Gray Media, Inc. · NYSE:GTN

Gray Media — Gray Television — Investor Presentation (October 2013)

33 slides from Gray Media's investor presentation, Oct 15, 2013

  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 June 30, 2013 Select Other Data as of September 2013 1

  2. Slide 2: Agenda

    Agenda  Company Overview Gray Television is a Dominant Mid-Market TV Platform with Significant Upside  Industry Overview Strong Industry Fundamentals and Growing Revenue Streams  Financial Overview Strong Momentum in the Core Business with Record Political and Retransmission Growth Gray Televisio

  3. Slide 3: 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

  4. Slide 4: Company Overview

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  5. Slide 5: Key Investment Highlights

    Key Investment Highlights  A Leading Television Broadcaster in Diverse Mid Markets with Dominant Market Positions  #1 or #2 market share in 29 out of 31 markets  Improving Advertising Market and Diversification of Revenue Mix  Strategic Acquisition and Duopoly Opportunities  Large Political Ups

  6. Slide 6: Gray Television is a Dominant Mid-Market TV Platform

    Gray Television is a Dominant Mid-Market TV Platform  88 total channels of programming spread Primary Channels by Affiliate: 46 1 across 31 attractive markets 5  46 channels affiliated with a “Big 4” 11% network and 42 additional channels1 8 17%  Reaches 6.2% of U.S. TV households, 22 48% signifi

  7. Slide 7: Gray Has a Diverse and National Footprint

    Gray Has a Diverse and National Footprint 31 markets reaching approximately 6.2% of US TV households Wausau - Omaha, NE Rhinelander, WI Lincoln - Hastings - La Crosse - Rockford, IL Kearney, NE Eau Claire, WI Madison, WI Parkersburg, WV South Bend, IN North Platte, NE Harrisonburg, VA Lansing, MI Le

  8. Slide 8: Key Recent Developments and Strategic Initiatives

    Key Recent Developments and Strategic Initiatives  Appointed new management structure in July 2013, with significant industry experience, to increase focus on:  Strategic growth: Kevin Latek  Station operations and performance: Nick Waller and Bob Smith  Digital media strategy: Jason Effinger 

  9. 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

  10. 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 12 12 10 9 10 71% 8 6  Gray’s late local Early Evening News Late Ne

  11. 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 Lincoln, NE 24 Topeka, KS 53 Bowling Green, KY 21 Lansing, MI 49 Charlottesville, VA 21 Tallahassee, FL 44 Ha

  12. 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

  13. 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% 4% 2% 1% Tribune Sinclair CBS FOX Gannett NBC ABC Hearst Media Nexstar EW Raycom Cox LIN TV Meredith Gray Journal Quincy Hoak General Scripps __________________

  14. 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

  15. 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

  16. 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 har lest o n / C har lest o n / 88 channels of programming: Hunt ing t o n, W V Omaha, N E Hunt ing t o n, W V Omaha, N E 8% 10 % 6% 7% 46 Big 4 Affiliates: Lexing t o n, KY 5%

  17. 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% 13.8%  #1 stations can capture

  18. Slide 18: Automotive Ad Spending on TV Continues to Grow and Still Below Peak Levels

    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 half of 2013 is up ~10%  In 2012, ~18% of Gray TV’s total broadcast advertising revenue was derived from automotive customers  TV auto

  19. Slide 19: Strong Growth in Retransmission Revenue

    Strong Growth in Retransmission Revenue  Over 50% of MVPD subscriber base Gray TV Retransmission Revenue renewed at year-end 2011 at ($ in millions) $33.8 significant increases  Approximately 2 million subs $20.2 $18.8 re-pricing in two deals in Q4 2013 $15.6  Remaining 4.5 million subs re-pricin

  20. 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, weather, sports $20.1  Demonstrated strong growth in page $11.9 $13.4 $11.4 views: ‘05 to ’12: +746% $9.5 $7.6 (30.6% CAGR)

  21. Slide 21: Unlocking the Value of Spectrum

    Unlocking the Value of Spectrum Significant Potential Upside from the Monetization of Spectrum  42 additional channels of programming (including 49 affiliations 1) with key networks including CW, MyNetwork TV, MeTv and Antenna TV  $14.9 million in 2012 Revenue  $8.2 million in BCF2 – 55% Margin 

  22. Slide 22: Industry Overview

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  23. 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 96 of the Top 100 Rated Programs are 88% Broadcast Programs (P18-49) Internet 73% Program Broadcast Cable Rank Stations TV

  24. 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 ($

  25. 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 

  26. Slide 26: Financial Overview

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  27. Slide 27: Historical Financial Overview – Continued Growth

    Historical Financial Overview – Continued Growth Net Revenue ($ in millions) $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) $174 $136 $25 $119 $2

  28. 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  2012 OCF conversion rate into FCF: 54% $50 $50  Equity value creation through strong free cash flow generation $18  Significant NOLs expected to $8 shield cash taxes in th

  29. Slide 29: Financial Leverage at Five Year Low

    Financial Leverage at Five Year Low  De-levered by over $100 million (~3.8x) between December 2009 and June 2013  Consistently reduced weighted average cost of debt  Gray now generates significant free cash flow in both political and non-political years Net Financial Leverage 1 ($ in millions) Ne

  30. 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  As of December 31, 2012, reduced total number of 39% employees by 367, or 15%, since December 31, 2007  Decreased ope

  31. Slide 31: YTD 6/30/2013 Operating Performance Update

    YTD 6/30/2013 Operating Performance Update YTD 2013 Highlights Net Revenue ($ in millions)  Strength in revenue driven by automotive and $163 retransmission, etc. $146  Local revenue +3% vs. 2012 and +6% vs. 2011  National Revenue +4% vs. 2012 and +8% vs. 2011  OCF +28% from 2010 to 2012 and +18

  32. Slide 32: Capitalization Overview

    Capitalization Overview Current and Pro Forma Capitalization ($ in Millions) Actual Pro Forma 1 6/30/2013 6/30/2013 Cash and Cash Equivalents $23.4 $23.4 $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

  33. Slide 33: 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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