QUARTERLY REPORT

Nexstar Reports Record 4Q Revenue

The increase to $1.4 billion from 4Q 2019 was boosted by a 717% increase in political advertising as well as higher distribution fee revenue. Core ad revenue was down 9.9%.

Nexstar Media Group this morning reported financial results for the fourth quarter of 2020 that included net revenue of $1,376,611, an increase of 25.1% from the same quarter of 2019.

Core ad revenue totaled $474 million, down 9.9% from $526 million in 4Q 2019.

Political ad revenue was $298.3 million, up 717% from a year ago.

Distribution fee revenue grew 18.4% to $528 million.

Digital revenue dropped 12.5% to $65 million.

Other revenue fell 34.3% to $11.8 million.

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Net revenue increased 25.1%, from $1.1 billion to $1.4 billion.

Net income totaled $363 million, an increase of 219% from 4Q 2019.

Free cash flow was $451 million, up 122% from $203 million.

Perry A. Sook, Nexstar chairman, president and CEO, said: “Nexstar’s fourth quarter financial results conclude an outstanding year, as we set new records across every key financial performance metric, all of which exceeded consensus expectations. Reflecting margin growth related to our record revenue and the strong operating leverage in our business model, Nexstar generated record year-over-year fourth quarter adjusted EBITDA and free cash flow growth of 73.3% and 154.9%, respectively. While we continue to operate in a dynamic environment, full year 2020 free cash flow was in line with our pre-pandemic expectations and 2021 is off to a solid start. As a result, we are reinstating guidance and expect to generate pro-forma average annual free cash flow of approximately $1.27 billion over the 2021/2022 cycle which supports our view that Nexstar’s path to growth, expanded returns of capital and enhanced shareholder returns remains on plan.

“Throughout 2020, our enterprise-wide focus on managing operations for current and future cash flow, combined with the actions we took to offset and, in many cases, overcome the economic impacts brought on by the pandemic, enabled us to generate record free cash flow of approximately $1.28 billion, representing growth of approximately 191% over 2019. We brought 28.4% of every net revenue dollar to the free cash flow line allowing us to invest in our local media platform and in complementary accretive acquisitions, while paying down approximately $1.0 billion in secured debt and returning approximately $383 million to shareholders in the form of share repurchases and dividends, as we reduced our year-end outstanding share count to 43.3 million shares.

“Throughout Nexstar’s history, our focus on free cash flow growth has supported greater levels of service and investment in our local operations and communities and increased shareholder returns. Consistent with our capital allocation priorities and long-standing commitment to enhancing shareholder value, in January, the Board of Directors increased Nexstar’s quarterly dividend by 25% to $0.70 per share and authorized the repurchase of up to an additional $1.0 billion of our Class A common stock. The Board’s repurchase authorization reflects the attractiveness of Nexstar’s free cash flow yield and a potential acceleration of share repurchases as our leverage moderates and large-scale acquisitions become more scarce given the current regulatory environment. The double-digit increase in Nexstar’s dividend for the eighth consecutive year and the implementation of a significant share repurchase authorization will allow us to continue delivering industry leading risk-adjusted returns to our shareholders.

“Turning to our revenue results, Nexstar generated fourth quarter net revenue of $1.4 billion representing a 25.1% increase over the prior year, essentially on a same station basis. Our inventory management and pricing strategies enabled us to maximize political revenue in our markets and with over $507 million in full year political revenue, we significantly exceeded our political advertising revenue guidance. Television ad revenue inclusive of political advertising grew 37.3% in the fourth quarter as the more than seven-fold increase in year-over-year political revenue was partially offset by a core spot revenue decline as we allocated ad inventory to political advertisers. Reflecting last year’s addition of the Tribune stations and presence in states with high levels of political spending activity, 2020 fourth quarter political revenue rose by 112.8% over the 2018 mid-term election cycle and increased 396.8% over the comparable 2016 Presidential election cycle.

“While robust demand from campaigns and issue advertisers this election season resulted in a reduction in inventory available for local and national advertisers in October, we continued to generate a sequential month-over-month improvement in core advertising revenue in November and December, which were the strongest months of the year since the pandemic began. In addition, Nexstar’s local sales initiatives continued to generate healthy levels of new business with fourth quarter new-to-television ad revenue rising both on a quarterly sequential and year-over-year basis. In total, our sales teams generated $27.8 million of fourth quarter new-to-television revenue, marking a 9.9% rise over the third quarter and a 35% increase over the comparable 2019 period.

