Gray Media, Inc. (GTN) Q3 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Gray Media Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Alan Gould, Vice President of Investor Relations. Alan, please go ahead.

Thank you, Christa, and welcome, everyone. Joining us on today's call are Hilton Howell, our Chairman and CEO; Pat LaPlatney, our President and Co-CEO; Sandy Breland, our Chief Operating Officer; Kevin Latek, our Chief Legal and Development Officer; and Jeff Gignac, our Chief Financial Officer. Today, we filed our third quarter earnings release and updated investor presentation on Form 8-K with the SEC. Later today, we will file our quarterly report on Form 10-Q. These materials, including our safe harbor disclaimer, are available on our website at www.graymedia/investorrelations. This conference call may include forward-looking statements regarding, among other things, future operating results that are subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Various risks and uncertainties which could cause actual results to differ 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. We refer you to the cautionary language regarding forward-looking statements contained in our earnings release and in our SEC filings. The company undertakes no obligation to update these forward-looking statements. In addition, we will refer to certain non-GAAP financial measures. Please see our 8-K and investor presentation issued earlier this morning for a reconciliation of these non-GAAP financial measures to GAAP. It is now my pleasure to turn the call over to Gray's Executive Chairman and CEO, Hilton Howell.

Thank you, Alan. Today, we are very pleased to share the results for an exceptionally strong third quarter of 2026. Our third quarter reported results included the contribution from the acquisitions and the station swaps that we have completed this year. Total revenue in the third quarter of 2026 was $972 million. This exceeded the high end of our updated guidance range by approximately $7 million. And total revenue increased 30% year-over-year, largely reflecting Gray's strong political performance and the contributions from our recent acquisitions. Political revenue in the third quarter reached $198 million, well above our updated guidance range of $188 million to $195 million. Our 2026 acquisitions contributed $4 million of this total. More importantly, with election day now behind us, we can now share guidance for the full year 2026 political advertising revenue through election day in the range of $630 million to $640 million. This year's political ad revenue through election day has set a new record for our company, surpassing even our high prior year watermark of $600 million during the 2020 presidential election year. Net retransmission revenue was $150 million for the quarter, at the high end of our guidance range. I'm highly encouraged by the continued progress we have made in net retransmission revenue. 2026 should approach our 2023 high of $595 million of net retrans, which would be meaningfully higher than in 2024 and 2025, even excluding the contribution from the acquisitions and despite the blackout we have previously discussed. Growth in this recurring revenue stream positions us well to continue deleveraging into the nonpolitical year ahead. Broadcast expenses before depreciation, amortization and gain or loss on disposal of assets in Q3 of 2026 were $596 million, in the middle of our guidance range, compared with $542 million in the third quarter of last year. Almost all of the increase is attributable to our acquisitions. We expect additional costs from the acquisitions to begin decreasing modestly in the fourth quarter as we continue our integration efforts. Net income attributable to common stockholders was $78 million for the quarter. Adjusted EBITDA for the third quarter was $319 million. We came into 2026 with a very favorable political map, and our results speak for themselves. Our continued success in political advertising cycle after cycle is less a biannual windfall than the predictable result of our intentional investment strategy. And that success is continually demonstrated not just in our political ad revenue. Gray's journalistic professionals are continually recognized by their peers for exceptional work. This year, they won 93 regional Edward R. Murrow Awards, up from 81 last year, as well as 9 National Murrow Awards. In both cases, our teams took more honors than any broadcast or cable network or any other independent broadcast group. I am exceptionally proud of the work of our teams and what they do each and every day across this nation to gather, produce and deliver the stories that matter locally, nationally, all of which exceed our public service obligations like no one else. On the capital market side, we have opportunistically assessed the market several times over the last 3 months to extend our maturities while lowering the average cost of our debt. We have now reduced our 10.5% first lien notes by approximately $1 billion to only $200 million remaining outstanding. As we noted last quarter, we plan to use our fourth quarter political cash flow to continue to reduce our absolute debt level. Today, we announced that we currently anticipate further debt reduction of an additional $175 million to $200 million annually this year. Between the lower coupons from our refinancing activities and our lower year-end debt balances, we currently anticipate at least $40 million in lower interest cost next year over this current year. We are making great progress growing our portfolio of top-rated stations, integrating our acquisitions and exceeding and executing our deleveraging strategy, enhancing long-term shareholder value. We therefore will enter 2027 with a great deal of momentum at our back. So at this time, I will turn the call over to Pat LaPlatney to dive deeper into our operations.

