Earnings Call Transcript
TEGNA INC (TGNA)
Earnings Call Transcript - TGNA Q4 2020
Operator, Operator
Good day, and welcome to the TEGNA Fourth Quarter 2020 Earnings Call. This call is being recorded. Our speakers for today will be Dave Lougee, President and Chief Executive Officer; and Victoria Harker, Chief Financial Officer. At this time, I would like to turn the conference over to Doug Kuckelman, Head of Investor Relations. Please go ahead, sir.
Doug Kuckelman, Head of Investor Relations
Thank you, and good morning, and welcome to our fourth quarter and full year 2020 earnings call and webcast. Today, our President and CEO, Dave Lougee; and our CFO, Victoria Harker, will review TEGNA's financial performance and results. After that, we'll open up the call for questions. Hopefully, you've had the opportunity to review this morning's press release. If you have not yet seen a copy of the release, it's available at tegna.com. Before we get started, I'd like to remind you that this conference call and webcast include forward-looking statements, and our actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. This presentation also includes certain non-GAAP financial measures. We have provided a reconciliation of those measures to the most directly comparable GAAP measures in the press release. With that, let me turn the call over to Dave.
Dave Lougee, President and CEO
Thank you, Doug, and good morning, everyone. As Doug noted, Victoria and I will be discussing our fourth quarter and full year 2020 financial results on today's call and we'll also provide our expectations for this first quarter and full year 2021, which you saw included on our earnings release this morning. But before we turn to financials, I first want to take a moment to reflect on the incredible achievements of our TEGNA colleagues over the last year. Despite the obvious significant challenges we face in 2020, our team remains steadfast in supporting each other and the communities we serve. Throughout the year, our local newsrooms were a lighthouse of trusted information in a sea of misinformation and disinformation. Our stations found innovative ways to deliver news and substantive content amidst the pandemic that brought clarity, context and hope to our audiences. Never before has our core purpose of serving the greater good been more relevant and needed across our markets and beyond. Our stations, journalists and production crews utilized very creative approaches to ensure the safety of themselves and others, all the while reporting on incredibly important developments related to the pandemic in their cities and states. And leading up to last year's elections, our team helped viewers sift fact from fiction and implemented comprehensive voter access programs to educate voters and combat disinformation and fraud. And following the midyear killing of George Floyd and other acts of racial injustice, TEGNA stations helped to create greater awareness of systemic racism through daily reporting and multiple special programs that highlighted racial inequality and social injustice. And just two weeks ago, when Uri delivered an unprecedented winter storm in Texas, our stations stepped up providing life-saving content through our digital platforms, answering questions via text messages through our UGC platform directly from folks experiencing the cold, who were staring at their smartphones for information, and holding state and federal officials accountable for systemic failure of the Texas power grid. All of this was made possible through the innovative spirit and perseverance of our nearly 1,100 Texas colleagues who were going through all the same challenges of no power, heat, and no water for themselves and their families. We cannot thank the team enough. Now to turn to our performance for the most recent quarter and this past year. As you saw in the commentary of our prerelease in January and the results we posted today, we had a record-breaking year despite unprecedented macroeconomic challenges. This performance is a direct result of the years of focus in executing against our five pillar strategy, which included evolving our business model to increase its resiliency and expanding our portfolio of strategically located big four affiliate stations. Our digital platforms have continued to grow and evolve, now with nearly 70 million average unduplicated monthly visitors to our digital properties. We have also stayed one step ahead of the content and services our viewers will increasingly expect. A few recent examples include our acquisition of Locked On, the leading podcast network for local sports; our new agreement with Tubi TV for OTT distribution of our station's local products, building on previous agreements with Roku and Amazon Fire; and our announcement just last week about the upcoming launch of Twist, a multicast entertainment network for women that will reach DMAs covering 70% of US households when it debuts later this spring. Twist will build on the growth and existing infrastructure of our highly successful True Crime and Quest multicast networks. Another continued area of focus for us going forward is building on the critical role we play in helping stop the spread of disinformation and misinformation across the country through VERIFY, our fact-checking reporting initiative launched in 2015. In January, we announced that in addition to the VERIFY reporting we will continue to do at our local stations, we are expanding VERIFY into a standalone national brand. We'll launch dedicated digital products and expand its franchise to other non-TEGNA social media platforms, like Snapchat, where we already have nearly 170,000 subscribers and 8.3 million unique viewers. VERIFY is already in high demand on our locally owned and operated digital sites, growing more than 400% year-over-year. Turning to Premion, our fast-growing business in the over-the-top advertising space. Premion had a record year of dollar growth, finishing with revenues of more than $145 million, up more than 40% relative to 2019 despite an overall down advertising market, as we all know. With the Gray TV partnership we announced last year, our combined TEGNA and Gray local sales forces can now directly reach and serve local advertisers in 70% of markets covering 70% of US households, which is a distinct advantage. With our direct Premion sales force, we can serve national advertisers by reaching OTT viewers across the entire country. We expect Premion to continue to grow at a similar pace in 2021 as it did last year, continuing the strong momentum and adoption and serving as an even stronger value proposition for advertisers, publishers and local broadcasters alike. Overall for TEGNA, one of the key drivers of our underlying performance and the durability of our business model is the growth of our subscription revenue business. On the top line, subscription revenues finished the year up 28%, exceeding the guidance we provided prior to the pandemic in early 2020. This growth was driven by contractual rate increases in our multiyear retrans agreements along with strong renewal step ups. As a reminder, last year, we repriced approximately 35% of our paid subscribers and will reprice approximately 30% toward the end of this year. These agreements, combined with our multiyear affiliation