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Good day, everyone, and thank you for joining this Gray Media Q3 2025 Earnings Call. [Operator Instructions] As a reminder, today's session is also being recorded. It's now my pleasure to turn the floor over to our host, CEO and President, Mr. Hilton Howell Jr. Please go ahead, sir.

Thank you, operator. Good morning, everyone. As the operator mentioned, this is Hilton Howell, the Chairman and CEO of Gray Media and I want to thank all of you for joining our third quarter 2025 earnings call. As usual, all of our executive officers are here with me in Atlanta; Pat LaPlatney, our President and Co-CEO; Sandy Breland, our Chief Operating Officer; Kevin Latek, our Chief Legal and Development Officer; and Jeff Gignac, our Chief Legal -- I'm sorry, our Chief Financial Officer. And then also we had Jim here for the last formal time to join us here but he won't be doing anything but telling us what the right answers are. And so we will begin with a disclaimer that Kevin will be providing.

Thank you, Hilton. Good morning, everyone. Today, we filed with the SEC on Form 8-K, our earnings release and an updated investor slides. Later today, we will file with the SEC our quarterly report on Form 10-Q. These materials are all available on our website, which is www.graymedia.com. Included on the call may be a discussion of non-GAAP financial measures and in particular, adjusted EBITDA, leverage ratio denominator and certain leverage ratios. These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public in its analysis and valuation of our company. Further discussions and reconciliations of the company's non-GAAP financial measures to comparable GAAP financial measures can be found on our website. All statements and comments made by management during this conference call other than statements of historical facts should be deemed forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors that are contained in our most recent filings with the SEC. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. And now I turn the call to Hilton.

Thank you, Kevin. Today, we are 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 on 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'm going 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, Gray. 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 transactions that strengthen our business and our balance sheet. All told, we -- as we have described previously, we anticipate entering into 6 new markets by acquiring the local news station that was ranked #1 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 $0.08 per share quarterly common dividend, which is consistent with recent quarters. 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 Quickplay 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 2 additional years. WANF, our station in Atlanta, became an independent television station on August 16, and as we expected, is off to an exceptionally strong start, adding over 25.5 hours of news and other locally focused programming in 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.

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, 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 at double-digit percentages versus last year and is the top 5 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 the third quarter of '25. Our guide for the third quarter was $6 million 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 quarter. 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 and 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.

Thanks, Pat. As Hilton mentioned earlier, we continued to make progress on our balance sheet during the third quarter. We took advantage of strong debt market conditions in July to extend our maturity profile out to 2033. Our capital markets activities addressed all material maturities through December of '28 with a modest impact of less than 25 basis points on our overall cost of debt. We finished the third quarter with over $900 million in liquidity and $232 million in availability on our open market repurchase authorization. Our leverage metrics at 9/30/25 were 2.72x first lien leverage ratio, 3.66x secured leverage ratio, which includes the second lien that's new this period and 5.77x total leverage ratio, each of those calculated as prescribed in our senior credit agreement. On our second quarter call, we discussed the expected impact of our pending M&A transactions on our leverage. We continue to estimate that if we close those transactions today using cash on hand and/or revolver borrowings, our total leverage ratio, again, as defined in our senior credit agreement, would be approximately a quarter turn lower than where we finished the quarter. Our expense reductions continue to show up in our results, and we're proud of our team for the company-wide focus on cost containment. In 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 multiyear 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 less network affiliation fees will decline slightly compared to the prior year period. That decline is primarily attributable to WANF and Atlanta shifting to be independent. Our guide for full year cash taxes for 2025 remains at $39 million, and we continue to expect that we will have no further cash tax payments this year. We've reduced our expected CapEx range for full year 2025 by $15 million to a new range of $70 million to $75 million, again, reflecting a company-wide effort on where and when to invest. We expect the further reimbursement related to public works construction at Assembly Atlanta to be received prior to year-end, such that our net capital investment in Assembly Atlanta during 2025 will be 0. That concludes my remarks, and I'll turn the call back to Hilton.

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

[Operator Instructions] We'll hear first from the line of Dan Kurnos at the Benchmark Company.

