Nexstar 2Q Revenue Climbs 19% To $262M

Nexstar Broadcasting Group today reported second quarter net revenue of $262 million, a 19.4% increase from $219 million in the same period last year.

Core revenue (excluding political) was $133.5 million, up 0.5% from 1Q’s $132.8.

The numbers break down to:

• Local revenue rose 3.8% to $97.6 million
• National revenue was down 7.5% to $35.9 million.
• Retransmission consent revenue 40.8% to $98.1 million.
• Political revenue grew 490.6% to $11.2 million.
• Digital media revenue rose 17.4% to $24.9 million.
• 2Q income from operations increased 21.8% to $64 million.
• Broadcast cash flow climbed 21% to $103.2 million.

“Year-to-date core, political, retransmission and digital revenue are largely tracking consistent with our expectations and Nexstar generated $3.29 in free cash flow per share through June 30,” said CEO Perry Sook.

“With rising political spending in the second half of the year, upcoming special event programming including last week’s start of the Rio 2016 summer Olympics, contractual retransmission revenue growth, our expanded digital operations and the realization of our actual cash tax rate for the full year, we remain confident that Nexstar will, on a stand-alone basis, generate record free cash flow in 2016,” said CEO Perry Sook.

The company, he said, “is on pace to achieve our guidance for annual average 2016/2017 free cash flow of $250 million — or average pro-forma free cash flow of $8.15 per share per year. In addition, we continue to make progress toward the completion of the Media General transaction later this year which we expect will result in approximately 37% growth in our annual average pro forma 2016/2017 free cash flow relative to what we are generating from our current operations.

“Reflecting the operating leverage in our model, our 19.4% rise in second quarter net revenue generated 21.0% growth in BCF and a 20.5% increase in Adjusted EBITDA.

“During the second quarter, television ad revenue inclusive of political advertising rose 7.5% with core local and national spot revenue increasing 0.5%, including a 1.0% rise in same station automotive advertising. Reflecting our expanded platform and presence in states with high levels of political spending activity, 2016 second quarter political revenue outpaced our budgets and rose by 491% compared to the same period last year and by 67% over second quarter 2014 levels.

“Nexstar’s gross revenue growth in the second quarter excluding political was healthy at almost 14% and reflects the 40.8% rise in retransmission fee revenue and 17.4% increase in digital revenue. Our ongoing renegotiations of retransmission consent agreements combined with the growth of our leading, locally focused, digital content management system, agency services, mobile and programmatic offerings resulted in a 35.3% increase in Nexstar’s total second quarter retransmission fee and digital revenue to $123.0 million.

“Reflecting continued success against our revenue diversification goals, these higher margin revenue streams accounted for 46.9% of 2016 second quarter net revenue up from 41.4% in the comparable period last year and 32.8% in the 2014 second quarter, the last political cycle.

“The rise in second quarter station direct operating expenses (net of trade expense) and SG&A primarily reflects higher variable costs related to the significant increase in advertising revenues, expanded local programming on our existing stations and the operation of stations acquired in 2015 and 2016.

“The $2.6 million increase in corporate expense reflects increased staffing and infrastructure to manage and operate the additional stations including approximately $2.0 million in non-recurring transaction-related expenses. Inclusive of these one-time expenses, second quarter Adjusted EBITDA grew 20.5% while adjusted BCF margin expanded by approximately 50 basis points to 39.4%. Cash income taxes of $17.7 million were above our expectations for the quarter largely due to the timing of the payments of 2016 taxes. This situation will self-resolve over the second half of 2016 and as a result does not affect our 2016 free cash flow guidance, as implied in our annual average 2016/2017 free cash flow of $250 million – or average pro-forma free cash flow of $8.15 per share per year.

“In addition to the record first half operating results, progress towards the completion later this year of our acquisition of Media General is tracking consistent with our timeline. During the quarter, shareholders of both Nexstar and Media General approved Nexstar’s acquisition of Media General, and we announced the execution of agreements providing for the divestiture of 13 stations for total consideration of $548 million.

“The consolidated total debt of Nexstar, its wholly owned subsidiaries, Mission Broadcasting and Marshall Broadcasting Group at June 30, 2016, was $1,487.8 million including senior secured debt of $695.2 million. The company’s total net leverage ratio at June 30, 2016 was 3.99x compared to a total permitted leverage covenant of 6.75x. The company’s first lien net leverage ratio at June 30, 2016 was 1.83x compared to the covenant maximum of 4.00x.