Gray Reports Second Quarter Operating Results
Friday, August 7th, 2020
Gray Television, Inc. today announced financial results for the second quarter ended June 30, 2020. The impact of the novel coronavirus and its disease (collectively, “COVID-19”) on economic activity significantly impacted our revenues and results for the second quarter and first half of 2020. Nevertheless, despite these macroeconomic challenges, over the first half of this year, we increased our cash on hand by $167 million and repurchased $49 million of our common stock. Key financial results are as follows:
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Our revenue for the second quarter of 2020 was $451 million, a decrease of $57 million, or 11%, from the second quarter of 2019. The primary components of revenue were: combined local and national broadcast advertising revenue of $198 million, political advertising revenue of $21 million, and retransmission revenue of $220 million.
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Net loss attributable to common stockholders for the second quarter of 2020 was $2 million, or ($0.02) per share.
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Broadcast Cash Flow was $123 million for the second quarter of 2020, decreasing $62 million, or 34%, from the second quarter of 2019. Our Adjusted EBITDA for the second quarter of 2020 was $108 million, decreasing $60 million, or 36%, from the second quarter of 2019.
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As anticipated, Covid-19 had an adverse impact upon our business in the second quarter of 2020, although the impact was noticeably less severe than we had anticipated at the time of our prior earnings release. In particular, while our total revenue declined by 11%, our combined local and national broadcast revenue, excluding political revenue (“Total Core Revenue”), for the second quarter 2020 only decreased by approximately 30% compared to the second quarter of 2019. In addition, the year-over-year declines in Total Core Revenue improved sequentially through the second quarter of 2020 as follows: April declined 38%, May declined 34% and June declined by only 17%. Our total revenue performed better in the second quarter than our Total Core Revenue on a year-over-year basis, because of continuing growth of retransmission consent revenue and political advertising revenue in the current “on-year” of the two-year political advertising cycle.
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As of June 30, 2020, our total leverage ratio, as defined in our senior credit facility, was 4.40 times on a trailing eight-quarter basis, netting our total cash balance of $379 million and giving effect to all Transaction Related Expenses (as defined below). We have not drawn any funding from our $200 million revolving credit facility, and, as a result, we are not subject to any maintenance covenants in our credit facilities at this time.
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During the second quarter of 2020, we repurchased approximately 3.3 million shares of our common stock at an average price of $13.02 per share, including commissions, for a total cost of approximately $43.4 million. During the first half of 2020, we repurchased approximately 3.8 million shares of our common stock on the open market at an average price of $12.81 per share, including commissions, for a total cost of approximately $49.2 million. We have not repurchased any shares since the close of the second quarter. Currently we have approximately 89,740,619 common shares and 7,048,006 Class A common shares outstanding, and we currently have approximately $80 million remaining under our stock repurchase authorization adopted in November 2019.
Government and private measures adopted to limit the spread of COVID-19 have affected, and are continuing to affect, our businesses in a number of ways. Although there has recently been a gradual decline in certain government and private measures adopted to limit the spread of COVID-19, we have generally experienced a reduction in demand for advertising across our television stations and digital platforms, a very significant reduction in demand in the market for the video production of sporting and other events by our production companies, and reductions in the supply of programming, especially sports content, provided by television networks. The extent to which some of the effects of the COVID-19 crisis continues to impact our business depends on numerous evolving factors; we believe, however, that some of our programming and production activities are beginning to rebound. Despite the adverse developments, we have experienced significant increases in viewership of our local newscasts and related digital assets. We did not access any stimulus or relief grants or loans from any governmental unit during the first half of 2020.
