Q4 2024 Gray Media Inc Earnings Call
Operator: Ladies and gentlemen, thank you for holding. Your call will begin momentarily.
Ladies and gentlemen, thank you for holding your call will begin momentarily.
Once again, thank you for holding your call will begin momentarily.
[music].
Operator: Good morning and welcome ladies and gentlemen to the Gray Media 2024 Q4 earnings If you'd like to ask a question, you may press star one on your telephone keypad at any time during the call. Once again, that's star one on your telephone keypad to join the question And without further ado, I will now turn the program over to Chairman and CEO, Mr. Hilton Howell. Thank you so much, operator. And good morning, everyone. As the operator mentioned, I'm Hilton Howell, the Chairman and CEO of Gray Media. Thank you all for joining our quarter 2024 earnings call.
Speaker Change: Good morning, and welcome ladies and gentlemen to the great beauty, our 'twenty 'twenty four Q4 earnings call if you'd like to ask a question you May press star one on your telephone keypad at any time during the call.
Once again Thats star one on your telephone keypad to join the question queue.
Speaker Change: And without further Ado I will now turn the program over to chairman and CEO, Mr. Hilton Howell.
Speaker Change: Thank you so much operator, and good morning, everyone as the operator mentioned I'm Hilton Howell, the chairman and CEO of Graham media. Thank you all for joining our fourth quarter 2024 earnings call with me here as usual and Atlanta all of our executive officers patent me, our president and co CEO Sandy Greenland.
Hilton Howell: With me here, as usual, in Atlanta, are all of our executive officers, Pat LaPlatney, our President and Co-CEO, Sandy Breland, our Chief Operating Officer, Kevin Latek, our Chief Legal and Development Officer, and Jeff Gignac, our Chief Financial Officer.
Speaker Change: Chief operating officer, Kevin <unk>, our chief legal and development Officer, and Jeff <unk>, Our Chief Financial Officer as usual, we will begin with the riveting disclaimer that Kevin will provide alright. Thank you Hilton.
Kevin Latek: As usual, we will begin with the riveting disclaimer that Kevin will provide. Thank you, Hilton. Great introduction.
Kevin Latek: Good morning, everyone. Today, we filed on Form 8K, our earnings release and investor presentation. Later today, we will file the SEC, our annual report on Form 10K. These materials are all available on our website, which is www.graymedia.com.
Speaker Change: Great introduction good morning, everyone. Today, we file on form 8-K, our earnings release and Investor presentation.
Speaker Change: Later today, we will file with the U S. You see our annual report on Form 10-K. These materials are all available on our website, which is www Gray media Dot com.
Kevin Latek: Included on the call may be a discussion of non-GAAP financial measures and in particular adjusted EBITDA, leverage ratio denominator, and certain leverage ratios. These metrics are not meant to replace GAAP measurements but are provided as supplements to assist the public in its analysis and valuation of our company. Further discussions and reconciliations of the company's non-GAAP financial measures to comparable GAAP measures can be found on our website.
Speaker Change: Included on the call, maybe a discussion of non-GAAP financial measures and in particular adjusted EBITA.
Speaker Change: Reaching the dominator and Sir.
Speaker Change: Leverage ratios. These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public in its analysis and valuation of our company.
Speaker Change: Further discuss further discussion and reconciliations of the company's non-GAAP financial measures to comparable GAAP measures can be found on our website all statements and comments made by management during this conference call.
Kevin Latek: All statements and comments made by management during this conference call, other than statements of historical fact, should be deemed forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statement as a result of various important factors that are contained in our most recent filings with the SEC.
Speaker Change: Other than statements of historical facts should be deemed forward looking statements. These forward looking statements are subject to a number of risks and uncertainties.
Speaker Change: Actual results in the future could differ from those described in the forward looking statements as a result of various important factors that are contained in our most recent filings with the FCC.
Kevin Latek: We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Milton: We undertake no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise, we now turn the call me Milton. Thank you, Kevin and you do that particularly well good morning again, everyone.
Hilton Howell: I now turn the call to Hilton. Thank you, Kevin. You do that particularly well.
Hilton Howell: Good morning again, everyone. For many reasons, today is a great day to discuss with you the state of our company and its direction. This past Sunday, on NBC and obviously all of our NBC-affiliated stations, Grosse Pointe Garden Society, the first of the broadcast shows produced at our own Assembly Studios, premiered at 10 p.m. Eastern Time. Next, this Monday, on CBS, the first new soap opera in over 30 years, Beyond the Gates, also shot at Assembly, premiered at 3 p.m. Eastern Time, and then every day so far this week on all of our stations and across the country.
Speaker Change: Many reasons today.
Milton: He has a great day to discuss with you the state of our company and its direction. This past Sunday on NBC and obviously all of our NBC affiliated stations gross point Garden's Society. The first of the broadcast shows produced at our own Assembly Studios premiered at 10 P.
Speaker Change: Eastern time.
Milton: This Monday.
Speaker Change: C B S.
Speaker Change: First new soap opera and over 30 years beyond the gates also shot at Assembly premiered at three P. M. Eastern time, and then every day. So far this week on all of our stations and across the country significantly the gates is a co production with <unk>.
Hilton Howell: Significantly, The Gates is a co-production between CBS and the NAACP that focuses on a very successful African-American family in Maryland, the Dupree family, a milestone show in broadcast history. And we are exceptionally proud to help get it on the air out of Assembly Studios here in Atlanta.
Speaker Change: Wayne CBS and double a C. P that focuses on a very successful African American family in Maryland, The Dupree family.
Speaker Change: Milestone show in broadcast history, and we are exceptionally proud to help get it all the air out of Assembly studios here in Atlanta.
Hilton Howell: And tonight, we are thrilled to reinforce the news that across 24 great television markets, the Atlanta Braves, America's team, will debut on live television from spring training in Florida. Tonight's game against the Washington Nationals will be the first of 10 preseason games produced by Braves that will air across Braves Nation. And we will follow up with 15 regular season games simulcast across the same footprint. These are accomplishments that we are truly proud of.
Speaker Change: And Tonight, we are thrilled to reinforce the news that across 24 Gray television markets. The Atlanta Braves Americas team will debut on live television from spring training in Florida.
Speaker Change: It's game against the Washington Nationals will be the first of 10 pre season games produced by grade that will air across Braves nation, and we will follow up with 15 regular season games simulcast across the same footprint.
Speaker Change: These are accomplishments that we are truly proud off now, let's turn to our financials.
Hilton Howell: Now, let's turn to our financials. We are very happy to announce that our results for the fourth quarter finish better than our guidance on both revenues and expenses. Total revenue in the fourth quarter of 2024 was $1 billion, an increase of 21% from the fourth quarter of 2023. Total operating expenses in the fourth quarter of 2024 were 2% below, below end of our previously announced guidance. Net income attributable to common stockholders was $156 million in the fourth quarter of 2024 compared to a net loss attributable to common stockholders of $22 million in Q4 2023. Adjusted EBITDA was $402 million in the fourth quarter of 2024, an increase of 86% from the fourth quarter of 2023, due primarily to political advertising revenue.
Speaker Change: We are very happy to announce that our results for the fourth quarter finished better than our guidance on both revenues and expenses total revenue in the fourth quarter of 2024 was $1 billion, an increase of 21% from the fourth quarter with 2023.
Speaker Change: Total operating expenses in the fourth quarter of 'twenty 'twenty four were 2% below the low end of our previously announced guidance.
Speaker Change: Net income attributable to common stockholders was 156 million in the fourth quarter of 2024 compared to a net loss attributable to common stockholders of 22 million in Q4 was <unk> 20.
Speaker Change: 'twenty three.
Speaker Change: Adjusted EBITDA was 402 million in the fourth quarter of 24, an increase of 86% in the fourth quarter of 2023, due primarily to political advertising revenue.
Hilton Howell: In addition to these operating results, we're proud of the progress we made on our balance sheet during the fourth quarter. Just two weeks after our third quarter earnings call, we announced that we had completed a series of transactions that collectively reduced the company's principal amount of debt outstanding by $278 million since October 1st. During the full year of 2024, we reduced the company's total principal debt by $520 million, exceeding our half a billion dollar goal. That November announcement was a fitting way to complete the year in which we executed on our pledge to concentrate our free cash on reducing our debt and improving our balance sheet.
Speaker Change: Tissue to these operating results, we're proud with the progress we made on our balance sheet.
Speaker Change: Fourth quarter, just two weeks after our third quarter earnings call, We announced we had completed a series of transactions that collectively reduced the company's pencil amount of debt outstanding.
Speaker Change: 278 million since October 1st during the full year of 'twenty 'twenty four we reduced the company's total principal debt by $520 million.
Speaker Change: Feeding our half a billion dollar goal.
Speaker Change: The announcement was a fitting way to complete the year in which we executed on our pledge to concentrate our free cash and reducing our debt and improving our balance sheet. In addition to reducing our total debt during the year.
Hilton Howell: In addition to reducing our total debt during the year, we also refinanced our debt to extend our maturity dates, increased our revolving loans available, and greatly lowered our capital spending as we completed numerous projects. In the end, we finished the end with a lower leverage ratio than we began the year.
