Gray Television, Inc. (GTN) is a leading multimedia company that owns and operates top-ranked local television stations and digital assets across the United States. With a diverse portfolio of 114 television markets, Gray has established itself as a dominant force in the local broadcasting industry, delivering exceptional content and unparalleled value to its viewers, advertisers, and stakeholders.

Financials

In the fiscal year 2023, Gray Television reported annual net income of -$76 million, annual revenue of $3.281 billion, annual operating cash flow of $648 million, and annual free cash flow of $300 million. The company's quarterly results for the first quarter of 2024 showcased its continued strength, with net income attributable to common shareholders of $75 million, or $0.79 per diluted share, and adjusted EBITDA of $197 million, an increase of 21% from the first quarter of 2023.

Business Overview

Gray Television is a multimedia company headquartered in Atlanta, Georgia, and is the nation's largest owner of top-rated local television stations and digital assets. The company's television stations serve 114 television markets that collectively reach approximately 36 percent of U.S. television households. This portfolio includes 79 markets with the top-rated television station and 102 markets with the first and/or second highest-rated television station. In addition to its broadcast operations, Gray owns video program companies Raycom Sports, Tupelo Media Group, PowerNation Studios, as well as the studio production facilities Assembly Atlanta and Third Rail Studios.

Revenue Breakdown and Trends

Gray Television's revenue is primarily derived from broadcast and internet advertising, retransmission consent fees, and other sources such as production of television and event programming, television commercials, tower rentals, and management fees. In the first quarter of 2024, the company reported a 3% increase in total revenue to $823 million, driven by a 4% increase in core advertising revenue and a 19% increase in political advertising revenue. The company's retransmission consent revenue decreased by 4% due to a decline in subscriptions, partially offset by an increase in rates.

Geographic Breakdown

Gray Television's television stations serve a diverse range of markets, with a focus on mid-sized and smaller markets. The company's portfolio includes 79 markets with the top-rated television station and 102 markets with the first and/or second highest-rated television station. This geographic diversity allows Gray to leverage its strong local presence and brand recognition to deliver exceptional value to its advertisers and viewers.

Operational Highlights

During the first quarter of 2024, Gray Television continued to demonstrate its operational excellence, with its television stations growing core advertising revenues by 4% over the first quarter of 2023. The company's in-house sales and business development teams have been instrumental in this success, leveraging intensive sales training and development efforts to deliver results for advertisers across a diverse range of categories, including Automobile and National.

Gray's digital businesses also performed exceptionally well in the first quarter, with the company setting new records for digital audience engagement and double-digit growth in digital revenue. The company's expansion of connected TV and fast channel offerings has been a key driver of this growth, as consumers increasingly find Gray's content on these platforms.

Guidance and Outlook

For the full year 2024, Gray Television is reaffirming its guidance of approximately $1.6 billion in core advertising revenue and $1.5 billion in retransmission revenue. The company has also reduced its broadcast operating expense guidance for the full year to approximately $2.3 billion, down from the previous guidance of $2.4 billion.

Gray's management team remains optimistic about the company's growth prospects, citing the strength of its local news operations, the expansion of its digital offerings, and the anticipated surge in political advertising revenue later in the year. The company's laser-focus on debt reduction and deleveraging also remains a top priority, with the recent authorization of a $250 million debt repurchase program further demonstrating its commitment to enhancing shareholder value.

Liquidity

As of March 31, 2024, Gray Television had a cash balance of $134 million and long-term debt, including the current portion and net of deferred financing costs, of $6.154 billion. The company's leverage ratio, as defined in its senior credit agreement, was 5.63 times, with a first-lien leverage ratio of 2.34 times. Gray's strong liquidity position and prudent capital management have positioned the company to navigate the evolving media landscape and capitalize on strategic opportunities.

Risks and Challenges

While Gray Television has demonstrated its resilience and adaptability, the company faces several risks and challenges common to the media industry, including the ongoing shift in consumer viewing habits, the impact of cord-cutting on traditional pay-TV subscriptions, and the competitive landscape for advertising dollars. Additionally, the company's reliance on political advertising revenue, which can be volatile and cyclical, presents a potential risk factor.

Conclusion

Gray Television's exceptional first-quarter results, coupled with its robust operational performance, strong liquidity position, and strategic initiatives, position the company for continued growth and success in the local broadcasting industry. The company's unwavering commitment to delivering high-quality content, expanding its digital footprint, and prudently managing its capital structure make it a compelling investment opportunity for those seeking exposure to the evolving media landscape.