Gray Media, Inc.

to 2025 GTN earnings relief. If you know you'd like to ask a question, you may press star one on your telephone keypad at any time during the call. Again, that's star one to join the question queue. And without further ado, I will now turn the call over to Chairman and CEO Hilton Howell.

Thank you so much, Chris. We really do appreciate it. Good morning, everyone. This is Hilton Howell, the chairman and CEO of Gray Media, and I want to thank all of you for joining our second quarter 2025 earnings call. We have a lot to talk about today. With me here in Atlanta are all of our executive officers, Pat LaPlatene, 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 as usual, we will begin with a disclaimer that Kevin will provide. Kevin?

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

Thank you, Kevin. Today we are very happy to announce that our results for the second quarter of 2025 finished better than our original guidance on both revenues and expenses and in line with our revised guidance announced on July the 8th, 2025. Total revenue in the second quarter was $772 million, a decrease of 7% from the second quarter of 2024 and 1% above the high end of our original guidance for the quarter. Total operating expenses before depreciation, amortization, impairment and gain on disposal of assets in the quarter were slightly below the low end of our original guidance. We had a net loss of $56 million in the second quarter compared to net income of $22 million in the second quarter of 2024. Adjusted EBITDA was $169 million in the second quarter, a decrease of 25% from the second quarter of 2024. Political advertising was obviously lower in the second quarter of 2024, yet similar to the first quarter this year, second quarter 2025 political advertising finished well above our expectation for an off-cycle year. In addition to these results, we have been very active on the M&A front in the past several weeks. If you recall, we reopened the TV industry M&A market in the spring when we obtained an FCC waiver to acquire the Fox affiliate in Rochester, Minnesota, and created a duopoly with our NBC station there. In July, we announced a first-of-its-kind five-market no-cash swap of assets with Scripps. That transaction will bring us into the Lafayette, Louisiana market and include a Fox affiliate in Lansing, Michigan, where we currently own the NBC affiliate. While our decision to sell our TV stations in Colorado Springs, Grand Junction, and Twin Falls, Idaho was a very difficult one, We are excited that Gray and Scripps found a path that improves our respective strategic positions and creates more opportunities for the stations in these five markets with their new respective owners. Last Thursday, we announced the acquisition of two shared services stations from Sagamore Hill Broadcasting for less than $2 million. And then on Friday, we announced the acquisitions of all block communications television stations, which are located in Louisville, Kentucky, Springfield, Decatur, Illinois, and Lima, Ohio for $80 million. And finally, this morning early, we announced an agreement to acquire television stations in 10 markets from Allen Media for $171 million, including the three new markets of Columbus, Tupelo, Mississippi, Terre Haute, Indiana, and West Lafayette, Indiana. So today, everyone on the calls, please be nice to Kevin. He's been up all night last night and has had no sleep. So he has an errata on his answers. Together, the Scripps, Sagamore, Block, and Allen transactions will add a net six new markets to our portfolio. We are particularly proud that we will enter each of these markets, the local news station that was ranked number one in their respective markets in 2024. These transactions also will create, and I'm really impressed with this, 11 new big four full-powered duopolies. In all of these markets, we expect our leverage of our new sales and sports strategies for the benefits of their local communities, and for the public interest. Each of these transactions also furthers our commitment to pursuing tuck-in and duopoly-creating transactions in a prudent manner. When totaled across all four transactions, we will be adding strong assets that will be immediately cash flow accretive and therefore will contribute to our efforts to improve and enhance our company's balance sheet. We have had a busy few weeks putting together these transactions, and we are not likely to continue at this pace in the next quarter or two. Instead, we will focus the balance of this year's strategic energy on obtaining the necessary regulatory and other approvals to ensure prompt closings of these announced transactions, as well as working to ensure smooth transitions for the affected employees, advertisers, and other stakeholders all by the end of 2025. We also made significant progress on strengthening our balance sheet during the second quarter of this year and into the third quarter of this year. During the second quarter, we reduced our outstanding indebtedness by an additional $22 million. We finished the second quarter with a first lien leverage ratio of 2.99 times and a leverage ratio of 5.66. times, each as defined by our senior credit agreement. In July of 2025, we completed an offering of $900 million as seniors secured second lien notes, along with a $50 million increase in our revolver commitment, which now stands at $750 million. The exceptional demand from the second lien transaction allowed us to also extend a $775 million first lien debt issuance. Jeff will provide more details on each of these transactions later in the call. I'd like to simply say thank you to our investors who are supporting us as we continue executing on our deleveraging and growth strategies. As noted in our press release this morning, our board of directors declared the usual $0.08 per share quarterly dividends. As always, our 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 second quarter of 2025. We now have local and regional professional sports deals covering nearly 80% of all of our markets. Our stations and our people continue to receive national recognition for their outstanding journalistic efforts. We are incredibly proud of our combined 81 regional R. Murrow awards for excellence in journalism to 38 of our television stations. I'm also exceptionally proud of KWTX in my hometown of Waco, Texas for spearheading a company-wide partnership with Graham Media on a campaign to raise money for the Texas floods in Kerrville, Texas. That campaign raised over $1.1 million, once again demonstrating the power of broadcast and our company's commitment to serving local communities. In June, we announced that we had renewed our affiliation agreement with CBS for two more years. As part of that agreement, WANF Our primary television station in Atlanta will become an independent television station. There are numerous examples of very successful independent television stations across the country and indeed within our own company, which includes KTVK in Phoenix, Arizona's family, which is the number one station in the market and across the state of Arizona. We're excited for WANF. to officially make the transition next week, and our community should be excited to see their Braves, the Hawks, and the Dream, and all of our expanded local offerings that are uniquely Atlanta. The momentum at Assembly Studios also continued in the second quarter of this year. The CBS daytime soap opera, Beyond the Gates, which we discussed on our last call, was extended for a second season and will continue to contribute to the activity onsite at Assembly. We are actively engaged with potential development partners who are contributing or would be contributing their financial resources and development expertise to accelerate value creation at Assembly Studios. We expect to have more announcements about these exciting plans later in 2025. We have made a lot of progress so far this year and are excited that we are capitalizing on opportunities across multiple aspects of our business to enhance shareholder value. At this time, I'll turn the call over to Pat to address our operations.

