Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Introduction. The following discussion and analysis of the financial condition and results of operations of Gray Media, Inc. and its consolidated subsidiaries (except as the context otherwise provides, "Gray," the "Company," "we," "us" or "our") should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included elsewhere herein, as well as with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC.

Business Overview. We are a multimedia company headquartered in Atlanta, Georgia. We are the nation's largest owner of top-rated local television stations and digital assets in the United States. Our television stations serve 120 full-power television markets that collectively reach approximately 37% of US television households. This portfolio includes 81 markets with the top-rated television station and 103 markets with the first and/or second highest rated television station in average all-day ratings across the 119 of such markets measured by Nielsen in 2025. We also own the largest Telemundo Affiliate group with 47 markets totaling over 1.6 million Hispanic TV Households. We also own Gray Digital Media, a full-service digital agency offering national and local clients digital marketing strategies with the most advanced digital products and services. Our additional media properties include video production companies Raycom Sports, Tupelo Media Group, and PowerNation Studios, and studio production facilities Assembly Atlanta and Third Rail Studios.

Our operating revenues are derived primarily from broadcast and internet advertising, as well as retransmission consent fees. For the three-months ended March 31, 2026 and 2025, we generated revenue of $768 million and $782 million, respectively.

Revenues, Operations, Cyclicality and Seasonality. Broadcast advertising is sold for placement generally preceding or following a television station's network programming and within local and syndicated programming. Broadcast advertising is sold in time increments and is priced primarily on the basis of a program's popularity among the specific audience an advertiser desires to reach. In addition, broadcast advertising rates are affected by the number of advertisers competing for the available time, the size and demographic makeup of the market served by the station and the availability of alternative advertising media in the market area. Broadcast advertising rates are generally the highest during the most desirable viewing hours, with corresponding reductions during other hours. The ratings of a local station affiliated with a major network can be affected by ratings of network programming. Most advertising contracts are short-term, and generally run only for a few weeks.

We also sell internet advertising on our stations' websites and mobile apps. These advertisements may be sold as banner advertisements, video advertisements and other types of advertisements or sponsorships.

Our broadcast and internet advertising revenues are affected by several factors that we consider to be seasonal in nature. These factors include:

●	Spending by political candidates, political parties and special interest groups increases during the even-numbered "on-year" of the two-year election cycle. This political spending typically is heaviest during the fourth quarter of such years;

●	Broadcast advertising revenue is generally highest in the second and fourth quarters each year. This seasonality results partly from increases in advertising in the spring and in the period leading up to, and including, the holiday season;

●	Core advertising revenue on our NBC-affiliated stations increases in certain years as a result of broadcasts of the Olympic Games; and

●	Because our stations and markets are not evenly divided among the Big Four broadcast networks, our core advertising revenue can fluctuate between years related to which network broadcasts the Super Bowl.

We derived a material portion of our non-political broadcast advertising revenue from advertisers in a limited number of industries, particularly the services sector, comprising financial, legal and medical advertisers, and the automotive industry. The services sector has become an increasingly important source of advertising revenue over the past few years. During both the three-months ended March 31, 2026 and 2025, approximately 27% of our broadcast advertising revenue (excluding political advertising revenue) was obtained from advertising sales to the services sector. During both the three-months ended March 31, 2026 and 2025, approximately 17% of our broadcast advertising revenue (excluding political advertising revenue) was obtained from advertising sales to automotive customers. Revenue from these industries may represent a lower percentage of total revenue in even-numbered years due to, among other things, the decreased availability of advertising time, as a result of such years being the "on year" of the two-year election cycle.

Our primary broadcasting operating expenses are employee compensation, related benefits and programming costs. In addition, the broadcasting operations incur overhead expenses, such as maintenance, supplies, insurance, rent and utilities. A large portion of the operating expenses of our broadcasting operations is fixed. We continue to monitor our operating expenses and seek opportunities to reduce them where possible.

Please see our "Results of Operations" and "Liquidity and Capital Resources" sections below for further discussion of our operating results.