The net impact of these factors has had an adverse effect on our financial and operational results during the past four months. The ultimate duration and impact of these disruptions cannot be predicted at this time. In light of this uncertainty, the Company cannot provide guidance for the three-month period ending on September 30, 2020, or calendar year 2020. Notwithstanding the foregoing, however, we continue to anticipate that in calendar year 2020, our political advertising revenue will be between $250 million to $275 million and the Company will remain free cash flow positive.
| Selected Operating Data (unaudited): | ||||||||||||||||
| As-Reported Basis | ||||||||||||||||
| Three Months Ended June 30, | ||||||||||||||||
| % Change | % Change | |||||||||||||||
| 2020 to | 2020 to | |||||||||||||||
| 2020 | 2019 | 2019 | 2018 | 2018 | ||||||||||||
| (dollars in millions) | ||||||||||||||||
| Revenue (less agency commissions): | ||||||||||||||||
| Broadcast | $ | 449 | $ | 499 | (10 | )% | $ | 250 | 80 | % | ||||||
| Production companies | 2 | 9 | - | |||||||||||||
| Total revenue | $ | 451 | $ | 508 | (11 | )% | $ | 250 | 80 | % | ||||||
| Political | $ | 21 | $ | 5 | 320 | % | $ | 18 | 17 | % | ||||||
| Operating expenses (1): | ||||||||||||||||
| Broadcast | $ | 324 | $ | 314 | 3 | % | $ | 142 | 128 | % | ||||||
| Production companies | $ | 5 | $ | 9 | $ | - | ||||||||||
| Corporate and administrative | $ | 17 | $ | 21 | (19 | )% | $ | 11 | 55 | % | ||||||
| Net income | $ | 11 | $ | 44 | (75 | )% | $ | 41 | (73 | )% | ||||||
| Non-GAAP cash flow (2): | ||||||||||||||||
| Broadcast Cash Flow | $ | 123 | $ | 185 | (34 | )% | $ | 108 | 14 | % | ||||||
| Broadcast Cash Flow Less | ||||||||||||||||
| Cash Corporate Expenses | $ | 108 | $ | 166 | (35 | )% | $ | 98 | 10 | % | ||||||
| Free Cash Flow | $ | 35 | $ | 69 | (49 | )% | $ | 59 | (41 | )% | ||||||
| As-Reported Basis | ||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||
| % Change | % Change | |||||||||||||||
| 2020 to | 2020 to | |||||||||||||||
| 2020 | 2019 | 2019 | 2018 | 2018 | ||||||||||||
| (dollars in millions) | ||||||||||||||||
| Revenue (less agency commissions): | ||||||||||||||||
| Broadcast | $ | 964 | $ | 980 | (2 | )% | $ | 477 | 102 | % | ||||||
| Production companies | 21 | 46 | - | |||||||||||||
| Total revenue | $ | 985 | $ | 1,026 | (4 | )% | $ | 477 | 106 | % | ||||||
| Political | $ | 57 | $ | 8 | 613 | % | $ | 24 | 138 | % | ||||||
| Operating expenses (1): | ||||||||||||||||
| Broadcast | $ | 659 | $ | 670 | (2 | )% | $ | 292 | 126 | % | ||||||
| Production companies | $ | 24 | $ | 44 | $ | - | ||||||||||
| Corporate and administrative | $ | 32 | $ | 69 | (54 | )% | $ | 19 | 68 | % | ||||||
| Net income | $ | 64 | $ | 26 | 146 | % | $ | 61 | 5 | % | ||||||
| Non-GAAP cash flow (2): | ||||||||||||||||
| Broadcast Cash Flow | $ | 304 | $ | 308 | (1 | )% | $ | 186 | 63 | % | ||||||
| Broadcast Cash Flow Less | ||||||||||||||||
| Cash Corporate Expenses | $ | 276 | $ | 244 | 13 | % | $ | 169 | 63 | % | ||||||
| Free Cash Flow | $ | 120 | $ | 73 | 64 | % | $ | 92 | 30 | % | ||||||
(1) Excludes depreciation, amortization and (gain) loss on disposal of assets.
(2) See definition of non-GAAP terms and a reconciliation of the non-GAAP amounts to net income included elsewhere herein.
