Company Overview
We are an innovative media company serving the greater good of our communities. Across platforms, we tell empowering stories, conduct impactful investigations and deliver innovative marketing services. With 64 television stations and two radio stations in 51 U.S. markets, we are the largest owner of top four network affiliates in the top 25 markets among independent station groups, reaching approximately 39% ofU.S. television households. We also own leading multicast networks True Crime Network, Twist and Quest. Each television station also has a robust digital presence across online, mobile, connected television and social platforms, reaching consumers on all devices and platforms they use to consume news content. We have been consistently honored with the industry's top awards, includingEdward R. Murrow ,George Polk ,Alfred I. DuPont and Emmy Awards. Through TEGNA Marketing Solutions (TMS), our integrated sales and back-end fulfillment operations, we deliver results for advertisers across television, digital and over-the-top (OTT) platforms, including Premion, our OTT advertising network. We have one operating and reportable segment. The primary sources of our revenues are: 1) subscription revenues, reflecting fees paid by satellite, cable, OTT (companies that deliver video content to consumers over the Internet) and telecommunications providers to carry our television signals on their systems; 2) advertising & marketing services (AMS) revenues, which include local and national non-political television advertising, digital marketing services (including Premion), and advertising on the stations' websites, tablet and mobile products and OTT apps; 3) political advertising revenues, which are driven by even year election cycles at the local and national level (e.g. 2022, 2020, etc.) and particularly in the second half of those years; and 4) other services, such as production of programming, tower rentals, and distribution of our local news content. Merger Agreement
On
We plan to continue to pay our regular quarterly dividend of$0.095 per share through the closing of the Merger, which is the maximum rate and frequency permitted by the Merger Agreement. As a result of the pending transaction, we suspended share repurchases under our previously announced share repurchase program. 18 --------------------------------------------------------------------------------
Consolidated Results from Operations
The following discussion is a comparison of our consolidated results on a GAAP basis. The year-to-year comparison of financial results is not necessarily indicative of future results. In addition, see the section titled "Results from Operations - Non-GAAP Information" for additional tables presenting information which supplements our financial information provided on a GAAP basis. As discussed above, our operating results are subject to significant fluctuations across yearly periods (primarily driven by even-year election cycles). As such, in addition to one year ago comparisons, our management team and Board of Directors also review current period operating results compared to the same period two years ago (e.g., 2022 vs. 2020). We believe this comparison will also provide useful information to investors and therefore, have supplemented our prior year comparison of consolidated results to also include a comparison against the second quarter and six months endedJune 30, 2020 results (through operating income).
Our consolidated results of operations on a GAAP basis were as follows (in thousands, except per share amounts):
Quarter ended June 30, Six months ended June 30, Change from Change from Change from Change from 2022 2021 2021 2020 2020 2022 2021 2021 2020 2020 Revenues$ 784,881 $ 732,908 7 %$ 577,627 36 %$ 1,559,004 $ 1,459,959 7 %$ 1,261,816 24 % Operating expenses: Cost of revenues 420,235 397,118 6 % 355,367 18 % 831,685 791,810 5 % 724,735 15 % Business units - Selling, general and administrative expenses 99,585 96,949 3 % 85,008 17 % 201,554 186,275 8 % 177,976 13 % Corporate - General and administrative expenses 13,612 23,183 (41 %) 28,312 (52 %) 34,932 40,053 (13 %) 50,026 (30 %) Depreciation 15,534 15,838 (2 %) 16,711 (7 %) 30,839 31,734 (3 %) 33,611 (8 %) Amortization of intangible assets 14,999 15,773 (5 %) 17,248 (13 %) 29,999 31,533 (5 %) 33,464 (10 %) Spectrum repacking (105) (1,475) (93 %) (116) (9 %) (163) (2,898) (94 %) (7,631) (98 %) reimbursements and other, net Total operating expenses$ 563,860 $ 547,386 3 %$ 502,530 12 %$ 1,128,846 $ 1,078,507 5 %$ 1,012,181 12 % Total operating income$ 221,021 $ 185,522 19 %$ 75,097 ***$ 430,158 $ 381,452 13 %$ 249,635 72 % Non-operating expenses (45,051) (47,682) (6 %) (48,917) (8 %) (75,163) (95,166) (21 %) (116,132) (35 %) Provision for income taxes 44,030 30,986 42 % 6,607 *** 88,768 66,600 33 % 27,732 *** Net income 131,940 106,854 23 % 19,573 *** 266,227 219,686 21 % 105,771 *** Net (income) loss attributable to redeemable noncontrolling interest (371) (227) 63 % 374 *** (424) (442) (4 %) 484 *** Net income attributable toTEGNA Inc. $ 131,569 $ 106,627 23 %$ 19,947 ***$ 265,803 $ 219,244 21 %$ 106,255 *** Earnings per share - basic$ 0.59 $ 0.48 23 %$ 0.09 ***$ 1.19 $ 0.99 20 %$ 0.48 *** Earnings per share - diluted$ 0.59 $ 0.48 23 %$ 0.09 ***$ 1.19 $ 0.99 20 %$ 0.48 *** *** Not meaningful Revenues Our Subscription revenue category includes revenue earned from cable and satellite providers for the right to carry our signals and the distribution ofTEGNA stations on OTT streaming services. Our AMS category includes all sources of our traditional television advertising and digital revenues including Premion and other digital advertising and marketing revenues across our platforms. Our revenues and operating results are subject to seasonal fluctuations. Generally, our second and fourth quarter revenues and operating results are stronger than those we report for the first and third quarter. This is driven by the second quarter reflecting increased spring seasonal advertising, while the fourth quarter typically includes increased advertising related to the 19 -------------------------------------------------------------------------------- holiday season. In addition, our revenue and operating results are subject to significant fluctuations across yearly periods resulting from political advertising. In even numbered years, political spending is usually significantly higher than in odd numbered years due to advertising for the local, state and national elections. Additionally, every four years, we typically experience even greater increases in political advertising in connection with the presidential election. The strong demand for advertising from political advertisers in these even years can result in the significant use of our available inventory (leading to a "crowd out" effect), which can diminish our AMS revenue in the even year of a two year election cycle, particularly in the fourth quarter of those years. The following table summarizes the year-over-year changes in our revenue categories (in thousands): Quarter ended June 30, Six months ended June 30, Change from Change from Change from Change from 2022 2021 2021 2020 2020 2022 2021 2021 2020 2020 Subscription$ 389,079 $ 375,081 4 %$ 323,475 20 %$ 780,733 $ 761,818 2 %$ 656,277 19 % Advertising & Marketing Services 335,259 340,889 (2) % 229,083 46 % 689,726 663,723 4 % 524,236 32 % Political 50,858 9,581 *** 17,544 *** 68,823 19,009 *** 64,931 6 % Other 9,685 7,357 32 % 7,525 29 % 19,722 15,409 28 % 16,372 20 % Total revenues$ 784,881 $ 732,908 7 %$ 577,627 36 %$ 1,559,004 $ 1,459,959 7 %$ 1,261,816 24 % *** Not meaningful 2022 vs. 2021 Total revenues increased$52.0 million in the second quarter of 2022 and$99.0 million in the first six months of 2022 compared to the same periods in 2021. The net increases were primarily due to growth in political revenue ($41.3 million second quarter,$49.8 million first six months) due to contested primaries and the run up to the mid-term elections which will occur in the fourth quarter. Also contributing to the increase was growth in subscription revenue ($14.0 million second quarter,$18.9 million first six months) primarily due to annual rate increases under existing agreements, partially offset by declines in subscribers. Lastly, AMS revenue was down$5.6 million in the second quarter due to softness in certain AMS advertising categories, primarily auto. However, for the first six months of 2022 AMS revenue was up$26.0 million reflecting increased demand for digital advertising (primarily Premion) in the first six months. 2022 vs. 2020 Total revenues increased$207.3 million in the second quarter and$297.2 million in the first six months of 2022 compared to the same periods in 2020. The increases were primarily due to growth in AMS revenue ($106.2 million second quarter,$165.5 million first six months) reflecting higher demand for advertising (as second quarter of 2020 was significantly impacted by reduced demand due to the then onset of the COVID-19 pandemic). Also contributing was growth in subscription revenue ($65.6 million second quarter,$124.5 million first six months) primarily due to annual rate increases under existing and newly renegotiated retransmission agreements, partially offset by declines in subscribers. In addition, political revenue grew$33.3 million in the second quarter of 2022 and$3.9 million in the first six months of 2022 as compared to 2020. Cost of revenues 2022 vs. 2021 Cost of revenues increased$23.1 million in the second quarter of 2022 and$39.9 million in the first six months of 2022 compared to the same periods in 2021. The increases were partially due to growth in programming costs ($11.0 million second quarter,$22.4 million first six months) driven by rate increases under existing affiliation agreements. Higher digital expenses ($9.9 million second quarter,$11.7 million first six months) driven by growth in Premion also contributed to the increases.
