Gray Media - Q2 2024
August 8, 2024
Transcript
Operator (participant)
Without further ado, I will now turn the program over to our Chairman and CEO, Hilton H. Howell Jr.
Hilton H. Howell Jr. (Chairman and CEO)
Thank you, operator. Good morning, everyone. As the operator mentioned, I'm Hilton Howell, the Chairman and CEO of Gray Television. Thank you all for joining our Q2 2024 Earnings Call. With me here in Atlanta are all of our executive officers, Pat LaPlatney, our President and Co-CEO, Sandy Breland, our Chief Operating Officer, Kevin Latek, our Chief Legal and Development Officer, and Jeff Gignac, who succeeded Jim Ryan as our Chief Financial Officer on the first of July. As usual, we will begin with a disclaimer that Kevin will provide. Kevin?
Kevin Latek (Chief Legal and Development Officer)
Thank you, Hilton. Good morning, everyone. Gray Television, commonly known as Gray Media or Gray, uses its website as a key source of company information. The website address is www.graymedia.com. We will file our quarterly report on Form 10-Q with the SEC today. We issued an updated investor presentation this morning that can be found on our website under Investor Relations. Included on the call may be a discussion of non-GAAP financial measures, and in particular, Adjusted EBITDA, leverage ratio denominator, and certain leverage ratios. These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public in its analysis and evaluation of our company. Included in our earnings release, as well as posted on our website, are reconciliations of these financial measures to the GAAP measures reported in our financial statements.
Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Those statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those expressed or implied in any forward-looking statements as a result of various important factors that have been set forth in the company's most recent reports filed with the SEC, including our most recent quarterly report on Form 10-Q and our most recent earnings release. The company undertakes no obligation to update these forward-looking statements. I now turn the call to Hilton.
Hilton H. Howell Jr. (Chairman and CEO)
Thank you, Kevin. As usual, there was no slowing down this summer for Gray. We certainly packed a lot of very exciting innovation, collaboration, and straightforward quality journalism into the last couple of months. Our local news stations and our production companies are performing at the top of their game. Our financial results evidence this success as much as the fantastic award-winning work of several stations that have been recognized over just the past few months, from the Investigative Reporters and Editors, the National Association of Broadcasters Leadership Foundation, the Mental Health America, and the Society of Professional Journalists. We are honored to work with dedicated employees at every level of this company, and we congratulate all those involved on these award-winning projects, who are making a real impact with investigative journalism, one story at a time.
Gray is also continuing to expand our content and reach in many ways. From the announcement of our upcoming live broadcast of the Harlem Globetrotters game on August 18, which will be produced by our subsidiary, Raycom Sports, to the launching of new networks like Rock Entertainment Sports Network in Ohio and Palmetto Sports and Entertainment in South Carolina. We are constantly looking for ways to entertain and inform our viewers. With this backdrop, I'm personally pleased to review our Q2 results for our company with you today. Our total revenue in the Q2 was $826 million, an increase of 2% from the Q2 of 2023. Net income was $22 million in the Q2, compared to $4 million in the Q2 of 2023.
Adjusted EBITDA was $225 million, essentially unchanged from the Q2 last year. Our core advertising revenue in the Q2 was $373 million, which was slightly below the low end of our guidance range. To be specific, our core advertising revenue was about $5.7 million less than 2023's result, but please remember that Q2 in 2023 was an exceptionally strong 4% ahead of 2022's results. So all in all, we feel quite good with where we are. Political advertising revenue in the Q2 was $47 million. On a combined historical basis, which includes the results of our acquired stations and excludes the results of our divested stations, our Q2 political ad revenues blew by the Q2 of 2020, the last presidential election year, by a whopping 62%.
