Gray Television, Inc. Aktie

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Gray Media, Inc., First Quarter Earnings Call. [Operator Instructions]

It is now my pleasure to turn the call over to Alan Gould, Vice President of Investor Relations. Thank you. You may begin.

Thank you, Tina, and welcome, everybody. Joining us today on Gray's call are Hilton Howell, our Chairman and CEO; 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 Financial Officer.

Today, we filed with the SEC on Form 8-K our first quarter earnings release and updated investor presentation. And later today, we will file with the SEC our quarterly report on Form 10-Q. These materials are all available on our website, www.graymedia.com.

Included on the call may be a discussion of non-GAAP financial measures and, in particular, adjusted EBITDA, leverage ratio denominator, net retransmission revenue and certain net 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 in the latest investor presentation 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.

It is now my pleasure to introduce Gray's Executive Chairman and CEO, Hilton Howell.

Thank you, Alan. Today, we are very pleased to announce solid results for our first quarter of 2026 with core advertising above our previously issued guidance, political revenue at the high end of our guidance range and total revenue at the high end of our guidance even factoring in a recently resolved dispute with one of our MVPDs.

Total revenue in the first quarter of 2026 was $768 million, at 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 first quarter of 2026 were $622 million, which was $7 million below the comparable period last year.

Notably, within these results, our broadcasting expenses continued to decline and were down by $22 million in Q1 2026 as compared to Q1 2025. Net loss attributable to common stockholders was $33 million for the first quarter of 2026. Adjusted EBITDA was $154 million in Q1 2026. Political advertising revenue was $30 million at the high end of our guidance and compares to $26 million in the first quarter of 2022, the last midterm cycle.

As you all hopefully saw by now on Friday, Gray and DISH, resolved the first extended distribution blackout amazingly in our company's history. It was a rough negotiation for both sides, and we very much regret how local viewers and advertisers were impacted by the impasse. In the end, we reached a new multiyear agreement that was consistent with our internal expectations. We thank our viewers, our advertisers and our team for their patience, as we navigated that uncharted territory for Gray Media.

Since the beginning of the year, we have successfully negotiated retransmission consent agreement renewals with 3 of our largest traditional MVPDs, representing approximately 39% of our traditional MVPD footprint. We also expanded important agreements with 2 of our virtual MVPDs involving a number of our independent stations that carry professional sports. We have no further retransmission negotiations for the remainder of 2026.

In addition to these operating results in the first quarter, we acquired WBBJ in Jackson, Tennessee from Bahakel. We recently completed the acquisition of TV stations in 10 markets from Allen Media Group. And just yesterday evening, we closed on our acquisition of stations in 3 markets from Block Communications. We currently anticipate closing our remaining transactions with E.W. Scripps and Sagamore Hill in the next few weeks.

Finally, turning to Assembly. We were delighted to learn that CBS renewed its successful daytime soap, Beyond the Gates, for 2 additional seasons. Seasons 1 and 2 will film at Assembly. And we anticipate leasing additional studio production space. In February, tennis league INTENNSE Tennis announced that it will host all 52 tennis matches for its 2026 season in our 30,000-square-foot sound stage within Assembly Studios. This setup will also have a live audience of up to 500 people, and we will broadcast some of the key matches on WANF and Peachtree Sports in Atlanta, Georgia. Meanwhile, discussions and design work are continuing to make further progress on future development at Assembly.

Looking forward, we are excited to have the upcoming FIFA World Cup games on both our 33 Fox channels and our 47 Telemundo affiliates. We are optimistic that as the largest owner of top-rated local television stations and a footprint covering most of the competitive races that we will again capitalize on a strong midterm political cycle.

At this time, I'll turn the call over to Pat to address our operations.

Thank you, Hilton. First quarter core advertising revenue was stronger than initial -- our guidance was reported to be approximately flat in the first quarter 2026 compared to 2025. We finished the quarter up 2% with the boost from the Winter Olympics.

As we move into the second quarter, we're seeing some softness in core advertising. It appears that the situation in the Middle East and resulting volatility in oil prices is having an effect, causing advertisers to delay their commitments, which limits our visibility. Some of the softness in core is due to NCAA Final Four rotating away from CBS. Recall last year, we earned $5 million of revenue in April as the largest CBS affiliate group.

Let's talk about categories for a minute. We saw strength in gaming, a trend that continued into Q2. Within services, legal, insurance and financial were strong. Automotive finished the first quarter down just slightly compared to the first quarter of '25, which is encouraging. Some of the consumer-focused categories experienced weakness, consumer goods and discount and department stores in particular. Digital continued its healthy growth in first quarter, up high teens versus first quarter of '25 and our new local direct business growth rate accelerated to 15% over the same period in 2025. Our sales teams continue to perform well against stiff competition for local advertising in a challenging market.

