Q2 2025 TEGNA Inc Earnings Call
Good day, and thank you for standing by. Welcome to the Q2 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 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, 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 sealant. Please go ahead.
Thank you. Good morning and Welcome to our second quarter conference call and webcast. My name is Kirk vanilin and I am tenus treasurer.
Today, our CEO Mike stye and our CFO. Julie heskett will review tenis financial performance and results and provide technis 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.
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 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 Mike.
Thanks Kirk. Good morning everybody. Thank you for joining us.
Coming up on a year as CEO here, I'm more confident than ever in what sets Tena apart our strong. Local Brands, high-quality local journalism loyal audiences
Deep roots with advertisers healthy, balance sheet.
And a terrific team.
The broadcasting industry.
On the regulatory front there.
Seems to be positive progress. For the local broadcasters who are working tirelessly for the public interest.
Chairman Carr. Now has his majority and appears to be advancing a queer and encouraging agenda.
To allow broadcasters more scale and local markets than across the US.
Importantly, the 8th us Circuit Court of Appeals recently handed down a decision to vacate. The previous fcc's top 4 Pro Vision rule,
Reasoning that the rule was arbitrary and capricious.
The Willing will not take effect for a 90-day period while the FCC assesses. Whether vacating the rule would be unduly disruptive Andor here as deficiencies found by the court. However,
Given chairman Carr as well. Established views on this topic, we believe the ruling will likely take effect following this 90-day period.
Of note, the court specifically held that the quadrant will review statute does not provide the FCC authority to tighten existing ownership rules.
These developments are a significant step forward for our industry.
And for teena's wide range of options and the evolving landscape.
While we track these regulatory developments closely.
We're staying focused on the work at hand.
Elevating tegna across our key priorities.
Number 1 building a world-class team culture and Company operating system that unlocks high impact execution.
Number 2, leveraging tenis strengths across our stations to improve performance.
Number 3, fully deploying technology Automation, and AI to supercharge our people and running more effective operations.
Number 4.
Growing digital Revenue by deepening engagement with our digital audience.
And number 5, cutting unnecessary, spend and bureaucracy.
Ensuring time and resources are maximally focused on growing audience and growing revenue.
We're scaling with purpose and discipline in doing it fast as part of building a world-class team. We've named 5 new Regional heads of content reporting to Adrian work, they'll lead content, strategy across the country, building centers of excellence, and further strengthening tunguz, award-winning journalism.
We're delivering on our commitment to innovate and invest in our local newsrooms.
We're doubling down in the areas that drive our future local content and digital.
Just last month, we announced a major local news expansion. Adding dedicated 7 to 9:00 a.m. streaming programming in over 50 markets.
That's more than 100 new hours of local news every single day. Giving people more of the critical, local news and information. They need to thrive in their communities.
To support this shift. We're using Automation and proprietary AI to boost productivity and speed.
Giving our journalists more time to do, what matters? Most
By automating routine work.
Sharing resources, simplifying layers and bureaucracy. We freed up more time in dollars to invest in content.
The result is better journalism.
Faster, and at lower cost.
It is a win-win and it works in every Market.
We're still early in this game but CTV streaming is a 30 billion dollar market growing quickly and we are building the muscle to lead in it by overhauling our sales process. Reorienting, our Focus toward the digital opportunity.
The big picture is local wins.
Catastrophic events such as the recent flooding in Texas, highlight the power of local news.
There is closer focus on local impact helping communities rebuild bringing people together.
And helping fundraising for local communities.
There's massive opportunity in local news and Community storytelling, and we are built to meet that need
Across platforms. We reach more than 100 million people. That reach is transforming how we create distribute and monetize content and how we run the business behind it. We have the historical assets and the team to seize the opportunity and lead in local digital content.
Before we wrap, I want to take a moment to recognize our Chief Operating Officer. Lynn Beal will be departing at the end of this month, after more than 35 years in the industry.
It's hard to capture a career like lens in a few sentences.
Or leadership across broadcasting is the nothing short of extraordinary. Most recently, she was honored with the 2025 radio and television business report lifetime. Leadership award, A fitting tribute to someone who has helped shape the industry.
As we approach the end of my first year here, I want to thank the team for their extraordinary efforts to transform the way we operate at TEGNA. Talented and motivated people with an important mission, superpowered by technology, can achieve amazing things.
And I'm excited for what's ahead.
With that, I'll turn it over to Julie for a closer. Look at our financial performance and third quarter guidance.