As you may have seen in this morning's earnings release, we are lowering our full revenue guide by $75 million for core ad revenue and $25 million for retransmission revenue. These adjustments reflect our current expectations for a continuing healthy local economy, continuing growing digital ad business, continuing strong political revenues, and a significant amount of political displacement. At the same time, we are continuing to carefully review all of our opportunities to increase revenue, reduce expenses even more intensely than this already efficient company always does. Meanwhile, we have really good news to share on Assembly Atlanta. Last week, the IATSE and Teamsters unions ratified new collective bargaining agreements that cover the important trade and craft workers in the film and television production industry....
With the risk of another Hollywood strike averted, we are now busy again lining up film and television productions for our sound stages and related facilities here in Atlanta. In fact, we've already signed our first long-term studio lease for multiple stages within the portion of Assembly Studios that are not leased by NBCUniversal. Last week, Gray entered into a lease with one of the major studio companies for the full suite of facilities needed to support a new, high-quality, episodic television drama for one of the Big Four broadcast networks. Our own stations that are affiliates of that network will actually start airing this new network show early next year. We are sincerely thrilled to welcome this production to the Atlanta metro area and to our world-class studio production complex at Assembly Atlanta, and we expect it to be a mutually beneficial, long-term relationship.
While we are proud of our recent and anticipated operational achievements, the most significant activity for Gray in the Q2 was undoubtedly the successful refinancing of our 2026 debt maturities. In particular, we extended almost $2 billion of debt maturities to 2029, while also increasing our revolving credit facility to $680 million. As a result of these efforts, we no longer have material near maturities. Through smart execution of the business, including increased efforts to raise revenues and thoughtful decisions around reducing costs and capital expenditures, we expect to generate significant free cash flow later this year and through 2026 that can and will be used to repurchase and pay off debt.
As Jeff Gignac will soon explain in his remarks, we began open market repurchases of our 2027 notes immediately after the closing of our refinancing, and that effort continues into this quarter. Reducing debt and leverage remains our top capital allocation priority. We have said this now for a few quarters, and we will continue to reiterate this guiding principle until our debt and leverage comes back down to our usual, more comfortable levels. More importantly than pledging our support to reducing leverage, you will continue to see Gray doing what it said it would do on this critical topic, as well as every other regard. Pat and the rest of the team will now provide some more color around our recent experiences and upcoming opportunities.
Pat LaPlatney (President and Co-CEO)
Thanks, Hilton. Our core advertising revenues started the Q2 strong, but tailed off a little in June. In the end, 2024 Q2 ad revenues are about 1.5% less than 2023. For context, core in the Q2 of this year did not include about $5 million of revenues attributable to the NCAA Final Four games that we broadcast in 2023, but did not have in 2024. And as Hilton mentioned, we were working against a pretty tough comp at +4% from Q2 2023. Looking ahead to Q3 of 2024, we expect core will be flat to up low single-digit percentages compared to the Q3 of 2023, driven primarily by the Olympics, which are proving to be an extraordinary event for both viewers and advertisers.
We currently anticipate that our 56 NBC affiliates, that cover about 11% of U.S. homes, will generate approximately $19 million of Olympic advertising revenue in the Q3. And for those of you wondering, some of that is political. Obviously, core will be impacted by displacement from strong political demand as we move through the Q3 of 2024, especially in September. Displacement is likely to be more impactful this year than we originally expected, with political ad revenue arriving later in the year in a more compact window, forcing us to displace more commercial ads to make room for political ads. Consequently, as we consider possible ranges of core and political revenues in the Q4, we determined that it would be prudent to reduce our internal forecast for core in Q4.
As a result of that decision, we today reduced our full-year guide for core from $1.6 billion to $1.525 billion. It's important to remember that we reduced our full-year 2024 guide for broadcast operating expenses by $50 million on our last earnings call. Today, we are lowering our guidance for broadcast OpEx and corporate and admin expenses for the full year by an additional $20 million, and our capital expense range by another approximately $20 million. While Gray has made good progress managing costs and expenses this year, we are redoubling our efforts to find thoughtful ways to reduce operating and capital expenses. We are continuing to lean on our strong in-house sales training programs and relentless effort in developing new local direct business, which is essentially our local sales force finding a customer that's new to Gray.
