Makita Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 25, 2023

There are 10 speakers on the call.

Operator

Welcome to the TEGNA Investor Conference Call. As a reminder, today's conference is being recorded. Now I'll turn it over to Julie Heskett, Senior Vice President, Financial Planning. Please go ahead, ma'am.

Speaker 1

Thank you. Good morning, and welcome to our investor conference call and webcast. Today, our President and CEO, Dave Lougee and our CFO, Victoria Harker, will review TEGNA's financial performance and results and discuss TEGNA's stand alone outlook. After that, we'll open the call for questions. Hopefully, you've had the opportunity to review our Form 8 filed this morning with the Securities and Exchange Commission as well as our Q1 earnings results, which we announced May 10.

Speaker 1

If you have not yet seen a copy of the release, it is available at tegna.com. Before we get started, I'd like to Factors that may cause them to differ are outlined in our SEC filings. This presentation also includes certain non GAAP financial measures. We have provided reconciliations of those measures to the most directly comparable GAAP measures in the press release. With that, let me turn the call over to Dave.

Speaker 2

Thank you, Julie, and good morning, everyone. It's good to talk to you again. It's been a while. As you know, TEGNA has not held a quarterly earnings call since November of 2021, given the merger agreement we entered into with Standard General in February of last year. Earlier this week, we announced the termination of the merger agreement after a protracted regulatory review.

Speaker 2

Armed with the knowledge of this possible outcome in recent months, our Board of Directors and senior management have been very focused on our stand alone plan, so we would hit the ground running post The outlook for TEGNA is strong. We are uniquely positioned within the sector with an industry leading balance sheet. We currently have the lowest leverage levels since we became a pure play broadcasting company and expect to remain comfortably in the mid-2s to the balance of the year even after returning excess capital to shareholders, including the first steps we announced this week, a $300,000,000 accelerated share repurchase program and a 20% increase to the quarterly dividend. With our assets and strong balance sheet, we're confident that TEGNA is very well positioned to generate strong shareholder value in a variety of economic scenarios. We have a leading portfolio of high quality local station and digital brands that fill a critical role in key large markets across the country, diversified by both geographic regions and network affiliations.

Speaker 2

The differentiated non substitutable programming we provide, including live local news, live local national sports and first run highly popular network content remain some of the most and highly viewed content available. And furthermore, in 2022, I want to compliment our team As they continue to execute extremely well during dynamic macroeconomic times, excuse me, Achieving records in total company revenue, subscription revenue, net income and adjusted EBITDA. Next, I'd like to provide you with the context for some of the highlights on our recent results and Victoria will cover these topics in more detail. Total company revenue for the Q1 was down 4% year over year, largely due to the cyclical even year events of pollutant revenue, The loss of that, the absence of Winter Olympics and the Super Bowl airing on the Fox stations compared with NBC last year, as well as the macroeconomic headwinds. Relative to that Super Bowl comment, as you may recall, NBC represents the largest percentage of our network portfolio with Fox representing the smallest, so the Super Bowl is a delta.

Speaker 2

On a 2 year basis, total company revenue was up 2% versus 2021, primarily driven by growth in subscription revenue, partially offset by lower advertising and marketing services or AMS revenue. TEGNA's subscription revenue continues to provide stable and predictable cash flows supported by contractual rate increases. This quarter, subscription revenue was an all time record and grew 6% year over year. In the Q1, we did lap a temporary disruption with a single distributor last year, which added roughly 2 points to that number. Also last year, we successfully repriced approximately 30% of our subscribers, improving multi year visibility for a significant portion of our subscription revenue.

Speaker 2

We have an additional 30% of our traditional subscribers up for renewal at the end of this year. As I indicated, AMS revenue comparisons this quarter take into account several variables, including the absence of the Winter Olympics and the Super Bowl airing on the NBC stations last year And a decrease in Premion due to the loss of a single national account as well as macroeconomic headwinds that continue to impact advertising demand. With that said, AMS was down 13% year over year. Victoria will unpack that in more detail in a moment, but the bottom line is this, Advertising trends were down mid single digits for TEGNA on a year over year basis and up low single digits on a 2 year basis. I also want to highlight the strength we're seeing in the automotive category, which as you can imagine is something we're very pleased to see.