Results of Operations for the Second Quarter of 2020
| Three Months Ended June 30, | |||||||||||||||||||
| 2020 | 2019 | Amount | Percent | ||||||||||||||||
| Percent | Percent | Increase | Increase | ||||||||||||||||
| Amount | of Total | Amount | of Total | (Decrease) | (Decrease) | ||||||||||||||
| (dollars in millions) | |||||||||||||||||||
| Revenue (less agency commissions): | |||||||||||||||||||
| Local (including internet/digital/mobile) | $ | 162 | 35.9 | % | $ | 226 | 44.5 | % | $ | (64 | ) | (28 | )% | ||||||
| National | 36 | 8.0 | % | 56 | 11.0 | % | (20 | ) | (36 | )% | |||||||||
| Political | 21 | 4.7 | % | 5 | 1.0 | % | 16 | 320 | % | ||||||||||
| Retransmission consent | 220 | 48.8 | % | 201 | 39.6 | % | 19 | 9 | % | ||||||||||
| Production companies | 2 | 0.4 | % | 9 | 1.8 | % | (7 | ) | (78 | )% | |||||||||
| Other | 10 | 2.2 | % | 11 | 2.1 | % | (1 | ) | (9 | )% | |||||||||
| Total | $ | 451 | 100.0 | % | $ | 508 | 100.0 | % | $ | (57 | ) | (11 | )% | ||||||
| Total local and national revenue | |||||||||||||||||||
| combined ("Total Core Revenue") | $ | 198 | 43.9 | % | $ | 282 | 55.5 | % | $ | (84 | ) | (30 | )% | ||||||
| Operating expenses (before | ||||||||||||||||||
| depreciation, amortization and | ||||||||||||||||||
| (gain) loss on disposal of assets): | ||||||||||||||||||
| Broadcast: | ||||||||||||||||||
| Station expenses | $ | 199 | 61.4 | % | $ | 208 | 66.3 | % | $ | (9 | ) | (4 | )% | |||||
| Retransmission expense | 124 | 38.3 | % | 104 | 33.1 | % | 20 | 19 | % | |||||||||
| Transaction Related Expenses | - | 0.0 | % | 1 | 0.3 | % | (1 | ) | ||||||||||
| Non-cash stock-based compensation | 1 | 0.3 | % | 1 | 0.3 | % | - | |||||||||||
| Total broadcast expense | $ | 324 | 100.0 | % | $ | 314 | 100.0 | % | $ | 10 | 3 | % | ||||||
| Production companies expense | $ | 5 | $ | 9 | $ | (4 | ) | (44 | )% | |||||||||
| Corporate and administrative: | ||||||||||||||||||
| Corporate expenses | $ | 15 | 88.2 | % | $ | 18 | 85.7 | % | $ | (3 | ) | (17 | )% | |||||
| Transaction Related Expenses | - | 0.0 | % | 1 | 4.8 | % | (1 | ) | ||||||||||
| Non-cash stock-based compensation | 2 | 11.8 | % | 2 | 9.5 | % | - | 0 | % | |||||||||
| Total corporate and | ||||||||||||||||||
| administrative expense | $ | 17 | 100.0 | % | $ | 21 | 100.0 | % | $ | (4 | ) | (19 | )% | |||||
Results of Operations for the Six-Month Period Ended June 30, 2020
| Six Months Ended June 30, | |||||||||||||||||||
| 2020 | 2019 | Amount | Percent | ||||||||||||||||
| Percent | Percent | Increase | Increase | ||||||||||||||||
| Amount | of Total | Amount | of Total | (Decrease) | (Decrease) | ||||||||||||||
| (dollars in millions) | |||||||||||||||||||
| Revenue (less agency commissions): | |||||||||||||||||||
| Local (including internet/digital/mobile) | $ | 361 | 36.6 | % | $ | 437 | 42.6 | % | $ | (76 | ) | (17 | )% | ||||||
| National | 87 | 8.8 | % | 106 | 10.3 | % | (19 | ) | (18 | )% | |||||||||
| Political | 57 | 5.8 | % | 8 | 0.8 | % | 49 | 613 | % | ||||||||||
| Retransmission consent | 433 | 44.0 | % | 405 | 39.5 | % | 28 | 7 | % | ||||||||||
| Production companies | 21 | 2.1 | % | 46 | 4.5 | % | (25 | ) | (54 | )% | |||||||||
| Other | 26 | 2.7 | % | 24 | 2.3 | % | 2 | 8 | % | ||||||||||