Thank you, Hilton. As you saw in our July 8th guidance update, we finished the quarter at the better end of both our revenue and expense guidance. Let me provide a little more context about how the quarter played out. Q2 started with the same cautious tone amongst our advertisers that we experienced in first quarter, particularly in the auto category. Through the quarter, we saw stronger core activity than we projected back in May, and we ultimately finished on the high side of guidance, down about 3% versus second quarter of 24. From the category perspective, like in first quarter and as we guided for second quarter, automotive came in down high single digits. Legal continues to grow nicely, up double digit percentages versus last year, and is a top five category. Other categories are a mixed bag, in some cases surprisingly resilient. Restaurants were soft, but discounted department stores, tourism, entertainment, all linked to consumer discretionary spending were up over 5% versus last year. More essential categories like health, home improvement, education, and financial services were flashed. Digital was up again nicely at 8%, and our new local direct business grew a little over 2% in the second quarter of 25. Our multimedia sales teams continued to partner with advertisers to bring new businesses to our trusted local platforms. Once again, political ad revenue, as Hilton said, was ahead of our expectations in the second quarter of 25. Our guide for the second quarter was about 2 to 3 million bucks, while our actual results came in at 9 million. Most of this revenue is generated from issue advertisers supporting the president's legislative priorities, but we saw spending from the Arizona governor's race as well as the Georgia Senate and state races in Virginia. Providing guidance for the third quarter of 25 continues to be challenging. We are guiding third quarter core ad revenue to be down low to mid single digits. It's important to remember, however, that the Olympics on NBC provided about a $20 million uplift in July and August of 24, of which about $4 million was political. To factor that in, our third quarter guide is flat to slightly up. Plus the categories in third quarter, we're seeing automotive and also restaurants facing lower. And we're also seeing some pockets of strength still in legal consumer goods and entertainment. We expect digital revenue to be up low double digits in Q3 with a continuation of political spending. Jeff will now address the key financial developments of the quarter.

