Gray Employees Thanked For Taking A Bullet

Gray Television Chairman-CEO Hilton Howell was speaking literally when he thanked the company’s employees for their “extraordinary efforts in these extraordinary times” during Gray’s quarterly conference call Thursday morning with Wall Street analysts.

“Learning to work from home, often in isolation. Learning to cover an ever-changing, life-destroying virus. Learning to balance a child’s care with unrelenting demands on deadlines our viewers count on. Learning to fight through their fears. And during the protests, and subsequent riots, learning to take a rubber bullet in the chest, Learning how to report clearly in the fog of tear gas. Learning to stomach the reporting of the ransacking of their beloved cities, towns and communities—and trying to make sense of it all,” Howell said of the efforts by Gray staffers in recent months.

As the potential impact of COVID-19 sank in, Howell said the priority of his management team was to ensure employees that their jobs, salaries and benefits were secure. That was to make sure they didn’t have to worry about their personal financial security. “Their job was to focus on their responsibilities, their journalism, our communities and our clients — and it has paid off,” Howell declared.

Advertising business “fell off a cliff” in April, said the CEO — a story repeated by many media companies in recent days. “But as the quarter matured, each month got better than the last,” he noted. For the full quarter, revenues were down 11% to $451 million. Retrans was up, along with political advertising, while core advertising dropped 30%.

“Our business slowed less than we feared and it recovered faster than we’d hoped,” Howell said. April core plummeted by 38%, but May was down only 34%, and June was off only 17% from a year ago. Howell noted that some stations actually beat their pre-COVID budgets in June.

Gray isn’t issuing formal guidance for the current third quarter. However, CFO Jim Ryan did offer some commentary to analysts. “Currently the anticipated increases in political and retransmission revenue should allow our total revenue to grow in a high single-digit to low double-digit range. And, with our peers, we are experiencing declines in total core revenue in Q3 and our visibility is understandably limited. As of today, again cautioning the situation still is fluid and our visibility is limited, we believe that total core revenue for Q3 will decline at least in a range of 10%-15%. But, as we saw in Q2, total core revenue appears to be sequentially improving each month of Q3. While still a decline, it is a dramatic improvement over Q2,” the CFO said.

Gray executives credited the strength of their portfolio for the advertising rebound. Even when clients have cut budgets, COO Bob Smith said dominant stations will be bought first. “We’re gonna get bought,” he declared.

Asked about the auto sector, Smith noted some reason to be hopeful, “It has been a bit of a laggard. We’re optimistic [for] when they finally get product on the ground,” said Smith, noting that the auto industry had experienced supply-chain disruptions.

The COO said sales reps and managers have been hearing from dealers that they just can’t get product, but that is expected to improve later this month or in September.

“Some of our car dealers are doing remarkably well with the limited inventory they’ve got. Used is driving it in a lot of cases. The ones that have hot product — with the little bit they can get — like [Ford] F-150s for example, If they get one on the lot, they sell it at list [price] and they’re really not negotiating right now, because of lack of inventory,” Smith explained. Once inventory returns, the car dealers will be healthier and TV stations should benefit.

Gray and other broadcasters continue to benefit from heavy political spending. “On the presidential front, Biden spending remains on par with the pace that the Clinton campaign had in 2016. The Trump campaign, however, has laid in their base buys through the election. Importantly, the Trump campaign is currently on track to be up 57% versus overall spending in 2016,” Gray President-Co-CEO Pat LaPlatney told analysts. PAC spending for the presidential contest is up only slightly at this point, he said, but Gray is seeing very strong demand for advertising in the U.S. Senate races.