TEGNA(TGNA) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements TEGNA's financial statements reflect asset growth, increased net income, and improved operating cash flow for Q3 and the first nine months of 2024 Condensed Consolidated Balance Sheets Total assets increased to $7.20 billion by September 30, 2024, driven by cash growth, while equity rose to $2.87 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sept. 30, 2024 | Dec. 31, 2023 | | :--- | :--- | :--- | | Total current assets | $1,215,740 | $1,050,318 | | Total assets | $7,198,602 | $7,000,057 | | Total current liabilities | $466,710 | $423,372 | | Total liabilities | $4,307,298 | $4,276,373 | | Total equity | $2,871,368 | $2,704,872 | Consolidated Statements of Income Q3 2024 revenues grew 13.1% to $806.8 million due to political advertising, with net income rising 53.1% to $147.4 million Q3 & Nine Months 2024 vs 2023 Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $806,827 | $713,243 | $2,231,442 | $2,185,076 | | Operating Income | $229,892 | $134,657 | $509,312 | $589,811 | | Net Income Attributable to TEGNA | $147,448 | $96,183 | $419,152 | $400,591 | | Diluted EPS | $0.89 | $0.48 | $2.44 | $1.86 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $435.2 million for the nine months ended September 30, 2024, with investing activities providing $49.1 million Nine Months Ended Sept. 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash flow from operating activities | $435,216 | $408,839 | | Net cash flow provided by (used for) investing activities | $49,107 | $(3,095) | | Net cash flow used for financing activities | $(309,106) | $(404,395) | | Increase in cash and cash equivalents | $175,217 | $1,349 | | Cash and cash equivalents at end of period | $536,253 | $553,030 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, revenue sources, the $56.0 million Octillion Media acquisition, debt levels, share repurchases, and ongoing legal proceedings - On January 31, 2024, the company's subsidiary Premion, LLC acquired substantially all assets of Octillion Media for a base purchase price of $56.0 million, plus a potential earnout of up to $14.0 million. This resulted in the preliminary recording of $34.4 million in intangible assets and $34.4 million in goodwill[28][29] - In the first quarter of 2024, the company received $152.9 million in pre-tax cash proceeds from the sale of its investment in Broadcast Music, Inc. (BMI), recognizing a gain of the same amount[32] - The company has an ongoing commercial agreement with MadHive, Inc., a related party. Expenses incurred under this agreement were $16.4 million for Q3 2024 and $53.7 million for the first nine months of 2024[48] Revenue by Source (in thousands) | Revenue Source | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Subscription | $356,205 | $377,891 | $1,098,554 | $1,188,297 | | Advertising & Marketing Services | $312,963 | $312,413 | $912,632 | $937,984 | | Political | $126,318 | $11,643 | $185,789 | $22,925 | | Other | $11,341 | $11,296 | $34,467 | $35,870 | | Total revenues | $806,827 | $713,243 | $2,231,442 | $2,185,076 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2024 revenue growth driven by political advertising, the impact of a prior-year merger fee on nine-month operating income, and strong liquidity with $286.4 million returned to shareholders Consolidated Results from Operations Q3 2024 revenues increased 13% due to political advertising, offsetting subscription declines, while nine-month operating income decreased 14% due to a prior-year merger fee Year-over-Year Revenue Change by Category (in thousands) | Revenue Category | Q3 2024 | Q3 2023 | Change | 9 Months 2024 | 9 Months 2023 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Subscription | $356,205 | $377,891 | (6%) | $1,098,554 | $1,188,297 | (8%) | | Advertising & Marketing Services | $312,963 | $312,413 | 0% | $912,632 | $937,984 | (3%) | | Political | $126,318 | $11,643 | *** | $185,789 | $22,925 | *** | - The decrease in nine-month operating income was primarily driven by the absence of the $136.0 million Merger termination fee received in 2023, a decrease in subscription revenue of $89.7 million, and a decline in AMS revenue of $25.4 million, which were partially offset by an increase in political revenue of $162.9 million[62] Non-GAAP Information Adjusted EBITDA, a non-GAAP measure, increased 62% to $269.5 million in Q3 2024 and 10% to $619.4 million for the nine months, driven by political revenue Adjusted EBITDA Reconciliation (in thousands) | Metric | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to TEGNA Inc. (GAAP) | $147,448 | $96,183 | $419,152 | $400,591 | | Adjustments (Taxes, Interest, D&A, Special Items, etc.) | $122,055 | $69,738 | $200,265 | $164,605 | | Adjusted EBITDA (Non-GAAP) | $269,503 | $165,921 | $619,417 | $565,196 | - Special items affecting 2024 results include retention costs, workforce restructuring expenses, M&A-related costs, a contract termination fee, and a gain on the sale of the BMI investment[68] Liquidity, Capital Resources and Cash Flows TEGNA maintains strong liquidity with $536.3 million cash and $737.9 million unused credit, returning $286.4 million to shareholders in the first nine months - The company's capital allocation framework aims to return 40-60% of Adjusted free cash flow from 2024-2025 to shareholders. In the first nine months of 2024, approximately 65% of Adjusted free cash flow was returned[80] - In January 2024, the company amended its revolving credit facility, reducing the commitment from $1.51 billion to $750 million and extending the term to January 2029[33][80] - Share repurchases in the first nine months of 2024 totaled $226.0 million for 15.7 million shares under a $650.0 million program authorized in December 2023[80] Item 3. Quantitative and Qualitative Disclosures about Market Risk Market risk exposures have not materially changed since December 31, 2023, with no floating interest rate obligations outstanding as of September 30, 2024 - There have been no material changes in market risk exposures since December 31, 2023[86] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that disclosure controls and procedures are effective as of September 30, 2024[87] PART II. OTHER INFORMATION Item 1. Legal Proceedings Information on legal proceedings, including ongoing antitrust litigation, is detailed in Note 10 to the condensed consolidated financial statements - Information regarding legal proceedings is detailed in Note 10 to the condensed consolidated financial statements[88] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K - There have been no material changes from the risk factors disclosed in the 2023 Annual Report on Form 10-K[89] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds TEGNA repurchased 4.8 million shares for $70.1 million in Q3 2024, with $424.0 million remaining under the current share repurchase program Issuer Purchases of Equity Securities (Q3 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2024 | 1,546,000 | $15.05 | | August 2024 | 1,797,000 | $14.03 | | September 2024 | 1,491,000 | $14.53 | | Total Q3 2024 | 4,834,000 | N/A | - As of the end of Q3 2024, $424.0 million remained available for purchase under the current share repurchase program, which expires on December 31, 2025[92] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, executive agreements, and required certifications