Earnings Call Transcript - TGNA Q1 2023

Operator, Operator

Welcome to the TEGNA Investor Conference call. As a reminder, today's conference is being recorded. Now I'll turn it over to Julie Heskett, Senior Vice President, Financial Planning. Please go ahead, ma'am.

Julie Heskett, Senior Vice President, Financial Planning

Thank you. Good morning, and welcome to our investor conference call and webcast. Today, our President and CEO, Dave Lougee; and our CFO, Victoria Harker, will review TEGNA's financial performance and results and discuss TEGNA's stand-alone outlook. After that, we'll open the call for questions. Hopefully, you've had the opportunity to review our Form 8-K filed this morning with the Securities and Exchange Commission as well as our first quarter earnings results, which we announced May 10. If you have not yet seen a copy of the release, it is available at tegna.com. Before we get started, I'd like to remind you that this conference call and webcast includes 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 reconciliations of those measures to the most directly comparable GAAP measures in the press release. With that, let me turn the call over to Dave.

David Lougee, President and CEO

Thank you, Julie, and good morning, everyone. It's good to talk to you again. It's been a while. As you know, TEGNA has not held a quarterly earnings call since November of 2021, given the merger agreement we entered into with Standard General in February of last year. Earlier this week, we announced the termination of the merger agreement after a protracted regulatory review. Armed with the knowledge of this possible outcome in recent months, our Board of Directors and senior management have been very focused on our stand-alone plan, so we would hit the ground running post termination of the agreement. The outlook for TEGNA is strong. We are uniquely positioned within the sector with an industry-leading balance sheet. We currently have the lowest leverage level since we became a pure-play broadcasting company and expect to remain comfortably in the mid-2s to the balance of the year even after returning excess capital to shareholders, including the first steps we announced this week, a $300 million accelerated share repurchase program and a 20% increase to the quarterly dividend. With our assets and strong balance sheet, we're confident that TEGNA is very well-positioned to generate strong shareholder value in a variety of economic scenarios. We have a leading portfolio of high-quality local station and digital brands that fill a critical role in key large markets across the country, diversified by both geographic regions and network affiliations. The differentiated nonsubstitutable programming we provide, including live local news, live local national sports, and first-run highly popular network content remains some of the most popular and highly viewed content available. And furthermore, in 2022, I want to compliment our team as they continue to execute extremely well during dynamic macroeconomic times, achieving records in total company revenue, subscription revenue, net income, and adjusted EBITDA. Next, I'd like to provide you with the context for some of the highlights on our recent results, and Victoria will cover these topics in more detail. Total company revenue for the first quarter was down 4% year-over-year, largely due to the cyclical even-year events of political revenue, the loss of that, the absence of Winter Olympics and the Super Bowl airing on the FOX stations compared with NBC last year, as well as the macroeconomic headwinds. Relative to that Super Bowl combination, as you may recall, NBC represents the largest percentage of our network portfolio with Fox representing the smallest. So the Super Bowl is a delta. On a 2-year basis, total company revenue was up 2% versus 2021, primarily driven by growth in subscription revenue, partially offset by lower advertising and marketing services or AMS revenue. TEGNA subscription revenue continues to provide stable and predictable cash flows, supported by contractual rate increases. This quarter, subscription revenue was an all-time record and grew 6% year-over-year. In the first quarter, we did lap a temporary disruption with a single distributor last year, which added roughly 2 points to that number. Also, last year, we successfully repriced approximately 30% of our subscribers improving multiyear visibility for a significant portion of our subscription revenue. We have an additional 30% of our traditional subscribers up for renewal at the end of this year. As I indicated, AMS revenue comparisons to this quarter take into account several variables, including the absence of the Winter Olympics and the Super Bowl airing on the NBC stations last year and a decrease in Premion due to the loss of a single national account as well as macroeconomic headwinds that continue to impact advertising demand. With that said, AMS was down 13% year-over-year. Victoria will unpack that in more detail in a moment, but the bottom line is this. When you factor out the noise of the Olympics, the Super Bowl, and the reduction of that single national account at Premion, underlying advertising trends were down mid-single digits for TEGNA on a year-over-year basis and up low-single-digits on a 2-year basis. I also want to highlight the strength we're seeing in the automotive category, which, as you can imagine, is something we're very pleased to see. As you may recall, auto is our largest advertising category and was challenged for several quarters due to the supply chain issues related to the pandemic. However, I'm pleased to report the category has steadily recovered and is generating strong year-over-year growth for the third consecutive quarter and pacing very strong in the second quarter. Premion, our first-to-market and industry-leading OTT advertising platform, continues to deliver differentiated solutions to both local and national advertisers. Premion ended 2022 with record revenue and is poised for ongoing growth in the years ahead, backed by the breadth of TEGNA as well as Gray's local sales forces and footprint of local stations. I'm happy to share that we've just extended a multiyear reseller agreement with Gray. Combined with Gray, Premion reaches more than 78% of U.S. households with local sales representatives. During the quarter, total Premion revenue declined modestly year-over-year, driven again by the reduction of that single national account. But