Q1 2024 TEGNA Inc Earnings Call

Okay.

Operator: Hello and welcome to the Tegna First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the call over to Kirk von Seelen, Vice President and Treasurer. You may begin.

Hello, and welcome to take no first quarter 'twenty 'twenty four earnings conference call.

Operator: At this time all participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Speaker Change: To ask a question. During this session you will need to press star one on your telephone.

Operator: You will then hear automated message advising your hand is raised.

Operator: To withdraw your question. Please press star one again.

Speaker Change: I would now like to turn the call over to Kirk plants, Zeeland, Vice President and Treasurer you may begin.

Kirk Von Seelen: Thank you. Good morning, and welcome to our first quarter 2024 conference call and webcast. My name is Kirk Von Seelen, and I am Tegna's treasurer. Today, our President and CEO Dave Lougee and our CFO Julie Heskett will review Tegna's first quarter performance and results and provide Tegna's full year and quarter ahead outlook. After that, we'll open the call for questions. Hopefully, you've had the opportunity to review this morning's press release. If you have not yet seen a copy of the release, it's available at Tegna.com.

Speaker Change: Thank you good morning, and welcome to our first quarter 2024 conference call and webcast. My name is Kirk bonds ceiling and I am techniques treasurer today are president and CEO, Dave Lougee, and our CFO, Julie Heskett will review <unk> first quarter performance and results and provide tegra is for year end.

Kirk Von Seelen: Quarter had outlook after that we'll open the call for questions.

Kirk Von Seelen: Hopefully you've had the opportunity to review this morning's press release, if you have not yet seen a copy of the release, it's available at <unk> Dot com.

Kirk Von Seelen: Before we get started, I'd like to remind you that this conference call and webcast includes forward-looking statements, and our actual results may differ. Factors that may cause them to differ are outlined in our SEC filing. This presentation also includes certain non-GAAP financial measures. We have provided reconciliations of those measures to the most directly comparable GAAP measures in the press release. With that, let me turn the call over to Dave. Thank you, Kirk.

Kirk Von Seelen: Before we get started I'd like to remind you that this conference call and webcast includes forward looking statements and our actual results may differ factors that may cause them to differ are outlined in our SEC filings. This.

Kirk Von Seelen: This presentation also includes certain non-GAAP financial measures, we've provided reconciliations of those measures to the most directly comparable GAAP measures in the press release with that let me turn the call over to Dave. Thank.

David T. Lougee: Thank you, Kirk, and good morning, everyone. I'll begin with a summary of recent highlights and then turn the call over to Julie to walk you through our financial results in more detail. Tegna achieved our key guidance metrics in the first quarter. We closed the acquisition of Actillion and began integrating it into Premium, made significant early progress toward our $350 million capital return commitment for 2024, and completed multiple local rights deals for local pro sports teams, including with the Indiana Fever and rookie phenom Kaitlyn Clark.

Dave: Thank you Kirk and good morning, everyone.

David T. Lougee: Also, during the quarter, we returned more than $100 million to shareholders with $82 million in share repurchases and $20 million in dividends. And, as we announced in this morning's press release, our board has approved a 10% increase to our regular quarterly dividend. This builds on our track record of dividend increases, including the 20% dividend increase last year, and reflects the confidence we have in the durability of our free cash flow from our business and the strength of our balance sheet.

David T. Lougee: I'll begin with a summary of recent highlights and then turn the call over to Julie to walk you through our financial results in more detail.

David T. Lougee: Technet Chiefs, our key guidance metrics in the first quarter, we closed the acquisition of Actelion and began integrating it into premium on.

David T. Lougee: Make significant early progress toward our $350 million capital return commitment for 2024 and completed multiple local rights deals for local pro sports teams, including with the Indiana fever, and rookie Phenom Caitlin Clarke.

David T. Lougee: Also during the quarter, we returned more than $100 million to shareholders with $82 million in share repurchases and $20 million in dividends and as we announced in this morning's press release, our board has approved a 10% increase to our regular quarterly dividend dividend. This builds on our track record of dividend increases, including a 20% dividend increase last year.

David T. Lougee: <unk> and reflects the confidence we have in the durability of our free cash flow from our business and the strength of our balance sheet.

David T. Lougee: As we shared on our last call, our initiatives to transform our core business operating model are now underway. Today, we are announcing that we expect these initiatives to generate between $90 to $100 million of annualized cost savings as we exit 2025, with initial benefits to be realized here in the second quarter with sequential improvements going forward. We'll continue to update investors on our progress as we roll out additional transformational initiatives. Now, turning to our financial performance. Julie will cover the first quarter performance in greater detail, but I'll cover a few highlights.

David T. Lougee: As we shared on our last call our initiatives to transform our core business operating or operating model are now underway. Today. We are announcing that we expect these initiatives to generate between $90 million to $100 million of annualized cost savings as we exit 2025.

David T. Lougee: With initial benefits to be realized here in the second quarter with sequential improvements going forward. We will continue to update investors on our progress as we roll out additional transformational initiatives turning to our financial performance Julie will cover first quarter performance in greater detail, but I'll cover a few highlights first as I mentioned earlier, we Richard we've achieved first quarter.

David T. Lougee: First, as I mentioned earlier, we've achieved first quarter key guidance metrics. National advertising has remained challenging, as it has across the media landscape, and affects us in both Core and Premion. But, local advertising continues to improve across our portfolio products. We're especially seeing that at Premion, our industry-leading OTT sales platform that serves the local marketplace. We further improved Premium's positioning with the acquisition of Octillion. We're now beginning to leverage its technology to improve Premium's local ad experience, the advertiser experience, with improved workflow tools, and better overall access to the connected TV market.

David T. Lougee: Key guidance metrics.

David T. Lougee: National advertising has remained challenging as it has across the media landscape.

David T. Lougee: FX us in both core and premium.

David T. Lougee: Local advertising continues to improve across our portfolio of products, we're especially seeing that a premium on our industry, leading OTT sales platform that serves the local marketplace.

David T. Lougee: We further improved premium positioning with the acquisition of October we're now beginning to leverage its technology to improve premiums local AD experience advertiser experience with improved workflow tools and better overall access to the connected TV market, we're already seeing meaningful signs of success.

David T. Lougee: We're already seeing meaningful signs of success, so we're encouraged by first quarter results for Premium, which returned to positive growth following last year's loss of a major national account. We expect continued sequential improvement in Q2 and throughout the year, driven by execution on local. Attorney to Political Advertising.

David T. Lougee: So we're encouraged by first quarter results for premium which returned to positive growth. Following last year's loss of a major national account. We expect continued sequential improvement in Q2 went throughout the year driven by execution on local.

David T. Lougee: We're feeling very good about the trends as they relate to our footprint. Once again, the presidential race will likely come down to the same seven states, and that's where the spending will be. And of those seven states, we cover six of them, specifically Pennsylvania, Arizona, Georgia, North Carolina, Michigan, and Wisconsin.

David T. Lougee: Turning to political advertising, we're feeling very good about the trends as they relate to our footprint.

David T. Lougee: Once again, the presidential race will likely come down to the same seven states and Thats, where the spending will be and of those seven states. We cover six of them spin.

David T. Lougee: Specifically, Pennsylvania, Arizona, Georgia, North Carolina, Michigan, and massage and Wisconsin.

David T. Lougee: In the Senate, there appear to be fewer competitive seats nationwide than in the past, so the spending and the large spending will be funneled to the seats that are competitive. And here again, our footprint is very, very strong. Of the seven seats currently competitive, we have markets covering five of them, including the races in Ohio, Georgia, Arizona, Michigan, and Wisconsin. And because we're based here in the Mid-Atlantic, we have a front row seat to the Maryland Senate race, which we think will be highly competitive for the first time in a very long time, even though it's not classified that way at the moment.

David T. Lougee: And the Senate there appear to be less competitive seats nationwide than in the past. So the spec so the spending and the large spending will be funneled to the seats that are competitive and here again, our footprint is very very strong of the seven seats currently competitive we have markets covering five of them, including the races.

