Q1 2025 TEGNA Inc Earnings Call
Okay.
Operator: Good day and thank you for standing by.
Speaker Change: Good day, and thank you for standing by and welcome to the Q1 2025 Technology, Inc. Earnings Conference call. At this time, all participants are in a listen only mode.
Operator: Welcome to the Q1 2025 Tegna Inc. 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 the 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. please be advised that today's conference is being recorded.
After the speaker's presentation, there will be a question and answer session.
Speaker Change: Ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again please.
Speaker Change: 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 fun ceiling. Please go ahead.
Operator: I would now like to hand the conference over to your first speaker today, Kirk von Seelen. Please go ahead. Thank you.
Kirk Von Seelen: Good morning and welcome to our first quarter conference call and webcast. My name is Kirk von Seelen and I am Tegna's treasurer.
Speaker Change: Thank you good morning, and welcome to our first quarter conference call and webcast. My name is Kirk funds ceiling and I am technique treasurer today, our CEO, Mike <unk> and our CFO, Julie Heskett will review <unk> financial performance and results and provide <unk> second quarter out.
Kirk Von Seelen: Today, our CEO, Mike Steib, and our CFO, Julie Heskett, will review Tegna's financial performance and results and provide Tegna's second quarter outlook.
Kirk Von Seelen: 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: 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 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 file. 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.
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 Mike.
Mike Steib: With that, let me turn the call over to my Thanks, Kirk. Good morning, everybody. And thank you for joining us today. It's been an eventful few weeks for the economy and for the stock market at times like this. are glad that we have strong brands and loyal audiences, deep relationships with local businesses. and more predictable distribution of revenue stream.
Mike: Thanks, Kirk and good morning, everybody and thank you for joining us today.
Mike: It's been an eventful few weeks for the economy and the stock market at times like this.
Mike: I'm very glad that we have strong brands and.
Mike: Loyal audiences and deep relationships with local businesses.
Mike: And more predictable our distribution revenue stream.
Mike Steib: Despite all the noise, we are staying locked in on our previously mentioned five areas of focus. Number one, we're building a world-class team, culture, and company operating system. that unlocks high-impact execution. Number two, we're leveraging Tegna's strengths across our stations to improve performance through better resource sharing. Number three, we are fully deploying technology, automation, and AI to run a more efficient and effective operation. Four, we are growing digital revenue by deepening engagement with our digital audience.
Mike: Despite all the noise, we are staying locked in on our previously mentioned.
Mike: Five areas of focus number one.
Mike: World Class team culture and company operating system.
Mike: Our remarks high impact execution.
Mike: Number two we're leveraging <unk> strengths across our stations to improve performance through better resource sharing.
Mike: Number three we are fully deploying technology automation and AI to run a more efficient and effective operation.
Mike: Four we are growing digital revenue by deepening engagement with our digital audience five.
Mike Steib: Five, cutting all unnecessary spend and bureaucracy, ensuring our time and our resources are maximally focused on growing audience and growing revenue.
Mike: Cutting all unnecessary spend and bureaucracy, ensuring our time and our resources are maximally focussed on growing audience growing revenue.
Mike Steib: We're moving fast, and I just wanted to highlight for everyone here a few recent examples. Number one on building out our world-class team, the new executive team is coming together and collaborating really nicely and we're moving with focus and velocity. We added two new senior leaders, Melissa Zimieski and Matt Yarrow, to inject new digital design, development, and growth capabilities into our organization. Our new sales performance management and incentive regime is driving more accountability. Faster Talent Upleveling, and Improved Execution Across Linear and Digital.
Mike: We're moving fast and I just wanted to highlight.
Mike: Everyone here a few recent examples.
Mike: Our number one on building out a world class team that new executive team is coming together.
Mike: Collaborating really nicely.
Mike: We're moving with focus on velocity.
Mike: We added two new senior leaders lessors asking about Europe.
Mike: To inject new digital design development and growth capabilities into our organization.
Mike: Okay.
Mike: Our new sales performance management incentive regime is driving more accountability.
Mike: Faster talent up leveling.
Mike: And improved execution across linear.
Mike Steib: So good progress here.
Mike: In digital.
Mike Steib: Number two, we're leveraging Tegna's strengths and improving resource sharing. On this one, our statewide news sharing and local regional sales tests in Florida have unlocked more productive capacity for our news teams, and new multi-market dollars for our sales teams. What we've learned in this test is going to inform our technology and operational rollout in the months ahead. On number three, fully deploying technology to run more effective stations, we are testing a new proprietary AI system to help our newsrooms find and cover more impactful local. reporting our journalists. and being the best newsroom in every market that we serve.
Mike: So good progress here and number two we're leveraging taking the strengths and improving resource sharing and this one our statewide news sharing in local regional sales test in Florida have unlocked more productive capacity for our news teams and new multimarket dollars for our sales team.
Mike: We've learned in this test.
Mike: To inform our technology and operational Rollouts in the months ahead.
Mike: And number three fully deploying technology to run more effective stations, we are testing a new proprietary AI assistant to help our newsrooms fine to cover more impact on local.
Mike: Supporting our journalists.
Mike: And being the best newsroom in every market that we serve.
Mike Steib: We're also progressing on plans for our two stations of the future, which will leverage reduced technology and real estate footprints to deliver the news more sustainably.
Mike: We're also progressing plans for our two stations in the future, which will leverage reduced technology and real estate footprint to deliver the news more sustainably.
Mike Steib: On number four, growing digital by deepening audience engagement. I'm really pleased with the new apps that we're testing and I expect we'll be moving to public launch in a couple of markets in the coming months. AI augmented software development is making our engineering team more productive than ever, and I'm excited about building on these capabilities.
Mike: A number for growing digital by deepening audience engagement I'm really pleased with new apps that we're testing.
Mike: That will be moving to public launch in a couple of markets in the coming months.
