Slide 1: Deutsche Bank Presentation
Gray Television, Inc. Deutsche Bank Presentation NYSE:GTN Schurz Acquisition Transaction – March 2016 1
Slide 2: Disclaimer
Disclaimer This presentation contains certain forward-looking statements that are based largely on Gray’s current expectations and reflect various estimates and assumptions by Gray. These statements may be identified by words such as “expect,” “anticipate,” “will,” “implied,” “assume” and similar ex
Slide 3: Company Overview
Company Overview An Industry Leading Power 3
Slide 4: Record As-Reported Historical Results for 2015
Record As-Reported Historical Results for 2015 Does not include Schurz and Related Transactions Year Ended December 31, % % Change Change 2015 to 2015 to 2015 2014 2014 2013 2013 (dollars in thousands, except per share data) Revenue (less agency commissions): Total $ 597,356 $ 508,134 18 % $ 346,298
Slide 5: Record Combined Historical Results for 2015
Record Combined Historical Results for 2015 Does not include Schurz and Related Transactions Year Ended December 31, % % Change Change 2015 to 2015 to 2015 2014 2014 2013 2013 (dollars in thousands, except per share data) Revenue (less agency commissions): Total $ 621,302 $ 621,018 0 % $ 510,977 22
Slide 6: Gray with Schurz and Related Transactions
Gray with Schurz and Related Transactions Gray Television, Inc. 6" 6
Slide 7: Schurz & Related Completed Acquisitions
Schurz & Related Completed Acquisitions ! On February 16, 2016, Gray TV (“Gray” or the “Company”) announced that it had closed the acquisition of certain TV assets of Schurz Communications, Inc. (“Schurz”) and certain related transactions for $415.3 million, excluding fees and expenses, but inclusiv
Slide 8: Overview of #1 Television Stations Acquired
Overview of #1 Television Stations Acquired 2014 BIA 2014 BIA DMA Affiliate Revenue Revenue Rank Market Station Primary Secondary Rank Share KWCH Weather+ 1 33% 65 Wichita - Hutchinson, KS KSCW 5 4% (1) KDCU - 7 2% 67 Roanoke-Lynchburg, VA WDBJ 1 34% KY3 Weather+ 1 44% (2) 75 Springfield, MO KSPR 3
Slide 9: Overview of Other Television Stations Acquired
Overview of Other Television Stations Acquired 2014 BIA 2014 BIA DMA Affiliate Revenue Revenue Rank Market Station Primary Secondary Rank Share 62 Knoxville, TN WBXX 5 6% Purchased from Lockwood in exchange for KAKE in Wichita, KS. Gray also owns WVLT, the CBS affiliate in Knoxville. 112 Augusta, GA
Slide 10: Snapshot
Snapshot Gray TV Schurz Pro Forma – All transactions ($ in Millions) (9) Financial Profile (2) 2014 Net Revenue $621 $154 $746 (2,3) 2014 Broadcast Cash Flow $277 $64 $337 (2,3) 2014 Operating Cash Flow (1) $257 $64 $317 Scale Stations 77 11 88 Markets 46 7 50 TV Household Reach 9.6 million (8.5%) 2
Slide 11: Acquisition Rationale
Acquisition Rationale Reinforces ! Demonstrates Gray’s commitment to acquire high-quality stations in attractive markets Gray’s Market ! Gray owns and/or operates the #1 or #2 ranked stations in 49/50 markets Leadership ! Provides Gray with the top-rated and highest grossing television stations in s
Slide 12: Gray National Footprint
Gray National Footprint Ranked #1 or #2 in 49 of 50 Markets Reaching approximately 9.4% of US TV households Rapid City, SD Lincoln, NE Sioux Falls, SD Omaha, NE Wausau - Rockford, IL Lansing, MI North Platte, NE Rhinelander, WI Fargo, ND Cedar Rapids, IA Flint, MI Bismarck, ND Madison, WI Casper, WY