Speaker 2

As you may recall, auto is our largest advertising category and was challenged for several quarters due to the supply chain issues related to the pandemic. However, I'm pleased to report the category has Steadily recovered and is generating strong year over year growth for the 3rd consecutive quarter and pacing very strong in the 2nd quarter. Premion,

Speaker 3

our first

Speaker 2

to market and industry leading OTT advertising platform continues to deliver differentiated solutions to both local and national advertisers. Premion ended 2022 with record revenue and is poised for ongoing growth in the years ahead, backed by the breadth of TEGNA as well as Gray's local sales And the first question comes from the line of Greg Gordon. Combined with Gray, Premion reaches more than 78% of U. S. Households with local sales representatives.

Speaker 2

During the quarter, total Premion revenue declined modestly year over year, driven again by the reduction of that single national account. But notably, local revenue was up And local is the strategic focus and the thesis of Premion and has also higher margin revenue than national for Premion. Investment in Premion has continued with a recent focus on enhancing the platform's attribution capabilities to demonstrate the value and effectiveness of campaigns on Premion relative to other advertising platforms. Premion's innovative results and tools for advertisers are well recognized within the industry, Having received numerous recent awards, including Synopsys' Best of the Best Award for the Best Ad Tech Solution. As we approach next year's presidential election cycle, we will benefit once again from strong political advertising revenue.

Speaker 2

TEGNA stations continue to play a critical role in political marketing strategies as the preferred medium to reach voters. Through thoughtful acquisitions over the years, TEGNA has built Strategic position in key battleground Straits and Large Markets. It's expected that the 2024 presidential cycle will break previous records. 1st quarter fundraising was very strong and that's expected to continue with a very well funded GOP presidential primary that is already active as you surely know. Add to that the razor thin margins in both chambers of Congress and there's a lot at stake in the 2024 elections for both parties.

Speaker 2

Now turning to capital allocation. As a reminder, TEGTA's business mix is weighted towards high margin durable subscription and political revenues, which generates and will be conducting the $136,000,000 termination fee owed to TEGNA by Standard General. We have entered into an agreement with Standard General to accept TEGNA common shares equivalent to the fee at market based pricing, a transaction which will be completed promptly. Furthermore, as announced in Monday's press release, TEGNA will be entering into a 300,000,000 Dollar accelerated share repurchase program shortly, commonly known as an ASR program, which we expect to complete near the end of the third quarter. Combined, these two actions will result in us retiring nearly $444,000,000 of our shares in short order.

Speaker 2

Beyond these actions, TEGNA's Board of Directors and management team are actively reviewing the return of additional excess Capital that accumulated during the pending merger. TEGNA has also increased its regularly quarterly dividend by 20%, on top of the 36% increase to the dividend announced in March of 2021, demonstrating the strong conviction we have in the long term cash flow of TEGNA's operations. Just to be clear, TEGNA will pay the previously declared regular quarterly dividend of $0.095 per share on July 3rd this year to stockholders of record as of the close of business on June 9. The increased quarterly dividend will be paid in the following quarter. Strong operating performance and disciplined use of free cash flow positions us with an industry leading balance sheet.

Speaker 2

Even after our $300,000,000 ASR program, We expect to end the year with net leverage of mid-two times, a strategic advantage as we examine next steps for capital allocation and shareholder value creation. Over the coming weeks, we look forward to reengaging with investors to incorporate their views as the Board and management make further refinements to TEGNA's capital allocation priorities, including actively reviewing The return of additional excess capital to shareholders. Now, I want to update you since it's been a while on several strategic initiatives underway at TEGNA. Since its development in 2015, our stations verify reporting has fought misinformation and disinformation, more important now than ever, 120,000 followers across its various dedicated channels, including its daily newsletter, TikTok, both of which were named Webby Award Honorees among some of the most notable brands online. And during the quarter, unique visitors to verifythis.com grew 77% year over year.