Political ad revenue exceeded our expectations in the first quarter of '26. Our guide for first quarter '26 was $25 million to $30 million, and our actual results came in at the high end right at $30 million. This compares to $26 million in the first quarter of 2022, which is the most recent midterm cycle. We saw strong spending in Texas, Maine, Virginia, Georgia and Michigan. We currently anticipate political revenue for Q2 will be in the range of $60 million to $70 million.

As I mentioned earlier, we're seeing some softness caused by economic uncertainty, as we progress through the second quarter. Our second quarter 2026 guidance is for core ad revenue to be down mid-single digits versus second quarter of '25. Some of the consumer-focused categories are the most affected.

We continue to expand our focus on sports programming. This year, 19 Major League Baseball teams will play in our 16 broadcast sports networks in addition to 13 NBA teams, 8 NHL teams, 6 WNBA teams and numerous NCAA and Minor League Baseball teams. I'm also proud to note that our Raycom Sports division has partnered with the Atlanta Braves as their live production team for BravesVision producing all non-national games, including 25 games in WANF here in Atlanta and across the Southeast on our broadcast sports networks.

Our digital team has completed the transition of all of our digital apps and websites to the Quickplay platform in a remarkably short window. This personalized streaming platform will revolutionize how our viewers find and connect with our content. We believe that we have now built an incredibly strong foundation for continued digital audience and advertising growth.

Jeff will now address the key financial developments.

Thanks, Pat. In the first quarter of 2026, our broadcasting station operating expenses excluding network affiliation fees were up 4% compared to first quarter of 2025. This was partially due to timing of certain expenses, as was noted in last quarter's call, along with normal inflationary increases. We're continuing our focus on smart cost management, and we are investing in our team and making sure they have the best tools available to efficiently and effectively compete in the marketplace.

You will also notice that we are guiding Q2 '26 broadcasting expenses to be down 3% at the midpoint versus the second quarter of 2025. Corporate expenses were above our guidance range due primarily to legal costs associated with completing our M&A regulatory approvals. And as you can see from our guide, corporate is expected to normalize as we complete the additional transactions.

Net retrans revenue was down $4 million in first quarter '26 versus first quarter of '25. We didn't anticipate the now-resolved distribution dispute when we provided our first quarter guide. I want to focus on that for a second. There are 2 things to point out in the Q2 '26 net retransmission guide: first, now that we've negotiated all MVPD renewals scheduled for 2026 and we know the impact of the blackout on second quarter, those elements are reflected.

Secondly, we now incorporate the 4 stations acquired in first quarter, but none of the stations that we have acquired since the end of first quarter into our guide. We currently expect 2026 net retransmission revenue to be in the same ZIP code as the quarter that just ended, implying low single-digit growth in net retransmission revenue.

Remember that the blackout impacted the full month of April versus only 21 days in the March quarter. And importantly, with all of our renewals now negotiated, we have clear line of sight to growth in net retransmission revenue for full year 2026 even before adjusting for the impact of any of the acquisitions.

Turning to the balance sheet for a minute, we finished first quarter with over $1 billion in liquidity. Our leverage metrics at March 31, 2026, were 2.56x consolidated first lien net leverage ratio, 3.79x consolidated secured net leverage ratio and 5.94x consolidated total net leverage ratio, each using the calculation in our amended senior credit agreement. These ratios include the pro forma impact of the 4 station acquisitions we completed as of March 31, 2026.

With the closing of the Allen 7 market transaction and yesterday's closing on the Block Communications transaction, we will begin to see the estimated quarter turn of delevering flow into our ratios. It's also worth noting that after we closed the Block acquisition yesterday, our revolver was undrawn. There was approximately a $50 million working capital swing during first quarter related to the payment of accrued interest.

On March 31, we completed an amendment to our senior credit agreement to align the document with the covenants under our secured notes and to incorporate current market standards. We pursued this to give us better access to the market, as we evaluate potential refinancing opportunities. Immediately after we closed that on April 2, we fully repaid the $10 million balance on the Term Loan F that was scheduled to mature in 2029.

As we progress through 2026, we're gaining visibility on deleveraging during the year. We're closing, and we will begin integrating our M&A transactions. Our net retrans revenue is set to grow compared to 2025. Political advertising is ramping, and finally, refinancing to reduce interest expense could further improve our cash flow during 2026.

A couple of housekeeping items. First quarter 2026 CapEx was $19 million versus $15 million in the first quarter of 2025. Both periods now include Assembly Atlanta. We're maintaining our $140 million company-wide CapEx estimate for 2026, although we expect that to be back-end weighted as we align the spending with the expected cash inflow from political advertising. Our full year tax guide came down by $25 million to a range of $90 million to $110 million.

