TEGNA Inc. Q3 FY2024 earnings call

• Local news is highly valued by communities, with 85% of people stating local news is important and most reporting local media teams are doing a good job. - TEGNA has strong leadership positions in attractive markets across the U.S. and reaches approximately 100 million people monthly across various platforms. - Mike Steib outlined five potential opportunities: ensuring team, culture, accountability, and leadership operating system; reviewing org structures and processes; nose-to-tail review of processes to leverage technology; examining opportunities to expand reach through digital channels; and scrutinizing every expense. - Welcomed new Chief Legal Officer Alex Tolston. - Julie Heskett discussed financial results, cost control initiatives, and guidance.

Total company revenue for the third quarter increased 13% year-over-year to $807 million. Subscription revenue decreased 6% year-over-year to $356 million. Political advertising delivered record revenue in the third quarter, with year-to-date through election day approximately $375 million. Core linear advertising was up in the third quarter, driven by Olympic sales across TEGNA's NBC stations, with a 35% growth in total hours watched for the Paris games versus the last summer games in Tokyo. AMS revenue was up slightly year-over-year, with strength in the Summer Olympic Games offset by softness from national customers and political displacement. Local advertising showed resilience in categories like services, banking, finance, healthcare, entertainment, education, and travel and tourism, but automotive, retail, and home improvement categories remained soft.

• Reaffirmed all full year 2024 key guidance metrics and combined 2024-2025 adjusted free cash flow guidance of $900 million to $1.1 billion. - Lowered full year 2024 effective tax rate guidance to 22% to 23%. - Expect fourth quarter total company GAAP revenue to be up 19% to 21% year-over-year driven by political advertising. - Expect total non-GAAP operating expenses to be up 1% to 3% compared to the fourth quarter of 2023, driven by growth in programming and Premion cost but offset by savings from core cost reduction initiatives.

• Digital transformation has caused viewers and advertisers to shift online, challenging traditional media. - Political advertising can be subject to displacement. - Regulatory environment may impact the company's ability to grow through combinations or operate effectively, with issues like Google and TikTok having significant market shares in advertising and news viewing respectively while broadcast regulations remain restrictive.

Q: Steven Cahall asked about opportunities related to a potentially more favorable FCC and how it affects free cash flow allocation, and about expense growth considering cost reductions and organic investments.

A: Mike Steib talked about the need to reevaluate the regulatory regime and the belief in unlocking synergies and value through combinations. Julie Heskett noted focusing on cost takeout of legacy businesses and the impact of integrating Octillion, Premion growth, and programming investments.

Q: Dan Kurnos inquired about philosophical differences, breadth of opportunities, and Premion's growth trajectory.

A: Mike Steib emphasized re-energization and focus on execution. Julie Heskett said Premion had a tough quarter comp in Q3 but is expected to return to growth in Q4, with local Premion performing well.

Q: Craig Huber followed up on Premion's growth in Q4 and next year's outlook, and asked about digital acquisitions.

A: Julie Heskett said they don't guide specific line items but Premion is expected to return to growth in Q4 driven by local. Mike Steib discussed the importance of acquisitions that unlock cost savings and revenue synergies and the opportunity in Premion to expand reach to connected TV audiences.

Q: Patrick Sholl asked about the shift between broadcast and Premion in political and Premion's rebound in growth in Q4.

A: Julie Heskett said broadcast still takes the majority share of political spending, Premion got some political but not material, and Q4 Premion's growth is driven by non-political local.

Q: David Karnovsky asked about regulatory changes and local sports deals.

A: Mike Steib said the FCC has opportunity to drive change in duopoly rules, etc. On local sports, sports rights are seen as an opportunity to engage audiences and drive advertiser accounts, with investments needing to deliver cash flow returns at the company's cost of capital.