Gray Media, Inc. · NYSE:GTN
Gray Media — Gray Television — Investor Presentation (November 2016)
46 slides from Gray Media's investor presentation, November 2016
Slide 1: Gray Television, Inc. Investor Presentation
Gray Television, Inc. Investor Presentation NYSE:GTN November 2016 Edition Updated for September 30, 2016 Financial Information 4370 Peachtree Road, NE, Atlanta, GA 30319 | P 404.504.9828 | F 404.261.9607 | www.gray.tv 1
Slide 2: Disclaimer
Disclaimer ALL COMBINED HISTORICAL BASIS DATA PRESENTED FOR GRAY IS ADJUSTED FOR ALL COMPLETED TRANSACTIONS UNLESS OTHERWISE NOTED. This presentation contains certain forward looking statements that are based largely on Gray’s current expectations and reflect various estimates and assumptions by Gra
Slide 3: Table of Contents
Table of Contents Company Overview 4 Investment Highlights 10 Importance of #1 11-15 Retrans/Networks 16-17 Political/Digital 19-21 National Sales 22 Financial Overview 23 See Appendix for Non-GAAP Reconciliations and Glossary of Defined Terms 3 3
Slide 4: An Industry Leading Power
COMPANY OVERVIEW INVESTMENT HIGHLIGHTS FINANCIAL OVERVIEW APPENDIX An Industry Leading Power 4 4
Slide 5: Gray National Footprint
Gray National Footprint Ranked #1 or #2 in 50 of 51 Markets | Reaching approximately 9.5% of US TV households Sioux Falls, SD Lincoln, NE Bismarck, ND Omaha, NE Rapid City, SD Fargo, ND Cedar Rapids, IA North Platte, NE La Crosse-Eau Claire, WI Wausau-Rhinelander, WI Presque Isle, ME Madison, WI Mar
Slide 6: High Quality, Diverse Station Group
High Quality, Diverse Station Group 190 36 channels 51 96 24 27 channels 51 markets 190 total 96 “Big 4” 24 markets with owned program network with two or and/or streams program more “Big operated across 93 streams 4” network 19 channels stations stations affiliations 14 channels 6 6
Slide 7: Gray Leads the Industry with the Highest Quality Portfolio of Local Television Stations
Gray Leads the Industry with the #1 50/51 markets: Highest Quality ranked #1 or #2 television station #2 Portfolio of Local Television Stations 7 7
Slide 8: Revenue Diversified Across Networks and Markets
Revenue Diversified Across Networks and Markets 2015CHB Revenue by Affiliate: 2015CHB BCF by Affiliate: $737mm $289mm Increasing Diversification of All Non-Big Four Channels All Non-Big Four Channels Revenue Sources 2% 5% 3% 2008: 5% • 96% of revenue derived from advertising sales 18% 39% 19% 36% 20
Slide 9: Recognized Industry Leader
Recognized Industry Leader Two Out of Three Ranked #77 NAB’s 2016 National Television Winners Fortune’s 100 Fastest Growing Companies Service to America Award KWTX/CBS Waco, Texas Service to Community Award “2016 top three-year TVNewscheck’s performers in revenue, 2016 Station Group profits, and sto
Slide 10: Investment Highlights
COMPANY OVERVIEW INVESTMENT HIGHLIGHTS FINANCIAL OVERVIEW APPENDIX Investment Highlights 1010
Slide 11: The Importance of #1
The Importance of #1 Highly Ranked News Price Leadership Franchises Drive Traffic • Dominate local and political revenue with highly-rated news platforms • #1 Stations can secure more than half of a Share of Market Ad $ market’s political ad buys • Greater purchasing power and leverage with MVPDs, p
Slide 12: Gray Leads Industry In Operating Margins
Gray Leads Industry In Operating Margins 2-year average 39% 35% 35% 34% 32% 31% 28% 20% 18% 2015 36% 34% 35% 33% 28% 30% 24% 19% 15% 2014 43% 37% 35% 36% 36% 33% 31% 20% 21% Gray Nexstar TEGNA Sinclair Media Entravision Tribune Meredith E.W. General Scripps Source: Company filings, Company investor
