Q2 2024 TEGNA Inc Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the Q2 2024 Tegna Inc. Earnings Conference Call.
Operator: Erning's Conference Call. At this time, all participants are in a listen-only mode.
Operator: After the speaker's presentation, who will be a question-and-answer session? To ask a question during the session, you will need to press star-1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-1-1 again.
Speaker Change: 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 the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.
Operator: Please be advised that today's conference is being recorded.
Speaker Change: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kirk von Seelen. Please go ahead.
Operator: Oh, now I'd like to hand the conference over to your first speaker today, Kirk von Seelen. Please go ahead. Thank you.
Operator: To withdraw your question, please press star 11 again. I would now like to hand the conference over to your first speaker today, Kirk von Seelen. Please go ahead.
Kirk Von Seelen: Good morning and welcome to our second 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 second quarter performance and results and provide Tegna's full-year and third quarter 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've not yet seen a copy of the release, it's available at Tegna.com.
Speaker Change: Thank you. Good morning and welcome to our second quarter 2024 conference call and webcast. My name is Kirk von Seelen and I am Tegna's Treasurer.
Speaker Change: Today, our President and CEO , David Lougee, and our CFO , Julie Heskett, will review Tegna's second quarter performance and results and provide Tegna's full year and third quarter outlook. After that, we'll open the call for questions.
Speaker Change: Hopefully you've had the opportunity to review this morning's press release. If you've not yet seen a copy of the release, it's available at Tegna.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. Actors that may cause them to differ are outlined in our SEC filings. This presentation also includes certain non-GAAP financial measures. We have provided reconciliations of those measures to the most directly comparable gap measures in the press release.
Speaker Change: 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.
Unknown Executive: This presentation also includes certain non-GAAP financial measures. With that, I will turn the call over to Dave.
Speaker Change: 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.
Dave Lougee: With that, let me turn the call over to Dave. Thank you, Kirk. And good morning, everyone.
Dave: Thank you, Kirk, and good morning everyone. First, let me begin by saying what a privilege it has been leading this great company for the past seven years. We've gone through a lot together, and I'm proud to have worked closely with you, the investment community, as well as my colleagues across Tegna.
Dave Lougee: First, let me begin by saying what a privilege it's been leading this great company for the past seven years. We've gone through a lot together, and I'm proud to have worked closely with you, the investment community, as well as my colleagues across Tegna.
Dave: Thank you Kirk and good morning everyone. First let me begin by saying what a privilege it's been leading this great company for the past seven years. We've gone through a lot together and I'm proud to have worked closely with you the investment community as well as my colleagues across Tegna.
Dave: My successor, Mike Steib, will say a few brief words before opening up for Q&A. I'm set to advise Mike and the team during this transition, and I look forward to watching him take the company forward to new heights. Mike's very eager to get started, but his first official day is not until next week, so I'll kindly ask that you hold off another quarter before asking questions.
Dave Lougee: My successor, Mike Stein, will say a few brief words before opening up for Q&A. I'm set to advise Mike and the team during this transition, and I look forward to watching him take the company forward to new heights. Mike's very eager to get started, but his first official day is not until next week.
Dave: My successor, Mike Stibe, will say a few brief words before opening up for Q&A. I'm set to advise Mike and the team during this transition, and I look forward to watching him take the company forward to new heights.
Speaker Change: Mike's very eager to get started but his first official day is not until next week so I'll kindly ask that you hold off another quarter before peppering with questions.
Dave Lougee: So I'll kindly ask that you hold off another quarter before prepping with questions.
Dave Lougee: I'll begin this morning by discussing our second quarter results and providing an update on recent wins. I'll then pass at the Julie, the highlighter financial performance and capital deployment strategy and more detail. We achieved our key guidance metrics in the second quarter, finishing at the midpoint of our guidance range for revenue and in line with expense range. Second quarter, total company revenue fell year over year as subscriber and national advertising declines continue to accelerate, partially offset by political advertising. The economy continues to proceed with a sluggish and uncertain pace, and that's been echoed in national ad spend, which is lower than we anticipated going into the year.
Speaker Change: I'll begin this morning by discussing our second quarter results and providing an update on recent wins. I'll then pass it to Julie to highlight our financial performance and capital deployment strategy in more detail.
Julie: We achieved our key guidance metrics in the second quarter, finishing at the midpoint of our guidance range for revenue and in line with expense range.
Dave: Second quarter, total company revenue fell year over year as subscriber and national advertising declines continue to accelerate, partially offset by political advertising. We're especially seeing that at Premium, our industry-leading CTV sales platform that serves the local marketplace. Our hypothesis continues to hold true that the local market will continue to adopt CTV advertising, and Premium is well-positioned to capitalize on this opportunity. But, as the saying goes, the more things change, the more they stay the same, and we cover all but one.
Speaker Change: Second quarter total company revenue fell year-over-year as subscriber and national advertising declines continue to accelerate, partially offset by political advertising.
Speaker Change: The economy continues to proceed at a sluggish and uncertain pace, and that's been echoed in national ad spend, which is lower than we anticipated going into the year. That said, local advertising is faring well considering the headwinds facing national, as small and medium local businesses show a more willingness to spend.
Dave Lougee: That said, local advertising is faring well considering the headwinds facing national. A small and medium local businesses show a more willingness to spend. We're especially seeing that at Premium, our industry leading CTV sales platform that serves the local marketplace. Our hypothesis continues to hold true that the local market will continue to adopt CTV advertising in premiums well positioned to capitalize on this opportunity. Our premium sales footprint reaches almost 80% of U.S. households and is considerable upside across selling to our existing linear customers as they increasingly adopt CTV. We're confident our recent acquisition of Artillion, which Mary's cutting-edge technology with premium sales acumen, will further accelerate the combined businesses.
Speaker Change: We're especially seeing that at Premion, our industry-leading CTV sales platform that serves the local marketplace. Our hypothesis continues to hold true that the local market will continue to adopt CTV advertising and Premion's well-positioned to capitalize on this opportunity.
Speaker Change: Our premium sales footprint reaches almost 80% of U.S. households, and there's considerable upside in cross-selling to our existing linear customers as they increasingly adopt CTV.
Speaker Change: We're confident our recent acquisition of Octillion, which marries cutting-edge technology with premium sales acumen, will further accelerate the combined businesses.
Dave Lougee: Again, while national advertising has been sluggish, we expect an uptick in ad spend during the third quarter due to the current Paris Olympics coverage on our NBC stations. We've continued to add dollars throughout the summer games, which are producing tremendous ratings as broadcast numbers for the Parrots Olympics are way up from Tokyo. Our NBC stations are some of the strongest in the country, outperforming the national average of ratings across all day parts, and we have seven of the top 13 rated stations in the top 30 markets.
Speaker Change: Our NBC stations are some of the strongest in the country, outperforming the national average of ratings across all day parts, and we have 7 of the top 13 rated stations in the top 30 markets.
Dave Lougee: Now, let's turn to the coming election in November. As you all know, the events of the last month are unprecedented. The change at the top of the Democratic ticket has clearly unleashed pent-up enthusiasm on that side of the aisle, and that's translated into more than 300 million in donations for the Harris campaign in just less than two weeks. In every way, including advertising, this is now a very different race. But as the same goes, the more things change, the more they stay the same. Specifically, once again, it looks like a seven-state electoral college race, the same seven states, and that's good news for Tegna.
Speaker Change: Now, let's turn to the coming election in November . As you all know, the events of the last month are unprecedented.
Speaker Change: The change at the top of the Democratic ticket has clearly unleashed pent-up enthusiasm on that side of the aisle. And that's translated into more than $300 million in donations for the Harris campaign in just less than two weeks.
Speaker Change: In every way, including advertising, this is now a very different race.
Speaker Change: But as the saying goes, the more things change, the more they stay the same. Specifically, once again, it looks like a seven-state electoral college race. The same seven states. And that's good news for Tegna.
Dave Lougee: It's once again coming down to Pennsylvania, Michigan, Wisconsin, Georgia, Arizona, North Carolina, and Nevada. And we cover all but one. And whatever the presidential spending was going to be in those states before, it's new math today. We expect record presidential spending from now through Election Day.
Speaker Change: It's once again coming down to Pennsylvania, Michigan, Wisconsin, Georgia, Arizona, North Carolina, and Nevada.
Speaker Change: And we cover all but one.
