TEGNA Inc. Reports 2016 First Quarter Results

Highlights for the first quarter include the following:

  • GAAP earnings from continuing operations of $0.42 per diluted share. Non-GAAP earnings from continuing operations of $0.45 per diluted share, an 88 percent year-over-year increase
  • Total company revenue up 7 percent and over 8 percent on a pro forma basis driven by strong Media and Digital Segment performances
  • Media Segment revenues 12 percent higher driven by robust growth in retransmission revenue and record first quarter political advertising revenue
  • Digital Segment revenues up over 4 percent on a pro forma, constant currency basis
  • Adjusted EBITDA totaled $264 million, a 16 percent increase
  • Strong free cash flow totaled $111 million

MCLEAN, Va.--()--TEGNA Inc. (NYSE: TGNA) today reported non-GAAP earnings per diluted share from continuing operations of $0.45 for the first quarter of 2016, an increase of 87.5 percent compared to $0.24 for the first quarter of 2015.

Gracia Martore, president and chief executive officer, said, “We are pleased to have kicked off 2016 with strong results across our businesses. Product innovation in the Media Segment contributed to revenue growth in the quarter and we plan to expand on these efforts as well as content innovation throughout the year. Additionally, we achieved a record level of first quarter politically related ad revenue and are very well positioned for the rest of the election cycle. In our Digital Segment, higher dealer penetration and new products at Cars.com contributed meaningfully to company-wide revenue growth of 7 percent.

Martore added, "Continued innovation has made us a more highly-focused, growth-driven media and digital company as we've made it our goal to be at the forefront of the evolving content consumption landscape. We continue to be extraordinarily well positioned for the rest of 2016 and beyond."

FIRST QUARTER
CONTINUING OPERATIONS

The following table summarizes the year-over-year changes in select financial categories for both GAAP and non-GAAP measures.

       
Continuing Operations

(Dollars in thousands)

           
GAAP Non-GAAP

First
Quarter
2016

First
Quarter
2015

First
Quarter
2016

First
Quarter
2015

 
Operating revenue $ 781,732 $ 731,491 $ 781,732 $ 731,491
Operating expense 579,813 549,019 569,415 555,807
Operating income $ 201,919 $ 182,472 $ 212,317 $ 175,684
 
Net income from continuing operations attributable to TEGNA $ 92,918 $ 69,412 $ 99,961 $ 55,396
 

See Table 3 for reconciliations between non-GAAP measures and the most directly comparable GAAP reported numbers.

 

Total company GAAP revenues were 6.9 percent higher in the first quarter compared to the first quarter of 2015. On a pro forma basis, which adjusts for the impact of a business sold last year, company revenues were up 8.3 percent. Media Segment revenues rose 12.0 percent driven by substantially higher retransmission and political revenue. Digital Segment revenues were 4.1 percent higher on a pro forma, constant currency basis.

First quarter non-GAAP operating expenses rose 2.4 percent as an increase in Media Segment expenses offset a significant decline in corporate expenses and the absence of publishing-related unallocated costs. Corporate expenses totaled $14.6 million compared to $18.9 million in the first quarter of 2015, a decline of 22.6 percent driven by continued efficiency efforts and re-sizing of our support platforms. Corporate expenses include $1.7 million of non-cash rent expense.

Operating income on a non-GAAP basis was 20.9 percent higher compared to the first quarter in 2015. Adjusted EBITDA (a non-GAAP term detailed in Table 4) totaled $264.5 million, an increase of 15.7 percent. The Adjusted EBITDA margin in the first quarter was 33.8 percent, an improvement of 2.6 percentage points compared to the same quarter last year.

Special items in the first quarter of 2016 unfavorably impacted GAAP results by $0.03 per share due primarily to charges related to a voluntary early retirement program. (Refer to Table 3 for a reconciliation of results on a GAAP and non-GAAP basis).

FIRST QUARTER
TEGNA MEDIA

Media Segment revenues were 12.0 percent higher driven by double-digit increases in retransmission revenues and online revenues and bolstered by $15.7 million of political advertising. Politically related advertising in the first quarter was 151 percent over the first quarter of 2012, the last Presidential election year, and 50 percent above 2014. The Super Bowl moved from our 17 NBC stations in 2015 to our 11 CBS stations in 2016 or 6 fewer of our stations in 2016. Excluding the impact of the Super Bowl, core advertising was up slightly.

The following table summarizes the year-over-year changes in select Media Segment revenue categories.

