Gray Media, Inc.

Good day, everyone, and thank you for joining us for this Gray Media Q4 2025 earnings release call. As a reminder, all phone participants are in a listen-only mode, but you are invited to signal for a question by pressing star followed by the digit 1 on your telephone keypad. Also, today's meeting is being recorded. For opening remarks and introductions, I am pleased to turn the floor over to Chairman and CEO, Mr. Hilton Howell. Welcome, sir.

Thank you, operator. Good morning, everyone. As the operator mentioned, this is Hilton Howell, and I'm chairman and CEO of Gray Media, and I want to thank all of you for joining our fourth 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 Latech, our chief legal and development officer, and Jeff Gignac, our chief financial officer. And joining us for the first time is Alan Gould, our newly appointed Vice President of Investor Relations, who many of you know from his prior role as a sell-side analyst. Alan joined us in December, and we are thrilled to have him on board and believe his insights will help us better engage with investors at a time when much is changing in our business. So we will begin with a disclaimer that Alan will provide.

Thank you, Elton. Good morning, everyone. I want to say how thrilled I am to join Gray and work with this outstanding team. After many years as a sell-side analyst covering the media industry, I have tremendous respect for what Gray has built in the strategic direction Hilton and the team are charting. Today we filed with the SEC our Form 8K, our fourth quarter earnings release, and updated slides. And later today we will file with the SEC our annual report on 10K. These materials are all available on our website, which is www.graymedia.com. Included on the call may be discussion of non-GAAP financial measures, and in particular adjusted EBITDA, leverage ratio denominator, net retransmission revenue, 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 evaluation 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. I now return the call to Hilton.

Thank you, Alan. Today, we are very pleased to announce that our results for the fourth quarter of 2025 compared very favorably to our previously issued guidance for both revenues and expenses. Total revenue in the fourth quarter of 2025 was $792 million above the high end of our guidance for the quarter. Total operating expenses before depreciation, amortization, impairment, And gain or loss on disposal of assets in the fourth quarter were $618 million, which was $5 million below the low end of our guidance. Notably, within these results, our broadcasting expenses actually declined by $41 million in the fourth quarter as compared to fourth quarter 2024. On a full year basis, broadcasting expenses declined by $78 million, or about 3%. in 2025 as compared to 2024. Net loss attributable to common stockholders was 23 million in the fourth quarter of 2025. Adjusted EBITDA was 179 million in the fourth quarter of 2025. Political advertising revenue of $12 million finished above our expectations for an off-cycle period. There is one particular item I'd like to highlight from our fourth quarter financial results. Our net retransmission revenue, which is our retransmission revenue less our network affiliation fees, returned to growth in the fourth quarter of 2025 as compared to the fourth quarter of 2024. You have heard us talk in prior quarters about the need to create a more sustainable model in light of subscriber trends. Returning to growth and net retrans is a clear sign of progress on this multi-year effort. On a full year basis, our net retransmission revenue stabilized at $547 million in 2025, similar to 2024. In addition to these operating results, we have now completed our recently announced acquisition of WBBJ-TV in Jackson, Tennessee from Vehicle for $25 million. We are continuing to work towards regulatory approvals and expect to close our other announced transactions in the next several months. We also continue to make progress in strengthening our balance sheet during the fourth quarter of 2025. We opportunistically issued a $250 million add-on to our second lien notes through a private placement. Now, I'll let Jeff provide additional details on that opportunistic transaction. We're entering 2026, poised to close our delivering M&A transactions, and we expect to both reduce our debt and leverage ratio through what we believe will be a fantastic 2026 political cycle for gray media. Operationally, we continue to enhance our local content offerings in the fourth quarter of 2025. Our newscasts continue to attract engaged local audiences and have won prestigious journalistic honors, including a total of 10 national Edouard Moreau Awards, the most of any media company in the United States. This honor underscores the culture of journalistic excellence that is across our company. We have added a number of local and regional live sports broadcasts throughout our portfolio. Investigate TV premiered its third season in September 2017, and also launched a multi-platform project to educate viewers about AI. Yesterday, we announced a new program called Aging Untold that will launch across our footprint next week. This new series features a panel of experienced industry professionals offering insight and solutions for people entering a new chapter of life, as well as their families and caregivers. We believe the program addresses the most important lifestyle topics that nearly everyone faces now or will soon face, and yet no one is really covering honestly or as in-depth as this new program will do. We have also continued to renew and expand our local professional sports portfolio. We are thrilled to continue our broadcast partnership with the Atlanta Braves. And another example, just yesterday, we reached an agreement to broadcast an additional five A's baseball games and will now broadcast 20 A's games in Las Vegas. Meanwhile, our digital team is now very busily rolling out the transition of all of our digital apps and websites to the Quick Play platform powered by Google Cloud. This personalized streaming platform will revolutionize how our viewers find and connect with our content. and we are honored and excited to be Google's first broadcast partner for Quick Play. In December, we renewed our affiliation agreement covering our 54 NBC markets for three additional years. Earlier this month, we renewed and expanded our Telemundo portfolio to include 47 markets, reaching 1.6 million Spanish-speaking households. This was a good timing with NBC hosting a very successful Super Bowl, Winter Olympics, and the NBA All-Star events all this month, and with Telemundo providing the only Spanish-language broadcast for both the Super Bowl and this summer's FIFA World Cup. Finally, we are continuing our efforts to bring in the right development partners to further monetize our investment at Assembly Atlanta. Our next capital investment in Assembly in 2025 was essentially zero. but we expect to have more announcements about the next phase of development as we move through 2026. One additional issue I'd like to add is that we have struck a deal with Intense Tennis that will begin actually competing in June, and we will be carrying it here locally in Atlanta and on our Peachtree Sports Broadcasting Network. 2025 was a pivotal year for Gray. We're excited about entering 2026 on a firm foundation that will lead to enhanced value for all our stakeholders. At this time, I'll turn the call over to Pat to address our operations.

