Operator: Good morning, ladies and gentlemen, and welcome to the Gray Television Q1 2024 Earnings Call. [Operator Instructions] And without further ado, I will now turn the program over to Executive Chairman and CEO, Hilton Howell Jr.

Hilton Howell: Thank you, operator. Good morning everyone. Thank you for joining our First Quarter 2024 Earnings Call. With me here in Atlanta are all of our Executive Officers; Pat LaPlatney, our President and Co-CEO; Sandy Breland, our Chief Operating Officer; Kevin Latek, our Chief Legal and Development Officer; Jim Ryan, our Chief Financial Officer; and for the first time as an Officer of this company, Jeff Gignac, currently our Executive Vice President of Finance. And as you all know, on July 1, Jeff will succeed Jim as the Chief Financial Officer of Gray Television after Jim's serving 26 years in that Chair and by my count, over 100 public earnings calls. As usual, we will begin with the disclaimer that Kevin will provide.

Kevin Latek : Thank you, Hilton. Good morning everyone. Gray uses its website as a key source of company information. The website address is www.gray.tv. We filed our quarterly report on Form 10-Q with the SEC today. Included on the call may be a discussion of non-GAAP financial measures, and in particular, adjusted EBITDA, leverage ratio denominator and certain leverage ratios. 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. Included in our earnings release, as well as on our website are reconciliations of these financial measures to the GAAP measures reported in our financial statements. Certain matters discussed in this call may include forward-looking statements regarding, among other things, future operating results. Those statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those expressed or implied in any forward-looking statements, as a result of various important factors that have been set forth in the company's most recent reports filed with the SEC, including our most recent Quarterly Report on Form 10-Q and our most recent earnings release. The company undertakes no obligation to update these forward-looking statements. Now I will turn the call to Hilton.

Hilton Howell: Thank you, Kevin. Once again, Gray Television has begun a new year and an excellent and strong position. It is a testament to the power of our high-quality local news operations that our television stations grew core advertising revenues by 4% over the first quarter of 2023. We are extremely pleased with the superb results from our fantastic in-house sales and business development teams. Throughout our markets, we’re leveraging our intensive sales training and development efforts with our high-quality advertising platforms to deliver results for our advertisers. Our first quarter core advertising results reflect growth in categories, including Automobile and National that have been challenging in the past. We appear to be growing not only revenues but also growing our share of advertising budgets. For the first quarter, the net income attributable to common shareholders was $75 million or $0.79 per diluted share. Our adjusted EBITDA was $197 million, an increase of 21% from the first quarter of 2023. Meanwhile, we continue to focus on debt reduction and on April 1, we used $50 million of our cash on hand to prepay portions of our term loans, as debt reduction and deleveraging remains a top priority for our company. In the first quarter of 2024, our TV stations core advertising business was higher on a pro forma basis than the first quarter of 2019. Importantly, we’re guiding to 2024's full year core advertising revenues to beat 2019's full year core revenue on a pro forma basis despite what we expect to be a large amount of displacement caused by a very strong political advertising revenue later this year. Speaking of political revenue, we believe that Gray will undoubtedly, as it always has again earn more than its fair share of political advertising revenue this year. Number 1 and Number 2 stations, that are hyper local news focused, have historically over-indexed on political revenue within their markets because they -- these stations deliver the audience that matters to campaigns and no one delivers that better than Gray Television. In the first quarter our political advertising revenue was slightly lower than our political advertising revenue in the first quarter of 2020 on a pro forma basis. This should not be a surprise to anyone because 2024 did not feature the same highly competitive presidential primary contest as the country experienced four years ago. We still expect political advertising revenues for the full year to be strong and will materialize later in the year as usual. In fact, consistent with expectation, we’re currently guiding for political advertising revenue in the second quarter of 2024 to range between 55% and 72% higher than the second quarter of 2020 on a pro forma basis. Overall, of the seven most competitive presidential swing states, Gray station covers all the markets in three big states; Arizona, Georgia and Nevada and it has -- and we have a very strong presence in three of the four remaining states, North Carolina, Michigan and Wisconsin. In addition, Gray has leading local news stations in nine of the 11 states, with governors races and 26 of the 34 senate races, including many of the most competitive governor and senate races in the country. Finally, all of our markets have House of Representatives and many markets involve competitive primaries or General Elections triggered by historic wave of house resignations. All of our markets also have down ballot races and some appear likely to have very contentious referendums on the ballot this year as well. There is no -- given this unparalleled exposure to competitive races we expect that our political advertising revenues will come in at a very large and healthy amount in 2024, which will support our efforts to reduce our total debt. Finally, I am thrilled to confirm that Gray has essentially completed the construction of Assembly Studios, and the larger infrastructure work for Assembly Atlanta. We began this project as many of you know, a few years ago when interest rates were low and demand for studio space in Georgia was white-hot. We saw them and still see today immense value for Gray and owning a multiuse development close to Bucket that is anchored by world-class studio production facilities and a premier tenant under a long-term lease. By last spring, as the capital markets began to become more challenging and Hollywood strikes came into focus. We determined that it will be prudent to pause capital expenditures at the assembly side after completion of the studios portion, and that's exactly what we did. As of the end of the first quarter of 2024, approximately 95% of our projected total of capital expenditures for Assembly Studios and Assemble Atlanta, net of reimbursements are now behind us. As you all know, late last year NBCU commenced is long-term lease for two-thirds of the Assembly Studios portion, and the studios are now contributing revenues to the totality of Gray Television. Today, we’re still in the early innings of what we believe will be a decades-long valuable cash flow contributor to our company. We will continue to carefully evaluate strategic opportunities to unlock the immense value that the investments we have created for our stakeholders, including through collaborations with outside partners for additional development at Assembly. There is no question that the tremendous reach and efficiency of our local broadcast television industry is still getting rediscovered and reaffirmed by audiences, advertisers, sports leagues and sports teams. Wall Street, however seems to be missing this universal message. We, therefore remain personally and professionally very disappointed that this company remains so undervalued given our operational success in near-term and long-term opportunities. We will continue to focus on executing and delivering for our viewers, our employees and our investors. Pat will now provide some more color around our successful start to 2024.

