Gray Media exceeds revenue expectations with $749 million in Q3 2025, boosted by political ad revenue and strategic M&A plans for future growth.

OPERATOR - (00:00:00)

Good day everyone and thank you for joining this Gray Media Q3 2025 earnings call. As a reminder, all phone participants have been placed in a muted or listen only mode to prevent background noise. And today's question and answer session will take place after our prepared remarks. And we ask today that you limit yourself to a single question and any follow ups you engage with management following today's 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.

Hilton Howell - (00:00:36)

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 La Platny, our President and co CEO Sandy Breland, our Chief Operating officer, Kevin Latek, our Chief Legal and Development Officer and Jeff Chignak, our Chief Financial Officer. And then also we have 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. So we will begin with a disclaimer that Kevin will be providing.

Kevin Latek - Chief Legal and Development Officer - (00:01:24)

Thank you Hilton. Good morning everyone. Today we filed with the SEC on Form 8K, our earnings release and an updated investor slides. Later today we will file with the SEC our quarterly report on Form 10Q. 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 fact 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. Now I return the call to Hilton.

Hilton Howell - (00:02:42)

Thank you, Kevin. Today we are very happy to announce that our results for the third quarter of 2025 compared favorably to our Q3 guidance for both revenues and expenses. Total revenue in the third quarter of 2025 was $749 million at the high end of our guidance for the quarter. Total operating expenses before depreciation, amortization, impairment and gain or loss in any disposal of assets in the third quarter were 592 million, which was $17 million below the low end of our guidance. While some of this was due to tightening the belt at the corporate headquarters, I want to take a moment to thank our TV stations who uniformly contributed to a much lower expense than we have had in previous operating quarters. So thank you Ray Net loss attributable to common stockholders was $23 million in the third quarter of 2025, adjusted EBITDA was $162 million in the third quarter of 2025 and political advertising revenue hit $8 million, which finished above our expectations for an off cycle year. In addition to these operating results, third quarter saw a significant acceleration of mergers and acquisition activity as we look to identify and negotiate accretive transaction that strengthened our business and our balance sheet. All told, as we have described previously, we anticipate entering into six new markets by acquiring the local news station that was ranked number one in their respective markets in 2024. We also plan to create 11 new big four full duopolies and we may deal with this in questions, but we believe these duopolies are absolutely necessary for our industry and to preserve local news in respective smaller markets. We also made significant progress on strengthening our balance sheet during the third quarter of 2025. The financing transactions completed in July were transformational and provide additional avenues for us to manage our debt and our leverage. As noted in our press release this morning, our Board of Directors has declared an 8 cent per share quarterly common dividend which is consistent with recent quarter and as always the board will consider capital allocation each quarter. In light of other opportunities to deploy capital for growth operationally, we continue to enhance our local content offerings. In the third quarter of 2025 we renewed our partnership with the Suns and the Mercury and we expanded our sports portfolio to include the Dallas Stars Outer Markets Investigate TV premiered its third season in September and also launched a multi platform project to educate viewers about artificial intelligence. We also announced a first of its kind partnership with Google Cloud powered by Quick Play to revolutionize how our viewers find and connect with our content. This new streaming structure will begin rolling out in all gray markets in January next year. In August we announced that we renewed our affiliation agreement covering our 27 Fox Markets for two additional years. WANF, our station in Atlanta, became an independent television station on August 16th and as we expected, is off to an exceptionally strong start, adding over 25.5 hours of news and other locally focused programming and our home market here in Atlanta. Finally, we are continuing to work with potential development partners at Assembly Atlanta who are contributing their financial resources and development expertise as we look to further monetize our investment in this remarkable asset. We expect to have more announcements in the following quarter and next year about all of these exciting plans. We have made a lot of progress so far in 2025 and we are excited that we're capitalizing on opportunities across multiple aspects of our business to enhance value for all of our stakeholders. At this time, I'll turn our call over to Pat to address our operations.

