Slide 1: Gray Update Presentation
Gray Update Presentation May 29, 2014 Rens od 4) 10 Rea 1] DOSE mee oy ae
Slide 2: Introduction
Introduction G gtay Certain statements in this presentation constitute “forward-looking statements” within the meaning of and subject to the protections of the Private Securities Litigation Reform Act of 1995 and other federal and state securities laws. Such forward-looking statements involve known
Slide 3: Transaction Summary
laa Transaction Summary
Slide 4: Transaction Overview
Transaction Overview gray + On November 20, 2013, Gray entered into definitive agreements, as amended, to acquire or operate a total of 15 television stations from Hoak Media and Parker for $297.5 million in cash, subject to a $9 million working capital adjustment = The total consideration of $297.5
Slide 5: Company Overview
Company Overview
Slide 6: Combination Snapshot
Combination Snapshot gray Hea Ast Bong Se Acquired or Operate by opiohsles Gray Pre-Synemgies Rapid Citie: Prime Cites Pro Forma Pc $376 $76 $6 sama $160 $39 $2 $205 147 $39 2 $195" 54 18 4 B 36 5 1 a2 7.5 million (6.4%) 4.2 million (1.4%) 0.2 million (0.2%) 8.5 million (7.4%) #1/ #2Station 32 6 “ 3
Slide 7: Diverse stations reaching approximately 7.4% of US TV households
verse aneine Cp stay 42 markets reaching approximately 7.4% of US TV households") ER reatFall, Te Siourtale, sO" Linco A lorth Platte, NE® Helena,MT Jl Rapid Cit : prox] MR Raidciy.sD—— @ \rargo,noe | © ye Wausau Temas me * — Fadionding iid North Platte, NE * LaCrosse- Rockford, IL_ me @ a a é Fearn
Slide 8: Hoak Overview
Hoak Overview Ge 15 total stations of programming spread across Historical Hoak Revenueand Margin “) seven attractive markets = Multicast programming in six of seven markets = #1 or#2 news rating in six of seven markets = Strong local news ratings drive political revenue and make Hoak stations a “mu
Slide 9: Acquisition Rationale
Acquisition Rationale gray Reinforces Gray’s Market Leadership Aligns with Gray’s Market and Station Focus Enhances Scale & Diversification Highly Accretive Acquisition Gray Telev Gray will acquire and/or operate the #1 or #2 ranked local television station operations in six of seven markets Gray wi
Slide 10: Prime Cities & Rapid Cities Acquisitions Overview
Prime Cities & Rapid Cities Acquisitions Ov $20 $26 $20 $16 $18 $15 $0.4 $08 $0.5 Minot-Bismarck- Dickinson, ND ‘DMA 145 gray NetRevenue $3.4 $37 $39 Op.Expenses $2.6 $28 $30 BCF $08 $09 $09 KNDX/ KID 10.1% 27.8% + KXND operates in Minot, ND as a satellite station to KNDX = Gray completed the acquis
Slide 11: Investment Highlights
Investment Highlights Ge y¥ ALeading Television Broadcaster in Diverse Mid Markets with Dominant Market Positions ¥ 139 program streams and 75 “Big 4” network affiliations v¥ #1 or #2 market rank in 38/42 markets; #1 news ranking in 27/42 markets v Improving Advertising Market and Diversification of
Slide 12: The Importance of Being #1
The Importance of Being #1 Share of Market Ad $ Ranked News Franchises Drive Traffic. Ge ong History of Being #1 in the Market ( [icrayActual Proforma 14 120 120«12:—2~«*Rs " “ OCB Dominate local and political revenue with highly-rated news platforms Greater purchasing power and leverage with MVPDs,
Slide 13: State capitals and university markets
Ge Approximate Approximate Market College(s) Enrollment Market College(s) Enrollment Waco, TX 92 Bowling Green, KY, @ 18 Topeka, KS 53 Harrisonburg, VA 18 Lansing, Ml 49 Cheyenne, WY 4 13 Tallahassee, FL 4B Charleston-Huntington, WV & 40 Madison, WI 43 Monroe, LA x& 9 ‘Lexington, KY 29 ‘South Bend,
Slide 14: Station Mix and Top Markets
