Tegna’s Lougee: Nobody Knows What The FCC Was Thinking

Speaking in a Wall Street conference call for the first time since November 2021, Tegna President and CEO Dave Lougee told analysts Thursday that the company’s board and executives had been preparing for continuation as a stand-alone company as its $8.6 billion buyout by Standard General stalled at the FCC. That deal was finally abandoned on Monday.

“Is the FCC open for business?” asked Wells Fargo analyst Steven Cahall.

“I did not have a lot of interaction with the FCC,” the CEO replied. “Nor did Standard General have a lot of interaction, or as much as they would have liked,” he added.

“I think nobody really knows what the FCC was thinking. I would point you to the NAB statement, by the NAB President Curtis LeGeyt, which really references that,” Lougee said. The Tegna CEO said the Hearing Designation Order which led to the deal being scrapped came with “very little interaction” with the parties involved. He called it a “conundrum” and asserted that for the entire broadcasting industry “people don’t know what to make of it.”

“I would point out just for the record, this wasn’t actually — the agreement that was terminated — was not a consolidation deal because some stations were going to be spun off to another company. Tegna was actually getting smaller. So, it really wasn’t consolidation,” Lougee concluded.

Standard General will pay Tegna a break-up fee of $136 million. Lougee revealed to the analysts that the payment will be made in Tegna stock at market value. The Tegna board has approved a new $300 million stock buyback authorization, so CFO Victoria Harker said a total of $436 million of Tegna shares will be retired in the coming weeks.

In addition, the board increased Tegna’s cash dividend by 20% to 11.375 cents per share. That increased dividend will be effective with the October payment. The July 3 payment has already been declared at 9.5 cents per share.

Jim Goss of Barrington Research wanted to know if Tegna had lost any key employees as the abandoned deal was pending.

“No, actually we really did not lose key executives during the time, Jim. Obviously, people were interested in what their future was going to be under any kind of new ownership,” said Lougee.

“Certainly at the local level it made recruiting harder,” he added.

Tegna had reported its first quarter financial results on May 10 without holding a conference call. Today it provided some guidance on the current quarter.

“For the second quarter,” Harker told the analysts, “we expect total company revenue to be down in a high single-digit percent year-over-year, primarily driven by the loss of political revenue and partially offset by higher subscription revenue. We forecast operating expenses in the second quarter to increase in the low single-digits compared to second quarter of 2022, driven by increased programming expenses associated with higher subscription revenue. Excluding programming costs, we expect second quarter operating expenses to be flat to slightly down.”

Focusing on current trends, Lougee said auto is pacing strong in the second quarter. Auto is Tegna’s largest ad category, he noted, so the consistent improvement over several quarters is good news.

One analyst wanted to know about any performance gap between large and smaller markets.

“Larger markets have a higher percentage of national revenue, and that’s always been the case,” Lougee noted. He confirmed that national is performing a bit worse than local advertising.

The CEO noted that the largest ad agency holding companies appear to be the “most stressed” by macro-economic issues. “Local is more money in, money out,” Lougee said.

Even so, he told the analysts that underlying trends for the second quarter are better than they were for the first quarter.