TEGNA reports Q2 Results, names Mike Steib as new CEO effective August 12

TEGNA, one of the largest owners of local television stations in the United States, this week released its financial results for the second quarter of 2024 and announced a significant leadership change. The company reported total revenue of $710 million for Q2, a 3% decrease compared to the same period last year. Additionally, TEGNA revealed that Mike Steib will succeed Dave Lougee as President, CEO, and Director, effective August 12, 2024.

According to the earnings report, TEGNA's subscription revenue decreased by 7% to $367 million, primarily due to subscriber declines, although this was partially offset by contractual rate increases. Advertising and Marketing Services (AMS) revenue also saw a decline of 5% to $301 million, which the company attributed to softness in demand from national accounts. However, political advertising showed strength, with revenue increasing to $31.6 million compared to $6 million in Q2 2023.

The leadership transition comes as Dave Lougee prepares to retire after seven years at the helm of TEGNA. Mike Steib, the incoming CEO, brings a wealth of experience from his previous roles as CEO of Artsy, the world's largest online platform for discovering and collecting art, and as president and CEO of XO Group, the parent company of The Knot. Steib's background also includes executive positions at NBCUniversal and Google, where he focused on launching, scaling, and acquiring advertising-supported businesses.

TEGNA's Board of Directors has also undergone changes, with the appointment of two new independent directors effective July 1, 2024. Catherine Dunleavy, the incoming COO and CFO of Olaplex, and Denmark West, who heads Market Intelligence and Strategic Engagements at X, The Moonshot Factory (a division of Alphabet), have joined the board as part of its regular refreshment process.

Despite the revenue challenges, TEGNA reaffirmed its full-year 2024 guidance and its two-year adjusted free cash flow guidance of $900 million to $1.1 billion for 2024-2025. The company remains committed to its capital allocation strategy, which includes returning 40-60% of adjusted free cash flow to shareholders through share repurchases and dividends over the 2024-2025 period.

In the second quarter alone, TEGNA returned $93 million to shareholders, with $72 million in share repurchases and $21 million in dividends. The company's Board of Directors also approved a 10% increase to the regular quarterly dividend, raising it from 11.375 to 12.5 cents per share, which was reflected in dividends paid to eligible shareholders in July.

TEGNA's financial position remains strong, with cash and cash equivalents totaling $446 million at the end of the second quarter. The company's net leverage finished Q2 at 2.9x, demonstrating a solid balance sheet that provides flexibility for future growth and shareholder returns.

Looking ahead to the third quarter of 2024, TEGNA expects total company revenue to increase by 9% to 12% year-over-year, driven by strong bookings from political ad spending and the Summer Olympics. The company anticipates that operating expenses in Q3 will be flat to slightly down compared to the previous year.

The upcoming U.S. presidential election is expected to be a significant driver of revenue for TEGNA in the latter half of 2024. Dave Lougee, the outgoing CEO, noted that recent political developments have unleashed pent-up enthusiasm and fundraising efforts, particularly on the Democratic side. This sudden change in the political landscape could translate into increased advertising spending across TEGNA's network of stations, especially in key battleground states.

TEGNA's strategic positioning in sports broadcasting is also noteworthy. The company has expanded its partnership with the NHL's Seattle Kraken, securing rights to broadcast games for free over-the-air across Washington, Oregon, and Alaska starting in October. This move, along with the distribution of WNBA Indiana Fever games across 12 markets, demonstrates TEGNA's commitment to leveraging sports content to drive viewership and advertising revenue.

The company's Premion advertising platform, which focuses on Connected TV (CTV) and over-the-top (OTT) advertising, continues to show promise. While national Premion revenue faced challenges, local revenue experienced positive momentum with growth in the low double-digits compared to the previous year. TEGNA expects Premion's revenue growth rate to increase in the coming years, bolstered by the recent acquisition of Octillion, a move designed to enhance Premion's technological capabilities.

TEGNA's commitment to local journalism and community engagement was recognized once again, as the company was named a 2024 Honoree of The Civic 50 and Telecommunications Sector Leader by Points of Light. This marks the fifth consecutive year TEGNA has been acknowledged as one of the most community-minded companies in the U.S. and the fourth year as the Telecommunications Sector Leader.

The company's focus on quality journalism was further underscored by its stations receiving 73 Regional Edward R. Murrow Awards, including six for overall excellence, seven for diversity, equity, and inclusion, and five for innovation. TEGNA stations received more honors in these categories than any other local broadcast station group, highlighting the company's dedication to impactful local news coverage.

As TEGNA navigates the evolving media landscape, it faces both challenges and opportunities. The decline in traditional cable subscribers continues to pressure subscription revenues, but the company is actively exploring new distribution channels and content strategies to offset these losses. The growth of streaming and digital platforms presents avenues for expansion, particularly through Premion and other digital initiatives.

The appointment of Mike Steib as CEO signals TEGNA's focus on digital transformation and innovation. Steib's experience in building industry-defining products and brands, coupled with his track record of delivering shareholder value, positions him well to lead TEGNA into its next phase of growth. His background in both traditional media (NBCUniversal) and digital platforms (Google, Artsy) aligns with the company's need to balance its legacy broadcast business with emerging digital opportunities.

As the media industry continues to evolve, TEGNA's strategic investments in local sports rights, political advertising capabilities, and digital advertising platforms like Premion could prove crucial in maintaining its competitive edge. The company's strong balance sheet and consistent cash flow generation provide it with the financial flexibility to pursue growth opportunities while returning capital to shareholders.

In summary, TEGNA's Q2 2024 earnings report and leadership announcement reveal:

Total revenue of $710 million, down 3% year-over-year

Subscription revenue decreased 7% to $367 million

Advertising and Marketing Services revenue fell 5% to $301 million

Political advertising revenue increased to $31.6 million

Mike Steib appointed as new President and CEO, effective August 12, 2024

Full-year 2024 guidance reaffirmed

$93 million returned to shareholders in Q2 through share repurchases and dividends

Expected Q3 2024 revenue growth of 9% to 12% year-over-year

Continued focus on political advertising, sports broadcasting, and digital platforms like Premion