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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
Commission file number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code) |
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Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☒ |
Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
The total number of shares of the registrant’s Common Stock, $1 par value, outstanding as of October 31, 2024 was
INDEX TO TEGNA INC.
September 30, 2024 FORM 10-Q
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Item No. |
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Page |
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1. |
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Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 |
3 |
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Consolidated Statements of Income for the Quarters and Nine Months Ended September 30, 2024 and 2023 |
5 |
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6 |
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7 |
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8 |
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10 |
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2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18 |
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3. |
27 |
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4. |
27 |
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1. |
27 |
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1A. |
27 |
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2. |
28 |
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3. |
28 |
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4. |
28 |
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5. |
28 |
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6. |
29 |
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30 |
2
PART I. FINA NCIAL INFORMATION
Item 1. Fi nancial Statements
TEGNA Inc.
CONDENSED CONSOLI DATED BALANCE SHEETS
In thousands of dollars (Unaudited)
|
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Sept. 30, 2024 |
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Dec. 31, 2023 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable, net of allowances of $
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Other receivables |
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Syndicated programming rights |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment |
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Cost |
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Less accumulated depreciation |
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(
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) |
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(
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) |
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Net property and equipment |
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Intangible and other assets |
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Goodwill |
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Indefinite-lived and amortizable intangible assets, less accumulated amortization of $
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Right-of-use assets for operating leases |
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Investments and other assets |
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Total intangible and other assets |
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Total assets |
$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
TEGNA Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands of dollars, except par value and share amounts (Unaudited)
|
|
Sept. 30, 2024 |
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Dec. 31, 2023 |
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LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY |
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Current liabilities |
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Accounts payable |
$ |
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$ |
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Accrued liabilities |
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Compensation |
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Interest |
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Contracts payable for programming rights |
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Other |
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Income taxes payable |
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Total current liabilities |
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Noncurrent liabilities |
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Deferred income tax liability |
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Long-term debt |
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Pension liabilities |
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Operating lease liabilities |
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Other noncurrent liabilities |
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Total noncurrent liabilities |
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Total liabilities |
$ |
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$ |
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Redeemable noncontrolling interest (see Note 1) |
$ |
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$ |
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Shareholders ̛ equity |
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Common stock of $
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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(
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(
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Less treasury stock at cost,
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(
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) |
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(
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Total equity |
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Total liabilities, redeemable noncontrolling interest and equity |
$ |
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$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
TEGNA Inc.
CONSOLIDATED STATEME NTS OF INCOME
Unaudited, in thousands of dollars, except per share amounts
|
|
Quarter ended Sept. 30, |
|
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Nine months ended Sept. 30, |
|
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2024 |
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2023 |
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2024 |
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2023 |
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Revenues |
$ |
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$ |
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$ |
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$ |
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||||
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Operating expenses: |
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Cost of revenues 1 |
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Business units - Selling, general and administrative expenses |
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Corporate - General and administrative expenses |
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Depreciation |
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Amortization of intangible assets |
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Asset impairment and other |
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Merger termination fee |
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(
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) |
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Total |
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Operating income |
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Non-operating (expense) income: |
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Interest expense |
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(
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) |
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(
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) |
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(
|
) |
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(
|
) |
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Interest income |
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Other non-operating items, net |
|
(
|
) |
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|
Total |
|
(
|
) |
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(
|
) |
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(
|
) |
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||||
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Income before income taxes |
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Provision for income taxes |
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Net income |
|
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Net loss (income) attributable to redeemable noncontrolling interest |
|
|
|
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|
(
|
) |
|
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|
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|
|
|
Net income attributable to TEGNA Inc. |
$ |
|
|
|
$ |
|
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|
$ |
|
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|
$ |
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||||
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Earnings per share: |
|
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|
||||
|
Basic |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Diluted |
$ |
|
|
|
$ |
|
|
|
$ |
|
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$ |
|
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||||
|
Weighted average number of common shares outstanding: |
|
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||||
|
Basic shares |
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Diluted shares |
|
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|
1
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
TEGNA Inc.
CONSOLIDATED STATEMENTS OF C OMPREHENSIVE INCOME
Unaudited, in thousands of dollars
|
|
Quarter ended Sept. 30, |
|
|
Nine months ended Sept. 30, |
|
||||||||||
|
|
2024 |
|
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2023 |
|
|
2024 |
|
|
2023 |
|
||||
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||||
|
Net Income |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Recognition of previously deferred post-retirement benefit plan costs |
|
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|
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|
|
|
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|
|
Income tax effect related to components of other comprehensive income |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Other comprehensive income, net of tax |
|
|
|
|
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|
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Comprehensive income |
|
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|
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Comprehensive loss attributable to redeemable noncontrolling interest |
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to TEGNA Inc. |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
TEGNA Inc.
CONDENSED CONSOLIDATED ST ATEMENTS OF CASH FLOWS
Unaudited, in thousands of dollars
|
|
Nine months ended Sept. 30, |
|
|||||
|
|
2024 |
|
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2023 |
|
||
|
Cash flows from operating activities: |
|
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|
||
|
Net income |
$ |
|
|
|
$ |
|
|
|
Adjustments to reconcile net income to net cash flow from operating activities: |
|
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||
|
Depreciation and amortization |
|
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Employee stock-based compensation expenses |
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Company stock 401(k) match contributions |
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Gain on investment sales |
|
(
|
) |
|
|
(
|
) |
|
Equity loss in unconsolidated investments, net |
|
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Merger termination fee |
|
|
|
|
|
(
|
) |
|
Pension expense, net of employer contributions |
|
(
|
) |
|
|
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Change in operating assets and liabilities, net of acquisitions: |
|
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Decrease in trade receivables |
|
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(Decrease) increase in accounts payable |
|
(
|
) |
|
|
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Increase (decrease) in interest and taxes payable |
|
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|
(
|
) |
|
Increase in deferred revenue |
|
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Changes in other assets and liabilities, net |
|
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Net cash flow from operating activities |
|
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Cash flows from investing activities: |
|
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||
|
Purchase of property and equipment |
|
(
|
) |
|
|
(
|
) |
|
Payments for acquisitions of businesses and assets, net of cash acquired |
|
(
|
) |
|
|
(
|
) |
|
Payments for investments |
|
(
|
) |
|
|
(
|
) |
|
Proceeds from investments |
|
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Proceeds from sale of assets |
|
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Net cash flow provided by (used for) investing activities |
|
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(
|
) |
|
Cash flows from financing activities: |
|
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Repurchase of common stock |
|
(
|
) |
|
|
(
|
) |
|
Dividends paid |
|
(
|
) |
|
|
(
|
) |
|
Payments for financing costs |
|
(
|
) |
|
|
|
|
|
Payment for acquisition-related earnout consideration |
|
(
|
) |
|
|
|
|
|
Payments for tax withholding related to vested stock-based compensation awards |
|
(
|
) |
|
|
(
|
) |
|
Net cash flow used for financing activities |
|
(
|
) |
|
|
(
|
) |
|
Increase in cash and cash equivalents |
|
|
|
|
|
|
|
|
Balance of cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
Balance of cash and cash equivalents at end of period |
$ |
|
|
|
$ |
|
|
|
|
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|
|
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||
|
|
|
|
|
|
|
||
|
Supplemental cash flow information: |
|
|
|
|
|
||
|
Cash paid for income taxes, net of refunds |
$ |
|
|
|
$ |
|
|
|
Cash paid for interest |
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
TEGNA Inc.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTEREST
Unaudited, in thousands of dollars, except per share data
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|||||||
|
Quarter ended: |
Redeemable noncontrolling interest |
|
|
|
Common stock |
|
Additional paid-in capital |
|
Retained earnings |
|
Accumulated other comprehensive loss |
|
|
Treasury stock |
|
|
Total Equity |
|
|||||||
|
Balance as of June 30, 2024 |
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
Net (loss) income |
|
(
|
) |
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other comprehensive income, net of tax |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total comprehensive income |
|
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|
|
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|
||||||
|
Dividends declared: $
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
(
|
) |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Company stock 401(k) match contributions |
|
— |
|
|
|
|
— |
|
|
(
|
) |
|
(
|
) |
|
— |
|
|
|
|
|
|
|
|
|
|
Stock-based awards activity |
|
— |
|
|
|
|
— |
|
|
(
|
) |
|
(
|
) |
|
— |
|
|
|
|
|
|
|
(
|
) |
|
Employee stock-based compensation expenses |
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Repurchase of common stock |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
Adjustment of redeemable noncontrolling interest to redemption value |
|
|
|
|
|
|
— |
|
|
— |
|
|
(
|
) |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Other activity |
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Balance as of Sept. 30, 2024 |
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Redeemable noncontrolling interest |
|
|
|
Common stock |
|
Additional paid-in capital |
|
Retained earnings |
|
Accumulated other comprehensive loss |
|
|
Treasury stock |
|
|
Total Equity |
|
|||||||
|
Balance as of June 30, 2023 |
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other comprehensive income, net of tax |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Dividends declared: $
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
(
|
) |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Company stock 401(k) match contributions |
|
— |
|
|
|
|
— |
|
|
(
|
) |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Stock-based awards activity |
|
— |
|
|
|
|
— |
|
|
(
|
) |
|
|
|
|
— |
|
|
|
|
|
|
|
(
|
) |
|
Employee stock-based compensation expenses |
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Repurchase of common stock |
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
Adjustment of redeemable noncontrolling interest to redemption value |
|
|
|
|
|
|
— |
|
|
— |
|
|
(
|
) |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Other activity |
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Balance as of Sept. 30, 2023 |
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
TEGNA Inc.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTEREST
Unaudited, in thousands of dollars, except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Nine Months Ended: |
Redeemable noncontrolling interest |
|
|
|
Common stock |
|
Additional paid-in capital |
|
Retained earnings |
|
Accumulated other comprehensive loss |
|
|
Treasury stock |
|
|
Total Equity |
|
|||||||
|
Balance as of Dec. 31, 2023 |
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
Net (loss) income |
|
(
|
) |
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other comprehensive income, net of tax |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Dividends declared: $
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
(
|
) |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Company stock 401(k) match contributions |
|
— |
|
|
|
|
— |
|
|
(
|
) |
|
(
|
) |
|
— |
|
|
|
|
|
|
|
|
|
|
Stock-based awards activity |
|
— |
|
|
|
|
— |
|
|
(
|
) |
|
(
|
) |
|
— |
|
|
|
|
|
|
|
(
|
) |
|
Employee stock-based compensation expenses |
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
||
|
Adjustment of redeemable noncontrolling interest to redemption value |
|
|
|
|
|
|
— |
|
|
— |
|
|
(
|
) |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Other activity |
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Balance as of Sept. 30, 2024 |
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Redeemable noncontrolling interest |
|
|
|
Common stock |
|
Additional paid-in capital |
|
Retained earnings |
|
Accumulated other comprehensive loss |
|
|
Treasury stock |
|
|
Total Equity |
|
|||||||
|
Balance as of Dec. 31, 2022 |
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
Net (loss) income |
|
(
|
) |
|
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other comprehensive income, net of tax |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Dividends declared: $
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
(
|
) |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Company stock 401(k) match contributions |
|
— |
|
|
|
|
— |
|
|
(
|
) |
|
(
|
) |
|
— |
|
|
|
|
|
|
|
|
|
|
Stock-based awards activity |
|
— |
|
|
|
|
— |
|
|
(
|
) |
|
(
|
) |
|
— |
|
|
|
|
|
|
|
(
|
) |
|
Employee stock-based compensation expenses |
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
||
|
Adjusted redeemable noncontrolling interest to redemption value |
|
|
|
|
|
|
— |
|
|
— |
|
|
(
|
) |
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Other activity |
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Balance as of Sept. 30, 2023 |
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
TEGNA Inc.