Nice print. I guess, Jeff, thanks for the color around net retrans. Super helpful. You're finishing the year at this $202 million to $203 million. Is that kind of the right run rate we should think of as we start heading into '26? How should we think about things kind of puts and takes there on the reverse side? And obviously, you have renewals. So I know you're not going to guide to net next year but it just feels like it could be an accelerating net year. So just any directional color would be helpful.

Yes, Dan. So let me focus the commentary more on the net because that's really where -- how we think about it. 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 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 can turn positive, and we're hopeful, but the big input there is some declines, and we don't know those.

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

Core advertising was down 4% in the first half of this year, down 3% in the third quarter and you're guiding flat to up low single digits for 4Q. I know there's some noise in those numbers. But you're closing the book on a tough 2025 with improved momentum. How does that frame the discussion on core for next year when you'll have the typical political crowd out and what's expected to be a very healthy political spending cycle but also a lot of incremental sports content and hopefully firming across key verticals as well.

Yes. Aaron, it's Pat. I would say that we're really optimistic about 2026. we have some early Q1 numbers that are encouraging, in fact, very encouraging. Towards the end of the year, we'll obviously get political crowd out, as you saw in the comps for this year from last year. But as we sit here today, we are very, very optimistic about 2026.

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

Just another follow-up on the ad trends. With the rebrand of the Atlanta Station, could you maybe just talk about like the advertiser reception to that increase in news content and if there was any sort of, I guess, disruption in how that viewership of that as that station transitioned?

Yes. This is Sandy. We've had really good reception to what we're doing in Atlanta. We added 25 hours of local news and sports and viewers are responding. We're seeing gains in mornings and key demos and in prime access, and we're able to really serve the community with hyperlocal content and they're responding. And it's quality content. This is a team that won 26 Southeast Emmy awards and a National Emmy Award this year. And so the quality of the content, people are finding it. They're staying with us longer and we expect those numbers to continue to grow.

Well, and Patrick, I just want to tell you, I wasn't there because I was previously committed with Sandy and Pat were plus our whole team at WANF and for the first time ever and so we may be repeating this in the future. We used the 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 -- the WANF as being the local CNN from the days when Ted Turner owns CNN for our local market in this really growing and really exciting city of Atlanta. And that upfront was unique, different and special.

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

[Operator Instructions] we'll hear next from the line of Craig Huber at Huber Research.

My one question has to do with the Assembly Atlanta. Can you remind us, please, of what the total cost, the net cost you've done there so far? I believe it's around $600 million. But along those fronts, can you just touch on when you think you're going to get a proper ROI off that spend? I see your production company EBITDA was about $3 million in the quarter. But just when do you think you'll be getting fuller lease commitments, et cetera, but the number will go up significantly?

We are not a development company but we are actually and have been from day 1 on the building portion of what we had at the old General Motors plant, which is the studios. It is doing quite well. The partnership between NBCUniversal and Gray Media is probably stronger than ever. They're bringing their shows in. We have leased out things and we actually heard last night and we kind of think that the dam may be broking that Hulu renewed a third season on a show that we believe is going to occupy 3 of our stages out there. I can't commit to you today that's going to happen, but it is. And so each of those parts add to a growing EBITDA out of what's been built. We're not making money, Craig, on raw land but we are in negotiations with a wide variety of parties who will bring their financial assets. And we will be entering into joint ventures with them to create assets that we would like to maintain an interest in and then other assets like an apartment complex. We may just absolutely sell and liquidate. As Jeff mentioned, we have finished up sort of the last obstacles to getting about $25 million back from the cities, which we will be picking up in Q4. And so we're not going to go and like tout what we've got coming, but it's really, really, really exciting. And I think within 12 to 24 months, I think it will be the biggest cash flowing operation we've got in the company.

And Craig, 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.

We will hear next from Mr. Steven Cahall at Wells Fargo.

So a question on M&A. I mean, you've been very active already this year between the announced deals and the swaps and related to pushing some of the debt out. So I know you're in a strong position to figure the next few years out. There's always the risk that things happen, I guess, that you're not a part of in terms of mergers and acquisitions. So how do you think about maybe something that's more strategic on the M&A side right now? And what do you look for that would be a particularly attractive sort of large-scale transaction if that is indeed something that could be on your radar?