notably, local revenue was up significantly and local is the strategic focus and thesis of Premion and is also higher margin revenue than National for Premion. Investment in Premion has continued with the recent focus on enhancing the platform's attribution capabilities to demonstrate the value and effectiveness of campaigns on Premion relative to other advertising platforms. Premion's innovative results and tools for advertisers are well recognized within the industry, having received numerous recent awards, including Synopsis Best of the Best award for the best ad tech solution. As we approach next year's presidential election cycle, we will benefit once again from strong political advertising revenue. TEGNA stations continue to play a critical role in political marketing strategies as the preferred medium to reach voters. Through thoughtful acquisitions over the years, TEGNA has built a strategic position in key battleground states and large markets. It's expected that the 2024 presidential cycle will break previous records. First quarter fundraising was very strong, and that's expected to continue with a very well-funded GOP presidential primary that is already active, as you surely know. Add to that, the razor-thin margins in both chambers of Congress and there's a lot at stake in the 2024 elections for both parties. Now turning to capital allocation. As a reminder, TEGNA's business mix is weighted towards high-margin durable subscription and political revenues, which generate strong free cash flows. Now let me begin by discussing the $136 million termination fee owed to TEGNA by Standard General. We have entered into an agreement with Standard General to accept TEGNA common shares equivalent to the fee at market-based pricing, a transaction which will be completed promptly. Furthermore, as announced in Monday's press release, TEGNA will be entering into a $300 million accelerated share repurchase program shortly, commonly known as an ASR program, which we expect to complete near the end of the third quarter. Combined, these two actions will result in us retiring nearly $444 million of our shares in short order. Beyond these actions, TEGNA's Board of Directors and management team are actively reviewing the return of additional excess capital that accumulated during the pending merger. TEGNA has also increased its regular quarterly dividend by 20% on top of the 36% increase to the dividend announced in March of 2021, demonstrating the strong conviction we have in the long-term cash flow of TEGNA's operations. Just to be clear, TEGNA will pay the previously declared regular quarterly dividend of $0.095 per share on July 3 of this year, to stockholders of record as of the close of business on June 9. The increased quarterly dividend will be paid in the following quarter. Strong operating performance and disciplined use of free cash flow positions us with an industry-leading balance sheet. Even after our $300 million ASR program, we expect to end the year with net leverage of mid-2x, a strategic advantage as we examine next steps for capital allocation and shareholder value creation. Over the coming weeks, we look forward to reengaging with investors to incorporate their views as the Board and management make further refinements to TEGNA's capital allocation priorities, including actively reviewing the return of additional excess capital to shareholders. Now I want to update you since it's been a while on several strategic initiatives underway at TEGNA. Since its development in 2015, our stations VERIFY reporting has fought misinformation and disinformation more important now than ever, helping viewers and users distinguish between true and false information. VERIFY continues to see strong momentum and ended the quarter with 420,000 followers across its various dedicated channels, including its daily newsletter, TikTok, both of which were named Webby Award Honorees among some of the most notable brands online. And during the quarter, unique visitors to VerifyThis.com grew 77% year-over-year. Looking ahead to the upcoming election cycle in 2024, VERIFY will play a critical role in ensuring that viewers are able to fact-check the news and stories that matter to them as they make their voting decisions. TEGNA stations owned and operating streaming apps for Roku and Fire TV continue on a strong growth trajectory with 560 million minutes of streaming in just the first quarter, a nearly 70% increase year-over-year, and the average visitor spent 10 hours in the apps during the month of March. Locked On, our leading local sports podcast network with daily shows for all four professional sports leagues and major college programs also continued strong growth during the quarter. The network finished the quarter with an impressive increase of nearly 60% in unique audience versus the first quarter of last year. Locked On's expansion into Video continues to be a major driver of network growth with video views seeing a 170% increase year-over-year. We continue to see Locked On's focus on national and local sports as a national complement to our local station assets. Moving now to our ESG efforts. We continue to make progress on our diversity, equity, and inclusion objectives and are continuing our progress on achieving our 2025 goals, our stated goals to increase representation of Black, Indigenous, and people of color at TEGNA in our content teams, content leadership, and company leadership. We take seriously the important role that we have in ensuring our coverage and storytelling reflects all of the communities we serve. Our innovative inclusive journalism program, which is entering its third year, is designed to help us accomplish this through unconscious bias, includes reporting and leadership training. Since the inception of this program, newsroom managers for nearly half of our newsrooms have taken part in this annual inclusive program. This four-month program for newsroom managers helps to expand the tools and people leadership skills that newsroom managers can use to engage their team to further inclusivity in storytelling. Delivering news that matters and impactful investigations that make the difference in people's lives are the center of each and every one of our newsrooms. We're very proud of the determination and resilience of our engaged employees that enable us to fulfill our mission every day, and we couldn't be more proud of the work they do. And with that, I'll now turn the call over to Victoria.

