TEGNA Inc. Reports 2018 Second Quarter Results

August 7, 2018

MCLEAN, Va.--(BUSINESS WIRE)--Aug 7, 2018--TEGNA Inc. (NYSE: TGNA) today announced solid results for the second quarter ended June 30, 2018.

Highlights for the second quarter of 2018:

Total company revenue from continuing operations grew seven percent year-over-year, at the high end of the guidance range provided last quarter, driven by subscription revenue growth and higher political revenue. Adjusted revenue, excluding political advertising and previously terminated digital businesses, was up five percent year-over-year. Subscription revenue was 16 percent higher year-over-year, a $29 million increase, on track to achieve guidance of mid-teens growth in 2018; subscription revenue now comprises 40 percent of total revenue, up from 37 percent in the second quarter of 2017. Total paid subscribers were up year-over-year for the first time in several years fueled by continued growth of OTT subscribers in TEGNA markets. Total advertising and marketing services revenue, which excludes political, declined five percent year-over-year on a GAAP basis, and three percent on an adjusted basis when revenue from discontinued marketing services is excluded. Political revenue of $26 million set a second quarter historical record. Premion full year guidance raised from $60 million to $75 million, excluding incremental political revenue, resulting from growing customer demand for this first-to-market OTT advertising service. Total company adjusted EBITDA was $169.6 million. GAAP earnings per diluted share from continuing operations were $0.43. Non-GAAP* earnings per diluted share from continuing operations were $0.36, an increase of 24 percent year-over-year. Free cash flow of $93 million was 18 percent of revenue. In the second quarter, TEGNA reduced debt by $67 million, resulting in total debt of $3.2 billion and net leverage of 4.3x. $5.8 million was spent on share repurchases during the quarter. Revolving credit agreement of $1.5 billion extended three years to June 2023 with existing favorable terms and financial covenants.

* See “Use of Non-GAAP Information” below for more details

“Our progress in the quarter gives us confidence that our growth strategy is on track,” said Dave Lougee, president and chief executive officer, TEGNA. “Our business mix continues to evolve toward predictable and profitable subscription-based revenue streams. Contrary to conventional wisdom, our paid subscriber base is very stable, and in fact, our total number of paid subscribers were up year-over-year for the first time in recent years. The bottom line: any lost traditional subs are being offset by new subscribers from OTT virtual MVPDs. As a result of this dynamic as well as annual rate increases, subscription revenues were up double-digits in the quarter. Demand for Premion continues to accelerate as we open new markets and offer new services. We are increasing Premion’s full year revenue guidance from $60 million to $75 million, excluding political advertising on Premion.”


In analyzing second quarter 2018 results, investors should be reminded that:

TEGNA’s odd-to even-year results are positively impacted by cyclical political advertising drivers due to the company’s footprint in states that tend to see substantial campaign spending. The second quarter of 2018 is the last quarter of negatively impacted revenue variances of $6.2 million due to the conclusion of a transition services agreement with Gannett which ended June 2017.

(a) Includes traditional advertising, digital advertising as well as revenue from the company’s digital marketing services business.

(b) Refer to Tables 2 through 5 for reconciliations to the most directly comparable financial measure calculated and presented in accordance with GAAP.

(c) Calculated as a percent of total GAAP revenues in Q2 2018.


Total company revenues increased seven percent in the quarter on a GAAP basis primarily due to a $29 million increase in subscription revenue and an $18 million increase in political advertising. When excluding the cyclical political advertising and discontinued digital marketing services, total company adjusted revenues were up five percent.

Advertising and marketing services revenue on a non-GAAP basis, excluding discontinued digital marketing services, was three percent lower in the quarter compared to the second quarter of 2017. On a GAAP basis, advertising and marketing services revenue declined five percent.

