Q2 2023 Gray Television Inc Earnings Call

August 4, 2023

[music].

Welcome to the Gray television second quarter 2023 earnings call I will now turn the call over to her and how low you may begin.

Thank you operator, good morning, everyone as as Mr. Yu mentioned my name is Hilton Howell I'm, the chairman and CEO of Gray television and thank you all for joining us for our second quarter 2023 earnings call.

Absolutely delighted that today, we also have with US on this call Sandy <unk>, our long time senior managing Vice President, who recently became graves Chief operating officer welcome standing in addition, and as usual I'm joined by Pat <unk>, Our President and co CEO , Kevin Latex, our chief legal and development all in.

And Jim Ryan, our Chief Financial Officer, and we will begin with a disclaimer that Kevin will provide as I usually am.

Right.

Thank you Helen.

Top banker critical column unit.

Yes.

Thank you Hilton and good morning, everyone Gray uses its website as a key source of company information.

That address is www G. R. A y dot TV, we will file our quarterly report on Form 10-Q with the SEC later today.

Put it on the call may be discussion of non-GAAP financial measures and in particular broadcast cash flow operating cash flow.

Free cash flow and certain leverage ratios.

Metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public in their analysis and valuation of our company.

Included in our earnings release as well as on our website a reconciliation to the non-GAAP financial measures to the GAAP measures reported in our financial statements.

Certain matters discussed this call may include forward looking statements regarding among other things future operating results. Those statements are subject to a number of risks and uncertainties.

Actual results in the future could from those expressed or implied in any forward looking statements. As a result of various important factors that have been set forth in the company's most recent reports filed with the SEC, including our most recent annual report on Form 10-K, and our most recent earnings release company undertakes no obligation to update these forward looking statements I know.

I'll turn the call to Hilton.

Thank you Kevin Great TV strong start in the first quarter of 2023 continued through our second quarter today, we beat guidance and consensus estimates on all five key metrics, we beat on core advertising revenue, we beat on retransmission revenue we beat on political.

<unk> advertising revenue, we beat on Abbott Dawn and we beat on free cash flow.

In particular, our total revenues of $813 million from for the quarter exceeded the high end of our revenue guidance. In addition, our total operating expenses of $593 million were below the low end of our expense guidance for the quarter.

We're especially pleased at the performance of our television stations during the quarter, our core advertising revenue increased 4% on a year over year basis with both local and national core up in low single digits on a year over year basis.

And significantly and as we had predicted the auto category also continues to recover strongly for grain mean.

Meanwhile, political was particularly strong also for our second quarter preceding a presidential election year.

Our strong footprint a number one ranked television stations has and will continue to allow us to over index on political advertising dollars.

As such we are very much looking forward to the 24 presidential election cycle.

The second quarter of 2023 compares quite well to last year's second quarter in which we set all time records for political revenue.

The continued strength in Gray's revenue, despite that tough comp confirms that our television station portfolio is delivering the trusted content that our viewers want. It also shows that the strong content and deep reach that we have will continue to produce real value for.

Our advertising clients.

Since the end of the first quarter Grays leadership team has remained very busy on a number of fronts first as we mentioned we promoted sandy breeland from senior managing Vice President to the role of our Chief operating officer.

Second we promoted Matt Jacqueline to Chief revenue Officer, Mike King to Chief Marketing Officer, and Matt Moran to senior managing Vice President.

Importantly, gray renewed and extended our CBS affiliation agreement for all of the former Meredith markets as well as all of our legacy legacy Gray television markets. We're very pleased with this extension in renewable.

We reached a historic set of agreements that patent plot and he will cover in more detail with the Phoenix SUNS and the Mercury to return their games to broadcast television and to expand the teams reach within its market in Arizona by threefold.

We also struck a deal with the CW network covering a package at ACC sports rights that partially mitigated the losses from the unfortunate disruption caused by the Diamond sports bankruptcy.

We are happy to report also that phase one of our Assembly Atlanta studio project is now largely complete.

Phase one covers the public infrastructure build out for the entire Assembly Atlanta project and the construction of the Assembly studios, which encompasses 19, new stages, most of which are under a long term lease with NBC universal.

In fact, as we speak with you today NBC Universal is moving into its new sound stages, middles spaces and offices.

Despite the current writers and actors strike, we anticipate that production will begin in the next few months not only in the least NBC youth facilities, but also in the newly constructed studios that gray retained for our own use and then for lease to other third party production houses.

We have not yet altered our plans and do not intend to and.

We do not anticipate to do so in light of the writers and actors strike, which we sincerely hope will be resolved amicably in the near term for the good of all parties in our industry.

The investment in Assembly Atlanta over the last few years and particularly during the first half of 2023 is now largely complete we anticipate the remaining construction cost to wrap up and finish the Assembly studios portion of the overall project in the second half of this year, we'll be in a range of between 25%.

$30 million net of expected governmental incentives.

Then reimbursements over the next five to seven years, the Atlanta Assembly development will be completed with various mixed use projects across the remaining roughly two thirds of the site's total acreage I will now introduce Pat La Platinate to provide more color on our operations Pat Thanks films.

During the second quarter of 2023, Gray television stations and production companies continued executing well it seemingly better than other parts of the advertising ecosystem.

Again, our advertising revenue continues to demonstrate positive results and we expect to see continuing positive trends for the rest of the year.

We read with some dismay storage reporting softness in auto advertising, particularly on the national side.

Those stores are not reflected the great experience at all to the contrary greatest TV stations posted a 20% year over year increase in auto in the second quarter and this increase was led by either larger increases year over year in national auto advertising.

Meanwhile, our stations continued to excel at developing new business from local customers, who previously did not advertise on our platforms in the first quarter. We are pleased to report that our new local direct business brought in 9% more revenues in the first quarter of 'twenty two.

We improved upon that result in second quarter, when we brought in 15% additional revenue from new local direct business over the second quarter of last year.

Political advertising has also been strong as Hilton mentioned.

Now in both the first quarter and the second quarter of 'twenty. Three we have literally doubled the amount of political AD revenue that our current station portfolio received a 19 the.

Last year, the preceded a presidential election year.

Political advertising revenue has been particularly strong in Arizona.

Xena, Virginia in Iowa, we're.

We're not prepared to make it we're not prepared to make any full year political AD estimates at this time, given the wide range of uncertainties as far out but still we are encouraged by the doubling of political revenue over 2019 levels that we've experienced in the first half of 2023.

In addition to these sales successes sandy and I with assistance from many others are actively engaged in discussions or in professional sports teams and leagues recall that in early may the Phoenix SUNS in Phoenix Mercury announced an innovative deal that return their games to television stations in Arizona owned by Greg.

At that time, our deal was conditioned on the exploration of an arrangement between diamond sports and the sons and Mercury.

In July the Diamond deal for the SUNS expired and the sons and Mercury deal with Gray became effective.

We're all very excited to be able to present these great teams to all the people of Arizona.

Our discussions with other teams and leagues.

Indicate that the new sports rights rights deal we have in Arizona.

Work in other markets as well, where do we replicate that structure or find new ways to partner with professional franchises, we see a growing recognition in the market that returning professional sports to local broadcast stations will increase marketing value advertising sales revenues fan engagement as well as team value.

We're spending a lot of time analyzing just professional sports opportunities.

The coming months, we hope to have more innovative sports rights partnerships to announce that we will return local teams to our broadcast stations into local fans.

I'll now turn the call to Sandy Thank you Pat.

Very happy to join my colleagues on this earnings call, especially when we have so many positive developments and successes.

Definitely my career began intelligently.

And I focused a good amount of my time, the last few years on great local news resources, including our investigate TV in Washington D C operation.

Therefore, very honored to join this call when Greg has so much great news to report about its own news effort.

In June with the greatest sense of humility Gray received recognition from the leadership Foundation 2023 celebration of service to America Award, which honors excellence in community service by local radio and television station.

This year Gray received the television ownership Group award in recognition of the outstanding work by grades investigate TV unit and its series six which exposed a critical shortage of public defenders across the country.

The Foundation also felt like the Grace K T T C and Rochester, Minnesota as its small market TV station winner for its fifth District Eagles cancer telethon.

K wch in Wichita, Kansas and W. T B Y in Dothan, Alabama were named finalists for their exemplary community service.

Also during the second quarter the radio television Digital News Association awarded a combined 78 regional Edward R. Murrow Awards for excellence in journalism to 31 of Gray's local stations.

Warrants roster was led by 10 separate awards to Hawaii News now in Honolulu, Hawaii, and seven separate awards to WWE in New Orleans, Louisiana.

This September gray will launch across the stations a new weekday newsmagazine program called investigate TV plus.

The news magazine will showcase groundbreaking investigation, featuring Great Award, winning investigate TV unit, plus consumer health and original content curated from grade 113 local market.

Well, we have no plans to become a new syndicated programming has we have been pleasantly surprised by this audience reaction to our investigate TV weekend show that airs primarily on grades one station.

By not Aron at a consistent time period or having national promotion behind it. The current investigate TV weekend program has been posting ratings that surpassed many well known broadcast and cable programs.

That unlike our weekend program are cleared in 100% of the country.

This tells us that there is an audience for good quality news programming.

Particularly investigative pieces that highlight otherwise unknown issues and that consistently produce results.

They will make the new weekday investigate TV plus programs available for local television stations owned by other broadcasters as well. Thanks for your time and thanks for your interest I will now turn the call to Kevin.

Thank you Sandy.

In the second quarter on a year over year.

Basis, our retransmission revenue grew 3% as a result of contract re pricing at the beginning of 2023 or.

Our subscriber trends are down low single digits on a year over years and therefore.

Essentially matching or slightly beating the industry as a whole.

Our network reverse compensation expenses increased by less than our gross retransmission revenue during the second quarter as a result, our net retrans revenues grew slightly to $159 million in the second quarter.

Consistent with prior years, we expect retransmission revenues to decline somewhat between the second and third quarters as subscriber churn routinely increases when spring turns into summer.

