TEGNA Inc. Reports Solid 2019 First Quarter Results
Strength of organic growth resulted in performance at the high-end of first quarter revenue expectations
Announced acquisition of 11 local television stations in eight markets will be financially accretive immediately, and a strategic fit for TEGNA’s Big Four affiliate portfolio
TYSONS, Va.--(BUSINESS WIRE)--May 9, 2019--
Highlights include:
-
Total company revenue was
$517 million , up three percent year-over-year and at the high-end of the guidance range provided last quarter. Adjusted total company revenue, excluding political and estimated incremental Olympic and Super Bowl revenue, was up eight percent year-over-year, also at the high-end of guidance. -
Record first quarter subscription revenue of
$242 million increased 18 percent, driven by rate increases and stable paying subscriber counts. -
Total company adjusted EBITDA was
$153 million , down$4 million , or less than three percent year-over-year as anticipated, nearly fully offsetting the absence of$21 million of high-margin political, Olympic and Super Bowl revenues. -
Net income of
$74 million increased 34 percent year-over-year, driven by a$12 million gain related to the sale of our interest in Captivate, a$3 million real estate sale gain as well as FCC repacking reimbursements of$4 million . -
Free cash flow for the quarter was
$109 million , and the company reduced debt by$53 million , resulting in total debt of$2.9 billion and net leverage of 4.0x. -
The company announced an agreement with
Nexstar Media Group onMarch 20 to acquire 11 stations in eight markets, including eight Big Four affiliates, in a$740 million transaction.- Multiple of 7.7x based on average estimated 2018/2019 EBITDA after synergies but prior to tax savings, which reduce the multiple to 6.7x.
- Expected to be accretive to EPS within a year after close and immediately accretive to free cash flow per share.
- Provides support for the high-end of the previously disclosed estimated 2019/2020 free cash flow range of 18 percent to 19 percent of revenue.
-
GAAP earnings per diluted share were
$0.34 in the first quarter and non-GAAP* earnings per diluted share were$0.29 .
* See “Use of Non-GAAP Information” below for more detail.
“2019 is off to a good start, and we are executing on both the organic
and inorganic components of our strategy. Our subscription revenues
posted an 18 percent year-over-year increase and our key operating
metrics all performed at the high-end of our expectations,” said
Lougee continued, “On the M&A front, we announced the purchase of the
Nexstar divestitures, our largest acquisition since becoming a pure play
broadcaster in
“To date in 2019, we have announced or closed on more than
OVERVIEW OF FIRST QUARTER RESULTS
Total company revenues grew three percent in the quarter, primarily due
to a
Subscription revenue grew 18 percent year-over-year due to the impact of rate escalators and higher rates negotiated in new agreements in the fourth quarter of 2018, highlighting the continued transition of TEGNA’s business toward stable, subscription-based revenue streams.
Advertising and marketing services revenue declined seven percent in the
quarter compared to the first quarter of 2018, due to the comparisons
against the Olympics and Super Bowl which aired on TEGNA’s 17
GAAP operating expenses were up five percent year-over-year, predominantly driven by higher programming fees. Excluding programming costs, expenses were flat.
GAAP operating income totaled
Net income was
Special items for the quarter included FCC spectrum repacking
reimbursements to
FIRST QUARTER NON-OPERATING AND CASH FLOW ITEMS
Interest expense in the quarter declined to
SECOND QUARTER AND FULL YEAR 2019 OUTLOOK
In the second quarter of 2019,
Second Quarter 2019 Key Guidance Metrics | |||
Total Company GAAP Revenue | + low single digits | ||
Non-GAAP Revenue (excluding political) | + mid single digits | ||
Total Operating Expenses | + mid single digits | ||
Operating Expenses (excluding programming) | - very low single digits | ||
Full Year 2019 Key Guidance Metrics 1 |
|||
Subscription Revenue | + mid-teens percent | ||
Corporate Expenses | approximately $45 million | ||
Depreciation | $55 - 60 million | ||
Amortization | approximately $35 million | ||
Interest Expense | $190 - 195 million | ||
Total Capital Expenditures | $70 - 75 million | ||
Non-Recurring Cap Ex (includes $17M spectrum repack) | $35 - 40 million | ||
Effective Tax Rate | 23 - 25% | ||
Leverage Ratio | approximately 4.0x | ||
Free Cash Flow as a % of est. 2018/19 Revenue | 17 - 18% | ||
Free Cash Flow as a % of est. 2019/20 Revenue | 18 - 19% | ||
1 | Guidance includes stations acquired in the first quarter of 2019; excludes acquisitions announced but not yet closed. | |
UPDATE ON KEY STRATEGIC INITIATIVES
- Announced Acquisition of Leading Multicast Channels Justice Network and Quest - Acquired 24/7 multicast networks to capitalize on the growth in over-the-air television audiences. Justice Network and Quest each offer unique ad-supported programming for free to television consumers and are among the top distributed entertainment multicast networks in the U.S.