David T. Lougee: In Ohio, Georgia, Arizona, Michigan and Wisconsin.

David T. Lougee: And because we're based here in the mid Atlantic we have a front row seat to the Maryland Senate race, which we think will be highly competitive for the first time in a very long time, even though it's not classified that at the moment with former Governor Larry Hogan they'll likely Republican nominee he's a very popular moderate and assuming he gets the nomination.

David T. Lougee: With former Governor Larry Hogan, the likely Republican nominee, he's a very popular moderate, and assuming he gets the nomination, Maryland is likely to be a significant and unexpected contribution to our political revenue. And because control of the Senate is up for grabs, and only a few seats are competitive, we think these races will very likely reach record spending levels for general election Senate races in their respective states. There are fewer governor's races in presidential years than during midterms, 11 to be exact, but we do have the only two races currently called competitive, North Carolina and New Hampshire.

David T. Lougee: Marilyn is likely a significant and unexpected contribution to our political revenues.

David T. Lougee: And because control of the Senate is up for grabs and only a few seats are competitive. We think these races will very likely reached record spending levels for general election Senate races in their respective states states.

David T. Lougee: There's less governors races in presidential years than during midterms 11 to be exact but we do have the only two races currently call competitive North Carolina, and New Hampshire. So in short we're in a great position to take a very strong share of linear and CTV OTT political dollars.

David T. Lougee: So, in short, we're in a great position to take a very strong share of linear and CTVOTT political dollars. And one more important tailwind, the highlight for all advertising spending, including political. The Summer Olympic Games this summer in Paris, with the largest portfolio of NBC stations and in a time zone more conducive to live programming and viewing, we expect enormous levels of engagement. I'd now like to share a little context on some of the recent sports pro sports deals we've announced.

David T. Lougee: One more important tailwind to highlight for all advertising spending including political.

David T. Lougee: Summer Olympic games. This summer in Paris, with the largest portfolio of NBC stations and in a time zone more concert conducive to live programming and viewing we expect enormous levels of engagement.

David T. Lougee: I'd now like to share a little context on some of the recent sports Pro sports deals, we've announced as I shared on our last call. Our strong portfolio of stations in Big Pro Sports markets are very well positioned for the shift currently happening in local sports distribution.

David T. Lougee: As I shared on our last call, our strong portfolio of stations in big pro sports markets is very well positioned for the shift currently happening in local sports distribution. Teams are learning, and in so many cases being reminded of, the benefit of being on local broadcast and the huge increase in reach and distribution that brings compared to the pay TV only model. We recently announced a deal with the National Hockey League's Seattle Kraken, as well as the Seattle Reign of the Women's Soccer League.

David T. Lougee: Teams are learning and so in many cases being reminded of the benefit of being on local broadcast and a huge increase in reach and distribution that brings compared to the pay TV only model.

David T. Lougee: We recently announced a deal with the National Hockey League, Seattle, Kraken as well as the Seattle reign of the Women's Soccer League.

David T. Lougee: We also announced an exclusive broadcast distribution deal in the Indianapolis market with the WNBA's Indiana Fever and rookie superstar Kaitlyn Clark. This morning, we announced we've signed additional deals, taking Caitlin and the Fever Games to 11 additional broadcast markets, including our home state of Iowa and our Cedar Rapids and Quad City stations, as well as on stations from Gray, Sinclair, Weigel Broadcasting, and Coastal Television. To my earlier point about broadcast distribution and the audience it brings, the recent NCAA Women's Basketball Final, featuring Caitlin Clark, drew a record-breaking 19 million viewers on ABC stations, including our Des Moines and Quad City stations. Notably, that audience was larger than the men's championship game for the first time ever, and just as notably, that game aired on cable. Pro sports teams are not recognizing the difference.

David T. Lougee: We also announced that exclusive broadcast distribution deal in the Indianapolis market with the Wnba's, Indiana, Indiana Fever Rookie Superstar Caitlin Clarke.

David T. Lougee: This morning, we announced we signed additional deals taking Caitlin and the fever games to 11 additional broadcast markets, including our home state of Iowa, and our Cedar Rapids in Quad cities stations as well as on stations from Grace Sinclair Broadcasting and coastal TV to my earlier point about broadcast distribution in the audience. It brings the recent.

David T. Lougee: See definitely women's basketball final featuring Caitlin Clarke drew a record breaking 19 million viewers on ABC stations, including our des Moines Quad City stations.

David T. Lougee: Notably that audience was larger than the men's championship game for the first time ever.

David T. Lougee: And just as notably that game aired on cable.

David T. Lougee: Pro sports teams are now recognizing the difference obviously the deals you've done to date.

David T. Lougee: Obviously, the deals we've done to date are with teams who aren't part of the existing Diamond RSNs. We're watching closely the bankruptcy court developments with Diamond and are ready to explore additional opportunities that make sense. Before I turn it over to Julie, I'd like to thank and recognize our station colleagues for their tireless dedication to serving our viewers across the country in a very difficult environment for journalists. As an example, our stations in Minneapolis, Denver, and Louisville were recently nominated for a prestigious Peabody Award for their work on a nationwide investigation into widespread sexual assault by private contractors transporting inmates over long distances.

David T. Lougee: With teams that Werent part of the existing diamond or a sense. We're watching closely the bankruptcy court developments with diamond and are ready to explore additional opportunities that makes sense.

David T. Lougee: Before I turn it over to Julie I'd like to thank and recognize our station colleagues for their tireless dedication to serving our viewers across the country and a very difficult environment for journalists as an example, our stations in Minneapolis, Denver and Louisville were recently nominated for a prestigious Peabody Award for their work on our nationwide investigation into widespread sexual.

David T. Lougee: Self by private contractors transporting inmates over long distances.

David T. Lougee: Our station's investigative journalism serves as the watchdog of communities, uncovering corruption, holding power to account, and amplifying the voices of marginalized groups. There are so fewer players doing that today, making the role we serve all that more important. I'm so proud of the critical role our stations play. Without them, vital stories would remain untold, injustice would remain unaddressed, and the public trust eroded.

David T. Lougee: Our stations investigative journalism serves as the watchdog of communities uncovering corruption holding power to account and amplifying the voices of marginalized groups Theres. So many less players doing that today, making the role we serve all of that with all of that more important I am so proud of the critical role our station.

David T. Lougee: Play without them vital store since vital stations would be would remain on tolled and justice is unaddressed in the public trust.

David T. Lougee: Eroded.

Julie Heskett: With that, I will turn it over to Julie. Thanks, Dave. Good morning.

David T. Lougee: With that let me turn it over to Julie.

Julie Heskett: Thanks, Dave. Good morning, everyone, and thank you for joining us. To start this morning, I will cover Tegna's capital allocation execution, then an update on our business transformation initiatives before closing out with a review of our financial results and guidance. As a reminder, in February of this year, Tegna announced a new comprehensive capital allocation plan, which included our commitment to returning between 40 and 60% of adjusted free cash flow to shareholders over the 2024 and 2025 timeframe. I am pleased to report today that we are off to a strong start on that commitment.

Julie Heskett: Thanks, Dave Good morning, everyone and thank you for joining us.

Julie Heskett: In the first quarter, we repurchased nearly $82 million of common stock and retired approximately 5.7 million shares. Combined with our regular dividend, our total cash returned to shareholders in the first quarter was $102 million. We are where we want to be to achieve our promise of returning $350 million to shareholders in 2024. During the quarter, Tegna also took possession of approximately 4 million shares, which occurred upon completion of our previously announced $325 million Accelerated Share Repurchase Program that launched in November last year. The settlement of these shares is incremental to the $82 million, or 5.7 million shares, in the first quarter just mentioned.

Julie Heskett: To start this morning, I will cover <unk> capital allocation execution, then an update on our business transformation initiatives before closing out with a review of our financial results and guidance.

Julie Heskett: As a reminder, in February of this year, <unk> announced a new comprehensive capital allocation plan, which included our commitment to returning between 40 and 60% of adjusted free cash flow to shareholders over 2024, and 2025 time frame.

