Gray Media, Inc. · NYSE:GTN
Gray Media — Gray Television — Investor Presentation (May 2014)
43 slides from Gray Media's investor presentation, May 13, 2014
Slide 1: Investor Presentation
NYSE: GTN Investor Presentation May 13, 2014
Slide 2: Company Overview / Industry Overview / Financial Overview
Ge = Company Overview Gray Television is a Dominant Mid-Market TV Platform with Significant Upside + Selectively acquiring stations ¢ Closed: 12 stations— 6 new markets—1 existing market, October 2013 to May 2014 ¢ PendingAcquisitions: 18 stations—20 affiliations—6 new markets—3 existing markets = I
Slide 3: Company Overview
Company Overview A jane Ba eer eR te y ‘ oe OO. C0 2a ao ome ek To Be Mote: Certain station information in this presentation includes stations under LMA or SSA agreements with Gray,
Slide 4: Key Investment Highlights
Key Investment Highlights Ge yv ALeading Television Broadcaster in Diverse Mid Markets with Dominant Market Positions v #1 or #2 market rank in 31 out of 36 markets as of May 1, 2014 v¥ #1 or #2 market rank in 38 out of 42 markets after all pending transactions close vy Improving Advertising Market
Slide 5: Gray Television is a Dominant Mid-Market TV Platform
Gray Television is a Dominant Mid-Market TV Platform As of February 1, 2014: = 110 total program streams spread across 34 markets = 52 affiliations with a “Big 4” network and 58 additional program streams’ = Reached 6.4% of U.S. TV households, significantly below FCC cap = #1 market rank in 23 marke
Slide 6: Diverse, Growing Markets 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 7: Highly Experienced Senior Management
Highly Experienced Senior Management gray Focused on maximizing potential of existing portfolio, while prudently pursuing strategic growth opportunities Eee || a Background and Notable Achievements Gray TV Industry + CEO since 2008, Vice Chairman since 2002 and director since 1993, + Sened as Presid
Slide 8: The Importance of Being #1
The Importance of Being #1 Dominant News Franchises Drive Traffic. Ge of Being #1 in the Market 1 8 nw 2 12 2 122g 06/06 ‘06/07 ‘07/08 ‘08/09 ‘09/10 “1044 “14712 "12/13 OCB rk and CBS National Ranking 1 12 1 14 1 4 News Rating: Dominate local and political revenue with highly-rated news platforms Se
Slide 9: Gray's Stations Dominate Local News and Information
Gray’s Stations Dominate Li and Information ; gray “ : ; National Average vs. Gray CBS vs. Gray Gray's early evening November "13 Household Share November ’13 Household Share local newscasts outperform the 6 19 national average 12 12 12 by 73% "1 9 9 : «Gray's late local Early Evening News Late News
Slide 10: Stable Markets — Concentration on DMAs 61-208
Stable Markets — Concentration on DMAs 61-20 With Focus on State Capitals / Collegiate Pre 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 Ch
Slide 11: Operational Strategy Focused on Market Leadership and Growth
Operational Strategy Focused on Market Leadership and Growth G = Maintain and grow our market leadership position Monetize Spectrum = Pursue selective strategic transactions = Continue to prudently invest in local content and news, syndicated programs, top talent and community relationships = Seek n
Slide 12: Gray TV has Significant Opportunity
ity Q Gray TV has Significant Opporti n Ge» 44% FCC U.S. TV Household Cap of 39% ‘Trbune Sinclair CBS FOX “Gannett. NBC | ABC Heart Media Nexstar EW Raycom. Cox LINTV Meredith’ Gray | Journal Quincy General Scripps: ‘Source! Company flings, BA investing in Television 2013 and SNL Kagan Includes stat
Slide 13: Strategic Acquisition Opportunities