Retransmission revenues, therefore continue to generate substantial cash flow that helps support the company during off years in the political cycle as we have this year.

We have discussed many times part of the reduction in broadcast affiliate retransmission revenues are the result of the network's exploiting the FCC's dreaming loophole to control the distribution of their affiliates signals on virtual distributors.

Recently, the four affiliate board organize the coalition for local news.

Coalition is an important step forward in our long battle by affiliates to regain control of the distribution of our content and to keep for ourselves the value that the virtual mvpds are already painted networks for affiliate signals.

Finally, I'd like to highlight just how strong grays portfolio of high quality television stations really is.

We recently decided to compare comscore as total average audience impressions during prime time for olive Gray television stations to the broadcast and cable networks.

In the month of May 2023 ratings data indicate that gray television stations.

Easily surpassed one of the big four networks audience.

Only a bit less than a total impressions log by the other big three networks.

Is it particularly impressive feat because unlike the big four broadcast networks. Our stations are only available in 36% of U S television households.

In addition in May 2023, Gray's stations total average audience impressions exceeded the combined audiences of Fox News MSNBC and C. N N during primetime hours and during late local hours late news hours.

It bears repeating that the audience across grades television stations exceeded all three Jews networks' combine when our stations are available and just 36% of the country. This concludes my remarks, and I'll now turn the call to Jim Ryan.

Thank you, Kevin and good morning, everyone.

Hilton Pat Sandy and Kevin have covered the key highlights of the quarter and year to date. So my Mark So we're gonna be really very short.

Again on our Q2 results. We are very pleased and we are exceptionally pleased with the core revenue up 4% in the second quarter.

Turning to our guidance for Q3 again, we are extremely pleased that we are saying based on the strength of our strong operating performance of our 113 television stations that we continue to expect core local revenue to be up in.

In the low single digit range.

I will remind everyone again as mentioned in both the release and in the Q that will be filed shortly that the anticipated 33 to 43 million impairment charge relating to the Diamond chapter 11 rejection of our ACC contract.

Is a pre tax non cash and I repeat noncash charge.

And we have a new agreement with the CW to air certain ACC games, which mitigate or the loss of the former diamond contract.

All in all the in and out of all of this is immaterial to this company.

Our full year commentary really has not changed since we first gave full year guidance on our fourth quarter call two quarters ago.

We continue to expect our core revenue will be somewhere around one 5 billion up low single digits.

We continue to expect our retransmission revenue of approximately 1.5 billion again will be up low single digits.

We expect currently our political revenue to be approximately $60 million, which is an improvement of the approximate $50 million range. We provided on our last call.

And our increase.

To $60 million is given the.

Given because of the solid first half political revenues that we just reported and in light of the racket early presidential spending that we have been booking.

We expect our broadcast revenue.

23, eight to be somewhere in the range of $3 $2 billion.

Our operating expenses.

Before depreciation amortization gain and loss on disposal of assets will be approximately $2 5 billion and that would exclude any noncash impairment charges that I just discussed.

<unk> operating expenses, we continue to expect to be in the $2 3 billion range.

Our our reverse network comp, we expect to be approximate approximating $936 million.

Our noncash stock comp will.

It will be approximately 5 million.

I'm, sorry, that's incorrect noncash stock comp of about <unk>.

$20 million.

And our noncash 401k expense will be about $10 million for the year, our corporate expenses will be around $120 million.

Cash uses for the year again has not changed significantly since we first gave you estimates at the beginning of this year, we expect cash interest of about $435 million.

I'll remind everybody that with the 5% sulfur interest rate caps that we put on $6 $2 billion of our floating rate debt in the first quarter.

We are well insulated from further interest rate increases and with the interest rate caps in place.

We are currently at about 95% fixed rate.

Rates on all of our debt.

Cash cash taxes again, we expect to be in the range of $38 million to $46 million for the year that that is including the benefit of a pending refund of approximately $21 million a routine capex is still in the range of about 110 million as.

You know our preferred dividends are consistently $52 million a year.

And again, our required term loan amortization on the term loan D is an annual $15 million.

Consistent with generally consistent with what we've said before we expect our free cash for the year to be in the range of approximately $115 million.

At this point again, I reiterate that we are well positioned midway through 2023 and look forward to a successful conclusion of the rest of the year I will turn the call back to Hilton.

Thank you, Jim well to summarize great generated free cash flow in the second quarter and the company continues to have a strong liquidity profile with no near term maturities as Jim noted, we have an interest rate cap in place to protect us from further interest rate increases on our bank debt.

We envision no changes in our dividend policy, we continue to focus on deleveraging our balance sheet. Finally, while we have no term needs to refinance any of our debt tranches. We are encouraged that the trading levels of our securities continues to recover as macroeconomic recession concerns.

Seem to be abating with half of the year behind US now it is clear that gray has begun in 2023 and a strong fashion and we will finish the year strongly our efforts to deliver the content audiences want and advertisers need are evident in our solid ratings.

Our core advertising results and our successful strategic initiatives.

With the capital investments in Phase one of the Assembly Atlantis Studios development essentially complete.

<unk> Board of directors continue to direct free cash flow to paying down our debt and improving our balance sheet as we progress through the next 18 months of what we expect will be another very strong political advertising cycle.

Operator at this time, we'd like to open up the line for questions from anyone.

Okay.

Just a question. Please press star one on your telephone keypad again to ask your question Press Star one from your telephone keypad.

Our first question is going to come from Aaron Watts with Deutsche Bank Your.

Your line is open.

Hi, everyone. Thanks for having me on today.

Couple of questions, maybe I'll start with.

One on core advertising you grew 4% in Q2, you're guiding flat to up in <unk>. What are the gives and takes in there sequentially just some general softening around the edges.

Parse out national and local for us and how they are trending relative to the low single digit growth in CAD.

And QQ.

Yes, so I'll start and let Jim jump in its pattern.

So.

Look.

I think one factor there is automotive and automotive is up as you heard substantially and it will be up substantially in Q3 working against the positive comp one of the first positive comps we've seen in.

The better part of 10 years from Q2 'twenty two pardon.

Pardon me Q3 'twenty two.

So.

That's part of it but it's overall a very very positive story.

In Q3, we continue to see.

Positive growth from home improvement and legal.

Obviously automotive we talked about and there's a few other categories.

Including communications in the lottery that are that are down a bit but all in all we expect to see a pretty solid performance in Q3.

Yeah Erinn.

As we've commented last summer many calls.

On a relative performance basis, local is performing a little bit better than national.

But we already said earlier in the call that a national auto in Q2 was significantly better than overall local.

I think looking into Q3 that that relative performance between local and national.

It is not.

Not changing luckily, they're both up.

And no surprise to anybody that the local side is doing better and in part I'd point to as Sandy mentioned that said, Pat and Sandy mentioned that very strong.

Results in an emphasis on the.

<unk>.

Creating new local direct business month after month.

Okay. That's helpful. I mean, maybe I'm parsing too thin here, but.

We've heard from some others that maybe national law, which has obviously been choppy the last several quarters.

Perhaps turning a corner.

Is that anything you'd call out there or just.

It's sort of holding steady as you kind of just that.

I think you just said you said it right.

I think from our standpoint since R. R. A local has been exemplary for several quarters relative split.

Relative split we think is holding fairly consistent but we're very very pleased with what they are both doing.

Okay, Alright, great and then.

Okay.

One other quick add to that is.

Remember we've said this many many times over the years, our proportion of local to core is probably much higher than everybody else's. So.

No other people waiting when national tweaks up or down they may see it faster or see it proportionately more but because of our local we just don't see it as much.

No.

Good to hear that your local is hanging in there so understood.

On the Retrans side, it sounds like your underlying subscriber erosion landed down low single digits.

Related to how youre tracking burkey industry overall, I would I would think the general trend we've seen since the pandemic that of job and population growth over indexing in the southeast relative relative to many other areas of the country would play to your benefit.

You think gray over time can be a net benefactor of that the one that may allow you do a little better on the gross retrans side, given that population and job shift to an area I consider a sweet spot for you.

Hi, Eric This is Kevin obviously.

I think that that's a good observation we.

We don't really.

We certainly have a very strong presence in the southeast.

Okay.

Agree as we see population moving into southeast that's more homes, it's more households, that's more.

Pay TV subscriptions and more audience. So.

The southeast grows disproportionately better than the rest of the country, that's probably going to benefit a little bit more than others. That's a fair observation.

Okay. Okay, Alright last one for me and again I appreciate the time I heard the comment around security prices rebounding as perhaps some concerns dampen around the macro picture.

Jim last quarter, you got asked about.

About your bond prices being trading at a discount I think that relationship still exist today.

Any updated thoughts on perhaps using that as a lever to help you.

Used cash to deleverage the balance sheet, which I know is a stated goal of yours.

So Aaron My my answer this quarter just like the last couple of quarters is pretty consistent I will place. It under the banner of I can never say never but consistent with what we've been saying for a while.

I would say the probability of focusing on our 2026 term loan maturities.

As being opportunistic on bond pricing is probably where we will continue to put our focus again on the 26 term loan maturities.

Understood. Thank you Daniel.

Thanks, Tom.

Our next question is going to come from Dan <unk> from benchmark Dan Your line is open.

Great. Thanks, good morning.

I'll just go back to some of the comments around assembly.

I wanted to make sure that we understand that.

The writers strike does not causing any necessarily delayed revenue recognition it sounds like NBC still moving and separately in the release.

$90 million in additional cash proceeds remaining quasi governmental authority.

Land sales later in 2023, I don't know if thats part of the value of our model that incremental can you guys just kind of talk to that and sort of.

Fox on future value unlock there for the real estate in terms of revenue Dan. Please know that the vast majority of what we get is going to be rental income from NBC U as they take possession and literally a couple of days ago.

Dozens of 18 Wheeler trucks.

That were arriving here from all over the country, bringing on.

<unk> cameras growth stuff and everything else and so that will begin and then there are some things that are backed up.