Julie Heskett: I am pleased to report today that we are off to a strong start on that commitment in the first quarter, we repurchased nearly $82 million of common stock and retired approximately five 7 million shares.

Julie Heskett: With our regular dividend our total cash return to shareholders in the first quarter was $102 million, we are where we want to be to achieve our promise of returning $350 million to shareholders in 2024.

Julie Heskett: During the quarter <unk> also took possession of approximately 4 million shares which occurred upon completion of our previously announced $325 million accelerated share repurchase program that launched in November last year.

Julie Heskett: Settlement of these shares is incremental to the $82 million or $5 7 million shares in the first quarter just mentioned.

Julie Heskett: In addition to our share repurchase activity, our Board just declared a 10% increase in our quarterly dividend to $0.125 per share. That builds on the 20% increase we announced last year. Our capital return actions through the use of both share repurchases and dividends underscore the durability and sustainability of Tegna's free cash flow and our commitment to shareholder value creation. While capital return remains an important part of our story, we continue to take actions that position Tegna for growth as well.

Julie Heskett: In addition to our share repurchase activity our board just declared a 10% increase of our quarterly dividend to $12.05 per share that built on the 20% increase we announced last year.

Julie Heskett: Our capital return actions through the use of both share repurchases and dividends underscore the durability and sustainability of <unk> free cash flow and our commitment to shareholder value creation.

Julie Heskett: While capital return remains an important part of our story, we continue to take actions that position <unk> for growth as well to that end in the first quarter. We closed on October <unk> media and expect to further bolstered the growth outlook for our premium business.

Julie Heskett: To that end, in the first quarter, we closed on Octillion Media and expect to further bolster the growth outlook for our premium business. The acquisition of Octillion gives greater control of key technologies Premium uses and better positions us with new go-to-market product development.

Julie Heskett: Acquisition of Actelion gives us greater control of key technologies premium users and better positions us with new go to market product development.

Julie Heskett: We continue to execute against our capital allocation framework by returning capital to shareholders, investing in the business both organically and inorganically, pursuing bolt-on adjacent acquisitions, and preparing for future debt maturity. Our industry-leading balance sheet and strong free cash flow generation is a differentiator that gives us the ability to reward shareholders, grow the business, and maintain our leverage at below three times. Now turning to business transformation initiatives. As Dave mentioned, our previously announced business transformation initiatives are underway and starting to generate savings.

Julie Heskett: We continue to execute against our capital allocation framework by returning capital to shareholders and investing in the business, both organically and Inorganically pursuing bolt on adjacent acquisition and preparing for future debt maturities.

Julie Heskett: Our industry, leading balance sheet and strong free cash flow generation is a differentiator that gives us the ability to reward shareholders grow the business and maintain our leverage at or below three times.

Julie Heskett: These initiatives are expected to be completed over the next two years and generate 90 to $100 million in annualized expense reductions as we exit 2025. This core business transformation will directly target all other operating expenses outside of programming and premium.

Julie Heskett: Now turning to business transformation initiatives as Dave mentioned, our previously announced business transformation initiatives are underway and starting to generate savings. These initiatives are expected to be completed over the next two years and generate $90 million to $100 million in.

Julie Heskett: And annualized expense reductions as we exit 2025.

Julie Heskett: This core business transformation will directly target all other operating expenses outside of programming and premium.

Julie Heskett: We will gain some initial expense benefits from these initiatives in the second quarter of 2024 and expect our run rate growth of all other expenses outside programming and premium to improve sequentially quarter to quarter. These cost reductions are already included and have previously provided two-year adjusted free cash flow guidance. Consistent with our prior programs, we will track our progress and keep you informed regularly over the coming quarters. Let's now take a look at the drivers of our first quarter 2024 financial performance. My comments today are primarily focused on Tegna's performance on a consolidated, non-gap basis to provide you with visibility, financial drivers of our business trends, as well as our operational results.

Julie Heskett: We will gain some initial expense benefits from these initiatives in the second quarter of 2024 and expect our run rate growth of all other expenses outside programming and premium to improve sequentially quarter to quarter.

Julie Heskett: These cost reductions are already included in our previously provided two year adjusted free cash flow guidance.

Julie Heskett: Consistent with our prior program, we will track our progress and keep you informed of regularly over the coming quarters.

Julie Heskett: Let's now take a look at the drivers of our first quarter 2024 financial performance. My comments today are primarily focused on <unk> performance on a consolidated non-GAAP basis to provide you with visibility on financial drivers of our business trends as well as our operational results you can find.

Julie Heskett: You can find all of our reported data and prior period comparatives in our press release. Total company revenue for the first quarter was down 4% year over year, primarily due to lower subscription revenue, partially offset by higher political advertising dollars. First quarter subscription revenue was down 9% year over year, primarily due to net subscriber declines and the temporary disruption of service with a distribution partner in January, partially offset by contractual rate increases.

Julie Heskett: All of our reported data and prior period Comparatives.

Julie Heskett: Comparatives in our press release.

Julie Heskett: Additionally, the year over year comparison was affected by a year-end adjustment that benefited our results in the first quarter of 2023 and did not recur in 2024. However, underlying subscription revenue trends, absent the one-time impacts, are down mid-single digits. We expect to renew 20% of our traditional subscribers at the end of this year and another 45% in 2025. Moving to advertising and marketing services, AMS revenue was down 3% year over year. While national advertising continues to show signs of softness, local advertising trends in the first quarter were resilient and continued to show positive momentum, including strong performance in automotive services, restaurants, banking, and finance, and entertainment advertising categories.

Julie Heskett: Total company revenue for first quarter was down 4% year over year, primarily due to lower subscription revenue, partially offset by higher political advertising dollars.

Julie Heskett: First quarter subscription revenue was down 9% year over year, primarily due to net subscriber declines and the temporary disruption of service with a distribution partner in January partially offset by contractual rate increases. Additionally.

Julie Heskett: Additionally, the year over year comparison was affected by a year end adjustment that benefited our results in first quarter of 2023 and did not recur in 2024.

Julie Heskett: Underlying subscription revenue trends absent the one time impacts is down mid single digit we expect to renew 20% of our traditional subscribers at the end of this year and another 45% in 2025.

Julie Heskett: Moving to advertising and marketing services Ams revenue was down 3% year over year, while national advertising continues to show signs of softness local advertising trends in the first quarter were resilient and continue to show positive momentum, including strong performance in automotive service.

Julie Heskett: Restaurants banking and finance and entertainment advertising categories.

Julie Heskett: Now turning to Premium. Premium continues to gain momentum with local advertisers by selling advertising in a converged linear and streaming television marketplace. The integration of Octillion Media with Premium is underway and will further drive innovation, new products, and streamline media buying processes.

Julie Heskett: Now turning to premium premium continues to gain momentum with local advertisers by selling advertising in a converged linear and streaming TV marketplace.

Julie Heskett: The integration of Octillion media with premium is underway and will further drive innovation, new products and streamline media buying processes.

Julie Heskett: For the 2024 election cycle, Premium has expanded its programmatic selling capabilities, enabling advertisers and agencies to leverage a multifaceted programmatic and managed service approach to executing CTV campaigns and driving measurable outcomes. Premium's total revenue has returned to positive growth following last year's loss of that large national account. Premium's revenue was up, low single digits year over year, driven by strong local revenue, offset by softness in national revenue.

Julie Heskett: For the 2020 for election cycle premium has expanded its programmatic selling capability, enabling advertisers and agencies to leverage a multi faceted programmatic and managed service approach to executing CTV campaign and driving measurable outcomes.

Julie Heskett: Premiums total revenue has returned to positive growth following last year's loss of that large national account.

Julie Heskett: Premium revenue was up low single digits year over year, driven by strong local revenue offset by softness in national revenue.

Julie Heskett: The rate of premium revenue growth is expected to grow sequentially throughout the year. Turning now to expenses. For the quarter, non-GAAP operating expenses of $568 million were up 1% compared to the first quarter of 2023. Notably, programming expenses were down slightly year over year, partially driven by the disruption of service with a distributor. As a reminder, as we said last earnings call, we expect the growth of reverse compensation fees to be negligible at best going forward. The majority of our reverse comp fees are variable and tied to paid subscribers.