That concludes my remarks, and I'll now turn the call back over to Hilton.

Thank you, Jeff. In closing, first quarter was very busy, and we have already accomplished numerous objectives in Q2, which will have long-term benefits for Gray Media. We will continue to take actions to enhance value for our advertisers, our investors and for the communities we serve. We thank everyone for joining the call today.

So Tina, at this time, we would like to ask that you open up the line for questions.

[Operator Instructions] Our first question comes from the line of Steven Cahall with Wells Fargo.

First, just a question on your regulatory outlook. I think the last time we spoke, you were encouraged by generally what was happening in Washington, but maybe things were moving a bit slowly in terms of getting transactions approved, like the Scripps swaps and some of the Allen Media stations. It looks like post Nexstar, TEGNA getting approved, the wheels are turning much faster. So I'm wondering if you now feel like that the regulatory process is something that you understand under this administration, if it's moving at a pace that's conducive to additional transactions. And as you think about potential strategic transactions, I was wondering just how you factor in state AG regulatory risk and if that's different from prior.

And then, Jeff, thank you for the retrans outlook for '26. Any sense of what that might have looked like had you not had the blackout? Is that a point or two addition? Or is it not so big now that reverse maybe is a bit more variable than it used to be? And also, as we think about retrans pro forma for the deals you've done, would that have added -- or could that still add a point or two as well?

Steven, it's Kevin. We announced, as you alluded to 5 deals last summer over the course of a couple of weeks and promptly filed those with the SEC and the DOJ, and those transactions are only now coming out of the regulatory agencies. We had to file them with DOJ as well. And our DOJ process pushed our transactions behind the Nexstar transaction and necessitated a very intensive document production and review, I'd say, a far more intense DOJ review of those transactions than anything we saw in Meredith, Quincy, Schurz or Hoak under prior administrations.

And the Department of Justice cleared those transactions just in the last, I think, roughly 2 or 3 weeks or so. The FCC, consistent with past practice, has waited for DOJ to resolve its reviews before it acted. So that's why we're seeing these now. It would appear to us on the outside that the FCC and DOJ, in particular, have received a number of broadcast transactions since last summer from us, from, obviously, other broadcasters, some large, some small, some gaining headlines, some not.

And through those reviews, especially of the mega deal and then our little deals, they've really come to understand the competitive situation that we face. And as a result, I think they're more comfortable with the transactions probably than they were a year ago. So we are encouraged that we're now seeing the DOJ after submitting millions of documents at great expense to us really seems to understand our industry far better than it has probably ever and that's supportive. So we do think that it facilitates the industry, not just us in the industry, continuing to do M&A for Gray. Well, again, as we've said many times, we're looking at strategic deleveraging transactions. And there are some things we're looking at and some things maybe we look at it at a different time.

And your last question on that is, we have not previously considered state AG theories on antitrust. And without commenting on current litigation, we are definitely mindful of what's happening, and we are evaluating our opportunities through the lens of potential additional uncertainty under new and novel theories being advanced by some attorneys generals in various states. So we're looking through it, but obviously, we've not announced any other transactions in a number of months. And as we evaluate the new FCC and DOJ understanding of our industries and this new uncertainty, we'll make decisions accordingly on what might be actionable in this environment versus what might not have been as actionable a year ago.

Does that answer the question?

That does, Kevin.

Yes. And I guess let me comment, Steven, on the net retrans question. So I won't comment about the specific impact of what it would have been from any individual contract. We always think about it as a portfolio on both sides. So think about for the full year, though, we're thinking of inflationary type organic growth in net retrans, even with the blackout, which is really a continuation of the trend that started in the fourth quarter, where we were getting back to growing net retrans. But on top of that, there is net retrans that is acquired that will start to flow in on top of that.

And our next question comes from the line of Dan Kurnos with StoneX.

Jeff, just to put a finer point on that response to Steve's question, notwithstanding the blackout, which we all knew was coming, so it shouldn't be surprise to folks, I mean other than that it happened, it seems like the net retrans guide has actually raised, and that's before the transactions, given the commentary you gave us last quarter. So is that an assumption on better underlying subs, better underlying terms? Just any thoughts you can give us there?

And then one for Hilton, one of my favorite subjects, political, and I know they're going to tell you to be careful with what you say Hilton because it's too early, and it never benefits until you really get over there pretty clear. But your 2Q guide is very, very strong. So I just -- any way, Hilton, you can help us think through how you're thinking about this political season would be fantastic.

