管理層發言
Good day, everyone, and thank you for joining this Gray Media Q3 2025 Earnings Call. As a reminder, today's session is also being recorded. It's now my pleasure to turn the floor over to our host, CEO and President, Mr. Hilton Howell Jr. Please go ahead, sir.
Thank you, operator. Good morning, everyone. As the operator mentioned, this is Hilton Howell, the Chairman and CEO of Gray Media and I want to thank all of you for joining our third quarter 2025 earnings call. As usual, all of our executive officers are here with me in Atlanta; Pat LaPlatney, our President and Co-CEO; Sandy Breland, our Chief Operating Officer; Kevin Latek, our Chief Legal and Development Officer; and Jeff Gignac, our Chief Financial Officer. And then also we had Jim here for the last formal time to join us here but he won't be doing anything but telling us what the right answers are. And so we will begin with a disclaimer that Kevin will be providing.
Thank you, Hilton. Good morning, everyone. Today, we filed with the SEC on Form 8-K, our earnings release and an updated investor slides. Later today, we will file with the SEC our quarterly report on Form 10-Q. These materials are all available on our website, which is www.graymedia.com. 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 valuation of our company. Further discussions and reconciliations of the company's non-GAAP financial measures to comparable GAAP financial measures can be found on our website. All statements and comments made by management during this conference call other than statements of historical facts should be deemed forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors that are contained in our most recent filings with the SEC. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. And now I turn the call to Hilton.
Thank you, Kevin. Today, we are pleased to announce that our third quarter results for 2025 exceeded our guidance for both revenues and expenses. Total revenue for the third quarter reached $749 million, aligning with the upper end of our expectations. Our operating expenses, excluding depreciation, amortization, and asset disposal effects, were $592 million, which was $17 million below our lower guidance limit. This reduction can be attributed in part to cost-cutting measures at our corporate headquarters, and I want to extend my gratitude to our TV stations for significantly contributing to a lower expense level compared to previous quarters. The net loss for common stockholders was $23 million for the third quarter. Adjusted EBITDA was $162 million. Political advertising revenue achieved $8 million, surpassing our expectations for an off-cycle year. Moreover, the third quarter saw a notable increase in mergers and acquisition activity as we aimed to identify beneficial transactions that would strengthen our business and balance sheet.
We anticipate entering six new markets by acquiring the top-ranked local news stations in those areas in 2024, and we also plan to establish 11 new Big Four full duopolies, which we believe are essential for our industry and for sustaining local news in smaller markets. We made substantial progress in improving our balance sheet during the third quarter. The financing transactions completed in July were transformative, offering us new ways to manage our debt and leverage. As mentioned in our press release this morning, our Board of Directors has declared a quarterly common dividend of $0.08 per share, consistent with recent quarters. The Board will evaluate capital allocation opportunities each quarter to support growth. Operationally, we have enhanced our local content offerings, renewing our partnership with the Suns and the Mercury, and extending our sports portfolio to include the Dallas Stars in surrounding markets.
Investigate TV launched its third season in September and introduced a multi-platform initiative to educate viewers about artificial intelligence. We also formed a groundbreaking partnership with Google Cloud powered by Quickplay to transform how viewers access and interact with our content, set to roll out in all Gray markets in January next year. In August, we renewed our affiliation agreement for our 27 FOX markets for an additional two years. WANF in Atlanta transitioned to an independent station on August 16 and has had a remarkably strong launch, adding over 25.5 hours of news and locally focused programming in Atlanta. Finally, we are collaborating with potential development partners at Assembly Atlanta to leverage their financial and developmental expertise as we seek to enhance our investment in this valuable asset. We expect further announcements in the upcoming quarter and next year regarding these exciting plans.
We have made significant strides in 2025 and are enthusiastic about seizing opportunities across various facets of our business to create value for all stakeholders. I will now pass the call to Pat to discuss our operations.
