Nexstar 2Q Revenue Climbs To $914.6M

Nexstar Media Group this morning reported financial results for the second quarter of 2020 that included net revenue of $914.6 million, up 40.9% from $649 million in the same quarter of 2019.

The results reflect the impact of Nexstar’s acquisition of Tribune Media that closed on Sept. 19, 2019.

Core ad revenue totaled $298.2 million, up 11.4% from $267.6 million in 2Q 2019.

Political ad revenue was $21.6 million, up 583% from a year ago.

Second quarter net income totaled $98.1 million, an increase of 38.7% from 2Q 2019.

Broadcast cash flow was $290.7 million, up 27.8% from $207.7 million.

Perry A. Sook, Nexstar chairman, president and CEO, said: “Nexstar’s industry leading scale and diversified business model combined with solid execution in a challenging environment resulted in record second quarter results with net revenue, profitability, and cash flow metrics all well above consensus expectations. The 40.9% rise in second quarter net revenue reflects growth in total television advertising revenue as we drove year-over-year increases in same station new-to-television business and strong shares of political spending in our markets, as well as a 71% increase in distribution fee revenues. In addition, despite the economic pressures related to the pandemic, Nexstar’s proven operating and expense management disciplines resulted in a 38.7% increase in net income and record second quarter broadcast cash flow, adjusted EBITDA and free cash flow with these metrics growing 27.8%, 48.6% and 127.3%, respectively, on a year-over-year basis.

“Notably, our enterprise-wide focus on managing operations for current and future cash flow enabled us to bring about 21% of every net revenue dollar to the free cash flow line. In the year-to-date period, and prior to the benefit of imminent and significant political spending, Nexstar has generated approximately $631 million of free cash flow before one-time transaction expenses.  Reflecting first quarter 2020 repurchases, we have reduced our issued and outstanding share count to approximately 45.3 million and we remain confident in our unique positioning in this environment to again generate positive free cash flow in the current quarter.

“Total second quarter television advertising revenue increased 18.1% to $319.8 million, including political revenue of $21.6 million and core advertising revenue of $298.2 million. While local and national advertisers adapted their media plans to meet the unique challenges of the pandemic during the second quarter, we saw sequential month over month improvement in our same-station core advertising revenue performance from April to May, and from May to June. Nexstar’s local sales initiatives helped offset marketplace challenges and continued to generate healthy levels of new business with second quarter new to television ad revenue rising both on a quarterly sequential and year-over-year basis.

“In total, our sales teams generated $20.7 million of second quarter new to television revenue, marking an 11.3% rise over the first quarter and a 4.5% rise over the comparable 2019 period. Recent distribution agreement renewals and the inclusion of WGN America resulted in a 70.7% rise in distribution revenue to $536.5 million, representing nearly 59% of total net revenue. Second quarter 2020 total digital revenue declined approximately $9.6 million or 17.0%, primarily due to softer local customer buying trends related to the COVID-19 pandemic, partially offset by an 8% year-over-year increase in Nexstar’s digital agency services revenues. However, digital profitability was up over the comparable prior year period and digital engagement trends were up significantly as Nexstar’s websites and mobile apps grew year-over-year page views by 250% to 1.1 billion* in April, with total monthly users up 133% to 96 million**.

“Total combined second quarter digital and distribution fee revenue of $583.2 million rose approximately 57.4% over the prior year period. The year-over-year increase in second quarter non-television revenue reflects new distribution agreements reached in the second half of 2019 and our realization of Tribune Media revenue synergies related to the after acquired clauses in our retransmission consent contracts, WGN America, and our realigned digital operations. With our successful renewal of 2019 year-end retransmission consent agreements, the approximate 20% of the base to be renewed and repriced this year, and subscriber levels remaining consistent with our expectations, further revenue growth from this source is projected for the balance of 2020 and beyond.