Speaker Change: And whatever the presidential spending was going to be in those states before, it's new math today. We expect record presidential spending from now through Election Day. And Julie and I look forward to taking your questions on the topic during the Q&A.
Dave Lougee: And Julie and I look forward to taking your questions on the topic during the Q&A. In the Senate, while there are fewer races than in recent cycles, as we've said several times before, the races that are competitive will likely break all spending records for those seats, as parties and donors have come to recognize more than ever what's at stake with control of the Senate. While there are fewer competitive seats overall, we have stations covering five of the seven hottest races: Ohio, Pennsylvania, Arizona, Michigan, and Wisconsin. There's not as many governors' races in presidential years than during the mid-term, so once again, a great footprint for us on the races that there are.
Speaker Change: In the Senate, while there are fewer races than in recent cycles, as we've said several times before, the races that are competitive will likely break all spending records for those seats, as parties and donors have come to recognize more than ever what's at stake with control of the Senate.
Dave: While there are fewer competitive seats overall, we have stations covering five of the seven hottest races, Ohio, Pennsylvania, Arizona, Michigan, and Wisconsin. There aren't as many governor's races in presidential years than during the midterm, so once again, a great footprint for us on the races that there are. We cover all three of the most competitive races, North Carolina, New Hampshire, and Washington State.
Speaker Change: And while there are fewer competitive seats overall, we have stations covering five of the seven hottest races, Ohio, Pennsylvania, Arizona, Michigan, and Wisconsin.
Dave Lougee: We cover all three of the most competitive races: North Carolina, New Hampshire, and Washington State.
Dave Lougee: Bottom line, we are extremely well positioned to capture our share of linear and OTT political add-dollars during what's going to be a red hot and 90 days of spending from now to Election Day.
Dave: Bottom line, we are extremely well positioned to capture our share of linear and OTT political ad dollars during what's going to be a red-hot 90 days of spending from now to election day. The recently announced NBA Network deal is a notable milestone that I don't think has been adequately reported on. Specifically, the deal with NBC signifies a huge shift away from pay cable to broadcast for the league. With a continually declining reach of pay cable, leagues and teams need and want the extraordinary distribution and marketing power of strong broadcast networks made strong in great part by their strong local affiliates like ours.
Dave Lougee: Before I wrap it up, I'd like to say a few words about the current state of sports on local broadcasting and what it implies about the ecosystem. The recently announced NBA network deals is a notable milestone that I don't think has been adequately reported on. Specifically, the deal with NBC signifies a huge shift away from pay cable to broadcast for the league. As we've talked about before, that's no accident. An NBA Commissioner Adam Silver came out and said it last week; it's all about reach with the continually declining reach of pay cable. Heeks and teams need and want the extraordinary distribution and marketing power of strong broadcast networks. Make strong and great part by their strong local affiliates like ours.
Speaker Change: with a continually declining reach of pay cable.
Dave: And in the case of NBC, no affiliate group is as important to NBC as Tegna. But at its core, the implications of this trend are important. A great deal of the most passionate and consumed local sports content is returning to local broadcasters.
Dave Lougee: And in the case of NBC, no affiliate group is as important to NBC as tech. Our portfolio of highly regarded large market stations in pro-team home markets is well positioned to capitalize on the shift. Last quarter we announced deals with the NHL's Seattle Kraken, the Seattle Rain of the Women's Soccer League, and an exclusive broadcast distribution deal with the WNBA's Indiana Fever. We took Katelyn Clark and the Fever to 12 other broadcast markets, including her home market of Iowa. The performance today has been exceptional for us and for them. Our deal with the Kraken to distribute all our games across the Northwest was expanded this quarter with distribution in Alaska by partnering with Gray Media.
Speaker Change: Our portfolio of highly regarded large market stations and pro-team home markets is well positioned to capitalize on this shift. Last quarter we announced deals with the NHL's Seattle Kraken, the Seattle Reign of the Women's Soccer League, and an exclusive broadcast distribution deal with the WNBA's Indiana Fever.
Dave Lougee: This adds to our outer market distribution in Seattle, Spokane, and Portland, creating an unprecedented footprint to airgames for free over the year of beginning in October. We're in multiple discussions with teams in several markets, and as we've said before, we'll do deals where they make strategic and financial sense.
Dave Lougee: But at its core, the implications of this trend are important. A great deal of the most passionate and consumed local sports content is returning to local broadcasting.
Dave Lougee: Finally, I want to use this opportunity to extend my deepest gratitude to our station colleagues for their tireless dedication to serving viewers across this country, especially in these challenging times for local journalists and journalists everywhere. Every day, our colleagues across Tegna are doing remarkable work, changing lives and changing laws, part of Tegna's stated purpose of serving the greater good of the communities we serve. It's because of them, this position has been such an honor and privilege to hold.
Dave Lougee: And to all our stakeholders, I want you to know how confident the board and I are that Mike's side is the right next leader for Tegna.
Mike Steib: With that, let me turn the microphone over to Mike to say a few words. Good morning, everyone. I'm here to briefly introduce myself, and then I'll turn it back to the team to take you through the numbers and answer your questions. But first, I want to thank Dave. Tegna is in a strong position it is today thanks to his leadership, and the entire industry has benefited from his decades of service. Dave's legacy is a real inspiration to me, and his ongoing council is going to be invaluable. I've joined the Tegna team because people served with quality local journalism are better informed, more engaged in our democracy, and more active in their communities.
Speaker Change: Good morning everyone. I'm here to briefly introduce myself and then I'll turn it back to the team to take you through the numbers and answer your questions.
Speaker Change: I want to thank Dave.
Speaker Change: Dave's legacy is a real inspiration to me and his ongoing counsel is going to be invaluable.
Speaker Change: I've joined the Tegna team because people served with quality local journalism are better informed, more engaged in our democracy, and more active in their communities.
Mike Steib: In an increasingly polarized and distrusted news environment, people genuinely value local news and hold their local broadcast news teams in the highest regard. In my experience, trusted brands and indispensable content are a powerful foundation for success. It was a lesson I learned as a leader at NBC Universal and again as an executive at Google, and one that I have employed repeatedly as CEO. Over my last two roles as CEO of Exo Group and then as CEO of Artsy, we combined great content, the loving brands and exceptional digital experiences to delight our users, lead our industries, drive substantial profit growth and unlock significant shareholder value.
Speaker Change: In an increasingly polarized and distrusted news environment, people genuinely value local news and hold their local broadcast news teams in the highest regard.
Speaker Change: In my experience, trusted brands and indispensable content are a powerful foundation for success.
Speaker Change: It was a lesson I learned as a leader at NBCUniversal, and again as an executive at Google, and one that I have employed repeatedly as CEO .
Speaker Change: Over my last two roles as CEO of ExoGroup and then as CEO of Artsy, we combined great content, beloved brands, and exceptional digital experiences to delight our users.
Speaker Change: drive substantial profit growth and unlock significant shareholder value.
Mike Steib: The potential to do the same at Tegna is enormous, and I'm really excited to get to work.
Mike Steib: I'll formally join the company next week. and I look forward to speaking with you all more falsely after Q3.
Mike Steib: I want to thank you all very much, and with that, back to you, Dave.
Julie Heskett: Thanks, Mike, and with that, I'll turn it over to Julie. Thanks, Dave, and Mike. Good morning, everyone, and thank you for joining us. To start this morning, I will cover Tegna's capital allocation execution, then provide an update on our business transformation initiatives before closing with a review of our financial results and guidance. My comments today are primarily focused on Tegna's performance on a consolidated non-GAAP basis to provide you with visibility into the financial drivers of our business trends, as well as our operational results. You can find all our reported data and prior period comparatives in our press release.
Speaker Change: Thanks, Mike. And with that, I'll turn it over to Julie.
Julie: Thanks, Dave and Mike. Good morning, everyone, and thank you for joining us. To start this morning, I will cover Tegna's capital allocation execution, then provide an update on our business transformation initiatives, before closing with a review of our financial results and guidance.
Dave: My comments today are primarily focused on Tegna's performance on a consolidated, non-gap basis to provide you with visibility into the financial drivers of our business trends, as well as our operational resources. In the first half of 2024, we have returned $196 million of capital to shareholders by way of share repurchases and dividends, achieving 56% year to date of our $350 million commitment for 2024. Our resorts were Automotive, Home Improvement, Retail, Healthcare, and Media Telecom. Furthermore, we anticipate that our efforts in deploying technological innovations, including AI, across our stations will start to yield results in late 2025.