In the Q2, we continued to break records again, pardon me, by again posting a double-digit percentage revenue increase from new local direct business over the Q2 of 2023. These strong results continued into July of 2024, which delivered 20% more new local direct business than July of 2023, some of which is likely attributable to the Olympics on our NBC stations. Our digital businesses are also continuing to grow audience and revenues. In the Q2, we once again set new records for engagement, as well as double-digit growth in the number of digital advertisers and in total digital revenue... which we include in core ad revenue. Our connected TV and fast channel offerings continue to roll out, finding viewers and attracting advertisers in this important and growing part of the ecosystem.
In terms of political advertising revenue, through June 30 of this half of the year, our political ad revenues were $74 million, compared to the $79 million that we recorded in the first half of 2020 on a combined historical basis. First half 2020, political revenues benefited from $31 million more in presidential primary ad spending than we achieved in the first half of 2024, otherwise known as the Bloomberg-Steyer effect. We certainly cannot predict where political revenue will end up this year, given the unprecedented nature of this year's presidential race. We are particularly encouraged to see the presidential race, since the end of the Q2, become very competitive and energize races up and down the ballot, fueling substantially more fundraising. For these reasons, we continue to anticipate very strong political ad revenues for the full year.
I now turn the call over to Sandy.
Sandy Breland (COO)
Thank you, Pat. We not only had success on the sales side. Once again, we served our audiences with high-quality local journalism. Throughout the Q2, we continued breaking important news stories, as well as gathering awards, recognitions, and most importantly, audiences, as we have been documenting on numerous recent calls and press releases. We are very proud to be investing in local news, weather, and sports, as well as investigative, political, and franchise stories that our local communities want. It is these efforts that allow our great sales team to provide the advertising solutions that are clearly resonating with businesses in our markets. In some of our large markets, we participate in third-party audits with all other local television stations to track the shares our stations obtain from the television-only portion of local ad markets.
These audits from the Q2 indicate that total ad dollars in some markets did decrease slightly over the past year. At the same time, however, the Q2 audits revealed that Gray's stations grew their shares of total advertising, as well as their shares of core revenue, fueled by strong digital sales and political ad revenue. We are not surprised by these results, because we have seen again and again that maintaining a strong focus on local newscasts and community involvement retains viewers regardless of economic conditions. Our strong local stations proved themselves over the past year as they demonstrated the power of television to a large number of local professional sports teams and fans alike.
In the last two weeks, as Hilton mentioned, we announced the launch of Rock Entertainment Sports, in partnership with Dan Gilbert's Sports and Entertainment, excuse me, Properties, as well as Palmetto Sports and Entertainment, a new statewide sports network in South Carolina. Throughout this year, we have been working aggressively on a number of other opportunities to bring more sports back to local broadcast television stations. We are optimistic that we will have some exciting news in this area to announce soon. Please, stay tuned. I now turn the call over to Kevin.
Kevin Latek (Chief Legal and Development Officer)
Hi. Thank you, Sandy. As most of you know, over the course of a 3-year cycle, Gray renews retransmission consent agreements covering roughly 400 traditional pay TV operators to carry our TV station signals to tens of millions of our mutual customers. Our current cycle began in the second half of 2022. While we had anticipated some final renewals throughout the second half of this year, we can now report that within the past few days, Gray has reached agreements and agreements in principle, completing the current 2022-2024 renewal cycle. Our next set of material MVPD retrans renewals occurs in the Q1 of 2026, with operators who serve approximately 23% of our traditional MVPD sub base. In the Q2 of 2026, our renewals will cover about 18% of our traditional MVPD subscribers.