| Total | $ | 985 | 100.0 | % | $ | 1,026 | 100.0 | % | $ | (41 | ) | (4 | )% | ||||||
| Total local and national revenue | |||||||||||||||||||
| combined ("Total Core Revenue") | $ | 448 | 45.5 | % | $ | 543 | 52.9 | % | $ | (95 | ) | (17 | )% | ||||||
| Operating expenses (before | ||||||||||||||||||
| depreciation, amortization and | ||||||||||||||||||
| (gain) loss on disposal of assets): | ||||||||||||||||||
| Broadcast: | ||||||||||||||||||
| Station expenses | $ | 410 | 62.2 | % | $ | 424 | 63.3 | % | $ | (14 | ) | (3 | )% | |||||
| Retransmission expense | 246 | 37.3 | % | 208 | 31.0 | % | 38 | 18 | % | |||||||||
| Transaction Related Expenses | - | 0.0 | % | 37 | 5.5 | % | (37 | ) | ||||||||||
| Non-cash stock-based compensation | 3 | 0.5 | % | 1 | 0.2 | % | 2 | |||||||||||
| Total broadcast expense | $ | 659 | 100.0 | % | $ | 670 | 100.0 | % | $ | (11 | ) | (2 | )% | |||||
| Production companies expense | $ | 24 | $ | 44 | $ | (20 | ) | (45 | )% | |||||||||
| Corporate and administrative: | ||||||||||||||||||
| Corporate expenses | $ | 28 | 87.5 | % | $ | 31 | 44.9 | % | $ | (3 | ) | (10 | )% | |||||
| Transaction Related Expenses | - | 0.0 | % | 33 | 47.8 | % | (33 | ) | ||||||||||
| Non-cash stock-based compensation | 4 | 12.5 | % | 5 | 7.3 | % | (1 | ) | (20 | )% | ||||||||
| Total corporate and | ||||||||||||||||||
| administrative expense | $ | 32 | 100.0 | % | $ | 69 | 100.0 | % | $ | (37 | ) | (54 | )% | |||||
Transaction Related Expenses
From time to time, we have incurred incremental expenses (“Transaction Related Expenses”) that were specific to acquisitions, divestitures and financing activities, including but not limited to legal and professional fees, severance and incentive compensation and contract termination fees. In addition, we have recorded certain non-cash stock-based compensation expenses. These expenses are summarized as follows (in millions):
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||
| Transaction Related Expenses: | |||||||||||||||||
| Broadcast | $ | - | $ | 1 | $ | - | $ | 37 | |||||||||
| Corporate and administrative | - | 1 | - | 33 | |||||||||||||
| Total Transaction Related Expenses | $ | - | $ | 2 | $ | - | $ | 70 | |||||||||
| Total non-cash stock-based compensation | $ | 3 | $ | 2 | $ | 7 | $ | 5 | |||||||||
Taxes
During the 2020 and 2019 six-month periods, we made aggregate federal and state income tax payments of approximately $1 million and $8 million, respectively. During the remainder of 2020, we anticipate making income tax payments (net of refunds) of approximately $57 million. We have approximately $438 million of federal operating loss carryforwards, which expire during the years 2023 through 2037. We expect to have federal taxable income in the carryforward periods. We therefore believe that these federal operating loss carryforwards will be fully utilized. Additionally, we have an aggregate of approximately $677 million of various state operating loss carryforwards, of which we expect that approximately half will be utilized. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. We are currently evaluating the impact of the CARES Act, but we do not believe it will have a material effect on our estimated effective tax rate.
