Tegna Wraps 2020, Provides 2021 Guidance
Tegna Inc. today announced preliminary financial results for the fourth quarter and full-year ended Dec. 31, 2020, and guidance for the full year. The company also announced that the Tegna board of directors authorized the renewal of its share repurchase program which allows the company to repurchase up to $300 million of its issued and outstanding common stock over the next three years.
Preliminary Fourth Quarter Highlights
- Record revenue is expected to be in the range of $932 million-$937 million, up 34%-35% percent year-over- year, driven by record political advertising and continued growth in subscription
- Tegna generated record political advertising revenue of approximately $264 million in the fourth quarter, including $50 million of revenue generated from the Georgia Senate runoff
- GAAP Net Income is expected to be in the range of $246-$251 million, up 193% to 199% year- over-year. Record adjusted EBITDA is expected to be in the range of $424 million-$429 million. This represents an increase of 85%-88% percent in adjusted EBITDA compared with fourth quarter
- During the quarter, Tegna repriced approximately 35% of its subscribers at leading Big 4 affiliate rates. Subscriber trends continue to improve, now with four consecutive months of sequential year-over-year
- Tegna renewed its comprehensive, multi-year affiliation agreement with NBC, the company’s largest network partner, covering 20 Tegna markets nationwide including 10 of the top 25 markets for NBC. This agreement, combined with our subscription revenue renewals, provides clear visibility into the growth of our durable, high-margin subscription revenue
Preliminary Full-Year 2020 Highlights
- Revenue will be in the range of $2,932 million-$2,937 million, up 27% to 28% year-over-year, driven primarily by growth in political and subscription revenues, as well as contributions from stations acquired in
- GAAP Net Income is expected to be in the range of $484 million-$490 million, up 69% to 71% year- over-year. Adjusted EBITDA will be in the range of $1,020 million-$1,025 million, up 44% to 45% year-over-year driven by approximately $445 million of high margin political advertising and growth in net subscription profits, despite advertising and marketing services challenges as a result of the COVID-19
- Free cash flow as a percentage of revenue will be above or at the high end of the previous guidance of 20% to 21% provided on Nov. 9, 2020, for the two-year period ended 31, 2020.
- Net leverage is expected to end the year at or below 4.0x, better than the year-end 2020 guidance of 4.1x provided when Tegna completed its 2019 acquisitions, and despite the impacts of the pandemic.
Dave Lougee, president and chief executive officer, said: “2020 was an extraordinary year of growth and innovation at Tegna, reflecting tremendous execution driven both by the resiliency and innovation of our colleagues across the company, as well as the resiliency of our business model in the face of significant challenges.
“Our fourth quarter and full-year preliminary results reflect strong subscription revenue growth and unprecedented political advertising that led to record revenues and profits. Despite the challenges of COVID-19, we expect to exceed all key metrics in our full-year 2020 outlook provided prior to the pandemic. This is due, in part, to the prudent decisions we made leading up to and throughout the pandemic. We expect to surpass $1 billion in Adjusted EBITDA for the year, a milestone that reflects the quality of our operations and continued discipline of our expense management. We were able to execute on our long-standing cost management philosophy during the year through new, innovative, and more efficient ways of operating our business, the key learnings of which we will apply to our operations going forward.
“Another driver of our results is the revenue achievement and demand for Tegna’s over-the-top advertising business, Premion, which is expected to finish the year with revenues of more than $145 million, reflecting growth greater than 40 percent relative to last year. We are expecting similar percentage growth in 2021. Premion is poised to continue to benefit from increased viewing on streaming services into 2021 and beyond, allowing us to expand our reach beyond our TV stations’ large audiences.
“Our full-year 2021 guidance metrics include our projection of year-over-year subscription revenue growth of mid-to-high-teens percent, reflecting leading retransmission rates for our portfolio of Big Four affiliates. Furthermore, our end of the year retransmission negotiations along with the new affiliation agreement with NBC, our largest network partner, provide visibility for years to come on durable and high-margin subscription revenues. We now project net subscription profits to grow in the mid-to-high twenties percent in 2021. As we’ve said before, and was reinforced in 2020, these growing and resilient subscription revenues and profits, along with continued growth in political advertising on our local media platforms, deliver a diversified mix of high margin revenues that will drive near and long-term value for our shareholders.
“Our underlying Advertising and Marketing Services revenue trends continued to improve in the fourth quarter, and while it is early, that trend is continuing nicely in the first quarter of 2021, with automotive continuing to show improvement in January.
“The combination of our firepower and the strength of our balance sheet affords us tremendous financial flexibility into 2021 and beyond. Our prudent capital allocation decisions have led us to this solid positioning despite the continued challenging macroeconomic backdrop due to the pandemic. Thanks to the strength of our financial position, we are able to reintroduce buybacks as an additional opportunistic tool to return value to shareholders if we determine it is the most appropriate use of capital in the future. As we look to the year ahead, we are confident that the strength of our operations, cash flow and balance sheet position Tegna for future growth and value creation for our shareholders.”
Full-Year 2021 Outlook
Tegna’s full-year 2021 financial guidance metrics reflect management’s expectations for continued strong performance resulting from operational excellence across our portfolio of strong stations, including our focus on best-in-class journalism.
2021 guidance for subscription revenue growth reflects the culmination of successful retransmission negotiations covering roughly 35 percent of our subscribers. Tegna’s net subscription profits are expected to grow mid-to-high twenties percent year over year.
Full-year Adjusted EBITDA and free cash flow will continue to reflect year-over-year expense improvements resulting from significant cost reduction initiatives that have been underway for the past 24 months. Excluding programming and Premion costs, all other operating expenses in 2021 will be flat or slightly lower than 2020. As a reminder, in early 2020, we targeted reducing our annual run-rate expenses by $50 million by the end of 2021. With the efficiencies we’ve gained while operating through COVID-19, as well as continued operating cost reductions driven by innovative technologies, centralization and automation, we now expect to realize these $50 million of savings in 2021, several quarters earlier than anticipated.
Renewal Of Share Repurchase Program
In December 2020, the Tegna board of directors authorized the renewal of its share repurchase program which allows the company to repurchase up to $300 million of its issued and outstanding common stock over the next three years. The program was previously suspended on March 20, 2019, simultaneously with the announcement of the company’s acquisition of the Nexstar-Tribune divestiture stations to prioritize debt repayment.
The $300 million, three-year share repurchase program renewal demonstrates the board’s and management’s confidence in the business and continued focus on making prudent, disciplined decisions to drive near and long-term shareholder value. As always, Tegna’s capital allocation decisions will balance investments in organic and inorganic growth opportunities, paying down debt, issuing dividends, and repurchasing shares in a way that maximizes the return on capital for the company’s shareholders.
Under the approved authorization, the company may purchase up to $300 million of common stock through Dec. 31, 2023, utilizing one or more open market transactions, transactions structured through investment banking institutions, in privately negotiated transactions or otherwise, by direct purchases of common stock or a combination of the foregoing in compliance with the applicable rules and regulations of the Securities and Exchange Commission.