Gray Television is being judicious in how the company uses its cash because it wants to pay down more debt.
It’s actually starting to de-lever now, executives said in the company’s first quarter earnings call.
The company closed on the Schurz stations at the end of last year when its leverage ratio was 5.5x and predicts that figure will drop to the “lower fours” by the end of this year, said EVP/CFO Jim Ryan.
The company reported $173.7 million in revenue, which was the highest for any first quarter in Gray history. That was driven by political ads and retransmission consent fees.
Gray is unusual in that the company dropped its contract with Katz Television Group to act as the national rep firm and brought that business in-house.
Analysts peppered Gray executives with questions about that.
Ryan said national dollars are higher because Gray is no longer paying “a mid-single commission rate” on those dollars, which will really pay off this year with political ad revenue.
The company estimates getting $143 million in political this year. National business was “well over half” comprised of political, previously he said.
“By going direct we will not be paying commissions on millions of dollars. That’s why we took advantage of our termination clause last year when we had the opportunity.”
Asked which ad categories typically get crowded out by political, Ryan said: “Auto loves a strong newscast and that’s where politicians want to be as well. We see this every political cycle.” The auto advertisers know the cycle too, and are not surprised in September and October when politicians “are trying to buy up all of our news inventory.”
In Q1, Gray reported revenue of $173.7 million (+30%), broadcast cash flow of $65.9 million (+41%), net income of $9 million, and free cash flow of $24.2 million (+10%).
