Automotive spending was down in second quarter, but Nexstar stations have generated a 10.1% gain in core advertising categories, excluding political, for the first half of 2006.
Citing strong local economies, a firming of the auto category, heavy political spending and sales related to retransmission consent agreements, Nexstar Broadcasting outlined for financial analysts this morning how it had achieved a 9.3% increase in local and national spot sales during the second quarter compared with the same quarter last year.
Although auto spending was down 5.8% overall for the quarter, spending from five foreign manufacturers was up, according to Chairman and CEO Perry Sook, who added that Toyota is now the second biggest spender in the category at Nexstar.
The company’s emphasis on local sales generated a 10.1% in total spot TV sales, excluding political, for the year’s first half, he said.
During the second quarter, Nexstar stations generated $43 million in local sales, $19.2 million in national sales, compared with $38.9 million in local and $18 million in national during the second quarter of 2005.
Political revenue for the quarter totaled $2.2 million, up from $850,000 in the same period a year ago.
Network compensation fell to $1 million, from $1.7 million a year ago, while retransmission cash grew to $2 million from $650,000. Company CFO Matt Divine noted that in addition to $2 million per quarter the company earns in retrans cash, it also receives $1 million in advertising spending from cable and satellite operators, as part of the overall retrans consent payment deals.
Company executives expect strong political spending in New York, Pennsylvania, Arkansas, Illinois, Missouri and Texas, all states where it owns stations, to help generate a 16-19% increase in spot TV sales during third quarter. Nexstar anticipates $5 million in political advertising during the third quarter.
For the year as a whole, the company expects automotive advertising sales to end up in the positive column, Sook said, given how much carmakers have already booked for the two remaining quarters.
Expenses for the company were up slightly more than anticipated, due to increase sales incentive compensation, Divine said, noting that $600,000 in incentive cash went to station general managers “for the work they do in the field in bringing operations in accord with budget projections.”
Broadcast cash flow rose 21.2% to $25.5 million in the second quarter compared to 2005, the company said.
EBITDA totaled $21.8 million for the second quarter, a 17.2% increase over 2005, it said.
“The second quarter marked another period where we exceeded the high end of our guidance range for net revenue and out-performed the consensus estimates for EBITDA growth,” said CEO Perry Sook in a statement.
Under pressure from securities analysts to trim the current debt load of $642.7 million, Sook promised to do so. In a statement, he said the company would use $20 million of its free cash flow to pay down debt in the second half of this year.
“We project the company’s total leverage of outstanding debt to EBITDA at the operating company will approximate 6 times at year-end while at the holding company total leverage will decline to approximately 7.25 times at year-end,” Sook said.
The leverage ratios factor in Nexstar’s just-announced purchase of WTAJ Johnstown-Altoona, Pa., the company said. The price tag of $56 million is 8.5 times the station’s pro forma 2006 EBITDA, it said. Company executives defended the purchase, saying that WTAJ ranks number-one in news in every daypart and is the market’s revenue leader. They also compared the cash flow multiple they paid with multiples of 12 and 14 times cash flow paid by Media General and Raycom in recent station acquisitions.
Sook said a constant item of attention for company executives is the possibility of selling assets to reduce leverage, but that most buyers want to pay multiples of last year’s cash flow, rather than this year’s. “In that sense, our stations are victims of their own success,” he said.
Sook also noted that new media strategies would generate new revenue for the stations in 2007.