Revenue

Set forth below are the principal types of revenue, less agency commissions, earned by us for the periods indicated and the percentage contribution of each type of revenue to our total revenue (dollars in millions):

		Three Months Ended March 31,
		2026								2025
						Percent								Percent
		Amount				of Total				Amount				of Total
Revenue:
Core advertising		$	352				46	%		$	344				44	%
Political			30				4	%			13				2	%
Retransmission consent			339				44	%			379				48	%
Production companies			29				4	%			27				3	%
Other			18				2	%			19				3	%
Total		$	768				100	%		$	782				100	%

Results of Operations

Three-Months Ended March 31, 2026 ("the 2026 three-month period") Compared to Three-Months Ended March 31, 2025 ("the 2025 three-month period")

Revenue. Total revenue decreased $14 million, or 2% compared to the 2025 three-month period, to $768 million in the 2026 three-month period. During the 2026 three-month period:

●

Core advertising revenue increased by $8 million compared to the 2025 three-month period. In the 2026 three-month period, we earned approximately $10 million of net revenue from the broadcast of the Super Bowl on our 54 NBC and 47 Telemundo channels in 2026 compared to the first quarter of 2025, when net revenue relating to the broadcast of the Super Bowl was $9 million on our 27 FOX channels. Our Super Bowl advertising revenue on our NBC channels increased to $10 million in 2026, compared $5 million on our NBC channels in 2022. Our first quarter 2026 benefited from the broadcasts of the recently concluded Winter Olympics across our NBC affiliated channels. The 2026 Winter Olympic broadcasts generated approximately $15 million of revenue compared to approximately $8 million of revenue earned in the first quarter 2022 Winter Olympics broadcasts.

●	Political advertising revenue increased by $17 million compared to the 2025 three-month period, resulting primarily from 2026 being the "on-year" of the two-year election cycle.

●

Retransmission consent revenue decreased by $40 million compared to the 2025 three-month period, due to the net effect of a decrease in subscriptions, the transition of one station to independent status, as well as a distribution dispute with a satellite television company removing our stations from its platform in early March 2026, offset, in part, by an increase in rates. Our dispute with the satellite television company was resolved on May 1, 2026.

●	Production company revenue increased by $2 million, or 7% compared to the 2025 three-month period.

Broadcasting Expenses. Broadcasting expenses (before depreciation, amortization and gain or loss on disposal of assets) decreased $22 million, or 4% compared to the 2025 three-month period, to $555 million in the 2026 three-month period:

●

Broadcasting Payroll expenses increased by $11 million in the 2026 three-month period compared to the 2025 three-month period primarily as a result of recurring, routine compensation changes and increased costs of employee healthcare benefits. Non-cash stock-based compensation was $1 million for the 2025 three-month period. There was no non-cash stock-based compensation for the 2026 three-month period.

●	Non-payroll broadcasting expenses decreased by $34 million for the 2026 three-month period primarily because of reductions in retransmission expenses.

Production Company Expenses. Production company operating expenses (before depreciation, amortization and gain or loss on disposal of assets) were $28 million in the 2026 three-month period, an increase of $8 million compared to $20 million in the 2025 three-month period primarily due to an increase in property taxes related to Assembly Atlanta.

Corporate and Administrative Expenses. Corporate and administrative expenses (before depreciation, amortization and gain or loss on disposal of assets) increased $7 million to $39 million in the 2026 three-month period compared to the 2025 three-month period. These increases were primarily the result of increases in professional service fees as a result of our completed and pending acquisitions.

Depreciation. Depreciation of property and equipment totaled $33 million for the 2026 three-month period and $34 million for the 2025 three-month period.

Amortization. Amortization of intangible assets totaled $32 million in the 2026 three-month period and $29 million in the 2025 three-month period.

Miscellaneous Income, Net. On January 20, 2026, we recorded a gain of $8 million from the sale of our investment in FreeTV, Inc.

Interest Expense. Interest expense decreased $1 million to $117 million for the 2026 three-month period compared to $118 million in the 2025 three-month period.

Gain on Early Extinguishment of debt. During the 2025 three-month period, we reported a gain on early extinguishment of debt of $1 million as a result of the repurchase of a portion of our outstanding debt in the open market at a discount. There were no gain or losses on early extinguishment of debt during the 2026 three-month period.

