Gray Television, Inc. Price & Performance (GTN)

These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public In its analysis and valuation of our company, Further discussions and reconciliations of the company's non GAAP financial measures to comparable GAAP measures can be found on our website. All statements and comments made by management during this conference call other than statements of historical facts, should be deemed forward looking statements. These forward looking statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward looking statements as a result of various important factors that are contained in our most recent filings with the SEC. We undertake no obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise. And I'll now turn the call to Hilton.

Thank you, Kevin. You do that particularly well. Good morning again, everyone. For many reasons, today, is a great day to discuss with you the state of our company and its direction. This past Sunday on NBC and obviously all of our NBC affiliated stations, Gray Point Garden Society the first of the broadcast shows produced at our own assembly studios premiered at ten p. M. Eastern Time. Next, this Monday, on CBS, the first new soap opera in over thirty years, beyond the gates also shot at assembly premiered at three p. M. Eastern Time and then every day so far this week on all of our stations and across the country. Significantly, The Gates is a co production between CBS and the NAACP. That focuses on a very successful African American family in Maryland. The Dupree family, a milestone show in broadcast history and we are exceptionally proud to help get it on the air out of assembly studios here in Atlanta.

And tonight, we are thrilled to reinforce the news that across 24 great television markets, the Atlanta Braves Americas team will debut on live television from spring training in Florida. Tonight's game against the Washington Nationals will be the first of 10 preseason games produced by Gray that will air across Gray Nation. And we will follow-up with 15 regular season games simulcast across the same footprint. These are accomplishments that we are truly proud of. Now let's turn to our financials. We are very happy to announce that our results for the fourth quarter finished better than our guidance on both revenues and expenses. Total revenue in the fourth quarter of twenty twenty four was $1,000,000,000 an increase of 21% from the fourth quarter of twenty twenty three. Total operating expenses in the fourth quarter of twenty twenty four were 2% below below end of our previously announced guidance. Net income attributable to common stockholders was $156,000,000 in the fourth quarter of twenty twenty four, compared to a net loss attributable to common stockholders of 22,000,000 in Q4 twenty twenty three.

Adjusted EBITDA was $4.00 $2,000,000 in the fourth quarter of twenty twenty four, an increase of 86% from the fourth quarter of twenty twenty three. Due primarily to political advertising revenue. In addition to these operating results, we're proud of the progress we made on our balance sheet during the fourth quarter. Just two weeks after our third quarter earnings call, we announced that we had completed a series of transactions that collectively reduced the company's principal amount of debt outstanding by $278,000,000 since October 1. During the full year of 2024, we reduced the company's total principal debt by $520,000,000 exceeding our $500,000,000 goal. That November announcement was a fitting way to complete the year in which we executed on our pledge to concentrate our free cash on reducing our debt and improving our balance sheet. In addition to reducing our total debt during the year, we also refinanced our debt to extend our maturity days increased our revolving loans available and greatly lowered our capital spending as we completed numerous projects. In the end, we finished the end with a lower leverage ratio than we began [indiscernible] Operationally, we continue to enhance our local content offerings in 2024, we devoted tremendous efforts to reaching new local sports back to our television stations.

Last year's milestones included a historic deal as I had mentioned earlier, bringing Atlanta Braves games back to broadcast of Grey's TV Stations In Our Hometown Of Atlanta and throughout most of the Southeast this Gray. We also renewed our affiliation agreement with the ABC network for four additional years. In 2024, our Investigate TV, and local news live franchises both continued their momentum with viewers and both also significantly expanded their distribution across broadcast, digital and mobile platforms.

