Scripps Targets EBITDA Growth via Cost-Cuts and AI, But Leverage and Cyclicality Linger

What happened

E.W. Scripps, a highly leveraged broadcaster with earnings tied to volatile ad cycles, has announced a new initiative aiming for $125-150 million in annual enterprise EBITDA growth by 2028 through cost-cutting and AI integration. This builds on prior multi-year restructuring that eliminated over 200 jobs and claimed $40 million in savings, as noted in recent SEC filings. However, the company's operating cash flow collapsed to $8 million in the first nine months of 2025, exposing fragile non-election earnings despite Scripps Networks' strong margins. The AI push targets efficiency in its networks segment, which shows 30%+ margins but flat total revenue as CTV growth merely offsets linear declines. While aligned with management's deleveraging plan using 2026 political cash, high debt costs and structural ad pressures raise skepticism about achieving these targets without deeper operational fixes.

Implication

Scripps' new cost-cutting and AI initiative highlights management's ongoing focus on operational efficiency to support EBITDA growth, but it does not materially alter the investment case given persistent high leverage and earnings volatility. The projected $125-150 million EBITDA boost by 2028 appears optimistic without sustained revenue recovery, as net leverage stands at 4.63x and operating cash flow is weak outside election years. AI integration may enhance margins in Scripps Networks, but total network revenue remains flat, indicating growth is offsetting declines rather than driving expansion. For equity holders, this plan underscores the need for successful deleveraging through the 2026 political cycle and CTV growth, yet execution risks and family control over M&A cap upside. Thus, the DeepValue report's 'WAIT' rating and entry near $3 remain prudent until clearer evidence of cash flow durability emerges.

Thesis delta

This news reinforces the existing thesis that Scripps' value hinges on cost discipline and EBITDA expansion to reduce leverage, without shifting the fundamental risk-reward profile. It emphasizes management's commitment to prior restructuring efforts but does not address cyclical headwinds or high debt costs that constrain equity upside. Investors should continue to monitor deleveraging progress and CTV growth as key catalysts, as outlined in the report.