Julie: You can find all our reported data and prior period comparatives in our press release.
Julie Heskett: We are making great progress on our promise to return between 40 and 60% of adjusted free cash flow to our shareholders. In the second quarter, we repurchased approximately $72 million of our common stock, representing 5.1 million shares. Combined with our regular quarterly dividend, our total cash return to shareholders in the second quarter was $93 million. In the first half of 2024, we have returned $196 million of capital to shareholders by way of share repurchases and dividends, achieving 56% year-to-date of our $350 million commitment for 2024. Notably, since the merger agreement termination in May last year, we've returned over $1 billion to shareholders to date.
Julie: We are making great progress on our promise to return between 40 and 60% of adjusted free cash flow to our shareholders over the 2024 to 2025 period.
Julie Heskett: We've repurchased more than $900 million or 27% of our shares outstanding, and over that same time, we have paid $103 million in dividends. We are well positioned to meet our commitment while keeping dry powder to take advantage of opportunities to grow our business organically or inorganically. We remain patient and discerning regarding the company's capital, preserving flexibility and investing where we see the greatest value. When we announced first quarter earnings in May, we simultaneously announced an increase to our dividend. The first payment to shareholders at the increased amount of $12.5 per share was made on July 1st.
Julie: We've repurchased more than $900 million, or 27% of our shares outstanding, and over that same time, we have paid $103 million in dividends.
Julie: We remain patient and discerning regarding the company's capital, preserving flexibility and investing where we see the greatest value.
Julie Heskett: We are proud to deliver a dividend yield in excess of 3% to our shareholders as an integral part of our return of capital strategy. As Dave referenced, we achieved our key guidance metrics in the second quarter, finishing at the midpoint of our guidance range for revenue and in line with our expense range. Total company revenue for the second quarter was down 3% year-over-year, primarily due to lower subscription and advertising marketing services revenues, partially offset by higher political advertising. Second quarter subscription revenue was down 7% year-over-year, primarily due to subscriber declines, which were partially offset by contractual rate increases.
Julie: We are proud to deliver a dividend yield in excess of 3% to our shareholders as an integral part of our return of capital strategy.
Julie: Second quarter subscription revenue was down 7% year over year, primarily due to subscriber declines, which were partially offset by contractual rate increases.
Julie Heskett: 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 5% year over year, due to softness in national advertising demand, while local advertising remained more resilient. We saw strength within the categories of services, entertainment, banking and finance, and restaurants within the quarter. Categories that were a drag on our resource were automotive, home improvement, retail, healthcare, and media telecom. Premium local revenue continues to experience positive momentum, delivering revenue growth in the low double digits compared to last year.
Julie: Moving to Advertising and Marketing Services, AMS revenue was down 5% year-over-year due to softness in national advertising demand, while local advertising remained more resilient.
Speaker Change: We saw strength within the categories of services, entertainment, banking and finance, and restaurants within the quarter. Categories that were a drag on our resorts were automotive, home improvement, retail, healthcare, and media telecom.
Speaker Change: Premion Local Revenue continues to experience positive momentum, delivering revenue growth in the low double digits compared to last year.
Julie Heskett: National premium revenue, however, remains challenging, offsetting local growth and resulting in second quarter non-political premium revenue to be flat year over year. Another added benefit of premium is the opportunity to gain political advertising revenue, which bodes well for Tegna's election cycle. When including political advertising on our CTV platform, total premium revenues are up year over year. As Dave discussed, we continue to be bullish with premiums position to capitalize on the growth of CTV advertising. Coupled with our recent acquisition of Octilian, we expect premiums revenue growth rate to increase for years to come, despite the tougher comps in 2024.
Speaker Change: National premium revenue, however, remains challenging, offsetting local growth and resulting in second quarter non-political premium revenue to be flat year over year.
Speaker Change: Another added benefit of Premium is the opportunity to gain political advertising revenue, which bodes well for Tegna's election cycle.
Speaker Change: When including political advertising on our CTV platform, total premium revenues are up year over year.
Julie Heskett: Turning now to expenses, as we introduced earlier this year, we have embarked on an internal review of our cost and developed transformative initiatives to structurally reduce our cost by generating $90 to $100 million in annualized savings as we exit 2025. As a reminder, these cost reductions are included and are previously provided two year adjusted free cash flow guidance. We are directly targeting reductions in operating expenses outside of our high growth factors of premium and sports programming, which are slated to see expenses grow year over year as they boost revenue for Tegna. A major area of focus is transforming the core operating model of television station.
Speaker Change: Turning now to expenses. As we introduced earlier this year, we have embarked on an internal review of our cost and developed transformative initiatives to structurally reduce our cost by generating $90 to $100 million in annualized savings as we exit 2025.
Speaker Change: As a reminder, these cost reductions are included in our previously provided two-year adjusted free cash flow guidance.
Speaker Change: We are directly targeting reductions in operating expenses outside of our high growth factors of premium and sports programming, which are slated to see expenses grow year over year as they boost revenue for Tegna.
Speaker Change: A major area of focus is transforming the core operating model of television stations.
Julie Heskett: Actions taken this far include a realignment of vendor services, workforce restructuring across several functions, such as sales and information technology, as well as a restructure of corporate oversight. These actions will result in incremental year-over-year expense improvements for operating expenses less programming and premium for the balance of 2024 and through 2025. Further, we anticipate that our efforts in deploying technological innovations, including AI, across our stations will start to yield results in late 2025. Consistent with prior initiatives, we will keep you informed of our progress regularly over the coming quarters. For the second quarter, non-GAAP operating expenses of $563 million were down slightly compared to the second quarter last year, reflecting the business transformation initiatives I just outlined.
Speaker Change: Actions taken thus far include a realignment of vendor services, workforce restructuring across several functions, such as sales and information technology, as well as a restructure of corporate oversight.
Speaker Change: These actions will result in incremental year-over-year expense improvements for operating expenses less programming and premium for the balance of 2024 and through 2025.
Speaker Change: Further, we anticipate that our efforts in deploying technological innovations, including AI, across our stations will start to yield results in late 2025. Consistent with prior initiatives, we will keep you informed of our progress regularly over the coming quarters.
Speaker Change: For the second quarter, non-GAAP operating expenses of $563 million were down slightly compared to the second quarter last year, reflecting the business transformation initiatives I just outlined.
Julie Heskett: This is a sequential improvement from the first quarter of 2024, where non-GAAP operating expenses were up 1% year over year. Adjusted EBITDA was $176 million, and we generated adjusted free cash flow of $131 million during the second quarter. We ended the quarter with total debt of 3.1 billion and cash of $446 million. Net leverage at the end of the quarter was 2.9 times. Our industry-leading balance sheet and strong adjusted 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.
Speaker Change: This is a sequential improvement from the first quarter of 2024, where non-GAAP operating expenses were up 1% year-over-year.
Dave: We ended the quarter with total debt of $3.1 billion and cash of $446 million. Net leverage at the end of the quarter was 2.9 times. Now turning to our outlook. As we noted in our press release this morning, we are reaffirming all our key full year 2024 guidance metrics and our combined 24 to 25 adjusted free cash flow guidance of $900 million to $1.1 billion. Please refer to our press release to see the full details of our guidance.
Speaker Change: We ended the quarter with total debt of $3.1 billion and cash of $446 million. Net leverage at the end of the quarter was 2.9 times.
Speaker Change: Our industry-leading balance sheet and strong adjusted 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: Now turning to our outlook, as we noted in our press release this morning, we are reaffirming all our key full-year 2024 guidance metrics and are combined 24 to 25 adjusted free cash flow guidance of $900 million to 1.1 billion. Please refer to our press release to see the full details of our guidance.
Speaker Change: Now turning to our outlook. As we noted in our press release this morning, we are reaffirming all our key full year 2024 guidance metrics and our combined 24 to 25 adjusted free cash flow guidance of $900 million to $1.1 billion.
Julie Heskett: I'll now provide our third quarter financial guidance metrics. We expect third quarter total company revenue to be up 9 to 12% year over year, as we are seeing strong bookings from political ad spending as well as the summer Olympics. We forecast operating expenses in the third quarter to be flapped to down slightly compared to last year.