2022 vs. 2020
Cost of revenues increased$64.9 million in the second quarter of 2022 and$107.0 million in the first six months of 2022 compared to the same period in 2020. The increases were partially due to growth in programming costs ($31.9 million second quarter,$63.9 million first six months) driven by rate increases under existing and newly renegotiated affiliation agreements and growth in subscription revenue (certain programming costs are linked to such revenues). Higher digital expenses ($22.8 million second quarter,$30.5 million first six months) driven by growth in Premion also contributed to the increase. 20 --------------------------------------------------------------------------------
Business units - Selling, general and administrative expenses
2022 vs. 2021
Business unit selling, general and administrative expenses increased$2.6 million in the second quarter of 2022 and$15.3 million in the first six months of 2022 compared to the same periods in 2021. The increases were primarily due to higher sales commissions and payroll costs (together,$3.4 million second quarter,$13.6 million first six months) driven by growth in digital revenue.
2022 vs. 2020
Business unit SG&A expenses increased$14.6 million in the second quarter of 2022 and$23.6 million in the first six months of 2022 compared to the same period in 2020. The increases were primarily due to higher sales commissions and payroll costs (together,$10.4 million second quarter,$18.2 million first six months) driven by growth in AMS revenue.
Corporate - General and administrative expenses
Our corporate costs are separated from our business expenses and are recorded as general and administrative expenses in our Consolidated Statement of Income. This category primarily consists of broad corporate management functions including Legal, Human Resources, and Finance, as well as activities and costs not directly attributable to the operations of our media business.
2022 vs. 2021
Corporate general and administrative expenses decreased$9.6 million in the second quarter of 2022 and$5.1 million in the first six months of 2022 compared to the same periods in 2021. The decreases were primarily driven by the absence in 2022 of advisory fees incurred in 2021 related to activism defense ($12.0 million second quarter,$16.6 million first six months). The decreases were partially offset by increases in M&A-related costs in 2022 ($4.2 million second quarter,$14.4 million first six months) which include costs incurred in support of the regulatory review of the Merger.
2022 vs. 2020
Corporate general and administrative expenses decreased$14.7 million in the second quarter of 2022 and$15.1 million in the first six months of 2022 compared to the same periods in 2020. The decreases were primarily due to the absence in 2022 of advisory fees incurred in 2020 related to activism defense ($15.4 million second quarter,$23.1 million first six months) and M&A due diligence costs ($4.6 million in the first six months). The decreases were partially offset by M&A-related costs in 2022 ($4.2 million second quarter,$14.4 million first six months) which include costs incurred in support of the regulatory review of the Merger.
Depreciation
2022 vs. 2021
Depreciation expense decreased by$0.3 million in the second quarter of 2022 and$0.9 million in the first six months of 2022 compared to the same period in 2021. The decreases were due to certain assets reaching the end of their assumed useful lives. 2022 vs. 2020 Depreciation expense decreased by$1.2 million in the second quarter of 2022 and$2.8 million in the first six months of 2022 compared to the same period in 2020. The decreases were due to certain assets reaching the end of their assumed useful lives.
Amortization of intangible assets
2022 vs. 2021
Amortization expense decreased$0.8 million in the second quarter of 2022 and$1.5 million in the first six months of 2022 compared to the same periods in 2021. The decreases were due to certain assets reaching the end of their assumed useful lives and therefore becoming fully amortized. 21 --------------------------------------------------------------------------------
2022 vs. 2020
Amortization expense decreased$2.2 million in the second quarter of 2022 and$3.5 million in the first six months of 2022 compared to the same periods in 2020. The decreases were due to certain assets reaching the end of their assumed useful lives and therefore becoming fully amortized.
Spectrum repacking reimbursements and other, net
2022 vs. 2021
Spectrum repacking reimbursements and other net gains were$0.1 million in the second quarter of 2022 compared to net gains of$1.5 million in the same period in 2021 and net gains of$0.2 million in the first six months of 2022 compared to$2.9 million in the same period in 2021. The 2022 activity is related to reimbursements received from theFederal Communications Commission (FCC) for required spectrum repacking. The 2021 activity is primarily related to reimbursements from spectrum repacking ($3.0 million second quarter,$4.4 million first six months), partially offset by a$1.5 million contract termination fee which impacted both the second quarter and first six months of 2021. 2022 vs. 2020 Spectrum repacking reimbursements and other net gains were$0.1 million in the second quarter of 2022 compared to net gains of$0.1 million in the same period in 2020 and$0.2 million in the first six months of 2022 compared to$7.6 million in the same period in 2020. The 2022 activity consists of the item discussed above. The 2020 activity primarily consists of reimbursements received from the FCC for required spectrum repacking ($2.3 million second quarter,$9.8 million first six months), partially offset by$2.1 million impairment charge due to the retirement of a brand name which impacted both periods.
