While presenting strong 1Q results to analysts, Nexstar CEO says factory and dealer group money likely to continue decline.
Nexstar President and CEO Perry Sook had plenty of good news for the securities analysts who gathered for his first-quarter conference call this morning, but it was not all good.
“We project a continued decline in the automotive sector through the first half the year,” he said. “We have no reason to believe that that sector will turn around, although we would note that the rate of decline is less this year than it was last year at this time.”
The broadcast group, which operates 46 TV stations in 27 markets, reported that net revenue for the quarter grew to $59.8 million, up $6.5 million or 12.2% from $53.3 million in the first quarter of 2005. The record revenue translated into strong growth in broadcast cash flow (24.5% to $19.8 million) and EBITDA (28.8% to $16.6 million).
According to Sook, most of the quarter-over-quarter growth in net revenue was due to the cyclical political and Olympics revenue and to new revenue stemming from retransmission consent deals Nexstar struck with cable operators last year.
But Sook said Nexstar saw significant growth in 16 of the top 25 ad categories, including fast food (a “dramatic turnaround” from 2005), furniture, insurance, grocery stores, telecommunications, cable and utilities.
Down were legal, banking, packaged goods, home electronics, soft drinks and, most significantly, auto, Sook said.
Auto dropped 5% in the quarter, even though local dealers increased their spending by 8%. They could not offset the decreases in factory and dealer group spending, he said, citing Dodge as a major non-spender.
One bright spot was Toyota, Sook said. It increase spending by 25%, making itself Nexstar’s second largest auto advertiser.
Asked what the outlook at Nexstar is for percentage growth in the core advertising—that is, advertising excluding political and Olympics—Sook first said mid- to high-single digits. Pressed on the point, he backed off a bit. “I would still maintain that we are in a mid-single digit ad growth environment for our company.”
Like most broadcasters, Sook is looking locally for ad growth.
Nexstar stations are rated first or second in news in about three-quarter of their markets, and a third of all revenues comes from selling time in and around the newscasts, Sook said. “Selling into this strength provides numerous opportunities to develop marketing partnerships and sales promotions that we tailor to our local business customers,” he said. “Ratings drive revenue and, I’m happy to report, our stations are performing well.”
Web sites are “a large untapped opportunity” for further local growth, Sook said. “While our goal is to launch new media strategies that leverage the company’s content, there is a compelling reason for us to move quickly on this front because online in the fastest growing advertising segment. Local businesses are seeking ad and promotional packages that can blanket a market or turn a prospect searching the Internet into a customer.”