The success of NBCU and CBS at Assembly Studios provides win in our sales as we continue discussion about leasing our remaining studio facilities with other production companies. We expect to have more announcements about Assembly Atlanta throughout this year. That will include progress on the build out of other parts of our mixed use campus on the land that we own. Importantly, utilizing financial resource of our future business partners at the site With our significant capital investments now largely behind us, future projects at Assembly Studios and Assembly Atlanta should enable the development to expand its financial contributions to our entire company. We are also encouraged by signs from Washington of the regulatory constraints it literally harmed local broadcasters While every day we compete for local ad dollars, [indiscernible] from constraining rules that we are shackled with, which as one of our more eloquent lawyers wrote, we're enacted before the Japanese bombed Pearl Harbor. It remains a fundamentally wrong and harmful policy for the government to burden our local news and sales employees With these decades old restraints, while imposing essentially no restraints on much larger companies who compete vigorously with us for the attention of viewers and advertising budgets.

We are optimistic that the federal government as well as our upcoming negotiations with our network partners CBS, FOX and NBC will recognize the reality of today's media market in 2025. Such actions will enable us and our peers to operate more efficiently compete better against the tech giants and deliver better services for our viewers our advertisers and indeed our shareholders. At this time, I would like to turn it over to Patna Plattnik, Thank you, Hilton. Last year, our business we remembered primarily for [indiscernible] Broadcasters overall took in record revenue from political ad spending and a lot of new dollars that entered the space were used to buy ads on connected TV. Gray also sells ads on connected TV platforms and has a dedicated team focused on ways to better leverage our strong digital audiences and local connections in the political ad space as we expect that sector to grow going forward. Overall, in '24, we saw increases in each category of political ad revenues other than Senate which is our largest category. Despite the Senate map not favoring Gray's footprint in 2024, we still believe that our political advertising revenues for the year exceeded our peers in total dollars and on a per television household basis, based on the results announced by our peers right after the election.

The $250,000,000 of political ad revenue in the fourth quarter had the expected effect of displacing large amounts as happens every election year. We mentioned on the Q3 call, we also heard from our commercial advertising clients in the third and fourth quarter about some hesitancy around advertising during an election given the tone of some of the political campaigns. We did however exceed our Q4 guidance core guidance. The hesitancy and caution around advertising we saw during last fall's election season persisted into January we think resulting from economic uncertainty due to potential government policy changes. This caution is most evident among our automobile advertising customers. Hearing that some dealers and manufacturers are pausing or reducing their advertising campaigns as they rate how tariffs and continued high interest rates may impact near term demand for new and used cars. Our January core ad revenues were down from last year.

Our February core ad revenues were about the same as last year's excluding Super Bowl bookings and Leap Day, And March pacings are currently showing improvement and tracking roughly flat to last year's actual poor ad revenues.

Overall, for the first quarter of twenty twenty five, we currently 7% to 8% compared to the first quarter of 'twenty four. Again, there are three primary factors causing this decline. First, the political or economic uncertainty that I just discussed. The second impact on core results was from the Super Bowl airing on our 33 Fox channels in 2025, compared to our 54 CBS stations in 2024. Fox stations did very well increasing their Super Bowl advertising revenue by about 50% for the last time the big game aired on Fox in 2023. This however was still only about half of what we sold during last year's Super Bowl that aired across our much larger CBS footprint including our CBS station in the Chiefs hometown of Kansas City, as well as St. Louis, Topeka and Wichita. Finally, our first quarter of twenty twenty five will be negatively impacted which we estimate impacted our core revenue by $3,500,000 to $4,000,000 Excluding Super Bowl and Leap Day impact, our core advertising revenue guide for the first quarter twenty twenty five is down 3.3% to 4.6% from the first quarter of twenty twenty four. We are encouraged by our success in acquiring Pro Sports rights.

Hilton mentioned the Braves, which will impact 24 Gray markets. We announced our Memphis Grizzlies deal this morning and expect to announce a couple more agreements in the next few weeks.

We anticipate having local sports product in '75 to 80 Gray markets by the end of the first quarter. With that, I'll turn it over to Jeff. Thank you, Pat. As Hilton mentioned earlier, reducing debt and leverage remains our top capital allocation priority and we made significant progress again in the fourth quarter.

