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GM

GRAY MEDIA, INC (GTN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $772M (-7% YoY) with Adjusted EBITDA of $169M (-25% YoY); diluted EPS was $(0.71) versus $0.09 in Q2 2024, reflecting off-cycle political and a $28M non-cash impairment tied to WANF’s CBS non-renewal .
  • Versus S&P Global consensus, revenue was a slight miss ($772M vs $774.1M*) and EPS was a larger miss (−$0.71 vs −$0.30*), while Adjusted EBITDA exceeded consensus ($169M vs $159.8M*) .
  • Management guided Q3 total revenue to $735–$750M with core down YoY on Olympics lap and lowered network affiliation fees; full-year interest expense guided to ~$460M and capex (ex-Assembly) to $85–$90M .
  • Strategic catalysts: multiple tuck-in M&A (Scripps swap; Sagamore Hill; Block) expected to reduce leverage ~0.25x upon closing, and two July debt transactions that extended maturities, increased revolver to $750M, and modestly lifted cost of debt ~25bps .

Note: Values marked with * were retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • EBITDA resilience: Adjusted EBITDA of $169M outperformed S&P consensus ($159.8M*), supported by stronger-than-expected political and expense control .
  • Deleveraging and liability management: Reduced principal debt by $22M in Q2; executed $900M 9.625% 2032 second-lien and $775M 7.25% 2033 first-lien notes, extended revolver to $750M and maturities to 2028+, leaving no material maturities until Dec 2028 .
  • Strategic portfolio moves: Announced station swap with Scripps (no cash), plus acquisitions from SGH (<$2M) and Block ($80M) that add duopolies and are immediately cash flow accretive; management expects leverage ratio ~0.25x lower pro forma closings .

Management quotes:

  • “Adjusted EBITDA was $169,000,000… Political advertising… finished well above our expectation for an off cycle year.”
  • “Together, the Scripps, Sagamore, Block, and Allen transactions will add a net six new markets… immediately cash flow accretive… contribute to our efforts to… deleveraging.”
  • “We completed the transactions with less than a 25 basis point increase in our overall cost of debt… no material maturities until December 2028.”

What Went Wrong

  • Earnings quality pressure: Diluted EPS of $(0.71) vs $0.09 prior year driven by off-cycle political and a $28M non-cash impairment at WANF tied to CBS affiliation change .
  • Core advertising softness: Core revenue down 3% YoY to $361M amid auto and restaurant weakness; sequential core improved vs Q1 but remains below 2024 .
  • Retrans and network fee mix shift: Q3 guidance embeds sequential declines in retrans revenue (−$24–$26M) and network fees (−$19–$21M), in part due to WANF transition and multi-year renegotiations to achieve sustainability .

Financial Results

Consolidated Performance (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($M)$1,045 $782 $772
Adjusted EBITDA ($M)$402 $160 $169
Net Income (Loss) ($M)$169 $(9) $(56)
Net Income Attributable to Common ($M)$156 $(22) $(69)
Diluted EPS ($)$1.59 $(0.23) $(0.71)

Segment Revenue Breakdown

Segment ($M)Q2 2024Q1 2025Q2 2025
Broadcasting$808 $755 $754
Production Companies$18 $27 $18
Total Revenue$826 $782 $772

Key Drivers (Q2 2025 vs Q2 2024)

Driver ($M)Q2 2024Q2 2025Change
Core Advertising$373 $361 −$12
Political Advertising$47 $9 −$38
Retransmission Consent$371 $369 −$2
Other$17 $15 −$2
Adjusted EBITDA$225 $169 −$56

Actual vs S&P Global Consensus (Q2 2025)

MetricActualConsensusSurprise
Revenue ($M)$772 $774.1*−$2.1M
Adjusted EBITDA ($M)$169 $159.8*+$9.2M
Primary EPS ($)−$0.71 −$0.30*—$0.41

Note: Values marked with * were retrieved from S&P Global.

