Based on the provided financial report articles, the title of the article is: "GRAY MEDIA, INC. (0000043196) - 10-K - Annual Report - 2024

Executive Overview

Introduction. The following discussion and analysis of the financial condition and results of operations of Gray Media, Inc. and its consolidated subsidiaries (except as the context otherwise provides, “Gray,” the “Company,” “we,” “us” or “our”) should be read in conjunction with our audited consolidated financial statements and notes thereto included elsewhere herein.

This section of our Annual Report discusses 2024 and 2023 items and year-over-year comparisons between 2024 and 2023. A detailed discussion of 2022 items and year-over-year comparisons between 2023 and 2022 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7. of our Annual Report for the year ended December 31, 2023.

Business Overview. We are a multimedia company headquartered in Atlanta, Georgia. We are the nation’s largest owner of top-rated local television stations and digital assets serving 113 television markets that collectively reach approximately 37 percent of US television households. The portfolio includes 78 markets with the top-rated television station and 99 markets with the first and/or second highest rated television station, as well as the largest Telemundo Affiliate group with 44 markets totaling over 1.5 million Hispanic TV Households. We also own Gray Digital Media, a full-service digital agency offering national and local clients digital marketing strategies with the most advanced digital products and services. Our additional media properties include video production companies Raycom Sports, Tupelo Media Group, and PowerNation Studios, and studio production facilities Assembly Atlanta and Third Rail Studios.

Our operating revenues are derived primarily from broadcast and digital advertising, retransmission consent fees and, to a lesser extent, other sources such as production of television and event programming, television commercials, tower rentals and management fees. For the years ended December 31, 2024, 2023 and 2022, we generated revenue of $3.6 billion, $3.3 billion and $3.7 billion, respectively.

Revenues, Operations, Cyclicality and Seasonality. Broadcast advertising is sold for placement generally preceding or following a television station’s network programming and within local and syndicated programming. Broadcast advertising is sold in time increments and is priced primarily on the basis of a program’s popularity among the specific audience an advertiser desires to reach. In addition, broadcast advertising rates are affected by the number of advertisers competing for the available time, the size and demographic makeup of the market served by the station and the availability of alternative advertising media in the market area. Broadcast advertising rates are generally the highest during the most desirable viewing hours, with corresponding reductions during other hours. The ratings of a local station affiliated with a major network can be affected by ratings of network programming.

We also sell digital advertising on our stations’ websites and mobile apps. These advertisements may be sold as banner advertisements, video advertisements and other types of advertisements or sponsorships.

Our broadcast and digital advertising revenues are affected by several factors that we consider to be seasonal in nature. These factors include:

● Spending by political candidates, political parties and special interest groups increases during the even-numbered “on-year” of the two-year election cycle. This political spending typically is heaviest during the fourth quarter of such years; ● Broadcast advertising revenue is generally highest in the second and fourth quarters each year. This seasonality results partly from increases in advertising in the spring and in the period leading up to and including the holiday season; ● Core advertising revenue on our NBC-affiliated stations increases in certain years as a result of broadcasts of the Olympic Games; and ● Because our stations and markets are not evenly divided among the Big Four broadcast networks, our local and national advertising revenue can fluctuate between years related to which network broadcasts the Super Bowl.

We derived a material portion of our non-political broadcast advertising revenue from advertisers in a limited number of industries, particularly the services sector, comprising financial, legal and medical advertisers, and the automotive industry. The services sector has become an increasingly important source of advertising revenue over the past few years. During the years ended December 31, 2024, 2023 and 2022 approximately 23%, 27% and 28%, respectively, of our broadcast advertising revenue (excluding political advertising revenue) was obtained from advertising sales to the services sector. During the years ended December 31, 2024, 2023 and 2022 approximately 20%, 20% and 17%, respectively, of our broadcast advertising revenue (excluding political advertising revenue) was obtained from advertising sales to automotive customers. Revenue from these industries may represent a lower percentage of total revenue in even-numbered years due to, among other things, the decreased availability of advertising time, as a result of such years being the “on-year” of the two-year election cycle.

Our primary broadcasting operating expenses are employee compensation, related benefits and programming costs. In addition, the broadcasting operations incur overhead expenses, such as maintenance, supplies, insurance, rent and utilities. A large portion of the operating expenses of our broadcasting operations is fixed. We continue to monitor our operating expenses and seek opportunities to reduce them where possible.

Please see our “Results of Operations” and “Liquidity and Capital Resources” sections below for further discussion of our operating results.