gray Station Mix 2013PF Revenue: Top 10 Markets ‘) 2013PF BCF: Top 10 Markets ())(3) 139 Total Program Streams: 75 Big 4 Affiliates: 27 CBS 24 NBC 14 ABC 10 FOX Chars, wu . . . . 64 Additional Program Streams with:24) 15 CW Wascn, W) % 2 Telemundo 2013PF Revenue by Affiliate: (2013PF BCF by Affiliat
Slide 15: Growth in net revenue and diversifying revenue mix
= 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 = Diversification lowers overall revenue vol
Slide 16: Gray TV Political Commentary
Gray TV Political Commentary 2012 Political Revenue as % of Total 2) = $86 Million in 2012 — New Record = 2011 - Off Year Record $13.5 million bans = Gray operates in key battleground states + #1 stations can capture over 50% of the political budget for a market 96% = Recent Supreme Court decisions
Slide 17: Strong Growth in Retransmission Revenue
Strong Growth in Retransmission Revenue: gray Gray TV Retransmi nRevenue™ (Sin millions) Approximately 2 million historical Gray subscribers® re-priced in two en deals in Q4 2013 sit Remaining 4.5 million historical Gray subscribers® re-pricing between 12/31/14 and 3/31/15 suo stg 82k mio” mn) az 21
Slide 18: Internet revenue and digital initiatives
gray {Sin millions) = Operate web and mobile applications in all markets = Focusedon local content: news, weather, sports = Allsites have converted to responsive design » “Moms Everyday” digital vertical; deployed in each Gray TV market and continues to expand to other markets (3). Gxay Standalone d
Slide 19: Operational Strategy Focused on Market Leadership and Growth
Operational Strategy Focused on Market Leadership and Growth Maintain and grow our market leadership position Pursue selective strategic transactions Continue to prudently invest in local content and news, syndicated programs, top talent and community relationships Seek new media opportunities — cur
Slide 20: Television Continues to be the #1 Choice for Advertisers
Television Continues to be the #1 Choice fi y Critical Mass Reach Among Advertisers gray TV Reaches More People than Any Other Medium TVis the Mostinfluential Local Media 96 of the Top 100 Rated Programs are Televison 28% Broadcast Programs (P18-49 Internet Radio 1-25 1 25 Newsoeeet 26-50 24 1 25 Wo
Slide 21: Strong Growth Across the Industry in Other Key Revenue Streams
Strong Growth Across the Industry in Other Key Revenue Streams | gtay = Record level of political revenue in 2012 and = Continued upside in retransmission fees, with estimates for continued growth through 2016 revenue projected to reach $7.1 billion in 2018 Industry-wide Political Spendon Local TV S
Slide 22: Television is a critical medium for automotive advertising
= Television continues to be a critical medium for automotive advertising = ~=TVauto ad spending growth of $0.2 billion or 6% from 2012 to 2013 but still below peak = Positive trend will continue, with automotive ad spending projectedto reach ~$3.5 billion in 2014 TV Ad Spendingin the Automotive Sec
Slide 23: Financial Overview
Financial Overview 7 corey wanes] MEG] ULM Son 5 FPRILSI TEs 2 EH OOo mm eo eee
Slide 24: Net Revenue
Net Revenue SLTMRevenue = L8QA Revenue $405 $356 2010 zat 2012 2013 2013 PF [LeGA Growth 3% 8% % = LLtm2.¥r. Grown 5% 18% 1 13% = Operating Cash Flow) Capital Expenditures {Sin millions) {Sin millions) capex PE Capex SLTMOCF =L8QA OCF sa sis [LeGA Margin sa 35 ae we He [is of Revenue™ = me % 7% lLTm
Slide 25: Record free cash flow and OCF buildup
Ge» = Gray realized record free cash flow of $95 million in 2012 = Gray's free cash flow is expected to increase with the acquisitions due to the incremental OCF, expected tax savings, and only a modest increase in CAPEX = Gray will also benefit from ~$225 million in net operating loss carryforwards