Dave: I'll now provide our third quarter financial guidance metrics. We expect third quarter total company revenue to be up 9 to 12% year over year, as we are seeing strong bookings from political ad spending as well as the Summer Olympics. We forecast operating expenses in the third quarter to be flat to down slightly compared to last year.
Speaker Change: I'll now provide our third quarter financial guidance metrics. We expect third quarter total company revenue to be up 9 to 12 percent year-over-year as we are seeing strong bookings from political ad spending as well as the Summer Olympics.
Speaker Change: We forecast operating expenses in the third quarter to be flat to down slightly compared to last year.
Julie Heskett: This concludes my outprepared remarks today. Before we begin Q&A, on behalf of all our management team and colleagues, I would like to thank Dave for his leadership, guidance, and tireless contributions that have had a positive impact on Tegna, our employees, and the entire broadcast industry. His passion for local journalism and serving the local communities is unparalleled. We wish him all the best to see retires as Pegna's President and CEO.
Speaker Change: This concludes my prepared remarks today. Before we begin Q&A, on behalf of all our management team and colleagues, I would like to thank Dave for his leadership, guidance, and tireless contributions that have had a positive impact.
Speaker Change: On Tegna, our employees, and the entire broadcast industry, his passion for local journalism and serving the local communities is unparalleled. We wish him all the best as he retires as Tegna's President and CEO.
Julie Heskett: Let's now turn to Q&A. As Dave mentioned, Mike will not be participating in Q&A, and Dave and I look forward to answering your questions.
Speaker Change: Let's now turn to Q&A. As Dave mentioned, Mike will not be participating in Q&A, and Dave and I look forward to answering your questions. Operator, please open the line for questions.
Operator: Operator, please open the line for questions. Thank you. At this time, we will conduct the question-and-answer session.
Operator: As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by; it will be compiled to Q&A roster.
Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster.
Dan Kernos: Our first question comes from the line of Dan Kernos of the Benchmark Company. Your line is now open. Great. Thanks. Good morning. Dave, it's been a wild ride since the bellow days.
Speaker Change: Our first question comes from the line of Dan Kurnos of The Benchmark Company. Your line is now open.
Dan Kurnos: Great. Thanks. Good morning.
Dan Kernos: If anyone has earned a break, you have. Congratulations on your retirement and certainly wish you the best going forward. I have maybe, we'll start with political since you brought it up. I mean, I don't know if anybody knows how it's going to play out, but we've certainly seen the fundraising numbers. I don't know if there's a knock-on effect now because of incremental enthusiasm on the Democrat side.
Dan Kurnos: Dave, it's been a wild ride since the below days. So if anyone has earned a break you have Congratulations on your retirement and certainly wish you the best going forward
Speaker Change: I have, maybe we'll start with political since you brought it up. I mean, I don't know if anybody knows how it's going to play out, but we've certainly seen the fundraising numbers. I don't know if there's a knock on effect now because of
Dave Lougee: But how should we be thinking relative to, and Julie, obviously, if you want to give us the comp again relative to 20, just how much we should be thinking about the potential upside over the balance of this year? I'll just let me give you a kind of color commentary and then let the joy to the play by play on the relative of the guidance is, you know, a couple things to think about. I think obviously there's definitely a new enthusiasm, new dollars. That said, I think in the last couple of months of Biden staying in the race, it had suppressed fundraising on the Democratic side.
Julie: incremental enthusiasm on the Democrat side. But how should we be thinking relative to, and Julie, obviously, if you want to give us the comp again, relative to 20, just how much we should be thinking about the potential upside over the balance of this year.
Speaker Change: I'll just let me give you a kind of color commentary and then let Julie do the play by play on the, on the relative to the guidance is, you know, a couple of things to think about. I think obviously there's definitely new enthusiasm, new dollars. That said, I think in the last couple of months of Biden staying in the race, it had suppressed.
Dave Lougee: So it kind of kind of depends how you look at it, right? Really, what the fund raising isn't will be. I think it's, you know, it will. It's going to keep the enthusiasm and all the Senate races and the fundraising there. I think very, very strong.
Julie: Fundraising on the Democratic side so the kind of kind of depends how you look at it, right? Really what what the fundraising is and will be I think it's
Julie: It's going to keep the enthusiasm in all the Senate races and the fundraising there, I think, very, very strong. But I think it is important, relative to the numbers, to understand where we are starting, the starting place that we're coming from. Let me turn that over to Julie.
Julie Heskett: But I think it is important to relative to the numbers to understand where we are starting at a starting place that we're coming from.
Julie Heskett: Let me turn that over to Julie. Yeah, hi. Good morning, everyone. From political dollars to level set full year 2020, excluding the Georgia Senate runoff, which was about $50 million for us, that would give a comparable 2020 of $395 million. If you break that down just in the first half, you have heard us talk about we do not have as many Senate races or competitive footprint on the Senate side, whereas strong as we were and now stronger with the fundraising of presidential, so there's puts and there's takes to both of those. The first half of the year, you'll now notice in looking at first quarter and second quarter, we're slightly behind 2020. We're 8% behind in the actuals for the first half of the year.
Julie: Yeah, hi, good morning, everyone. From political dollars to level set full year 2020, excluding the Georgia Senate runoff, which was about $50 million for us, that would give a comparable 2020 of $395 million.
Speaker Change: If you break that down just in the first half, you have heard us talk about we do not have as many Senate races or competitive footprint on the Senate side.
Julie: We're as strong as we were and now stronger with the fundraising of Presidential, so there's puts and there's takes to both of those. The first half of the year, you'll now notice in looking at first quarter and second quarter, we're slightly behind 2020. We're 8% behind in the actuals for the first half of the year, so we need to make that up here in the back half just to get back to that $395 million, but that's kind of where we see it, so it's going to depend. As you said, Dan, it's the puts and the takes, but Presidential is definitely looking strong for us.
Julie Heskett: So we need to make that up here in the back half just to get back to that $395 million, but that's kind of where we see it. So it's going to depend, as you said, Dan; it's the puts and the takes, but presidential is definitely looking strong for us. And your idea at one foot, where we don't have good clarity on right now, is how all the events that last two or three weeks will affect the Republican, the presidential fundraising on the Republican side. But I assume at this point you guys have started to factor in some of the down ballot stuff that's really picked up some of the measures that we've seen.
Dan: And you're right, Dan, at one point, what we don't have good clarity on right now is how all the events of the last two or three weeks will affect the Republicans, the presidential fundraising on the Republican side.
Dan: But I assume at this point you guys have started to factor in some of the down ballot stuff that's really picked up some of the measures.
Julie Heskett: Yeah, yeah, I'm not sure the events at the last month have been impacted those much, but we've been counting on those all along. You're right. And then look, I mean the metrics for the Olympics have been fantastic. I don't know if you guys want to put a finer point on the incremental tailwind from that.
Speaker Change: that we've seen.
Dan: I'm not sure the events of the last month have impacted those much, but we've been counting on those all along. You're right.
Unknown Executive: Okay. And then, look, I mean, the metrics for the Olympics have been fantastic. I don't know if you guys want to put a finer point on the incremental tailwind from that. I know it's always hard to kind of balance that between, you know, what gets lost with sort of more traditional inventory. But between that and, obviously, the NBA coming at the end of this year, just how we should think about, I guess, sort of core in the next Six months balanced against the obviously increasing crowd out effect.
Dan: Okay.
Speaker Change: And then, look, I mean, the metrics for the Olympics have been fantastic. I don't know if you guys want to put a finer point on the incremental tailwind from that. I know it's always hard to kind of balance that between
Julie Heskett: But I know it's always hard to kind of balance that between what gets lost with sort of more traditional inventory, but between that, and then obviously the NBA coming at the end of this year, just how we should think about, I guess, sort of core in the next six months balanced against the obviously increasing crowd out of fact. That's right. So, in all of those factors, Dan, there's just a lot of complications. It's an art, not a science.
Speaker Change: , and John Kessler. Between that and the NBA coming at the end of this year, how we should think about core in the next six months balanced against the increasing crowd out effect.
Speaker Change: That's right. So in all of those factors, Dan, there's just a lot of complications. It's an art, not a science. Let me break down third quarter first.