2024 Refinancing and Debt Reduction Activities. During 2024 we completed several steps to enhance our liquidity, to extend the maturity of portions of our debt obligations that were scheduled to mature in the near future and to reduce the principal amount of our debt outstanding. Please refer to Note 4. “Long-Term Debt” for further information. During 2024, we:

● Increased lender commitments under our Revolving Credit Facility to $680 million and extended the maturity date of all commitments thereunder to December 31, 2027; ● Issued a $500 million 2024 Term Loan that will mature on June 4, 2029 ($498 million outstanding at December 31, 2024); ● Issued $1.25 billion of 2029 Notes, that are secured pari passu with our Senior Credit Agreement and that will mature on July 15, 2029; ● Fully repaid the $1.15 billion 2019 Term Loan that was scheduled to mature on January 2, 2026; and ● Pre-paid through a tender offer, $690 million of the $700 million in outstanding 2026 Notes that were scheduled to mature on July 15, 2026.

In addition, in the year ended December 31, 2024 we used $327 million of cash to repurchase and retire an aggregate principal amount of $373 million of our outstanding 2019 Term Loan, 2027 Notes, 2030 Notes and 2031 Notes on the open market. Currently, our Board of Directors has authorized us to make additional open market repurchases of our indebtedness of $250 million.

Together with other payments at par, collectively, these actions resulted in a $520 million reduction in the principal amount of our outstanding indebtedness at December 31, 2024, as compared to December 31, 2023.

Risk Factors. The broadcast television industry relies primarily on advertising revenue and faces significant competition. For a discussion of certain other presently known, significant risk factors that may affect our business, see “Item 1A. Risk Factors” included elsewhere herein.

Revenue

Set forth below are the principal types of revenue, less agency commissions, and the percentage contribution of each to our total revenue (dollars in millions):

,,Year Ended December 31,,,,,,,,,,,,,,,,,,,,,, ,,2024,,,,,,,,2023,,,,,,,,2022,,,,,,, ,,Amount,,,,%,,,,Amount,,,,%,,,,Amount,,,,%,,, Revenue:,,,,,,,,,,,,,,,,,,,,,,,,, Core advertising,,$,1 490,,,,41,%,,$,1 514,,,,46,%,,$,1 496,,,,41,%, Political,,,497,,,,14,%,,,79,,,,2,%,,,515,,,,14,%, Retransmission consent,,,1 482,,,,41,%,,,1 532,,,,47,%,,,1 496,,,,41,%, Production companies,,,105,,,,3,%,,,86,,,,3,%,,,93,,,,3,%, Other,,,70,,,,1,%,,,70,,,,2,%,,,76,,,,1,%, Total,,$,3 644,,,,100,%,,$,3 281,,,,100,%,,$,3 676,,,,100,%,

Results of Operations

Year Ended December 31, 2024 (“2024”) Compared to Year Ended December 31, 2023 (“2023”)

Revenue. Total revenue increased $363 million, or 11%, to $3.6 billion for 2024 compared to 2023.

During 2024: ● Core advertising revenue decreased by $24 million, due primarily to displacement during the on-year of the two-year political advertising cycle, partially offset by advertising revenue of $18 million from the broadcast of the Super Bowl on our 54 CBS channels, compared to $6 million of revenue relating to the broadcast of the Super Bowl on our 27 FOX channels during 2023, and $20 million of advertising revenue on our 53 NBC channels from the broadcast of the 2024 Olympic Games; ● Consistent with 2024 being the on-year of the two-year political advertising cycle, political advertising revenue increased by $418 million; ● Retransmission consent revenue decreased by $50 million due to a decrease in subscribers, offset, in part, by an increase in rates; and ● Production company revenue increased by $19 million in 2024 primarily due to the start-up of our operations at Assembly Atlanta.

Broadcasting Expenses. Broadcasting expenses (before depreciation, amortization, impairment and gain on disposal of assets) increased $49 million, or 2%, to $2.3 billion for 2024, compared to 2023.

During 2024: ● Broadcasting payroll and employee benefit expenses increased by $27 million primarily as a result of routine increases in compensation of $32 million, increases of $2 million severance pay and offset in part by decreases of $8 million in contributions to our defined contribution retirement plan; ● Broadcasting non-payroll expenses increased by $21 million primarily due to increases in sports programming costs; and ● Broadcast non-cash stock-based compensation expense was $5 million in each of the 2024 and 2023 years.

Production Company Expenses. Production company expenses (before depreciation, amortization, impairment and gain or loss on disposal of assets) decreased by approximately $32 million in 2024 to $83 million, compared to $115 million in 2023. Production company operating expenses decreased in 2024 primarily due to significant expenses incurred in 2023, which did not re-occur in 2024.

Corporate and administrative expenses. Corporate and administrative expenses (before depreciation, amortization, impairment and gain or loss on disposal of assets) decreased by $8 million, or 7%, to $104 million in 2024 compared to $112 million in 2023, primarily as a result of decreases in professional services costs. We recorded corporate non-cash stock-based compensation expense of $17 million and $15 million in 2024 and 2023, respectively.

