Nexstar’s 2Q Net Revenue Finishes Flat

Nexstar Media Group this morning reported financial results for the second quarter of 2023 that included net revenue of $1.24 billion, a decrease of 0.4% from the same quarter of 2022.

It said “the cyclical year-over-year decline in political advertising and core advertising revenue was virtually offset by record second quarter distribution revenue and the benefit of The CW Network acquisition which occurred on Sept. 30, 2022.”

67% of Nexstar’s second quarter net revenue was generated by distribution, digital and other revenue sources.

Excluding political advertising revenue, net revenue increased 6.3% year-over-year.

The 2Q revenue comprised:

• Core ad revenue of $404 million, down 2.2%.
• Political ad revenue of $9 million, compared to $87 million in the prior year.
• Distribution fee revenue of $696 million, up 7.7%.
• Digital revenue of $98 million (a 2Q record), up 11.4%.
• Other revenue of $33 million, up 200%.

Digital revenue growth was primarily due to the inclusion of The CW Network and year-over-year increases in Nexstar’s local digital advertising revenue and agency services business, which more than offset weakness in national digital advertising and ecommerce.

Distribution revenue growth was driven by the renewal of distribution agreements in 2022 representing more than half of its subscriber base on improved terms and annual rate escalators, as well as growth in virtual MVPD revenue and the inclusion of The CW Network. These factors more than offset continued MVPD subscriber attrition and the impact of the removal of partner stations from certain MVPDs related to continued negotiations.

Income from operations was $179 million, down 46%.

Net income totaled $75 million, a decrease of 66.8%.

Free cash flow was $131 million, down 40.7%.

Perry A. Sook, Nexstar chairman, president and CEO, said: “Nexstar again outperformed consensus expectations in the second quarter across all key financial metrics including net revenue, Adjusted EBITDA and Attributable Free Cash Flow. We attribute our strong performance to the combination of the benefits of scale in our company-wide relationships and our decentralized local and business-unit management which are focused on delivering exceptional news, sports and entertainment to viewers and proven marketing solutions for advertisers at attractive operating margins. During the quarter we made continued meaningful progress with our ongoing organic growth initiatives at The CW Network and NewsNation. Our consistent free cash flow generation provides us with the financial flexibility to invest in our future while continuing to return capital to our shareholders. In the first half of the year, we returned $414 million to shareholders in the form of dividends and share repurchases, representing 86% of our first half Attributable Free Cash Flow.

“We are excited about Nexstar’s near- and longer-term organic growth opportunities as we continue to leverage our portfolio of local and national media assets.  Our platform provides nationwide reach with local activation at a greater scale than every other major broadcast network owner.  Nexstar’s platform has attracted strong interest from sports properties looking to align with broadcast television to deliver the highest ratings and widest distribution to their fan bases while also providing promotion and engagement at the local level to drive attendance and ancillary revenue streams. Subsequent to quarter-end The CW entered into sports programming agreements to carry ACC football and basketball beginning in September 2023 and the NASCAR Xfinity Series beginning in 2025, both of which are expected to accelerate viewership and revenue growth for The CW ecosystem.  In addition, with our deep local and national news resources and unbiased approach, NewsNation remains the fastest growing cable news network in primetime. During the quarter, NewsNation marked a major milestone by becoming a 24/5 news network with the debut of new expanded daytime programming, the launch of the network’s political ensemble program, The Hill, and the addition of a new evening news program.

“Looking forward, we expect the balance of 2023 will continue to reflect our ability to outperform the overall advertising market and benefit from renegotiated distribution contracts representing more than half of our subscribers at the end of 2022, partially offset by the ongoing impact of negotiations with certain distribution partners.  We are even more excited about 2024 as Nexstar will realize upside from presidential election year political advertising, additional distribution contract renewals this year, a slowing of losses related to The CW Network, as well as expectations for a declining interest rate environment and a recovering economy. Given Nexstar’s exciting growth initiatives, robust free cash flow generation, solid capital returns to shareholders and our modest leverage, we remain well positioned to deliver enhanced value to shareholders.”

Read the company’s report here.