Mike: Augmented software development is making our engineering team more productive than ever.
Mike: I am excited about building on these capabilities.
Mike Steib: And finally, on number five, cutting unnecessary spin and bureaucracy, our team has surfaced tons of opportunities to save dollars and time that can be invested in our future. We're doing this by rethinking our real estate footprint and slashing internal processes that distract from growing ratings and growing revenue. Removing unnecessary bureaucracy improves everything from employee engagement to speed of execution. finding more opportunities like this every day.
Mike: And finally on number five cutting unnecessary spend and bureaucracy arcana surfaced tons of opportunities to save dollars and time that can be invested in our future.
Mike: We're doing this by rethinking, our real estate footprint and slashing internal processes to extract from growing ratings and growing revenue.
Mike: Moving unnecessary bureaucracy improve everything from employee engagement to speed of execution.
Mike: We're finding more opportunities like this every day.
Mike Steib: I also want to shout out the team for landing some exciting new sports rights deals. We've secured local team rights across NBA, WNBA, NHL, and MLB.
Mike: Yes.
Mike: I also want to shut out the team for landing some exciting new sports rights deals with secured local team rights across NBA, WNBA NHL and MLB on top of that we partner with multiple NFL teams to air preceded games for free over the air.
Mike Steib: On top of that, we've partnered with multiple NFL teams to air preseason games for free over the air. In short, we are making it easier for every single hometown fan. to find and watch their favorite local teams. It's a win for fans and it's a win for the power of local broadcasting.
Mike: We are making it easier for every single hometown band.
Mike: To find and watch their favorite local teams.
Mike: The winter stands to.
Mike: When the power of local broadcasters.
Mike Steib: Anne Forgo, I want to recognize the outstanding local journalism coming out of our station. Specifically, our four stations that received the Gracie Awards.
Mike: And before I go I want to recognize the outstanding local journalism coming out of our stations.
Mike: Specifically, our four stations that received Gracie Award.
Mike Steib: Before we wrap, a comment on the evolving regulatory landscape. Seventy-three members of Congress have signed a letter to FCC Chairman Brendan Carr advocating for deregulation in broadcasting, and the chairman is expected to have a majority soon. Staying close to all of this, and our healthy balance sheet, consistent free cash flow generation, and track record of disciplined capital allocation position us well to pursue the best opportunities.
Mike: Before we wrap our comment on the evolving regulatory landscape.
Speaker Change: 73 members of Congress signed a letter to FCC Chairman, Brendan Kerr advocating for deregulation and broadcasting and the chairman is expected to have a majority soon.
Mike: Close to all of this.
Speaker Change: Our healthy balance sheet, consistent free cash flow generation and track record of disciplined capital allocation position us well pursue the best opportunities.
Mike Steib: for ValuGration.
Christian: Hey, Christian.
Mike Steib: In closing, I want to thank the team. These first few months of my tenure have brought significant changes to our people, culture, strategy, and performance expectations. It takes a very special team to evolve this quickly. I'm really proud of our folks for doing the hard work to ensure a sustainable future for local news and a bright future for Tegna.
Christian: In closing I want to thank the team. These first few months of my tenure brought significant changes to our people culture strategy and performance expectations.
Christian: It takes a very special team to evolve this quickly I'm really proud of our folks for doing the hard work to ensure a sustainable future for local news a bright future protected.
Julie Heskett: And with that, I'll turn it over to Julie for a closer look at our financial performance and second quarter guidance. Thanks, Mike, and good morning, everyone. Our financial performance this quarter came in as expected and within our guidance range. We delivered on what we set out to do this quarter, and I want to thank our teams for their focus and execution.
Christian: I'll turn it over to Julie for a closer look at our financial performance and second quarter guidance.
Julie Heskett: Thanks, Mike and good morning, everyone. Our financial performance this quarter came in as expected and within our guidance range. We delivered on what we set out to do this quarter and I want to thank our teams for their focus on execution I.
Julie Heskett: I will begin today by covering our first quarter financial results, then provide an update on our business operational initiatives and capital allocation priorities, before closing with a review of our guidance. Total company revenue for first quarter finished at $680 million, a decrease of 5% year-over-year, in line with our outlook of down 4-7%. The decrease was primarily due to lower political advertising revenue consistent with cyclical even-to-odd-year comparisons. Advertising and Marketing Services revenue, also known as AMS, finished at $286 million in the first quarter, a 3% decrease year-over-year due to macroeconomic headwinds and the Super Bowl airing on Fox, our smallest affiliate group this year, versus CBS last year.
Julie Heskett: I will begin today by covering our first quarter financial results, then provide an update on our business operational initiatives and capital allocation priorities before closing with a review of our guidance.
Julie Heskett: Total company revenue for first quarter finished at $680 million, a decrease of 5% year over year in line with our outlook of down 4% to 7%.
Julie Heskett: The decrease was primarily due to lower political advertising revenue consistent with cyclical even to odd year comparison.
Julie Heskett: Advertising and marketing services revenue also known as IMS finished at $286 million in the first quarter, a 3% decrease year over year due to macroeconomic headwinds and the Super Bowl airing on Fox, our smallest affiliate group this year versus CBS last year.
Julie Heskett: The decrease was partially offset by growth in advertising revenue from local sports rights. When we normalized for the Super Bowl impact, AMS revenue finished flat to last year. Advertising demand remains closely tied to overall economic sentiment and with consumer confidence softening, some advertisers are taking a more cautious wait-to-see approach. This may lead to near-term delays in spending and ultimately impact our second quarter AMS revenue performance. As Mike highlighted, we're aggressively pursuing growth initiatives of our digital product portfolio consisting of web solutions, mobile and streaming apps, as well as local CTV advertising. We are encouraged by our digital advertising performance, with digital ad revenue growing year over year.
Julie Heskett: The decrease was partially offset by growth in advertising revenue from local sports right.