Speaker Change: We also refinanced our debt to extend our maturity dates increased our revolving loans available oh greatly lowered.
Speaker Change: Our capital spending as we completed numerous projects.
Speaker Change: We finished with a lower leverage ratio than we began the year.
Hilton Howell: Operationally, we continued to enhance our local content offerings in 2024. We devoted tremendous efforts to reaching new... Local Sports back to our television station. Last year's milestones included a historic deal that, as I have mentioned earlier, brings Atlanta Braves games back to broadcast on Gray's TV stations in our hometown of Atlanta and throughout most of the Southeast this spring. We also renewed our affiliation agreement with the ABC network for four additional years. In 2024, our Investigate TV and local news live franchises both continued their momentum with viewers and both also significantly expanded their distribution across broadcast, digital, and mobile platforms. The success of NBCU and CBS at Assembly Studios provides wind in our sails as we continue discussion about leasing our remaining studio facilities with other production companies.
Speaker Change: Operationally, we continue to enhance our local content offerings in 2024.
Speaker Change: We devoted tremendous opex to reaching new.
Speaker Change: Local sports back to our TV stations last year's milestones included a historic deal as I had mentioned earlier.
Speaker Change: Atlanta Braves games back to broadcast.
Speaker Change: Raise television stations in our hometown of Atlanta and <unk>.
Throughout most of the southeast this great.
Speaker Change: We also renewed our affiliation agreement with the ABC network for four additional years in 2024 or investigate TV and local news live franchises. Both continued their momentum with viewers and both also significantly expanded their distribution across broadcast digital and.
Speaker Change: Mobile platforms.
Speaker Change: The success of N B C U N C. B S. At Assembly Studios provides wind in our sales as we continue discussion about leasing our remaining studio facilities with other production companies, we expect to have more announcements about our St. Louis Atlanta throughout this year that will include.
Hilton Howell: We expect to have more announcements about Assembly Atlanta throughout this year that will include progress on the buildup of other parts of our mixed-use campus on the land that we own, importantly utilizing financial resource of our future business partners at the site. With our significant capital investments now largely behind us, future projects at Assembly Studios and Assembly Atlanta should enable the development to expand its financial contributions to our entire company.
Speaker Change: Progress on the buildup of other parts of our mixed used catalysts on the land that we own importantly, utilizing financial resource of our future business partners at the site.
Speaker Change: With our significant capital investments now largely behind US future projects at Assembly Studios and Assembly Atlanta should enable the development to expand its financial contributions to our entire company.
Hilton Howell: We are also encouraged by signs from Washington pointing to a long overdue reform of the regulatory constraints that have literally harmed local broadcasting. Well, every day we compete for local ad dollars with tech giants free from constraining rules that we are shackled with, which, as one of our more eloquent lawyers wrote, were enacted before the Japanese bombed Pearl Harbor.
Speaker Change: Also encouraged by signs from Washington hold them to a long overdue reform of the regulatory constraints that are literally hard local broadcasters.
Speaker Change: [noise] well every day, we compete for local AD dollars with Tech Giants free from constraining rules that were shackled with which is one of our more eloquent lawyers wrote were enacted before the Japanese bombed Pearl Harbor.
Hilton Howell: It remains a fundamentally wrong and harmful policy for the government to burden our local news and sales employees with these decades-old restraints, while imposing essentially no restraints on much larger companies who convene vigorously with us for the attention of viewers and advertising budgets. We are optimistic that the federal government as well as our upcoming negotiations with our network partners CBS, Fox and NBC will recognize the reality of today's media marketplace in 2025. Such actions will enable us and our peers to operate more efficiently, compete better against the tech giants, and deliver better services for our viewers, our advertisers, and indeed our shareholders.
Speaker Change: It remains a fundamentally wrong and harmful policy for the guy in the world to burden, our local news and sales employees with these decades old restates, while imposing essentially no restraints a much larger companies, who compete vigorously with us for the attention of viewers and advertisers.
Speaker Change: Budgets, we are optimistic that the federal government.
Speaker Change: As well as our upcoming negotiations with our network partners CBS Fox and NBC well recognize the reality of today's media marketplace in 2025.
Speaker Change: Such actions will enable us and our peers to operate more efficiently compete better against the tech Giants and deliver better services for our viewers are advertisers and indeed, our shareholders. At this time I would like to turn it over to Pat with platinum.
Pat LaPlatney: At this time, I would like to turn it over to Pat LaPlatney. Thank you. Last year, our business will be remembered primarily for pull-up lab revenue. Broadcasters overall took in record revenue from political ad spending, and a lot of new dollars that entered the space were used to buy ads on connected TV. Gray also sells ads on connected TV platforms and has a dedicated team focusing on ways to better leverage our strong digital audiences and local connections in the political ad space as we expect that sector to grow going forward. Overall, in 24, we saw increases in each category of political ad revenues other than Senate, which is our largest category.
Pat: Thank you Don.
Speaker Change: Last year, our business remember primarily from pull up lab revenues.
Speaker Change: <unk> overall check and record revenue from political AD spending and a lot of new dollars have entered the space, we're used to buy ads on connected TV.
Speaker Change: Great also sells ads on connected TV platforms and that is a dedicated team focusing on ways to better leverage our strong digital audiences and local connections and the political AD space and should we expect that sector to grow going forward.
Speaker Change: Overall in 'twenty four we saw increases in each category of political AD revenues other than furniture, which is our largest category.
Pat LaPlatney: Despite the Senate map not favoring Gray's footprint in 2024, we still believe that our political advertising revenues for the year exceeded our peers in total dollars and on a per-television household basis based on the results announced by our peers right after the election. The $250 million of political ad revenue in the fourth quarter had the expected effect of displacing a large amount of poor advertising revenue through Election Day, as happens every election day. As we mentioned on the Q3 call, we also heard from our commercial advertising clients in the third and fourth quarter about some hesitancy around advertising during an election given the tone of some of the political candidates.
Speaker Change: Despite the Senate, Matt not favoring grades footprint in 'twenty 'twenty four you still believe that our political advertising revenues for the year exceeded our peers in total dollars and on a per TV household basis based on the results announced by our peers right after the election.
Speaker Change: The $250 million of political AD revenue in the fourth quarter had the expected effect of displacing a large amount of core advertising revenue through election day, that's happens every election year.
Speaker Change: We mentioned on the Q3 call. We also heard from our commercial advertising clients in the third and fourth quarter about some hesitancy around advertising during the election, given the tone of some of the political campaigns. We did however, exceed our Q4 guidance core guidance.
Pat LaPlatney: We did, however, exceed our Q4 core guidance. The hesitancy and caution around advertising we saw during last fall's election season persisted into January, we think resulting from economic uncertainty due to potential government policy changes. This caution is most evident among our automobile advertising customers. We're hearing that some dealers and manufacturers are pausing or reducing their advertising campaigns as they evaluate how tariffs and continued high interest rates may impact near-term demand for new and used cars. Our January core ad revenues were down from last year. Our February core ad revenues were about the same as last year's excluding Super Bowl bookings and leap day.
Speaker Change: Hesitancy of caution around advertising, we saw during last fall's election season persisted into January we think resulting from economic uncertainty due to potential government policy changes.
This caution is most evident among our automobile advertising customers. We're hearing of some dealers and manufacturers are pausing or reducing their advertising campaigns as they evaluate how tariffs and continued high interest rates may impact near term demand for new and used cars.
Speaker Change: Our January core AD revenues were down from last year. Our February core AD revenues were about the same as last year's excluding Super Bowl bookings and leap day and.
Pat LaPlatney: And March pacings are currently showing improvement and tracking roughly flat to last year's actual core ad revenue.
Speaker Change: In March Pacings are currently showing improvement and tracking roughly flat to last year's actual core ad revenues.
Pat LaPlatney: Overall, for the first quarter of 2025, we currently expect the core advertising revenue will be down seven to 8% compared to the first quarter of 24. Again, there are three primary factors causing this decline. First is the political or economic uncertainty that I just discussed. The second impact on core results was from the Super Bowl airing on our 33 Fox channels in 2025 compared to our 54 CBS stations in 2024. Our Fox stations did very well increasing their Super Bowl advertising revenue by about 50% from the last time the big game aired on Fox in 2023.
Speaker Change: Overall for the first quarter of 2025, we currently expect a core advertising revenue will be down 7%, 8% compared to the first quarter of 'twenty. Four again, there are three primary factors, causing this decline first is the political or economic uncertainty that I just discussed the second impact on core results was from the superbowl arrogant.
Speaker Change: Our 33 Fox channels in 2025 compared to <unk> 54, CBS stations in 2024 Fox stations did very well increasing their Super Bowl advertise your revenue by about 50%.
Pat LaPlatney: This, however, was still only about half of what we sold during last year's Super Bowl. They dared to cross our much larger CBS footprint, including our CBS station in the Chiefs hometown of Kansas City, as well as St. Louis, Topeka and Wichita.
Speaker Change: Last time, the big game aired on Fox in 2023.