agreements, provide clear visibility into net subscription growth in 2021 and for years to come. For instance, on the expense side of our subscription revenue business, in January, we renewed our affiliation agreement with NBC, which covers 20 TEGNA markets across the US, including 10 of the top 25 markets for NBC. We now have network affiliation agreements in place covering 94% of our Big Four subscribers through the end of 2022 and beyond. So to the bottom line on retrans, as we said earlier this year and we're reaffirming today, we expect our net subscription profits to increase in the mid to high 20s percent this year. As we discussed during our third quarter call, we had a record year with $446 million of political advertising as election year spending continues to trend higher each four-year cycle. We were able to capitalize on an unprecedented level of spending through our strategically constructed portfolio of Big Four stations in numerous battleground states, not just the presidency, but for the Senate and Governor's races as well. As reported, our political revenues in 2020 were almost double that of 2018 and almost three times that of 2016, the prior presidential election year. We expect 2022 to be another extraordinary off-cycle robust cycle for TEGNA. Our portfolio will have 24 US Senate races and 24 gubernatorial races. As of today, 100% of the Senate races classified as very competitive are covered by TEGNA markets, specifically, the races in Arizona; Georgia, yes, Georgia, again; North Carolina, yes, North Carolina, again; Ohio; Pennsylvania; and Wisconsin, where we will get spending in neighboring Minneapolis. In terms of competitive gubernatorial races, we have Arizona, Florida, Georgia, Maryland, Michigan, Pennsylvania, and again, Wisconsin. We remain well positioned to continue capturing these high-margin revenues with even higher margins than we had prior to 2020 as a result of our political sales efforts being brought in-house last year. Combined, our subscription and political revenues have surpassed 50% of our total two-year revenues as we promised and are expected to comprise a greater percentage going forward. Turning now to our non-political advertising revenues. As we have previously shared, our advertising and marketing services were the most impacted revenues by the pandemic. However, we have continued to see quarterly sequential improvement since the peak of the pandemic, finishing the quarter down only 6% year-over-year despite political displacement and the full year down just 4%. I'm pleased to say that our advertising and marketing services are expected to finish positive in the first quarter. This year-over-year AMS growth, combined with our significant subscription revenue growth, are key drivers of the first quarter and full year 2021 outlook. Victoria will provide more color on AMS revenue trends shortly. Now turning to capital allocation. Over the past year, we have continued to be diligent in both our cost containment efforts and the thoughtful review of how we manage our capital. As we discussed last quarter, at the onset of COVID-19, we acted quickly and strategically to identify and implement expense reductions, building on efficiencies already in place prior to the pandemic. As a result, we have executed on cost and efficiency initiatives at an accelerated pace to drive out $50 million of recurring annualized expense savings within 2020, and these same initiatives and cost cuts will continue to generate expense savings in 2021. Victoria will provide more detail on these initiatives in her remarks. The combination of our prudent expense management and the strength of our revenue base led us to exceed $1 billion in adjusted EBITDA for the year. Additionally, the two refinancings we completed in 2020 lowered our overall interest rate and extended our maturities, with no outstanding maturities of senior notes until 2024. Our strong free cash flows have allowed us to continue to pay down debt, resulting in a less than 4 times net leverage as promised by the end of 2020, which was a goal we had in place prior to the pandemic. As you saw in our full-year guidance today, we're expecting to finish 2020 with net leverage in the mid-3s. On a two-year basis, our full-year cash flow as a percentage of revenue also exceeded our pre-COVID guidance, and we accomplished this while still paying our regular quarterly dividend to shareholders. In addition to continuing our debt paydown, as always, we will continue to evaluate any and all opportunities that are presented to us, both inorganic and organic, to support the ongoing growth of our business, always through the lens of what we believe will drive the most value for our shareholders. Further, with the recent announcement of our three-year $300 million share repurchase renewal in January, we now have a number of tools at our disposal to return value to our shareholders. The strength of our balance sheet, coupled with this expanded toolkit, positions us well to continue to create and return value both over the near and long term. To that end, following the December re-initiation of the buyback program, our Board has continued an active dialogue on capital allocation in light of our increased cash flow generation, our expectation for continued strong financial performance and faster than expected deleveraging. In light of those factors, we're carefully weighing our options to increase the amount of capital returned to shareholders through either repurchasing shares, increasing our dividend, or both. All, again, through the lens of what action is most beneficial for our shareholders and makes the most sense in light of current market conditions. Before I pass the call over to Victoria, I want to highlight one of our long-standing areas of focus here at TEGNA, social responsibility, including continued enhancements to our investor-facing disclosures. Over the last year, we have continued to strengthen our leadership and oversight over diversity, equity and inclusion at TEGNA, including through the appointment of Grady Trip, our Chief Diversity Officer and the identification of specific areas of oversight for our Board related to DE&I and the launch of a diversity inclusion employee working group. We just published our 2020 social responsibility highlights report, which includes additional disclosure of our DE&I focus throughout TEGNA as well as the diversity of our workforce. We know there is room for improvement. So to hold ourselves accountable, we have also established five-year goals to increase Black, Indigenous, and People of Color representation in our content teams, news leadership, and management roles across the company. The social responsibility highlights report also reflects our enhanced ESG reporting, including the adoption of SaaS B disclosure standards for our industry and a preview of more detailed tracking of our environmental impact in the near term. We would encourage you to take a look through this report, which is linked for your convenience in this morning's release and can also be found on our investor website. We look forward to continuing to share our progress in these important areas in the quarters and years ahead. And with that, I'll turn the call over to Victoria to cover our financials in more detail.
