Gray falls on lack of political


Gray TelevisionThe $88.3M in revenue pulled in by Gray Television in Q3 2013 was $14.6M dollars, or 14% less than it made the prior Q3, and it was hardly surprise, given the precipitous drop in political for the group. All in all, results were on the high side of expectations, and the group has considerable near-future upside potential.

The group is particularly well-positioned to rake in political income, boasting an excellent footprint in perennial battleground states, which of course carries the downside of making off-year comps all the more challenging.

Gray offered the following Q3 highlights:
* Local advertising revenue increased $2.1 million, or 4%, to $48.7 million.
* National advertising revenue decreased $0.8 million, or 5%, to $13.6 million.
* Internet advertising revenue increased $0.1 million, or 2%, to $6.5 million.
* Political advertising revenue decreased $23.1 million, or 94%, to $1.4 million.
* Retransmission consent revenue increased $0.6 million, or 8%, to $9.2 million.
* Other revenue decreased $0.1 million, or 6%, to $1.8 million.
* Consulting revenue increased $6.6 million to $7.1 million.

The consulting income refers to the company’s now-concluded agreement to provide services to the Young television group, which has been acquired by Media General.

Gray offered color on its five largest non-political ad categories. On the upside: automotive (5%), restaurant (2%), communications (6%) and furniture/appliances (2%). The lone  loser was medical, down 9%.

Looking at Q4, Gray is expecting a 10% increase in non-political local income and an 8% increase in non-political national income. It expects a 28% increase in retransmission consent income.

Wells Fargo analyst Marci Ryvicker noted tremendous upside potential in the retrans category, with a number of contracts up for renewal in Q4 2013 and many more set for renewal at the end of 2014.

She added that the announced results were on the high side of Gray’s revised guidance for the quarter, and that EBITDA of $35M was as expected.

Ryvicker applauded the recently announced acquisition of Yellowstone television stations, and suggested that there could be similar small deals in the pipeline. The door may also be open to larger acquisitions, she said, but added that a bigger M&A investment will likely not occur until after it goes through the aforementioned renewal of retransmission consent deals.