TEGNA Inc. Q1 FY2025 earnings call

Key Focus Areas

• Building a world-class team, culture, and company operating system for high-impact execution.
• Leveraging TEGNA's strength across stations for better resource sharing.
• Fully deploying technology, automation, and AI for efficient operations.
• Growing digital revenue by deepening engagement with digital audience.
• Cutting unnecessary spend and bureaucracy to focus on growing audience and revenue.

Recent Progress

• Added 2 new senior leaders for digital capabilities. New sales performance management and incentive regime driving accountability.
• Statewide news sharing and local regional sales tests in Florida unlocking productive capacity.
• Testing new proprietary AI system for newsrooms and progressing on 2 stations of the future.
• Testing new apps and making progress on AI-augmented software development for digital growth.
• Secured local team rights across NBA, WNBA, NHL and MLB, and partnered with multiple NFL teams.
• 4 stations received awards for outstanding local journalism.
• 73 members of Congress signed a letter to SEC Chairman advocating for deregulation in broadcasting.

Total company revenue for the first quarter finished at $680 million, a decrease of 5% year-over-year, in line with the outlook of down 4% to 7%. Advertising and marketing services revenue (AMS) finished at $286 million in the first quarter, a 3% decrease year-over-year due to macroeconomic headwinds and Super Bowl impact, but partially offset by growth in local sports rights advertising. When normalizing for the Super Bowl impact, AMS revenue finished flat to last year. Distribution revenue in the first quarter was flat year-over-year at $380 million. Total adjusted EBITDA in the first quarter finished at $136 million, a 22% decrease year-over-year primarily due to lower political advertising revenue and AMS revenue, partially offset by cost benefits from core operational cost-cutting initiatives.

2-Year Guidance

• Reaffirmed combined 2024-2025 adjusted free cash flow guidance of $900 million to $1.1 billion.
• Lowered 2025 effective tax rate guidance to a range of 22% to 23% due to expected tax refunds from Texas.

Second Quarter Guidance

• Expect total company revenue to be down in the 4% to 7% range year-over-year due to lower political advertising and advertising environment headwinds.
• Expect non-GAAP operating expenses to be flat to down 2% compared to Q2 of 2024 reflecting cost reduction efforts.

Risks

• Advertising demand closely tied to economic sentiment; consumer confidence softening may lead to near-term delays in advertising spend and impact second quarter AMS revenue.
• Uncertainty regarding regulatory landscape changes and their potential impact on the company's operations and growth opportunities.

Q: Steven Cahall from Wells Fargo asked about FCC deregulation, M&A potential, and Q2 advertising environment.

A: Michael Steib talked about FCC's support for local broadcasters and M&A opportunities, while Julie Heskett mentioned Q2 softer than Q1 due to tariffs and trading policies but no specific cancellations.

Q: Dan Kurnos from Benchmark Company asked about M&A appetite and Premion trend.

A: Michael Steib expressed excitement about M&A opportunities and Julie Heskett said Premion revenues were flattish quarter-to-quarter with local growth offsetting national declines.

Q: Craig Huber from Huber Research Partners asked about spectrum utilization and local news market with M&A.

A: Michael Steib discussed ATSC 3.0 opportunity and local news market competitive landscape with big tech dominance.

Q: Patrick Sholl from Barrington Research asked about M&A impact on local news market.

A: Michael Steib compared big tech's dominance in media to broadcasters' situation.

Q: Avi Steiner from JPMorgan asked about M&A leverage, synergy, and industry ownership evolution.

A: Michael Steib talked about leverage deleveraging quickly with deals and industry ownership evolution depending on players, prices, and motivations.