Gray Media, Inc. · NYSE:GTN
Gray Media — Gray Television — Goldman Sachs Conference 2016
46 slides from Gray Media's conference presentation, May 17, 2016
Slide 1: Gray Television, Inc. Investor Presentation
Gray Television, Inc. Investor Presentation NYSE:GTN May 2016 Edition – Updated for March 31, 2016 Financial Information 1
Slide 2: Disclaimer
Disclaimer 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 be identified by words such as “expect,” “anticipate,” “will,” “implied,” “assume” and similar ex
Slide 3: Company Overview: An Industry Leading Power
Company Overview An Industry Leading Power 3
Slide 4: Snapshot: High Quality, Diverse Station Group
Snapshot: High Quality, Diverse Station Group 50 markets 13 channels 35 channels 179 total program streams across 91 19 channels 26 channels stations 93 “Big 4” network program streams 23 markets with two or more “Big 4” network affiliations 49/50 markets with #1 or #2 ranked Standalone metrics full
Slide 5: Gray National Footprint
Gray National Footprint Ranked #1 or #2 in 49 of 50 Markets Reaching approximately 9.4% of US TV households Rapid City, SD Lincoln, NE Sioux Falls, SD Omaha, NE Wausau - Rockford, IL Lansing, MI North Platte, NE Fargo, ND Rhinelander, WI Cedar Rapids, IA Flint, MI Bismarck, ND Madison, WI Casper, WY
Slide 6: Combined Historical Basis Results – Pro Forma
Combined Historical Basis Results – Pro Forma Combined Historical Basis Year Ended December 31, % Change % Change % Change 2015 to 2015 to 2015 to 2015 2014 2014 2013 2013 2012 2012 (in thousands, except per share data) Revenue (less agency commissions): Total $728,917 $745,765 (2)% $609,917 20% $68
Slide 7: Combined Historical Basis Results – Pro Forma
Combined Historical Basis Results – Pro Forma Combined Historical Basis Combined Historical Basis Three Months Ended March 31, % Change % Change 2016 to 2016 to 2016 2015 2015 2014 2014 (dollars in thousands, except per share data) Revenue (less agency commissions): Total $187,076 $167,421 12% $153,
Slide 8: Gray Leads the Industry with the Highest Quality Portfolio of Local Television Stations
Gray Leads the Industry with the Highest Quality Portfolio of Local Television Stations Dominate local and political revenue with highly-rated news The Importance of Being #1 platforms #1 Stations can secure more than Price half of a market’s political ad Share of Leadership buys Market Ad $ Net
Slide 9: Gray Leads Industry In Operating Margins
Gray Leads Industry In Operating Margins 2014 EBITDA Margins 42% 37% 36% 36% 35% 33% 31% 21% 21% (2) (3) (4) (5) (6) (7) (1) Nexstar Sinclair Media General TEGNA Entravision Tribune Meredith E.W. Scripps •Source: Company filings, Company investor presentations and Company earnings calls •Note: Based
Slide 10: The Importance of Being #1
The Importance of Being #1 Long History of Being #1 in the Market(1) 19 18 19 19 19 17 16 17 16 15 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CBS National Ranking 1 1 1 1 1 1 1 1 1 1 19 17 17 16 15 14 15 14 14 13 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 NBC National Ranking 3 3 4 4 4
Slide 11: Gray's Stations Over-Index Every Major Network
Gray’s Stations Over-Index Every Major Network(1) CBS vs. Gray November ’15 Household Share CBS, NBC, and ABC perform +73% 16 18 12 14 far better on Gray’s stations 10 10 10 Amount by which Gray’s late local newscasts 6 than national averages outperform the national average… The Morning Network News
Slide 12: Gray Dominates Local News and Information
Gray Dominates Local News and Information(1) +93% National Average vs. Gray Amount by which Gray’s 6PM November ’15 Household Share newscasts outperform the national average… 29 +92% 23 Amount by which Gray’s late 15 local newscasts outperform 12 the national average… Gray’s national Household Share
Slide 13: Gray Has Long-Term Ratings Stability
Gray Has Long-Term Ratings STABILITY November DMA Rating – All Viewing(1) Ratings Stable Since 2010 – Averaging 5.7 5.9 5.9 5.7 5.7 5.6 5.6 2010 2011 2012 2013 2014 2015 (1) Nielsen November DMA Average Rating in DMA TV HH Monday-Sunday 6:00am to 2:00am Note: Pro forma for all completed transactions
Slide 14: Gray Leads the Industry in Household Ratings
Gray Leads the Industry in Household Ratings Household Rating Analysis – November 2015(1) 5.7 5.3 4.9 4.6 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 Viacom- Sinclair TEGNA ABC O&O Nexstar Tribune Scripps NBC O&O Fox General CBS ____________________ (1) Nielsen Novem
Slide 15: Recognized Industry Leader