Speaker Change: This however was still only about half of what we sold during last year's Super Bowl there David across a much larger C. B S footprint, including our CBS station and the chiefs hometown of Kansas City, as well at St. Louis Topeka and Wichita.
Pat LaPlatney: Finally, our first quarter of 2025 will be negatively impacted by one less billing day due to leap day, which which we estimate impacted our core revenue by three and a half to four million. Excluding Super Bowl and Leap Day Impact, our core advertising revenue guide for the first quarter 2025 is down 3.3 to 4.6 percent from the first quarter of 2024.
Speaker Change: Finally, our first quarter of 'twenty 25 will be negatively impacted by one less billing day due to due to leap day, which which we estimate impacted our core revenue by three and a half to $4 million.
Speaker Change: Excluding Super Bowl and Leap day impact our core advertising revenue guide for the first quarter 2025 is down 3.3% to 4.6% from the first quarter of 'twenty 'twenty four.
Pat LaPlatney: We are encouraged by our success in acquiring pro sports. Hilton mentioned the Braves, which will impact 24 gray markets. We announced our Memphis Grizzlies deal this morning and expect to announce a couple more agreements in the next few weeks. We anticipate having local sports product in 75 to 80 gray markets by the end of the first quarter.
Speaker Change: We are encouraged by our success in acquiring pro sports rights.
Speaker Change: <unk> mentioned, the Braves, which will impact 'twenty four gray market, we announced our Memphis Grizzlies deal. This morning, and expect to announce a couple more agreements in the next few weeks.
Speaker Change: We anticipate having local sports product in 75 to 80 Gray markets by the end of the first quarter and with that I'll turn it over to Jeff.
Jeff Gignac: With that, I'll turn it over to Jeff. Thank you, Pat. As Hilton mentioned earlier, reducing debt and leverage remains our top capital allocation priority, and we made significant progress again in the fourth quarter. As everyone saw in our release, we finished the year at 2.97 times first lean leverage and 5.49 times total leverage. And as an aside, I would note that our leverage ratio as defined in our senior credit agreement, it does not allow us to take credit immediately for cost containment initiatives. And that may not be comparable to what is indicated by publicly available documents for others out there.
Speaker Change: Pat assortment as Hilton mentioned earlier, reducing debt and leverage remains our top capital allocation priority and we made significant progress again in the fourth quarter.
Jeff: As everyone saw in our release, we finished the year at 297 times first lien leverage and 5.49 times total leverage.
Jeff: And as an aside I would note that our leverage ratio as defined in our senior credit agreement does not allow us to take credit immediately for cost containment initiatives.
Jeff: And that may not be comparable to what is indicated by publicly available documents for others out there. So it's a.
Jeff Gignac: So to be clear, we've not retroactively included the benefits from the 60 million of cost initiatives we announced last quarter. in our December 31-24 calculations. We are, however, on pace to be at the full $60 million run rate by the end of this quarter. We've been very transparent and opportunistic on our debt reduction efforts and are proud that we reduced our principal balance by $520 million during 2024. Through use of open market repurchases, we captured $46 million in debt discounts during 2024. And we continue to have our $250 million board authorization available for further open market repurchases.
Jeff: But to be clear, we've not retroactively included the benefits from the 60 million of cost initiatives, we announced last quarter.
Jeff: In our December 31, 24 calculations, we are however on pace to be at the full $60 million run rate by the end of this quarter.
Jeff: We've been very transparent not an opportunistic on our debt reduction efforts and are proud that we reduced our principal balance by $520 million during 'twenty 'twenty four.
Jeff: Through use of open market repurchases, we captured $46 million in debt discounts during 'twenty 'twenty four.
Jeff: We continue to have our $250 million board authorization available for further open market repurchases.
Jeff Gignac: And I think as we've pretty clearly demonstrated, we'll continue to be thoughtful and nimble in deploying our liquidity to further de-lever the company. We entered 2025 in a very strong liquidity position. As of December 31st, 24, we had $135 million in cash plus 600 plus our $680 million revolving credit facility available. We expect that the next political cycle in 2026 will provide significant cash that together with the liquidity that I just mentioned, will be more than sufficient to address our remaining $528 million 2027 bond maturity. While repaying debt is our number one capital allocation priority, we could also access the debt markets if attractive terms and pricing are available.
Jeff: As we've pretty clearly demonstrated we will continue to be thoughtful and nimble and deploying our liquidity to further delever the company.
Jeff: We entered 2025 and a very strong liquidity position.
Jeff: As of December 31, 24, we had $135 million in cash plus 600 or $680 million revolving credit facility available.
Jeff: We expect that the next political cycle in 2026 will provide significant cash that together with the liquidity that I just mentioned will be more than sufficient to address our remaining 528 million dollar twenty-twenty southern bond maturity.
Jeff: While repaying debt as our number one capital allocation priority. We could also access the debt markets at attractive terms and pricing are available.
Jeff Gignac: A couple of other items to mention, our cash taxes were a little above our Q4 guidance. That's primarily due to taxes on cancellation of indebtedness income. And our CapEx, excuse me, our CapEx came in slightly below our fourth quarter guide at $96 million. And we expect slightly lower CapEx again in 2025. Yesterday, our board of directors declared our regular quarterly common dividend of eight cents per share and the cash payment of our quarterly preferred dividend. As a reminder, the common dividend is a small use of cash for the year that helps the company on the equity side of the balance sheet.
Jeff: A couple of other items to mention our cash taxes were a little above our Q4 guidance, that's primarily due to taxes on cancellation of indebtedness income in.
Jeff: And our Capex excuse me our Capex came in slightly below our got our fourth quarter guide at $96 million and we expect slightly lower capex again in 2025.
Jeff: Yesterday, our board of directors declared a regular quarterly common dividend of eight cents per share and the cash payment of our quarterly preferred dividend.
Jeff: As a reminder, the common dividend as a small use of cash for the year that helps the company on the equity side of the balance sheet and going forward. The board will continue to evaluate our dividends in light of our financial position capital needs and other appropriate factors on a quarterly basis.
Jeff Gignac: And going forward, the board will continue to evaluate our dividends in light of our financial position, capital needs, and other appropriate factors on a quarterly basis.
Jeff Gignac: Before I turn the call back to Hilton, a couple of comments on what we're seeing on re-trans. Over the last two years, our traditional MVPD subscriber base has declined essentially the same year over year overall rate. We're encouraged, however, by recent sub reports from major cable companies showing a modest improvement in their rate of sub declines, which we attribute to a number of factors that have been discussed on many of our prior calls, including better consumer value proposition by staying with cable. As you know, we entered into a four-year affiliation agreement with ABC at the end of last year.
Jeff: Before I turn the call back to Hilton a couple of comments on what we're seeing on Retrans.
Jeff: Over the last two years, our traditional N V. P. M. B P. D subscriber base has declined essentially the same year over year overall rate.
Jeff: We're encouraged however by recent sub reports from major cable company is showing a modest improvement in their rate of sub declines, which we attribute to a number of factors that have been discussed on many of our prior calls including better consumer value proposition.
Jeff: Staying with cable.
Jeff: As you know we entered into a four year affiliation agreement with a b C. At the end of last year.
Jeff Gignac: That agreement and the upcoming renewals this year with the other broadcast networks provide opportunities for us to rebalance the economics of those deals in light of the MVPD subscriber erosion and loss of exclusivity that have occurred since our last renewal cycle. It's worth noting that our network affiliation fees increased for many years at double-digit rates. Over the past few years, those network affiliation fees have flattened out, and even better, we booked the first-ever year-over-year decrease in network affiliation fees in 2024, which we anticipate will continue and even accelerate.
Jeff: That agreement and the upcoming renewals this year with the other broadcast networks provide opportunities for us to rebalance the economics of those deals in light of the M. B P. D subscriber erosion and loss of exclusivity that have occurred since our last renewal cycle.
Jeff: Worth, noting that our network affiliation fees increased for many years at double digit rates over the past few years those network affiliation fees have flattened out.
Jeff: And even better we booked the first ever year over year decrease in network affiliation fees in 'twenty 'twenty, four which we anticipate will continue.
Jeff Gignac: This concludes my remarks, and I'll now turn the call back to Hilton. Thank you very much, Jeff.
Jeff: Even accelerate.
Hilton Howell: This concludes my remarks, and I'll now turn the call back to Hilton.
Operator: And now operator, I'd like to open up the call to any questions that anyone may have. Absolutely, ladies and gentlemen at the press star one on your We would like to ask a question. That is star one on your telephone keypad. If you would like to ask a question. So far, it does look like we have several in queue.
Hilton Howell: Thank you very much Jeff and now operator, I'd like to open up the call to any questions that anybody may have.
Hilton Howell: Absolutely, ladies and gentlemen at this time.
Hilton Howell: Star one on your telephone keypad, if you would like to ask a question that.
Hilton Howell: That is star one on your telephone keypad, if he would like to ask a question.
Operator: So we'll take the first one.
Speaker Change: And so far it does look like what look like we have several in queue. So we'll take the first one Mr. Aaron Watts of Deutsche Bank. Your line is now open.