Victoria Harker, CFO
Thanks, Dave. Good morning, everyone, and thank you for joining us. As Dave discussed, we had a record-breaking fourth quarter and year due to the strength of our business model and the strategic decisions we've made, not just in these most recent challenging months but really ever since becoming a pure play broadcast company. Our disciplined M&A strategy has resulted in a strong portfolio of stations, positioning us well to capitalize on future growth. That same thoughtful approach to capital allocation has also served to strengthen our balance sheet while growing shareholder value throughout our history. As a reminder, my comments today are primarily focused on TEGNA's performance on a consolidated non-GAAP basis to provide you with visibility into the financial drivers of our business trends as well as our operational results. You'll find all of our reported data and prior period comparatives in our press release. As you saw in this morning's release, we provided key guidance metrics for the first quarter of 2021 as well. All of our full-year 2021 guidance remains as we provided in our January 6 pre-release, with the addition of our non-recurring CapEx outlook. We've also added more detail, as you've seen in our press release this morning, on the drivers of our projections for the balance of what we expect to be a very strong year. I'll touch on our outlook in more detail later in my remarks. For the fourth quarter, total company revenue was up 35% year-over-year and up 46% compared to the fourth quarter of 2018. This was driven by record political advertising revenue and continued strength in subscription revenue, partially offset by lower advertising and marketing services, which, as Dave pointed out, continues to accelerate each quarter since the onset of COVID. In terms of revenue stream growth, here are some additional details. Subscription revenue increased 9% year-over-year this quarter. As a reminder, it would have been up fully 17% but for a temporary suspension of service with AT&T DIRECTV in December. The growth reflects the impact of step ups in retransmission rates with approximately 50% of subscribers repriced in the fourth quarter of 2019. As we said on our last earnings call, our subscription revenue growth was lower than prior quarters, having lapped our 2019 acquisitions by the start of the fourth quarter. We forecast positive net subscription profit growth in the mid to high 20s in 2021 and growth after that as well. Subscriber counts continue to trend as expected, with stable net subscriber counts reflected through our most recent reporting from November 2020. This continued growth in our high-margin subscription revenues, combined with our expansive political footprint, provides us with strong annuity-like EBITDA and free cash flow production. As you saw evidence this year, this has resulted in a more resilient portfolio than ever before, indicative of the ongoing successful execution of our strategic plan. Now turning to advertising and marketing services revenues, which have shown quarterly sequential improvement since the height of the pandemic in the second quarter of 2020. AMS also serves as a key growth driver to support our first quarter and full-year 2021 guidance. AMS finished fourth quarter down 6% compared to last year. This was primarily due to core advertising displacement related to our record political revenue of $264 million in the fourth quarter. We continue to see recovery in non-political advertising in many categories and strong audience metrics on both traditional television and digital platforms. To provide you with some further color on specific advertising category trends in the fourth quarter. As you'd expect, there was noise from political displacement among categories, specifically in October. That said, when looking at November and December trends, many categories are up over last year, including home improvement, services, banking and financing, insurance, and packaged goods. Automotive improved significantly, down year-over-year only low single digits relative to November and December. Notably, automotive is pacing positive, up mid-single digits this quarter. Not surprisingly, categories that continue to struggle include retail, restaurants, entertainment, and travel and tourism, given the ongoing impacts of the pandemic. Beyond these positive trends, it's also reaffirming to see advertising improvements continuing to pace this quarter as well, with AMS pacing positive over last year and expected to finish above the first quarter of last year. Now turning to expenses for the fourth quarter. Non-GAAP operating expenses were $543 million, up 9% year-over-year, driven by programming fees, including reverse compensation with higher subscription revenues. Without programming costs, expenses increased just 3%, driven by continued investments in growth initiatives such as Premion. Without the impacts of Premion and programming, all other operating expenses were down 3% compared to the fourth quarter last year as we continue to drive permanent operating efficiencies across the company. To provide just a bit more color on the specific cost management initiatives for the year that Dave touched on earlier. Our expense savings in 2020, of course, included reducing all nonessential costs and discretionary capital expenditures during the peak of the pandemic in order to protect the long-term health of our business. However, it's important to highlight these measures were in addition to the ongoing streamlining of our business processes and company-wide cost reduction efforts. As we've discussed in our prior calls, these structural improvements have been underway for some time as part of our culture of thoughtful cost management through operational leverage. Examples of those efforts include the successful integration of One Team TEGNA sales organization, which brought our national sales effort in-house; further upgrades to our centralized streaming center, also known as master control; and a strategic decision to reallocate investment