KPIs and Balance Sheet

KPIQ1 2025Q2 2025
First Lien Leverage Ratio (Senior Credit Agreement)2.92x 2.99x
Total Leverage Ratio (Senior Credit Agreement)5.48x 5.60x
Cash ($M)$210 $199
Long-term Debt, net ($M)$5,609 $5,590
Revolver Availability ($M)$692 $692 (commitment $700M; undrawn LCs reduce)

Guidance Changes

Q2 2025 Guidance: Prior vs Updated vs Actual

MetricPeriodPrevious Guidance (May 8)Updated Guidance (Jul 8)Actual
Core Advertising ($M)Q2 2025Mid-single-digit decline (implied) $360–$362 $361
Political ($M)Q2 2025$2–$3 $8–$9 $9
Retrans ($M)Q2 2025$369–$371 $368–$369 $369
Production ($M)Q2 2025$17–$18 $18–$19 $18
Station Expenses ($M)Q2 2025$335–$340 $332–$335 $330
Network Fees ($M)Q2 2025$233–$235 $233–$235 $233
Corporate Exp ($M)Q2 2025$25–$30 $20–$25 $19

Change summary: Political guidance raised; station expenses and corporate expenses lowered; retrans narrowed; production raised .

Q3 2025 Guidance vs Prior Year Actual

MetricQ3 2024 ActualQ3 2025 Guidance (Low)Q3 2025 Guidance (High)
Core Advertising ($M)$365 $345 $355
Political ($M)$173 $6 $7
Retrans ($M)$369 $343 $345
Production ($M)$26 $26 $27
Other ($M)$17 $15 $16
Total Revenue ($M)$950 $735 $750
Station Expenses ($M)$336 $342 $345
Network Fees ($M)$234 $213 $215
Corporate Exp ($M)$20 $25 $30

Full-Year 2025 Supplemental Guidance

MetricGuidance
Interest Expense ($M)$460
Amortization of Deferred Financing Costs ($M)$16
Preferred Stock Dividends ($M)$52
Common Stock Dividends ($M)$32
Capex ex-Assembly ($M)$85–$90
Assembly Atlanta Capex ($M)$0
Income Tax Payments ($M)$39

Earnings Call Themes & Trends

TopicQ4 2024 (Feb 27)Q1 2025 (May 8)Q2 2025 (Aug 8)Trend
Deleveraging & maturities$520M debt reduction; leverage 2.97x / 5.49x; no urgency; board maintains dividend AR facility to $400M; revolver to $700M; leverage 2.92x / 5.48x $900M 2L + $775M 1L; revolver $750M; no material maturities until Dec 2028; ~25bps higher cost of debt Positive balance sheet progress; extended runway
Retrans & network feesFirst-ever YoY decrease in network fees in 2024; aim to rebalance in upcoming renewals Continued flattening; expense control improving Q3 guide lowers both retrans revenue and network fees; WANF impacts; multi-year sustainability effort Economics improving but near-term P&L mix shift
Supply chain/tariffs/macroAuto advertisers cautious; tariff uncertainty Auto down HSD; hesitancy vs cancellations; services resilient Auto/restaurants pacing lower; legal/entertainment pockets of strength Mixed core; selective resilience
Local sports strategyBraves and broad RSN-style footprint; halo effect 80% markets with local sports ~80% markets; expanding; WANF independent to focus Atlanta sports Durable audience and advertiser engagement
Assembly AtlantaNetwork shows premiered; aim for partner-funded Phase 2 ~75–80% occupancy; capex neutral; high contribution on leases Continued activity; no incremental 2025 capex; partner-driven acceleration later ’25 Building contribution; capital-light expansion
Regulatory/NextGenExpect deregulatory tone; swaps/duopolies; NextGen TV asks Watching Washington signals Focus on approvals for announced deals; expect changes Constructive backdrop
Political advertisingRecord 2024; Q1 surprised to upside (WI, FL) Q2 political ahead of expectations Q3 guide $6–$7M; issue spend persists Off-cycle tailwinds, but lapping major 2024 events