Thank you, Mike and good morning everyone. Our second quarter Financial results, exceeded our expectations, primarily driven by lower operating expenses, which came in better than our previously announced guidance range.
We had anticipated advertising softness to persist during the second quarter as a result. Our teams continue to take a proactive approach to advancing our broad transformation agenda, which is generating Topline growth from various revenue streams.
I am thankful for all of our employees for their ongoing, focus and execution. As we work to build a more sustainable and growth-oriented future at tagnaout.
I will begin today by covering our second quarter Financial results, then provide an update on our operational initiatives and capital allocation priorities before closing with a review of our guidance.
Total company revenue for the second quarter, decreased 5%, year-over-year to 675 million in line with our Outlook range of down, 4 to 7%.
The decrease was primarily due to lower political advertising Revenue which is consistent with cyclical, even to odd year comparisons and softer, advertising and marketing Services, which was expected going into the quarter.
AMS, Revenue declined, 4% year-over-year to 288 million in the second quarter reflecting ongoing macroeconomic, headwinds amid economic uncertainty and softening consumer confidence. Some advertisers remained cautious and delayed spending contributing to a weaker AMS performance within the quarter.
As disclosed in our 10q filing, grey media, a reseller partner of Premium exited its Equity position and shifted to a non-exclusive advertising agreement.
This change is reducing premium-related revenue and therefore negatively impacting year-over-year AMS comparisons by approximately 200 basis points, which began in Q2 and will continue for the next 3 quarters.
Excluding this impact, underlying AMS, Revenue declined, 2% year-over-year in the quarter.
Despite near-term Market pressures. We are encouraged by the continued growth of our owned and operated digital products.
Which delivered strong double-digit growth year-over-year for the third consecutive quarter.
We remain focused on accelerating digital initiatives, where we have a clear competitive advantage.
As Mike discussed earlier, our digital strategy remains on track with our underlying business performing in line with expectations and we believe the long-term growth opportunity ahead is substantial.
Moving to distribution, revenue in the second quarter was flat year-over-year at $370 million due to subscriber declines, partially offset by contractual rate increases.
In terms of the distribution renewal cycle, approximately 35% of traditional subscribers are up for renewal at the end of this year, this comes after successfully. Renewing roughly 10% of our traditional mvpd subscribers at the end of the first quarter.
In 2026, we have approximately 30% of traditional subscribers up for renewal at year-end.
During the quarter, we reached a comprehensive multi-year agreement with Fox corporation that renews station affiliations for 6 of our markets.
These Fox markets cover approximately 7% of our Tega households, which is our smallest affiliate portfolio.
Moving on to cost cutting initiatives. We continue to drive, significant improvements to our cost structure. As we have highlighted in recent calls. We're aggressively deploying technology to run our stations more effectively and cutting all unnecessary spending. It's an important to note these improvements focus on our core operations, allowing us to streamline processes. While maintaining our high standards of execution. This enables us to provide higher quality journalism at faster speeds and lower cost.
Driven by local sports rights.
All other expenses outside of programming finished down 6% 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 dollars in annualized. Core non-programming savings, as we exit 2025.
At the end of the second quarter, we have achieved 80% of our target.
Our cost Reduction Program is more than just a Target, it's a disciplined zero waste, zero based budgeting approach.
We're scrutinizing. Every dollar we spend to ensure resources are aligned with our strategic priorities.
We are reinvesting savings back into the business but only into operate opportunities, that a enhance, the quality and reach of our content or B Drive sustainable Revenue growth.
As a result, our total adjusted ibida. In the second quarter, decreased 14% year-over-year to 151 million based on a previously. Discussed declines of high margin political and AMS revenues partially offset by continued cost cutting initiatives. I just spoke about
turning to Capital allocation, we remain committed to returning 40 to 60% of our adjusted free cash flow to shareholders over the 2-year period of 2024 and 2025
We paid 20 million in dividends to our shareholders in the second quarter.
On July 2nd, we called 250 million, par value of tenos, outstanding 550 million, senior notes, due in March of 2026, and a partial reduction, with cash on hand, which leaves $300 million in par value outstanding.
Cash and cash equivalents totaled $757 million at quarter-end, and our net leverage finished at 2.8 times.
We continue to take a disciplined approach to Capital deployment to ensure. We are investing for growth. In all avenues. We Believe will create the most value for shareholders.
