QUARTERLY REPORT

Nexstar Reports 1Q Net Revenue Up 2%

The increase to $1.1 billion from 1Q 2020 was boosted by a higher distribution fee revenue (up 13%) and digital revenue growth of 18%. Core ad revenue was down 1.4%.

Nexstar Media Group this morning reported financial results for the first quarter of 2021 that included net revenue of $1,113,931, an increase of 2% from the same quarter of 2020.

Core ad revenue totaled $412 million, down 1.4% from $417 million in 1Q 2020.

Political ad revenue was $5.4 million, down 90.2% from a year ago.

Distribution fee revenue grew 13% to $621 million.

Digital revenue climbed 17.6% to $66 million.

Other revenue fell 29.1% to $9.1 million.

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Net income totaled $199 million, an increase of 26.3% from 1Q 2002.

Free cash flow was $483 million, up 14.3% from $423 million.

Perry A. Sook, Nexstar chairman, president and CEO, said: “Nexstar generated record first quarter financial results across key financial and cash flow metrics, outperforming consensus expectations and marking continued operating momentum and an exceptionally strong start to the year. Record first quarter net revenue reflects double-digit growth in digital and distribution revenue and Nexstar’s ability to drive recovery in core advertising, which more than offset the year-over-year reduction in political spending.

“Top-line growth combined with our ongoing expense management disciplines and the cash distribution from our 31.3% ownership stake in TV Food Network, resulted in record first quarter Adjusted EBITDA and free cash flow, before one-time transaction expenses, of $572.6 million and $484.6 million, respectively. Nexstar’s industry-leading free cash flow generation is providing us with the flexibility to continue investing in our local media platform while driving growing shareholder returns.

“Reflecting our capital allocation priorities and long-standing commitment to enhancing shareholder value, in the first quarter we allocated $75 million toward leverage reduction, returned approximately $30.4 million to shareholders through our recently upsized quarterly cash dividend, and repurchased $121 million of our Class A common shares, reducing our outstanding share count to approximately 43 million shares.

“Overall, our record first quarter results continue to highlight the strength of our assets and operations, the resiliency of our business model, and the value of our enterprise-wide focus on managing operations for current and future cash flow. With operating momentum continuing in the second quarter across our businesses, we expect to generate year-over-year growth across all of our non-political revenue sources throughout 2021, as the vaccine rollout progresses and economic conditions continue to improve. As a result, we remain confident in our ability to meet or exceed our pro-forma average annual free cash flow guidance of approximately $1.27 billion over the 2021/2022 cycle.

“Nexstar generated first quarter net revenue of $1.1 billion, representing a 2% increase over the prior year, as the ongoing execution of our strategies to leverage our local content and diversify our revenue sources more than offset the approximate $50 million year-over-year decline in political advertising. Total television advertising revenue, excluding political, decreased just 1.4% versus the comparable year-ago period, outpacing expectations and reflecting growing demand for our premium local and national marketing solutions.

“In addition, Nexstar’s local sales initiatives continue to deliver healthy levels of new business with our sales teams generating $27.8 million of first quarter new-to-television revenue, marking a 149% increase over the prior year. We previously disclosed that we expected the 2021 first quarter to be our most challenging core revenue comparison for the year given our significant outperformance in the year-ago period prior to the pandemic impact in the last three weeks of March 2020. We are extremely proud of the success of our sales teams for delivering solid first quarter core advertising results.

“As the largest broadcast television group in the United States, we are seeing some clear differences in terms of the pace of recovery in core advertising by geographic region and reopening stage. Looking ahead, we are encouraged by the overall acceleration in economic activity and the improved trajectory of ad spending across our footprint as market conditions continue to improve. As a result, we expect core advertising to return to growth over the prior year beginning in the second quarter of 2021.

“First quarter 2021 distribution fee revenue rose 13% year-over-year to approximately $621.2 million, reflecting our renewal of distribution agreements in 2020 representing approximately 18% of our subscriber base, synergies related to the December closing of Mission Broadcasting’s acquisition of WPIX-TV and stable subscriber trends across our platform that remain consistent with our expectations. Nexstar has solid visibility into our contractual distribution economics through 2022 year-end as, in addition to the 2019 and 2020 multi-year retransmission consent agreement renewals representing approximately 88% of our subscribers, over 85% of our Big Four affiliations are contracted through Dec. 31, 2022. As a result, we expect to generate continued growth from this revenue source throughout 2021 and beyond.

“First quarter 2021 total digital revenue increased 18% to approximately $66.4 million with digital profitability up substantially over the prior year period, partially reflecting our actions over the last year to discontinue or de-emphasize certain less profitable digital operations. Top-line growth was driven by the success of Nexstar’s integrated content and audience development strategies combined with contributions from the December 2020 accretive acquisition of Best Reviews, a leading consumer product recommendations company.

“After delivering record growth across key performance indicators in 2020, Nexstar’s digital network continues to generate strong audience engagement with our media content and significant consumer digital usage across our 400-plus digital touchpoints. Throughout 2021, we continue to project mid-seven figure expense savings this year, following the 2020 strategic operational realignment of our broadcasting and digital operating subsidiaries under Nexstar Media Inc.

“This June, Nexstar will celebrate the 25th anniversary of the company’s founding. During this period, the company has grown from a single station to become the nation’s largest broadcast television operator and top producer of local news content based on our disciplined approach to growth through accretive acquisitions, a focus on enhancing the operating results of acquired stations, and our long-standing, organization-wide commitment to localism.

“At the same time, the material diversification of our revenue mix has resulted in strong and consistent free cash flow generation, affording us the financial flexibility to reduce leverage, increase shareholder returns and pursue additional accretive growth opportunities, while investing in our business and our people. As always, we remain focused on actively managing our capital structure and expect Nexstar’s net leverage, absent additional strategic activity, to be in the sub 4x range at the end of 2021.

“In summary, we continue to execute well on our strategic priorities, including serving our local communities and driving increased content monetization, while reducing leverage and allocating free cash flow to growing capital returns for shareholders. With Nexstar’s core advertising acceleration beginning in the second quarter, our local sales teams are working hard to ensure that our stations are in the best position to drive revenue share gains as we move deeper into the recovery phase.

“As a result, we expect to drive continued growth across all of our non-political revenue sources for the remainder of 2021. Looking ahead, we have excellent visibility to delivering on or exceeding our free cash flow targets in the current cycle and a clear path for the continued near- and long-term enhancement of shareholder value as we follow the successful strategies we’ve established in terms of building the top line, maintaining close control of fixed and variable costs and optimizing the balance sheet. Our disciplines in these areas have added consistency and visibility to our results, while creating new value for our shareholders.”

Read the company’s report here.


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