GAAP expenses were up nine percent year-over-year, primarily driven by higher programming fees and investments in Premion, including the data management platform. We continue to reinvest the majority of Premion’s operating income in its growth in order to capitalize on Premion’s first to market opportunity in the local and regional OTT ad space. The GAAP operating expense comparison benefited from a gain on the sale of real estate. Non-GAAP operating expenses, excluding the real estate gain, were up 12 percent (refer to Table 2 for a reconciliation of non-GAAP operating expenses). Given the upward revision of Premion’s revenue outlook, we expect our full year Adjusted EBITDA margin to be in the range of 36 to 38 percent, excluding corporate expenses.

GAAP operating income totaled $154.1 million in the second quarter of 2018. Adjusted EBITDA (a non-GAAP measure detailed in Table 3) totaled $169.6 million in the quarter and the Adjusted EBITDA margin equaled 32.4 percent. Adjusted EBITDA excluding corporate expenses was $180.9 million which resulted in a margin of 34.5 percent.

Net income from continuing operations was $92.5 million. On a non-GAAP basis, net income from continuing operations was 24 percent higher year-over-year and totaled $78.4 million reflecting a lower tax rate.

Special items of $6.3 million impacting operating results for the quarter included gains related to the sale of real estate in Houston and FCC spectrum repacking reimbursements, partially offset by an early lease termination payment. Special items impacting non-operating results totaled a gain of $11.0 million comprised of equity earnings from CareerBuilder’s sale of a business unit, partially offset by certain non-operating expenses and donations to the TEGNA Foundation. Refer to Table 2 for a reconciliation of results on a GAAP and non-GAAP basis.


Interest expense in the quarter was $49.1 million compared to $54.8 million in the second quarter of 2017. The decline was due primarily to lower average debt outstanding, partially offset by a slightly higher average interest rate. Debt outstanding was $3.2 billion and total cash was $24.5 million at the end of the quarter. Given that 85 percent of our debt has fixed interest rates, there was a minimal impact from rising interest rates during the quarter.

Other non-operating expenses were $0.3 million in the quarter compared to $21.1 million last year. The decrease was primarily attributable to a decline in transaction costs of $6.8 million and the absence of $9.3 million of impairment charges recognized in 2017. Pension expense was also $3.1 million lower due to recent strong investment returns achieved.

Cash flow from operating activities for the second quarter of 2018 was $102.9 million. Free cash flow from continuing operations (a non-GAAP measure - refer to Table 5) was $92.6 million compared to $71.4 million in the second quarter of 2017. This increase is primarily attributable to declines in tax payments ($18.7 million), lower interest payments ($9.2 million) and cash dividends received in the second quarter of 2018 of $11.5 million (primarily from CareerBuilder). These increases are partially offset by declines of approximately $26 million from the disposition of Cars.com and CareerBuilder which were spun-off and sold, respectively, during 2017.

During the second quarter, TEGNA repaid $67 million of debt and spent $5.8 million on share repurchases.


In the third quarter, TEGNA expects GAAP total company revenue to increase mid-teens year-over-year driven by substantially higher political revenue, subscription revenue growth and innovative initiatives such as Premion.


Structured Content Innovation process - TEGNA’s disciplined and intensive Content Innovation process continues to produce tangible results as TEGNA grows and broadens its offerings to audiences on all platforms. Recapturing local news viewers - KUSA in Denver cancelled the #1 6pm newscast in the market and replaced it with a dramatically different product, “NEXT with Kyle Clark.” 72 percent of the viewers in the time period turned over, and “NEXT” is now the #1 newscast in all of Colorado with Adults 25-54, comprised of many viewers who had stopped watching local news. Transforming morning news - A focused transformation effort on morning newscasts is producing results across TEGNA. An example is in St. Louis, where KSDK has doubled its share of morning viewers. Industry-wide recognition for innovation - Won 10 National Edward R. Murrow Awards for excellence in journalism, more than any other company. Six were for overall excellence, but nine were for excellence in innovation and eight originated from pilot concepts created by TEGNA innovators. Announced Facebook Watch series - As part of TEGNA’s comprehensive voter education plan, partnered with Facebook Watch on a new digital-first series, “An Imperfect Union.” Launched DEALBOSS commerce brand - Successfully launched the DEALBOSS commerce brand across TEGNA’s local stations’ digital and social platforms and on-air in select markets. DEALBOSS empowers audiences to be smart, savvy shoppers by providing discounts, information, reviews and early Amazon Prime deals. Increased Premion reach and revenue outside of TEGNA’s broadcast footprint - Premion began piloting partnerships with local media broadcast groups and other businesses to enable Premion sales in additional local markets. Premion has now generated revenue in all 50 states. Premion Data Management Platform (DMP) - Accelerated buildout of new ancillary business for Premion, leveraging audience data targeting capabilities for brands and advertisers. Invested in technology driving Premion growth - Closed a minority investment in MadHive, a leading advertising and data technology company pioneering the OTT advertising space. This investment will further cement Premion’s partnership with MadHive and drive continued innovation across both companies.