 
Media Segment Revenue Detail
(Dollars in thousands)
 

First Quarter
2016

 

Percentage
change

from First Quarter
2015

Core (Local & National) $ 249,021 (1.6 %)
Political 15,744 666.7 %
Retransmission (a) 146,812 33.2 %
Online 27,718 16.4 %
Other 4,534 (37.5 %)
Total $ 443,829 12.0 %
 
(a) Reverse compensation to networks is included as part of programming costs.
 

Media Segment non-GAAP operating expenses totaled $264.1 million compared to $229.5 million in the first quarter a year ago. The increase was due to higher programming fees and investments in growth initiatives. Operating income on the same basis was up 7.7 percent and totaled $179.7 million while Adjusted EBITDA was $199.1 million.

Based on current trends, we expect increases in retransmission revenue, political advertising and digital revenue to result in Media Segment revenue growth of 10 percent to 12 percent for the second quarter of 2016, compared to the second quarter of 2015. However, revenue growth will, in part, be dependent on the timing of political spending in the second quarter.

FIRST QUARTER
TEGNA DIGITAL

The following table reconciles Digital Segment revenues reported on a GAAP basis to revenues presented on a pro forma, constant currency basis (a non-GAAP measure).

 
(Dollars in thousands) First Quarter
2016   2015  

Percentage
Change

Digital Segment Revenue
Reported (GAAP Measure) $ 337,903 $ 335,074 0.8%
Adjust for business sold (9,561 )
Constant currency impact 132 (659 )  
Total adjusted pro-forma revenue $ 338,035 $ 324,854   4.1%
 

The revenue increase in the Digital Segment was driven by continued growth at Cars.com offset, in part, by revenue declines at CareerBuilder and the impact of the sale of our PointRoll business. On a pro forma, constant currency basis, Digital Segment revenues were 4.1 percent higher.

Cars.com revenues sold directly by the company were up 9.4 percent. Including the impact of affiliate revenue performance, revenues were 5.9 percent higher. The increase in direct sales was driven primarily by dealer market penetration and new product sales.

CareerBuilder revenue was 2.3 percent lower in the first quarter, a sequential improvement from a 5.1 percent decline in the fourth quarter of 2015. CareerBuilder results continued to be impacted by the transition to a greater concentration of SaaS products and away from lower margin, transaction-based businesses. On a constant currency basis, CareerBuilder revenue was 1.8 percent lower.

Non-GAAP expenses in the Digital Segment were $290.7 million in the quarter, an increase of 2.5 percent, reflecting primarily accelerating investments in sales force and growth initiatives.

Digital Segment operating income was $47.2 million. Adjusted EBITDA totaled $77.6 million resulting in an Adjusted EBITDA margin of 23.0 percent.

FIRST QUARTER
NON-OPERATING AND CASH FLOW ITEMS

Interest expense totaled $61.7 million in the quarter, a decline of $9.0 million from $70.7 million in the first quarter of 2015 due to lower average debt outstanding and a lower average interest rate.

The decline in reported other non-operating items reflects primarily a gain on the sale of a business in the first quarter of 2015. Other non-operating items on a non-GAAP basis in the first quarter totaled $3.0 million of income compared to an expense of $1.2 million in the first quarter of 2015.

In the first quarter, the company implemented the early adoption of a new accounting standard that changes certain aspects of the accounting for employee share-based payments. As a result, all excess tax benefits and tax deduction shortfalls will now be recognized as income tax expense or benefit in the income statement. The adoption of this accounting standard increased diluted earnings per share by $0.02, reduced the first quarter income tax provision by $4 million and reduced the tax rate by 3 percentage points.

Cash flow from operating activities for the first quarter was $127.1 million. Free cash flow (a non-GAAP measure) totaled $110.6 million for the quarter. Long-term debt outstanding was $4.2 billion and total cash was $79.2 million at the end of the quarter. During the first quarter, we repurchased approximately 3.2 million shares of our outstanding stock for $75.4 million and paid dividends of $30.8 million, returning $106 million to our shareholders.

* * * *

As previously announced, the company will hold an earnings conference call at 10:00 a.m. E.T. today. The call can be accessed via a live webcast through the company's Investors website, investors.TEGNA.com, or listen-only conference lines. U.S. callers should dial 1-866-598-9340 and international callers should dial 1-480-293-0667 at least 10 minutes prior to the scheduled start of the call. The confirmation code for the conference call is 3629345. A replay of the conference call will be available from Wednesday, April 27 at 2 p.m. (ET) to Wednesday, May 11 at 2 p.m. (ET). To access the replay, go to https://jsp.premiereglobal.com/webrsvp/ or Investors.TEGNA.com. The confirmation code for the replay is 3629345. Materials related to the call will be available through the Investor Relations section of the company's website Wednesday morning.