Thank you, Hilton. In the third quarter, we observed that advertisers remained somewhat cautious due to the overall macroeconomic conditions, which is a trend we've described throughout 2025. However, we saw stronger core activity than we initially projected in August, ultimately finishing at the higher end of our guidance. It's important to note that the Olympics on NBC contributed around $20 million in July and August 2024, with approximately $16 million coming from core ad revenue and $4 million from political ads. When factoring this in, our third quarter was up about 1% compared to 2024. Looking at specific categories, automotive finished down in the high single digits, mirroring our guidance for the first and second quarters. Overall, the services sector grew, particularly legal services, which continued to increase at double-digit rates compared to last year and ranks among the top five categories for Gray.
The financial services category is also performing well, with increases in the high single digits. Digital retains its robust growth, and our new local direct business saw low single-digit growth compared to the same period in 2024. Our sales teams have performed commendably in a tough environment. Political ad revenue surpassed our expectations in the third quarter of 2025. Our guidance was set between $6 million and $7 million, but we achieved actual results of $8 million. A portion of this revenue came from issue advertisers backing the President's legislative goals, along with early spending for the 2026 U.S. Senate races, which included positive outcomes in Virginia from the 2025 Governor and Attorney General races. For the fourth quarter of 2025, we anticipate core ad revenue to rise by low single digits, as we face more favorable comparisons compared to the prior year's political displacement.
October performances were up in the low double digits, which aligns with the strong demand from political advertisers during the previous year. It's also promising to see that November and December are slightly ahead in pacing. In the fourth quarter, we are witnessing positive trends across several categories, especially in services like legal, financial, and home improvement. Supermarkets and travel and tourism are also improving, and it's reassuring to see automotive stabilizing at a new lower run rate, down in the low single digits, contrasting with the higher single-digit declines earlier this year. Jeff will now cover the key financial developments.
Thanks, Pat. As Hilton mentioned earlier, we continued to make progress on our balance sheet during the third quarter. We took advantage of strong debt market conditions in July to extend our maturity profile out to 2033. Our capital markets activities addressed all material maturities through December of '28 with a modest impact of less than 25 basis points on our overall cost of debt. We finished the third quarter with over $900 million in liquidity and $232 million in availability on our open market repurchase authorization. Our leverage metrics at 9/30/25 were 2.72x first lien leverage ratio, 3.66x secured leverage ratio, which includes the second lien that's new this period and 5.77x total leverage ratio, each of those calculated as prescribed in our senior credit agreement. On our second quarter call, we discussed the expected impact of our pending M&A transactions on our leverage.
We continue to estimate that if we close those transactions today using cash on hand and/or revolver borrowings, our total leverage ratio, again, as defined in our senior credit agreement, would be approximately a quarter turn lower than where we finished the quarter. Our expense reductions continue to show up in our results, and we're proud of our team for the company-wide focus on cost containment. In the third quarter of 2025, our station-level operating expenses, excluding network affiliation fees, were actually down $8 million or 2% compared to the third quarter of '24, and that follows a decline in first quarter versus first quarter of '24 and flat in second quarter versus second quarter of '24. We've had a lot of questions about net retrans, so let me provide a little more context to help everyone understand the current situation. We've discussed our multi-year effort working towards sustainability with our MVPD and network partners.
In the third quarter, our network affiliation expenses declined by 9%, while our retransmission consent revenue declined by 6%. Our fourth quarter guide, which now fully excludes the expected impact on both revenue and expenses related to WANF, is that our retransmission consent revenue less network affiliation fees will decline slightly compared to the prior year period. That decline is primarily attributable to WANF and Atlanta shifting to be independent. Our guide for full year cash taxes for 2025 remains at $39 million, and we continue to expect that we will have no further cash tax payments this year. We've reduced our expected CapEx range for the full year 2025 by $15 million to a new range of $70 million to $75 million, again, reflecting a company-wide effort on where and when to invest. We expect the further reimbursement related to public works construction at Assembly Atlanta to be received prior to year-end, such that our net capital investment in Assembly Atlanta during 2025 will be 0. That concludes my remarks, and I'll turn the call back to Hilton.