Income Tax Benefit. During the 2026 three-month period, we recognized income tax benefit of $8 million. During the 2025 three-month period, we recognized income tax benefit of $15 million. For the 2026 and 2025 three-month periods, our effective income tax rates were 29% and 63%, respectively. We estimate our differences between taxable income or loss and recorded income or loss on an annual basis. Our tax provision for each quarter is based upon these full-year projections which are revised each reporting period. These projections incorporate estimates of permanent differences between U.S. GAAP income or loss and taxable income or loss, state income taxes and adjustments to our liability for unrecognized tax benefits. For the 2026 three-month period, these estimates increased our statutory federal income tax rate of 21% to our effective income tax rate of 29% as follows: state income taxes that added 6% and permanent differences that added 2%.

Liquidity and Capital Resources

General. On March 31, 2026 we amended and restated the credit agreement for our senior credit facility to modernize the legal document. The commitments under the revolving credit facility, the principal amounts of the term loans, and the stated maturities under the senior credit facility remained unchanged at closing. No new borrowings were incurred with the amendment. On April 2, 2026, we repaid the $10 million remaining balance on the 2024 term loan.

The following table presents data that we believe is helpful in evaluating our liquidity and capital resources (in millions):

		Three Months Ended
		March 31,
		2026				2025
Net cash provided by operating activities		$	1			$	132
Net cash used in investing activities			(77	)			(15	)
Net cash used in financing activities			(33	)			(42	)
Net (decrease) increase in cash		$	(109	)		$	75

		As of
		March 31,				December 31,
		2026				2025
Cash		$	259			$	368
Long-term debt, including current portion, less deferred financing costs		$	5,746			$	5,744
Series A Perpetual Preferred Stock		$	650			$	650
Revolving Credit Facility:
Revolving Credit Facility commitment		$	750			$	750
Undrawn outstanding letters of credit			(5	)			(5	)
Borrowing availability under Revolving Credit Facility		$	745			$	745

Net Cash Provided By (Used In) Operating, Investing and Financing Activities. Net cash provided by operating activities was $1 million in the 2026 three-month period compared to net cash provided by operating activities of $132 million in the 2025 three-month period. The net decrease of $131 million was primarily the result of a decrease in net working capital of $131 million and an increase in our net loss by $11 million, offset by an increase in non-cash charges of $11 million.

Net cash used in investing activities was $77 million in the 2026 three-month period compared to net cash used in investing activities of $15 million in the 2025 three-month period. The net increase was due to the WBBJ and Allen 3 acquisitions, as described in Note 3 "Acquisitions".

Net cash used in financing activities was approximately $33 million and $42 million in the 2026 and 2025 three-month periods, respectively. The decrease was primarily due to a reduction in net repayments of long-term debt.

Liquidity. We estimate that we will make approximately $450 million in debt interest payments over the twelve months immediately following March 31, 2026. Although our cash flows from operations are subject to a number of risks and uncertainties, we anticipate that our cash on hand, future cash expected to be generated from operations, borrowings from time to time under our 2019 Senior Credit Facility (or any such other credit facility as may be in place at the appropriate time) and, potentially, external equity or debt financing, will be sufficient to fund any debt service obligations, estimated capital expenditures and acquisition-related obligations for the next twelve months and the foreseeable future. Any potential equity or debt financing would depend upon, among other things, the costs and availability of such financing at the appropriate time. We also believe that our future cash expected to be generated from operations and borrowing availability under our 2019 Senior Credit Facility (or any such other credit facility) will be sufficient to fund our future capital expenditures and long-term debt service obligations for the next twelve months and the foreseeable future.

Collateral, Covenants and Restrictions of our Credit Agreements. Our obligations under our 2019 Senior Credit Facility, the 2029 1L Notes, the 2033 1L Notes and the 2032 2L Notes are secured by substantially all of our consolidated assets, excluding real estate. In addition, substantially all of our subsidiaries (subject to certain limited exceptions) are joint and several guarantors of, and our ownership interests in those subsidiaries are pledged to collateralize, our obligations under our 2019 Senior Credit Facility, the 2029 1L Notes, the 2033 1L Notes and the 2032 2L Notes. We are a holding company, and have no material independent assets or operations. For all applicable periods, the 2030 Notes and 2031 Notes have been fully and unconditionally guaranteed, on a joint and several, senior unsecured basis, by substantially all of our subsidiaries (subject to certain limited exceptions). Any subsidiaries that do not guarantee the 2030 Notes, 2031 Notes, our 2019 Senior Credit Facility, the 2029 1L Notes, the 2033 1L Notes and 2032 2L Notes are not material or are designated as unrestricted under our 2019 Senior Credit Facility. As of March 31, 2026, there were no significant restrictions on our subsidiaries to distribute cash to us or the guarantor subsidiaries.

