QUARTERLY REPORT

A Merged Nexstar Posts Record 1Q Numbers

Net revenue growth of 111% following the Media General merger boosts revenue to $540 million, driving record operating income of $110.1 million. All of the company’s revenue areas are up, except political.

Nexstar Broadcasting Group today reported first quarter net revenue of $540.3 million, up 111.3% from the first quarter of 2016, before it bought Media General Inc. The company did not offer same-station comparisons.

On Jan. 17, Nexstar completed its acquisition of Media General Inc. and also closed on the divestitures of 13 television stations. The results announced today, it says, “reflect the impact of $47.7 million of one-time transaction expenses incurred in the quarter ended March 31, 2017. The actual results … for the three months ended March 31, 2017, reflect the company’s legacy Nexstar broadcasting and digital operations (less 73 days of results from six Nexstar station divestitures) and 73 days of results from the Media General stations (net of divestitures). The comparable three-month period ended March 31, 2016 reflects the company’s legacy Nexstar broadcasting and digital operations.

The revenue numbers break down to:

  • Local revenue of $202.4 million, up 116% from 1Q 2016.
  • National revenue of $77.7 million, up 119%.
  • Retransmission consent revenue of $232 million, up 138%.
  • Political revenue of $2 million, down 83%.
  • Digital revenue of $46.7 million, up 107%.

First quarter income from operations totaled $110 million, up 90%.

Broadcast cash flow was $188 million, up 92%.

Perry A. Sook, Nexstar chairman, president and CEO, said: “Nexstar’s record first quarter results highlight our expanded scale, ongoing diversification and unwavering commitment to localism, innovation and growth as we capitalize on the many opportunities to serve viewers and businesses in our local markets. Our record first quarter net revenue led to record cash flows before the impact of $47.7 million of one-time transaction expenses which we disclosed and estimated at $46.0 million on our fourth quarter conference call.

BRAND CONNECTIONS

“A partial quarter’s contribution from the Media General transaction and the continued strength of Nexstar’s legacy operations led to triple digit growth in all of our non-political revenue sources and combined with our expense discipline and focus on managing operations for cash flow, resulted in BCF, Adjusted EBITDA and free cash flow growth before transaction expenses of 91.9%, 97.6% and 80.5%, respectively. Importantly, the Media General integration and synergy realization plans are proceeding ahead of schedule, and to date we have harvested approximately 85% of the $81 million of year one synergies we previously identified.

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“We remain confident that significant year-over-year growth in our non-political revenue sources will continue throughout the year, and we expect 2017 to mark the company’s sixth consecutive year of record financial results. With the operating momentum across our business and our integration initiatives proceeding according to plan, we remain confident in Nexstar’s ability to meet or exceed our targets for average annual free cash flow in the 2017/2018 cycle of approximately $565 million, or approximately $12.00 per share, per year. Overall, the Media General transaction is meeting our expectations and will result in excess of 55% growth in our annual average pro forma 2017/2018 free cash flow per share relative to the record performance of our legacy operations in 2016.

“For the quarter, net revenue rose 111% as our increased scale and the ongoing execution of our strategies to leverage our local content and diversify our revenue sources more than offset the $9.8 million year-over-year decline in political advertising. First quarter core television ad revenue growth of 117% was complemented by a 138% rise in retransmission fee revenue and a 107% increase in digital media revenue both of which benefited from organic growth as well the addition of the Media General operations.

“Our strong local sales teams and focus on managing core ad inventory resulted in a modest increase in pro forma combined Company same-station local advertising revenue, despite the absence of political and soft first quarter GDP trends as the U.S. economy grew during the period at its weakest pace in three years. Reflecting transaction-related growth and our historical success in growing political ad spending during odd-year cycles, we reported first quarter political revenue of approximately $2 million marking a 454% rise over the comparable 2015 period. Notably, excluding political, gross revenue grew 120% in the first quarter compared to the prior year, reflecting Nexstar’s further success in leveraging the value of our television broadcasting operating model and content creation capabilities into a diversified platform with multiple high margin revenue streams.