About TEGNA

TEGNA Inc. (NYSE: TGNA), formerly Gannett Co., Inc., is comprised of a dynamic portfolio of media and digital businesses that provide content that matters and brands that deliver. TEGNA reaches more than 90 million Americans and delivers highly relevant, useful and smart content, when and how people need it, to make the best decisions possible. TEGNA Media includes 46 television stations and is the largest independent station group of major network affiliates in the top 25 markets, reaching approximately one-third of all television households nationwide. TEGNA Digital is comprised of Cars.com, the leading online destination for automotive consumers, CareerBuilder, a global leader in human capital solutions, and other powerful brands such as G/O Digital and Cofactor. For more information, visit www.TEGNA.com.

Certain statements in this press release may be forward looking in nature or “forward looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The forward looking statements contained in this press release are subject to a number of risks, trends and uncertainties that could cause actual performance to differ materially from these forward looking statements. A number of those risks, trends and uncertainties are discussed in the company's SEC reports, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward looking statements in this press release should be evaluated in light of these important risk factors.

TEGNA is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this press release by wire services, Internet service providers or other media.

 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Continuing Operations

TEGNA Inc.

Unaudited, in thousands (except per share amounts)

     
Table No. 1

First Quarter
2016

First Quarter
2015

% Increase
(Decrease)

 
Operating revenues:
Media $ 443,829 $ 396,417 12.0
Digital 337,903   335,074   0.8  
Total 781,732   731,491   6.9  
 
Operating expenses:
Cost of revenues and operating expenses, exclusive of depreciation 248,256 226,577 9.6
Selling, general and administrative expenses, exclusive of depreciation 281,034 264,751 6.2
Depreciation 22,233 24,279 (8.4 )
Amortization of intangible assets 28,290 28,688 (1.4 )
Facility consolidation   4,724   (100.0 )
Total 579,813   549,019   5.6  
Operating income 201,919   182,472   10.7  
 
Non-operating (expense) income:
Equity income (loss) in unconsolidated investees, net 2,933 (1,249 ) ****
Interest expense (61,713 ) (70,670 ) (12.7 )
Other non-operating items 2,379   24,464   (90.3 )
Total (56,401 ) (47,455 ) 18.9  
 
Income before income taxes 145,518 135,017 7.8
Provision for income taxes 42,108   51,015   (17.5 )
Income from continuing operations 103,410 84,002 23.1
Net income attributable to noncontrolling interests (10,492 ) (14,590 ) (28.1 )
Net income from continuing operations attributable to TEGNA Inc. $ 92,918   $ 69,412   33.9  
 
Earnings from continuing operations per share:
Basic $ 0.42 $ 0.31 35.5
Diluted $ 0.42 $ 0.30 40.0
 
Weighted average number of common shares outstanding:
Basic 219,286 227,089 (3.4 )
Diluted 223,254 231,931 (3.7 )
 
Dividends declared per share $ 0.14 $ 0.20 (30.0 )
 
 
BUSINESS SEGMENT INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

     
Table No. 2

First Quarter
2016

First Quarter
2015

% Increase

(Decrease)

 
Operating revenues:
Media $ 443,829 $ 396,417 12.0
Digital 337,903   335,074   0.8  
Total $ 781,732   $ 731,491   6.9  
 
Operating income (net of depreciation, amortization and facility consolidation and asset impairment charges):
Media $ 169,299 $ 176,880 (4.3 )
Digital 47,219 48,181 (2.0 )
Corporate (14,599 ) (18,860 ) (22.6 )
Unallocated costs (b)   (23,729 ) (100.0 )
Total $ 201,919   $ 182,472   10.7  
 
Depreciation, amortization and facility consolidation:
Media $ 19,441 $ 21,261 (8.6 )
Digital 30,361 33,709 (9.9 )
Corporate 721   2,721   (73.5 )
Total $ 50,523   $ 57,691   (12.4 )
 
Adjusted EBITDA (a):
Media $ 199,138 $ 185,780 7.2
Digital 77,580 82,739 (6.2 )
Corporate (12,228 ) (16,139 ) (24.2 )
Unallocated costs (b)   (23,729 ) (100.0 )
Total $ 264,490   $ 228,651   15.7  
 

(a)

 

"Adjusted EBITDA" is a non-GAAP measure used by management to measure, analyze and compare the performance of its business segment operations at a more detailed level and in a meaningful and consistent manner. The definition of "Adjusted EBITDA" is provided in the section "Use of Non-GAAP Information" and Table No. 4 provides reconciliations to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income.