Thank you, Hilton. Fourth quarter poor advertising revenue started strong in October, which was up low double digits versus a comp from 24 that included significant political displacements. We finished the quarter slightly above the high end of our guidance, up 3% compared to the fourth quarter at 24. In terms of our core advertising categories, we saw continued strength in services, including financial, health, and home improvement. Legal, again, showed strong growth in Q4, and that trend continues as we look ahead to our guidance for Q1 of 26th. There was also a nice pickup in gaming and lottery slash gambling in the fourth quarter that is also reflected in our Q1 26 guidance. Automotive finished fourth quarter down low single digits. For the full year, core finished down 3%. Recall that in first quarter of 25, we were down 8% primarily on tariff uncertainty. And it's encouraging that the second half of 25 finished in positive territory versus the second half of 24. Digital continued its healthy growth in the fourth quarter, up low double digits, and our new local direct business continued to grow 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 fourth quarter 25. Our guide for the fourth quarter of 25 was 7 to 8 million, and our actual results came in at 12 million. Once again, we saw some revenue from issue advertisers supporting the president's legislative priorities. We also saw good results in Virginia from the 2025 state governor and attorney general races. Our first quarter of 2026 guidance is for core ad revenue to be approximately flat with first quarter of 25. The Super Bowl generated 11 million on our 54 NBC affiliates and 47 Telemundo affiliates in 2026, compared to 9 million on our Fox affiliates in 2025. We will also benefit from the Winter Olympics on NBC in Q1 of 26. We estimate that our net revenue from the games will contribute $15 million in the quarter versus $8 million during the 2022 games. Across categories in the first quarter, as I mentioned before, legal services and lottery slash gaming are bright spots. We're also seeing signs of improvement in auto, which is currently flattish. We're excited about the upcoming midterm election season. Our first quarter 26 guidance for political is to be 25 to 30 million, which compares to 26 million in the first quarter of 22, which is a comparable period for the 26 midterm elections. The map in 26 looks to be very favorable for our TV station footprint with all 10 competitive Senate races, nearly all of the 13 competitive gubernatorial races, and countless other competitive races in markets where we operate top-ranked local news stations. Jeff will now address the key financial developments.