Julie Heskett: We normalize for the Super Bowl impact Ams revenue finished flat to last year.
Julie Heskett: I think demand remains closely tied to overall economic sentiment and with consumer confidence softening.
Julie Heskett: Some advertisers are taking a more cautious wait to see approach. This may lead to near term delays in spending and ultimately impact our second quarter Ams revenue performance.
Julie Heskett: As Mike highlighted were aggressively pursuing growth initiatives of our digital product portfolio, consisting of web solution mobile and streaming apps as well as local television advertising. We are encouraged by our digital advertising performance with digital AD revenue growing year over year the moment.
Julie Heskett: The momentum we saw in the fourth quarter from our owned and operated products continued in the first quarter. Leveraging our powerful brand's expansive footprint and deep customer relationships, we're in a strong position to drive profitable digital growth through 2025 and beyond.
Julie Heskett: We saw in the fourth quarter from our owned and operated products continued in the first quarter, leveraging our powerful brand expansive footprint and deep customer relationships. We're in a strong position to drive profitable digital growth through 2025 and beyond.
Julie Heskett: Before moving on, I want to point your attention to a reclassification of subscription revenue to distribution revenue that we highlight in the press release. The reclass amounts were immaterial, and we have provided recasted numbers in the release to simplify year-over-year comparisons. Distribution revenue in the first quarter was flat year-over-year at $380 million due to a temporary disruption of service with a distributor that successfully concluded in mid-January last year, as well as distributor renewals and contractual rate increases partially offset by subscriber decline. We have approximately 45% of our traditional subscribers up for renewal in calendar year 2025, providing us with additional opportunities to capture appropriate value for our content.
Julie Heskett: Before moving on I want to point your attention to a reclassification of subscription revenue to distribution revenue that we highlight in the press release. The requested amounts were immaterial and we have provided recast the numbers in the release to simplify year over year comparisons distribution revenue in the first.
Julie Heskett: Quarter was flat year over year at $380 million due to a temporary disruption of service with a distributor that successfully concluded in mid January last year, as well as distributor renewals and contractual rate increases partially offset by subscriber declines.
Julie Heskett: We have approximately 45% of our traditional subscribers up for renewal in calendar year 2025, providing us with additional opportunities to capture appropriate value for our content. We successfully renewed approximately 10% of our traditional mvpds subscribers at the end of the first quarter.
Julie Heskett: We successfully renewed approximately 10% of our traditional MVPD subscribers at the end of the first quarter. Our total adjusted EBITDA in the first quarter finished at $136 million, a 22% decrease year over year, primarily due to the lower political advertising revenue and AMS revenue, partially offset by continued cost benefits from core operational cost cutting and Moving on to the cost-cutting initiatives, we continue to drive significant improvements to our cost structure.
Julie Heskett: Our total adjusted EBITDA in the first quarter finished at $136 million.
Julie Heskett: A 22% decrease year over year, primarily due to the lower political advertising revenue in Ams revenue, partially offset by continued cost benefits from core operational cost cutting initiatives.
Julie Heskett: Moving on to the cost cutting initiatives, we continue to drive significant improvements to our cost structure as we highlighted on our last earnings call and as you heard Mike say earlier, we are deploying technology to run our stations more effectively and cutting all unnecessary spending.
Julie Heskett: As we highlighted on our last earnings call, and as you heard Mike say earlier, we are deploying technology to run our stations more effectively and cutting all unnecessary spending. First quarter, non-GAAP expenses finished flat year over year, driven by increases in programming expenses, which include local sports rights, offset by cost reduction. All other expenses outside of programming finished 4% below last year, continuing the sequential improvement of structural cost reduction efforts. We remain on track to achieve our goal of generating 90 to $100 million in annualized core non-programming savings as we exit 2025. At the end of the first quarter, we stand at approximately 60% of our target.
Julie Heskett: First quarter non-GAAP expenses finished flat year over year, driven by increases in programming expenses, which include local sports rights offset by cost reductions.
Julie Heskett: All other expenses outside of programming finished 4% below last year, continuing the sequential improvement.
Julie Heskett: Structural cost reduction efforts.
Julie Heskett: We remain on track to achieve our goal of generating $90 million to $100 million in annualized core non programming savings as we exit 2025 at.
Julie Heskett: At the end of the first quarter, we stand at approximately 60% of our target.
Julie Heskett: Turning now to capital allocation, we remain committed to returning 40 to 60 percent of adjusted free cash flow to shareholders over the 24 and 25 two-year period, and we are on track to achieve that goal. We paid $20 million in dividends to our shareholders in the first quarter. Cash and cash equivalents totaled $717 million at quarter end, and our net leverage finished at 2.8 times. Given the prospects of deregulation and station M&A, we're taking a more measured approach to share-free purchases at this time. Preserving financial flexibility ensures we remain agile while staying disciplined in our capital deployment and focused on delivering long-term shareholder returns.
Julie Heskett: Turning now to capital allocation, we remain committed to returning 40% to 60% of adjusted free cash flow to shareholders over the 24 and 25 two year period, and we are on track to achieve that goal, we paid $20 million in dividends to our shareholders in the first quarter cash and cash equivalents.
Julie Heskett: Totaled $717 million at quarter end and our net leverage finished at two eight times.
Julie Heskett: Given the prospects of deregulation and station M&A, we're taking a more measured approach to share repurchases at this time preserving financial flexibility and ensures we remain agile while staying disciplined in our capital deployment and focused on delivering long term shareholder returns.
Julie Heskett: As Mike mentioned, our healthy balance sheet, consistent free cash flow generation, and track record of disciplined capital allocation position us to act when attractive, value-creating opportunities arise.
Julie Heskett: As Mike mentioned, our healthy balance sheet, consistent free cash flow generation and track record of disciplined capital allocation position us to act when attractive value creating opportunities arise.