Slide 13: Gray Leads Industry In Operating Margins
Gray Leads Industry In Operating Margins 2014 EBITDA Margins (1) 42% (2) (3) 37% 36% 35% 33% 31% (4) 25% (5) 18% (6) 10% Nexstar Sinclair Media General Entravision Tribune TEGNA Meredith Scripps Source: Company filings, Investor presentations Note: Based on “as-reported” financials for all companies
Slide 14: Significant Scale Poised for Long-Term Success
Significant Scale Poised for Long-Term Success Net Revenue BCF OCF FCF 2014 PF (in millions) $746 $337 $317 $189 181 program streams 94 “Big 4” network affiliations 14 channels 93 stations 35 channels 50 markets 19 channels 18 markets with two “Big 4” network affiliations 5 markets with three “Big 4
Slide 15: The Importance of Being #1
Gray Leads the Industry with the Highest Quality Portfolio of Local Television Stations ! Dominate local and political The Importance of Being #1 revenue with highly-rated news platforms Price ! #1 Stations can secure more than Leadership half of a market’s political ad Share of buys Market Ad $ Net
Slide 16: The Importance of Being #1
The Importance of Being #1 Long History of Being #1 in the Market(1) 19 18 19 19 19 16 17 16 15 2006 2007 2008 2009 2010 2011 2012 2013 2014 CBS National Ranking 1 1 2 1 1 1 1 1 1 19 17 17 15 14 15 14 13 14 2006 2007 2008 2009 2010 2011 2012 2013 2014 NBC National Ranking 3 3 4 4 4 4 4 3 3 8 7 7 7 7
Slide 17: Gray's Stations Over-Index Every Major Network
Gray’s Stations Over-Index Every Major Network(1) CBS vs. Gray November ’14 Household Share CBS, NBC, and ABC perform +73%10 15 17 12 12 10 far better on Gray’s stations 9 Amount by which Gray’s late local newscasts 5 than national averages outperform the national average… The Morning Network News P
Slide 18: Gray Dominates Local News and Information
Gray Dominates Local News and Information(1) +91% National Average vs. Gray Amount by which Gray’s late November ’14 Household Share local newscasts outperform the national average… 27 +80% 21 15 Amount by which Gray’s 6PM newscasts outperform the 11 national average… Gray’s national 6PM News Late N
Slide 19: Gray Has Long-Term Ratings Growth
Gray Has Long-Term Ratings GROWTH November DMA Rating – All Viewing(1) 5% Ratings Growth Since 2010 5.9 5.9 5.7 5.6 5.6 2010 2011 2012 2013 2014 (1) Nielsen November DMA Average Rating in DMA TV HH Monday-Sunday 6:00am to 2:00am Note: Pro forma for all completed transactions Gray Television, Inc. 19
Slide 20: Gray Leads the Industry in Household Ratings
Gray Leads the Industry in Household Ratings Household Rating Analysis – November 2014(1) 5.9 5.2 4.9 4.9 4.4 4.1 3.9 3.8 3.7 3.6 3.3 3.2 3.1 2.7 2.5 Cox Raycom Media Hearst Meredith TEGNA ABC O&O Sinclair Viacom-CBS Nexstar Tribune Scripps NBC O&O Fox General (1) Nielsen November DMA Average Rating
Slide 21: Network and Retrans Visibility
Network and Retrans Visibility All 14 @ 6/30/19 5 @ 9/30/17 All 26 @ 12/31/18 All 19 @ 12/31/20 30 @ 8/31/19 2016 2017 2018 2019 2020 2018 Retrans Renewals 4.2 M Subs 6.4 M Subs 1.0 M Subs 2022 All 21 @ 9/1/22 Gray Television, Inc. 21"21
Slide 22: Gray Excels at Retrans