Thanks, Hilton. Third quarter for advertising revenue came in above our expectations at plus 1% compared with our Q3 '25 results. The benefits from the 2026 acquisitions slightly more than offset the political crowd out and some softness from macroeconomic headwinds. On an as-reported basis, we were up 1%. Excluding the acquisitions, our core advertising revenue would have been down somewhere in the mid-single-digit range. Looking at our categories, we saw strength in gambling/betting, as well as some service sectors in Q3. Communications, health and insurance were soft. The automotive vertical and legal services finished the third quarter down just 1% to 2% compared to Q3 of '25 on a same-station basis. For Q4, core is currently pacing down low to mid-single digits. As you'd expect, there was significant political crowd out in October and early November. In Q4 categories, legal is pacing up, along with communications and finance. Auto and other service categories are down low single digits to mid-single digits at this point in the quarter. Our digital momentum continued in the third quarter with healthy 12% year-over-year growth. That's remained strong into Q4. Driving some of that digital growth is the migration of Quickplay for our digital video platforms. That project is on track and already paying dividends. Political advertising is the headliner exceeded our updated expectations against initial third quarter guidance of $165 million to $185 million and an updated guide of $188 million to $195 million, we delivered $198 million, including $4 million from our 2026 acquisitions. This compares with $173 million in the third quarter of 2024 and $144 million in the third quarter of 2022. A very strong October more than offset the fact that there are only 3 calendar days in November during this election cycle. Fourth quarter political revenue is expected to be a record $319 million to $329 million, or again, slightly more than half of the full year result with full year 2026 political advertising revenue of $630 million to $640 million. We continue to expand our focus on sports programming. We've recently begun new and expanded broadcast coverage of the Hornets, St. Louis Blues, Minnesota Timberwolves, Cleveland Cavaliers and the Orlando Magic. We have a pro sports presence in 90 Gray markets now. Our sports programming is bringing new viewers and revenue into our stations. It's also an excellent marketing platform, and while still relatively small, a nice profitable business for Gray. We're also focused on quality local nonsports programming. InvestigateTV+ returned for its fourth season, once again delivering solutions-oriented in-depth investigative journalism. Aging Untold enters its second season, providing practical solutions for aging adults, their families and caregivers. We're also thrilled to recently announce a partnership with Aging Untold and Hoda Kotb's Joy 101 wellness company. The partnership will involve content for Aging Untold, as well as providing wellness resource for our employees. And finally, The Good Side, which has been a highly successful weekend program, will move to a Monday through Friday strip. The Good Side celebrates people across our footprint who are making a real difference in our communities. I'll close by highlighting the operational benefits we're beginning to see from integrating our acquisitions. As Hilton noted, in Q4, acquired station expenses should be down materially from the $52 million we reported during the third quarter. Jeff will now address the key financial developments since the last call. Jeff?