Thank you so much, Jeff. And so operator, let us open it up to any questions anyone may have.
分析師問答
We'll hear first from Dan Kurnos at the Benchmark Company.
Nice print. I guess, Jeff, thanks for the color around net retrans. Super helpful. You're finishing the year at this $202 million to $203 million. Is that kind of the right run rate we should think of as we start heading into '26? How should we think about things kind of puts and takes there on the reverse side? And obviously, you have renewals. So I know you're not going to guide to net next year but it just feels like it could be an accelerating net year. So just any directional color would be helpful.
Yes, Dan. Let me focus on the net because that's really how we think about it. There are hundreds of contracts that support all of this. The way to consider it is that you can see how much it has flattened out, even if you compare 2024 to 2023 and where the guidance suggests for the full year 2025 compared to 2024. You can observe the quarters becoming more stable. It's too early to provide guidance for the full year, but there is definitely a flattening happening right now. Ideally, it could turn positive, and we are hopeful, but the main factor is some declines, which we cannot predict.
Our next question will come from Aaron Watts at Deutsche Bank.
Core advertising was down 4% in the first half of this year, down 3% in the third quarter and you're guiding flat to up low single digits for 4Q. I know there's some noise in those numbers. But you're closing the book on a tough 2025 with improved momentum. How does that frame the discussion on core for next year when you'll have the typical political crowd out and what's expected to be a very healthy political spending cycle but also a lot of incremental sports content and hopefully firming across key verticals as well.
Yes. Aaron, it's Pat. I would say that we're really optimistic about 2026. We have some early Q1 numbers that are encouraging, in fact, very encouraging. Towards the end of the year, we'll obviously get political crowd out, as you saw in the comps for this year from last year. But as we sit here today, we are very, very optimistic about 2026.
We'll hear next from Patrick Sholl at Barrington Research.
Just another follow-up on the ad trends. With the rebrand of the Atlanta Station, could you maybe just talk about like the advertiser reception to that increase in news content and if there was any sort of, I guess, disruption in how that viewership of that as that station transitioned?
Yes. This is Sandy. We've had really good reception to what we're doing in Atlanta. We added 25 hours of local news and sports and viewers are responding. We're seeing gains in mornings and key demos and in prime access, and we're able to really serve the community with hyperlocal content and they're responding. And it's quality content. This is a team that won 26 Southeast Emmy awards and a National Emmy Award this year. And so the quality of the content, people are finding it. They're staying with us longer and we expect those numbers to continue to grow.
I want to clarify that I wasn't present because I was previously engaged with Sandy and Pat along with our entire team at WANF. For the first time, we utilized the stage at Assembly Atlanta for a full-scale local WANF, Telemundo, Peachtree TV, CW Upfront event aimed at the advertising community. The attendance was excellent, and it greatly facilitated our transition to an independent station in a remarkable way. We view WANF as the local CNN, reminiscent of the days when Ted Turner owned CNN, serving our increasingly vibrant market in Atlanta. The upfront event was unique, different, and special.
I'd add that we renewed our Hawks deal and our Braves deal for 2026 is going to kick in, in March with a 10-game spring training schedule and the ratings last year were great for those games. So there's a lot of momentum over there.
We'll hear next from Craig Huber at Huber Research.
My one question has to do with the Assembly Atlanta. Can you remind us, please, of what the total cost, the net cost you've done there so far? I believe it's around $600 million. But along those fronts, can you just touch on when you think you're going to get a proper ROI off that spend? I see your production company EBITDA was about $3 million in the quarter. But just when do you think you'll be getting fuller lease commitments, et cetera, but the number will go up significantly?
