Serving the Greater Good of Our Communities - Through Empowering Stories, Impactful Investigations and Extensive Marketing Services
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2018 ANNUAL REPORT Serving the Greater Good of Our CommunitiesTEGNA 2018 Annual Report b Company Profile TEGNA Inc. is a media company innovating in the matter, are an advocate for those in need and digital age. Our purpose is to serve the greater help bring positive change to our communities. good of our communities through empowering Our award-winning journalists have been stories, impactful investigations and innovative recognized with numerous national honors marketing services. including Edward R. Murrow, Alfred I. duPont, George Foster Peabody, George Polk, Walter As one of the largest and most geographically Cronkite and Emmy awards. diverse broadcasters in the U.S., TEGNA is a best-in-class operator with 49 television stations TEGNA also provides local and national partners (including those serviced by TEGNA) and two custom, targeted and innovative campaigns radio stations in 41 markets from coast to coast. through TEGNA Marketing Solutions (TMS). We are the largest owner of Big 4 affiliates in the TMS is a one-stop shop that helps businesses top 25 markets and reach one-third of all television thrive through an unmatched suite of services households nationwide. Each month, TEGNA and solutions that reach consumers across reaches 50 million adults on-air and approximately television, email, social and over-the-top (OTT) 35 million across our digital platforms. Across platforms, including Premion, TEGNA’s OTT Twitter, Facebook and Instagram, TEGNA's stations advertising service. have over 25 million social followers. In everything we do, we are driven by our strongly TEGNA produces trusted, impactful and innovative held values and our stated purpose to serve the content across platforms. We tell stories that greater good of our communities. c TEGNA 2018 Annual Report 2018 Year in Review % Record Political 16 % Revenue Growth to Revenue of 47 Above Previous $2.2B $234M Midterm Election 17% 2.3% Subscription Revenue Growth Dividend Yield TEGNA 2018 Annual Report 1 Letter to Shareholders including Premion; political advertising, which is driven by even-year election cycles at the local and national level; Dear Fellow Shareholders, and subscriptions, reflecting fees paid by cable, satellite, over-the-top and telecommunications providers. All of us at TEGNA are proud to be serving our communities with locally relevant content and proven In 2018, TEGNA’s total revenues increased 16 percent marketing solutions while delivering a combination of to $2.2 billion, driven by strong subscription revenue strong financial results and award-winning journalism. We growth and record political advertising revenue. These are guided by our Board of Directors, who bring unique, historical high-water marks drove adjusted EBITDA* to varied experiences and expertise through diversity of $781 million for the year, producing an adjusted EBITDA thought and background, providing a mix of skills that margin of 35 percent and non-GAAP EPS* of $1.83 per push us to continue to improve as a business and a diluted share. Likewise, our free cash flow for the year leader in our communities. was $469 million, fully 21 percent of revenue, which enabled us to allocate capital to accretive acquisition From our innovative content, impactful investigations opportunities. During 2018, we pursued acquisitions and accretive acquisitions, to our people, purpose while also reducing debt to under $3 billion, increasing and performance, we are making strong progress in our firepower for future investments, with over 90 diversifying our revenue and cash flow streams and percent of our remaining debt at low cost fixed rates. creating value for our shareholders, all while continuing In addition, we continued to reinvest in the business, to serve the greater good of our communities. including new products and initiatives such as As a pure play broadcaster, our primary sources of Premion, while returning 13 percent of free cash flow to revenues include advertising and marketing services shareholders in the form of dividends, a 2.3 percent yield. comprised of local, national and digital marketing services * Reconciliations of the following non-GAAP financial measures to the Company’s results as reported under accounting principles generally accepted in the United States may be found in the Company’s Form 10-K, filed March 1, 2019; adjusted EBITDA – page 25 and non-GAAP earnings per share – page 24. 2 TEGNA 2018 Annual Report Our financial strength is enhanced by our increasing subscribers. Notably, TEGNA’s paid subscribers increased concentration in high-margin political and subscription year-over-year for the first time in several years due to revenue streams, which are stable cash flows that we an expanding OTT subscriber base in TEGNA markets. expect to be relatively immune from secular or economic These subscribers are fueling growth, especially in trends. 