TEGNA Inc

Good day and welcome to the first quarter 2021 Tegna Earnings Conference call. This call is being recorded. Our speakers for today will be Dave Logee, President and Chief Executive Officer, and Victoria Harker, Chief Financial Officer. At this time, I would like to turn the call over to Doug Cockleman, Head of Investor Relations. Please go ahead.

Thank you and good morning and welcome to all of Welcome to our first quarter 2021 earnings call and webcast. Today, our president and CEO, Dave Lugey, and our CFO, Victoria Harker, will review Tegna's financial performance and results. After that, we will open the call for questions. Hopefully, you've had an opportunity to review this morning's press release. If you have not yet seen a copy of the release, it's available at tegna.com. Before we get started, I'd like to remind you that this conference call and webcast includes forward-looking statements and our actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. This presentation also includes certain non-GAAP financial measures and we have provided reconciliations of those measures to the most directly comparable GAAP measures in the press release. With that, let me turn the call over to Dave.

Thank you, Doug, and good morning, everyone. As Doug mentioned, during today's call, Victoria and I will provide an overview of our performance in the first quarter, which was Tegna's strongest first quarter since becoming a pure play broadcasting company. We achieved record total revenues, record advertising and marketing services revenues, record subscription revenue, record net income, and record adjusted EBITDA, all while making progress on our debt pay down and growing our free cash flows. And we expect continued growth as we look forward to the second quarter and remainder of the year. As you saw in our release today, advertising and marketing services were up 9.4% year-over-year. Growth was driven across markets for both traditional and digital advertising, including our innovative offerings such as Premium, as well as continued expansion with more advertisers. Victoria will provide more color on performance of individual advertising categories during the quarter shortly. Premion, our first-to-market over-the-top advertising platform, has continued to evolve and expand to best serve the needs of regional and local advertisers. With further acceleration of growth this year, we're now updating our projection for the full year with our new expectation that Premion will close out 2021 with revenues 45% to 50% higher than 2020. Our partnership with Gray is also helping drive Premion's already exceptional growth by expanding our local footprint and leveraging Gray's sales footprint. Turning now to subscription revenues, which have been supported by the improvement of subtrends to levels we have not seen since 2019. It is down in the quarter less than 5% and closer to 4% in the most recent month. Subscription revenues were a first quarter record, up 16% year over year, and are on track to grow mid to high teens percent this year. The combination of contractual rate increases in our multi-year retrans agreements strong renewal step-ups, and improving subscriber trends has supported this continued growth. In 2020, we repriced approximately 35% of our subs, and we'll reprice an additional 30% toward the end of this year, supporting our expectation for net subscription profits to grow in the mid to high 20% this year, 2021. And as a reminder, we reached a comprehensive multi-year affiliation agreement with NBC earlier this year, for our 20 Tegna NBC markets nationwide, including 10 of the top 25 NBC markets. We now have clear visibility into future expenses through multi-year network affiliation agreements, which cover 94% of our big four subscribers through the end of 2022 and beyond. Turning to strategic and content updates from the quarter, Tegna is positioned to continue to leverage streaming growth in two distinct ways. First, through Premion, as I noted on the ad side, and second, by expanding our news and information entertainment content through streaming platforms. Last week, we participated in our first ever IAB Newsfronts to showcase our digital marketing solutions, including Premion, to a large audience of advertisers and agencies. More than 1,000 people engaged with our Newsfront session, including people watching live through the IAB stream and those who have streamed it on demand and will continue to. which can be seen on Tegna.com forward slash new fronts. During our presentation, we announced new attribution capabilities for automotive and tourism clients to help them understand consumer behavior throughout the buying cycle. For those unfamiliar with Tegna attribution, it connects TV and streaming viewing habits with outcome metrics such as website visits, but also brick and mortar store visits. Now, for example, car dealers advertising through Tegna and Premion we'll be able to see how their media dollars are bringing foot traffic to their dealership and driving new car sales. The second way we're leveraging streaming growth is through distributing our content across OTT platforms. In the quarter, we inked a new distribution deal with Amazon for all our stations to provide on-demand news on Amazon's News app on Fire TV. This is an addition to completing the rollout of Fire TV apps for all of