away from commoditized digital products like paid media to focus instead on growth in video products across the portfolio, including Premion. As a result of these cost savings and efficiencies we've gained, we are realizing our previously disclosed $50 million annual cost takeout initially targeted for the end of 2021, a full year earlier than we had planned. As you've seen reported this morning, these permanent expense reductions, coupled with revenue growth investments, produced very strong EBITDA margins and free cash flow conversion last year and well into the future. As a result of these drivers, we achieved adjusted EBITDA for the quarter of a record $429 million, producing a 46% margin for the quarter. Adjusted EBITDA was up 87% year-over-year and up 57% compared to the fourth quarter of 2018. The high-margin political advertising revenue, growth in subscription as well as ongoing cost savings all contributed to these strong results. I'd like now to touch briefly on balance sheet activities and liquidity. As we previously mentioned, we've taken a series of proactive steps in the past year to further strengthen our balance sheet. As you may recall, on September 10th, we successfully completed a $550 million refinancing with senior notes due March of 2026, opportunistically leveraging a historically low-interest rate environment. The proceeds were used to repay the remaining balance of $350 million of 2021 notes as well as $188 million of our 2024 notes, leaving only $137 million left due callable in 2022. The unused borrowing capacity under our revolver stood at $1.13 billion on December 31st. At the end of the quarter, we also had cash on hand of $41 million. This resulted in total debt of $3.6 billion for the quarter, producing net leverage of 3.95 times or 3.86 times as defined by our revolver covenant, which excludes certain items such as stock-based compensation. The strong performance of our entire portfolio of stations, as well as a very strong political cycle, supported accelerated debt reduction during 2020, reducing leverage below the 4.1 times level we had targeted upon completion of the 2019 acquisitions. Having delivered this important milestone ahead of schedule, we reinstated our $300 million share repurchase program in December. This leaves us ample headroom under our only financial covenant related to the revolver, which caps leverage at 5.5 times based on a trailing eight-quarter EBITDA calculation. Reflecting our stronger financial results in 2020, including our reduced leverage, S&P recently affirmed our BB minus credit rating, revising their outlook to positive. We've continued to generate strong free cash flow, a testament to our financial model and ability to carefully manage our balance sheet. In the fourth quarter, we generated $350 million of free cash flow, fully 37% of total revenue, driven by record high-margin political revenue. To provide a few thoughts now on our capital allocation before I turn to first quarter and full-year 2021 outlook. As has been true throughout our history, TEGNA has remained prudent and disciplined in managing our investments and liquidity, particularly critical during this recent period of uncertainty and market volatility. We've prioritized spending and continue to pay down debt while delivering our regular quarterly dividend to shareholders. As I mentioned, we also recently renewed our share repurchase program, which includes an authorization of $300 million over the next three years. As a reminder, we had suspended our buyback program on March 20, 2019, upon the announcement of our acquisition of the Nexstar-Tribune divestiture stations. We had stated then that our priority was paying down debt associated with those acquisitions, and we did just that. Thanks to our strong financial position, including our significant debt paydown ahead of schedule, we were able to reintroduce buybacks as an additional opportunistic tool to return value to shareholders. As Dave mentioned, given our significant cash flow generation, we are also carefully analyzing our options for additional capital deployment, including returning additional capital to shareholders while still continuing to pay down debt and funding any organic or inorganic investment opportunities that fit our disciplined framework. On the M&A front, each of the stations we acquired in 2019 have now been fully integrated into our portfolio and are performing well despite the impact of the pandemic. The same is true for our True Crime network and Quest multicast networks, which we also acquired in 2019. This is a true testament to TEGNA's ability to not only identify opportunities that complement our portfolio and that are accretive to EPS in less than a year and immediately free cash flow accretive, but also to successfully integrate and execute on the synergies achieved by those acquisitions. Across all of our stations and the corporate, we moved quickly in early 2020 to evaluate areas for reduced or delayed spending, scaling back on our capital expenditures for longer-term benefits while continuing to accelerate many of our operational efficiency efforts. All of these actions taken together are proving now to be an increasingly important aspect of our ongoing strategy. Now turning to first quarter and full year 2021 guidance. In an effort to help forecast our near-term results, I'll now provide several key quarter-ahead financial guidance metrics. For the first quarter, we expect total company revenue to be up mid single digits. We expect to see year-over-year revenue growth, both in subscription revenue as well as advertising and marketing services, partially offset by record political advertising last year. We forecast operating expenses in the first quarter to increase in the mid-single digit percent driven by programming expenses. Excluding programming costs, we project expenses to be up in the low single digit range, the majority of which is driven by Premion. For full year 2021, we expect subscription revenue to be up mid to high teens percent, driven by MVPD renewals completed