Operating income
2022 vs. 2021
Operating income increased$35.5 million in the second quarter of 2022 and$48.7 million in the first six months of 2022 compared to the same periods in 2021. The increase was driven by the changes in revenue and expenses discussed above, most notably the increase in political revenue.
2022 vs. 2020
Operating income increased$145.9 million in the second quarter of 2022 and$180.5 million in the first six months of 2022 compared to the same periods in 2020. The increase was driven by the changes in revenue and expenses discussed above, most notably the increases in AMS, political and subscription revenues as well as programming expense.
Non-operating (expense) income
Non-operating expenses decreased$2.6 million in the second quarter of 2022 compared to the same period in 2021. This decrease was primarily due to a$3.7 million decrease in interest expense driven by lower average outstanding debt partially offset by higher average interest rate. Total average outstanding debt was$3.09 billion for the second quarter of 2022, compared to$3.51 billion in the same period of 2021. The weighted average interest rate on outstanding debt was 5.26% for the second quarter of 2022, compared to 5.07% in the same period of 2021. In the first six months of 2022, non-operating expenses decreased$20.0 million compared to the same period in 2021. This decrease was primarily due to a$20.8 million gain recognized on our available for sale investment in MadHive (see Note 3 to the condensed consolidated financial statements). Further, interest expense decreased$6.5 million driven by lower average outstanding debt partially offset by higher average interest rate. The average debt outstanding was$3.14 billion for the first six months of 2022, compared to$3.50 billion in the same period of 2021. The weighted average interest rate on outstanding debt was 5.25% for the first six months of 2022, compared to 5.10% in the same period of 2021. Provision for income taxes Income tax expense increased$13.0 million in the second quarter of 2022 compared to the same period in 2021. Income tax expense increased$22.2 million in the first six months of 2022 compared to the same period in 2021. The increases were primarily due to increases in net income before tax. Our effective income tax rate was 25.1% for the second quarter of 2022, compared to 22.5% for the second quarter of 2021. The tax rate for the second quarter of 2022 is higher than the comparable rate in 2021 primarily due to state tax planning strategies implemented in 2021. Our effective income tax rate was 25.0% for the first six months of 2022, compared to 23.3% for the same period in 2021. The tax rate for the first six months of 2022 is higher than the comparable amount in 2021 primarily due to a valuation allowance recorded on a minority investment and nondeductible M&A-related transaction costs incurred. 22 --------------------------------------------------------------------------------
Net income attributable to
Net income attributable toTEGNA Inc. was$131.6 million , or$0.59 per diluted share, in the second quarter of 2022 compared to$106.6 million , or$0.48 per diluted share, during the same period in 2021. For the first six months of 2022, net income attributable toTEGNA Inc. was$265.8 million , or$1.19 per diluted share, compared to$219.2 million , or$0.99 per diluted share, for the same period in 2021. Both income and earnings per share were affected by the factors discussed above. The weighted average number of diluted common shares outstanding in the second quarter of 2022 and 2021 were 224.5 million and 222.5 million, respectively. The weighted average number of diluted shares outstanding in the first six months of 2022 and 2021 was 223.9 million and 221.9 million, respectively. 23 --------------------------------------------------------------------------------
Results from Operations - Non-GAAP Information
Presentation of Non-GAAP information
We use non-GAAP financial performance 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, nor should they be considered superior to the related GAAP measures, and should be read together with financial information presented on a GAAP basis. Also, our non-GAAP measures may not be comparable to similarly titled measures of other companies. Management and our Board of Directors use non-GAAP financial measures for purposes of evaluating company performance. Furthermore, theLeadership Development and Compensation Committee of our Board of Directors uses non-GAAP measures such as Adjusted EBITDA, non-GAAP net income, non-GAAP EPS and free cash flow to evaluate management's performance. Therefore, we believe that each of the non-GAAP measures presented provides useful information to investors and other stakeholders by allowing them to view our business through the eyes of management and our Board of Directors, facilitating comparisons of results across historical periods and focus on the underlying ongoing operating performance of our business. We also believe these non-GAAP measures are frequently used by investors, securities analysts and other interested parties in their evaluation of our business and other companies in the broadcast industry. We discuss in this Form 10-Q non-GAAP financial performance measures that exclude from our reported GAAP results the impact of "special items" which are described in detail below in the section titled "Discussion of Special Charges and Credits Affecting Reported Results." We believe that such expenses and gains are not indicative of normal, ongoing operations. While these items may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur. Therefore, while