Our 2019 Senior Credit Facility contains affirmative and restrictive covenants with which we must comply, including: (a) limitations on additional indebtedness, (b) limitations on liens, (c) limitations on the sale of assets, (d) limitations on guarantees, (e) limitations on investments and acquisitions, (f) limitations on the payment of dividends and share repurchases, (g) limitations on mergers and other fundamental changes and (h) maintenance of a first lien net leverage ratio not to exceed certain maximum limits in the event revolving loans are outstanding under the revolving credit facility or more than $50 million of undrawn letters of credit are outstanding that have not been cash collateralized as of the last day of the applicable fiscal quarter, as well as other customary covenants for credit facilities of this type. The 2029 1L Notes, 2030 Notes, 2031 Notes, 2032 2L Notes and 2033 1L Notes include covenants with which we must comply which are typical for financing transactions of their nature. As of March 31, 2026, we were in compliance with all required covenants under all of our debt obligations.

In addition to results prepared in accordance with U.S. GAAP, "Leverage Ratio Denominator" is a metric that management uses to calculate our compliance with our financial covenants in our indebtedness agreements. This metric is calculated as specified in our 2019 Senior Credit Facility and is a significant measure that represents the denominator of a formula used to calculate compliance with material financial covenants within our 2019 Senior Credit Facility that govern our ability to incur indebtedness, incur liens, make investments and make restricted payments, among other usual and customary limitations for credit agreements of this type. Accordingly, management believes this metric is a material metric to our debt and equity investors.

Leverage Ratio Denominator gives effect to the revenue and broadcast expenses of all completed acquisitions and divestitures as if they had been acquired or divested, respectively, on April 1, 2024. It also gives effect to certain operating synergies expected from the acquisitions and related financings, and adds back professional fees incurred in completing the acquisitions. Certain of the financial information related to the acquisitions, if applicable, has been derived from, and adjusted based on, unaudited, un-reviewed financial information prepared by other entities, which Gray cannot independently verify. We cannot assure you that such financial information would not be materially different if such information were audited or reviewed, and no assurances can be provided as to the accuracy of such information, or that our actual results would not differ materially from this financial information if the acquisitions had been completed on the stated date. In addition, the presentation of Leverage Ratio Denominator as determined in our 2019 Senior Credit Facility and the adjustments to such information, including expected synergies, if applicable, resulting from such transactions, may not comply with U.S. GAAP or the requirements for pro forma financial information under Regulation S-X under the Securities Act of 1933. Leverage Ratio Denominator, as determined in our 2019 Senior Credit Facility, represents an average amount for the preceding eight quarters then ended.

"Specified Transaction Costs and Expenses" are defined in our 2019 Senior Credit Facility and include incremental expenses incurred specific to acquisitions and divestitures, including but not limited to legal and professional fees, severance and incentive compensation, and contract termination fees. We present certain line items from our selected operating data, net of transaction related expenses, in order to present a more meaningful comparison between periods of our operating expenses and our results of operations.

Our "Consolidated First Lien Net Debt," "Consolidated Secured Net Debt" and "Consolidated Total Net Debt," in each case, net of all cash, represents the amount of outstanding principal of our long-term debt, plus certain other obligations as defined in our 2019 Senior Credit Facility for the applicable amount of indebtedness.