Victoria Harker, CFO

Thanks, Dave. Good morning, everyone, and thanks for joining us. As Dave has already mentioned, our first quarter financial results and forward guidance reflect the resiliency of our business and our ongoing commitment to operational excellence and shareholder value creation. Before I drill down on the drivers of our first quarter financial results, I want to touch briefly on the strength and differentiation of our balance sheet in a little bit more detail. As you've seen post this morning, we are very well-positioned with modest net leverage of 2.3x, no bond maturities until 2026, all of which are fixed rate at 5.2% on a weighted average basis. As you've already seen, we ended the quarter with total debt of $3.1 billion and cash of $683 million. And as a reminder, our only debt-related financial covenant is a 4.5x leverage cap on our undrawn $1.5 billion revolver, which doesn't expire until August of 2024. Tremendous financial flexibility afforded us by our ongoing business execution and our strong balance sheet enables us to generate both immediate and longer-term shareholder value in a number of significant ways. As Dave mentioned, the first step in returning a portion of the excess capital accumulated while the merger agreement was pending includes an agreement with Standard General to accept TEGNA common shares equivalent to the $136 million termination fee, the $300 million ASR program, which we expect will conclude near the end of the third quarter, and a 20% increase in our regularly scheduled quarterly dividend. We look forward to discussing business trends and ongoing capital allocation plans with you all in the coming weeks. And we expect to have more information to share by our second quarter earnings call in August. Now let's take a look at the drivers of our first quarter financial performance. As is always the case, 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 operating results. You can find all of our reported data and prior period comps in our May 10 earnings press release. As Dave mentioned, our revenues in the first quarter faced tough year-over-year comparisons given the benefit of political advertising, the Winter Olympics, and Super Bowl across our NBC stations last year. As a reminder, we are the largest NBC affiliate group. For the first quarter, total company revenue was down 4% year-over-year, primarily due to the cyclical even-year events, including midterm elections and Winter Olympics in 2022. The Super Bowl was also a factor as the 2023 event aired on the Fox stations compared to last year on a strong portfolio of NBC stations. Excluding political revenue and the incremental revenue from the two NBC sporting events, total revenue was down less than 1% compared to the first quarter of 2022. As you've heard from our peers, AMS declines have been driven by macroeconomic headwinds; this was partially offset by ongoing subscription revenue growth, which increased 6% year-over-year. Subscription revenue growth in the quarter was a result of subscriber rate increases, contractual rate escalators, and favorable comparisons against the partial quarter interruption experienced with a single distributor last year. This was partially offset by mid-single-digit subscriber declines. As Dave previously mentioned, we successfully repriced approximately 30% of our subscribers at the end of 2022, and we have an additional 25% of subscribers up for renewal by the end of this year. We successfully negotiated multiyear network affiliation agreements with CBS and FOX in 2022. We also look to renew our agreements with NBC and ABC, which collectively account for approximately 60% of our Big 4 subscribers near the end of this year. TEGNA's high-margin subscription revenues, coupled with our political revenues, produce annuity-like EBITDA and free cash flow and continue to comprise more than 50% of our total revenues on a 2-year basis. Next, I'll unpack the drivers of our AMS performance in the first quarter. As you've seen, AMS revenue finished the quarter down 13% compared to the first quarter of last year due to several unique factors, including the impact from Winter Olympics and last year's Super Bowl on our strong NBC stations, as well as a reduction in a single Premion national account, as well as broader macroeconomic headwinds. Outside of these unique year-over-year factors, underlying advertising trends in the first quarter were down mid-single-digits year-over-year and up low-single-digits compared to 2021. Automotive, as