Nexstar’s Ad Demand Strong Despite Supply Chain Disruptions

Reporting third quarter results a day after a MoffettNathanson analyst warned that supply chain problems could hurt fourth quarter national television advertising, Nexstar Media Group Chairman-CEO Perry Sook was asked about the supply chain impact in his company’s Wall Street conference call. But Sook insisted that pacings remain strong.

“I do think that the results that we’ve turned in have been despite supply chain issues that have been prevalent that affect the furniture category, appliance category, electronics, as well as certainly automotive. But the good news on the automotive front is the GM plant here not too far from our offices in Arlington [Texas], where all of the Escalades and Yukons and Suburbans are made—at least most of them in America — has just added overtime shifts, trying to catch up with demand.

“So, we anticipate that the automotive category will remain a headwind in the fourth quarter, and perhaps the first quarter of next year, but it should probably turn to a net-positive tailwind by the second quarter and certainly the second half of next year,” Sook told the analysts.

“In Q3 and in Q4, 14 of the top 25 categories are up,” added Nexstar President-COO Tom Carter. “Perry mentioned some of the other ones — furniture, autos, electronics, etc. that are being affected. But the rest of them are more than making up for that, from a growth perspective, so we’re seeing growth over ’19, ex-auto, and growth over ’20, ex-auto,” he said.

Having reported record third quarter revenues, Carter had praise for Nexstar’s local sales teams.

“Core television advertising, reflecting accelerated rebound demand for our premium local and national marketing solutions, led to a 13.3% year-over-year increase in revenue for this segment. As we’ve done consistently for many quarters, Nexstar’s local sales initiatives continued to deliver healthy levels of new business, with our sales teams generating a record $34.8 million of new, third quarter new-to-television revenue, marking a 37% increase over the prior year and a 6% rise over Q2 of 2021,” said Carter.

“Excluding auto, 2021 third quarter advertising revenue exceeded pro forma 2019 levels, and with the significant ongoing growth of the gaming/sports betting category, we expect Nexstar’s positive ad trends to continue in the fourth quarter and next year,” Carter said in the call.

“In the third quarter, total revenue for Nexstar’s top 10 ad categories paced 12% ahead of the prior year. We recorded gains in nine of our top 10 categories — the biggest dollar gains coming in gaming/sports betting, services and the retail category, as consumers returned to in-person shopping,” Carter said.

Making her first appearance as part of the Nexstar management team, New EVP-CFO Lee Ann Gliha noted that with net revenue for the third quarter up 3.5%, that was essentially flat on a same-station basis — and up 11.5% excluding political. “Core revenues on a same-station basis were up 10%, distribution revenue was up 13%, and digital revenue was up 10%” she said.

Political advertising is due to be a big driver again next year, but for now Sook is trying to keep a lid on expectations when asked if 2022 could beat the presidential election year 2020.

“Well, I don’t want to be irrationally exuberant here, as relates to political. But as you look at our footprint and the races, we’re going to have, we’re going to participate in 30 of the 34 Senate races — and the ones we think will be particularly competitive next year will be Florida, Ohio, Pennsylvania, North Carolina, Georgia, Nevada, Wisconsin. Governor: 31 of 36 races, and again Florida, Pennsylvania, Kansas, Maryland, Michigan, Georgia, Wisconsin. And in the House, we will literally participate in 355 of the 435 races,” Sook spelled out as the roadmap for 2022.

“So, we think we’ll do very well. We are not guiding to a number that would equal or exceed 2020 in terms of total ad revenue — where we generated over $600 million in revenue. But I think that as the year goes on — and political is kind of a wildcard as far as who drops in and who drops out, what races change, where the money flows — but I think that we’ll be a lot closer to 2020 than maybe most folks are thinking. We’re not guiding to a number equal to that or greater than that for next year,” Sook concluded.