Thanks, Pat. As Hilton mentioned earlier, reducing debt and leverage remains our top capital allocation priority, and we remain focused during the second quarter. We continue to chip away at our debt by repaying an additional $22 million in the second quarter of 2025. This is our total capital markets debt reduction since the beginning of 2024 to $560 million. Our expense reductions that we've been discussing on our prior calls are showing up in our results and supporting the other side of the equation. Notably, our operating expenses were flat in the second quarter of 25 versus the second quarter of 2024, and that follows a decline in the first quarter versus first quarter of 24. We finished the quarter at 2.99 times first lien leverage and 5.6 times total leverage, each using the calculation in our senior credit agreement. On our first quarter call, we raised the possibility of M&A providing another avenue to reduce leverage and enhance our ability to serve our markets. As we described, our guiding principles on the M&A front focused on finding delivering transactions that are strategically important and or create duopolies to strengthen our local market presence. Indeed, our transactions with Scripps, Sagamore Hill, Block, and Allen will be immediately accretive to cash flow and to our leverage ratio when we close later this year. We estimate that if we close these transactions today, our leverage ratio would be approximately a quarter turn lower than where we finished the quarter. We're continuing to make progress on our net retransmission and moving towards sustainability on that front. This is a function of a multi-year effort that continues. We continue to work with our network partners to find mutually beneficial arrangements. In July, strong market conditions allowed us to access the debt market twice. As we evaluated our options, it became clear that raising some junior capital could accomplish a number of objectives. We also wanted to set the stage to refinance our first lien debt after 2026 political cash flows. We ended up raising $900 million of nine and five eighths senior secured second lien notes due 2032. and we concurrently increased our revolver by $50 million to $750 million and also extended our revolver maturity to December 1, 2028. The new second lien layer in our capital structure fully repaid our 2027 notes and reduced first lien leverage by repaying $403 million of our term loan F. Given the strong reception to the second lien, we quickly followed with an issuance of $775 million of 7.25% first lien notes that lowered our cost of debt and extended our maturities out to 2033. As a result of these actions, we have no material maturities until December 2028, and we have a clear path to address our remaining 28 and 29 first lien maturities. We completed the transactions with less than a 25 basis point increase in our overall cost of debt, And you'll see that reflected in our updated interest guide. Importantly, we also have access to balance sheet and internally generated capital to reduce debt and to pursue delivering M&A. Taking into account the July refinancings, we estimate that our first lien leverage decreased from 2.99 to 2.6 times. Our secured leverage increased from 2.99 to approximately 3.6 times. And our total leverage did not change other than from the impact of the transaction costs. One last thing I'll note, the One Big Beautiful Bill Act allows for greater interest deductibility. As a result, you will see that we lowered our tax guidance for the year, and we no longer expect to make any material tax payments for the remainder of 2025. This concludes my remarks, and I'll turn the call back to Hilton.

Thank you so much, Jeff. And operator, we'd love to open up the line for any questions you guys may have.

All right, ladies and gentlemen, at this time, please press star 1 on your telephone keypad. If you would like to ask a question, that is star 1 on your telephone keypad. First up, we have Dan Kernos of The Benchmark Company.

Yeah, thanks. Good morning. A lot of ground to cover. Appreciate all the color guys. I guess, well, first I'll just say just a shout out to Jeff heroic job with the balance sheet. So well done on that front. Thanks Dan. Second, second, I'll say I'll ask Hilton, I guess, you know, kind of standing Pat, does it mean, you know, I assume you'll continue to look at swaps and other things that could improve. Obviously you have a lot to digest after what you've done, but just, kind of where your head is if an opportunity arises. And Jeff, I know you gave the color on leverage improvement post-transaction, but just any way to think about synergies or buyer's multiples on some of these? Question five.