Julie Heskett: Now let's turn to our financial guidance elements. As we noted in our press release this morning, we are reaffirming our combined two-year 2024-2025 adjusted pre-cash flow guidance of $900 million to $1.1 billion. You can see our full-year guidance metrics in our earnings release.
Julie Heskett: Now, let's turn to our financial guidance elements as we noted in our press release. This morning, we are reaffirming our combined two year 2020 for 2025, adjusted free cash flow guidance of $900 million to $1 1 billion.
Julie Heskett: You can see our full year guidance metrics in our earnings release, there's one small update to call out we are lowering our full year 2025 effective tax rate guidance to a range of 22% to 23%, reflecting tax refunds, we expect to receive from the state of Texas.
Julie Heskett: There's one small update to call out. We are lowering our full-year 2025 effective tax rate to $1.1 billion. to a range of 22-23%, reflecting tax refunds we expect to receive from the state of Texas.
Julie Heskett: Let me provide our financial guidance for second quarter. We expect total company revenue to be down in the 4% to 7% range year over year, primarily reflecting lower political advertising revenue due to cyclical even to odd year comparisons, as well as anticipated headwinds in advertising environment stemming from the recent shifts in global trade dynamics. We expect non-GAAP operating expenses to be flat to down 2% compared to Q2 of 2024, reflecting cost reduction efforts previously In closing, our first quarter results reflect the strength of Tegna's market position and the solid foundation that we have built. With strong brands, a great footprint, and deep customer relationships, we're well positioned for what lies ahead.
Julie Heskett: Let me provide our financial guidance for second quarter, We expect total company revenue to be down in the 4% to 7% range year over year, primarily reflecting lower political advertising revenue due to cyclical even to odd year comparison, as well as anticipated headwinds in advertising environment stemming from there.
Julie Heskett: Recent shifts in global trade dynamics, we expect non-GAAP operating expenses to be flat to down 2% compared to Q2 of 2024, reflecting cost reduction efforts previously discussed.
Julie Heskett: In closing our first quarter results reflect the strength of <unk> market position and the solid foundation that we have built with strong brands, a great footprint and deep customer relationships. We are well positioned for what lies ahead. We remain focused on staying one step ahead on cost and sharpening our digital portfolio.
Julie Heskett: We remain focused on staying one step ahead on cost and sharpening our digital portfolio to prioritize the services we believe have the greatest growth potential for Tegna. As the industry continues to evolve, and companies brace for broader economic pressures, our priorities remain clear. Execute with discipline, unlock operational efficiencies, and deploy capital where it drives long-term shareholder growth. Our healthy balance sheet gives us the flexibility to continue investing in growth.
Julie Heskett: We owe to prioritize the services, we believe have the greatest growth potential for Tenda.
Julie Heskett: As the industry continues to evolve and companies brace for broader economic pressures, our priorities remain clear execute with discipline unlock operational efficiencies and deploy capital where it drives long term shareholder correct. Our healthy balance sheet gives us the flexibility to continue investing in growth.
Operator: With that, operator, let's open the call for 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 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Julie Heskett: With that operator, let's open the call for questions.
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 standby, while we compile the Q&A roster.
Julie Heskett: Yeah.
Steven Cahill: Our first question comes from Steven Cahill from Wells Fargo. Your line is now open. Thank you. So, you know, Mike, you talked a bit about what's happening with the FCC and deregulation. Tech is in a unique position. You have a strong balance sheet. You're below the cap. Clearly, this FCC is pretty favorable to getting deals done.
Stephen Cahill: Our first question comes from Stephen Cahill from Wells Fargo. Your line is now open.
Speaker Change: Thank you so Mike you talked a bit about what's happening with the FCC and deregulation plagued us in a unique position you have a strong balance sheet you are below the cap.
Speaker Change: Clearly this FCC is pretty favorable to getting deals done. So do you need to wait on future deregulation initiatives or do you feel like the opportunities or are already in front of you and Julie you talked about the 40% to 60%.
Mike Steib: So do you need to wait on future deregulation initiatives, or do you feel like the opportunities are already in front of you? And, you know, Julie, you talked about the 40 to 60 percent return of free cash flow. I assume that if there isn't strategic M&A to do. So that's kind of the first question around M&A.
Speaker Change: Turning to free cash flow I assume that is if there isn't strategic M&A to do so that's kind of the first question around M&A.
Julie Heskett: And then, Julie, you mentioned anticipated headwinds arising from the macroeconomic environment that are implied in the Q2 guide. Could you just expand a little bit on whether that's conservatism or whether you're seeing specific changes to the advertising environment start to show up in Q2? Thank you. Thanks Steve.
Speaker Change: And then Julie you mentioned anticipated headwinds arising from the macroeconomic environment that are implied in the Q2 guide could you just expand a little bit on weather.
Speaker Change: That's conservatism or whether youre seeing specific changes to the advertising environment start to show up in Q2. Thank you.
Speaker Change: Okay.
Mike Steib: Chairman Carr has been clear with his agenda and support for local broadcasters in the important role that local broadcasters play for our communities and the role the local news plays for our democracy. He is expected to have his majority soon and as I noted in my prepared remarks he seems to have bipartisan congressional support for supporting local and supporting local broadcasters. We think that it will unlock M&A opportunities in the space that can be really accretive for buyers and sellers.
Steve: Thanks, Steve.
Speaker Change: Chairman car has been clear with his agenda and supports the local broadcasters and the important role that local broadcasters play for our communities.
Speaker Change: Well the local news plays for our democracy.
Speaker Change: He is expected to have his majority.
Speaker Change: And as I noted in my prepared remarks, he seems to have bipartisan congressional support.
Speaker Change: We're supporting local and supporting local broadcasters.
Speaker Change: We think that it will unlock M&A opportunities in the space that can be really accretive for buyers and sellers, but until we know until we know the full landscape. It until we know the prices.
