TEGNA’s TGNA second-quarter 2020 non-GAAP earnings of 12 cents per share beat the Zacks Consensus Estimate by 71.4%. However, the bottom line plunged 65.7% on a year-over-year basis.
Revenues rose 7.6% year over year to $577.6 million and also beat the consensus mark by 2.4%. This year-over-year growth was driven by solid contributions from acquisitions, a continued spike in subscription revenues and strong spending on political advertisements.
Excluding political advertising revenues, adjusted revenues increased 5% year over year.
Quarter in Detail
Advertising and Marketing services (39.7% of revenues) revenues declined 20.9% year over year to $229.1 million, attributable to disruptions caused by the coronavirus.
TEGNA Inc. Price, Consensus and EPS Surprise
TEGNA Inc. price-consensus-eps-surprise-chart | TEGNA Inc. Quote
Notably, Premion benefited from the growth of viewing on streaming services and outperformed traditional TV advertising in the quarter under review. Moreover, the rollout of the company’s previously announced partnership with Gray Television GTN is progressing on schedule.
Subscription (56% of revenues) revenues surged 37% year over year to $323.5 million. The top line benefited from new station acquisitions and higher rate.
Political (3% of revenues) revenues were $17.5 million compared with $3.2 million in the year-ago quarter. Other revenues (1.3% of revenues) were $7.5 million, down 5.6% year over year.
Non-GAAP adjusted EBITDA declined 26.2% year over year to $124.4 million. Adjusted EBITDA margin declined to 21.5% compared with 31.4% in the year-ago quarter.
Non-GAAP operating expenses (84.3% of revenues) of $487.2 million were up 24.4% year over year, primarily on account of buyouts and higher programming expenses in relation to a spurt in subscription revenues.
Non-GAAP operating income was down 37.7% year over year to $90.4 million. Operating margin declined to 15.7% from 27% reported in the year-ago quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2020, total cash was $173 million compared with $35 million as of Mar 31, 2020. The company had more than $650 million in undrawn capacity under its revolving-credit facility.
Total debt was $4.1 billion and net leverage was 4.76 times as of Mar 31, 2020 compared with $4.1 billion debt and net leverage of 4.7 times as of Mar 31, 2020.
Markedly, TEGNA paid down $25 million on a term loan maturing in June and now has near-term remaining maturities of $75 million in 2020 and $350 million in the second half of 2021.
Moreover, on Jun 11, 2020, the company amended the leverage covenant in its credit agreement to extend the step-down of the maximum-permitted total leverage ratio from 5.5 times to 5.25 times until Mar 31, 2022.
Free cash flow in the second quarter was $96.1 million, up 86.3% year over year.
Key Q2 Developments
During the quarter, TEGNA launched Near Me, a mobile app feature that allows audience members to share photos and videos and see station-produced and user-generated content down to the neighborhood and street level.
Moreover, the company witnessed solid demand for VERIFY content in the reported quarter. In August, VERIFY launched on Snap’s SNAP Discovery platform.
Further, on May 6, the company’s VAULT Studios announced the premiere of SELENA: A STAR DIES IN TEXAS, a six-part podcast series developed in partnership with TEGNA’s Texas stations.
Noteworthy Q3 Developments
TEGNA entered into a renewed and expanded partnershipwith TV data and measurement company Alphonso to include all of Premion, linear and OTT and advertising platforms on Jul 8.
Additionally, on Jul 27, TEGNA's Justice Network, its leading multicast television network, relaunched as True Crime Network, including a free, ad-supported OTT-streaming service and apps for Apple’s AAPL Apple TV and iOS, Amazon Fire TV, and Android.
TEGNA still expects 2020 subscription revenues to be up at mid-twenties percentage. Moreover, this Zacks Rank #1 (Strong Buy) company now expects political revenues to contribute at least $370 million for the full year. You can see the complete list of today’s Zacks #1 Rank stocks here.
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