Pat La Platny - President and Co-CEO - (00:07:32)

Thanks, Hilton Q3 continued the theme we've been describing throughout 25 with advertisers remaining somewhat cautious due to the macro environment. Through the quarter though, we saw core activity strengthen more than we had projected back in August and we ultimately finished on the high side of guidance. Remember that the Olympics on NBC provided about a $20 million uplift in July and August of 24, of which about 16 million was core ad revenue and 4 million was political. Factoring that in our third quarter was up about 1% over 24 from a category perspective in first and second quarters and as we guided for third quarter, Automotive finished down high single digits. Services as a whole were up driven by legal which continues to grow with double digit percentages versus last year and is the top five category for gray. The financial services category is also a bright spot up high single digit percentages. Digital continued its healthy growth and our new local direct business was up low single digits over the same period in 24. Our sales teams continue to perform admirably in a challenging environment. Political ad revenue exceeded our expectations in third quarter of 25. Our guide for the third quarter was 6 to 7 million and our actual results came in at 8 million. Some of this revenue was generated from issue advertisers supporting the President's legislative priorities. We also saw early spending supporting 2026 U.S. senate candidates and generated good results in Virginia from the 25 Governor and Attorney General races. Our fourth quarter 25 guidance is for core ad revenue to be up low single digits as we have less challenging comps due to political displacement in the prior year. October finished up low double digits, which really isn't surprising given the significant demand from political advertisers in the prior year period. It's also encouraging that as of today, November and December are pacing up slightly across categories. In the fourth quarter we're seeing a lot of green in services like Legal Financial, Home improvement, yes in Financial home Improvement. Supermarkets in travel and tourism are trending better and it's good to see automotive flattening out at a new run rate down low single digits as opposed to the higher single digits numbers we saw earlier in the year. Jeff will now address the key financial developments.

Jeff Chignak - Chief Financial Officer - (00:09:59)

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 2.72 times first lien leverage ratio, 3.66 secured leverage ratio which includes the second lien that's new this period, and 5.77 times 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 MA 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 third quarter of 2025, our station level operating expenses excluding network affiliation fees were actually down $8 million or 2% compared to 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 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 is less network affiliation. fees will decline slightly compared to the prior year period. That decline is primarily attributable to WANF in 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 cash tax payments this year. We've reduced our expected capex range for full year 2025 by $15 million to a new range of 70 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 zero. That concludes my remarks and I'll turn the call back to Hilton.

Hilton Howell - (00:13:13)

Thank you so much Jeff. And so operator, let us open it up to any questions anyone may have.

OPERATOR - (00:13:19)

Thank you gentlemen. And to our audience joining over the phone at this time, if you would like to ask a question, simply press the star followed by the digit 1 on your telephone keypad. Pressing star on 1 will place your line into a queue and I will open your lines one at a time. Also, we kindly ask today that you limit yourself to a single question and then if you have a follow up, you're invited to contact management with a message or email following today's session. Once again ladies and gentlemen, that is Star and one. If you would like to ask a question, we'll hear first from the line of Dan Kernos at the Benchmark company.

Dan Kernos - Equity Analyst - (00:13:53)

Yeah, great, thanks. Good morning guys. Nice print I guess. Jeff, thanks for the color around Net retrans. Super helpful. You're finishing the year at, you know. This $202 to $203. Is that kind of the right run rate we should think of as we start heading into 26? You know, 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. Thank you.

Jeff Chignak - Chief Financial Officer - (00:14:27)

Yeah Dan, so let me focus the commentary more on the net because that's really where how we think about it. You know there's hundreds of contracts that underlie all of this. So the way to really think about it is that we you can see how much it has flattened out. even if you go back to 24 versus 23 and where the guide implies for full year 25 versus 24. So you're seeing the quarters flatten out and you know, it's too early to give a guide for full year, but there's really this flattening that's occurring in front of us. And look, ideally it could turn positive and we're hopeful, but the big input there is some declines and we don't know those.

OPERATOR - (00:15:18)

Our next question will come from Aaron Watts at Deutsche Bank.

Aaron Watts - Equity Analyst - (00:15:24)

Hi, thanks for having me on. 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 in 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?

Pat La Platny - President and Co-CEO - (00:16:01)

Yeah, 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're very, very optimistic about 2026.

OPERATOR - (00:16:28)

Our next question this morning will come from Patrick Scholl at Barrington Research.

Patrick Scholl - Equity Analyst - (00:16:34)

Hi, thanks for taking the question. Just another follow up on the ad trends. With the rebrand of the Atlanta station. Could you maybe just talk about the. Advertiser reception to that increase in news. Content and if there was any sort of, I guess, disruption and how that. Viewership of that as that station transitioned.

Sandy Breland - Chief Operating Officer - (00:17:00)

Yeah, this is Sandy. You know, we've had really good reception to what we're doing in Atlanta. We added 25 hours of local news in 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 hyper local content. And they're responding and it's quality content. You know, this is a team that won't 26 Southeast Emmy Awards and a National Emmy Award this year. 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 well.

