Name: TEGNA INC Q1 2024 Earnings Call
Start: 2024-05-08T14:01:00.000Z

Executive Summary

Q1 2024 revenue was $714.3M, down 4% YoY, at the midpoint of guidance; non-GAAP EPS was $0.45, with Adjusted EBITDA of $174.2M (24% margin). Management met quarterly guidance metrics and reaffirmed full-year guidance. Political advertising was stronger YoY, while subscription revenue fell 9% on net subscriber declines and a January distributor disruption .
The Board raised the regular quarterly dividend by 10% to $0.125 per share and returned over $100M to shareholders ($82M buybacks; $20M dividends). Net leverage ended at 2.8x with $431M cash; total debt held at $3.1B .
Transformation initiatives targeting $90–$100M annualized cost savings exiting 2025 are underway, with early benefits expected in Q2 and sequential OpEx improvement thereafter. Q2 outlook: revenue down low-to-mid single digits YoY and non-GAAP OpEx flat YoY .
Premion returned to positive revenue growth (low single digits) driven by local advertisers; integration of Octillion is expected to enhance growth, margin, and product innovation. National advertising remains soft, but local advertising showed positive momentum .
Street consensus (S&P Global) data was unavailable today, so beat/miss vs estimates cannot be assessed. Management indicated Q1 was in-line with internal guidance; Q2 political expected to be slightly better sequentially but still back-half-weighted in 2024 .

What Went Well and What Went Wrong

What Went Well

Dividend increased 10% and $102M returned to shareholders in Q1, underscoring FCF durability and balance sheet strength: “confidence we have in the durability of our free cash flow” .
Transformation initiatives launched to deliver $90–$100M in annualized expense reductions by exit 2025, with sequential OpEx improvements starting in Q2; no significant upfront cost to achieve .
Premion returned to positive YoY growth on strong local demand; Octillion integration underway to improve workflow, access to CTV inventory, and margins; programmatic capabilities expanded for political campaigns .

What Went Wrong

Subscription revenue fell 9% YoY to $375.3M, driven by net subscriber declines, a January distributor disruption, and a non-recurring year-end adjustment benefit in Q1 2023; underlying trend down mid-single digits .
National advertising softness persisted across core linear and Premion, pressuring AMS (-3% YoY to $298.7M) despite resilient local categories (auto, services, restaurants, banking, entertainment) .
Adjusted EBITDA margin compressed to 24% from 28% in Q1 2023, reflecting lower subscription profits; adjusted FCF declined to $113.1M vs $140.5M in Q1 2023 .

Financial Results

Metric	Q1 2023	Q3 2023	Q4 2023	Q1 2024
Revenue ($USD Millions)	$740.3	$713.2	$725.9	$714.3
GAAP Diluted EPS ($)	$0.46	$0.48	$0.40	$1.06
Non-GAAP Diluted EPS ($)	$0.47	$0.39	$0.43	$0.45
Adjusted EBITDA ($USD Millions)	$205.0	$165.9	$177.1	$174.2
Adjusted EBITDA Margin (%)	28%	23.3%	24.4%	24%
Operating Income (GAAP) ($USD Millions)	$173.6	$134.7	$143.7	$137.6
Total Operating Expenses (GAAP) ($USD Millions)	$566.8	$578.6	$582.1	$576.7
Wall Street Consensus (S&P Global)	N/A	N/A	N/A	N/A

Note: Street consensus (S&P Global) estimates were unavailable today and therefore not shown or compared.

Segment revenue breakdown:

Segment	Q1 2023	Q4 2023	Q1 2024
Subscription ($USD Millions)	$414.3	$339.3	$375.3
Advertising & Marketing Services ($USD Millions)	$307.8	$351.9	$298.7
Political ($USD Millions)	$5.3	$22.9	$27.8
Other ($USD Millions)	$12.9	$11.8	$12.4

KPIs and Cash/Leverage:

KPI	Q3 2023	Q4 2023	Q1 2024
Cash and Cash Equivalents ($USD Millions)	$553	$361	$431
Net Leverage (x)	2.61x	2.8x	2.8x
Adjusted Free Cash Flow ($USD Millions)	$60.1	$130.0	$113.1
Total Debt ($USD Billions)	$3.1	$3.1	$3.1
Share Repurchases ($USD Millions)	—	—	$82
Dividends Paid ($USD Millions)	—	—	$20