Strategic Acquisition Opportunities Ge Potential for Equity Value Creation Through Accretive Acquisitions Illustrative Stock Price Accreti m= Industry continues to consolidate 15.0% = Gray TV's strategic transactions should not be curtailed by recent and proposed Acquieith regulatory changes eauleid
Slide 14: Diversifying Revenue Mix
gray = 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 ad-based sources — internet and subscriber driven — and retransmission revenue = Diversification lowe
Slide 15: Station Mix and Top Markets
gray As of December 31, 2013 4 4 Current Station Mix 2013' Revenue: Top 10 Markets 2013 ' BCF: Top 10 Markets 110 Total Program Streams: suntington, wy, Heintpalae WY, 52 Big 4 Affiliates: Charleston / Omang NE: Charleston / 10% 7% Lexington, KY on Lexington, KY Wace - Bryan, TX = 24CBS = other ye =
Slide 16: Gray is a Leading Beneficiary of Political Revenue
Gray is a Leading Benefici: ry of Political Revenue with Large Ups Gray TV Political Revenue Commentary = $86 milion in 2012 — new record 2011 off year record $13.5 million Gray operates in key battleground states. 15.1% + #1 stations can capture over 50% of the political budget for a market = Recen
Slide 17: Gray TV continues to benefit from growth in auto ad spending
m= Gray TV continues to benefit from the growth in auto ad spending = Auto ad spending grew ~8% in 2013 = In 2013, ~25% of Gray TV's total broadcast advertising revenue was derived from automotive customers = ~=TVauto ad spending growth of $0.4 billion or 16% from 2011 to 2012 but still below peak T
Slide 18: Retransmission Revenue Growth
Approximately 2 million subscribers? $39.8 re-priced in two deals in Q4 2013 (Sin millions) Remaining 4.5 million subscribers? re-pricing between 12/31/14 and 3/31/15 Anticipate significant price increase in each case 2005 2006 —-2007_—-2008—«-2009— 2040 ~—2041~—«2012——-2013, % of Total Revenue 0.4%
Slide 19: Internet and New Media Revenue
Operate web and mobile applications in all markets Focusedon local content: news, weather, sports All sites already converted to responsive design Moms Everyday digital vertical; deployed in each Gray TV market and continues to expand to other markets {Sin millions) $134 S119 $114 ali 2005 2006 2007
Slide 20: Unlocking the Value of Spectrum
Unlocking the Value of Spectrum Ge Significant Potential Upside from the Monetization of Spectrum = As of 12/31/13, 58 additional program streams(’) with programming from key networks including CW, MyNetwork TV, Telemundo, MeTv and Antenna TV‘) 20134) 2012") YrYr % = $19.5 million in net revenue = =
Slide 21: Industry Overview
Slide 22: 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 23: Strong Growth in Other Key Revenue Streams
Strong Growth in Other Key Revenue Streai gray = 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" Strong Growthin Retrans
Slide 24: Significant Asset Value and Transaction Synergies for Television Broadcasters
Significant Asset Value and Transaction Synergies for Television Broadcasters Ge 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 2012 and 2013 at attractive =
Slide 25: Financial Overview
Financial Overview BER Lie Mi CSL. 2 saa 0-0 mes 2hGi So mame Te
Slide 26: Net Revenue, Operating Cash Flow and Capital Expenditures
Net Revenue) (Sin millions) $405 $346 $348 : || 2010 2011 2012 2013 28% (11%) 32% (14%) o% 14% 17% 13% Operating Cash Flow? Capital Expenditures") {Sin millions) {Sin millions) $174 2007 2008 +2009 2010-2011 2012_—«2013 %Margin 32% 36% «28% ~—O% THM “Ty Wet Revenue and capial expenditures historical
Slide 27: Free Cash Flow
Free Cash Flow Ge « Record free cash flow of $95 Free Cash Flow’ million in 2012 {Sin millions, exceptpershareamounts) = 2012 OCF conversion rate into FCF: 54% = Equity value creation through strong free cash flow generation = Significant NOLs of $225 million, as of 12/31/13, expected to shield cash