at the end of 2020 as well as stable subscriber trends. This is proof positive of our ability to work collaboratively with our MVPD partners to complete successful agreements, which drive strong revenue and naturally, free cash flow, both now and well into the future. As Dave mentioned, after renewing our NBC affiliate agreement at the beginning of this year, we entered 2021 with clear visibility into the strength of our Big Four relationships, with network affiliation agreements in place covering fully 94% of our Big Four subscribers through the end of 2022. We expect growth in 2021 full-year EBITDA and free cash flow, which will also continue to benefit from significant cost initiatives that have been underway for the past 24 months. And as a reminder, here's an overview of our updated key full-year 2021 guidance elements. For the year, we expect corporate expenses to be in the range of $44 million to $48 million. Depreciation is projected to be in the range of $62 million to $66 million. Amortization is projected to be in the range of $60 million to $65 million. Interest expense reduced through the benefit of our refinancings is expected to be in the range of $187 million to $192 million. We expect capital expenditures to be in the range of $64 million to $69 million, which includes nonrecurring capital expenditures of approximately $20 million to $22 million, comprised mostly of UHF VHF transitions as well as the continuation of our centralized streaming facility. The effective tax rate is expected to be in the range of 24% to 25%. We expect to end 2021 with net leverage in the mid-3 times, absent any other uses of capital beyond deleveraging. Finally, we expect free cash flow as a percentage of revenue for 2020 and 2021 to be in the range of 20.5% to 21.5%. Hopefully, all of that additional color will provide greater context for you and for your modeling. And with that, we'll now turn to Q&A to take your questions.
Operator, Operator
I will now move to our first question over the phone, which comes from Dan Kurnos from The Benchmark Company.
Dan Kurnos, Analyst
Just maybe on just on sports, maybe the sports gambling category. Certainly, it's been talked about a lot by the peer group in terms of becoming material. I know you guys called out a bunch of your other categories is doing well. Also nice to see auto back in the green. Just maybe some color on where you're putting that, what you're seeing there, what you think the opportunity is? And then separately, it's funny because we all know ad tech used to be a dirty word, and now it's amazing and Premion. You guys are obviously crushing it. So I'm just curious, Dave, maybe I really appreciate the incremental thoughts on capital allocation. I think that's going to be nice for shareholders to hear. But within sort of the Premion bucket and some of the other things you've done, adding services, expanding VERIFY. Is there any way to accelerate kind of the CTV Premion aspect? Are there any kind of tuck-ins that would be nice here or incremental spending you can make to kind of continue to grow those things at even more meaningful size?
Dave Lougee, President and CEO
We are very focused on accelerating Premion. As a first mover in this space, we have a strong brand and our team has excelled in execution. This is a rapidly evolving area, and we intend to lead the way. This could potentially involve some acquisitions and various organic initiatives. While we are not announcing any specific actions today, we are committed to growing this business. Our unique advantage in this sector lies in our ability to leverage local connections. We are performing well on a national scale, but the local market is more competitive. Connecting local advertisers to the opportunity of reaching a broad range of viewers on OTT services is crucial for our long-term success. We are fully dedicated to expanding this business. Regarding sports betting, we are still in the early stages. For example, Virginia has recently legalized mobile gambling, and in the DC market, which includes Maryland, both areas are moving forward with it. In DC, you cannot watch a sports event without encountering advertisements from operators like William Hill, DraftKings, or Fanduel. We had anticipated that this would become an important local area even before the pandemic, and now, due to the pandemic and the tax revenue losses in local states, more states are moving towards legalization. States like Arkansas, Colorado, Indiana, Iowa, Michigan, New York, Oregon, Pennsylvania, Tennessee, and DC have already legalized it, with pending legalization efforts in Louisiana, Maryland, North Carolina, and others. Additionally, there are ongoing initiatives in Connecticut, Georgia, Kentucky, and Missouri. Ohio is also a significant target for us. Therefore, even if we only focused on producing high-quality content on our stations and digital services, we would benefit from this advertising category. However, we are also exploring additional ways to capitalize on these opportunities.
Operator, Operator
We'll now move to our next question over the phone, which comes from Steven Cahall from Wells Fargo.
Steven Cahall, Analyst
So with retrans up mid to high single digits and net retrans up kind of mid to high 20s in the renewal of NBC, I'm no mathematician, but it seems like you've implied that your reverse comp expense is growing slower than your gross retrans revenue growth. So maybe just help us kind of what's going on there. Are you at the latter end of some deals on some of the networks with modest escalators, or is there anything else that's giving you a more flat expense growth profile this year on programming? And then as it relates to the Supreme Court case, if they do happen to rule in favor of the FCC, I think you've said that you have some JSAs, which could each be in the 10% to 15% accretion range. Could you give us an idea of what that means in terms of total company EBITDA? And then are there some markets that are really attractive for you to look at swaps of the Big Fours and the non-Big Fours?