Let me just address the retrans since we're on that topic, so that in the transcript, it's all together. The short answer to your question, Dan, is yes, it is better sub trends, it is us achieving our objectives on market and getting to market rates as we renew contracts. It's everything together. Look, the blackout is unfortunate, but that's part of the business. And we reached something, as Hilton said, that was mutually beneficial and a long-term agreement there. So I'll kick it over on the political question to Kevin or Hilton.

Yes. I'll refrain from using adjectives to describe this. We've said a couple of times, we're pretty encouraged, and we have exposure to almost every -- all but one of the competitive governor and senate races this year. One thing I'd mention is, a couple of years ago, in 2022, we had a number of interparty very expensive conflict -- or contest that brought a lot of primary money to us. And what we discovered at the end of the year is that a lot of the money raised and then spent in '22 was essentially pulled forward to these primaries. And once those primaries were over, we talked about this a bunch, obviously, in early '22, the candidates who didn't have any money and the super PACs were kind of tired of spending on those races. And those campaigns kind of died after the primary, and that was something we hadn't seen before.

This time around, obviously, there's 2 or 3 pretty high-profile Senate primaries, one of which just essentially ended the other day in Maine. So we're down to 2 pretty expensive Senate primaries: Texas, where we have a number of stations, but definitely not a huge presence relative to the 45 media markets there, and then, Michigan, where we have a decent presence, but we're not in 2 or 3 of the markets there. So we have some exposure to those.

The money -- the impression is that while a lot of money is being spent in those competitive primaries. It's -- the map is just different from '22, where we spent -- so much money was pulled into second quarter for those primaries. You've seen all the articles on the hundreds of millions of dollars that the super PACs are sitting on, the candidates have raised, and frankly, haven't even been allocated yet.

One of the Senate party's super PACs has started reserving time. The other has barely started reserving time. So it seems this is going to be a cycle where the money is going to be -- is being deployed more towards the general elections and not second quarter primary. So we still feel very good about this year. I'd say recent events in fundraising numbers and successes are pointing to a very engaged electorate.

And as we've said many times a year ago, the house might have been a potential jump ball for the Dems, but not the Senate, and now, the house is very much in play. And even the headline in the Washington Post this morning says Dems are feeling they have a real shot now at taking the Senate. Didn't -- never would have seen that 6 months ago. And obviously, that may change with the more people are engaged and think there's a potential change of control, the more motivated they are to raise money and campaign and work the doors and work the phones and vote. And so we think this is going to be a very, very engaged campaign season, and we happily have a very good portfolio of #1 TV stations in the right markets to capitalize on that.

Does that answer your question, Dan? Or you're looking for an adjective?

I'll take an adjective Hilton if I can get one. That was the safe answer, but very helpful from Kevin.

But suffice it to say I'll give you one, Dan, though. It's just going to be extraordinarily strong. What those numbers are going to be? We've learned our lesson. We don't know. And -- but I think it's easy to check our markets, our position and where the races are. And we do think that we are exceptionally well positioned the way Kevin so wisely articulated our market sort of operations.

[Operator Instructions] Our next question comes from the line of Aaron Watts with Deutsche Bank.

Apologies in advance, but one more on retrans. You had described an unprecedented new demand as being at the core of the programming dispute you recently resolved. Is it safe to say you were able to back that demand down? And what risk do you see that other distributors bring that type of a demand to the table in the future?

Aaron, it's Kevin. You've understandably asked what was the detail. We don't comment on specifics in our negotiations. I would say I started doing retrans in 1997. Did it pretty much full time for 1.5 decades before coming here. And obviously, Gray has a few retrans negotiations over the last 14 years I've been here. I did retrans on for Comcast and some cable companies in a prior job and a whole bunch of broadcasters. And we've seen a ton of retrans contracts through our 60-some-odd transaction since I came to Gray. I've never seen a provision like the one that was thrown at us as a nonnegotiable line in the sand, take it or leave it, as we saw here. It is not something that we are prepared then or ever to do. I don't expect other MVPDs will expect to exert control over a broadcast company anymore than we would expect to do a deal where we would try to control the operations of another company.

So the bottom line is it was bizarre, it was incredibly unprecedented in a lot of very deep professional experience. And we're willing to take the extraordinary step of Gray, breaking its long history of never having a major retrans dispute. It clearly was pretty existential for us. So we resolved -- when this was resolved, it was resolved in terms that we felt comfortable with. And that's unfortunately all I really can say on terms that are subject to confidentiality that we expect DISH to respect, and we will respect. So I think it was a one-off. I'm not expecting other people on either side to ask for a level of control or another company that neither -- I think no entity is willing to -- will be willing to give. So let's just leave it at that.

