Gray Finishes 2023 In A Strong Position and Issues Positive Outlook for 2024
Monday, February 26th, 2024
Gray Television, Inc. (“Gray,” “we,” “us” or “our”) (NYSE: GTN) today announced strong financial results for the fourth quarter ended December 31, 2023, including total revenue of $864 million, which was in-line with the high end of our revenue guidance and total operating expenses (before depreciation, amortization, impairment and loss on disposal of assets) of $664 million, which was below the low end of our expense guidance for the quarter.
Gray continued to execute across its portfolio of high-quality television stations and digital platforms as it combines its market-leading local news with strong network programming to deliver unparalleled reach for advertisers. In the fourth quarter of 2023, Gray’s total revenue increased by $143 million or 20% compared to 2021, our most recent non-political year.
We are particularly pleased with the performance of our television stations during the quarter, whose core advertising revenue increased 2% on a year-over-year basis. We saw continued improvement in the automobile advertising category with a 16% year-over-year increase. In addition, political advertising revenues in a non-political year were relatively strong at $33 million.
In the fourth quarter, NBCUniversal completed its initial move-in activities and began its lease with us for the soundstages, offices, warehouses, mill spaces, parking and related facilities in our Assembly Studios real estate complex located in the Atlanta metro area. We are continuing to evaluate opportunities to maximize the value of the undeveloped portion of this unique real estate development. We currently anticipate that the mixed-use complex will be fully constructed by 2030. Based on current expectations, we anticipate capital expenditures of $52 million in 2024 to complete the studio complex and certain infrastructure projects at the complex. In addition, we anticipate receiving $31 million of proceeds from certain incentive payments that reimburse us for a portion of prior and planned 2024 capital projects at the complex.
On February 8, 2024, we received $110 million in pre-tax cash proceeds from the closing of the previously announced sale of Broadcast Music, Inc. (“BMI”) to a shareholder group led by New Mountain Capital, LLC. $50 million of the net proceeds from the sale of BMI were used to pay in full the amount then outstanding under our Revolving Credit Facility. We intend to use the remaining proceeds for general corporate purposes.
On February 16, 2024, we completed the extension and upsizing of our revolving credit facility. Due to strong demand, our banking group increased their commitments to our revolving credit facilities to $625 million, which includes a new $552.5 million revolving credit facility maturing on December 31, 2027, and $72.5 million facility maturing on December 1, 2026.
On February 20, 2024, we announced that our Chief Financial Officer, Jim Ryan has notified us of his voluntary decision to transition into retirement after 2025. We also announced the hiring of Jeff Gignac, who currently serves as a Managing Director and Head of Media & Telecom Investment Banking at Wells Fargo Securities. Mr. Gignac will join us initially as Executive Vice President, Finance, on April 1, 2024, and he will step into Mr. Ryan’s role as Executive Vice President, Chief Financial Officer on July 1, 2024. Mr. Ryan will work closely with Mr. Gignac and our entire executive team until he retires at the end of 2025.
| Summary of Fourth Quarter Operating Results |
Operating Highlights (the respective 2023 periods reflect the “off-year” of the two-year political advertising cycle):
- Total revenue was $864 million, a decrease of 19% from the fourth quarter of 2022, entirely as a result of the decrease in political advertising revenue in this off-year of the two-year political advertising cycle.
- Core Advertising Revenue was $415 million, an increase of 2% from the fourth quarter of 2022.
- Retransmission revenue was $365 million, an increase of 3% from the fourth quarter of 2022.
- Net loss attributable to common stockholders was $22 million, or $0.24 per share.
- Broadcast Cash Flow was $245 million, a decrease of 49% from the fourth quarter of 2022, due primarily to the decrease in political advertising.
Other Key Metrics
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As of December 31, 2023, our Total Leverage Ratio, Net of all Cash, was 5.60 times on a trailing eight-quarter basis, netting our total cash balance of $21 million and giving effect to all Transaction Related Expenses, which is calculated as set forth in our Senior Credit Facility.
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Non-cash stock compensation was $6 million and $5 million during the fourth quarters of 2023 and 2022, respectively.
