TEGNA’s Q1 Results Highlight Revenue Headwinds, But Strategic Moves Offer Glimmer of Hope

TEGNA Inc. (NASDAQ: TGNA) reported its first-quarter 2025 earnings, revealing a 5% year-over-year revenue decline to $680 million, driven by cyclical headwinds in political advertising and the Super Bowl’s shift to a smaller affiliate. While the results underscore challenges in traditional media, the company’s cost discipline, balance sheet strength, and strategic bets on local sports rights and digital integration offer reasons to remain cautiously optimistic.

Revenue Declines Reflect Cyclical and Structural Factors

The top-line contraction was largely expected, given the decline in political advertising—a recurring issue between election cycles. Political revenue plummeted 87% to just $3.6 million, a stark contrast to the mid-cycle boost seen in 2024. Meanwhile, AMS revenue fell due to the Super Bowl’s move to FOX, TEGNA’s smallest affiliate, compared to CBS in 2024. Excluding that one-off impact, AMS revenue was flat, suggesting underlying stability in core advertising.

Distribution revenue held steady at $380 million, aided by distributor renewals and contractual rate hikes. This stability contrasts with the prior-year quarter, which included a temporary service disruption with a distribution partner. However, subscriber declines and the reclassification of “subscription revenue” into “distribution revenue” (to better reflect licensing deals with streaming platforms) complicates direct year-over-year comparisons.

Cost Cuts Offset Some Revenue Pain, but Margin Pressure Persists

TEGNA’s GAAP operating income fell 21% to $109 million, with non-GAAP operating income dropping 19% to $112 million. Adjusted EBITDA declined 22% to $136 million, though cost-cutting initiatives partially mitigated the hit from lower revenues. GAAP net income nosedived 69% to $59 million, reflecting a 71% drop in pre-tax income.

The company’s operational discipline shone through: GAAP operating expenses fell 1%, and non-GAAP expenses were flat, despite rising programming costs tied to new sports rights deals. This balance highlights management’s ability to navigate trade-offs between growth investments and short-term profitability.

Strategic Bets on Local Sports and Digital Integration

TEGNA’s reclassification of subscription revenue into distribution underscores its push to monetize beyond traditional linear TV. The company also secured local sports rights for the NBA, WNBA, NHL, and MLB—a move aimed at attracting younger audiences and boosting digital engagement. Meanwhile, new executive hires to lead digital product development signal a focus on reinventing local media through hybrid digital-linear models.

These initiatives align with TEGNA’s broader goal of becoming a “local media platform,” blending TV’s reach with digital’s interactivity. With $717 million in cash and a net leverage ratio of 2.8x—comfortably below its 4.5x target—the company has flexibility to invest without overleveraging.

Guidance and Risks Ahead

For Q2 2025, TEGNA forecasts total revenue to drop 4%–7% YoY, with non-GAAP operating expenses flat to 2% lower. The full-year 2024/2025 Adjusted Free Cash Flow guidance of $900 million–$1.1 billion remains intact, supported by $62 million in Q1 Adjusted Free Cash Flow.

However, risks linger. The cyclical dip in political advertising will persist until the 2026 election cycle, and macroeconomic pressures could further dampen ad spending. Subscriber declines in distribution also hint at broader trends in cord-cutting, which TEGNA must counter with its streaming partnerships.

Conclusion: Navigating a Rocky Road with Steady Hands

TEGNA’s Q1 results paint a mixed picture: revenue headwinds are real, but its financial discipline and strategic pivots offer a path forward. The company’s focus on local sports rights and digital integration—backed by a strong balance sheet—positions it to capitalize on trends favoring hyper-local content.

Crucially, TEGNA’s Adjusted Free Cash Flow guidance remains achievable, and its dividend (at $20 million for the quarter) signals confidence in its liquidity. While the stock (TGNA) has underperformed the market over the past year——its valuation at roughly 7x 2025E EBITDA appears reasonable given its defensive cash flows and growth bets.

Investors should watch for execution on its digital initiatives and the timing of political ad recovery. For now, TEGNA’s ability to navigate cyclical and structural challenges suggests it’s not just surviving but repositioning—a key trait for media companies in an evolving landscape.