NOTES TO CONDENSED CONSO LIDATED FINANCIAL STATEMENTS
NOTE 1 – Basis of presentation and accounting policies
Basis of presentation: Our (or TEGNA’s) accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting, the instructions for Form 10-Q and Article 10 of the U.S. Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all information and footnotes which are normally included in the Form 10-K and annual report to shareholders. In our opinion, the condensed consolidated financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods presented. The condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 .
We operate
Accounting guidance adopted in 2024: We did not adopt any new accounting guidance in 2024 that had a material impact on our condensed consolidated financial statements or disclosures.
New accounting guidance not yet adopted: In November 2023, the Financial Accounting Standards Board (FASB) issued new guidance that changes required disclosures related to segment reporting. The guidance will require entities to disclose on a quarterly and annual basis the significant segment expense items that are regularly provided to the entity’s chief operating decision maker (CODM). Entities will also be required to disclose the title and position of their CODM. The new guidance is effective for us beginning in 2024 on an annual basis and the first quarter of 2025 on a quarterly basis, and is to be applied on a retrospective basis. We are currently evaluating the effect this new guidance will have on our disclosures.
In December 2023, the FASB issued new guidance that changes certain disclosures related to income taxes. The guidance requires entities to disclose additional quantitative and qualitative information about the reconciliation between their statutory and effective tax rates. Specifically, the guidance requires disaggregation of the reconciling items using standardized categories. This guidance also requires additional disclosure of income taxes paid to now include disaggregation on a federal, state and foreign basis and to specifically include the amount of income taxes paid to individual jurisdictions when they represent five percent or more of total income tax payments. The new guidance is effective for us beginning in 2025 annual reporting and may be applied on either a prospective or retrospective basis. Early adoption of the guidance is permitted. We are currently evaluating the effect this new guidance will have on our disclosures.
In November 2024, the FASB issued new guidance related to expense disaggregation disclosures. This guidance requires additional disclosure of certain amounts included in the expense captions presented in the Statement of Income as well as disclosures about selling expenses. The new guidance is effective for us beginning in 2027 on an annual basis and the first quarter of 2028 on a quarterly basis, and may be applied on either a prospective or retrospective basis. Early adoption of the guidance is permitted. We are currently evaluating the effect this new guidance will have on our disclosures.
10
Redeemable Noncontrolling interest: Our Premion business operates an advertising network for over-the-top (OTT) streaming and connected television platforms. In March 2020, we sold a minority interest in Premion to an affiliate of Gray Television (Gray) and entered into a commercial reselling agreement with the affiliate. Gray’s investment allows it to sell its interest to Premion if there is a change in control of TEGNA or if the commercial agreement terminates. Since redemption of the minority ownership interest is outside our control, Gray’s equity interest is presented outside of the Equity section on the Condensed Consolidated Balance Sheets in the caption “Redeemable noncontrolling interest.” When the redemption or carrying value (the acquisition date fair value adjusted for the noncontrolling interest’s share of net income (loss) and dividends) is less than the recorded redemption value, we adjust the redeemable noncontrolling interest to equal the redemption value with changes recognized as an adjustment to retained earnings. Any such adjustment, when necessary, will be performed as of the applicable balance sheet date.
Treasury Stock: We account for treasury stock under the cost method. When treasury stock is re-issued at a price higher than its cost, the difference is recorded as a component of additional paid-in-capital (APIC) in our Condensed Consolidated Balance Sheets. When treasury stock is re-issued at a price lower than its cost, the difference is recorded as a component of APIC to the extent that there are previously recorded gains to offset the losses. If there are no accumulated gains in APIC, the losses upon re-issuance of treasury stock are recorded as a reduction of retained earnings in our Condensed Consolidated Balance Sheets.
Revenue recognition: Revenue is recognized upon the transfer of control of promised services to our customers in an amount that reflects the consideration we expect to receive in exchange for those services. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Amounts received from customers in advance of providing services to our customers are recorded as deferred revenue.
The primary sources of our revenues are: 1) subscription revenues, reflecting fees paid by satellite, cable, OTT (companies that deliver video content to consumers over the Internet) and telecommunications providers to carry our television signals on their systems; 2) advertising & marketing services revenues, which include local and national non-political television advertising, digital marketing services (including Premion), advertising on the stations’ websites, tablet and mobile products, and OTT apps; 3) political advertising revenues, which are driven by even-year election cycles at the local and national level (e.g. 2022, 2024, etc.) and particularly in the second half of those years; and 4) other services, such as production of programming, tower rentals and distribution of our local news content.
Revenue earned by these sources in the third quarter and first nine months of 2024 and 2023 are shown below (amounts in thousands):
|
|
Quarter ended Sept. 30, |
|
|
Nine months ended Sept. 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Subscription |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Advertising & Marketing Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Political |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
11
NOTE 2 – Goodwill and other intangible assets
The following table displays goodwill, indefinite-lived intangible assets, and amortizable intangible assets as of September 30, 2024 and December 31, 2023 (in thousands):
|
|
Sept. 30, 2024 |
|
|
Dec. 31, 2023 |
|
||||||||||
|
|
Gross |
|
|
Accumulated Amortization |
|
|
Gross |
|
|
Accumulated Amortization |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Goodwill |
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Indefinite-lived intangibles: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Television and radio station FCC broadcast licenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Retransmission agreements |
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Network affiliation agreements |
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Other |
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Total indefinite-lived and amortizable intangible assets |
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
Our retransmission agreements and network affiliation agreements are amortized on a straight-line basis over their estimated useful lives. Other intangibles primarily include distribution agreements from our multicast networks acquisition, which are also amortized on a straight-line basis over their useful lives. In the first nine months of 2024
, gross intangible assets and associated accumulated amortization decreased by $
On January 31, 2024, Premion, LLC acquired substantially all the assets of Octillion Media, a next-generation, demand-side platform focused on Local Connected TV (CTV)/Over-the-Top (OTT) advertising. The acquisition expands Premion’s capabilities in the growing CTV marketplace by combining Octillion’s technology with Premion’s local CTV/OTT advertising solution.
The base purchase price of the acquisition was $
The acquisition was funded with available cash on hand.
We are accounting for the acquisition as a business combination, which requires us to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of the net assets acquired is recorded as goodwill. We have commenced the appraisals necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed and the amount of goodwill to be recognized. Based on preliminary valuations we have recorded $
The amounts recorded for acquired assets and liabilities are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date.
