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GM

GRAY MEDIA, INC (GTN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue of $0.782B was 1% above the high end of guidance and beat S&P Global consensus; diluted EPS came in at -$0.23 vs consensus of -$0.49, helped by lower-than-guided operating expenses and stronger-than-expected political advertising .
  • Core advertising fell 8% YoY due to Super Bowl mix (FOX vs. 2024 CBS footprint) and one fewer selling day; retransmission revenue was resilient (-1% YoY) and above the high end of guidance .
  • Management raised liquidity and reiterated deleveraging focus: reduced principal debt by $17M; AR securitization expanded to $400M; revolver increased to $700M; first-lien and total leverage ratios ended at 2.92x and 5.48x, respectively .
  • Q2 2025 guide: core ad down mid-single digits vs Q2 2024, political $2–3M, retrans $369–$371M; FY 2025 tax cash payments reduced to $48–$68M from $80–$100M prior—expense containment exceeding the $60M run-rate provides a key support; declared a $0.08 dividend .

What Went Well and What Went Wrong

What Went Well

  • Revenue and expense outperformed: “results… finished much better than our guidance on both revenues and expenses” with revenue above high end and operating expenses 1% below the low end of guidance .
  • Political advertising surprised positively: Q1 political revenue of $13M vs guide of $2–$4M, driven by Wisconsin Supreme Court race and special elections; “we’re pleasantly surprised with what’s going on right now in political” .
  • Cost containment progress: broadcasting operating expenses declined YoY for the first time since COVID; network affiliation fees declined for the fifth consecutive quarter; management believes cost actions now exceed the $60M annualized run-rate .

What Went Wrong

  • Core advertising down 8% YoY due to Super Bowl mix and one less selling day; consumer discretionary categories (auto, restaurants, department stores) remained soft amid tariff and interest-rate uncertainty .
  • Net loss attributable to common stockholders of $22M vs $75M income a year ago, with Adjusted EBITDA down 19% YoY due to cyclical political decline and prior-year non-recurring BMI gain .
  • Corporate expenses rose 13% YoY to $26M; management noted normal variability and ordinary-course raises across ~9,700 employees .

Financial Results

Consolidated Results vs Prior Periods

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$0.950 $1.045 $0.782
Diluted EPS ($USD)$0.86 $1.59 -$0.23
Operating Income ($USD Millions)$250 $325 $92
Adjusted EBITDA ($USD Millions)$338 $402 $160
Net (Loss) Income ($USD Millions)$96 $169 -$9

EBITDA margin (%) calculated as Adjusted EBITDA / Revenue:

  • Q3 2024: 35.6%
  • Q4 2024: 38.5%
  • Q1 2025: 20.5%

Note: EBITDA margin figures are calculated from cited revenue and Adjusted EBITDA.

Performance vs S&P Global Consensus (Q1 2025)

MetricActualConsensusSurprise
Revenue ($USD Billions)$0.782 $0.773*Beat (~$0.009B)
Diluted EPS ($USD)-$0.23 -$0.49*Beat (+$0.26)

Values with * retrieved from S&P Global.

Segment and Revenue Mix (Q1 2025 vs Q1 2024)

Category ($USD Millions)Q1 2024Q1 2025YoY Change
Core Advertising$372 $344 -8%
Political Advertising$27 $13 -52%
Retransmission Consent$381 $379 -1%
Other$19 $19 0%
Total Broadcasting Revenue$799 $755 -6%
Production Companies$24 $27 +13%
Total Revenue$823 $782 -5%

KPIs and Balance Sheet

KPIQ1 2024Q4 2024Q1 2025
Net Cash from Operating Activities ($MM)$68 $751 (FY 2024) $132
Cash ($MM)$135 $135 $210
Long-term Debt, net of deferred costs ($MM)$5,621 $5,621 $5,609
First Lien Leverage Ratio (x)2.97x (12/31/24) 2.97x (12/31/24) 2.92x (3/31/25)
Total Leverage Ratio (x)5.49x (12/31/24) 5.49x (12/31/24) 5.48x (3/31/25)
Debt Principal Reduction ($MM)—$520 FY 2024 $17 Q1 2025