Now, let's turn to our financial guidance elements. As we noted in our press release this morning, we are reaffirming our adjusted free cash flow. Guidance of 900 million to 1.1 billion dollars over the combined 2 year 2024 2025 period.
You can see all of our full year guidance metrics in our earnings release. We are lowering our full year. 2025 interest expense, guidance, range to 160, to 165 million reflecting, the 250 million, par value. Partial Redemption of our senior notes due in March that, I just mentioned.
Our financial.
Reporter is as follows.
We expect total company Revenue to decline, 18 to 20% year-over-year in line with expectations. Given the cyclical nature of our business. Specifically, the shift from an even year with significant political and Summer, Olympic advertising to an odd year without those Revenue drivers.
We expect non-gaap operating expenses to decline 2 to 3% year-over-year.
To recognize an extraordinary leader, our chief operating officer Lynn Beal.
As Mike already said she's retiring, at the end of the month, I have seen firsthand the commanding and lasting impact. She has had not just here at tegna where she spent more than 35 years shaping, our culture operations and success. But also across the entire industry
Her leadership strategic vision and countless contributions have elevated. The standard for excellence in local media.
On a personal note, Lyn is the person who hired me into this industry and has been a tremendous mentor and coach for more than two decades. I'm deeply grateful for her guidance, friendship, and unwavering commitment to developing those around her.
On behalf of all of us at tagna. Thank you Lynn. We wish you the very best in your well-earned retirement.
In closing our strong Brands robust local presence, a growing digital focused Workforce, and industry-leading balance sheet position us well to invest in internal growth opportunities. And those that arise from potential deregulation. We continue to generate results in line, with expectations, while investing for the future, in local journalism, local content, digital development. And in our people with that operator, let's open the call for questions.
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 1 1 1 on your telephone, and wait, for your name to be announced.
All your question. Please press star 1 1 again.
Please stand by while we compile the Q&A roster.
Our first question comes from the line of Dan kernos with the Benchmark company. Your line is now open.
Yeah. Thanks. Good morning. Uh, appreciate the color as always guys. Um Mike I guess to I know you did NBC last year, um but obviously they've come under some more scrutiny from chairman Carr and given how much their continuing to shift uh, exclusively on to Peacock. I just wonder um, if you think that anything might evolve in terms of the structure of that deal or if you're just simply locked in because of the deal that you did last year and then secondarily, I know that you have a lot of wood to chop and you've done a great job, kind of reorganizing the business towards internal growth initiatives. I'm just kind of curious where your head is at in terms of a sense of urgency from an m&a perspective. Especially since you've got, you know, both in market and out of Market opportunities, you don't have quite the same duopoly portfolio. That others have. Um, and so it kind of broadens, the spectrum for how you can attack the m.
A landscape. So I'll just stick with those 2 because that's probably already a mouthful.
Say that the network affiliate relationship is important and it is symbiotic. And we we value our Network partners and we, we approach those Partnerships with a constructive mindset in particular around, uh, the preservation of the uh, of the linear bundle, which has served this industry so well for such a long time.
I'm also.
That chairman car is so focused on the good work. That local broadcasters, both our local communities and that is looking to continue to help us poor public interest to those communities.
There's behind that there's nothing to comment on. In our in our Network relationships, you saw that we had a constructive engagement with uh, with Fox this quarter. And um, and you should continue expect to see us to continue to work, uh, collaboratively with our Network partners.
your second question, uh,
specifically, you have
Just uh, how much urgency we feel?
I'll forgive me for being repetitive, but I'll I'll come back to it first. We believe that deregulation is necessary important and coming. Our industry is up against big Tech competitors who have absolutely no encumbrances in how they compete across the country. And in our
secondly, we believe that when the government to create a significant profit pool for the broadcast industry and we have every expectation that we will participate.
We've told you that we are either a buyer or seller depending upon how the opportunities present themselves.
and you've already heard and and the last uh, few weeks from some of our peers in the industry,
About swaps, which are great opportunities to be both the buyer.
Parties.
We believe that it's a great opportunity but we also have a strong balance sheet and a great set of assets and we are going to be disciplined and how we approach this.
And so, we are continuing to take that approach. We're excited about the possibilities. Uh, and the team is doing their work.
Okay. Thanks, Mike. I appreciate it.
Thank you.
Our next question comes from the line of Craig Huber with Huber research Partners LLC. Your line is now open.