NOTE 3 – Investments and other assets
Our investments and other assets consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):
|
|
Sept. 30, 2024 |
|
|
Dec. 31, 2023 |
|
||
|
|
|
|
|
|
|
||
|
Cash value life insurance |
$ |
|
|
|
$ |
|
|
|
Equity method investments |
|
|
|
|
|
|
|
|
Other equity investments |
|
|
|
|
|
|
|
|
Deferred financing costs |
|
|
|
|
|
|
|
|
Prepaid assets |
|
|
|
|
|
|
|
|
Other long-term assets |
|
|
|
|
|
|
|
|
Total |
$ |
|
|
|
$ |
|
|
12
Cash value life insurance: We are the beneficiary of life insurance policies on the lives of certain employees/retirees, which are recorded at their cash surrender value as determined by the insurance carrier. These policies are utilized as a partial funding source for deferred compensation and other non-qualified employee retirement plans. Gains and losses on these investments are included in “Other non-operating items, net” within our Consolidated Statements of Income and were not material for all periods presented.
Equity method investments: These are investments in entities in which we have significant influence, but do not have a controlling financial interest. Our share of net earnings and losses from these ventures is included in “Other non-operating items, net” in the Consolidated Statements of Income.
Other equity investments : Represents investments in non-public businesses that do not have readily determinable pricing, and for which we do not have control and do not exert significant influence. These investments are recorded at cost less impairments, if any, plus or minus changes in observable prices for those investments.
In the first quarter of 2024 we received $
Deferred financing costs
: These costs consist of amounts paid to lenders related to our revolving credit facility. On January 25, 2024, we entered into an amendment of our credit facility that resulted in the capitalization of $
Prepaid assets: These amounts primarily consist of an asset related to a long-term services agreement for IT security.
NOTE 4 – Long-term debt
Our long-term debt is summarized below (in thousands):
|
|
Sept. 30, 2024 |
|
|
Dec. 31, 2023 |
|
||
|
|
|
|
|
|
|
||
|
Unsecured notes bearing fixed rate interest at
|
$ |
|
|
|
$ |
|
|
|
Unsecured notes bearing fixed rate interest at
|
|
|
|
|
|
|
|
|
Unsecured notes bearing fixed rate interest at
|
|
|
|
|
|
|
|
|
Unsecured notes bearing fixed rate interest at
|
|
|
|
|
|
|
|
|
Unsecured notes bearing fixed rate interest at
|
|
|
|
|
|
|
|
|
Total principal long-term debt |
|
|
|
|
|
|
|
|
Financing costs |
|
(
|
) |
|
|
(
|
) |
|
Unamortized premiums and discounts, net |
|
|
|
|
|
|
|
|
Total long-term debt |
$ |
|
|
|
$ |
|
|
On January 25, 2024, we entered into an amendment to our revolving credit facility (the Credit Agreement). Among other things, the amendment amends the Credit Agreement to:
Under the amended Credit Agreement, the Company’s maximum Total Leverage Ratio (as defined in the Credit Agreement) will remain unchanged at
As of September 30, 2024, cash and cash equivalents totaled
$
13
NOTE 5 – Retirement plans
We have various defined benefit retirement plans. Our principal defined benefit pension plan is the TEGNA Retirement Plan (TRP). The total net pension obligations, including both current and non-current liabilities, as of September 30, 2024, were
$
Pension costs (income), which primarily include costs for the qualified TRP and the non-qualified TEGNA Supplemental Retirement Plan (SERP), are presented in the following table (in thousands):
|
|
Quarter ended Sept. 30, |
|
|
Nine months ended Sept. 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest cost on benefit obligation |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Expected return on plan assets |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Amortization of prior service cost (credit) |
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Amortization of actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense for company-sponsored retirement plans |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Benefits no longer accrue for TRP and SERP participants as a result of amendments to the plans in past years, and as such we no longer incur a service cost component of pension expense. All other components of our pension expense presented above are included within the “Other non-operating items, net” line item of the Consolidated Statements of Income.
During the nine months ended September 30, 2024 and 2023
we made cash contributions to the TRP of $
NOTE 6 – Accumulated other comprehensive loss
The following table summarizes the components of, and the changes in, Accumulated Other Comprehensive Loss (AOCL), net of tax (in thousands):
|
|
Retirement
|
|
|
Foreign
|
|
|
Total |
|
|||
|
Quarter ended: |
|
|
|
|
|
|
|
|
|||
|
Balance as of June 30, 2024 |
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
Amounts reclassified from AOCL |
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of Sept. 30, 2024 |
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
|
|
|
|
|
|
|
|
|
|||
|
Balance as of June 30, 2023 |
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
Amounts reclassified from AOCL |
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of Sept. 30, 2023 |
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
|
|
|
|
|
|
|
|
|
|||
|
Nine Months Ended: |
|
|
|
|
|
|
|
|
|||
|
Balance as of Dec. 31, 2023 |
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
Amounts reclassified from AOCL |
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of Sept. 30, 2024 |
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
Balance as of Dec. 31, 2022 |
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
Amounts reclassified from AOCL |
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of Sept. 30, 2023 |
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
14
Reclassifications from AOCL to the Consolidated Statements of Income are comprised of pension and other post-retirement components. Pension and other post-retirement reclassifications are related to the amortization of prior service costs and actuarial losses.
|
|
Quarter ended Sept. 30, |
|
|
Nine months ended Sept. 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Amortization of prior service cost (credit), net |
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
Amortization of actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications, before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax effect |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Total reclassifications, net of tax |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
NOTE 7 – Earnings per share
Our earnings per share (basic and diluted) are presented below (in thousands, except per share amounts):
|
|
Quarter ended Sept. 30, |
|
|
Nine months ended Sept. 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net loss (income) attributable to the noncontrolling interest |
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Adjustment of redeemable noncontrolling interest to redemption value |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Earnings available to common shareholders |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted average number of common shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance share awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income per share - basic |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income per share - diluted |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Our calculation of diluted earnings per share includes the dilutive effects for the assumed vesting of outstanding restricted stock units and performance share awards. The diluted earnings per share amounts exclude the effects of approximately
NOTE 8 – Fair value measurement
We measure and record certain assets and liabilities at fair value in the accompanying condensed consolidated financial statements. U.S. GAAP establishes a hierarchy for those instruments measured at fair value that distinguishes between market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 – Quoted market prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3 – Unobservable inputs developed using our own estimates and assumptions, which reflect those that a market participant would use.
We also hold other financial instruments including cash and cash equivalents, receivables, accounts payable, contingent consideration and debt. The carrying amounts for cash and cash equivalents, receivables and accounts payable approximated their fair values. The fair value of our total debt, based on the bid and ask quotes for the related debt (Level 2), totaled $
15
As described in Note 2, in connection with the Octillion acquisition, the sellers may be entitled to earn additional consideration in the form of earnouts depending on the achievement of certain technological and financial milestones. The maximum value of these earnouts is $
NOTE 9 – Share repurchase program
On June 2, 2023, we entered into our first accelerated share repurchase program (the first ASR) with JPMorgan Chase Bank, National Association (JPMorgan). Under the terms of the first ASR, we repurchased $
On November 9, 2023, we entered into a second accelerated share repurchase (the second ASR) program with JPMorgan. Under the terms of the second ASR, we repurchased $
In December 2023, our Board of Directors authorized a new share repurchase program for up to $
During the first nine months of 2024
, we returned $
Our capital allocation plan is subject to a variety of factors, including our strategic plans, market and economic conditions and the discretion of our Board of Directors.
NOTE 10 – Other matters
Litigation
Antitrust matters
In the third quarter of 2018, certain national media outlets reported the existence of a confidential investigation by the United States Department of Justice Antitrust Division (DOJ) into the local television advertising sales practices of station owners. We received a Civil Investigative Demand (CID) in connection with the DOJ’s investigation. On November 13 and December 13, 2018, the DOJ and
Since the national media reports, numerous putative class action lawsuits were filed against owners of television stations (the Advertising Cases) in different jurisdictions. Plaintiffs are a class consisting of all persons and entities in the United States who paid for all or a portion of advertisement time on local television provided by the defendants. The Advertising Cases assert antitrust and other claims and seek monetary damages, attorneys’ fees, costs and interest, as well as injunctions against the allegedly wrongful conduct.
16
These cases were consolidated into a single proceeding in the United States District Court for the Northern District of Illinois, captioned In re: Local TV Advertising Antitrust Litigation on October 3, 2018. At the court’s direction, plaintiffs filed an amended complaint on April 3, 2019, that superseded the original complaints. Although we were named as a defendant in
On May 26, 2023, plaintiffs moved for preliminary approval of settlements with
Discovery in the Advertising Cases is ongoing. We believe that the claims asserted in the Advertising Cases are without merit and intend to defend vigorously against them.
Other litigation matters
We, along with a number of our subsidiaries, also are defendants in other judicial and administrative proceedings involving matters incidental to our business. We do not believe that any material liability will be imposed as a result of any of the foregoing matters.
Related Party Transactions
We have an equity investment in MadHive, Inc. (MadHive) which is a related party of TEGNA. We also have commercial agreements with MadHive, under which MadHive supports our Premion business in acquiring over-the-top advertising inventory and delivering corresponding advertising impressions. In the third quarter and first nine months of 2024
, we incurred expenses of $
17
Item 2. Managemen t’s Discussion and Analysis of Financial Condition and Results of Operations
Company Overview
We serve our local communities across the U.S. through trustworthy journalism, engaging content, and tools that help people navigate their daily lives. Through customized marketing solutions, we help businesses grow and thrive. With 64 television stations in 51 U.S. markets, we reach approximately 100 million people every month across the web, mobile apps, streaming, and linear television. We have been consistently honored with the industry’s top awards, including Edward R. Murrow, George Polk, Alfred I. DuPont and Emmy Awards. We also own leading multicast networks True Crime Network and Quest.