Julie Heskett: Rate of premiums revenue growth is expected to grow sequentially throughout the year.

Julie Heskett: Turning now to expenses for the quarter non-GAAP operating expenses of $568 million were up 1% compared to first quarter of 2023.

Julie Heskett: Notably programming expenses were down slightly year over year, partially driven by that disruption of service with the distributor as a reminder, what we said last earnings call. We expect the growth of reverse compensation fees to be negligible at best going forward. The majority of our reverse comp fee.

Julie Heskett: These are variable and tied to paid subscribers.

Julie Heskett: All other operating expenses for the quarter were up 2% compared to 2023, primarily due to compensation expenses. Adjusted EBITDA was $174 million, and we generated adjusted free cash flow of $113 million for the quarter. We ended the quarter with total debt of $3.1 billion and cash of $431 million. Net leverage ended the quarter at 2.8 times.

Julie Heskett: All other operating expenses for the quarter were up 2% compared to 2023, primarily due to compensation expenses.

Julie Heskett: Adjusted EBITDA was $174 million.

Julie Heskett: We generated adjusted free cash flow of $113 million for the quarter we.

Julie Heskett: We ended the quarter with total debt of $3 1 billion and cash of $431 million net.

Julie Heskett: We are in excellent shape to continue with our capital allocation priorities in the second quarter and beyond. Now, turning to our forward-looking outlook. As we noted in our press release this morning, we are reaffirming all our key full-year 2024 guidance metrics, including two-year adjusted free cash flow guidance of $900 million to $1.1 billion. As Dave highlighted, the robust political environment and our favorable portfolio, as well as the Summer Olympics this year, support our confidence in our guidance.

Julie Heskett: Net leverage ended the quarter at two eight times, we are in excellent shape to continue with our capital allocation priorities in the second quarter and beyond.

Julie Heskett: Turning to our forward looking outlook.

Julie Heskett: As we noted in our press release. This morning, we are reaffirming all our key full year 2024 guidance metrics, including two year adjusted free cash flow guidance of $900 million to $1 1 billion as.

Julie Heskett: As Dave highlighted the robust political environment, and our favorable portfolio as well as the Summer Olympics. This year supports our confidence of our guide with the acquisition of Actelion media, we are updating our guidance range for the amortization expense to be between $51 million.

Julie Heskett: With the acquisition of Octillion Media, we are updating our guidance range for the amortization expense to be between $51 million and $55 million. Please refer to our press release to see all full year 2024 guidance elements. In an effort to help forecast our near-term results, I'll provide quarterly-ahead financial guidance metrics as follows. We expect second-quarter total company revenue to be down low to mid-single-digit percent year-over-year due to lower subscription and AMS revenue, partially offset by higher political ad dollars.

Julie Heskett: $55 million please.

Julie Heskett: Please refer to our press release to see all full year of 2024 guidance elements.

Julie Heskett: In an effort to help forecast our near term results I'll provide a quarter ahead financial guidance metrics as follows we expect second quarter total company revenue to be down low to mid single digit percent year over year due to lower subscription and Ams revenue, partially offset by higher political ad dollars.

Julie Heskett: We forecast operating expenses in the second quarter to be flat compared to last year. This is sequential improvement from the first quarter, and you'll see this improving trend continue in future quarters as a result of transformation cost reduction efforts. With that, as we turn to Q&A, please note Tom Cox, our Senior Vice President of Digital and Chief Growth Officer, is here with Dave and I as we take your questions.

Julie Heskett: We forecast operating expenses in the second quarter to be flat compared to last year. This is sequential improvement from first quarter and Youll see this improving trend continue in future quarters as a result of transformation cost reduction efforts.

Julie Heskett: With that as we turn to Q&A. Please note Tom Cox, our senior Vice President of digital and Chief growth Officer is here with Dave and I as we take your questions.

Tom Cox: Thank you.

Operator: Ladies and gentlemen, as a reminder to ask the question, please press star 1-1 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Dan Kornovsk with the Benchmark Company. Your line is open.

Speaker Change: Ladies and gentlemen, as a reminder to ask the question.

Operator: Please star one on your telephone and wait to hear your name announce.

Operator: To withdraw your question. Please press star one again.

Operator: Please standby, while we compile the Q&A roster.

David Karnovsky: Our first question comes from the line of Dan can ask with the benchmark company. Your line is open.

David Karnovsky: Yeah, thanks. Good morning.

David Karnovsky: Yeah. Thanks, good morning.

David Karnovsky: Maybe I guess, maybe for Julie or Dave you want to pitch in too, but can we just unpack the <unk> guide a little bit more.

David Karnovsky: It feels a little bit light on the revenue side.

David Karnovsky: Especially since you have the disruption behind you so subscription gets a little bit more of a.

David Karnovsky: You know what a tailwind relative sequentially than you would normally have in political everybody. Your Q1 political was strong and Q2 should be better than that so is there anything more color you guys can give us around core.

Julie Heskett: Maybe I guess maybe Julie or Dave, you want to pitch in too, but can we just unpack the 2Q guide a little bit more? It feels a little bit light on the revenue side. You know, especially since you have the disruption behind you. So subscription gets a little bit more of a, you know, a tailwind relative to sequentially than you would normally have. And politically, everybody, your Q1 political was strong, and Q2 should be better than that. So is there anything more color you guys can give us around? core trends or other things that could be driving the year over year decline.

Julie Heskett: Core trends or other things that could be driving the year over year decline.

David T. Lougee: Hey Dan, I'll make one comment and then I'll turn it over to Julie from Margot. Remember, though, on retrans, we don't have any deals up in the second quarter. So once we had a deal up in the first quarter, so from going forward until no deals are up, we're just dealing off the sub base as is.

Dave: Hey, Dan I'll make one comment and I'll turn it over to Julian from AGA remember, though on Retrans that we don't have any deals up in the second quarter. So one so we had to do up in the first quarter so that.

David T. Lougee: And going forward until no deals are up we're just dealing off the sub base as is.

Julie Heskett: And I would just say, unpacking from an AMS perspective, we continue to see softness, specifically on the national side of our business. So similar to what you saw in the first quarter, that is projected to continue into the second quarter. And from a subscription perspective, you heard us say in the first quarter, aside from those one-time only, the run rate of subscription revenue is down. Down mid single digits. And then I would just encourage you to continue to look at, to Dave's point, there are no deals that are up in the second quarter. So look at that quarterly seasonal trend with prior years and sequential second to first in history.

Julie Heskett: Julien yes.

Julie Heskett: And I would just say unpacking.

Julie Heskett: From an Ams perspective, we continue to see softness specifically on the national side of our business. So similar to what you saw in first quarter that is projected to continue into second quarter.

Julie Heskett: And from a subscription perspective, you heard us say first quarter aside from those one time only a run rate of subscription revenue is.

Julie Heskett: Down mid single digits.

Julie Heskett: And then I would just encourage you to continue to look at to Dave's point Theres no deals that are up in second quarter. So look at that quarterly seasonal trend with prior years and sequential second to first in history.

Julie Heskett: Political should be better in order, though, given timing, yes?

Julie Heskett: The second.

Julie Heskett: Political political should be better sequentially, though given timing yes.

Julie Heskett: Political should be sequentially better than the first quarter, slightly.

Julie Heskett: Political should be sequentially better than first quarter slightly.

David T. Lougee: But not dramatically, right?

Speaker Change: But not dramatically right and again the quarter variances again, if you go back to 2020 right first quarter was huge second quarter was very small and 2022 first quarter was small second quarter was large this one appears to be more even if you will but what happens with political because of the primary calendars.

David T. Lougee: Dan It's really about first half and second half. So first half is usually always somewhere between 15 and 16% of the total and that we believe will be consistent through 2024.

David T. Lougee: And again, the quarterly variances, again, if you go back to 2020, right, the first quarter was huge, the second quarter was very small. And in 2022, the first quarter was small, and the second quarter was large. This one appears to be more even, if you will.