Speaker 2

Looking ahead to the upcoming election cycle in 2024, VERIFI will play a critical role in ensuring the viewers are able to fact check the news and stories that matter to them as they make their voting decisions. TEGNA stations owned and operating streaming apps Spiroku and Fire TV continue on a strong growth trajectory with 560,000,000 minutes of streaming in just the first quarter, A nearly 70% increase year over year and the average visitor spent 10 hours in the apps during the month of March. Lock'd On, our leading local sports podcast network with daily shows for all 4 professional sports leagues and major college programs Also continued strong growth during the quarter. The network finished the quarter with an impressive increase of nearly 60% in unique audience versus the Q1 of last year. LockDown's expansion into video continues to be a major driver of network growth with video views seeing 170% increase year over year.

Speaker 2

We continue to see LockDown's focus on national and local sports as a national complement to our local station assets. Moving now to our ESG efforts. We continue to make progress on our diversity, equity and inclusion objectives and are continuing our progress on achieving 2025 goals are stated goals to increase representation of black indigenous people of color at TEGNA in our content teams, Content leadership and company leadership. We take seriously the important role that we have in ensuring our coverage and storytelling reflects all of the communities we serve. Our innovative inclusive journalism program, which is entering its 3rd year, is designed to help us accomplish this through unconscious bias, includes reporting and leadership training.

Speaker 2

Since the inception of this program, newsroom managers for nearly half of our newsrooms have taken part in this annual inclusive program. This 4 month program for newsroom managers helps to expand the tools and people leadership skills that newsroom managers can use to engage their team to further inclusivity in storytelling. Delivering news that matters and impactful investigation That make a difference in people's lives are the center of each and every one of our newsrooms. We're very proud of the determination and resilience of our engaged employees that enable us to fulfill our mission every day, and we couldn't be more proud of the work they do. And with that, I'll now turn the call over to Victoria.

Speaker 4

Thanks, Dave. Good morning, everyone, and thanks for joining us. As Dave has already mentioned, our Q1 financial results and forward guidance reflect the resiliency of our business and our ongoing commitment to operational excellence and shareholder value creation. Before I drill down on the drivers of our Q1 financial I want to touch briefly on the strength and differentiation of our balance sheet in a little bit more detail. As you've seen posted this morning, we are very well With modest net leverage of 2.3 times, no bond maturities until 2026, all of which are fixed rate at 5.2 percent on a weighted average basis.

Speaker 4

As you've already seen, we ended the quarter with Total debt of $3,100,000,000 and cash of $683,000,000 And as a reminder, our only debt related Tremendous financial flexibility afforded us by our ongoing business execution and our strong balance sheet enables us to generate both immediate and longer term shareholder value in a number of significant ways. As Dave mentioned, the first step in Returning a portion of the excess capital that accumulated while the merger agreement was pending include an agreement with Standard General to accept TEGNA common shares equivalent to the $136,000,000 termination fee the $300,000,000 ASR program, which we expect We look forward to discussing business trends and ongoing capital allocation plans with you all in the coming weeks. And we We expect to have more information to share by our Q2 earnings call in August. Now, let's take a look at the drivers of our Q1 financial performance. As is always the case, my comments today are primarily focused on TEGNA's performance on a consolidated non GAAP basis to provide you with visibility into the financial drivers of our business trends as well as our operating results.

Speaker 4

You can find all of our reported data and prior period comps in our May 10 earnings press release. As Dave mentioned, our revenues in the Q1 faced tough year over year comparisons given the benefit of political advertising, the Winter Olympics and Super Bowl across our NBC stations last year. As a reminder, we are the largest NBC affiliate group. For the Q1, total company revenue was down 4.4% year over year, primarily due to cyclical even year events, including midterm elections and Winter Olympics in 2022. The Super Bowl was also a factor as the 2023 event aired on the Fox stations compared to last year on a strong for the portfolio of NBC stations.