Julie Heskett: Let me break down third quarter first. Yes, the Olympics is extremely favorable. We're pleased with the audience, which is driving that revenue. We've mentioned before some of the favorability of Olympics is being in a political cycle. So some of our Olympic dollars is political. So recognize that those dollars would fall into the political line item, not necessarily the AMF line item. We have digital sales. We have linear sales. So that is AMF.
Speaker Change: Yes, the Olympics is extremely favorable. We're pleased with the audience.
Speaker Change: which is driving that revenue. We've mentioned before, some of the favorability of Olympics is being in a political cycle. So some of our Olympic dollars is political. So recognize that those dollars would fall into the political line item, not necessarily the AMS line item. We have digital sales, we have linear sales, so that is AMS. I know your question is specific about political crowd out and or incremental in Q3.
Julie Heskett: I know your question is specific about political crowd out and or incremental in Q3. Our Olympic historical incremental has been roughly three to five percent of our AMF number that will depend, but showing winter and summer, summer is more favorable. What we're seeing in this one is that would be at the high end of that three to five percent. So you can expect Olympic incremental to be about four or five percent of our total AMF in third quarter.
Speaker Change: Our Olympic historical incremental has been roughly 3-5% of our AMS number. That will depend between winter and summer. Summer is more favorable. What we're seeing in this one is that would be at the high end of that 3-5% so you can expect
Speaker Change: Olympic incremental to be about four or five percent of our total AMS in third quarter.
Julie Heskett: Leaning into fourth quarter, you're really going to have more political crowd out. Again, art versus a science. But we have seen advertising kick up in Q3 based on that Olympics. Second quarter AMF was weaker, as you heard Dave say. And I, in our prepared remarks, auto was a really big factor of that. Auto has improved in Q3.
Speaker Change: Leaning into fourth quarter, you're really going to have more political crowd out, again, art versus the science, but we have seen advertising tick up in Q3, based on that Olympics, second quarter AMS.
Speaker Change: was weaker, as you heard Dave say, and I, in our prepared remarks, auto was a really big factor of that. Auto has improved in Q3.
Julie Heskett: And on the last coming about the NBA, Dan, I'd say we don't have all the details yet on the NBC deal. We don't quite a bit. I'm not sure all we can say yet. But the bottom line is they're regular season games, and regular season NBA games up in during the NFL season tend to, from audience ratings, everything else, advertisers just not be as high demand. So we're only looking at, you know, I think at best a couple of months of that. So and those games will be preempting previous inventory that was in there, what was prime or local news.
Unknown Executive: And on that last comment about the NBA, Dan, I'd say we don't have all the details yet on the NBC deal, but we know quite a bit.
Unknown Executive: I'm not sure what we can say yet, but the bottom line is that their regular season games and regular season NBA games up during the NFL season tend to, from audience ratings, everything else, advertisers just not be as in demand. So we're only looking at, you know, I think at best, a couple months of that. And those games will be preempting previous inventory that was in there, whether it was Prime or local news. So I don't think I'd look at much of a driver this year for that.
Speaker Change: And on that last comment about the NBA, Dan, I'd say we don't have all the details yet on the NBC deal, you know, quite a bit. I'm not sure all we can say yet, but the bottom line is their regular season games and regular season NBA games up during the NFL season tend to, from audience ratings, everything else, advertisers, just not be as high demand.
Speaker Change: So we're only looking at, you know, I think at best a couple months of that. And those games will be preempting previous inventory that was in there, whether it was Prime or local news. So I don't think I'd look at much of a driver this year for that.
Dan Kernos: So I don't think I'd look at much of a driver this year for that. Okay, thanks for all the color. And again, Dave, best of luck to you. It's been a pleasure working with you. Thank you, Dan. Thank you.
Speaker Change: Okay, great. Thanks for all the color. And again, Dave, best of luck to you. It's been a pleasure working with you.
Craig Huber: Our next question comes from the line of Craig Huber of Huber Research Partners.
Dave: Thank you, Dan. Same to you.
Speaker Change: Thank you.
Craig Huber: Your line is not open. Great. Thank you. Dave, we've known each other a long time. I think you're going to be missed by all your colleagues. And that's certainly satisfied in your investors out there.
Speaker Change: Our next question comes from the line of Craig Huber of Huber Research Partners. Your line is now open.
Unknown Executive: Great, thank you. Dave, we've known each other a long time. I think you're gonna be missed by all your colleagues, and that's certainly satisfying your investors out there, but I personally think you've done a hell of a job over these decades.
Craig Huber: Great, thank you. Dave, we've known each other a long time. I think you're gonna be missed by all your colleagues. And that's certainly satisfying your investors out there. But I personally think you've done a hell of a job over these decades of
Craig Huber: But I personally think you've done a hell of a job over these decades. Of all the best in your retirement.
Craig Huber: Okay.
Craig Huber: My first question, Dave, can you just pick a question? Your retransubscriber losses in the quarter. How much were they down? Obviously, your retransubscription revenue was down about 7%. Your rates were up, right? But all. What was the actual sub losses percentage year over year, please? Our net subs were down, you know, mid single digits that we said before. But you know, slightly, you know, more towards, more towards high single, you know, digital digits than zero. Craig, I would expand on that slightly. So we do frequently always say mid single digits, subscribers being down. There is cyclicality in our subscriber trends where, you know, late winter, spring, and summer, they are weaker, and then they jump back up in Q3 and Q4.
Speaker Change: All the best to you in retirement.
Speaker Change: My first question, Dave,
Speaker Change: Can you just, nitpick question, your retrans subscriber losses in the quarter, how much were they down? Obviously your retrans subscription revenue was down about 7%, your rates were up, right, but all, what was the actual sub-losses percentage year-over-year, please?
Dave: Our net subs are down, you know, mid-single digits as we said before, but, you know, slightly, you know, more towards high single, you know, digital digits than zero, so.
Craig Huber: Craig, I would expand on that slightly. So we do frequently always say mid-single digits, subscribers being down. There is cyclicality in our subscriber trends where, you know, late winter, spring, and summer, they are...
Dave Lougee: So flight acceleration in Q2 because of the lag of- and there's some turning to volatility season.
Craig Huber: Weaker and then they jump back up in Q3 and Q4. So slight acceleration in Q2 because of the lag of- And because of some volatility seasonally with the reversal in VBs. That's exactly right. But it is still comfortably in that mid-single-digit down range.
Dave Lougee: Exactly. That's exactly right. But it is still comfortably in that mid single digit downrange.
Craig Huber: Okay, great.
Craig Huber: Thank you for that.
Dave Lougee: And then talk a little bit further about local advertising, your TV stations, how that performed the second quarter year over year, which are sent so far on the third quarter. And maybe also touch on Dave or if about nationally said that that got worse, I heard you right in the quarter. How's that trending for you in the third quarter? Yeah, national is definitely the macro concern and the tougher comp for us, Craig. So national down, you know, double digits, core, much stronger, resilient, flat to up slightly. Auto was a really big turn for us in second quarter.
Speaker Change: Okay, great. Thank you for that. And then talk a little bit further about local advertising at your TV stations.
Speaker Change: How that performed in the second quarter year over year and what's your sense so far on the third quarter? And maybe also touch on Dave or if about nationally you said that that got worse if I heard you right in the quarter How's that trending for you?
Unknown Executive: Third quarter.
Speaker Change: This concludes today's conference. Thank you for joining us. This concludes today's conference.
Speaker Change: Yeah, national is definitely the macro concern and the tougher comp for us, Craig.
Speaker Change: So national down, you know, double digits.
Speaker Change: Core, Much Stronger, Resilient, Flat to Up Slightly.
Dave Lougee: As you know, auto really was rebounding in 2023. We have seven consecutive quarters of auto being up, including first quarter, but now in Q2 auto was down and down, you know, double digits. So it was a big turn in that category specifically. And you are seeing that really in the Tier One and the Tier Two, which is much more on the national side of the business than the local. But on a positive note, we've seen auto return positive here in Q3 on the linear core side. And if I heard you right, I think you said premium revenues were up below double digits year over year.
Speaker Change: Auto was a really big turn for us in second quarter. As you know, Auto really was rebounding in 2023. We had seven consecutive quarters of Auto being up, including first quarter. But now in Q2, Auto was down, and down, you know, double digits. So it was a big turn in that category specifically. And you are seeing that really in the Tier 1 and the Tier 2, which is much more on the national side of the business than the regional side of the business. But on a positive note, we've seen Auto return positive here in Q3 on the linear core side.
