GRAY MEDIA, INC Q3 FY2024 earnings call

Gray Media is a strong company. Third quarter revenues were largely in line with guidance except for slightly lower political advertising revenues, and expenses were well below the low end of the guidance range. Core ad revenue growth despite headwinds, new local direct business growth, digital ad sales as a bright spot. Stations served as a critical lifeline during hurricanes, announced media rights deal with New Orleans Pelicans. Launched cost containment exercise, identified and began implementing initiatives to reduce operating expense run rate by approximately $60 million annually, including non-personnel and personnel expense reductions.

In the third quarter, total revenue was $950 million, an increase of 18% from the third quarter of 2023. Net income attributable to common shareholders was $83 million, compared to a net loss of $53 million in the third quarter of 2023. Adjusted EBITDA was $338 million, an increase of 61% from the third quarter of 2023. Core ad revenue in the third quarter of 2024 was $365 million, an increase of 1% from the third quarter of 2023. Political ad revenue in the third quarter was $173 million, slightly below the guidance range but only $17 million below the record year of 2020. At the end of the third quarter, the leverage ratio was 5.67 to 1.00. Core ad revenue grew by 1% despite headwinds, new local direct business in Q3 2024 was up almost 14% over Q3 2023, digital ad sales had double-digit year-over-year growth and new records, with 22 markets having over $1 million in digital ad sales in Q3.

For full-year 2024, expect approximately $0.5 billion of political revenue, making Gray the largest recipient of political ad dollars in the television broadcasting business. Expect to reduce total net debt outstanding by approximately $500 million in 2024. Board authorized a reset of open market repurchase authorization to $250 million. Benefit from deduction of interest expense attributable to real estate in cash tax payments this year and going forward. 2025 and beyond, take actions to be a stronger, more efficient and impactful company.

Political ad revenue affected by political campaign distribution with some races outside Gray's footprint. Subscriber losses not significantly improved affecting retrans revenue growth. Uncertainty in affiliate renewals impacting costs and revenues. Network fees need to be renegotiated as they were priced in different environments.

Q: Hi, everyone. Thanks for having me on. I have a couple of questions. The first is a question around your core ad guidance. I'm hoping you can parse out your 4Q down 10.5% guide a bit more. Are you able to say how much of that was weather related? And it'd be really helpful to hear what you're seeing in the post-election core ad environment generally, areas of strength, weakness et cetera and how things feel turning the corner into 2025? I guess, second, Jeff, I'd point your way with regards to the $60 million of run rate savings you announced. How should we think about the timing of that phasing in and hitting the P&L over the next several quarters? And are there any further cost actions you're exploring in any ways to kind of frame that incremental opportunity? And then finally, just regarding capital allocation, it sounds like the focus remains on debt reduction. Do you envision continuing to be in the market repurchasing front-end loans and bonds? How do you think about the timing of potentially accessing the capital markets to address your first maturities? And has there been any further consideration on reducing the dividend?

A: Thanks, Aaron. It's Pat LaPlatney. I'll start. Q4, number of factors at play here, right. So, there's political crowd out. We talked about SEC, which is for us is material. And then we have some -- I would say that I'd say going forward, which I think was the thrust of your question, we are cautiously optimistic about the remainder of the quarter. We have seen some green shoots just in the last couple of days, which we think is a good sign and to be candid not completely unexpected. So, the better -- the more improvement we see in Q4, the more optimistic we are by Q1 2025 and the remainder 2025. So, I think there's some reason for optimism there. Jeff, I know you got a bunch of questions out there. Yes. Aaron, I jotted down a list. So, I'll try to tick through them in the order. And if I miss anything, just weigh in. So, first of all, on the $60 million of run rate savings and the timing of those, I guess most of that, especially the personnel piece of that is already completed. So that's already we're already -- we've already achieved that. It's in the rearview mirror and that will start filtering through. I think you should think about that as much as anything as bending the curve. If you look over the last couple of years and quarters, you've seen our run rate on expense growth come down. So, you'll continue to see that come down as a result of these actions. There are a number of things that were renegotiation of contracts and workflow changes that we were able to make. And those will take a little bit longer, but it'll be in starting beginning of the year in first quarter. In terms of further cost actions, look, we're continuously monitoring it. but there's nothing specific that's been identified as of right now. So, we'll continue to look at things, but nothing else planned at the moment. Capital allocation, so you can see that we reloaded the $250 million authorization from the board. So, we're going to continue to be guided by where we can get good value. We can go -- it's not in any tranche of debt. And so, we'll look at where things are trading. We will look if there's an opportunity to tap the capital markets to -- at a reasonable price that doesn't work against us too much in terms of cash flow and delevering, that's certainly of interest. And then, on the dividend, Hilton can weigh in on this as well, but I would say that we look at it from quarter-to-quarter. And where we sit today, we're comfortable paying it for this quarter. Hilton, I don't know if you want to comment any further on that. No further comment right now.

Q: Thank you for taking my questions. You actually just addressed many of them. A quick one though, in terms of the political, is it possible to provide some number around potentially the impact from the hurricane specifically? Meaning what would political have been without that hurricane impact?

A: It's a few $1 million.

Q: Thank you for taking my questions. You actually just addressed many of them. A quick one though, in terms of the political, is it possible to provide some number around potentially the impact from the hurricane specifically? Meaning what would political have been without that hurricane impact?

A: It's a few $1 million.

Q: Thank you for taking my questions. You actually just addressed many of them. A quick one though, in terms of the political, is it possible to provide some number around potentially the impact from the hurricane specifically? Meaning what would political have been without that hurricane impact?

A: It's a few $1 million.

Q: Thank you for taking my questions. You actually just addressed many of them. A quick one though, in terms of the political, is it possible to provide some number around potentially the impact from the hurricane specifically? Meaning what would political have been without that hurricane impact?

A: It's a few $1 million.

Q: Thank you for taking my questions. You actually just addressed many of them. A quick one though, in terms of the political, is it possible to provide some number around potentially the impact from the hurricane specifically? Meaning what would political have been without that hurricane impact?

A: It's a few $1 million.