As everyone saw in our release, we finished the year at two 2.97x first lien leverage and 5.49x total leverage And as an aside, I would note that our leverage ratio as defined in our senior credit agreement It does not allow us to take credit immediately for cost containment initiatives and that may not be comparable to what is indicated by publicly available documents for others out there.

So to be clear, we've not retroactively included the benefits from the $60,000,000 of cost initiatives we announced last quarter in our 12/31/2024 calculations.

We are, however, on pace to be at the full $60,000,000 run rate by the end of this quarter. We've been very transparent and opportunistic on our debt reduction efforts. And are proud that we reduced our principal balance by $520,000,000 during 2024 Through use of open market repurchases, we captured $46,000,000 in debt discounts during 2024 and we continue to have our $250,000,000 borrow authorization available for further open market repurchases. And I think as we've pretty clearly demonstrated, we'll continue to be thoughtful and nimble and deploying our liquidity to further delever the company. We entered 2025 in a very strong liquidity position. As of 12/31/2024, we had $135,000,000 in cash plus $680,000,000 revolving credit facility available We expect that the next political cycle in 2026 will provide significant cash that together with the liquidity that I just mentioned will be more than sufficient to address our remaining $528,000,000 2027 bond maturity.

While repaying debt is our number one capital allocation priority, we could also access the debt markets if attractive terms and pricing are available. A couple of other items to mention, our cash tax taxes were a little above our Q4 guidance. That's primarily due taxes on cancellation of indebtedness income and our CapEx came in slightly below our four quarter guide at $96,000,000 we expect slightly lower CapEx again in 2025.

Yesterday, our Board of Directors declared our regular quarterly common dividend of $0.08 per share and the cash payment of our quarterly preferred dividend As a reminder, the common dividend is a small use of cash for the year that helps the company on the equity side. Of the balance sheet. Going forward, the Board will continue to evaluate our dividends in light of our financial position, capital needs, Before I turn the call back to Hilton, a couple of comments on what we're seeing on Over the last two years, our traditional MVP MVPD subscriber base has declined essentially the same year over year over all rate, We're encouraged however by recent sub reports from major cable companies showing modest improvement in their rate of sub declines. We attribute to a number of factors that have been discussed on many of our prior calls, including better consumer value proposition by staying with cable As you know, we entered into a four year affiliation agreement with ABC Gray of last year, That agreement and the upcoming renewals this year with the other broadcast networks provide opportunities for us to rebalance the economics of those deals in light of the MVPD subscriber erosion and loss of exclusivity that have occurred since our last renewal cycle.

Worth noting that our network affiliation fees increased for many years at double digit rates over the past few years those network affiliation fees have flattened out and even better, we booked the first ever year over decrease network affiliation fees in 2024, which we anticipate will continue and even accelerate. This concludes my remarks and I'll now turn the call back to Hilt. Thank you very much, Jeff. And now operator, I'd like to open up the call to any questions that anyone may have. Absolutely. Ladies and gentlemen, at the time, And so far, it does look like look like we have several in queue.

We'll take the first one, Mr. Aaron Watts Deutsche Bank, Your line is now open. Hi guys. Thanks for having me on. I have two questions. Maybe I'll just cover one at a time.

The first is around core advertising. Your comments on the softness at the end of twenty twenty four and into 2025 seem to echo your peers. Given the modest firming up you saw as 1Q played out, As you look ahead, do you think core adds can move to growth on a full year basis And if so, what might drive that?

Yes. Aaron, it's Pat. So I think the answer is yes. We are it's early, but we are [indiscernible] the second quarter pacing currently.