we may incur or recognize these types of expenses and gains in the future, we believe that removing these items for purposes of calculating the non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance. We discuss Adjusted EBITDA (with and without corporate expenses), a non-GAAP financial performance measure that we believe offers a useful view of the overall operation of our businesses. We define Adjusted EBITDA as net income attributable toTEGNA before (1) net income attributable to redeemable noncontrolling interest, (2) income taxes, (3) interest expense, (4) equity loss in unconsolidated investments, net, (5) other non-operating items, net, (6) M&A-related costs, (7) advisory fees related to activism defense, (8) spectrum repacking reimbursements and other, net, (9) depreciation and (10) amortization. We believe these adjustments facilitate company-to-company operating performance comparisons by removing potential differences caused by variations unrelated to operating performance, such as capital structures (interest expense), income taxes, and the age and book appreciation of property and equipment (and related depreciation expense). The most directly comparable GAAP financial measure to Adjusted EBITDA is Net income attributable toTEGNA . Users should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. In particular, Adjusted EBITDA is not intended to be a measure of cash flow available for management's discretionary expenditures, as this measure does not consider certain cash requirements, such as working capital needs, capital expenditures, contractual commitments, interest payments, tax payments and other debt service requirements. We also discuss free cash flow, a non-GAAP performance measure that the Board of Directors uses to review the performance of the business. Free cash flow is reviewed by the Board of Directors as a percentage of revenue over a trailing two-year period (reflecting both an even and odd year reporting period given the political cyclicality of our business). The most directly comparable GAAP financial measure to free cash flow is Net income attributable toTEGNA . Free cash flow is calculated as non-GAAP Adjusted EBITDA (as defined above), further adjusted by adding back (1) stock-based compensation, (2) non-cash 401(k) company match, (3) syndicated programming amortization, (4) dividends received from equity method investments, (5) reimbursements from spectrum repacking and (6) proceeds from company-owned life insurance policies. This is further adjusted by deducting payments made for (1) syndicated programming, (2) pension, (3) interest, (4) taxes (net of refunds) and (5) purchases of property and equipment. Like Adjusted EBITDA, free cash flow is not intended to be a measure of cash flow available for management's discretionary use. 24 --------------------------------------------------------------------------------
Discussion of Special Charges and Credits Affecting Reported Results
Our results included the following items we consider "special items" that, while at times recurring, can vary significantly from period to period:
Quarter and six months ended
•Spectrum repacking reimbursements and other, net consisting of gains due to reimbursements from the FCC for required spectrum repacking; •M&A-related costs; •Other non-operating items consisting of a gain recognized on an available-for-sale investment and an impairment charge related to another investment; and •Tax expense associated with establishing a valuation allowance on a deferred tax asset related to an equity method investment.
Quarter and six months ended
•Spectrum repacking reimbursements and other, net consisting of gains due to reimbursements from the FCC for required spectrum repacking and a contract termination fee; •Advisory fees related to activism defense; and •Tax benefits as a result of state tax planning strategies implemented during the second quarter of 2021. Reconciliations of certain line items impacted by special items to the most directly comparable financial measure calculated and presented in accordance with GAAP on our Consolidated Statements of Income follow (in thousands, except per share amounts): Special Items Spectrum repacking GAAP reimbursements and Non-GAAP Quarter ended June 30, 2022 measure M&A-related costs other measure Corporate - General and administrative expenses$ 13,612 $ (4,212) $ -$ 9,400 Spectrum repacking reimbursements and other, net (105) - 105 - Operating expenses 563,860 (4,212) 105 559,753 Operating income 221,021 4,212 (105) 225,128 Income before income taxes 175,970 4,212 (105) 180,077 Provision for income taxes 44,030 7 (27) 44,010 Net income attributable to TEGNA Inc. 131,569 4,205 (78) 135,696 Earnings per share - diluted (a)$ 0.59 $ 0.02 $ -$ 0.60
(a) Per share amounts do not sum due to rounding.
25 -------------------------------------------------------------------------------- Special Items Advisory fees Spectrum repacking GAAP related to reimbursements and Non-GAAP Quarter ended June 30, 2021 measure activism defense other Special tax items measure Corporate - General and administrative expenses$ 23,183 $ (12,012) $ - $ -$ 11,171 Spectrum repacking reimbursements and other, net (1,475) - 1,475 - - Operating expenses 547,386 (12,012) 1,475 - 536,849 Operating income 185,522 12,012 (1,475) - 196,059 Income before income taxes 137,840 12,012 (1,475) -
148,377
Provision for income taxes 30,986 3,111 (374) 2,797
36,520
Net income attributable to TEGNA Inc. 106,627 8,901 (1,101) (2,797)
111,630
Earnings per share - diluted (a)
- $ (0.01)$ 0.50
(a) Per share amounts do not sum due to rounding.
