TEGNA : Transcript of first-quarter 2025 earnings conference call

Published: 2025-05-09 14:15:06 ET TGNA

Published on 05/09/2025 at 14:15

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TGNA.N - Q1 2025 Tegna Inc Earnings Call

EVENT DATE/TIME: MAY 08, 2025 / 3:00PM GMT

Good day and thank you for standing by. Welcome to the Q1 2025 Tegna Inc earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded.

‌I would now like to hand the conference over to your first speaker today, Kirk von Seelen. Please go ahead.

Thank you. Good morning and welcome to our first-quarter conference call and webcast. My name is Kirk von Seelen, and I am Tegna's Treasurer. Today, our CEO, Mike Steib; and our CFO, Julie Heskett, will review Tegna's financial performance and results and provide Tegna's second-quarter outlook. After that, we'll open the call for questions.

Hopefully, you've had the opportunity to review this morning's press release. If you have not yet seen a copy of the release, it's available at tegna.com.

‌Before we get started, I'd like to remind you that this conference call and webcast includes forward-looking statements, and our actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. This presentation also includes certain non-GAAP financial measures. We have provided reconciliations of those measures to the most directly comparable GAAP measures in the press release.

With that, let me turn the call over to Mike.

Thanks, Kirk. Good morning, everybody, and thank you for joining us today.

It's been an eventful few weeks for the economy and for the stock market at times like this. Very glad that we have strong brands and loyal audiences, deep relationships with local businesses, and more predictable distribution revenue stream. And despite all the noise, we are staying locked in on our previously mentioned five areas of focus.

Number one, we're building a world-class team, culture and company operating system that unlocks high-impact execution.

Number two, we're leveraging Tegna's strengths across our stations to improve performance through better resource sharing. Number three, we are fully deploying technology, automation, and AI to run a more efficient and effective operation.

Four, we are growing digital revenue by deepening engagement with our digital audience.

Five, cutting all unnecessary spend and bureaucracy, ensuring our time and our resources are maximally focused on growing audience and growing revenue.

We're moving fast and I just wanted to highlight for everyone here a few recent examples.

Number one, on building out our world-class team. The new executive team is coming together and collaborating really nicely, and we're moving with focus and velocity. We added two new senior leaders, Melissa Zimyeski and Mat Yurow, to inject new digital design, development, and growth capabilities into our organization. Our new sales performance management and incentive regime is driving more accountability, faster talent up-leveling, and improved execution across linear and digital. So good progress here.

Number two, we're leveraging taking the strengths and improving resource sharing. On this one, our statewide news sharing and local regional sales tests in Florida have unlocked more productive capacity for our news teams and new multi-market dollars for our sales teams. What we've learned in this test is going to inform our technology and operational rollouts in the months ahead.

On number three, fully deploying technology to run more effective stations. We are testing a new proprietary AI system to help our newsrooms find and cover more impactful local local stories, supporting our journalists and being the best newsroom in every market that we serve. We're also progressing on plans for our two stations of the future, which will leverage reduced technology and real estate footprints to deliver the news more sustainably.

On number four, growing digital by deepening audience engagement. I'm really pleased with the new apps that we're testing, and I expect we'll be moving to public launch in a couple of markets in the coming months. AI-augmented software development is making our engineering team more productive than ever, and I'm excited about building on these capabilities.

And finally, on number five, cutting unnecessary spend and bureaucracy, our team has surfaced tons of opportunities to save dollars and time that can be invested in our future. We're doing this by rethinking our real estate footprint and slashing internal processes that distract from growing ratings and growing revenue. Removing unnecessary bureaucracy improves everything from employee engagement to speed of execution. We're finding more opportunities like this every day.

I also want to shout out the team for landing some exciting new sports rights deals. We've secured local team rights across NBA, WNBA, NHL, and MLB. On top of that, we've partnered with multiple NFL teams to air preseason games for free, over-the-air. In short, we are making it easier for every single hometown fan to find and watch their favorite local teams. It's a win for fans, and it's a win for the power of local broadcasting.

And before I go, I want to recognize the outstanding local journalism coming out of our stations. Specifically, our four stations that received the Gracie Awards.

Before we wrap, a comment on the evolving regulatory landscape. 73 members of the Congress have signed a letter to FCC Chairman, Brendan Carr, advocating for deregulation and broadcasting, and the Chairman is expected to have a majority soon. We're staying close to all of this, and our healthy balance sheet, consistent free cash flow generation, and track record of disciplined capital allocation position us well to pursue the best opportunities for value creation.

In closing, I want to thank the team. These first few months of my tenure have brought significant changes to our people, culture, strategy, and performance expectations. It takes a very special team to evolve this quickly. I'm really proud of our folks for doing the hard work to ensure a sustainable future for local news and a bright future for Tegna.

And with that, I'll turn it over to Julie for a closer look at our financial performance and second-quarter guidance.

Thanks, Mike, and good morning, everyone.

Our financial performance this quarter came in as expected and within our guidance range. We delivered on what we set out to do this quarter, and I want to thank our teams for their focus and execution.

I will begin today by covering our first-quarter financial results, then provide an update on our business operational initiatives and capital allocation priorities before closing with a review of our guidance.

Total company revenue for first quarter finished at $680 million, a decrease of 5% year over year in line with our outlook of down 4% to 7%. The decrease was primarily due to lower political advertising revenue consistent with cyclical even-to-odd year comparisons.

