Slide 1: Investor Presentation
Investor Presentation September 15, 2014 1
Slide 2: Introduction
Introduction 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 and unk
Slide 3: Company Overview
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Slide 4: Gray Has a Diverse and National Footprint
Gray Has a Diverse and National Footprint 44 markets reaching approximately 8.1% of US TV households Great Falls, MT(1) Sioux Falls, SD Lincoln, NE Rockford, IL Lansing, MI South Bend, IN North Platte, NE Helena, MT(1) Rapid City, SD Fargo, ND (2) Wausau - Bismarck, ND Omaha, NE Toledo, OH Rhineland
Slide 5: Combination Snapshot
Combination Snapshot (1) Figures per Company filings and 12/31/13 Compliance Cert and 8/27/14 Press Release; Scale, Asset Quality, and Affiliations data (3) Assumes 15% agency commission discount on gross political revenues for includes Montana and the Acquisitions other than the SJL acquisition the
Slide 6: Hoak Acquisition Overview
Hoak Acquisition Overview 15 acquired stations of programming spread across seven attractive markets Multicast programming in six of seven markets Hoak Geographic Footprint #1 or #2 news rating in six of seven markets KSFY (#2) Strong local news ratings drive political revenue and KFYR (#2)
Slide 7: Prime Cities & Rapid Cities Acquisitions Overview
Prime Cities & Rapid Cities Acquisitions Overview Prime Cities Broadcasting Mission TV (Rapid Cities) Minot-Bismarck- Rapid Dickinson, ND City, SD DMA 145 DMA 173 Gray acquired the Fox affiliated stations for $7.5 million Gray acquired two FOX affiliated stations for $7.75 on May 1, 2014 million
Slide 8: SJL Holdings Station Acquisitions Overview
SJL Holdings Station Acquisitions Overview WJRT-TV WTVG-TV Toledo, Flint-Saginaw-Bay OH City, MI DMA 76 DMA 68 Affiliation Market Revenue Rank Revenue Share Affiliation Market Revenue Rank Revenue Share 1 32.8% 2 31.1% Gray acquired the two ABC-affiliated stations for $128.0 WJRT-TV and WTVG-TV Co
Slide 9: Senior Secured Credit Facility
Senior Secured Credit Facility Gray refinanced its senior secured indebtedness with $650 million in new senior secured credit facilities, consisting of the following: $50 million Priority Revolving Credit Facility – matures June 13, 2019 Interest Rate is L + 200 with step ups based on first li
Slide 10: Investment Highlights
Investment Highlights A Leading Television Broadcaster in Diverse Mid Markets with Dominant Market Positions 141 program streams and 76 “Big 4” network affiliations #1 or #2 market rank in 40/44 markets; #1 news ranking in 29/44 markets Improving Advertising Market and Diversification of Rev
Slide 11: 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 Pursue selective strategic transactions Accretive Partnerships Continue to prudently invest in local content and news, syndicated programs, top talent Maintain Intern
Slide 12: The Importance of Being #1
The Importance of Being #1 Price Leadership Reinvest Long History of Being #1 in the Market in Business Gray Actual Pro Forma(1) 14 Share Highly 12 12 12 12 12 11 11 of Ranked News Reinvest 13 Market in Franchises Ad $ Business Drive Traffic Share of '05/'06 '06/'07 '07/'08 '08/'09 '09/'10 '10/'11 '
Slide 13: 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 92 Bowling Green, KY 18 Topeka, KS 53 Harrisonburg, VA 18 Lansing, MI 49 Cheyenne, WY 13 Tallahassee, FL 43 Char
Slide 14: Diversification Across Networks and Markets
Diversification Across Networks and Markets Station Mix 2013PF Revenue: Top 10 Markets (1) 2013PF BCF: Top 10 Markets (1), (3) 141 Total Program Streams:(4) Lexington, KY 6% Charleston, WV Charleston, WV 6% 8% 76 Big 4 Affiliates:(4) Omaha, NE 4% Lexington, KY 6% 26 CBS Waco, TX 4% Monroe, LA 5%
Slide 15: 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 16: Strong Growth in Retransmission Revenue
Strong Growth in Retransmission Revenue Approximately 9.5 million Big-4 Gray TV Retransmission Revenue (1) Affiliate subscribers(2) ($ in millions) $60.4 Approximately 5.0 million Big-4 $13.8 Affiliate subscribers(2) re-pricing $39.8 12/31/14 $33.8 $7.6 $5.6 Approximately 0.9 million Big-4 $15
Slide 17: Gray is A Leading Beneficiary of Political Revenue with Large Upside
Gray is A Leading Beneficiary of Political Revenue with Large Upside Gray TV Political Commentary 2012 Political Revenue as % of Total (1), (2) $86 Million in 2012 – New Record 21.2% 21.2% 2011 - Off Year Record $13.5 million Gray operates in key battleground states 15.1% 13.8% #1 stations c
Slide 18: Successful Digital Media Initiatives
Successful Digital Media Initiatives Operate web and mobile Gray TV Digital Media Revenue (1) applications in all markets ($ in millions) Focused on local content: news, weather, sports $28.2 $25.0 $25.4 All sites have converted to $20.1 responsive design $13.4 $11.4 “Moms Everyday” digital
