Gray Media, Inc. Q4 FY2023 earnings call

• CFO Transition: Jim Ryan will step down as CFO later this summer, with Jeff Janiak set to become the next CFO. Jeff has a deep understanding of the company from working on many transactions. - 2023 Achievements: Core advertising and retrans revenues increased; political advertising revenue exceeded that of 2019; local stations received awards for news investigations and community service; Assembly Atlanta studios were substantially completed with NBCUniversal leasing two-thirds of the sound stages; secured sports broadcasting deals for NBA teams like Atlanta Hawks and New Orleans Pelicans; renewed all retransmission consent agreements with MVPDs expiring in Q4 2023 and January 2024 at higher rates. - 2024 Outlook: Began 2024 with strong momentum, having new sports contracts and confidence in continued success in 2024 due to factors like the presidential election cycle and strong station performance.

In the fourth quarter of 2023, Gray Television had total revenue of $864 million, which was at the high end of its revenue guidance. Core advertising revenue in the fourth quarter was $415 million, an increase of 2% from the fourth quarter of 2022. Retransmission consent revenue was $365 million, an increase of 3% from the fourth quarter of 2022. Due to non-cash write-downs of certain investments, the company posted a net loss attributable to common stockholders of $22 million. The local television stations continued to perform well, and the company made progress in various initiatives including sports broadcasting and studio projects. The core advertising and retrans revenues contributed significantly to the overall revenue, with core advertising making up a substantial portion and retransmission consent revenue also playing a key role in the financial performance.

• Q1 2024: Expect mid-single-digit percentage increase in core revenue, helped by the $18 million in local ad sales from the Super Bowl. - Full-year 2024: Core revenue expected to be approximately $1.6 billion; retransmission revenue approximately $1.5 billion; operating expenses before depreciation and amortization, etc. approximately $2.4 billion. Political revenue not provided a specific guide, but confident it will be strong. Capital expenditures: Net additional investment in Assembly Atlanta expected to be $21 million. - Debt and dividends: Expect cash interest of approximately $430 million; routine capital expenditures between $115 million and $120 million; cash or cash taxes between $190 million and $210 million; preferred dividends approximately $52 million; common dividends approximately $30 million.

• Capital market volatility: Led to postponement of refinancing efforts for the term loan expiring in 2026. - Traditional MVPD subscription decline: Impacted retransmission revenue growth as sub counts for traditional MVPDs continued to decline. - Hollywood production slowdown: Affected the leasing of sound stages at Assembly Atlanta as some productions were canceled or delayed.

Q: Aaron Watts asked about the slowdown in retrans revenue growth.

A: Kevin Latek responded that it was due to sub declines in traditional MVPDs despite rate increases, attributing it to traditional MVPD subs continuing to decline through last year.

Q: Dan Kurnos inquired about the production studios on Assembly.

A: Hilton Howell said Hollywood production was slow but expected resumption, and Jim Ryan mentioned timing issues with reimbursements related to Assembly.

Q: Jim Goss asked about sports on CW and LIV Golf.

A: Pat LaPlatney said there were some increases but not significant, and Hilton Howell talked about the ACC football and basketball packages on CW.

Q: John Kornreich asked about refinancing subordinated debt.

A: Jim Ryan expressed confidence in refinancing the subordinated debt in due course.

Q: Craig Huber asked about retrans sub trends and miscellaneous income.

A: Kevin Latek said sub trends were reflective of public reports on traditional MVPD subs, and Jim Ryan said he'd address miscellaneous income later.

Q: Hal Steiner asked about free cash flow and refinancing.

A: Jim Ryan said focusing on '26 and '27 debt first as the main priority for free cash flow.

Q: Alan Gould asked about reimbursements on Assembly and Georgia tax credits.

A: Jim Ryan said timing issues with reimbursements, and Hilton Howell said Georgia tax credits were not an issue.

Q: Steven Cahall asked about reverse retransmission alignment, sports margins, and refinancing restart.

A: Kevin Latek talked about reverse retransmission realignment needing a per sub basis model, Pat LaPlatney said sports deals are accretive, and Jim Ryan said will restart refinancing soon.