Speaker Change: And if I heard you right, I think you said premium revenues were up below double digits year over year. Are you still expecting the performance of premium to accelerate in the back half of the year versus what happened in the second quarter, say?
Dave Lougee: Are you still expecting the performance of premium to accelerate in the back half of the year versus what happened in the second quarter?
Dave Lougee: Say. I do, Craig. So premium in second quarter in totality, while being up low single digits, does include some political; excluding that, non-political premium was flat. The local premium was up double digits, which again signals that tougher comp on the national side. There is another big comp coming up in Q3 on that national side of the business, but definitely we expect premium to ramp up in the back half of the year.
Speaker Change: I do, Craig. So premium in second quarter in totality while being up low single digits does include some political excluding that non-political premium was flat.
Speaker Change: The local premium was up double digits, which again signals that tougher comp on the national side.
Craig Huber: There is another big hump coming up in Q3 on that national side of the business, but definitely we expect Premium to ramp up in the back half of the year.
Craig Huber: Sorry, just say that one more time please with premium revenues in total. What was the percent change versus a year ago? Yes, second quarter was up low single digits year over year in Q2. Excluding political, non-political revenue was flat year over year. Within that, local is up low double digits. That's correct; local up double digits.
Speaker Change: Sorry, just say that one more time please, what premium on revenues in total, what was the percent change versus a year ago?
Speaker Change: Second quarter was up low single digits year over year in Q2, excluding political, non-political revenue was flat year over year.
Speaker Change: And then within that, local is up low double digits.
Unknown Executive: Okay, I got it. Thank you very much. And again, Dave, all the best.
Craig Huber: Okay, got it.
Craig Huber: Thank you very much.
Speaker Change: That's correct. Local up double digits.
Craig Huber: And again, Dave, all the best.
Craig Huber: Thank you.
Speaker Change: Okay, got it. Thank you very much. And again, Dave, all the best.
Steven Cahall: Our next question comes from the line of Steven Cahall of Wells Fargo. Your line is now open. Thanks. So just wanted to unpack retrans a little more. Thank you for that sub attrition number.
Operator: Our next question comes from the line of Steven Cahall of Wells Fargo. Your line is now open.
Dave: Thank you, Kirk. Thank you.
Speaker Change: Our next question comes from the line of Steven Cahall of Wells Fargo. Your line is now open.
Steven Cahall: I was wondering if you could also update us as to what percentage of your retrans or distribution revenue at this point is digital between VMBPDs and allocart streaming subs like Peacock. And how should we think about net retrans for the quarter in 2024? I'm guessing it's still stable since I think like two thirds of your subs are on variable cost structures, but we just wanted to confirm that. And then Dave, he talked about a greater willingness to spend from local businesses. I think the big macro question after what we saw last week is whether this latest economic weakness is more pronounced towards the lower end of the economic range.
Steven Cahall: Thanks. So just wanted to unpack retrans a little more. Thank you for that sub attrition number. I was wondering if you could also update us as to what percentage of your retrans or distribution revenue at this point is digital between VMVPDs and a la carte streaming subs like Peacock.
Steven Cahall: And how should we think about net retrans for the quarter in 2024? I'm guessing it's still stable since I think like two-thirds of your subs are on variable cost structures, but just wanted to confirm that.
Steven Cahall: And then Dave, you talked about a greater willingness to spend from local businesses. I think the big macro question after what we saw last week is whether this latest economic weakness is more pronounced towards the lower end of the economic range. And if that has any more pronounced impact on on local businesses than what we've seen over the last couple years with national being weaker and local being stronger. So is there any signs that that's happening? Or you know, it's kind of the markets reaction to some of these things, not necessarily something you're seeing at the at the business level. Thanks.
Dave Lougee: And if that has any more pronounced impact on local businesses and what we've seen over the last couple of years with national being weaker and local being stronger. So is there any signs that that's happening, or you know it's kind of the market's reaction to some of these things, not necessarily something you're seeing at the business level. Thanks.
Dave Lougee: Dave, and I'll take that, and then I'd like to let Julie handle the retrans question. I think so it's a mixed bag. We're trying to read the TV's. Obviously, is really mentioned. Auto is really, I think, the main variable from, you know, from first to second quarter relative to underlying pacing. So you can read into that what you will, and that appears to be crossed the board and auto. So I don't know that we have an indication of which end of the economic spectrum of any of where if that's more broadly distributed. You know local businesses continue to hang in there. I would say, you know, certainly a local services which are not in which I think are fairly good bell whether they're there, they're strong but they're not stronger.
Dave: Thanks, Steven. I'll take that and then I'll let Julie handle the retrans question. I think, so it's a mixed bag. We're trying to read the tea leaves. Obviously, as Julie mentioned, auto is really, I think, the main variable from, you know, from first to second quarter relative to underlying pacing. So you can read into that what you will. And that appears to be across the board in auto. So I don't know that we have an indication of which end of the economic spectrum, if any, or if that's more broadly distributed. You know, local businesses continue to hang in there, I would say.
Julie: You know, certainly a local services, which are not, which I think are a fairly good bell weather. They're, they're, they're, they're strong, but they're not stronger. I mean, I definitely maybe even maybe even falling back a little bit in the second quarter. So it feels like it feels like it's an across the board, you know.
Dave Lougee: I mean I definitely maybe even maybe even falling back a little bit in the second quarter, so it feels like it feels like it's an across the board. You know across the board right now, Stephen, but we don't, I don't think we have any definitive data that answers the question on which which end of the spectrum.
Julie: across the board right now Steven but we don't I don't think we have any definitive data that answers the question on the which which end of the spectrum.
Julie Heskett: And on the retrans question, Stephen, we do not break out any of our data publicly between traditional, virtual, streaming. What I can say is you've now seen the reset for Tegna. Both you saw it in first quarter, now second quarter, with the top line revenues being down in that mid single digits. The majority just because of top line is a factor of the traditional subscriber declines, which again you can look at the public numbers for cable and satellite, which are down the double digits, offset by the virtual and streaming subscribers. Subscribers increasing but, of course, that's the mix of you know the lower top line rate because of our successful negotiations in our affiliation agreements being mostly variable now versus fixed.
Dave: And on the retrans question, Steven, we do not break out any of our data publicly between traditional virtual streaming. What I can say is you've now seen the reset for Tegna, both you saw it in the first quarter, and now in the second quarter with the top line revenues being down in the mid single digits. The majority, just because of the top line, is a factor of traditional subscriber declines, which again, you can look at the public numbers for cable and satellite, which are down double digits offset by the virtual and streaming subscribers increasing, but of course, that's the mix of, you know, the lower top line rate.
Julie: And on the retrans question, Steven, we do not break out any of our data publicly between traditional virtual streaming.
Speaker Change: What I can say is you've now seen the reset for Tegna, both you saw it in first quarter, now second quarter with the top line revenues being down in that mid-single digits.
Speaker Change: The majority, just because of top line, is a factor of the traditional subscriber declines, which again you can look at the public numbers for cable and satellite, which are down the double digits, offset by the virtual and streaming subscribers increasing, but of course that's the mix of the lower top line rate.
Dave: Because of our successful negotiations in our affiliation agreements being mostly variable now versus fixed, we have bent that curb and the stability of net retrans. So, quarter to quarter to quarter now going forward with that new reset, if you will, net retrans is stable.
Julie Heskett: We have bent that curb and stability stability on net retrans, so quarter to quarter to quarter now going forward with that new reset, if you will, net retrans is stable. Thank you. You're welcome. Thank you.
Patrick Shoal: Our next question comes from the line of Patrick Shoal of Parenting Research.
Patrick Shoal: Your line is now open. Patrick Shoal, if you don't do it.
Jim Goss: Here, this is Jim Goss, also from Parenting Research. David, I'd like to have my good luck and congratulations on your success at B-Low and the Gennat and Technical companies in particular. You've been ahead a long, long ride there.
Speaker Change: Patrick Scholl, if you could unmute.
Unknown Executive: Also from Barrington Research.
Speaker Change: Here, this is Jim Goss.
Patrick Scholl: Also from Barrington Research.