Dave mentioned, our largest advertising category has steadily recovered and is generating strong year-over-year growth for the third consecutive quarter. Other categories growing year-over-year include home improvements, services, entertainment, and travel and tourism. Categories facing headwinds in the current macroeconomic environment include health care, packaged goods, retail, media, telecom, and restaurants. Now turning to expenses for the quarter. For the quarter, non-GAAP operating expenses were $564 million, up 2% compared to the first quarter last year, driven by higher programming fees. Excluding programming fees, non-GAAP operating expenses for the quarter were down 2% when compared to last year due to prudent expense management and lower stock-based compensation. Our first quarter adjusted EBITDA of $205 million was down 18% year-over-year, driven by reduced high-margin advertising revenue from political and the Super Bowl in NBC stations last year, as well as the absence of NBC Winter Olympics revenue. Adjusted EBITDA margin was 28% this quarter. We continue to generate strong free cash flow of $133 million during the quarter, driven primarily by our high-margin, durable subscription, political revenues and our ongoing careful and thoughtful management of the balance sheet. As you saw in today's Form 8-K filing, we provided guidance on key financial metrics for the quarter ahead, second quarter, and for the full year 2023. To help model our near-term expectations, let's walk through a few second quarter financial guidance metrics. For the second quarter, we expect total company revenue to be down mid- to high-single-digit percent year-over-year, primarily driven by the loss of political revenue and partially offset by higher subscription revenue. We forecast operating expenses in the second quarter to increase in the low single digits compared to second quarter 2022, driven by increased programming expenses associated with higher subscription revenue. Excluding programming costs, we project second quarter operating expenses to be flat to slightly down. Now turning to our full year 2023 guidance elements. As a reminder, you can also find our 2022 actuals for these same metrics on our investor presentation on our website. For the full year 2023, we expect corporate expense to be in the range of $40 million to $45 million. Depreciation is projected to be in the range of $60 million to $65 million. Amortization is projected to be in the range of $53 million to $54 million. Interest expense is expected to be in the range of $170 million to $175 million. We expect capital expenditures to be in the range of $55 million to $60 million. We forecast an effective tax rate in the range of 23.5% to 24.5%. And as we've already mentioned, we expect to end 2023 with net leverage in the mid-2x including the impact of the $300 million planned share repurchase. As I mentioned earlier, we look forward to reengaging with you all in the weeks ahead, and thank you for your ongoing support. With that, we'll now turn to Q&A to take your questions.

Operator, Operator

And we'll take our first question from Steven Cahall from Wells Fargo.

Steven Cahall, Analyst

Good to chat with you all again, Dave and Victoria. It's been a while. As a result, I've got a few. So maybe to start, Victoria, just on the retrans side, I guess the simple math would be that with 60% of your affiliations renewing this year and you did some last year, that seems like a bigger percentage than the MVPD renewals that you're doing over a similar period. So should we expect net retrans to grow this year? Or is your timing sequence such that that's going to be pretty tough to achieve in the current environment?

David Lougee, President and CEO

Steven, I'll go ahead and take that one. You're right on the numbers as far as what the renewals are. But no, I wouldn't agree with your conclusion at the end there. There's a lot to be negotiated. And I think there will be some different dynamics than in the past on the network negotiations.

Steven Cahall, Analyst

Got it. And then maybe just next on capital allocation. So you talked about the 2.5x leverage and then you also said, I think, that you're actively reviewing some return of excess capital. So do we just kind of think about 2.5x as like the North Star in a model and any cash left after that goes back to shareholders? Or is it a bit more kind of strategic and how you're thinking about when and how you might look to deploy capital over the next couple of years?