Speaker 4

Excluding political revenue and the incremental revenue from the 2 NBC sporting events, Total revenue was down less than 1% compared to the Q1 of 2022. As you've heard from our peers, AMS declines have been driven by macroeconomic headwinds. This was partially offset by ongoing subscription revenue growth, which increased 6% year over year. Subscription revenue growth in the quarter was a result of subscriber rate increases, contractual rate escalators and favorable comparisons against the partial quarter interruption As Dave previously mentioned, we successfully repriced approximately 30% of our subscribers at the end of 2022, and we have an additional 25% of subscribers up for renewal by the end of this year. We successfully negotiated multiyear network and we will continue to deliver on our financial results.

Speaker 4

We also look to renew our agreements with NBC and ABC, which collectively account for approximately 60% of our Big 4 subscribers near the end of this year. Cigna's high margin subscription revenue, coupled with our political revenues, produce annuity like EBITDA and free cash flow and continue to comprise more than 50% of our total revenues on a 2 year basis. Next, I'll unpack the drivers of our AMS performance in the Q1. As you've seen, AMS revenue finished the quarter down 13% compared to the Q1 of last year due to several unique factors, including the impact from Winter Olympics and last year's Super Bowl on our strong NBC stations, as well as a reduction in a single Premion National account as well as broader macroeconomic headwinds. Outside of these unique year over year factors, underlying advertising trends in the Q1 were down mid single digits year over year and up low single digits compared to 2021.

Speaker 4

Automotive, as Dave mentioned, our largest advertising category has steadily recovered and is generating strong year over year growth for the 3rd consecutive quarter. Other categories growing year over year include home improvement, services, entertainment and travel and tourism. Categories facing headwinds in the current macroeconomic environment include healthcare, packaged goods, retail, media, telecom and restaurants. Now turning to expenses for the quarter. For the quarter, non GAAP operating expenses were $564,000,000 up 2% compared to the Q1 last year, driven by higher programming fees.

Speaker 4

Excluding programming fees, non GAAP operating expenses Our Q1 adjusted EBITDA of $205,000,000 was down 18% year over year, driven by reduced high margin advertising revenue from political and the Super Bowl and NBC stations last year as well as the absence of NBC Winter Olympics revenue. Adjusted EBITDA margin was 28% this quarter. We continue to generate strong free cash flow of $133,000,000 during the quarter, driven primarily by our high margin, durable subscription, and key financial metrics for the quarter ahead, Q2 and for the full year 2023. To help model our near term expectations, let's walk through a For the Q2, we expect total company revenue to be down mid to 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 Q2 to increase in the low single digits compared to Q2 2022, driven by increased programming expenses associated with higher subscription revenue.

Speaker 4

Excluding programming costs, we project 2nd quarter operating expenses to be flat to slightly down. Now turning to our full year 2023 guidance elements. As a reminder, you can also find our 2022 actuals for these same metrics on our investor presentation on our website. For the full year 2023, we expect corporate expense to be in the range of $40,000,000 to $45,000,000 Depreciation is projected to be in the range of $60,000,000 to $65,000,000 Amortization is projected to be in the range of $53,000,000 to $54,000,000 Interest expense We forecast an effective tax rate in the range of 23.5% to 24.5%. And as we've already mentioned, we expect to end 2023 with net leverage in the mid two times, including the impact of the $300,000,000 plan As I mentioned earlier, we look forward to reengaging with you all in the weeks ahead and thank you for your ongoing support.

Speaker 4

With that, we'll now turn to Q and A to take your questions.

Operator

Thank you very much. And we'll take our first question from Stephen Cahill from Wells Fargo. Please go ahead.

Speaker 5

Good morning. Good morning and good to chat with you all again, Dave and Victoria. It's been a while. As a result, I've got a few. So maybe to start, Victoria, just On the retrans side, I guess the simple math would be that with 60% of your affiliations renewing this year and you did Ex net retrans to grow this year or is your timing sequence such that that's going to be pretty tough to achieve in the current environment?