Pat LaPlatney : Thank you Hilton. Looking at our first quarter financial results, it should be clear that Gray Stations are continuing to find and attract strong advertiser demand for our market-leading local television stations and premium brand-safe digital products. Throughout our markets, local businesses are doing generally well. We believe local businesses are tuning out the political and geopolitical noise to focus on finding customers, moving their products and selling their services. In fact, during the first quarter our new local direct business, which is our local sales force finding a customer that is new to Gray, continue to break record set just a year earlier. In the first quarter of 2024, our new local direct business brought in 18% more revenue than the first quarter of 2023, which itself was 8% higher than the first quarter of 2022. These strong results continued into April 2024 just last month, which delivered 14% higher new local direct business than April of 2023. Meanwhile, our digital businesses are also very healthy. In the first quarter, we set new records for engagement with digital audiences, as well as double-digit growth in digital revenue. As we continue to expand our connected TV and fast channel offerings, and as consumers increasingly find our content on those platforms, we are seeing significant growth in this space. In fact our station [CTV] (ph) fast revenue more than tripled over the same period last year. Our first quarter results also benefited from our successful efforts to bring professional sports back to our broadcast stations. In addition to broadcasting the full season of games for the Phoenix Suns across Arizona, our [technical difficulty] coverage in Georgia and Louisiana allowed us to bring the NBA's Atlanta Hawks and New Orleans Pelicans games to their local fans in all of the markets located in those states and some adjacent markets. In total, we partnered with eight NBA and three WNBA teams this season, to expand their reach while also bringing new viewers and new advertisers to our local stations. The impressive ratings that Gray's broadcast of basketball games have generated, as well as those of our peers, confirms the reach of local broadcast television, professional -- for professional sports fans, teams and leagues. And looking ahead, we’re upbeat about our core advertising guidance for the second quarter despite a range that shows modest growth against a strong comp to 2023 second quarter. It is important to remember that we are facing tough comps because Q2 of 2023 was very good. In last year's second quarter, we posted 4% growth in core advertising revenue on a year-over-year basis compared to an average 4% decline across our publicly traded broadcast peer group. We [had set] (ph) last year in part on having the NCAA Final Four and a couple of onetime only advertising campaigns that will not recur in our broadcast channels in the second quarter of 2024. Thinking ahead to the summer, we are excited about the Summer Olympic Broadcast from Paris on our NBC affiliates that cover about 11% of US TV households. We currently anticipate generating $15 million to $20 million of advertising revenue related to those broadcasts in the third quarter of this year. We already have approximately $6 million of advertising revenue booked for the Olympics. Our core advertising revenue consistently performs above average because we have the largest and most watched news teams in the major markets, and we intend to maintain that leadership. Our content attracts audiences on linear television, on connected television and on virtually every other platform that exists. We are a content-first company. And for a few high-profile examples of our recent successes in this area, I turn the call over to Sandy Breland.

Sandy Breland: Thanks, Pat. Beyond the numbers, Gray has continued to deliver exceptionally well from an operational perspective. Late in March, we announced that CBS had retained Gray's in-house News Research and Consulting Group, which we call our Strat -- to provide market research and news consulting services to all 14 of CBS' owned and operated television stations. This first of its kind partnership between a network and an affiliate group's news research division began on April 1. We are thrilled to partner with CBS stations on this news research venture. In the past few weeks, we have also made other important announcements that I would like to highlight briefly. On January 26, the Columbia Journalism School honored Grace TV's, InvestigateTV Unit and WANF, our CBS station here in Atlanta, among the 15 winners of the 2024 DuPont Columbia Awards for their joint multi-part investigative series The Sixth, which exposed a critical shortage of public defenders in Georgia and many other states where defendants can languish in jail for months, even years awaiting trial. On April 8, Gray's Local News Live, a streaming news network that provides live news coverage from Gray's television markets and our DC Bureau streams continuous and frankly excellent coverage of the total solar eclipse from Gray's DC Bureau and local reports for more than 20 markets along the path of totality from KGNS and Eagle Pass Texas to WAGM and [Presque, Maine] (ph), it was pretty cool. Last September, we launched a New Daily 30 minute news Magazine Investigate TV-Plus. Since then, the show built audience throughout its first season with an average of 25% growth in adults 18+ across all gray markets. This kind of ratings growth for any new syndicated program is rare in today's world. Moreover the show is drawing higher audiences than nearly all prime-time cable news and cable entertainment programs, as well as many syndicated programs on broadcast television, even though it only reaches 36% of US households at this time. The program clearly has found an audience, so no surprise, we are thrilled to renew Investigate TV-Plus for a second season. We also recently launched a Spanish-language version of this highly successful show in 26 of Gray's Telemundo markets. 2024 has begun very well due in large part to the great work of our content professionals. Earlier, Hilton talked about how important it is for us to own and operate highly rated television stations. The selected accomplishments I've highlighted here this morning are evidence that our employees are doing what it takes for us to maintain our station's high rankings and put us in a position to continue to over index in this year's political advertising relative to other stations and platforms in our markets. I now turn the call over to Kevin.