Well, Dan, let me just begin. First, thank you on your comments with regard to our balance sheet. It really was, in fact, heroic. And I'm really proud of Jeff Gignac for leading that and our whole team for that effort. With regard to the transactions that we have announced really since the announcement that I've covered in my comments in Rochester, Minnesota, we've done a lot of transactions. I think everybody that has spoken in the industry will tell you that everybody's talking to everybody else. And while we don't have any current plans on other transactions, we're always going to be listening, Dan. But I do know that Sandy here, who's also with us, is going to have. It's a big look. We got a lot of markets here. And the first thing that you have to do when you run any kind of business is make sure what you've bitten off can be handled. I am very, very excited. And I want to publicly thank the entire management team at Scripps because it's hard for any two companies who are all justifiably proud of their assets and their operations to be able to reach an amicable swap. And we did so, and I'm immensely proud of it. And so it's going to be very good for Scripps. It's also going to be very good with Gray. Because really when we announced it, we had a duopoly in Lansing. But now with the acquisition through Scripps and what we have announced this morning with Allen, we get a second duopoly out of that transaction. in Lafayette, Louisiana. But we also get new duopolies in lots of markets. And as Jeff mentioned, if all these deals were done, just the transactions themselves deliver us by about a quarter point. And that is just the transactions. We have done a tremendous number of other initiatives that's going to be reducing our debt on a ratio basis prospectively. so you know with regard to other deals yeah sure we're going to talk about them but right now we've got a big job ahead of us and we have to get these deals approved by the fcc i don't see and kevin's a better one to answer this question but i don't see any real uh hurdles to getting every one of them done and so for all of these uh just a handful about six i think new net up increase in markets We are really excited to welcome them to our portfolio, but to see our increased depth in our local markets, and as you know, gray media is known for its content. The recognition with 81 Edward R. Murrow Awards is remarkable, and we're going to be able to increase local news, increase new local sports, and increase new exciting content in each and every one of those markets.

Dan, this is Kevin. I'll just interject on the transactions. Everyone's talking about how everyone's really busy with transactions, but Gray has announced five this year, four in the last four weeks. The Scripps deal, as Hilton said, is historic. No one's ever done anything like what we did there. The Allen Media transaction announced a couple hours ago. The Block transaction required a tremendous amount of time, as you can imagine, to negotiate and put together. And we have a lot of work to do to get through all the approvals. And then, as you mentioned, we have essentially 17 new markets and duopolies to plan for and integrate. And that is where our focus is at. So while we're not saying we're not looking at anything, Hilton's precise comments were our focus is going to be on executing the transactions that we have announced, not chasing another four or five or six transactions over the next couple months. So that's a comment. You asked about cash flow. We're not commenting, we don't comment on multiples and cash flows. I think we've been pretty clear for a couple calls now that we were going to pursue transactions only when they were deleveraging, and that's exactly what we've done here. I'll mention, you know, when I joined the company a couple, a number of years ago, Gray was more highly levered than it is today, and part of how we got out of that was we started doing some transactions that were de-levering, right? We started with a little one, and then we progressively got larger, and those transactions were done at multiples that were lower than our leverage ratio, and we grew our way out of our leverage ratio through a couple measures of those transactions were really key to getting that done. And so we're kind of repeating that playbook here, but just to emphasize, we do not anticipate another several transactions over the next several months, because our focus is going to be on getting these over the finish line and getting them integrated, close, get the money into the bank accounts, get our feet, get these people into our, uh, working with us, get the news expanded and, and, um, the other strategies that we've talked about.

Thank you, Dan.

All right. Next up, we have Stephen Cahill of Wells Fargo.

Yeah, thank you. Just wanted to dig a bit more in the M&A as well. So, Jeff, I was wondering if you could break the quarter turn improving leverage down to help us understand maybe what the net cash out is and what the EBITDA contribution is. And should we think of that as inclusive of synergies or is that prior to, I'm sure, what are some really significant synergies that you'll be able to drive through?

Yeah, Steven, so we really don't want to comment beyond the quarter-turn reduction in our total leverage ratio, inclusive of funding and synergies.