Aaron Watts: Mr. Aaron Watts of Deutsche Bank. Your line is now. Alright, thanks for having me on. I have two questions. Maybe I'll just cover one at a time. The first is around core advertising, your comments. Softness at the end of 24 and into 25 seem to echo your peers. Given the modest firming up you saw as 1Q played out, as you look ahead, do you think core ads can move to growth on a full year basis?
Aaron Watts: Alright, Thanks for having me on I have two questions maybe I'll just cover one at a time. The first is around core advertising your comments on the softness at the end of 'twenty four and into twenty-five seem to echo your peers.
Aaron Watts: Given the modest firming up you saw as one Q played out as you look ahead do you think core ads can move to growth on a full year basis, and if so what might drive that.
Pat LaPlatney: So what might drive Yeah, Aaron's Pat. So I think the answer is yes. We are, you know, it's early, but we are encouraged by the second quarter pacing currently. Some of those categories that have been challenged over the last four to six quarters. are showing improvement at this point. So again, based on the data we have today, I would, I would answer yes to your question and say that, you know, as we look at a little bit, things are more encouraging.
Aaron Watts: Yeah, Erin it's Pat So I think the answer is yes.
Aaron Watts: We are you know it's early but we are encouraged by the second quarter pacing currently some of those categories that have been challenged over the last four to six quarters.
Aaron Watts: Showing improvement at this point, so again based on the data we have today I would say I would answer yes to your question and I'd say that.
Hilton Howell: And Aaron, this is Hilton. Can I add just a little bit of something to that? We discussed this at length in our board meeting yesterday. You know, a lot of our the, you know, the weakness is in the automobile department. And, you know, really, for the first time since the end of the Second War, the automobile productions don't know what the cost of goods sold are going to be. So many parts come from Mexico and Canada, and other places around the world. And as we discuss tariffs, I think that's putting a natural chilling effect upon advertising in the automobile sector.
Aaron Watts: As we look out a little bit things are more encouraging.
Aaron Watts: And Aaron.
Speaker Change: And I had just a little bit there's some things about we discussed this at length in our board meeting yesterday.
Speaker Change: What are the you know the the weaknesses in the automobile department and really for the first time since the end of the second war the.
Speaker Change: The mobile productions don't know if it's a cost of goods sold are going to be so many parts come from Mexico, and Canada and other places around the world and as you discuss tariffs I think that's putting a natural chilling effect upon advertising in the automobile sector that will settle out as <unk>.
Aaron Watts: That will settle out. As President Trump has said, there may be some initial pain, but this too will pass. And when they know exactly what the prices they need to have to sell their products profitably, I think you're going to see all of the automobile sector returning to advertising. Okay, that's helpful commentary. Thank you.
Those will Trump has said there may be some initial pain. This too will pass and when they know exactly what the prices they need to have to sell their products profitably and they can see all of the automobile sector returning to advertising.
Aaron Watts: And then my second question is around expenses in the first quarter. Can you parse out your guide, which looks relatively flat year-over-year, how much of the cost-efficient... you've highlighted flowed through in the first quarter. And what other factors are at play there, including maybe any incremental sports rights? And if you can, how should we think about expenses overall as the year unfolds?
Speaker Change: Okay. That's helpful commentary. Thank you and then my my second question is around expenses in the first quarter can you parse out your guide and which looks relatively flat year over year, how much of the cost efficiencies you've highlighted flowed through in the first quarter and what other factors are at play there.
Speaker Change: There, including maybe any incremental sports rights and then if you can how should we think about expenses overall as the year unfolds.
Pat LaPlatney: Yeah, Aaron, I'll kick off and others can weigh in. So as we think about what the flow through of the initiatives that that we've announced um you do start there's probably quite a handicap but it's two-thirds to 75 percent of it is going to be flowing through in Q1. And then it will build from there. It also doesn't mean that, you know, it doesn't mean that we're necessarily done, we look at everything every day and try to be really smart about where we're spending. So I think for the full year, You know, our hope is that we'll be able to, as we've said before, keep the overall rate of growth on the expense side below inflation and potentially even get it to turn negative during the Yeah, I know, I know.
Speaker Change: Yeah, Erinn I'll kick off and others can weigh in so as we think about what.
Speaker Change: The flow through of the initiatives that we've announced.
Speaker Change: You do start there's probably I had to handicap it its two thirds to 75% of it is going to be flowing through in Q1.
Speaker Change: And then it will build from there it also doesn't mean that.
Speaker Change: Doesn't mean that we're necessarily dawn and we look at everything every day and try to be really smart about where we're spending so I think for the full year.
Speaker Change:
Speaker Change: Our hope is that we'll be able to as we've said before keep the overall rate of growth on the expense side below inflation and potentially even get it to turn negative during the year.
Speaker Change: Yeah.
Pat LaPlatney: Just real quick, I would amplify with just saying we look at these numbers every day and are trying to find ways to weigh in cost. And, you know, I can think of a few initiatives over just the last three or four weeks where may not have been part of the big project we announced in fourth quarter, but Like Jeff said, we're looking at it every day. And so offsetting some of those costs you're taking out, what were some of the kind of offsetting ups and costs? are playing into the flat overall guys. Yeah, look, we we didn't, we still have to run very strong local businesses.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Just real quick I would amplify we're just saying we look at.
Speaker Change: These numbers every day and are trying to find ways.
Speaker Change: Ship to rein in costs and.
Speaker Change: I can think of a few initiatives over just the last three or four weeks where.
It may not have been part of the big.
Speaker Change: Project, we announced in fourth quarter, but.
Speaker Change: Like Jeff said, we're looking at it everyday.
Speaker Change: Yeah.
Speaker Change: And so offsetting some of those costs.
Speaker Change: Costs, you're taking out what what were some of the kind of offsetting.
Ops and costs that are playing into the overall guidance in Guangzhou.
Speaker Change: Yeah look we we didnt, but we still have to run very strong local businesses and we have to attract and retain the talent across the firm and so we.
Pat LaPlatney: And we have to attract and retain the talent across the firm. And so we did give raises that are, you know, ordinary course of business type things. So when you have $9,700 or so employees in the company that there's some uplift there. There's some normal increases and other things that just are contractual. But other than that, I mean, it's really, like Pat said, it's looking for the most efficient way to continue to deliver a very high-quality product in the markets that we make.
Speaker Change: We did give raises that are ordinary course of business type things. So when you have.
Speaker Change: 9700, or so employees in the company you know that that there's some uplift there there's some normal increases and other things that just are contractual but what other other than that I mean, it's really like Pat said, it's looking for more the most efficient way to continue to deliver a very high quality product.
Aaron Watts: Okay.
Aaron Watts: Appreciate the time.
Aaron Watts: Thank you.
Speaker Change: The markets that we serve.
Operator: Thank you, Aaron.
Speaker Change: Okay I appreciate the time thank you.
Daniel Kurnos: All right, next up we have Daniel Kurnos of the Benchmark Great, thanks. Good morning. Hilton, maybe I'll stick with you or Pat a little bit here. Since you talked about the Braves, obviously, we have a somewhat public breakup between Major League Baseball and ESPN. So, just curious, the RSNs have picked up a bunch of local games and other sports, but curious if you view that as an opportunity. And then, separately, you know, Hilton, you've talked a lot about expanding sort of the mixed use zones with regards to assembly. It seems like that's starting to move forward.
Hilton Howell: Thank you Aaron.
Speaker Change: Yeah.
Speaker Change: Oh right next door, we have Daniel Carnose at the benchmark company.
Speaker Change: Great. Thanks, Good morning, maybe I'll stick with you or Pat a little bit here since you talked about the Braves, obviously, we have a somewhat public breakout between major League baseball and E. S. P. N. So just curious on the Rs ends it picked up a bunch of.
Speaker Change: Local games and other sports, but curious if you view that as an opportunity and then separately you know.
Speaker Change: Hilton you've talked a lot about expanding sort of the mixed use zones with regards to assembly.
Hilton Howell: So, I'd love to get a sense from you on TAM, timing, monetization, just how we should think about the contribution to that, you know, either this year, next year, or however you want to put it. Well, you know, you heard this in Pat's discussions. Let me start with sports first, all right. It's a remarkable opportunity. I think by the end of this quarter, Pat articulated to you guys that we will have live professional local sports in 80 something markets across our 113 market profile. That's amazing. And we have been working assiduously. A year ago, we had Arizona and the Suns.
Speaker Change: Seems like that's starting to move forward, So love to get a sense from you on Tam tiny monetization just how we should think about the contribution to that either this year next year or however, you want to frame it. Thank you.
Speaker Change: You know you heard this and and Pat's discussion, let me start with sports first alright.
Speaker Change:
Speaker Change: It's a remarkable opportunity I think by the end of this quarter Pat articulated to you guys that we will have live professional local sports and 80 something markets across our 113 market profile that's amazing.
Speaker Change: And we have been working assiduously, a year ago, we had Arizona and the sons and now we have stations across our footprint. If you take a look at our investment deck. Daniel you can see our sports networks. The Gray regional sports networks that we've created on our own all of them.
