Slide 1: Gray Television, Inc. Investor Presentation
Gray Television, Inc. Investor Presentation NYSE:GTN September 2016 Edition Updated for June 30, 2016 Financial Information 1
Slide 2: Disclaimer
Disclaimer ALL DATA PRESENTED FOR GRAY IS PRO FORMA 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 Gray. These statements may b
Slide 3: An Industry Leading Power
COMPANY OVERVIEW INVESTMENT HIGHLIGHTS FINANCIAL OVERVIEW TRANSACTION OVERVIEW APPENDIX An Industry Leading Power 3 3
Slide 4: Recent Development
Recent Development § On June 3, 2016, Gray announced the acquisition Acquisition Cements Gray’s for $270 million in cash of two #1-ranked Presence in Midwest television stations that Nexstar will divest in its merger with Media General: § Green Bay, WI (DMA #68) – WBAY (ABC) § Davenport, IA (DMA #10
Slide 5: Gray in Eight Points
Gray in Eight Points 1 ABROADCASTER LEADING TELEVISION IN DIVERSE 5 SUCCESSFUL NEW MEDIA INITIATIVES AND SPECTRUM UPSIDE MID-MARKETS WITH DOMINANT MARKET POSITIONS 2 HIGHEST QUALITY PORTFOLIO 6 ROBUST FREE CASH FLOW GENERATION OVER ANY TWO YEAR CYCLE 3 LARGE POLITICAL ADVERTISING REVENUE UPSIDE IN E
Slide 6: 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 7: High Quality, Diverse Station Group
High Quality, Diverse Station Group 187 36 channels 51 96 24 27 channels 51 markets 187 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 7 7
Slide 8: Gray Leads the Industry with the Highest Quality Portfolio of Local Television Stations
Gray Leads the Industry with the #1 50/51 markets: ranked #1 or #2 Highest Quality #2 television station Portfolio of Local Television Stations 8 8
Slide 9: 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 9 9
Slide 10: Recognized Industry Leader
Recognized Industry Leader KWTX/CBS KOLO/ABC, Waco, Texas Reno, Nevada 2016 NAB’s 2016 NAB’s National Winner: National Winner: Service to Service to America Award TVNewscheck’s Community Award 2016 Station Group of the Year 1010
Slide 11: 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. Scripps General Source: Company filings, Company investor
Slide 12: Significant Growth Since 2011
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 13: … 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 14: Investment Highlights
COMPANY OVERVIEW INVESTMENT HIGHLIGHTS FINANCIAL OVERVIEW TRANSACTION OVERVIEW APPENDIX Investment Highlights 1414
Slide 15: 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 1515
Slide 16: The Importance of #1 Highly Ranked News Franchises Drive Traffic
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 17: 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 18: Network Programs Over-Index on Gray's Stations
CBS vs. Gray | November ’15 Household Share 18 Network 16 14 12 10 Gray 10 10 6 Programs 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 19: 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 12 outperform the national National average 6PM News Late News Amount by which Gray’s +93% 6PM newscast
Slide 20: Revenue Diversified Across Networks and Markets
Revenue Diversified Across Networks and Markets 2015PF Revenue by Affiliate: 2015PF BCF by Affiliate: $737mm $289mm Increasing Diversification of All Non-Big Four Channels All Non-Big Four Channels Revenue Sources 2% 5% 3% 5% 2008: • 96% of revenue derived from advertising sales 18% 39% 19% 36% 2015
Slide 21: 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 22: 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% 2222
Slide 23: A Leading Beneficiary of Political Revenue