Speaker 2

Welcome, Stephen. I'll go ahead and take that one. You're right on the numbers as far as what the renewals are. But no, I wouldn't conclude I wouldn't agree to what your conclusion is at the end there. There's a lot to be negotiated and I think there'll be some different dynamics than in the past on the network negotiations.

Speaker 5

Got it. And then maybe just next on capital allocation. So you talked about the 2.5 times leverage. And then you also said, I think that you're actively reviewing some return of excess capital. So do we just kind of think about 2.5 times as like The North Star in a model and any cash left after that goes back to shareholders?

Speaker 5

Or is it a bit more kind of strategic in how You're thinking about when and how you might look to deploy capital over the next couple of years? Yes.

Speaker 4

I think the as I said in my comments, Stephen, I think obviously will be spending the next couple of weeks, obviously, talking with the Board, talking with shareholders, gathering some input in terms of the business needs. Frankly, we haven't done a lot of investment over the last 14 months. So we will be back to you in August with more comments and color on that. But I think it's fair to say the 2.5 times is a very, very Fair and comparable leverage for the rest of this year.

Speaker 5

Great. And then maybe just lastly, Dave, I mean, From some reports, it looks like you've had a lot of interaction with the FCC over this last year with all the issues around the merger. In your view, is the FCC open for business as it relates to broadcast consolidation? Or I'd love to get your view on Why maybe you think that the merger wasn't consummated and if it closes the door to lots of things in the future or if you still think that the door is open for Thank you.

Speaker 2

Thanks, Stephen. I don't have a lot to add on that other than to say I did not have a lot of interaction with the FCC, Nor frankly, as I think they've indicated nor did Standard General have a lot of interaction as much as they would have liked. I'm not I think nobody really knows what the FCC was thinking. I think I would point you to the NAB statement by the NAB President, Curtis Leggett, which really references that topic. The fact that it was sent to a hearing designation order, Really with very little interaction with the parties is a conundrum.

Speaker 2

And I think For the entire industry, people don't really know what to make of it, because of what was a frankly unprecedented process Would be the comment I would say. So I really don't have a view on what their future view will be of deals. I would just I would point out just for the record, this wasn't actually the agreement that terminated was not a consolidation deal, Because some stations were going to be spun off to another company, the TEGM was actually getting smaller. So, it really wasn't consolidation.

Speaker 5

Yes. Great. Thank you.

Speaker 6

Thank you, Stephen. Thank you.

Operator

And our next question comes from Dan Kurnos from The Benchmark Company. Please go ahead.

Speaker 7

Great. Thanks. Good morning. Great to speak with you both. Thank you, Dan.

Speaker 6

How are you doing? Good.

Speaker 7

So a

Speaker 6

couple of things.

Speaker 7

Let me start off with, go back to retrans just for a second. Dave, you've obviously had Listening to everybody else get to talk about all of this whole virtual dynamics and subs issue while you Has been going through the process, so maybe I'll give you a platform for a second if you want to just talk about how you're expecting the impact of the much higher growth The virtual sales of the deals that were signed is impacting or going to impact your forward look on both gross And that going forward here.

Speaker 2

Yes. A little trouble hearing your microphone, but I think I understood the question, Dan. So yes, so we are we certainly prefer the economics on the traditional subs, although, the virtual subs are We simply believe as you've heard from others, we should be negotiating those ourselves. We actually think frankly The networks would benefit from us doing that as well. So that's a high priority, and that will be an ongoing, I think, Discussion and one that potentially regulators may take an interest in.

Speaker 2

But there's certainly but the virtual is growing, Which certainly helps offset the loss of traditional subs, but it is I think there's more to be written on that as to how that

Speaker 7

And to follow-up on your hopefully this is better for you, but to follow-up with my audio, but to follow-up on your Commentary around net growth, I mean, we continue to hear that potentially programming is actually getting cheaper in some ways as obviously the networks need to monetize more. So To the extent that obviously both of those deals that you're doing, I think are still relatively percentage based rather than fixed fee, I don't know if that's changed at all. Is there kind of a view are you in line with kind of the peer group in your view that reverse is going to continue to Either slowing its growth or potentially inflect and come down, is that what you're kind of intimating with your commentary?

