TEGNA Inc

Thank you for standing by and welcome to the second quarter Tegna earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentations, there will be a question and answer session. To ask a question at that time, please press star 11 on your telephone. As a reminder, this call is being recorded. I would now like to turn the call over to your host, Ms. Julie Heskett, Senior Vice President of Finance and Investor Relations. Please go ahead.

Thank you. Good morning and welcome to our second quarter conference call and webcast. Today, our President and CEO, Dave Luge, and our CFO, Victoria Harker, will review Tegna's financial performance and results and discuss Tegna's standalone outlook. After that, we'll open the call for questions. Hopefully, you've had the opportunity to review our Form 8K filed this morning with the Securities and Exchange Commission, as well as our second quarter earnings results. If you have not yet seen a copy of the release, it's available on 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 filing. This presentation also includes certain non-GAAP financial measures. We have provided reconciliations of those measures to the most direct comparable GAAP measures in the press release. With that, let me turn the call over to Dave.

Thank you, Julie, and good morning, everyone. Tegna's second quarter results reflect our continual momentum and sharp focus on delivering value for our shareholders. We achieved a record second quarter for subscription revenue and saw sequential improvement in underlying advertising trends this quarter compared to the first. Importantly, our solid results, along with our strong balance sheet, underpin our ability to create value for Tegna shareholders, which I'll outline now in detail a little later in the call as well. Building on our initial steps to return accumulated capital to shareholders pending from the, during the merger, the failed merger agreement, today we announced that Tegna's board approved a second accelerated share repurchase agreement, or ASR, of $325 million, which is expected to commence after our three Q earnings are reported in early November. This will bring our commitment this year of more than three-quarter of a billion dollars in share reduction, including the previously announced $300 million ASR currently underway and the $136 million termination fee paid in shares by Standard General. The Board also declared a 20% increase to the regular quarterly dividend to 11.375 cents per share, which was previously announced in May. Taken together, these actions demonstrate our track record of acting on feedback we've received from our engagement with shareholders over the past several months, and our continuing commitment to returning capital to shareholders in a disciplined and thoughtful manner. As we continue to refine our longer-term capital allocation priorities, we anticipate providing a more detailed update by year-end. Next, I'd like to provide some of the highlights of our second quarter results, and Victoria will cover these topics in more detail. Total company revenue was down 7% year-over-year, almost exclusively due to the reduction of political revenue from last year from the midterm election cycle. Excluding political revenue was down just slightly. Subscription revenue was a second quarter record and grew 2% year over year. As a reminder, growth in the first quarter lapped a temporary disruption with the distributor last year, as well as an accounting drop. Therefore, second quarter results reflect a more normalized trend. Our subscription revenue continues to provide stable and predictable cash flows supported by contractual rate increases. Late this year, we expect to reprice approximately 30% of our traditional subscribers, further improving clarity into our outlook. Despite broader macroeconomic challenges, advertising revenue trends were sequentially better than the first quarter. AMS revenue finished the quarter down 5% compared to the second quarter of last year. However, underlying advertising trends were down low single digits, when adjusting for the loss of a single premium national account we discussed on our last investor call. Automotive, our largest category within AMS, has steadily recovered and is generating strong year-over-year growth, and it did so in the second quarter for the fourth consecutive quarter and is doing it again as is strong in Q3 as well. Another factor in improved advertising trends is the accelerating shift of audience reach from cable to broadcast, a favorable impact for broadcast from cord-cutting. While many of the traditional cable and satellite homes we lose are replaced by virtual MVPDs, as well as over-the-air antenna homes, the local cable interconnects in our many markets don't have that subscriber and viewer replacement mechanism. And their reach in any individual market is down dramatically in recent years. Advertisers are increasingly recognizing this dramatic and growing delta. between the reach of local broadcasting compared to local cable, and the dollars will follow, and that will impact political dollars as well. Premion, our first-to-market and industry-leading OTT advertising platform, continues to focus on growth in local OTT revenue where it is uniquely positioned to win. Local Premion revenue continues its strong growth, and Premion, too, will