That are talking to us about also leasing the studios that we have kept so I believe that we will start seeing revenue I know that we will start seeing revenue in the fourth quarter of this year.

With regards to reimbursement, we there is a community improvement district.

We have that overlays the entirety of the of the project both Pat and I are on that board and it has north of $100 million in liquidity in the CIB and as issues that are public.

Streets.

Utilities various other things as those are complete and then our assumed by the local municipalities.

Gray is reimbursed from the CIB proportionately and so I think we have received about $39 million ish.

Year to date, and we anticipate more as things kind of mature out and get completed.

Got it so that's just incremental reimbursement that has nothing to do with.

Additional scale leasing.

Ill leasebacks or any other incremental value unlock you could achieve.

Correct correct that it's purely a balance sheet.

Activity it is not a P&L activity.

Okay got it. Thank you and then just going back to the guidance for a second Jim I just also wanted to Doubleclick.

May be lapping.

Station acquisition I know you said, we expect that.

Thank you guys had outperformed the broader industry by viewpoint now on core.

Is that something else that we should be factoring into kind of the Q3 guide that sort of goodness starts to fade a little bit.

We closed two years ago, not one year ago.

Yes, I mean.

Yeah.

We had we closed on Meredith in Quincy two years ago.

We said consistently starting sometime last year through every call.

Since then that we had thought that there was revenue upside in especially in certain Meredith markets.

<unk> consistently said for several quarters that we are.

<unk>.

Reaping the benefit of that assumption that that assumption was never into the synergies of the deal we announced.

We see continuing.

Benefit from the Meredith markets, they're making tremendous progress that's in part why we outperformed I think the industry in Q2 that by a few points, but what I'm reading is by.

Problem, probably close to 8% to 10 points. So please give us credit is due.

And.

That will continue.

For the reasonably foreseeable future in garnering benefit.

We've commented that that both on the local side and on the digital side also to some extent on the national side, but also.

The entire rest of the portfolio is performing very strongly.

So part of it's the Meredith revenues upside story that we've been talking about for a while but the rest of the portfolio is doing very well too.

It certainly wasn't a negative comments im just trying to understand any lapping elements going into Q3. So.

Taken as a negative I just wanted to get some credit.

Yes.

Okay fair enough fair enough.

Last one for Mr. Kevin Obviously, just a question on Retrans just want to make sure that the Q2 numbers that clean.

Mostly because of churn came in below what you expected or was there any noise in Q.

Do you want.

To make sure.

The.

Our retrans our gross came in.

Million higher than our guide because it subs were not as.

Did not decline as much as we had modeled we have been attempting to be particularly conservative in all of our guides.

Over the last year.

A year since the <unk>.

Little surprised on political last fall. So we are.

Again, we're trying to model things.

I'm Conservative so we don't have any negative surprises out there so yes.

Our subs came in a bit better than expected.

Got it alright, thanks, everybody I appreciate it.

Thank you Dan.

Our next question is going to come from John Dixon with Artemis investment Your line is open.

Good morning, Hilton and your team.

I just wanted to tell you as a as an investor in your company I'm very.

Very impressed with your portfolio and the leadership of your team.

One of my question is one of my concerns from a long term picture is your debt load.

I just wanted to <unk>.

And you guys can.

Can you give some more insight.

Into.

What youre doing to pay that debt down.

Let me begin and then I'll, let Jim follow up with all of that.

We have had a pretty direct.

Communication with the street in all of our investors about what our intentions were to do them.

And that was to grow the size of our portfolio and we have allowed our debt ratio to grow into the five range.

And then we have quickly paid it down that happened after the acronym assures that happened after the acquisition of <unk> com.

And we're in the same situation now.

Our percentage ratio in my judgment is is really.

Not totally accurately reflected because we have such a high quality portfolio of television stations. During a political year, we have a very strong proven record of over delivering on political and so as you measure the ratio of the quarters that we have a lot of big political.

Roles and so we have paid down about $600 million in absolute debt over the last.

Several quarters and that is our intention to do that going forward. So I think that you will see us.

Continuing to reduce our ratios in our absolute debt as well.

Well, thank you Hilton and that's really the only question I had then lastly, I'd just like to leave it as I really appreciate the leadership of your team I think youre doing well and I'm very impressed with the quality of your portfolio. Thank you very much you are often honest I certainly appreciate it everybody does John .

Okay.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad to ask a question press star one on your telephone keypad.

Question is going to come from Steven Cahall with Wells Fargo. Your line is open.

Yes, maybe first just pick.

Pick up on the last question so it.

It would be great. Jim if maybe you could just walk through some of the puts and takes to get to free cash flow available for debt Paydown. This year.

I know you talked to a free cash flow number but between maybe some of the dividend then and the Capex how much cash do you think you'll be able to use for debt reduction this year.

And then I assume that is going to be a big number next year. So any kind of look on the amount of debt you might be able to bring down with a big political year coming next year.

Steve.

Our free cash as we define it would.

It would be in the $150 million range.

As you know we define free cash before our common dividend, which is currently running about $28 million a year.

It would also be before the.

Expected net investment for a full year 23 in the Assembly project.

Roughly.

55 ish million dollars on a net basis and a full year.

So we will be paying down some debt.

Late this year.

You are absolutely right and Hilton.

Basically the same thing a couple of minutes ago that historically as you know in political years.

We.

Performed exceptionally well and had four.

Longer than we can remember out indexed on a per capita basis political revenues from anybody in this space.

We see no reason why 24 won't be similar we are certainly not going to put a full year estimate on 24 political issue.

Jim.

Only to say, it's going to be a large number political comes cash you didnt, Dan so for all intents and purposes.

These directory cash flow.

So we will be able to make.

A significant payment.

Debt, especially the latter part of next year I'll remind people that.

For every political season, except for 'twenty, two and it changed slightly in 'twenty two.

History has said that about half of our political in 'twenty two it was slightly less than half of our political but anyways. The vast majority of political what shows up in the fourth quarter of the year.

In 24 will allow us to make a.

Significant debt Paydown, you can look at our investor deck and see what we've done in prior political years too.

Can't guarantee the past is the future.

But if you look at the Investor deck, you can see what we've been able to do in free cash in political years, I think it will be very instructive to everyone.

Thanks, Jim and maybe to follow up on that political fee.

It could be for Jim or for Pat I think your guidance for Q3 and political is lower than what you did pro forma in 2019 is that just some conservatism. After some of the more dynamic nature of political spending and maybe related to that.

How many political impressions do you pick up in core in the back half of the year, because I imagine that's a pretty big tailwind given the level of crowd out you had last year.

It will definitely it'll it'll be impactful in September October in terms of crowd out.

You are right we are being conservative.

For obvious reasons.

Obviously.

<unk>, the former president of huge wildcard.

And his situation I think sort of decades conservatism so.

It could turn out significantly better or it could.

It could fall into a wide range, but.

I think.

Particularly in October of last year, there was a significant.

Sort of crowd out factor September and October .

Yes.

Obviously.

And if you look at it is Steve it again, if you're comparing it to 19 year, we're probably a little more conservative as Pat said, there's probably a reason to be we've obviously had an extremely strong first half performance.

We started the year with a political guide I'd have to go back and look but I think it was closer to $40 million in the current $60 million guide. So certainly our expectations had been improving proving as we've gone along.

You know I think.

Again, keeping in mind that.

This year is except for the early President 24 presidential money. It is a traditional off year.

Traditional off the year is progressing kind of like we would expect it to.

I don't think any visits seen any major red flags yet.

Are there and as Pat said the wildcard in political whether it's Q3 or Q4 is going to be.

What happens with the early 'twenty for especially the early primary states. We certainly expect that we will we will be getting more money on the early primary states as we go through the latter part of the year because of our very strong position in those states.

We'll kind of let the numbers take care of themselves.

All in all for a non political year and we've commented about.

Unimaginable early political spending in 'twenty three going into 'twenty four for the 24 presidential cycle at.

At the end of the day, we think credit political for 'twenty. Three is an off year is going to take care of itself.

Okay.

Thank you and then maybe just the last one for Kevin.

We do kind of our own sub counts and forecast as well in your low single digit number certainly sounds better than ours I think some of the Delta, maybe Paramount flex and Peacock, which I know you do get paid on for your stations as well so.

Number one is that correct in terms of the way Youre doing your sub counts and is there any way to think about the impact of Paramount plus peacock within that low single digit rate that you're at now thank you.

Stephen we have.

Yes.

Always always included.

Every distributor who pays us a fee for the linear distribution of our signals as a distributor when we do subscriber counts and we have always counted a subscriber.

With Paramount Pos and before that CBS all access.

When we count subscribers.

Getting paid a monthly fee per sub for the $24 seven edition of our signals. So we have never excluded them and I don't see a reason to exclude them otherwise.

In terms of magnitude of Paramount pause in Peacock.

Concerned about giving that.

<unk> out.

I think I recall for that.

We're not supposed to be disclosing the.

So no numbers for any distributor.

We provide combined number I think it provides it.

Easy roadmap people to figure out what Paramount pluses numbers are and we're not prepared to do that we are the biggest CBS affiliate.

And so you can presume that.

That's between Peacock and Paramount classics.

Paramount passes a very large part of that Peacock is a fairly small part of that.

Great. Thank you.

Thanks Steven.

Our next question is going to come from Nick <unk> with Stephens, Inc.

Your line is open.

Hey, everyone. Thanks.

First off man do I wish I receive compliments like you just received from the Artemis Investor there.

You're going to follow up I mean come on.

It's always nice to hear and nice of them to detail as I say.

Okay.

Sure.

But if you ask the questions here, if you strip out auto's contribution to growth in the quarter, which I imagine it's back of the envelope math is pretty sizeable assuming auto.

Are those maybe 20% of the mix at this point and obviously growing 20% just curious how you gauge I guess local performance in the quarter and the outlook stripping out auto and if theres really any other verticals to call out that that.

And that is contributing to the growth outlook and commentary.

