Gray Media, Inc. · NYSE:GTN
Gray Media — Gray Television — Wells Fargo Securities Tech, Media & Telecom Conference 2013
35 slides from Gray Media's conference presentation, Nov 13, 2013
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 September 30, 2013 Select Other Data as of November 1, 2013 1
Slide 2: Summary
Summary Company Overview Gray Television is a Dominant Mid-Market TV Platform with Significant Upside • Selectively acquiring stations Industry Overview Strong Industry Fundamentals and Growing Revenue Streams Financial Overview Strong Momentum in the Core Business with Record Political and Re
Slide 3: Company Overview
Company Overview Note: Certain station information in this presentation includes stations under LMA or SSA agreements with Gray. 3
Slide 4: Key Investment Highlights
Key Investment Highlights A Leading Television Broadcaster in Diverse Mid Markets with Dominant Market Positions #1 or #2 market share in 32 out of 34 markets Improving Advertising Market and Diversification of Revenue Mix Strategic Acquisition and Duopoly Opportunities Large Political Ups
Slide 5: Gray Television is a Dominant Mid-Market TV Platform
Gray Television is a Dominant Mid-Market TV Platform 98 total channels of programming spread “Big 4” Channels by Affiliate: 51(1) across 34 attractive markets 5 51 channels affiliated with a “Big 4” 10% network and 47 additional channels 1 9 18% Reaches 6.5% of U.S. TV households, 23 45% signi
Slide 6: Gray Has a Diverse and National Footprint
Gray Has a Diverse and National Footprint 34 markets reaching approximately 6.5% of US TV households Cheyenne, WY (1) North Platte, NE Omaha, NE Wausau - Rhinelander, WI Rockford, IL Lincoln - Hastings - La Crosse - Parkersburg, WV Kearney, NE Eau Claire, WI Madison, WI Casper, WY (1) South Bend, IN
Slide 7: Key Recent Developments and Strategic Initiatives
Key Recent Developments and Strategic Initiatives Appointed new management structure in July 2013, with significant industry experience On November 1, 2013, Gray invested $23 million, acquired: 99% non-voting interest in Yellowstone Television KGNS-NBC Laredo, TX KGWN-CBS and KCHY-NBC Chey
Slide 8: 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
Slide 9: 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 11 11 Dominant 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 Market Ad $ Network and Net
Slide 10: 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 ’12 Household Share November ’12 Household Share newscasts 24 23 outperform the 15 national average by 14 15 10 12 12 10 8 9 71% 6 Gray’s late local Early Evening News Late Ne
Slide 11: 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 Waco, TX 62 Bowling Green, KY 21 Topeka, KS 53 Charlottesville, VA 21 Lansing, MI 49 Harrisonburg, VA 20 Tallahassee, FL
Slide 12: 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
Slide 13: Gray TV has Significant Opportunity to Grow
Gray TV has Significant Opportunity to Grow 44% 39% 38% FCC U.S. TV Household Cap of 39% 37% 30% 27% 23% 18% 15% 14% 13% 13% 11% 11% 10% 6.5% 4% 2% 1% Tribune Sinclair CBS FOX Gannett NBC ABC Hearst Media Nexstar EW Raycom Cox LIN TV Meredith Gray Journal Quincy Hoak ____________________ General Scr
Slide 14: Strategic Acquisitions and Duopoly Opportunities
Strategic Acquisitions and Duopoly Opportunities Potential for Equity Value Creation Through Accretive Acquisitions / Duopolies Industry continues to consolidate rapidly Illustrative Stock Price Accretion Gray TV’s strategic transactions should 15.0% not be impacted by proposed regulatory thresh
Slide 15: 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
Slide 16: Diversification Across Networks and Markets
Diversification Across Networks and Markets Current Station Mix 2012 1 Revenue: Top 10 Markets 2012 1 BCF: Top 10 Markets C harleston / C harleston / 98 total channels of programming:(4) Huntington, WV Omaha, NE Huntington, WV Omaha, NE 8% 10% 6% 7% Lexington, KY 51 Big 4 Affiliates:(4) 5% M adison,
Slide 17: 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 $13.5 million Gray operates in key battleground states 15.1% #1 stations can capture over 5
Slide 18: Automotive Ad Spending on TV Continues to Grow
Automotive Ad Spending on TV Continues to Grow and Still Below Peak Levels Gray TV continues to benefit from the growth in auto ad spending Auto for the first three quarters of 2013 is up ~8% In 2012, ~18% of Gray TV’s total broadcast advertising revenue was derived from automotive customers
Slide 19: Strong Growth in Retransmission Revenue