Taxes
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During 2023 and 2022, we made aggregate federal and state income tax payments of $50 million and $180 million, respectively. Based on current forecasts, during 2024, we anticipate making income tax payments within a range of $190 million to $210 million.
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As of December 31, 2023, we have an aggregate of $299 million of various state operating loss carryforwards, of which we expect that approximately one-third will be utilized.
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During 2020, we carried back certain net operating losses, resulting in a refund of $21 million, excluding interest, that is outstanding.
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Guidance for the Three-Months Ending March 31, 2024 |
Based on our current forecasts for the quarter ending March 31, 2024, we anticipate the following key financial results, as outlined below in approximate ranges. We present revenue net of agency commissions. We present operating expenses excluding depreciation, amortization and gain/loss on disposal of assets.
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Revenue:
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Total Core Revenue of $365 million to $375 million, up low to mid-single digit percentage increases.
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In the three months ended March 31, 2024, we anticipate approximately $18 million of net revenue from the broadcast of the Super Bowl on our 49 CBS channels compared to an aggregate of $6 million of net revenue relating to the broadcast of the Super Bowl on our 27 FOX channels during the three months ended March 31, 2023.
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Retransmission revenue of $375 million to $380 million.
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Political revenue of $30 million to $33 million.
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Production company revenue of $23 million to $24 million.
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Total revenue of $810 million to $830 million.
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Operating Expenses:
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Broadcasting expenses of $585 million to $595 million, including retransmission expense of approximately $235 million and non-cash stock-based compensation expense of approximately $1 million.
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Production company expenses of approximately $21 million to $22 million.
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Corporate expenses of $35 million to $40 million, including non-cash stock-based compensation expense of approximately $4 million.
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| Selected Operating Data (Unaudited) | |||||||||||||||
| Three Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | % Change 2023 to 2022 | 2021 | % Change 2023 to 2021 | |||||||||||
| (dollars in millions) | |||||||||||||||
| Revenue (less agency commissions): | |||||||||||||||
| Core advertising | $ | 415 | $ | 406 | 2 | % | $ | 359 | 16 | % | |||||
| Political advertising | 33 | 255 | (87 | )% | 20 | 65 | % | ||||||||
| Retransmission consent | 365 | 353 | 3 | % | 294 | 24 | % | ||||||||
| Other | 19 | 21 | (10 | )% | 19 | 0 | % | ||||||||
| Total broadcasting revenue | 832 | 1,035 | (20 | )% | 692 | 20 | % | ||||||||
| Production companies | 32 | 37 | (14 | )% | 29 | 10 | % | ||||||||
| Total revenue | $ | 864 | $ | 1,072 | (19 | )% | $ | 721 | 20 | % | |||||
| Operating expenses (1): | |||||||||||||||
| Broadcasting | |||||||||||||||
| Station expenses | $ | 371 | $ | 343 | 8 | % | $ | 274 | 35 | % | |||||
| Retransmission expense | 232 | 225 | 3 | % | 171 | 36 | % | ||||||||