As we've said consistently for multiple quarters home improvement has continued to be very strong quarter after quarter.

<unk> is no different.

Our expectations for Q3 for that is not different as well based on our long track record and as we've also commented for the last.

Oh at least year, if not longer legal has done exceedingly well.

So you are right part of it is a story about auto rebound, which we had said for a long time would eventually happen and guess what it did.

But there is also again other bright spots.

Someplace in some categories that you would expect.

Fast food, probably a little challenge.

Been challenged for longer now than I can remember.

No surprise, there and things like that and again I think.

That new local business development.

Bump after month quarter after quarter is I mean, that's that's.

Basically not auto that's that's mom and pop.

Growing growing business that is good old fashioned way.

Hum.

Got it that's helpful and then.

Didn't want to talk on the sports rights because you guys you guys kind of brought it up but basically I am wondering if youre able to Brian really any details.

On the structure that <unk> got with the Phoenix SUNS in Mercury and perhaps alternatively.

You spoke to just many different types of structures. These sports deals can take.

I am wondering maybe if you could just actually just walk us through that like what what types of structures do you see just like whether or not there's typically fixed payments potential advertising Rev share agreements just anything to kind of help us understand what the structures look like as potentially more our to be announced as we push forward.

So I'll start it's Pat.

There are independent number of ways you can structure these deals.

There's variances in distribution, whether it's all over the air whether it's some.

Over the year some cable some direct to consumer some over there with direct to consumer there's a lot of ways that can be played there are differences in the way ways. The inventory gets sold.

Does the Reits acquire or sell the inventory does the team sell the inventory who does the production.

Is there a pre and post there's just a ton of different variables.

That that impact those types of discussions.

And I think we're at a point, where all that's sort of starting to get figured out, but it's a very fluid situation and.

And.

As is the.

The diamond situation and we're just monitoring where we need to monitor we're acting where we need to act.

But we do believe there will be opportunity there.

Got it and then last one from me here just on political given.

Some estimates are coming out maybe maybe.

Maybe $11 billion in this cycle, maybe $12 billion for the cycle.

And obviously the potential for there to be some pull forward I guess into 2023 as you look across your markets are there any maybe worth highlighting where you are seeing political AD spend at this point in time significantly above or just different from what you would have seen at this.

This point in time in the last presidential election, there might be a leading indicator of just how large this.

The spend might be as we think about the whole cycle.

Short answer is no.

People arent really advertising outside of the.

For early primary states to any noticeable extent I mean look it's still.

Getting any money now for presidential primary is still a big deal and that's what I was doing really well in the other states that are generally performing well.

Our Governor's race in two states State House race in Virginia.

And then there are some issues that have popped up.

From time to time, but <unk>.

<unk> primary money is.

Has historically been.

19, it was a fourth quarter event now happening little early but it is happening in the primary primarily Iowa for us.

Got it thanks, guys I appreciate it.

Thanks, Nick.

Yeah.

As another reminder, if you would like to ask a question. Please press star one.

Next question is going to come from Alan Gould.

Loop capital your line.

Thank you first question, Kevin can you drill down a little bit more about what the affiliate boards are going to negotiate to get the virtual distribution any benchmarks, we should be looking for or are you trying to literally change laws. So what's can you just give us some more details there.

The focus of the coalition is too.

Courage, the FCC to reopen.

Basically to request comment on a 2014 rulemaking.

I was asking whether the FCC issued updated rules to reflect.

The potential arrival of virtual Mvpds.

Comments submitted in 2014 are obviously scale in 2023.

We are simply at this point the askers for the FCC to reopen proceeding what people tell the FCC was going on.

That's clearly where we're at there has been support both sides of the aisle in the Senate.

Supporting the FCC to again, just opened the window and let us what the SEC here, what's going on.

And what has developed in the nine years since they.

Ask questions about an industry that literally did not exist at that time.

Any timeframe when we should hear whether you actually see chooses to open that window again.

It's entirely up to the chairwoman.

<unk>.

I don't know.

So is it entirely off the chairwoman.

Thanks, Jim two questions for you one is that free cash flow estimate 115 million or 150 million and on <unk> is that all behind us now or is there any potential liability remaining.

So free cash as we define it is approximately 150.

Mhm and.

The.

The issues with the diamond bankruptcy and the impact on our historic.

<unk> is behind US obviously, as we said that technically that's a Q3 event that you've got the numbers there, but it is all behind us at this point and as we've said.

<unk>.

As a result of the diamond rejection in the contract we were able to put a new contract in place with the CW or ACC games.

And I would say that the key.

Clearly the net impact on the company with the ins and outs.

As we move forward is going to be a immaterial.

Significantly immaterial number.

Okay. Thank you very much.

Thank you Aaron.

Our next question is going to come from Craig Huber with Keybanc.

Your line is open.

Thank you I wanted to ask first off.

Obviously your core advertising numbers are much much better than your peers out there I wanted to give you a chance to just explain why you think you guys are outperforming their peers. So much out there. We all have our thoughts up I'd like to hear your bullet points on why you think you're outperforming so much from core please.

Well this is GM onstar, and then I'm going to.

I'll, let Pat and Sandy jump in.

I'm not going to comment on the peers only to acknowledge that obviously the results that we published today.

Seem to be leading the peer group in core advertising.

Within the quarter and year to date.

You'd have to ask them.

I'd respectfully.

Im not going to comment on our peer.

You should ask peers.

What why they think their results or their results certainly cannot answer for them.

Answering for gray.

I think it goes back to what we had been saying literally for decades and.

Q2s results I think again is in many times in the past prove it.

We have the preeminent.

Portfolio with asset quality and the TV broadcast business.

We have had that for decades.

We have always had a focus on strong local operations.

With an exceedingly laser focus on strong local news operations and.

When you got us strong local news operation wrapped around a strong larger overall TV operation and most of the hydrogen 13.

13 markets you operate in.

You have a chance to consistently warm well two exceedingly well to outperforming the peer group.

So what we're saying in this quarter is really no different than what we had said lots of times and lots of other quarters.

I would add on that is Pat I would add.

The risk of being a little bit repetitive.

We talked about our new local direct efforts.

We're packing on north of $30 million, a quarter in new business every quarter and Thats growing.

Talked a little bit about the Meredith impact.

Which we telegraphed back when we closed on Meredith, we thought there was revenue upside there and there is and youre seeing the impact of that.

Finally, and again, something I've talked about quite a bit on previous calls our training efforts and our category focused approach.

That is paying great dividends, we have a really well trained sales staff and we invest in category experts to move our business forward.

I think youre seeing the result of all of that right now.

And my second question, if I could comment.

Comments earlier about the Phoenix SUNS arrangement for games when you sell your stations there.

I was just discussing what percent of the games or number of games you anticipating showing on your TV stations.

Alan.

So we would guess it's in the numbers flexible depending on how many games go to the networks, but historically somewhere on the order of 70 games.

So it's a lot okay.

Obviously, youre, what youre trying to do more of these and other markets. If the opportunity arises I assume because economics must be quite favorable to you.

Yes.

Okay and then also.

What are your local news ratings.

Early morning News and maybe late night can you give us a sense of how those rating trends are doing to separate the two early late day.

Yeah, so yeah.

Look we have a bunch of good television stations and.

I can't sit here and tell you that theres this dramatically dramatic spike.

Up or down the.

The numbers are.

Our large and continue to be large.

Morning News.

Little bit of a little bit noise in morning news numbers around COVID-19.

And.

But we are back sort of.

Any thoughts on that Sandy, yes, it's kind of we are back to normal there, but we have seen especially in some of our larger markets and quite frankly, some of the former Meredith markets, where we've seen our audience in the morning news grow significantly and we're very we're very pleased with that.

The same I would say for late news as well, we're seeing that in several of those markets.

Sorry, so are you, suggesting maybe versus pre pandemic COVID-19 levels, the ratings or stay flat or up.

No. We were just saying there has been a bit of a normalization and we.

We're also saying that.

And the Meredith markets, which are the larger markets. We have we're seeing audience growth in key and in a number of those markets.

Okay. My last question if I could this ongoing Hollywood strike. If this thing continues here do you anticipate any.

Ramifications for your TV stations here.

This is Jim I'll start off and Patterson, you're welcome to join in but we don't see that as a significant headwind one way or the other.

Obviously it will have.

To a modest degree we think some impact on prime time as we move through the fall obviously, it'll all depend on how quickly.

The strikes are settled and as Hilton said, we hope that they are settled amicably for all parties concerned sooner than later, but.

Any strike eventually get settled.

We don't given the limited amount of inventory that we have is we have available to sell on time.

The impact to us as we move through September in fourth quarter is not significant at all I mean, we've seen it before it's not a big deal given again.

The local broadcast niche that we occupy we are we are not a network. So.

No.

Not a super big deal to us.

Great. Thank you.

Yes.

Yeah.

One left to come.

And our last question is going to come from Jim Goss with Barrington Research. Your line is open.

Thank you.

One more on the.

Sports programming, you've been talking about with the Phoenix and the ACC.

Youre, making compelling arguments for setting.

So I think getting involved and I do understand its early stages and trying to figure. This all out but I am wondering how far you do plan to take this how extensive the separate type fee.

And I assume there is pretty good competition.

Four of those rates locally.

Comment on that and the <unk> the big issues always seem to be how does it fit into.

Network scheduling because youre.

And all of the areas where you have.

Network feed.

Interrupt prime time, and a lot of cases I am just wondering how how it blends with that sort of situation.

Sure I'll start Jim it's Pat So we have a number of.

Independent television stations in larger markets.

Phoenix happens to be one of those markets. So in markets, where we have these.

His independence.

Not a problem, it's a great opportunity.

And then I think what youll see on affiliated stations.

Is your use of the sub channels to carry these games. So there is not just the CBS affiliate, but theres other other channels that we are.

Where it would be.

No issues carrying.

Pro sports games.

So theirs.

It's going to vary by market.

But particularly in larger markets, where we do have independence, which include Phoenix Atlanta Portland.