Slide 13: Gray Leads in Household Ratings
Gray Leads in Household Ratings Household Rating Analysis – November 2015 Gray’s Ratings Have Remained Stable Over Time 5.9 5.9 5.7 5.7 5.7 5.6 5.6 5.3 4.9 4.6 2010 2011 2012 2013 2014 2015 4.3 4.3 4.0 3.8 3.7 3.6 3.4 3.3 3.0 2.8 2.8 Cox Raycom Media Hearst Meredith CBS O&O Sinclair TEGNA ABC O&O Ne
Slide 14: Network Programs Over-Index on Gray's Stations
CBS vs. Gray | November ’15 Household Share 18 Network 16 14 12 10 Gray 10 10 Programs 6 CBS Over-Index on The Morning Show Network News Prime (Mon-Sun) The Late Show Gray’s Stations NBC vs. Gray | November ’15 Household Share CBS, NBC, and 30 32 ABC perform 13 Gray 12 10 11 19 7 far better on NBC G
Slide 15: Gray's Local Newscasts Over-Index National Averages
Gray’s Local Newscasts Over-Index National Averages Gray’s national Household Share average exceeds all major affiliate news programs 29 Gray 23 Amount by which Gray’s 15 +92% late local newscasts outperform the national National 12 average 6PM News Late News Amount by which Gray’s +93% 6PM newscast
Slide 16: Gray Excels at Retransmission Revenue
Gray Excels at Retransmission Revenue Gray Retransmission Revenue in Millions STABLE Sub Count 2012-2015 for continuously owned Big-4 stations (data unavailable for acquired stations) As Network Reverse Comp increased from 0% to roughly 50% of $240 Gross Retransmission Revenue over the past five yea
Slide 17: Retrans Visibility + Network Stability
Retrans Visibility + Network Stability All 27 @ 12/31/18 All 14 @ 6/30/19 5 @ 9/30/17 1 @ 6/30/18 30 @ 8/31/19 All 19 @ 12/31/20 All 22 @ 9/1/22 2016 2017 2018 2019 2020 2022 Retrans Renewals 4.2 M Subs 6.4 M Subs 1.0 M Subs 36% 55% 9% 1717
Slide 18: Focus on State Capitals and College Markets
Focus on State Capitals and College Markets Better demographics, more stable economies Gray stations cover 11 state capitals 11 Gray stations cover 27 university towns 27 Enrollment of approximately 634,000 students 634,000 1818
Slide 19: A Leading Beneficiary of Political Revenue
A Leading Beneficiary of Political Revenue Gray Political Revenue in Millions $144 $119 $92-$93 $82 $86 New $86-$87 New Record Record Non- $58 Presidential $48 Presidential Year Year (9) 2008 2010 2012 2014 2016 Est. 2012CHB 2014CHB 2016 CHB Est. 2014 Political Revenue Per TV Household $11.02 $ $4.4
Slide 20: Significant Monetization of Spectrum Today
Significant Monetization of Spectrum Today Secondary Channel 2015 CHB Financials $98 MILLION IN REVENUE 98 $55 MILLION IN BCF SECONDARY CHANNELS 56% MARGIN ON DIGITAL SECONDARY CHANNELS 2020
Slide 21: Successful Digital Media Initiatives
Successful Digital Media Initiatives Gray Digital Media • Pacing for 2.75 billion total page views in 2016 (up 23% over 2015) First local broadcaster launching all stations on Instant Articles • Mobile makes up 74% 1.2 million Twitter followers, up 138% of all digital traffic from same time last yea
Slide 22: Gray Alone Sells National Ads Directly
Gray Alone Sells National Ads Directly In early 2016, Gray terminated all contracts with National Advertising Representation firms (except for one DMA). We are the first and still only broadcast group to take this innovative step to reduce our costs and streamline service to our clients. BEFORE NOW(
Slide 23: Financial Overview
COMPANY OVERVIEW INVESTMENT HIGHLIGHTS FINANCIAL OVERVIEW APPENDIX Financial Overview 2323
Slide 24: 2014/2015 Snapshot