Kevin Latek: Thank you, Sandy. Our retransmission revenues and network affiliation fees were largely stable despite headwinds in subscriber trends in the pay-TV industry. Indeed we recently announced that we have completed the renewals of retransmission consent agreements with cable, satellite and telco operators who collectively represent more than 70% of the Big 4 traditional MVPD subscriber base in a three-year renewal cycle that began in the second half of 2022. For a number of reasons, including -- strong and loyal viewership of our new station, we completed all of those negotiations covering roughly 400 operators without a single blackout. We remain comfortable with the guidance provided on the February earnings call for stable, retransmission revenues and network affiliation fees for full year 2024. The other topic I want to highlight is increasing litany of positive developments involving the new transmission standard for broadcast signals called NEXTGEN TV. It was less than seven years ago that the FCC approved its first advancement in broadcast technology since the 1990s. Importantly, NEXTGEN TV deployment is already well ahead of HDTV and the DTV transition at the same seven year mark. First -- the first NEXTGEN TV did not go on sale until 2020. Yet by 2026, the Consumer Technology Association projects that NEXTGEN set sales in the US, will exceed smart phone sales in the US at the same six-year mark in the product life cycle. To-date, just four years after the first set was sold, more than 10.3 million NEXTGEN TV sets have been sold in the US, and there will be more NEXTGEN channels available in 2024 than DTV channels in [2004] (ph). Back by 2026, fully 65% of TV set shipments in the US are projected to include NEXTGEN TV receiver chips. In addition to the successes with receiver rollout, station transmitter buildouts continue, and the industry now delivers a NEXTGEN signal reaching 75% of US TV households. This milestone brings Gray and the industry much closer to being able to deliver the vastly improved picture and features for viewers as well as new monetization opportunities for broadcasters. Indeed, just this past Saturday, our NBC affiliate in Louisville, Kentucky, WAVE, the Kentucky Derby, broadcast made history as the first major sporting event broadcast in the United States using Dolby Vision HDR as part of NEXTGEN technology. The progress in NEXTGEN TV across broadcasters and technology companies is tangible and important. We expect there will be many more impressive achievements and milestones announced over the next few months in this area. This concludes my remarks. I now turn the call to Jim Ryan.

Jim Ryan: Thanks, Kevin. Hilton and Pat covered the key highlights of the quarter. As such my remarks today will be very short. You will see a few changes in the definitions and metrics in our earnings release and 10-Q today. These changes and potentially a few other changes next quarter result from comments that we received from the SEC recently, as part of the agency's routine review and comment process that all public companies undergo every few years. Turning to our Q1 '24 results. Again, we are very pleased with our results, especially our plus 4% growth in core ad revenue. While the Super Bowl on our [50] (ph) CBS channels allowed us to generate $18 million of core ad revenue compared to $6 million on our then 27 Fox channels in 2023. The quarter benefited from broad-based advertising demand with most categories being up, including services and auto. Our operating expenses, excluding depreciation, amortization, impairment and gain loss and disposal of assets were better than our initial expectations, and we will continue to monitor our expenses for additional efficiencies as we proceed through 2024. Demonstrating our commitment to debt reduction, we paid $50 million of revolver borrowings in February and prepaid an additional $1 million of term loan debt on April 1. These amounts are in addition to the routine quarterly term loan amortization of $3.75 million that we made in the first quarter. As of March 31, 2024, our leverage ratio was 5.63 times and more importantly our first-lien leverage ratio was a very modest 2.34 times, both on a trailing eight quarter basis, netting our total cash balance of $134 million and excluding the results of our unrestricted subsidiaries and our $110 million gain on sale of our BMI shares. And again, all of that is calculated in accordance with our senior credit agreement. Turning to our full year guide. We are reaffirming the guidance of approximately $1.6 billion in core ad revenue for the year and again reaffirming our $1.5 billion of retransmission revenue for the year. We are reducing our broadcast operating expense guide for the full year to approximately $2.3 billion from the previous guide of $2.4 billion. We look forward to a very successful full year 2024 including strong political ad spending later in the year. It's now time for me to introduce my successor as CFO. Jeff is the ideal person for this role given his very close working relationship with Gray, as a key banking partner for almost 20 years. I'm therefore very happy to turn the call over to Jeff.