Recognized Industry Leader TVNewscheck’s 2016 NAB’s National Winner: 2016 Station Group of the Year Service to America Award KWTX/CBS, Waco, Texas 2016 NAB’s National Winner: Service to Community Award KOLO/ABC, Reno, Nevada 2016 Strategic Investment in Technology Company Syncbak “Gray’s forward-thi
Slide 16: Gray's National Sales: Now Direct
Gray’s National Sales: Now Direct Effective January 1, 2016: Gray terminated all contracts with National Advertising Representation firms except one DMA. The first and only broadcast group to take this innovative step to streamline our process and reduce our costs. BEFORE NOW(3) Stations directly tr
Slide 17: Network and Retrans Visibility
Network and Retrans Visibility All 14 @ 6/30/19 5 @ 9/30/17 All 26 @ 12/31/18 All 19 @ 12/31/20 30 @ 8/31/19 2016 2017 2018 2019 2020 2018 Retrans Renewals 4.2 M Subs 6.4 M Subs 1.0 M Subs 2022 All 21 @ 9/1/22 Gray Television, Inc. 1717
Slide 18: Gray Excels at Retrans
Gray Excels at Retrans Gray Retransmission Revenue in Millions STABLE Sub Count 2012-2015 for continuously owned Big-4 stations (data unavailable for acquired stations) 240.0 As Network Reverse Comp has increased 205.0 from 0% to 50% over past five years, 184.0 Gray’s net retrans revenue increas
Slide 19: Significant Opportunity for Continued M&A
Significant Opportunity for Continued M&A 44% 38% FCC U.S. TV Household Cap: 39% 31% 23% 19% 18% 18% 14% 11% 11% 9.4% 6% 4% 4% 3% 3% 3% 2% 2% 1% ... Tribune Sinclair TEGNA Media Hearst EW Nexstar Raycom Cox Meredith Graham Weigel Hubbard Sunbeam Calkins Quincy Bahakel Dispatch Capitol General Scripp
Slide 20: Investment Highlights
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Slide 21: Key Credit Highlights
Key Credit Highlights A Leading Television Broadcaster in Diverse Mid-Markets with Dominant Market Positions Stable Advertising Market and Diversification of Revenue Mix Large Political Upside in Election Years with Presence in Key States. Larger Political Upside in Presidential Election Years Stron
Slide 22: Diverse Revenue Mix
Diverse Revenue Mix In 2008, 99% of revenue derived from advertising, 1% from subscription/fee income. By 2015, 75% of revenue derived from advertising, 25% from retransmission fee income. Total Revenue by Segment 2007-15 (As Reported Basis) 2015 2014 2013 2012 2011 2010 2009 2008 2007 0% 10% 20% 30
Slide 23: Diversification Across Networks and Markets
Diversification Across Networks and Markets 2015PF Revenue by Affiliate: 2015PF BCF by Affiliate: Station Mix(1) $729mm (1) $285mm (1), (3) 179 Total Program Streams: All Secondary Channels & Other 93 Big 4 Affiliates: All Secondary 5% 3% Channels & Other 4% 35 CBS 9% 26 NBC 18% 19 ABC 38% 33%
Slide 24: Stable Markets – Concentration on DMAs 62-209
Stable Markets – Concentration on DMAs 62-209 with Focus on State Capitals / Collegiate Presence Gray stations cover 11 state capitals and 27 university towns Better demographics, more stable economies Enrollment of approximately 634,000 students Approximate Approximate Market College(s) Enrol
Slide 25: 2016 Campaigns & Elections
2016 Campaigns & Elections Open Presidential Contest 1 Gray Markets in 7 out of 8 Predicted 2016 Swing States 5 (CO, FL, IA, NV, OH, VA, WI) Ballot Presidential Initiatives & Primaries & Referendums General 34 Senate Races 9 Competitive Races in Gray Markets (CO, FL, GA, IL, IN, NV, NC, OH, WI) Fede
Slide 26: Gray is a Leading Beneficiary of Political Revenue
Gray is a Leading Beneficiary of Political Revenue with Large Upside in Presidential Years Gray Political Revenue in Millions $143 $118 $86 $82 New New Record Record Presidential Non- $58 Year Presidential $48 Year 2008 2010 2012 2014 2012PF 2014PF 2014 Political Revenue Per TV Household $11.03 $ $4
Slide 27: Successful Digital Media Initiatives: Gray Digital Media
Successful Digital Media Initiatives Gray Digital Media • Total 2015 Page views – 2.3 billion (Up 26%) 600k iOS Downloads to date • Mobile makes up 74% of all digital traffic 1.2 million Android Downloads to date • Fully responsive websites 195k Roku Downloads to date • Gray Connect App allows repor
Slide 28: MomsEveryday
Successful Digital Media Initiatives MomsEveryday MomsEveryday is a sustainable content and revenue solution built by Gray for our stations, as well as stations interested in licensing the product. This market-exclusive program allows local and national businesses to tell their story with a unique m
Slide 29: Significant Potential Upside from Spectrum Monetization Opportunities
