Scripps Q4 Revenue Rises Sequentially, Yet Leverage and Cyclicality Underscore Caution

What happened

Scripps reported Q4 2025 revenue of $560 million, a sequential increase from Q3's $526 million, potentially signaling early benefits from the 2026 political advertising cycle or improved performance in its connected-TV segment. This uptick contrasts with the year-over-year revenue decline of 10.7% for the first nine months of 2025, as highlighted in prior filings, reflecting ongoing volatility in non-election periods. The company remains highly leveraged with net debt-to-EBITDA at 4.63x and operating cash flow having collapsed to $8 million in the first nine months of 2025, emphasizing its fragile cash generation outside political peaks. M&A optionality from Sinclair's $7 per share bid is constrained by a poison pill and family control, which limits near-term transaction prospects and adds governance risk. Overall, while the revenue beat offers a glimmer of operational improvement, Scripps' fundamental challenges—high debt, cyclical earnings, and structural pressures in local media—persist, demanding careful scrutiny of deleveraging progress and CTV sustainability.

Implication

The sequential revenue improvement hints at early momentum from political advertising or CTV growth, but sustained performance is essential to drive meaningful deleveraging and cash flow recovery in 2026. Scripps' balance sheet remains fragile with high-cost debt, including 9.875% second-lien notes, and operating cash flow needs to rebound significantly from its depressed 2025 levels to avoid further financial stress. The Sinclair bid provides a potential valuation floor, but the poison pill and family control cap near-term M&A upside, making strategic outcomes uncertain and dependent on board actions. Key monitoring points include net leverage trending below 4.6x, Scripps Networks margins staying above 30%, and early 2026 political booking trends confirming revenue durability. Until clearer evidence of deleveraging and durable cash generation emerges, investors are advised to maintain a wait stance, prioritizing entry points closer to $3 or definitive catalysts over speculative optimism.

Thesis delta

The Q4 revenue beat does not fundamentally shift the investment thesis, which remains centered on successful deleveraging through the 2026 political cycle and sustained CTV growth offsetting linear declines. However, if this revenue trend continues into 2026, it could slightly improve the probability of the base case scenario, but significant risks from high leverage, family control, and cyclical earnings persist, keeping the overall 'WAIT' recommendation unchanged.