TEGNA(TGNA) - 2024 Q3 - Quarterly Results

Q3 2024 Performance and Q4 2024 Guidance Third Quarter 2024 Financial Highlights TEGNA's Q3 2024 saw 13% revenue growth to $807 million, fueled by record political advertising, and a 62% increase in Adjusted EBITDA Q3 2024 Key Financial Metrics (YoY) | Metric | Q3 2024 | Change (YoY) | | :--- | :--- | :--- | | Total Revenue | $807 million | +13% | | Political Advertising Revenue | $126 million | Record High | | Subscription Revenue | $356 million | -6% | | AMS Revenue | $313 million | Slight Increase | | GAAP Net Income | $147 million | - | | Non-GAAP Net Income | $157 million | - | | GAAP EPS (diluted) | $0.89 | - | | Non-GAAP EPS (diluted) | $0.94 | - | | Adjusted EBITDA | $270 million | +62% | - The company exceeded its key guidance metrics for the third quarter[1] - GAAP and non-GAAP operating expenses decreased slightly, benefiting from reduced programming fees and core cost initiatives[1] Key Business Updates TEGNA expanded sports rights, announced key executive changes, and received 10 National Edward R. Murrow Awards - Continued expansion of sports rights through new agreements with the Dallas Mavericks, Denver Nuggets, and Colorado Avalanche[4] - Key executive updates include the appointment of Alex Tolston as Chief Legal Officer, the planned departure of COO Lynn Beall in mid-2025, and the retirement of SVP of News Ellen Crooke in January 2025[4] - TEGNA stations won 10 National Edward R. Murrow Awards, more than any other station group[4] Capital Allocation, Leverage, and Liquidity TEGNA returned $91 million to shareholders in Q3 2024, reporting strong Adjusted free cash flow and a 2.8x net leverage ratio Q3 2024 Capital & Liquidity | Metric | Value | | :--- | :--- | | Capital Returned to Shareholders | $91 million | | - Share Repurchases | $70 million (4.9M shares) | | - Dividends | $21 million | | Adjusted Free Cash Flow | $211 million | | Net Leverage Ratio | 2.8x | | Cash and Cash Equivalents | $536 million | - The company expects to return 40-60% of its Adjusted free cash flow to shareholders over 2024-2025[5] Full-Year and Fourth Quarter 2024 Outlook TEGNA reaffirmed full-year 2024 guidance, including net leverage below 3.0x, and projected strong Q4 2024 revenue growth Reaffirmed Full-Year 2024 Guidance | Metric | Guidance | | :--- | :--- | | 2024/2025 Two-Year Adjusted FCF | $900 million – $1.1 billion | | Net Leverage Ratio (Year-End) | Below 3x | | Interest Expense | $170 – $173 million | | Capital Expenditures | $62 – $67 million | | Effective Tax Rate | 22.0 – 23.0% (Improved) | Fourth Quarter 2024 Guidance (vs. Q4 2023) | Metric | Guidance | | :--- | :--- | | Total Company GAAP Revenue | Up 19% to 21% | | Total Non-GAAP Operating Expenses | Up 1% to 3% | Financial Statements and Non-GAAP Reconciliations Consolidated Statements of Income (Table 1) TEGNA's Q3 2024 revenues grew 13% to $806.8 million, with operating income up 71% and diluted EPS up 85% Q3 2024 vs Q3 2023 Income Statement Highlights (in thousands) | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues | $806,827 | $713,243 | +13% | | Operating Income | $229,892 | $134,657 | +71% | | Net Income Attributable to TEGNA | $147,448 | $96,183 | +53% | | Diluted EPS | $0.89 | $0.48 | +85% | Nine Months 2024 vs 2023 Income Statement Highlights (in thousands) | Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues | $2,231,442 | $2,185,076 | +2% | | Operating Income | $509,312 | $589,811 | -14% | | Net Income Attributable to TEGNA | $419,152 | $400,591 | +5% | | Diluted EPS | $2.44 | $1.86 | +31% | Revenue Categories (Table 2) Q3 2024 revenue growth was driven by a surge in Political advertising, offsetting a 6% decline in Subscription revenue Q3 