Gray Media, Inc. · NYSE:GTN

Gray Media — Gray Television — Deutsche Bank Media Internet and Telecom Conference 2014

37 slides from Gray Media's conference presentation, Mar 11, 2014

  1. Slide 1: Investor Presentation

    Investor Presentation NYSE: GTN Historical Financial Data as of June 30, 2 Investor Presentation Select Other Data as of September, 2013 Historical Financial Data as of December 31, 2013 Select Other Data as of March 11, 2013 1

  2. Slide 2: Summary

    Summary  Company Overview Gray Television is a Dominant Mid-Market TV Platform with Significant Upside • Selectively acquiring stations and/or entering into LMA or SSA Agreements ♦ Closed: 6 stations – 4 markets, October/November, 2013 ♦ Pending Acquisitions: 20 stations–26 affiliations–6 new marke

  3. Slide 3: Company Overview

    Company Overview Note: Certain station information in this presentation includes stations under LMA or SSA agreements with Gray. 3

  4. Slide 4: Key Investment Highlights

    Key Investment Highlights  A Leading Television Broadcaster in Diverse Mid Markets with Dominant Market Positions  #1 or #2 market rank in 31 out of 34 markets  Improving Advertising Market and Diversification of Revenue Mix  Strategic Acquisition Opportunities  Large Political Upside in Electi

  5. Slide 5: Gray Television is a Dominant Mid-Market TV Platform

    Gray Television is a Dominant Mid-Market TV Platform  110 total program streams spread across 34 “Big 4” Channels by Affiliate: 52 attractive markets 5  52 affiliations with a “Big 4” network and 10% 58 additional program streams1 9  Reaches 6.5% of U.S. TV households, 17% significantly below FCC

  6. Slide 6: Gray Has a Diverse and National Footprint

    Gray Has a Diverse and National Footprint 40 markets reaching approximately 7.3% of US TV households Sioux Falls, SD(3) Wausau - North Platte, NE(3) Lincoln, NE Omaha, NE Fargo, ND(3) Rapid City, SD(3) Rhinelander, WI Bismarck, ND(3) Rockford, IL La Crosse - Parkersburg, WV North Platte, NE Madison,

  7. Slide 7: Highly Experienced Senior Management

    Highly Experienced Senior Management Focused on maximizing potential of existing portfolio, while prudently pursuing strategic growth opportunities Years at Years in Name Background and Notable Achievements Gray TV Industry  CEO since 2008, Vice Chairman since 2002 and director since 1993 Hilton H

  8. Slide 8: The Importance of Being #1

    The Importance of Being #1 Price Leadership Reinvest Long History of Being #1 in the Market 1 in Business 12 12 12 12 12 13 Dominant 11 11 Reinvest News Reinvest in in Franchises Business Business Drive Traffic Share of '05/'06 '06/'07 '07/'08 '08/'09 '09/'10 '10/'11 '11/'12 '12/'13 Market Ad $ Netw

  9. Slide 9: Gray's Stations Dominate Local News and Information

    Gray’s Stations Dominate Local News and Information National Average vs. Gray CBS vs. Gray  Gray’s Early Evening November ’13 Household Share November ’13 Household Share newscasts 25 outperform the 19 19 national average by 15 12 12 12 11 9 9 10 73% 5  Gray’s late local Early Evening News Late Ne

  10. Slide 10: Stable Markets – Concentration on DMAs 61-208

    Stable Markets – Concentration on DMAs 61-208 With Focus on State Capitals / Collegiate Presence Approximate Approximate Market College(s) Enrollment Market College(s) Enrollment Charlottesville, VA Waco, TX 92 21 Topeka, KS 53 Reno, NV 19 Lansing, MI 49 Bowling Green, KY 18 Tallahassee, FL 43 Harri

  11. Slide 11: Operational Strategy Focused on Market Leadership and Growth

    Operational Strategy Focused on Market Leadership and Growth  Maintain and grow our market leadership position Monetize Spectrum  Continue to prudently invest in local content and news, syndicated programs, top talent Accretive Partnerships and community relationships  Seek new media opportunitie

  12. Slide 12: Gray TV has Significant Opportunity to Grow

    Gray TV has Significant Opportunity to Grow 44% FCC U.S. TV Household Cap of 39% 39% 38% 37% 30% 27% 23% 18% 15% 14% 13% 13% 11% 11% 10% 7.3% 4% 2% Tribune Sinclair CBS FOX Gannett NBC ABC Hearst Media Nexstar EW Raycom Cox LIN TV Meredith Gray Journal Quincy General Scripps ____________________ Sou