Okay. That's helpful. I appreciate your kind of view on that. And then just one for Jeff. We can see your continued work on the expense side in the first half of this year. How should we be thinking about costs in the second half? Are you lapping any initiatives that will flatten things out? Or is the first half expense base a fair baseline for the remainder of the year? Any help would be appreciated.

Yes. We talked about this a little bit on our first quarter call, Aaron. We did align company-wide raised dates for all non-union employees to January 1 so that we can manage things better and budget better. Everybody had their own individual anniversary date prior to this. So you can imagine when you've got 5,000 employees, it's a lot just to keep track of, and it was fair to everybody. So it's that pull forward some of the increases in what's our largest expense item that will average out throughout the year to get back to it, so the back half.

I wouldn't say the first half is necessarily a perfect proxy for the back half. The back half should be -- on a comparable basis, the year-to-date should start to get to a more normalized inflationary type, right? We also will have in the back half of the year, too. Remember, as we report, we'll have all the acquired station expenses rolling into. So that's the other piece of it here. But they come in normal SEC reporting, they come in as they close.

Your next question comes from the line of Patrick Sholl with Barrington Research.

Just on your advertising guidance, is there any amount of crowd out from the World Cup just being on -- just not based on the station that it's a part of?

No. There's -- World Cup is a benefit, net benefit. There's no question. But if you mean preemptions of other programming by World Cup, there's really no sort of net negative. It's -- World Cup is a positive.

Okay. Yes. Just that as in respect of like drawing advertiser interest to different stations, but okay. And then just with the MVPDs, including access to the network streaming services, have you seen that have any sort of impact on like local programming viewership?

Yes. Modestly, if any.

Our local programming viewership is still extremely strong, especially when you look at our local newscasts. What we're doing on the linear side, and frankly, the streaming side as well, our local newscast continue to perform very well.

The streaming is totally additive. And if you go back and look at the net viewership between all the different platforms are on now, that's grown over the last few years, hasn't diminished.

Pat, this is Hilton. Pat mentioned that FIFA was a positive, but not a negative. And I really think that our sort of unique degree in NBC exposure to the Telemundo portfolio, we have 47 affiliates with the largest affiliate group outside of the major markets that NBC has. And we think it's going to be really, really strong in the Spanish language. And we're also very excited about FIFA on our 33 FOX stations in English, obviously. But it's going to have a big impact on us, we believe.

And having stations in 2 host cities in Atlanta and Kansas City.

Yes, it's very beneficial for us.

Your next question comes from the line of Shanna Qiu with Barclays.

I just had a clarification on the guidance for the net retrans distribution. Is there any true-up catch-up payments that we should think about that was negotiated as part of the resolution?

So Shanna, everything is factored into the guide. Again, I don't want to comment about any specific aspect of the contract's portal really. There are multiple contracts that were negotiated during the quarter.

And then just on your comments on organic low single-digit growth in the net retrans, does that take into account for the full year? Does that take into account any kind of changes from the pending closing of Charter and Cox.

So we've factored in our own estimate of when that closes into the guide. So I'm not going to handicap exactly when that closes, but we're aware of that, and it is factored into what we've put out and the comments about inflationary type growth for the full year.

Your next question comes from the line of Craig Huber with Huber Research Partners.

Can you just comment if you would, where you think the FCC is right now on this 39% TV station ownership cap? I mean, they obviously did the TEGNA deal. They approved it underneath the waiver as opposed to first doing the -- getting rid of the 39% ownership cap or lifting it. Where do you think we are on the timing of maybe getting rid of that? It's been long overdue, obviously.

Yes. This is Kevin Latek. To be honest, we have no idea, and it's just not something we follow. Gray is at 25% under the cap. There's nothing that we could imagine doing in the near or medium term that would require the cap to be raised for Gray. So it's just not, frankly, an issue that we follow. I point you to one of the broadcasters who's closer to the cap and lobbying on that issue. We are not. It's just not -- again, it's irrelevant to Gray.

Okay. And my other question I want to ask you, the use of AI at your company, your TV stations, can you just quickly go through with us the benefits in terms of just enhancing your services, but also just on the efficiency side of things at your station level, the use of AI?

It's really been a multiplier of sorts for our teams, primarily time saving, increasing productivity on both the sales and the news side, it kind of allows us to free up our people on the content side to create more original sticky content. And on the sales side, it allows us to spend more time on client relationships and growing businesses with using AI for things like accelerated pipeline for new business and things such as that. It's really -- and prospecting. So it's really a multiplier amplifying -- giving our people more time to focus on the things that we really need them to focus on.