Thank you, Pat. As Hilton mentioned earlier, we made further progress on our balance sheet during the fourth quarter. We completed a $250 million add-on to our nine and five-day second lien notes at 102 and used a portion of the proceeds to call 125 million of our 10.5% first lien notes at 103. This transaction is another step in our capital structure plan and matches long-term funding with long-term investment for M&A while also reducing our interest cost. We finished fourth quarter with over $1.1 billion in liquidity and $232 million in availability under our open market debt repurchase authorization. Our leverage metrics at year-end 2025 were 2.43 times first lien leverage ratio, 3.65 times secured leverage ratio, and 5.8 times total leverage ratio, each using the calculation in our senior credit agreement. We expect that our delevering M&A transactions together with political revenue in 2026 will help us make significant progress on our leverage during 2026. Our expense reductions are once again reflected in our results. In fourth quarter of 2025, our broadcasting station operating expenses, excluding network affiliation fees, were down 10 million, or 3%, compared to fourth quarter 2024. Let me elaborate a little bit more on net retrans, as this is important to understanding our financial picture. Hilton mentioned the return to growth in fourth quarter 2025 versus fourth quarter 2024. In fourth quarter, our network affiliation expenses declined by 13%, while our retransmission consent revenue declined by 7%. Remember, the WANF moving to an independent station affected both the revenue and expense sides of the net retransmission revenue equation starting in third quarter 2025. That also means that our results are not comparable to our peers when you look at these numbers in isolation. Fourth quarter 2025 is the first quarter where the full impact of that change is reflected in our results. Our fourth quarter guide was for a slight decline in net retransmission revenue, but we ended up with growth in net retrans of about $4 million, which is largely attributable to better than expected subscriber trends. For the full year, net retransmission revenue finished at $547 million in 2025 versus $550 million in 2024. which is essentially flat. Our first quarter guide of 148 to 156, 150 million, excuse me, indicates that we expect continued modest growth in net retransmission revenue. And without giving a full year guide, our current expectation is that net retransmission revenue will grow slightly for full year 2026 as compared to 2025. You will also notice that we are guiding Q1 broadcasting expenses to be down 3% at the midpoint versus the first quarter of 2025. This would be a similar decline to full year 2025, but less than the 7% year-over-year decline reported in fourth quarter 2025, which is primarily due to the timing of certain annual expenses as well as normal inflationary adjustments at year end. We finished 2025 at $74 million of capital expenditures, excluding Assembly Atlanta, which is in line with our revised guidance. Net of reimbursements related to public infrastructure at Assembly Atlanta, our net capital investment in Assembly Atlanta during 2025 was $1 million. We currently estimate that our 2026 company-wide CapEx will be approximately $140 million. For some context, we've historically invested about $25 million more during political years. For 2026, the increase will be a little more than usual as we take advantage of bonus depreciation under the OBBBA bill. We will also do several building-related construction projects within the TB business that we intentionally scheduled to coincide with our stronger cash position this year. This concludes my prepared remarks, and I'll return the call back to Hilton.

Thank you, Jeff. And now, operator, we'll open up the call to any questions that anyone may have.

Thank you, gentlemen. And to our audience listening today, a reminder that it is star and one on your telephone keypad if you would like to join today's question queue. A reminder also, if you're joining today on a speakerphone, please return to your handset prior to repressing star and one to be certain that your signal does reach our equipment. Initially, we ask that you limit yourselves to one question and one follow-up. And then if you have additional, you are invited to re-signal using star and one. Thank you, everyone. We'll hear first today from the line of Dan Kernos at Benchmark.

Great. Thanks. Good morning. Nice results, guys. Hilton, just first for you, I've been asking everybody this. Outside of Nexstar, I mean, if Nexstar after the tweet seems pretty confident they're going to get their deal done by the end of the second quarter, we'll see a lot of moving pieces there. But if it does get done, does that change the way that you guys think assets become available? It takes some of the risk off the table. Does it change how you guys maybe approach anything either larger, more transformative in addition to all of the accretive stuff you've already done? And then Jeff, just a quick one for you. Appreciate the color on net, you know, and understand no lack of specific guide, but on a going forward basis, I mean, should we expect, I know there's going to be timing delta with when you guys have renewals, but is like modest growth and net retrain is the right way to think about the trajectory from, you know, kind of here on out with just some lumpiness in years when you don't have renewals? Thank you.

Yeah. I'll tackle the question for me first. So yes, Dan, we've talked about the multi-year effort to get to a sustainable model on the net retrand side, which would start to look maybe more like inflationary growth type of an arrangement. So that's, I think, the right way to think about that.

And Dan, I will say, woman, I'm happy about it. I can reiterate Nextar's optimism about our own transactions, we have all smaller than what they're doing with this mega merger with Tegna, but maybe five different transactions before the FCC and the DOJ. And we're very optimistic about having those close, hopefully very early in 2026. And then with regard to, you know, if Nextar Tegna closes, you know, sure, that'll present a number of issues competitively. And it may put a little impetus on our company to get larger, but that's something that the whole industry is just going to have to take a look at. I wish Nexstar all the best in getting that closed. They, like we, believe that consolidation is important for the industry because it is critically important that we maintain local news in all of the markets, all the 210 markets across the United States, And as our industry faces broader competition from the massive companies, from Google to Meta to all the rest, getting larger is an absolute requirement. So, you know, we're delighted that they're optimistic. And, you know, I am personally looking forward to clarity in terms of what the rules are, because, you know, you hate to launch a deal and then not be able to get it to completion. But we've got new optimism on that potential.

Great. Thanks, Hilton. Thanks, Jeff. We'll move forward to the line of Stephen Cahill at Wells Fargo.