Victoria Harker, CFO

Yes. As I mentioned, we will be spending the next few weeks discussing with the Board and shareholders to gather input on business needs. Frankly, we haven't made many investments in the past 14 months. We will provide more updates in August. However, it's reasonable to say that a 2.5x leverage is very appropriate and comparable for the remainder of this year.

Steven Cahall, Analyst

Great. And then maybe just lastly, Dave, I mean, from some reports, it looks like you've had a lot of interaction with the FCC over this last year with all the issues around the merger. In your view, is the FCC open for business as it relates to broadcast consolidation? Or I'd love to get your view on why maybe you think that the merger wasn't consummated. And if it closes the door to lots of things in the future? Or do you still think that the door is open for other opportunities?

David Lougee, President and CEO

I don't have much to add on that except to say that I did not have extensive interaction with the FCC, and it seems that neither did Standard General, as they might have preferred. Nobody seems to fully understand what the FCC was thinking. I would refer you to the NAB President, Curtis LeGeyt's statement on this matter. The fact that it was sent to a hearing as a national order with minimal interaction with the parties involved is puzzling. The entire industry seems uncertain about how to interpret this situation, given the unusual process that occurred. Therefore, I don't have a perspective on their future stance regarding deals. I would like to clarify that the agreement that was terminated was not a consolidation deal since some stations were to be sold to another company, with TEGNA actually becoming smaller. So it truly wasn't a case of consolidation.

Operator, Operator

Our next question comes from Dan Kurnos from the Benchmark Company.

Daniel Kurnos, Analyst

So a couple of things. Let me start off by revisiting retrans for a moment, Dave. You had the experience of listening to everyone else discuss the whole virtual dynamics subscriptions issue while you have been navigating through the process. I'll give you a moment to share your thoughts on how you anticipate the impact of the significantly higher growth rate of virtual subscriptions and the deals that were signed will affect your outlook on both the gross and net figures moving forward.

David Lougee, President and CEO

Yes. I had a bit of trouble with the microphone, but I believe I understood your question, Dan. We definitely prefer the economics of traditional subscriptions, although virtual subscriptions are also profitable for us. We feel that we should be negotiating those ourselves, as we think the networks would benefit from that. It's a high priority for us and will continue to be a topic of discussion, which may also catch the attention of regulators. Virtual subscriptions are growing, helping to offset the decline in traditional subscriptions. There is still a lot to be determined regarding how those deals will be negotiated in the future.

Daniel Kurnos, Analyst

To follow up on your commentary about net growth, we continue to hear that programming may actually be getting cheaper as networks need to monetize more. To the extent that both deals you’re pursuing remain relatively percentage-based rather than fixed fee, I’m curious if that has changed at all. Is your perspective aligned with others in your view that growth may either slow down or potentially decline? Is this what you are suggesting with your comments?

David Lougee, President and CEO

It is what I'm intimating.

Daniel Kurnos, Analyst

Okay. And then just on the local national kind of outlook here. As we look to Q2, I know you guys don't break out core. In particular, we've heard some commentary from others that larger markets are starting to behave a little bit more like national markets. I don't know if you have any commentary on that or just kind of your view on how sort of broader core should trend over the balance of the year?

David Lougee, President and CEO

I believe I get your question. Larger markets typically account for a greater share of national revenue, and that's been consistent. If you're inquiring about the performance of national relative to local, national is actually performing slightly worse than local. It's important to clarify some definitions as well. The biggest holding companies, which are part of national and also reflected in our local numbers, are experiencing the most stress. My broader observation is that local businesses are generally doing well and consumers are spending. At the national holding company level, concerns are similar to those of large investors, focusing on the upcoming debt situation and the risk of a recession. Thus, their spending is influenced more by macroeconomic factors, while local spending is more about immediate cash flow. However, the difference for us isn't significant. We typically don’t distinguish core performance as you mentioned, but trends are showing improvement. In the second quarter, the underlying trends outperformed those in the first quarter. As Victoria noted, we faced a comparison to $50 million in political revenue from the second quarter last year. Nonetheless, underlying advertising in the second quarter has seen enhancements. There was a slight pause in national spending in June, largely related to upcoming events.

Operator, Operator

We'll take our next question from Craig Huber from Huber Research Partners.