Jeff Gignac: Thank you, Jim. As Jim mentioned, with my prior firm, I was the lead debt banker for virtually all of Gray's market activity for a very long time, including the recent acquisitions of Raycom, Quincy and Meredith. Incidentally, I was also the lead debt banker to Raycom and Quincy, among others. From that long history, I've learned the business and come to know the talented and dedicated management team at Gray. What attracted me to Gray is the exceptional set of assets and scale of the company. As you all know, the portfolio has Number One and Number Two ranked local news stations in 102 out of 114 markets. At this time, Gray's large-scale M&A for [foot] (ph) expansion is complete, and the asset's key functions and people are fully integrated. Today, you are seeing those results in our core business. When I first discussed the opportunity of joining Gray with Hilton, it was clear that deleveraging was this top priority, which aligned with my view. Delevering is good for our shareholders, for our debt holders and for our employees. It's also how we position the company to capitalize on changes in the media landscape and the most straightforward way to increase our equity value. In that light, earlier this week our Board authorized spending up to $250 million of liquidity for debt repurchases, giving us another tool to implement our delevering plan in an efficient way. In late January, Gray took advantage of strong market conditions to launch a refinancing of the revolver and 2026 term loan. We successfully completed an amendment upsizing and extending the duration of our revolver with the banks who know us best, and we again thank them for their support. Obviously, the term-loan marketing process became more challenging with news from three other media companies regarding their plans to bundle their sports rights into a new virtual MVPD, which was completely misunderstood by the investment community in the first several days after its announcement. In the end, Gray made the decision to close the revolver and postponed the term-loan refi process until the new cycle quieted down, and we can capitalize on our positive outlook for 2024. Going forward, you should expect to see us act quickly when necessary but always in a smart way to manage our capital structure. The company has been and will continue to be very thoughtful about the cost of capital as being measured over a period of time rather than at any specific point in time. And that's extremely important. Our current low secured leverage at 2.34 times allows us access to multiple pockets of capital in the public and private markets. We also expect significant cash from political advertising later this year that will allow us to further reduce total indebtedness and extend our maturity profile. We believe that we can do all this in a way that is positive for all stakeholders. And lastly, as a new shareholder myself, I look forward to engaging further with all of our investors to maximize value for all of our stakeholders. And with that, I will turn the call back to Hilton for some closing remarks.

Hilton Howell: Thank you, Jeff, and welcome on board. I'll leave all of you with this perspective. There are challenges in the media business, most of which are not of our making, but many of which provide opportunities for us. What we can control, our leading local franchises, expansion of digital ad cells, our retrans rates, expansion of sports content partnerships implementing NEXTGEN TV and probably most importantly, in the short-term where we deploy capital. All of those things are going exceptionally well. So operator, at this time, we ask that you open the line for any questions for me or anyone here at the table.

Operator: [Operator Instructions] The first up it looks like we have Daniel Kurnos. Your line is now open.

Daniel Kurnos : Great. Thanks good morning. Nice start to the year guys. Kevin, just a quick housekeeping. What's left this year either by quarter or however you want to put it in terms of distribution renewals?

Kevin Latek: Good morning Dan. We have a very small number of contracts with cable companies to cover about 30% of the big four traditional MVPD subs. Those will be in the -- come up in the second half of the year.

Daniel Kurnos : Perfect. And then look, the core -- you guys have been harping on this for a while. I don't think any of us years ago would have thought you guys would have beat in 2019 at this point perhaps been a good amount of time detailing it. But I mean, is this sustainable? How do you guys think this trends from here? And what are you guys doing differently to get such massive outperformance?

Pat LaPlatney: Hi, Dan, it's Pat. I'll start. Look, at a private company from 2010 through 2019, we watched core deteriorate slowly but steadily, mostly with the auto category for a long time and to be ahead of 2019 now is -- in my mind, pretty remarkable. Do I think it's sustainable? Yeah, I think, we can continue to grow. I think that we now have a much more diverse basket of advertisers. If you go back to '18 or '19, auto was probably 25% or 30%. Today, it is mid-to-high teens and services are a huge part of our revenue. And so I think we are in much better shape. I think the reasons for that at least for Gray, it's our investment in training. It is our investment in going after having a team that focuses on certain categories, verticals, we've had that team in place now for years and the training in place probably eight years now. So it's paying dividends for us. And I think, we absolutely have the capacity to continue to grow.

Sandy Breland: Yes. And this is Sandy, Dan. The other thing I would add to that -- we talk a lot about our laser focus on new local direct and Pat talked about the increase over last year. But I’ll tell you, we challenge our stations, and they deliver month after month after month, continuing to set records there, and that is something we can control. And just one other point, we talked about the importance of strong content and strong rank stations, that also gives us an advantage and a competitive edge there.

Daniel Kurnos : All right. Thank you so much. I appreciate it guys.

Operator: Next up, we have Aaron Watts. Your line is now open.

Aaron Watts: Hi everyone. Thanks for having me on. I've got a couple of questions. One on core advertising, I heard your comments around core and the tough comps you're up against in 2Q. Anything more you can kind of tell us on the underlying themes, areas of strength and softness looking forward? And any reason for optimism [and ATR] (ph) can improve from here despite some of the macro uncertainties that seem to still be weighing on advertiser decision-making.

Pat LaPlatney: Yes. Again, so we are a sort of the Main Street company as opposed to a Wall Street company. I think early in our comments, what we're seeing is local businesses doing well and advertising with us at the end of the day. So looking at the categories, auto was -- auto again had this long steady decline in to COVID, then it came out of COVID pretty strong, started to level off a little bit, but the services sector for us is extremely strong. We had a bump with the gambling category and now that's a little sort of lumpy. Some quarters it is up, some quarters it's down. But all in, if you look at the broad set of key categories for us, it is a good story. So again I think we are a better sales organization than we were a few years ago. and we've invested heavily in that area and I think we can continue to grow. Sandy, do you have a comment on that?

Sandy Breland: I agree. I mean it is the nice thing too -- is we are seeing growth among multiple categories, not just auto but legal and particularly, we've done very well. And we continue to see that grow, furniture, restaurants as well, so we're seeing it spread across multiple categories that growth.

Pat LaPlatney: I think our scale also adds a significant benefit. You go back and look at the company five years ago, a very different company than it is today.

Hilton Howell: Aaron, this is Hilton. I want to just add one other thing. And to the extent that they're on this telephone line right now, it's our people. Aaron, I mean we give them the tools to do their job and they execute. And one of the things I'm very, very proud of this company is we execute across the board. And at every moment, we do the right thing and carry it out and it all comes down to the people that we have in our TV stations in all of our 114 markets.