- Launched VAULT Studios and Debuted BOMBER Podcast - Introduced VAULT Studios, a digital content studio offering high-quality storytelling from TEGNA’s owned archive of investigative reports. VAULT projects pull from real-life true crime cases investigated by TEGNA’s stable of award-winning reporters. In the quarter, VAULT’s first six-part crime investigation podcast series BOMBER debuted across podcast players and apps, including iTunes where it was among the top 12 podcasts in the News & Politics category.
- Daily Blast LIVE (DBL) Continues to Grow - DBL has seen impressive year-over-year growth and increased its household reach by 17 percent. There has also been a significant uptake in viewership by women 25-54, up 17 percent year-over-year.
-
Content Transformation Process - Initiatives continue to show
results with audience share increases in key large markets. In
the November-February ratings period, more than half of large
market stations were up in morning and late local news in adults
25-54.
TEGNA innovators completed 10 additional pilots from December through February, including late news, podcast andYouTube pilots.TEGNA stations received 91 regional Edward R. Murrow Awards for excellence in journalism and innovation, more than any other local media company inthe United States . FourTEGNA stations were awarded Walter Cronkite Awards for Excellence in Political Journalism, again more than any other news organization.
CAPITAL ALLOCATION AND M&A UPDATE
TEGNA’s disciplined capital allocation strategy is designed to create
long-term value for shareholders. The agreement with Nexstar to acquire
11 local television stations, including eight Big Four affiliates,
highlights the efficacy of TEGNA’s disciplined M&A process. As a result
of this acquisition,
CONFERENCE CALL
ADDITIONAL INFORMATION
Certain statements in this press release may be forward looking in
nature or “forward-looking statements” as defined in the Private
Securities Litigation Reform Act of 1995. The forward-looking statements
contained in this press release are subject to a number of risks, trends
and uncertainties that could cause actual performance to differ
materially from these forward-looking statements. A number of those
risks, trends and uncertainties are discussed in the company’s
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
TEGNA Inc. |
|||||||||||
Unaudited, in thousands of dollars (except per share amounts) |
|||||||||||
Table No. 1 | |||||||||||
Quarter ended March 31, | |||||||||||
2019 | 2018 |
% Increase |
|||||||||
Revenues | $ | 516,753 | $ | 502,090 | 2.9 | ||||||
Operating expenses: | |||||||||||
Cost of revenues, exclusive of depreciation | 281,311 | 258,493 | 8.8 | ||||||||
Business units - Selling, general and administrative expenses, exclusive of depreciation | 71,465 | 73,621 | (2.9 | ) | |||||||
Corporate - General and administrative expenses, exclusive of depreciation | 14,735 | 12,708 | 16.0 | ||||||||
Depreciation | 14,917 | 13,471 | 10.7 | ||||||||
Amortization of intangible assets | 8,689 | 6,782 | 28.1 | ||||||||
Spectrum repacking reimbursements and other | (7,013 | ) | — | *** | |||||||
Total | 384,104 | 365,075 | 5.2 | ||||||||
Operating income | 132,649 | 137,015 | (3.2 | ) | |||||||
Non-operating income (expense): | |||||||||||
Equity income (loss) in unconsolidated investments, net | 12,028 | (1,238 | ) | *** | |||||||
Interest expense | (46,385 | ) | (47,725 | ) | (2.8 | ) | |||||
Other non-operating items, net | (1,539 | ) | (12,480 | ) | (87.7 | ) | |||||
Total | (35,896 | ) | (61,443 | ) | (41.6 | ) | |||||
Income before income taxes | 96,753 | 75,572 | 28.0 | ||||||||
Provision for income taxes | 22,774 | 20,385 | 11.7 | ||||||||
Net income | $ | 73,979 | $ | 55,187 | 34.1 | ||||||
Earnings per share: | |||||||||||
Basic | $ | 0.34 | $ | 0.26 | 30.8 | ||||||
Diluted | $ | 0.34 | $ | 0.25 | 36.0 | ||||||
Weighted average number of common shares outstanding: | |||||||||||
Basic | 216,709 | 216,276 | 0.2 | ||||||||
Diluted | 217,202 | 216,989 | 0.1 | ||||||||
USE OF NON-GAAP INFORMATION
The company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, the related GAAP measures, nor should they be considered superior to the related GAAP measures, and should be read together with financial information presented on a GAAP basis. Also, our non-GAAP measures may not be comparable to similarly titled measures of other companies.