We have two signals in Cleveland.

There are great opportunities there should be great opportunities in those markets.

Okay and.

Okay.

And one last thing after years of scaling up your platform and developing assembly studio.

And a variety of other things.

Do you have any further growth growth ambition, Dan focusing on your high quality expanded platform save for the other 3%.

And getting into the cap limit or are you sitting still for a while and just evaluating which has been undertaken.

Yes.

With regard to the last three points to the cap.

Has said consistently for a long time.

There are no must have stations less.

Our opinion.

Over time.

And I stress over time is clearly theres absolutely nothing today.

But over time, if the right thing came along at the right time when.

Or are we felt good about our leverage.

Say it differently when our leverage was lower would we consider some transaction or a couple of transactions to get the last three percentage points.

That's a definite maybe but it would depend on the circumstances of the time the outlook, we have as a company the price our leverage because again there is no must have left in our view.

Okay.

We have been very clear on assembly that phase one studio project is.

Essentially completed it will be B will wrap up its completion over the next few months.

We have said consistently that there is remaining acreage that remains to be developed and Hilton <unk> opening comments. He talked about that that's a long term project for the company.

That will be exceedingly thoughtful about.

But other than that I think we've been very clear for a long time that we.

We view our Assembly studios is a complementary business to the core operations of the company.

And we've said for a long time that we we are happy to entertain when it makes sense to this company.

Further acquisition of either again potentially core business and TV, although those opportunities are going to be exceedingly limited.

Or other complementary businesses.

It has to make sense to us and we're not going to go off and.

Completely.

Change, what we have been doing for many decades as far as our core business and our core philosophies.

Okay.

Okay. Thank you very much then.

Alright, Thank you Jim.

Yeah.

There are no more questions in queue. So ill turn it back over to you for any closing remarks.

Thank you operator, and thank all of you for joining US this morning, and we look forward to talking to you next quarter have a great weekend.

Thank you for your call you may now disconnect.

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Welcome to the Gray television second quarter 2020 earnings call I will now turn the call over to her and Hello, you may begin.

Thank you operator, good morning, everyone as as Mr. Yu mentioned my name is Hilton Howell Chairman and CEO of Gray television and thank you all for joining us for our second quarter 2023 earnings call.

I'm absolutely delighted that today, we also have with US on this call Sandy <unk>, our long time senior managing Vice President, who recently became graves Chief operating officer welcome standing in addition, and as usual I'm joined by Pat <unk>, Our President and co CEO , Kevin latex, our chief legal and developed.

Officer, and Jim Ryan, Our Chief Financial Officer, and we will begin with a disclaimer that Kevin will provide.

Yes.

Thank you Hilton.

Top banker protocol column unit please.

Thank you Hilton and good morning, everyone Gray uses its website as a key source of company information.

Does that address is www <unk> <unk> dot TV, we will file our quarterly report on Form 10-Q with the SEC later today.

Included on the call, maybe a discussion of non-GAAP financial measures and in particular broadcast cash flow.

Operating cash flow.

Free cash flow and certain leverage ratios.

These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public in their analysis and valuation of our company.

Included in our earnings release as well as on our website a reconciliation to the non-GAAP financial measures to the GAAP measures reported in our financial statements.

Certain matters discussed this call may include forward looking statements regarding among other things future operating results.

Those statements are subject to a number of risks and uncertainties.

Actual results in the future could from those expressed or implied in any forward looking statements. As a result of various important factors that have been set forth in the Companys. Most recent reports filed with the SEC.

Our most recent annual report on Form 10-K, and our most recent earnings release.

<unk> undertakes no obligation to update these forward looking statements I'll now return the call to Hilton.

Thank you Kevin.

TV strong start in the first quarter of 2023 continued through our second quarter today, we beat guidance and consensus estimates on all five key metrics, we beat on core advertising revenue, we beat on retransmission revenue, we beat on political advertising revenue.

We beat on EBITDA, and we beat on free cash flow.

Our TV stations during the quarter, our core advertising revenue increased 4% on a year over year basis with both local and national core up in low single digits on a year over year basis.

And significantly and as we had predicted the auto category also continues to recover strongly for grain.

Meanwhile, political was particularly strong also for our second quarter preceding a presidential election year.

Our strong footprint a number one ranked television stations has and will continue to allow us to over index on political advertising dollars.

As such we are very much looking forward to the 24 presidential election cycle.

The second quarter of 2023 compares quite well to last year's second quarter in which we set all time records for political revenue.

Our advertising clients.

Since the end of the first quarter Grays leadership team has remained very busy on a number of fronts first as we mentioned, we promoted sandy Greenland from senior managing Vice President to the role of our Chief operating officer.

Second we promoted Matt <unk> to Chief revenue Officer, Mike King to Chief Marketing Officer, and Matt Moran to senior managing Vice President.

We reached a historic set of agreements that Paolo flattening will cover in more detail with the Phoenix SUNS and the Mercury to return their games to broadcast television and to expand the teams reach within its market in Arizona by threefold.

We also struck a deal with the CW network covering a package of ACC sports rights that partially mitigated the losses from the unfortunate disruption caused by the Diamond sports bankruptcy.

We are happy to report also that phase one of our Assembly Atlanta studio project is now largely complete.

Today NBC Universal is moving into its new sound stages, middles spaces and offices despite.

Despite the current writers and actors strike, we anticipate that production will begin in the next few months not only in the least NBC you facilities, but also in the newly constructed studios that gray retained for our own use and then for lease to other third party production houses.

We have not yet altered our plans and do not intend to.

And do not anticipate to do so.

<unk> of the writers and actors strike, which we sincerely hope will be resolved amicably in the near term for the good of all parties in our industry.

The investment in Assembly Atlanta over the last few years and particularly during the first half of 2023 is now largely complete we anticipate the remaining construction cost to wrap up and finished the assembly studios portion of the overall project in the second half of this year, we'll be in a range of between 25 and 30.

<unk> million dollars net of expected governmental incentives.

Then reimbursements over the next five to seven years, the Atlanta Assembler development will be completed with various mixed use projects across the remaining roughly two thirds of the site's total acreage.

I will now introduce Pat La flattening to provide more color on our operations Pat. Thanks films during the second quarter of 2023, Gray television stations and production companies continue to executing well it seemingly better than other parts of the advertising ecosystem.

Again, our advertising revenue continues to demonstrate positive results and we expect to see continuing positive trends for the rest of the year.

We read with some dismay storage reporting softness in auto advertising, particularly on the national side.

Those stores are not reflected the great experience at all to the contrary greatest TV stations posted a 20% year over year increase in auto in the second quarter and this increase was led by even larger increases year over year and national auto advertising.

We improved upon that result in second quarter, when we brought in 15% additional revenue from new local direct business over the second quarter of last year.

Political advertising has also been strong as Hilton mentioned.

Now in both the first quarter and the second quarter of 'twenty. Three we have literally doubled the amount of political AD revenue that our current station portfolio received a 19 the last year the preceded a presidential election year.

Political advertising revenue has been particularly strong in Arizona.

Louisiana, Virginia in Iowa, we're.

We're not prepared to make any we're not prepared to make any full year political AD estimates at this time, given the wide range of uncertainties as far out but still we are encouraged by the doubling of political revenue over 2019 levels that we've experienced in the first half of 2023.

At that time, our deal was conditioned on the exploration of an arrangement between diamond sports and the sons and Mercury.

In July the Diamond deal for the SUNS expired and the sons and Mercury deal with Gray became effective.

We're all very excited to be able to present these great teams to all the people of Arizona.

Our discussions with other teams and leagues.

Indicate that the new sports rights rights deal, we have in Arizona can work in other markets as well, where do we replicate that structure or find new ways to partner with professional franchises, we see a growing recognition in the market that returning professional sports to local broadcast stations will increase marketing value advertising sales revenues.

Fan engagement as well as team value.

We're spending a lot of time analyzing this professional sports opportunities.

The coming months, we hope to have more innovative sports rights partnerships to announce that will return local teams to our broadcast stations and to local fans I'll now turn the call to Sandy. Thank you Pat I'm, Sandy <unk> and I'm very happy to join my colleagues on this earnings call, especially when we have so many positive developments and successes personally.

My career began in TV.

And I focused a good amount of my time, the last few years and great local news resources, including our investigate TV in Washington D. C. Operation I'm, Therefore, very honored to join this call when Greg has so much great news to report about its own news effort.

The Foundation also selected Grace K, TTC and Rochester, Minnesota as its small market TV station winner for its fifth district Eagle cancer telephone while.

K wch in Wichita, Kansas and Wty in Dothan, Alabama were named finalists for their exemplary community service.

Also during the second quarter the radio television Digital News Association awarded a combined 78 regional Edward R. Murrow Awards for excellence in journalism to 31 of Gray's local stations.

Parents roster with led by 10 separate awards to Hawaii is now in Honolulu, Hawaii and seven separate awards <unk> in New Orleans, Louisiana.

This September Greg will launch across the stations a new weekday newsmagazine program called investigate TV plus.

The news magazine will showcase groundbreaking investigation, featuring Great Award, winning investigate TV unit, plus consumer health and original content curated from Grace 113 local markets.

<unk> not airing at a consistent time period or having national promotion behind it. The current investigate TV weekend program has been posting ratings that surpassed many well known broadcast and cable programs.

That unlike our weekend program are cleared in 100% of the country.

This tells us that there is an audience for good quality news programming.

Particularly investigative pieces that highlight otherwise unknown issues and that consistently produce results.

It will make the new weekday investigate TV plus programs available for local television stations owned by other broadcasters as well. Thanks for your time and thanks for your interest I will now turn the call to Kevin.

Thank you Sandy.

In the second quarter on a year over year.

Basis, our retransmission revenue grew 3% as a result of contract re pricing at the beginning of 2023.

Our subscriber trends are down low single digits on a year over years, and therefore, essentially matching or slightly beating the industry as a whole.

Consistent with prior years, we expect retransmission revenues to decline somewhat.