Hilton Howell: And now we have stations across our footprint. If you take a look at our investment deck, Daniel, you can see our sports networks, the gray regional sports networks that we created on our own all on broadcast. And we're immensely proud of what we're able to do not just with this professional sports, but with local sports teams that go down to the high school level across these networks. And so I think that's going to be really, really Hugely additive in terms of our viewership and our profits because it creates an immense Halo around the stations and it attracts viewers and a year ago.
Speaker Change: <unk> cast.
Speaker Change: And we are immensely proud of what we were able to do not just with this professional sports, but with local sports teams.
Speaker Change: Go down to the high school level across these networks. So I think that's going to be really really.
Speaker Change: Uh huh.
Speaker Change: Hugely additive in terms of our viewership and our profits because it creates an immense a halo around the stations and it attracts viewers and a year ago. We didn't have that it's a great. Great addition to our portfolio now Assembly goes.
Hilton Howell: We didn't have that It's a great great addition to our portfolio now assembly The studios are finished. They are making shows and as I mentioned And I and I mean, you know, you guys know, I mean some people take me about assembly I'm immensely proud of what Rose Coat Garden Society on NBC did Sunday night and Remarkably proud really remarkably proud of Beyond the Gates in terms of the Productions that are now on our stations and so from a business standpoint I could not be happier with assembly studios and the Georgia film production that we have in this state Now in terms of phase two, I'm not in a position To prudently announce anything, but we are looking at growing other assets largely in partnership with other companies, we've got a lot of folks that have come to us and We do not have a large capital expenditure budget in assembly So it will be met, you know, we contribute our land They put in whatever they decide to do and we will add more profitable operations to it Not using our balance sheet Dramatically at all and but it will allow the remaining 80 something acres to begin adding Profits to the broader company, which we're very excited about.
Speaker Change: Studios are finished they are making shows and as I mentioned.
Speaker Change: I mean, you guys know I mean, some people take me about assembly I'm immensely proud of pledged Rosko Garden's Society on NBC did Sunday night and.
Speaker Change: Remarkably crop really remarkably proud of beyond the gates in terms of the productions that are now on our stations and so from a business standpoint, I could not be happier with Assembly studios and the Georgia film production that we have in this state now.
Speaker Change: Now in terms of phase two.
Speaker Change: I'm not in a position to prudently announced anything but we are looking at growing other assets largely in partnership with other companies without a lot of folks that have come to us and we do not have a large capital expenditure budget and assembly. So.
Speaker Change: It will be met we contribute our land they put in whatever they decide to do and we will add more profitable operations to it not using our balance sheet dramatically at all.
Speaker Change: But it will allow the remaining.
Speaker Change: 80, something acres to begin adding prop.
Pat LaPlatney: So I hope I answered your question Daniel Dan, I'll just just touch on ESPN real quick and baseball, you know I'm not sure that's a huge opportunity for broadcast as Hilton mentioned.
Speaker Change: Profits to the broader company, which we're very excited about so I hope I answered your question David.
Dan: Dan I'll.
Speaker Change: Just touch on ESPN real quick in baseball you know I'm not sure that's a huge opportunity for broadcast as Al mentioned, there's all kinds of opportunities out there that particular sort of divorce. If you will I'm not sure that creates a ton.
Pat LaPlatney: There's all kinds of opportunities out there that particular Sort of divorce if you will, I'm not sure that creates a ton You know like the Sunday Night Package, right?
Pat LaPlatney: Is that going to end up in syndication?
Pat LaPlatney: I kind of doubt it, but who knows but the reality is You know, just if you look at our new investor deck and the logo suit page on the sports section I mean there are there is a lot of a lot of baseball that's going to land in the small Packages on broadcast television this year and we're involved in many of those and Hilton touched on the sort of halo impact of having sports on your stations, and I'm going to turn it to Sandy to talk about that for a second because it's very real. Yes, Dan, it is.
Speaker Change: The Sunday night package right is that going to end up in syndication I kind of doubt it, but who knows but the reality is.
Speaker Change: You know just if you if you look at our new Investor deck, a logo sup page on the sports section I mean, there are there is a lot of there are a lot of baseball that's going to land in small packages on broadcast television this year and we're involved in many of those had touched on.
Speaker Change: The sort of a halo impact of having sports on your stations that I'm going to turn it to sandy to talk about that for sarcasm is very real yesterday and it is I mean, you know these relationship not only bring viewers to the game, but theres, an overall halo effect and we're seeing that in Phoenix is a perfect case study we're in our second full season.
Sandy Breland: I mean, you know, these relationships not only bring viewers to the games, but there's an overall halo effect, and we're seeing that, and Phoenix is a perfect case study. We're in our second full season with the Suns, and we have seen that. We have seen advertisers who came to us for the games and now rediscover the power of broadcast and local broadcast reach and are now advertising in other day parts, so we've seen that halo effect across the board.
Speaker Change: And with the time and we have seen that we have seen advertisers who came to us for the game now rediscovered the power broadcast local broadcast reach Internet advertising and other day part so we've seen that halo effect across the board.
Daniel Kurnos: That is very comprehensive, guys. Thank you. And Pat, we'll see how they end up carving it up out. Maybe they'll be a NHL. Yeah, we had just All right, moving right along.
Speaker Change: Yeah.
Speaker Change: Yes. It is very comprehensive guys. Thank you and Pat we will see how they end up carving it out maybe though.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Interesting.
Craig Huber: Next up, we have Craig Huber of Huber Research. Thank you.
Speaker Change: Yeah.
Speaker Change: Alright, moving right along next definitely have Craig Huber Huber research.
Craig Huber: Assembly of Atlanta, maybe can you just give us the updated figure for what the total cost Project Gross and the Net Cost when we start. Land cost, acquisition cost, building cost is roughly $500 million more or less. The specific numbers are in the 10K. who are following the latest... Alright, so roughly 500 net, is that what you're saying? Yeah, Meadowbrook's very important. Okay, very good. You guys are, I think you're talking about 27 to 28. production company revenue in the first quarter, that'd be up, I guess, five to six million dollars. expect that number to ramp up.
Speaker Change: Oh, thank you.
Speaker Change: Assembly Atlanta, maybe could you just give us the updated figure for what the total cost is for the project gross and the net costs when we start there. Please.
Speaker Change: Land cost acquisition cost building cost is.
Speaker Change: There's roughly $500 million more or less.
Speaker Change: Specific numbers are in the 10-K.
Speaker Change: Following later this afternoon.
Speaker Change: Alright, so roughly five 500 is what you're saying.
Speaker Change: Yeah, another grocery what was that.
Speaker Change: And then.
Speaker Change: I think you're talking about 27% to $28 million up production company revenue in the first quarter that'd be up I guess $5 million to $6 million over a two year basis do you expect that number to ramp up significantly is putting aside seasonality as the year progressed and I'm just trying to get a sense here of the oral why that you have.
Hilton Howell: get a sense here of the ROI. Answer is yes.
Hilton Howell: But there's a couple things to keep in mind. The immediate impact will be added revenue as more productions build. I'm sure a lot of you guys know, right now, Hollywood, however you want to define that, you know, has got has had a lot of issues. And none of those are under our control. And none of it was created by by our company. But, you know, the strikes slowed everything in 2024. But as you can tell, productions continue. And I'm really quite excited about not just what we have currently in place, and the television shows showing and for the first time in Georgia, we actually got a broadcast TV show everything before went on streaming or on cable.
Speaker Change: Getting off that $500 million.
Speaker Change: Answer is yes, but theres a couple of things to keep in mind.
Speaker Change: The immediate impact will be added.
Speaker Change: Revenue is more productions bill because I'm sure a lot of you guys know right now Hollywood. However, you wanted to find out you know this guy has got a lot of issues and none of those are under our control and none of that was created by our company, but you know the strikes slowed everything in 2024.
Speaker Change: But as you can tell productions continue and I'm really quite excited about not just what we have currently in place and the TV shows showing in for the first time in Georgia, We actually got a broadcast television show everything before it went on screening or on cable and and you know we are gross point when the gates.
Hilton Howell: And, and, you know, we are gross point and the gates on our stations, and I could not be happier. We're probably 70% occupied in the stages. So I think there's about a 30% maybe more upside just in terms of booking. And we have literally quotes out for every station that is not currently filled with a film or television production. And so we're seeing a lot of more robust activity in the film and television production side. And while I can't talk to you about the individual stuff, because often sometimes I really don't know. Like when we're doing a deal, it comes under a code name, and we'll get a production request.
Speaker Change: On our stations and I could not be happier.
Speaker Change: We're probably 70% occupied in the stages. So I think there's about a 30% maybe more upside just in terms of booking and we have literally close out for every station that is not currently filled with a film and TV production.
Speaker Change: So where were saying.
Speaker Change: We're seeing a lot more robust activity in the film and television production side, while I can't talk to you about the individual stuff because often sometimes I really don't know like when we're doing a deal that comes under a code name and you will get a production real question I have no idea other than who the company is you know what the actual production is because they kind of keep it under.
Hilton Howell: And I have no idea other than who the company is, what the actual production is, because they kind of keep it under wraps until really the last moment, because they like to control their own publicity. So immediately, you're going to see it through the return on the studios. But we have another 80 acres that is not currently adding value.
Speaker Change: Reps until.