Management and the company’s Board of Directors use the non-GAAP
financial measures for purposes of evaluating company performance.
Furthermore, the
We believe that such expenses and gains are not indicative of normal, ongoing operations. While these items may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur. Therefore, while we may incur or recognize these types of expenses and gains in the future, we believe that removing these items for purposes of calculating the non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance.
The company also discusses Adjusted EBITDA (with and without corporate expenses), a non-GAAP financial performance measure that it believes offers a useful view of the overall operation of its businesses. The company defines Adjusted EBITDA as net income before (1) interest expense, (2) income taxes, (3) equity income (loss) in unconsolidated investments, net, (4) other non-operating items, net, (5) severance expense, (6) transaction costs, (7) spectrum repacking reimbursements and other, (8) depreciation and (9) amortization. The most directly comparable GAAP financial measure to Adjusted EBITDA is Net income. Users should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. In particular, Adjusted EBITDA is not intended to be a measure of cash flow available for management’s discretionary expenditures, as this measure does not consider certain cash requirements, such as working capital needs, capital expenditures, contractual commitments, interest payments, tax payments and other debt service requirements.
The company also considers adjusted revenues to be an important non-GAAP financial measure. Adjusted revenue is calculated by taking total company revenues on a GAAP basis and adjusting it to exclude (1) estimated incremental Olympic and Super Bowl revenue and (2) political revenues. These adjustments are made to our reported revenue on a GAAP basis in order to evaluate and assess our core operations on a comparable basis, and it represents the ongoing operations of our media business.
This earnings release also discusses free cash flow, a non-GAAP performance measure. Beginning in the first quarter of 2019 we began using a new methodology to compute free cash flow. The change in methodology was determined to be preferable as it will better reflect how the Board of Directors reviews the performance of the business and it more closely aligns to how other companies in the broadcast industry calculate this non-GAAP performance metric. The most directly comparable GAAP financial measure to free cash flow is Net income. Free cash flow is now calculated as non-GAAP Adjusted EBITDA (as defined above), further adjusted by adding back (1) stock-based compensation, (2) syndicated programming amortization, (3) dividends received from equity method investments, (4) pension reimbursements, and (5) reimbursements from spectrum repacking. This is further adjusted by deducting payments made for (1) syndicated programming, (2) pension, (3) interest, (4) taxes (net of refunds) and (5) purchases of property and equipment. Like Adjusted EBITDA, free cash flow is not intended to be a measure of cash flow available for management’s discretionary use.
Tabular reconciliations for all of the non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the following tables.