| Transaction Related Expenses | - | 1 | (100 | )% | 3 | (100 | )% | ||||||||
| Non-cash stock-based compensation | 1 | 1 | 0 | % | 1 | 0 | % | ||||||||
| Total broadcasting expense | $ | 604 | $ | 570 | 6 | % | $ | 449 | 35 | % | |||||
| Production companies | $ | 27 | $ | 27 | 0 | % | $ | 23 | 17 | % | |||||
| Corporate and administrative | |||||||||||||||
| Corporate expenses | $ | 28 | $ | 19 | 47 | % | $ | 29 | (3 | )% | |||||
| Transaction Related Expenses | - | 1 | (100 | )% | 52 | (100 | )% | ||||||||
| Non-cash stock-based compensation | 5 | 4 | 25 | % | 3 | 67 | % | ||||||||
| Total corporate and administrative expense | $ | 33 | $ | 24 | 38 | % | $ | 84 | (61 | )% | |||||
| Net (loss) income | $ | (9 | ) | $ | 186 | (105 | )% | $ | 29 | (131 | )% | ||||
| Non-GAAP Cash Flow (2): | |||||||||||||||
| Broadcast Cash Flow | $ | 245 | $ | 485 | (49 | )% | $ | 258 | (5 | )% | |||||
| Broadcast Cash Flow Less Cash Corporate Expenses | $ | 216 | $ | 465 | (54 | )% | $ | 177 | 22 | % | |||||
| Free Cash Flow (3)(4) | $ | 43 | $ | 242 | (82 | )% | $ | 59 | (27 | )% | |||||
| Year Ended December 31, | |||||||||||||||
| 2023 | 2022 | % Change 2023 to 2022 | 2021 | % Change 2023 to 2021 | |||||||||||
| (dollars in millions) | |||||||||||||||
| Revenue (less agency commissions): | |||||||||||||||
| Core advertising | $ | 1,514 | $ | 1,496 | 1 | % | $ | 1,190 | 27 | % | |||||
| Political advertising | 79 | 515 | (85 | )% | 44 | 80 | % | ||||||||
| Retransmission consent | 1,532 | 1,496 | 2 | % | 1,049 | 46 | % | ||||||||
| Other | 70 | 76 | (8 | )% | 57 | 23 | % | ||||||||
| Total broadcasting revenue | 3,195 | 3,583 | (11 | )% | 2,340 | 37 | % | ||||||||
| Production companies | 86 | 93 | (8 | )% | 73 | 18 | % | ||||||||
| Total revenue | $ | 3,281 | $ | 3,676 | (11 | )% | $ | 2,413 | 36 | % | |||||
| Operating expenses (1): | |||||||||||||||
| Broadcasting | |||||||||||||||
| Station expenses | $ | 1,326 | $ | 1,252 | 6 | % | $ | 928 | 43 | % | |||||
| Retransmission expense | 937 | 903 | 4 | % | 615 | 52 | % | ||||||||
| Transaction Related Expenses | - | 6 | (100 | )% | 3 | (100 | )% | ||||||||
| Non-cash stock-based compensation | 5 | 4 | 25 | % | 2 | 150 | % | ||||||||
| Total broadcasting expense | $ | 2,268 | $ | 2,165 | 5 | % | $ | 1,548 | 47 | % | |||||
| Production companies | $ | 115 | $ | 83 | 39 | % | $ | 62 | 85 | % | |||||
| Corporate and administrative | |||||||||||||||
| Corporate expenses | $ | 97 | $ | 84 | 15 | % | $ | 76 | 28 | % | |||||
| Transaction Related Expenses | - | 2 | (100 | )% | 71 | (100 | )% | ||||||||
| Non-cash stock-based compensation | 15 | 18 | (17 | )% | 12 | 25 | % | ||||||||
| Total corporate and administrative expense | $ | 112 | $ | 104 | 8 | % | $ | 159 | (30 | )% | |||||
| Net (loss) income | $ | (76 | ) | $ | 455 | (117 | )% | $ | 90 | (184 | )% | ||||
| Non-GAAP Cash Flow (2): | |||||||||||||||
| Broadcast Cash Flow | $ | 912 | $ | 1,440 | (37 | )% | $ | 813 | 12 | % | |||||
| Broadcast Cash Flow Less Cash Corporate Expenses | $ | 815 | $ | 1,354 | (40 | )% | $ | 666 | 22 | % | |||||
| Free Cash Flow (3)(4) | $ | 141 | $ | 581 | (76 | )% | $ | 238 | (41 | )% | |||||
| 1) | Excludes depreciation, amortization, impairment and loss (gain) on disposal of assets, net. |
| 2) | See definition of non-GAAP terms and a reconciliation of the non-GAAP amounts to net income (loss) included herein. |
| 3) | Excludes deductions, net of reimbursements, for purchase of property, plant and equipment related to the Assembly Atlanta project of $3 million, $85 million and $18 million for the 2023, 2022 and 2021 three-month periods, respectively; and excludes $176 million, $264 million and $109 million for the 2023, 2022 and 2021 years, respectively. |
| 4) | Excludes $17 million and $89 million of income tax payments in the 2021 three-month and full-year periods, respectively, related to our Acquisitions. |