We are not a development company but we are actually and have been from day 1 on the building portion of what we had at the old General Motors plant, which is the studios. It is doing quite well. The partnership between NBCUniversal and Gray Media is probably stronger than ever. They're bringing their shows in. We have leased out things and we actually heard last night and we kind of think that the dam may be breaking that Hulu renewed a third season on a show that we believe is going to occupy 3 of our stages out there. I can't commit to you today that's going to happen, but it is. And so each of those parts add to a growing EBITDA out of what's been built. We're not making money, Craig, on raw land but we are in negotiations with a wide variety of parties who will bring their financial assets. And we will be entering into joint ventures with them to create assets that we would like to maintain an interest in and then other assets like an apartment complex. We may just absolutely sell and liquidate. As Jeff mentioned, we have finished up sort of the last obstacles to getting about $25 million back from the cities, which we will be picking up in Q4. And so we're not going to go and like tout what we've got coming, but it's really, really, really exciting. And I think within 12 to 24 months, I think it will be the biggest cash flowing operation we've got in the company.
And Craig, to follow up on the numbers, it's around $650 million of net investment so far. There will be some development ideas currently being evaluated. We can expect a return on either our capital or the investments as those plans materialize. As Hilton mentioned, hopefully by the time of our next call later this year, we'll have more updates to share. There's a lot of activity and significant progress happening.
We will hear next from Mr. Steven Cahall at Wells Fargo.
So a question on M&A. I mean, you've been very active already this year between the announced deals and the swaps and related to pushing some of the debt out. So I know you're in a strong position to figure the next few years out. There's always the risk that things happen, I guess, that you're not a part of in terms of mergers and acquisitions. So how do you think about maybe something that's more strategic on the M&A side right now? And what do you look for that would be a particularly attractive sort of large-scale transaction if that is indeed something that could be on your radar?
Steven, it's Kevin. Just to repeat what we said last time, we are laser-focused on the deals that we announced in the third quarter. The government being shut for so long has clearly delayed our efforts to work on that approval process and transition. But we remain fully committed and fully occupied by those transactions. Looking sort of down the road into the future, I think was really your question. We think there are other opportunities to do transactions like the ones we've done here, which is, say, sub-$200 million deleveraging deals that improve our portfolio and our balance sheet. Those we will look at, again, down the road as we get through these transactions. Also closing these transactions will give us some real intel on where the new regulatory restrictions will be. We have FCC proceedings that are ongoing and more news will come out of that by the end of this year which will provide all of us some additional insight into what our real opportunities are.
I would say from the very beginning, this company was essentially a single TV station. It was about becoming a large company with very, very high-quality TV stations. And we've stuck to that now for decades. It's #1, strong #2 TV stations. There are a lot of stations out there that would, we think, be good fits for Gray. And we're going to continue our focus on transactions that improve the overall portfolio that don't tax the balance sheet with high-quality assets and great employees. So again, thinking down the road, nothing has really changed in our views there.
I will add to that, Steven, regarding smaller acquisitions and what we announced in Q3, we completed several transactions in markets that helped expand our reach, particularly in relation to the sports partners we have established. It's important to note that this approach is a significant aspect of our strategy. We have created numerous different sports networks across the United States, though I can't recall the exact number.
Yes, 13.
They literally operate from coast to coast, and we aim to fill those gaps. You can look at our map to see where we might be considering expansion. Regarding significant transactions, there's been some news this morning that we are aware of, but we are not currently in deep negotiations. We are in a period where changes are happening faster than ever, and we find ourselves in an uncertain environment. Anyone claiming to understand the rules is mistaken. While there are many opportunities we believe we can pursue, my main concern is to ensure the company's stability and safeguard the jobs of our 10,000 employees and their families. We have substantial growth opportunities, but unlike some competitors, my management team and I believe that Gray does not need to rush into any deals. We are comfortable where we are and intend to continue our efforts to reduce debt and return value to shareholders. However, if a valuable opportunity arises, we will consider it. There are many chances to expand while also enhancing local news in our communities. Historically, we have focused on acquiring top stations because they provide essential services, and today, local news is under threat. We are committed to preserving and enhancing this critical aspect of our industry, which will guide our discussions on mergers and acquisitions.
We'll hear next from Shanna Qiu at Barclays.
Sorry if I missed this, but I think historically, 4Q ahead of a political year generated $20 million, $30 million of revenue. And I think in the fourth quarter guide, it's $7 million to $8 million. I guess just what's driving that delta if it seems like political is still going to be a reasonably strong year into 2026.