Gray Excels at Retrans Gray Retransmission Revenue in Millions ! Approximately 11.6 million Big-4 Affiliate subscribers total across all markets Retransmission Revenue ! Approximately 1.0 million Big-4 Affiliate Network “Reverse Comp.” subscribers re-priced on or before “Net Retransmission Revenue”
Slide 23: Significant Opportunity for Continued M&A
Significant Opportunity for Continued M&A 44% 38% FCC U.S. TV Household Cap: 39% 31% 23% 19% 18% 18% 14% 11% 11% 9.4%(1) 6% 4% 4% 3% 3% 3% 2% 2% 1% ... Tribune Sinclair TEGNA Media Hearst EW Nexstar Raycom Cox Meredith Graham Weigel Hubbard Sunbeam Calkins Quincy Bahakel Dispatch Capitol General Scr
Slide 24: Investment Highlights
mp otay ° Digital ° Mobile Investment Highlights ee ISIS Qasr eT EE CLUSOn
Slide 25: Key Credit Highlights
Key Credit Highlights A Leading Television Broadcaster in Diverse Mid-Markets with Dominant Market Positions Stable Advertising Market and Diversification of Revenue Mix Large Political Upside in Election Years with Presence in Key States. Larger Political Upside in Presidential Election Years Stron
Slide 26: Acquisitions Closed in 2013 through February 2016 Significantly Increased Scale and Margins
Acquisitions Closed in 2013 through February 2016 Significantly Increased Scale and Margins Summary Financial Metrics ’13A/’14A Blended 2-Year Averages In Millions As Reported Pro Forma $678 $427 $292 $275 $175 $154 $150 $67 Revenue BCF OCF FCF Revenue BCF OCF FCF % Margin 41% 36% 44%(1) % Margin 43
Slide 27: Diversification Across Networks and Markets
Diversification Across Networks and Markets 2014PF Revenue by Affiliate: 2014PF BCF by Affiliate: Station Mix(1) $746mm (1) $337mm (1), (3) 181 Total Program Streams: All Secondary All Secondary Channels & Other Channels & Other 94 Big 4 Affiliates: 5% 3% 4% 3% " 35 CBS " 26 NBC 17% 16% " 19 ABC 38%
Slide 28: Stable Markets – Concentration on DMAs 62-209
Stable Markets – Concentration on DMAs 62-209 with Focus on State Capitals / Collegiate Presence ! Gray stations cover 11 state capitals and 27 university towns ! Better demographics, more stable economies ! Enrollment of approximately 634,000 students Approximate Approximate Market College(s) Enrol
Slide 29: Revenue Mix Continues to Diversify
Revenue Mix Continues to Diversify ! Growth in net revenue, driven by increases in core revenue, political, retransmission and internet revenues ! Revenue mix continues to diversify from traditional ad-based sources to new media – internet and subscriber driven – and retransmission revenue ! Diversi
Slide 30: November 8, 2016 Elections
November 8, 2016 Elections Open Presidential Contest 1 Gray Markets in 6 out of 7 Predicted 2016 Swing States 5 Ballot Presidential Initiatives & Primaries & Referendums General 34 Senate Races 9 Competitive Races in Gray Markets (CO, FL, GA, IL, IN, NV, NC, OH, WI) Federal State & Races Local 2 Rac
Slide 31: Gray is a Leading Beneficiary of Political Revenue
Gray is a Leading Beneficiary of Political Revenue with Large Upside in Presidential Years Gray Political Revenue in Millions $143 $118 $86 $82 New New Record Record Presidential Non- $58 Year Presidential $48 Year 2008 2010 2012 2014 2012PF 2014PF 2014 Political Revenue Per TV Household $11.03 $ $4
Slide 32: Successful Digital Media Initiatives