Yeah, hi there. Thank you. Um, like a couple questions. Um, maybe we'll start with the first 1. Um, you've spoken a lot over almost the last year. Now about significant cost savings at Tenga using technology. Can you give us some of the biggest areas where you've you've used Ai and Technology to take out costs? Where the big the biggest wins you've had on taking costs out using technology?
Just like examples, please. Sure, great, um, higher level examples but I, I, I won't for today's call contextualize those and Julie's sort of specific cost saving numbers that she's been saving, uh, sharing with you first. I'll make an important distinction often think about ai's involvement in the content creation itself and that's not where we are in our our playing. Um, we believe you need good journalists.
And we have done.
Do we have an audio problem?
Julie, it's a little choppy. Yep, there's a little choppy. If you want to try again. It's intermittent like try again.
I'm sorry about that.
So, let me come back to the examples.
We?
we do and we have to Wing analysis of the workflows of every person and every business process in the company that there are a number
of activities that are sort of wrote and could be automated. And we're looking uh and we're looking for opportunities to automate those 1 example.
Is transcription. We've had a lot of journalists who finished an interview and then hand write the interview. Another example is video editing. Uh, it takes a lot of time to edit videos and we have found ways to deploy AI to do. The video editing.
Um, another is identifying news stories, before the team gets to the office, we receive lots of emails, um, from sources and those can be summarized and presented to the team so that they can jump on the the hottest opportunities.
We see opportunities on the, on the sales and go to market side as well, um, creating, uh, draft campaigns for prospects, uh, warming up, uh, leads with new advertisers through email campaigns and others. It's not 1 or 2 or even 3 potential, AI automation initiatives. It's a full company mindset around demanding that our people spend their time on the high leverage activities that only good smart people can do and have an expectation that when they can offload Road tasks, they will.
I appreciate that. I would add Frank. This is Julie just on the the cost side and and future leveraging cost of capital coming down. Both from a technology perspective um as well as space is real estate, um, and we're finding really good progress on building. If you will, Stations of the future, which is a smaller footprint from a square footage perspective spending potentially 80% Less in capex utilizing the the new technology and the Virtual Technology that is available to us. Um and also identifying about 50% Less in operating expenses um by taking advantage of of these opportunities.
Clear, appreciate that. Also, I want to ask you, can you talk a little further about your outlook for core advertising here in the third quarter year-over-year. What's the trending like right now, please?
Yeah, let me I touched this first on the, the sort of macro piece of that is, you know, as we look at it, the economy seems to be strong the, you know, but but choppy and so far. As first quarter uh, was close to Flat year-over-year growth, second quarter, you saw a spike to 3% growth and tariffs, certainly played a a role in all that. Um as we look to Q3 the Blue Chip, consensus was for GDP growth around 1% in the Atlanta fed Outlook based on. The latest data is about 2 and a half.
So overall.
We think the economy is heading in the right direction at the same time, it as I've shared with you all on these calls before. My experience is that
Uncertainty in the economy uh is not good for collecting advertising Revenue. The advertisers tend to sit on the sidelines, a little longer until they feel confident in the direction of the economy. It's also been my experience that they always come back and you get to, you get to reclaim the um the dollars you didn't take when
Uh, when advertisers were feeling that uncertainty. So at a high level, we sort of understand that the ad Market might be a little bit softer right now relative to our view of the macro economy. It's also been my experience that the advertisers tend to tend to catch up, um, with uh, you know, they tend to catch up and they tend to catch up, uh, with more in their pockets from the money that they kept on the sidelines in the previous quarter or quarters.
Reseller partnership which is also impacting our AMS Trends going forward. That began in Q2 and now it will take 3 additional quarters to lap that, um, that was also about 200 basis points. Um, I'm positive um, growth in digital of our own and owned properties continues to ramp up, um, and, you know, our go to market strategy of training up on capitalizing. On the digital growth area is continuing to improve on a sequential uh, basis. And then I would say while July and August are substantially weaker because of more of the Olympic and the trickle down of the tariffs, I can tell you exiting Q3 you know, September is in the positive direction and and pacing up on a year-over-year basis.
so, when, when you roll that all together, Julie, where where is it overall quarter looking like advertising might end up being
The core advertising percent change that gets down year over year.
Yeah. So we don't guide to advertising specific. You saw the comments of total revenue is projected to be down 18 to 20% and I would say you know advertising is going to be and that you know low doubles to Mid teens range.
Very good. Thank you.
Thank you.