Julie Heskett: But, you know, until we know the full landscape and until we know the prices, I can't sort of comment more precisely than that. As it pertains to how we think about capital allocation, I'll just remind you of our philosophy. It is not our money, it's our shareholders' money. When we can deploy it in a way that is significantly accretive for our shareholders, we will. And when we can't, we'll send it back to our shareholders in the form of stock buybacks, dividends, or debt repurchase.
Speaker Change: Cant sort of comment more precisely.
Speaker Change: As it pertains to how we think about sort of think about capital capital allocation I'll, just remind you of our philosophy. It is not our money, it's our shareholders money when we can deploy it in a way that is significantly accretive for our shareholders, we will and when we can't we will send it back to our shareholders in the form of stock buybacks dividends.
Speaker Change: Ends or debt repurchases.
Julie Heskett: June, can you jump on that? Yeah, so from an advertising perspective, Steven, we are seeing Q2 softer than where Q1 is finishing. That may be impacted by the tariffs and the overall trading policies. But we're not seeing cancellations. We're not seeing or hearing specific conversations that advertisers are changing their strategy because of those trading policies. So we're in this wait and see. Consumer sentiment is obviously lower now. So the confidence in advertising now through the end of the year is probably worse today than it was 90 days ago. But it's too early to actually see the impacts of that.
Julien: Julien Hi, Jonathan Yes, so from an advertising perspective, Steven we are seeing Q2 softer than where Q1 is finishing.
Julien: That may be impacted by the tariffs and the overall trading policies.
Julien: But we're not seeing cancellations, we're not seeing or hearing specific conversations that advertisers are changing their strategy because of those trading policies. So we're in this wait and see.
Julien: <unk> sentiment is obviously lower now so the confidence in advertising now through the end of the year is probably worse today than it was 90 days ago, but it's it's too early to actually see the impacts of that but Q2 is slightly worse from an IMS perspective than what we saw in Q1 and one of the things that we know definitively.
Julie Heskett: But Q2 is slightly worse from an AMS perspective than what we saw in Q1.
Mike Steib: Yeah, and one of the things that we know definitively is that through previous down cycles, advertisers have continued to lean in to build their brands and reach customers, outperform those that didn't. So that's certainly the message our customers will be hearing from us at this moment of uncertainty is that these moments of uncertainty are moments of opportunity for good marketers.
Julien: It really is that through previous down cycles to advertisers, who have continued to lean in.
Julien: To build their brands and reach customers.
Julien: Outperformed those that didn't so that's certainly the message our customers will be hearing from us at this moment of uncertainty is that these moments of uncertainty our moments of opportunity for good marketers.
Operator: Thank you.
Julien: Thank you.
Julien: Thank you.
Dan Kurnos: Our next question comes from Dan Kurnos from The Benchmark Company. Your line is now open. Yeah, thanks. Good morning. Maybe just to follow up on Steve's question, Mike, you know, like the way that you guys have positioned yourselves now, it looks, I know you're open to both buying and selling, but it looks more bent towards buying.
Speaker Change: Our next question comes from Dan <unk> from the Benchmark Company. Your line is now open.
Speaker Change: Yes. Thanks, Good morning, maybe just a follow up on <unk> question Mike.
Speaker Change: The way that you guys are positioned yourselves now it looks.
Speaker Change: I know youre open to both buying and selling but it looks more bent towards buying and we obviously don't know what the FCC will pass or change or what Congress will pass or change but.
Mike Steib: And, you know, we obviously don't know what the FCC will pass or change or what Congress will pass or change, but I mean, what's kind of your appetite if you, you know, the opportunities, the creative opportunities were there to get, say, substantially larger if the in-market and ownership cap were removed? So that's question one.
Speaker Change: I mean, what's kind of your appetite if you the opportunities be accretive opportunities were there to get say substantially larger.
Speaker Change: If the end market and ownership cap were removed. So that's question one and then question two would be can you just update us on how premium trended in the quarter, because it kind of sounds like with local sports rights.
Julie Heskett: And then question two would be, can you just update us on how premium trended in the quarter? Because it kind of sounds like with local sports rights, You know, ex-Super Bowl, core was almost flattish to up in Q1 and then you've got some softness in Q2, just from what the advertising Julie was talking about.
Speaker Change: Ex Super Bowl core was almost flattish to up in Q1, and then you've got some softness in Q2.
Speaker Change: From what the advertising Juliet was talking about.
Mike Steib: Yeah, Dan, I, you know, I'm as excited about the M&A opportunity in the space as you all are, and I'm sure it's frustrating not to hear us be able to be more specific in our responses. You probably imagine it is for us as well. What I can tell you is we believe that the deregulatory moment is coming, and it's coming at just the right time. I can tell you that philosophically, and it's coming at just the right time, and it's coming at just the right time. We are buyers of anything that's a fit for our mission and our company at a price that If you offer us something for a price that is less than it is worth to us and our shareholders, we're very interested.
Dan: Yes, Dan.
Speaker Change: I'm as excited about the M&A opportunity in this space as you all are and I am sure its frustrating not to hear us be able to be more specific in our responses that you'd probably imagine it as it is for us as well what I can.
Dan: I'll tell you is we believe that the debt.
Dan: The Deregulatory moment is coming and it's coming at just the right time I can tell you that philosophically.
Dan: We are we.
Dan: We are buyers of any.
Dan: Anything that's a fit for our mission and our company at a price that.
Dan: If you offer something at a price that is less than it is worth to us and our shareholders. We are very interested and if theres anything someone wants to buy from us at a price that is more than it is worth to our shareholders. We're interested in selling it.
Mike Steib: And if there's anything someone wants to buy from us at a price that is more than it is worth to our shareholders, we're interested in selling it. So we think that that is the essence of good capital allocation. And we are at this really dynamic moment in the space and this great moment of opportunity. We're staying flexible and focused on being good, smart capital allocators.