our stations during the quarter. We also began expanding Locked On's daily sports podcast to OTT platforms, which is one of the opportunities we saw as part of that acquisition. Specifically, we've launched video simulcast of some of Locked On's podcasts that are now available on our local station's OTT apps. We've also announced that we will launch a standalone OTT app for Locked On later this year. Vault Studio's podcast content has also expanded through our Amazon partnerships. with the entire Vault catalog now available on Amazon Music. And last week, we debuted our national Verify brand, building on the substantial growth of Verify content on our station properties over the past few years. Verify is dedicated to helping the public distinguish between true and false information by fact-checking claims through research and credible sources with our many talented journalists. Consumers can now text Verify to submit any story question they want verified. Turning now to capital allocation, where we've continued to deliver on the actions we said we would take. Last year, we communicated that one of our top capital priorities was to pay down debt, following our temporarily increased leverage to finance our 2019 acquisitions. We've made considerable progress here, ending the quarter at a net leverage ratio almost a full turn lower than we were this time last year. And as we've said before, we expect to end the year at low three times. well below our 2020 year-end level of 3.95 times. We've also communicated that we will evaluate the most appropriate use of capital given the current market environment with an eye toward creating and returning value to shareholders. Again, we have delivered on this with a recently announced 36% increase to our quarterly dividend, which begins this July, which closely followed our board's authorization of a three-year, $300 million share repurchase program which provides us the option to buy back shares when we determine it's most appropriate. Tegna's strong business performance supports our growing cash flows, which provides us the ability to return value to our shareholders through these capital allocation actions. This flywheel is expected to continue, as reflected in our second quarter and recently updated full-year guidance, including our expectations for free cash flow as a percentage of 2020-2021 revenues on a two-year basis to reach 21% to 22%. On the expense management side, we have remained diligent in cost containment efforts since the beginning of COVID-19, expanding on the efficiencies we'd established well before the pandemic. We're still on track to drive up $50 million of recurring annualized savings this year and will continue to generate increased savings through careful execution of cost and efficiency initiatives. Victoria will discuss our expense management initiatives in more detail shortly. During our fourth quarter earnings call earlier this year, I provided you also with an update on some of the key actions that our board and management have taken to further install diversity, equity, and inclusion in our culture here at Tegna. DE&I remains a top priority for our leadership team. And we've continued to take steps to ensure that our broader workforce both reflects the communities we serve and receive the support they need to grow their career at Tegna. With that focus in mind, last year we developed a first of its kind inclusive journalism program in partnership with diverse leaders at Tegna and at the Poynter Institute, a leading nonprofit journalism organization. This program is specifically geared to address unconscious bias in news reporting, sources, and content development through training and third-party audits. All newsroom staff, inclusive of news, digital, and marketing employees, are currently taking part in this program and training throughout the year in 2021. Many have already had it, and by the end of the year, everyone will. And notably, last Thursday, in recognition of our actions and commitment to coverage and storytelling around race and inequality, Tegna received six regional Edward R. Murrow Awards for an inaugural award this year, Excellence in Diversity, Equity, and Inclusion. We also took action at the beginning of this year to hold us accountable for making forward progress on inclusivity across Tegna. As a reminder, we have established specific measurable five-year goals to increase black, indigenous, and people of color representation in content teams, news leadership, and overall company management. You can find additional information on these goals as well as our broader DE&I efforts and accountability in our social responsibility highlights and website. Before I turn the call over to Victoria to cover our financial results in more detail, I want to take a moment to thank all of our colleagues and journalists for continuing to deliver important, impactful news to viewers in our local markets across the country. As local markets, we play a critical role in convening and facilitating important discussions around race, inequality, and systemic injustice in our communities. Technojournalists across the nation are helping us deliver on this role every day and making communities more tolerant of each other and making them more informed in every way. And we thank them again for their dedication. I'll now turn the call over to Victoria.