[Operator Instructions] And with no further questions in queue, I will now turn the call back over to Mr. Hilton Howell, Jr., for closing remarks.

Well, thank you very much, operator. And I want to thank everyone for joining us this morning. We're very pleased with our results that we've reported, and I really look forward to talking to you guys at the conclusion of next quarter. Thank you.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.

Good day, everyone, and thank you for joining us for this Gray Media Q4 2025 Earnings Release Call. [Operator Instructions] 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 CEO; and Sandy Breland, our Chief Operating Officer; Kevin Latek, 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, Hilton. 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 and the strategic direction Hilton and the team are charging.

Today, we filed with the SEC, our Form 8-K, our fourth quarter earnings release and updated slides. And later today, we will file with the SEC our annual report on 10-K. 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, 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 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 and 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 compare 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 in net retrans is a clear sign of progress on this multiyear 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 Bahakel 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 continued 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 delevering 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 continued to enhance our local content offerings in the fourth quarter of 2025. Our newscasts continue to attract, engage local audiences and have won prestigious journalistic honors, including a total of 10 National Edward R. Murrow 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 broadcast throughout our portfolio. Investigate TV premiered its third season in September 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 5 Ace baseball games and will now broadcast 20 Ace 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 Quickplay platform powered by Google Cloud. This personalized streaming platform will revolutionize, help our viewers find and connect with our content. And we are honored and excited to be Google's first broadcast partner for Quickplay.

In December, we renewed our affiliation agreement covering our 54 NBC markets for 3 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 0, 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 INTENNSE 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 at not 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 core advertising revenue started strong in October, which was up low double digits versus a comp in '24 that included significant political displacement. We finished the quarter slightly above the high end of our guidance, up 3% compared to the fourth quarter of '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 '26. There's also a nice pickup in gaming and lotteries/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 up 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 million 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 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/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 million 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 you operate top-ranking 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 9 5/8 second-lien notes at 102% and used a portion of the proceeds to call $125 million of our 10 1/2 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 2.43x first-lien leverage ratio, 2.65x secured leverage ratio and 5.8x 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 million to $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 [ be having ] several building-related construction projects within the TV 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.

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

Great. Nice results. 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 the deal -- 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, take some of the risk off the table, have you guys maybe approach anything either larger or more transformative in addition to all of the accretive stuff you've already done?

And then, Jeff, just a quick one for you. I appreciate the color on net and understand no lack -- or 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 in net retrans the right way to think about the trajectory from kind of here on out with just some lumpiness in years when you don't have renewals?

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

And then I will say, woman, I'm happy about -- I can reiterate Nexstar's optimism about our own transactions. We have all smaller than what they're doing with this mega merger with Tegna, but maybe 5 different transactions before the FCC and the DOJ. And we're very optimistic about having those closed, hopefully, very early in 2026.

And then with regard to if Nexstar-Tegna closes, sure, that will 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 dust ] 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 we're delighted that they're optimistic. And I am personally looking forward to clarity in terms of what the rules are. Because you'd hate to launch a deal and then not be able to get it to completion. But we've got new optimism on that potential.

We'll move forward to the line of Steven Cahall at Wells Fargo.

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 0.25 turn of deleveraging. I think about something that sort of rounds to 4x is 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?

Yes, Steve. So 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 0.25 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 said progress, we know it's -- we know the longer-term objective is to get back towards that 4x. So once we know exactly -- 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. 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 net retrans. 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?

So look, WANF is in there, so I can't speculate about what it would look like if it were -- it was part of -- it was all part of a broader negotiation and 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 there is that we're -- our net retransmission revenue is getting back to growth, which is critically important.

Look, on the leverage point, 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.

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

I had 2 questions, if I may. The first on advertising. Can you just talk a bit more about the health of the core ad 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 your first Q guide and the robust political that's going to roll through?

Yes. So look, I think -- Aaron, it's Pat LaPlatney. 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. We 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 is in the midst of their first season with the MDA. 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?

Yes. Look, it's a negotiation at the end of the day. I mean there's going to be -- there's a lot of speculation around the platforms coming in, picking up a package, I'm not going to comment on that, but there is a lot of speculation out there. 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 will be a dialogue around who pays for it, but it will work its way through the ecosystem like it always does.

And to say that -- I'm not sure you can compare the NBC NBA deal with anything else that's out there. So we'll just -- we'll take it 1 day at a time. But net-net, keeping the NFL on broadcast is critical, and we're -- we fully believe that will happen.

Craig Huber with Huber Research Partners.

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 impacted revenues in the fourth quarter versus how it was trending a year before? How much better is it, please?

Craig, this is Kevin. We have not disclosed subscriber numbers, I think, 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 pay-TV 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 MVPD. There are still increases in virtual MVPD. The net result is that there's still declines overall in our pay TV subs, but the rate of decline has slowed.

