Gray Television, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2021. The filing is by Gray Television, Inc., which operates television broadcasting and production businesses. Amounts below are in millions of dollars unless otherwise stated.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $547 | $451 | $1,091 | $985 |
| Operating income | $108 | $65 | $209 | $189 |
| Net income | $39 | $11 | $78 | $64 |
| Net income attributable to common stockholders | $26 | $(2) | $52 | $38 |
| Operating margin, approximately | 19.7% | 14.4% | 19.2% | 19.2% |
| Operating cash flow | Not separately stated | Not separately stated | $238 | $307 |
- Q2 revenue increased 21%; six-month revenue increased 11%. Local and national advertising and retransmission consent revenue were key contributors.
- Q2 diluted earnings per share were $0.27, compared with a loss of $0.02; six-month diluted EPS was $0.55 versus $0.39.
- Six-month cash used in investing was $177, including $121 of property and equipment purchases and $41 for acquisitions. Cash used in financing was $49. Cash increased by $12 to $785.
- At June 30, cash was $785 and current assets and liabilities were $1,257 and $223, respectively. Long-term debt, net of deferred loan costs, was $3,979; outstanding debt principal was $4,035. Revolving-credit availability was $299. The company reported compliance with debt covenants.
- Interest expense was $47 in Q2 and $95 for the six months. The company declared common dividends of $0.08 per share quarterly, totaling $15 paid during the first half; preferred dividends paid were $26.
Changes versus comparable periods
- Q2 revenue rose $96, with local and national revenue up a combined $81 and retransmission revenue up $22. Political revenue fell $15 as 2021 was an election-cycle off-year.
- For the first half, revenue rose $106: local and national revenue increased a combined $91 and retransmission revenue increased $56, while political revenue declined $42.
- Higher retransmission revenue was accompanied by higher retransmission expense: up approximately $20 in Q2 and $43 for the first half.
- Q2 corporate and administrative expense increased $8, including $7 of transaction costs. First-half corporate and administrative expense increased $11, including $8 of transaction costs.
- First-half operating cash flow fell $69 year over year, primarily because changes in operating assets and liabilities provided less cash. Investing outflow rose, largely reflecting higher capital spending, including the Doraville land purchase.
Outlook, transactions, and risks
- Management expected full-year 2021 capital expenditures, excluding Repack, of approximately $185–$190, including an estimated $110 for the Doraville land project and $75–$80 for routine spending. Repack spending was expected to be about $7, with most costs anticipated to be reimbursed; timing and sufficiency of FCC reimbursement are uncertain.
- The company stated that cash, operating cash flow, and available borrowing were expected to fund obligations and capital needs. It estimated approximately $178 of debt interest payments in the 12 months after June 30; this estimate was expected to increase materially after pending acquisitions.
- The Quincy acquisition and the related sale of stations in overlapping markets closed August 2, 2021, after quarter-end. Quincy was acquired for $925 cash, subject to adjustments, and the divestiture was for $380 cash before taxes.
- The Meredith transaction remained pending at filing. Gray agreed to acquire Meredith’s Local Media Group for $16.99 per share, with stated total enterprise value of $2.825 billion, and expected a fourth-quarter 2021 closing, subject to regulatory, shareholder, financing, and other conditions. Gray planned approximately $2.9 billion of new debt obligations for the transaction and agreed to sell WJRT for $70 cash before taxes to facilitate regulatory approval. Termination fees may apply in specified circumstances.
- Management cited continuing COVID-19 effects, including disruption to content and production, economic and advertising uncertainty, and difficulty forecasting. Advertising competition from the internet, political-advertising cyclicality, fixed operating costs, acquisition execution and financing, and legal contingencies are additional considerations. Management said no material changes had occurred to the risk factors in its 2020 Form 10-K.
Important facts for investors to verify
- Post-quarter closing and final financial effects of the Quincy acquisition and overlapping-station divestiture.
- Meredith closing conditions, regulatory approvals, final financing terms, incremental debt and resulting interest burden.
- Whether advertising and retransmission trends persist, particularly as political revenue varies with the election cycle and retransmission costs also rise.
- Actual capital spending, Doraville project requirements, and timing and recovery of Repack reimbursements.
- Cash generation and liquidity after acquisitions, including covenant compliance and the effect of higher debt service.