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“Highlighting further success against our diversification initiatives, combined digital media and retransmission fee revenue of $278.6 million more than doubled compared to the prior year period and accounted for 51.6% of net revenue marking the highest contribution to our quarterly revenue mix for the combined metric and significant growth over the 2016 first quarter level of 46.9%. The year-over-year increase in first quarter non-television revenue reflects new distribution agreements reached in late 2016 with multichannel video programming distributors covering approximately 10 million subscribers, Media General revenue synergies related to the after acquired clauses in our retransmission consent contracts, and our expanded digital operations.

“The rise in first quarter station direct operating expenses (net of trade expense) and SG&A expense primarily reflects the operation of acquired stations and digital assets and increases in network affiliation expense. First quarter corporate expense was in line with our overall guidance and our prior indication that we would incur transaction costs related to the completion of the Media General transaction and certain divestitures.

“With significant and growing free cash flow Nexstar has excellent visibility to delivering on or exceeding our free cash flow targets in the current cycle and a clear path for the continued near- and long-term enhancement of shareholder value. As always, we remain focused on actively managing our capital structure to provide the financial flexibility to support our near- and long-term growth. In this regard, subsequent to the closing of the Media General transaction, Nexstar made voluntary prepayments on its Term Loan B amounting to $125.0 million and called the entire $525 million of the 6.875% senior unsecured notes. As a result, we reduced our funded debt at March 31, 2017, by [$650] million relative to the levels at the time we closed the Media General transaction. We continue to expect Nexstar’s net leverage, absent additional strategic activity, to be in the high 4x range at the end of 2017 and to decline to the mid 3x range by the end of 2018.

“To ensure precise execution across our significantly expanded operating base, during the first quarter we promoted Tim Busch to serve as president of the Nexstar Broadcasting Inc., announced three newly-created regional managers and moved quickly to fill open general manager positions and to date have hired or promoted 22 new station GMs. We also hired our Washington D.C. News Bureau Chief, CBS News veteran Bill Mondora, who will leverage our expanded team of journalists and production resources to deliver local content to communities across Nexstar’s markets. We added sales resources to the former Media General markets and continue to transition our stations onto the same operating systems, platforms and services.

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“We also announced the appointment of technology venture capital investor and former Rubicon Project president and board member, Greg Raifman, to president of Nexstar Digital LLC. Greg brings outstanding leadership and entrepreneurial skills to Nexstar and a record of success in efficiently scaling advertising technology and services companies to a position of market leadership while accelerating revenue growth. He will continue the progress we have made integrating our digital products under the Nexstar Digital brand, while evaluating new potential complementary capabilities that maximize results for our customers and create revenue opportunities for the Company’s shareholders.

“As the nation’s leading local media company with a portfolio of premiere stations and digital assets, a strong balance sheet, an attractive weighted average cost of capital, and prodigious annual free cash growth, we continue to have the financial flexibility to reduce leverage, evaluate additional accretive strategic growth investments and expand our return of capital to shareholders.

“In summary, Nexstar is executing very well on all functions including our operations, integration, synergy realization, capital structure, and service to our local communities. Our disciplines in these areas have driven significant growth as well as consistency and visibility to our results. We look forward to realizing the significant strategic and economic benefits from the Media General transaction in 2017 and remain confident that our ongoing initiatives to drive distribution, digital and odd-year political revenue growth across our platform combined with prudent management of our capital structure are a proven formula for sustained long term financial growth.”

Read the company’s report here.


Comments (4)

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Cheryl Thorne says:

May 9, 2017 at 8:43 am

This tells us nothing … let’s see what happens after the 2qtr apples to apples including Media General. Not going to be pretty I’m afraid for their shareholders

Snead Hearn says:

May 9, 2017 at 9:05 am

It may be some creative accounting but the numbers are impressive.

Jean Garneau says:

May 9, 2017 at 9:15 am

All broadcast groups are flush with cash post-auction. They need it to pay down debt and increase cashflow. This is not a surprise. What will be interesting is if the new Nexstar comes to appreciate its scale and can lever that to consolidate operations and get better pricing. It would be nice to see some long-term planning for sustainability in addition to “the next big thing.”

Brian Bussey says:

May 9, 2017 at 10:11 am

the next deal will be news maker because it will ultimately lead to the own fall of democracy in America


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