Slide 19: 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
Slide 20: Strong Growth Across the Industry in Other Key Revenue Streams
Strong Growth Across the Industry in Other Key Revenue Streams 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 Spend on Local TV (1) Str
Slide 21: 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 Television continues to be a critical medium for automotive advertising TV auto 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 p
Slide 22: Financial Overview
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Slide 23: Gray Historical Financial Summary
Gray Historical Financial Summary Net Revenue (1) LTM Revenue L8QA Revenue $523 $505 $405 $376 $346 $356 $346 $308 $307 $327 2010 2011 2012 2013 6/30/14 PF ) L8QA Growth 3% 6% 9% 5% -- LTM 2-Yr. Growth 6% 14% 17% 13% -- Operating Cash Flow (1) Capital Expenditures (1) ($ in millions) ($ in millions)
Slide 24: Strong Free Cash Flow Conversion
Strong Free Cash Flow Conversion 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 ~$225 million in net
Slide 25: Prudent Balance Sheet Management Leads to Deleveraging
Prudent Balance Sheet Management Leads to Deleveraging Gray has significantly reduced secured and total leverage from historical levels Gray’s strategic investments have diversified its revenue base, allowing for significant free cash flow in both political and non-political years Net Financial
Slide 26: Sources & Uses and Pro Forma Capitalization
Sources & Uses and Pro Forma Capitalization Current & Pro Forma Capitalization ($ in Millions) SJL Acquisition Adjustments 6/30/2014 6/30/2014PF Cum. Cum. Cum. Cum. WJRT-TV & $ xL8QA xLTM $ xL8QA xLTM WTVG-TV OCF1 OCF2 OCF3 OCF4 Cash & Equivalents $66.1 ($32.8) $33.3 Priority Revolver ($50MM) due 20
Slide 27: Questions & Answers
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Slide 28: Appendix
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Slide 29: Glossary
Glossary “Acquisitions”: The Hoak Acquisition and Gray’s other previously completed acquisitions of Rapid Cities, Prime Cities, Lockwood, Yellowstone and KJCT; excludes Montana and SJL unless otherwise specified “Excalibur” (Excalibur Broadcasting, A television broadcaster with two stations (KJCT, K
Slide 30: Q2'14 L8QA and LTM Financial Summary
Q2’14 L8QA and LTM Financial Summary 6 Months Ended ($ in millions) 2012 2013 6/30/2012 6/30/2013 6/30/2014 LTM 6/30/13 LTM 6/30/14 L8QA 6/30/14 Net Revenues Local 191.3 203.1 94.3 97.3 107.7 194.3 213.5 203.9 National 56.8 58.3 27.3 28.5 28.2 57.9 58.0 58.0 Political 86.0 4.6 18.1 1.4 11.4 69.3 14.
Slide 31: Pro Forma Non-GAAP Reconciliation
Pro Forma Non-GAAP Reconciliation ($ in thousands) Year Ended December 31, Six Months Ended June 30, LTM L8QA 2012 2013 2012 2013 2014 6/30/13 6/30/2014 6/30/2014 Net income $ 59,350 $ 29,243 $ 24,000 $ 9,036 $ 16,439 $ 44,385 $ 36,646 $ 40,516 Adjustments to reconcile from net income to Broadcast C
Slide 32: Pro Forma Non-GAAP Reconciliation (continued)
Pro Forma Non-GAAP Reconciliation (continued) Pro Forma Twelve Months Ended December 31, 2013 Gray SJL Other Pro forma Gray Actual Actual Acquisitions Adjustments Pro forma Net income $ 18,288 $ 2,944 $ 25,031 $ (17,020) $ 29,243 Adjustments to reconcile from net income to Broadcast Cash Flow Less C
Slide 33: Pro Forma Non-GAAP Reconciliation (continued)
Pro Forma Non-GAAP Reconciliation (continued) Pro Forma Twelve Months Ended December 31, 2012 Gray SJL Other Pro forma Gray Actual Actual Acquisitions Adjustments Pro forma Net income $ 28,129 $ 10,532 $ 32,199 $ (11,510) $ 59,350 Adjustments to reconcile from net income to Broadcast Cash Flow Less
Slide 34: Pro Forma Non-GAAP Reconciliation (continued)
Pro Forma Non-GAAP Reconciliation (continued) Pro Forma Six Months Ended June 30, 2014 Gray SJL Other Pro forma Gray Actual Actual Acquisitions Adjustments Pro forma Net income $ 2,868 $ 2,601 $ 44,401 $ (33,432) $ 16,439 Adjustments to reconcile from net income to Broadcast Cash Flow Less Cash Corp
Slide 35: Pro Forma Non-GAAP Reconciliation (continued)
Pro Forma Non-GAAP Reconciliation (continued) Pro Forma Six Months Ended June 30, 2013 Gray SJL Other Pro forma Gray Actual Actual Acquisitions Adjustments Pro forma Net income $ 6,014 $ 1,507 $ 11,207 $ (9,693) $ 9,036 Adjustments to reconcile from net income to Broadcast Cash Flow Less Cash Corpor
Slide 36: Pro Forma Non-GAAP Reconciliation (continued)
Pro Forma Non-GAAP Reconciliation (continued) Pro Forma Six Months Ended June 30, 2012 Gray SJL Other Pro forma Gray Actual Actual Acquisitions Adjustments Pro forma Net income $ 14,365 $ 3,957 $ 11,321 $ (5,643) $ 24,000 Adjustments to reconcile from net income to Broadcast Cash Flow Less Cash Corp
Slide 37: Investor Presentation
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