NON-GAAP FINANCIAL INFORMATION |
TEGNA Inc. |
Unaudited, in thousands of dollars (except per share amounts) |
Table No. 2 |
Reconciliations of certain line items impacted by special items to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's Consolidated Statements of Income follow: |
Special Items | |||||||||||||||||||||||
Quarter ended March 31, 2019 |
GAAP |
Spectrum |
Transaction |
Net gains on |
Other non- |
Non-GAAP |
|||||||||||||||||
Corporate - General and administrative expenses, exclusive of depreciation | $ | 14,735 | $ | — | $ | (3,911 | ) | $ | — | $ | — | $ | 10,824 | ||||||||||
Spectrum repacking reimbursements and other | (7,013 | ) | 7,013 | — | — | — | — | ||||||||||||||||
Operating expenses | 384,104 | 7,013 | (3,911 | ) | — | — | 387,206 | ||||||||||||||||
Operating income | 132,649 | (7,013 | ) | 3,911 | — | — | 129,547 | ||||||||||||||||
Equity income (loss) in unconsolidated investments, net | 12,028 | — | — | (13,126 | ) | — | (1,098 | ) | |||||||||||||||
Other non-operating items, net | (1,539 | ) | — | — | — | 1,000 | (539 | ) | |||||||||||||||
Total non-operating expense | (35,896 | ) | — | — | (13,126 | ) | 1,000 | (48,022 | ) | ||||||||||||||
Income before income taxes | 96,753 | (7,013 | ) | 3,911 | (13,126 | ) | 1,000 | 81,525 | |||||||||||||||
Provision for income taxes | 22,774 | (1,758 | ) | 979 | (3,169 | ) | 251 | 19,077 | |||||||||||||||
Net income | 73,979 | (5,255 | ) | 2,932 | (9,957 | ) | 749 | 62,448 | |||||||||||||||
Net income per share-diluted (a) | $ | 0.34 | $ | (0.02 | ) | $ | 0.01 | $ | (0.05 | ) | $ | — | $ | 0.29 | |||||||||
(a) - Per share amounts do not sum due to rounding. | |||||||||||||||||||||||
Special Items | |||||||||||||||||||||||
Quarter ended March 31, 2018 |
GAAP |
Pension lump- |
Other non- |
Non-GAAP |
|||||||||||||||||||
Other non-operating items, net | $ | (12,480 | ) | $ | 6,300 | $ | 9,462 | $ | 3,282 | ||||||||||||||
Total non-operating expense | (61,443 | ) | 6,300 | 9,462 | (45,681 | ) | |||||||||||||||||
Income before income taxes | 75,572 | 6,300 | 9,462 | 91,334 | |||||||||||||||||||
Provision for income taxes | 20,385 | 1,608 | (1,443 | ) | 20,550 | ||||||||||||||||||
Net income | 55,187 | 4,692 | 10,905 | 70,784 | |||||||||||||||||||
Net income per share-diluted (a) | $ | 0.25 | $ | 0.02 | $ | 0.05 | $ | 0.33 | |||||||||||||||
(a) - Per share amounts do not sum due to rounding. |
NON-GAAP FINANCIAL INFORMATION |
TEGNA Inc. |
Unaudited, in thousands of dollars |
Table No. 3 |
Reconciliations of Adjusted EBITDA to net income presented in accordance with GAAP on the company's Consolidated Statements of Income are presented below (in thousands): |
Quarter ended March 31, | ||||||||||
2019 | 2018 |
% Increase |
||||||||
Net income (GAAP basis) | $ | 73,979 | $ | 55,187 | 34.1 | |||||
Plus: Provision for income taxes | 22,774 | 20,385 | 11.7 | |||||||
Plus: Interest expense | 46,385 | 47,725 | (2.8 | ) | ||||||
(Less) Plus: Equity (income) loss in unconsolidated investments, net | (12,028 | ) | 1,238 | *** | ||||||
Plus: Other non-operating items, net | 1,539 | 12,480 | (87.7 | ) | ||||||
Operating income (GAAP basis) | 132,649 | 137,015 | (3.2 | ) | ||||||
Plus: Transaction costs | 3,911 | — | *** | |||||||
Less: Spectrum repacking reimbursements and other | (7,013 | ) | — | *** | ||||||
Adjusted operating income (non-GAAP basis) | 129,547 | 137,015 | (5.5 | ) | ||||||
Plus: Depreciation | 14,917 | 13,471 | 10.7 | |||||||
