An Exciting Year Ahead for Gray Television – Insider Weekends

Key Insights:

• Gray Television is the nation’s second-largest television broadcaster and currently serves 117 television markets, reaching 36% of US television households.
• After a large drop in stock price over the last few months, Chairman and CEO Hilton Howell Jr, who has served as CEO since 2008, made a small purchase for a total of $80,934.
• The company had a weak fiscal 2023, with total revenue declining by 11% YoY to $3.3 billion and reported a net loss of $76 million for the year.
• Following acquisitions in both 2019 and 2021, the company is highly leveraged, which remains a key concern for numerous investors, as long-term debt totals $6.15 billion against a market cap of just $611.01 million.
• However, the company is committed to deleveraging over 2024 and will also benefit from a surge in political advertising during the presidential election this year – opening the door to a possible turnaround.

Gray Television Inc. (GTN): $5.97

Market Cap: $611.01 M

Enterprise Value: $7.48 B

Gray Television is a multimedia corporation headquartered in Atlanta, Georgia. Founded in 1946, the company has grown to become the nation’s second-largest television broadcaster and currently serves 117 television markets, reaching 36% of US television households. The company has a strong hold over local news, owning the most #1 ranked local news television stations of any broadcaster.

The company’s stock has been very volatile over the last few years – with its common stock reaching highs of around $24 per share in late November 2021, but declining to around $9 per share by January 2024. However, following poor 2023 results, the stock dropped by 36% over the last three months and now trades at just under $6 per share. It seems this drop is what motivated the Chairman and CEO of the company, Hilton Howell Jr, to purchase Class A shares for a total of $80,934.

While this purchase is quite small, it marks Mr. Howell’s first purchase since June 2023. It is worth noting that he purchased the higher priced and lower volume class A shares (GTN.A), which entitles owners to 10 votes per share compared to the common shares, which have one vote per share.

This purchase also has a little more weight to it considering Mr. Howell has well over 30 years of broadcasting experience and has served as CEO of Gray Television since 2008. Such a deep understanding of the industry likely lets Mr. Howell recognize the same thing we’re noticing about Gray Television and the broadcasting industry as a whole: 2024 will be an exciting year.

Investors have beaten Gray Television’s stock down over the last year as the company delivered poor financial results on a year over year basis. The reason for this is simple – Gray Television and other broadcasting services tend to do very well in election years, but lose out on this political advertising revenue in non-election years, thus delivering poor results. In the fiscal year 2023, total revenue decreased by 11% YoY to $3.3 billion and broadcasting expenses increased by 5% to $2.3 billion. The company ended up with a net loss of $76 million, primarily due to large interest payments.

The large interest payments reveal a bigger issue with Gray Television – as one can see from the enterprise value, the company is highly leveraged and massively in debt. This is the result of a series of acquisitions Gray Television undertook. In January 2019, they closed their acquisition of broadcast company Raycom Media for $3.6 billion and in December 2021, they completed their acquisition of the television division of Meredith Corporation for $2.8 billion.

With these acquisitions, Gray Television ended up with nearly $6.15 billion of long-term debt on the balance sheet, a fair amount of which is set to mature by 2026. Investors were concerned about the company’s ability to refinance these loans, which is yet another reason that the stock suffered in the last few months. However – as noted in their March 2024 investor presentation and Q4 2023 earnings call, the company has plans to deleverage down to the 4x EBITDA range and has confidence that they will be able to refinance the debt given their robust free cash flow.

More promising to us is what 2024 holds. With this year being another political election year, and more significantly, a presidential election year with candidates that are raising record levels of funding for their advertising campaign, Gray Television is in a prime spot to profit from this surge in advertising revenue. There are numerous gubernatorial, senate, and house races also in play – and Gray Television has stations in most of the states with races. The charts below show not only how much of a focus political advertising is for the company, but how much of a competitive advantage Gray Television has in this space (especially considering their recent acquisitions).

We’re rather excited by Gray Television’s prospects over the next year, and first quarter 2024 guidance appears to be high as well – with estimated revenue in the range of $810 million to $830 million. The concerns surrounding debt give us the most pause, but if the company manages to refinance the debt as they have planned and continue to deleverage, the boost from advertising revenue will only continue to strengthen the company. We’ll hold off from investing directly, however, we’ll keep an eye out on the debt situation and revisit the company once those concerns are alleviated to some extent.