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core Advertising (YoY)Q2 2025N/ADown mid-single digits vs Q2 2024 New
Political Advertising ($MM)Q2 2025N/A$2–$3 New
Retransmission Consent ($MM)Q2 2025N/A$369–$371 New
Production Companies ($MM)Q2 2025N/A$17–$18 New
Other Revenue ($MM)Q2 2025N/A$16–$17 New
Broadcasting Station Expenses ($MM)Q2 2025N/A$335–$340 New
Network Affiliation Fees ($MM)Q2 2025N/A$233–$235 New
Corporate Expenses ($MM)Q2 2025N/A$25–$30 New
Interest Expense ($MM)FY 2025$450 $450 Maintained
Amortization of Deferred Financing Costs ($MM)FY 2025$16 $16 Maintained
Preferred Stock Dividends ($MM)FY 2025$52 $52 Maintained
Common Stock Dividends ($MM)FY 2025$32 $32 Maintained
CapEx excl. Assembly ($MM)FY 2025$85–$90 $85–$90 Maintained
Assembly Atlanta CapEx, net ($MM)FY 2025$0 (stated as “-”) $0 Maintained
Income Tax Payments ($MM)FY 2025$80–$100 $48–$68 Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Deregulation/M&A flexibilityHighlighted swaps/duopolies potential; optimism on Washington reform Actively pursuing swaps/duopolies; “good white smoke” from Washington; could delever via strategic transactions Building momentum
Core ad market and tariffs/macroCautious auto; tariff uncertainty; Q1 core guide down 7–8% Q1 core -8%; categories mixed; no cancellations but hesitancy; core guide for Q2 down MSD Still pressured
Local sports rights expansionMajor additions (Braves, RSN gaps) driving halo to stations 80% footprint carrying local sports (90 stations); continuing growth Expanding
Retrans/Affiliate negotiationsABC renewals reduce reverse comp; renewals with other networks pending Ongoing talks; hopeful renewals; virtual MVPD economics discussed Negotiations active
Assembly Atlanta~$500–$600M invested; occupancy building; capital neutral in 2025 ~75–80% occupancy; multiple productions; capital neutral; high incremental contribution per lease Improving utilization
Cost containment$60M annualized savings targeted by late-2024 Exceeded $60M run-rate; Q1 broadcasting expenses down YoY; network fees down 5th straight quarter Savings realized

Management Commentary

  • “Our results for the first quarter of 2025 finished much better than our guidance on both revenues and expenses… Adjusted EBITDA was $160 million” .
  • “We increased our AR securitization facility… to $400 million… and increased our revolver… to $700 million. Together, these facilities provide access to over $1 billion of availability” .
  • “A very bright spot… political ad revenue… guide was $2–$4 million, actual came in at $13 million… strong results in Wisconsin” .
  • “It’s the first time since the COVID slowdown that we posted lower first quarter broadcasting operating expenses than… prior year… fifth consecutive quarter in which our network affiliation fees did not exceed prior year” .
  • “80% of our footprint now carrying local sports… equates to 90 stations… we’re very excited to watch that part of our business grow” .

Q&A Highlights

  • Deregulation/M&A: Management sees swaps/duopolies as most attractive near-term; prepared to pursue equity-based structures and even selective cash buys for smaller strategic deals to delever .
  • Advertising tone: No cancellations, but hesitancy persists; services categories (legal, health, home improvement) now ~1/3 of business and less impacted by tariffs; political is a key upside variable .
  • Virtual MVPDs economics: Direct negotiation would have a significant gross impact vs current network-controlled arrangements; net impact depends on network economics .
  • Assembly Atlanta monetization: ~75–80% occupancy; capital neutral in 2025; high incremental contribution per lease; cautious approach to Phase 2 partnerships without stressing balance sheet .
  • Capital allocation: $240M remaining authorization for debt repurchases; will be opportunistic between near-term maturities and discount capture; reinforced liquidity from AR facility and revolver .

Estimates Context

  • Q1 2025 came in above S&P Global consensus on both revenue and EPS: $0.782B vs $0.773B*; EPS -$0.23 vs -$0.49*. Management also exceeded the high end of internal revenue guidance and kept expenses below the low end .
  • With Q2 core ad guided down MSD and political guided to $2–$3M, sell-side models may need to reflect continued macro softness offset by cost containment and retrans resilience .

Values with * retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue beat and expense outperformance in Q1 indicate cost actions are flowing through; Adjusted EBITDA margin compression is cyclical (political off-year) and should improve with category normalization and sports halo .
  • Core ad softness is driven by mix (FOX Super Bowl vs CBS in 2024) and macro tariffs/interest-rate uncertainty; watch auto, restaurants, and department stores for inflection against improving macro clarity cited by management .
  • Retransmission revenue and declining network affiliation fees underpin stability; upcoming affiliate renewals and potential regulatory changes (virtual MVPDs) are key medium-term levers .
  • Deleveraging remains central: $17M debt reduction in Q1, ample liquidity (AR $400M; revolver $700M), and lower FY 2025 cash taxes ($48–$68M) support continued balance sheet improvement .
  • Assembly Atlanta is nearing steady-state utilization, capital neutral in 2025; incremental leases/high contribution, plus Phase 2 partnerships, can add diversified cash flows without large capex .
  • Local sports strategy continues to scale (80% footprint), strengthening audience and advertiser relationships; anticipate continued halo to core ad as packages expand .
  • Trading implications: Near-term positive bias from Q1 beat and lowered tax cash guidance; medium-term optionality from deregulation-driven M&A, affiliate renegotiations, and sports-led monetization could catalyze estimate revisions and multiple expansion if achieved .