Steven, it's Kevin. Just to repeat what we said last time, we are laser-focused on the deals that we announced in the third quarter. The government being shut for so long has clearly delayed our efforts to work on that approval process and transition. But we remain fully committed and fully occupied by those transactions. Looking sort of down the road into the future, I think was really your question. We think there are other opportunities to do transactions like the ones we've done here, which is, say, sub-$200 million deleveraging deals that improve our portfolio and our balance sheet. Those we will look at, again, down the road as we get through these transactions. Also closing these transactions will give us some real intel on where the new regulatory restrictions will be. We have FCC proceedings that are ongoing and more news will come out of that by the end of this year which will provide all of us some additional insight into what our real opportunities are. I would say from the very beginning, this company was essentially single TV station. It was about becoming a large company with very, very high-quality TV stations. And we've stuck to that now for decades. It's #1, strong #2 TV stations. There are a lot of stations out there that would, we think, be good fits for Gray. And we're going to continue our focus on transactions that improve the overall portfolio that don't tax the balance sheet with high-quality assets and great employees. So again, thinking down the road, nothing has really changed in our views there.

I will add to that, Steven, like 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, Sandy? different sports networks across the United States.

Yes, 13.

13. So -- and they literally go really from coast to coast. And we like to fill those holes in. And so 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 we're well aware of that. And -- but there's nothing that we are in deep negotiation with at the moment. But we're in a period of time in our industry where things change faster than I've 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 get 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 #1 and #2 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 threatened piece of what needs to be done in our country is retained and enhanced. So that will drive our M&A discussions.

[Operator Instructions] we'll hear next from Shanna Qiu at Barclays.

Sorry if I missed this, but I think historically, 4Q ahead of a political year generated $20 million, $30 million of revenue. And I think in the fourth quarter guide, it's $7 million to $8 million. I guess just what's driving that delta if it seems like political is still going to be a reasonably strong year into 2026.

This is Kevin. The first half of this year is essentially the same political revenue we had in the first half 2 years ago and 3 years ago, and there's always puts and takes. There was some Georgia Senate runoff money in early '21, for example, some ballot initiatives pop up. generate a lot of money. A couple of years ago, Maine had a ballot issue that was brought more money than the Virginia governor raised for us despite our bigger presence in Virginia. So there's always sort of puts and takes. The second half of this year, we just -- we 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 -- sorry, 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 handwringing 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 races in Georgia to California, Virginia State House across the board. 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 electric showed on Tuesday that the Democrats do have a really good shot in a lot of races. So we have seen 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 pacing 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 of off cycles. We're pretty optimistic that's going to change because of the outcome on Tuesday of this week. And we certainly hope to see that democratic fundraising flow through pretty quickly to supporting races that are going to happen in the primaries next year and of course, the 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 of elections. It's 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 would be our view on political at this time.

Shannon, this is Hilton. Let me just add something. I stayed up late and watched the returns on Tuesday night and it was a democratic blowout. And I left regardless of where people come out on political, what I love is a great fight out there. And I think the Democrats are going to be able to raise a ton of money. And I know the Republicans are going to be able to do the same thing. And so my confidence in the level of political spend in the midterm this year is tremendous. I think it's going to be gargantuan. I'm really looking forward to seeing it all rolling in.

Next question today will come from the line of Avi Steiner at JPMorgan.

I would love to get your thoughts on the YouTube TV carriage dispute. What might the impact be on future negotiations and maybe between affiliates and networks as well going forward?

Sure. Avi, it's Pat LaPlatney. Look, the situation with our ABC stations going off YouTube is frustrating. Obviously, we prefer to have a voice in the MVPD negotiations for our stations. We don't. Hopefully, they get it worked out soon. And I can't really speculate on what's going to happen here, how it's going to impact the market going forward. But this is -- these are 2 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. But like the government dispute, we hope they all come to a positive conclusion soon.

Ladies and gentlemen, we thank you all for your questions and comments today. Again, if you did have a question or comment or follow-up that we didn't get to today, you are invited to reach out to management following today's conference. It is now my pleasure to turn the call back to Mr. Hilton and our management team for any additional or closing remarks.

Thank you, operator, and I'm going to thank you all for the questions. 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.