be able to keep an eye on it that way.

But we don’t model it any different, obviously these are less mature businesses than buying a TV station of about the same size. But our long-term expectations for cash returns are no different. .

Hey, Barry it’s Brian. Let me take on your ATSC 3.0 question, a lot of time by a lot of folks being spent in that place we’ve got committees on the business side, we’ve got committees on the technical side. And really the technical is where most of the work is being done now as work to perfect the standard.

There’s been a lot of innovation done and a lot of decision made there and probably not overly public, but there’s a ton of very positive momentum around the technical decision making that will build the foundation for the standard.

Down the road when the technical is finished, it’s build and ready for prime time per se, there’ll be a couple of probably more public events. It will have to be adopted by the FCC, it will be adopted by the consumer electronics industry, so there’ll probably be more visibility about that.

But first obviously we got to get the technical side perfect and there’s a lot of really smart people working to make that happen as we speak. .

Presuming that it moves along at a timely pace Brian, when does the business opportunities begin to manifest themselves?.

Yeah, couple of years, three years may be something like that. You may see toward the end of the auction as people are converting to moving – on their repackage channel you may start to see some folks launch on the new standard at that point and I think that would be the beginning.

And then following that as all of the adoptions and approvals are needed kind of get finalized then you’ll see more of a migration toward beginning the early adopters trying to set the early business standards.

But I think we got to get through the auction first and I think that we’ve got to get to the point where people are going to stay in the business identify the people that get out so that then the people who are all committed to the future of the business and say, all right, we know we are sticking around, we’re all in, now how do we make this a great platform moving forward? So, I think in a perfect world, things would have been timed a little bit better, but the world’s not perfect.

But I think once we get through the next couple of months as we get through the bidding and all, then I think the people who are staying will be able to start to get some real momentum around this. .

Hey, Barry, as Brian just said, about the time of these standard rolls out, you get back into the auction, you’ve also created scarcity in markets so those who were there and building to the new standard had the opportunity to be – have a much stronger position to market as markets have cleared out through the auction. .

Great. Thanks very much for that, Rich. .

And we’ll go next to the line of John Hall with Wells Fargo. .

Good morning, guys. Just two questions on radio, it looks like you beat the expense guide by pretty big margin in Q2 but you didn’t change the full year commentary.

So, are those expenses getting pushed out to the back half of the year? And then, my second question is do you have any thoughts around the recent announcement for AT&T NextRadio and how material you think that could eventually be? Thanks. .

Hey John, it’s Steve Wexler. On the expense, we’ve been tracking right in line with guidance, one of the variables for us is sports and the Green Bay Packers, NFL schedule came out and it actually moved to game, which is actually for us a fairly significant piece. So there’s some – expense that follows that.

So we’re confident that the guidance we gave on expense and radio now low single for the quarter is good and is appropriate. So we’re not kicking expense on the road, we’re right on plan to do the things strategically that we think are sounding right, in radio.

Regarding, AT&T, we joined others in radio who were really pleased with the announcement and a lot of credit goes to just small unit of group over there who have done a very nice job of representing radios costs, if you will. Yeah, I think it’s all good.

Many of us remember a day when the transistor radio was how we listened to the radio and this technology makes a smartphone into a radio. So that’s good, because being wherever our users are digitally, with mobile, with streaming, with the web over-the-air and on the smartphone, it’s good for the industry.

I will just add that I think that while the technology and the platform is good and growing in a positive, our challenge and our opportunities is to make sure that we’ll provide local differentiated content, that’s meaningful in our marketplace. The technology won’t do that for us.

So, the fact that there’s more ways to receive radio is a good move and a positive and we applaud it and we’re excited about it. But we’re hard at work to make sure that our stations are really doing great things in our local markets..

Great. Thank you so much. .

And speakers, there are no further questions in queue at this time from the phone. .

Thanks, Kailey..

Do you have any closing remarks?.

No, I think we’ll wrap up here. Thanks so much to everyone for joining us. .

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