Slide 28: Net Financial Leverage
gray = De-levered significantly (~4.0x) between December 2009 and December 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 {Sin millions), MNetDebt/ OCF "Net Debt = Preferedto
Slide 29: Prudent Cost Management and Increasing Margins
Prudent Cost Management and Increasing Marg Ge easing Operating Cash Flow Margins arcio™ ane? = Gray TV continues to grow wort operating margins through identified operational efficiencies 33% = Decreased operating costs by converting to digital 2010 2011 2012 2013 Historical as reported basis, Gray
Slide 30: Full Year 2013 Results
Strength in revenue driven by automotive and Gin mlions) th > retransmission, etc. + Local revenue +6% vs. 2012 and +9% vs. 2011 + National Revenue +3% vs. 2012 and +3% vs. 2011 + OCF +18% from 2011 to 2013 YTD 2013, Operating Cash Flow®) Free Cash Flow”) (S in millions) (S in millions) ‘ d + ae a )
Slide 31: Year-to-Date March 31, 2014 Results
{Sin millions) + Strength in revenue driven by automotive +11% tt and retransmission revenue $913 $78.2 + Retransmission Revenue +66% vs. YTD 2012 YTD 2013 YTD 2014 Operating Cash Flow Free Cash Flow”) (Sin milons) F sk (Sin millions) $714 _ L | =“. = | YTD 2013 YTD 2014 YTD 2013 YTD 2014 (1) Alldat
Slide 32: Recent Completed Acquisitions
Recent Completed Acquisitions Closed Purchaser Seller Price Market DMA | Affiliation Station(s) Date Prime Cities Minot-Bismarck- KNDX/KXND Gray Broadcasting | $7.5 Million‘) | Dickinson, ND 445 FOX LMA Commenced 5/1/14 Inc. May 1, 2044 Gray Mission TV, | $7.8Million Rapid City, SD 173 FOX KEVN/KIW
Slide 33: Pending Acquisitions
Pending Acquisitions (closings subject to regulatory approval expected Q2 or Q3 2014) Ge Gray/Excalibur | HoakMedia, $297.5 | Lincoln-Hastings- 405 NBC KHAS®) LLC/ Parker Million | Kearney, NE ai Sioux Falls, SD 414 ABC&CW | KSFY/KABY/ KPRY) Fargo-Valley City, ND 116 NBC KvLy) CBS KB?) Monroe, LA 13
Slide 34: Capitalization Overview
Capitalization Overview gray Current Capitalization Gin Millions) 3812014 1231/2013 Cash and Cash Equivalents $270 S135 S4OMM Revolver due 2017 00 00 Term Loan B due 2019 (L + 350/ 1.0% LIBOR Floor) 1590 1590 Total First Lien Debt 159.0 159.0 7.500% Senior Unsecured Notes due 2020 615.0 615.0 Other
Slide 35: Pro Forma - closed and announced transactions
Pro Forma - closed and announced transa Ge Own/Operate stations: + 42 markets / DMAs 61-208/ 7.4% U.S. Households + #1 Ranked 28 of 42 markets / #1 or #2 Ranked in 38 of 42 markets + 11 state capitals / 22 university towns + 139 program streams +75 Big 4 Affiliations Currently Pending® Pending Total
Slide 36: Gray Non-GAAP Reconciliations
Gray Non-GAAP Reconciliations
Slide 37: Gray Non-GAAP Reconciliation
Gray Non-GAAP Reconciliation gray 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 and Broadcast C
Slide 38: Gray Non-GAAP Reconciliation (Continued)
Gray Non-GAAP Reconciliation (Continued) gray = Operating Cash Flow: Operating cash flow is defined as net income (loss) plus depreciation and amortization (including amortization of program broadcast rights), impairment of goodwill and broadcast licenses, loss on disposal of assets, loss on early e
Slide 39: Gray Non-GAAP Reconciliation (Continued)
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Slide 40: Gray Non-GAAP Reconciliation (Continued)
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Slide 41: Gray Non-GAAP Reconciliation (Continued)
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Slide 42: Safe-Harbor
SAFE-HARBOR G gray 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
Slide 43: sees Rn ag He
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