Gray Television reported higher profit as political advertising surged and acquisitions generated additional revenue.
Net income in the fourth quarter was $173 million, or $1.88 a share, up from $29 million, or 17 cents a share, a year ago.
Revenue rose 49% to $1.1 billion, mainly because of political advertising. Political spending rose tenfold, to $225 million in the quarter compared to $20 million a year ago.
Core advertising revenue rose 13% to $406 million and retransmission revenue increased 20% to $353 million. The increases reflect acquisitions made by Gray in the past year.
On a combined historical bases, including the year-ago results from acquired properties, total revenue was up 25% and total core revenue was down 4%, reflecting displacement caused by political ad demand.
Looking ahead, Gray said it expected first-quarter revenue of $777 million to $796 million.
First-quarter total core revenue is expected to be between $350 million and $360 million, which would be down 3% from last year. The Super Bowl on Gray’s 27 Fox affiliates will generate $6 million in net revenue for the company, compared to the $13 million the company garnered from airing the Olympics on its 56 NBC affiliates in 2022.
Gray expects first-quarter retransmission revenue to be between $387 million and $393 million, down about 6%, and political revenue to be just $2 million to $3 million.
“Despite concerns about a possible macroeconomic recession discussed publicly in the general media and by certain sectors of the economy, we believe that our businesses performed well throughout last year and have started 2023 in a strong position,” the company said.
“Looking ahead, we anticipate that our television stations and production companies will maintain revenues at a level generally flat with recent years should macroeconomic conditions, particularly in local markets, slow during 2023. In addition, we anticipate that our retransmission revenues in the first quarter of 2023 will increase by approximately 10% to 11% over the fourth quarter of 2022 as rates increases continue to outpace negative subscriber trends,” the company said.
Gray has also been investing to build a production facility in Atlanta.
“We currently anticipate that construction on the Assembly Studios portion of the development and much of the infrastructure for the entire project will be completed in the summer of 2023. At that time, we expect that the new facilities will begin generating revenue from both long-term and short-term leases of soundstages and related facilities to various content producers,” Gray said.
“Also at that time, Gray intends to pause its funding of construction projects at Atlanta Assembly to evaluate carefully certain opportunities to maximize the long-term value of this unique real estate investment,” the company said.
Analyst Steven Cahall of Wells Fargo noted that Gray’s financial results came in ahead of its conservative guidance for the fourth quarter. He said that the company’s guidance for the first quarter points to better pacing for ad sales and retransmission fees in line with expectations.
“On the [company’s earnings call with analysts and investors], investors will be curious about retrans trends and ‘23 cash available for debt reduction,” Cahall said. ■