The next group, covering about 34% of these subs, will come up in the Q1 of 2027, with the remaining 25% of traditional MVPD subs covered in the final tranche of renewals occurring in the Q3 of 2027. Once again, Gray has completed a retrans renewal cycle without a single public dispute impacting our business, the distributor's business, or our mutual customers. We value the collaborative approach with our retrans partners to secure continued distribution of our strong television stations without interruption. Importantly, Gray obtained the necessary rate increases and terms that reflect the formidable value that the content our stations deliver to these distributors. We remain optimistic that the pace of sub declines will slow going forward.
This is a result of the addition of more streaming apps to MVPD bundles, the proliferation of ads and price increases in streaming products, more MVPD control over the carriage and payment for the little-watched cable channels, and the migration of sports to broadcast networks and local stations. To date, however, traditional MVPD subscriber base has continued to decline this year at about the same pace as last year. This is in contrast to our more optimistic expectations earlier this year. Given these experiences through the first half of 2024, we are bringing our guidance for full year retransmission down by about 3%, to approximately $1.475 billion.... We continue to anticipate network affiliation fees of approximately $935 million for the year, essentially in line with last year's amount.
As a reminder, we will be negotiating new affiliation agreements with each of the Big Four networks over the next 18 months. The networks see the same trends we do, and we know that they also see the same value to their businesses that only strong local affiliates can provide. We will not get into details or specifics of our network affiliation agreements, which remain strictly confidential. What we can tell you is that Gray has been and will remain committed to adjusting the network cost side of the retransmission equation to ensure that they reflect the significant changes to the television ecosystem that have occurred over the past few years. With this concludes my remarks, and I turn the call now to Jeff.
Jeff Gignac (CFO)
Thanks, Kevin. Hilton and Pat covered the key financial highlights of the quarter, which are detailed in the earnings release and the 10-Q. I'll therefore focus most of my remarks on the big improvements we made recently to our balance sheet. But first, I'd like to point out that, as Hilton mentioned, our Adjusted EBITDA for Q2 came in at $225 million. This exceeded our expectations as our operating expenses were $17 million below the low end of our guidance range of $624 million. During the quarter, we capitalized on receptive debt market conditions to extend $1.85 billion of our 2026 maturities. We also increased our revolving credit facility commitments to $680 million, all of which is due on December 31, 2027.
This financing provides us with clear line of sight to addressing our 2027 notes maturity, using on-balance sheet liquidity and the significant cash flow we expect to generate later this year and again in 2026. We sincerely appreciate the banks in our lending group that have stood by us for many years, as well as those who joined our lending group in the last few months. We also sincerely appreciate the support of the many investors who understood our business and our plans and followed through with very strong commitments to purchase our new senior secured loan and our new senior secured notes. As Hilton mentioned earlier, reducing debt and leverage remains our top capital allocation priority.
And to that end, following the completion of the refinancing in Q2, we retired $50 million of our 2027 notes via open market repurchases at an average price of approximately 90.5% of par. Subsequent to quarter end, in July, we acquired an additional $29 million of face value of the 2027 notes at just over 92% of par. As of August 7, we have $178 million remaining under the previously announced $250 million open market purchase program, and we'll continue to monitor market conditions for additional open market repurchase opportunities. Further, our strong cash flow generation in July allowed us to repay $75 million of our revolver on August 1, leaving $125 million currently drawn.
As of August 7th, that leaves us with available liquidity of over $600 million from cash on hand and undrawn revolver capacity. Depending on the timing of additional open market repurchase activities, we currently expect to fully repay our revolver by quarter end. One last item I'd like to point out is that our leverage metrics did tick up slightly from Q1 to Q2. This was expected and is mostly related to the timing of our refinancing as we paid fees and expenses related to the refinancing and had to settle interest on the 2026 notes tender offer prior to quarter end. The other notable factor is on the leverage ratio denominator. On that side of the equation, we have a timing swing related to political revenue.
In Q2 of 2022, the quarter that's rolling out of our 8th quarter calculation, political was $90 million. In Q2 of 2024, political was $47 million. Our guidance for year-to-date political Q1 through Q3 2024 indicates that we expect Q3 to approximate our year-to-date 2022 and 2020 political, which will normalize the denominator in our calculation and align with Q3 cash flows. This concludes my remarks, and I'll turn the call back over to Hilton.