Some of those categories that have been challenged over the last April, are showing improvement at this point. So again, based on the data we have today, I would answer yes to your question and say that as we look out a little bit, I think more encouraging. And Aaron, this is helpful. Can I add just a little bit of something to that? We discussed this at length in our Board meeting yesterday. A lot of our the weaknesses in the automobile department. And really for the first time since the end of the second war, the automobile productions don't know what the cost of goods sold are going to be.

So many parts come from Mexico and Canada and other places around the world. And as we discussed tariffs think that's putting a natural chilling effect upon advertising in the automobile sector. That will settle out as President Trump has said there may be some initial pain This too will pass. And when they know exactly what the prices they need to have to sell their products profitably, and they can see all of the automobile sector returning to advertising.

Gray. That's helpful comments. Thank you. And then my my second question is around expenses in the first quarter.

Can you parse out your guide and looks relatively flat year over year, how much of the cost efficiencies you've highlighted flowed through in the first quarter? And what other factors are at play there including maybe any incremental sports rights? And then if you can, how should we think about expenses overall as the year unfolds? Yes. Aaron, I'll kick off and others can weigh in. As we think about what the flow through of the initiatives that we've announced. You do start there's probably by the handicap, but it's two thirds to 75% of it is going to be flowing through in Q1. And then it will build from there. It also doesn't mean that that doesn't mean that we're necessarily done. We look at everything every day and try to be real hard about we're spending. So I think for the full year, Our hope is that we'll be able to, as we've said before, keep the overall rate of growth on the expense side below inflation and potentially even get it to turn negative during the year. [indiscernible] Just real quick, I would amplify what Jeff is saying. We look at these numbers every day and are trying to find ways to Gray in costs.

And I can think of a few initiatives over just the last three to four weeks where may not have been part of the big project we announced in the fourth quarter, but like Jeff said, we're looking at it every day.

And so offsetting some of those you're taking out, what were some of the kind of offsetting Ups in costs that are playing into the flat overall guidance in 1Q?

Yes. Look, we didn't we still have to run very strong local businesses and we have to attract and [indiscernible] we did give raises that are ordinary course of business type things. So when you have 9,700 or so employees in the company, That There's some uplift there. There's some normal increases and other things that just are contractual, but other than that, I mean, it's really like Pat said, it's looking for more the most efficient way to continue to deliver a very high quality product in the markets that we serve.

Gray. Appreciate the time. Thank you.

Thank you, Aaron.

All right. Next up, we have Daniel Kurnos of The Benchmark Company.

Great. Thanks. Good morning. Hilton, maybe I'll stick with you or Pat a little bit here since you talked about the Braves Obviously, we have a somewhat public breakup between Major League Baseball and ESPN. Just curious, the RSNs have picked up a bunch of local games and other sports, but curious if you view that as an opportunity. And then separately, Hilton, you've talked a lot about expanding sort of the mixed use zones with regards to assembly. It seems like that's starting to move forward. So love to get a a sense from you on TAM timing, monetization, just how we should think about the contribution to that either this year, next year and for however you want to frame it? Well, you heard this in Pat's discussions. Let me start with sports first, all right? It's a remarkable opportunity. I think by the end of this quarter, Pat articulated to you guys that we will have live professional local sports in 80 markets.

Across our 113 market profile. That's amazing. And we have been working assiduously year ago, we had Arizona and the Suns. And now we have stations across our footprint. If you take a look at our instrument deck, Daniel, you can see our sports networks, the Gray regional sports networks. That we created on our own all in broadcast And we are immensely proud of what we're able to do, not just with this professional sports, with local sports teams that go down to the high school level. Across these networks. And so I think that's going to be really, really Hugely additive in terms of our viewership, and our profits. Because it creates an immense halo around the stations and attracts viewers. And a year ago, we didn't have that. It's a great great addition to our portfolio. Now Assembly, those studios are finished they are making shows and as I mentioned, and I mean, you guys know mean, some people take me about assembly. I'm immensely proud Rose Pope Garden Society on NBC did Sunday night. [indiscernible] remarkably proud, really remarkably proud of Beyond the Gates in terms of the productions that are now on our stations And so from a business standpoint, I could not be happier with Assembly Studios and the Georgia film production that we have in the state.