Okay, got it. And then just on the Q3 guide, you know, so I know you went through a change in the way WANF is going to receive certain fees and expenses with its CBS affiliation. So I was just trying to understand if that had a meaningful impact on the retrans revenue guide for Q3 and overall EBITDA as well for Q3, which I think is quite a bit below where you were in Q3, 2023. Yeah.

So, The short answer to your question is yes. The P&L, we're not going to get into the details on exactly what the numbers are around any one station. Obviously, everybody's investing in the whole company. The P&L at, just generically speaking, the P&L at WANF will shift much more in favor of advertising. So a piece of the retrans revenue side is a reduction in the rates that we'll get at WANF. You can see what we, our guide incorporates what we see today on both sides of that, inclusive of everything that we know as of today.

And Steven, let me just add something, because I think color is kind of important, if you don't mind. With regard to WANF, we hosted our board of directors meeting there yesterday. It had been planned for some time. It couldn't have gone better. But one thing that we did, we utilized about two weeks ago, studios and had a full mini Atlanta based up front. And we had more than 300 guests that attended. It could not have gone better. And we expect to have a, you know, candidly, a very robust sort of advertising uh opportunity not just with the local community but also for the political community you know we've got a lot of political races that will be coming up in 2026 we're going to have a tremendous amount of local news local sports local entertainment and content that's really good and honestly it's what a lot of folks want to watch and so we're actually very excited about atlanta our commitment to the city and the state of georgia And I think it's going to be amazing what we do as an independent here in the city.

Next up, we have Craig Huber of Huber Research Partners.

Good morning. Thank you. My first question will just start with this CBS Atlanta station stuff. Can you just talk about what happened there exactly? Why this switch? This obviously rarely happens in the industry when the affiliation is not renewed. What can you comment there, please?

Craig, this is Kevin. In the mid-1990s, CBS and Paramount came together Paramount had a station group of independent stations. CBS had O&Os affiliated with the CBS network in all of those markets other than a small handful. The only markets in the United States where a network owned a TV station not affiliated with their network was Atlanta, Seattle, and Tampa. And that's simply CBS. We have expected at least As long as I've been in the industry, which has gone on three decades, we have long expected that CBS would have a strong interest in moving its affiliation to those independent stations at some point in time. When Gray acquired Meredith, we knew there was a strong possibility that CBS would move the affiliation to the independent at some point in time. When we closed on the station, we made significant investments we've talked about in prior calls and press releases. We changed the call letters to Atlanta News First, WANF, We made that our everything about that station was a line of news first. It's not about anything else. It's about a line of news first. We added dozens of reporters, tons of hours of local news, tremendous amounts of additional resources. And it showed in the shows and research shows in the ratings shows in the station sales. At some point, that station was going to stand on its own as an independent with the Super Bowl coming to Atlanta. In February 2027, it seemed likely to us that CBS is going to want the affiliation back on their independent station at some point prior to the Super Bowl and therefore probably prior to the 2026 NFL season. So as we were negotiating with CBS this time around, the opportunity came up to take our station independent at this time. We felt very good about what the station has done, what it's accomplished. having gone from three regional Emmy nominations the year we bought it to, I think they had 30-some-odd last year, and they won a national award. They won 31. Nominated for over 50. Nominated for over 50. The list of awards goes on and on, and that's not just awards recognizing journalism. It shows up in every other measure of that station. We felt very good. This was the right time to take the station to an independent, not during a political year, but this year. So we worked out a transition with CVS in which our station will stand on its own this month. So that's the back story. This is something that started in like 1990s when Paramount and CVS came together. And so we've gotten like 50 phone calls saying, is this because of something that happened in May or June or July or the Skydance deal or the whoever won the Super Bowl. It has nothing to do with what's happened in the last six months or the last five years. There is a situation that has existed since the mid-1990s, and Gray saw the challenge, stepped up to the plate, and got ready for what we are doing today. We could not be more prepared and excited and ready for that station to be Atlanta's news first in every metric, and we expect it will be there in time.

