SEC Filings

10-Q
TEGNA INC filed this Form 10-Q on 11/08/2018
Entire Document
 



Total revenues increased $74.7 million, or 16%, in the third quarter of 2018 compared to the same period in 2017. This net increase was primarily due to an increase in subscription revenue of $29.8 million, or 17%, in the third quarter of 2018, primarily due to annual rate increases under existing retransmission agreements and increases from OTT streaming service providers. Also contributing to the overall increase was political revenue which increased $56.6 million in the third quarter of 2018, driven by the mid-term elections cycle. These increases were partially offset by a decrease in AMS revenue of $13.0 million, or 5%, in the third quarter of 2018. This decline was attributed to a softening of demand for traditional television advertising and election year political displacement, partially offset by an increase in digital revenue (primarily from Premion) and revenue from our KFMB station acquisition.

In the first nine months of 2018, total revenues increased $152.4 million, or 11%, compared to the same period in 2017. This increase was primarily due to an increase in subscription revenue of $82.0 million, or 15%, in the first nine months of 2018 primarily due to annual rate increases under existing retransmission agreements and increases from OTT streaming service providers. Also contributing to the overall increase was political revenue which increased $80.3 million in the first nine months of 2018, largely due to activity related to the mid-term elections cycle. AMS revenue during first nine months of 2018 declined $13.5 million, or 2%, as compared to the same period in 2017. Increases in AMS from Winter Olympic and Super Bowl advertising, KFMB station acquisition, and digital advertising (primarily Premion) were offset by declines in digital marketing services (DMS) revenue (primarily due to conclusion of a transition service agreement with Gannett Co., Inc. (Gannett) in June 2017) and a softening of demand and election year political displacement for traditional television advertising.

Cost of Revenues

Cost of revenues increased $35.7 million, or 15%, in the third quarter of 2018 compared to the same period in 2017. The increase was primarily due to a $15.7 million increase in programming costs (due to the growth in subscription revenues), a $12.4 million increase in digital expenses (due to investments made in the Premion business), and $6.8 million increase comprised of the increase from our KFMB station acquisition and increases in costs from production of original content (Daily Blast LIVE!, local news, and Sister Circle). Also contributing to the increase was $0.9 million of severance expense due to a reduction in force at our DMS business.

In the first nine months of 2018, cost of revenues increased $97.4 million, or 14%, compared to the same period in 2017. The increase was primarily due to a $45.6 million increase in programming costs (due to the growth in subscription revenues), a $35.1 million increase in digital expenses (due to investments made in the Premion business), and $18.9 million increase comprised of the increase from our KFMB station acquisition and increases associated with production of original content (Daily Blast LIVE!, local news, and Sister Circle), and variable editorial costs tied to increased revenues (event coverage costs of Olympics and Super Bowl). These increases were partially offset by a decline in DMS costs of $10.1 million due to the conclusion of the transition services agreement with Gannett.

Business Units - Selling, General and Administrative Expenses

Business unit selling, general and administrative expenses increased $5.7 million, or 8%, in the third quarter of 2018 compared to the same period in 2017. The increase was primarily due to a $4.2 million increase in costs due to incremental political revenue from the mid-term elections cycle and our acquisition of KFMB. In addition, $0.9 million of severance expense in third quarter of 2018 due to a reduction in force at our DMS business, and an increase in legal costs.

In the nine months ended September 30, 2018, business unit selling, general and administrative expenses increased $14.5 million, or 7% compared to the same period in 2017. The increase was primarily driven by a $5.0 million increase due to higher selling costs (due to incremental revenue from the midterm elections, Olympics and Super Bowl). The remaining net $9.5 million increase was primarily due to the acquisition of KFMB and higher legal costs.

Corporate General and Administrative Expenses

Corporate general and administrative expenses increased $4.7 million, or 37%, in the third quarter of 2018 compared to the same period in 2017. The increase was driven by $5.5 million in severance expenses recognized during the third quarter of 2018, which more than offset operational efficiencies, and resulted from a reduction in force related to our ongoing consolidations of our corporate structure following our strategic transformation into a pure play broadcast company.

In the nine months ended September 30, 2018, corporate general and administrative expenses decreased $0.9 million, or 2%, compared to the same period in 2017. The decrease was primarily due the absence of $0.9 million in severance incurred in the first nine months of 2017, lower corporate expenses associated with the right-sizing of the corporate function following the spin-off of Cars.com and the sale of our majority interest in CareerBuilder in 2017. These reductions were partially offset by $5.5 million in severance expense incurred in the third quarter of 2018 due to a reduction in force.

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