Now in terms of Phase two, I'm not in a position to prudently announce anything but we are looking at growing other assets largely in partnership with other companies. We've had a lot of folks that have come to us And we do not have a large capital expenditure budget in assembly. So it will be net, we contribute our our land, they put in whatever they decide to do. And we will add more profitable operations to it not using our balance sheet dramatically at all. But it will allow the remaining 80 something acres to begin adding profits to the broader company, which we're very excited about. So I hope I answered your question, Daniel.

Daniel. Dan, I'll just touch on ESPN real quick and baseball. I'm not sure that's a huge opportunity for broadcast. Hilton mentioned, there's all kinds of opportunities out there. That particular sort of divorce, if you will, I'm not sure that creates a ton like the Sunday night package, right? Is that going to end up in syndication? I kind of doubt it, but who knows. But the reality is just if you look at our new investor deck, a logo suit page on the sports section, I mean, there is a lot of a lot of baseball that's going to land in small packages on broadcast television. This year and we're involved in many of those. Hilton touched on the sort of halo impact of having sports on your stations and I'm going to turn it to Sandy to talk about that for a second because it's Yes, Diane, it is. I mean, these relationships not only bring viewers [indiscernible] the gains, but there's an overall halo effect and we're seeing that. And Phoenix is a perfect case study. We're in our second full season with the Suns and we have seen that. We have seen advertisers who came to us for the games and now rediscovered the power of broadcast, the local broadcast reach are now advertising in other dayparts.

So we've seen that halo effect across the board.

That is very comprehensive guys. Thank you. And Pat, we'll see how they end up carving it up [indiscernible] [indiscernible] [indiscernible] All right.

Moving right along, next up we have Craig Huber of Huber Research.

Thank you. Assembly Atlanta, maybe can you just give us the updated figure for what the total cost is for the project gross and the net cost Let me start there, please.

Land cost, acquisition cost, building cost, is roughly $500,000,000 more or less.

Specific numbers are in the 10 ks. We were following the latest afternoon.

So roughly 500 net, is that what you're saying? [indiscernible] Gray, very good. And then You guys are I think you're talking about $27,000,000 to $28,000,000 of production company revenue in the first quarter. That'd be up, I guess, $5,000,000 to $6,000,000 over a two year basis. Do you expect that number to ramp up significantly as putting aside seasonality as the year progresses? I'm just trying to get a sense here of the ROI that you're getting off that $500,000,000 here. The answer is yes. But there's a couple of things to keep in mind. The immediate impact will be added revenue as more productions build. As I'm sure a lot of you guys know, right now Hollywood, however you want to define that, has had a lot of issues. And none of those are under our control and none of the was created by our company. But the strikes slowed everything in 2024. But as you can tell, productions continue I'm really quite excited about not just what we have currently in place and the television shows showing for the first time in Georgia we actually got a broadcast TV show. Everything before went on streaming or on cable and and we have Gray point and the gates on our stations and I could not be happier about it.

We're probably 70% occupied in the stages So I think there's about a 30%, maybe more upside just in terms of booking and we have literally quotes out for every station that is not currently filled with a film or television production. And so we're seeing seeing a lot of more robust activity in the film and television production side. And while I can't talk to you about the individual stuff because often sometimes I really don't know like when we're doing a deal it comes under a code name and we'll get a production request and I have no idea other than who the company is. What the actual production is because they kind of keep it under wraps until until really the last moment because they like to control their own publicity. So immediately, you're going to see it through the through the return on the studios. But we have another 80 acres that is not currently adding value. And as I mentioned, we're not going to spend a lot more capital. We're going to enter into partnerships for a variety of assets It's Because it's an Atlanta thing, sort of the inspiration for what has been done at the battery with the Braves, which has added immense value to the Braves franchise and to their audiences is sort of what we're looking at as a comparable in this city.