| Gray Television, Inc. | |||||||||||||||||
| Selected Operating Data (Unaudited) | |||||||||||||||||
| (in millions, except for per share data) | |||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||
| Revenue (less agency commissions) | |||||||||||||||||
| Broadcasting | $ | 449 | $ | 499 | $ | 964 | $ | 980 | |||||||||
| Production companies | 2 | 9 | 21 | 46 | |||||||||||||
| Total revenue (less agency commissions) | 451 | 508 | 985 | 1,026 | |||||||||||||
| Operating expenses before depreciation, amortization | |||||||||||||||||
| and gain on disposal of assets, net: | |||||||||||||||||
| Broadcast | 324 | 314 | 659 | 670 | |||||||||||||
| Production companies | 5 | 9 | 24 | 44 | |||||||||||||
| Corporate and administrative | 17 | 21 | 32 | 69 | |||||||||||||
| Depreciation | 21 | 20 | 42 | 40 | |||||||||||||
| Amortization of intangible assets | 26 | 28 | 52 | 57 | |||||||||||||
| Gain on disposals of assets, net | (7 | ) | (3 | ) | (13 | ) | (13 | ) | |||||||||
| Operating expenses | 386 | 389 | 796 | 867 | |||||||||||||
| Operating income | 65 | 119 | 189 | 159 | |||||||||||||
| Other income (expense): | |||||||||||||||||
| Miscellaneous (expense) income, net | (2 | ) | 1 | (3 | ) | 4 | |||||||||||
| Interest expense | (46 | ) | (58 | ) | (98 | ) | (116 | ) | |||||||||
| Income before income tax expense | 17 | 62 | 88 | 47 | |||||||||||||
| Income tax expense | 6 | 18 | 24 | 21 | |||||||||||||
| Net income | 11 | 44 | 64 | 26 | |||||||||||||
| Preferred stock dividends | 13 | 13 | 26 | 26 | |||||||||||||
| Net (loss) income attributable to common stockholders | $ | (2 | ) | $ | 31 | $ | 38 | $ | - | ||||||||
| Basic per share information: | |||||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (0.02 | ) | $ | 0.31 | $ | 0.39 | $ | - | ||||||||
| Weighted-average shares outstanding | 97 | 100 | 98 | 100 | |||||||||||||
| Diluted per share information: | |||||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (0.02 | ) | $ | 0.31 | $ | 0.39 | $ | - | ||||||||
| Weighted-average shares outstanding | 97 | 101 | 98 | 100 | |||||||||||||
Other Financial Data:
| As of | |||||||
| June 30, | December 31, | ||||||
| 2020 | 2019 | ||||||
| (in millions) | |||||||
| Cash | $ | 379 | $ | 212 | |||
| Long-term debt, including current portion | $ | 3,703 | $ | 3,697 | |||
| Series A perpetual preferred stock | $ | 650 | $ | 650 | |||
| Borrowing availability under our Senior Credit Facility | $ | 200 | $ | 200 | |||
| Six Months Ended June 30, | |||||||
| 2020 | 2019 | ||||||
| (in millions) | |||||||
| Net cash provided by operating activities | $ | 307 | $ | 105 | |||
| Net cash used in investing activities | (59 | ) | (2,599 | ) | |||
| Net cash (used in) provided by financing activities | (81 | ) | 1,326 | ||||
| Net increase (decrease) in cash | $ | 167 | $ | (1,168 | ) | ||
The Company
We are a television broadcast company headquartered in Atlanta, Georgia, that is the largest owner of top-rated local television stations and digital assets in the United States (“U.S.”). Gray currently owns and/or operates television stations and leading digital properties in 94 television markets that collectively reach approximately 24 percent of U.S. television households. Over calendar year 2019, Gray’s stations were ranked first in 69 markets, and first and/or second in 87 markets, as calculated by Comscore, Inc.’s audience measurement service. We also own video program production, marketing, and digital businesses including Raycom Sports, Tupelo-Raycom, and RTM Studios, the producer of PowerNation programs and content, which we refer to collectively as our “production companies.”
