Gray Media, Inc. Q3 FY2024 earnings call

• Gray had a strong Q3 2024 with revenues largely in line with guidance except for lower political ad revenue. Expenses were well below the low end of guidance ranges.
• Core ad revenue grew 1% despite headwinds like political displacement and SEC football shift. New local direct business in Q3 2024 was up almost 14% year-over-year. Digital ad sales saw double-digit growth and new records.
• News teams received 8th National Edward R. Murrow Awards for Excellence in Journalism. Launched a cost containment exercise in August, aiming to reduce operating expense run rate by ~$60 million annually.
• Announced a media rights deal with the New Orleans Pelicans, expanding local sports broadcasting through the Gulf Coast Sports and Entertainment Network. Reduced debt by ~$250 million in Q3 and plans to repay $0.5 billion by year-end.

In the third quarter of 2024, Gray Media reported total revenue of $950 million, an increase of 18% from Q3 2023. Net income attributable to common shareholders was $83 million, compared to a net loss of $53 million in Q3 2023. Adjusted EBITDA was $338 million, up 61% from Q3 2023. Core ad revenue was $365 million, a 1% increase from Q3 2023. Political ad revenue in Q3 2024 was $173 million, slightly below guidance but $17 million below 2020's record. For full-year 2024, Gray expects approximately $0.5 billion in political revenue, making it the largest recipient of political ad dollars in TV broadcasting on both a gross and per TV household basis. Core ad revenue for full-year 2024 is expected to be slightly down, with factors like political displacement and SEC football shift contributing to this.

• Full-year 2024 political revenue expected to be approximately $0.5 billion. Core ad revenue for full-year 2024 is expected to be slightly down. Expect to reduce total net debt outstanding by ~$500 million in 2024. Board authorized reset of open market repurchase authorization to $250 million. Anticipate tax benefit from full deductibility of real estate interest expense.

• Political ad revenue shifted out of Gray's footprint to states like Montana and Pennsylvania. Sub-erosion affecting retransmission revenue growth. Dependence on affiliate renewals and network fee negotiations. Uncertainty around regulatory changes and ownership caps.

Q: Question about core ad guidance and weather impact A: Pat and Jeff provided responses discussing factors like political crowd out, SEC shift, and early signs of improvement in Q4 Q: Question about political footprint and structural concerns A: Hilton and Kevin explained that political ad revenue shifted out of Gray's footprint to other states, but Gray still had strong performance in other political categories Q: Question about regulatory ownership cap A: Hilton stated he would be open to considering transactions if Congress eliminates the ownership cap