Nexstar Posts Record 2Q Net Revenue

Nexstar Broadcasting Group today reported second quarter net revenue shot up 50.6% to $221.3 million. Core revenue increased 37.5% to $132.8 million.

The numbers break down to:

• Local revenue was up 33.4% to $94 million.

• National revenue increased 48.8% to $38.8 million.

• Retransmission consent money rose 99.4% to $69.7 million.

• Political revenue decreased 71.7% to $1.9 million.

• Digital media revenue climbed 59.9% to $21.2 million.

• Net revenue rose 52% to $203.3 million.

• Income from operations was up 50.4% to $52.5 million.

Perry A. Sook, Nexstar chairman, president and CEO, commented: “Nexstar’s consistent operating momentum and financial growth was evident again in the second quarter as we delivered another period of record financial results with profitability metrics all exceeding consensus expectations. Contributions from recently completed acquisitions combined with organic core advertising, distribution and digital media revenue growth and our focus on managing operations for current cash flow and future growth, resulted in all of our non-political revenue sources posting substantial second quarter increases.

“The record second quarter results highlight the benefit of our initiatives to integrate our portfolio of broadcasting and digital media properties while leveraging our scale, extracting anticipated revenue and cost synergies and capitalizing on the many growth opportunities throughout our portfolio and in the local markets we serve. As such, we remain confident that significant year-over-year growth in our non-political revenue sources will continue in the second half of the year and we expect 2015 to mark the company’s fourth consecutive year of record free cash flow as we prepare for what are expected to be record levels of political advertising in 2016.

“During the quarter, we continued to advance the visibility of our long-term growth with the successful re-negotiation of a retransmission consent agreement with one of our top five distribution partners. We also extended affiliation agreements for five CBS television stations owned or operated by Nexstar and created the NBC affiliate in Lafayette, Louisiana and the MyNetworkTV affiliate in Waco, Texas, both of which successfully launched on July 1. With the creation of the new NBC and MyNetworkTV affiliates, we innovatively and efficiently re-allocated Nexstar’s existing spectrum assets thereby creating two new duopolies with no incremental M&A costs while further elevating our advertising and retransmission consent revenue growth. At the same time, reflecting our commitment to localism and the markets we serve, during the quarter, Nexstar and Mission Broadcasting Inc. garnered nine regional Edward R. Murrow Awards bringing the number of broadcasting and journalism awards that our stations have won since 2009 to nearly 500. 

“With 2015 first half operating results in the books, Nexstar is on pace to achieve its projected pro-forma free cash flow of approximately $456 million during the 2015/2016 cycle, or average pro-forma free cash flow of approximately $7.30 per share per year. Notably, with over $93 million in free cash flow generated year-to-date, we’ve already recorded approximately $3 per share in free cash flow. With accelerating growth in the back half of the year and the full year benefit in 2016 of these new affiliations and retrans renewals combined with our ability to capture large shares of political advertising in our markets, we believe we have excellent visibility toward achieving our free cash flow targets.

“During the second quarter, the successful integration of recently acquired stations combined with ongoing initiatives to leverage our targeted localism, content and advertiser relationships drove a 51% rise in net revenue, more than offsetting the $4.8 million year-over-year decline in political advertising revenue. Excluding political advertising revenue and including results from our recent acquisitions, second quarter gross revenue grew 54%, reflecting core television ad revenue growth, a significant rise in retransmission consent revenues and continued digital media revenue increases. Nexstar’s record second quarter television ad revenue was complemented by a nearly 100% rise in retransmission fee revenue and a nearly 60% increase in digital media revenue which both benefited from organic growth as well as our recent accretive acquisitions.

“We expect our long-term distribution revenue growth trend to continue as in late 2014 additional contract renewals representing about 40% of the Company’s MVPD subscribers were completed and another approximately 45% of our subscribers will be renewed in 2015,  inclusive of the top five partner that was successfully renewed in July.

“Nexstar’s ongoing revenue diversification is reflected in the growth in total second quarter retransmission fee and digital media revenue which rose 89% to $90.9 million, and accounted for 41% of 2015 second quarter net revenue, compared to 33% of net revenue in the year-ago period and 26% of net revenue in the 2013 second quarter.

“Second quarter BCF, adjusted EBITDA and free cash flow increases of 45.4%, 51.0% and 64.8%, respectively, reflect the value of our initiatives to actively expand our scale through strategic, accretive acquisitions while managing costs. The value-building accretive transactions completed in late 2014 and early 2015 added 27 stations as well as a digital media advertising and programmatic technology provider to our growth platform.

“With their successful integration we are realizing the forecasted synergies and efficiencies that were disclosed at the time the transactions were announced. Specifically, in January 2015 we closed the largest acquisition in the company’s history, adding the net operations of 18 stations in nine markets from Communications Corp. of America. This was followed by the completion of single station transactions in Phoenix and Las Vegas bringing our TV station portfolio to 107 stations under ownership or management, serving 58 separate DMAs.  

“With our priority of generating free cash flow, we remain disciplined in managing costs and in addressing our capital structure, leverage and cost of capital.  Reflecting this focus, second quarter corporate expense came in slightly better than our guidance at $10.5 million. Record revenue and disciplined expense and capital structure management led to second quarter 2015 free cash flow of $50.1 million representing growth of approximately 145% over the second quarter of 2013, the previous non-political period, which clearly highlights the value being derived from our platform building and revenue diversification strategies.

“In summary, Nexstar’s ongoing operating execution and discipline in managing costs, combined with select accretive station transactions have positioned the company to achieve record revenue and free cash flow in 2015, 2016 and beyond.  Importantly, our station platform now reaches approximately 18% of all U.S. television households.

“As such there remains considerable opportunity for Nexstar to further expand our platform through additional accretive station and digital media acquisitions and we remain active and engaged on this front. At the same time, our focus on the capital structure and cost of capital have positioned Nexstar with the financial flexibility to simultaneously further consolidate mid-sized markets and return capital to shareholders while maintaining a favorable leverage profile, which, pro-forma for the completion of all announced transactions is expected to result in a total leverage ratio of approximately 3.0 times at year-end 2016.”

Read the company’s report here.