“Fourth quarter 2020 distribution fee revenue rose 18.4% year-over-year to approximately $528 million reflecting our renewal of distribution agreements in 2019, partially offset by the one-time impact of outages during distribution negotiations with a satellite television company during the quarter. Excluding the aforementioned one-time impact, subscriber trends across our platform continue to remain consistent with our expectations and the ongoing distribution revenue growth trends we project. With our successful renewal of 2020 year-end distribution agreements representing approximately 18% of our subscriber base and 70%+ of our subscriber base renewed in 2019, continued revenue growth from this source remains highly visible for 2021.

“Fourth quarter 2020 total digital revenue declined 12.5%, due to de-emphasizing unprofitable lines of business that produced high volumes without substantial margins. However, digital profitability was up substantially over the comparable prior-year period. Following the acquisition of Tribune Media, over the past year Nexstar has transitioned its digital operations to focus on content and audience development. As a result, Nexstar’s digital network delivered record growth and audience engagement in 2020, ranking No. 1 in local news for every month of the year and reaching all-time highs across key performance indicators including average monthly users of 91 million, total pageviews of 7.8 billion, total multiplatform minutes of 10.4 billion and total digital video views of 1.6 billion, according to Comscore.

“In the fourth quarter, we completed the first transaction under our new ‘content first’ strategy with the accretive acquisition of BestReviews, a leading consumer product recommendations company. BestReviews diversifies our digital content portfolio while presenting the company with new and significant revenue channels by leveraging our media content, national reach and significant consumer digital usage across multiple platforms. During the quarter, we also completed the strategic operational realignment of our broadcasting and digital operating subsidiaries under Nexstar Inc., which we expect will result in a mid-seven figure expense savings in 2021 and we intend to leverage our integrated content strategy across Nexstar’s 400+ digital touchpoints to drive increased monetization this year.

“At the beginning of the pandemic, we responded with great speed and intensity to adapt our business to preserve the health and well-being of our employees, while ensuring that we continued to prudently and diligently manage our cost structure and liquidity position. We implemented a range of cost-cutting initiatives which resulted in operating and corporate expense savings approximating $75 million from budgeted levels for the year. The strong foundation of our assets, operations and financial structure enabled us to extract significant cost savings, while preserving the incomes of our valued employees so we could continue delivering uninterrupted service to our local communities during this critical time. Reported fourth quarter direct operating expenses (net of trade expense) were essentially flat, while the year-over-year rise in selling, general and administrative expenses reflects growth in expenses associated with broadcast ad sales related to record political revenue. Fourth quarter pro forma fixed expenses, excluding programming expenses, were down 7.4%.

“In the almost 25 years since we founded Nexstar, we have built the nation’s leading local broadcast group by demonstrating a focus on the communities where we operate and the prudent use of leverage to support our strategies for growth and the enhancement of shareholder value. Throughout the Company’s history, we have upheld our promise to our communities by expanding our local news programming and content to inform and entertain our viewers, while providing premium local advertising opportunities at scale for advertisers and political campaigns. At the same time, we have maintained our commitment to creating new value for our shareholders through growing returns of capital, capital structure improvements and a continued focus on leverage reduction. Shortly after closing our historic acquisition of Tribune Media, our business and our industry face unprecedented headwinds created by the pandemic. I am extraordinarily proud of Nexstar’s dedicated team members who have risen up to meet this moment and worked tirelessly to deliver on the value of the Tribune Media transaction for our shareholders while providing essential services to our local communities during a difficult time for our country.

“In summary, despite the challenges presented by the pandemic, 2020 was a year of historic financial growth for Nexstar. The strength of our broadcast and digital content combined with the success of our innovative sales programs enabled us to capture record levels of political spending in our markets, as well as sequential improvements in core advertising. In addition, our revenue diversification, including record-level distribution revenue and profitable digital revenue, as well as significant income from equity investments were important drivers of our outstanding financial results in 2020. Nexstar continues to precisely execute on all facets of our business 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. Looking ahead, our strategic priorities remain focused on serving our local communities and driving increased content monetization, while reducing leverage and aggressively returning capital to shareholders. With improving economic trends, the continued double-digit growth of distribution revenue, and spending related to the return of high-profile events including the NCAA basketball tournament and the Tokyo Summer Olympic Games, we have excellent visibility to delivering on or exceeding our free cash flow targets and a clear path for the continued near- and long-term enhancement of shareholder value.”

Read the company’s report here.


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