Jim Goss: Jim, I wanted to ask if you can identify any share of the dollars from the states and the, you mentioned the seven state electoral races that are particularly important. Is it reasonable to think of those as taking a pretty significant share of those dollars? Because I know there would be dollars in all the other states as well, but just how important are they relative to the rest of the country, which is safe? Well, I say every state has its long tail of political spending, depending on, there's all this down ballot races, but when you think about the, you know, not the least rate sensitive dollars from the PACs, they go to the competitive races. The vast majority of those PAC money go to the governor's, senate, and presidential races where they are competitive.
Patrick Scholl: You had a long ride there. Thank you, Jim.
Patrick Scholl: I wanted to ask if you can identify any share of the dollars from the states and the those you mentioned the seven state electoral races that are particularly important.
Speaker Change: Is it reasonable to think of those as taking a pretty significant share of those dollars? Because I know that there would be dollars in all the other states as well. But just how important are they relative to the rest of the country, would you say?
Speaker Change: Well, I'd say every state has its long tail of political spending, right? Depending on, there's all these down ballot races, but the, when you think about the,
Speaker Change: You know, the least rate sensitive dollars, right, from the PACs, they go to the competitive races. The vast majority of those PAC money go to the Governor's, Senate, and Presidential races where they are competitive. So I would say you do see quite a disproportionate share of total political ad dollars going to the competitive races. And frankly, I missed actually, there's a key other part, which is the House, right? And of course, by definition, we're in 39% of the country, so we got 39% of the House races.
Dave Lougee: So I would say you do see a quite a disproportionate share of total political ad dollars going to the competitive races.
Dave Lougee: And Frank, I should, I've missed actually, there's a key other part which is the House, right? And of course, by definition, we're in 39% of the country, so we've got 39% of the House races. And then, you know, there's less competitive House races than there were 20 years ago because of redistricting, but that means that the individual House races that are competitive will also see a disproportionate share, and we've got a lot of those House races.
Dave Lougee: Okay.
Tom Cox: Then also on the, in terms of, in discussing premium and the CTV advertising, I was wondering if you could talk about the availability of your stations on the CTV platforms, in addition to the more traditional or MVPD distribution versions. Yeah, Tom Cox, who oversees premium in our company, is here, and I'll let him take the answer. I believe your question was primarily related to our streaming ONO apps, followed it correctly. The good news there is we continue to see strong acceleration and viewership across those platforms, or actually reaching a point where the viewership levels are sufficiently large enough to go direct sales with many of those markets.
Speaker Change: Okay. Thank you.
Speaker Change: Then also in the, in terms of
Speaker Change: stations on the CTV platforms in addition to the more traditional or MVPD, VMVPD distribution versions.
Unknown Executive: Yeah, Tom Cox, who oversees Premion in our company, is here, and I'll let him take the answer.
Tom Cox: Yeah, Tom Cox, who oversees Premion in our company, is here and I'll let him take the answer.
Speaker Change: I believe your question was primarily related to our streaming O&O apps, if I followed it correctly. The good news there is we continue to see strong acceleration in viewership across those platforms. We're actually reaching a point where the viewership levels are sufficiently large enough to go direct sales with many of those markets.
Tom Cox: And so we see that as a significant opportunity for us moving forward to drive both greater viewership as well as higher revenues. The other nice piece about that is that's our ONO inventory. So the margin on that business versus the premium on business or many of our other digital products is quite high, again because they're owned and operated.
Speaker Change: And so we see that as a significant opportunity for us moving forward to drive both greater viewership as well as higher revenues. The other nice piece about that is that's our O&O inventory, so the margin on that business
Speaker Change: versus the Premion business or many of our other digital products is quite high again because they're owned and operated.
Jim Goss: Okay, yes, thank you.
Unknown Executive: Okay, yes, thank you. And then the last thing, we've gotten used to rising net retrends over the years, and it's been very important to the broadcasters. As that category begins to flatten, if you will, what are the key areas you think we should look to in terms of driving?
Dave Lougee: Then the last thing, we've gotten used to rising net returns over the years, and it's been very important to the broadcasters. As the category begins to flatten, if you will, what are the key areas you think we should look to in terms of driving incremental growth? Is it premium? Is it the programming like True Crime Channel and the others? Is it ATSE 3.1 initiatives? How would you think of the key areas to drive future growth?
Speaker Change: Okay, yes, thank you. And then the last thing, we've gotten used to rising net retrends over the years and it's been very important to the broadcasters.
Speaker Change: As that category begins to flatten, if you will, what are the key areas you think we should look to in terms of driving?
Speaker Change: Incremental growth. Is it premium? Is it the programming like True Crime Channel and the others? Is it ATSC 3.1 initiatives?
Speaker Change: How would you think of the...
Dave: Yeah, I will take that, Jim, as I hand the reins over here in the next week. Look, I think that, yes, the innings of net retrans as the growth driver have, you know, certainly come to the later stages there relative to the industry. I think a lot of it's going to have to do with what programming, both in the digital space and in the linear space, that the company is able to create and achieve on an efficient basis going forward.
Dave Lougee: Yeah, I will take that, Jim, as I hand the reins over here in the next week. Look, I think the net, the innings of the net returns as the growth driver have certainly come to the later stages there, relative to the industry. I think a lot of it's going to have to do with what programming, both in the digital space and in the linear space, that the company is able to create and achieve an efficient basis going forward, but I think most importantly is the smart strategic use of this balance sheet. We have a tremendous amount of assets. We've got strong local brands in local communities, which are not nearly as competitive as the national landscape. That's a valuable asset to have. Net, to have valuable local content that is strongly branded, is can be a jumping off point, source significant new business of whether organic or inorganic, as Julian we have said many times.
Dave: But I think most importantly is the smart strategic use of this balance sheet. We have a tremendous amount of assets. We've got strong local brands in local communities, which are not nearly as competitive as the national landscape. That's a valuable asset to have net, to have valuable local content that is strongly branded can be a jumping off point to source significant new business, whether organic or inorganic, as Julie and we have said many times.
Julie: It can be a jumping-off point for a significant new business, whether organic or inorganic, as Julie and we have said many times. So the team going forward under Mike's leadership will be looking at how to leverage that and as well.
Dave: So the team going forward under Mike's leadership, we'll be looking at how to leverage that, and as well. And frankly, I think that then there was also the regulatory issue. Depending on which administration wins, there should be some type of regulatory relief in the future. Again, I'm not going to put a timeframe on that, but that will be an opportunity for this company as well, whether that's in the virtual MVP side or whether that's in the ownership cap. Given the strength of this company, our scale and the balance sheet that we have, the company is well positioned to find those new areas of growth, but I wouldn't saddle my successor with pinning down one particular area wouldn't be appropriate.
Dave Lougee: So the team going forward under Mike's leadership will be looking at how to leverage that and as well.
Dave Lougee: And frankly, I think then there was also the regulatory issue. Depending on which administration wins, there should be some type of regulatory relief in the future. Again, I'm not going to put a time frame on that, but that will be an opportunity for this company as well, regarding whether that's in the virtual MVPD side or whether that's in the ownership cap. Given the strength of this company, our scale, and the balance sheet that we have, the company is well positioned to find those new areas of growth.
Speaker Change: There is also the regulatory issue, depending on which administration wins, there should be some type of regulatory relief in the future. Again, I'm not going to put a time frame on that, but that will be an opportunity for this company as well, whether that's on the virtual MVPD side or whether that's in the ownership cap.
Speaker Change: Given the strength of this company, our scale, and the balance sheet that we have, the company is well positioned to find those new areas of growth, but I wouldn't saddle my successor with pinning down one particular area, it wouldn't be appropriate at this point.
Dave Lougee: But I wouldn't saddle my successor with putting; pinning down one particular area wouldn't be appropriate at this point.
Jim Goss: All right, well thanks for your thoughts. Thank you, Jim. Thank you.
Speaker Change: Alright, well thanks for your thoughts.
Operator: As a reminder to ask a question, you will need to press star one one.
Jim Goss: Thank you, Jim.
Speaker Change: Thank you. As a reminder, to ask a question, you will need to press star 11.
Craig Cooper: Our next question, we welcome Craig Cooper of Hubert Research Partners. Your line is not open. Thank you. Can you talk a little bit further about the auto trends? You just a little bit more, expand upon that what you saw in the quarter. I think you said what you're optimistic is trend better in the third quarter. I guess, why? I did say that, Craig. In QQ, as I mentioned, auto was down low double digits. That was mostly driven into your one into your Q, but also sprinkled into Q3. I'm sorry, in Q3. Moving to Q3, it has improved.
