Gray Television today reported record first quarter revenue of $173.7 million (+30% from 1q 2015), broadcast cash flow of $65.9 million (+41%), net income of $9 million, and free cash flow of $24.2 million (+10%).
On a pro forma basis (what Gray calls “Combined Historical Basis”), revenue was $187.1 million (+12%), broadcast cash flow was $69.3 million (+11%), and free cash flow was $30.9 million (+9%). Diluted net income per share was $0.12 for the first quarter of 2016.
Historically, Gray has reported its local television advertising revenues and its internet/digital/mobile advertising revenues separately. Beginning in 2016, it is reporting a single line item identified as “Local (including internet/digital/mobile)” which will combine both its local television ad revenues and its internet/digital/mobile advertising revenues.
The company said: “Since this revenue originates within each local market in which we operate and is sold by each local sales force, we believe this classification is more consistent and more representative of our operating focus, to maximize all aspects of local revenue. All prior periods presented have been reclassified to reflect our current presentation.”
First quarter fnancial highlights included:
- Record Revenue and Broadcast Cash Flow — Revenue for the first quarter of 2016 was $173.7 million, which was the highest for any first quarter in Gray’s history ($187.1 million on a combined historical basis). Moreover, total revenue increased $40.4 million, or 30%, for the first quarter of 2016 compared to the year-earlier period. Net income was $9.0 million for the first quarter of 2016, which was also the highest for any first quarter in Gray’s history. Broadcast cash flow was $65.9 million, which was also the highest for any first quarter in Gray history ($69.3 million on a combined historical basis).
- Total Leverage Ratio — As of March 31, Gray’s total leverage ratio was 5.25 times on a trailing eight-quarter basis, netting all $120.7 million of cash on our balance sheet against our debt balance.
- Schurz Acquisition and Related Transactions Completed — During February 2016, Gray completed the Schurz acquisition and related transactions. The net adjusted purchase price, excluding transaction and financing costs, was approximately $457.4 million. This amount was funded by additional borrowings under Gray’s senior credit facility and proceeds from the sale of certain assets acquired in the transaction. Excluding transaction and financing costs, net consideration paid was approximately $416.2 million. In the first quarter of 2016, these acquired stations contributed $16.6 million of net revenue and $5.8 million of broadcast cash flow to Gray’s results of operations. The station group now comprises 50 television markets broadcasting approximately 180 programming streams, including 35 CBS affiliates, 26 NBC affiliates, 19 ABC affiliates and 13 Fox affiliates.
- Transaction Costs — In connection with its acquisition activities, Gray incurred professional fees of approximately $6.7 million and $300,000 in the first quarters of 2016 and 2015, respectively. These expenses are included in its corporate and administrative operating expenses.
Total revenue increased $40.4 million, or 30%, to $173.7 million for the first quarter of 2016 compared to the first quarter of 2015. Revenue from the 2016 Acquired Stations and 2015 Acquired Stations, collectively, accounted for approximately $30.7 million of our total revenue in the first quarter of 2016. Revenue from the 2015 Acquired Stations had no effect on the first quarter of 2015 as none of the 2015 Acquired Stations were acquired in the first quarter of 2015.
The company said the revenue increase was due to the additional revenue from the 2016 Acquired Stations and 2015 Acquired Stations; increases in retransmission revenue due primarily to increased retransmission consent rates; and increases in political advertising revenue due to 2016 being the “on year” of the two-year election cycle.
Local and national advertising revenue included approximately $2.1 million of revenue from the broadcast of the 2016 Super Bowl on our CBS channels, an increase of approximately $0.6 million compared to the $1.5 million of revenue from the broadcast of the 2015 Super Bowl on our NBC channels.
The principal types of revenue were:
- Local advertising revenue (including internet/digital/mobile) increased $14.5 million, or 19%, to $89.4 million.
- National advertising revenue increased $4.3 million, or 24%, to $22.1 million.
- Political advertising revenue increased $8.5 million, or 733%, to $9.7 million.
- Retransmission consent revenue increased $11 million, or 30%, to $47.3 million.
- Other revenue increased $2.1 million, or 65%, to $5.4 million.
Within Gray’s local and national advertising revenue categories, and excluding the 2016 Acquired Stations and 2015 Acquired Stations, its five largest customer categories experienced the following approximate changes during the first quarter of 2016 compared to the first quarter of 2015:
- Automotive increased 2%
- Medical increased 4%
- Restaurant increased 2%
- Furniture and appliances increased 5%
- Communications decreased 12%
Factoring out the new station acquisitions (the “combined historical basis”), total revenue increased $19.7 million, or 12%, to $187.1 million in the first quarter of 2016 as compared to the first quarter of 2015. On a Combined Historical Basis, the principal types of revenue for the first quarter of 2016 compared to the first quarter of 2015, were approximately as follows:
- Local advertising revenue (including internet/digital/mobile) increased $3.0 million, or 3%, to $96.7 million.
- National advertising revenue decreased $0.8 million, or 3%, to $24.0 million.
- Political advertising revenue increased $8.6 million, or 697%, to $9.9 million.
- Retransmission consent revenue increased $8.6 million, or 21%, to $50.3 million.
- Other revenue increased $0.3 million, or 5%, to $6.3 million.
Within Gray’s local and national advertising revenue categories, and including the revenue attributable to the 2016 Acquired Stations and the 2015 Acquired Stations, its five largest customer categories experienced the following approximate changes during the first quarter of 2016 compared to the first quarter of 2015:
- Automotive was unchanged
- Medical was unchanged
- Restaurant increased 3%
- Furniture and appliances increased 6%
- Communications decreased 12%
Wells Fargo analyst Marck Ryvicker was pleased with the company’s results, saying: “We think Gray is in one of the best positions on a fundamental basis given a significant political footprint coupled with all network affiliation renewals secured for the next five years.”
Read the company’s report here.
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