Dan: We think that that is the essence of good capital allocation and we are we are at this really dynamic moment in this space in this great moment of opportunity.
We're staying flexible and focused on being good smart capital allocators.
Mike Steib: I'll invite Julie to respond on the numbers, but I just want to reiterate, I've spent a lot of time with our sales teams and with our customers in market, and the customers and the sales teams really like the product. The opportunity for our local advertisers in particular to reach a significantly broader audience, the audience that's left the cable, satellite, and over-the-air bundle, if you would, being a broadband-only home, and to be able to reach that audience with greater targeting, it's a phenomenal seller proposition. And so, in that regard, I can just tell you we've got a lot of excitement about the business.
Julian: Primiano owned by Julian.
Speaker Change: Respond on the numbers, but I just want to reiterate I've spent a lot of time with our sales teams and with our customers in market and the customers and the sales teams really liked the product the opportunity for our local advertisers in particular to reach a significantly broader audience.
Speaker Change: The audience, that's left the cable satellite and over the year bundle. If you would had gone too.
Speaker Change: Being a broadband only homes and to be able to reach that audience with greater targeting is a it's a phenomenal.
Speaker Change: Seller proposition.
Speaker Change: And so and.
Speaker Change: That regard I can just tell you we've got a lot of excitement about that business.
Julie Heskett: Yeah, and I'll reiterate what we have said previously with premium revenues. The CTV addressable market opportunity continues to be strong, specifically in the local communities and the local advertising space. Premium total revenues remain flattish, quarter to quarter, up one quarter, down one quarter. I would just consider it flattish, with local continuing to grow high singles, low double digits, and offset by national declines. So we didn't see a dramatic change in Q1. It's very consistent with what we've been saying the last few quarters. Got it. Thank you. Super helpful caller. Appreciate it.
Speaker Change: Yes, and I'll reiterate what we have said previously with premium revenues the CTV addressable market opportunity continues to be strong specifically in the local communities and our local advertising space.
Speaker Change: Premiums and total revenues remained flattish quarter to quarter up one quarter down one quarter.
Speaker Change: I would just consider it flattish with local continuing to grow high single to low double digits and.
Speaker Change: In Nash offset by natural declines so that we didn't see a dramatic change in Q1, it's very consistent with what we've been saying the last few quarters.
Speaker Change: Got it. Thank you Super helpful color I appreciate it.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Okay.
Craig Huber: Our next question comes from Craig Huber from Huber Research Partners. Your line is now open. Great, thank you. I just want to ask you, I don't know how much time you've spent new role there, but alternative uses of space. I mean, in terms of when you think out here over the coming years, How much time have you been putting into this so far, or is there so much... Please focus on it. Do you have an opinion? I'm curious. How do you view in terms of when significant amount of revenues could potentially be generated here from lease now to exit?
Speaker Change: Our next question comes from Craig Huber from Huber Research Partners. Your line is now open.
Speaker Change: Great. Thank you just wanted to ask you I don't know how much time spent on this.
Your new role there, but to alternative uses of spectrum.
Speaker Change: TV stations I mean in terms of when you think out here over the coming years and stuff I mean, how much time have you been put into this so far or is there. So much other stuff that you're working on at the company that you have been really focused on it too much and if you have an opinion I'm curious.
Speaker Change: How do you view in terms of when significant amount of revenues could potentially be generated here from lease noted exit excess spectrum.
Speaker Change: Markets.
Mike Steib: I've been very grateful to some of my peers in the space who have been spending a lot of time on this topic, on the ATSC 3.0 opportunity, and have been engaging in Washington around it. From a first principle standpoint, we believe a long, bright future for over-the-air television is really important to America. And that the technology is the opportunity to continue to evolve to deliver a better pre-over-the-air product. higher quality and with many more bells and whistles we think is important and a real positive. Secondly, the sort of evolution of the technology also creates the potential for new revenue streams, many of which you've heard from my colleagues in the space, like data casting and others.
Speaker Change: Thank you Greg I'd been very grateful to some of my peers in this space, who have been spending a lot of time on.
Speaker Change: This topic on the <unk> opportunity.
Speaker Change: <unk> been engaging in Washington around it.
Speaker Change: The first principle standpoint, we believe a long bright future for the over the air over the year television is really important to America.
Speaker Change: And that the technology is the opportunity to continue to evolve to deliver a better free over the air product.
Speaker Change: Higher quality and with many more bells and whistles, we think as we think is important and a real positive.
Speaker Change: Secondly, the sort of evolution of the technology also creates the potential for new revenue streams, many of which you've heard from my colleagues in the space like data casting and others.
Mike Steib: And there, as the world moves to lots of video consumption on the internet, the thesis that Bandwidth will need to be supplemented, I think is a pretty strong thesis. So we're not we're not seeing dollars on that opportunity today. But I do think there's I think there's substantial optionality in it. And it is an interesting longer term. Any idea in your mind how many years out? I don't know that I, I don't think I could give you a great answer on that. I would encourage you, some of my, some of my peers have been spending years on this topic.
Speaker Change: And there and as the world moves to lots of video consumption on the Internet.
Speaker Change: Thesis that.
Speaker Change: Bandwidth will need to be supplemented I think is a pretty strong thesis. So we are not.
Speaker Change: We're not seeing.
Speaker Change: On that opportunity today.
Speaker Change: But I do think there is I think your substantial optionality in it and.
Speaker Change: And it is an interesting longer term opportunities.
Speaker Change: Okay.
Speaker Change: The idea in your mind, how many years out until it could be significant to your revenue streams.
Speaker Change: I don't know that I don't think I could give you a great answer on that I would encourage you to some of my some of my peers have been spending years on this topic I'd encourage you to ask them as well.