Hilton H. Howell Jr. (Chairman and CEO)
Thank you very much. Operator, at this time, would like to open up the call for any questions anyone may have.
Operator (participant)
All right. Once again, ladies and gentlemen, please press star one on your telephone keypad if you'd like to join the question queue. That is star one on your telephone keypad if you would like to join the queue. And, seeing we have several in queue so far, looks like our first question will come from Daniel Kurnos of Benchmark.
Craig Huber (Analyst)
Great, thanks. Good morning. Three, if I could. Just first on political, you know, third-party sources have already taken up estimates for the year pretty substantially, even before, you know, the transition and the Democratic Party of who's running. And the peers, your peers, at let's just say, at least X runoff, are now all calling for records. I know that visibility is super limited in July, was slow, obviously, until Biden dropped out of the race. Just what can you guys give us any update? I assume you guys think you're going to take political market share here. I just want to gauge your level of confidence relative to 2020 here on how this might play out.
Kevin Latek (Chief Legal and Development Officer)
I think we're all pretty optimistic on political, but I think we've also been crystal clear that we're not going to give a guide for a full year. So we provided a pretty strong guide for Q3. That puts Q3 at the same spot as 2020.
... And I run, and also for what it's worth, same spot as 2022, despite the fact we didn't have $30 million of presidential primary money. But we're gonna leave it to everyone else to make their predictions on what Q4 is gonna be like and what the full year will be. But we're very optimistic. We're seeing lots of good signs, but we're not gonna put a number out.
Hilton H. Howell Jr. (Chairman and CEO)
Dan, and I hope you understand that, but I will tell you, everybody here is extremely bullish on political for this, this entire year. You know, we've only got 90-something days to the election, and in some states, they start voting in about 30 days. And so, we're seeing a tremendous amount of political advertising that is coming in, and we expect it to be a really good year.
Craig Huber (Analyst)
Okay, fair enough. Housekeeping, Kevin, when are the network, not won't ask for terms, just when are the network renewals up?
Pat LaPlatney (President and Co-CEO)
We have all the network renewals up for the next 18 months. There's a schedule in our investor deck from March that lists them out by network.
Craig Huber (Analyst)
Okay. And then Hilton, just on Assembly, any way to kind of gauge your optimism on how the cash flow evolves from here and how you're thinking about, you know, kind of the payback now that you guys have most of the costs sunk?
Hilton H. Howell Jr. (Chairman and CEO)
Well, as you know, we have the studios are built, all right? And they were profitable from day one, with the conclusion, as I mentioned in our prepared remarks, you know, getting IATSE and the Teamsters unions and the full votes behind everyone has really put a lot of wind in the sails. And in fact, I meet this afternoon, after this call, with individuals that are coming in to look at studios that are, you know, really prominent folks in this business. It's unbelievable how quickly things turned.
We have secured, and you know, Gray, we like to make sure we have our I's dotted and T's crossed before we talk about things, but we have secured a very solid lease with a very important client that we're very, very proud of, that is actually operating right now. So, we expect all of our studios to be leased up in the fairly near future.
Operator (participant)
All right, next up, we have James Goss of Barrington Research.
James Goss (Analyst)
Okay, thanks. One question I have is about local sports. You know, you've always been involved a lot in it, especially with Raycom, and you and your peers have been leaning even more into that in recent years. I wonder if you might talk any more about the approach you might take to identify additional ways you can be involved, since that's obviously a clearly attractive way to keep people in the broad area.