Speaker 2

That is what I'm intimating.

Speaker 7

Okay. And then just on the local, national kind of Outlook here, as we look to Q2, I know you guys don't break out core. In particular, we've heard some commentary from others that Larger markets are starting to behave a little bit more like national markets. I don't know if you have any commentary on that or just kind of your view on How sort of broader core should trend over the balance of the year?

Speaker 2

Well, I think I understand your question. Larger markets Have a higher percentage of national revenue writ large and that's always been the case. If you ask About how National is performing better compared to local. National is comparing a little bit worse than local and I and again, I have to get into definitions here too. It's really the large holding companies, the largest holding company part of National, some of which is in our local numbers in our case, that are the most Stressed and I guess what I my macroeconomic commentary on that would be local businesses are doing fine.

Speaker 2

People are spending. I think at the very national holding company levels, they are worried about the same types of things that large investors are just about the next week's debt showdown, a potential recession, etcetera. So their spending is a little bit more based on macro and economic concerns, whereas local is more of money in, money out. But there's not that big a gap for us, frankly. And what I would say is, we don't break out core like you said, but Trends are improving, right.

Speaker 2

So, 2nd quarter, the underlying trends are better than they are in the Q1. Our total net revenue, As Victoria said, we're up against $50,000,000 in political in the Q2 last year. But Underlying advertising in the 2nd quarter has improved. I think in June, it's there's a little bit of Shakiness and pausing on the national side, literally, I think a lot of it's got to do with next week.

Speaker 7

Got it. Okay. Super helpful and great to hear from you guys again. Thanks for taking my questions.

Speaker 6

Thank you. You too.

Operator

Thank you. And we'll take our next Question from Craig Huber from Huber Research Partners. Please go ahead.

Speaker 3

Good morning. Thank you. Nice to talk to you guys again. On the capital return side of things, you guys it's an interesting thing here, dollars 300,000,000 share buyback over the next 4 months A lot of people thought maybe you were going to announce, say, a $1,000,000,000 plus share buyback program. Was the thought process here to give yourself the And if it looks reasonably okay to you at that point, maybe re up another massive large share buyback at that point

Speaker 2

I'd like to make a couple of comments. And hi, Craig. We didn't know that a lot of people thought we would do $1,000,000,000 a share of that. So that is news to us. So I'd also point out and remind you with my announcement today That we're letting Standard General pay their fee through shares.

Speaker 2

That's not that's added to the buyback, right? So which we Sort of new would probably be what the outcome we would choose. So think of the buyback as $436,000,000 versus $300,000,000 To your overall question though, look, we're just coming out of the chute back as a standalone. We need to we've been spending time looking at our standalone plans, But we're back, we need to doing strategic thinking, following what the economy does and we need to we're taking this in steps and being both methodical and thoughtful. But I think we've clearly indicated and these steps show as well as the dividend That we are very focused on shareholder returns.

Speaker 4

And Craig, just one more technical point, and you're correct in that the ASR program will takes through that period of time to complete, but mechanically speaking, both the, Standard General Equity shares as well as the launch of the ASR program will be in the next coming days, not weeks.

Speaker 3

So you'll get those shares from Standard General here over the next few weeks?

Speaker 4

Correct. Days, not weeks. The bulk of them, I'm talking about the ASR.

Speaker 2

And the standard general shares. And also in the The amount of shares to cover the fee will be days, not weeks.

Speaker 3

Okay. And then maybe talk a little bit further, you guys won't quantify this, which is unfortunate, but your ad Revenue pacings for the quarter for your TV stations, are you trying to say it's tracking better than the number In the Q1 adjusting for the Super Bowl and the Olympics in the Q1, what are you trying to suggest there, please?

Speaker 2

That's right. I meant to say that directly, Craig. That's correct. That's exactly right.