Aaron Watts: Okay. Got it. Thanks. On the debt repurchase program, to-date, I believe your focus has been on addressing that front-end term loan maturity. But you do also have debt trading at discounts to par value. How are you thinking about balancing, attacking the nearest maturities with perhaps capturing greater discounts to further your deleveraging aspirations. Is this authorization a sign of maybe being more open to repurchasing discounted debt securities than you've been open to previously?

Pat LaPlatney: Yes. Aaron, I think you nailed it. I mean it is a balanced approach. With the front end, the short maturities, we'll have to address those in due course here, but we are not oblivious to the fact that we've got debt trading in the 60s, and it would be nice to capitalize on some of that to accelerate the deleveraging. Again not sacrificing our liquidity position or the need in the near-term, maybe reapproach the markets for the refi.

Operator: Next up we have Steven Cahall of Wells Fargo. Your line is now open.

Steven Cahall: Yeah. Thanks. I've got a few. So Kevin, I was wondering if you could just talk about the structure of reverse comp on a medium-term basis. It is something we've talked about before, but I think you are looking to potentially convert fixed programming fees to something that's more variable. Just wondering if you're having any early conversations around those and how you think those conversations may trend over time? And then, Pat, just to pick up on some of the advertising commentary. I think you are the first media company, I've heard in about 18 months to talk about national advertising being better. So I would love to know what's going on underneath the surface there for Gray? And then lastly, Hilton so you talked about how Wall Street is kind of missing the point about the business fundamentals. I know we can have a myopic view. I think a lot of the debate is just when there's going to be free cash flow that's available to the equity holder and how you can deleverage? So I'm wondering what you think about as potentially helping with deleveraging, whether you would look at asset sales, whether you look at changes to the dividend or whether you think you can get there purely organically?

Hilton Howell: Thank you, Steven. All right. Kevin, do you want to start?

Kevin Latek: Yes, Steven our network affiliation agreements are up on the following schedule. We have ABC up at the end of this year. We have CBS and Fox up in the second half of '25, and we have NBC at the very end of '25. There is not really not aware of any precedent where network and affiliate group have opened a negotiation early and changed the terms early. We've done -- at Gray we have done countless negotiations with the networks. Typically, we buy we buy something with an earlier expiration date, and we'll add years to other markets so that they all have a coterminous end. So we don't reopen the existing contract. We live with whatever contracts exist until they expire. And then we roll into -- has been negotiated either recently or sometimes two or three years in advance. Where we are now is, we are not acquiring anything. All of our stations are on the same schedule with all four networks. We will likely talk with CBS and Fox a year from now. So I think there'll be a lot of other broadcasters who will be talking to all the networks before we will. And we would expect that all broadcasters, including those [alone] (ph) -- the networks are very aware of what's happening with cord cutting, and we'll be adjusting the programming fees to reflect where we [trans] (ph) this add and the exclusivity of the content we're receiving. But we are not -- I don't anticipate us other than ABC at the end of this year having any conversations on any changes to our existing contracts until those contracts are over. And again, that's not until the second half of '25.

Hilton Howell: Pat?

Pat LaPlatney: Yes. So Steven, your question around National, we had a good quarter in the first quarter for National. There were a number of categories that I think contributed to that, one that I'd point out would be consumer goods for us, which was up high-single digits. Look, National for us is a much smaller piece than local, which we have more control over. But at the end of the day, you're going to see National, it's going to be a little bit lumpy, but this quarter was a very good one. And I think it's due in large part just from a sort of a broad number of categories that happen to be up in Q1.

Hilton Howell: And Steven, I guess on the last one here. So let me say that I read everything that you write, and I appreciate every comment that you have -- some of which I greatly differ with, but I appreciate every word you write. That being said, we're going to do it the way great as everything else we execute. And it's really simple. But we don't intend to sell any assets. We see no panic. We are not concerned. We will operate our TV stations and our other assets, and we are generating a huge amount of free cash flow. And we will use that to deleverage the company. We have no intentions -- our Board has not even considered cutting the dividend nor picking anything. Some of our competitors may have chosen to do so. Each company is their own best guide in that regard. Gray, as this quarter's results, I think, demonstrate is a stunning company. We have spent 30 years assembling some of the finest assets and the people around this table and talking to you today represent one of the greatest in my judgment, media companies currently operating. And I think our results demonstrate that. So what we're going to do is go to work every day. We're not going to sell things. We're not going to blink and we're not going to panic. And we're just going to reduce our debt, just like we've done for the last 30 years. We moved our debt ratio to what we considered to be as high as we would ever like it to be due to the opportunities to acquire both Quincy and Meredith, and that completed a remarkable footprint for our company. And now we are enjoying the fruits of those efforts. And so we're just going to carry on, and that's all there is to it.

Operator: [Operator Instructions] The next up, we have Craig Huber. Your line is now open.

Craig Huber: Great. Thank you. I wanted to ask about the Assembly Atlanta project here. I mean, I think last call, you guys talked about how the revenues are starting to generate off that got delayed because of the Hollywood strikes and stuff. Maybe just update us on your thoughts on when you think you full revenues will start coming through? It sounds like a 2025 event. That's my first question and I'll take the second one after that, if I could please.