Sandy Breland (COO)
Yeah, I think that, you know, we've been really clear that we're interested in doing more local sports partnerships. We had just concluded our first year with the Phoenix Suns, extremely successful. We are happy with how it's going, so is the team. We're working currently with four NBA teams, the Atlanta Dream, the Las Vegas Aces, the Phoenix Mercury, and through a partnership with TEGNA, the Indiana Fever in several markets, and we're happy with how that's going as well. I mean, it's a great local sports and local news are a great combination. And, you know, the teams that we're working with are seeing that increased distribution and reach. And so we are absolutely interested and have, you know, shared with you guys on multiple calls that we are working on additional partnerships.
As I've said, we hope to have some really exciting news soon.
Operator (participant)
Okay, great. Moving right along, our next question will come from Craig Huber. Your line is now open.
Craig Huber (Analyst)
Great, thank you. My first question, can you just elaborate a little bit further on your core ad revenue comment about it tailing off in the month of June? Do you feel that that was more economic driven, or is it just one or two categories? And whatever you saw in June, what parts of that on the negative side have carried forward into third quarter? Anything you can comment there, please.
Pat LaPlatney (President and Co-CEO)
Yes, Pat, I would say, you know, it was primarily driven by auto. It trailing off at the end of the quarter, at the end of the second. In third quarter, our auto is down mid-single digits, you know, although we've seen an uptick here in the last couple of weeks, possibly due to the Olympics. So it, look, in terms of broader, you know, economic outlook, I think, you know, we're projecting to be flat to +3. It's things are pretty positive out there. If you look at the long list of categories that we track, we have many more up than down in third quarter. And while auto is down, and it's a big one, there are other large ones that are up as well.
We are, you know, we are pretty bullish as far as Main Street goes in third quarter.
Sandy Breland (COO)
Yeah, I think just to add to that, Pat, too, we see, you know, we see that over and over again with our strong performance on new local direct and the emphasis we've had there with our really sales teams is we saw an increase in second quarter, again, record-setting of double digits, and we just finished July with a 20% increase in new local direct.
Operator (participant)
All right, next up, we have Avi Steiner of J.P. Morgan.
Avi Steiner (Analyst)
Thank you, and good morning. I recognize you're not gonna give a political guide, and so I'm gonna try and ask it a little bit differently, if I could. You took revenue down for the full year by $100 million. How much better do you think political has become for Gray since Biden stepped down? And, if you don't want to answer it that way, I think BIA took up their estimates for political spend this year by about 5%. Is that the right way to think about it, as they think of offsets for the decline? Thank you.
Pat LaPlatney (President and Co-CEO)
Really hard to make that call. I mean, clearly, you know, Biden stepping back had a significant positive impact, not just on the presidential, but right down the ballot. So I look, there's gonna be more money out there, but, you know, we're not a, not in a position to really quantify what exactly that is. It's going to be a very good year.
Jeff Gignac (CFO)
Well, we feel really good. This is Sultan. I'd just like to point you to our footprint, because one of the exciting things about Gray, in particular, is that we have very significant exposure to essentially every single battleground state, where this election will be decided on a presidential level, and as well as significant exposure to both gubernatorial and senatorial races that are going to be very competitive. So, while we're not giving a guide, I will reiterate that we are very, very bullish about where we are coming. I remember last quarter, everybody was asking questions about whether or not we would have any political at all this year. But it's gonna come in, and is coming in at a very rapid pace.
Operator (participant)
All right. Before we take our next question, I just want to remind participants, you can press star one on your telephone keypad if you would like to join the question queue. That is star one on your telephone keypad, if you would like to join the question queue. And just so we can get to everybody in queue, just keep in mind, we're taking one question at a time, but you can always rejoin the queue if you'd like. So next up, we have Steven Cahall of Wells Fargo.
Steven Cahall (Analyst)
Thanks, Jeff. For the commentary on what drove the leverage a little higher this quarter, I know that's been the big focus has been getting that refinancing done, and you're repurchasing those 2027 notes. I was just wondering if you have a number in mind for leverage, where you think you can be at the end of the year, between the free cash flow that you'll generate, maybe some benefit from, you know, assembly and obviously political, that sort of thing. And then to follow up on Dan's question, is there any way to think about the run rate of assembly EBITDA as you exit the year? And you have so many more studios kind of signed up and chugging along there.