Mike Steib: I'd encourage you to, to ask them as well. They've, I think they've started to see some green shoots and have some excitement around it. I can tell you, we've gotten up the learning curve on it. We see, you know, we see the opportunity. But I don't know that I could help you start to pencil out the, the five-year model in that. last question that do you feel where your peers are here or do you think it doesn't really matter? No, I think it's important to own spectrum and to see the FCC ultimately supporting the transition to ATSC 3.0, and then we're sitting on some fantastic real estate.
Speaker Change: I think they've started to see some green shoots and have some excitement around it I can tell you we've gotten up the learning curve on it we see we see the opportunity.
Speaker Change: But I don't know that I could help you start to pencil out the five year model and that just yet.
Speaker Change: I guess my last question that you feel that you are significantly behind where your peers are here or do you think it doesn't really matter that they're leading on this front.
Speaker Change: No I think I think it is important too.
Speaker Change: One spectrum and to see the end to see the the.
Speaker Change: The FCC ultimately supporting the transition to <unk> III.
Speaker Change: And then we're sitting on some fantastic real estate.
Speaker Change: I mean, obviously some people in the industry. It's my last point some people industry believe by the end of the decade, it could be as large as with Retrans revenues or today for individual television stations and stuff. If it's handled correctly here and it plays out.
Mike Steib: Some people in the industry believe by the end of the decade it could be as large. I've heard the same and the business case that's been made for it is really compelling and I can't tell you just how happy I'll be if that turns out to be the case.
Speaker Change: Okay.
Speaker Change: Heard this I've heard the same and the the business case, that's been made for it is really compelling and I cant tell you just how happy Albi.
Speaker Change: It turns out to be the case.
Speaker Change: Okay very good thank you.
Speaker Change: Thank you.
Patrick Sholl: Our next question comes from Patrick Sholl from Barrington Research. Your line is open. Hi. I just had a question on the M&A potential and the view of regulators. If there's consolidation within the broadcast space, one way of looking at it from the regulator's standpoint is the competitive market for advertising. Certainly from that standpoint, broadcasters would still play a strong role, but I'm just curious on how you view like the market for local news and the extent that regulators might see that as being becoming too concentrated and not having as many, you know, options there. And I guess maybe just your view on how that market would shape up if there is more.
Speaker Change: Our next question comes from Patrick <unk> from Barrington Research. Your line is open.
Speaker Change: Hi.
Speaker Change: Thanks Heather.
Speaker Change: On the M&A potential.
Speaker Change: Regulators so.
Speaker Change: If there is consolidation within the broadcast phase III, one way of looking at it from the Regulator's standpoint is the competitive market for advertising.
Speaker Change: Certainly from that standpoint broadcasters, but still play a long haul, but I was curious on how you view the market for local news.
Speaker Change: And the extent that regulators might see that as being okay.
Speaker Change: Becoming too concentrated.
Speaker Change: Not having as many options there.
Speaker Change: Maybe just your view on how that market would shape up if there is more M&A.
Patrick Sholl: Thank you very much. Thank you.
Mike Steib: Big tech dominates viewer consumption of every kind of media at this point, including including So if regulators were to look at it through that lens, I would direct them to TikTok, which is now the number one source of news for Gen Z, and parenthetically, owned by a foreign adversary. I would direct them to YouTube, which it's recently been estimated to have a valuation a number of multiples greater than the entirety of the traditional media ecosystem. I direct them to Facebook, I direct them to many of the accounts I follow on Instagram, which are citizen journalists with tens of thousands of followers.
Speaker Change: Big Tech dominates viewer consumption of every kind of media at this point, including including news.
Speaker Change: So if the if regulators would look at it through that lens I would I would direct them to tick tock, which is now the number one source of news for Gen Z and parenthetically owned by a foreign adversary.
Speaker Change: Direct them too.
Speaker Change: Youtube, which recently been estimated to have evaluation.
Speaker Change: A number of multiples greater than the entirety of the traditional media ecosystem.
Speaker Change: And then the Facebook.
Speaker Change: Direct them to many of the accounts I follow on Instagram with chart citizen journalists with tens of thousands of followers.
Operator: Through that lens, it is very clear that broadcasters have been hamstrung for decades and are in a position where we're competing with really well funded, completely unregulated, massive big tech Okay, thank you. Thank you.
Speaker Change: Through that lens. It is very clear that broadcasters have been hamster.
Speaker Change: Hamstrung for decades and are in a position where we're competing with.
Speaker Change: Really well funded completely unregulated.
Speaker Change: Massive big Tech brands.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Avi Steiner: 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 Our next question comes from Avi Steiner from J.P. Morgan. Your line is open.
Speaker Change: 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.
Speaker Change: Our next question comes from Avi Steiner from Jpmorgan. Your line is open.
Avi Steiner: Bobby, if you're there, you may be on mute. Apologies for that. Thank you. Apologies. I really appreciate this.
Speaker Change: Obviously, there may be a gift.
Speaker Change: Apologies for that thank you I apologize.
Mike Steib: I'm going to start with M&A if I can. You both highlighted your low leverage as an asset as it relates to potential M&A opportunities, and I'm wondering if you can discuss where You can take leverage to pursue a deal. And I think much more importantly, how you think about synergy opportunities, which might turn a higher initial multiple into something more creative. A real driver of value in the consolidation opportunity is around local costs. And those calls specifically are just the sort of management and back office that goes into running TV stations that are, you know, three, four, five, six TV stations performing the same tasks in a market.
Speaker Change: I really appreciate that I'm going to start with M&A. If I can you both highlighted your low leverage as an asset as it relates to the potential M&A opportunities.
And I'm wondering if you could discuss where.
Speaker Change: You could take leverage to pursue a deal and I think much more importantly, how you think about synergy opportunities, which might turn a higher initial multiple with something more accretive.
Speaker Change: The.
Speaker Change: Driving.
Speaker Change: The real driver of value in the consolidation opportunity is around.