Speaker 3

Okay. And then, sorry, I got several questions. We haven't talked to you guys in a while. A lot of companies that go through a long process like you guys see with the deal was terminated, kind of Yes, but I taken off the ball, I'm totally distracted by the deal and stuff. Do you feel that management as well as all your workers, I was taking off the ball, given the unknownness, what's going to happen here with the Standard General deal put you guys behind in terms of the strategic outlook for your company in terms of the internal investment spending,

Speaker 2

We think the obviously in terms of investment spending, we were on pause. So that speaks for itself relative to the terms of a merger agreement because we were so there's no doubt about that. But I think our 2022 results, so to speak for themselves relative to the performance of the management team and keeping the eye on the ball. Obviously, in terms of long term strategic Planning, that certainly was on pause until very recently, given that obviously we run the merger agreement, we were not going to be the owners of the company. But, and that's the best way I can answer the question.

Speaker 4

And Craig, you've seen obviously the merger agreement and the details of it. That's not to say we haven't invested in regular way ongoing maintenance of the business. So we and we did last year in 2022. It's really it was more from a merger agreement standpoint. It kept our ability to invest in new types of things or expanded strategies or things like that.

Speaker 4

Please don't take it that we didn't invest in the baseline business.

Speaker 2

I also don't want to imply that we're now coming out of the chute and ready to go buy a bunch of things, okay. Obviously, given And capital allocation issues and the macroeconomic environment we're in, we understand the concern of shareholders relative This is a time we like having a conservative balance sheet position. And so note that We feel we've come out of the other side of this merger agreement in the right place.

Speaker 4

And therefore, our projected leverage at the 2.5 times was Obviously, reading right down that alley.

Speaker 3

And my last question, if I could, just go through this one more time. The timing of your retrans subs, renewals for this year and also for next year, if you could, please?

Speaker 2

Well, I don't give exact times on there, but most of them are all but toward the end of the each year. So We had we've got 30% of our traditional subs up in the back half of this year. And next year, that number It depends on how long deals we do this year, Craig.

Speaker 3

Okay, great. Thanks.

Speaker 6

Thank you.

Operator

We'll go next to Jim Goss from Barrington Research. Please go ahead.

Speaker 4

Hi, Jim.

Speaker 8

Thanks. Hi. How are you, Victoria? One follow-up to what Craig was can you hear me?

Speaker 6

Yes. Yes. We can hear you.

Speaker 8

Okay, sorry. One follow-up was Craig was just asking. With the pause In the business with the merger going on. Were there or the purchase, was were there any Key positions that you might have lost that you may have had to rebuild or does this give you an opportunity to reposition the executive team In a post deal environment, because I imagine the uncertainty probably did, cause some people to rethink their future.

Speaker 2

No. Actually, we really did not lose key executives during the time, Jim. Obviously, people were What their future was going to be under any kind of new ownership. But as a matter of normal course, we will always be looking at And obviously, we will resume the look at succession planning across the organization as we've always done as part of good governance in the past just as the Board We'll look at Board refreshment like it has a track record of doing in the past, but no, it did not cost us key folks. Clearly, it certainly at the local level, It made recruiting harder, right, because of the uncertainty of what was going to happen, but that's standard in any kind of merger agreement when you're a seller, but that's over with now.

Speaker 2

So and we are back as a standalone company and back on the offense.

Speaker 8

And with the deal related spin off stations, was that undone or did they take place All righty.

Speaker 2

No, no, no. That was all tied to the whole agreement. So that will not happen. We stay the same company with the same stations we have before. I appreciate that question because I know there's been some confusion around that.

Speaker 8

Okay. And pre Free the whole issue and given that there were a number of parties who seem to have an interest in Cigna, Your attitude was always that you were somewhat indifferent to remaining a standalone versus Potentially selling the company if it benefited shareholder value. And I'm wondering if in the wake of all that's happened, if you have a heightened determination to Just had a standalone company and charge forward with that ambition.