We have one operating and reportable segment. The primary sources of our revenues are: 1) subscription revenues, reflecting fees paid by satellite, cable, over-the-top (OTT) (companies that deliver video content to consumers over the Internet) and telecommunications providers to carry our television signals on their systems; 2) advertising & marketing services (AMS) revenues, which include local and national non-political television advertising, digital marketing services (including Premion), and advertising on the stations’ websites, tablet and mobile products and OTT apps; 3) political advertising revenues, which are driven by even year election cycles at the local and national level (e.g. 2022, 2024, etc.) and particularly in the second half of those years; and 4) other services, such as production of programming, tower rentals, and distribution of our local news content.
Consolidated Results from Operations
The following discussion is a comparison of our consolidated results on a GAAP basis. The year-to-year comparison of financial results is not necessarily indicative of future results. In addition, see the section titled “Results from Operations - Non-GAAP Information” for additional tables presenting information that supplements our financial information provided on a GAAP basis.
Our consolidated results of operations on a GAAP basis were as follows (in thousands, except per share amounts):
|
|
Quarter ended Sept. 30, |
|
Nine months ended Sept. 30, |
||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
2024 |
|
|
2023 |
|
|
Change |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Revenues |
$ |
806,827 |
|
|
$ |
713,243 |
|
|
13% |
|
$ |
2,231,442 |
|
|
$ |
2,185,076 |
|
|
2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cost of revenues |
|
437,855 |
|
|
|
438,260 |
|
|
0% |
|
|
1,300,466 |
|
|
|
1,295,720 |
|
|
0% |
|
Business units - Selling, general and administrative expenses |
|
96,882 |
|
|
|
98,394 |
|
|
(2%) |
|
|
294,080 |
|
|
|
294,734 |
|
|
0% |
|
Corporate - General and administrative expenses |
|
13,188 |
|
|
|
13,552 |
|
|
(3%) |
|
|
40,671 |
|
|
|
52,158 |
|
|
(22%) |
|
Depreciation |
|
15,543 |
|
|
|
15,083 |
|
|
3% |
|
|
45,026 |
|
|
|
45,119 |
|
|
0% |
|
Amortization of intangible assets |
|
13,467 |
|
|
|
13,297 |
|
|
1% |
|
|
40,790 |
|
|
|
40,175 |
|
|
2% |
|
Asset impairment and other |
|
— |
|
|
|
— |
|
|
*** |
|
|
1,097 |
|
|
|
3,359 |
|
|
(67%) |
|
Merger termination fee |
|
— |
|
|
|
— |
|
|
*** |
|
|
— |
|
|
|
(136,000 |
) |
|
*** |
|
Total |
$ |
576,935 |
|
|
$ |
578,586 |
|
|
0% |
|
$ |
1,722,130 |
|
|
$ |
1,595,265 |
|
|
8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating income |
$ |
229,892 |
|
|
$ |
134,657 |
|
|
71% |
|
$ |
509,312 |
|
|
$ |
589,811 |
|
|
(14%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Non-operating (expense) income |
|
(37,961 |
) |
|
|
(10,602 |
) |
|
*** |
|
|
36,378 |
|
|
|
(85,633 |
) |
|
*** |
|
Provision for income taxes |
|
44,743 |
|
|
|
27,801 |
|
|
61% |
|
|
127,211 |
|
|
|
103,827 |
|
|
23% |
|
Net income |
|
147,188 |
|
|
|
96,254 |
|
|
53% |
|
|
418,479 |
|
|
|
400,351 |
|
|
5% |
|
Net loss (income) attributable to redeemable noncontrolling interest |
|
260 |
|
|
|
(71 |
) |
|
*** |
|
|
673 |
|
|
|
240 |
|
|
*** |
|
Net income attributable to TEGNA Inc. |
$ |
147,448 |
|
|
$ |
96,183 |
|
|
53% |
|
$ |
419,152 |
|
|
$ |
400,591 |
|
|
5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net Income per share - basic |
$ |
0.89 |
|
|
$ |
0.48 |
|
|
85% |
|
$ |
2.44 |
|
|
$ |
1.86 |
|
|
31% |
|
Net Income per share - diluted |
$ |
0.89 |
|
|
$ |
0.48 |
|
|
85% |
|
$ |
2.44 |
|
|
$ |
1.86 |
|
|
31% |
*** Not meaningful
Revenues
Our Subscription revenue category includes revenue earned from cable, satellite and telecommunication providers for the right to carry our signals and the distribution of TEGNA stations on OTT streaming services. Our AMS category includes all sources of our traditional television advertising and digital revenues, including Premion and other digital advertising and marketing revenues across our platforms.
18
Our revenues and operating results are subject to seasonal fluctuations. Generally, our second and fourth quarter advertising revenues are stronger than those we report for the first and third quarters. This is driven by the second quarter reflecting increased spring seasonal advertising, while the fourth quarter typically includes increased advertising related to the holiday season. In addition, our revenue and operating results are subject to significant fluctuations across yearly periods resulting from political advertising. In even numbered years, political spending is usually significantly higher than in odd numbered years due to advertising for the local, state and national elections. Additionally, every four years, we typically experience even greater increases in political advertising in connection with the presidential election. The strong demand for advertising from political advertisers in these even years can result in the significant use of our available inventory (leading to a “crowd out” effect), which can diminish our AMS revenue in the even year of a two-year election cycle, particularly in the fourth quarter of those years.
The following table summarizes the year-over-year changes in our revenue categories (in thousands):
|
|
Quarter ended Sept. 30, |
|
Nine months ended Sept. 30, |
||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
2024 |
|
|
2023 |
|
|
Change |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Subscription |
$ |
356,205 |
|
|
$ |
377,891 |
|
|
(6%) |
|
$ |
1,098,554 |
|
|
$ |
1,188,297 |
|
|
(8%) |
|
Advertising & Marketing Services |
|
312,963 |
|
|
|
312,413 |
|
|
0% |
|
|
912,632 |
|
|
|
937,984 |
|
|
(3%) |
|
Political |
|
126,318 |
|
|
|
11,643 |
|
|
*** |
|
|
185,789 |
|
|
|
22,925 |
|
|
*** |
|
Other |
|
11,341 |
|
|
|
11,296 |
|
|
0% |
|
|
34,467 |
|
|
|
35,870 |
|
|
(4%) |
|
Total revenues |
$ |
806,827 |
|
|
$ |
713,243 |
|
|
13% |
|
$ |
2,231,442 |
|
|
$ |
2,185,076 |
|
|
2% |
*** Not meaningful
Total revenues increased $93.6 million in the third quarter of 2024 and $46.4 million in the first nine months of 2024 compared to the same periods in 2023. The net increases were primarily driven by an increase in political revenue ($114.7 million third quarter, $162.9 million first nine months) reflecting increased spending on the upcoming elections. Partially offsetting these increases was a decrease in subscription revenue ($21.7 million third quarter, $89.7 million first nine months) primarily due to declines in subscribers and for the nine-month period only, a temporary disruption of service with a distribution partner which was successfully resolved on January 13, 2024. These declines were partially offset by contractual rate increases under our retransmission agreements. For the third quarter, AMS revenue was up slightly driven by increased advertising related to the Summer Olympic Games partially offset by political crowd out. The underlying advertising trend improved due to demand from local accounts that outweighed continued softness from national accounts. For the nine month period only, AMS revenue was down $25.4 million due to continued softness in the national advertising market.
Cost of revenues
Cost of revenues decreased $0.4 million in the third quarter of 2024 and increased $4.7 million in the first nine months of 2024 compared to the same periods in 2023. The third quarter decrease was primarily due to a $9.0 million decline in programming costs, partially offset by increases in payroll-related costs of $3.7 million, employee stock-based compensation of $1.2 million, and employee retention costs of $0.6 million. The increase for the first nine months was primarily due to increase in payroll-related costs of $11.9 million, employee stock-based compensation of $3.8 million, employee retention costs of $2.9 million, and workforce restructuring costs of $0.9 million. These increases were partially offset by a $15.0 million decline in programming costs.
Business units - Selling, general and administrative expenses
Business unit selling, general and administrative expenses decreased $1.5 million in the third quarter of 2024 and $0.7 million in the first nine months of 2024 compared to the same periods in 2023. The decreases were primarily due to declines in professional service costs partially offset by increases from payroll-related costs, employee retention costs, employee stock-based compensation, and workforce restructuring costs.
Corporate - General and administrative expenses
Our corporate costs are separated from our direct business expenses and are recorded as general and administrative expenses in our Consolidated Statements of Income. This category primarily consists of corporate management and support functions including Legal, Human Resources, and Finance.
Corporate general and administrative expenses decreased $0.4 million in the third quarter of 2024 and $11.5 million in the first nine months of 2024 compared to the same periods in 2023. The decrease for the first nine months was primarily due to declines in merger and acquisition (M&A)-related costs of $17.6 million, partially offset by increases in employee retention costs of $4.2 million and workforce restructuring costs of $1.8 million.