Speaker Change: Our next question, we welcome back Craig Huber of Huber Research Partners. Your line is now open.
Craig Huber: Thank you. Can you talk a little bit further about the auto trends? Just a little bit more, expand upon that, what you saw in the quarter. I think you said you're optimistic it's going to trend better in the third quarter. I guess why?
Speaker Change: I did say that, Craig. In Q2, as I mentioned, auto was down low double digits.
Speaker Change: That was mostly driven in Tier 1 and Tier 2, but also sprinkled into Q3. I'm sorry, in Tier 3.
Dave Lougee: Olympics does improve that substantially, but even when we factor out what we believe is that incremental part of auto, we still believe that the core auto we see as flat top, slightly just pacing in Q3.
Speaker Change: Moving to Q3, it has improved. Olympics does improve that substantially. But even when we factor out what we believe is that incremental part of auto, we still believe that the core auto we see as as flat to up slightly just pacing in Q3.
Dave Lougee: Okay, then just a big picture here, I guess Dave, the economic front to me, given all the markets you guys are in, how are you personally feeling on the US economy now, versus last time we spoke three months ago? Better, worse? No, I think, well, I think it's what we saw before, right? I think it's what we saw with National was an early precursor of what everybody's seeing nationally now on public, you know, on jobs data and stuff. That said, my personal view is that it's everything that you read. It's kind of like this; it's just kind of like a little bit shaky, but potentially optimistic moments where, depending on which way it could go, that the soft landing is still possible.
Speaker Change: Okay, and then just big picture here, I guess, Dave, on the economic front, I mean given all the markets you guys are in, how are you personally feeling on the U.S. economy?
Unknown Executive: Better? Worse? No, I think– BETTER? WORSE?
Dave: Now versus how last time we spoke three months ago.
Dave: better or, you know, I think I
Dave: Well, I think it's it's what we saw before, right? I think it's what we saw with national was an early precursor of what everybody's seeing nationally now on public, you know, on on jobs data and stuff. That said, my personal view is is that
Dave: It's everything that you read. It's kind of like this, it's just kind of like a little bit of shaky but potentially optimistic moments.
Dave Lougee: You know, the great debate where the feds dropped interest rates low enough or not, but you know, I think we'll see, you know, I think the job market is changing, but will that, will that flatten out or get worse? And I think that's where advertisers are, you know, with a large holding company's other; it's just nobody's really clear. But I don't think there's certainly; there's not a definitively negative view, but there's no definitively optimistic view. There's a definite, I think, a concern and a bit of wait and see. But it's interesting, relative to your commentary member from three months ago, it sounds more on the negative side; you're describing the thing, because is that sort of kind of what? Yeah, I think what we do, what I said in my notes and what Julie's talked about with the national is spoken for itself, right?
Dave: We are, depending on which way it could go, that a soft landing is still possible. You know, the great debate on whether the Fed's dropped interest rates low enough or not. But, you know, I think we'll see.
Speaker Change: You know, I think the job market is changing, but will that flatten out or get worse? And I think that's where advertisers are, you know, where the large holding companies are. It's just nobody's really clear.
Speaker Change: But I don't think there's certainly there's not a definitively negative view, but there's no definitively optimistic view. There is a definitely I think a
Speaker Change: A concern, but a bit of wait and see.
Speaker Change: But that's interesting, but relative to your commentary member from three months ago, that sounds more on the negative side you're describing.
Unknown Executive: Yeah, I think what we do, what I said in my notes, and what Julie's talked about with the nationals, speaks for itself, right? This national issue is not a Tegna issue, right? I mean, we are obviously more exposed to it given our large market station, but that, you know, auto is certainly, you know, as we talked about in the quarter gotten worse; we'll see where it ends up in the third. But yeah, I think that there definitely is some, some cooling down of what was pretty hot.
Tim Hassolini: and Tim Hassolini.
Dave Lougee: This national is not a technical issue, right? I mean, we are obviously more exposed to it given our large market station, so, but that, you know, auto is certainly, you know, as we talked about in the quarter, gotten worse. We'll see where it ends up in the third, but yeah, I think that there definitely is some cooling down of what was a pretty, you know, there was a lot of money got put in that system during COVID in 21 and 22. You know, a lot of fed money got put in the system and it's working itself out.
Speaker Change: Yeah, I think what we do what I said in my notes and what Julie's talked about with national is spoken for itself, right? This national is not a Tegna issue, right? I mean, we are obviously more exposed to it given our large market stations. So But that you know Auto is certainly, you know, as we talked about in the quarter gotten worse. We'll see where it ends up in the third But yeah, I think that they're
Speaker Change: There definitely is some cooling down of what was a pretty
Speaker Change: You know, it was a lot of money got put in that system during COVID in in 21 and 22. You know, a lot of Fed money got put in the system and it's working itself out.
Dave Lougee: And we shall see, but yeah, I would say I don't know that I'm more pessimistic. I just think what we're seeing is what we saw before, and, but, you know, what happened in the market Monday doesn't give you a confidence that recovered yesterday. And so, you know, I think it literally, Craig, don't read too much into my comments. I'm just like everybody else. It's kind of like, let's wait and see.
Speaker Change: And we shall see, but yeah, I would say.
Speaker Change: I don't know that I'm more pessimistic. I just think what we're seeing is what we saw before and But you know what happened in the market Monday doesn't give you a confidence that recovered yesterday And so you know I think it literally
Dave Lougee: Techno, I think, is well positioned either way.
Craig Huber: Craig, don't read too much into my comments. I'm just like everybody else. It's kind of like, let's wait and see. Tegna, I think, is well positioned either way.
Dave Lougee: And my last question, if I could squeeze this in, what percent of your viewers in your markets right now are watching your content over the year as opposed to an MDPD? What's that rough number? You know, it's a great question, Craig, that there's not terribly awesome data collection on that nationally. I'll just leave that alone without, you know, talking about vendors or anything on that. But it makes, if you look at the audiences, we know we have through CommScore, on the Olympics, on our NBC stations, and then you look at what you know mathematically has been in the reduction and pay cable subs, they are sure finding us.
Speaker Change: And my last question, if I could squeeze this in, what percent of your viewers in your markets right now are watching your content over the air as opposed to through an MVPD?
Speaker Change: What's wrong? What's that?
Speaker Change: That's a tough number.
Speaker Change: You know, it's a great question, Craig, that there's not terribly awesome data collection on that nationally. I'll just leave that alone without talking about vendors or anything on that. But it makes
Speaker Change: If you look at the audiences we know we have through ComScore on the Olympics on our NBC stations, and then you look at what you know mathematically has been the reduction in pay cable subs, they are sure finding us.
Craig Cooper: It makes sense to me, obviously, that there's probably more over-the-year viewing than is known. But we don't have great. I'm just going to be frankly honest with you about this, and it's an industry issue that does need to get worked on. There's not perfect data on that. Okay. Thanks, guys. Thank you.
Speaker Change: It is, it makes intuitive sense to me obviously that there's probably more over the year viewing than is known, but we don't have great, I'm just going to be frankly honest with you about this and it's an industry issue that does need to get worked on, there's not perfect data on that.
Speaker Change: Okay, thanks guys.
Dave Lougee: I'm showing no further questions at this time.
Dave Lougee: I would now like to turn it back to Dave Lugie for closing or more. Well, I'll keep them short, but once again, I want to thank the investment community and all of our stakeholders for their support over the past seven years. Most importantly, going forward, I know that Tegna is in great hands with Mike Steib and this great management team.
Speaker Change: Thank you.
Speaker Change: I'm showing no further questions at this time. I would now like to turn it back to Dave Lougee for closing remarks.
Dave: Well, I'll keep my remarks short, but just once again, I want to thank the investment community and all of our stakeholders for their support over the past seven years, and, most importantly, going forward, I know that Tegna is in great hands with Mike Steib and this great management. Thank you everyone, and have a great day.
Dave Lougee: Well, I'll keep them short, but just once again, I want to thank the investment community and all of our stakeholders for their support over the past seven years, and most importantly going forward, I know that Tegna is in great hands with Mike Stive and this great management team. Thank you, everyone, and have a great day.
Operator: Thank you, everyone, and have a great day. Thank you for your participation in today's conference.
Operator: This does conclude the program, and we now disconnect.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program.