The second and third quarters as subscriber churn routinely increases when spring turns into summer.

Retransmission revenues, therefore continue to generate substantial cash flow that helps support the company during off years in the political cycle as we have this year.

Recently, the four affiliate board organize the coalition for local news.

Finally, I'd like to highlight just how strong <unk> portfolio of high quality television stations really is.

We recently decided to compare comscore as total average audience impressions during prime time for all of Gray television stations to the broadcast and cable networks.

In the month of May 2023 ratings data indicate that graze TV stations.

Easily surpassed one of the big four networks audience.

Only a bit less than a total impressions log by the other big three networks.

This is a particularly impressive feat because unlike the big four broadcast networks. Our stations are only available in 36% of U S television households.

It bears repeating that the audience across graze TV stations exceeded all three Jews networks' combined when our stations are available and just 36% of the country. This concludes my remarks, and I'll now turn the call to Jim Ryan.

Thank you, Kevin and good morning, everyone.

Hilton Pat Sandy and Kevin have covered the key highlights of the quarter and year to date. So my remarks, we're going to be really very short.

Again on our Q2 results. We are very pleased and we are exceptionally pleased with the core revenue up 4% in the second quarter.

In the low single digit range.

Is a pre tax non cash and I repeat noncash charge.

And we have a new agreement with the CW to air certain ACC games, which mitigate the loss of the former diamond contract.

All in all the in and out of all of this is immaterial to this company.

Our full year commentary really has not changed since we first gave full year guidance on our fourth quarter call two quarters ago.

We continue to expect our core revenue will be somewhere around $1 5 billion up low single digits.

We continue to expect our retransmission revenue of approximately $1 5 billion again will be up low single digits.

We expect currently our political revenue to be approximately $60 million, which is an improvement of the approximate $50 million range. We provided on our last call.

And our increase.

$60 million is given the give.

Given because of the solid first half political revenues that we just reported and in light of the record early presidential spending that we have been booking.

We expect our broadcast revenue.

<unk> 23 to be somewhere in the range of $3 $2 billion.

Our operating expenses.

Before depreciation amortization gain and loss on disposal of assets will be approximately $2 5 billion and that would exclude any non cash impairment charges that I just discussed.

<unk> operating expenses, we continue to expect to be in the $2 $3 billion range.

Our reverse network comp, we expect to be approximate approximating $936 million.

Our noncash stock comp.

We will be approximately $5 million.

Sorry.

Noncash stock comp of about.

$20 million.

And our noncash 401, K expense will be about $10 million for the year, our corporate expenses will be around $120 million.

Cash uses for the year again has not changed significantly since we first gave you estimates at the beginning of this year, we expect cash interest of about $435 million.

I'll remind everybody that with the 5% sulfur interest rate caps that we put on $6 $2 billion of our floating rate debt in the first quarter.

That we are well insulated from further interest rate increases and with the interest rate caps in place.

We are currently at about 95% fixed.

Rates on all of our debt.

Cash cash taxes again, we expect to be in the range of $38 million to $46 million for the year that that is including the benefit of a pending refund of approximately $21 million. Our routine capex is still in the range of about 110 million.

As you know our preferred dividends are consistently $52 million a year.

And again, our required term loan amortization.

Term loan D is an annual $15 million.

Consistent with generally consistent with what we've said before we expect our free cash for the year to be in the range of approximately $115 million.

At this point again, I reiterate that we are well positioned midway through 2023 and look forward to a successful conclusion of the rest of the year I will turn the call back to Hilton.

Thank you Jim well to summarize.

<unk> generated free cash flow in the second quarter and the company continues to have a strong liquidity profile with no near term maturities as Jim noted, we have an interest rate cap in place to protect us from further interest rate increases on our bank debt, but we envision no changes in our dividend policy.

We continue to focus on deleveraging our balance sheet. Finally, while we have no term needs to refinance any of our debt tranches. We are encouraged that the trading levels of our securities continues to recover as macroeconomic recession concerns seem to be abating with half of the year behind us now.

Now it is clear that gray has begun in 2023 and a strong fashion and we will finish the year strongly our efforts to deliver the content audiences want and advertisers need are evident in our solid ratings, our core advertising results and our success.

<unk> strategic initiatives.

The capital investments in Phase one of the Assembly Atlanta Studios development essentially complete.

Operator at this time, we'd like to open up the line for questions from anyone.

Okay. If you would like to ask a question. Please press star one on your telephone keypad again to ask your question Press Star one from your telephone keypad.

Our first question is going to come from Aaron Watts with Deutsche Bank.

Your line is open.

Hi, everyone. Thanks for having me on today.

Questions here and I'll start with.

One on core advertising grew 4% in Q2, you're guiding flat to up in Q4 did I get it.

<unk> been taken there sequentially, just some general softening around the edges and maybe you could parse out national and local for us and how they are trending relative to the low single digit growth in CAD.

In QQ.

Yes, so I'll start and let Jim jump in its pattern.

So.

Look.

I think one factor there is automotive automotive was up as you heard substantially and it will be up substantially in Q3.

Working against the positive comp over the first positive comps we've seen in <unk>.

The better part of 10 years from Q2 'twenty two.

Q3, 'twenty two so.

That's part of it.

Overall, a very very positive story.

In Q3, we continued to see.

Sure.

Positive growth from home improvement and legal.

Obviously automotive we talked about and there's a few other categories.

Including <unk>.

Communications and lottery that are that are down a bit but all in all we expect to see a pretty solid performance in Q3.

Yes Aaron.

As we've commented last many calls.

On a relative performance basis, local is performing a little bit better than national.

But we already said earlier in the call that the National Auto in Q2 was significantly better than overall local.

I think looking into Q3 that that relative performance between local and national.

Is.

Not changing luckily, they're both up.

And.

No surprise to anybody that the local side is doing better and in part I'd point to as Sandy mentioned that.

Pat and Sandy mentioned that very strong.

Results in emphasis on.

Creating new local direct business month after month.

Okay. That's helpful. I mean, maybe I'm parsing too thin here, but.

We've heard from some others that maybe national which had obviously been choppy the last several quarters.

Perhaps turning a corner.

Is that anything you'd call out there or just.

It's sort of holding steady as you kind of just that.

I think you just said you said Ed.

I think from our standpoint since our.

Local has been exemplary for several quarters that relative split.

Relative split.

Zinc is holding fairly consistent but we're very very pleased with what they are both doing.

Okay, Alright, great and then.

Second proposal.

One other quick add to that is.

Remember we've said this many many times over the years, our proportion of local to core is probably much higher than everybody else's. So.

Other people when when national tweaks up or down they may see it faster or see it proportionally more but because of our local we just don't see it as much.

No that's good to hear that Youre local is hanging in there so understood.

And on the Retrans side, it sounds like your underlying subscriber erosion Atlanta down low single digits.

Related to how youre tracking burkey industry overall, I would I would think the general trend we've seen since the pandemic that a job and population growth over indexing in the southeast relative relative to many other areas of the country would play to your benefit you think gray over time can be a net benefactor of that theme.

One that May allow you did a little better on the gross retrans side, given that population and job shift to an area I consider a sweet spot for you.

Hi, Erin.

This is Kevin obviously.

I think that that's a good observation.

We don't really.

Certainly have a very strong presence in the southeast.

I agree.

We see population moving into southeast that's more homes as more households, that's more.

Pay TV subscriptions and more audience. So.

The southeast grows disproportionately better than the rest of the country, that's probably going to benefit a little bit more than others. That's a fair observation.

Okay, Okay, Alright, and last one for me and again I appreciate the time I heard the comment around security prices rebounding as perhaps.

Concerns dampen around the macro picture.

Jim last quarter, you got asked about.

About your bond prices being trading at a discount I think that relationship still exists today.

Any updated thoughts on perhaps using that as a lever to help.

Used cash to deleverage the balance sheet, which I know is a stated goal of yours.

I would say the probability of focusing on our 2026 term loan maturities versus being opportunistic on bond pricing is probably where we will continue to put our focus again on the 26 term loan maturities.

Understood. Thank you Daniel.

Thanks Darren.

Our next question is going to come from Dan <unk> from benchmark Dan Your line is open.

Great. Thanks, good morning.

I'll just go back to some of the comments around Assembly I just wanted to make sure that we understand that.

The writers strike is not causing any necessarily delayed revenue recognition it sounds like a bill moving in and separately in the release.

$90 million in additional cash proceeds for me quasi governmental authority.

Land sales later in 2023, I don't know if thats part of the value model of that incremental can you guys just kind of talk to that and sort of.

Box on future value unlock there for the real estate in terms of revenue Dan. Please know that the vast majority of what we get is going to be rental income from NBC U as they take possession and literally a couple of days ago.

Dozens of 18 Wheeler trucks.

That were arriving here from all over the country, bringing on.

<unk> cameras growth stuff and everything else and so that will begin and then there are some things that are backed up.

That are talking to us about also leasing the studios that we have kept so I believe that we will start seeing revenue I know that we will start seeing revenue in the fourth quarter of this year.

With regards to reimbursement, we there is a community improvement district.

We have that overlays the entirety of the of the project both patent and I are on that board and it has north of a $100 million in liquidity in the CIB and as issues that are public.

Streets.

Utilities various other things as those are complete and then our assumed by the local municipalities.

Gray is reimbursed from the CIB proportionately and so I think we have received about $39 million ish.

Year to date, and we anticipate more as things kind of mature out.

Get completed.

Got it so that's just incremental reimbursement that has nothing to do with additional scale or sale leasebacks or any other incremental value unlock you can achieve real estate correct correct that it's purely a balance sheet.

Activity it is not a P&L activity.

Okay got it. Thank you and then just going back to the guidance for a second Jim I, just also want to Doubleclick.

Maybe lapping Meredith.

<unk> acquisition I know you said, we expect that.

Thank you guys had outperformed the broader industry by viewpoint now on core.

Is that something else that we should be factoring into kind of the Q3 guide that sort of good news starts to fade a little bit.