We're going to take a deal by deal and step by step And we delayed everything because the market wasn't right. People banks weren't lending. And the world kind of changed in November. There's a lot of animal spirits that we're seeing out there. So we're very bullish about opportunities and partnerships going forward.

And my second question, if I could, on potential deregulation, can hear do you guys feel that you will be a major of significant participant if deregulation happens here if assets come available out there? What does your debt load preclude you from participating much? How are you thinking about that?

Well, I mean, look, we're going to if we do a deal, it will be a smart deal. There are a lot of things that we would be very interested in doing.

It Deregulation occurs as we have been indicated it will are opportunities for swaps There are opportunities for acquisitions. And when we we've been in this position And we've done a number of acquisitions, actually delevering acquisitions. And so we will be looking at that, but there is an opportunity And we'll take each deal and each opportunity as it comes. One of the happy things about our company is that there's no must haves we need to have.

We have and I suggest you look at it, I think we have the finest footprint in broadcast history. There is no peer in our industry that could have delivered what we delivered the Braves and 24 markets, If you look at what we have and what we can do, it's quite remarkable. But you can look in our investment deck that we have published I think today, And you can look at that being true and the Arizona throughout Nevada, throughout the American Midwest throughout the other Southeastern states that are not the same. But what we've done in the Gulf Coast with the pelicans, we're thrilled with absolutely thrilled with. And we hope to replicate that in a lot of places because while you got to have the major markets, Gray has the smaller markets that really root for these teams.

My last question, you guys talked about potential here for retrans sub declines to moderate. I'm just curious if maybe you're willing to share with us how are you guys budgeting sub declines in your financials for this year? Are you expecting it to materially get better, say, in the back half of the year or a year over year basis?

Hi, this is Kevin.

We do expect the rate of sub decline to slow. Same thing last year, Well, we have seen encouraging signs late last year as have other folks in the media industry have expressed that. Our internal numbers are assuming things stay the same. We're not giving full year guidance on retrans, so that's just an internal number. Are not projecting a material increase or decrease. We're presuming that Gray rate of decline would just be the same, that's the easiest baseline to budget.

Gray, very good. Thank you, both. Thank you all.

All right. Next up, we have Avi Steiner of JPMorgan Chase and Company.

Thank you. On the reverse comp trends, you mentioned an opportunity to rebalance economics And I think you rightly pointed out the decrease in fees in 2024. I thought you mentioned it could be lower in 2025. Could you dimensionalize that for us?

This year or maybe put a little more context around it? Thank you. And then I have one more. Yes, Avi, it's Jeff. So we [indiscernible] our two large our two larger contracts, CBS and Fox are up this summer.

And then NBC at the end of the year. And so I don't want to say a lot about about specifics around where those contracts The coordinator will assist you momentarily.

We're not going to be giving a full year guide have more clarity on where those negotiations are going to come out.

But suffice it to say Avi, we're very optimistic and again, we can't disclose it, but we're very proud of our new relationship with ABC. I think it properly balances the value of their affiliation with the value of our local TV stations as has been mentioned in our earnings script, it's the first time we've actually started seeing a decrease in our network by payments. And I think that's very important in today's world. And it's a recognition of reality that the media broadcast space in 2025.

Perfect. I appreciate that. Thank you for the color. One last one for me.

Maybe Jeff for you or anyone else, but you guys were opportunistic late last year across debt stack and as we move into '25, you have the authorization you highlighted perhaps some other cash coming in.

The question is how do you view the trade off from here between discount on the longer dated debt but lower coupon debt versus some front end needs you will have in the coming years? Thank you.

Yes.

