Gray Television(GTN) - 2024 Q2 - Quarterly Results

Executive Summary & Key Highlights Second Quarter 2024 Performance Overview The company reported a 2% year-over-year revenue increase to $826 million in Q2 2024, driven by a 292% surge in political advertising revenue | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $826 | $813 | 2% | | Core Advertising Revenue | $373 | $379 | (2)% | | Political Advertising Revenue | $47 | $12 | 292% | | Net Income | $22 | $4 | 450% | | Adjusted EBITDA | $225 | $227 | (1)% | - Macro-economic and other factors are expected to result in somewhat lower revenues for the year than previously anticipated[1] Updated Full-Year 2024 Outlook The company revised its full-year 2024 guidance, lowering revenue expectations while reducing expense and capital expenditure forecasts | Metric | Previous FY2024 Guidance (Millions) | Revised FY2024 Guidance (Millions) | Change (Millions) | | :--- | :--- | :--- | :--- | | Core Advertising Revenues | $1,600 | ~$1,525 | ($75) | | Retransmission Consent Revenues | N/A (anticipated improvement) | ~$1,475 | N/A | | Broadcast Operating Expense | $2,350 (reduced from $2.4B) | $2,335 | ($15) | | Corporate & Administrative Expenses | N/A | $120 | ($5) | | Capital Expense Range | N/A | Reduced by ~$20 | ($20) | | Estimated Cash Income Taxes | N/A | Reduced by ~$23 | ($23) | - Management is redoubling efforts to improve the efficiency of stations and other businesses by increasing revenues and further managing operating costs, capital expenses, and investment opportunities[5] Detailed Financial Results Revenue Performance Q2 2024 total revenue grew 2% to $826 million, propelled by strong political advertising and production company revenue growth | Revenue Stream | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Broadcasting Revenue | $808 | $801 | 1% | | Production Companies | $18 | $12 | 50% | | Total Revenue | $826 | $813 | 2% | Core Advertising Revenue Q2 2024 core advertising revenue decreased 2% to $373 million, with full-year guidance revised downward to $1.525 billion | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Core Advertising Revenue | $373 | $379 | (2)% | - For Q3 2024, core advertising revenue is expected to be flat to up low single-digit percentages compared to Q3 2023, primarily driven by the Olympic Games[2] Political Advertising Revenue Q2 2024 political advertising revenue surged 292% to $47 million, with strong performance expected to continue into Q3 | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | Q2 2020 (Millions) | | :--- | :--- | :--- | :--- | :--- | | Political Advertising Revenue | $47 | $12 | 292% | $29 | - Q3 2024 political advertising revenue is anticipated to be in the range of $180 million to $200 million, comparable to Q3 2020[3] Retransmission Consent Revenue Retransmission consent revenue declined 6% in Q2 2024 to $371 million, prompting a downward revision of full-year guidance | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Retransmission Consent Revenue | $371 | $394 | (6)% | - Pay-television subscriber numbers have largely extended trends from last year, leading to a revised full-year 2024 retransmission consent revenue expectation of approximately $1.475 billion[4] Other Revenue Other revenue for Q2 2024 was $17 million, showing a 6% increase compared to Q2 2023 | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Other Revenue | $17 | $16 | 6% | Operating Expenses Total operating expenses were $607 million in Q2 2024, reflecting a 2% increase in broadcasting expenses and a 7% decrease in corporate expenses | Expense Category | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Broadcasting Expense | $565 | $552 | 2% | | Production Companies Expense | $14 | $11 | 27% | | Total Corporate & Admin Expense | $28 | $30 | (7)% | Broadcasting Expenses Broadcasting expenses increased by 2% in Q2 2024 to $565 million, driven by a 5% rise in station expenses | Broadcasting Expense Category | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Station Expenses | $331 | $314 | 5% | | Network