Significant Potential Upside from Spectrum Monetization Opportunities One of first to monetize digital spectrum Secondary Channel 2015 PF Financials Opportunities to benefit from the 2016 FCC Broadcast Incentive Auction Potential opportunities from future changes $98 to new broadcast technical
Slide 30: Financial Overview
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Slide 31: Gray's Financial Scale Continues to Increase
Gray’s Financial Scale Continues to Increase Net Revenue Pro Forma All Completed Transactions LTM L8QA LTM L8QA $597 $746 $553 $685 $729 $737 $508 $678 $427 $610 $648 $405 $346 $308 $307 $327 $356 $346 $376 2010 2011 2012 2013 2014 2015 2012 2013 2014 2015 Operating Cash Flow LTM L8QA LTM L8QA $330
Slide 32: Robust Free Cash Flow Generation
Robust Free Cash Flow Generation Presidential Election Year Non Election Year Non Presidential Election Non Election Year 2015 OCF 2012 OCF Buildup (1), (2) 2013 OCF Buildup (1), (2) Year 2014 OCF Buildup (1), (2) Buildup (1), (2) ($ in millions) ($ in millions) 48% ($ in millions) ($ in millions) 5
Slide 33: 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 millio
Slide 34: Capitalization
Capitalization Current Capitalization ($ in millions) Cum. X Cum. Actual L8QA X LTM 3/31/2016 OCF(1) OCF(2) Cash & Equivalents $121 Priority Revolver -- Term Loan B due 2021 556 2016 Incremental Term Loan due June 424 2021 Total Secured Debt $980 3.3x 3.8x 7.5% Senior Notes 675 Total Debt $1,655 5.7
Slide 35: Record Combined Historical Basis Results for Q1 2016
Record Combined Historical Basis Results for Q1 2016 Combined Historical Basis Three Months Ended March 31, % % Change Change 2016 to 2016 to 2016 2015 2015 2014 2014 (dollars in thousands, except per share data) Revenue (less agency commissions): Total $ 187,076 $ 167,421 12 % $ 153,228 22 % Politi
Slide 36: Combined Historical Basis Results – Pro Forma
Combined Historical Basis Results – Pro Forma Combined Historical Basis Year Ended December 31, % Change % Change % Change 2015 to 2015 to 2015 to 2015 2014 2014 2013 2013 2012 2012 (in thousands, except per share data) Revenue (less agency commissions): Total $728,917 $745,765 (2)% $609,917 20% $68
Slide 37: Record As Reported Basis Results for Q1 2016
Record As Reported Basis Results for Q1 2016 As-Reported Basis Three Months Ended March 31, % % Change Change 2016 to 2016 to 2016 2015 2015 2014 2014 (dollars in thousands, except per share data) Revenue (less agency commissions): Total $ 173,723 $ 133,303 30 % $ 91,297 90 % Political $ 9,655 $ 1,1
Slide 38: Record As Reported Basis Results for 2015
Record As Reported Basis Results for 2015 As-Reported Results Year Ended December 31, % % Change Change 2015 to 2015 to 2015 2014 2014 2013 2013 (dollars in thousands, except per share data) Revenue (less agency commissions): Total $ 597,356 $ 508,134 18 % $ 346,298 73 % Political $ 17,163 $ 81,975
Slide 39: Questions
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Slide 40: Appendix: Non-GAAP Reconciliation and Glossary
Appendix: Non-GAAP Reconciliation and Glossary 40
Slide 41: As Reported Basis Non-GAAP Reconciliation
As Reported Basis Non-GAAP Reconciliation As Reported Basis Three Months Ended March 31, 2016 2015 2014 Net income $ 8,990 $ 5,595 $1,277 Adjustments to reconcile from net income to Broadcast Cash Flow Less Cash Corporate Expenses: Depreciation 11,126 8,798 6,384 Amortization of intangible assets 3,
Slide 42: Combined Historical Basis Non-GAAP Reconciliation
Combined Historical Basis Non-GAAP Reconciliation Combined Historical Basis Three Months Ended March 31, 2016 2015 2014 Net income $ 6,406 $ 6,679 $10,600 Adjustments to reconcile from net income to Broadcast Cash Flow Less Cash Corporate Expenses: Depreciation 11,772 11,289 10,724 Amortization of i
Slide 43: Combined Historical Basis Non-GAAP Reconciliation
Combined Historical Basis Non-GAAP Reconciliation Combined Historical Basis Year Ended December 31, 2012 2013 2014 2015 L8QA 2015 Net income $ 96,027 $ 50,911 $100,845 $ 49,952 $ 75,398 Adjustments to reconcile from net income to Broadcast Cash Flow Less Cash Corporate Expenses: Depreciation 40,643
Slide 44: Glossary
Glossary “Combined Historical Basis”: Combined Historical Basis reflects financial results, position or statistics that have been prepared by adding Gray’s historical financial results, position or statistics with the historical financial results, position or statistics of the Completed Acquisitions
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: Investor Presentation
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