The TV broadcasting company formerly known as Gannett on Thursday announced preliminary financial results for Q4 — as well as the successful completion of its previously announced $1 billion private placement eight-year senior note offering, priced at 4.625%.
As previously reported, TEGNA intends to use the net proceeds from the offering to repay the remaining $310 million principal amount of its 5.125% senior notes (due 2020), the $650 million principal amount of its 6.375% senior notes (due 2023), and borrowings under its revolving credit agreement.
“In support of the offering,” TEGNA now reports that its Q4 revenue will be in the range of $688 million-$693 million, up 7% to 8% year-over-year and above TEGNA’s prior guidance of mid-single digit percent growth.
The improvements are driven by continued growth in subscription revenue, 2020 political advertising spending “beginning in earnest earlier than anticipated” and stronger advertising and marketing services revenue across TEGNA’s portfolio of stations, including the 13 stations acquired mid-way through Q3 2019.
Excluding political advertising, revenue is expected to be up 32%-33% compared to last year, exceeding prior guidance of high twenties.
The news triggered strong after-hours trading for TGNA, which was up 3.2% to $17.22 as of 4:50pm Eastern.
However, while revenue is poised to surge, earnings before interest are going to take a haircut.
Q4 Adjusted EBITDA is expected to be in the range of $225 million-$230 million, reflecting a full quarter of new station contributions as well as the strength of TEGNA’s existing stations.
This represents a $43 million-$48 million decline in Adjusted EBITDA compared with fourth quarter 2018, despite being up against $140 million of high margin political advertising dollars last year.
TEGNA President/CEO Dave Lougee said, “Our preliminary fourth quarter results reflect a very positive trajectory in our key long-term value drivers, including strong subscription revenue growth and accelerating political advertising. These also are reflected in our full-year 2020 guidance metrics, which we have updated to include our projection of year-over-year subscription revenue growth of at least mid-twenties. This growth reflects our top of the market retransmission rates for our portfolio of Big Four affiliates, providing solid momentum as we head into 2020 and beyond. We also anticipate at least $300 million in high-margin political advertising revenue in 2020, heavily weighted toward the third and fourth quarters given the geographic footprint of our stations.
“These trends strengthen our firepower, allowing us to quickly reduce leverage while we continue to pursue transformative M&A opportunities, for which we have ample room even under the FCC’s existing national cap,” he continued. “Meanwhile, we have continued to be thoughtful in managing our balance sheet, including completing two debt refinancings over a four-month period, taking advantage of the low interest rate environment to reduce interest expense and improve our financial flexibility. The strength of our operations and fortress balance sheet position TEGNA to continue to play a key role as an industry consolidator in the years ahead.”
TEGNA has also updated its full-year 2020 guidance for subscription revenue growth, reflecting “the culmination of successful late fourth quarter retransmission negotiations and interest expense reductions generated by this week’s $1 billion refinancing.”