David Karnovsky: But what happens with politics because of the primary calendars, Dan, it's really about first half and second half. So the first half is usually always somewhere between 15 and 16% of the total. And that we believe will be consistent through 2024. 85% of us put a vote in the back half. Very right.

David T. Lougee: 85% of them political comes in the back half very roughly right.

Dan: Yes, no everyone's saying it's back half weighted this year I was just trying to get help in the near term Dave can I. Just ask you one high level question. You. Obviously, you got on the board with some sports deals above the fever deal obviously.

David T. Lougee: Yeah, no, everyone's saying it's back halfway through this year. I was just trying to get help in the near term. Dave, can I just ask you one high-level question? You obviously got on the board with some sports deals. I love the Fever deal, obviously. I guess you guys have really done a great job on the cost side of the equation. Can we just talk about tactical investments even beyond Octillion to help reinvigorate the top line and how we should think about, you know, your guys' opportunity set to sort of re-accelerate growth and where we should be looking for that? Yeah, actually.

David T. Lougee: You guys have really done a great job on the cost side of the equation can we just talk about tactical investments even beyond auxilium to reinvigorate the top line and how we should think about.

David T. Lougee: And are your guys opportunity set.

David T. Lougee: Sort of Reaccelerate growth and where we should be looking for that yes.

David Karnovsky: Yeah, actually, I appreciate the question, Dan, because I recognize that we're not, we can't announce it until we have something to announce, right? And if we're in spaces that we're looking at, for obviously competitive reasons, we can't get ahead of ourselves. But just going back to what we said since the termination of the merger agreement last year, both in terms of, it's in our DNA, right, to, through bolt-on or organic investments, like we did with Premion, we know how to do that, right?

Dave: Yes actually I appreciate the question, Dan because I recognize I mean, we're not we can't announcing until we have something to announce right and if we are in spaces that we're looking at for obviously a competitive reasons, we can't get ahead of ourselves, but just going.

David Karnovsky: Going back to what we said since the termination of the merger agreement last year. Both in terms of its in our DNA right two through bolt on or organic investments like we did with premium on we know how to do that right and so and now as you look at it our balance sheet as we settle along with our capital returned to shareholders numbers the <unk>.

David Karnovsky: And so, and now, when you look at our balance sheet, as we said, along with our capital return to shareholders numbers, the other, the remainder remains available for investments for growth. So we are in the middle of a lot of conversations around that, on things that are both organic and inorganic from a bolt-on perspective. Some more to come, right? But I like the way we are positioned.

David Karnovsky: They're not the remainder remains available for investments for growth. So we are in the middle of a lot of conversations around that on things that we both organic and inorganic from a bolt on perspective, some more to come but I like the way we are positioned.

David T. Lougee: Okay, I appreciate the color. Thanks, guys.

Speaker Change: Okay I appreciate the color thanks, guys.

Operator: Please stand by for our next question. Our next question comes from the line of Steven Cahill with Wells Fargo. Your line is open.

Speaker Change: Thank you.

Speaker Change: Please standby for Omics question.

Steven Cahill: Our next question comes from the line of Steven Cahall with Wells Fargo. Your line is open.

Steven Cahill: Thank you. We'd love to just maybe ask a little bit more about retransmissions. So understand that it's down mid-single digit on an underlying basis. You didn't have a lot of renewals in Q1, and not many in Q2. Should we kind of think about down mid-single digit as a decent run rate since I think you typically have an annual retrans cadence that's pretty consistent? And then I know your reverse comp is more variable now, so maybe this still all pencils out to kind of a flattish net retrans?

Steven Cahill: Thank you, we'd love to just maybe ask a little bit more on retrans. So understand that it's down mid single digit on an underlying basis.

Steven Cahill: Have a lot of renewals in Q1 not much in Q2 should we kind of think about down mid single digits as a decent run rate. Since I think you typically have an annual retrans cadence that's pretty consistent and then I know your reverse comp is more variable now so maybe there's still all pencils out to kind of flattish net retrans is that a good way to think about it or is there anything.

Steven Cahill: Is that a good way to think about it, or is there something that I'm missing there? And then just one on the transformation and the cost savings. Are there costs associated with this? So as we think about the impact on free cash flow for 2024 and 2025, does it weigh on net free cash flow at all in 2024, and then it becomes a benefit in 2025, or any mix there? And then lastly, this may be for Dave or for Tom, after Octillion and your new go-to-market strategy, do you see any other opportunities for bolt-on M&A that could benefit Premium? Thank you.

Steven Cahill: Thing that I'm I'm missing there.

Steven Cahill: And then just one on the transformation and the cost savings.

Steven Cahill: Are there cost to achieve associated with this so as we think about the impact on free cash flow for 2024, and 2025 does it weigh on net free cash flow at all in 2024, and then it becomes a benefit in 2025 or any any mix there.

Steven Cahill: And then lastly, maybe.

Steven Cahill: Maybe for Dave or for Tom After Actelion in your new go to market strategy do you see any other opportunities for bolt on M&A that could benefit Permian. Thank you.

David T. Lougee: Okay, let's take those in order. So, you know, just a net retransmission, just take the bottom question. As we've said before, we look for it to be stable, Dan, going forward. So, I mean, you're not guiding to one direction or the other, but with a variable comp, it will be a significant stable number going forward. You had, let me just before I leave retransmit, you had a couple. Did you have a question on top of the net retransmission question?

Speaker Change: Okay, let's take those in order so yes.

David T. Lougee: I was just a net retrans or just take the bottom question as we've said before we look for it to be stable.

David T. Lougee: Dan going forward, so I mean, you're right.

Speaker Change: Not guiding to it one direction or the other but with the variable comp it will be a significant stable number going forward you had let me just before I leave Retrans you had a couple of did you have a question on top of the net Retrans question.

Steven Cahill: Yeah, just a mid-single digit, down mid-single digit for grocery trans. A good way to think about it, or, you know, are there things that could improve that revenue run rate a little bit?

Speaker Change: Yes, mid single digit down mid single digit for gross Retrans, a good way to think about it or are there things that could improve that revenue run rate a little bit.

Julie Heskett: Yeah, from a gross top line perspective, Steven, you're right. It's a function of the mix of revenues. So, right, traditional subscriber declines are accelerating at that higher gross rate offset by growth of virtual subscribers at that net rate. So it's a mix. But yes, that mid single-digit run rate, which now first and, you know, is consistent until we have deals up, we have an opportunity to reprice another 20% of our subs at the end of 2024.

Steven Cahill: From a gross top line perspective, Stephen you're right. It's a function of the mix of revenues. So right. The traditional subscriber declines accelerating at that higher growth rate offset by growth of <unk>.

Julie Heskett: And the virtual subscribers at that net right. So it's a mix, but yes that mid single digit run rate, which now firsthand.

Julie Heskett: Is a consistent until we have deals that we have an opportunity to reprice another 20% of our subs at the end of 2024.

Steven Cahill: And Steven, I'm sorry, is your expense question: do we have investments to hit that number? Was that your question?

Speaker Change: And Stephen I'm, sorry is your expense question do we have investments to hit that number or is that your question.

Julie Heskett: It's more that with the transformation in cost savings, is there like a cost to achieve? So cash you have to spend up front to realize the savings, and then you get the run rate savings afterwards. So tends to benefit you, but just trying to understand as we think about free cash flow, whether it's a bit lumpier and whether that's a benefit to 24 or not.

Steven Cahill: It's more of that with the.

Julie Heskett: Transformation and cost savings is there like a cost to achieve so cash you'll have to spend upfront to realize savings and then you get the run rate savings afterwards, so tends to benefit EBITDA, but just trying to understand as we think about free cash flow, whether it's a bit lumpier.

Julie Heskett: And whether that's a benefit to 'twenty four or not.

Julie Heskett: The answer is no to your question.

Julie Heskett: We do not the answer is no to your question, we do not anticipate significant upfront cost they will be savings realized and will be a part of the free cash flow benefits in our guidance.

