Gray Media stock lost more than 26% of its value on Friday, after the broadcast television station owner released third quarter earnings that put a spotlight on “additional cost containment initiatives.”
“GTN,” which trades on the NYSE, finished the day at $4.28, with heavy volume of 6.96 million shares (on regular trading volume of 1.13 million shares) as the company’s total revenue grew to $950 million from $803 million in Q3.
The consensus estimate based on the input of six analysts was for revenue of $967.56 million.
Meanwhile, Gray Media (which still trades under its former Gray Television name) swung to net income of $83 million ($0.86 per diluted share), from a net loss of $53 million (-$0.57) in the third quarter of 2023.
Five analysts chimed in with prognostications on EPS, and the Q3 2024 consensus estimate came in at $0.92.
While Gray Media missed analysts’ estimates on both earnings per share and revenue, it said both total revenue and its core advertising revenue of $365 million (slightly up from $363 million in Q3 2023) were within its own guidance ranges.
Speaking at the start of Gray Media’s Q3 earnings call, Chairman of the Board and Chief Executive Officer Hilton Howell Jr. struck an almost defensive note, noting how Gray is an “exceptionally strong company” that continues to evolve. He stressed how strong Gray is by repeating the word in his next sentence.
ELECTING OTHER MEDIA OUTLETS
Political revenue in Q3 2024 totaled $173 million; it was $26 million in the year-ago quarter. That total fell short for Gray, and the company acknowledged it in prepared remarks ahead of the earnings call on Friday morning.
“Our results in the third quarter were largely in line with our guidance, with the exception of political advertising revenues, which, while strong, were slightly below our expectations,” Gray said, noting that broadcast and corporate operating expenses “were much lower than expectations.”
Even so, the political dollars did not impact core advertising growth, as it rose by 1%; Sinclair Inc. experienced the same upward momentum in Q3.
Speaking on the earnings call, Kevin Latek, Gray’s Chief Legal & Development Officer said that “this was a story entirely about Senate races for Gray,” explaining to a testy analyst asking about the company’s footprint, and any concerns it may have about it. “Spending on both sides did not match the way the polls worked out,” Latek said. “We can’t force a party to spend an additional $100 million on a race in Nevada.”
And, production company revenue is starting to kick in, rising to $26 million from $20 million in Q3 as Assembly Atlanta dollar-generation is forecast to become a significant contributor to Gray’s bottom line. Making a profit will be in the eyes of investors, however, as expenses rose to $22 million from $18 million for Gray’s production companies.
Then, there is the 3% increase in expenses for all of Gray’s broadcasting units (station and retransmission), rising to $571 million from $557 million.
Retransmission consent revenue slipped to $369 million, from $378 million.
Add it all up, and political dollars saved the day, with adjusted EBITDA rising to $338 million from $210 million.
Gray’s leverage ratio stood at 5.67x at the close of Q3; the principal amount of Gray debt was reduced by $241 million in 2024 and the company expects full-year 2024 net debt reduction of approximately $500 million.
HAZY SHADE OF WINTER
Gray offered a peek at how Q4 is shaping up for the owner of such stations as KCTV-5 in Kansas City, KVVU-5 in Las Vegas and flagship properties WANF-46 and WPCH-17 in Atlanta.
The portrait isn’t a pleasant one, as core advertising revenue in Q4 will be down approximately 11% year-over-year, due primarily to political advertising revenue displacement and, Gray explained, the movement of SEC college football games in its Southeastern markets from the CBS Network to the ABC Network.
In addition, “the continuing impact of Hurricane Helene and the added impact of Hurricane Milton” is expected to adversely impact core ad revenue in several of Gray’s Southeastern markets in Q4.
“We now anticipate core advertising revenues within a range of $1.475 billion to $1.488 billion for full-year 2024,” down approximately 3% from Gray’s earlier guidance of $1.525 billion and down approximately 2% compared to full-year 2023.
What’s Political looking like for Q4? Gray offers a range of $248 million-$253 million, and for full-year 2024 political dollars within a range of $495 million-$500 million.
Gray explains, “Our political advertising revenue was impacted by fewer competitive non-presidential races in some of our markets during the second half of this year.”
EXPENSES ASSESSED
In its Q3 earnings report, Gray explained how in August the company began to identify and implement “various measures throughout the company” designed to trim its operating expense run-rate by approximately $60 million on an annualized basis.
“As part of our routine budgeting process, we are carefully evaluating our capital expenditure needs for 2025,” Gray said.
This means Gray has taken “several steps to reduce personnel expenses in 2025.”
These steps include:
- Streamlining workflows at Gray’s television stations and other business units
- Closing some unfilled positions it was seeking to fill through new hiring
- Eliminating certain positions that will not be filled following normal attrition throughout the second half of 2024
- For the first time in many years, “eliminating certain positions in a handful of television stations and certain business units.”
“Importantly, despite these staffing changes, we will continue to produce local newscasts with local journalists and local meteorologists in all of our existing local news markets, including small markets,” Gray stressed.
DELETING THE DEBT
Gray also shared that its Board of Directors on Thursday approved an increase in the company’s debt repurchase authorization to repurchase additional debt in the open market.
This, Gray explained, replenished its previous authorization, bringing the total current authorization to $250 million.
“The extent of such repurchases, including the amount and timing of any repurchases, will depend on general market conditions, regulatory requirements, alternative investment opportunities and other considerations,” Gray said, noting that this repurchase program supersedes any previous repurchase authorization, does not require Gray to repurchase a minimum amount of debt, and may be modified, suspended or terminated at any time without prior notice.