Depreciation. Depreciation of property and equipment totaled $144 million and $145 million for 2024 and 2023, respectively.

Amortization of intangible assets. Amortization of intangible assets totaled $125 million and $194 million for 2024 and 2023, respectively. Amortization decreased primarily due to finite-lived intangible assets becoming fully amortized.

Impairment of goodwill and other intangible assets. In 2024 we did not incur impairment charges, compared to $43 million of impairment charges incurred in 2023.

Loss on Disposals of Assets, Net. We recognized a loss on disposal of assets of $20 million in 2024 compared to a loss on disposal of assets of $21 million in 2023. The loss in 2024 was primarily related to the acquisition of a construction permit to build television station KCBU in exchange for the divestiture of television stations KCWY and KGWN in which we recognized a loss of $14 million. The loss in 2023 was primarily related to the sale of television station KNIN, in which we recognized a loss of $14 million in 2023.

Miscellaneous Income, Net. Miscellaneous income, net totaled $117 million and $7 million in 2024 and 2023, respectively. Miscellaneous income, net in 2024 was due primarily to a gain of $110 million from the sale of our investment in BMI.

Impairment of Investments. During 2024 and 2023, we wrote down the value of certain investments to their estimated net realizable values. The total impairment charges were $25 million and $29 million in 2024 and 2023, respectively.

Interest Expense. Interest expense increased $45 million, or 10%, to $485 million for 2024 compared to 2023. This increase was primarily attributable to several factors including: increases in average interest rates on all of our debt to 7.2% in 2024 compared to 6.5% in 2023, partially offset by a decrease in the outstanding principal balances of our debt, for a net increase of $22 million; a reduction in the amount of capitalized construction period of interest which increased interest expense by $19 million; an increase in deferred financing cost amortization, consistent with our 2024 refinancing activities, which increased interest expense by $2 million; and an increase in the amortization of costs related to our interest rate caps which increased interest expense by $2 million.

Gain (Loss) on Early Extinguishment of Debt. We recorded a gain on the early extinguishment of debt of $34 million in 2024, primarily as a result of our open-market repurchases of debt, partially offset by the write-off of deferred financing costs related to the open-market repurchases and expenses incurred related to our refinancing activities. We recorded a loss on the early extinguishment of debt of $3 million in 2023 related the write-off of deferred financing costs related to the partial repayment of a portion of our 2017 Term Loan.

Income Tax Expense. Our effective income tax rate increased to a net provision of 24% for 2024 from 7% for 2023. Our effective income tax rates differed from the statutory rate due to the following items:

,,Year Ended December 31,,,,,, ,,2024,,,,2023,,, Statutory federal income tax rate,,,21,%,,,21,%, Current year permanent items,,,1,%,,,(13,)%, State and local taxes, net of federal tax benefit,,,4,%,,,6,%, Reserve for uncertain tax positions,,,(3,)%,,,(1,)%, Other items, net,,,1,%,,,(6,)%, Effective income tax expense rate,,,24,%,,,7,%,

We file a consolidated federal income tax return and such state or local tax returns as are required based on our current forecasts. We estimate that these income tax payments, before deducting refunds, will be within a range of $80 million to $100 million in 2025.

Liquidity and Capital Resources

General. Our primary sources of liquidity are cash on hand, cash flows from operations and borrowing capacity under our Revolving Credit Facility.

We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of December 31, 2024, while others are considered future commitments. Our contractual obligations primarily consist of amounts required to be paid for: the acquisition of television stations; the purchase of property and equipment; service and other agreements; commitments for various syndicated television programs; and commitments under affiliation agreements with networks. In addition to our contractual obligations, we expect that our primary anticipated uses of liquidity in 2025 will be to reduce our indebtedness, fund our working capital, make interest and tax payments, fund capital expenditures, pursue certain strategic opportunities and maintain operations.

The following tables present data that we believe is helpful in evaluating our liquidity and capital resources (dollars in millions):

,,Year Ended December 31,,,,,,,,,, ,,2024,,,,2023,,,,2022,,, Net cash provided by operating activities,,$,751,,,$,648,,,$,829,, Net cash used in investing activities,,,(28,),,,(291,),,,(503,), Net cash used in financing activities,,,(609,),,,(397,),,,(454,), Net increase (decrease) in cash,,$,114,,,$,(40,),,$,(128,),

,,December 31,,,,,, ,,2024,,,,2023,,, Cash,,$,135,,,$,21,, Long-term debt, including current portion, less deferred financing costs,,$,5 621,,,$,6 160,, Series A Perpetual Preferred Stock,,$,650,,,$,650,, Borrowing availability under Senior Credit Agreement,,$,674,,,$,494,,

Net Cash Provided By (Used In) Operating, Investing and Financing Activities – 2024 Compared to 2023

Net cash provided by operating activities increased $103 million to $751 million in 2024 compared to net cash provided by