TEGNA follows a disciplined capital allocation strategy focused on creating value for long-term shareholders. The company’s flexible investment evaluation process seeks to maximize returns by anticipating and taking advantage of new opportunities and evolving market conditions.

Structured, repeatable process - TEGNA has abundant and stable cash flows, which are used to execute value accretive M&A, retire debt, pay dividends and opportunistically repurchase shares at attractive prices. Substantial consolidation opportunities in broadcast industry - With the possible changes in ownership regulations, the broadcast industry is likely poised for accelerated consolidation and station ownership changes. TEGNA remains uniquely positioned to benefit from both vertical and horizontal M&A opportunities due to its strong station portfolio in attractive markets and its track record of exceeding acquisition return targets. The company continues to actively evaluate a broad range of acquisition opportunities that are EPS and free cash flow accretive within the first 12-18 months. Proven track record of meeting or exceeding EPS and free cash flow acquisition criteria - All of TEGNA’s broadcast transactions (including Belo and London Broadcasting) have exceeded these targets. For instance, this year’s acquisition of KFMB in San Diego was immediately free cash flow accretive and will be EPS accretive by the end of the year, one quarter ahead of schedule.


As previously announced, the company will hold an earnings conference call at 8:30 a.m. ET today. The call can be accessed via a live webcast through the company’s Investors website, investors.TEGNA.com, or listen-only conference lines. U.S. callers should dial 1-888-394-8218 and international callers should dial 1-323-794-2588 at least 10 minutes prior to the scheduled start of the call. The confirmation code for the conference call is 1183984. A replay of the conference call will be available under “Investor Relations” at www.TEGNA.com from Tuesday, August 7, at 12:30 p.m. (ET) to Tuesday, August 21, at 12:30 p.m. (ET). To access the replay, dial 888-203-1112 or 719-457-0820. The confirmation code for the replay is 1183984. Materials related to the call will be available through the Investor Relations section of the company’s website Tuesday morning.


TEGNA Inc. (NYSE: TGNA) is an innovative media company that serves the greater good of our communities. With 47 television stations and two radio stations in 39 markets, TEGNA delivers relevant content and information to consumers across platforms. It is the largest owner of top 4 affiliates in the top 25 markets, reaching approximately one-third of all television households nationwide. Each month, TEGNA reaches 50 million adults on-air and approximately 30 million across its digital platforms. TEGNA has been consistently honored with the industry’s top awards, including Edward R. Murrow, George Polk, Alfred I. DuPont and Emmy Awards. TEGNA delivers results for advertisers through unparalleled and innovative solutions including OTT local advertising network  Premion, centralized marketing resource Hatch, and  G/O Digital, a one-stop shop for local businesses to connect with consumers through digital marketing. Across platforms, TEGNA tells empowering stories, conducts impactful investigations and delivers innovative marketing solutions. For more information, visit  www.TEGNA.com.

Certain statements in this press release may be forward looking in nature or “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this press release are subject to a number of risks, trends and uncertainties that could cause actual performance to differ materially from these forward-looking statements. A number of those risks, trends and uncertainties are discussed in the company’s SEC reports, including the company’s annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements in this press release should be evaluated in light of these important risk factors.

TEGNA is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this press release by wire services, Internet service providers or other media.

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