Thanks, Pat. I'd like to spend a minute on our balance sheet and our leverage. As most of you have seen, we've been exceptionally active in the capital market since our last call. In July, as we previously discussed, we repurchased $120 million of our secured and unsecured notes using cash and revolver borrowings. On October 21, we issued $750 million of 7.5% first lien notes due 2034, with most of the proceeds used to redeem $675 million of our 10.5% 2029 notes. Political cash allowed us to fully repay our revolver by the end of the quarter. In October, we issued a $675 million Term Loan G due July of 2030 at SOFR +350. The Term Loan G proceeds and cash were used to pay down all but $150 million of our Term Loan D that's due in December of 2028 and to redeem an additional $150 million of our 10.5% notes. In October, we also extended our revolver from -- to July of 2030 from December of 2028, and we reduced the commitments to $680 million. This past Monday, we prepaid $25 million on the Term Loan G, satisfying all scheduled amortization payments through maturity. Just yesterday, we closed on an upsize of our AR securitization facility to $450 million. We also reduced the pricing on that facility to SOFR +115 and extended the maturity to November of 2029. Finally, as noted in our release, we intend to use our political cash to further reduce debt by another $175 million to $200 million between now and the end of the year. That's almost $2 per share of value as we reduce debt. The net result of all of these actions is that our nearest maturities are now $150 million on the Term Loan D due in December '28, $200 million of our 10.5% first lien notes due in July of '29. We incurred $65 million of transaction costs related to these refinancing transactions, which includes about $43 million of call premiums on the 10.5% notes. While the breakage costs work against us on near-term debt and leverage reduction, the lower debt coupons, together with additional debt repayments, are expected to reduce our annual interest cost, as Hilton noted, by at least $40 million next year. Remember, too, that the preferred equity redemption earlier this year reduced our annual preferred dividends by $4 million, and that was $50 million of face value that we reduced earlier this year. All of this enhances our discretionary free cash flow as we move into the nonpolitical year next year. Our leverage metrics at the end of the quarter under our amended senior credit agreement definitions were 2.54x consolidated first lien net leverage ratio, 3.7x consolidated secured net leverage ratio and 5.7x consolidated total net leverage ratio. A few things I'd like to mention related to our release in the 10-Q. Our third quarter '26 results included a full quarter of the stations that we acquired and swapped earlier in the year. All key third quarter revenue metrics exceeded our updated guidance, and our expense items all fell within the updated guidance ranges. We're progressing as expected on our acquired station integrations, and you're seeing that show up in our reported results. Net retrans revenue was $150 million for the quarter. That included $9 million of the contribution from our '26 acquisitions. And this is the second straight quarter in which net retrans revenue benefited our leverage ratio denominator, rather than being a drag on that on an 8-quarter basis. We expect net retrans revenue to be a growing contribution and to accelerate into 2027. We lowered our company-wide CapEx estimate to $110 million to $120 million from a prior $120 million to $130 million for 2026. It's mainly due to a couple of our station construction projects moving to 2027. We also lowered our full year tax guidance to a range of $75 million to $80 million. And with that, I'll turn the call back over to Hilton.

Thank you so much, Jeff. And so operator, at this time, we'd love to open up the call to any questions anyone may have.

[Operator Instructions] And your first question comes from Patrick Sholl with Barrington Research.

Just wondering if you could maybe provide a little bit more color on the expense reductions that you expect as you integrate some of the acquisitions? And maybe just within the guidance, how to think about some of the core advertising trends when you back out the 2026 acquisitions?

Yes. Pat, it's Jeff. I'll take that one. So the way to think about it is, remember, this integration is, in most cases, pushing 2 stations together in a market. And we don't want to break things. So we've taken a very deliberate approach on that. It's taken a little bit longer than in historical periods because it's in-market rather than new market integration. So we are -- I'd say we're probably 75% to 80% of the way there in getting those into our run rate. You'll start to see that show up as -- certainly as we get through fourth quarter and into first quarter. The other -- so the other part of your question about just the underlying kind of same station, I would say it's inflation-ish in terms of the growth on a comparative station basis versus last year.

Okay. And then on the sports programming, as that, I guess, process of more inventory going into local has progressed, so why some of these agreements gone to more multiyear? Or is that, kind of, more the standard now? I'm just kind of curious, what that process has looked like and, kind of, getting more, I guess, consistency and predictability of the inventory?

I didn't understand the question. Pat, could you repeat that question, the most recent question, please?

Yes. Just on the sports programming across, I think you said 90 markets with pro sports inventory. Just how many of those agreements are like multiyear in nature?

Got you. So a small percentage are multiyear. As you know, some of the leagues are working on some broader national deals that will impact local deals. So that's the primary reason, although we do some of the bigger deals we have are multiyear deals. So it's a mixed bag, but most of them are short term.

In the case of the Phoenix Suns, our longest-standing partner, we just expanded that deal, extended that deal.