Hilton Howell - (00:17:32)

And Patrick, I just want to tell you I wasn't there because I was previously committed, but Sandy and Pat were, plus our whole team at ANF for the first time ever. And so we may be repeating this in the future. We used A stage at Assembly Atlanta. And we had a full scale local wanf, Telemundo, Peachtree tv, CW upfront for all of the advertising community. And it was hugely well attended and it really helped set the whole transition off to an independent station in a remarkable, remarkable way. We see this as being anF, as being the local CNN from the days when Ted Turner owned CNN for our local market in this really growing and really exciting city of Atlanta. And that upfront was unique, different and special.

Sandy Breland - Chief Operating Officer - (00:18:28)

I'd add that we renewed our Braves, renewed our Hawks deal and our Braves deal for 2026 is going to kick in March with a 10 game spring training schedule and the ratings last year were. So there's a lot of momentum over there.

OPERATOR - (00:18:48)

Thank you gentlemen. And to our phone audience once again, that is Star and One. If you would like to ask a question, if you find your question has been asked and you'd like to remove yourself from the queue, repeating the steps of Star and One will also remove you. We'll hear next from the line of Craig Huber at Huber Research. Please go ahead.

Craig Huber - Equity Analyst - (00:19:06)

Great, thank you. My one question has to do with 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. Thank you.

Hilton Howell - (00:19:36)

We are not a development company, but we are actually and have been from day one 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 broken, that Hulu renewed a third season on a show that we believe is going to occupy three 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 you know, 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 tout what we've got coming, but it's really, really, really exciting and I think within 12 to 24 months, I think it'll be the biggest cash flowing operation we've got in the company.

Jeff Chignak - Chief Financial Officer - (00:21:36)

And Craig, just to follow up on the numbers, it's around $650 million of net investment thus far. There will be, as Hilton just mentioned, some of the development ideas that are. Being. Basically diligence at this point. Those will we can get return either of capital or on capital as those come to fruition. So as Hilton mentioned, later in the year, hopefully by the time we have Our next call, hopefully we'll have more to report. There's a lot of activity and a lot going on up there.

Hilton Howell - (00:22:14)

Anyone else? Brad?

OPERATOR - (00:22:17)

Go right ahead operator. Apologies, sir, did not mean to speak over you. We will HEAR Next from Mr. Steven Cahill at Wells Fargo.

Steven Cahill - Equity Analyst - (00:22:27)

Thank you. So, a question on ma. 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 MA side right now and what 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.

Kevin Latek - Chief Legal and Development Officer - (00:23:06)

Hey 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 really 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 write all of us some additional insight into what our real opportunities are. I would say from the very beginning this company was essentially single TV station. It was about becoming a large company with very, very high quality TV stations. And we've stuck with that now for decades. It's number one strong, number two TV stations. There are a lot of stations out there that 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's really changing our views there.

Hilton Howell - (00:25:00)

I will add to that, Stephen, with regard to smaller acquisitions and what we announced in Q3, we did a lot of transactions of markets that really helped fill in our footprint, particularly a footprint that we want to address with regard to our sports partners that we have created. And so you need to know that's very much part of what we're doing and we've created I can't remember how many sanding different sports networks across the United States.

Sandy Breland - Chief Operating Officer - (00:25:31)

13. 13.

Hilton Howell - (00:25:33)

And they literally go really from coast to coast. And you know, we like to fill those holes in. And so, you know, you can kind of look at our map and get a guess where we might be interested in going in terms of really big transactions. Obviously there was sort of some news on TV news check this morning. And you know, we're well aware of that and there's nothing that we are in deep negotiation with at the moment. But you know, we're in a period of time in our industry where things change faster than I've ever, ever seen it. And for the first time in the history of our business, we are really operating in the wild, wild West. No one knows what the rules actually are. And anybody that tells you that they do is just. I mean, they just don't. They can't. Now there's a lot of things that we think we can do, but also the one thing I don't want to happen to our company is to do any deal that would put the basic company in any kind of risk. We have 10,000 employees and all of their families to look after. And that's sort of my first job is looking after what they do. Now there's a lot of big opportunities to grow, but unlike perhaps some of our competitors, I don't believe and my management team unanimously does not believe that Gray actually has to do anything. I mean that we're just fine where we are and we can carry on our previously announced efforts to just reduce our debt and pay it down and then return more to our shareholders. But if not, and if we get an opportunity at the right price to get much bigger, we're not going to run from it. We're not going to run from it. There are a lot of opportunities to make a bigger company that does better by its shareholders and then from our standpoint, does better by creating more local news within its individual community. If you go back and you look at the full 30 plus year history of building this company, the reason we only bought number one and number two stations is because we know that those stations deliver something that is absolutely needed. And today local news is threatened and we're going to do everything we can to make sure that that that threatened piece of what needs to be done in our country is retained and enhanced. So that will drive our MA discussions.