Depreciation
Depreciation expense increased by $0.5 million in the third quarter of 2024 and decreased $0.1 million in the first nine months of 2024 compared to the same periods in 2023.
19
Amortization of intangible assets
Intangible asset amortization expense increased $0.2 million in the third quarter of 2024 and $0.6 million in the nine months of 2024 compared to the same periods in 2023. The increases were primarily due to the amortization of intangible assets acquired in the Octillion Media acquisition, partially offset by a decrease in amortization due to certain intangible assets reaching the end of their assumed useful lives and therefore becoming fully amortized.
Asset impairment and other
Asset impairment and other expenses were $1.1 million in the first nine months of 2024 compared to $3.4 million in the first nine months of 2023. The 2024 activity was due to a contract termination fee. The 2023 activity was due to an impairment charge recognized on programming assets in the second quarter of 2023.
Merger termination fee
On February 22, 2022, we entered into an Agreement and Plan of Merger (as amended, the Merger Agreement), with Teton Parent Corp. On May 22, 2023, after a protracted regulatory review, we terminated the Merger Agreement in accordance with its terms. Per the terms of the Merger Agreement, we received $136.0 million as a result of this termination which was satisfied in TEGNA common stock and recorded as a reduction in operating expense.
Operating income
Operating income increased $95.2 million in the third quarter of 2024 and decreased $80.5 million in the first nine months of 2024 compared to the same periods in 2023. The third quarter increase was primarily driven by an increase in political revenue of $114.7 million. The decrease in the first nine months of 2024 was primarily driven by the absence of the $136.0 million Merger termination fee, a decrease in subscription revenue of $89.7 million and a decline in AMS revenue of $25.4 million, partially offset by an increase in political revenue of $162.9 million. Non-GAAP operating income increased $103.0 million in the third quarter of 2024 and $53.7 million in the first nine months of 2024 due to the increases in political revenues, partially offset by declines in subscription revenues discussed above. For information on the nature and magnitude of items excluded from non-GAAP results, and a reconciliation to the most directly comparable GAAP measure, see the “Results from Operations- Non-GAAP Information” section.
Non-operating (expense) income
Non-operating expense increased $27.4 million in the third quarter of 2024 compared to the same period in 2023. The increase in expense was primarily due to the absence in 2024 of a $25.8 million gain recognized on the sale of a portion of our MadHive investment in the third quarter of 2023.
In the first nine months of 2024, non-operating income increased $122.0 million compared to the same period in 2023. The increase was primarily due to a $152.9 million gain recognized on the sale of our investment in Broadcast Music, Inc. in the first quarter of 2024. Partially offsetting this increase was the absence of the $25.8 million gain on the partial sale of our MadHive investment in 2023.
Provision for income taxes
Income tax expense increased $16.9 million in the third quarter of 2024 compared to the same period in 2023. Income tax expense increased $23.4 million in the first nine months of 2024 compared to the same period in 2023. The increases were primarily due to increases in net income before tax and higher effective income tax rates. Our effective income tax rate was 23.3% for the third quarter of 2024, compared to 22.4% for the third quarter of 2023. The tax rate for the third quarter of 2024 is higher than the comparable rate in 2023 primarily due to tax benefits recorded in 2023 associated with the release of a valuation allowance on a deferred tax asset related to an equity method investment. The tax rate for the third quarter of 2024 benefited from the purchase of federal clean energy tax credits. Our effective income tax rate was 23.3% for the first nine months of 2024, compared to 20.6% for the same period in 2023. The tax rate for the first nine months of 2024 is higher than the comparable rate in 2023 primarily due to the 2023 tax rate being favorably impacted by the deduction of previously capitalized transaction costs resulting from the termination of the Merger Agreement and a portion of the Merger termination fee being treated as non-taxable. The tax rate for the first nine months of 2024 benefited from the purchase of federal clean energy tax credits and discrete tax benefits as a result of a favorable settlement of an IRS audit related to the 2016 and 2017 tax years.
20
Net income attributable to TEGNA Inc.
Net income attributable to TEGNA Inc. was $147.4 million, or $0.89 per diluted share, in the third quarter of 2024 compared to $96.2 million, or $0.48 per diluted share, during the same period in 2023. On a non-GAAP basis, net income attributable to TEGNA Inc. was $156.9 million, or $0.94 per diluted share, in the third quarter of 2024 compared to $78.0 million, or $0.39 per diluted share, during the same period in 2023. For the first nine months of 2024, net income attributable to TEGNA Inc. was $419.2 million, or $2.44 per diluted share, compared to $400.6 million, or $1.86 per diluted share, during the same period of 2023. On a non-GAAP basis, net income attributable to TEGNA Inc. was $323.2 million, or $1.88 per diluted share, in the first nine months of 2024 compared to $282.2 million, or $1.31 per diluted share, during the same period in 2023. Both income and earnings per share, on a GAAP and non-GAAP basis, were affected by the factors discussed above. For information on the nature and magnitude of items excluded from non-GAAP results, and a reconciliation to the most directly comparable GAAP measure, see the “Results from Operations- Non-GAAP Information” section.
The weighted average number of diluted common shares outstanding during the third quarter of 2024 and 2023 were 165.7 million and 201.2 million, respectively. The weighted average number of diluted shares outstanding in the first nine months of 2024 and 2023 was 171.3 million and 214.6 million, respectively. The decline in the number of diluted common shares outstanding was primarily due to share repurchases of 39.5 million under our ASR programs which began in the second quarter of 2023, the receipt of 8.6 million shares to satisfy the Merger termination fee which occurred in the second quarter of 2023 and share repurchases of 17.5 million shares from the third quarter of 2023 through the third quarter of 2024 under our authorized repurchase programs.
21
Results from Operations - Non-GAAP Information
Presentation of Non-GAAP information
The Company uses non-GAAP financial performance measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, the related GAAP measures, nor should they be considered superior to the related GAAP measures and should be read together with financial information presented on a GAAP basis. Also, our non-GAAP measures may not be comparable to similarly titled measures of other companies.
Management and the Company’s Board of Directors (the “Board”) regularly use Corporate – General and administrative expenses, Operating expenses, Operating income, Income before income taxes, Provision for income taxes, Net income attributable to TEGNA Inc., and Diluted earnings per share, each presented on a non-GAAP basis, for purposes of evaluating company performance. Management and the Board also use Adjusted EBITDA to evaluate Company performance. The Leadership Development and Compensation Committee of our Board uses non-GAAP measures such as Adjusted EBITDA, non-GAAP net income, non-GAAP EPS to evaluate and compensate senior management. The Company, therefore, believes that each of the non-GAAP measures presented provides useful information to investors and other stakeholders by allowing them to view our business through the eyes of management and our Board, facilitating comparisons of results across historical periods and focus on the underlying ongoing operating performance of our business. The Company also believes these non-GAAP measures are frequently used by investors, securities analysts and other interested parties in their evaluation of our business and other companies in the broadcast industry.
The Company discusses in this Form 10-Q non-GAAP financial performance measures that exclude from its reported GAAP results the impact of “special items” which are described in detail below in the section titled “Discussion of Special Charges and Credits Affecting Reported Results.” The Company believes that such expenses and gains are not indicative of normal, ongoing operations. While these items should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur. Therefore, while we may incur or recognize these types of expenses, charges, and gains in the future, the Company believes that removing these items for purposes of calculating the non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance.
The Company also discusses Adjusted EBITDA (with and without stock-based compensation expense), a non-GAAP financial performance measure that it believes offers a useful view of the overall operation of its businesses. The Company defines Adjusted EBITDA as net income attributable to TEGNA before (1) net loss attributable to redeemable noncontrolling interest, (2) income taxes, (3) interest expense, (4) interest income, (5) other non-operating items, net, (6) M&A-related costs, (7) asset impairment and other, (8) workforce restructuring costs, (9) employee retention costs, (10) the Merger termination fee, (11) depreciation and (12) amortization of intangible assets. The Company believes these adjustments facilitate company-to-company operating performance comparisons by removing potential differences caused by variations unrelated to operating performance, such as capital structures (interest expense), income taxes, and the age and book appreciation of property and equipment (and related depreciation expense). The most directly comparable GAAP financial measure to Adjusted EBITDA is Net income attributable to TEGNA. Users should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. In particular, Adjusted EBITDA is not intended to be a measure of cash flow available for management’s discretionary expenditures, as this measure does not consider certain cash requirements, such as working capital needs, capital expenditures, contractual commitments, interest payments, tax payments and other debt service requirements.