Speaker Change: Local costs.
Speaker Change: And those costs, specifically or just sort of management and back office that goes into running television stations that are.
Speaker Change: $345 six Tvs stations performing the same tasks in our market.
Mike Steib: As I fantasize about station combinations and the benefit it can do for our industry, I just, you know, I see a world where there's less back office needed to support still multiple news brands and news teams and just as many today, if not more journalists in the future, covering the news, but just able to do it much more efficiently and sustainably with us able to save on the back office support. And if you look at the potential, you know, for us as an industry to be able to save on the back office support, I think it's going to be a great opportunity for us as an industry to be able to save on the back office support.
Speaker Change: As I as I fantasize about station combinations and the benefit it can do for our industry.
Speaker Change: I see.
Speaker Change: Where theres less back office needed to support still multiple news brands and news teams in <unk>.
Speaker Change: As many today, if not more journalists in the future.
Speaker Change: Covering the news, but just able to do it much.
Speaker Change: Much more efficiently and sustainably with us able to save on me.
Speaker Change: On the back office us as an industry able to save on the back office support and if you look at the potential.
Mike Steib: sort of back office and support takeout costs across markets and across the country. It's many billions of dollars of potential savings for the ecosystem. And so with that, you know, we're really why we all continue to harp on this. We think it's a huge value unlock. We think it's really important for a more sustainable future for local news. And and we're standing by to see how how we can participate in that in a way that's most accretive.
Speaker Change: Sort of back office and support takeout costs across markets across and across the country. It's many billions of dollars of potential savings for the ecosystem.
Speaker Change: And so with that we're really.
Speaker Change: It's why we all continue to harp on this we think it's a huge value unlock we think it's really important for a more sustainable future for local news and.
Speaker Change: And we're standing by to see how we can participate in that in a way that's most accretive.
Mike Steib: Okay, maybe one more if I can. One of your peers was on a call, you know, just before yours and also talked about all the opportunities out there. And I'm curious, maybe how you see industry ownership evolving? You envision a number of groups changing hands to create... For lack of a better description, supergroups, or do you think... It evolves more so by swaps and stations vetting. And thanks for the time.
Speaker Change: Okay.
Speaker Change: Maybe one more if I can.
Speaker Change: One of your peers.
Speaker Change: It was on a call.
Speaker Change: Just before your orders and also talked about all the opportunities out there.
Speaker Change: And I was curious maybe how you see industry ownership.
Speaker Change: Evolving.
Speaker Change: Do you envision a number of groups changing hands to create.
For lack of a better description super groups or do you think.
Speaker Change: <unk> more so by swaps and Stacey and thanks for the time.
Mike Steib: Welcome. You know, we, I have, I have no idea. I know that if we have two stations in the market, those stations can run much more profitably. The previous question about leverage, it can be deleveraging very quickly. These are the kinds of getting these sort of back office and support costs and, you know, redundant management, etc. out of out of an organization, you can do within 60 days of closing a deal. I've done it before. And I would expect if if in a scenario where we were a buyer, I would expect that here. So even if one were to take on more some more debt to do it, it's it's deleveraging very quickly.
Speaker Change: Youre welcome.
Speaker Change: <unk>.
Speaker Change: Have I have no idea.
Speaker Change: I know that.
Speaker Change: If we have two stations in the market.
Speaker Change: Those patients can run much more profitably.
Speaker Change: Previous question about leverage it can be deleveraging very quickly. These are the kinds of.
Speaker Change: Getting these sort of back office and support costs.
Speaker Change: Redundant management et cetera.
Speaker Change: Out of an organization.
Speaker Change: You can do within 60 days of closing a deal have done it before and I would expect if.
Speaker Change: In a scenario, where we were a buyer I would expect that here. So even if one were to take on some more debt to do it it's deleveraging very quickly.
Mike Steib: Whether those are bigger deals or cash-free swaps or some combination, I think it'll depend on who shows up to play and where the prices land. And because we don't know that is why I continue to be, I continue to sort of respond in a way that's somewhat unsatisfying, which is, you know, what's our role in all that? Once we see better clarity on the players, the prices and the motivations, we'll know what the right thing to do is for our shareholders.
Speaker Change: Whether those are bigger deals or sort of cash free swaps or some combination it will I think it'll depend on.
Who shows up to play and where the where the prices land.
Speaker Change: And because we don't know that is why I continue to be I continue to sort of respond in a way that somewhat unsatisfying, which is whats our rolling all of that once we get better clarity on the players the prices and the the motivations will know what the right thing to do is for our shareholders.
Operator: Thank you. I am showing no further questions at this time.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: I'm showing no further questions at this time I would now like to turn it back to Mike Stein for closing remarks.
Mike Steib: I would now like to turn it back to Mike Steib for closing remarks. As always, I want to thank you all for your attention and your support. I want to thank, again, the Tegna team for the amazing work so far. I'm really proud of the way everyone has leaned into the change and transformation going on here.
Mike Stein: As always I want to thank you all for your attention and your.
Mike Stein: Your support I want to thank again taken a team for the amazing work, so far I'm really I'm really proud of the way everyone has leaned into to the change in transformation going on here.
Mike Steib: I want to remind everybody that Sunday is Mother's Day. I want to say thanks to Julie and all the wonderful moms at our company for everything that they do, and I hope you all have the opportunity to call your mom. Have a great day. Thank you.
Mike Stein: I want to remind everybody that Sunday is mother's day I want to say thanks to Julian all the wonderful moms at our company and for everything that they do in.
Mike Stein: I hope you all have the opportunity to call your mom have a great day.
Mike Stein: Thank you.
Operator: Thank you for your participation in today's conference. This does conclude our program. And you may now.
Mike Stein: Thank you for your participation in today's conference. This does conclude our program and you may now disconnect.
Mike Stein: Okay.
[music].
Mike Stein: Okay.