Dave Lougee, President and CEO
On retrans, look, there's never a complete sync between when your total number of subs are up and when the percentage of your network subs are up. But bottom line, I wouldn't use the word flat on our reverse compensation. Obviously, we're paying more to the networks. And as together, between our programming together, our investments in programming and their investments in programming, we're by far the highest few channels, especially stronger stations like we have than anything else in the ecosystem, and we're appropriately getting more for wholesale rights together, and then we're splitting that pie. So I think what you're seeing for us is that, obviously, we have a very strong set of assets. With both our scale and our quality, we have a lot of negotiating leverage on the top line. We also have negotiation leverage with the networks. But those are a little bit more partnership discussions, I'll call them, than the retrans, the MVPD discussions. But fundamentally, yes, we are growing net retrans by growing the top line at a percentage, at least or it's better than the bottom line and expenses. Now the screen core. So look, we need to wait to see, A, what the ruling is going to be, Steven, and then how it gets leveled out and then how the FCC is going to interpret it. So unclear whether it will be available in all markets or whether there will be any kind of DOJ qualifier the combined market share of two stations can have. I'm sort of optimistic of getting rid of that over time because that's so anachronistic, and there's been a change in administration at the antitrust division of the DOJ. But until we have more clarity on what and when, it's just not prudent of us to be giving any kind of total company EBITDA suggestions on what it could be worth. But it will certainly be very accretive and very attractive to us specifically if we're able to execute it.
Operator, Operator
We'll now move to our next question over the phone, which comes from Alexia Quadrani from JP Morgan.
Alexia Quadrani, Analyst
Just a couple of things. First, just following up on your color you gave on advertising trends. Great to see auto stronger. But could you ballpark real roughly kind of how big your revenues are in terms of expose to obvious lagging categories like restaurants where we have a tenor recovery yet, but could still see improvement later this year? And my second question is just on the NFL. I know it's just press reports at this point, but it seems to be pretty consistent. Does the reported step up a little bit larger than I think people expected to have an impact on you in terms of maybe having a different outlook in terms of what your reverse comp will be? And then the inclusion of ABC on some games and super bowl, does that impact you in the sense of having to invest more in promoting those games? Thank you.
Dave Lougee, President and CEO
So let me talk about AMS first. So if I try to understand your question, you're sort of looking to understand what the outlook on some of the weaker categories from COVID we've seen like retail and restaurants…
Alexia Quadrani, Analyst
I'm trying to understand the recovery we've seen in various areas and what the potential is for further improvement in regions that are still lagging behind. I'm also interested in how we can anticipate recovery and the momentum that could build moving forward.
Dave Lougee, President and CEO
Restaurants have a clear path for improvement for obvious reasons. Fast food has performed well and, when we look at the restaurant sector, it has shown growth in the first quarter. However, overall, restaurants are still struggling. That said, when we consider sectors like automotive, retail, and restaurants together, our outlook is quite positive. A recent story highlighted that 1% of the population has maintained their jobs, worked from home, and saved a significant amount of money, leading to pent-up demand. This situation should be beneficial for automotive, retail, and restaurants. Additionally, a large segment of the population is expected to receive $1,400 stimulus checks. With the vaccine rollout and the economy reopening, we see potential for a strong recovery across all these categories. While retail and automotive are showing improvement, restaurants continue to lag. Nevertheless, we anticipate a year-over-year increase this quarter and have a hopeful perspective for the latter half of the year, especially with favorable comparisons to 2020, given how low those numbers were. Regarding the NFL, we will wait to see how the deals unfold. The NFL's return to broadcast is promising for the overall ecosystem. The specifics of our individual agreements will not be disclosed, but we will navigate the implications with our network partners. If games appear on ABC, our current diverse portfolio mitigates past concerns from when we were predominantly an NBC company, although we would prefer to see them remain on NBC due to our strong presence there. Lastly, Alexia, I hope I addressed your concerns regarding advertising.
Operator, Operator
We'll now move to our next question over the phone, which comes from Kyle Evans from Stephens.
Kyle Evans, Analyst
A few political questions. How much of political in this cycle came from presidential? What do you think the percentage point brackets were for displacement in the fourth quarter? And I understand that requires guessing on your part. And then, given the setup you detailed for us, what are the odds that '22 could be even better than '20? And then I've got a follow-up.
Dave Lougee, President and CEO
Well, our team has gathered the presidential information again. Let me explain the displacement. First of all, it's important to understand that displacement is more of an art than a science. We also had some unique factors and a substantial amount of displacement in one of our larger markets in Atlanta during November and December. If I had to assign a number, I would estimate it was in the high single digits relative to AMS for the quarter. This would suggest a low single-digit positive growth for the quarter. However, I must emphasize that this is not a precise calculation. Regarding presidential spending, 22% of our total expenditure in 2020 was related to presidential campaigns. To address your inquiry about 2022, we have observed in the past that presidential elections can generate additional revenue, but it's essential to note that even on a pro forma basis, we reported $209 million in 2016, a presidential year, and $280 million in 2018. These figures do not include acquisitions; we are evaluating the previous company. We anticipate significant growth every four years in terms of funding, but if you remove 22% of that from this year's figures, achieving the same numbers would require even more fundraising. That said, currently, we haven't experienced a Senate and governor portfolio in past elections quite like what we are likely to have in 2022. I believe I have addressed your question about displacement.