Plus: Amortization of intangible assets | 8,689 | 6,782 | 28.1 | |||||||
Adjusted EBITDA (non-GAAP basis) | $ | 153,153 | $ | 157,268 | (2.6 | ) | ||||
Corporate - General and administrative expense, exclusive of depreciation (non-GAAP basis) | 10,824 | 12,708 | (14.8 | ) | ||||||
Adjusted EBITDA, excluding Corporate (non-GAAP basis) | $ | 163,977 | $ | 169,976 | (3.5 | ) | ||||
NON-GAAP FINANCIAL INFORMATION |
TEGNA Inc. |
Unaudited, in thousands of dollars |
Table No. 4 |
Reconciliations of adjusted revenues to our revenues presented in accordance with GAAP on the company's Consolidated Statements of Income are presented below (in thousands): |
Quarter ended March 31, | |||||||||||
2019 | 2018 |
% Increase |
|||||||||
Advertising and Marketing Services | $ | 264,402 | $ | 282,939 | (6.6 | %) | |||||
Subscription | 241,575 | 205,556 | 17.5 | % | |||||||
Political | 2,704 | 7,606 | (64.4 | %) | |||||||
Other | 8,072 | 5,989 | 34.8 | % | |||||||
Total revenues (GAAP basis) | $ | 516,753 | $ | 502,090 | 2.9 | % | |||||
Factor impacting comparisons: | |||||||||||
Estimated net incremental Olympic and Super Bowl | (8,000 | ) | (24,000 | ) | (66.7 | %) | |||||
Political | (2,704 | ) | (7,606 | ) | (64.4 | %) | |||||
Total company adjusted revenues (non-GAAP basis) | $ | 506,049 | $ | 470,484 | 7.6 | % | |||||
NON-GAAP FINANCIAL INFORMATION |
TEGNA Inc. |
Unaudited, in thousands of dollars |
Table No. 5 |
“Free cash flow” is a non-GAAP performance measure used in addition to and in conjunction with results presented in accordance with GAAP. Free cash flow should not be relied upon to the exclusion of similar GAAP financial measures. |
Quarter ended March 31, | |||||||||||
2019 | 2018 |
% Increase (Decrease) |
|||||||||
Net income (GAAP Basis) | $ | 73,979 | $ | 55,187 | 34.1 | % | |||||
Plus: Provision for income taxes | 22,774 | 20,385 | 11.7 | % | |||||||
Plus: Interest expense | 46,385 | 47,725 | (2.8 | %) | |||||||
Plus: Other non-operating items | 1,539 | 12,480 | (87.7 | %) | |||||||
Plus: Transaction costs | 3,911 | — | *** | ||||||||
Plus: Depreciation | 14,917 | 13,471 | 10.7 | % | |||||||
Plus: Amortization | 8,689 | 6,782 | 28.1 | % | |||||||
Plus: Stock-based compensation | 4,433 | 3,599 | 23.2 | % | |||||||
Plus: Syndicated programming amortization | 13,463 | 13,286 | 1.3 | % | |||||||
Plus: Pension reimbursements | — | 29,240 | *** | ||||||||
Less: Spectrum repacking reimbursements and other | (7,013 | ) | — | *** | |||||||
Less (Plus): Equity (income) losses | (12,028 | ) | 1,238 | *** | |||||||
Less: Syndicated programming payments | (13,288 | ) | (13,656 | ) | (2.7 | %) | |||||
Less: Pension contributions | (942 | ) | (28,372 | ) | (96.7 | %) | |||||
Less: Interest payments | (27,412 | ) | (30,128 | ) | (9.0 | %) | |||||
Plus (Less): Tax refunds, net of (payments) | 397 | 2,799 | (85.8 | %) | |||||||
Less: Purchases of property and equipment | (24,810 | ) | (10,643 | ) | *** | ||||||
Add: Cash reimbursements from spectrum repacking | 4,134 | — | *** | ||||||||
Free cash flow (non-GAAP basis) | $ | 109,128 | $ | 123,393 | (11.6 | %) | |||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190509005480/en/
Source:
For investor inquiries, contact:
John Janedis, CFA
SVP,
Capital Markets & Investor Relations
703-873-6222
jjanedis@TEGNA.com
For media inquiries, contact:
Anne Bentley
Vice President,
Corporate Communications
703-873-6366
abentley@TEGNA.com