TEGNA Inc

Good day and thank you for standing by. Welcome to Tegna's third quarter 2023 earnings conference call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Julie Heskett, Senior Vice President, Financial Planning and Analysis and Head of Investor Relations. Please go ahead. Thank you.

Good morning and welcome to our third quarter conference call-in 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 quarter-ahead outlook. After that, we'll open the call for questions. Hopefully, you've had the opportunity to review our third quarter earnings results. 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. We have provided reconciliations of those measures in the most directly comparable GAAP measures in the press release. With that, let me turn the call over to Dave.

Thank you, Julie, and good morning, everyone. TECNA's third quarter results reflect our business plan centered on continuing to enhance performance, optimizing operational efficiency, and driving long-term value for our shareholders. We achieved a record third quarter for subscription revenue, and saw sequential improvement in advertising and marketing services revenue, driven by improving trends in key verticals such as auto and services. In addition to these strong underlying results, we also completed our initial $300 million of accelerated share repurchases, or ASR. We completed that ASR at the end of August earlier than anticipated. Despite a limited trading window, we were able to quickly purchase shares opportunistically in the open market. This increases our capital commitment this year to return nearly $800 million to shareholders. I'll talk more about our capital return actions and our advantage positioning in a couple of moments. Turning to third quarter results, total company revenue finished in line with our guidance, down 11% year-over-year due almost exclusively to the reduction of political revenue from the midterm election cycle last year. Excluding political, revenue is down just slightly year-over-year. As I mentioned, subscription revenue was a third quarter record and up just slightly year over year. Technus subscription revenue continues to provide stable and predictable cash flows supported by contractual rate increases partially offset by subscriber declines. We expect to reprice approximately 30% of our traditional subs by the end of this year, further improving visibility into our outlook. Despite broader macroeconomic challenges, advertising revenue trends were sequentially better than the first two quarters of the year, and that trend is continuing into the fourth. AMS revenue finished the quarter down 3% compared to the third quarter of last year. However, underlying advertising trends were basically flat year over year when adjusting for the premium national account loss we've discussed on prior calls. Automotive, our largest category within AMS, continues to improve and show strong year over year growth, now for the fifth consecutive quarter. Auto was up 20% year over year in the quarter, Also notably, services, our second largest category, continues to be strong, almost 15% year over year. Looking ahead, 2024 will be a strong year of performance at Tegna, with a very favorable portfolio of stations for political advertising in next year's presidential Olympic cycle, as well as the Summer Olympic Games from Paris on our large NBC portfolio stations, and the Super Bowl on our large CBS portfolio compared to last year's much smaller Fox portfolio. Turning to capital allocation, we are enthused about the go-forward opportunity at Tegna and building on our strong track record of returning capital to shareholders. Our industry-leading balance sheet and resilient financial performance affords us the unique ability to return capital to shareholders through share repurchases and dividends while we simultaneously pursue organic initiatives and evaluate opportunistic bolts on M&A to further augment our attractive growth outlook and opportunities. We're on track to surpass our previously announced capital return to shareholders. Following the completion of our initial $300 million ASR program earlier than anticipated, as I said, we repurchased an incremental $28 million of shares in the open market just shortly before entering our blackout period. These repurchases were executed under our existing $300 million share repurchase program. On our last earnings call, we announced a second ASR program of $325 million. That program is expected to commence shortly. The completion of these four steps, the two ASRs, the stock transfer to satisfy the $136 million deal termination fee, and our recent opportunistic purchase of shares will result in us retiring nearly $800 million worth of Tegna shares. Looking ahead, strong operating performance and disciplined use of free cash flow position us to continue to build on our capital return track record. As I said, we have an industry-leading balance sheet, and that provides us that optionality. Even after both ASR programs and the incremental purchase of shares in 2023, we still expect to end the year with net leverage under three times. Our strong free cash flow generation is expected to further strengthen next year due to the political Olympic and Super Bowl tailwinds I mentioned earlier. This offers additional flexibility as we make capital allocation decisions across organic growth, both on M&A opportunities and in returning capital to shareholders through share repurchases and our recently increased dividends. Turning to strategic updates. In the quarter, we reached a comprehensive multi-year deal with ABC. This renews our ABC network affiliations in 13 markets across the country, which cover 9% of the U.S., serving nearly 11 million households. Our partnership combines ABC's popular entertainment, sports, and news program with our strong local stations and large audiences. We believe our successful negotiation with ABC highlights the win-win long-term relationships we have with our programming partners. Tegna's local stations provide irreplaceable local news, which is some of the most watched and trusted within the nation. Coupled with leading program from program partners like ABC, our platforms deliver scale audiences with strong engagement. The vast and powerful reach of broadcast distribution is enjoying a growing audience reach advantage over other far more fragmented competitors in the ecosystem, most specifically cable channels and cable programmers. One area that highlights that shift is what's happening now with professional sports. With the existing RSN cable model in the final innings, the move of local sports from cable to broadcast is in the first inning of a new era. Professional sports teams and leagues are more acutely aware than anyone of this seismic shift in reach and distribution and are excited about the chance to reach all consumers, not just a smaller and smaller percentage of their addressable market. Along these lines, this quarter we announced that Ken's, our station in San Antonio, will exclusively air 11 San Antonio Spurs games during this broadcast season. With French sensation and number one draft pick Victor Wimbenyana, capturing attention across the country, and if not the globe, we're thrilled to be the Spurs broadcast partner for this year. As the current RSN bankruptcy proceeding plays out, look for more announcements to come. Given our large portfolio of strong stations in big sports home markets, we are very, very well positioned for this shift and opportunity in local sports. Also in the third quarter, Locked On, our leading local sports digital network with daily shows for all four pro sports leagues and major college programs, hit more milestones. Its audience has now gone past 27 million listens and views per month, and we launched four local Locked On fast channels in the quarter with more slated to launch in the fourth quarter. Daily Blast Live, our daily talk and trending topic show, entered its seventh season this September, now with a larger distribution footprint than ever. We've added 20 Sinclair markets and an additional Hearst market to our current footprint of 16 gray markets, as well as all of the Tegna stations in our large reach, bringing our total reach to more than 55% of the U.S. As the programming landscape continues to evolve, we believe Daily Blast Live's efficient production model will increasingly offer broadcasters a sustainable option for their content needs while simultaneously delighting our audiences. Verify, our national brand that combats disinformation, ended the third quarter with approximately 467,000 followers across its various dedicated channels. Weekly Verify, this show increased for the fourth consecutive quarter with more than 2.8 million minutes watched across Tegna Station streaming apps during the third quarter. And about those streaming apps, are Tegna Station streaming apps now have reached 677 million minutes on streaming, a 78% increase year over year in the quarter. These apps are now available for all stations on Roku, Fire TV, and Apple TV devices. And in the quarter, we also started rolling out our apps for Samsung, LG, Chromecast, and other platforms, and expect to have all stations live on these platforms by year end. Delivering news that matters and impactful investigations that make a difference in people's lives are the center of each and every one of our newsrooms. We're very proud of the determination and resilience of our engaged employees that enables us to fulfill our mission every day. A special congratulations and shout out to WWL, our station in New Orleans that recently received a national news Emmy for their investigative reporting that shines a light on the deplorable living conditions for nursing home residents after Hurricane Ida. Their investigation led to much needed law changes in Louisiana. The work we do changes lives and changes laws. With that, I'll now turn the call over to Victoria.