Your next question comes from the line of Dan Kurnos with StoneX.

Great. I'm going to ask one kind of sweeping question that touches a bunch of things, and this is probably for Hilton and Jeff. I mean, first of all, I guess, just, Jeff, again, I know I feel like I say this every call, but you're clearly ahead of the curve on all the balance sheet stuff. And I think that puts you relative to the folks in sort of your relative situation on a much better footing going into '27. Now we all know there's a lot of puts and takes. As we turn the page post election, everybody is thrilled with all the political dollars. You guys did fantastic. You're paying down debt. For both of you, the interest savings will help accelerate the leverage cal. And I know, Hilton, you're kind of looking at the rest of the space, we've had some government change in Congress. And so how do you guys think about having cash dry and/or available if things change and maybe a tougher nonpolitical environment in '27 versus continuing to attack the balance sheet, which I know is going to remain a priority, but you've got a lot of moving pieces, and you guys are in kind of great position, plus all the sports stuff is helping you too. So I know there's a lot of things in there, but just help us think through the puts and takes into '27 and how you're thinking about sort of the broader landscape more from an M&A perspective?

Well, Dan, first, I'm extremely proud of what we've been able to accomplish with the entire complexion of our balance sheet. And so it moves us beyond not just the '26 but the '28 presidential election year and gives us a lot of freedom to think about how we develop and grow this company. Second, the election was Tuesday. And I think it's going to take us a little time to sort out exactly what impact that's going to have in terms of things from what I've seen. There's not going to be a significant change in -- from the FCC in terms of their views. We'll wait and see probably in January, what Democratic majority in both the Senate and the House had to say about it. But I will tell you that I think both sides are very interested in making sure that newsrooms don't close. What they, I think mean by that is that it's not the multiple numbers of newsrooms. It's the quality, the intensity and just the overall comprehensiveness of local news coverage, one of the things that we are really, really -- that we strive at. And in every deal that we have made, what we actually have done is saved a local newsroom. We have saved the news jobs despite whatever the BS that goes out in terms of headlines, we are creating jobs. We are adding news coverage because at the end of the day, this company and I, in particular, believe profoundly that we're not going to make the mistake that the newspapers were forced to make by cutting our local content. So you saw and you can see an increase in news jobs within our portfolio and an increase in hours that are put out to the local community. And I think actually, the awards that we have had this year is an independent proof of that. So I'm willing to talk to either a Republican executive or to a Democratic legislative house and tell them the benefits of continuing consolidation because the truth, Dan, is without consolidation, the mom-and-pop nature of this business when I was born into it would not exist. Consolidation has allowed newsrooms to stay open and to expand. And I only speak with regard to our company. But at the end of the day, if you don't have a damn product that people want to watch, you're not going to have viewers, and you're not going to have advertisers. So I believe that we can make the case, regardless of who is in power, that consolidation needs to continue because of our track record. And we can prove it. We can absolutely prove it. So that's -- I don't know if that answered all of your questions, but that's where I am.

Yes. Dan, it's Jeff. Let me just add on to what Hilton said. I think really, your question is what is capital allocation and what's the highest priority. The highest priority is the highest return. So if that means reducing our debt, and we see good opportunities there. You've seen us do that pretty consistently and in a very thoughtful way so that we don't -- cost of capital is not a static thing. It is an over time thing. If we find M&A that helps us delever faster, then we're all about that. You saw us take a bite out of the preferred earlier this year. Not a priority for us to do more there. It was available, and we thought it made sense. And so again, I think it's -- we're assessing a whole bunch of opportunities, and I would not be surprised if there's a lot more opportunities that come over the next couple of years, given some of the things that we've already done to get ourselves in the spot where we can be choosy about what we do.

Your next question comes from the line of Aaron Watts with Deutsche Bank.

To start, just around core advertising. I want to clarify some of your comments earlier. Were those core pacings all post the election or for 4Q overall? And maybe you can talk a bit more about what you're seeing and hearing from the ad marketplace as you turn the corner into 2027? Are there any kind of green shoots to point to at this time, or is the same macro uncertainty still serving as a bit of a headwind?