A Leading Beneficiary of Political Revenue Gray Political Revenue in Millions $144 $119 $82 $86 New New Record Record Non- $58 Presidential $48 Presidential Year Year 2008 2010 2012 2014 2012PF 2014PF 2014 Political Revenue Per TV Household $11.02 $ $4.40 $4.02 $3.63 $3.51 $3.45 $3.27 $1.75 (1) (2)
Slide 24: 2016 Competitive Races in Gray Markets
2016 Competitive Races in Gray Markets Fourth Quarter is Key Over the past several political cycles, approximately 51 to 2012 = $144 Million 2016 60 percent of total annual political advertising revenue 19 Markets for Presidential 24 Markets for fell in the fourth quarter of Presidential the year. 1
Slide 25: Significant Monetization of Spectrum Today
Significant Monetization of Spectrum Today Secondary Channel 2015 PF Financials $98 MILLION IN REVENUE 98 $55 MILLION IN BCF SECONDARY CHANNELS 56% MARGIN ON DIGITAL SECONDARY CHANNELS 2525
Slide 26: Successful Digital Media Initiatives
Successful Digital Media Initiatives Gray Digital Media • 2.3 billion total page views (up 26% over 2014) 3.8 million ‘Likes’ in 2015 • Mobile makes up 74% (up 31% over 2014) of all digital traffic 875,000 ‘Followers’ in 2015 (up 73% over 2014) Gray is live with Facebook’s ‘Instant • Website Develop
Slide 27: Gray Alone Sells National Ads Directly
Gray Alone Sells National Ads Directly In early 2016, Gray terminated all contracts with National Advertising Representation firms (except for one DMA). We are the first and still only broadcast group to take this innovative step to reduce our costs and streamline service to our clients. BEFORE NOW(
Slide 28: Financial Overview
COMPANY OVERVIEW INVESTMENT HIGHLIGHTS FINANCIAL OVERVIEW TRANSACTION OVERVIEW APPENDIX Financial Overview 2828
Slide 29: Financial Scale Continues to Increase
Financial Scale Continues to Increase Revenue ($ in millions) Pro Forma All Completed Transactions LTM L8QA LTM L8QA $597 $753 $737 $745 $692 $776 $553 $685 $508 $616 $654 $405 $427 $346 $356 $346 $376 $308 $307 $327 2010 2011 2012 2013 2014 2015 2012 2013 2014 2015 6/30/2016 L8QA Operating Cash Flo
Slide 30: Prudent Balance Sheet Management Leads to Deleveraging
Prudent Balance Sheet Management Leads to Deleveraging Gray has significantly reduced secured and total leverage from historical levels. Gray has diversified its revenue base, allowing for significant free cash flow in both political and non-political years. Net Financial Leverage (1) ($ in millions
Slide 31: 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 32: Refinancing Transaction Overview
COMPANY OVERVIEW INVESTMENT HIGHLIGHTS FINANCIAL OVERVIEW TRANSACTION OVERVIEW APPENDIX Refinancing Transaction Overview $525 Million 5.125% 8-yr Notes due 2024 A record low interest rate for a Gray Note $200 Million add-on to Gray’s 2026 Notes Priced at 103 to yield 5.398% 3232
Slide 33: Sources & Uses and Pro Forma Capitalization
Sources & Uses and Pro Forma Capitalization Sources & Uses ($ in Millions) Sources Uses New Senior Notes due 2024 $525 Repay Senior Notes due 2020 $675 Add-on 5.875% Senior Notes due 2026 200 Tender Premium 28 Cash from Balance Sheet 13 Accrued Interest 23 Estimated Net Fees and Expenses 11 Total So
Slide 34: Non-GAAP Reconciliation and Glossary
COMPANY OVERVIEW INVESTMENT HIGHLIGHTS FINANCIAL OVERVIEW TRANSACTION OVERVIEW APPENDIX Non-GAAP Reconciliation and Glossary 3434
Slide 35: Combined Historical Basis Results – Pro Forma
Combined Historical Basis Results – Pro Forma 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 $119,007 (84
Slide 36: Record As Reported Basis Results for Q2 2016
