TEGNA Inc

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

Thank you and good morning and welcome to our second quarter 2021 earnings call and webcast. Today, our President and CEO, Dave Luge, and our CFO, Victoria Harker, will review the financial performance and results. After that, we'll 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 include forward-looking statements, and our actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. This presentation also includes certain non-GAAP financial measures. We have provided reconciliations of those measures to the most directly comparable GAAP measure in the press release. With that, let me turn the call over to Dave.

Thank you, Doug, and good morning, everyone. Tegna's second quarter was another record, reflecting execution of our long-term strategy, relentless focus on operational performance and expense management, and an improvement in underlying economic trends since the height of the pandemic. We achieved a number of second quarter records – total revenue, subscription revenue, advertising and marketing services revenue, net income, and adjusted EBITDA. Looking forward, we see continued growth across the key drivers of our business – which is reflected in our positive outlook for the third quarter and full year, which now includes an even stronger free cash flow guide. To provide an overview of some of our key second quarter results, total company revenues were up 27% year-over-year, yet another quarter of record revenue, supported by continued strong subscription revenue and growth in AMS revenue. To provide some further color, Subscription revenue grew 16% year-over-year in the second quarter, the same growth rate we saw in the first quarter of 2021. And when compared to the second quarter of 2019, subscription revenues were 59% higher. Our predictable subscription revenue streams continue to be a key driver of our underlying growth and durability of our business model through two key factors. One, improving underlying subscriber trends. Our year-over-year subscriber trends continue to strengthen in the quarter, now more than a full percentage point better than five months earlier. And two, strong step-ups in retransmission rates. Last year, we repriced approximately 35% of our subscribers, and we'll reprice an additional 30%, approximately 30% toward the end of this year. Combined, these factors support our full-year guidance for subscription revenue to be up mid to high teens percent, for the year and for net subscription profits to grow in the mid to high 20s percent. Another key driver for performance this quarter was strong advertising and marketing services revenue. AMS revenue continues to accelerate and was up 49% over last year for the second quarter and continues to accelerate. On a two-year basis, advertising revenue was basically flat, down less than 1% on a pro forma basis compared to the second quarter of 2019. a result of the magnitude of the rebound in the ad market since the height of the impact of COVID, and strong performance by our sales and marketing teams. Victoria will cover advertising categories in more detail in a few minutes, but I did want to highlight that if you exclude automotive advertising, which as you all know is challenged temporarily due to supply chain issues, our AMS revenue would have been up in the mid-single digits over 2019 on a pro forma basis. And based on the continued acceleration we're seeing today, We expect for the third quarter to show further significant improvement, even when excluding for the positive impact of the Olympics. Turning now to Premion, our first to market an industry-leading OTT advertising platform, which had a record quarter for a non-political year. Premion continues to execute on its strategy and affirm Tegna's distinct advantage in selling OTT advertising services across our footprint and beyond. Combined with great television and Premion Direct Salesforce coverage, our local Salesforce now extends to almost 75% of households across the U.S., broadening our reach beyond TV and accessing new markets. In June, Premion announced an expanded partnership with Polk Automotive Solutions to leverage market-leading insights to bolster audience targeting and sales lift measurements to deliver an end-to-end OTT ad solution for automotive advertisers. This is a great example of Premion's role in supporting the growing and evolving needs of local and regional advertisers by driving measurable business outcomes, another key component of Tegna's strong underlying AMS growth. We continue to see and expect robust growth at Premion with revenues on track to finish the year 45% to 50% higher than last year. Now, turning to capital allocation and expense management. During the second quarter, we paid our first elevated dividend since the 36% annual increase we announced earlier this year, shortly following our three-year, $300 million share repurchase announcement. These actions reflect our board's and management's confidence in Tegna's performance and long-term growth, which are supported by our significant free cash flows. Our board is actively evaluating all additional capital allocation options in anticipation of reaching our net leverage target of low threes by the end of the year, with a goal of staying below four times net leverage. The continued strength of our business also gives us greater confidence in our future free cash flows. This is reflected in our new 2020-21 free cash flow as a percentage of revenue guide of 21.5% to 22.0%, which we expect to achieve the high end of. We continue to have clear visibility into the durable subscription and political revenues that drive these cash flows and create value for our business. And as always, we remain diligent in our expense management efforts, staying focused on generating incremental savings through our coordinated discipline cost management and many efficiency initiatives. Now to update you on several strategic initiatives underway at Tegna. This spring, based on the growth and success of Verify content across our stations, we launched Verify as a national standalone brand. to combat the sea of misinformation and disinformation audiences are bombarded with on a daily basis, especially on social media. Verify helps consumers by identifying which stories or claims are true and which ones are false, and provides trustworthy, transparent research fact gathering, always showing sources up front. Verify now has a dedicated presence across all major social media channels, including Snapchat, Facebook, and TikTok, making it even easier for consumers to verify the news and information they are consuming or sharing, and for us to be able to reach all generations of viewers and consumers. Year-to-date, Verify content on our local station sites and our VerifyThis.com website delivered approximately 30 million total visitors and 7 million total video plays, and we're just getting started. Locked On, the leading sports podcast network we acquired earlier this year, also continues to innovate, now expanding into video. Locked On is now distributed on YouTube and across our station's OTT apps. Twenty Locked On shows are now available on YouTube, including Locked On NFL, Locked On NBA, Locked On Big Ten, and Locked On Fantasy Basketball, as well as podcasts for the major NFL and NBA franchises. Since inception of the network's first YouTube channel early this year, Locked On has generated more than 160,000 total hours of watching time and more than one million video views. which averaged more than 10 minutes per play in each in June, which is a long time in the digital world. For the NBA draft, Locked On partnered with our Dallas station, WFAA, to co-produce a draft special featuring more than 30 local analysts with in-depth experience, a true differentiator for our company. We're also very proud to launch the first ever daily sports podcast dedicated to historically black colleges and universities. We remain committed as a company to making progress on diversity, equity, and inclusion, and further embedding these principles in our culture. At the beginning of this year, we set quantifiable five-year goals to increase black, indigenous, and people of color representation across our content teams, news leadership, and management positions. Since then, through intentional actions, we are progressing at or above the rate of change required to achieve these goals. This includes improvements in the number of diverse department head positions that are key to hiring and decision-making. Our inclusive journalism program, which we developed last year with the Poynter Institute, aims to tackle unconscious bias in news reporting and content development across all our platforms. All stations' news, digital, and marketing personnel have begun taking part in the program with 54 stations involved. completing the first phases of the program that includes unconscious bias and inclusive reporting training, leadership-specific training, and content audits to ensure we're making progress and hold ourselves accountable. Finally, we're proud to share that Tegna recently received two honors that reflect our longstanding commitment to our employees and communities. Last week, we were recognized as one of Achiever's 50 most engaged workplaces in the United States. This achievement reflects our culture of employee engagement across the company. Our people are at the heart of everything we do, and our deliberate approach to understanding our colleagues' perspectives and acting on what we've heard are key to our innovative and purpose-driven culture. Tegan was also an honoree of the Civic 50 for the second consecutive year in recognition of our role as a community-minded, socially responsible company that drives social impact. We are very proud of the determination and resilience of our very engaged employees that enables us to fulfill our mission every day. And with that, I'll now turn the call over to Victoria.