GRAY MEDIA, INC Q4 FY2024 earnings call

• Broadcast show premieres: Grosse Pointe Garden Society on NBC and Beyond the Gates on CBS premiered from Assembly Studios.
• Sports: Brought Atlanta Braves games back to Gray's TV stations in Atlanta and the Southeast, and announced Memphis Grizzlies deal, expecting local sports product in 75-80 markets by end of Q1 2025.
• Affiliation: Renewed ABC network affiliation agreement for four additional years.
• Distribution: Investigate TV and local news live franchises expanded across broadcast, digital, and mobile platforms.
• Debt reduction: Reduced principal debt by $520 million in 2024, refinanced debt to extend maturity, increased revolving loans, and lowered capital spending.

In the fourth quarter of 2024, Gray Media achieved significant financial results. Total revenue was $1 billion, an increase of 21% from Q4 2023. Net income attributable to common stockholders was $156 million in Q4 2024, compared to a net loss of $22 million in Q4 2023. Adjusted EBITDA was $402 million in Q4 '24, up 86% from Q4 2023, driven primarily by political advertising revenue. Additionally, the company reduced its total principal debt by $520 million in 2024, exceeding the $0.5 billion goal, and finished the year with a lower leverage ratio than at the start.

• Core advertising revenue: Expect Q1 2025 core advertising revenue to be down 7% to 8% compared to Q1 2024, due to political/economic uncertainty, Super Bowl impact, and Leap Day. Excluding Super Bowl and Leap Day, down 3.3% to 4.6%.
• Expenses: Cost efficiencies expected to flow through 2/3 to 75% in Q1, with hope to keep expense growth below inflation or negative during 2025.

• Regulatory constraints: Local broadcasters face constraints vs tech giants, which is harmful.
• Automobile advertising: Hesitancy due to tariffs and high interest rates impacting advertising campaigns.
• Retransmission sub declines: Expect rate of sub declines to slow but not projecting material change in budgeting.

Q: Around core advertising and full year growth, do you think core ads can move to growth on a full year basis?

A: Pat said yes, encouraged by second quarter pacing and improvement in challenged categories; Hilton added automobile advertising will return once they know cost of goods sold.

Q: Can you parse out Q1 expenses guide, how much cost efficiencies flowed through?

A: Jeff said 2/3 to 75% of cost efficiencies likely flow through in Q1, building from there, and they look at expenses daily.

Q: On Assembly Atlanta, updated cost and ROI?

A: Hilton said land, acquisition, building costs roughly $500 million; expects ROI to ramp up as productions build, with 70% occupancy in stages and 80 acres for future partnerships.

Q: On retransmission sub declines, how budgeting?

A: Kevin said expect rate of sub declines to slow, but internal numbers assume rate stays same, not giving full year guidance.

Q: On rebalancing network economics, context on fee decrease?

A: Jeff said larger contracts with CBS, FOX, NBC up this year, not giving full year guide yet but optimistic about rebalancing.

Q: On M&A and political/Connected TV?

A: McNamara Breland said dedicated team focusing on leveraging digital audiences for political, and Hilton said Gray is interested in M&A opportunities like swaps.

Q: On leverage goal and deregulation?

A: Jeff said taking a few years to get to 4x leverage, Kevin said big goals from Washington include relaxing market rule, SEC interest in network-affiliate relationships, and NEXTGEN TV growth.