Gray Television, Inc. (“Gray,” “we,” “us” or “our”) (NYSE: GTN) today announced strong financial results for the third quarter ended September 30, 2023, including total revenue of $803 million, which was above the high end of our revenue guidance and total operating expenses (before depreciation, amortization, impairment and loss on disposal of assets) of $598 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 third quarter of 2023, Gray’s total revenue increased by $202 million or 34% 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 1% on a year-over-year basis. We saw continued improvement in the automobile advertising category with an 18% year-over-year increase. In addition, political advertising revenues in a non-political year were relatively strong at $26 million. Continuing the trend of the first and second quarters of 2023, the third quarter’s political advertising revenue exceeded the amount of the corresponding quarter in 2019, the last year that preceded a presidential election year. As a result of another strong quarter of political advertising revenue, we today raise our previous guidance for full-year 2023 political advertising revenue by 33% to at least $80 million.

Given these solid performances across our television stations in the first three quarters of 2023, we currently anticipate that our television station operations will grow advertising revenues during the remainder of 2023, due to our strong positions in local markets and the exceptional efforts of our local station staff.

On September 1, 2023, we entered into an agreement with the CW Network (“CW”) to extend their network affiliation agreements at most of our legacy stations and to commence an affiliation with PeachtreeTV, our independent television station in the Atlanta market. Prior to that agreement, we entered into a sports rights agreement that allows CW to broadcast a slate of Atlantic Coast Conference (“ACC”) football as well as men’s and women’s basketball games on a national basis.

In the third quarter, we returned the Phoenix Suns and Phoenix Mercury local basketball games from a sports network to our local broadcast television stations serving all three of Arizona’s media markets covering the entire state. We continue pursuing similar innovative arrangements to expand the local availability of professional sports on Gray’s television stations in additional markets.

Finally, in the third quarter, we completed and delivered to NBCUniversal the soundstages, offices, warehouses, mill spaces, parking and related facilities that the studio has leased from us in our Assembly Studios real estate complex located in the Atlanta metro area. Construction on Gray’s facilities within Assembly Studios and key infrastructure for the surrounding Assembly Atlanta complex is currently expected to be completed prior to year-end. We are continuing to evaluate opportunities to unlock the value of this unique real estate development. While we currently anticipate that the mixed-use complex will be fully constructed and utilized by 2030, we currently do not anticipate any material capital projects at Assembly Atlanta in 2024.

Operating Highlights (the respective 2022 periods reflect the “on-year” of the two-year political advertising cycle):

• Revenue was $803 million, a decrease of 12% from the third quarter of 2022.

• Core Advertising Revenue was $363 million, an increase of 1% from the third quarter of 2022.

• Impairment charge of $43 million was related to the bankruptcy of Diamond Sports Group, LLC’s (“Diamond”) Atlantic Coast Conference (“ACC”) contract with our Raycom Sports subsidiary and its replacement with new ACC sports rights agreements with ESPN and the CW.

• Net loss attributable to common stockholders was $53 million, or $0.57 per share.

• Broadcast Cash Flow was $229 million, a decrease of 36% from the third quarter of 2022, due primarily to the cyclical decrease in political advertising.

Other Key Metrics

• As of September 30, 2023, our Total Leverage Ratio, Net of all Cash, was 5.50 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.

• Non-cash stock compensation was $5 million during the third quarter of 2023, and $6 million in the third quarter of 2022.

Taxes

• During the nine-months ended September 30, 2023 and 2022, we made income tax payments of $43 million and $128 million, respectively. During the remainder of 2023, based on our current forecasts, we anticipate making income tax payments (before deducting any refunds) within a range of $5 million to $9 million. During 2020, we carried back certain net operating losses, resulting in a refund of $21 million, excluding interest, that is outstanding.

• As of September 30, 2023, we have an aggregate of $344 million of various state operating loss carryforwards, of which we expect that approximately one-third will be utilized.

Based on our current forecasts for the quarter ending December 31, 2023, we anticipate the following key financial results, as outlined below in approximate ranges. We present revenue net of agency commissions. We exclude depreciation, amortization, impairment and (gain) loss on disposal of assets from our estimates of operating expenses.

• Revenue:

  • Core advertising revenue of $410 million to $414 million; up low single digit percentage increases over the fourth quarter of 2022.

  • Retransmission revenue of $362 million to $365 million; up low single digit percentage increases over fourth quarter 2022.

  • Political advertising revenue of $34 million to $35 million.

  • Production company revenue of $30 million to $31 million.

  • Total revenue of $854 million to $864 million.

• Operating Expenses:

  • Broadcasting expenses of $605 million to $610 million, including retransmission expense of approximately $233 million and non-cash stock-based compensation expense of approximately $1 million.

  • Production company expenses of approximately $26 million to $28 million.

  • Corporate expenses of $35 million to $40 million, including non-cash stock-based compensation expense of approximately $4 million.

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 80 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.

Cautionary Statements for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act

This press release contains certain forward-looking statements that are based largely on our current expectations and reflect various estimates and assumptions by us. These statements are statements other than those of historical fact and may be identified by words such as “estimates,” “expect,” “anticipate,” “will,” “implied,” “assume” and similar expressions. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in such forward-looking statements. Such risks, trends and uncertainties, which in some instances are beyond our control, include: estimates of future revenue, future expenses, future proceeds from Assembly Atlanta property sales, future proceeds from any quasi-governmental entities related to Assembly Atlanta, and other future events. We are subject to additional risks and uncertainties described in our quarterly and annual reports filed with the Securities and Exchange Commission from time to time, including in the “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained therein, which reports are made publicly available via our website, www.gray.tv. Any forward-looking statements in this press release should be evaluated in light of these important risk factors. This press release reflects management’s views as of the date hereof. Except to the extent required by applicable law, Gray undertakes no obligation to update or revise any information contained in this press release beyond the published date, whether as a result of new information, future events or otherwise. Information about certain potential factors that could affect our business and financial results and cause actual results to differ materially from those expressed or implied in any forward-looking statements are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2022, and may be contained in reports subsequently filed with the U.S. Securities and Exchange Commission and available at www.sec.gov.

Conference Call Information:

We will host a conference call to discuss our third quarter operating results on November 8, 2023. The call will begin at 11:00 AM Eastern Time. The live dial-in number is 1 (800) 285-6670. The call will be webcast live and available for replay at www.gray.tv. The taped replay of the conference call will be available at 1 (888) 556-3470, Confirmation Code: 898476# until December 8, 2023.