TGNA.Tegna INC
10-Q: TEGNA Inc. Reports Second Quarter 2024 Results, Revenue Declines Offset by Political Ad Gains
Sentiment:
Quarterly Report
TEGNA Inc. experienced a decrease in revenue for the second quarter of 2024, primarily due to declines in subscription and advertising revenue, partially offset by a significant increase in political advertising revenue.
Worse than expectedThe company's revenue, operating income, and net income all decreased compared to the same period last year.The absence of a merger termination fee received in the second quarter of 2023 significantly impacted operating income.The company experienced declines in both subscription and advertising revenue, indicating challenges in its core business.
Summary
- TEGNA Inc.'s revenue decreased by 3% to $710.4 million in the second quarter of 2024 compared to $731.5 million in the same period of 2023.
- The decline in revenue was primarily driven by a 7% decrease in subscription revenue and a 5% decrease in advertising and marketing services revenue.
- Political advertising revenue increased significantly, offsetting some of the declines in other revenue streams.
- Operating income decreased by 50% to $141.9 million, primarily due to the absence of a $136 million merger termination fee received in the second quarter of 2023.
- Net income attributable to TEGNA Inc. decreased by 59% to $82.1 million, or $0.48 per diluted share, compared to $200.1 million, or $0.92 per diluted share, in the second quarter of 2023.
- The company repurchased 5.1 million shares in the second quarter of 2024 at an average price of $14.05 per share for a total cost of $71.3 million.
- TEGNA is on track to return approximately $350 million of capital to shareholders in 2024 through dividends and share repurchases.
- The company expects to realize annualized cost savings of $90-$100 million exiting 2025 from transformation initiatives.
Sentiment
Score: 4
Explanation: The document presents a mixed picture with some positive aspects like cost-cutting and share repurchases, but the overall financial performance is worse than the previous year, indicating a negative sentiment.
Positives
- Political advertising revenue increased significantly, partially offsetting declines in other revenue streams.
- The company is on track to return approximately $350 million of capital to shareholders in 2024 through dividends and share repurchases.
- TEGNA expects to realize annualized cost savings of $90-$100 million exiting 2025 from transformation initiatives.
- The company successfully resolved a temporary service disruption with a distribution partner in January 2024.
- TEGNA's Board of Directors increased the quarterly dividend by 10%.
Negatives
- Total revenue decreased by 3% year-over-year, driven by declines in subscription and advertising revenue.
- Operating income decreased by 50% due to the absence of a merger termination fee received in the second quarter of 2023.
- Net income attributable to TEGNA Inc. decreased by 59% to $82.1 million.
- Adjusted EBITDA decreased by 10% in the second quarter of 2024 compared to the same period in 2023.
- The company experienced continued softness in the national advertising market.
Risks
- The company's financial results are subject to seasonal fluctuations, with the second and fourth quarters typically being stronger than the first and third quarters.
- Political advertising revenue is subject to significant fluctuations across yearly periods, driven by election cycles.
- The company's ability to re-price or renew subscribers is a risk factor.
- Changes in consumer behaviors and impacts on TEGNA's operations and business are a risk.
- Economic, competitive, governmental, technological and other factors may affect the company's operations or financial results.
Future Outlook
TEGNA expects to return 40-60% of adjusted free cash flow generated in 2024-2025 to shareholders through share repurchases and dividends. The company also expects to realize annualized cost savings of $90-$100 million exiting 2025 from transformation initiatives.
Management Comments
- The company is on track to return approximately $350 million of capital to shareholders in 2024 through dividends and share repurchases.
- TEGNA's capital allocation plan is subject to a variety of factors, including strategic plans, market and economic conditions and the discretion of the Board of Directors.
- The company will continue to analyze all uses of capital, including regular evaluation of the dividend, with a goal of maximizing long-term shareholder value creation.
Industry Context
The decrease in subscription revenue reflects a broader trend of cord-cutting and shifting consumer preferences towards streaming services. The softness in the national advertising market is also a common challenge faced by media companies. However, the increase in political advertising revenue is a positive sign, particularly in an election year.
Comparison to Industry Standards
- TEGNA's performance is mixed when compared to industry standards.
- While the company's political advertising revenue growth is in line with expectations for an election year, the declines in subscription and advertising revenue are concerning.
- Other media companies are also facing similar challenges in subscription and advertising revenue, but some are showing stronger growth in digital and streaming segments.