Thanks. So, a couple of questions pertaining to leverage. So, Jeff, you said significant progress to leverage in 26. I think the M&A deals you've announced are about a quarter turn of deleveraging. I think about something that sort of rounds to four times as like the big key to unlocking your equity value. So, Could you give us any sense of what significant progress means and if it maybe could get you towards that zip code? And then sort of a bigger picture follow-on, you've done a lot to bring down leverage, but it is gradual. An equity merger with synergies could do that in a much shorter amount of time or to a greater extent. I know you're being very patient and deliberate in terms of looking at those types of transactions, but could you just give us an update on the state of industry conversations between maybe yourselves and other levered broadcasters and how we should just think about that continued opportunity?

Yeah, Stephen, we're not going to talk about private conversations. We have consistently said that we are we will look at any transaction that we think makes sense for us and whoever the partner is. So to your question about leverage, yes, about a quarter turn from the announced M&A. There could be more of that out there once we, as Hilton said, once we know what the rules are. So that is another avenue to help us accelerate that deleveraging. And then if you could tell me exactly what the political number is going to be this year, I could give you a pretty good direction on exactly where we'll land. But when I say progress, we know it's, you know, we know the longer term objective is to get back towards that four times. So, you know, once we know exactly what, we've been pretty clear in our actions about what we're doing on the leverage side, managing the top of the capital structure, making sure we're proactive in having the runway that we need. So now we have this political cycle plus the next one before our next maturity and So we will continue to be judicious in lowering the quantum of debt outstanding and proactively addressing maturities as we have in the past.

And if I could squeeze in a quick follow-on, I certainly get the constructive direction of NetRetrans. Just to help us understand, since WANF is in there right now, would it look even better if the WANF noise wasn't in there in the first half of 26?

So look, WANF is in there, so I can't speculate about what it would look like if it were, you know, it was all part of a broader negotiation. And, you know, you're seeing the results of not just that, but a whole bunch of other negotiations that are out there. And importantly, the improving subscriber trends. So it's hundreds of contracts like we've talked about that all result in that number. And part of the reason we went to giving that number is both the gross and those sides create a lot of noise for us relative to peers. But the point here is that our net retransmission revenue is getting back to growth, which is critically important. Look, on the leverage point, too, just to follow up on that piece, part of what we've been doing is chasing the denominator because of the drag from net retrans. So that's also why we are pointing people to that, because that will also help us as the denominator flattens out and hopefully returns to growing here in the not too distant future, all of that will help us get to a better spot from a leverage point of view.

Great. Our next question today comes from the line of Aaron Watts at Deutsche Bank.

Hey, everyone. Thanks for having me on. I had two questions, if I may. The first on advertising. Can you just talk a bit more about the health of the CoreAd backdrop based on what you're seeing so far in the year, what optimism do you have that core ads can grow as you move through 2026, acknowledging, you know, your first Q guide and the robust political that's going to roll through?

Yeah. So look, I think Aaron's pat on the plat. And I think, I think given the large expected political Looking for growth in this kind of year can be challenging. In Q1, we're calling it flat. And obviously, the month of February for us has been pretty strong. We have a lot of NBC affiliates. With the Olympics and the Super Bowl, it's helpful. You got to remember that we also have non-NBC affiliates too. So that isn't as beneficial for those guys. But we're optimistic about the market, but we have to be fully aware that political is going to get really, really heavy once you get into August, September, and so that's going to impact the core numbers.

Okay, that makes sense. And then if I could just ask one more, the potential for the NFL to reassess its TV rights this year has raised some concerns around economics and also potential dilution of content to digital platforms. Do you still view this potential renegotiation as an overall positive for the space and for Gray? And I guess specifically on the economic side, you just renewed your affiliation agreement with NBC, who's in the midst of their first season with the NBA. Any learnings from that renewal that can be informative of how sports rights price increases absorbed by the networks might trickle down to the local affiliates like yourselves?

Yeah, look, it's a negotiation at the end of the day. I mean, there's going to be a lot of speculation around the platforms coming in, picking up a package. You know, I'm not going to comment on that, but there is a lot of speculation out there. You know, in general, extending the NFL contracts is a big, big positive for the industry. The NFL is a huge driver of audience for our TV stations. And ultimately, there'll be dialogue around who pays for it, but it'll work its way through the ecosystem like it always does. And, you know, to say that I'm not sure you can compare, you know, the NBC NBA deal with anything else that's out there. So we'll just, you know, we'll take it one day at a time. But net net to keeping the NFL on broadcast is critical. And we're, you know, we fully believe that'll happen.

Appreciate the time as always. Thanks.

