TEGNA(TGNA) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents TEGNA's unaudited financial statements and management's discussion and analysis for the period ended June 30, 2022 Financial Statements This section presents TEGNA's unaudited condensed consolidated financial statements for the period ended June 30, 2022, including balance sheets, income statements, cash flows, and equity, along with detailed notes Condensed Consolidated Balance Sheets As of June 30, 2022, TEGNA's balance sheet shows total assets of $6.97 billion, a slight increase, with total liabilities decreasing to $4.21 billion and total equity increasing to $2.74 billion Key Balance Sheet Items (in thousands) | Account | June 30, 2022 | Dec. 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $200,770 | $56,989 | | Goodwill | $2,981,587 | $2,981,587 | | Total assets | $6,965,478 | $6,917,646 | | Liabilities & Equity | | | | Long-term debt | $3,067,608 | $3,231,970 | | Total liabilities | $4,206,990 | $4,381,611 | | Total equity | $2,741,723 | $2,519,906 | Consolidated Statements of Income For Q2 2022, TEGNA reported $784.9 million in revenues and $131.9 million in net income, with diluted EPS of $0.59, showing significant year-over-year growth Q2 and H1 2022 vs 2021 Performance (in thousands, except EPS) | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $784,881 | $732,908 | $1,559,004 | $1,459,959 | | Operating income | $221,021 | $185,522 | $430,158 | $381,452 | | Net Income | $131,940 | $106,854 | $266,227 | $219,686 | | Diluted EPS | $0.59 | $0.48 | $1.19 | $0.99 | Condensed Consolidated Statements of Cash Flows Net cash flow from operating activities significantly increased to $391.4 million for H1 2022, with cash used for investing and financing activities, resulting in a substantial increase in cash and cash equivalents Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash flow from operating activities | $391,387 | $196,493 | | Net cash flow used for investing activities | ($23,819) | ($34,252) | | Net cash flow used for financing activities | ($223,787) | ($145,947) | | Increase in cash | $143,781 | $16,294 | Notes to Condensed Consolidated Financial Statements The notes detail significant accounting policies, the pending Merger Agreement for $24.00 per share, revenue sources, and ongoing litigation including antitrust claims - On February 22, 2022, TEGNA entered into a Merger Agreement to be acquired for $24.00 per share in cash, with a 'ticking fee' for delayed closing and an expected close in the second half of 2022, pending regulatory approvals[24] Revenue by Source (in thousands) | Revenue Source | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Subscription | $389,079 | $375,081 | $780,733 | $761,818 | | Advertising & Marketing | $335,259 | $340,889 | $689,726 | $663,723 | | Political | $50,858 | $9,581 | $68,823 | $19,009 | | Other | $9,685 | $7,357 | $19,722 | $15,409 | - In Q1 2022, the company recognized a $20.8 million gain on an available-for-sale debt security from MadHive, Inc., recorded in 'Other non-operating items, net' following an amendment to the security's terms[37] - The company is a defendant in a consolidated class action lawsuit alleging antitrust violations in local television advertising sales, which TEGNA denies and intends to defend vigorously[52][53] Management's Discussion and Analysis (MD&A) Management discusses TEGNA's financial performance, highlighting the positive impact of political advertising, the pending merger, and the company's strong liquidity and compliance with debt covenants Consolidated Results from Operations Operating income increased to $221.0 million in Q2 2022 and $430.2 million in H1 2022, driven by political and subscription revenue, despite a slight dip in AMS revenue Revenue Change Analysis (2022 vs. 2021, in thousands) | Revenue Category | Q2 2022 | Q2 2021 | % Change | YTD 2022 | YTD 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Subscription | $389,079 | $375,081 | 4% | $780,733 | $761,818 | 2% | | Advertising & Marketing | $335,259 | $340,889 | (2)% | $689,726 | $663,723 | 4% | | Political | $50,858 | $9,581 | 431% | $68,823 | $19,009 | 262% | - The increase in total revenues for H1 2022 was primarily driven by a $49.8 million increase in political revenue and an $18.9 million increase in subscription revenue from annual rate increases[74] - Corporate G&A expenses decreased in H1 2022 compared to H1 2021, mainly due to the absence of $16.6 million in advisory fees for activism defense incurred in 2021, partially offset by $14.4 million in M&A-related costs in 2022[81] Non-GAAP Information This section reconciles non-GAAP measures, showing Adjusted EBITDA of $505.3 million for H1 2022 and a trailing two-year Free Cash Flow of $1.42 billion, reflecting improved operational performance Adjusted EBITDA Reconciliation (in thousands) | Metric | H1 2022 | H1 2021 | % Change | | :--- | :--- | :--- | :--- | | Net income attributable to TEGNA Inc. | $265,803 | $219,244 | 21% | | Adjusted EBITDA (non-GAAP) | $505,279 | $458,432 | 10% | - For the six months ended June 30, 2022, the Adjusted EBITDA margin was 32% with corporate expenses, compared to 31% for the same period in 2021, driven by higher political and subscription revenue[108][109] Free Cash Flow (Trailing Two-Year Period, in millions) | Metric | Two-Year Period Ended June 30, 2022 | Two-Year Period Ended June 30, 2021 | | :--- | :--- | :--- | | Free cash flow (non-GAAP) | $1,424.15 | $1,207.28 | | Free cash flow as a % of Revenue | 22.9% | 21.4% | Liquidity, Capital Resources and Cash Flows TEGNA maintains strong liquidity with $200.8 million in cash and $1.49 billion in unused credit, a leverage ratio of 2.64x, and nearly doubled operating cash flow in H1 2022 - As of June 30, 2022, the company had total debt of $3.07 billion, cash of $200.8 million, and unused borrowing capacity of $1.49 billion[115] - The company's leverage ratio was 2.64x as of June 30, 2022, significantly below the permitted maximum of 5.0x[114] - Cash flow from operating activities increased to $391.4 million for H1 2022 from $196.5 million in H1 2021, largely due to higher political revenue (which is paid upfront) and favorable changes in accounts receivable and payable[118] Quantitative and Qualitative Disclosures about Market Risk The company's market risk exposure remains unchanged, with 100% of its $3.09 billion principal debt carrying a fixed interest rate as of June 30, 2022 - As of June 30, 2022, 100% of the company's $3.09 billion in principal debt has a fixed interest rate, minimizing exposure to market interest rate risk[125] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal controls during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[126] PART II. OTHER INFORMATION This section provides information on legal proceedings, risk factors, share repurchases, and exhibits Legal Proceedings This section refers to Note 9 of the financial statements for details on ongoing litigation, including antitrust claims and merger-related lawsuits - For details on legal proceedings, the report refers to Note 9 of the condensed consolidated financial statements[128] Risk Factors The company reports no material changes to the risk factors previously disclosed in its 2021 Annual Report on Form 10-K - No material changes have been identified from the risk factors disclosed in the 2021 Annual Report on Form 10-K[129] Share Repurchases TEGNA suspended its share repurchase program following the Merger Agreement announcement and made no repurchases in the first six months of 2022 - The company's share repurchase program has been suspended as a result of the pending Merger Agreement announced on February 22, 2022. No shares were repurchased in the first six months of 2022[130] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, compensatory plan agreements, and required certifications