Successful Digital Media Initiatives ! Operates web and mobile applications in all Gray Digital Media Revenue in Millions markets ! Approximately 80% of all traffic is Anticipate 3+ Billion Digital Ads Served in 2015 mobile ! Focused on local content: news, weather, sports ! Estimating 2 Billion pag
Slide 33: Significant Potential Upside from Spectrum Monetization Opportunities
Significant Potential Upside from Spectrum Monetization Opportunities " One of first broadcasters to monetize digital spectrum " 99 secondary channels of programming today " Opportunities to benefit from the 2016 FCC Broadcast Incentive Auction " Potential opportunities from future changes to new br
Slide 34: Financial Overview
mp otay ® Digital e Mobile Financial Overview mie = oom S sray SEOE OB ee ISIS Qasr eT EE CLUSOn
Slide 35: Gray's Financial Scale Continues to Increase
Gray’s Financial Scale Continues to Increase Net Revenue (1) LTM L8QA $746 $678 $610 ($ in Millions) $508 $405 $427 $346 $356 $346 $376 $308 $307 $327 2010 2011 2012 2013 2014 2013PF (2) 2014PF (2) '13/'14 PF ) (2) L8QA Growth 3% 6% 9% 5% 14% -- -- -- LTM 2-Yr. Growth 6% 14% 17% 13% 25% -- -- -- Ope
Slide 36: Robust Free Cash Flow Generation
Robust Free Cash Flow Generation Presidential Election Year Non Election Year Non Presidential Election Year 2015 and 2016 FCF 2012 OCF Buildup (1), (2) 2013 OCF Buildup (1), (2) 2014 OCF Buildup (1), (2) Drivers ($ in millions) ($ in millions) ($ in millions) 48% 61% $233 60% Local $330 $317 Presid
Slide 37: Prudent Balance Sheet Management Leads to Deleveraging
Prudent Balance Sheet Management Leads to Deleveraging ! Gray has significantly reduced secured and total leverage from historical levels ! Gray has diversified its revenue base, allowing for significant free cash flow in both political and non-political years Net Financial Leverage (1) ($ in millio
Slide 38: Sources & Uses and Capitalization
Sources & Uses and Capitalization Gray + Schurz Acquisition Current & Pro Forma Capitalization ($ in millions) Acq. Of Cum. Cum. X Cum. Schurz Cum. X Actual L8QA X LTM Broadcast Pro Forma X L8QA LTM 12/31/2015 OCF(1) OCF(2) Assets(3) 12/31/2015 OCF(4) OCF(5) Cash & Equivalents $97 (6) 91 Priority Re
Slide 39: Pro Forma 9/30/15 L8QA Reconciliation
Pro Forma 9/30/15 L8QA Reconciliation YTD ($ in millions) 2013PF1 2014PF Q3'13PF Q3'14PF Q3'15PF LTM 9/30/14 PF LTM 9/30/15 PF L8QA 9/30/15 PF Net Revenues Local 297.2 300.3 214.9 220.1 232.4 302.4 312.6 307.5 National 91.4 87.5 66.6 63.4 66.1 88.2 90.2 89.2 Political 6.8 93.5 4.1 40.5 8.5 43.3 61.5
Slide 40: Pro Forma Annual Results 2012-2014
Pro Forma Annual Results 2012-2014 Selected Operating Data on Combined Historical Basis Year Ended December 31 % % Change Change 2014 to 2013 to 2014 2013 2013 2012 2012 (in thousands except per share data) Revenue (less agency commissions): Total $ 745,765 $ 609,917 22 % $ 684,884 9% Political $ 11
Slide 41: Record Pro Forma Results YTD, September 2015
Record Pro Forma Results YTD, September 2015 Selected Operating Data on Combined Historical Basis Nine Months Ended September 30, % % Change Change 2015 to 2015 to 2015 2014 2014 2013 2013 (in thousands, except per share data) Revenue (less agency commissions): Total $ 532,273 $ 515,525 3% $ 445,724
Slide 42: Combined Historical Results – Pro Forma