Craig Huber with Huber Research Partners. Your line is open for our next question.

Great. Thank you. Just a housekeeping question. You said a few times here that your subscriber trends for retrans has improved. Can you just quantify that for us? I mean, how much better was the year-over-year that impact your revenues in the fourth quarter versus how it was trending a year before? How much better is it, please?

Hi, Craig. This is Kevin. We have not disclosed subscriber numbers ever. What we have said is our trends, given that we are fairly well dispersed from large markets to small markets, are similar to what is reported publicly for the ATV industry. We said in the last call, and reiterating here, we are seeing some improvement in the rate of decline. There's still declines in traditional MVPDs. There are still increases in virtual MVPDs. The net result is that there's still declines overall in our ATV subs, but the rate of decline has slowed. We're not going to provide more detail on that. I'm not sure any other company is providing much more clarity than that. We have markets from Atlanta, Georgia to North Platte Nebraska, so we are pretty well dispersed with the U.S. population.

Okay, and then my second question, on Atlanta Assembly, just update us, if you would, the overall net cost of that project has cost you so far. How much money have you put into it on a net basis? And then as I typically like to ask you, How much further out do you think until you'll start to get a real proper return off that in terms of leasing out the space, et cetera, that you'll be happy with versus that overall cost? How much further out is that that you think at this stage?

This is Hilton. We actually will have a number of transactions that we will likely be announcing through the course of 2026. And right now we've got 80 plus or minus acres that are not producing, you know, that we purchased when we bought the General Motors plant. And we've got a lot of potential joint ventures that will be opening up there soon, and we will be announcing. But right now, we can't say too much about that one way or another.

Okay.

Yeah, to answer the other part of your question, Craig, it's around $630 million as of the end of 2025.

That's the net number, right?

None of all of the reimbursements that we received through the end of the year.

Okay, great. Thank you. Thank you.

And once again, ladies and gentlemen, we'll pause for just another moment to allow everyone in the audience the opportunity to signal for a question with star and one.

All right. Mr. Huber, do you have a follow-up, sir?

Your line is open. Yeah, I do have a follow-up. Thank you. On the AI front, can you just give us some examples of how AI is helping you from a cost efficiency standpoint, the speed of what you guys provide on your services, news, advertising, et cetera? Just what's the benefits of AI so far? What's the examples that you're most excited about what you're implementing so far?

So we're seeing benefits really across the company. We unveiled our own sort of Ask AI, sort of our own chat GPT, if you will, and we're really finding it allows us to be much more efficient for time-consuming tasks, things that can be automated. For journalists, for example, helping convincing a broadcast story to a story that will air or run on other platforms. So things that previously would take hours can literally be done in a matter of minutes. That allows our journalists to spend more time on their important work of reporting, and enterprise reporting. One thing to note, though, I do want to add is that, you know, our internal policy is any final product is signed off on by a human. So that's really important to us. But it's certainly allowed us to be much more efficient. And even in things like sales, right, prospecting, I mean, the opportunity is there. It's allowed us to really focus on the important core work and free up time for that work.

I assume it's too hard to figure out how much potential cost savings that it may have at this stage on an annual basis? AI? A little early.

Yeah, it is. And quite honestly, we've really been using it at this point. It's more about how to make us more efficient, more productive, more responsive to our communities.

But it's not replacing human beings? Or how would you categorize that?

The way... The way we are using great AI across news, sales, marketing, administration is like having a thousand extra interns that we're not paying for. So there are a lot of mechanical tasks like building a sales pitch or converting a story for the web, adding information databases that people do that takes away from their creative energies. And if we could offload that to an intern, or 1,000 interns, we would do that. And just like our intern policy, everything gets reviewed by a great employee before it becomes final. So if you want to talk about expense savings, it's like saving the cost of 1,000 interns. It's making us more productive, but we are thinking about this as efficiency to provide better, faster, more, and not about saving money. But if one quantifies costs, we would guess at this point it's like, saving the money on 1,000 interns.

And we thank each of our audience members who shared their questions and comments today. Mr. Howell, I'm happy to turn the floor back to you, sir, for any additional or closing remarks that you've got.

Well, thank you. So in closing, like the rest of 2025, our fourth quarter was very busy and we accomplished numerous objectives and that will have long-term benefits for our company. We will continue to take actions to enhance our value for our advertisers, our investors, and for the communities we serve. We thank everyone for joining the call today, and we look forward to our Q1 call coming up soon. Thank you.

Ladies and gentlemen, this does conclude today's Gray Media Q4 2025 Earnings Conference call. We thank you all for your participation. You may now disconnect your lines.