QUARTERLY REPORT

Nexstar 2Q Revenue Drops 10.3%

However, factoring out political results in a 2.7% increase. Retrans grows 13.8% to $314 million.

Nexstar Media Group this morning reported financial results for the second quarter that included net revenue of $270,768,000, down 10.3% from $301,829,000 in the same quarter a year ago.

The revenue numbers break down to:

  • Local revenue of $199,279,000, a 0.4% increase.
  • National revenue of $69332,000, a 4.6% decrease.
  • Retransmission consent revenue of $314,268,000, a 13.8% increase.
  • Political revenue of $3,157,000, down 90%.
  • Digital revenue of $56,237,000, down 12.1%.
  • Trade and barter/other revenue of $7,739,000, a decrease of 57.5%.

Second quarter net income totaled $70,735,000, down 18.3%, while broadcast cash flow totaled $227,458,000, a decrease of 11.7%.

Perry A. Sook, Nexstar chairman, president and CEO, said: “Nexstar’s second quarter results reflect our ongoing progress in leveraging the viewership and reach of our leading local broadcast platform to generate continued double-digit distribution revenue growth. Nexstar’s second quarter net revenue, excluding political, increased 2.7% compared to the prior year period. Overall, second quarter broadcast cash flow and adjusted EBITDA before one-time transaction expenses were largely in-line with expectations, while free cash flow was impacted by the timing of 2019 operating cash tax payments and capital expenditures. Our fiscal year 2019 budgets for cash taxes and cap-ex remain unchanged, therefore the timing issue will self-resolve over the remainder of the year. As a result, our Nexstar stand-alone 2018/2019 free cash flow guidance remains unchanged at $615 million for Nexstar’s legacy operations.

“We look forward to the upcoming completion of the Tribune Media acquisition. Last week the Department of Justice provided its settlement and conditional approval of the Tribune acquisition, subject to the planned station divestitures, moving us one step closer to completing the transaction. During the second quarter, we priced a new $3.1 billion term loan B and a new $675 million term loan A facility, which when combined with the $1.1 billion of senior notes issued in early July, comprise all of the primary financing components to complete the transaction. With our focus on growing free cash flow, we are pleased with the favorable rates and terms of the transaction financings. In addition, during the second quarter we entered into an agreement to sell two Indianapolis stations to minority-led broadcaster Circle City Broadcasting I, Inc., thereby completing our divestiture plan to comply with FCC local and national television ownership rules and to obtain regulatory approval of the proposed transaction. In aggregate, and concurrent with the closing of the Tribune transaction later this quarter, we will divest a total of 21 stations in 16 markets for gross proceeds of $1.36 billion. The total gross proceeds from the proposed station divestitures will exceed our initial estimate by approximately 36%. With the transaction timeline proceeding according to plan, we remain confident in our ability to deliver pro-forma average annual free cash flow of $900 million for the combined operations, which is 46% higher than Nexstar’s record stand-alone average annual 2018/2019 free cash flow projections. We intend to update our guidance at the time of the transaction closing.

“Turning back to second quarter results, excluding political, total spot television ad revenue decreased by $2.6 million or 1.0%, reflecting 0.4% growth in local which was offset by the 4.6%, or $3.3 million, year-over-year decline in national. Overall, second quarter spot television advertising trends showed a marked improvement over first quarter 2019 levels with local and national spot revenue growth on a quarterly sequential basis of 6% and 7%, respectively. For the 2019 full year, we continue to expect low single-digit growth in non-political television advertising revenue versus the comparable 2018 period.

BRAND CONNECTIONS

“Combined second quarter digital media and retransmission fee revenue of $370.5 million rose 8.9% over the prior-year period and accounted for 57.1% of net revenue compared to 51.5% of net revenue in the 2018 second quarter, reflecting both the lower levels of political advertising in the current period and the ongoing shift in our revenue mix. Retransmission fee revenue increased by approximately $38.0 million or 13.8% over the prior-year period, as overall subscriber levels remained largely constant and taking into account recent renewals of distribution agreements with multichannel video programming distributors, and contributions from distribution agreements with various OTT providers. Total second quarter digital revenue declined by approximately $7.8 million or 12.1%, as we continue to cycle through certain market place changes that occurred earlier this year. Importantly, Nexstar’s second quarter local digital advertising revenue generated year-over-year percentage growth in mid-teens range and our digital agency services business also achieved healthy growth over 2018 second quarter levels.

“The rise in second quarter station direct operating expenses (net of trade expense) primarily reflects the growth in budgeted increases in network affiliation expense as a partial offset to the rising retransmission consent revenue. Second quarter station SG&A and corporate expense excluding non-cash compensation and one-time transaction expenses was essentially flat compared to the prior year period, and in line with our expectations.

“Our active management of our capital structure and strong free cash flow allowed us to act on a range of opportunities to enhance shareholder value in the second quarter through our return of capital and leverage reduction initiatives which included reducing funded debt by approximately $112.0 million and returning approximately $21.0 million to shareholders through our quarterly cash dividend. Through the six-month period ended June 30, we have allocated approximately $204.0 million cash from operations to reduce total outstanding debt.

“With significant and growing free cash flow, an attractive, reduced weighted average cost of borrowings and long-term record of success in fully integrating acquired stations, extracting synergies and enhancing operating results while improving service to viewers and advertisers, Nexstar is prepared to complete the highly accretive Tribune Media acquisition. Nexstar and Tribune have completed all of the steps and satisfied all of the merger agreement conditions necessary to finalize the planned transaction including entering into agreements to divest stations to achieve ownership and other regulatory compliance approvals, securing approval from Tribune shareholders and putting in place substantially all of the necessary financing.

“With the Department of Justice’s conditional approval last week, we are waiting on FCC approval, court approval of the Department of Justice settlement and certain other customary closing matters, and we continue to expect the transaction will close in the current quarter. As with our past transactions, we have developed a comprehensive integration plan and we remain confident in our ability to deliver on the value of this compelling combination given our operating management disciplines and history of success in exceeding synergy targets. In terms of capital allocation, our substantial annual free cash flow growth combined with our strong balance sheet and attractive weighted average cost of capital will provide us with the financial flexibility to continue investing in our business and our employees, while quickly and meaningfully reducing leverage and returning capital to shareholders.

“In summary, Nexstar’s organization-wide commitment to excellence in local content for viewers and users as well as unparalleled marketing results for our advertisers has been fundamental to our success and growth. We look forward to realizing the significant strategic and economic benefits from the Tribune Media transaction later this year. With our increased geographic diversity and audience reach, a large number of distribution contract renewals at 2019 year-end and the return of the political cycle with the upcoming 2020 presidential election, Nexstar has excellent visibility to delivering on or exceeding our free cash flow and leverage reduction targets in the current cycle and a clear path for the continued near- and long-term enhancement of shareholder value.”

Read the company’s report here.


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