Below is a calculation of our "Consolidated First Lien Net Leverage Ratio," "Consolidated Secured Net Leverage Ratio" and "Consolidated Total Net Leverage Ratio" as defined in our 2019 Senior Credit Facility as of March 31, 2026:

		Eight Quarters Ended
		March 31, 2026
		(in millions)
Net income		$	183
Adjustments to reconcile from net income to Leverage Ratio Denominator
Denominator as defined in our 2019 Senior Credit Facility:
Depreciation			274
Amortization of intangible assets			230
Non-cash stock-based compensation			46
Non-cash 401(k) expense			-
Loss on disposal of assets, net			-
Loss on disposal of investment, not in the ordinary course			2
Interest expense			961
Gain on early extinguishment of debt			(24	)
Income tax expense			50
Impairment of investments, goodwill and other intangible assets			74
Amortization of program broadcast rights			55
Payments for program broadcast rights			(55	)
Pension expense			2
Contributions to pension plans			-
Adjustments for unrestricted subsidiaries			37
Adjustments for stations acquired or divested, financings and expected synergies during the eight quarter period			25
Specified Transaction Costs and Expenses			10
Total eight quarters ended March 31, 2026		$	1,870
Leverage Ratio Denominator (total eight quarters ended March 31, 2026, divided by 2)		$	935

		March 31, 2026
		(dollars in millions)
Total outstanding principal secured by a first lien		$	2,649
Cash			(259	)
Consolidated First Lien Net Debt		$	2,390
Consolidated First Lien Net Leverage Ratio (maximum permitted incurrence is 3.5 to 1.00) (1)			2.56
Total outstanding principal secured by a lien		$	3,805
Cash			(259	)
Consolidated Secured Net Debt		$	3,546
Consolidated Secured Net Leverage Ratio (maximum permitted incurrence is 5.50 to 1.00) (2)			3.79
Total outstanding principal, including current portion		$	5,809
Letters of credit outstanding			5
Cash			(259	)
Consolidated Total Net Debt		$	5,555
Consolidated Total Net Leverage Ratio (maximum permitted incurrence is 7.00 to 1.00)			5.94

(1) At any time any amounts are outstanding under our revolving credit facility, our maximum First Lien Leverage Ratio cannot exceed 4.25 to 1.00.

(2) For our 2023 Notes (2L) the maximum permitted Second Lien incurrence is 4.5 to 1.00.

Capital Expenditures. We currently expect that our routine capital expenditures will be approximately $120 million for the remainder of 2026, which includes several significant station construction projects and capital expenditures at Assembly Atlanta. Required public infrastructure investment at Assembly Atlanta is substantially complete, and future reimbursements of public infrastructure costs, if any, are expected to be less than $4 million.

Pending Acquisitions. For information on our recently completed and remaining pending acquisitions, see Note 3 "Acquisitions."

Other. We file a consolidated federal income tax return and such state and local tax returns as are required. During the first quarter of 2026, we made no material federal or state income tax payments. During the remainder of 2026, we anticipate making income tax payments within a range of $90 million to $110 million. As of March 31, 2026, we have an aggregate of approximately $259 million of various state operating loss carryforwards, of which we expect that a portion will not be utilized due to Internal Revenue Code Section 382 limitations, and those that will expire prior to utilization. After applying our state effective tax rate, this amount is included in our valuation allowance for deferred tax assets.

During the 2026 three-month period, we did not make a contribution to our defined benefit pension plan. During the remainder of 2026, we do not expect to contribute to this pension plan.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments and estimations that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. We consider our accounting policies relating to intangible assets to be critical policies that require judgments or estimations in their application where variances in those judgments or estimations could make a significant difference to future reported results. These critical accounting policies and estimates are more fully discussed in our 2025 Form 10-K.

Cautionary Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q (the "Quarterly Report") contains and incorporates by reference "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements are all statements other than those of historical fact. When used in this annual report, the words "believes," "expects," "anticipates," "estimates," "will," "may," "should" and similar words and expressions are generally intended to identify forward-looking statements. These forward-looking statements reflect our then-current expectations and are based upon data available to us at the time the statements are made. Forward-looking statements may relate to, among other things, our strategies, expected results of operations, general and industry-specific economic conditions, future pension plan contributions, future capital expenditures, future income tax payments, future payments of interest and principal on our long-term debt, assumptions underlying various estimates and estimates of future obligations and commitments, and should be considered in context with the various other disclosures made by us about our business. Readers are cautioned that any forward-looking statements, including those regarding the intent, belief or current expectations of our management, are not guarantees of future performance, results or events and involve significant risks and uncertainties, and that actual results and events may differ materially from those contained in the forward-looking statements as a result of various factors including, but not limited to, those listed in Item 1A. of our 2025 Form 10-K and the other factors described from time to time in our SEC filings. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to update such forward-looking statements to reflect subsequent events or circumstances.