It was a record-setting quarter for Gray Television, with never-before-seen highs for revenue and Broadcast Cash Flow seen in Q3.
Investors were more focused on its poor political dollar intake, sending the company’s shares down 10.4% in Tuesday’s trading, to $7.35, on the disappointing Q3 news.
“Despite inventory displacement resulting from political advertising and the Olympic games, our core revenue was flat compared to the same period in 2015,” the company said.
Additionally, a charge for loss from early extinguishment of debt of approximately $32 million contributed to a slight net loss in the quarter.
“Excluding that charge, our net income would have been $19.3 million, and our basic and diluted net income per share would have been $0.27 and $0.26, respectively,” the company explained.
While that is better than 18 cents a share, seen in Q3 2015, it is far below the consensus estimate of analysts of 39 cents.
Including the charge, Gray saw its net income slide by 106%, from a $6.6 billion profit to a net loss of $213,000.
Political revenue totaled $22.3 million in Q3 — a 1% improvement from what was seen in Q3 of 2014.
Hilton H. Howell Jr., Gray’s Chairman/CEO, commented, “This year’s political election season presented extraordinary challenges from the top of the ticket to the bottom, especially after mid-September. These challenges created a ‘perfect storm’ for our political revenue. Earlier this year, a large number of races were expected to be highly competitive and political fundraising appeared to be highly encouraging through the summer. However, actual spending by candidates, political parties and third-parties fell far short of expectations, especially in Gray’s markets … The political revenue results and uncertain macro environment make it more likely that Gray will place the highest priority on debt repayment over the next four to five quarters.”
Overall, net revenue climbed 35%, to $204.5 million. However, operating expenses in Gray’s broadcast division increased 22%, to $120.7 million.
Free Cash Flow increased by 89%, to $29.5 million.
To help combat the difficult financial road ahead for Gray, the company’s board of directors authorized the Company to repurchase up to an additional $75 million of its outstanding common stock, provided it do so by the last day of 2019.
This comes on top of an authorization to repurchase up to an aggregate 5 million shares of its common stock and Class A common stock at such times as management deems appropriate, subject to any contractual or other restrictions.
As of November 4, 2016, the Company had authority to purchase 279,200 shares of Gray common stock and Class A common stock under the previous authorization, which did not have a termination date.
Howell said, “Reducing our debt level remains a high priority for Gray as we end this political season. But we also see this as an opportunity to provide a return of capital to our shareholders.