I think look, I think the best place to look is what we did last year. The market guided where we were going. I did want to finish the year with a manageable 2027 maturity. And so at $528,000,000 that is manageable either via the revolver or a nice round offering size if we went back to the debt market. So think we're just going to have to see where things where things are trading at any point in time when we have excess cash available to deploy it. And let that be our guide just one piece of maybe sort of color to what you were asking about. Like on our CapEx deal, which everybody's got to realize that this company did lot of acquisitions over a substantial period of time. What we announced quite candidly that we were cutting back on our CapEx [indiscernible] that is what that is in recognition of is that we basically done all the CapEx that we inherited because we picked up a lot of portfolios that weren't where they needed to be. A lot of stations needed transmitters that we picked up. A lot of stations had really, really not secure buildings that kind of imperiled some of our employees.

We had a variety of CapEx And so we naturally have finished that. Not cutting it off and leaving our stations short of what they need. They're fully prepared to fight and win the battle that they have in their markets. We're very excited about that.

Appreciate the time. Thank you everyone. All right, ladies and gentlemen, before we move on to the next one, I just wanted to remind participants you can press star one on your telephone keypad. If you would like to join the queue, The next up, we have Stephen Cahill of Wells Fargo.

Thank you.

First, Hilton, I was wondering if you could just touch a little more on some of your comments around the M and A opportunity.

Certainly looks like could be an exciting next few years with what the FCC is doing. You mentioned swaps is something that might be attractive to Gray. How do we think about those and what the financial benefits of those could be And I know assembly is close to home figuratively and and literally you do have the large acreage there that you spoke about. Would you ever consider monetizing that to give you more dry powder for station M and A since you're at a point of a little higher leverage now? And then just a second question on political Some of the things stayed the same this last political cycle, some of the things changed As you look to 2026 and maybe have a little bigger fight against Connected TV to retain your share of political dollars. What can you kind of do this year and next year to be ready to maintain that share?

I think we're going to have to pass these questions around to each other. Make sure I have I understand the question about What we're doing at assembly, Steven, what were you asking?

Yes, that if you would just monetize any of your unused acreage just to give yourself some more dry powder for station M and A. I mean, we don't foreclose any profitable and appropriate [indiscernible] Right? So we're willing to listen to all kinds of folks. So the answer is yes. Does that mean we're going to do that?

No.

But I'm not going to foreclose any kind of of opportunity. It would depend on the individual [indiscernible] And we have considered a variety of things, all of which at great value to our company and to our shareholders. I really I encourage you, Stephen and actually everybody on call and we really should probably one day have an investor meeting at our studios because I think when you actually physically see them, I think you're going to have a very positive view of what we've created. The value that it has for this company and will in the future.

But a core business for us is the studio.

We got 80 acres and we're going to be we may strike lots of deals in lots of different Financially beneficial structures as we see what we can do with the remaining 80 acres. Now with regard to political and connected TV, Sandy, is that echo what Pat said in his comments. I mean, strength of our stations, we have not only strong local reach on the linear broadcast side, but because of that also on all of our platforms, we have strong digital audiences and we have strong connections in those communities. So we have a Pat set a dedicated team now actively working to focusing on ways to better leverage our strong digital audiences going forward. We know that that's going to continue. And we have a lot of opportunity in 2026. We have a lot of opportunity in all of our markets that is a high focus for us and we expect that to grow certainly for Gray Gray.

Well, and then you asked a question about M and A. And anyone in our room guys can open as you see fit. But, Steven, I mean, there's all kinds of opportunities. Swaps, we will be looking at particularly if the FCC and the Department of Justice allows them because it's hard particularly in smaller markets to make a decent buck.