This is Kevin. The political revenue in the first half of this year is quite similar to what we experienced in the first halves of the past two years, though there are fluctuations. For instance, early in 2021, we had some significant funding from the Georgia Senate runoff and various ballot initiatives that arose in different states. A couple of years back, Maine's ballot issue brought in more funds than the Virginia governor's race, even though we had a stronger presence in Virginia. In the second half of this year, we didn't observe the kind of robust spending on races that we anticipated until this week. We believe this isn't due to a change in the dynamics of our coverage but mainly because the fundraising levels this year have been quite different. Over the last ten months, there has been a sense in Washington that the Trump administration was performing more actively than any previous administration, while Democrats seemed less effective in addressing issues.
The results from Tuesday's election revealed that the polls were significantly off, and Democrats performed exceptionally well across various races, from statewide contests in Georgia to California and the Virginia State House. It now appears that Democrats have a much better chance in races that seemed unlikely just a week ago, with some races that we thought would not be competitive actually becoming competitive. This indicates that Democratic fundraising will likely increase significantly following the election results on Tuesday, which showcased their strong positioning in many upcoming races. Thus far, we noticed limited strong Democratic fundraising to support our anticipated races going into Tuesday. Based on our last analysis, we didn't expect a significant surge in spending in the fourth quarter for races next year, unlike previous off-cycle elections. However, we feel optimistic this will change due to the election outcomes from earlier this week, and we hope to see Democratic fundraising quickly supporting the primaries next year and the general election next November.
Additionally, we know that Democrats are spending heavily, which will prompt Republicans to follow suit. Many races are seeing a return to discussions about candidate quality, and some upcoming races are attracting prominent names from both parties. Overall, we believe we are well-prepared for next year. While we were somewhat disappointed in this year's fundraising levels affecting the second quarter, we also approached the year with lower expectations regarding political fundraising. Therefore, we feel quite satisfied with how political fundraising has performed compared to our initial expectations at the beginning of this year. That reflects our perspective on political at this moment.
Shannon, this is Hilton. Let me just add something. I stayed up late and watched the returns on Tuesday night and it was a democratic blowout. And I left regardless of where people come out on political, what I love is a great fight out there. And I think the Democrats are going to be able to raise a ton of money. And I know the Republicans are going to be able to do the same thing. And so my confidence in the level of political spend in the midterm this year is tremendous. I think it's going to be gargantuan. I'm really looking forward to seeing it all rolling in.
Next question today will come from the line of Avi Steiner at JPMorgan.
I would love to get your thoughts on the YouTube TV carriage dispute. What might the impact be on future negotiations and maybe between affiliates and networks as well going forward?
Sure. It's Pat LaPlatney. The situation with our ABC stations leaving YouTube is frustrating. We would prefer to have a say in the MVPD negotiations for our stations, but we currently don't. We hope they resolve this quickly. I can't predict the outcome or its market impact, but these are two large companies with significant presence. It is our hope that for the benefit of both companies and the American consumer, they come to an agreement soon.
It is. But it is very frustrating that we're getting penalized and have no control over the outcome of that dispute. But like the government dispute, we hope they all come to a positive conclusion soon.
Ladies and gentlemen, we thank you all for your questions and comments today. Again, if you did have a question or comment or follow-up that we didn't get to today, you are invited to reach out to management following today's conference. It is now my pleasure to turn the call back to Mr. Hilton and our management team for any additional or closing remarks.
Thank you for the questions. In closing, I want to highlight that the first half of 2025, particularly the third quarter, was extremely busy, and we achieved numerous objectives that will benefit Gray Media and all stakeholders in the long run. We will continue our efforts to enhance value for our advertisers, investors, and the communities and families we serve. I appreciate everyone for joining the call today, and we look forward to speaking with you next quarter.
Thank you, ladies and gentlemen, for joining today's Gray Media Q3 2025 Earnings Call. You may now disconnect your lines, and have a good day.