This situation is likely a trade and not a potential long-term opportunity because the business model is a melting ice cube as more and more of their viewers continue cutting the cord and migrating to other platforms for content.

Editor’s Note: Tamanana Suria contributed to this article.

Welcome to edition 728 of Insider Weekends. Insider buying decreased significantly last week; with insiders purchasing $19.93 million of stock compared to $110.06 million in the week prior. Selling also declined to $1.51 billion compared to $1.94 billion in the week prior.

Sell/Buy Ratio: The Insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by the total insider purchases that week. The adjusted ratio increased notably to 76.10. In other words, insiders sold more than 76 times as much stock as they purchased. This week the Sell/Buy ratio was not favorable; compared to the prior week when the ratio stood at 17.65.

Notable Insider Buys:

1. BRT Apartments Corp (BRT): $16.7

President and CEO Jeffrey Gould acquired 24,598 shares of this apartment REIT, paying $16.85 per share for a total amount of $414,510.

You can view the list of recent insider transactions for BRT Apartments Corp here.

2. Dollar Tree Inc (DLTR): $130.71

Chief Financial Officer Jeffrey A. Davis acquired 1,800 shares of this discount variety store chain, paying $136.00 per share for a total amount of $244,794. Mr. Davis increased his stake by 10.44% to 19,047 shares with this purchase.

You can view the list of recent insider transactions for Dollar Tree Inc here.

3. SentinelOne Inc. (S): $22.6

Director Mark S. Peek acquired 10,000 shares of this cybersecurity company, paying $22.36 per share for a total amount of $223,596.

You can view the list of recent insider transactions for SentinelOne here.

4. Gray Television, Inc. (GTN): $5.97

Chairman, President & CEO Hilton H. Howell of this broadcasting company acquired 10,000 shares, paying $8.09 per share for a total amount of $80,934. Mr. Howell increased his stake by 0.34% to 2,982,386 shares with this purchase.

You can view the list of recent insider transactions for Gray Television, Inc. here.

5. Altus Power Inc. (AMPS): $4.62

Co-founder, CO-CEO and CO-President Gregg J. Felton acquired 12,500 shares of this renewable energy company, paying $4.78 per share for a total amount of $59,750.

You can view the list of recent insider transactions for Altus Power Inc. here.

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Apple Inc. (AAPL): $169.58

Shares of Apple were sold by 3 insiders:

• Chief Executive Officer Timothy D. Cook sold 196,410 shares for $169.33, generating $33.26 million from the sale.
• SVP, GC and Secretary Katherine L. Adams sold 54,732 shares for $168.90, generating $9.24 million from the sale.
• Senior Vice President Deirdre O’Brien sold 54,732 shares for $168.91, generating $9.24 million from the sale.

You can view the list of recent insider transactions for Apple Inc. here.

2. Copart, Inc. (CPRT): $56.55

Executive Chairman Jayson Adair sold 600,000 shares of this online automotive auction company for $57.77, generating $34.66 million from the sale.

You can view the list of recent insider transactions for Copart, Inc. here.

3. Meta Platforms Inc. (META): $527.34

Shares of Meta were sold by 3 insiders:

• COB and CEO Mark Zuckerberg sold 62,958 shares for $489.91, generating $30.84 million from the sale.
• Chief Legal Officer Jennifer Newstead sold 585 shares for $485.00, generating $283,725 from the sale.
• Chief Operating Officer Javier Olivan sold 490 shares for $486.75, generating $238,508 from the sale.

You can view the list of recent insider transactions for Meta Platforms Inc.here.

4. Microstrategy Inc. (MSTR): $1439

Executive Chairman Michael J. Saylor sold 15,447 shares of this analytics software company for $1653.10, generating $25.54 million from the sale.

You can view the list of recent insider transactions for Microstrategy Inc. here.

5. Crowdstrike Holdings Inc. (CRWD): $315.5

Shares of this cybersecurity technology company were sold by 2 insiders:

• CFO Burt W. Podbere sold 64,000 shares for $316.48, generating $20.25 million from the sale.
• Director Sameer K. Gandhi sold 15,000 shares for $316.82, generating $4.75 million from the sale.

You can view the list of recent insider transactions for Crowdstrike Holdings Inc. here.

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.