EARNINGS CALL

Media Gen.: Plenty Of Growth Prior To Merger

As the station group awaits approval of its merger with Nexstar, it sees dollar signs ahead in the form of political ad revenue. The category has gotten off to a flying start for the company, with Iowa and South Carolina already under its belt and with Super Tuesday on the near horizon. Media General goes into the March 1 event with stations in seven states and 15 in-state markets. Plus, it sees retrans as a major growth category.

Vincent L. Sadusky, president-CEO of television group Media General, told investors and analysts that the upcoming merger with Nexstar is all about scale, echoing the words of Nexstar’s Perry Sook. But until that happens later in the year, he’s looking forward to growth fueled by political and the Olympics.

Olympic success will be driven by Media General’s 13 NBC affiliates, and its strong presence in political battleground states such as Ohio and Florida will help it rake in political dollars.

The latter category has gotten off to a flying start for the company, with Iowa and South Carolina already under its belt and with Super Tuesday on the near horizon. Media General goes into the March 1 event with stations in seven states and 15 in-state markets.

SVP-CFO Jim Woodward said the company is expecting a 12%-16% gain during the first quarter of 2016. Excluding political, it will be 7%-11%, largely on the strength of increased retransmission consent income.

Sadusky said: “In the first quarter, inclusive of political we’re seeing pacing up mid-single-digits, we’re seeing pacing flattish on the core side. But there’s been a good amount of political. I think on the political side, for the first quarter, our business on the books is in the $12 million dollar range.”

That compares to only $5 million in political by the end of 1Q 2014, and 1Q 2016 isn’t over yet. “Business comes in very quickly on political so there’s still quite a bit of time left to go in the quarter,” he added.

BRAND CONNECTIONS

Retransmission consent is seen as a major growth category. Media General closed on 77 agreements representing 28% of its subscribers in 2015, and according to Sadusky, further renewal opportunities loom in 2016. “[W]e believe there is a lot more room to grow this important revenue stream as the current market for local TV’s highly-rated programming is still under-valued.”

Hyundai was the fly in the ointment for the automotive category during 2015 and early 2016, according to Sadusky. Its decision to cease supporting local dealers had a negative effect on all television groups, in his opinion. That situation has been reversed, which will inject positive flow into the category.

A major disappointment for Media General was in the digital category, which Sadusky laid squarely on the doorstep of its national segment. He said, “The national advertising marketplace is and has been facing downward pricing pressure from programmatic solutions and industry [challenges] such as non-human traffic and ad-blocking.” Local and social are doing much better, and will be the focus of Media General’s future digital efforts.

Sadusky is pleased with the effort made by the staff of WISH Indianapolis in the wake of its lost CBS affiliation. “Going from an affiliate to an independent is a really different model,” he observed. The station is relying on maintaining a strong local news operation.

Sadusky also mentioned Raleigh’s WNCN, which is switching from NBC to CBS effective Monday, Feb. 29. He is particularly excited about getting the CBS NFL package there, and the high regional viewership index it brings along.

The spectrum auction represents “oil in the ground,” according to Sadusky, and the company’s simple plan is to make sure Media General shareholders will have a chance to reap its benefits.

As to what those benefits might be, he claimed no special knowledge. His only speculation was that it would remain on schedule beginning with the planned March 29 kick-off date.

Wells Faro analyst Marci Ryvicker said the company’s reported $366 million in 4Q 2015 income was just below Wells Fargo guidance of $367.1 million, and on the low end of Media General’s own guidance, which called for a gain of between $366 million and $377 million.


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