Nexstar Riding Recovery From The Pandemic

While last year’s political windfall is in the past, Nexstar Media Group Chairman-CEO Perry Sook says core advertising revenues in the first quarter exceeded expectations. The $412 million in core reported this morning, down 1.4% from a year ago, included $27.8 million in new-to-television ad sales — long a focus for the company.

“Looking ahead, we’re encouraged by the overall acceleration in economic activity and the improved trajectory of ad spending across our footprint as market conditions continue to improve,” Sook said in his quarterly conference call with analysts.

“In [the] first quarter, total revenue for Nexstar’s top 10 ad categories paced 9% ahead of the prior year, with gains in six of our top 10. In addition, five of our top 10 auto advertisers increased their spending year-over-year. The reduction in auto category spending is being complemented by the resurgence in insurance, lottery, sports betting, home service and repair, medical/healthcare, packaged goods, grocery stores and auto after-market spending.

“Nexstar’s core ad strength is being achieved despite the auto inventory headwinds as the result of the chip and supply chain issues,” Sook added. “We’re also accomplishing this growth before all small and mid-sized businesses have fully returned to the ad market—a trend which we think bodes well for our business, and one which could possibly accelerate as we move throughout the year.”

The CEO was later asked when auto might return to year-over-year growth.

“Auto was down in the first quarter a low single digit versus the prior year. It depends on the chip shortage. At some point I think there’ll be a tremendous pull forward of demand. People are looking for cars. They can’t find cars. Whether that bubble exists in the third quarter or the fourth quarter, I don’t know. But I would anticipate it’s there. I don’t think it will be in second quarter, although our auto is performing relatively on par with the first quarter performance from comps to prior year,” Sook answered.

One analyst wanted to clarify just how close the ad market has come back to what it was in 2019, the last full year before the pandemic.

Looking at the current quarter, Sook said all ad-supported revenue for the month of April was up 62%. For broadcast alone, including political, the gain was 73%. “So, if I extrapolate that to 2019, we get into the low single digits down,” he said of second quarter pacings.

Sports betting continues to be a hot category. “Gaming, in conjunction with lottery and all other gambling spend, is already a top 5 category. In fact, it was the No. 3 category, behind auto and attorneys, in the first quarter. We have every reason to believe that it will be a nine-digit contributor in 2021,” Sook said in response to an analyst’s question.

Asked about market-to-market variations in recovery, Sook said there is no hard and fast rule. “I would say that New York and its recovery and reopening is lagging behind,” he noted. But while New York City and Chicago are not as robust as some other markets, he added that KTLA in Los Angeles, which until recently was in a lockdown, “is just actually killing it.” Sook attributed that ad strength in L.A. to the station’s strong schedule of local news.

The Nexstar CEO congratulated Gray Television on its deal to acquire Meredith Local Media, noting that the combination will grow Gray to about half the size of Nexstar. “We are a big believer in scale, not only nationally. For example, we’re in every market in the State of New York now. What unique content and advertising opportunities can we create that no one else can compete with? You can say the same thing about the states of Tennessee, Illinois, Missouri, California. So we see real value in that and we’re just beginning to unlock,” Sook stated.