Yes. So the fourth quarter pacing is full quarter, right? So we obviously saw significant crowd out in October. So and you can do the math. If the quarter is down mid-singles, that means that November and December are pretty solid, and they are. And I would -- to your question around Q1 green shoots, the answer is yes, we're actually seeing some green shoots. Our current -- it's early, but our current pacing in Q1 is positive. And I just note that in Q1 of last year, we had the Winter Olympics and NBC Super Bowl. So that was a lot of money that -- not all of which is going to return, obviously. So we feel positive about what's going on in -- currently in Q4 and as we look to Q1.

Okay. Great. That is helpful. And then if I could ask one more, kind of turning over to the distribution side. It sounds like you're cautiously optimistic about net retrans going into next year. On the distribution revenue side, I think you have around 60% of your MVPD subs up for renewal. What are you seeing from your latest reports on the pace of sub declines? And as you balance that with the current pricing environment, what are your latest thoughts on how to think about distribution revenue growth in 2027? And I guess on the other side of the coin, with the affiliation renewals you're going through, how are those discussions trending? And I think about Disney deciding to offer multiple feeds of the Super Bowl across its broadcast, cable and digital platforms. And -- what impact do you see that having on your typical upside from a game like that? And I suppose it points to content exclusivity and how that dovetails with those renewals?

Aaron, we tend to do about 18 months of busy retrans negotiations, and then we take 18 months off. We're in that latter period now. Our next round of retrans get going, really finish 6 or so months from now, so I can't tell you what might be happening in that environment. At a high level, we -- as Jeff said, do anticipate retrans, both gross and net, to grow in '27. In terms of networks, we also are not in discussions with any networks on any renewals right now. So I can't -- there's no intel to share on how those negotiations are going because we're just not in any of those. So thankfully, we've had -- we have other things to keep us busy than talking to the networks and the distributors right now at a -- I mean you identified, a bunch of the talking points and concerns for the industry talking points that we believe are being addressed by not just those who are in active negotiations with the networks because they're important points, but also by the 4 affiliate network boards with their networks as they have done now for 40 or 50 years with issues of concern to all affiliates generally. And those negotiations and discussions sometimes lead to improvements and sometimes don't. That's the nature of a business relationship. So again, we don't have any unique insight on anything right now, but you've definitely hit some of the talking points that are purely under discussion with the networks.

Your next question comes from the line of Steven Cahall with Wells Fargo.

First, maybe a question for either Pat or Hilton. I think I saw an article about some innovation you're doing in a Louisville newsroom. I was wondering if you could speak a little more to that project and if you think it's applicable and scalable across the enterprise and what it could mean for both content and expenses? And then, Jeff, just wanted to go a bit deeper into deleveraging efforts. I think the challenge is sector valuations are kind of in the 7x EBITDA range. And if we add up net debt and accounts receivable, there just isn't a lot of room left for equity. And so I was wondering if you can think of ways that are more strategic? I know you're chipping away at the debt, but is there anything bigger that you can do to take that down a chunk the way equity investors look at it to help drive more equity value?

Yes, Steven, I'll go first. So the AR facility is what it is. It's a cheap source of financing. You didn't mention the preferred, by the way, where ours has declined this year, which frankly, is a bigger -- that starts to grow, that's a bigger drag on equity value. So the AR facility is evergreen. It just kind of sits there, and there is a cost associated with that. But we should have pretty decent positive cash flow in 2027 due to all the actions that we have taken this year, reducing the quantum of debt. We're talking about $40 million to $50 million less in fixed charges that we have to bear in '27 versus '26. Also, all the M&A activity should -- as those lap and they go into -- we report everything as reported. We haven't gotten into any kind of pro forma or anything like that, but we try to be clear on what the contribution is from the acquisition. So when you put that together, you have an 8-quarter leverage ratio denominator, however, whatever you want to call it. That has been working against us for a while and is now starting to turn positive. That's the best way to delever the company is to grow the denominator. And we've hit that inflection point where it's starting to flatten and turn. So going into '27, and then look, the outlook, based on what happened with the map on Tuesday, there's reasons for optimism where there was a lot of pessimism. I think a lot of people might have had us under $500 million for the year on political this year on everything going to connected TV. And that narrative seems to have died on Tuesday. So there's a lot of things that are pointing in the right direction that I think should really accelerate the delevering and also then -- or therefore, drive equity value, which is the ultimate objective here.