Our next question comes from the line of Stephen Cahal with Wells Fargo. Your line is now open.
I think so Mike, you know, help helpful comments about how you kind of think about the m&a market and
I know there's a lot of options there between being a buyer or seller um you know 1 of your peer CEOs are just you know, saying that everybody's talking to everybody right now. So I was wondering if you could give us some perspective as to whether or not you think this is more of a buyer's market or more of a seller's market. Um, when I kind of look at things, it seems like there are quite a few things, maybe for sales, not that many, with, at least cash for for purchasing, which may skew those conversations in a particular direction. But just wanted to know, if, if that's correct or if some things that maybe we've missed in that characterization and again, I know whatever deals you do will be subject to those exact terms. Um, and then, uh, maybe just secondly on on reverse comp. Um, you know, are you seeing any sort of Paradigm shifts in the way that these are done? Whether it's the pricing algorithm fixed versus variable? Um, you know, I know the renewal you did was relatively
Small in terms of your household. But just wondering if there are any trends that you've seen in reverse that you think are sort of bigger picture for the next few years. Thank you.
Um, thank you for the first question.
I can't answer the market. I can only answer the market through our perspective, and our perspective is we have a strong balance sheet and, and, and, and strong relative, uh, to the market. And we have great assets. It should create significant value creation opportunities for our shareholders. And so, we're engaged in the market. As you would expect us to be, uh, seeking to identify the way to create the most value for our shareholders. And, um, and as, as we've noted, there are acquisition Swap and sale opportunities that can that can benefit across the board. We have a wide aperture on this and at the end of the day it is our job to be dispassionate, capital allocators and do what's best for the shareholders.
The second question. Uh, uh.
Julie, do you want to jump on the sort of reverse retrans?
Yeah. So it's Stephen. I'll take that 1. If you recall last year, I think we were 1 of the, um, initial uh, companies to identify a bend in the curve of what used to be a steep growth expense line item of programming fees with the networks is as they come up for Renewal. There are opportunities to renegotiate and have favorable terms for both parties, quite frankly, um, on the, the partnership of those deals. Um, so that continues to play out, our reverse comp programming fee, line item continues to be, um, flattish. Um, as we look at year-over-year trends of, of each of those, uh, agreements.
Great. Thank you all for the color.
Thank you. As a reminder, to ask a question, please press *1, 1, 1 on your telephone, and wait for your name to be announced.
Is now open.
Hi. Uh, thank you. I just had a follow-up question on uh premium. Um
just with with the exiting of the, the reseller relationship can you talk about like just the overall um how how how advertisers view that product with the kind of just focus more on the, the tagna, uh, footprint and, you know, and you just sort of broader impact that might have within like
Uh, net for National advertisers or you know, wider political buys.
uh, on premium something, I've I've shared with you all before I, you know, spent a lot of time with our, our sales team and our, our customers on premium, and it is a real value to local advertisers, um, who
you know, are have a relationship with our sales teams and
Trust our sales teams and and have had that consultative partnership in helping them to reach Their audience and reach their business objectives on television.
Half of the audience left, the traditional linear television bundle and went to streaming, and we're able to go to those advertisers and offer them. Not only the reach that they've gotten historically by buying TV because now they can buy from us both TV and connected TV streaming. But in addition, a layer of demographic psychographic and location-based targeting that helps them to enhance their buying and improve their return on investment.
The premium business is also highly synergistic with the efforts, um, that we've leaned into very hard this year, around our owned and operated streaming apps.
Uh, it's driving significant growth in our total digital, unique audience and minutes streamed every month, and just creating a real and significant opportunity for us on both fronts.
So we are, uh, we're excited about premium. Uh, it is and we are engaged in conversations with folks around, uh, around expanding the
Expanding the premium service. Um as you can imagine we had a good and constructive partnership with gray and um and we're keen to have more like that.
Okay, thank you.
Thank you.
I'm showing no further questions at this time. I would now like to turn it back to Mike's dye for closing remarks.
Well just as always, thank everyone for your interest that you know we're a year into this journey right now and I I want to reiterate I'm I'm extremely proud of the team. It is it is difficult to change the Strategic and operational and pace of execution in the way that's necessary to capture this moment of opportunity. Uh, but the gang is really stepped up and I'm really excited about the future. So I like to thank everybody for your engagement, as always, and
Talk to you next quarter.
Thank you for your participation. In today's conference, this does conclude the program. You may now disconnect