Nexstar 3Q Net Revenue Climbs 25%

The boost to $154.7 million is driven by increases in every area except national, with big percentage gains from political, digital and retrans.

Nexstar Broadcasting Group today reported third quarter revenue of $154.7 million, up 25.4% from the year-earlier period.

It breaks down to:

  • Local revenue was up 3.5% to $65.8 million
  • National revenue decreased 10.7% to $25.6 million
  • Retransmission consent money rose 59.2% to $40.7 million
  • Political revenue increased 1,665% to $18.1 million
  • Digital media revenue climbed 28.6 % to $12.9 million

The company said gross revenue excluding political rose 12.5% to $153.8 million.

Income from operations rose 65.7% to $41.7 million.

Perry A. Sook, Nexstar chairman, president and CEO, commented: “Nexstar’s record third quarter financial results reflect ongoing benefits from our results-focused operating disciplines, growing retransmission consent revenues, expanded digital media platform and our strategies to maximize the political revenue opportunity. These factors, coupled with completed, value-building station and digital media acquisitions and integrations, including the first full quarter of operations of five television stations in Colorado and Florida acquired in mid-June, drove record third quarter net revenue, BCF, adjusted EBITDA and free cash flow.

“Nexstar remains on track to generate record free cash flow in 2014 while continuing to identify, structure and enter into agreements that will grow future operating results through accretive transactions. In this regard, we recently announced a highly accretive transaction that upon completion will mark our entrée into the Phoenix market, and this morning we are announcing a smaller accretive transaction that will represent our second station in Des Moines, both of which we expect to complete in early 2015. Earlier this week, we announced FCC approval of the license transfer related to the seven stations soon-to-be-acquired from the Grant Co. We also expect to close another significant pending transaction later this year and one transaction early next year all of which will meaningfully benefit 2015 operating results and beyond.


“With the strong operating leverage in our business model, the 25.4% rise in third quarter net revenue generated 37.5% growth in BCF, a 38.7% increase in adjusted EBITDA, and a 80.0% rise in free cash flow. Third quarter television ad revenue inclusive of political advertising grew 17.5% as Nexstar’s spot inventory management initiatives resulted in a nearly 18-fold increase in political revenue and flat core local and national spot revenue. Reflecting our expanded platform and presence in states with high levels of political spending activity, 2014 third quarter political revenue rose by a robust 79.1% over comparable 2012 third quarter levels. With Election Day behind us, we are confident that 2014 fourth quarter results will similarly benefit from healthy political revenue contributions.

“Notwithstanding the benefits we are deriving from strong political ad spending in our markets, Nexstar’s gross revenue excluding political grew in the third quarter an impressive 12.5% and reflects the 59.2% rise in retransmission fee revenue to $40.7 million and 28.6% increase in digital media revenue to $12.9 million. Ongoing renewals of retransmission consent agreements combined with the growth of our digital publishing platform resulted in a 50.6% year-over-year increase in total third quarter retransmission fee and digital media revenue to $53.7 million.

“Nexstar’s 2014 year-to-date retransmission consent revenue of $110.8 million and digital media revenue of $32.4 million already exceed full year 2013 levels. These higher margin revenue streams continue to diversify and complement our core television operations and accounted for 34.0% of 2014 third quarter net revenue, up from 32.8% in the 2014 second quarter, 28.3% in the comparable 2013 period, and 21.8% in the 2012 third quarter, the last political cycle.

“With our focus on growing free cash flow, we remain disciplined in managing costs and driving BCF and Adjusted EBITDA margins. The rise in third quarter station direct operating expenses (net of trade expense) and SG&A primarily reflects higher variable costs related to the higher local and political revenues and the operation of acquired stations and digital assets while total third quarter corporate expense was slightly lower than budgeted.

“With significant and growing free cash flow, an attractive, declining weighted average cost of borrowings and long-term record of success in integrating newly acquired stations, extracting synergies and enhancing operating results while improving service to viewers and advertisers, Nexstar remains well positioned to further consolidate mid-sized markets and pursue additional accretive digital media transactions while continuing to lower leverage and return capital to shareholders.

“Last month, Nexstar announced a definitive agreement to acquire KASW-TV, the CW affiliate serving Phoenix for $68.0 million plus working capital. In the first twelve months following the closing of the transaction, KASW-TV is expected to generate approximately $14.0 million in BCF and is expected to provide free cash flow accretion in the first year of ownership of approximately $0.30 per share. This morning we are announcing a definitive agreement to acquire KCWI-TV, the CW affiliate in Des Moines for $3.5 million, which upon closing will complement our existing ownership of the ABC affiliate in the market and add approximately $1 million in incremental BCF.

“Looking ahead, with distribution agreements representing approximately 60% of Nexstar’s MVPD subscribers renewed in 2013 and by 2014 year-end, and another 25% of Nexstar’s subscriber households up for renewal in 2015, we project visible ongoing revenue growth from this source in 2015 and beyond. Similarly, digital media revenue growth in the remainder of 2014 and in 2015 will further benefit from our recent accretive acquisitions of Internet Broadcasting Systems and Enterprise Technology Group. These strategic additions to Nexstar’s existing digital platform and agency capabilities have expanded Nexstar’s digital business portfolio to over $50 million in annual run rate revenues.

“As such, inclusive of the two recently announced station transactions and assuming the completion of all other announced transactions, Nexstar would generate pro-forma free cash flow in excess of $365 million during the 2014/2015 cycle, or average pro-forma free cash flow in excess of $6.00 per share per year. Our current operations alone are tracking to generate blended free cash flow of approximately $4.50 per share per year in the current 2014/2015 period and with just the free cash flow generated from this base of operations, we expect Nexstar’s net leverage to decline to approximately 4.0x at the end of 2014.”

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