Revenue by Category (in thousands, YoY) | Category | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Subscription | $356,205 | $377,891 | -6% | | Advertising & Marketing Services | $312,963 | $312,413 | 0% | | Political | $126,318 | $11,643 | *** | | Total Revenues | $806,827 | $713,243 | +13% | Nine Months Revenue by Category (in thousands, YoY) | Category | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Subscription | $1,098,554 | $1,188,297 | -8% | | Advertising & Marketing Services | $912,632 | $937,984 | -3% | | Political | $185,789 | $22,925 | *** | | Total Revenues | $2,231,442 | $2,185,076 | +2% | Use of Non-GAAP Information The company uses non-GAAP measures like Adjusted EBITDA and free cash flow to evaluate performance and compensate management - Non-GAAP measures are used to evaluate company performance, liquidity, and to compensate senior management[18] - Special items excluded from non-GAAP calculations include M&A-related costs, retention costs, workforce restructuring, and gains/losses on investments[18] - Starting in Q2 2024, the definition of Adjusted free cash flow was updated to include cash flows from changes in certain working capital accounts[20] Non-GAAP Reconciliations (Tables 3-6) This section details reconciliations of GAAP results to non-GAAP metrics, including Adjusted EBITDA, Free Cash Flow, and Net Leverage Ratio Reconciliation of GAAP to Non-GAAP Operating Results (Table 3) Q3 2024 GAAP net income was adjusted to $156.9 million non-GAAP net income, resulting in $0.94 non-GAAP diluted EPS Q3 2024 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | GAAP Measure | Total Adjustments | Non-GAAP Measure | | :--- | :--- | :--- | :--- | | Operating Income | $229,892 | $10,601 | $240,493 | | Net Income Attributable to TEGNA | $147,448 | $9,411 | $156,859 | | Diluted EPS | $0.89 | $0.05 | $0.94 | Reconciliation of Adjusted EBITDA (Table 4) Adjusted EBITDA for Q3 2024 significantly increased to $269.5 million, calculated by adjusting GAAP net income Adjusted EBITDA Calculation (in thousands) | Period | Adjusted EBITDA | Adjusted EBITDA (YoY Change) | | :--- | :--- | :--- | | Q3 2024 | $269,503 | +62% | | Q3 2023 | $165,921 | - | | Nine Months 2024 | $619,417 | +10% | | Nine Months 2023 | $565,196 | - | Reconciliation of Adjusted Free Cash Flow (Table 5) Adjusted free cash flow for Q3 2024 was $211.4 million, derived from operating cash flow with adjustments Adjusted Free Cash Flow Calculation (in thousands) | Period | Net Cash Flow from Operating Activities | Adjusted Free Cash Flow | | :--- | :--- | :--- | | Q3 2024 | $210,057 | $211,430 | | Year-to-Date 2024 | $435,216 | $441,019 | Net Leverage Ratio Calculation (Table 6) As of September 30, 2024, TEGNA's net leverage ratio was 2.8x, calculated using net debt and average Adjusted EBITDA Net Leverage Ratio Calculation (as of Sept. 30, 2024) | Component | Value (in thousands) | | :--- | :--- | | Net Debt (Numerator) | $2,553,747 | | T2Y Adjusted EBITDA (Denominator) | $904,291 | | Net Leverage Ratio | 2.8x | Other Information Conference Call TEGNA will host a conference call and webcast on November 7, 2024, at 9:00 a.m. ET to discuss financial results - A conference call to discuss financial results is scheduled for 9:00 a.m. ET on November 7, 2024[8] Forward-Looking Statements This section cautions that forward-looking statements are subject to risks and uncertainties that may cause actual results to differ - The report includes forward-looking statements subject to risks and uncertainties that may cause actual results to differ[10] - Key risks include changes in market price, capital allocation plan effectiveness, subscriber renewals, regulatory actions, and changes in consumer behavior[10]