Gray 3Q Pro Forma Revenue Down 5%

Gray Television pro forma broadcast revenue for the third quarter was $501 million, down 5% from $529 million from 3Q 2018.

The pro forma financials, labeled as “Combined Historical Basis,” released this morning, reflect divestitures and acquisitions that the company has made since the start of 2017, most notably its merger with Raycom Media, which closed in January.

Highlights of the report:

• Local advertising revenue (including internet/digital/mobile) decreased $2 million, or 1%, to $218 million.
• National advertising revenue decreased $5 million, or 8%, to $56 million.
• Political advertising revenue decreased $46 million, or 68%, to $22 million.
• Retransmission consent revenue increased $26 million, or 15%, to $196 million.
• Production company revenue decreased $3 million, or 16%, to $16 million.
• Other revenue decreased $1 million, or 10%, to $9 million.

The company said: “On a Combined Historical Basis, our local and national advertising revenue was consistent with the upper end of our guidance for the third quarter of 2019 and were slightly less than the third quarter of 2018. Political advertising revenue decreased consistent with 2019 being an “off-year” in the two-year political advertising cycle yet were significantly higher than our guidance for the third quarter of 2019, due to stronger and more widespread demand from political ad buyers across our larger portfolio of stations.

“Retransmission consent revenue continued to grow, reflecting the increasing rate environment.”

On a Combined Historical Basis, broadcast operating expenses increased $12 million, or 4%, to $316 million in the third quarter of 2019 compared to the third quarter of 2018. The increase reflects, in part, the following:

Retransmission expense paid to broadcast networks increased $16 million, or 18%, to $105 million in the third quarter of 2019 compared to the third quarter of 2018 consistent with increases in retransmission consent revenue. National sales representative commission expense decreased by approximately $3 million in the third quarter of 2019 compared to the third quarter of 2018 consistent with our termination of those relationships earlier in 2019. Other broadcast operating expenses, primarily professional fees also decreased by approximately $1 million in the third quarter of 2019 compared to the third quarter of 2018.

Compensation expense decreased slightly in the third quarter of 2019 compared to the third quarter of 2018 due primarily from the elimination of redundant positions related to the 2019 Acquisitions. Non-cash stock-based compensation expenses were $2 million in the third quarter of 2019, but were not significant in the third quarter of 2018.

On a Combined Historical Basis, production company operating expenses decreased $2 million, or 13%, to $13 million in the third quarter of 2019 compared to the third quarter of 2018, primarily due to decreases in the cost of sports programming.

For the company as a whole, total revenue for the third quarter of 2019 was $517 million, increasing $238 million, or 85%, from the third quarter of 2018, what it called its all-time best quarterly revenue.

Net income was $59 million, and was its second-best third quarter net income.

Broadcast cash flow was the company’s all-time best quarterly result at $192 million, increasing $57 million, or 42%, from the third quarter of 2018.

Gray also announced that it has authorized repurchase of up to $150 million of outstanding common stock and/or Class A common stock through Dec. 31, 2022.

Gray’s Executive Chairman and CEO Hilton H. Howell, Jr., said: “Reducing our debt level remains a high priority for Gray, as demonstrated by our recent voluntary pre-payment of $100 million of the 2019 term loan outstanding under our senior credit facility. At the same time, we believe that recent trading prices do not fully value the scale, quality, leadership and opportunities created through our merger with Raycom, which nearly doubled our size while increasing the depth and breadth of our business. From time to time, these market dislocations may provide an opportunity for stock repurchases, all while keeping a close eye on steadily decreasing our leverage.”

Read the company’s report here.