  13. Slide 13: Strategic Acquisition Opportunities

    Strategic Acquisition Opportunities Potential for Equity Value Creation Through Accretive Acquisitions Illustrative Stock Price Accretion  Industry continues to consolidate rapidly 15.0%  Gray TV’s strategic transactions should not be impacted by proposed regulatory Acquisitions thresholds 10.0% 

  14. Slide 14: Revenue Mix Continues to Diversify

    Revenue Mix Continues to Diversify  Growth in Net Revenue, driven by core revenue, political, retransmission and internet  Revenue mix continues to diversify from traditional ad-based sources to new media ad-based – Internet, and subscriber driven – Retransmission  Lowers overall revenue volatili

  15. Slide 15: Diversification Across Networks and Markets

    Diversification Across Networks and Markets Current Station Mix 2013 1 Revenue: Top 10 Markets 2013 1 BCF: Top 10 Markets 110 Total Program Streams:(4) Cha rle ston / O ma ha , NE Cha rle ston / Huntington, WV 6% O ma ha , NE Huntington, WV 10 % 7% 7% 52 Big 4 Affiliates:(4) Le xington, KY 6% Le xin

  16. Slide 16: Gray is the Leading Beneficiary of Political Revenue with Large Upside

    Gray is the Leading Beneficiary of Political Revenue with Large Upside Gray TV Political Commentary 2012 Political as % of Total Net Revenue  $86 Million in 2012 – New Record 21.2%  2011 Odd Year Record $13.5 million  Gray operates in key battleground states 15.1% 13.8%  #1 stations can capture

  17. Slide 17: Automotive Ad Spending on TV Continues to Grow

    Automotive Ad Spending on TV Continues to Grow and Still Below Peak Levels  Gray TV continues to benefit from the growth in auto ad spending  Auto is up ~8% in 2013  In 2013, ~25% of Gray TV’s total broadcast advertising revenue was derived from automotive customers  TV auto ad spending growth o

  18. Slide 18: Strong Growth in Retransmission Revenue

    Strong Growth in Retransmission Revenue Gray TV Retransmission Revenue(1)  Approximately 2 million subs(2) $39.8 re-priced in two deals in Q4 2013 ($ in millions) $33.8  Remaining 4.5 million subs(2) re- $18.8 $20.2 pricing between 12/31/14 and $15.6 3/31/15 $2.4 $3.0 $1.0 $1.6  Anticipate signif

  19. Slide 19: Successful Digital Media Initiatives

    Successful Digital Media Initiatives Gray TV Digital Media Revenue ($ in millions)  Operate web and mobile $25.0 $25.4 applications in all markets $20.1  Focused on local content: news, $13.4 weather, sports $11.9 $11.4 $9.5 $7.6 $6.4  All sites already converted to responsive design  Owns Moms

  20. Slide 20: Unlocking the Value of Spectrum

    Unlocking the Value of Spectrum Significant Potential Upside from the Monetization of Spectrum  Currently 58 additional program streams(1) with programming from key networks including CW, MyNetwork TV, Telemundo, MeTv and Antenna TV(3) 2013 2012 Yr/Yr %  $19.5 million in Net Revenue ■ $14.9 millio

  21. Slide 21: Industry Overview

    Television Digital * Mobile Industry Overview

  22. Slide 22: Television Continues to be the #1 Choice for Critical Mass Reach

    Television Continues to be the #1 Choice for Critical Mass Reach Among Advertisers TV Reaches More People than Any Other Medium TV is the Most Influential Local Media Television 96 of the Top 100 Rated Programs are 88% Broadcast Programs (P18-49) Internet 73% Program Broadcast Cable Rank Stations TV

  23. Slide 23: Strong Growth in Other Key Revenue Streams

    Strong Growth in Other Key Revenue Streams  Record level of political in 2012 and estimates for  Continued upside in retransmission fees, with 2016 project continued growth revenue projected to reach $7.1 billion in 2018 Industry-wide Political Spend on Local TV 1 Strong Growth in Retransmission R

  24. Slide 24: Significant Asset Value and Transaction Synergies for Television Broadcasters

    Significant Asset Value and Transaction Synergies for Television Broadcasters M&A Consolidation Stages  Stage 1: “Low hanging fruit”  TV broadcasting M&A activity has ramped up considerably  Stage 2: “Merger of smaller equals”  Sizeable individual transactions in 2013 and 2014 at attractive  St

  25. Slide 25: Financial Overview

    Television Digital * Mobile Financial Overview

  26. Slide 26: Historical Financial Overview – Continued Growth

    Historical Financial Overview – Continued Growth Net Revenue ($ in millions) $405 $346 $346 $327 $307 $307 $270 2007 2008 2009 2010 2011 2012 2013 ) YOY Growth 6% (17%) 28% (11%) 32% (14%) 2YOY Growth (12%) 6% 14% 17% 13% Operating Cash Flow 1 Capital Expenditures 2 ($ in millions) ($ in millions) $

