- Revenue Decline Amidst Cost Savings Total revenue fell 5% YoY to $675M, driven by 4% AMS revenue drop to $288M and political revenue declines, while non-GAAP expenses decreased 3% due to cost-cutting.
- Strong Digital Growth Continues Digital revenue achieved double-digit growth for the third consecutive quarter, offsetting distribution revenue stagnation at $370M amid subscriber declines.
- AI Automation and Cost Efficiency AI implementation in transcription/video editing and "stations of the future" technology reduced CapEx by 80% and operating expenses by 50%.
- Revised Guidance and Outlook Adjusted free cash flow guidance reaffirmed at $900M–$1.1B, with 2025 interest expense lowered to $160M–$165M, despite Q3 revenue expected to drop 18–20%.
Distribution Revenue Flat, Subscriber Trends
Distribution revenue remained flat at $370 million, attributable to subscriber declines partially offset by contractual rate increases. The company successfully renewed a portion of its traditional MVPD subscribers and secured a multiyear agreement with FOX Corporation for six markets. This suggests a focus on strengthening its core cable distribution business while navigating the ongoing cord-cutting trend.
Optimistic Outlook Despite Third-Quarter Challenges
TEGNA anticipates a 18% to 20% decline in total company revenue in the third quarter, primarily due to the cyclical nature of the business. However, they expect non-GAAP operating expenses to decline 2% to 3% year-over-year. They also project low double-digit to mid-teen year-over-year growth in core advertising revenue for the third quarter, despite a challenging macroeconomic environment.
AI-Powered Efficiency and Growth Opportunities
TEGNA is actively investing in internal growth opportunities, including local journalism, content, digital development, and employee training. "We are using AI to help us be more efficient," CEO Dave Lougee stated on the earnings call, "from things like transcription and video editing to identifying new story leads." This focus on leveraging technology for both cost savings and content creation positions the company for long-term success in a rapidly evolving media landscape.
M&A Strategy and Valuation
TEGNA remains open to both M&A opportunities as a buyer and seller, but emphasizes a disciplined approach. This suggests a prudent approach to capital allocation, focusing on strategic acquisitions that create shareholder value. From a valuation standpoint, TEGNA trades at a P/E ratio of 5.27, P/B ratio of 0.81, and a free cash flow yield of 23.73%. These metrics indicate that the market is pricing in significant growth potential and a high degree of risk.