Gray Television (NYSE: GTN) reported Q3 EPS of $0.70, versus $0.00 reported last year. Revenue for the quarter came in at $279.3 million versus the consensus estimate of $275.76 million.

• Record Third Quarter Revenue, Net Income and Broadcast Cash Flow - Our revenue, net income and Broadcast Cash Flow for the third quarter of 2018 were all record results. Our revenue was $279.3 million, increasing $60.3 million, or 28%, from the third quarter of 2017, and was our best all-time quarterly revenue. Our net income was $61.9 million, increasing $46.6 million, or 304%, from the third quarter of 2017, and was our all-time best third quarter net income. Our Broadcast Cash Flow was $134.6 million, increasing $54.7 million, or 69%, from the third quarter of 2017, and was also our all-time best quarterly result.
• Political Revenue – Our political advertising revenue was $48.0 million for the third quarter of 2018, consistent with our recently updated guidance. For comparison, after giving effect to stations acquired and divested since January 1, 2014, we earned $41.1 million of political advertising revenue in the third quarter of 2014, which was the most recent non-presidential election year. Our political advertising revenue for the third quarter of 2018 was 17% greater than that of the third quarter of 2014, on this adjusted basis.
• Retransmission Revenue, Expense and Net - Our gross retransmission revenue for the third quarter of 2018 was $91.6 million, and our retransmission expense was $41.4 million. Therefore, our retransmission revenue, net of retransmission expense, was $50.2 million for the third quarter of 2018. We currently anticipate that for calendar year 2018, gross retransmission revenue will be approximately $354.0 million to $356.0 million and retransmission revenue net of retransmission expense, will be approximately $188.0 million to $190.0 million.
• Total Leverage Ratio, Net of all Cash - As of September 30, 2018, our total leverage ratio, as defined in our senior credit facility, was 3.51 times on a trailing eight-quarter basis after netting our total cash balance of $550.9 million.
• Pending Merger with Raycom Media - On June 23, 2018, we entered into a merger agreement with, among others, Raycom Media, Inc. Giving effect to the merger including divestitures of stations due to market overlaps, upon completion we will own and/or operate television stations and leading locally focused digital platforms in 92 markets broadcasting approximately 400 separate programming streams, including over 150 affiliates of the ABC/NBC/CBS/FOX networks. The combined entity will own number-one or number-two ranked stations in 85 of the 92 markets. These stations were ranked number-one in all day Nielsen ratings in 62 of the combined markets and number-one or number-two in 92% of the combined markets. In addition to high quality television stations, as part of the merger, we plan to acquire businesses that provide sports marketing, production and digital signage services, which should result in our becoming a more diversified media company. The consummation of the transaction is subject to the satisfaction or waiver of certain customary closing conditions, including approval from the Federal Communications Commission and the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. We anticipate that the transaction will be completed later in the fourth quarter of 2018.
• Financing for Pending Merger with Raycom – In connection with our acquisition of Raycom Media, we expect to enter into an amendment and restatement of our senior credit facility, pursuant to which we would borrow $1.4 billion of additional secured term loan financing. In addition, we expect, through a new special purpose wholly-owned subsidiary of Gray (“Escrow Issuer”), to assume $750.0 million in aggregate principal amount of 7% senior unsecured notes due 2027, upon consummation of the Raycom Merger. We expect to use the net proceeds of the term loan, notes and other sources, to finance the acquisition and pay related fees and expenses.

GUIDANCE:

Gray Television sees Q4 2018 revenue of $319-325 million, versus the consensus of $306 million.

For earnings history and earnings-related data on Gray Television (GTN) click here.