And we're not going to provide more detail on that, and I don't think any of our -- I'm not sure any other company is providing much more clarity than that. So I will just -- again, 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 and how much money have you put into on a net basis? And then as I typically like to ask you, how much further out do you think until you 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 farther out is that, do 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, 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.

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

That's a net number, right?

Yes, net of all of the reimbursements that we that we received through the end of the year.

[Operator Instructions] Mr. Huber, do you have a follow-up, sir?

Yes, I do have a follow-up. On the AI front, can you just give us some examples of how AI is helping you from a cost efficiency standpoint, 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 example 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 Gray AI, sort of our own ChatGPT, 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 on other -- 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 at their important work of reporting and enterprise reporting.

One thing to note though I do want to add is that our internal policy is any final product is signed off 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 aftersales, right, prospecting, I mean, the opportunities 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.

Yes, 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 Gray AI across news, sales, marketing, administration is like having 1,000 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, building -- 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 Gray employee before it becomes final. So this is not -- 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 you want to quantify cost, it's -- we would get to 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.

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.

Thank you, ladies and gentlemen, for joining today's Gray Media Q3 2025 Earnings Call. You may now disconnect your lines, and have a good day.

Good morning, ladies and gentlemen. Welcome to the Gray Media Q2 2025 GTN earnings release. [Operator Instructions]

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 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 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 8-K our earnings release and an updated investor slide later today. We will file with the SEC our quarterly report on Form 10-Q. 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 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.

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 8, 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 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 than in the past several weeks. If you recall that 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 5 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 5 markets with their new respective owners.

Last Thursday, we announced the acquisition of 2 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 3 new markets of Columbus-Tupelo, Mississippi; Terre Haute, Indiana; and West Lafayette, Indiana.

So today, everyone on the call, please be nice to Kevin. He's been up all night last night and has had no sleep. So he has on the [indiscernible] on his answers. Together, the Scripps, Sagamore, Block and Allen transactions will add a net 6 new markets to our portfolio. We are particularly proud that we will enter each of these markets, the local news station that was ranked #1 in their respective markets in 2024. These transactions also will create, and I'm really impressed with this 11 new big 4 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 4 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 2. 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 2.99x and a leverage ratio of 5.6x, each as defined by our senior credit agreement.

In July of 2025, we completed an offering of $900 million of senior secured second lien notes along with the $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 works 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 that KWTX in my hometown of Waco, Texas. We're spearheading a company-wide partnership with Graham Media on a campaign to raise money for the Texas floods in Cervo, 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 2 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 [ KTBK ] in Phoenix, Arizona's Family, which is the #1 station in the market and across the state of Arizona. We are excited for WANF to officially make the transition next week and our community should be excited to see the [ 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 on site 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 8 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 the first quarter, particularly in the auto category. Through the quarter, we saw stronger core activity that we projected back in May, and we ultimately finished on the high side of the guidance, down about 3% versus second quarter '24.

From a 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 the top 5 category. Other categories are a mixed bag, in some cases, surprisingly resilient. Restaurants were soft, but discount and department stores, tourism and 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 flattish.

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 continue 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 million to $3 million, 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 state races in Virginia.

Providing guidance for the third quarter of '25 continues to be challenging. We have guided our 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. If you factor that in, our third quarter guidance's flat to slightly up.

Across the categories in the third quarter, we're seeing automotive and also restaurants basing 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, [indiscernible] 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 the decline in the first quarter versus first quarter of '24.

We finished the quarter at 2.99x first lien leverage and 5.6x 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 delevering 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 0.25 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 multiyear 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 9 [indiscernible] 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 delevering M&A.

Taking into account the July refinancings, we estimate that our first lien leverage decreased from 2.99x to 2.6x, our secured leverage increased from 2.99x to approximately 3.6x, 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 like to open up the line for any questions you guys may have.

[Operator Instructions] First up, we have Dan Kurnos of The Benchmark Company.

Yes. Lot of ground to cover. Appreciate all the color, guys. I guess, well, first, I'll just say, just to shout out to Jeff, heroic job with the balance sheet. So well done on that front.

Second, I'll say -- I'll ask Hilton, I guess, kind of standing path, does it mean -- 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 you're headed that 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 buyers, multiples on some of these?

Question 5. 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 Jeffrey 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 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 is talking to everybody else. And while we don't have any current plans on other transactions, we're always going to be listening, Dan. I mean -- but I do know that Sandy here, who's also with us is going to have -- it's a big lift. We've 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 2 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 delevers by about [ 0.25 ] 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 perspectively.