Craig Huber, Analyst

It's great to connect with everyone again. Regarding capital returns, we are initiating a $300 million share buyback over the next four months. This is an accelerated program, and some may have anticipated a larger buyback of over $1 billion. The strategy behind this decision was to allow us the flexibility to reassess the state of the U.S. economy in four months. If the economic conditions appear stable at that time, we might consider implementing another substantial share buyback rather than committing to a larger program right now given the current uncertain economic environment.

David Lougee, President and CEO

I want to make a few comments. We were unaware that many people expected a $1 billion share buyback, so that was news to us. I’d also like to remind you that with my announcement today, we are allowing Standard General to pay their fee with shares, which adds to the buyback. We anticipated this would be the outcome we would choose. Therefore, consider the buyback as $436 million instead of $300 million. Regarding your overall question, we are just beginning to operate independently. We have been focusing on our stand-alone plans. However, we need to engage in strategic thinking as the economy evolves, and we are approaching this in a methodical and thoughtful manner. We have clearly indicated, and our actions, including the dividend, show that we are very focused on shareholder returns.

Victoria Harker, CFO

And Craig, just one more technical point. And you're correct in that the ASR program will take through that period of time to complete. But mechanically speaking, both the Standard General equity shares as well as the launch of the ASR program will be in the next coming days, not weeks.

Craig Huber, Analyst

So you'll get those shares from Standard General here over the next few weeks?

Victoria Harker, CFO

Correct. Days, not weeks. Yes. I'm sorry, I'm talking about the ASR.

David Lougee, President and CEO

The shares from Standard General to cover the fee will be available in days, not weeks.

Craig Huber, Analyst

Okay. And then maybe talk a little bit further. You guys won't quantify this, which is unfortunate, but your ad revenue pacings for the quarter for your TV stations, are you trying to say it's tracking better than the number in the first quarter, adjusting for the Super Bowl and Olympics in the first quarter? What are you trying to suggest there, please?

David Lougee, President and CEO

I meant to say that directly, Craig. That's correct. That's exactly right. The underlying trend is positive.

Craig Huber, Analyst

I have several questions since it’s been a while since we last spoke. Companies that go through a lengthy process like yours, especially with the deal termination, often experience some distractions. Do you believe that management and all your employees have been sidetracked? With uncertainties surrounding the Standard General deal, do you think this has set you back in terms of your strategic outlook and internal investment plans for the company?

David Lougee, President and CEO

We were obviously on pause regarding investment spending, which relates to the merger agreement. Our results for 2022 reflect the performance of the management team and our focus during this time. Long-term strategic planning was also on pause until recently since we wouldn’t be the owners of the company due to the merger agreement. That’s the best way I can respond to your question.

Victoria Harker, CFO

And Craig, you've seen the merger agreement and its details, but that doesn't mean we haven't invested in the regular ongoing maintenance of the business. Last year in 2022, our focus was more on the merger agreement, capturing the ability to invest in new types of initiatives or expand strategies. However, please don't interpret that as a lack of investment in the core business.

David Lougee, President and CEO

I also don't want to imply that we're now coming out of the chute and ready to go buy a bunch of things, okay? Obviously, given the environment and capital allocation issues and the macroeconomic environment we're in, we understand the concern of shareholders relative to this is a time we like having a conservative balance sheet position. And so note that we feel we've come out of the other side of this merger agreement in the right place.

Victoria Harker, CFO

And therefore, our projected leverage at the 2.5x was obviously reading right down that alley.

Craig Huber, Analyst

And my last question, if I could, just go through this one more time. The timing of your retrans subs renewals this year and also for next year, if you could, please?

David Lougee, President and CEO

I can't provide exact times, but most of the renewals occur toward the end of each year. We anticipate having 30% of our traditional subscriptions in the second half of this year. The figure for next year is still to be announced, depending on the duration of the deals we finalize this year, Craig.

Operator, Operator

We'll go next to Jim Goss from Barrington Research.

James Goss, Analyst

One follow-up to what Craig was asking is if you can hear me.

Victoria Harker, CFO

Yes, we can hear you.

James Goss, Analyst

Okay. One follow-up to what Craig was asking. With the pause in the business and the ongoing merger, were there any key positions that you might have lost or had to rebuild? Or does this give you an opportunity to reposition the executive team in a post-deal environment, considering that the uncertainty may have prompted some individuals to reconsider their futures?