Hilton Howell: Sure, Craig. This is Hilton. Let me see if I can answer that for you. Obviously, we have a long-term lease with the Universal Production Services division of Comcast, NBCU. And what that effectively create a financial 70% occupancy rate for all of our studios. The other 30% of not only assembly but third rail studios, which are two separate businesses, but all operated together have always been producing, but we have had a lag in commitments. And what everyone has told me, it is because of the lack of actually getting greenlit due to a potential [IRC] (ph) strike. By the end of the month of May it is my understanding that -- that issue will either fully matriculate or it will go away. And I think once that happens, I think we are going to have a great boom in terms of what we are doing because the only issue that we have is getting TV productions that are getting quotes left and right, getting greenlit from Hollywood. And so I think, that green light is going to come. And I think it is just a matter of time. In the meantime, we're in a remarkable position. We've got, I think, about four production shooting currently. And our reviews from people using our studios have been superb. And so I anticipate that we will see a more fully leased out 100% sometime during the course of 2024 and then it will carry for, obviously in future years.

Craig Huber: Great. I appreciate that. And my other question, if I could ask just longer term here. You guys have plenty of broadcast spectrum, of course, and with the continued rollout of ATSC 3.0. Just curious, when do you think you might start being able to monetize that to some degree. Once we start seeing somewhat of some material revenues off that? And I assume the whole thing maybe late this decade, but just maybe talk about what you're kind of doing on that front, the extra spectrum you have? Thank you.

Pat LaPlatney: Yes, it's Pat. So I would say that we'll start seeing revenues probably first quarter of next year. In terms of material revenues, it is a little bit difficult to forecast. It will be a matter of years. I'm not certain it will be the end of the decade though. I think it will be sooner than that. So although I can't give you a hard and fast number there, but we will start seeing money next year. And I think in a few years, the money will be meaningful.

Operator: All right. Next up, we have James Goss. James, your line is now open.

Jim Goss: Okay. Just one thing following up on what you just said, what sort of monetization efforts do you think can be made with NEXTGEN TV? How will it come into play, do you expect?

Pat LaPlatney: Yes. So there is a number of different areas. One of the sort of primary is digital data delivery. So getting data into automobiles, taking data that gets offloaded from the [cellular] (ph). There is a number of conversations that have been going on in that area for years. I think that will probably be the first. But a little longer-term, the new 3.0 standard gives us the ability to target ads, which can be a game changer if all of our current impressions on linear television, we're targetable, that really changes the paradigm for local TV. And ultimately, that's where 3.0 leads us. It is going to take a little bit of time -- but we'll get there.

Jim Goss: Okay. And there was also a discussion earlier about fast channels and connected TV offerings. What sort of economic model are you pursuing along those lines?

Pat LaPlatney: It's an ad sales model, Jim. And while it is a small number today, we expect it to grow dramatically as we roll out more of our stations on the fast platforms. So we are in the early stages of rollout right now. And as you might guess, the more stations you roll out, the higher the revenue and a rollout period is going to grow quicker than it would in a sort of a static period. So we would expect that, again, a small number today to grow significantly over the next few years.

Jim Goss: Okay. One last one. Jeff mentioned and welcome Jeff -- that Wall Street sort of misunderstood the Sports JV impact. And I wonder if you might expand on that a little bit. What do you think was the nature of the misunderstanding and please clarify what we should understand about it.

Kevin Latek: Do you want to take --.

Jeff Gignac: Either one of us -- I mean I'll start and Kevin can correct me. But look, look, the Sports JV when it was first announced, there were very few details about what it meant as it relates to the existing distribution channels and who it was targeting, et cetera. And so the -- if we are -- if it is another avenue for us and another MVPD, virtual MVPD using our programming, that should be a positive for us. So that, I think, is the crux of why I use the term misunderstanding on it because it was declared as the latest way that we're going to get disintermediated and in fact, it should help us to be part of the plan going forward.

Kevin Latek: Just to echo that, I think we feel that four dozen phone calls on the JV in two days and a fair number of questions seem to stem from the idea that the sports JV was going have 14 linear channels, 12 cable and then the reference to the two broadcast channels, Fox and ABC somehow meant a national ABC network and a national Fox Network that don't exist. Frankly, that a lot of people did not understand that the way that broadcast networks work is that there are local TV stations that carry a certain number of hours a day of content, two hours a day for Fox Sports and about 15 hours a day for ABC-plus sports content. So for example if you are in Cedar Rapids and you want to watch Fox, you don't turn on the Fox Network, you turn on the Fox affiliate owned by another broadcaster. If you're in Cedar Rapids, you want to watch ABC, you don't turn on ABC network. You turn on the ABC station that's -- ABC affiliated TV station in Cedar Rapids, that is owned by Gray Television. People just seem to have completely missed that. I think, the comments from the networks to us privately and the comments publicly return people to the understanding that broadcast is different than a cable channel that's distributed to all homes at essentially at the same time with the same content. And as that sunk in people, I think started to appreciate what really we said in the statement we issued that day, which was a virtual MVPD that carries local affiliates will compensate the local affiliates for their signals. And therefore as we learn -- many subsequent conversations, the target audience here is not to destroy the linear -- the traditional MVPD sub base that is contributes a significant amount of money and distribution for the cable channels that are distributed there as well as the two broadcast networks. But it is going to target the core never crowd. So to the extent they are bringing in people that do not currently pay for television, that's incremental revenue for all of us. So if it is successful, it's incremental revenue, and that's a good thing. There are a couple -- there are three or four virtual MVPDs today. One has already gone on the business. So this is another new virtual MVPD, there may be more in the future. It is a dynamic business. And the industry does not end every time somebody announces a new virtual MVPD, but that seems like that's what happened for that first week. So I think we are at the point where people understand now what virtual MVPD is and how slim these offerings will be and that virtual MVPD that carries Fox and ABC affiliates is a benefit to Fox and ABC affiliates.