Affiliation Fees | $233 | $235 | (1)% | | Total Broadcasting Expense | $565 | $552 | 2% | Production Companies Expenses Production companies expenses increased by 27% in Q2 2024 to $14 million compared to $11 million in Q2 2023 | Expense Category | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Production Companies Expense | $14 | $11 | 27% | Corporate and Administrative Expenses Corporate and administrative expenses decreased by 7% in Q2 2024 to $28 million, primarily due to an 8% reduction in corporate expenses | Corporate & Admin Expense Category | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Corporate Expenses | $23 | $25 | (8)% | | Non-cash Stock-based Compensation | $5 | $5 | 0% | | Total Corporate & Admin Expense | $28 | $30 | (7)% | Profitability The company demonstrated strong profitability improvements in Q2 2024, with net income increasing significantly by 450% year-over-year | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Net Income | $22 | $4 | 450% | | Adjusted EBITDA | $225 | $227 | (1)% | Net Income Net income for Q2 2024 was $22 million, a substantial increase of 450% from $4 million in Q2 2023 | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | 6 Months 2024 (Millions) | 6 Months 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Income | $22 | $4 | 450% | $110 | ($27) | (507)% | Adjusted EBITDA Adjusted EBITDA for Q2 2024 was $225 million, remaining stable compared to the prior year period | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | Change (%) | 6 Months 2024 (Millions) | 6 Months 2023 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $225 | $227 | (1)% | $422 | $390 | 8% | Balance Sheet and Debt Management Debt Reduction and Maturity Extension Initiatives The company executed several strategic transactions in H1 2024 to reduce debt and extend its next material maturity to 2027 - Next material debt maturity will not occur until 2027, following the 2024 and 2026 political cycles[6] - Weighted average cost of debt increased to 7.7% from 6.8%[6] - Key debt management actions include: * Amended Senior Credit Facility to increase commitments to $680 million and extend maturity to December 31, 2027 * Fully prepaid $1.15 billion 2019 Term Loan * Issued $500 million 2024 Term loan maturing June 4, 2029 * Pre-paid $690 million of $700 million outstanding 2026 Notes via tender offer * Issued $1.25 billion of 2029 Notes maturing July 15, 2029 * Repurchased $50 million of 2027 Notes in Q2 and an additional $29 million in Q3 2024 * Repaid $75 million of $200 million drawn under Revolving Credit Facility[6][7] - Remaining availability of approximately $178 million under Board authorization to repurchase additional debt in the open market[8] Leverage Ratios and Debt Metrics As of June 30, 2024, the company's leverage ratios remained within the permitted incurrence limits under its debt agreements | Metric | Value (as of June 30, 2024) | Maximum Permitted Incurrence | | :--- | :--- | :--- | | First Lien Leverage Ratio (net of cash) | 3.21 to 1.00 | 4.00 to 1.00 | | Leverage Ratio (net of cash) | 5.92 to 1.00 | 7.00 to 1.00 | | Adjusted Total Indebtedness | $6,146 million | N/A | Financial Guidance Third Quarter 2024 Guidance The company anticipates Q3 2024 total revenue between $948 million and $986 million, driven by strong political advertising revenue | Revenue Stream (Q3 2024 Guidance) | Low (Millions) | High (Millions) | Q3 2023 Actual (Millions) | | :--- | :--- | :--- | :--- | | Core Advertising | $365 | $375 | $363 | | Political Advertising | $180 | $200 | $26 | | Retransmission Consent | $365 | $370 | $378 | | Production Companies | $23 | $25 | $20 | | Other | $15 | $16 | $16 | | Total Revenue | $948 | $986 | $803 | | Operating Expense (Q3 2024 Guidance) | Low (Millions) | High (Millions) | Q3 2023 Actual (Millions) | | :--- | :--- | :--- | :--- | | Station Expenses | $351 | $356 | $322 | | Network Affiliation Fees | $233 | $233 | $234 | | Production Companies | $20 | $22 | $18 | | Corporate Expenses | $22 | $25 | $19 | Full-Year 2024 Guidance Updates The company