David Lougee, President and CEO

No, we did not lose any key executives during this period. People were understandably curious about their future under potential new ownership. However, we will continue to evaluate succession planning throughout the organization, as we have consistently done for good governance. The Board will also consider refreshment, as it has done in the past. While local recruitment became more challenging due to uncertainty, this is typical during any merger when you're the seller. That uncertainty has passed, and we are now functioning as a standalone company and actively moving forward.

James Goss, Analyst

And were the deal-related spin-off stations, was that undone or did they take place already?

David Lougee, President and CEO

No, no, no. That was all tied to the whole agreement so that will not happen. We stay the same company with the same stations we have before. I appreciate that question because I know there's been some confusion around that.

James Goss, Analyst

Okay. And pre the whole issue and given that there were a number of parties who seem to have an interest in TEGNA, your attitude was always that you were somewhat indifferent to remaining a stand-alone versus potentially selling the company if it benefited shareholder value. And I'm wondering if in the wake of all that's happened if you have a heightened determination to just have a stand-alone company and charge forward with that ambition.

David Lougee, President and CEO

I think we have an obligation, right, to absolutely focus on our stand-alone efforts unless there ever becomes an opportunity that the Board determines is intended to do like it chose to do 1.5 years ago. Our laser focus is on running this as a stand-alone company, which is what we should be doing in management to produce the best results.

James Goss, Analyst

Okay. Last question, political positioning geographically, are there any highlights that you would draw our attention to, given how things are developing, especially on the Republican side?

David Lougee, President and CEO

I would say that on the presidential front, the states we've acquired over the years or those with changing dynamics, such as Georgia and Arizona, are now becoming competitive. Off the top of my head, you can think of states like Florida, Arizona, Georgia, North Carolina, Michigan, Pennsylvania, and Minnesota, among others. There will always be variations based on the candidates, but overall, our presidential portfolio gives us a strong advantage in these regions.

Operator, Operator

And we'll go to our last question from Doug Arthur from Huber Research.

Douglas Arthur, Analyst

Yes, Victoria, I just want to clarify about Premion. You mentioned the loss. I'm uncertain if it was just a temporary issue with a national account or a permanent loss of that account. How will this impact 2023? Will we continue to face challenges with this as a tough comparison? Or will the growth rate start to align more with what you're observing locally as the year progresses?

Victoria Harker, CFO

Yes. It's the single account that's reallocating some of its business. So we will have a recurring impact over time. I don't know what's going to happen next year or subsequently. But obviously, we continue to do very well in the rest of the business. So there will be the offsetting benefits of growth in other areas.

Douglas Arthur, Analyst

So the growth outlook in 2023 is a little muddled because you don't quite know how this account is going to reallocate through the year. But I mean, how would you sort of frame the kind of more sustainable growth rate of the business at this point, ex that?

David Lougee, President and CEO

I can't provide a specific number, but local performance is very strong, Doug. The situation will depend on how much of that account remains; it has been significantly reduced. This will have some impact. However, as I mentioned earlier, this is fundamentally a local business. There are many national players in the field, but we were fortunate to secure a substantial amount of national business right from the start, which we didn't anticipate. It's an unfortunate timing issue, but we view this as a digital start-up that's rapidly growing. This moment of volatility is related to the size of that one account, but the fundamental organic metrics of Premion are positive.

Operator, Operator

And I'd like to turn the call back over to Dave for any final or closing remarks.

David Lougee, President and CEO

Well, thanks for taking the time to join us all today, and it's good to talk to you all again. Finally, we are very well-positioned for the future, as I said before, with advantaged station assets and our industry-leading balance sheet. We look forward to reengaging with investors in the coming weeks and months to update you on our progress in delivering our long-term value to our shareholders. Furthering our DE&I efforts and serving our communities and consumers through impactful trusted and innovative content and advertising solutions and we'll be looking to investors for their feedback after this long period of time without common. If you have additional questions, please reach out to our Head of Investor Relations, Julie Heskett, her phone number is (703) 873-6747. Thank you all again, and everyone, have a great long holiday weekend as well. Thank you, everyone.

Operator, Operator

Thank you. Ladies and gentlemen, that does conclude today's conference. We appreciate your participation, and have a wonderful day.