Operator: All right. Next up, we have John Kornreich. Your line is now open.

John Kornreich: Two questions, I guess, for Jim. One, should we expect leverage to get a little bit under five by the end of this year? And secondly, can we be hopeful that net retrans, which by your forecast, will -- I guess, decline by about 3% this year could resume some small growth in '25 and '26?

Jeff Gignac: Yes, John, it's Jeff. I'll take your first one, in terms of leverage towards the end of the year. I don't think we quite get below 5%, but we should be getting into the low 4s by the end of the year. Sorry, low 5 by the end of the year. Sorry about that. Yes, low 5.

John Kornreich: You had me excited for a minute.

Jeff Gignac: Yeah. My apologies.

John Kornreich: And the other question is, anybody can take it, I guess.

Jim Ryan: So this is Jim. I'll lead off and Kevin can provide a little bit more color. Given the pace of our sub renewals after we finish the remaining roughly 30% this year, rate renewals, I mean we have about 18 months where we don't have any re-trans agreements up for renewal. So I think, the re-trans is going to be more stable in 2025. And then I think, as you get past 2025 and into 2026, 2027, we have an opportunity again to grow. Kevin feel free to add more color.

Kevin Latek: Yes, I think that's correct. The fixed fee network contracts were set at a time when we all anticipated that retrans would be in a different position or I should say, the traditional MVPD sub numbers will be higher than they are today. And we fully expect that we will be resetting those prices when we renew in 2025 and that should allow us to return to net retrans growth going forward.

John Kornreich: After '25?

Kevin Latek: I would say after '25, whether it occurs in '25 will depend on a couple of puts and takes with our renewals this year and sub-losses also sub migrations, subs that move from traditional to the virtual, just how that flows. So it -- I think this year, we're looking at -- we talked about stable to maybe low single-digit decline on that next year. There is still some puts and takes. I'd say, as we look over a number of years, we should see net retrans returning to a growth trajectory.

John Kornreich: Kevin, what is your calculated the sub-decline of late?

Kevin Latek: Gray's experience is fairly consistent with the overall industry. Our TV households break down about 45% roughly in large markets, 45% in midsized markets and the balance in small markets and that skews a little bit more towards midsized markets than the overall the US population distribution, but our experience with the MVPDs is, I'd say, pretty similar to what you read overall and estimates for the overall industry.

John Kornreich : Thank you very much for your answers.

Operator: All right. Next up, we have Davis Hebert. Your line is now open.

Davis Hebert: Hi everybody. Thanks for taking the question. I wanted to ask a follow-up on the retrans because I think your guidance shows a mid-single digit decline in the second quarter. And you could just give some data on cord cutting, but are you able to sort of segment out what the pressure is between cord cutting versus mix shift of linear subs moving to virtual because I know YouTube has had some nice growth over the past couple of quarters Sunday Ticket. So I just wanted to ask for a comment there.

Kevin Latek: Haven't really thought through philosophically, what's the bigger driver or what the relative breakdown is the traditional MVPD subs are declining double-digits, that's fairly well known. And the virtuals and the DTCs are growing at a pretty healthy clip. That's also fairly well known. So the – we are not immune to that at all, and we're exposed to it at kind of the same level as everybody else. We probably are a bit more exposed than others in terms of the price difference, the revenue difference we get from a traditional sub versus a virtual sub because our traditional rates are at the high-end of the industry. There are some broadcasters who probably are still looking at kind of parity between traditional rates and what they receive from the networks for the virtuals, I think that the large groups have more success in driving their traditional retrans rates. And so those who have higher rates are obviously going to have a bigger delta when they move to essentially the same fee that's paid to all affiliates in all markets of all quality levels. So we probably are a bit more exposed in that area. On the flip side, sooner we can -- as those fees on the virtual side, can move closer to a market rate. Gray would benefit more than others. So we are all rolling in the same direction as an industry, meaning broadcast affiliates -- return our rights to us that is our ability to negotiate for the distribution of our signals on all platforms, not just all platforms minus three or four. And when we succeed there, which unfortunately will not be quick because it is a Washington solution. I think, we will see good benefits for Gray, as well as the whole industry. But your following questions can be when is that going to happen, and I can’t tell you what anything is going to happen in Washington.

Davis Hebert: No, it makes sense. If I could just follow-up with one kind of all encompassing sports question. I think broadcast is clearly offers an incredible reach medium. But you have NBC doing exclusive NFL games on Peacock. And so there seems to be some experimentation with doing exclusive sports on streaming. What sort of commitment levels do you get from your broadcast partners in terms of keeping sports on the broadcast medium and limiting sort of that leakage to streaming services? And then my second question is -- on sports is. What sort of feedback have you gotten on your sort of early innings distribution of local games. NBA, et cetera. What's been the feedback I guess from either fans or the teams themselves? Thank you.