And Steve, on Louisville, we've been working to bring together, as you know, the 2 newsrooms, WDRB and WAVE. We're bringing those together under a local first product. We have more than 100 journalists now coming together under 1 roof, serving that community, focusing on community impact, around the clock breaking news, sports and weather. We will be able to serve the community of Louisville, quite frankly, unmatched. And we have been very methodical in how we have brought those 2 stations together, really tapping into the best of both, using those teams to broaden our reach and our impact across all of Louisville. As Hilton said earlier, we've taken our time with this because we want to get it right. And quite candidly, it's not -- we have not taken a one-size-fits-all approach. We've looked at each individual market, each individual newsroom, tapped into the strength, and put together the product that best serves that particular community. And that's what we're doing in Louisville.

Steven, does that cover it for you?

Is the Louisville project scalable to other markets?

Absolutely.

Yes. So look, I think what Sandy was saying is putting 2 stations together Louisville is different than putting 2 stations together in Meridian, Mississippi or Phoenix, Arizona, right? You got to look at the assets you have in each market. And you put them together, utilizing the best resources from either side. The numbers vary widely. And just in the case of Louisville, there's a ton of capability, and we're making sure we hang on to every bit. And we're very excited about that business.

Great.

And Steven, it is scalable. I mean, across the board out of all of the acquisitions that we have done. And I think it's 26 or north in terms of individual station count. All but 3 are duopolies within our market. And as Sandy mentioned in her comments to you, we've looked at them based upon each set of assets because there's really talented folks on both sides. And she has been -- I'm particularly proud of what she and her team have accomplished in doing a lot of these things through the course of 2026. So we think it's scalable, and we intend to continue.

Just for a data point, Steven, we currently have 51 markets with 2 or more Big 4 channels across the 117 markets. Some of those are just FOX D2s and tiny markets, but many of them are places like Louisville.

Our next question comes from the line of Craig Huber with Huber Research Partners.

Just a couple of points of clarification, if I could start, please. When you were talking about core ad revenue trends for the first quarter being up, does that comment include the small acquisitions?

No, it's on the same station. Our pacing report is done on a same-station basis.

Okay. And then I had the same question, frankly, when you said you're expecting growth in net up next year in '27. Does that include small acquisitions when you said that?

So that actually does because the core reports are bookings, but the retrans, we're looking at our contracts. So the retrans side, up on a gross and net basis, would include the acquisitions.

Okay. So growth in net-net comment does include the small acquisitions. Okay. I appreciate that. And then the other bigger question I have. When you look at one of your peers that's in the process this calendar year of removing, laying off 20% of their workforce this year, trying to streamline things given where the debt is at this stage and stuff, when you look at your company, your cost base and stuff -- and I know this is a tough question to ask and answer on a public call. But I mean, are you comfortable with your cost base here? Or do you think there's some significant moves you can potentially make here to save some significant costs without harming the top line? I mean, how comfortable are you guys right now with your cost base, both employee levels and all your other expenses in your TV station?

Actually -- Craig, this is Hilton. I'll start, and I'll let everybody else in the room as they see fit, opine. We feel very good with regard to where we are on a cost basis. But know that as a company, we, as a matter of course, always maintain a strict expense control as we're able to do. That's not only at the station level, but it's at the corporate level. And so we're looking at it 100% of the time. I will tell you, you're not going to see us making big dramatic 100 people reductions in our force. We don't see a need to, to be quite honestly with you. Our revenue is great. If we don't have folks to sell the content that we're creating, we're not going to be pacing our core up. It's just not going to happen. There is a certain level of humanity that is absolutely necessary for the journalistic quality that we insist upon and for the sales that we insist upon. And so we feel very good where we are. And a lot of what people are talking about reinventing TV. We've been doing it for 5, 6, 7 years at this point. So we're very comfortable about it. Anyone else want to add?