Speaker Change: You know until really the last moment, because they like to control their own publicity. So immediately you're going to see it through the.
Speaker Change: There's a return on the studios, but we have another 80 acres that is not currently adding value and as I mentioned, we're not going to spend a lot more capital, but were going to enter into partnerships for a variety of assets is.
Hilton Howell: And as I mentioned, we're not going to spend a lot more capital, but we're going to enter into partnerships for a variety of assets. Because it's an Atlanta thing, sort of the inspiration for what has been done at the Battery with the Braves, which has added immense value to the Braves franchise and to their deal by deal and step by step.
Speaker Change: Because it's in Atlanta thing you know.
Speaker Change: Sort of the inspiration for what has been done at the battery with the Braves, which has added immense value to the Braves franchise into their audiences is sort of what we're looking at as a comparable in this city, we're gonna take it deal by deal and step by step and you know we delayed everything because the market.
Hilton Howell: And we delayed everything because the market wasn't right. Banks weren't lending. And the world kind of changed in November. There's a lot of animal spirits that we're seeing out there. So we're very bullish about opportunities and partnerships going forward.
Speaker Change: Wasn't right.
Speaker Change: People banks weren't lending and you know the world kind of changed in November there's a lot of animal spirits that we're seeing out there. So we're very bullish about opportunities and partnerships going forward.
Hilton Howell: My second question, if I could, on potential deregulation. How do you guys feel that you will be able to... Well, I mean, look, we're going to if we do a deal, it will be a smart There are a lot of things that we would be very interested in doing.
Speaker Change: And my second question, if I could on potential deregulation here do you guys feel that you will be a major a significant participant if deregulation happens to your fastest come available out there or does your debt load preclude you from <unk>.
Speaker Change: So pretty much how are you thinking about that.
Speaker Change: Well I mean look we're going to do if we do a deal it will be a smart deal. There are a lot of things that we would be very interested in doing a deregulation occurs as we.
Hilton Howell: If deregulation occurs as we have been indicated, it will. There are opportunities for swaps. There are opportunities for acquisitions. And you know, when we, we've been in this position before. And we've done a number of acquisitions, actually delevering acquisitions. And so we will be looking at that. But there is an opportunity, and this is a finite universe. And, you know, we'll take each deal and each opportunity as it comes.
Speaker Change: Had been indicated it will there are opportunities for swaps there are opportunities for acquisitions and you know when we we've been in this position before.
Speaker Change: And we've done a number of acquisitions actually delevering acquisitions and.
Speaker Change: So we will be looking at that but there is an opportunity and this is a finite universe.
Speaker Change: And you know, we'll take each deal and each opportunity as it comes one of the happy things about our company.
Hilton Howell: One of the happy things about our company. is that there's no must-have deals we need to have. We have, and I suggest you look at it. I think we have the finest footprint in broadcast history. There is no peer in our industry that could have delivered what we delivered to the Braves in Braves Nation. 24 markets. If you look at what we have and what we can do, it's quite remarkable.
Speaker Change: Is that Theres no must have deals we need to have we have and I suggest you look at it I think we have the finest food pets approach in broadcast history. There is no peer in our industry that could have delivered what we delivered to the Braves embraced nation plentiful markets. If you look at what we have and what we can do.
Hilton Howell: But you can look in our investment deck that we have published, I think, today, and you can look at that being true in Arizona, throughout Nevada, throughout the American Midwest, throughout the other southeastern states that are not the same. But what we've done in the Gulf Coast with the Pelicans, we're thrilled with, absolutely thrilled with.
Speaker Change: He was quite remarkable but you can look in our investment deck that we published I think today.
Speaker Change: And you can look at that being true and Arizona throughout Nevada throughout the American Midwest throughout the other southeastern States that you know are not there.
Speaker Change: But you know what we've done in the Gulf Coast with the Pelicans, we're thrilled with absolutely thrilled with.
Kevin Latek: And we hope to replicate that in a lot of places, because while you gotta have the major markets, Gray has the smaller markets that really root for these teams. My last question, you guys talk about the potential here for retrans sub declines to moderate.
Speaker Change: And we hope to replicate that in a lot of places because while you got to have the major markets Gray has the smaller markets that really root for these changes.
Speaker Change: My last question you guys talked about the potential here for Retrans sub declines to moderate I'm just curious if maybe you're willing to share with us how are you guys budgeting.
Kevin Latek: I'm just curious if maybe you're willing to share with us, how are you guys budgeting sub declines? Transcripts provided by Transcription Outsourcing, LLC.
Speaker Change: Sub declines in your financials for this year are you expecting it to materially get better say in the back half of the year a year over year basis.
Kevin Latek: Hi, this is Kevin. We do expect the rate of sub-decline to slow. We were saying the same thing last year. We have seen some encouraging signs late last year, as have other folks in the media industry have expressed that. Our internal numbers are assuming things stay the same. We're not giving full year guidance on retrends, so that's just an internal number. We are not projecting a material increase or decrease. We're presuming that the rate of decline will just be the same. That's the easiest baseline to budget.
Kevin Milton: Yeah, Hi. This is Kevin are we do expect the ratings have declined to 12.
Speaker Change: Saying all of last year.
We have seen some encouraging signs late last year as have other folks in the media industry have expressed that our internal numbers are assuming things stay the same.
Speaker Change: But again, we're not giving full year guidance on Retrans. So that's just an internal number.
Speaker Change: We were not projecting a material increase or decrease we're.
Speaker Change: Presuming that the star.
Speaker Change: Radio decline would just be the same as the easiest baseline to budget.
Kevin Latek: Okay, very good.
Kevin Latek: Thank you both.
Kevin Latek: Thank you.
Operator: Thanks, Craig. Oh, right.
Speaker Change: Okay very good. Thank you vote. Thank you all.
Craig: Thanks, Craig.
Avi Steiner: Next up, we have Avi Steiner of JPMorgan. Thank you. Good morning.
Speaker Change: Oh right.
Speaker Change: Next definitely had Avi Steiner at J P Morgan Chase and company.
Speaker Change: Thank you.
Avi Steiner: on the reverse comp trend. You mentioned an opportunity to rebalance economics. And I think you rightly pointed out the decrease in fees in 24. I thought you mentioned it could be lower in 25. Could you dimensionalize that?
Speaker Change: Thank you and good morning.
Speaker Change: Uh huh.
Speaker Change: Yeah.
Speaker Change: On the reverse comp trends, you mentioned, an opportunity to rebalance economics, and I think you rightly pointed out the decrease in fees in 'twenty four I thought you mentioned it could be lower than 25 could you dimensionalize that for us this year or maybe put a little more context around it. Thank you and then I have one more.
Kevin Latek: Transcripts provided by Transcription Outsourcing, LLC. Yeah, it's so quick we We have our two larger contracts, CBS and Fox, are up this summer. and then NBC at the end of the year. And so I don't want to say a lot about specifics around where those contracts need to go, other than to say that they're pretty out of balance at the moment.
Speaker Change: Yeah I'll be itself so.
Speaker Change: We.
Speaker Change: We have the are too large or too larger contracts CBS and Fox are up the summer.
Speaker Change: And then N B C. At the end of the year and so I don't want to say a lot about about specifics around where were those contracts need to go other than to say that.
Kevin Latek: And so, you know, we're intentionally not going to be giving a full year guide until we have more clarity on where those negotiations are going to come out. But suffice it to say, Avi, we're very optimistic and we're very proud. Again, we can't disclose it, but we're very proud of our new relationship with ABC. I think it properly balances the value of their affiliation with the value of our local TV stations.
Speaker Change: They're pretty out of balance at the moment and so.
Speaker Change: Potentially not going to be giving a full year guide until we have more clarity on where those negotiations are going to come out.
Speaker Change: But suffice it to say Avi, we're very optimistic and we're very proud again can disclose it but we're very proud of our new relationship with ABC I think it properly balances the value of their affiliation with the value of our local television stations and as as we mentioned in our earnings scripts.
Kevin Latek: And as has been mentioned in our earnings scripts. It's the first time we've actually started seeing a decrease in our network by payments. And, and I think that's very important in today's world. And it's a recognition of reality.
Speaker Change: It's the first time, we've actually started.
Speaker Change: So a decrease in our network by payments.
Speaker Change: And I think that's very important in today's world and its a recognition of reality, but the media broadcast space in 2025.
Avi Steiner: The media broadcast Space in 2020. Perfect. I appreciate that. Thank you for that color.
Jeff Gignac: One last one for me. Maybe Jeff for you or anyone else, but you guys were opportunistic late last year across the debt stack. And as we move into 25, you have the authorization you highlighted, perhaps some other cash coming in.
Speaker Change: Perfect I appreciate that thank you for that color one last one for me.
Speaker Change: Maybe Jeff for you or anyone else, but you guys were opportunistic late last year across the debt stack and as we move into 'twenty five you have the authorization you highlighted.
Jeff Gignac: The question is, how do you view the tradeoff from here between discount on the longer dated debt, but lower coupon debt versus some front end needs you will have? coming years. Thanks. Yeah, I think look, I think the best place to look is what we did last year. The market guided where we were going. I did want to finish the year with a manageable 2027 maturity. And so at 528 million, that is manageable either via the revolver or, you know, a nice round offering size if we went back to the debt market. So I think we're just gonna have to see where things where things are trading at any point in time when we have excess cash available to deploy it and let that be our guide.