Slide 26: Prudent Balance Sheet Management Leads to Deleveraging
Prudent Balance Sheet Management Leads Deleveraging Ge Gray has significantly reduced secured and total leverage from historical levels Gray's strategic investments have diversified its revenue base, allowing for significant free cash flow in both political and non-political years nancial Leverage (
Slide 27: Appendix
Appendix
Slide 28: Definitions
“Acquisitions”: gray ‘The pending Hoak Acquisition and Gray's previously completed acquisitions of Rapid Cities, Prime Cities, Lockwood, Yellowstone and KJCT: excludes Montana unless otherwise specified “Excalibur” (Excalibur Broadcasting, Inc.}: television broadcaster with two stations (KJCT, KKHD)
Slide 29: Q1'14 LTM and Net Revenues
Q1’14 L8QA and Net Revenues Local National Poltical Intemet Retransmission Other Management Fee - Young Gray Standalone Net Revenue Local National Poltical Intemet Retransmission Other Hoak Standalone Net Revenue Prime Cities Standalone Net Revenue Rapid City Standalone Net Revenue KICT, Yellowstone
Slide 30: Pro Forma Non-GAAP Reconciliation
Pro Forma Non-GAAP Reconciliation Net income $ ans er rn ee ee) ‘Adjustments to reconcile from nat income to Brosdeas Cath Flow Less Cash Corporate Smanses Deprecision ame 2eme Tee 7s TES men MOT Eve ‘Amentzation of intangible sets me 82 meas Ts 10% el Nom-cashstoc: bared compensation a8 1974 18 2a7
Slide 31: Pro Forma Non-GAAP Reconciliation (continued)
Pro Forma Non-GAAP Reconciliation (conti Netincome (11,862) ‘Adjustments o reconcile fom net incometo Broadcast Cash FlowLess Cash Corporate Expenses: 3 43,09 Depreciaton 4317 . 29,253 Am ortzation ofintangible assets 332 = Bs Non-cash stock based compensation Es 2 a8 Gain on disposals of assets, ne
Slide 32: Pro Forma Non-GAAP Reconciliation (continued)
Pro Forma Non-GAAP Reconciliation (conti Netinceme S$ 18.288 24588 ers (17.142) $ (26.410 ‘Adjustments o reconcile fom net incometo Broadcast Cash FlowLess Cash Corporate Expenses: Depreciaton 24,098 4438 4192 . 29,28 ‘morization ofintangible assets 3% 278 Ed = 22 Non-cash stock based compensation 1
Slide 33: Pro Forma Non-GAAP Reconciliation (continued)
Pro Forma Non-GAAP Reconciliation (conti Netincame saa 5314 st) ea s 547 ‘Adjustments o reconcile fom net incometo Broadcast Cash FlowLess Cash Corporate Expenses Depreciaton 5831 1198 453 7 7H8 ‘Am ortzation ofintangibe assets 19 105 at : 2s Non-cash stock based compensation 4 = 2 : 14 Gain on disp
Slide 34: Pro Forma Non-GAAP Reconciliation (continued)
Pro Forma Non-GAAP Reconciliation (conti Netincame sam 56m (190) 283) 81482. ‘Adjustments to reconcile fom net income to Broadcast Cash FlowLess Cash Corporate Expenses Depreciaton 5,800 4.110 324 7 728 ‘Am ortzation ofintangibe assets 19 es 3 : cial Non-cash stock based compensation 1% 2 2 : 16 Gai
Slide 35: Pro Forma Non-GAAP Reconciliation (continued)
Pro Forma Non-GAAP Reconciliation (conti Netincome ‘Adustments to reconcile fom net income to Broadcast Cash Flow Less Cash Corporate Expenses: Depreciation Amortization of intangible assets Non-cash stock based compensation Gain on disposals of assets, net Hiscelaneous income, net Interest expense
Slide 36: Hoak Media assets acquired versus not acquired
ve G gray (Sin milions) Hoak Media Assets Not Hoak Assets Being Being Acquired or Acquired or Operated by Hoak Media Consolidated Operated by Gray Gray Net Revenue $84.3 $11.4 $72.9 Operating Expense 444 72 26.9 Broadcast Cash Flow $40.2 $4.2 $36.0 Margin % 47.7% 36.8% 49.3% Net Revenue $89.8 $13.3