Speaker 2

I think we have an obligation, right, to absolutely focus on our standalone efforts Unless there ever becomes an opportunity, that the Board determines is intended to do like it chose to do, a year and a half ago. Our laser focus is on running this as a standalone company, which is what we should be doing in management to produce the best results.

Speaker 8

Okay. Last question, political positioning geographically, are there any highlights you would draw our attention to given how things are developing especially on the Republican side.

Speaker 2

I think I would just say on The presidential side, the states that were added to our either through Acquisitions we did a couple of years ago or the changing dynamics like in Georgia and Arizona, we just have a number of states that are competitive now and I'm doing off the top of my head, Jim, but you can think of them from the past of Florida, Arizona, Georgia, North Carolina, Michigan, on and on and on, in Pennsylvania, Minnesota. So it's there'll always be some change depending on who the candidates are. Sometimes those change. But fundamentally, We have given what our portfolio is from a presidential standpoint, we have a disproportionately good footprint. And I think you sort

Speaker 8

of own Texas and cruises up for election and apparently has some challengers. I don't know if That creates some bad

Speaker 2

news for you. Yes. Full disclosure, TEGNA is not a big producer of political for us and never has been because it's Such, remains a red state and at some point at one point that was turning more purple, but changes in voter laws, I think successfully kept that in the Republican So we don't expect to see and that would be a pleasant surprise, I'd say, if we saw some big primary, some big dollars out of Texas.

Speaker 8

All right. Thanks a lot, Dave, Victoria.

Speaker 2

Thanks, Jim. Good to talk to you again. Thanks.

Operator

Thank you. And we'll go to our last question from Doug Arthur from Huber Research.

Speaker 9

Yes. Victoria, just a clarification on Premion. You talked about the loss. I don't know whether it was a 1 quarter blip in a national account or a loss of that account. How is that going to flow Through 2023, are we going to continue to hear about that as a tough comp or Do you does the growth rate start to reflect what you're seeing in local more as the year rolls on?

Speaker 4

Yes. It's the single account that's reallocating some of its business, so it will have a recurring impact over time. I don't know what's going to happen next year or But obviously, we continue to do very well in the rest of the business. So there will be the offsetting benefits of growth in other areas.

Speaker 9

So the growth outlook in 2023 is a little muddled because you don't quite know how this account is going to reallocate through the year. But I mean how would you sort of frame the kind of more sustainable growth rate of the business at this point ex that?

Speaker 5

I wouldn't put a number

Speaker 2

on it, but local is very strong, Doug. And so it will be dependent on How much of that? That account is not gone, but it's quite reduced. So that will have some impact. But like I said in my comments, Over time, this is a local business.

Speaker 2

There's a lot of national players. We just were fortunate when we came out of the shoot with the business. We've got a lot of national business, which we didn't really even expect. So it's an unfortunate moment in time thing, but it's by the way we look at it, this is The digital startup that's on a rocket ship upward and this is just a kind of a volatile moment given the size of that one account, but The underlying organic metrics of Premion are good.

Speaker 9

Got it. Okay. Thank you very much.

Speaker 6

Thank you. And I'd

Operator

like to turn the call back over to Dave for any final or closing remarks.

Speaker 2

Well, Thanks for taking the time to join us all today and it's good to talk to you all again. Finally, we are very well positioned for the future as I said before with Advantage Station Assets and our industry leading balance sheet. We look forward to reengaging with investors in the coming weeks months to update you on our progress and delivering our long term value to our shareholders, furthering DE and I efforts in serving our communities' consumers through insightful, trusted and innovative content and advertising solutions, and we'll be looking to investors for their feedback after this long period of time without comment. If you have additional questions, please reach out to our Head of Investor Relations, Julie Heskett. Her phone number is 703-873-6747.

Speaker 2

Thank you all again, And everyone have a great long holiday weekend as well. Thank you everyone.

Operator

Thank you. Ladies and gentlemen, that does conclude today's conference. We appreciate your participation and have a wonderful day.

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Earnings Conference Call
Makita Q1 2023
00:00 / 00:00