Gray Television announced financial results for the first quarter ended March 31, 2023, reflecting our total revenue of $801 million, that was above our revenue guidance and total operating expenses (before depreciation, amortization and loss on disposal of assets) of $640 million, which, after excluding $35 million of production segment operating charges as discussed below, was near the low end of our expense guidance for the quarter.
Gray took several steps in the first quarter to manage its leverage and ensure its access to ample liquidity should macroeconomic circumstances become more challenging the rest of this year. Overall, our businesses have started 2023 in a strong position.
The first quarter of 2023 produced record results, including $801 million in total revenue, an increase of $257 million or 47% compared to 2021, our most recent non-political year. Our first quarter results benefited from continued strong advertiser demand for our local content and continued improvement in retransmission revenues. We attribute these solid results to real-world confidence among advertisers and businesses in local markets who rely at least in part on our high-quality television stations to reach local audiences.
During the first quarter of 2023, our production segment recorded $35 million in unanticipated operating charges. These charges included $18 million to resolve litigation related to our Atlanta Assembly project, which removed potential restrictions over future development opportunities at the site, related to that litigation, and $17 million of allowance for credit losses related to the bankruptcy filing of Diamond Sports Group, LLC.
Looking ahead, we anticipate that our television stations will maintain advertising and retransmission revenues at a level generally flat to somewhat ahead of revenues in recent years due to our strong position in local markets. Meanwhile, we believe our investments in Atlanta Assembly will provide some diversification from our broadcasting segment with new exposure to the growing film and television production industry in Georgia.
In the first quarter, we received $26 million in cash proceeds from a quasi-governmental authority. At various times through the remainder of the year, we anticipate receiving additional funds of approximately $98 million, in cash proceeds from a quasi-governmental authority and/or certain land sales.
We currently anticipate that construction on the Assembly Studios portion of Assembly Atlanta and much of the infrastructure for the entire project will be completed in the summer of 2023. Soon thereafter, we expect that the new facilities will begin ramping up revenue from both long-term and short-term leases of soundstages and related facilities to various content producers. Upon the completion of the Assembly Studios construction, we intend to pause all future construction projects at Atlanta Assembly while we evaluate opportunities to maximize the long-term value of this unique real estate investment. See more.
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Commentary by Randy Davidson
I’m not proud of it 😊 but something I enjoy doing is listening to quarterly earnings calls of publicly traded digital entertainment and media companies. There’s much insight beyond the press releases as company executives field questions from Wall Street analysts covering the stock. Between complex discussions around debt ratio’s, bond maturity dates and Secured Overnight Financing Rates, there’s usually nuggets of good information.
In Gray Television’s latest earnings conference call on Friday, I noted the bullish tone of CEO Hilton Howell – manageable debt, dominance in the local markets served and impressive indicators of ad spending leading into the next presidential election.
Mr. Howell spoke about Assembly’s relationship with NBC and how revenue would be meaningful in 2023 and in full swing through 2024. (Oddly, neither executives or analysts mentioned the writer’s strike.) Regarding Assembly, Mr. Howell called the project the single most important asset in the company’s portfolio and noted that Assembly is more valuable than the company’s market cap. In other words, Gray Television’s stock is way undervalued by investors. I’m no analyst, but I agree. While there are many variables in play, Gray’s leadership in local broadcasting and general diversification should bode well for the company mid to longterm. Listen to their latest conference call here.
