Gray Media, Inc. · NYSE:GTN
Gray Media — Gray Television — Debt Investor Presentation (January 2016)
50 slides from Gray Media's debt investor presentation, January 2016
Slide 1: Gray Television Lender Presentation
Gray Television, Inc. Lender Presentation NYSE:GTN Schurz Financing Transaction – January 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: Transaction Overview
Transaction Overview On September 14, 2015, Gray TV (“Gray” or the “Company”) announced that it had reached an agreement to acquire all of the television and radio assets of Schurz Communications, Inc. (“Schurz”) for $442.5 million, inclusive of working capital The purchase price represents a mu
Slide 5: Acquisition Rationale
Acquisition Rationale Reinforces Demonstrates Gray’s commitment to acquire high-quality stations in attractive markets Gray’s Market Gray will own the #1 ranked station in 40/50 markets, and the #1 or #2 ranked stations in 49/50 markets Leadership Provides Gray with the top-rated and highest g
Slide 6: Acquisition Snapshot
Acquisition Snapshot Schurz Pro Forma – All announced ($ in Millions) Gray TV transactions (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 Reac
Slide 7: Gray Pro Forma National Footprint
Gray Pro Forma 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 Fargo, ND Rhinelander, WI Cedar Rapids, IA Flint, MI Bismarck, ND Madison, WI
Slide 8: Overview of #1 Television Stations to be Acquired
Overview of #1 Television Stations to be 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 K
Slide 9: Overview of Other Television Stations to be Acquired
Overview of Other Television Stations to be acquired: 2014 BIA 2014 BIA DMA Affiliate Revenue Revenue Rank Market Station Primary Secondary Rank Share 62 Knoxville, TN WBXX 5 6% Purchasing from Lockwood in exchange for KAKE in Wichita, KS. Gray also owns WVLT, the CBS affiliate in Knoxville. These t
Slide 10: 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 11: 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 14 channels 94 “Big 4” network affiliations 35 channels 93 stations 50 markets 19 Channels 18 markets with two “Big 4” network affiliations 26 channels 5 markets with
Slide 12: Gray Leads the Industry with the Highest Quality Portfolio of Local Television Stations
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 buys Share of Market Ad $ Net
Slide 13: 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 14 13 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 14: 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% 15 17 12 12 far better on Gray’s stations 10 9 10 Amount by which Gray’s late local newscasts 5 than national averages outperform the national average… The Morning Network News
Slide 15: 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 16: 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 and pending transactions Gray Televis
Slide 17: 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 18: Gray Big-4 Affiliation Renewals
Gray Big-4 Affiliation Renewals TOTAL 19 35 14 26 YEAR (1) 2016 1 @ 1/15/16 2017 3 @ 12/31/17 5 @ 9/30/17 2018 14 @12/31/18 26 @ 12/31/18 2019 1 @ 12/31/19 30 @ 8/31/19 14 @ 6/30/19 (1) Renewal negotiations in process Note: Pro forma for all completed and pending transactions Gray Television, Inc. 1
Slide 19: 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.” “Net Retransmission Revenue” 240.0 subscribers re-priced on or b
Slide 20: 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 21: Credit Highlights
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Slide 22: 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 23: Acquisitions Significantly Increased Scale and Margins
Acquisitions Announced and Closed in 2013, 2014 and 2015 Significantly Increased Scale and Margins Summary Financial Metrics ’13A/’14A Blended 2-Year Averages In Millions As Reported Pro Forma $678 $427 $292 $175 $275 $154 $150 $67 Revenue BCF OCF FCF Revenue BCF OCF FCF % Margin 41% 36% 44%(1) % Ma
Slide 24: Diversification Across Networks and Markets
Diversification Across Networks and Markets 2014PF Revenue by Affiliate: 2014PF BCF by Affiliate: Station Mix $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% 38% 19 ABC 39
Slide 25: 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 26: 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 27: 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 28: 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 29: 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 30: 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 31: Financial Overview
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Slide 32: 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 $327 2010 2011 2012 2013 2014 2013PF (2) 2014PF (2) '13/'14 PF)(2) L8QA Growth 3% 6% 9% 5% 14% -- -- -- LTM 2-Yr. Growth 6% 14% 17% 13% 25% -- -- -- Opera
Slide 33: Robust Free Cash Flow Generation
Robust Free Cash Flow Generation Presidential Election Year Non Election Year Non Presidential Election Year 2015 and 2016 FCF 2012 OCF Buildup (1), (2) 2013 OCF Buildup (1), (2) 2014 OCF Buildup (1), (2) Drivers ($ in millions) ($ in millions) ($ in millions) 48% 61% $233 60% Local $330 $317 Presid
Slide 34: Prudent Balance Sheet Management Leads to Deleveraging
Prudent Balance Sheet Management Leads to Deleveraging Gray has significantly reduced secured and total leverage from historical levels Gray has diversified its revenue base, allowing for significant free cash flow in both political and non-political years Net Financial Leverage (1) ($ in millio
Slide 35: Record Pro Forma Results YTD, 2015
Record Pro Forma Results YTD, 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 19 % Poli
Slide 36: 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 37: 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 38: 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 39: 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 40: 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 41: 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 42: 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 43: 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 44: 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 45: 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 46: Schurz Audit Reconciliation
Schurz Audit Reconciliation Gray Television, Inc. Reconciliation of Schurz Financial Information Amounts in Thousands For The Year Ended For The Nine Months Ended For The Nine Months Ended 12/31/2014 9/30/2015 9/30/2014 Broadcast Broadcast Broadcast Operating Operating Operating Cost and Cost and Co
Slide 47: Additional Transactions to Primarily Facilitate Regulatory Approval
Additional Transactions to Primarily Facilitate Regulatory Approval To facilitate regulatory approval, Gray has either announced agreements for, or completed the following transactions: Gray will divest KAKE (ABC) – Gray’s station in Wichita, KS (DMA 65) in exchange for WBXX (CW) – Lockwood’s st
Slide 48: 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 49: 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 50: Lender Presentation
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Gray Television — Debt Investor Presentation (January 2016) on 6ix