Speaker Change: Some other cash come again.
Speaker Change: The question is how do you view the tradeoff from here between discount on the longer dated debt, but lower coupon debt versus some front end needs you will have.
Speaker Change: In the coming years. Thank you.
Speaker Change: Yeah, I think look I think the best place to look is what we did last year the market guided where we were going I did want to finish the year with a manageable twenty-twenty southern maturity and so at 528 million that.
Speaker Change: It was manageable either via the revolver or a nice round offering size. If we went back to the debt market. So I think we're just gonna have to see where things.
Speaker Change: Where things are trading at any point in time, when we have excess cash available to deploy it and and what that would be our guide.
Hilton Howell: And I appreciate the time. Thank you. Go ahead.
Hilton Howell: Just one piece of maybe sort of color to what you were asking about, like on our CapEx deal, which everybody's got to realize is that this company did a lot of acquisitions over a substantial period of time. And we announced quite candidly that we were cutting back on our CapEx. Well, that is What that is a is in recognition of is that we basically have done all the CapEx that we inherited, because we picked up a lot of portfolios that work where they needed to be, you know, a lot of stations needed transmitters that we picked up, a lot of stations had really, really not secure buildings that kind of imperiled some of our employees.
Speaker Change: And how we can say at this time. Thank you go ahead.
Speaker Change: Just one piece of it maybe sort of a color to what you were asking about like all of our Capex deal, which everybody's got to realize is that this company did a lot of acquisitions over a substantial period of time, we have announced quite candidly that we were cutting back on our capex well that is.
Speaker Change: What that is is in recognition of is that we basically have done all the capex that we inherited because we picked up a lot of portfolios that work, where they needed to be you know a lot of stations needed transmitters that we picked up a lot of stations had really really.
Hilton Howell: We had a variety of CapEx. And so we naturally have finished that. We're not cutting it off and leaving our stations, you know, short of what they need. They're fully prepared to fight and win the battle that they have in their markets. And we're very excited about that. Appreciate the time. Thank you, everyone.
Speaker Change: Not secure buildings that have that kind of apparel some of our employees, who have a variety of capex and so we naturally have finished that luck cutting at all and leaving our stations you know short of what they need they are fully prepared to fight and win the battle that they have in their markets and we're very excited about that.
Steven Cahall: All right, ladies and gentlemen, before we move on to the next one, I just wanted to remind participants, you can press star one on your telephone keypad if you would like to join the queue. That is star one on your telephone keypad to join the question But next up, we have Steven Cahill of Wells Fargo. Thank you. First, Hilton, I was wondering if you could just touch a little more on some of your comments around the M&A opportunity. You know, it certainly looks like it could be an exciting next few years with what the FCC is doing.
Speaker Change: I appreciate the time, thank you everyone.
Speaker Change: Yeah.
Speaker Change: All right, ladies and gentlemen, before we move onto the next one I just wanted to remind participants you can press star one on your telephone keypad, if you would like to join the queue.
Speaker Change: That is star one on your telephone keypad to join the question queue.
Speaker Change: The next definitely had that Stephen Cahill of Wells Fargo.
Speaker Change: Thank you.
First Hilton: First Hilton I was wondering if you could just touch a little more on some of your comments around the M&A opportunity certainly looks like it could be an exciting next few years with what the FCC is doing you mentioned swaps as something that might be attractive to gray how do we think about those and what the financial benefits of those could be and you know I know assembly.
Hilton Howell: You mentioned swaps as something that might be attractive to Gray. How do we think about those and what the financial benefits of those could be? And, you know, I know Assembly is close to home, figuratively and literally. You do have the large acreage there that you spoke about.
First Hilton: Is it close to home figuratively and literally you do have a large acreage there that you spoke about would you ever consider monetizing some of that to give you more dry powder for station M&A since you're at a point or a little higher leverage now and then just a second question on on political you know some of them.
Hilton Howell: Would you ever consider monetizing some of that to give you more dry powder for station M&A since you're at a point of a little higher leverage now? And then just a second question on political, you know, some of the things stayed the same this last political cycle. Some of the things changed. As you look to 2026 and, you know, maybe have a little bigger fight against connected TV to retain your share of political dollars, what can you kind of do this year and next year to be ready to maintain that share? Thank. Well, I think we're gonna have to pass these questions around to each other.
First Hilton: Things stayed the same this last political cycle some of the things change as you look to 2026, and maybe have a little bigger fight against connected T V to retain your share of political dollars. What can you kind of do this year and next year to be ready to maintain that share. Thank you.
Speaker Change: Well I think we're going to have to pass these questions around to each other.
Hilton Howell: Make sure I have understand the question about, you know, What we're doing at assembly, Steven, what were you asking? Yeah, that if you would just monetize any of your unused acreage, just give yourself some more dry powder for station M&A. I mean, we don't foreclose any profitable and appropriate transaction. All right. So we're willing to listen to all kinds of folks. So the answer is yes. Does that mean we're going to do that? No. But you know, I'm not going to foreclose any kind of opportunity. It would depend on the individual for a transaction. And we have considered a variety of things, all of which add great value to our company and to our shareholders.
Speaker Change: Make sure I have I understand the question about you know.
Speaker Change: What we're doing at Assembly, Stephen what were you asking.
Speaker Change: But if you if you would just monetize any of your unused acreage totally give yourself some more dry powder first nation.
Speaker Change: I mean, we don't foreclose any profitable at appropriate transaction right. So we're willing to listen to all kinds of folks.
So the answer is yes does that mean, we're going to do that but.
Speaker Change: But you know I'm not going to foreclose any kind of opportunity it would depend on the individual sort of transaction. We have considered a variety of things all of which add great value to our company and to our shareholders.
Hilton Howell: I really I encourage you, Steven, and actually everybody on this call, and we really should probably one day have an investor meeting, you know, at our studios, because I think when you actually physically see them, I think you're going to have a very positive view of what we've created, and the value that it has for this company and will in the future. But a core business for us is the studio. We've got 80 acres, and we may strike lots of deals and lots of different financially beneficial structures as we see what we can do with the remaining 80 acres.
Speaker Change: I really I encourage you Stephen and actually everybody on this call and we really should probably one day have a an investor meeting at our studios because I think when you actually physically see them I think youre going to have a very positive view of what we've created and the value that it has for this company and will in the future.
Speaker Change: But a core business for us.
Speaker Change: Well, we got 80 acres and we're gonna be we may strike lots of deals in lots of different financially beneficial straw.
Sandy Breland: Now, with regard to political and connected TV, Sandy, is that? Yeah, I just want to echo what Pat said in his comments. I mean, Steven, you know, we're fortunate that, you know, with the strength of our stations, we have not only strong local reach on the linear broadcast side, but because of that also on all of our platforms, we have strong digital audiences and we have strong connections in those communities. So we have a, as Pat said, a dedicated team now actively working to focusing on ways to better leverage our strong digital audiences going forward.
Speaker Change: Structures as we see what we can do with the remaining 80 acres now with regard to political and connected TV.
Sandy Greenland: Sandy is that.
Speaker Change: As others have said.
Speaker Change: Comment that I see that you know, we're fortunate that you know and with the strength of our stations we have not only strong local reach on the linear broadcast side, but because of that also on all of our platform. We've got the strong digital audience. If somebody gets strong connections in that entity that we have a dedicated team now actively working.
Hilton Howell: We know that that's going to continue and we have a lot of opportunity in 26. We have a lot of political opportunity in all of our markets. So that is a high focus for us and we expect that to grow, certainly for Gray. Well, and then you ask a question about M&A and anyone in our room guys can opon as you see fit. But Steven, I mean, there's all kinds of opportunities, swaps, we'll be looking at particularly if the FCC and the Department of Justice allows them because it's hard, particularly in smaller markets, to make a decent buck with the expenses of having significant local news.
Speaker Change: You too are focusing on ways to better leverage our strong digital audience is going forward, we know that that's going to continue.
Speaker Change: And we have a lot of opportunity in 'twenty six we have a lot of political out to any and all of our markets. So that.
Speaker Change: That is a high focus for us and we expect that the growth certainly for gray.
Speaker Change: Well and then you ask a question about M&A and anyone in our room guys can opine as you see fit but Stephen I mean, theres all kinds of opportunities swaps, we will be looking at.
Speaker Change: Particularly if the FCC and the department of Justice allows them because you know it's hard particularly in smaller markets are to make a to make a decent buck with the expenses of having a significant local news one of the great benefits to our company that we have been articulating to the pub.
Hilton Howell: One of the great benefits to our company that we have been articulating to the public markets literally forever is that we have only bought number one news stations throughout our entire M&A efforts. And so we have a handful that are not at the levels that we want them to be. We've fixed that. I mean, we have done that. And our news content is there and it's focused, it's consistent, and it's focused on local issues and local news. We don't do opinion journalism. And something I do want to say with regard to this, I'm really proud of what John and our boy John Decker, almost every day in the White House conferences, and I've been awfully proud of that.