Discussion of Special Charges and Credits Affecting Reported Results
Our results included the following items we consider “special items” that, while at times recurring, are not normal and can vary significantly from period to period:
Quarter and nine months ended September 30, 2024:
Quarter and nine months ended September 30, 2023:
22
Reconciliations of certain line items impacted by special items to the most directly comparable financial measure calculated and presented in accordance with GAAP on our Consolidated Statements of Income follow (in thousands, except per share amounts):
|
|
|
|
|
|
Special Items |
|
|
|
|
|||||||||||
|
Quarter ended Sept. 30, 2024 |
|
GAAP
|
|
|
Retention costs - SBC |
|
|
Retention costs - Cash |
|
|
Workforce restructuring |
|
|
Non-GAAP
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Corporate - General and administrative expenses |
|
$ |
13,188 |
|
|
$ |
(1,771 |
) |
|
$ |
(1,181 |
) |
|
$ |
(1,231 |
) |
|
$ |
9,005 |
|
|
Operating expenses |
|
|
576,935 |
|
|
|
(4,044 |
) |
|
|
(2,390 |
) |
|
|
(4,167 |
) |
|
|
566,334 |
|
|
Operating income |
|
|
229,892 |
|
|
|
4,044 |
|
|
|
2,390 |
|
|
|
4,167 |
|
|
|
240,493 |
|
|
Income before income taxes |
|
|
191,931 |
|
|
|
4,044 |
|
|
|
2,390 |
|
|
|
4,167 |
|
|
|
202,532 |
|
|
Provision for income taxes |
|
|
44,743 |
|
|
|
242 |
|
|
|
430 |
|
|
|
518 |
|
|
|
45,933 |
|
|
Net income attributable to TEGNA Inc. |
|
|
147,448 |
|
|
|
3,802 |
|
|
|
1,960 |
|
|
|
3,649 |
|
|
|
156,859 |
|
|
Earnings per share - diluted |
|
$ |
0.89 |
|
|
$ |
0.02 |
|
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
$ |
0.94 |
|
|
|
|
|
|
|
Special Items |
|
|
|
|
|||||||||||||||
|
Quarter ended Sept. 30, 2023 |
|
GAAP
|
|
|
Retention costs - SBC |
|
|
Retention costs - Cash |
|
|
Other non-operating item |
|
|
Special tax item |
|
|
Non-GAAP
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Corporate - General and administrative expenses |
|
$ |
13,552 |
|
|
$ |
(440 |
) |
|
$ |
(553 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
12,559 |
|
|
Operating expenses |
|
|
578,586 |
|
|
|
(1,692 |
) |
|
|
(1,192 |
) |
|
|
— |
|
|
|
— |
|
|
|
575,702 |
|
|
Operating income |
|
|
134,657 |
|
|
|
1,692 |
|
|
|
1,192 |
|
|
|
— |
|
|
|
— |
|
|
|
137,541 |
|
|
Income before income taxes |
|
|
124,055 |
|
|
|
1,692 |
|
|
|
1,192 |
|
|
|
(25,809 |
) |
|
|
— |
|
|
|
101,130 |
|
|
Provision for income taxes |
|
|
27,801 |
|
|
|
237 |
|
|
|
152 |
|
|
|
(6,604 |
) |
|
|
1,516 |
|
|
|
23,102 |
|
|
Net income attributable to TEGNA Inc. |
|
|
96,183 |
|
|
|
1,455 |
|
|
|
1,040 |
|
|
|
(19,205 |
) |
|
|
(1,516 |
) |
|
|
77,957 |
|
|
Earnings per share - diluted |
|
$ |
0.48 |
|
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
$ |
(0.10 |
) |
|
$ |
(0.01 |
) |
|
$ |
0.39 |
|
|
|
|
|
|
|
Special Items |
|
|
|
|
|||||||||||||||||||||||
|
Nine months ended Sept. 30, 2024 |
|
GAAP
|
|
|
Retention costs - SBC |
|
|
Retention costs - Cash |
|
|
M&A-related costs |
|
|
Workforce restructuring |
|
|
Asset impairment and other |
|
|
Other non-operating item |
|
|
Non-GAAP
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Corporate - General and administrative expenses |
|
$ |
40,671 |
|
|
$ |
(3,094 |
) |
|
$ |
(2,056 |
) |
|
$ |
(2,290 |
) |
|
$ |
(1,834 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
31,397 |
|
|
Operating expenses |
|
|
1,722,130 |
|
|
|
(9,135 |
) |
|
|
(3,963 |
) |
|
|
(2,290 |
) |
|
|
(7,804 |
) |
|
|
(1,097 |
) |
|
|
— |
|
|
|
1,697,841 |
|
|
Operating income |
|
|
509,312 |
|
|
|
9,135 |
|
|
|
3,963 |
|
|
|
2,290 |
|
|
|
7,804 |
|
|
|
1,097 |
|
|
|
— |
|
|
|
533,601 |
|
|
Income before income taxes |
|
|
545,690 |
|
|
|
9,135 |
|
|
|
3,963 |
|
|
|
2,290 |
|
|
|
7,804 |
|
|
|
1,097 |
|
|
|
(152,867 |
) |
|
|
417,112 |
|
|
Provision for income taxes |
|
|
127,211 |
|
|
|
1,035 |
|
|
|
678 |
|
|
|
593 |
|
|
|
1,408 |
|
|
|
284 |
|
|
|
(36,621 |
) |
|
|
94,588 |
|
|
Net income attributable to TEGNA Inc. |
|
|
419,152 |
|
|
|
8,100 |
|
|
|
3,285 |
|
|
|
1,697 |
|
|
|
6,396 |
|
|
|
813 |
|
|
|
(116,246 |
) |
|
|
323,197 |
|
|
Earnings per share - diluted (a) |
|
$ |
2.44 |
|
|
$ |
0.05 |
|
|
$ |
0.02 |
|
|
$ |
0.01 |
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
|
$ |
(0.68 |
) |
|
$ |
1.88 |
|
(a) Per share amounts do not sum due to rounding.
|
|
|
|
|
|
Special Items |
|
|
|
|
|||||||||||||||||||||||||||
|
Nine months ended Sept. 30, 2023 |
|
GAAP
|
|
|
M&A-related costs |
|
|
Retention costs - SBC |
|
|
Retention costs - Cash |
|
|
Merger termination fee |
|
|
Asset impairment and other |
|
|
Other non-operating item |
|
|
Special tax item |
|
|
Non-GAAP
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Corporate - General and administrative expenses |
|
$ |
52,158 |
|
|
$ |
(19,848 |
) |
|
$ |
(440 |
) |
|
$ |
(553 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
31,317 |
|
|
Operating expenses |
|
|
1,595,265 |
|
|
|
(19,848 |
) |
|
|
(1,692 |
) |
|
|
(1,192 |
) |
|
|
136,000 |
|
|
|
(3,359 |
) |
|
|
— |
|
|
|
— |
|
|
|
1,705,174 |
|
|
Operating income |
|
|
589,811 |
|
|
|
19,848 |
|
|
|
1,692 |
|
|
|
1,192 |
|
|
|
(136,000 |
) |
|
|
3,359 |
|
|
|
— |
|
|
|
— |
|
|
|
479,902 |
|
|
Income before income taxes |
|
|
504,178 |
|
|
|
19,848 |
|
|
|
1,692 |
|
|
|
1,192 |
|
|
|
(136,000 |
) |
|
|
3,359 |
|
|
|
(25,809 |
) |
|
|
— |
|
|
|
368,460 |
|
|
Provision for income taxes |
|
|
103,827 |
|
|
|
4,552 |
|
|
|
237 |
|
|
|
152 |
|
|
|
(24,504 |
) |
|
|
860 |
|
|
|
(6,604 |
) |
|
|
7,959 |
|
|
|
86,479 |
|
|
Net income attributable to TEGNA Inc. |
|
|
400,591 |
|
|
|
15,296 |
|
|
|
1,455 |
|
|
|
1,040 |
|
|
|
(111,496 |
) |
|
|
2,499 |
|
|
|
(19,205 |
) |
|
|
(7,959 |
) |
|
|
282,221 |
|
|
Earnings per share - diluted (a) |
|
$ |
1.86 |
|
|
$ |
0.07 |
|
|
$ |
0.01 |
|
|
$ |
— |
|
|
$ |
(0.52 |
) |
|
$ |
0.01 |
|
|
$ |
(0.09 |
) |
|
$ |
(0.04 |
) |
|
$ |
1.31 |
|
(a) Per share amounts do not sum due to rounding.