Julie Heskett: We do not anticipate significant upfront costs. They will be savings realized and will be a part of the free cash flow benefits in our guide. And Steven, I'm happy to take the question.

Tom Cox: And Steven, I'm happy to take the question on Octillion and potential further M&A there. So, as a starting point, one of the key benefits of the marriage of Octillion and Primeon is their technology combined with our sales force.

Speaker Change: Stephen I'm happy to take that question on Australia.

Tom Cox: Potential further M&A there so as a starting 0.1 of the key benefits of.

Tom Cox: The marriage of Actelion and Permian as their technology with our sales force and we believe that there could be further opportunities around M&A in and around the streaming landscape that being said as Dave mentioned, we're looking at a variety of opportunities as we look to transform the company.

Tom Cox: And we believe that there could be further opportunities around M&A in and around the streaming landscape. That being said, as Dave mentioned, we're looking at a variety of opportunities as we look to transform the company into a more dynamic set of assets. And from that perspective, again, we feel very good about where we're positioned to compete and pursue those assets. Can't really take you into the lab on any of those things at this particular moment in time. But certainly, opportunities around streaming would be part and parcel of what we'd consider.

Tom Cox: And two a M.

Tom Cox: A more dynamic set of assets and from that perspective.

Tom Cox: Again, we feel very good about where we're positioned to compete and pursue those assets can't really take you into the lab on any of those things at this particular moment in time, but certainly opportunities around streaming would be part and parcel of what we would consider.

Speaker Change: Thank you.

Speaker Change: Thank you Steven.

Tom Cox: Please standby for Omics question.

Operator: Please stand by for our next question. Our next question comes from the line of Craig Huber with Huber Research Partners. Your line is open.

Tom Cox: Our next question comes from the line of Craig Huber with Huber Research Partners. Your line is open.

Craig Anthony Huber: Thank you. Maybe just a little bit further.

Craig Anthony Huber: Thank you maybe just a little bit further can you just give us a little more detail if you would.

Tom Cox: Can you just give us a little more detail, if you would, on the octillion acquisition, what the benefit is specifically on the technology side, etc. that's making you so optimistic about the fit here? That's my first question.

Tom Cox: Julien.

Tom Cox: Position, what the benefit is specifically on the technology side et cetera, Thats, making you so optimistic about the fit here Thats My first question.

Tom Cox: Sure. So I think the Artillion acquisition is both offensive and defensive. It's offensive in the sense that it allows us to bring to market more cutting-edge software products and capabilities that we can use to maximize our local advertising relationships that we already have from our legacy business. It's defensive in that it allows us to access inventory through yet another pathway that we have greater control and flexibility around. And so from that vantage point, we believe that Artillion, as Julie mentioned earlier, will allow us to accelerate the growth of Premion and, over time, improve the overall margin of the business.

Craig Anthony Huber: Sure. So I think Pierre Chilean acquisition as both offensive and defensive offensive in the sense that it allows us to bring to market more cutting edge software products and capabilities that we can use to maximize our local advertising relationships that we already have from our legacy business.

Tom Cox: It's defensive in that it allows us to access inventory through yet another pathway that we have greater control and flexibility around and so from that vantage point, we believe that octillion as Julie mentioned earlier will allow us to accelerate the growth of premium and over time improve.

Tom Cox: The overall margin of the business.

Craig Anthony Huber: Okay, thank you for that. And my second question, on the year.

Speaker Change: Okay. Thank you for that and then my second question.

David T. Lougee: NetRetrans, you touched on that, but I'm curious about the contracts for your affiliated companies, saying you think the next say two to three years you think those dollars, I think we only have one affiliate agreement up between now and the end of 2026, and it's our smallest one, Craig. So we have the reverse cop side of the equation is very set for some period of time. That's what I'm asking. Are you quite comfortable, Dave, that that number in total, that dollar, reverse re-trans causally relatively stable here the next two to

Craig Anthony Huber: On the yen.

Craig Anthony Huber: Net retrans you touched on that but I'm curious the contracts. We have affiliated agreements are you, saying you think the next say two to three years do you think those dollars you'll be paying will be roughly flattish.

David T. Lougee: As opposed to I think.

David T. Lougee: Only have one affiliate agreement up between now now and.

David T. Lougee: And.

David T. Lougee: In the end of 2026, and it's our smallest one Craig.

David T. Lougee: So we have.

David T. Lougee: The reverse comp side of the equation is very set for some period of time.

David T. Lougee: That's what I'm asking are you quite comfortable David that number in total dollars.

David T. Lougee: Reverse retrans costly relatively stable here the next two to three years.

David T. Lougee: The cost, as we said in the last earnings call, and I think Julie mentioned in her script, is that we said last time that any growth would be negligible, and I added in the last earnings call, negligible at best. Right, so, speak clear, are you saying that beyond this year, Dave, not just this year? That's right. That's right. Yes.

David T. Lougee: And of course, as we've said in the last earnings call I think Julian mentioned in his script is that we said last time that any growth would be negligible and I added in the last earnings call negligible at best.

David T. Lougee: So.

David T. Lougee: Yes.

Speaker Change: Are you just saying that beyond this year to date not just this year right.

David T. Lougee: Right that's right yes.

Craig Anthony Huber: And my last question, guys, on the cost side, Julie, just give us a little bit more, just so I understand better. What do you say about the cost for the remaining part of the year? Are you saying the year-over-year percent change will keep improving sequentially, so we'll get a better trend going for the rest of the year, or are you talking about the absolute dollar amount spent each quarter will be better relative to the quarter three months before?

Speaker Change: And my last question guys on the cost side, Julie just give us a little bit more just to understand better what do you say about cost for the remaining remaining part of the year, you're saying the year over year percent change will keep improving sequentially. So we'll get a better trend going for the rest of the year, you're talking about the absolute dollar amount spent each quarter will be better relative to the quarter three months before.

Julie Heskett: The former, Craig, it's about that percentage growth year over year; each quarter will improve, not absolute dollars.

Julie Heskett: The former Craig it's about that percentage growth on year over year, each quarter will improve not absolute dollars.

Craig Anthony Huber: Okay, great. Thank you. You're welcome.

Speaker Change: Great. Thank you.

Speaker Change: Youre welcome.

Operator: Please stand by for our next question. Our next question comes from the line of Jim Goss with Barrington Research. Your line is open.

Speaker Change: Thank you.

Speaker Change: Please standby for our next question.

Operator: Okay.

Operator: Our next question comes from the line of Jim Goss with Barrington Research. Your line is open.

James Charles Goss: Okay. Thank you.

James Charles Goss: Okay, thank you. A couple of things. First, you alluded to the notion that premium and actilion might provide some opportunity for political ad sales. I was just wondering if you'd give us any. Transcribed by https://otter.ai

James Charles Goss: Couple of things first.

James Charles Goss: You alluded to the notion that premium.

James Charles Goss: On Actelion may provide some opportunity for political AD sales I was just wondering if you could give us any scale of how important that could be and whether you think you would borrow premier broadcast side.

Tom Cox: Sure, great question. So one of the key advantages of Premion is that it's not confined to our station footprint the way our core business is. So it allows us to participate in political races outside of our footprint. And we've already seen dollars come in from markets outside of the Tegna footprint. Ultimately, as the political races get tighter, and the availability of linear inventory gets tighter, we anticipate that those dollars will cascade over to the streaming ecosystem, and there we're well positioned to pick up those dollars.

James Charles Goss: Sure Great question. So one of the key advantages around Permian is it it's not confined to our station footprint the way our core businesses. So it allows us to participate in political races outside of our footprint. So we've already seen dollars come in from markets outside of.

Tom Cox: The tigner footprint.

Tom Cox: Ultimately as the political races get tighter and the availability of linear inventory gets tighter we anticipate that those dollars will cascade over to the streaming ecosystem and there we're well positioned to pick up those dollars as you probably saw we've also.