 

(b)

Unallocated expenses represent certain expenses that historically were allocated to the former Publishing Segment but that could not be allocated to discontinued operations because they were not clearly and specifically identifiable to the spun-off businesses, the accounting criteria for reclassification to discontinued operations.

 

USE OF NON-GAAP INFORMATION

The company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation from or as a substitute for the related GAAP measures, and should be read together with financial information presented on a GAAP basis.

The company discusses in this report non-GAAP financial performance measures that exclude from its reported GAAP results the impact of special items consisting of workforce restructuring charges, facility consolidation charges, certain gains and expenses recognized in operating and non-operating categories and a credit to our income tax provision. The company believes that such expenses, charges and gains are not indicative of normal, ongoing operations and their inclusion in results makes for more difficult comparisons between years.

The company also discusses Adjusted EBITDA, a non-GAAP financial performance measure that it believes offers a useful view of the overall operation of its businesses. Adjusted EBITDA is defined as net income from continuing operations attributable to TEGNA before (1) net income attributable to noncontrolling interests, (2) income taxes, (3) interest expense, (4) equity income (losses), (5) other non-operating items, (6) workforce restructuring, (7) facility consolidation charges, (8) depreciation and (9) amortization. When Adjusted EBITDA is discussed in reference to performance on a consolidated basis, the most directly comparable GAAP financial measure is Net income from continuing operations attributable to TEGNA. Management does not analyze non-operating items such as interest expense and income taxes on a segment level; therefore, the most directly comparable GAAP financial measure to Adjusted EBITDA when performance is discussed on a segment level is Operating income. This earnings report also discusses free cash flow, a non-GAAP liquidity measure. Free cash flow is defined as “net cash flow from operating activities” as reported on the statement of cash flows reduced by “purchase of property, plant and equipment”. The company believes that free cash flow is a useful measure for management and investors to evaluate the level of cash generated by operations and the ability of its operations to fund investments in new and existing businesses, return cash to shareholders under the company’s capital program, repay indebtedness, add to the company’s cash balance, or use in other discretionary activities. Management uses free cash flow to monitor cash available for repayment of indebtedness and in its discussions with the investment community.

Management uses non-GAAP financial performance measures for purposes of evaluating business unit and consolidated company performance. The company, therefore, believes that each of the non-GAAP measures presented provides useful information to investors by allowing them to view our businesses through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods and providing a focus on the underlying ongoing operating performance of its businesses. Tabular reconciliations for the non-GAAP financial measures are contained in Tables 3 through 6 attached to this news release.

 
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars (except per share amounts)

             
Table No. 3
 
Reconciliations of certain line items impacted by special items to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income follow:
 

GAAP

Measure

Special Items  

Non-GAAP

Measure

First
Quarter
2016

Primarily
workforce

restructuring

 

Non-
operating
items

 

First Quarter
2016

 
Cost of revenues and operating expenses, exclusive of depreciation $ 248,256 $ (6,035 ) $ $ 242,221
Selling general and administrative expenses, exclusive of depreciation 281,034 (4,363 ) 276,671
Operating expenses 579,813 (10,398 ) 569,415
Operating income 201,919 10,398 212,317
Other non-operating items 2,379 653 3,032
Total non-op (expense) income (56,401 ) 653 (55,748 )
Income before income taxes 145,518 10,398 653 156,569
Provision for income taxes 42,108 4,008 46,116
Net income from continuing operations attributable to TEGNA 92,918 6,390 653 99,961
Net income from continuing operations per share-diluted $ 0.42 $ 0.03 $ $ 0.45
 
 
 

GAAP

Measure

Special Items

Non-
GAAP
Measure

First
Quarter
2015

Workforce

restructuring

 

Facility
consolidation

 

Building sale
gain

 

Non-
operating
items

 

Special tax
credit

First
Quarter
2015

 
 
Cost of revenues and operating expenses, exclusive of depreciation $ 226,577 $ (1,017 ) $ $ 12,709 $ $ $ 238,269
Selling general and administrative expenses, exclusive of depreciation 264,751 (180 ) 264,571
Facility consolidation 4,724 (4,724 )
Operating expenses 549,019 (1,197 ) (4,724 ) 12,709 555,807
Operating income 182,472 1,197 4,724 (12,709 ) 175,684
Other non-operating items 24,464 (25,680 ) (1,216 )
Total non-op (expense) income (47,455 ) (25,680 ) (73,135 )
Income before income taxes 135,017 1,197 4,724 (12,709 ) (25,680 ) 102,549
Provision for income taxes 51,015 445 1,757 (4,726 ) (16,318 ) 390 32,563
Net income from continuing operations attributable to TEGNA 69,412 752 2,967 (7,983 ) (9,362 ) (390 ) 55,396
Net income from continuing operations per share - diluted $ 0.30 $ $ 0.01 $ (0.03 ) $ (0.04 ) $ $ 0.24
 