“With a focus on generating free cash flow, we remain committed to actively managing our capital structure, cost of capital, and liquidity position to provide the financial flexibility to support our business and enhance shareholder returns as we emerge from the pandemic. During the first half of 2020 we allocated approximately $594 million toward debt reduction, opportunistic share repurchases and cash dividends. Additionally, Nexstar continues to maintain a strong balance sheet including $664.6 million in cash at June 30, with access to an additional $140 million under our revolving credit facility. With our year-to-date progress on cash generation, historically low LIBOR rates, contractual distribution fee revenues and what is projected to be the biggest Presidential election cycle in the Company’s history, we continue to expect to be free cash flow positive in every quarter of 2020 and remain confident in our liquidity position and ability to service our debt. As such, we continue to expect Nexstar’s net leverage to decline to approximately 4x by year-end.

“At the onset of the pandemic we took immediate action to adapt our business to address the economic impact on the U.S. commercial advertising market. We implemented a range of cost-cutting initiatives which resulted in operating and corporate expense savings in excess of $40 million from budgeted levels in the second quarter of 2020. Reported second quarter station direct operating expenses (net of trade expense) primarily reflects a full quarter of incremental expenses related to the operation of the acquired Tribune stations and budgeted increases in network affiliation expense as a partial offset to Nexstar’s rising distribution revenue. Second quarter pro forma same station fixed expenses, excluding programming expenses, were down 18%.

“While the pandemic has created unprecedented challenges that have impacted our families, the economy and our daily lives, it has also changed consumers’ media consumption habits in ways that showcase the inherent strength of local broadcast television and Nexstar Media Group’s leading local brands. As we all continue to navigate through the unique and evolving challenges related to the coronavirus, local news has never been more essential for Americans. As the most powerful and trusted voice in this country, more people are tuning into their stations’ local newscasts than ever before. According to Nielsen data, even as states and localities began to slowly reopen in the second quarter, local broadcast television evening news viewership among adults age 18 to 34 remained impressively high, with year-over-year increases in average cumulative weekly impressions in April, May and June of 151%, 83% and 89%, respectively.

“As the nation’s largest broadcast group and the top producer of local news programming and content, Nexstar’s content has never been more valuable, as we provide essential, life-saving news and information to our viewers across all traditional and digital media platforms that is unique and relevant to each of the local communities we serve across the United States while offering local businesses, advertisers and brands unparalleled 24/7 reach and marketing opportunities across all screens and devices.

“Looking ahead to the third quarter, while the pandemic continues to impact commercial advertising, we are seeing the same pattern of month over month improvement in our pacing data and will benefit from significantly increased levels of political ad spending beginning in September. Overall, we are encouraged by early signs of recovery across our station footprint, as nearly all of our markets have reopened in some form and key economic indicators, including employment and consumer spending, are improving.

“At present, we are cautiously optimistic about the return of live sports, as live news and sports programming continue to generate the strongest levels of viewership across all demographics. Additionally, preparations for the September 1 launch of WGN America’s primetime national newscast, News Nation, which will reach approximately 75 million television households across the country, are proceeding on schedule and on budget.  During the quarter we announced the anchor teams and correspondents for our live three-hour prime-time national newscast and we are already attracting strong interest from leading national advertisers for this daily three-hour broadcast.

“In summary, Nexstar’s leading local broadcast platform is well positioned to withstand this environment due to several factors including our differentiated broadcast and digital sales programs, continued growth of distribution revenue, income from equity investments and what are projected to be record levels of political spending in 2020. In terms of capital allocation, we believe that our free cash flow combined with the active management of both our cost structure and balance sheet will provide us with the financial flexibility to continue supporting our shareholder value creation initiatives, including leverage reduction, quarterly cash dividends and share repurchases.

“As a result, Nexstar is well positioned to fully participate in the recovery and we remain highly confident in our long-term strategies in terms of serving the communities where we have operations, building the top line, maintaining close control of fixed and variable costs and optimizing the balance sheet. This focus, combined with our time proven operating and integration strategies, is enabling Nexstar to overcome the near-term challenges and extend our strong long-term record of growth and shareholder value creation.”

Read the company’s report here.