So with regard to other deals, yes, 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 is a better one to answer this question, but I don't see any real hurdles to getting every one of them done. And so for all of these, just a handful, about 6, I think, new net up increase in markets. We are really excited to welcome them to our portfolio, but to see our increased debt 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 ever one of those markets.

Dan, this is Kevin. I'll just interject on the transactions. Everyone is talking about how everyone is really busy with transactions. But Gray has announced 5 this year, 4 in the last 4 weeks. They -- 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 of hours ago, the Block transaction required a tremendous amount of time, as you can imagine, negotiate and put together. And we have a lot of work to do to get through all the approvals. And then as he 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 where our focus is going to be on executing the transactions that we have announced, not chasing another 4 or 5 or 6 transactions over the next couple of months.

So that 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 of 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 when I joined the company a couple -- a number of years ago, Gray was more highly levered than it is today. And we -- part of how we got out of that was we started doing some transactions that we're delevering, right? We did -- 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 of measures. 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 to close, get the money into their bank accounts, get these people into our working with us, get the news expanded and the other strategies that we've talked about.

All right. Next up, we have Steven Cahall of Wells Fargo.

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?

Yes, Steven. So we really -- we 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. 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.

Yes. 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 is 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 2 weeks ago [indiscernible] Studios and had a full mini Atlanta-based upfront. And we had more than 300 guests that attended. It could not have gone better. And we expect to have a, candidly, a very robust sort of advertising opportunity, not just with the local community, but also for the political community. 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.

My first question will just start with the CBS Atlanta station. So can you just talk about what happened there exactly? I mean, why the switch? I mean, 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 is going on 3 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 [indiscernible] 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 the station was Atlanta News First. It's not about anything else, it's about Atlanta News First. we added dozens of reporters, tons of hours of local news, tremendous amounts of additional resources. And it showed in the -- shows in research, shows in the ratings, it 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 under 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 has accomplished having gone from 3 regional Emmy nominations, the year we bought it to I think they had 30-some-odd last year, and they won a national award.

It's over 50.

Now, I mean over 50. I mean we have -- 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 transaction -- worked out an, excuse, worked out a transition with CBS 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 CBS 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 whoever won the Super Bowl. It has nothing to do with what's happened in the last 6 months or the last 5 years This 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 public fashion. I mean, we still are a very exciting 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.

[Operator Instructions] Next up, we have Alan Gould of Loop Capital.

I've got 2, please. First, Jeff, congratulations on stretching out those -- extending those maturities till after 2 more political cycles. If your pro forma debt is now [ 5.75x ] levered right now, rough ballpark, how much do you think that can go down between now and the end of '28 with 2 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 will -- 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, 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.

So 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 4x, which will have a pretty significant benefit on the equity. It will 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 Raycom transaction on 2019 more or less, [indiscernible] dates, but I guess I am. Within 18 months, we [indiscernible] because we levered up to close Raycom. We got to [ 5.5, 5.6. ] Within 18 months, we were down to [ 3.5, ] 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 4 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 a decreasing environment. We have things balanced out. And so I just put out to you, the Raycom transaction as a historical [indiscernible] to consider.

Next up, we have [indiscernible] of BMO.

Sort of a 2-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 delever 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 0.25x that you're outlining?

Well, this is Hilton. I think that those decreases and the leverage happened almost upon closing. And so it could be very, very rapidly with regard to when those are realized.

Was the strategy realized day 1?

I'm sorry, [ Eli. ] So yes, Yes, look, there is some short implementation period, but they're realized fairly quickly after we close those transactions. So that piece of it, it will 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 or 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. They fit together. We already know the markets. We have people in a lot of those markets, by definition in those markets.

So for us, this was this was a really elegant opportunity to go ahead and add and 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 advertiser 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. 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, 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, we want to do some huge deal or we want to put our companies together with another company or with 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 wait and see things on bigger things.

Next up, we have Avi Steiner of JPMorgan.

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 2 groups of TV assets you just bought from Block and Allen Media, 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.

Yes, Avi, with time constraints and the number of callers, we're taking one question per 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, least to say, I worked with a 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 -- we know [indiscernible], we've done number of transactions with him in the past. I've served with him on the CBS affiliate Board for 4 years. We all know them 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. I think 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. It's -- 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.

Ladies and gentlemen, we do have time for one final question. David Hamburger of Morgan Stanley.

Your guidance for the third quarter shows a sequential decline in retransmission consent revenue 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 and sequential trends in those 2 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?

Yes. So look, there are definitely an impact and the WANF -- this is Pat LaPlatney, by the way. But the change in the reverse payments, the drop in reverse payments is the result of a multiyear 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. 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 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.

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