Pat LaPlatney: Yes, sure. To answer your second question first I mean, the feedback has been extraordinary from the fans from the teams and there is a really good reason for that. I mean the numbers, the audience that we are generating for these teams is significantly above their former levels or what they're currently doing, right? So in Phoenix we were up 70%, 80%. In some of the other markets where we did smaller packages, we did some five and 10 game packages. In some markets, the numbers were double or triple what they were on the current carrier. So obviously, the teams are going to be excited about that. But the fans who -- many of which have been sort of disenfranchised over the last few years are able to see their team. And it's a really exciting moment. And so the feedback has been extraordinary and not only for the fans, but also from the advertisers. They are really excited to have those games reach the types of audiences that they are now reaching. As far as the networks and sports, they are dabbling in direct-to-consumer with a small number of games and a lot of the games or in the case of NBC, the vast majority of the sports they do is simulcast. So we are not -- some of the audiences, there a little bit of audience leakage there, but not a lot. And so we continue to be very, very effective in selling those high-profile sports properties. So I can't -- as far as commitments go, I can't get into that but I think you are going to see some experimentation in that area. I think you will see that with a number of the leagues. But I think that broadcast television has clearly illustrated its value over the last six months.

Sandy Breland: Yes Dave just one additional point to that is that Phoenix, the Suns where we have the full commitment, the full season commitment, and side-by-side games where games are carrying on national cable, our local broadcast in our station just absolutely significantly higher ratings. People are turning to us to see the game and the feedback has been fantastic from both the team and the fans. And Pat mentioned the small package of games that we had, just to give you one example. So in New Orleans with the Pelicans, their ratings were up over 200% and over 300% in adults 25 to 54. So as you probably no surprise, we are getting great feedback from both the teams and the fans.

Pat LaPlatney: I think one other sort of interesting point there is that in Phoenix, where we’ve an independent station, KTVK, it's the Number One billing station in that market. And for some context, if you go back 10 quarters, to go back when we made the Meredith acquisition, our CBS station and our KTVK, the independent, we're the Number Three and Four stations in that market from a revenue perspective. They're now the Number One and Number Two stations in the market. Now in fairness, KPHO, the CBS had the Super Bowl in first quarter, but KTVK is the Number One station in Phoenix. So I think that tells you a little bit about the value and the impact of local sports and where that can head. So we are excited about that.

Sandy Breland: I'd certainly show that to the team there.

Pat LaPlatney: Absolutely.

Sandy Breland: And our team may [family] (ph).

Hilton Howell: David, this is Hilton. You ask for some anecdotes. Let me give you a couple of them just real quick. We took our Board to Phoenix because we are really proud of what we are doing with the Suns and the Mercury, and took them to a game on Sunday afternoon, held our Board meet out there. And I walked in because the hotel we were staying and didn't have our independent on the television. And I asked them if they could program it. And the guy that was sitting there behind the thing is -- are you part of the companies that bought the Suns to live free TV. I said, yes, actually, I am. And he goes, Oh my God, I'm a college student. I can't afford to like pay XYZ. The fact you brought it back to free TV, it's unbelievable. That night, we go up and we had all our board at a dinner, and we were just talking about what we had done with the Suns and where we're going to go to the game, et cetera, et cetera. And then we freaking got three of our folks that were serving us our dinner applauding because we brought the Suns back to the market. Now if that doesn't tell you something, I don't know what does. Those are great anecdotes, and we are thrilled with our experience with the Suns. And I think, everybody in Arizona is too.

Operator: All right. And it looks like we have time for just one more question. So Michael Kupinski will be our final question.

Michael Kupinski: Most of my questions have been already addressed, but a quick one here. You've always prided yourself on local direct business, which has been just an incredible success for you. The agency business looked like it ticked up in the last quarter 48% of your revenue. I assume that's because of the pickup in national, but I was wondering if you maybe provide a little color there if that was maybe a little political. Do you anticipate that the agency business will be a greater percent of total revenues as national recovers? And then maybe because of some of your initiatives like sports or targeting advertisers that have a broader geographic reach. I was just some thoughts of what you think Agency business will be in terms of the "norm" local direct versus agency?

Pat LaPlatney: Yes. So because we skew to midsize and smaller markets we have a lower percentage of agency business than most groups. So I think that I don't -- I wouldn't say, that we think our revenue -- the agency share of our revenue is going to grow significantly going forward. Again I think the area that we control the most is local direct. So our control better is local direct. And Sandy may have some comments --.

Sandy Breland: Certainly, political plays a part in that as well.

Pat LaPlatney: Yes, that's true -- right. For first quarter, yes. Yes. So you'll see a lot -- in a political, obviously, agency business go up.

Jim Ryan: One the [issue] (ph) is strong. It will be agency side business, too.

Sandy Breland: Yes. Yes, absolutely.

Michael Kupinski: Yes. So we should just look for that to go up this year, but maybe kind of go back to more of a normalized in the 43%, 44% range going forward.

Pat LaPlatney: Yes, it would go back to a more normalized range going forward.

Michael Kupinski: Okay, all right. Thank.

Operator: And with that, I'll now turn the program back over to Chairman Howell for closing remarks.

Hilton Howell: Thank you, operator. Before we close out this morning, I just want to take a moment to thank Jim Ryan for his time with our company. I don't know if he's feeling a sense of great elation that this is his last earnings call. I know that he'll have other phone calls to talk to with you guys. But for, what 26 years, and as I mentioned at the beginning, over 100 of these calls, he has been there, steady and true. And I greatly thank him for his time and service. And I will say we still have around to help us out for the next year. And I also want to welcome Jeff Gignac to our company. I could not be more proud of that individual and the succession that we have accomplished. Jeff knows our company. He may know some parts of it better than the rest of us around this table. And now he's getting to know the people and the assets that create the financial numbers that all of you look at. And so thank you, Jim, and welcome, Jeff. With that, we’ll sign off for Q1, and we’ll see you next quarter. Thank you.

Operator: All right. Ladies and gentlemen, this does conclude your call. You may now disconnect your lines, and thank you very much again for joining us today.