Tegna’s 1Q Got Lift From Subscription Strength

Tegna’s “productive” first quarter growth was highlighted by its “continued strength” in subscription revenue and its acquisition of 11 TV stations in eight markets from Nexstar Media Group that included eight Big Four affiliates, David Lougee, Tegna president-CEO, said May 9 on an earnings call.

As TVNewsCheck reported this morning, Tegna’s first quarter revenue grew 3% year-over-year to $517 million although, excluding political and estimated incremental Olympics and Super Bowl revenue, revenue came in at the high end of its guidance, increasing 8%.

The revenue growth was “driven primarily by” subscription revenue growing 18% to $242 million that Lougee said was a “first quarter record,” along with growth in Tegna’s sales, digital and content operations.

The company’s $740 million cash purchase of 11 stations from Nexstar, announced in March, was “the largest acquisition since we became a pure-play” media company in June 2017, Lougee noted, adding: “These stations are an excellent fit with our portfolio.” The Big Four affiliates it acquired included two each in Iowa and Pennsylvania, which he pointed out are “key presidential battleground states, further strengthening our positioning” for the 2020 U.S. election.

That acquisition also represented a “very efficient use of cap space for us as we expand our portfolio,” he said. Although the stations will increase Tegna’s reach by about only 2% on a UHF discount basis, they will add nearly $100 million in annual EBITDA on a two-year average basis, he told analysts.

Since that purchase, the company also announced its acquisition of the 85% of multicast networks Justice and Quest that Tegna didn’t already own.

Noting how those two fast-growing networks are taking advantage of the growing number of over-the-air TV viewers with a successful and “extremely cost-efficient” programming strategy, Lougee said: “Over-the-air audiences have increased by more than 48% over the past eight years.” He predicted Justice and Quest will “continue to benefit from that secular tailwind” as more U.S. consumers either cut or “shave” the cord and over-the-air viewing continues to grow.

So far this year, Tegna has closed on or announced more than $900 million worth of “attractive assets that fit our strategic plan and financial requirements” overall, he told analysts. The company continues to have a “disciplined” M&A strategy in which it targets “accretive acquisitions that fit our strategy and benefit our shareholders,” he said.

Tegna is awaiting a decision by the FCC on whether to raise the national TV ownership cap from 39% of U.S. TV homes, he told analysts and pointed out his company still had “a lot of room under the cap, given the UHF discounts still in place.” Following the Nexstar acquisition, Tegna will be at 30.5% under the cap on a discounted basis, he said.

Tegna’s overall content innovation efforts, meanwhile, are “showing results, with audience share increases in key large markets,” he said.

The company recently launched Vault Studios, a digital content initiative that uses archived content from Tegna TV reporters. The first offering was a Bomber series of investigative report podcasts that launched in March and, “for weeks, was one of the most listened to news and politics podcasts” on Apple’s iTunes, Lougee said.

“Looking forward, there will be new business opportunities out of the Vault initiative and the Justice network acquisition that will allow us to capitalize on these exclusive archive assets,” he said.