And, Craig, let me just emphasize In a in a public fashion, I mean we still are a very excited CBS affiliate group. We renewed in 52 markets and we're friends with the management team. This transition has gone well and we wish at the CBS Atlanta Channel 69 all the best in the future and we will be happy competitors with them. And so there is no problem there. And I think that the broadcast affiliate relationship, while always challenging, will still remain one of the great partnerships in business.

All right, ladies and gentlemen, just as a reminder, if you would like to ask a question, you can press star one on your telephone keypad. That is star one to join the question queue. Next up, we have Alan Gould of Loop Capital.

Thanks for taking the question. I've got two, please. First, Jeff, congratulations on stretching out those, extending those maturities till after two more political cycles. If your pro forma debt's now five and three quarters times leveraged right now, rough ballpark, how much do you think that can go down between now and the end of 28 with two more political cycles?

Without giving a specific number, Alan, we think it's going to go down a lot.

We're at 5.6 today. There's been some pressure on the denominator, which we expect will not be as intense as we move forward, given all the actions that we've taken. And so, if you look out, you know, pick your number for what cash flow you think we generate in the 26 and 28 political cycles, And we've been very clear, not only through our words, but through our actions, what we're doing with capital allocation and paying down debt. And when you have 10.5% debt in your capital structure, there's a pretty good return on repaying that as quickly as you can. So the second lien deal was designed to get us to, and you can see in the investor deck that we published, how we're thinking about the plan and the sequence going forward. We're trying to be very transparent about how we're tackling the delevering piece here. It's capital allocation, but when we have the opportunities on the M&A side, allocating some capital there is actually a good way to accelerate the deleveraging. It's immediate, and then looking forward, it gives us additional cash flow on an ongoing basis. It's too soon to tell you where I think we end 2028, but our longer-term objectives we've been clear about, which is to drive to get back below four times, which will have a pretty significant benefit on the equity. It'll benefit our cost of debt. It's helpful in a lot of ways.

Alan, this is Hilton. Let me just share a little piece of history, and I'm not going to throw dates at you, but I'm going to throw transactions at you. When we closed on the RACOM transaction 2019, more or less, I'm sorry I wouldn't do dates, but I guess I am. Within 18 months, we went, because we levered up to close RACOM, we got to 5556. Within 18 months, we were down to 35, all right? Now the world has changed, but the biggest delta between that deal and then the Meredith transaction, which is really the last time that we added any kind of debt to our portfolio, has been the last four years with interest rates going up to battle the inflation that was caused by a lot of excessive government spending. We're now in an interest rate, I hope, I believe it's going to be, decreasing environment. You know, we have things balanced out. And so I just would put out to you the Raycon transaction as a historical antecedent to consider.

All right, next up we have Eli Lapp of BMO.

Oh, thanks. Sort of a two-part, maybe following up on some prior questions, but I was wondering if you think about acquisitions, how does the size factor play in, meaning your goal is to deliver with these transactions. Does size play a decent role in that endeavor? And then also, can we... Can you give us a bit of a timetable for when the synergies get leveraged to that lower 0.25 times that you're outlining?

Well, this is Sultan.

I think that those decreases in leverage happen almost upon closing. And so it could be very, very rapidly with regard to when those are realized.

Yeah, and Alan, with regard... So the synergies are realized day one.

I'm sorry, Eli. So yeah, look, there is some short implementation period, but they're realized fairly quickly after we close those transactions. So that piece of it, it'll start to come into the run rate of the actual cash generation of the business fairly quickly after close. With regard to the size of the transaction, I don't think we can comment on anything specific. We look at what's available that's out there that makes sense for us, and you can see what we've done. I'd say the beauty of creating duopolies in these markets for most of the transactions that we're talking about and most of the stations that we're acquiring, the beauty of those is that they are less risky in terms of integration, implementation, et cetera. together we already know the markets we have people in a lot of those mark in by definition in those markets so you know for for us this was this was a really elegant opportunity to go ahead and add um add additional heft in market that really accomplishes exactly what we want to do which is to be the news leader in our markets and serve our communities and our advertising clients so it's We'll see what else comes along, but we've got a lot to digest right now, and I think we're pretty happy with what we've announced, but I can't predict the future entirely in terms of what else comes along and could make sense. That answers your question.

