Tegna Set For Extra-Innings Political Bonanza

“We’re not done yet,” said Tegna President-CEO Dave Lougee as he reported to Wall Street analysts and investors on the company’s $395 million in 2020 political advertising sales through last Tuesday. “The spending has already begun,” he said of the two U.S. Senate runoffs scheduled for early January in Georgia, with both parties out to raise more funds and spend to attract votes as they battle for majority control of the Senate.

Tegna has two stations in Atlanta and one in Macon, but until now Georgia hadn’t even been its hottest state for political spending. That has changed, with control of the Senate at stake. “We’re trying to size it now. We don’t have, frankly, a good answer, other than we know it will be very, very large,” the CEO said.

Post-election, Lougee says core advertising is “looking pretty good — the best all year since first quarter.”

“When you take the weeks just after Election Day, we’re looking at down mid-single-digits — roughly minus 5% — and it’s improving,” he told analysts. “Auto is down, but not much worse than that…. It’s not much of a drag at all now,” he added when asked specifically about auto. Noting the just-announced news about progress on a COVID-19 vaccine, Lougee suggested that such news is just the sort of thing that might encourage big-ticket advertisers who have been holding back because of economic uncertainty.

Earlier, EVP-CFO Victoria Harker had given some details on the sequential improvement the company saw in advertising for the third quarter. “As you’d expect, home improvement, services, banking and financing, medical and fast food were all up above last year. Automotive and retail are improving, and while they were still down relative to last year, they were sequentially better than last quarter. Not surprisingly, the categories that continued to struggle for this quarter were entertainment, travel and tourism,” she said.

While Tegna is still not providing formal guidance, due to the continuing COVID-related turmoil, Harker did offer some outlook on the fourth quarter. “We now expect subscription revenue [retrans] growth in the high-20s for the full year — and improvement from our prior outlook of up mid-20s. Second, we exceeded our prior political guidance of at least $370 million through Election Day, with $395 million already on the books last week. With runoff races, we will finish higher yet,” the CFO said.

As the television industry awaits a U.S. Supreme Court ruling next year on the FCC’s in-market deregulation efforts, Lougee reiterated that Tegna is potentially the biggest beneficiary if the result is that broadcasters can own two Big 4 network affiliates in each market. He told the analysts that Tegna has the “firepower” for M&A activity, but noted that the outcome of the court case is unknowable.

Meanwhile, Tegna is reaping the benefits of past M&A which produced a footprint to maximize political revenues. As a result, Lougee sees his company reaping 50% of its revenues from political and retrans over each two-year election cycle. He also noted that Tegna has boosted the margin on its political ad sales from having taking its national spot business in-house.