Record Olympics Spend Drives Tegna Media Revenue Up 23% in 3Q

Although presidential election spending was uncharacteristically low, Tegna's media segment revenue rose 23% in 3Q 2016, driven by record Olympics advertising, increased retransmission money, and down-ballot races, the company said in its earnings report Wednesday.

With a hefty NBC footprint, Summer Olympics advertising accounted for nearly $56 million of the broadcast group’s $502 million 3Q total revenue. That’s 20% more than the 2012 Summer Olympics drew, and 35% more than the 2014 Winter Olympics generated, said Dave Lougee, president of Tegna Media.

Retransmission brought in $144 million, 32% higher than 3Q 2015.

Yet Tegna experienced a drop in political advertising, a phenomenon being felt by broadcast groups across the industry.  During 3Q 2016, campaigns spent $38 million with Tegna, down from $55 million in 2012, due to what Lougee called “the Trump factor.”

“In 2012 presidential was 50 % of our 3Q political spending, this year it was 23%,” said Lougee. In addition to a lack of spending by Trump and the expected supporters – the Republican party and super PACs – senatorial races in Colorado, Ohio and Florida didn’t generate the expected ads, he said.

Spending on congressional races, however, is up, he said. “Fourth quarter billing for the house will exceed 2012 and 2014,” Lougee said. Tegna expects to generate $80 million - $90 million in 4Q.

Lougee also also addressed other topics of industrywide interest – NFL ratings and over-the-top TV among them.

He said that while NFL ratings are largely flat, and some stations have experienced declines from last year, “they are still at near historic levels.”

And while he would not detail what Tegna has brewing for OTT, he said the group has “a key seat at the table” with new OTT providers, MPVDs and the networks.

“We can reiterate with confidence that OTT distributors very much value the local national broadcast channels over all others because consumers do,” he said.

The station group's operating expenses totaled $281 million compared to $248 million in the third quarter of 2015. The increase was due primarily to higher programming fees and continued investment in growth initiatives, Tegna said.

Operating income grew 39% from the third quarter in 2015 to $221 million. On a non-GAAP basis, operating income in the quarter was up 40% to $222 million.

Adjusted EBITDA was 40% higher, totalling $241 million for the quarter. The adjusted EBITDA margin was 48% in the quarter, an increase of 4.4 percentage points from 3Q 2015.

The company said it expects its 4Q 2016 revenue to be up 12-15% over 2015, driven by a 20-22% increase in retransmission revenue and $88-90 million in political.

Gracia Martore, Tegna’s president and CEO, said the broadcast group’s strong performance was a major factor in the 14% year-over-year growth in the company’s total 3Q revenue, which was $860 million.