Combined Historical Results(1) – Pro Forma Pro Forma Non-GAAP Reconciliation Year Ended December 31, Nine Months Ended September 30, 2012 2013 2014 2013 2014 2015 L8QA 2015 (in thousands) Net income $ 96,027 $ 50,911 $ 100,845 $ 30,772 $ 51,025 $ 35,305 $ 78,144 Adjustments to reconcile from net inc
Slide 43: Non-GAAP Reconciliation
Non-GAAP Reconciliation Gray Television, Inc. Year Ended December 31, 2012 Combined Schurz and As Reported Historical Related Basis Other Acquisitions Adjustments Basis Transactions Adjustments Pro-Forma Net income $ 28,129 $ 48,253 $ (5,840) $ 70,542 $ 29,409 $ (3,924) $ 96,027 Adjustments to recon
Slide 44: Non-GAAP Reconciliation, continued
Non-GAAP Reconciliation, continued Gray Television, Inc. Year Ended December 31, 2013 Combined Schurz and As Reported Historical Related Basis Other Acquisitions Adjustments Basis Transactions Adjustments Pro-Forma Net income $ 18,288 $ 31,477 $ (10,575) $ 39,190 $ 16,157 $ (4,435) $ 50,911 Adjustme
Slide 45: Non-GAAP Reconciliation, continued
Non-GAAP Reconciliation, continued Gray Television, Inc. Year Ended December 31, 2014 Combined Schurz and As Reported Other Historical Related Basis Transactions Adjustments Basis Transactions Adjustments Pro-Forma Net income $ 48,061 $ 29,799 $ (2,008) $ 75,852 $ 29,303 $ (4,311) $ 100,845 Adjustme
Slide 46: Non-GAAP Reconciliation, continued
Non-GAAP Reconciliation, continued Gray Television, Inc. Nine Months Ended September 30, 2013 Combined Schurz and As Reported Historical Related Basis Other Acquisitions Adjustments Basis Transactions Adjustments Pro-Forma Net income $ 13,087 $ 18,609 $ (8,634) $ 23,062 $ 11,179 $ (3,468) $ 30,772 A
Slide 47: Non-GAAP Reconciliation, continued
Non-GAAP Reconciliation, continued Gray Television, Inc. Nine Months Ended September 30, 2014 Combined Schurz and As Reported Historical Related Basis Other Acquisitions Adjustments Basis Transactions Adjustments Pro-Forma Net income $ 16,808 $ 22,780 $ (1,826) $ 37,762 $ 16,272 $ (3,010) $ 51,025 A
Slide 48: Non-GAAP Reconciliation, continued
Non-GAAP Reconciliation, continued Gray Television, Inc. Nine Months Ended September 30, 2015 Combined Schurz and As Reported Other Historical Related Basis Transactions Adjustments Basis Transactions Adjustments Pro-Forma Net income $ 24,314 $ 6,880 $ - $ 31,194 $ 6,730 $ (2,619) $ 35,305 Adjustmen
Slide 49: Non-GAAP Reconciliation, continued
Non-GAAP Reconciliation, continued Gray Television, Inc. Last Eight Quarters Ended September 30, 2015 Combined Schurz and As Reported Other Historical Related Basis Transactions Adjustments Basis Transactions Adjustments Pro-Forma L8QAOCF Net income $ 77,576 $ 49,547 $ (3,949) $ 123,174 $ 41,010 $ (
Slide 50: Glossary
Glossary “Combined Historical Basis”: Combined Historical Basis reflects financial results, position or statistics that have been prepared by adding Gray’s historical financial results, position or statistics with the historical financial results, position or statistics of the Completed Acquisitions
Slide 51: Non-GAAP Terms
Non-GAAP Terms From time to time, Gray supplements its financial results prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) by disclosing the non-GAAP financial measures Broadcast Cash Flow, Broadcast Cash Flow Less Cash Corporate Expenses,
Slide 52: Investor Presentation
mp otay ® Digital e Mobile Investor Presentation ee ISIS Qasr eT EE CLUSOn