Strong Growth in Retransmission Revenue Gray TV Retransmission Revenue Over 50% of MVPD subscriber base renewed at year-end 2011 at ($ in millions) $33.8 3% significant increases R :8 AG 2C 01 Approximately 2 million subs 08-2 0 K2 $18.8 $20.2 re-pricing in two deals in Q4 2013 $15.6 Remaining
Slide 20: Successful Digital Media Initiatives
Successful Digital Media Initiatives Operate web and mobile Gray TV Digital Media Revenue applications in all markets ($ in millions) $25.0 Focused on local content: news, R: 2 1% CAG weather, sports 5-20 12 $20.1 200 Demonstrated strong growth in page $13.4 $11.9 $11.4 views: ‘05 to ’12: +746
Slide 21: Unlocking the Value of Spectrum
Unlocking the Value of Spectrum Significant Potential Upside from the Monetization of Spectrum Currently 47 additional channels of programming (including 56 affiliations 1) with key networks including CW, MyNetwork TV, Telemundo, MeTv and Antenna TV (3) $14.9 million in 2012 Revenue $8.2 milli
Slide 22: Industry Overview
gray ision * Digital * Mobile Industry Overview
Slide 23: Television Continues to be the #1 Choice for Critical Mass Reach Among Advertisers
Television Continues to be the #1 Choice for Critical Mass Reach Among Advertisers TV Reaches More People than Any Other Medium TV is the Most Influential Local Media Television 88% 96 of the Top 100 Rated Programs are Broadcast Programs (P18-49) Internet 73% Program Broadcast Cable Rank Stations TV
Slide 24: Strong Growth on Other Key Revenue Streams
Strong Growth on Other Key Revenue Streams Record level of political in 2012 and estimates for TV broadcasting captures 35% of viewers but 2014 and 2016 project continued growth only 7% of Retransmission Fees Industry-wide Political Spend on Local TV 1 Strong Growth in Retransmission Revenue ($
Slide 25: 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 at attractive valuations
Slide 26: Financial Overview
gray Television ¢ Digital * Mobile Financial Overview
Slide 27: Historical Financial Overview – Continued Growth
Historical Financial Overview – Continued Growth Net Revenue ($ in millions) G R: 5% 2008-2012 CA $405 $346 $327 $307 $307 $270 2007 2008 2009 2010 2011 2012 ) YOY Growth 6% (17%) 28% (11%) 32% 2YOY Growth (12%) 6% 14% 17% Operating Cash Flow 1 Capital Expenditures 2 ($ in millions) ($ in millions)
Slide 28: 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) % $94 R : 17 12 CAG 2012 OCF conversion rate into 08 -20 20 FCF: 54% $50 $50 Equity value creation through strong free cash flow generation $18 Significant NOLs expected to
Slide 29: Financial Leverage at Five Year Low
Financial Leverage at Five Year Low De-levered by over $100 million (~4.1x) between December 2009 and September 2013 Consistently reduced weighted average cost of debt Gray now generates significant free cash flow in both political and non-political years Net Financial Leverage 1 ($ in million
Slide 30: Prudent Cost Management and Increasing Margins
Prudent Cost Management and Increasing Margins Gray TV continues to grow Increasing Operating Cash Flow Margins operating margins through identified operational 43% efficiencies b ps 6 50 f~ no As of December 31, 2012, ns io p a reduced total number of x ne rgi employees by 367, or 15%, Ma 39% s
Slide 31: YTD 9/30/2013 Operating Performance Update
YTD 9/30/2013 Operating Performance Update YTD 2013 Highlights Net Revenue ($ in millions) Strength in revenue driven by automotive and + 13% retransmission, etc. $223 $251 Local revenue +4% vs. 2012 and +7% vs. 2011 National Revenue +1% vs. 2012 and +5% vs. 2011 OCF +28% from 2010 to 2012 a
Slide 32: Recent Bond Transaction Overview
Recent Bond Transaction Overview Gray Television, Inc. (“Gray” or the “Company”) issued $375 million add-on to its existing 7.50% Senior Unsecured Notes due 2020 (the “Existing Notes”) Issue Price 102.125% with aggregate gross proceeds approximately $383 million Net proceeds from the new Notes
Slide 33: Recent Acquisitions/Investments
Recent Acqusitions/Investments Gray and Excalibur Broadcasting closed KJCT acquisitions October 31, 2013. KJCT-ABC Grand Junction Gray has SSA with Excalibur Yellowstone Television – November 1, 2013 $23 million investment for 99% non-voting interest Yellowstone owns KGNS-NBC Laredo, TX
Slide 34: Capitalization Overview
Capitalization Overview Current and Pro Forma Capitalization ($ in Millions) Actual Pro Forma 1 9/30/2013 9/30/2013 Cash and Cash Equivalents $43.3 $12.0 $40MM Revolver due 2017 $0.0 $0.0 Term Loan B due 2019 (L+350 2 / 1.0% LIBOR Floor) 535.0 159.0 Total First Lien Debt $535.0 $159.0 7.500% Senior
Slide 35: 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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