Special Items Spectrum repacking GAAP
reimbursements and Other non-operating Special tax
Six months ended
measure M&A-related costs other items item Non-GAAP measure Corporate - General and administrative expenses$ 34,932 $ (14,446) $ - $ - $ - $ 20,486 Spectrum repacking reimbursements and other, net (163) - 163 - - - Operating expenses 1,128,846 (14,446) 163 - - 1,114,563 Operating income 430,158 14,446 (163) - - 444,441 Other non-operating items, net 15,454 - - (18,308) - (2,854) Total non-operating expenses (75,163) - - (18,308) - (93,471) Income before income taxes 354,995 14,446 (163) (18,308) - 350,970 Provision for income taxes 88,768 38 (41) 168 (7,117) 81,816 Net income attributable to TEGNA Inc. 265,803 14,408 (122) (18,476) 7,117 268,730 Net income per share-diluted$ 1.19 $ 0.06 $ - $ (0.08)$ 0.03 $ 1.20 26
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Special Items Advisory fees Spectrum repacking GAAP related to reimbursements and Special tax Six months ended June 30, 2021 measure activism defense other item Non-GAAP measure Corporate - General and administrative expenses$ 40,053 $ (16,611) $ - $ - $ 23,442 Spectrum repacking reimbursements and other, net (2,898) - 2,898 - - Operating expenses 1,078,507 (16,611) 2,898 - 1,064,794 Operating income 381,452 16,611 (2,898) - 395,165 Equity income (loss) in unconsolidated investments, net (3,926) - - - (3,926) Other non-operating items, net 1,854 - - - 1,854 Total non-operating expenses (95,166) - - - (95,166) Income before income taxes 286,286 16,611 (2,898) - 299,999 Provision for income taxes 66,600 4,291 (741) 2,797 72,947 Net income attributable to TEGNA Inc. 219,244 12,320 (2,157) (2,797) 226,610 Net income per share-diluted (a)$ 0.99 $ 0.06 $ (0.01)$ (0.01) $ 1.02
(a) Per share amounts do not sum due to rounding.
Adjusted EBITDA - Non-GAAP
Reconciliations of Adjusted EBITDA to net income presented in accordance with GAAP on our Consolidated Statements of Income are presented below (in thousands): Quarter ended June 30, Six months ended June 30, 2022 2021 Change 2022 2021 Change Net income attributable toTEGNA Inc. (GAAP basis)$ 131,569 $ 106,627 23 %$ 265,803 $ 219,244 21 % Plus: Net income attributable to redeemable noncontrolling interest 371 227 63 % 424 442 (4 %) Plus: Provision for income taxes 44,030 30,986 42 % 88,768 66,600 33 % Plus: Interest expense 42,950 46,609 (8 %) 86,570 93,094 (7 %) Plus: Equity loss in unconsolidated investments, net 236 2,597 (91 %) 4,047 3,926 3 % Plus (less): Other non-operating items, net 1,865 (1,524) *** (15,454) (1,854)
***
Operating income (GAAP basis) 221,021 185,522 19 % 430,158 381,452 13 % Plus: M&A-related costs 4,212 - *** 14,446 - *** Plus: Advisory fees related to activism defense - 12,012 *** - 16,611
***
Less: Spectrum repacking reimbursements and other, net (105) (1,475) (93 %) (163) (2,898) (94 %) Adjusted operating income (non-GAAP basis) 225,128 196,059 15 % 444,441 395,165 12 % Plus: Depreciation 15,534 15,838 (2 %) 30,839 31,734 (3 %) Plus: Amortization of intangible assets 14,999 15,773 (5 %) 29,999 31,533 (5 %) Adjusted EBITDA (non-GAAP basis) 255,661 227,670 12 % 505,279 458,432 10 % Corporate - General and administrative expense (non-GAAP basis) 9,400 11,171 (16 %) 20,486 23,442 (13 %) Adjusted EBITDA, excluding Corporate (non-GAAP basis)$ 265,061 $ 238,841 11 %$ 525,765 $ 481,874 9 % *** Not meaningful In the second quarter of 2022 Adjusted EBITDA margin was 34% without corporate expense or 33% with corporate expense, compared to second quarter of 2021 Adjusted EBITDA margin of 33% without corporate expense or 31% with corporate expense. For the six months endedJune 30, 2022 , Adjusted EBITDA margin was 34% without corporate expense or 32% with corporate expense, compared to six months endedJune 30, 2021 Adjusted EBITDA of 33% without corporate expense or 31% with corporate 27 -------------------------------------------------------------------------------- expense. These margin increases were primarily driven by the operational factors discussed above within the revenue and operating expense fluctuation explanation sections, most notably, the increase in political revenue due to the run up to the mid-term elections and subscription revenue from annual rate increases under existing and newly renegotiated retransmission agreements.