23
Adjusted EBITDA - Non-GAAP
Reconciliations of Adjusted EBITDA to net income presented in accordance with GAAP on our Consolidated Statements of Income are presented below (in thousands):
|
|
Quarter ended Sept. 30, |
|
|
Nine months ended Sept. 30, |
|
||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net income attributable to TEGNA Inc. (GAAP basis) |
$ |
147,448 |
|
|
$ |
96,183 |
|
|
|
53 |
% |
|
$ |
419,152 |
|
|
$ |
400,591 |
|
|
|
5 |
% |
|
(Less) Plus: Net (loss) income attributable to redeemable noncontrolling interest |
|
(260 |
) |
|
|
71 |
|
|
*** |
|
|
|
(673 |
) |
|
|
(240 |
) |
|
*** |
|
||
|
Plus: Provision for income taxes |
|
44,743 |
|
|
|
27,801 |
|
|
|
61 |
% |
|
|
127,211 |
|
|
|
103,827 |
|
|
|
23 |
% |
|
Plus: Interest expense |
|
42,288 |
|
|
|
43,418 |
|
|
|
(3 |
%) |
|
|
126,404 |
|
|
|
129,121 |
|
|
|
(2 |
%) |
|
Less: Interest income |
|
(7,023 |
) |
|
|
(7,389 |
) |
|
|
(5 |
%) |
|
|
(18,469 |
) |
|
|
(23,498 |
) |
|
|
(21 |
%) |
|
Plus (Less): Other non-operating items, net |
|
2,696 |
|
|
|
(25,427 |
) |
|
*** |
|
|
|
(144,313 |
) |
|
|
(19,990 |
) |
|
*** |
|
||
|
Operating income (GAAP basis) |
|
229,892 |
|
|
|
134,657 |
|
|
|
71 |
% |
|
|
509,312 |
|
|
|
589,811 |
|
|
|
(14 |
%) |
|
Plus: M&A-related costs |
|
— |
|
|
|
— |
|
|
*** |
|
|
|
2,290 |
|
|
|
19,848 |
|
|
|
(88 |
%) |
|
|
Plus: Asset impairment and other |
|
— |
|
|
|
— |
|
|
*** |
|
|
|
1,097 |
|
|
|
3,359 |
|
|
|
(67 |
%) |
|
|
Plus: Workforce restructuring |
|
4,167 |
|
|
|
— |
|
|
*** |
|
|
|
7,804 |
|
|
|
— |
|
|
*** |
|
||
|
Plus: Retention costs - Employee stock-based compensation expenses |
|
4,044 |
|
|
|
1,692 |
|
|
*** |
|
|
|
9,135 |
|
|
|
1,692 |
|
|
*** |
|
||
|
Plus: Retention costs - Cash |
|
2,390 |
|
|
|
1,192 |
|
|
*** |
|
|
|
3,963 |
|
|
|
1,192 |
|
|
*** |
|
||
|
Less: Merger termination fee |
|
— |
|
|
|
— |
|
|
*** |
|
|
|
— |
|
|
|
(136,000 |
) |
|
*** |
|
||
|
Adjusted operating income (non-GAAP basis) |
|
240,493 |
|
|
|
137,541 |
|
|
|
75 |
% |
|
|
533,601 |
|
|
|
479,902 |
|
|
|
11 |
% |
|
Plus: Depreciation |
|
15,543 |
|
|
|
15,083 |
|
|
|
3 |
% |
|
|
45,026 |
|
|
|
45,119 |
|
|
|
0 |
% |
|
Plus: Amortization of intangible assets |
|
13,467 |
|
|
|
13,297 |
|
|
|
1 |
% |
|
|
40,790 |
|
|
|
40,175 |
|
|
|
2 |
% |
|
Adjusted EBITDA |
$ |
269,503 |
|
|
$ |
165,921 |
|
|
|
62 |
% |
|
$ |
619,417 |
|
|
$ |
565,196 |
|
|
|
10 |
% |
|
Stock-based compensation expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Employee awards |
|
6,546 |
|
|
|
4,866 |
|
|
|
35 |
% |
|
|
21,526 |
|
|
|
13,711 |
|
|
|
57 |
% |
|
Company stock 401(k) match contributions |
|
4,035 |
|
|
|
3,924 |
|
|
|
3 |
% |
|
|
14,251 |
|
|
|
14,150 |
|
|
|
1 |
% |
|
Adjusted EBITDA before stock-based compensation costs |
$ |
280,084 |
|
|
$ |
174,711 |
|
|
|
60 |
% |
|
$ |
655,194 |
|
|
$ |
593,057 |
|
|
|
10 |
% |
*** Not meaningful
In the third quarter of 2024 Adjusted EBITDA margin was 33% with stock-based compensation expense or 35% without those expenses. For the nine months ended September 30, 2024, Adjusted EBITDA margin was 28% with stock-based compensation expense or 29% without those expenses. Our total Adjusted EBITDA increased $103.6 million, or 62%, in the third quarter of 2024 and $54.2 million, or 10% in the first nine months of 2024, compared to 2023. These increases were primarily driven by the operational factors discussed above within the revenue and operating expense fluctuation explanation sections, most notably, the increase in political revenue, partially offset by a decrease in subscription revenue.
Liquidity, Capital Resources and Cash Flows
Our operations have historically generated positive cash flow that, along with availability under our existing revolving credit facility and cash and cash equivalents on hand, has been sufficient to fund our capital expenditures, interest payments, dividends, share repurchases, investments in strategic initiatives and other operating requirements.
We paid dividends totaling $61.4 million and $63.1 million in the nine months ended September 30, 2024 and 2023, respectively. On May 8, 2024 we announced that our Board of Directors further increased the quarterly dividend by 10%, from 11.375 to 12.5 cents per share. This increase builds on a 20 percent increase to TEGNA’s dividend in 2023. The most recent increase to the dividend took effect beginning with the July 1, 2024 dividend payment.
On June 2, 2023, we entered into our first accelerated share repurchase program (the first ASR) with JPMorgan Chase Bank, National Association (JPMorgan). Under the terms of the first ASR, we repurchased $300 million in TEGNA common stock from JPMorgan, with an initial delivery of approximately 15.2 million shares received on June 6, 2023, representing 80% ($240 million) of the value of the first ASR contract. The first ASR program was completed during the third quarter of 2023 at which time JPMorgan delivered an additional 3.1 million shares to us. The final share settlement was based on the average daily volume-weighted average price of TEGNA shares during the term of the first ASR program, less a discount, less the previously delivered 15.2 million shares.
24
On November 9, 2023, we entered into a second accelerated share repurchase (the second ASR) program with JPMorgan. Under the terms of the second ASR, we repurchased $325 million in TEGNA common stock from JPMorgan, with an initial delivery of approximately 17.3 million shares received on November 13, 2023, representing 80% ($260 million) of the value of the second ASR contract. The second ASR program was completed on February 22, 2024, shortly after which JPMorgan delivered an additional 4.0 million shares to us. The final share settlement was based on the average daily volume-weighted average price of TEGNA shares during the term of the second ASR program, less a discount, less the previously delivered 17.3 million shares.
In December 2023, our Board of Directors authorized a share repurchase program for up to $650.0 million of our common stock, which was in addition to the second ASR program. This share repurchase program expires on December 31, 2025. In the first nine months of 2024, 15.7 million shares were repurchased under this program at an average share price of $14.36 for an aggregate cost of $226.0 million, of which $1.0 million had not yet been paid as of the end of the third quarter.
Our comprehensive capital allocation framework supports shareholder value creation through a predictable and sustained distribution of free cash flow to shareholders. During the first nine months of 2024, we returned approximately 65% of Adjusted free cash flow to shareholders through share repurchases and dividends. We continue to expect to return 40-60 percent of our Adjusted free cash flow generated over 2024-2025 to shareholders. Remaining Adjusted free cash flow is expected to be used for organic investments and/or bolt-on acquisitions and to prepare for future debt retirement. We will continue to analyze all uses of capital, including regular evaluation of the dividend, with a goal of maximizing long-term shareholder value creation.
Consistent with this framework, we are on track to return approximately $350 million of capital to shareholders in 2024 through dividends and share repurchases from time to time on the open market at prevailing prices or in negotiated transactions.
During the first nine months of 2024, we returned $286.4 million of capital to shareholders with $225.0 million of share repurchases, representing 15.7 million shares, and paid $61.4 million in dividends.
Our capital allocation plan is subject to a variety of factors, including our strategic plans, market and economic conditions and the discretion of our Board of Directors.
In addition to the above share repurchase initiatives, during 2024 we deployed surplus cash in time deposit and money market investments with several financial institutions.
On January 25, 2024, we entered into an amendment to our revolving credit facility. Among other things, the amendment amends the revolving credit facility to:
Under the amended Credit Agreement, the Company’s maximum Total Leverage Ratio (as defined in the Credit Agreement) will remain unchanged at 4.50x. None of the available capacity on the revolving credit facility was drawn on the amendment date.
As of September 30, 2024, we were in compliance with all covenants contained in our debt agreements and credit facility. Our leverage ratio, calculated in accordance with our revolving Credit Agreement, was 2.79x, below the maximum permitted leverage ratio of 4.50x. The leverage ratio is calculated using annualized adjusted EBITDA (as defined in the Credit Agreement) for the trailing eight quarters. We expect to remain compliant with all covenants for the foreseeable future. As of September 30, 2024, our total debt was $3.08 billion, cash and cash equivalents totaled $536.3 million, and we had unused borrowing capacity of $737.9 million under our revolving credit facility after reducing for outstanding letters of credit. Our debt consists of unsecured notes which have fixed interest rates.
Our financial and operating performance, as well as our ability to generate sufficient cash flow to maintain compliance with credit facility covenants, are subject to certain risk factors. See Item 1A. “Risk Factors,” in our 2023 Annual Report on Form 10-K for further discussion. We expect our existing cash and cash equivalents, expected future cash flow from our operations, and borrowing capacity under the revolving credit facility will be more than sufficient to satisfy our recurring contractual commitments, debt service obligations, capital expenditure requirements, and other working capital needs for the next twelve months and beyond.
