Nexstar 3Q Revenue Soars 68.5%

Nexstar Media Group this morning reported financial results for the third quarter of 2020 that included net revenue of $1.1 billion, up 68.5% from $664 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 $382 million, up 31.6% from $290.2 million in 3Q 2019.

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

Second quarter net income totaled $132.4 million, an increase of 1,115% from 3Q 2019.

Distribution fee revenue grew 83% to $538 million.

Digital revenue dropped 5% to $55 million.

Other revenue rose 8% to $10 million.

Net revenue increased 68.5%, from $664 million to $1.1 billion.

Broadcast cash flow was $463 million, up 128% from $203 million.

Perry A. Sook, Nexstar chairman, president and CEO, said: “During the third quarter we continued to successfully navigate the challenges presented by the pandemic thanks to our outstanding operating teams and their ability to adapt and dynamically manage the business for continued growth. Nexstar delivered record third quarter operating results with net revenue, profitability, and cash flow metrics all exceeding consensus expectations. Third quarter net revenue increased 68.5% and with the strong operating leverage in our business model, Nexstar generated record third quarter BCF, adjusted EBITDA and free cash flow with these metrics growing 128.3%, 209.1% and 268.3%, respectively on a year over year basis.  In addition, throughout the quarter, we made significant progress with our leverage reduction and return of capital initiatives as we lowered net debt by $162.5 million and allocated $150.4 million toward share repurchases and quarterly cash dividends.

“Reflecting our continued focus on optimizing our capital structure and lowering our cost of capital, during the quarter we completed two capital market transactions that allowed us to eliminate our most expensive debt while extending maturities. The resulting interest expense savings, combined with the declining borrowings and attractive rate environment, will allow us to de-lever even more quickly and increase reported free cash flow, while affording us the financial flexibility to act on other opportunities to enhance shareholder value.  We generated approximately $854 million of free cash flow in the first nine months of the year (before one-time transaction expenses) and with expectations for a robust fourth quarter, Nexstar will finish 2020 with net leverage below 4x.  Reflecting the repurchase of 2,250,000 shares in 2020 to-date, we have reduced our issued and outstanding share count to approximately 44.0 million and with the recent expansion of our repurchase authorization, we remain on plan to continue to return capital to shareholders while aggressively reducing leverage.

“Nexstar’s industry leading scale, including last year’s addition of the Tribune stations, diversified revenue sources and consistent, solid execution resulted in a 68.5% rise in third quarter net revenue. Third quarter total television advertising revenue rose 70.8% as we benefited from the recovery in advertising spending for key categories, drove year-over-year increases in same station new-to-television business and captured exceptionally strong shares of political spending in our markets. Distribution fee revenue rose 82.6% year over year to $538.4 million reflecting a full quarter benefit of the retransmission consent synergies from last year’s Tribune Media transaction, our renewal in 2019 of retransmission consent agreements representing approximately 70% of our subscriber base and MVPD and OTT subscriber counts consistent with our expectations. With approximately 18% of our subscriber base remaining 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.

“Third quarter television advertising revenue of $514.3 million includes political revenue of $132.4 million and core advertising revenue of $381.9 million. Third quarter political spending by political action committees and candidates exceeded our projections and with Election Day behind us and the potential for additional spending for runoffs, we will exceed our prior full year 2020 expectation for net political revenue in the low $400 million range by approximately 20%.  Encouragingly, while local and national advertisers initially reacted to the pandemic by modifying their spending, during the third quarter, we saw rebounds in several key categories as we generated year-over-year growth in four of our top nine categories with sequential month-over-month improvements in our same-station core advertising revenue performance — which began in the second quarter — continuing throughout the third quarter and into the fourth quarter to date. Nexstar’s local sales initiatives continued to generate healthy levels of new business with third quarter new-to-television ad revenue rising both on a quarterly sequential and year over year basis. In total, our sales teams generated $25.3 million of third quarter new-to-television revenue, marking a 22.2% rise over the second quarter and a 30.4% rise over the comparable 2019 period.

“Third quarter 2020 total digital revenue declined approximately 5.0%, due to de-emphasizing unprofitable lines of business and softer local customer buying trends related to the pandemic. However, digital profitability was up substantially over the comparable prior-year period and digital engagement statistics remain significant and continue to show a 20% increase over the prior year. Last month we announced an operational realignment whereby we combined Nexstar’s broadcasting and digital operating subsidiaries under the Nexstar Inc. name. The new operational structure and appointment of proven divisional leaders is intended to accelerate our growth by leveraging our leading local content to maximize its value, our national reach, and significant consumer digital usage across multiple platforms.  We expect a mid-seven figure expense savings in 2021 as a result of the synergies, efficiencies, and streamlined reporting structure resulting from this realignment.

“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 nine months of 2020 we allocated approximately $906.9 million toward debt reduction, opportunistic share repurchases and cash dividends. Additionally, Nexstar continues to maintain a strong balance sheet including $409.9 million in cash at September 30, with access to an additional $197.7 million under our revolving credit facilities. With record year-to-date free cash flow, historically low LIBOR rates, contractual distribution fee revenues and record political revenue, we remain highly confident in our liquidity position and path toward further de-leveraging.

“Our growth to-date in 2020 reflects the strong foundation of our assets, operations and financial structure and the adaptability of our teams coast-to-coast to take immediate actions to offset and in many cases overcome the economic impacts on our businesses brought on by the pandemic. We implemented a range of cost-cutting initiatives which resulted in third quarter operating and corporate expense savings in excess of $25 million from budgeted levels and over $70 million year to date. Reported third quarter 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. Third quarter pro forma fixed expenses, excluding programming expenses, were down 14%.

“Looking ahead to the fourth quarter, we continue to see month-over-month improvements in our pacing data and our expected record results will reflect the final five weeks of political spending that led up to Election Day. We remain encouraged by the advertising rebound we are generating across our station footprint, most notably in auto, our largest category, which is pacing up significantly from where the third quarter finished.  The resumption in auto category spending is being complemented by a resurgence in large box retail spending, fast food, home improvement, attorney and sports wagering ad spending. Additionally, on September 1 we successfully launched WGN America’s primetime national newscast, News Nation, which is distributed to approximately 75 million television households across the country, as well as the accompanying mobile app, NewsNationNow and its mobile audience and viewers. We are very pleased with the content and overall product as well as the ability of the newscast to stay true to our goal of presenting news in an unbiased manner.  Our focus now is on growing national awareness and audience delivery of the three-hour nightly broadcast while continuing to attract strong interest for the on-air and digital offerings from leading national advertisers.

“In summary, Nexstar’s leading local platform has performed exceptionally well despite the challenges presented by the pandemic. Our differentiated broadcast and digital content, innovative sales programs, continued robust distribution revenue growth, significant income from equity investments and record levels of 2020 political spending continue to drive financial results. Our capital allocation actions in 2020 to date, highlight that our strong free cash flow combined with the active management of both our cost structure and balance sheet provides us with the financial flexibility to continue supporting our shareholder value creation initiatives, including select acquisitions. Leverage reduction, quarterly cash dividends and share repurchases will continue to be the priority of our capital allocation. As a result, Nexstar remains highly confident in our long-term strategies of serving the communities where we operate, building the top line, maintaining close control of fixed and variable costs and optimizing our balance sheet. This focus is enabling Nexstar to overcome the near-term challenges and extending our strong long-term record of growth and shareholder value creation.”

Read the company’s report here.