What’s Gray TV’s Q1 Outlook?

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What can investors expect to see during the first three months of 2019 from Gray Television?


The company that has absorbed Raycom Media had much to say on Thursday. Here’s all you need to know, in its entirety.


 

Our results of operations in the first quarter of 2019 will be materially impacted by the Raycom Merger and are generally not comparable to the first quarter of 2018 on an as-reported basis. Accordingly, our comments on the expected first quarter of 2019 selected operating data are only presented on a Combined Historical Basis, as defined herein.

First Quarter of 2019 on Combined Historical Basis

Based on our current forecasts for the first quarter of 2019, we anticipate the following changes from the Combined Historical Basis results for the first quarter of 2018 as outlined below.

Revenue on Combined Historical Basis:
• We believe our first quarter of 2019 total revenue will be within a range of approximately $495.0 million to $502.0 million (or increase approximately +2% to +4% from $484.0 million in the first quarter of 2018).
• We believe our first quarter of 2019 local advertising revenue (including internet/digital/mobile) will be within a range of approximately $202.0 million to $205.0 million (or decrease approximately -5% to -4% from $213.8 million in the first quarter of 2018).
• We believe our first quarter of 2019 national advertising revenue will be within a range of
approximately $48.0 million to $49.0 million (or decrease approximately -10% to -8% from $53.1 million in the first quarter of 2018).
• We believe our first quarter of 2019 political advertising revenue will be within a range of
approximately $750,000 to $1.0 million. Our political advertising revenue was approximately $8.9 million in the first quarter of 2018 and approximately $2.1 million in the first quarter of 2017.
• We believe our first quarter of 2019 retransmission consent revenue will be within a range of approximately $197.0 million to $200.0 million (or increase approximately +22% to +23% from $162.1 million in the first quarter of 2018). We currently anticipate full year 2019 retransmission consent revenue will increase by approximately 20% compared to the full year of 2018.

Our 2018 local and national revenue included approximately $12.7 million of advertising revenue associated with the broadcast of the Winter Olympics (including approximately $3.6 million from automotive advertising customers). There were no Olympic broadcasts in the first quarter of 2019.
Excluding the advertising revenue from the 2018 Winter Olympics, we believe that our first quarter of 2019 combined local and national advertising revenue will be approximately unchanged from the first quarter of 2018.
In the first quarter of 2019 we anticipate approximately $4.7 million of revenue from the broadcast of the Super Bowl in our 44 CBS markets compared to approximately $4.1 million in the first quarter of 2018 when the Super Bowl was broadcast in our 42 NBC markets.

Broadcast Operating Expenses (before depreciation, amortization and gain or loss on disposal of assets) on Combined Historical Basis
Our total broadcast operating expenses for the first quarter of 2019 are anticipated to increase from the first quarter of 2018 on a Combined Historical Basis by a range of approximately $55.0 million to $58.0 million (or increase approximately +18% to +19% from $300.0 million in the first quarter of 2018).
This increase reflects an expected increase in retransmission expense by a range of approximately $19.0 million to $20.0 million (or increase approximately +22% to +23% from $85.3 million in the first quarter of 2018). Compensation expenses will include non-cash stock-based compensation expenses of approximately $0.1 million in the first quarter of 2019 compared to $1.2 million for the first quarter of 2018.
In addition, broadcast expenses in the first quarter of 2019 are anticipated to include between $33.0 million and $34.0 million of transaction related expenses associated with the Raycom Merger including, but not limited to, approximately $27.6 million of expense associated with termination of Raycom’s national sales representation agreement and approximately $5.3 million of severance or other transaction related compensation.

Excluding these transaction related expenses, we expect that our broadcast operating
expenses on a Combined Historical Basis will increase to within a range of approximately $322.0 million to $324.0 million compared to $300.0 million for the first quarter of 2018.
Corporate and Administrative Operating Expenses (before depreciation, amortization and gain or loss on disposal of assets) on Combined Historical Basis

Our total corporate and administrative operating expenses for the first quarter of 2019 are anticipated to increase from the first quarter of 2018 on a Combined Historical Basis by a range of approximately $28.0 million to $33.0 million (or increase approximately +169% to +199% from $16.7 million in the first quarter of 2018). Compensation expenses will include non-cash stock-based compensation expenses of approximately $2.6 million in the first quarter of 2019 compared to $0.9 million for the first quarter of 2018.

In addition, corporate and administrative operating expenses in the first quarter of 2019 are anticipated to include between $29.0 million and $30.0 million of transaction related expenses associated with the Raycom Merger including, but not limited to, advisor fees, legal and accounting fees and severance or other transaction related compensation. Excluding these transaction related expenses, we expect that our corporate and administrative operating expenses on a Combined Historical Basis will be within a range of
approximately $16.0 million to $20.0 million compared to $16.7 million for the first quarter of 2018.