2014/2015 Snapshot Pro Forma 2014/2015 (in millions) 2014 2015 Average Revenue Total $753 $737 $745 Political $119 $19 $69 Cash Flow Broadcast Cash Flow $341 $289 $315 Operating Cash Flow $321 $263 $292 Free Cash Flow $189 $141 $165 Total leverage net of all cash 5.4X 2424
Slide 25: Annual Year-Over-Year Results Combined Historical Basis
Annual Year-Over-Year Results Combined Historical Basis Combined Historical Basis z Year Ended December 31 % % % Change Change Change 2015 to 2015 to 2015 to 2015 2014 2014 2013 2013 2012 2012 (dollars in thousands) Revenue: Total $736,658 $753,453 (2)% $616,410 20% $691,505 7% Political $ 18,672 $1
Slide 26: Significant Growth Since 2011… Increasing scale, decreasing leverage
Significant Growth Since 2011… Increasing scale, decreasing leverage +39% +111% Household Reach Broadcast Channels +87% +94% Reach of 6.2% of US TV Total channels of Operating Revenue households at YE2011 programming increased Income grew to 8.6% of TVHH from 76 at YE2011 to 160 Revenue increased fr
Slide 27: … with Opportunity for More M&A
… with Opportunity for More M&A 44% 39% FCC U.S. TV Household Cap: 39% 38% 31% 19% 18% 16% 11% 11% 9.5% 7% 4% 4% 3% 3% 2% 2% 1% ... Tribune Nexstar Sinclair TEGNA Hearst EW Raycom Cox Meredith Graham Weigel Hubbard Sunbeam Quincy Bahakel Dispatch Capitol Media Scripps Holdings Group Source: Company
Slide 28: Financial Scale Continues to Increase
Financial Scale Continues to Increase Revenue ($ in millions) As Reported Combined Historical Basis For All Completed Transactions LTM L8QA LTM L8QA $753 $597 $692 $737 $745 $784 $553 $685 $508 $616 $654 $405 $427 $346 $356 $346 $376 $308 $307 $327 2010 2011 2012 2013 2014 2015 2012 2013 2014 2015 9
Slide 29: Prudent Balance Sheet Management Leads to Deleveraging
Prudent Balance Sheet Management Leads to Deleveraging Gray has significantly reduced secured and total leverage from historical levels. Gray has diversified its revenue base, allowing for significant free cash flow in both political and non-political years. Net Financial Leverage (1) ($ in millions
Slide 30: Robust OCF and Free Cash Flow Generation
Robust OCF and Free Cash Flow Generation Presidential Election Year Non Election Year Non Presidential Election Year Non Election Year 2012 OCF Buildup 2013 OCF Buildup 2014 OCF Buildup 2015 OCF Buildup ($ in millions) ($ in millions) ($ in millions) ($ in millions) 47% 54% 60% $237 $263 $334 59% $3
Slide 31: Capitalization
Capitalization ($ in thousands) Leverage using Last Eight Quarter Average or As of “L8QA” OCF September 30, 2016 September 30, 2016 Cash $ 230,398 Debt: Revolving Credit Facility $ - Term Loan B due 2021 $ 556,438 Total Secured Debt $ 556,438 1.9x Senior Notes due 2024 $ 525,000 Senior Notes due 202
Slide 32: Appendix Follows
Appendix Follows Gray Television, Inc. 4370 Peachtree Rd., NE Atlanta, Georgia 30319 www.gray.tv 32
Slide 33: Non-GAAP Reconciliations and Glossary of Defined Terms
COMPANY OVERVIEW INVESTMENT HIGHLIGHTS FINANCIAL OVERVIEW APPENDIX Non-GAAP Reconciliations and Glossary of Defined Terms 3333
Slide 34: Disclaimer
Disclaimer ALL COMBINED HISTORICAL BASIS DATA PRESENTED FOR GRAY IS ADJUSTED FOR ALL COMPLETED TRANSACTIONS UNLESS OTHERWISE NOTED. This Appendix contains certain forward looking statements that are based largely on Gray’s current expectations and reflect various estimates and assumptions by Gray. T
Slide 35: Nine-Months Year-Over-Year Results As Reported Basis
Nine-Months Year-Over-Year Results As Reported Basis As Reported Results Nine Months Ended September 30 % Change % Change 2016 to 2016 to 2016 2015 2015 2014 2014 (dollars in thousands) Revenue: Total $ 574,846 $ 427,869 34 % $ 330,248 74 % Political $ 41,576 $ 7,950 423 % $ 33,437 24 % Operating ex
