GTN Q2 Deep Dive: M&A Activity Drives Portfolio Expansion, Guidance Reflects Cautious Advertising Trends

Local television broadcasting and media company Gray Television (NYSE:GTN) met Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 6.5% year on year to $772 million. On the other hand, next quarter’s revenue guidance of $742.5 million was less impressive, coming in 5.1% below analysts’ estimates. Its non-GAAP loss of $0.48 per share was 76.2% below analysts’ consensus estimates.

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StockStory’s Take

Gray Television’s second quarter results were received positively by the market, as management highlighted several factors shaping performance. The company attributed the year-on-year revenue decline primarily to continued softness in core advertising, particularly in the automotive segment, but noted better-than-expected contributions from legal, entertainment, and digital categories. CEO Hilton Howell emphasized, “Political advertising finished well above our expectation for an off-cycle year,” with legal advertising growing at double-digit rates and digital revenue up 8%. Operational cost discipline also played a role, with expenses held flat compared to the prior year.

Looking ahead, Gray Television’s guidance reflects ongoing uncertainty in core advertising, weaker anticipated Olympic-related uplift, and transitional dynamics tied to network affiliation changes in Atlanta. Management pointed to the upcoming transition of WANF to an independent station and the impact on retransmission revenue as key variables. President Pat LaPlatney acknowledged, “Providing guidance for the third quarter continues to be challenging,” noting that core advertising is expected to be down, although digital and political advertising should remain resilient. The company will focus on integrating newly acquired stations while navigating a complex advertising and regulatory environment.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to resilient digital and political advertising, active portfolio reshaping through M&A, and focused cost control, while also citing headwinds in several core categories.

• Automotive advertising remains weak: Management described automotive as "down high single digits," continuing a trend of cautious spending by local auto advertisers. The company acknowledged that this softness dragged overall core advertising lower, but noted that other consumer discretionary categories showed resilience.
• Legal and digital advertising outperformed: The legal category grew at a double-digit rate and is now a top-five revenue contributor, while digital advertising rose 8% year-over-year. These segments helped partially offset broader advertising headwinds and highlight Gray’s efforts to diversify revenue streams beyond traditional TV spots.
• Political ad revenue exceeded expectations: Despite being an off-cycle year, political advertising generated $9 million, well above the $2–3 million projected for the quarter. Management attributed this to increased issue advertising and early spending in key state races, signaling the ongoing importance of political cycles for revenue stability.
• Active M&A reshapes portfolio: The company announced several acquisitions and swaps, adding net new markets and creating 11 new duopolies. CEO Hilton Howell emphasized that these deals are “immediately cash flow accretive” and will improve local market positions, reflecting a strategy to leverage scale and local dominance.
• Cost control and deleveraging priorities: Operating expenses remained flat year-over-year despite inflationary pressures, supporting margin preservation. CFO Jeff Gignac highlighted ongoing debt reduction and a recent $900 million notes offering, stating, “Reducing debt and leverage remains our top capital allocation priority.”

Drivers of Future Performance

Management expects near-term results to be shaped by core ad market pressures, integration of recent acquisitions, and changes in network affiliations impacting revenue mix and margins.

• Advertising and Olympic impact: The company anticipates continued weakness in core advertising categories, especially automotive and restaurants, while digital and political ads are expected to provide relative strength. Management noted that the absence of the Olympic boost, which added $20 million last year, will affect comparability in the next quarter.
• Affiliate transition in Atlanta: The transition of WANF to an independent station will reduce retransmission consent revenue and alter the revenue mix, with management expecting a greater reliance on advertising versus affiliate fees. President Pat LaPlatney stated, “The P&L at WANF will shift much more in favor of advertising.”
• M&A integration and leverage: The integration of recently acquired stations is expected to deliver quick cash flow benefits and further reduce leverage. Management aims to close these transactions by year-end, with CFO Jeff Gignac noting that anticipated synergies should be realized “fairly quickly after close,” contributing to future margin improvement.

Catalysts in Upcoming Quarters

For the remainder of 2025, our analysts will closely monitor (1) the successful integration and performance of newly acquired stations and duopolies, (2) the impact of the WANF affiliate change on advertising and retransmission revenues, and (3) the trajectory of core advertising trends in key categories such as automotive and legal. Execution on cost control, further deleveraging, and any additional regulatory changes will also be important indicators of future progress.

Gray Television currently trades at $4.59, up from $4.17 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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