| Detail Table of Operating Results (Unaudited) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| (in millions, except for net income per share data) | |||||||||||||||
| Revenue (less agency commissions): | |||||||||||||||
| Broadcasting | $ | 832 | $ | 1,035 | $ | 3,195 | $ | 3,583 | |||||||
| Production companies | 32 | 37 | 86 | 93 | |||||||||||
| Total revenue (less agency commissions) | 864 | 1,072 | 3,281 | 3,676 | |||||||||||
| Operating expenses before depreciation, amortization, | |||||||||||||||
| impairment and gain on disposal of assets, net: | |||||||||||||||
| Broadcasting | 604 | 570 | 2,268 | 2,165 | |||||||||||
| Production companies | 27 | 27 | 115 | 83 | |||||||||||
| Corporate and administrative | 33 | 24 | 112 | 104 | |||||||||||
| Depreciation | 39 | 33 | 145 | 129 | |||||||||||
| Amortization of intangible assets | 47 | 51 | 194 | 207 | |||||||||||
| Impairment of goodwill and other intangible assets | - | - | 43 | - | |||||||||||
| Loss (gain) on disposal of assets, net | 1 | 4 | 21 | (2 | ) | ||||||||||
| Operating expenses | 751 | 709 | 2,898 | 2,686 | |||||||||||
| Operating income | 113 | 363 | 383 | 990 | |||||||||||
| Other income (expense): | |||||||||||||||
| Miscellaneous income (expense), net | 12 | (1 | ) | 7 | (4 | ) | |||||||||
| Impairment of investments | (21 | ) | (18 | ) | (29 | ) | (18 | ) | |||||||
| Interest expense | (116 | ) | (100 | ) | (440 | ) | (354 | ) | |||||||
| Loss on early extinguishment of debt | - | - | (3 | ) | - | ||||||||||
| Income before income tax | (12 | ) | 244 | (82 | ) | 614 | |||||||||
| Income tax (benefit) expense | (3 | ) | 58 | (6 | ) | 159 | |||||||||
| Net income (loss) | (9 | ) | 186 | (76 | ) | 455 | |||||||||
| Preferred stock dividends | 13 | 13 | 52 | 52 | |||||||||||
| Net (loss) income attributable to common stockholders | $ | (22 | ) | $ | 173 | $ | (128 | ) | $ | 403 | |||||
| Basic per share information: | |||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (0.24 | ) | $ | 1.90 | $ | (1.39 | ) | $ | 4.38 | |||||
| Weighted-average shares outstanding | 93 | 91 | 92 | 92 | |||||||||||
| Diluted per share information: | |||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (0.24 | ) | $ | 1.88 | $ | (1.39 | ) | $ | 4.33 | |||||
| Weighted-average shares outstanding | 93 | 92 | 92 | 93 | |||||||||||
| Other Financial Data (Unaudited) | |||||||
| Year Ended December 31, | |||||||
| 2023 | 2022 | ||||||
| (in millions) | |||||||
| Net cash provided by operating activities | $ | 648 | $ | 829 | |||
| Net cash used in investing activities | (291 | ) | (503 | ) | |||
| Net cash used in financing activities | (397 | ) | (454 | ) | |||
| Net decrease in cash | $ | (40 | ) | $ | (128 | ) | |
| As of December 31, | |||||||
| 2023 | 2022 | ||||||
| (in millions) | |||||||
| Cash | $ | 21 | $ | 61 | |||
| Long-term debt, including current portion, less deferred | |||||||
| financing costs | $ | 6,160 | $ | 6,455 | |||
| Series A Perpetual Preferred Stock | $ | 650 | $ | 650 | |||
| Borrowing availability under Revolving Credit Facility | $ | 494 | $ | 496 | |||
The Company
We are a multimedia company headquartered in Atlanta, Georgia and the nation’s largest owner of top-rated local television stations and digital assets in the United States. Our television stations serve 113 television markets that collectively reach approximately 36 percent of US television households. This portfolio includes 79 markets with the top-rated television station and 102 markets with the first and/or second highest rated television station. We also own video program companies Raycom Sports, Tupelo Media Group, and PowerNation Studios, as well as the studio production facilities Assembly Atlanta and Third Rail Studios. Gray owns a majority interest in Swirl Films. For more information, please visit www.gray.tv.