I think we're all trying to understand what that can mean for earnings generation in the years to come. And then maybe finally, Kevin, would just love to get a little more thinking on your subscriber outlook. You know, you said that you're optimistic that subscriber declines could start to improve here at some point. As a long media analyst, it isn't necessarily something I've observed much of in my career, but would just love to kind of compare notes on it and see, you know, when you think that might just start to happen. Thank you.
Jeff Gignac (CFO)
Yeah, Steven, it's Jeff. So I guess what I would say on the production company's line, we didn't change our guide. That's still at the same $105 number, and it reflected our expectations around leasing at the studios, along with the other production companies. So I think that, you know, that'll directionally get you to what we expect for the full year from that piece of it. As it relates to leverage, I'm sure when people saw the 5.9, they said there was maybe a little bit of head scratching, and we view it as a timing thing.
By the time we get to the end of third quarter, with the cash that we expect to generate, you know, as I said in my prepared remarks, we should be out of the revolver, depending on, you know, exactly where the final political number shakes out. And the priority for the political cash flow is to get the debt repaid. So again, depending on exactly where political shakes out, we should be, you know, we should be probably something in the low to mid five-fives at the end of, at the end of the year, just depending on exactly where things shake out.
Operator (participant)
All right, next up, we have Mike Crane of Truist Securities.
Michael Crane (Analyst)
Hey, thanks for taking my question. I wanted to maybe try to ask the political question one slightly different way. You lowered your core guidance for the full year by about $75 million, and it looks like, you know, maybe part of that was due to, you know, the Q2 results were, you know, looks like core was maybe 8 or 9 lower than what you were expecting in Q2. But how much of that, you know, the remaining, like, $66 million-$67 million decline in your core guidance is from displacement or crowding out? And how much is due to that weakness that you saw kind of at the end of the Q2 and, you know, expecting—are you expecting core to continue to be a little bit weaker, or is that really just displacement from political?
Jeff Gignac (CFO)
Yeah, I guess I'll start, and Pat and Sandy can provide some color. I mean, if you look at our guide and where it's shaking out, you know, the revised $1.525 billion, that's still up versus 2023, despite the fact that we are gonna be cramming a whole heck of a lot of political into the next 90 days. So I don't know that there's a specific read-through when we look at the business itself. We've got new local direct that's performing well. That's a barometer for the broader economic outlook that's out there. From a data point of view, let me just cite a specific data point. So if you compare our in the last presidential cycle, if you compare Q4 of 2020 to Q4 of 2019-
... we had about 10% displacement in the 2020 political cycle. So it's at least a data point that you can think about, but it's, you know, it's very difficult to put a specific number on exactly how much impact we're gonna see there.
Michael Crane (Analyst)
Yeah, I think that covers it. Yeah. Next question.
Operator (participant)
All right, the next question is from David Hamburger of Morgan Stanley.
David Hamburger (Analyst)
Hi, thank you for the question. So, your distribution revenue, the trends over the last few years continue to deteriorate, and I know you called out, you know, subscriber churn as being a primary driver of that. Now that you've locked in all of your distribution renewals for the next couple of years, I'm curious, you know, it seems as though the affiliate expense growth has flattened. So you have a pretty significant structural imbalance here. And I'm wondering, as you go into the next 18-month renewal process with the networks, you know, what can you do and how can you position yourself to, you know, get some of the relief necessary to get that back in balance?
I mean, does it mean trying to get more of the networks onto a variable pricing model, or, you know, how do you see reversing this trend that seems to kind of be a bit pernicious in your inner numbers, persistent?