Speaker Change: Markets literally forever is that we have only bought number one news stations throughout our entire M&A efforts and so we have a handful that are not at the levels that we want to debate with fixed that I mean, we we have done that in our news content is there and its focus.
Speaker Change: It's consistent and it's focused a local issues and local news, we don't do opinion journalism and something I do want to say with regards to this I'm really proud of what John Ducker I want to call them out because you know the new the White house has been call. It a gray television in our boy John Decker almost every.
Hilton Howell: But adding duopolies in smaller markets, which is something that has been anathema, and in bigger markets, candidly, that has been anathema to regulations in the past, is something that is going to be very helpful to maintaining a strong local news content. And the government has got to get with it. So I think the M&A world will begin with swaps. But who knows, if the rules change dramatically, there could be broader combinations. Thank you. All right.
Speaker Change: Day in the White house in conferences, and Ive been awfully proud of that but adding duopolies in smaller markets, which is something that has been a nascent and at bigger markets candidly that is been anathema to regulations in the past is something that is going to be very helpful to maintaining a strong local news content.
Speaker Change: And the government has gotta get with it so I think the M&A World will began with swaps, but who knows if the world's changed dramatically there could be broad or combinations.
Speaker Change: Just interested in all of the above.
Speaker Change: Thank you.
Operator: And so far, we only have one more question in queue. So I'll just remind everyone, you can press star one on your telephone keypad. If you would like to get a question.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: All right. So far we only have one more question in queue. So I'll just remind everyone. You can press star one on your telephone keypad, if he would like to get a question and it's so far our final question is going to come from Alan Gould of loop capital.
Alan Gould: So far, our final Alan Gould of Thank you. Thanks for taking the question, and thanks for the investor deck earlier today. First, Jeff, in the investor deck, it shows a leverage goal of four times. You're about five... day, you usually go up in political and it usually increases in political.
Alan Gould: Hi, Thank you thanks for taking the question and thanks for the Investor deck earlier today.
Speaker Change: Jeff any investor deck. It shows the leverage goal of four times.
Speaker Change: Five and a half times today, you usually go up in political and it usually increases in political years, well, how long until we get to four times and then the second question I guess for Kevin.
Jeff Gignac: How long till we get to four times?
Kevin Latek: And then the second question, I guess for Kevin, your Washington slide talking about deregulation. So besides M&A. station swaps, what other dereg are there. I know specifically you also mentioned there the network affiliate relationships. I'm sure I assume that's with the VMVPDs, but what else will help benefit with.
Speaker Change: Washington, Slide talking about deregulation, so besides M&A and station swaps what other deregulation opportunities are there and it was specifically you also mentioned there the network affiliate relationships I'm sure I assume that's what the B M. B E D, but what else will help benefit with deregulation. Thank you.
Kevin Latek: I'll go first because it's easy. Our big goals from Washington are as Hilton mentioned, relaxing the one new market rule adopted in 1940. Secondly, the FCC has shown some interest in the network affiliate relationship, primarily around the network's complete control of our distribution on the virtual MVPDs, which are a sizable part of the distribution. Next Gen TV is a huge and important growth opportunity for this industry and we've gotten some middling progress in the SEC the last couple of years. We really need them to some of the shackles on our business regarding NextGen. So there's a lot that can happen there.
Speaker Change: I'll go first because it's easy.
Speaker Change: Our big goes from Washington, or.
Hilton Howell: As Hilton mentioned, a relaxing the wandoo market rule adopted in 1940, Secondly, yes, you see shown some interest in the network affiliate relationship.
Speaker Change: I'll be around.
Bruce.
Speaker Change: We control our distribution.
Speaker Change: Actual mvpds, which already has a part of the.
Speaker Change: Fusion industry at this point and then third a next Gen T V.
Speaker Change: The huge and important.
Speaker Change: The opportunity for this industry.
Speaker Change: We've.
Speaker Change: We've gotten some Midland progress when he said the last couple of years, we really need them to step forward and removed.
Speaker Change: Some of the shackles on our business regarding nexgen, so there's a lot that can happen there.
Jeff Gignac: So those are the big three pillars of a Washington regular. Yeah, now and on your other question about getting to the four times, it's going to take it's going to take a few years to get there. Obviously, the heavy cash flow years are the political years. Even in off years, we are cash flow positive. And so it's just not to the same extent. And so I, you know, it'll take us, it'll take us a few years to get there. But I think there's clear line of sight after what we've done what we did in 24.
Speaker Change: Uh huh.
Speaker Change: So those would be that those are the big three pillars are in Washington regulation.
Speaker Change: Yeah, no and on your other question about getting to the four times its going to take it's going to take a few years to get there obviously the heavy cash flow years are the political years.
Speaker Change: Even in off years, we are cash flow positive and so it's just not to the same extent and so you know it'll take it'll take us a few years to get there but.
Speaker Change: I think there's clear line of sight after what we've done what we did in 'twenty four.
Jeff Gignac: And, you know, capturing a little bit of the discount accelerated it in fourth quarter accelerated some of the principal reduction, which then drives lower interest expense. And starts to starts to get the cash flow, the discretionary free cash flow to a spot where we have more ability to reduce the principal further.
Speaker Change: And.
Speaker Change: Now capturing a little bit of a discount of accelerated at and fourth quarter accelerated some of the principal reduction, which then drives lower interest expense and starts.
Speaker Change: It starts to it starts to get the cash flow the discretionary free cash flow to a spot where we have.
Hilton Howell: Well, Alan, just let me tell you a little bit about history. When we closed on the Raycon transaction, one of the best deals in the history of broadcast, we got up to a 5.5, and within 18 months, we got down to a 3.5. But that was at a time when the interest rates were very much lower than what we have had in the past. Over the last couple of years, since we finished the acquisition of Meredith and Quincy, we've seen during the Biden administration, a very rapid increase in interest rates. And it's been happy that the Fed, happy for me at least, that the Fed has seen Fed to reduce interest rates over the course of, or at the beginning of, through 2024.
Speaker Change: More ability to reduce the principal further well.
Speaker Change: Just let me tell you a little bit about history. When we closed on the right countries a transaction one of the best deals in the history of broadcast.
Speaker Change: We got up to a five star and within 18 months, we got down to a three five add but that was at a time when interest rates were very much lower than what we have had in the past over the last couple of years. Since we finished the acquisition of Meredith and Quincy Hussein during the by the administration.
Speaker Change: Very rapid increase in interest rates and its been happy that the fed happy for me at least that the fed has seen fit to reduce interest rates are of course, we're at the beginning of 'twenty through 'twenty 'twenty four I know they kind of paused at the beginning of 'twenty 'twenty five but I think that we are in an interest rate diminishing.
Hilton Howell: I know they kind of paused at the beginning of 2025, but I think that we are in an interest rate diminishing area, prospectively. And that's going to help us tremendously, because this is a free cash flow generating business, and Gray particularly is a robust free cash flow generator. So we look forward to getting it delivered on a lot of. in a lot of areas.
Speaker Change: Area prospectively, and that's going to help us tremendously because this is a free cash flow generating business.
Speaker Change: Particularly is a robust free cash flow generator. So we look forward to getting it delivered on a lot of and.
Operator: Okay, thank you. All right.
Speaker Change: And a lot of areas.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you.
Hilton Howell: And with that, we will now turn the program back over to Mr. Hilton Howell for Thank you so much, Operator and everyone on this call. Listen, everybody, Gray is an exceptional company with an exciting future that will continue to evolve and invest to meet the opportunities in our ever-changing and really quite exciting industry. Our revenues and cash flow are solid. We have walked the talk on reducing our debt. Our expenses have slowed significantly. Our investment in NextGen TV and Assembly Atlanta are poised to deliver. We are reaching new audiences with local sports, and we expect that the government will finally level the playing field for companies like Gray.
Speaker Change: Okay.
Speaker Change: Oh, right and with that I will now turn the program back over to Mr. Hilton Howell for closing remarks.
Speaker Change: Thank you so much operator and everyone on this call listen everybody Gray is an exceptional company with an exciting future that will continue to evolve and invest to meet the opportunities in our ever changing and really quite exciting industry, our revenues and cash flow our solid we've walked the talk on reducing our debt our expenses.
Speaker Change: Slowed significantly our investment in Nextgen TV and assembly Atlanta are poised to deliver we are reaching new audiences with local sports and we expect that the government will finally leveled the playing field for companies like Gray.
Hilton Howell: These are the main reasons why I personally remain buoyed and excited by our long-term prospects.
Speaker Change: These are the main reasons why I personally remain weak and excited about our long term prospects. We thank everyone for joining the call today operator at this time, we ask that you hope that you closed a lot and thank you all for being with us.
Operator: We thank everyone for joining the call today. Operator, at this time, we ask that you close the line, and thank you all for being with us. And with that, ladies and gentlemen, this does conclude your call. You may now disconnect your lines and thank you again for joining us today.
Speaker Change: Yeah.
Speaker Change: And with that ladies and gentlemen that does conclude your call. You may now disconnect your lines and thank you again for joining us today.