Advertising and marketing services revenue, also known as AMS, finished at $286 million in the first quarter, a 3% decrease year over year due to macroeconomic headwinds and the Super Bowl airing on Fox, our smallest affiliate group this year, versus CBS last year. The decrease was partially offset by growth in advertising revenue from local sports rights. When we normalized for the Super Bowl impact, AMS revenue finished flat to last year.

Advertising demand remains closely tied to overall economic sentiment, and with consumer confidence softening, some advertisers are taking a more cautious wait-to-see approach. This may lead to near-term delays in spending and ultimately impact our second quarter AMS revenue performance.

As Mike highlighted, we're aggressively pursuing growth initiatives of our digital product portfolio consisting of web solutions, mobile and streaming apps, as well as local CTV advertising. We are encouraged by our digital advertising performance, with digital ad revenue growing year over year. The momentum we saw in the fourth quarter from our owned and operated products continued in the first quarter.

Leveraging our powerful brands, expansive footprint, and deep customer relationships, we're in a strong position to drive profitable digital growth through 2025 and beyond.

Before moving on, I want to point your attention to a reclassification of subscription revenue to distribution revenue that we highlight in the press release. The reclassed amounts were immaterial, and we have provided recast numbers in the release to simplify year-over-year comparisons. Distribution revenue in the first quarter was flat year over year at $380 million due to a temporary disruption of service with a distributor that successfully concluded in mid-January last year, as well as distributor renewals and contractual rate increases partially offset by subscriber declines.

We have approximately 45% of our traditional subscribers up for renewal in calendar year 2025, providing us with additional opportunities to capture appropriate value for our content. We successfully renewed approximately 10% of our traditional MVPD subscribers at the end of the first quarter.

Our total adjusted EBITDA in the first quarter finished at $136 million, a 22% decrease year over year, primarily due to the lower political advertising revenue and AMS revenue, partially offset by continued cost benefits from core operational cost-cutting initiatives.

Moving on to the cost-cutting initiatives, we continue to drive significant improvements to our cost structure. As we highlighted on our last earnings call, and as you heard Mike say earlier, we are deploying technology to run our stations more effectively and cutting all unnecessary spending.

First-quarter non-GAAP expenses finished flat year over year, driven by increases in programming expenses which include local sports rights offset by cost reductions. All other expenses outside of programming finished 4% below last year, continuing this sequential improvement of structural

cost reduction efforts. We remain on track to achieve our goal of generating $90 million to $100 million in annualized core non-programming savings as we exit 2025. At the end of the first quarter, we stand at approximately 60% of our target.

Turning now to capital allocation, we remain committed to returning 40% to 60% of adjusted free cash flow to shareholders over the '24 and '25 two-year period, and we are on track to achieve that goal. We paid $20 million in dividends to our shareholders in the first quarter. Cash and cash equivalents totaled $717 million at quarter end, and our net leverage finished at 2.8 times.

Given the prospects of deregulation and station M&A, we're taking a more measured approach to share repurchases at this time. Preserving financial flexibility ensures we remain agile while staying disciplined in our capital deployment and focused on delivering long-term shareholder returns. As Mike mentioned, our healthy balance sheet, consistent free cash flow generation, and track record of disciplined capital application position us to act when attractive value creating opportunities arise.

Now, let's turn to our financial guidance elements. As we noted in our press release this morning, we are reaffirming our combined two-year 2024, 2025 adjusted pre-cash flow guidance of $900 million to $1.1 billion. You can see our full-year guidance metrics in our earnings release. There's one small update to call out. We are lowering our full-year 2025 effective tax rate guidance to a range of 22% to 23% reflecting tax refunds we expect to receive from the state of Texas.

Let me provide our financial guidance for the second quarter. We expect total company revenue to be down in the 4% to 7% range year over year, primarily reflecting lower political advertising revenue due to cyclical, even-to-odd year comparisons, as well as anticipated headwinds in advertising environments stemming from the recent shifts in global trade dynamics. We expect non-GAAP operating expenses to be flat to down 2% compared to Q2 of 2024, reflecting cost reduction efforts previously discussed.

In closing, our first-quarter results reflect the strength of Tegna's market position and the solid foundation that we have built. With strong brands, a great footprint, and deep customer relationships, we're well positioned for what lies ahead. We remain focused on staying one step ahead on cost and sharpening our digital portfolio to prioritize the services we believe have the greatest growth potential for Tegna.

As the industry continues to evolve and companies brace for broader economic pressures, our priorities remain clear: execute with discipline, unlock operational efficiencies, and deploy capital where it drives long-term shareholder growth. Our healthy balance sheet gives us the flexibility to continue investing in growth.

With that operator, let's open the call for questions.

(Operator Instructions) Steven Cahall, Wells Fargo.

Thank you. So Mike, you talked a bit about what's happening with the FCC and deregulation. Tegna is in a unique position. You have a strong balance sheet. You're below the cap. Clearly, this FCC is pretty favorable to getting deals done. So do you need to wait on future deregulation initiatives, or do you feel like the opportunities are already in front of you?

And Julie, you talked about the 40% to 60% return or free cash flow, I assume that is if there isn't strategic M&A to do. So that's kind of the first question around M&A. And then Julie, you mentioned anticipated headwinds arising from the macroeconomic environment that were implied in the Q2 guide. Could you just expand a little bit on whether that's conservatism or whether you're seeing specific changes to the advertising environment starting to show up in Q2?

Disclaimer

Tegna Inc. published this content on May 09, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 09, 2025 at 18:14 UTC.