Tom Cox: As you probably saw, we've also expanded our programmatic capabilities leading into this next political cycle, and we believe that that will be another tool in our arsenal to compete for those political dollars. Ultimately, I would say they are additive and not cannibalistic to the linear opportunity that Tegna already has.

Tom Cox: Expanded our programmatic capabilities, leading into this next political cycle and we believe that that will be another tool in our arsenal to compete for those political dollars. Ultimately I would say they are additive and not cannibalistic to the linear opportunity that taken out already has.

James Charles Goss: Okay, thank you. Another thing is that a number of the sports programming opportunities you alluded to involve women's sports, and I was wondering if you could, I talked about the dynamics there in terms of perhaps getting increasingly good viewing levels with less expensive rate fees. Is there an opportunity to arbitrage that a little bit?

Speaker Change: Okay. Thank you.

James Charles Goss: Another thing is.

James Charles Goss: A number of the sports programming opportunities you alluded to.

James Charles Goss: The women's sports and I was wondering if you could.

James Charles Goss: And I'll talk about the dynamics there in terms of perhaps getting increasingly good viewing levels with less expensive rate fees is there an opportunity to arbitrage that a little bit.

David T. Lougee: Yeah, that's a little bit what the thinking is, Jim, right? So obviously, you know, the, you know, the audiences that Caitlin Clark will bring were, you know, to your point, and index well over what the value of the assets is in the current marketplace from a cost standpoint, right? So, that's kind of the exception. I mean, frankly, like we're very pleased to be the partner of the Seattle Reign, but women's sports obviously just don't have the marketplace acceptance yet from advertisers and others, but we think that's gonna change with your question.

Speaker Change: Yes, that's a little bit what the thinking is Jim right. So obviously.

David T. Lougee: <unk> for instance, with the fever the.

David T. Lougee: The audiences that Caitlin Clarke will bring.

David T. Lougee: Sure.

David T. Lougee: <unk>.

David T. Lougee: To your point.

David T. Lougee: Index well over what the value of the assets are in the current marketplace from a cost standpoint right. So.

David T. Lougee: And that's kind of the exception I mean, frankly, we're very pleased to be the partner of the Seattle rain, but women's sports obviously, just don't have the marketplace.

David T. Lougee: Acceptance, yet from advertisers and others, but we think thats going to change to your question.

James Charles Goss: Okay, and maybe one other thing, this is maybe getting a little ahead of things, but do you think there's any potential for regulatory changes such as dual station ownership in top markets should there be a change in administration?

Speaker Change: Okay, and maybe one other thing this is maybe getting a little ahead of things but.

James Charles Goss: Do you think there is any potential for regulatory changes.

James Charles Goss: His dual station ownership and top markets should there be a change in administration.

David T. Lougee: Yeah, I think that last comment is the answer. It's like, it depends on what administration is in charge. So I think we're going to have to kind of punt on what that question looks like until there's a change in administration. And if there's not a change in administration, there might be, you know, will there be a change in leadership at the FCC too? So there are a couple of variables there, but until we know the answers to those, we don't have a lot of insight.

Speaker Change: Yes, I think thats it.

David T. Lougee: The last comment is that is the answer is it depends on what administration is in charge. So I think we're going to have to kind of punt on what that question looks like.

David T. Lougee: Until there's a change in administration and if there's not a change in administration there might be but it will there be a change in leadership at the FCC to so a couple of variables there, but until we know the answers to that we don't have a lot of insight.

James Charles Goss: Even in the past, when there has been a Republican administration, it doesn't seem like you've made much headway in that particular area, and that seems to be the one potential change that would really be meaningful in terms of maybe rationalizing costs and getting a bigger advantage in big markets.

David T. Lougee: But even in the past when there has been a Republican administration. It doesn't seem like you've made much headway in that particular area and that seems to be.

James Charles Goss: One the one potential change that would really be meaningful in terms of.

James Charles Goss: Maybe rationalizing costs and getting a bigger advantage in big markets.

David T. Lougee: Well, I will say my memory or my all my time and years of working with the internet with the, in some cases running the National Association of Broadcasters from a board perspective, they, the Republican administrations were generally friendlier, right? And in fact, there was an opening to, frankly, potentially raise the ownership cap in the last Republican administration that, you know, in some ways, the industry didn't choose to go through for a variety of reasons.

Speaker Change: Well I will say I have to thank my memory here My all my time in years from working with it.

David T. Lougee: In some cases running the National Association of broadcasters from a board perspective.

David T. Lougee: Robert administrations were generally friendlier right and in fact, there was an opening to frankly potentially raise the ownership cap and the last Republican administration that.

David T. Lougee: In some ways the industry didn't choose to go through for a variety of reasons.

David T. Lougee: But, but, but that said, even without a change in administration, what I would call the marketplace irrationality of the rules becomes more and more obvious as time goes by. So I would say, regardless of administration, am I optimistic about the change in regulation, change in regulations on the going forward? Yes. It's the timing that matters, right? It, you know, the FCC was way too late on changes in the newspaper industry, like media cross ownership, which was approved, you know, 10 years after it should have been.

David T. Lougee: But with that said, even without a change in administration, what I would call the marketplace. The irrationality of the rules becomes more and more obvious as time goes by.

David T. Lougee: So I would say.

David T. Lougee: Regardless of administration am I optimistic about the change in regulation.

David T. Lougee: Change in regulations on a going forward I am is the timing that matters right.

David T. Lougee: The FCC was way too late on changes the newspaper industry like media Cross ownership.

David T. Lougee: It was approved.

David T. Lougee: So I will say, though, I feel like the industry is far more organized; we actually have one of the greatest lobbying organizations when you think about television station, journal managers, and companies across the country. And we, you know, we have that value that I referenced that we bring to the local marketplace, which appropriately brings with it great lobbying power given the service we provide. So I do have some optimism. But, you know, on a two-year horizon, it's very difficult to say.

David T. Lougee: 10 years after it should've been so I will say, though I feel like the industry is far more organized we have actually one of the greatest lobbying organizations. When you think about television station general managers and companies across the country and we have that value that I referenced that we bring to the local marketplace appropriately.

David T. Lougee: Appropriately brings with it great lobbying power given the service we provide so I do have some optimism, but on a two year horizon very difficult to say.

James Charles Goss: All right, thank you very much.

David T. Lougee: Alright.

James Charles Goss: You very much.

Operator: Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question. Please stand by for our next question. Our next question comes from the line of David Karnovsky with J.P. Morgan. Your line is open. Yes, hi, this is that.

Speaker Change: Thank you.

David Karnovsky: As a reminder, ladies and gentlemen that star one to ask the question.

David Karnovsky: Please standby for our next question.

David Karnovsky: Our next question comes from the line of David <unk> with Jpmorgan. Your line is open.

Operator: Hi, this is Ted speaking on behalf of David. I had two questions. The first is your latest thoughts on the NBA rights and the potential impact on broadcast if NBC replaces Warner. And my second question is about how you're thinking about national and local advertising. Transcripts provided by Transcription Outsourcing, LLC.

Operator: Yes, Hi, this is Ted on for David I had two questions. The first.

Operator: As on your latest thoughts on the NBA rights and the potential impact broadcaster NBC replaces Warner.

Operator: And my second question.

Operator: Is on how youre thinking about national and local advertising.

Operator: Trends moving through the.

Operator: For the year, particularly in.

Operator: The back half.

Speaker Change: Thank you.

David T. Lougee: Well, thank you, Dave, for the question. I'll take the NBA comment on advertising and turn that part over to Julie. But yeah, so we're very positive about the NBA going to NBC. And obviously, as a reference to my Olympic comments, we have by far, the largest number of NBC homes than any other, you know, affiliate broadcast group, and our NBC stations are very, very strong.

Operator: Alright.

David T. Lougee: Dave for the question I'll take the NBA and the comment on advertising and in turn that part of the jewelry, but yes. So we're very positive about the NBA go into NBC that obviously as I referenced semi Olympic comments, we have by far the largest we reached the by far the largest number of NBC homes than any other.