Kevin Latek (Chief Legal and Development Officer)
Sure. Hi, this is Kevin Latek. We have seen probably a peak decline in our retrans this quarter. Going forward, we should see the declines should be less and less. There's a couple reasons for that, but we're not gonna get into the details of our contracts. You're right, the network fee growth slowed, and then has been, you know, largely stable the last couple of years, as the growth has now come down. What we've said a couple times, kind of to reiterate it again, is we, we and everyone else have had a lot of discussions with the networks about what's happened to the growth side of the equation and the subscriber numbers that underpin the assumptions that went into the network affiliation pricing.
Certainly for us, we had models, and I'm sure they had models, and the subscriber numbers have been not as good as we had expected. And as a result, our expectations were not met in the current contracts. The next round of contracts, we will need to price what we're paying the networks more fairly, more appropriately. I'll remind you that we compensate networks through cash and through eyeballs. The networks derive between half and two-thirds of their revenue from selling advertising that appears in the affiliates markets, not their owned and operated stations. Those ads that we are airing and our peers are airing on their stations are a significant amount of compensation for the networks.
The affiliates who are, have stronger local ratings are delivering more eyeballs to those network programs, allowing the networks to monetize those network programs better than other opportunities. That is part of the compensation that we are providing them. So our conversation with the networks will continue to be that we are compensating you with these eyeballs, which are above the affiliate average, and we're compensating you in money, and we need to set the amount we are compensating you at an appropriate level that rewards us for delivering what we're delivering in both eyeballs and dollars. And that end result, in our very strong belief, is that our network affiliation fees are too high for the current environment and will need to be adjusted down in the next round.
Exactly how that happens is not something we can speculate, because, again, those conversations happen 18 months, you know, over the next 18 months. A lot of people are gonna negotiate with company networks before then, and a lot of things are gonna happen in this industry, no doubt, over the next several months and years. So we're not gonna speculate on the exact outcome, except the headline is that we need those costs to come down in order to remain affiliated to the networks, and we expect that the there is a number there that works for both parties.
Operator (participant)
All right, next up, we have Richard Darnley of Longport.
Richard Darnley (Analyst)
Good morning. Could you—the refi for five years, was there any thought about turning a longer term for some of that debt?
Jeff Gignac (CFO)
Yeah, it's Jeff. So yeah, we evaluated the market. We looked at a whole range of different opportunities and availability of capital, and ultimately it came down to putting something in place that was the right balance of cost and tenure, and that really, you know, accomplished our objective of getting rid of our 2026 maturities in the most efficient way with the best terms.
Richard Darnley (Analyst)
Okay, thank you.
Operator (participant)
Next up, we have Craig Huber at Huber Research.
Craig Huber (Analyst)
Yeah, hi there. On Assembly Atlanta, can you just update us on what the final cost for the project will be, net and gross, at the end of this year? And then also, it sounds like, based on your commentary and your guidance for the rest of the year for Assembly, the 105 number, that maybe we should assume the Q1 next year as we start to see a meaningful return on that that benefits your PNL. Is that fair?
Jeff Gignac (CFO)
I think that's fair, in the Q1. Yeah. Yeah. Yeah, and Craig, on the other part of your question, the final cost, net was $571 million.
Craig Huber (Analyst)
Okay, thank you very much.
Operator (participant)
All right, and our final question for the day will be from Mike Crane of Truist Securities.
Michael Crane (Analyst)
Hey, thanks. Just, you know, one more question on the bond repurchase authorization. Are you guys planning to continue to only target the 7s of 2027, or would you look at other bonds in the capital structure?
Jeff Gignac (CFO)
Yeah, I think... Look, I think we'll be guided by where the best return will be, balancing the fact that we have a 2027 maturity with where the pricing is at any point in time. And in the meantime, we don't have to execute on any of that. We do have $125 million more on the revolver, so it's totally opportunistic. We can, we'll be guided by what the markets tell us. All right, if that was the last question, operator, I just want to thank everyone for your time this morning. We're very excited about the next time we get a chance to talk to you, because I've got a--we'll be able to give you real numbers on this political race, which is evolving in a very positive way for the entire-