Gray TV Boosts Political Revenue Target

After reporting core ad revenue up 26% for the fourth quarter, including the newly acquired Quincy and Meredith stations, Gray Television Chairman-CEO Hilton Howell told Wall Street analysts Friday morning to expect good results for the current quarter.

“On a combined historical basis, we anticipate a 4%-7% increase in total revenue over the first quarter of 2021 and a 6%-9% increase in total revenue over the first quarter of 2020 — a presidential campaign year,” Howell said.

“Our guidance today also includes a big change to our full-year 2022 political ad revenue guidance. Specifically, we are today increasing our 2022 political revenue guidance by approximately 10% from the $525 million announced on our November 2021 earnings call, to $575 million today. This new target of $575 million represents a whopping 55% increase over the $372 million of political revenue that we achieved on a combined historical basis in the last mid-term election year of 2018,” the CEO said.

Gray COO Bob Smith later noted that the company’s stations had already seen primary campaign ads begin in December in Alabama and Nebraska, and in January in Illinois.

Adjusted to include all stations now in the Gray portfolio, Smith told analysts that the fourth quarter core revenue of $422 million was 11% higher than the fourth quarter of 2020, which he noted was depressed by both COVID impact and political displacement. “Interestingly, our fourth quarter 2021 core revenue was precisely equal to our fourth quarter 2019 core revenue,” he added.

“Overall, the advertising business was solid for us, with the notable exception of the auto category. For the fourth quarter, with the exception of the auto category, every other category posted strong gains over the prior year period. As expected, our entertainment ad category, which included gaming and gambling companies, more than doubled over the year and is now our largest category,” Smith told the analysts. Going forward, Gray is separating that to report gaming as its own category.

Noting that auto used to comprise 25% of non-political advertising, Smith said that was 17% for 2021. But Gray has diversified its ad base. He noted a focus on the health sector and most recently travel as growth areas. He said legal and home improvement have also grown at a healthy pace.

“While auto is still a top category, it is no longer a run-away No. 1. As our diversification has shown, that is a good thing. When auto returns — and it will — all the better,” Smith said.

As we’ve been hearing in Wall Street calls this quarter, Gray confirmed that reverse comp growth is slowing.

“In the combined historical basis financial data that we provided today, you will see that the growth in network fees over the past five years has slowed. This is because Gray, Meredith and Quincy previously experienced large step-ups in network fees two years ago as the networks prepared for their contract renewals with the NFL. We expect this slowdown in network fee growth to continue as we progress to our new CBS affiliation term and our next affiliation terms with the other networks,” said Kevin Latek, Gray’s chief legal and development officer.