David T. Lougee: So getting that content on our stations overall, you know, if they do give me the deal, we've got some things to work out on placement of games and time zones and stuff like that. But that said, we're very optimistic. I think Turner is losing it, I think the questions that it raises for us are, you know, we think there was probably way too much concern for broadcasters raised when the sports service, now affectionately known as Spooloo, was announced a few months ago.

David T. Lougee: Affiliate broadcast group and our NBC stations are very very strong so getting that content on our stations overall, we've got if they assuming they get the deal. We've got some things to work out on placement of games and time zones and stuff like that but that said, we're very optimistic I asked I think Turner, losing it I think.

David T. Lougee: The questions that it raises for US is we think there was probably way too much concern for broadcasters raised when the sports service now affectionately known as Blue was announced a few months ago. I think this really calls into question, what's buelow will be.

David T. Lougee: I think this really calls into question what Spooloo will be, and we have a hard time imagining how they're negotiating rights deals, first of all, right now, with each of these being the players in the NBA.

David T. Lougee: We should have I have a hard time imagining how they're negotiated rights deals first of all right now in the middle of with each of these being of players in the NBA. So bottom line is.

David T. Lougee: So the bottom line is that, for us, the games moving from Turner to NBC are seen as very much a net positive. As it relates to national and local throughout the year, in terms of trends, I think we'll continue to see local be very strong, and national is hard to tell, right? Some of the national is unclear what the causes are, but remember, we have very large stations. We have big stations in the top 10 markets, which from a quantity standpoint, are far more than any of our peer groups, publicly reported peer groups.

David T. Lougee: For us the games moving from Turner to NBC, we see as a very much a net positive.

David T. Lougee: As it relates to national local throughout the year in terms of trends I think we'll I think we'll continue to see local would be very strong and national is hard to tell right. Some of the national is.

David T. Lougee: It's unclear what the causes are but remember we have very large stations, we have we have.

David T. Lougee: We have big stations in the top 10 markets, which from a quantity standpoint far more than any of our peer group peer groups publicly reported peer groups and Thats, where you see things like auto while auto is a good tier one is not great and that probably is tier one comment and that affects us a little more and there is also some secular thing economically.

David T. Lougee: And that's where you see things like auto, well, auto is a good tier one, not great, and that probably is tier one coming, and that affects us a little more. And there's also some secular things, I mean, some economic things clearly taking place that, like, as home sales slow down, that affects some services categories, but there's other puts and takes. So I think local will continue to be very good, and for us, we've got some additional drivers with Octillion and Premion. National is a question.

David T. Lougee: Make things clearly taking place that like.

David T. Lougee: As home sales slowdown that affects some services category, but there's other puts and takes so I think we think I think local will continue to be very good and for US. We've got some additional drivers is without with actelion in premium on National's a question Mark.

David T. Lougee: Okay.

Operator: Please stand by for our next question. Our next question comes from Alana John Cornridge with JK Media. Your line is open.

Speaker Change: Thank you.

Speaker Change: Please standby for our next question.

Speaker Change: Our next question comes from the line of John Kornreich with J with JK Media. Your line is open hi, three pretty quick questions. One on the fever in the crack and I assume they are one year deals, which is probably good because you can renew for more games next time around that's one question.

Alana John Cornridge: Hi, three pretty quick questions. One on the Fever and the Kraken. I assume they're one-year deals, which is probably good because you can renew for more games next time around.

Alana John Cornridge: That's one question. Secondly, what goes into the low end of your free cash flow two-year forecast versus the high end? And finally, Julie.

Speaker Change: Secondly, what what goes into the low end.

Alana John Cornridge: Of your free cash flow two year forecast versus the high end.

Alana John Cornridge: And finally Julie.

Alana John Cornridge: If you assume no more acquisitions this year and you do return $350 million to shareholders, your leverage will be down around 2.5x at the end of this year. Is there any purpose to going lower than that? Going into the future. That's it. Thanks.

Alana John Cornridge: If you assume no more acquisitions this year and you do returned $350 million to shareholders, you will leverage will be down around two five X.

Alana John Cornridge: At the end of this year is there any purpose to going lower than that.

Alana John Cornridge: Going into the future.

David T. Lougee: Hey John, good to talk to you. I'll take the fever cracking comment very quickly and then I'll let Julie answer the low-end free cash flow and the leverage questions. So simply put, not going to answer the deals are confidential, we're not talking about the length of those deals, but no, I would not assume that all deals are one-year deals. Yes, as far as

Alana John Cornridge: Thanks.

Speaker Change: Hey, John Good to talk to you I will take the fever cracking comment very quickly and I'll, let Julie to answer the low end free cash flow and the leverage questions.

David T. Lougee: So simply put not going to answer the deals are confidential, we're not talking about the length of those deals, but no I would not assume that all deals are one year deals.

Julie Heskett: As far as the sensitivity on the free cash flow guide, I would bucket those into a couple of different things. First, it's a presidential year, and we have seen competitive races that are extremely hot go flat, and vice versa. Those that are flat become hot.

Speaker Change: Thank you.

Julie Heskett: Yes, as far as the sensitivity on the free cash flow guide I would bucket those into a couple of different things first it's a presidential year and we have seen competitive races that are extremely hot go flat and vice versa. Those that are flat become hot we've had.

Julie Heskett: We've had runoff seats, and then we've not had runoff seats. So politics is definitely one of those factors. It could be better. It could be worse.

Julie Heskett: Runoff seats, and then we've not had run off seats. So.

Julie Heskett: Political is definitely one of those factors that could be better it could be worse.

Julie Heskett: Second, is the cost takeout transformation that you heard us talk about from a timing perspective. Just making sure that we execute that appropriately on time would be a second bucket. And thirdly, I would say is the forecasting of subscriber trends and what we believe that to be. Obviously, we've included those subscriber trends in this forward-looking guide, but again, that could be better or worse, and therefore the sensitivity for that range is appropriate. All right. And the leverage question, you know, we're obviously very comfortable, and in this cautious environment, we have an industry-leading balance sheet, so remaining under three times feels appropriate in this environment.

Julie Heskett: Second is the cost takeout transformation that you've heard us talk about from a timing perspective, just making sure that we execute that appropriately on time would be a second bucket and third I would say is the forecasting of subscriber trends and what we believe that to be obviously we've included those.

Julie Heskett: <unk> trends in this forward looking guide, but again that could be.

Julie Heskett: Better or worse, and therefore, the sensitivity for that range is appropriate.

Julie Heskett: And the leverage alright.

Julie Heskett: Leverage and the leverage question.

Julie Heskett: We're obviously very comfortable and in this cautious environment, we have an industry leading balance sheet.

Julie Heskett: So remaining under three times feels appropriate in this environment.

Alana John Cornridge: What about going under two times? Is there any point to all of that?

Julie Heskett: What about going under two times.

Alana John Cornridge: Is there any any pointed all of that.

Alana John Cornridge: No.

Alana John Cornridge: Okay.

Speaker Change: Thank you.

Operator: At this time, I would like to turn the call back over to Dave for his closing remarks.

Alana John Cornridge: At this time I would like to turn the call back over to Dave for his closing remarks.

David T. Lougee: Thank you, operator. As you can tell, we feel very good about our positioning, as we talked about here in the Q&A, relative to how we're poised going forward given our balance sheet, the excellence of our management team, and leveraging again, once again, that operational excellence that's always been a hallmark of this company to restructure our core operating model and create a new cost structure for our business going forward. We look forward to updating you on all things next quarter. And so, thanks for everyone taking the time to join us today. And if you have additional questions, please reach out to Julie at 703-873-6747. Thanks, and good day.

Dave: Thank you operator as you can tell we feel very good about our positioning as we as we talked about here in the Q&A relative to how we're poised going forward given our balance sheet.

David T. Lougee: And the excellence of our management team and leveraging again and once again that operational excellence, it's always been a hallmark of this company to restructure our core operating model and create a new cost structure for our business going forward. We look forward to updating on all things next quarter and so thanks for everyone and taking the time to join US today and if you have additional questions.

David T. Lougee: Please reach out to Julie at 703, 870, 367, 47, thanks and good day.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: Okay.

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