Free Cash Flow Reconciliation
Reconciliation from "Net income" to "Free cash flow" follow (in thousands):
Two-year period ended June 30, 2022 2021 Net income attributable to TEGNA Inc. (GAAP basis)$ 1,119,281 $ 834,323 Plus: Provision for income taxes 350,810 262,662 Plus: Interest expense 373,677 416,146 Plus: M&A-related costs 18,184 26,225 Plus: Depreciation 128,949 129,689 Plus: Amortization 127,236 131,815 Plus: Stock-based compensation 61,462 47,182 Plus: Company stock 401(k) contribution 34,974 32,167 Plus: Syndicated programming amortization 142,664 139,793 Plus: Workforce restructuring expense 1,021 5,933 Plus: Advisory fees related to activism defense 16,611 45,778
Plus: Cash dividend from equity investments for return on capital
8,240 9,093 Plus: Cash reimbursements from spectrum repacking 8,517 26,153
Plus: Net income attributable to redeemable noncontrolling interest
2,135 427
Plus: Reimbursement from Company-owned life insurance policies
1,456 -
Plus (Less): Equity loss (income) in unconsolidated investments, net
14,299 (5,207) Less: Spectrum repacking reimbursements and other, net (4,794) (6,869) (Less) Plus: Other non-operating items, net (6,481) 27,640 Less: Syndicated programming payments (148,229) (145,058) Less: Income tax payments, net of refunds (343,503) (230,749) Less: Pension contributions (10,140) (24,158) Less: Interest payments (364,856) (391,913) Less: Purchases of property and equipment (107,361) (123,792) Free cash flow (non-GAAP basis) $
1,424,152
Revenue$ 6,226,061 $ 5,643,551 Free cash flow as a % of Revenue 22.9 % 21.4 % Our free cash flow, a non-GAAP performance measure, was$1.42 billion and$1.21 billion for the two-year periods endedJune 30, 2022 and 2021, respectively. The increase in free cash flow is primarily due to increases in subscription and political revenues. 28 --------------------------------------------------------------------------------
Liquidity, Capital Resources and Cash Flows
Our operations have historically generated positive cash flow which, along with availability under our existing revolving credit facility and cash and cash equivalents on hand, have been sufficient to fund our capital expenditures, interest expense, dividends, investments in strategic initiatives (including acquisitions) and other operating requirements. We paid dividends totaling$42.3 million in first six months of 2022 and$36.4 million in first six months of 2021. We expect to continue to pay our regular quarterly dividend of$0.095 per share through the closing of the Merger, which is the maximum rate and frequency permitted by the Merger Agreement. As ofJune 30, 2022 , we were in compliance with all covenants contained in our debt agreements and credit facility and our leverage ratio, calculated in accordance with our revolving credit agreement, was 2.64x, below the permitted leverage ratio of less than 5.0x. The leverage ratio is calculated using annualized adjusted EBITDA (as defined in the agreement) for the trailing eight quarters. We believe that we will remain compliant with all covenants for the foreseeable future. As ofJune 30, 2022 , our total debt was$3.07 billion , cash and cash equivalents totaled$200.8 million , and we had unused borrowing capacity of$1.49 billion under our revolving credit facility. Our debt consists of unsecured notes which have fixed interest rates. Our financial and operating performance, as well as our ability to generate sufficient cash flow to maintain compliance with credit facility covenants, are subject to certain risk factors. See Item 1A. "Risk Factors," in our 2021 Annual Report on Form 10-K for further discussion. We expect our existing cash and cash equivalents, cash flow from our operations, and borrowing capacity under the revolving credit facility will be more than sufficient to satisfy our recurring contractual commitments, debt service obligations, capital expenditure requirements, and other working capital needs for the next twelve months and beyond. Cash Flows
The following table provides a summary of our cash flow information followed by a discussion of the key elements of our cash flow (in thousands):
Six months ended June 30, 2022 2021 Balance of cash and cash equivalents beginning of the period$ 56,989 $ 40,968 Operating activities: Net income 266,227 219,686 Depreciation, amortization and other non-cash adjustments 73,715 92,749 Pension contributions, net of income (1,070) (8,781) Decrease (increase) in trade receivables 25,263 (37,207) Increase (decrease) in interest and taxes payable 9,615 (52,483) Other, net 17,637 (17,471) Cash flow from operating activities 391,387 196,493
Investing activities: Payments for acquisitions of businesses and other assets, net of cash acquired
- (13,341) All other investing activities (23,819) (20,911) Cash flow used for investing activities (23,819) (34,252) Cash flow used for financing activities (223,787) (145,947) Increase in cash and cash equivalents 143,781 16,294 Balance of cash and cash equivalents end of the period $
200,770
