Tegna Sees More Opportunities For It In Sports

Look for more sports licensing deals from Tegna, capitalizing on a trend away from regional sports networks. That word came from Dave Lougee, president and CEO of the company, speaking during the company’s third-quarter earnings call, which took place this morning.

“With the existing RSN and cable model in the final innings, the move of local sports from cable to broadcast is in the first inning of a new era,” Lougee said. “Professional sports teams and leagues are more acutely aware than anyone of this seismic shift in reach and distribution and are excited about the chance to reach all consumers, not just a smaller and smaller percentage of their addressable market.”

Lougee noted that Tegna’s San Antonio CBS affiliate, KENS, has an exclusive deal to air 11 San Antonio Spurs games during the current season. “As the current RSN bankruptcy proceeding plays out, look for more announcements to come. Given our large portfolio of strong stations in big sports home markets, we are very, very well positioned for the shift and opportunity in local sports.”

While the sports licensing landscape evolves, Tegna’s Locked On sports podcasting network is also growing. It has added four local FAST channel versions in the third quarter — in Atlanta, Dallas, Cleveland and Los Angeles. And more will launch in the fourth quarter.

Looking at the company’s Q3 more broadly: revenue was down 11%, compared with the same period last year, largely due to the off-political year. Core advertising (minus political) was “down slightly” in the quarter.

Auto advertising was up for the fifth consecutive quarter, and in the third quarter the category was up double digits, versus same time last year.

“The services category was also up double digits year over year, with strength in home services such as HVAC, electrical, pest control and plumbing,” commented Victoria Harker, executive vice president and CFO.

More challenged ad sectors included media, telecom, healthcare, restaurants and banking.

The Premion CTV/OTT ad platform added programmatic capabilities in the quarter, but its revenue was down due to the loss of a single national account. The platform is now focused on local OTT as a key driver moving forward. In fact, local advertising year-to-date is up double digits, according to Julie Heskett, Tegna’s SVP, financial planning and business operations and head of investor relations.

In the fourth quarter, the company is expecting GAAP revenue to drop mid to high teens, since the company garnered $179 million from political spending for the midterms during the same quarter last year.

Political revenue will boost the numbers substantially next year, although Tegna doesn’t have stations in many of the critical primary markets, Lougee said. Tegna stations will also be supercharged next year by the Olympics and the Super Bowl.

On the network affiliate renewal front, Tegna inked a multi-year deal with ABC that covers 13 markets and 9% of the U.S. The agreement encompasses 11 million households. “We believe our successful negotiation with ABC highlights the win-win long term relationships we have with our programming partners,” Lougee said.

Tegna will negotiate another affiliate contract before year’s end: with NBC. All told, 60% of Tegna’s Big 4 subscribers are up for renewal by the close of 2023, Harker said.

Lougee noted that the company’s revenue from subscriptions “continues to provide stable and predictable cash flow supported by contractual rate increases partially offset by subscriber declines. We expect to re-price approximately 30% of our traditional subs by the end of this year, further improving visibility into our outlook.”

Tegna completed an initial $300 million accelerated stock repurchase (ASR) program at the end of August, then repurchased an incremental $28 million of shares in September. “Total share reduction as of the end of the third quarter was 29 million. Beyond this, as announced in August, our second ASR program targeting $325 million in repurchases will kick off this week,” Harker said.

“We expect approximately 45 to 50 million shares to be retired by the end of March 2024, based on current market prices, reflecting more than 20% of shares outstanding prior to us undertaking these actions,” she added.