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
2-year Adjusted FCF	2024–2025	$900M–$1.1B	$900M–$1.1B	Maintained
Net Leverage	FY 2024 YE	Below 3x	Below 3x	Maintained
Corporate Expenses	FY 2024	$40–$45M	$40–$45M	Maintained
Depreciation	FY 2024	$56–$60M	$56–$60M	Maintained
Amortization	FY 2024	$46–$48M	$51–$55M	Raised (Octillion)
Interest Expense	FY 2024	$170–$173M	$170–$173M	Maintained
Capital Expenditures	FY 2024	$62–$67M	$62–$67M	Maintained
Effective Tax Rate	FY 2024	23.5–24.5%	23.5–24.5%	Maintained
GAAP Revenue	Q2 2024	—	Down low-to-mid single digit YoY	New
Non-GAAP OpEx	Q2 2024	—	Flat YoY	New
Dividend per Share	Ongoing	$0.11375	$0.125 (starting July 1)	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 & Q4 2023)	Current Period (Q1 2024)	Trend
AI/Tech & Octillion/Premion	Octillion acquisition to own DSP tech, improve innovation and margins; programmatic capabilities; Premion local growth double digits in 2023	Integration underway; local demand driving Premion’s return to growth; expanded programmatic selling for political	Improving
Advertising: National vs Local	Sequential AMS improvement, auto/services strong; national headwinds persisted	National softness continues; local momentum in auto, services, restaurants, banking, entertainment	Local strong; National soft
Subscription/Net Retrans	Record Q3 subscriptions; variable reverse comp mix growing; blackout impact in Q4; renewals cadence noted	Underlying subscription down mid-single digits; net retrans viewed as stable; no Q2 renewals; mid-single digit gross decline run-rate	Stable to modest decline
Political	Limited primary footprint; strong back-half weighting; battleground coverage	Strong footprint across 6 of 7 key states; Q2 slightly better than Q1; ~85% of spend back half	Building (H2-weighted)
Sports Distribution	Spurs/Mavs/Bucks local deals; RSN shift to broadcast	Kraken multi-year deal; WNBA Indiana Fever multi-market distribution; Reign partnership; expanding reach	Accelerating
Cost Transformation	Efficiency focus; initiatives to be sized in coming quarters	$90–$100M annualized savings by exit 2025; sequential OpEx improvement starting Q2	Underway
Regulatory/Ownership	Watching FCC; potential opportunities with administration changes	Maintaining a watchful stance; optimism but timing uncertain	Watchful

Management Commentary

“We expect these initiatives to generate between $90 million to $100 million of annualized cost savings as we exit 2025… initial benefits… in the second quarter with sequential improvements going forward” — Dave Lougee .
“Premion’s total revenue has returned to positive growth… expected to grow sequentially throughout the year” — Julie Heskett .
“Our Board has approved a 10% increase to our regular quarterly dividend… confidence we have in the durability of our free cash flow” — Dave Lougee .
“Political should be sequentially better than first quarter slightly… first half ~15–16% of total; ~85% in the back half” — Julie Heskett .
“We do not anticipate significant upfront cost [for transformation]. They will be savings realized and will be a part of the free cash flow benefits in our guidance” — Julie Heskett .

Q&A Highlights

Q2 guide: Revenue down low-to-mid single digits YoY; national advertising softness persists; no Q2 retrans deals; political slightly better sequentially but not dramatically; H2 heavy cycle .
Net retrans outlook: Gross retrans down mid-single digits amid mix shift; variable reverse comp supports stability; opportunity to reprice ~20% of subs end-2024 .
Transformation costs: No significant upfront cost to achieve savings; benefits flow to 2024/2025 free cash flow .
Premion/Octillion M&A: Bolt-on opportunities around streaming; Octillion’s tech plus Premion salesforce as margin/innovation drivers .
NBA rights/NBC: Management positive on NBA moving to NBC; sees value for affiliate footprint .

Estimates Context

S&P Global consensus estimates for Q1 2024 EPS and revenue were unavailable today due to an API limit error; as a result, formal beat/miss vs Wall Street cannot be assessed. Management reported Q1 was at the midpoint of guidance and reaffirmed full-year metrics; Q2 revenue is guided down low-to-mid single digits YoY with flat non-GAAP OpEx .

Key Takeaways for Investors

Q1 delivered in-line with internal guidance amid subscription headwinds and national ad softness; stronger political drove partial offset. Margin compression from Q1 2023 reflects lower subscription profits, but Adjusted EBITDA and FCF remain resilient .
Dividend uplift and $102M Q1 capital returns, with net leverage at 2.8x and $431M cash, support continued shareholder yield and optionality for bolt-ons; transformation savings should improve OpEx trajectory starting Q2 .
Premion re-accelerating from local demand, aided by Octillion tech integration and expanded programmatic tools ahead of peak political; expect sequential revenue growth through 2024 .
Political setup is favorable across key battlegrounds, reinforced by broadcast sports rights (Kraken, Fever) and Olympic tailwinds across NBC footprint; spending heavily weighted to H2 2024 .
Subscription outlook: underlying revenue down mid-single digits with stable net retrans aided by variable reverse comp; limited near-term renewals imply Q2 trend follows seasonality; ~20% of subs up for repricing in late 2024 .
Q2 guide conservative on revenue with national ad softness; watch for sequential improvements from transformation initiatives and Premion, and modest increase in political sequentially .
Regulatory evolution (ownership caps/FCC posture) could create future optionality; management remains watchful and opportunistic on M&A in streaming/CTV .

TEGNA INC (TGNA)·Q1 2024 Earnings Summary