We closed two years ago, not one year ago, So, yes, I mean.

Yeah.

We had we closed on Meredith in Quincy two years ago.

We said consistently starting sometime last year through every call.

Since then that we had thought that there was revenue upside in especially in certain Meredith markets. We have consistently said for several quarters that we are.

<unk>.

Reaping the benefit of that assumption that that assumption was never built into the synergies of the deal we announced.

We see continuing.

Benefit from the Meredith markets, they're making tremendous progress that's in part why we outperformed the industry in Q2 backed by a few points, but what I'm reading is by.

Probably close to 8% to 10 points. So please give us credit is due.

And.

That will continue.

For the reasonably foreseeable future in garnering benefit.

We've commented that that both on the local side and on the digital side also to some extent on the national side, but also.

The entire rest of the portfolio is performing very strongly.

So part of it's the Meredith revenues are upside story that we've been talking about for a while but the rest of the portfolio is doing very well too.

Yeah.

It certainly wasn't a negative comments I'm, just trying to understand any lapping elements going into Q3. So.

Taken as a negative I just wanted to get some credit.

Yes.

Okay Fair enough fair enough Jim.

Last one for Mr. Kevin Obviously, just a question on Retrans just wanted to make sure that the Q2 numbers that clean.

Because even below what you expected or was there any.

And then what drove that in Q1.

To make sure.

The.

Our retrans growth came in.

<unk> was higher than our guide because of the subs were not as.

Oh.

Did not decline as much as we had modeled we have been attempting to be particularly conservative in our guidance.

Over the last.

Year since the <unk>.

Little surprised on political last fall. So we are.

Again, we're trying to model things.

Conservative, but we don't have any negative surprises out there so yes.

Our subs came in a bit better than expected.

Got it alright, thanks, everybody I appreciate it.

Thank you Dan.

Our next question is going to come from John Dixon with Artemis investment Your line is open.

Good morning, Hilton and your team.

I just wanted to tell you as a as an investor in your company I'm very <unk>.

Very impressed with your portfolio and the leadership of your team.

One of my question is one of my concerns from a long term picture is your debt load.

I just wanted to <unk>.

So you guys can.

Can you give some more insight.

Into.

Or what youre doing to pay that debt down.

Let me begin and then I'll, let Jim follow up with all of that.

We have had a pretty direct.

Communication with the street in all of our investors about what our intentions were to do an.

And that was to grow the size of our portfolio and we have allowed our debt ratio to grow into the five range.

And then we have quickly paid it down that happened after the ackman assures that happened after the acquisition of <unk> com.

And we're in the same situation now.

Our percentage ratio in my judgment is is really.

Roles and so we have paid down about $600 million in absolute debt over the last.

Several quarters and that is our intention to do that going forward. So I think that you will see us.

Continuing to produce our ratios in our absolute debt as well.

Well, thank you Hilton and that's really the only question I had then lastly, I'd just like to leave it as I really appreciate the leadership of your team I think youre doing well and are very impressed with the quality of your portfolio. Thank you very much you are awfully nice I certainly appreciate it everybody does John .

Okay.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, Jack a question Star one on your telephone keypad.

Next question is going to come from Steven Cahall with Wells Fargo. Your line is open.

Yes, maybe first just a pick.

Pick up on the last question so it.

It would be great. Jim if maybe you could just walk through some of the puts and takes to get to free cash flow available for debt Paydown. This year.

I know you talked to a free cash flow number but between maybe some of the dividend then and the Capex how much cash do you think youll be able to use for debt reduction this year.

I assume that is going to be a big number next year. So any kind of work on the amount of debt you might be able to bring down with a big political year coming next year.

Steven I said, our free cash as we define it would.

Would be in the $150 million range.

As you know we define free cash before our common dividend, which is currently running about $28 million a year.

It would also be before the.

Expected net investment.

For a full year 23 in the Assembly project.

Roughly.

The five ish million dollars on a net basis and a full year.

So we will be paying down some debt.

Late this year.

You are absolutely right and Hilton base.

Basically the same thing a couple of minutes ago that that historically as you know in political years.

We.

Performed exceptionally well and had four.

The longer then we can remember out indexed on a per capita basis political revenues from anybody in the peer space.

We see no reason why 24 won't be similar we are certainly not going to put a full year estimate on 24 political as you can.

Imagine.

Only to say, it's going to be a large number political comes cash you didnt, Dan so for all intents and purposes.

Our record cash flow.

So we will be able to make a significant payment that especially the latter part of next year I'll remind people that.

For every political season, except for 'twenty, two and it changed slightly in 'twenty, two but history has said that about half of our political in 'twenty. Two it was slightly less than half of our political but anyways. The vast majority of political that shows up in the fourth.

Quarter of the year, which in 2004 will allow us to make a.

Significant debt Paydown, you can look at our investor deck and see what we've done in prior political years too.

Can't guarantee the past is the future, but if you look at the Investor deck, you can see what we've been able to do in free cash in political years, I think it will be very instructive to everyone.

Okay.

Thanks, Jim and maybe to follow up on that political theme.

Yes, it could be for Jim or for Pat.

I think your guidance for Q3 and political is lower than what you did pro forma in 2019 is that just some conservatism. After some of the more dynamic nature of political spending and maybe related to that.

Cat, how many political impressions do you pick up in core in the back half of the year, because I imagine that's a pretty big tailwind given the level of crowd out you had last year.

It'll definitely it'll it'll be impactful in September October in terms of crowd out.

You are right, we are being conservative and for obvious reasons.

Obviously, the former president of huge wildcard.

And his situation I think sort of decades conservatism so.

It could turn out significantly better or it could it could.

Followed a wide range, but.

I think.

Particularly in October of last year, there was a significant.

So in a crowd out factor September and October .

Yes.

Obviously.

And if you look at it is Steve It again, if you're comparing an 19 year, we're probably a little more conservative as Pat said, there's probably a reason to be we've obviously had an extremely strong first half performance.

We started the year with a political guide I'd have to go back and look but I think it was closer to $40 million in the current 60 million guide. So certainly our expectations had been improvement improving as we've gone along.

You know I think.

Again, keeping in mind that.

This year is <unk>.

Except for the early President 24 presidential money it is a traditional off year.

Traditional off years progressing kind of like we would expect it to.

I don't think any of us have seen any major red flags yet.

There and as Pat said, the wildcard in political whether it's Q3 or Q4 is going to be.

What happens with the early 'twenty for especially the early primary states. We certainly expect that we will we will be getting more money on the early primary states as we go through the latter part of the year, because we were very strong position in those states.

We'll kind of let the numbers take care of themselves.

All in all for a non political year and we've commented about.

Iron imaginable early political spend in 'twenty three going into 'twenty four for the 24 presidential cycle.

At the end of the day, we think political for 'twenty. Three is an off year is going to take care of itself.

Okay.

Thank you and then maybe just the last one for Kevin.

Stephen we have.

Yes.

Always always included.

Every distributor who pays us a fee for the linear distribution of our signals as a distributor when we do subscriber counts and we have always counted a subscriber.

With Paramount Pos and before that CBS all access.

When we count subscribers.

Or getting paid a monthly fee per sub for the $24 seven <unk> of our signals. So we have never excluded them and I don't see a reason to exclude them otherwise.

In terms of magnitude of Paramount plus Peacock.

Concerned about giving that.

<unk> out.

I think every call for that.

We're not supposed to be disclosing the.

So no numbers for any distributor.

We provide combined number I think it provides it.

Easy roadmap for people to figure out what Paramount pluses numbers are at and we're not prepared to do that we are the biggest CBS affiliate.

And so you can presume that that's between Peacock and Paramount classics.

Paramount passes a very large part of that and Peacock is a fairly small part of that.

Great. Thank you.

Thanks Steven.

Our next question is going to come from Nick <unk> with Stephens, Inc. Nick Your line is open.

Hey, everyone. Thanks.

First off man do I wish I received complements like you just received from the Artemis Investor there.

You're going to follow.

It has been and its always nice to hear a nicer them to detail as I say.

Okay.

Sure.

But if you move to the questions here, if you strip out auto's contribution to growth in the quarter, which I imagine is.

Back of the envelope math is pretty sizeable assuming odd.

That is contributing to the growth outlook and commentary.

As we've said consistently for multiple quarters home improvement has continued to be very strong quarter after quarter.

<unk> is no different.

Our expectations for Q3 for that is not different as well based on our long track record and as we've also commented for the last.

Oh at least year, if not longer legal has done exceedingly well.

So you are right part of it is a story about auto rebound, which we had said for a long time would eventually happen and guess what it did.

But there is also again.

Other bright spots someplace in some categories that you would expect.

Fast food, probably a little challenge, but that's.

Been challenged for longer now than I can remember.

No surprise, there and things like that and again I think.

That new local business development.

Bump after month quarter after quarter is I mean, that's that's.

<unk> basically not auto thats that mom and pop.

Growing growing business that is good old fashioned way.

Hmm.

Got it that's helpful and then.

Didn't want to talk on the sports rights because you guys you guys kind of brought it up but basically I am wondering if youre able to Brian really any details.

On the structure that you've got with the Phoenix SUNS in Mercury and perhaps alternatively.

You spoke to just many different types of structures. These sports deals can take.

I'm wondering maybe if you could just actually just walk us through that like what what types of structures do you see just like whether or not there is typically fixed payments potential advertising Rev share agreements just anything to kind of help us understand what the structures look like as potentially more our to be announced as we push forward.

So I'll start it's Pat.

There are a number of ways you can structure these deals.

There's variances in distribution, whether it's all over the air whether it's some.

Over the year some cable some direct to consumer some over there with direct to consumer there is a lot of ways that can be played there are differences in the way the ways the inventory gets sold.

Does the Reits acquire or sell the inventory does the team sell the inventory who does the production.

Is there a pre and post there's just a ton of different variables.

That that impact those types of discussions.

And I think we're at a point where all of that.