25
Cash Flows
The following table provides a summary of our cash flow information followed by a discussion of the key elements of our cash flow (in thousands):
|
|
Nine months ended Sept. 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
|
Cash and cash equivalents at beginning of the period |
$ |
361,036 |
|
|
$ |
551,681 |
|
|
|
|
|
|
|
|
||
|
Operating activities: |
|
|
|
|
|
||
|
Net income |
|
418,479 |
|
|
|
400,351 |
|
|
Gain on investment sales |
|
(153,626 |
) |
|
|
(25,809 |
) |
|
Merger termination fee |
|
— |
|
|
|
(136,000 |
) |
|
Depreciation, amortization and other non-cash adjustments |
|
131,491 |
|
|
|
115,623 |
|
|
Pension expense, net of employer contributions |
|
(1,530 |
) |
|
|
3,982 |
|
|
Decrease in trade receivables |
|
16,931 |
|
|
|
50,207 |
|
|
(Decrease) increase in accounts payable |
|
(22,987 |
) |
|
|
9,690 |
|
|
Increase (decrease) in interest and taxes payable |
|
13,766 |
|
|
|
(29,601 |
) |
|
All other operating activities |
|
32,692 |
|
|
|
20,396 |
|
|
Net cash flow from operating activities |
|
435,216 |
|
|
|
408,839 |
|
|
|
|
|
|
|
|
||
|
Investing activities: |
|
|
|
|
|
||
|
Purchase of property and equipment |
|
(36,297 |
) |
|
|
(29,301 |
) |
|
Payments for acquisitions of businesses and assets, net of cash acquired |
|
(52,799 |
) |
|
|
(1,150 |
) |
|
Proceeds from investments |
|
157,365 |
|
|
|
27,646 |
|
|
All other investing activities |
|
(19,162 |
) |
|
|
(290 |
) |
|
Net cash flow provided by (used for) investing activities |
|
49,107 |
|
|
|
(3,095 |
) |
|
|
|
|
|
|
|
||
|
Financing activities: |
|
|
|
|
|
||
|
Repurchase of common stock |
|
(224,996 |
) |
|
|
(327,914 |
) |
|
Dividends paid |
|
(61,375 |
) |
|
|
(63,078 |
) |
|
Payments for tax withholding related to vested stock-based compensation awards |
|
(11,620 |
) |
|
|
(13,403 |
) |
|
All other financing activities |
|
(11,115 |
) |
|
|
— |
|
|
Net cash flow used for financing activities |
|
(309,106 |
) |
|
|
(404,395 |
) |
|
Net change in cash and cash equivalents |
|
175,217 |
|
|
|
1,349 |
|
|
Cash and cash equivalents at end of the period |
$ |
536,253 |
|
|
$ |
553,030 |
|
Operating activities - Cash flow from operating activities was $435.2 million for the nine months ended September 30, 2024, compared to $408.8 million for the same period in 2023. The increase in operating cash flow of $26.4 million was primarily due to an increase in net income of $18.1 million mainly due to an increase in political revenue. Also driving the increase was a decrease in cash paid for income taxes of $25.8 million, driven in part by the utilization of purchased clean energy tax credits to reduce estimated income tax payments in the first nine months of 2024. Payment for these tax credits will be made primarily in the fourth quarter of 2024. The increase was partially offset by a $32.7 million change in accounts payable driven by the timing of payments.
Investing activities - Cash flow from investing activities was a net cash inflow of $49.1 million for the nine months ended September 30, 2024, compared to a net cash outflow of $3.1 million for the same period in 2023. The increase in net cash flows of $52.2 million from investing activities was primarily driven by a $129.7 million increase in proceeds from investments, primarily driven by $152.9 million of proceeds from the sale of our investment in BMI in the first quarter of 2024. Proceeds in 2023 were primarily related to $26.4 million of cash received from the sale of a portion of our investment in MadHive. This increase was partially offset by cash outflows of $52.8 million for the acquisition of Octillion Media in 2024 and a $19.0 million increase in 2024 in payments made for debt and equity investments.
Financing activities - Cash flow used for financing activities was $309.1 million for the nine months ended September 30, 2024, compared to $404.4 million for the same period in 2023. The decrease was primarily due to our repurchase of common stock, which included a $300.0 million ASR program payment in the second quarter of 2023 that did not recur in 2024. In the first nine months of 2024 we repurchased $225.0 million of common stock on the open market under our authorized share repurchase program, as compared to repurchases of $27.9 million in the first nine months of 2023.
26
Certain Factors Affecting Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q that do not describe historical facts may constitute forward-looking statements within the meaning of the “safe harbor” provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in the communication, the words “believes,” “estimates,” “plans,” “expects,” “should,” “could,” “outlook,” and “anticipates” and similar expressions as they relate to the Company, or its financial results are intended to identify forward-looking statements. Forward-looking statements in this communication may include, without limitation, statements regarding anticipated growth rates and the Company’s plans, objectives and expectations. Forward-looking statements are based on a number of assumptions about future events and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs, projections and estimates expressed in such statements, many of which are outside the Company’s control. These risks, uncertainties and other factors include, but are not limited to, risks and uncertainties related to: changes in the market price of the Company’s shares; general market conditions, constraints, volatility, or disruptions in the capital markets; the possibility that the Company’s capital allocation plan, including dividends, share repurchases, and/or strategic acquisitions, investments, and partnerships may not enhance long-term stockholder value; legal proceedings, judgments or settlements; the Company’s ability to re-price or renew subscribers; potential regulatory actions; changes in consumer behaviors and impacts on and modifications to TEGNA’s operations and business relating thereto; and economic, competitive, governmental, technological and other factors and risks that may affect the Company’s operations or financial results, which are discussed in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Any forward-looking statements in this communication should be evaluated in light of these important risk factors. The Company is not responsible for updating the information contained in this communication beyond the published date, or for changes made to this press release by wire services, Internet service providers or other media.
Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of the Company. Each such statement speaks only as of the day it was made. We undertake no obligation to update or to revise any forward-looking statements.
Item 3. Quan titative and Qualitative Disclosures about Market Risk
For quantitative and qualitative disclosures about market risk, refer to the following section of our 2023 Annual Report on Form 10-K: “Item 7A. Quantitative and Qualitative Disclosures about Market Risk.” Our exposures to market risk have not changed materially since December 31, 2023.
As of September 30, 2024, we did not have any floating interest obligations outstanding and had unused borrowing capacity of $737.9 million under our $750 million revolving credit facility, which expires in January 2029. Any amounts borrowed under the revolving credit facility in the future are subject to a variable rate. Refer to Note 8 to the condensed consolidated financial statements for information regarding the fair value of our long-term debt.
Item 4. Con trols and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2024. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective, as of September 30, 2024, to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
There have been no material changes in our internal controls or in other factors during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. O THER INFORMATION
Item 1. Legal P roceedings
See Note 10 to the condensed consolidated financial statements for information regarding our legal proceedings.
Item 1A. R isk Factors
While we attempt to identify, manage and mitigate risks and uncertainties associated with our business, some level of risk and uncertainty will always be present. “Item 1A. Risk Factors” of our 2023 Annual Report on Form 10-K describes the risks and uncertainties that we believe may have the potential to materially affect our business, results of operations, financial condition, cash flows, projected results and future prospects. We do not believe that there have been any material changes from the risk factors previously disclosed in our 2023 Annual Report on Form 10-K.
27
Item 2. Unreg istered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table presents stock repurchases by the Company during the three months ended September 30, 2024 (in thousands, except per share amounts):
|
Period |
|
Total
|
|
|
Average
|
|
|
Total Number
|
|
|
Approximate
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
July 1, 2024 - July 31, 2024 |
|
|
1,546 |
|
|
$ |
15.05 |
|
|
|
1,546 |
|
|
|
470,885 |
|
|
|
August 1, 2024 - August 31, 2024 |
|
|
1,797 |
|
|
|
14.03 |
|
|
|
1,797 |
|
|
|
445,668 |
|
|
|
September 1, 2024 - September 30, 2024 |
|
|
1,491 |
|
|
$ |
14.53 |
|
|
|
1,491 |
|
|
|
424,003 |
|
|
|
Total Third Quarter 2024 |
|
|
4,834 |
|
|
|
|
|
|
4,834 |
|
|
|
|
|
||
In December 2023, our Board of Directors authorized the renewal of our share repurchase program for up to $650 million of our common stock over two years. The shares may be repurchased at management’s discretion, either on the open market or in privately negotiated block transactions. Management’s decision to repurchase shares will depend on price, blackout periods and other corporate developments. Purchases may occur from time to time and no maximum purchase price has been set. Since the inception of this program, we have repurchased 15.7 million shares under this program, including the 4.8 million shares shown in the above table, at an aggregate price of $226.0 million. As of the end of the third quarter of 2024, $424.0 million of common stock may still be purchased under this program.
Item 3. De faults Upon Senior Securities
None.
Item 4. Min e Safety Disclosures
None.
Item 5. O ther Information
28
Item 6. Exhibits
|
Exhibit Number |
|
Description |
|
|
|
|
|
|
|
|
|
3-1 |
|
|
|
|
|
|
|
3-2 |
|
|
|
|
|
|
|
10-1 |
|
|
|
|
|
|
|
31-1 |
|
|
|
|
|
|
|
31-2 |
|
|
|
|
|
|
|
32-1 |
|
|
|
|
|
|
|
32-2 |
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
|
|
|
|
* Asterisks identify management contracts and compensatory plans and arrangements.
29
SIGNA TURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
Date: November 7, 2024 |
TEGNA INC. |
|
|
|
|
|
/s/ Clifton A. McClelland III |
|
|
Clifton A. McClelland III |
|
|
Senior Vice President and Controller |
|
|
(on behalf of Registrant and as Principal Accounting Officer) |
30