updated its full-year 2024 estimates, projecting core advertising at $1.525 billion and retransmission revenue at $1.475 billion | Full-Year 2024 Estimate (Millions) | Value | | :--- | :--- | | Core Advertising | $1,525 | | Political Advertising | $180-$200 | | Retransmission Consent | $1,475 | | Production Companies | $105 | | Other Revenue | $70 | | Total Broadcasting Expense | $2,335 | | Production Companies Expense | $85 | | Corporate & Administrative Expense | $120 | | Interest Expense | $475 | | Total Capital Expenditures (excl. Assembly Atlanta) | $90-$100 | | Income Tax Payments, net of refunds | $177-$187 | Supplemental Financial Information Cash Flow and Balance Sheet Data Net cash from operating activities was $86 million for the first six months of 2024, with the cash balance increasing to $75 million | Cash Flow (6 Months Ended June 30) | 2024 (Millions) | 2023 (Millions) | | :--- | :--- | :--- | | Net cash from operating activities | $86 | $459 | | Net cash from investing activities | $50 | ($187) | | Net cash used in financing activities | ($82) | ($297) | | Net increase (decrease) in cash | $54 | ($25) | | Balance Sheet Item (as of) | June 30, 2024 (Millions) | December 31, 2023 (Millions) | | :--- | :--- | :--- | | Cash | $75 | $21 | | Long-term debt | $6,138 | $6,160 | | Series A Preferred Stock | $650 | $650 | | Borrowing availability under Revolving Credit Facility | $474 | $494 | Non-GAAP Financial Measures and Reconciliations The company utilizes non-GAAP measures like Adjusted EBITDA to provide additional insight into operating performance and debt covenant compliance - Adjusted EBITDA is calculated as net income (loss) adjusted for income tax expense (benefit), interest expense, loss on extinguishment of debt, non-cash stock-based compensation, non-cash 401(k) expense, depreciation, amortization of intangible assets, impairment charges, loss (gain) on asset disposals, and certain other miscellaneous items[22] - Leverage Ratio Denominator is a key metric for calculating compliance with financial covenants in indebtedness agreements, giving effect to acquisitions/divestitures and expected synergies[23] - Transaction Related Expenses are incremental expenses specific to acquisitions and divestitures, presented net of certain operating data for meaningful comparison[24] Adjusted EBITDA Reconciliation The reconciliation details adjustments from net income to Adjusted EBITDA for the three and six-month periods ended June 30, 2024 and 2023 | Reconciliation Item (Q2) | 2024 (Millions) | 2023 (Millions) | | :--- | :--- | :--- | | Net income | $22 | $4 | | Depreciation | $36 | $35 | | Amortization of intangible assets | $32 | $50 | | Non-cash stock-based compensation | $6 | $7 | | Interest expense | $118 | $109 | | Income tax expense | $7 | $5 | | Loss from early extinguishment of debt | $7 | $0 | | Adjusted EBITDA | $225 | $227 | | Reconciliation Item (6 Months) | 2024 (Millions) | 2023 (Millions) | | :--- | :--- | :--- | | Net income (loss) | $110 | ($27) | | Depreciation | $72 | $70 | | Amortization of intangible assets | $63 | $99 | | Non-cash stock-based compensation | $12 | $9 | | Interest expense | $233 | $213 | | Income tax expense (benefit) | $38 | ($6) | | Loss from early extinguishment of debt | $7 | $3 | | Adjusted EBITDA | $422 | $390 | Leverage Ratio Denominator and Debt Ratios Calculation The Leverage Ratio Denominator was $1,038 million as of June 30, 2024, resulting in leverage ratios within permitted covenant limits | Debt Metric (as of June 30, 2024) | Value (Millions) | | :--- | :--- | | Total outstanding principal | $6,215 | | Letters of credit outstanding | $6 | | Cash | ($75) | | Adjusted Total Indebtedness | $6,146 | | Leverage Ratio Denominator | $1,038 | | Leverage Ratio | 5.92 | | Total outstanding principal secured by a first lien | $3,405 | | First Lien Adjusted Total Indebtedness | $3,330 | | First Lien Leverage Ratio | 3.21 | | Total outstanding principal secured by a lien | $3,405 | | Secured Adjusted Total Indebtedness | $3,330 | | Secured Leverage Ratio | 3.21 |