 
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

         
Table No. 4
 
 
Reconciliations of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income follow:
 
First Quarter 2016:
Media Digital Corporate

Consolidated

Total

 
Net income from continuing operations attributable to TEGNA Inc. (GAAP basis) $ 92,918
Net income attributable to noncontrolling interests 10,492
Provision for income taxes 42,108
Interest expense 61,713
Equity (income) in unconsolidated investees, net (2,933 )
Other non-operating (income) items, net (2,379 )
Operating income (GAAP basis) $ 169,299 $ 47,219 $ (14,599 ) $ 201,919
Primarily workforce restructuring 10,398       10,398  
Adjusted operating income (non-GAAP basis) 179,697 47,219 (14,599 ) 212,317
Depreciation 13,748 7,764 721 22,233
Amortization 5,693 22,597 28,290
Non-cash rent     1,650   1,650  
Adjusted EBITDA (non-GAAP basis) $ 199,138   $ 77,580   $ (12,228 ) $ 264,490  
 
First Quarter 2015:
Media Digital Corporate

Unallocated
Costs

Consolidated

Total

 
Net income from continuing operations attributable to TEGNA Inc. (GAAP basis) $ 69,412
Net income attributable to noncontrolling interests 14,590
Provision for income taxes 51,015
Interest expense 70,670
Equity loss in unconsolidated investees, net 1,249
Other non-operating items (24,464 )
Operating income (GAAP basis) $ 176,880 $ 48,181 $ (18,860 ) $ (23,729 ) $ 182,472
Workforce restructuring 348 849 1,197
Facility consolidation 2,367 2,357 4,724
Building sale gain (12,709 )       (12,709 )
Adjusted operating income (non-GAAP basis) 166,886 51,387 (18,860 ) (23,729 ) 175,684
Depreciation 13,296 8,262 2,721 24,279
Amortization 5,598   23,090       28,688  
Adjusted EBITDA (non-GAAP basis) $ 185,780   $ 82,739   $ (16,139 ) $ (23,729 ) $ 228,651  
 
 
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

 
Table No. 5
 
"Free cash flow" is a non-GAAP liquidity measure used in addition to and in conjunction with results presented in accordance with GAAP. Free cash flow should not be relied upon to the exclusion of GAAP financial measures.
 
 

First Quarter
2016

 
Net cash flow from operating activities $ 127.1
Purchase of property, plant and equipment (16.5 )
Free cash flow $ 110.6  
 
 
TAX RATE CALCULATION

TEGNA Inc.

Unaudited, in thousands of dollars

       
Table No. 6
 
The calculations of the company's effective tax rate on a GAAP and non-GAAP basis are below:
 
GAAP Non-GAAP

First Quarter
2016

First Quarter
2015

First Quarter
2016

First Quarter
2015

 
 
Income before taxes (per Table 3) $ 145,518 $ 135,017 $ 156,569 $ 102,549
Noncontrolling interests (per Table 1) (10,492 ) (14,590 ) (10,492 ) (14,590 )
Income before taxes attributable to TEGNA $ 135,026   $ 120,427   $ 146,077   $ 87,959  
 
Provision for income taxes (per Table 3) $ 42,108 $ 51,015 $ 46,116 $ 32,563
 
Effective tax rate 31.2 % 42.4 % 31.6 % 37.0 %
 

Contacts

TEGNA Inc.
For investor inquiries, contact:
Jeffrey Heinz
Vice President, Investor Relations
703-854-6917
jheinz@TEGNA.com
or
For media inquiries, contact:
Steve Kidera
Corporate Communications
703-854-6077
skidera@TEGNA.com

Release Summary

TEGNA today reported non-GAAP earnings per diluted share from continuing operations of $0.45 for the first quarter of 2016, an increase of 87.5 percent compared to $0.24 for the first quarter of 2015.

Contacts

TEGNA Inc.
For investor inquiries, contact:
Jeffrey Heinz
Vice President, Investor Relations
703-854-6917
jheinz@TEGNA.com
or
For media inquiries, contact:
Steve Kidera
Corporate Communications
703-854-6077
skidera@TEGNA.com