Today, you are seeing those results in our core business. When I first discussed the opportunity of joining Gray with Hilton, it was clear that deleveraging was this top priority, which aligned with my view. Delevering is good for our shareholders, for our debt holders and for our employees. It’s also how we position the company to capitalize on changes in the media landscape and the most straightforward way to increase our equity value. In that light, earlier this week our Board authorized spending up to $250 million of liquidity for debt repurchases, giving us another tool to implement our delevering plan in an efficient way. In late January, Gray took advantage of strong market conditions to launch a refinancing of the revolver and 2026 term loan.
We successfully completed an amendment upsizing and extending the duration of our revolver with the banks who know us best, and we again thank them for their support. Obviously, the term-loan marketing process became more challenging with news from three other media companies regarding their plans to bundle their sports rights into a new virtual MVPD, which was completely misunderstood by the investment community in the first several days after its announcement. In the end, Gray made the decision to close the revolver and postponed the term-loan refi process until the new cycle quieted down, and we can capitalize on our positive outlook for 2024. Going forward, you should expect to see us act quickly when necessary but always in a smart way to manage our capital structure.
The company has been and will continue to be very thoughtful about the cost of capital as being measured over a period of time rather than at any specific point in time. And that’s extremely important. Our current low secured leverage at 2.34 times allows us access to multiple pockets of capital in the public and private markets. We also expect significant cash from political advertising later this year that will allow us to further reduce total indebtedness and extend our maturity profile. We believe that we can do all this in a way that is positive for all stakeholders. And lastly, as a new shareholder myself, I look forward to engaging further with all of our investors to maximize value for all of our stakeholders. And with that, I will turn the call back to Hilton for some closing remarks.
Hilton Howell: Thank you, Jeff, and welcome on board. I’ll leave all of you with this perspective. There are challenges in the media business, most of which are not of our making, but many of which provide opportunities for us. What we can control, our leading local franchises, expansion of digital ad cells, our retrans rates, expansion of sports content partnerships implementing NEXTGEN TV and probably most importantly, in the short-term where we deploy capital. All of those things are going exceptionally well. So operator, at this time, we ask that you open the line for any questions for me or anyone here at the table.
Operator: [Operator Instructions] The first up it looks like we have Daniel Kurnos. Your line is now open.
Daniel Kurnos : Great. Thanks good morning. Nice start to the year guys. Kevin, just a quick housekeeping. What’s left this year either by quarter or however you want to put it in terms of distribution renewals?
Kevin Latek: Good morning Dan. We have a very small number of contracts with cable companies to cover about 30% of the big four traditional MVPD subs. Those will be in the — come up in the second half of the year.
Daniel Kurnos : Perfect. And then look, the core — you guys have been harping on this for a while. I don’t think any of us years ago would have thought you guys would have beat in 2019 at this point perhaps been a good amount of time detailing it. But I mean, is this sustainable? How do you guys think this trends from here? And what are you guys doing differently to get such massive outperformance?
Pat LaPlatney: Hi, Dan, it’s Pat. I’ll start. Look, at a private company from 2010 through 2019, we watched core deteriorate slowly but steadily, mostly with the auto category for a long time and to be ahead of 2019 now is — in my mind, pretty remarkable. Do I think it’s sustainable? Yeah, I think, we can continue to grow. I think that we now have a much more diverse basket of advertisers. If you go back to ’18 or ’19, auto was probably 25% or 30%. Today, it is mid-to-high teens and services are a huge part of our revenue. And so I think we are in much better shape. I think the reasons for that at least for Gray, it’s our investment in training. It is our investment in going after having a team that focuses on certain categories, verticals, we’ve had that team in place now for years and the training in place probably eight years now. So it’s paying dividends for us. And I think, we absolutely have the capacity to continue to grow.
Sandy Breland: Yes. And this is Sandy, Dan. The other thing I would add to that — we talk a lot about our laser focus on new local direct and Pat talked about the increase over last year. But I’ll tell you, we challenge our stations, and they deliver month after month after month, continuing to set records there, and that is something we can control. And just one other point, we talked about the importance of strong content and strong rank stations, that also gives us an advantage and a competitive edge there.