<unk> sort of starting to.

Get.

It out, but it's a very fluid situation and.

And.

As is the the.

The diamond situation and we're just monitoring where we need to monitor we're acting where we need to act.

But we do believe there will be opportunity there.

Got it and then last one from me here just on political given.

Some estimates are coming out maybe maybe.

Maybe $11 billion in this cycle, maybe $12 billion for the cycle.

Point in time in the last presidential election that might be a leading indicator of just how large this.

The spend might be as we think about the whole cycle. Thanks.

Short answer is no.

People arent really advertising outside of the.

For early primary states to any noticeable extent I mean look it's still.

Getting any money now.

Presidential primary is still a big deal for Io is doing really well in the other states that are generally performing well.

The Governor's race in two states State House race in Virginia.

And then there are some issues that have popped up.

From time to time, but.

Presidential primary money is.

Has historically been.

19, it was a fourth quarter event.

Now happening little early but it is happening in the primary.

Italy, Iowa for us.

Got it thanks, guys I appreciate it.

Thanks, Nick.

Okay.

As another reminder, if you would like to ask a question. Please press star one.

Question is going to come from Alan Gould.

Loop capital your line.

The focus of the coalition is too.

Courage, the FCC to reopen.

Basically to request comment on a 2014 rulemaking.

That was asking whether the FCC issued updated rules to reflect.

The potential arrival of virtual Mvpds.

Comments submitted in 2014 are obviously scale in 2023.

Our simple yet at this point the ask is for the SEC reopened preceding what people tell the FCC was going on.

That's where we're at there has been support.

Both sides of the aisle in the Senate.

Supporting the FCC to again, just opened the window and let us with the SEC here, what's going on.

And what has developed in the nine years since they.

Ask questions about an industry that literally did not exist at that time.

Any timeframe on when we should hear whether it's the FCC chooses to open that window again.

It's entirely up to the chairwoman.

Sure.

I don't know.

So entirely off the chairwoman.

Thanks, and Jim two questions for you one is that free cash flow estimate 115 million or 150 million and on diamonds towards is that all behind us now or is there any potential liability remaining.

So free cash as we define it is approximately 150.

Mhm and.

The.

The issues with the diamond bankruptcy and the impact on our historic.

<unk> is behind US obviously, as we said that technically that's a Q3 event that you've got the numbers there, but it is all behind us at this point and as we've said.

<unk>.

As a result of the diamond rejection of the contract we were able to put a new contract in place with the CW or ACC games.

And I would say that the <unk>.

Clearly the net impact on the company with the ins and outs as we move forward is going to be a in mid tier.

Significantly immaterial number.

Okay. Thank you very much.

Thank you Aaron.

Our next question is going to come from Craig Huber with Keybanc.

Your line is open.

Thank you I wanted to ask first off.

Obviously your core advertising numbers are much much better than your peers out there I wanted to give you a chance to just explain why you think you guys are outperforming their peers. So much out there. We all have our thoughts I would like to hear your bullet points on why you think you're outperforming so much on core please.

Well this is GM onstar, and then I'm going to.

I'll, let Pat and Sandy jump in.

I'm not going to comment on the peers only to acknowledge that obviously the results that we published today.

Seem to be leading the peer group in core advertising.

Within the quarter and year to date.

You'd have to ask them I would respectfully.

Im not going to comment on appear.

You should ask peers.

What why they think their results or their resolve certainly cannot answer for them.

Answering for gray.

I think it goes back to what we had been saying literally for decades and.

Q2s results I think again is it many times in the past prove it.

We have the preeminent.

Portfolio with asset quality in the TV broadcast business.

We have had that for decades.

We have always had a focus on strong local operations.

<unk> been exceedingly laser focus on strong local news operations.

When you got us strong local news operation wrapped around a strong larger overall TV operation and most of the hydrogen 13.

Our 13 markets you operate in.

You have a chance to consistently warm well do exceedingly well to outperforming the peer group.

So what we're saying in this quarter is really no different than what we had said lots of times and lots of other quarters.

I would add on that pad I would add.

The risk of being a little bit repetitive.

We talked about our new local direct efforts.

We're packing on north of $30 million, a quarter in new business every quarter and Thats growing.

We talked a little bit about the Meredith impact.

Which we telegraphed back when we closed on Meredith, we thought there was revenue upside there and there is and youre seeing the impact of that.

Finally, and again, something I've talked about quite a bit on previous calls our training efforts and our category focused approach that is paying great dividends, we have a really well trained sales staff and we invest in category experts to move our business forward.

Youre seeing the result of all of that right now.

And my second question, if I could your comments earlier about the Phoenix SUNS arrangement for games and Youre right on your stations there.

How can you just discuss if you would.

What percent of the games or number of games, you anticipating showing on your TV stations.

Susan.

So we would guess it's a <unk>.

<unk> flexible depending on how many games go to the networks, but historically somewhere on the order of 70 games.

So it's a lot okay.

Just curious what you are trying to do more of these and other markets. If the opportunity arises I assume good economics must be quite favorable to you.

Yes.

Okay and then also on.

Your local news ratings.

Early morning News and maybe late night can you give us a sense of how those rating trends are doing to give separate the too early and late day.

So yeah.

Yes.

Look we have a bunch of good television stations and.

I can't sit here and tell you that theres this dramatically dramatic spike.

Up or down.

The numbers are.

Our large and continue to be large.

Morning News.

Little bit of a little bit of noise in morning news numbers around COVID-19.

Ed.

But were back sort of.

Any thoughts on that Sandy yes. It is kind of we are back to normal there, but we have seen especially in some of our larger markets and quite frankly, some of the former Meredith markets, where we've seen our audience in the morning news grow significantly and we're very we're very pleased with that.

And the same I would say for late news as well, we're seeing that in several of those markets.

Sorry, so are you, suggesting maybe versus pre pandemic 2019 levels, the ratings or stay flat or up.

No we.

We were just saying there has been a bit of a normalization and.

We're also saying that.

Meredith markets, which are the larger markets, we have we're seeing audience growth in it.

And a number of those markets.

Okay. My last question, if I could this ongoing Hollywood strike.

If this thing continues here do you anticipate any.

Negative ramifications for your TV stations here.

This is Jim I'll start off.

Patterson, you're welcome to join in but we don't see that as a significant headwind one way or the other.

Obviously it will have.

Modest degree, we think some impact on prime time, as we move through the fall obviously, it all depends on how quickly.

The strikes are settled.

Hilton said, we hope that they are settled amick globally for all parties concern sooner than later, but.

Any strike eventually get settled.

We don't given the limited amount of inventory that we have is we have available to sell on time.

The impact to us as we move through September in fourth quarter is not significant at all I mean, we've seen it before.

It's not a big deal given again.

The local broadcast niche that we occupy we are we are not in network. So.

Yeah.

Not a super big deal to us.

Great. Thank you.

Yeah.

One a lot too.

And our last question is going to come from Jim Goss with Barrington Research.

Your line is open.

Thank you.

One more on the.

Sports programming, you've been talking about with the Phoenix and the ACC.

Youre, making compelling arguments for.

I think getting involved and I do understand its early stages and trying to figure. This all out but I am wondering how far you do plan to take this how extensive the separate type fee.

And I assume theres pretty good competition.

Four of those rates locally.

Comment on that and the <unk> the big issues always seem to be how does it fit into.

Network scheduling because youre.

No.

And all of the areas where you have.

Network feed.

Interrupt prime time, and a lot of cases I'm, just wondering how how it blends with that sort of situation.

Sure I'll start Jim it's Pat.

So we have a number of.

Independent television stations in larger markets.

Phoenix happens to be one of those markets. So in markets, where we have these.

These independents, it's not a problem, it's a great opportunity and then I think what youll see on affiliated stations.

Is use of the sub channels to carry these games. So there is not just the CBS affiliate, but theres other other channels that we are.

Where it would be there would be no issues carrying.

Pro sports games.

Sure.

So theirs.

It's going to vary by market.

But particularly in larger markets, where we do have independence, which include Phoenix Atlanta Portland.

We have two signals in Cleveland.

There are great opportunities there should be great opportunities in those markets.

Okay.

<unk>.

Okay.

And one last thing after years of scaling up your platform and developing assembly studio.

And a variety of other things.

Do you have any further growth growth ambition, Dan focusing on your high quality expanded platform.

For the other 3%.

And getting into the cap limit or are you sitting still for a while and just evaluating which has been undertaken.

Yes.

With regard to the last three points to the cap, we have said consistently for a long time.

There are no must have stations less in.

In our opinion.

Over time.

And I stress over time, because clearly there is absolutely nothing today.

But over time, if the right thing came along at the right time when.

Or are we felt good about our leverage.

Say it differently when our leverage was lower would we consider some transaction or a couple of transactions to get the last three percentage points.

Thats, a definite maybe but it would depend on the circumstances of the time the outlook, we have as a company the price our leverage because again there is no must have left in our view.

Okay.

We have been very clear on assembly that the phase one studio project is.

Essentially completed it will be can be will wrap up its completion over the next few months.

We have said consistently that there is remaining acreage that remains to be developed and Hilton <unk> opening comments. He talked about that that's a long term project for the company.

That will be exceedingly thoughtful about.

But other than that.

We've been very clear for a long time that.

We view Assembly studios is a complementary business to the core operations of the company.

We've said for a long time that we we are happy to entertain when it makes sense to this company.

Further acquisitions of either again potentially core business and TV, although those opportunities theyre going to be exceedingly limited.

Or other complementary businesses, but it has to make sense to us and we're not going to go off and <unk>.

Completely.

Change, what we have been doing for many decades as far as our core business and our core philosophies.

Okay. Thank you very much then.

Alright, Thank you Jim.

There are no more questions in queue. So ill turn it back over to you for any closing remarks.

Thank you operator, and thank all of you for joining US this morning, and we look forward to talking to you next quarter have a great weekend.

Thank you for your call you may now disconnect.

Q2 2023 Gray Television Inc Earnings Call

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