GTN Q1 Earnings Call: Advertising Weakness and Political Upside Amid Industry Uncertainty

Local television broadcasting and media company Gray Television (NYSE:GTN) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 5% year on year to $782 million. Its non-GAAP EPS of $0.24 per share was 50.6% above analysts’ consensus estimates.

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StockStory’s Take

Gray Television’s first quarter performance was shaped by ongoing softness in core advertising categories, particularly within the automotive sector, and the absence of major events like last year’s Super Bowl on CBS affiliates. Management attributed the year-over-year revenue decline to these factors, as well as lower political advertising compared to the prior year; however, political ad spending in Q1 still exceeded the company’s expectations for an off-cycle year. COO Sandy Breland noted growth in new local direct business despite economic uncertainty, and CFO Jeffrey Gignac highlighted that cost containment efforts resulted in lower operating expenses compared to the prior year. CEO Hilton Howell also pointed to progress in balance sheet deleveraging as a priority during the period.

Looking ahead, Gray Television’s outlook is influenced by persistent macroeconomic headwinds and ongoing advertiser hesitancy, with management providing cautious guidance for the second quarter. President Pat LaPlatney described continued uncertainty in core categories such as automotive and restaurants, but expressed optimism about sustained momentum in legal, health, and home improvement advertising. Management is also closely watching the regulatory environment, suggesting that potential changes could accelerate industry consolidation and create new growth opportunities. CFO Jeffrey Gignac emphasized the expected benefits of recent cost-saving initiatives and reinforced the company’s focus on maintaining expenses below inflationary levels throughout 2025.

Key Insights from Management’s Remarks

Management linked first quarter results to advertising softness, cost savings measures, and outperformance in political revenues, while highlighting ongoing strategic investments and regulatory developments.

• Advertising softness persists: Core advertising revenue declined, driven by weakness in automotive and certain consumer discretionary categories, as advertisers remained hesitant due to economic uncertainty and tariff concerns. The absence of a major event like the Super Bowl on key affiliates contributed to lower year-over-year results.
• Political ad revenue upside: Despite being an off-cycle year, political advertising exceeded management’s expectations, largely due to competitive races in Wisconsin and Florida as well as several special elections. Management noted early spending for future election cycles as a potential positive for upcoming quarters.
• Cost containment impact: The company’s previously announced $60 million cost savings program began to materialize in Q1, with operating expenses falling below prior-year levels for the first time since the COVID-19 slowdown. Management expects further benefits as these initiatives are fully realized across 2025.
• Assembly Studios progress: Assembly Studios, Gray’s production facility in Atlanta, reported high occupancy and active film and television production, following a year of industry strikes. CEO Hilton Howell described the facility as nearing 80% occupancy, with more productions expected to drive incremental revenue and capital returns in future periods.
• Balance sheet and liquidity actions: Gray Television extended and expanded its accounts receivable securitization facility and credit revolver, enhancing liquidity and supporting its deleveraging plan. Management continues to prioritize debt reduction and highlighted flexibility to pursue strategic M&A if regulatory changes enable industry consolidation.

Drivers of Future Performance

Gray Television’s guidance is shaped by cautious advertiser sentiment, the pace of political ad spending, and potential regulatory shifts that could impact industry structure and growth opportunities.

• Political advertising variability: Management expects political advertising to remain a significant swing factor, emphasizing that early bookings for upcoming races could drive upside, but also cautioning that the category is inherently difficult to forecast.
• Expense management focus: The company aims to maintain tight cost controls, with operating expenses guided to stay below inflationary levels for the remainder of the year. Management believes this discipline, combined with the full impact of recent cost-saving measures, will support profitability even if revenue pressures persist.
• Industry consolidation opportunities: Regulatory developments in Washington may enable Gray to pursue acquisitions, market swaps, or new duopolies, which could improve margins and competitive positioning. However, management noted that each potential transaction is unique and subject to market and regulatory conditions.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be watching (1) the trajectory of core ad recovery in key categories like automotive and restaurants, (2) the pace and magnitude of political advertising bookings as the election cycle ramps up, and (3) progress toward filling Assembly Studios to full occupancy and diversifying production revenue streams. Regulatory shifts and potential M&A activity will also be key in assessing Gray Television’s execution against its strategic objectives.

Gray Television currently trades at a forward EV-to-EBITDA ratio of 0.6×. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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