With the expenses of having significant local news, One of the great benefits to our company that we have been articulating to the [indiscernible] [indiscernible] is that we have only bought number one news stations throughout our entire M and A efforts, And so we have a handful that are not at the levels that we want them to be. Fixed that. I mean, we have done that And our news content is there and it's focused it's consistent and it's focused on local issues and local news. We don't do opinion journalism and something I do want to say with regard to this. I'm really proud of what John Decker, I want to call him out because the new the White House has been calling on great television and our boy John Decker almost every day in the White House conferences and I've been awfully proud of that. But adding duopolies in smaller markets which is something that has been anathema and in bigger markets candidly. That has been anathemat to regulations in the past is something that is going to be very helpful to maintaining a strong local news content. And the government is got to get with it.

So I think M and A world will begin with swaps. Who knows, if the rules change dramatically, there could be broader combinations. We're very interested in all the above.

All right. And so far, we only have one more question in queue.

So far, our final question is going to come from Alan Gould of Loop Capital.

Thank you. Thanks for taking the question. And thanks for the investor deck earlier today. First, Jeff, in the investor deck, it shows a leverage goal of four times You're about 5.5 times today. You usually go up in political. It usually increase in political years.

How long until we get to four times And then the second question, I guess for Kevin, your Washington slide talking about deregulation.

So besides M and A and station swaps, what other deregulation opportunities are there I know specifically you also mentioned there the network affiliate relationships. I assume that's with the VMBPD. But what else will help benefit with deregulation? Thank you. I'll go first because it's easy. Our big goal is from Washington, our As Hilton mentioned, we're electing the one new market rule adopted in 1940. Secondly, the SEC has shown some interest in the network and affiliate relationship primarily around the network's complete control of our distribution on virtual MVPDs, which are a sizable part of the distribution industry at this point. And then third, next gen TV is a a huge an important Gray opportunity for this industry and we have gotten some middling progress in the SEC the last couple of years. We really need them to step forward and remove some of the shackles on our business regarding NextGen. So there's a lot they can have in there. So those are the big three pillars of Washington regulation. Yes. And Alan, on your other question about getting to the 4x, it's going to take a few years to get there.

Obviously, the heavy cash flow years are the political years. Even in off years, we are cash flow positive And so it's just not to the same extent. And so it'll take us a few years to get there, but think there's clear line of sight after what we've done what we did in 2024 and capturing a little bit of account accelerated it in fourth quarter. Accelerated some of the principal reduction, which then drives lower interest expense and starts to get the cash flow the discretionary free cash flow to a spot where we have more ability to reduce the principal further.

Well, Alan, just let me tell you a little bit about history. When we closed on the Raycom transit transaction, one of the best deals in the history of broadcast. We got up to a 5.5 And within eighteen months, we got down to a 3.5. But that was at a time when the interest rates were very much lower than what we have had in the past. Over the last couple of years, since we finished the acquisition of Meredith and Quincy, we've seen during the Biden administration a very rapid increase in interest rates and it's been happy that the Fed happy for me at least, that the Fed has seen fit to reduce interest rates over the course of the beginning of twenty twenty four. I know they kind of paused at beginning of twenty twenty five, But I think that we are in an interest rate diminishing [indiscernible] Prospectively. And that's going to help us tremendously because this is a free cash flow generating business and Gray particularly is a robust free cash flow generator. So we look forward to getting it delivered on a lot of in a lot of areas.

Gray. Thank you.

Mr. Hilton Howell for closing remarks. Thank you so much, operator, and everyone on this call. Listen, everybody, Gray is an exceptional company with an exciting future that will continue evolve and invest to meet the opportunities in our ever changing and really quite exciting industry. Our revenues and cash flow are solid We have walked the talk on reducing our debt Our expenses slowed significantly. Our investment in NextGen TV Assembly Atlanta are poised to deliver we are reaching new audiences with local sports and we expect that the government will finally level the playing field for companies like Gray.

These are the main reasons why I personally remain buoyed and excited by our long term prospects. We thank everyone for joining the call today. Operator, at this time, we ask that you that you close the line and thank you all for being with us.

And with that, ladies and gentlemen, this does conclude your call.

You may now disconnect your lines. And thank you again for joining us today. [indiscernible]