2018 was a record-breaking year for political large markets where we have a strong presence. The advertising revenue for our company, including continued growth of subscription revenue and paid presidential election years. The energy and engagement subscribers is a direct reflection of the consistently high in 2018’s midterm elections were unparalleled; as a demand for our must-have local and network content. result, candidates and campaigns, reflecting a wide Live television accounts for the most time spent with variety of issues, placed $234 million in political media with more than four hours per day spent watching advertising with us last year, up 47 percent from the television.* Local news content drives audience and last midterm election in 2014. We expect that TEGNA’s advertising growth. In 2018, across our markets, we advertising solutions will continue to comprise an introduced several new multiplatform initiatives that essential element of any political marketing strategy were a direct result of our recurring, structured due to the impactful content we produce and our innovation process that encourages fresh and bold ideas strong nationwide footprint, including large stations from our employees. We launched digital-first episodic in competitive states. investigations like “Mothers Matter”; strengthened our In 2018, subscription revenue grew 17 percent, a multiplatform news fact-checking segments like VERIFY; $122 million increase. Paid subscribers include traditional debuted new local news programs like “Get Up DC!”; MVPDs, such as cable and satellite providers, as well as and distributed original digital series like “An Imperfect new and growing over-the-top (OTT) or virtual MVPD Union,” a new series for Facebook Watch. *Nielsen, September 2018 TEGNA 2018 Annual Report 3 Award-Winning Journalism 2019 Alfred1 I. duPont 4 Gracie Awards Columbia University Award Presented by the Alliance for WTSP, Investigative News Partnership Women in Media Foundation for “Zombie Campaigns” 10 83 National Edward R. Murrow Awards Regional Edward R. Murrow Awards for Excellence in Local Journalism Most in the company’s history and 2 for Excellence in Innovation more than any other local broadcaster These efforts have not gone unnoticed. TEGNA has won marketing services revenue. In 2018, we integrated the more national journalism awards over the past five years existing capabilities of our in-house creative agency, than any other local broadcaster including multiple digital marketing services provider and advertising Gracie Awards from the Alliance for Women in Media, network into one data-driven sales strategy and market- Alfred I. duPont-Columbia University Awards, George facing brand called TEGNA Marketing Solutions to help Foster Peabody Awards, National Edward R. Murrow our partners reach audiences across platforms. We have Awards and Service to America Awards from the National invested in intelligent ad automation, audience attribution Association of Broadcasters Education Foundation. and pricing analytics to create and capture additional high-value revenue opportunities to deliver results to our Another way we are growing new audiences is through customers. Premion, the industry’s first OTT advertising live, daily programming. “Daily Blast LIVE” and “Sister network, continues to capture an increasing percentage Circle” are multiplatform, daily shows that reach new of advertising spend for those looking to reach audiences and offer unique voices. Launched in 2017, audiences across streaming services. both shows continue to grow and resonate with younger viewers. “Daily Blast LIVE” added 15 additional markets This past year, we joined other broadcasters in support in the fall of 2018, including 14 non-TEGNA markets. of the nationwide rollout of the ATSC 3.0 over-the-air “Sister Circle,” which serves a predominantly female television standard, known as Next Gen TV, by 2020. African-American audience, now reaches 60 percent Next Gen TV is a vital next step that will allow us to better of the country through TEGNA stations and its national compete with digital advertisers, provide enhanced distribution deal with cable channel TVOne. Both shows services for our communities and open up new business are also streamed live on Facebook and YouTube. models and revenue opportunities for our business. We are also taking full advantage of content and As the industry continues to consolidate, we remain in an technology innovation to grow our advertising and excellent position to capitalize on potential opportunities. 4 TEGNA 2018 Annual Report Large Stations in Growing Markets Serving Largest NBC 49 41 Affiliate Group Stations Markets