  27. Slide 27: Record Free Cash Flow in 2012

    Record Free Cash Flow in 2012  Record free cash flow of $94 Free Cash Flow 1 million in 2012 ($ and shares in millions)  2012 OCF conversion rate into $94 FCF: 54% $50 $50 $38  Equity value creation through $18 strong free cash flow generation $8 2007 2008 2009 2010 2011 2012 2013 -$15  Signific

  28. Slide 28: Financial Leverage at Six Year Low

    Financial Leverage at Six Year Low  De-levered significantly (~4.0x) between December 2009 and December 2013  Consistently reduced weighted average cost of debt  Gray now generates significant free cash flow in both political and non-political years Net Financial Leverage 1 ($ in millions) Net De

  29. Slide 29: Prudent Cost Management and Increasing Margins

    Prudent Cost Management and Increasing Margins Increasing Operating Cash Flow Margins  Gray TV continues to grow operating margins through 43% identified operational 39% 36% efficiencies 33% 32% 26%  Decreased operating costs by converting to digital 2008 2009 2010 2011 2012 2013 Historical “As Re

  30. Slide 30: YTD 2013 Operating Performance Update

    YTD 2013 Operating Performance Update YTD 2013 Highlights Net Revenue ($ in millions)  Strength in revenue driven by automotive and retransmission, etc. $346 $307  Local revenue +6% vs. 2012 and +9% vs. 2011  National Revenue +3% vs. 2012 and +3% vs. 2011  OCF +18% from 2011 to 2013 YTD 2011 YTD

  31. Slide 31: Recent Acquisitions/Investments

    Recent Acquisitions/Investments  Gray and Excalibur Broadcasting closed KJCT acquisitions October 31, 2013.  KJCT-ABC, CW and Telemundo, Grand Junction  Gray has SSA with Excalibur  Yellowstone Television – November 1, 2013  $23 million investment for 99% voting interest  Yellowstone owns KGNS

  32. Slide 32: Capitalization Overview

    Capitalization Overview Current and Pro Forma Capitalization ($ in Millions) Actual 12/31/2013 Cash and Cash Equivalents $13.5 $40MM Revolver due 2017 $0.0 Term Loan B due 2019 (L + 3502 / 1.0% LIBOR Floor) 159.0 Total First Lien Debt $159.0 7.500% Senior Unsecured Notes due 2020 675.0 Other 3.0 Tot

  33. Slide 33: Announced Acquisitions

    Announced Acquisitions (closings subject to regulatory approval expected Q2, 2014) Recently announced acquisitions by Gray/Excalibur of: Hoak Media, LLC Parker Broadcasting, Inc. Prime Cities Broadcasting, Inc. (Fox) Lockwood (CW), and Mission TV, LLC (Fox) Each acquisition brings: • Immediately acc

  34. Slide 34: Announced Acquisitions

    Announced Acquisitions (closings subject to regulatory approval expected Q2, 2014) Purchaser Seller Price Market DMA Affiliation Station(s) Gray/Excalibur Hoak Media, $297.5 Lincoln-Hastings- 105 NBC KHAS(2) LLC/ Parker Million Kearney, NE Broadcasting, Sioux Falls, SD 111 ABC & CW KSFY/KABY/ KPRY(1

  35. Slide 35: Announced Acquisitions

    Announced Acquisitions (closings subject to regulatory approval expected Q2, 2014) Purchaser Seller Price Market DMA Affiliation Station(s) Excalibur Prime Cities $7.5 Million Minot-Bismarck- 145 FOX KNDX/KXND Broadcasting, Inc. Dickinson, ND Gray Lockwood $5.5 Million Charleston-Huntington, 65 CW W

  36. Slide 36: Pro Forma – All transactions closed and announced

    Pro Forma – All transactions closed and announced Own/Operate stations: • 40 markets / DMA’s 61-208 / 7.3% U.S. Households • #1 Ranked 27 of 40 markets / #1 or #2 Ranked in 37 of 40 markets • 136 program streams •73 Big 4 Affiliations Currently Pending(1) Pending Total Owned Operated Launch Acquisit

  37. Slide 37: Safe Harbor

    SAFE-HARBOR Certain statements in this presentation constitute “forward-looking statements” within the meaning of and subject to the protections the Private Securities Litigation Reform Act of 1995 and other federal and state securities laws. Such forward-looking statements involve known and unknown

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