OPERATOR - (00:28:31)

Again to our phone audience today. That is Star and one. If you would like to place yourself in the queue for a question, we'll hear next from Shanna Q at Barclays.

Shanna Q - Equity Analyst - (00:28:42)

Thank you guys for taking my question. Sorry if I missed this, but I think historically 4Q ahead of a political year generated 2030 million of revenue and I think in the fourth quarter guide it's 7 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.

Kevin Latek - Chief Legal and Development Officer - (00:29:08)

Hi, this is Kevin. The first half of this year essentially the same political revenue we had in the first half two years ago and three years ago. And there's always puts and takes. There was some Georgia run up, Georgia Senate runoff money in early 21, for example. There some ballot initiatives pop up generate a lot of money. A couple years ago Maine had a ballot initiative that was brought in more money than the Virginia governors raised for us despite our bigger presence in Virginia. So there's always sort of puts and takes. In the second half of this year, we just did not see up until this week we've not seen as robust spending on races that we have seen in prior off years. We would attribute that not to any sort of change in the dynamic of the rate of necessarily our coverage of the races, but rather the fundraising levels were really different this year for the last kind of 10 months. There's been, at least in my world in Washington the feeling that the Trump administration was doing more than any prior administration and the Democrats were not, let's say, effectively addressing those issues and There was a lot of seemingly some hand wringing on the Democratic side about Trump administration's efforts. And the election on Tuesday showed that not only were the polls radically wrong, but the Democrats did exceptionally well from statewide raises in Georgia to California, Virginia, state house across the board. And it would appear this week that the Democrats have a much better shot at races that were written off as recently as a week ago. Some races that we expected to not be competitive will be competitive and that fundraising for the Democrats is going to change in a very material way now that the electorate showed on Tuesday that the Democrats do have a really good shot in a lot of races. So we have seen just not a lot of frankly very strong Democratic fundraising this year to support the races we went into on Tuesday. And at least as of our last read on pacings last week that we used for our guidance, we have not anticipated a huge upsurge in spending in the fourth quarter of this year for races that happen next year like we've seen in the last couple off cycles, we're pretty optimistic that's going to change because of the outcome on Tuesday this week. And we certainly hope to see the Democratic fundraising flow through pretty quickly to supporting races that are going to happen in the primaries next year and of course in general next November. And what we do know is Democrats are spending heavily. The Republicans will follow. We've seen a number of races where we're it seems candidate quality is where we've talked about the last couple elections. It's back on back in the dialogue again this week. And some races next year seem to be attracting some marquee names on both sides. So I think we're set up really well for next year. This year we are a bit disappointed in the fundraising levels that have impacted us in the second quarter. But we also went into the year expecting political not to be as strong as it has been. So we're actually pretty happy with how political has done versus our expectations at the beginning of this year. So that will be our view on political at this time.

Hilton Howell - (00:32:53)

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 you know, I left. Regardless of where people come out on political, what I love is a great, you know, a great fight out there. And I think the Democrats can be raised 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.

OPERATOR - (00:33:39)

Next question today will come from the line of Abby Steiner at JPMorgan. Please go ahead. Your line is open.

Abby Steiner - Equity Analyst - (00:33:46)

Thank you. Good morning. 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? And thank you for the time.

Hilton Howell - (00:34:03)

Sure.

Pat La Platny - President and Co-CEO - (00:34:03)

It's Pat La Platany. Look, the situation with, you know, our ABC stations going off YouTube is frustrating. Obviously we prefer to have a voice in the BMPBD negotiations for our stations. We don't, you know, hopefully they get it worked out soon. I can't really speculate on, you know, what's going to happen here, how it's going to impact the market going forward. But this is, these are two very big companies have very big footprints. And again, it's our hope that for the good of both companies and candidly, the American consumer, they get something worked out soon. So that's our thoughts. It is, but it is very frustrating that we're getting penalized and have no control over the outcome of that dispute, like the government dispute. We hope they all come to a positive conclusion soon.

OPERATOR - (00:35:04)

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.

Hilton Howell - (00:35:23)

Thank you, operator. And I want to thank you all for the questions. And. In closing, I just want to say that the first half of 2025, the third quarter, was very, very busy and we accomplished a tremendous number of objectives that will have long term benefits to Gray Media and all of its stakeholders. We will continue to take actions to enhance the value for our advertisers, for our investors and for the communities and families that we serve. And I really want to take everyone to thank everyone for joining the Call today and we'll talk to you next quarter.

OPERATOR - (00:36:09)

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.