Craig, this is Kevin. Without picking on or addressing any particular company, I would say, just a very high level, I've been at Gray for 15 years now. We've closed over 60 transactions in that time period. As a general rule, when we have acquired stations from private equity owners, we have found that the stations were understaffed, and we added -- we are going to add some reporters or add some sellers, add some digital people. When we have acquired from newspaper or former newspaper owners, we have found many, many additional bodies doing work that our folks are doing with technology and smarter work processes with many fewer bodies involved. And those former newspaper owned stations over time have gotten new work streams, new training and new technology and have come into line with our very lean staffing model. So we don't -- that's just, again, a very high level from our experience over 15 years. You can buy that however you want. Not everyone is where they were, obviously, 10, 12 years ago in this industry. But as a general rule, we have been, I believe, the leanest operator of TV stations in this industry, other than some private equity folks who were just cut into the bone. And I say that having done diligence on hundreds and hundreds of stations, many of which we bought, many of which we walked away and shared our own diligence in some potential swaps and sale and divestiture transactions. There's just not a lot of extra people working in Gray stations like we have found with certain other broadcasters. And so therefore, it's not like we have 4 people doing the job that 1 person can do. We've already fixed that a long time ago with technology and support from other stations and better work streams. Anyone else?

Just the only other thing I would say is Hilton and Kevin both just said we're always looking for ways to continuously be efficient. And quite frankly, AI has been -- played a part in that recently, obviously. And that is -- we're looking at that not as a replacement, but as an enhancement. How do we become more efficient? How can we improve sales? How can we improve content? How can we use it in those ways, lead generation, preparation resource, editing, all under the eye, verified by a human journalist, but how do we use it to become more efficient across our business? And that's just one of the things we're looking at.

Your next question comes from the line of Gowshi Sri with Singular Research.

On the acquisitions, now that you have a full quarter of results, how you guys think about the buy multiple on the 2026 deals? And the acquired stations moving into your retrans and network terms, is that a 2027 step-up? Or is that more of a 2028 step up?

This is Kevin. Our 2026 transactions, I'd say we're all -- without exception, were very good for us financially and operationally. These transactions were all -- follow the formula of our transactions over the last many, many years here, with 15 years I've been here. Retrans steps up on day 1, and everything else takes a little bit of time. If you have 2 buildings, you don't move to 1 building the day of the transaction. Frankly, you don't move there within 6 months. If you have to adjust our systems, our back end corporate systems, computer systems, number of servers, staffing, workflows, adding newscast, which means you have sometimes moved some programming around drop some syndication contracts, those things just take time. We spent months while waiting for FCC approval working on these integration plans, but we often don't even get a chance to meet with the employees until we close. And we don't walk in the door and ask -- tell employees here's where we are, here's our business plan. We walk in the door and we meet the employees, and we talk to them and we understand what they think they need, what we think we need and we figure it out over the next couple of months, and we implement it over the subsequent quarters. So we're going to see retrans on these deals like the past was immediate. The other synergies roll in over 1, 2, 3, 4 quarters depending on the type of efficiencies we can get from them. So I think the answer is it's a little bit of immediate and a little bit of '27. There should not -- I don't think we got to wait until 2028 for anything on the acquisitions we did here, just like when we did Meredith and Quincy and Schurz and all the rest of them. There's a lot of the operational stuff. It just takes time to work through. And sometimes contracts you have to keep paying and not using, going to get those have to burn off. And sometimes you can launch a new newscast at 4:00, for example, or 9:00 at night. You got to staff up for that. You got to get resources in place, you got your graphics in place, and you just can't do it overnight. So it takes a little bit of time. It's worth it at the end, but you should see the impact of the acquisitions fully in 2027, not 2028.

On your strategy, what is the cycle -- political cycle really teach you? Where do the political dollars go when the races shift so late? And how does that shape your thinking for '28? And how should we think about the 2027 free cash directed towards debt versus M&A?