Daniel Kurnos : All right. Thank you so much. I appreciate it guys.
Operator: Next up, we have Aaron Watts. Your line is now open.
Aaron Watts: Hi everyone. Thanks for having me on. I’ve got a couple of questions. One on core advertising, I heard your comments around core and the tough comps you’re up against in 2Q. Anything more you can kind of tell us on the underlying themes, areas of strength and softness looking forward? And any reason for optimism [and ATR] (ph) can improve from here despite some of the macro uncertainties that seem to still be weighing on advertiser decision-making.
Pat LaPlatney: Yes. Again, so we are a sort of the Main Street company as opposed to a Wall Street company. I think early in our comments, what we’re seeing is local businesses doing well and advertising with us at the end of the day. So looking at the categories, auto was — auto again had this long steady decline in to COVID, then it came out of COVID pretty strong, started to level off a little bit, but the services sector for us is extremely strong. We had a bump with the gambling category and now that’s a little sort of lumpy. Some quarters it is up, some quarters it’s down. But all in, if you look at the broad set of key categories for us, it is a good story. So again I think we are a better sales organization than we were a few years ago. and we’ve invested heavily in that area and I think we can continue to grow. Sandy, do you have a comment on that?
Sandy Breland: I agree. I mean it is the nice thing too — is we are seeing growth among multiple categories, not just auto but legal and particularly, we’ve done very well. And we continue to see that grow, furniture, restaurants as well, so we’re seeing it spread across multiple categories that growth.
Pat LaPlatney: I think our scale also adds a significant benefit. You go back and look at the company five years ago, a very different company than it is today.
Hilton Howell: Aaron, this is Hilton. I want to just add one other thing. And to the extent that they’re on this telephone line right now, it’s our people. Aaron, I mean we give them the tools to do their job and they execute. And one of the things I’m very, very proud of this company is we execute across the board. And at every moment, we do the right thing and carry it out and it all comes down to the people that we have in our TV stations in all of our 114 markets.
Aaron Watts: Okay. Got it. Thanks. On the debt repurchase program, to-date, I believe your focus has been on addressing that front-end term loan maturity. But you do also have debt trading at discounts to par value. How are you thinking about balancing, attacking the nearest maturities with perhaps capturing greater discounts to further your deleveraging aspirations. Is this authorization a sign of maybe being more open to repurchasing discounted debt securities than you’ve been open to previously?
Pat LaPlatney: Yes. Aaron, I think you nailed it. I mean it is a balanced approach. With the front end, the short maturities, we’ll have to address those in due course here, but we are not oblivious to the fact that we’ve got debt trading in the 60s, and it would be nice to capitalize on some of that to accelerate the deleveraging. Again not sacrificing our liquidity position or the need in the near-term, maybe reapproach the markets for the refi.
Operator: Next up we have Steven Cahall of Wells Fargo. Your line is now open.
Steven Cahall: Yeah. Thanks. I’ve got a few. So Kevin, I was wondering if you could just talk about the structure of reverse comp on a medium-term basis. It is something we’ve talked about before, but I think you are looking to potentially convert fixed programming fees to something that’s more variable. Just wondering if you’re having any early conversations around those and how you think those conversations may trend over time? And then, Pat, just to pick up on some of the advertising commentary. I think you are the first media company, I’ve heard in about 18 months to talk about national advertising being better. So I would love to know what’s going on underneath the surface there for Gray? And then lastly, Hilton so you talked about how Wall Street is kind of missing the point about the business fundamentals.
I know we can have a myopic view. I think a lot of the debate is just when there’s going to be free cash flow that’s available to the equity holder and how you can deleverage? So I’m wondering what you think about as potentially helping with deleveraging, whether you would look at asset sales, whether you look at changes to the dividend or whether you think you can get there purely organically?