Kyle Evans, Analyst
Quick question on subscriber counts. Could you provide the 2020 number? I may have missed it. It seems like you are projecting a stable subscriber count in your 2021 guidance. I just wanted to confirm that.
Dave Lougee, President and CEO
So we have been very conservative every year in what we model, just to make sure we're right. But you're right, again, we're three months in arrears on our sub count strike because of the billing cycles. But right now, starting with July, we have seen no acceleration, and in some months, an improvement from the previous month. So it has definitely flattened out. I think you've heard about mid-single digits and so that's where we are, and it looks very, very stable at the moment. So I think we're looking at continued stabilization throughout '21 as well.
Operator, Operator
We'll now move to our next question over the phone, which comes from Doug Arthur from Huber Research.
Doug Arthur, Analyst
Yes, two questions. Dave, any thoughts on what you're hearing via the Olympics in Japan this summer? I mean, you have a fairly high exposure there. And then Victoria, on the $50 million achieved early, any thoughts on kind of next cost moves, programs in place that could be incremental to '21, '22?
Dave Lougee, President and CEO
I'll address the first question, Doug, regarding the Olympics. The answer is no, I don't have any predictions about the Olympics taking place this summer. However, we have seen some disarray with the organizing committee in Japan. It's important to note that as our company has grown and diversified, the impact of the Olympics now accounts for only a little over half a point of our total revenue, with the incremental benefits diminishing. This is partly because we have a smaller portion of our homes in British Columbia. While the Olympics may benefit NBC homes, it poses challenges for our non-NBC homes. Therefore, the overall impact on our advertising base and total revenue has decreased as our other sources of revenue have increased. We would love to have the games as they are a valuable marketing opportunity, and I believe they would be beneficial for the country, but from a business perspective, we are not overly concerned.
Victoria Harker, CFO
And in terms of finishing the swing on your question relative to the cost initiatives, I think it'd be premature to size them. But I can tell you, just qualitatively what's underway, for incremental savings beyond the $50 million that we've already identified. So we have the second phase of our ERP implementation, which is going underway this year, allowing us to do more on the financial transformation that we started two years ago. We have automation of certain back office and sales support order processing types of functions. The second and third phases really relative to some of the efforts that we have in terms of our monitoring and traffic systems. So all of those are still going to be delivering on cost savings beyond 2021, but it would be premature to say sort of sizing incremental to the $50 million, what that will be worth.
Dave Lougee, President and CEO
And we'll be consolidating, Doug, also some non-station real estate we've used for some back-end issues that the pandemic has taught us that we can live without.
Operator, Operator
We'll now move to our next question over the phone, which comes from Vasily Karasyov from Cannibal Research.
Vasily Karasyov, Analyst
My question is about Premion. I wanted to ask you to talk about what you're seeing in terms of where the budgets are coming from. The growth is very impressive. Are you winning budgets from TV or online? I would appreciate color on that. And then is my understanding correct that at this point, all of the advertising days sold directly. And if so, I was wondering if you have plans to introduce programmatic or does it fit with the business model that Premion has? Thank you.
Dave Lougee, President and CEO
We have largely steered clear of becoming a programmatic platform. While there may be some instances here and there, our unique value to advertisers lies in directly sourcing publishers' content, which ensures that advertisers can feel secure about the environments in which their ads appear. Regarding budget trends, we are observing that over time, more of the budgets are being shifted from conventional digital budgets at major agencies. Some of this is also coming from TV budgets, but this is not at our expense nor strictly from TEGNA's spending. Overall, there is a noticeable shift from TV to digital, although this transition at the local level will likely take a bit longer. The trend is clear, with budgets moving more toward discrete digital allocations.
Operator, Operator
We'll now move to our next question over the phone, which comes from Craig Huber from Huber Research.
Craig Huber, Analyst
The impressive growth you guys had in Premion, I think you said 40% plus last year. Was that even higher than that in the fourth quarter or what was that, please?
Dave Lougee, President and CEO
Sure, Craig, I'll address that shortly. Yes, the answer is yes.
Craig Huber, Analyst
Is it let’s say, materially better than up 40% in the fourth quarter, the exit rate sort of?
Dave Lougee, President and CEO
Well, we can debate the definition of material, but it was definitely higher, definitely higher.
Craig Huber, Analyst
Sports betting day, do you think in the coming few years, say, three years, sports betting could be a top five advertising category for your TV stations?
Dave Lougee, President and CEO
Yes, I can easily envision that. The variable will depend on how many states actually legalize it, but I think you will see an increase in that. By nature, it will be a hyperlocal advertising issue, and I also believe that our stations will take actions to capture a larger share of that market.
Craig Huber, Analyst
Then my last question, Dave, about your changes with your advertising sales force. Can you just update us on a little bit further what changes you made there, and was it more to help drive the top line and also save costs?