- TEGNA's cost-cutting initiatives and share repurchase program are positive steps, but the company needs to address the underlying issues in its core business to achieve sustainable growth.
- Compared to companies like Nexstar Media Group and Sinclair Broadcast Group, TEGNA's revenue decline is more pronounced, suggesting potential competitive pressures or operational challenges.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| President and Chief Executive Officer | NA | David T. Lougee | NA | NA |
| Senior Vice President and Chief Financial Officer | NA | Julie A. Heskett | NA | NA |
| Senior Vice President and Controller | NA | Clifton A. McClelland III | NA | NA |
| Senior Vice President/Chief HR Officer | NA | Jeffery Newman | 2024-07-02 | NA |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Deferred Compensation Plan Amendment | Amendment No. 11 to TEGNA Inc. Deferred Compensation Plan Rules for Post-2004 Deferrals, modifying payment commencement dates and methods for deferral elections made after September 1, 2024. | 2024-07-02 | The amendment provides more flexibility in payment options for participants, potentially impacting the timing of cash outflows for the company. |
Legal Proceedings
- TEGNA is involved in ongoing antitrust litigation related to local television advertising sales practices.
- The company believes the claims are without merit and intends to defend vigorously against them.
- TEGNA is also a defendant in other judicial and administrative proceedings incidental to its business, but does not believe any material liability will be imposed.
Related Party Transactions
- TEGNA has commercial agreements with MadHive, Inc., a related party, under which MadHive supports TEGNA's Premion business.
- In the second quarter of 2024, TEGNA incurred expenses of $23.0 million as a result of the commercial agreement with MadHive.
Stakeholder Impact
- Shareholders will be impacted by the decrease in net income and earnings per share, but also by the share repurchase program and increased dividend.
- Employees may be affected by workforce restructuring and cost-cutting initiatives, but also by retention programs.
- Customers may experience changes in service offerings and pricing.
- Suppliers and creditors may be impacted by changes in the company's financial performance and capital allocation decisions.
Next Steps
- The company will continue to execute its capital allocation plan, including share repurchases and dividends.
- TEGNA will focus on transformation initiatives to streamline operations and achieve cost reductions.
- The company will continue to monitor market conditions and adjust its strategies as needed.
Key Dates
| Date | Description |
|---|---|
| 2018-10-03 | Date of consolidation of advertising cases into a single proceeding. |
| 2018-12-13 | Date of DOJ settlement with seven other broadcasters. |
| 2019-06-01 | Date of TEGNA and four other broadcasters entering into an agreement with DOJ. |
| 2019-12-03 | Date the settlement with DOJ was entered by the court. |
| 2020-03-01 | Date of sale of minority interest in Premion to an affiliate of Gray Television. |
| 2022-02-22 | Date TEGNA entered into an Agreement and Plan of Merger with Teton Parent Corp. |
| 2023-05-22 | Date TEGNA terminated the Merger Agreement. |
| 2023-05-26 | Date plaintiffs moved for preliminary approval of settlements with four co-defendants. |
| 2023-06-02 | Date TEGNA entered into the first accelerated share repurchase program. |
| 2023-11-09 | Date TEGNA entered into the second accelerated share repurchase program. |
| 2023-11-13 | Date of initial delivery of shares under the second ASR program. |
| 2023-12-01 | Date the Board of Directors authorized a new share repurchase program. |
| 2023-12-31 | End of the fiscal year 2023. |
| 2024-01-13 | Date a temporary service disruption with a distribution partner was resolved. |
| 2024-01-25 | Date TEGNA entered into an amendment to its revolving credit facility. |
| 2024-01-31 | Date Premion, LLC acquired substantially all the assets of Octillion Media. |
| 2024-02-22 | Date the second ASR program was completed. |
| 2024-06-07 | Record date for the increased dividend payment. |
| 2024-06-30 | End of the second quarter of 2024. |
| 2024-07-01 | Effective date of the increased dividend payment. |
| 2024-07-02 | Date of Amendment No. 11 to TEGNA Inc. Deferred Compensation Plan Rules for Post-2004 Deferrals. |
| 2024-07-31 | Total number of shares of the registrants Common Stock outstanding. |
| 2024-08-07 | Date of the filing of the quarterly report. |
| 2024-09-01 | Date after which new rules for deferral elections apply. |
| 2025-12-31 | Expiration date of the share repurchase program. |
Keywords
TEGNA, revenue, advertising, subscription, political advertising, EBITDA, share repurchase, dividends, cost savings, broadcasting, media
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