Craig, this is Hilton. I'm going to let other people talk too on this. But the one thing we learned on Tuesday night or Wednesday morning is that there's a hell of a lot more swing states and competitive states in this country and in our portfolio than we ever dreamed of before the election. So the way we look at it is that we're going to have a very healthy, very exciting from a financial standpoint, political contest in 2028. And states that used to be viewed as being noncompetitive are certainly going to be competitive prospectively. And we actually had someone who helps us in D.C. go through with our Board yesterday in Nashville, Tennessee, looking at that exact question. And we remain extremely pleased with where our existing station groups are and what we think we're going to be able to do in a couple of years.

This is Kevin again. With U.S. political dollars moving around, every cycle political dollars move around as races tighten up and races break away. We saw in this campaign, money moving out of states that we thought would be very competitive early in the year, and they move to other battlegrounds. That happens every single cycle. It's part of the fun for the political people. We traditionally are there to capture the money because we have such a great footprint in battleground places. Not always, but we usually cover them pretty well. In '22 and '24, we saw money move to places -- move out of our markets and into states where we don't have much of a presence or any presence like California, like Pennsylvania. This cycle, as money moved out of Georgia and out of North Carolina, for example, they moved into Iowa and Alaska, in Maine, Nebraska, places where Gray has a huge presence. In fact, almost every one of those places, we are the largest media company in the entire state. For context, in 2022, our political revenue was $11.50 per TV household. '24 was $10.83. So a little bit less. We had presidential there, but we didn't have as much of the Senate piece in 2024. In 2026, our political ad dollars work out about $13.45 for the TV households that are covered by Gray's local news TV stations. That's just incredible. It's still heads and shoulders above anyone else, whether it's a network or another group. So $13.45, call it, is a pretty remarkable number. It's because of where our footprint is. As we look forward, as Hilton said, as you're now reading in every analysis of this, every single swing state that has existed in the last 3 presidential cycles, it remains a swing state today. And now we also have several additional swing states that will likely be added to that column. These additional swing states are places where, again, Gray has a very strong position. So the map as we look forward to 2028, I can't say yet, it's going to be as nearly perfect or 100% perfect with Gray's footprint because it's too early to know exactly who the candidates are and whatnot this far out. But looking at the swing states the last 3 cycles, plus the newly competitive, we're not missing anything. We have strong #1 TV stations in all of them. And most of them, we cover or darn -- we have a very, very strong presence in all of them. So looking forward, we feel political worked out very well for us and will continue to work out very well for us because the politicians want to reach persuadable voters and the voters who are interested. And those are people who watch local news, and we deliver a bigger local news audience than anyone in the country.

Yes. I would just -- I would echo that. Craig, it reaffirmed that it pays to have #1 stations, #1 stations with strong local news presence. I'm really proud of the fact that our stations delivered more than 100 candidate forums, debates, town halls this midterm cycle.

I think 1 final note. I am particularly excited about our Telemundo footprint as we head into '28 because I think that is going to be a very interesting watch as we saw what happened on Tuesday, and there were some significant changes there. And I think that they're up for grabs.

I hope we handled that question, Craig.

Ladies and gentlemen, that does conclude our question-and-answer session. And I would now like to turn the conference back over to Hilton Howell, Chairman and CEO, for closing comments.

Thank you so much, operator. First, I want to thank everyone here for joining us on the call this morning. I know that you had a lot of folks in this industry and our sector kind of compressed in a short period of time. But also, I want to take just a small portion of a sort of personal privilege. We're all here together in Atlanta at our headquarters. But yesterday, our Board of Directors and everyone here in the room today were in Nashville, where we watched a remarkable transformation of our NBC affiliate in that market. And I just want to publicly thank each and everyone that was involved in hosting our Board there in Nashville. It was an extraordinary day. The numbers coming out of that market demonstrate what we do as an operator of television stations, and that is grow them and build their audiences across the board. And the progress that has been made in the now the 25th largest market in the United States and Nashville, Tennessee, was fabulous. Thank you, Nashville. All the rest of you, we have great pacings for Q4. Q1 is actually looking pretty good. So I'm looking forward to talking to you on our future earnings calls. Thank you, and have a happy holiday.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.