Dave Lougee, President and CEO
It's a multipronged approach, which all was a virtual circle. So we used to act our national sales, including our political sales to an outside firm that did a very good job for us. But over time, especially with Premion and others, it became clear that we needed to take ownership of that and really integrate the experience with our national clients so that we could provide the right platform. And frankly, we also knew we'd save a tremendous amount of money, especially in our political advertising. So even on our traditional national TV business, we now have a lower expense rate. But the other thing we, frankly, have been doing, Craig, intentionally is that, given that we're in a lot of large markets, we do have local people calling on major agencies in major markets, call it, Dallas, Atlanta, Houston, etc., which is really like a national business. We've been able now with our own in-house sales team to move some of those accounts to our in-house national sales team, so that our local assets in the sales arena can be totally focused on nontraditional new business - very innovative ideative selling as opposed to just doing request for proposal business. And so we're in the process of doing that, give the credit to the team, a massive amount of credit for doing it during a very difficult year, but it's been very, very effective.
Operator, Operator
We'll now move to our next question on the phone, which comes from Jim Goss from Barrington Research.
Jim Goss, Analyst
Could you provide more details on Premion? You've mentioned that streaming is a key driver for growth beyond traditional broadcasting, and there are an increasing number of streaming services. Can you elaborate on that process? Additionally, could you offer any guidance on the compound annual growth rate for Premion over the next three to five years and discuss its profitability? It seems that after initially working to establish the business, you are likely operating profitably now. Can you share insights on that?
Dave Lougee, President and CEO
So in terms of streaming services, there are multiple services. So we're all aware of the Netflix’s and the Disney Pluses and the stuff. But on top of that, just take a look at the amount of traffic on Roku, because Roku in itself is a distribution service or Sling. You have a long tail of services where it all adds up to a tremendous amount of viewing and growing viewing. It was growing at very high CAGRs prior to the pandemic, and it only accelerated during the pandemic. So obviously, this is an absolutely critical and massively growing form of distribution. And so as a company, we are all in on it. So remember, we had deals with publishers, in some case, Jim. A publisher puts their streaming channel, a cable channel, let's say, on some of these services where we are, there are ads, and their ads that we've sold for them in their inventory will appear often in those services depending on what they are. We have deals with many other services. So it's a long tail of services where our inventory is, but it's not just about our deals with the services; it's about the publishers' deals with the services. So we're trafficking ads and selling ads for them that, in some cases, is silent to the services themselves. As it relates to profitability, we are profitable. Obviously, we had a revenue goal in 2020 that despite our massive growth, we were short of our plan because of how bad the advertising environment was. So that had impacted our margin a little bit, but we're profitable. We're going to stay profitable. And we will scale it up over time. But to the earlier question, somebody asked me, if we've got the opportunities to invest to grow that business, it's such a big growth space for years to come, we're going to invest for the long term. As it relates to a CAGR, I couldn't tell you exactly what it was. But just look at the overall CAGR for what OTT advertising revenue is going to be in the company, large, and it's pretty enormous what the size of the opportunity is. So it will be up to us to figure out what share of that pie we can take.
Jim Goss, Analyst
And one other area I thought I'd bring out is Twist. It seems like True Crime Network, for example, your first effort in that area, was sort of a repurposing of some of the actual content your news group is creating. Twist does not sound like that. It looks like it really created content to various types focused on women's entertainment. And you're getting more active in this whole programming area. And I wonder if you could talk a little bit more on the economics of what you plan to do there, how that syndication would be handled, anything you'd like to characterize for its relative importance to revenues and profitability.
Dave Lougee, President and CEO
So you're right, True Crime Network does leverage some local content, but at the moment, very little. We're in the very early stages of that. We're working on cost-effective ways to build that up over time, and we will. We're pulling out digital archives of unsolved crimes across all of our TV stations, which cover nearly 40% of the country and leveraging those into stories. Right now, we pretty much got them on podcast, those stories, under our Vault Studios brand, which often are at the top of the True Crime genre on podcasting. But soon, we'll be moving those over to video off, and those will show up on True Crime. But the fact of the matter is, on all three of those multicast networks, True Crime, Quest and now Twist, it's almost all off the shelf library content, Jim, from large studios that don't have enough ways to monetize that content. So it's a win-win for both of us. For a period of time, that programming is going to come from the libraries, and there's enough of it out there and we can get it into cost to mix the channels profitable from almost day one.
Operator, Operator
It appears there are no further questions queued at the phone this time. I'd like to turn the call back over to our speakers for any additional or closing remarks.
Dave Lougee, President and CEO
All right. Thank you, everyone. Thanks for taking the time to join us today. As you've heard from Victoria and me, we are more confident than ever that the decisions our Board and management have been made over the last several years and especially this past year during this incredible environment have positioned the company to be resilient in our business model, no matter what we face, consistently strong in our operations and critical to our communities and customers across the country. We look forward to all that have ahead of us in 2021 with a lot of optimism for both our business and our country and as well as what's beyond 2021. As we continue to focus on creating value for our shareholders and to live up to our purpose of serving the greater good of the communities we serve. If you have additional questions, please reach out to Doug Kuckelman at (703) 873-6764. And again, thanks for your time today. Have a good day.
Operator, Operator
Ladies and gentlemen, this does conclude today's call. Thank you very much for your participation. You may now disconnect.