Well, I'll just add one other thing, too. I mean, we all expect to see significant changes in the regulatory environment, but at some point, you know, bigger transactions are going to depend upon what happens with the FCC, the DOJ, and the regulatory environment. So it's kind of tough to say, all right, well, we want to do some huge deal or we want to put our companies together with another company or anything else because we need to see the parameters of what the world looks like from a regulatory standpoint before we can do anything one way or another.

And so we're kind of in a way and see things on bigger things.

All right, next up we have Avi Steiner of J.P. Morgan.

Thank you. Good morning. I've got a couple of questions. First, and if I missed this, I apologize. I recognize that everyone is talking to everyone, but I'm curious if the two groups of TV assets you just bought from Block and Alameda, were those competitive auctions or did the sellers approach you because of maybe particular benefits Gray brings to the table? And then I've got a couple more. Thank you.

Yeah, sorry, with time constraints and the number of callers, we're taking one question for folks, and I think we have you on our schedule for a call later today so we can address the others later. We're under NDAs with our sellers, so we can't talk about their processes. I would say that, look, it's a small industry. Folks know each other. On the block side, I'm pleased to say I've worked with block folks literally since I started in this industry in 1997. So I've known them for a very long time. And we all know, you know, we know Byron. We've done a number of transactions with him in the past. I've served with him on his CBS affiliate board for four years. We all know him from a number of industry events. So it's not like we need a broker to introduce us to people. Everybody knows everyone. Sometimes bankers are involved, sometimes they're not. because they're not with us on these transactions. But whether people go to an auction process or hire bankers or just call us, it just depends on their situation, and we can't really comment on their decisions. I would say that I think our relationships with the counterparties here, which would include Scripps, have a lot to do with how we got these transactions done. There's a lot of trust that's required here and a lot of history with folks makes these transactions go smoothly and putting them together and getting them closed. And that's really important to us. We have, I think, a call with you in a little bit. We can hit your other questions at that time.

Thank you, Avi. Yes, thank you for the questions.

And with that, ladies and gentlemen, we do have time for one final question. David Hamburger of Morgan Stanley, your line is now open.

Hi, thank you very much for taking the question. You know, your guidance for the third quarter shows a sequential decline in retransmission consent revenue of about $25 million, and it shows a decline in network affiliate fees of about $19 million. I don't think we've seen such a big kind of step function in sequential trends in those two areas. line items? Does this have to do with the CBS affiliate change, or is there something else that we should think about, and should we think about that going forward as well?

So, look, there definitely is an impact on WANF. This is Pat LaPlatte, by the way. But, you know, the change in, you know, the reverse payments, the drop in reverse payments is the result of a multi-year effort to create a sustainable model. And we feel like we're getting there. That effort is ongoing. And look, there's a lot of pieces to these network deals. You know, obviously the financial piece is big, but there's a lot of pieces and we're doing everything we can to find agreements that make sense for not only us, but our network partners. So it's not just WANF, it's a lot of things.

Well, I think that's the last question.

And so in closing, let me first thank everyone for joining us this morning. And I want you all to be nice to folks if you have calls scheduled later today because we literally finished off at dawn this morning on the Allen transaction. And literally everyone from our board of directors to everyone sitting around this table today has been involved. And we're very excited. I think these transactions are tremendously accretive, but it's even more than that. They're immensely strategic. They're going to help us in terms of the growth of our sports portfolios, whether it's the Pelicans out of New Orleans or the Braves out of Atlanta. Across the board, they expand what we can do and what we can deliver as a local broadcaster of note. We are very proud of our company and thank you for your support and your interest this morning.

We'll talk to you guys next quarter.

And with that, ladies and gentlemen, this does conclude your call. You may now disconnect your lines and thank you again for joining us today.