29 -------------------------------------------------------------------------------- Operating activities - Cash flow from operating activities was$391.4 million for the six months endedJune 30, 2022 , compared to$196.5 million for the same period in 2021. Driving the increase in operating cash flow was a favorable change in accounts receivable of$62.5 million , primarily due to timing of cash payments related to AMS revenue and an increase in subscription revenue. Operating cash flow was also positively impacted by an increase in political revenue of$49.8 million in the first six months of 2022 as compared to 2021 (political revenue is paid upfront and provides an immediate benefit to cash flow from operating activities). Also contributing to the increase was a favorable change in accounts payable of$34.1 million in the first six months of 2022 as compared to the same period in 2021, due to timing of payments. Lastly, tax payments declined$37.7 million due to the absence of elevated tax payments made in arrears in 2021 related to the strong political-driven record results achieved in fourth quarter of 2020. Investing activities - Cash flow used for investing activities was$23.8 million for the six months endedJune 30, 2022 , compared to$34.3 million for the same period in 2021. The decrease of$10.5 million was primary due to$13.3 million being invested on an acquisition in 2021 and an absence of acquisitions in 2022. Also contributing to the decrease was a decrease in capital expenditures of$4.5 million . Financing activities - Cash flow used for financing activities was$223.8 million for the six months endedJune 30, 2022 , compared to$145.9 million for the same period in 2021. The change was primarily due to our revolving credit facility which had net repayments of$166.0 million in the first six months of 2022 as compared to net repayments of$99.0 million in the first six months of 2021.
Certain Factors Affecting Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q that do not describe historical facts may constitute forward-looking statements within the meaning of the "safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on a number of assumptions about future events and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs, projections and estimates expressed in such statements. These risks, uncertainties and other factors include, but are not limited to, those described within Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 and our Quarterly Reports on Form 10-Q, including following: (1) the timing, receipt and terms and conditions of any required governmental or regulatory approvals of the proposed transaction and the related transactions involving the parties that could reduce the anticipated benefits of or cause the parties to abandon the proposed transaction, (2) risks related to the satisfaction of the conditions to closing the proposed transaction (including the failure to obtain necessary regulatory approvals), and the related transactions involving the parties, in the anticipated timeframe or at all, (3) the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the Company's common stock, (4) disruption from the proposed transaction could make it more difficult to maintain business and operational relationships, including retaining and hiring key personnel and maintaining relationships with the Company's customers, vendors and others with whom it does business, (5) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement entered into pursuant to the proposed transaction or of the transactions involving the parties, (6) risks related to disruption of management's attention from the Company's ongoing business operations due to the proposed transaction, (7) significant transaction costs, (8) the risk of litigation and/or regulatory actions related to the proposed transaction or unfavorable results from currently pending litigation and proceedings or litigation and proceedings that could arise in the future, (9) other business effects, including the effects of industry, market, economic, political or regulatory conditions, (10) information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity, malware or ransomware attacks, and (11) changes resulting from the COVID-19 pandemic (including the effect of COVID-19 on the Company's revenues, particularly our non-political advertising revenues), which could exacerbate any of the risks described above. Potential regulatory actions, changes in consumer behaviors and impacts on and modifications to our operations and business relating thereto and our ability to execute on our standalone plan can also cause actual results to differ materially. We are not responsible for updating the information contained in this Quarterly Report on Form 10-Q beyond the published date. Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of the Company. Each such statement speaks only as of the day it was made. We undertake no obligation to update or to revise any forward-looking statements. The factors described above cannot be controlled by our Company. When used in this Quarterly Report on Form 10-Q, the words "believes," "estimates," "plans," "expects," "should," "could," "outlook," and "anticipates" and similar expressions as they relate to our Company or management are intended to identify forward looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q may include, without limitation: statements about the potential benefits of the proposed acquisition, anticipated growth rates, the Company's plans, objectives, expectations, and the anticipated timing of closing the proposed transaction. 30
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