Gray Television, Inc. (“Gray Media,” “Gray,” “we,” “us” or “our”) (NYSE: GTN) today announced financial results for the second quarter ended June 30, 2024, including total revenue of $826 million and total operating expenses (before depreciation, amortization and loss on disposal of assets) of $607 million. While we are overall pleased with our results in the second quarter, macro-economic and other factors largely beyond our control appear likely to result in somewhat lower revenues for the year than we previously anticipated.

Our core advertising revenue in the second quarter was $373 million, which was slightly below the low end of our guidance range. For the quarter ending September 30, 2024, we expect core advertising revenue will be flat to up low single digit percentages compared to the third quarter of 2023, driven primarily by the Olympic Games. In light of results to date and political advertising revenues arriving later in the year than originally anticipated, we currently anticipate core Advertising Revenues of approximately $1.525 billion for full-year 2024, down from our earlier guidance of $1.6 billion.

Political advertising revenue in the second quarter was $47 million, which significantly surpassed the $29 million of political advertising revenue during the second quarter of 2020 recorded by our current television station portfolio. We continue to anticipate strong political advertising revenues for the remainder of the year, including such revenues in a range of $180 million to $200 million in the third quarter, which would be essentially comparable to such revenues from our current television station portfolio in the third quarter of 2020.

Our retransmission consent revenue in the second quarter was $371 million, which was within our guidance range. With half of the year now complete, we have determined that our current pay-television subscriber numbers have largely extended the trends from last year rather than improving somewhat as we anticipated at the start of this year. As a result, we currently expect retransmission consent revenues in the range of $365 million to $370 million for the third quarter and a total of approximately $1.475 billion for full-year 2024.

Earlier this year, we reduced our broadcast operating expense guide for full-year 2024 by $50 million from the previous guide of $2.4 billion. Today, we lower our guidance for broadcast operating expense and corporate and administrative expenses for the full-year by a further $15 million and $5 million, respectively. Further, we are reducing our capital expense range by approximately $20 million and our estimated range for cash income taxes by approximately $23 million. In addition, for the second quarter, our station expenses were $8 million below the low end of our expense guidance range as well as $17 million less than station expenses in the first quarter of 2024. While we have made good progress managing costs and expenses this year, our management team is redoubling its efforts to improve the efficiency of our stations and other businesses by both increasing revenues and by further managing operating costs, capital expenses and investment opportunities for the remainder of the year and beyond.

We continue to focus on improving our balance sheet. In the first half of 2024, we undertook significant steps to reduce our debt and extend the maturities of those debt obligations that were scheduled to mature within the next two years. As a result, our next material debt maturity will not occur until 2027, following the 2024 and 2026 political cycles, and our weighted average cost of debt has increased to 7.7% from 6.8%. In particular, since the end of 2023, we:

• Amended our Senior Credit Facility to:
  • Increase lender commitments under our Revolving Credit Facility to $680 million, increased the number of participating banks and extend the maturity date to December 31, 2027;
  • Fully prepay the $1.15 billion 2019 Term Loan that was scheduled to mature on January 2, 2026;
  • Issue a $500 million 2024 Term loan that will mature on June 4, 2029;
• Pre-paid through a tender offer, $690 million of the $700 million in outstanding 2026 Notes, scheduled to mature on July 15, 2026;
• Issued $1.25 billion of our 2029 Notes, that are secured pari passu with our Senior Credit Facility and that will mature on July 15, 2029;
• Used available liquidity to repurchase and retire approximately $50 million of our outstanding 2027 Notes on the open market at an average price of approximately 90.5% of their par value;
• So far in the third quarter of 2024, we have used our available liquidity to retire an additional $29 million of our outstanding 2027 Notes on the open market at an average price of approximately 92.1% of their par value. Currently, the remaining par value of our 2027 Notes has been reduced to $671 million; and
• In order to complete the above transactions, we have used $200 million drawn under our Revolving Credit Facility. Due to strong operating cash flows since then, currently we have repaid $75 million of that borrowing and continue to prioritize repayment of our debt.

Currently, we have remaining availability of approximately $178 million under our previously announced Board authorization to utilize available liquidity to repurchase additional debt in the open market. The extent of such repurchases, including the amount and timing of any repurchases, will depend on general market conditions, regulatory requirements, alternative investment opportunities and other considerations. This repurchase program does not require us to repurchase a minimum amount of debt, and it may be modified, suspended or terminated at any time without prior notice.

Operating Highlights (the respective 2024 periods reflect the “on-year” of the two-year political advertising cycle):

• Total revenue in the second quarter of 2024 was $826 million, an increase of 2% from the second quarter of 2023.
• Core Advertising Revenue in the second quarter of 2024 was $373 million, a decrease of $6 million or 2% from the second quarter of 2023.
• Political advertising revenue in the second quarter of 2024 was $47 million, an increase of 292% from the second quarter of 2023.
• Net income was $22 million in the second quarter of 2024, compared to $4 million in the second quarter of 2023.
• Adjusted EBITDA was $225 million in the second quarter of 2024, essentially unchanged from the second quarter of 2023.

Other Key Metrics

• As of June 30, 2024, calculated as set forth in our Senior Credit Agreement, our First Lien Leverage Ratio and Leverage Ratio, each net of all cash, was 3.21 to 1.00 and 5.92 to 1.00, respectively.
• Non-cash stock compensation was $6 million during the second quarter of 2024, and $7 million in the second quarter of 2023.

Taxes

• During the six-months ended June 30, 2024 and 2023, we made income tax payments, net of refunds, of $85 million and $24 million, respectively. During the remainder of 2024, based on our current forecasts, we anticipate making income tax payments, net of refunds, within a range of $92 million to $102 million.
• As of June 30, 2024, we have an aggregate of $282 million of various state operating loss carryforwards, of which we expect that approximately $201 million will not be utilized.

Based on our current forecasts for the quarter ending September 30, 2024, we anticipate the following key financial results, as outlined below in approximate ranges and as compared to the quarter ending September 30, 2023, as well as certain currently anticipated full-year financial results. As always, guidance may change in the future based on several factors and therefore may not reflect actual results:

(1)   Excludes depreciation, amortization and loss (gain) on disposal of assets.