Management Commentary

  • “Total revenue in the second quarter was $772,000,000… Adjusted EBITDA was $169,000,000… Political finished well above our expectation for an off cycle year.” — Hilton Howell
  • “We finished the quarter at 2.99x first lien leverage and 5.6x total leverage… completed… $900,000,000… second lien… and… $775,000,000… first lien notes… no material maturities until December 2028… less than a 25 basis point increase in our overall cost of debt.” — Jeff Gignac
  • “We will focus… on obtaining… approvals… ensure prompt closings… [Scripps, Sagamore Hill, Block, Allen]… immediately cash flow accretive and… delever.” — Hilton Howell
  • “WANF will become an independent… P&L will shift much more in favor of advertising… we expect a robust advertising opportunity in Atlanta.” — Jeff Gignac; Hilton Howell

Q&A Highlights

  • M&A and deleveraging pace: Management prioritizes closing/integration of 4 recent transactions; expects ~0.25x leverage ratio reduction on close; future deal cadence likely slower near term .
  • WANF CBS non-renewal: Retrans revenue and reverse comp to decline at WANF, with P&L shifting to advertising; expected Q3 sequential declines in retrans and network fees partly reflect this transition and multi-year network negotiations .
  • Debt strategy outcomes: July transactions extended maturities to 2032/2033 and revolver to 2028 with modest cost increase; path to address remaining 2028/2029 first-lien maturities; tax guidance reduced given interest deductibility .
  • Synergies timing: Duopoly-creating acquisitions expected to yield quick cash flow benefits post-close; management sees lower integration risk in markets where Gray already operates .
  • Guidance clarifications: Core down YoY in Q3 due to Olympics lap ($20M advertising uplift in Q3’24); excluding that, core is flat to slightly up .

Estimates Context

  • Q2 2025 results vs S&P Global: Revenue $772M vs $774.1M* (slight miss), Adjusted EBITDA $169M vs $159.8M* (beat), EPS −$0.71 vs −$0.30* (miss). Management attributes EPS pressure to off-cycle political and $28M non-cash impairment .
  • Q3 2025: Company total revenue guidance $735–$750M; S&P consensus revenue ≈ $745.0M*, EPS ≈ −$0.48*. Guidance implies retrans and network fees step-down (WANF impact; sustainability of reverse comp), while core softness is largely Olympics lap-related .

Note: Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term print risk: EPS miss and guidance for lower Q3 retrans/network fees could pressure sentiment; however, EBITDA outperformance vs consensus and cost control support downside resilience .
  • Structural mix shift: WANF’s move to independent increases advertising focus while reducing retrans; watch Atlanta market advertising traction and political spend as early proof points .
  • Deleveraging trajectory: Liability management extended maturities and set path to address 2028/2029 first-lien debt; Q4 closings of accretive M&A likely reduce leverage ~0.25x and improve cash generation .
  • Retrans economics rebalancing: Multi-year effort lowering reverse comp and recalibrating network deals continues; expect ongoing declines in network fees to support margins over time .
  • Sports strategy and local content: ~80% market sports footprint drives audience and advertiser engagement with halo effects across dayparts; supports core revenue stabilization as macro uncertainty abates .
  • Assembly Atlanta optionality: High-occupancy studios, capex-neutral 2025, and potential partner-funded Phase 2 provide capital-light growth optionality into 2026 .
  • Trading setup: Near-term volatility around Q3 guide and EPS miss; medium-term thesis hinges on deleveraging execution, retrans fee sustainability, and monetization of M&A and sports-led local content .

Appendix: Additional Data and Disclosures

Additional Selected Operating Data (Q2 2025, Unaudited)

ItemQ2 2025
Non-cash impairment (WANF) ($M)$28
Non-cash stock-based comp ($M)$5
Debt principal reduction ($M)$22
First Lien / Total Leverage (net of cash)2.99x / 5.60x
Dividend$0.08 per share (payable Sept 30, 2025)

S&P Global Consensus Inputs Used

  • Q2 2025: Revenue $774.1M*, EBITDA $159.8M*, EPS −$0.30*; # of estimates: Revenue 4, EPS 3*.
  • Q3 2025: Revenue $745.0M*, EBITDA $138.8M*, EPS −$0.48*; # of estimates: Revenue 5, EPS 1*.

Note: Values marked with * were retrieved from S&P Global.