benefit from local cable's declining reach. Now, turning to capital allocation, as I mentioned, following an initial review of capital allocation priorities and incorporation from investor feedback that's been a robust process over the past several months, the Board has approved the return of additional accumulated capital to shareholders in the form of a $325 million accelerated share repurchase program to commence after our third quarter earnings are reported in early November. This second ASR follows the initial steps we took in June after the merger agreement termination to immediately return capital to shareholders by entering into a $300 million ASR, the current one in place, which we expect to complete by the end of the third quarter. The completion of these steps, the two ASRs, and the stock transfer to satisfy the deal termination fee, will result in us retiring more than $3.25 billion of our shares by approximately the end of the first quarter of next year. Strong operating performance and disciplined use to free cash flow position us with an industry-leading balance sheet. Even after both ASR programs in 2023, we expect to end the year with net leverage under three times. Moving forward, we are laser-focused on generating strong shareholder value. Our board and management team has consistently taken a methodical approach to our long-term strategic priorities in capital allocation. We are actively focused on refining our thinking on these topics as Tegna evaluates its next chapter as a standalone company. and we strive to generate attractive, durable growth for our shareholders for both the near and long term. Since the termination of our merger agreement, we believe our initial actions to commit to more than $3.25 billion in share reductions, as I just mentioned, send a strong signal on Tegna's outlook. This management team and board have a strong and disciplined track record of making forward-thinking, organic and inorganic investments that have generated strong returns and and augmented our competitive positioning amidst an industry backdrop that continues to evolve. We are in a fantastic position today as we assess these longer-term opportunities, but again, through a very disciplined lens. Our balance sheet is industry-leading, and our financial performance remains strong, allowing us to consider accretive opportunities while returning capital to shareholders. We can do both. As we look ahead, we're excited about the go-forward opportunities for Tegna. Now to update you on a few strategic and operating highlights from this past quarter. Verify, our national brand that combats disinformation, ended the second quarter with approximately a half billion followers across its various dedicated channels, including on YouTube, which has seen nearly 100% increase in subscriber growth over the past year. In June, we launched Apple TV streaming apps for all stations. We now have apps for all our stations on Roku, Fire TV, and Apple TV. By the way, when I say back to verify, I should have said a half million, not a half billion. But our apps are now generating 580 million minutes of streaming, an 82% increase year over year, and we've begun testing station apps for Samsung, LG, Chromecast, and additional platforms and expect to launch on most or all of these platforms in the third quarter. Locked On, our leading local sports podcast network, which is now on video and YouTube as well, with daily shows for all four professional sports league teams and most major college programs hit a new milestone in the quarter. The network exceeded 24 million monthly audio downloads and video views for the first time in May. In the first six months of 2023, total views and listens grew 44% year over year. As local broadcasters, we take seriously the important role we play in ensuring our editorial coverage and storytelling reflects all of the communities we serve. During the quarter, all new content employees who joined Tegna since December of last year have completed our innovative, inclusive journalism training program. We awarded grants to more than 30 of our colleagues to attend journalism conferences taking place this summer and right now, in fact. where they can take part in important professional development and networking opportunities. As an example of the value of those network opportunities, at last year's Investigative Reporters and Editors Conference, Tegna investigative reporters collectively developed the idea for a project titled Seven Days, 1,000 Shootings, which launched during the second quarter. The title of this project comes from the fact that there were 1,000 shootings in the U.S. during that same time period in 2022. As part of the project, eight stations followed up on these shootings, looking not only at gun violence, but hearing from families and communities on the steps that are being taken to find solutions, an issue that's obviously of critical importance in this country more than ever before. Delivering news that matters and impactful investigations that make a difference in people's lives are at the center of each and every one of our newsrooms and our purpose as a company. We are very proud of the determination and resilience of our engaged employees and that enable us to fulfill our mission every day. And with that, I'll now turn the call over to Victoria.