Record As Reported Basis Results for Q2 2016 As-Reported Basis Three Months Ended June 30 % Change % Change 2016 to 2016 to 2016 2015 2015 2014 2014 (dollars in thousands) Revenue: Total $ 196,633 $ 143,464 37 % $ 107,249 83 % Political $ 9,649 $ 2,197 339 % $ 8,616 12 % Operating expenses (1): Broa
Slide 37: Record As Reported Basis Results for 2016
Record As Reported Basis Results for 2016 As-Reported Results Six Months Ended June 30 % Change % Change 2016 to 2016 to 2016 2015 2015 2014 2014 (dollars in thousands) Revenue: Total $ 370,356 $ 276,767 34 % $ 198,546 87 % Political $ 19,304 $ 3,356 475 % $ 11,408 69 % Operating expenses (1): Broad
Slide 38: Combined Historical Basis Results – Pro Forma
Combined Historical Basis Results – Pro Forma Combined Historical Basis Three Months Ended June 30 % Change % Change 2016 to 2016 to 2016 2015 2015 2014 2014 (dollars in thousands) Revenue (less agency commissions): Total $ 198,031 $ 182,874 8% $ 172,384 15 % Political $ 10,064 $ 2,572 291 % $ 14,68
Slide 39: Combined Historical Basis Results – Pro Forma
Combined Historical Basis Results – Pro Forma Combined Historical Basis Six Months Ended June 30 % Change % Change 2016 to 2016 to 2016 2015 2015 2014 2014 (dollars in thousands) Revenue: Total $ 387,097 $ 351,972 10 % $ 325,612 19 % Political $ 19,971 $ 3,810 424 % $ 19,570 2% Operating expenses (1
Slide 40: As Reported Basis Non-GAAP Reconciliation
As Reported Basis Non-GAAP Reconciliation As Reported Basis Three Months Ended June 30 2016 2015 2014 (dollars in thousands) Net income $17,662 $12,110 $1,591 Depreciation 11,617 8,754 6,986 Amortization of intangible assets 4,242 2,731 1,179 Non-cash stock-based compensation 1,272 1,009 980 Loss on
Slide 41: As Reported Basis Non-GAAP Reconciliation
As Reported Basis Non-GAAP Reconciliation As Reported Basis Six Months Ended June 30 2016 2015 2014 (dollars in thousands) Net income $26,652 $17,705 $ 2,868 Depreciation 22,743 17,552 13,370 Amortization of intangible assets 8,130 5,502 1,468 Non-cash stock-based compensation 2,556 2,002 3,051 Loss
Slide 42: As Reported Non-GAAP Reconciliation
As Reported Non-GAAP Reconciliation 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 4,020 5,01
Slide 43: Combined Historical Basis Non-GAAP Reconciliation
Combined Historical Basis Non-GAAP Reconciliation Combined Historical Basis Three Months Ended June 30 2016 2015 2014 (dollars in thousands) Net income $18,108 $17,065 $18,003 Depreciation 11,652 11,186 11,052 Amortization of intangible assets 4,251 4,326 2,987 Non-cash stock-based compensation 1,27
Slide 44: Combined Historical Basis Non-GAAP Reconciliation
Combined Historical Basis Non-GAAP Reconciliation Combined Historical Basis Six Months Ended June 30 2016 2015 2014 (dollars in thousands) Net income $24,922 $24,159 $29,030 Depreciation 23,489 22,597 21,934 Amortization of intangible assets 8,972 8,822 4,910 Non-cash stock-based compensation 2,556
Slide 45: Combined Historical Basis Non-GAAP Reconciliation
Combined Historical Basis Non-GAAP Reconciliation 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 46: Combined Historical Basis Non-GAAP Reconciliation
Combined Historical Basis Non-GAAP Reconciliation Eight Quarters Ended Combined Historical Basis Operating Cash Flow June 30, 2016 as defined in the Senior Credit Agreement: (dollars in thousands) Net income $ 148,423 Depreciation 91,589 Amortization of intangible assets 38,151 Non-cash stock-based
Slide 47: 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 historical financial re
Slide 48: 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 49: Gray Television, Inc. 4370 Peachtree Rd., NE Atlanta, Georgia 30319
Gray Television, Inc. 4370 Peachtree Rd., NE Atlanta, Georgia 30319 www.gray.tv 49