Slide 36: Nine-Months Year-Over-Year Results Combined Historical Basis
Nine-Months Year-Over-Year Results Combined Historical Basis Results Combined Historical Basis Nine Months Ended September 30 % Change % Change 2016 to 2016 to 2016 2015 2015 2014 2014 (dollars in thousands) Revenue: Total $ 591,579 $ 534,835 11 % $ 513,538 15 % Political $ 42,243 $ 8,920 374 % $ 53
Slide 37: Annual Year-Over-Year Results As Reported Basis
Annual Year-Over-Year Results As Reported Basis As Reported Results Year Ended December 31 % Change % Change 2015 to 2015 to 2015 2014 2014 2013 2013 (dollars in thousands) Revenue: Total $ 597,356 $ 508,134 18 % $ 346,298 73 % Political $ 17,163 $ 81,975 (79)% $ 4,598 273 % Operating expenses (1):
Slide 38: Annual Year-Over-Year Results Combined Historical Basis
Annual Year-Over-Year Results Combined Historical Basis Combined Historical Basis z Year Ended December 31 % % % Change Change Change 2015 to 2015 to 2015 to 2015 2014 2014 2013 2013 2012 2012 (dollars in thousands) Revenue: Total $736,658 $753,453 (2)% $616,410 20% $691,505 7% Political $ 18,672 $1
Slide 39: Non-GAAP Reconciliation As Reported Basis
Non-GAAP Reconciliation As Reported Basis As Reported Nine Months Ended September 30 2016 2015 2014 (dollars in thousands) Net income $26,439 $24,314 $16,808 Depreciation 34,237 26,906 21,598 Amortization of intangible assets 12,365 8,715 5,291 Non-cash stock-based compensation 3,827 3,011 4,032 Los
Slide 40: Non-GAAP Reconciliation As Reported Basis
Non-GAAP Reconciliation As Reported Basis As Reported Year Ended December 31 2015 2014 2013 2012 (dollars in thousands) Net income $ 39,301 $ 48,061 $ 18,288 $ 28,129 Depreciation 36,712 30,248 24,096 23,133 Amortization of intangible assets 11,982 8,297 336 75 Non-cash stock-based compensation 4,02
Slide 41: Non-GAAP Reconciliation Combined Historical Basis
Non-GAAP Reconciliation Combined Historical Basis Combined Historical Basis 2016 Nine Months Ended September 30 2015 (dollars in thousands) 2014 Net income $24,825 $34,765 $50,732 Depreciation 34,982 34,619 33,796 Amortization of intangible assets 13,207 13,844 10,450 Non-cash stock-based compensati
Slide 42: Non-GAAP Reconciliation Combined Historical Basis
Non-GAAP Reconciliation Combined Historical Basis Combined Historical Basis Year Ended December 31 2015 2014 2013 2012 (dollars in thousands) Net income $ 51,903 $100,628 $ 50,242 $ 95,720 Depreciation 46,531 43,503 43,589 41,359 Amortization of intangible assets 18,827 15,262 1,997 2,822 Non-cash s
Slide 43: Non-GAAP Reconciliation Combined Historical Basis
Non-GAAP Reconciliation Combined Historical Basis Combined Historical Basis Eight Quarters Ended September 30, 2016 Operating Cash Flow as defined in the Senior Credit Agreement: (dollars in thousands) Net income $ 126,624 Depreciation 91,220 Amortization of intangible assets 36,846 Non-cash stock-b
Slide 44: Glossary
Glossary “Clarksburg Stations” WDTV (CBS) and WVFX (FOX), which Gray operates pursuant to a pre-closing Local Marketing Agreement. “Combined Historical Basis” Combined Historical Basis reflects financial results, position or statistics that have been prepared by adding Gray’s or “CHB” historical fin
Slide 45: 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 46: Gray Television, Inc. 4370 Peachtree Rd., NE Atlanta, Georgia 30319
Gray Television, Inc. 4370 Peachtree Rd., NE Atlanta, Georgia 30319 www.gray.tv 46
Gray Television — Investor Presentation (November 2016) on 6ix