Nexstar Sets Records With 4Q, Full-Year Rev

Nexstar Broadcasting Group today reported record financial results for the fourth quarter and full year ended Dec. 31, 2015.

Core revenue (excluding political) was up 33% for the quarter to $144 million; up 34% for the year to $523 million.

The numbers break down to:

Local revenue rose 33% to $102.8 million (4Q) and 32% to $369 million (year).

National revenue increased 33% to $41.3 (4Q) million and 40% to $153.6 million (year).

Retransmission consent revenue climbed 85% to $81.7 million (4Q) and 92% to $298 million.

Political revenue fell 77.7% to $7.9 million (4Q) and was down 80% to $12.7 million for all of 2015.

Digital media revenue rose 106% to $29.3 million (4Q) and 93% to $909 million (year).

Net revenue grew 31% to $252 million (4Q) and 42% to $896 million.

Income from operations was dipped 2.3% in the 4Q to $67.3 million, while for the full year it increased 19% to $206 million.

Perry A. Sook, Nexstar chairman, president and CEO, commented: “Nexstar’s strong fourth quarter and full year financial results mark the conclusion of another successful and active year of growth for the company. Nexstar generated record fourth quarter and full year revenue, BCF, Adjusted EBITDA and free cash flow, all of which exceeded consensus expectations. During 2015, we completed or entered into agreements to strategically expand our operating base, in accretive transactions, to 104 full power stations while driving robust retransmission distribution fee and digital media revenue growth. In addition, we returned over $2.34 per share to shareholders in 2015 through quarterly cash dividends and opportunistic share repurchases while lowering our leverage ratio from year-end 2014 levels.

“With 2015 actual free cash flow of approximately $6.80 per share, our near- and long-term path to growth and the enhancement of shareholder value remains on plan and we will achieve our fifth consecutive year of record financial results in 2016. Nexstar’s 2016 financial growth will reflect our expanded scale, new operating efficiencies and synergies related to recent and to-be-completed acquisitions, the 2015 renewal of a significant number of retransmission consent agreements, an expansion of our digital media initiatives and the return of the political cycle and highly rated special event programming such as the Rio 2016 summer Olympics.

“Reflecting these factors, we are initiating a pro-forma 2016-2017 free cash flow projection for legacy Nexstar of approximately $250 million of average annual free cash flow, or average pro-forma free cash flow of approximately $8.15 per share per year. Our disciplined operating and cost management practices, revenue diversification initiatives and the success we are achieving in identifying, financing and integrating accretive acquisitions all contribute to Nexstar’s consistent industry out-performance.

“With our long-term strategic focus on completing accretive transactions that expand our scale and free cash flow growth, we were delighted to announce last month that we reached a definitive agreement to acquire Media General. The combined entity will be named Nexstar Media Group to highlight our broadened base of local operations and capabilities as the transaction will increase Nexstar’s broadcast portfolio by approximately two thirds and more than double our audience reach while presenting opportunities related to the increased scale and complementary nature of the combined digital media operations which we intend to aggressively manage to profitability.

“Financially, the Media General transaction is expected to more than double our revenue and adjusted EBITDA, will be immediately accretive upon closing and will result in over $500 million of average annual free cash flow which we intend to allocate to leverage reduction, additional strategic growth investments and the return of capital to shareholders. Nexstar Media Group’s annual free cash flow per share is expected to approximate $11.15 per year over the 2016/2017 period, and we initially plan to allocate free cash flow to leverage reduction with a target of approximately 4.5x covenant leverage by year end 2016 — a level only slightly higher than where we ended 2015. Nexstar has committed financing for the transaction and has made all required FCC and other regulatory applications, and subject to securing approvals we expect to complete the transaction late in the third quarter/early in the fourth quarter of 2016.

“Fourth quarter results benefited from accretive station and digital media acquisitions completed in late 2014 and early 2015, our revenue diversification initiatives, and ongoing focus on building new local direct advertising. Fourth quarter core ad revenue rose 33.1% which was complemented by an 85.1% rise in retransmission fee revenue and a 105.8% increase in digital media revenue which collectively more than offset the impact of a $27.5 million, or 77.7%, year-over-year reduction in political revenue.

“In addition to the strong core ad revenue growth, total combined fourth quarter retransmission fee and digital media revenue rose 90.1% to $111.0 million, representing nearly 45% of 2015 fourth quarter net revenue. By comparison, total fourth quarter retransmission fee and digital media revenue comprised 30.3% of total net revenues in the year-ago period and 24.2% of fourth quarter net revenue in 2013.

“The rise in fourth quarter station direct operating expenses (net of trade expense) and SG&A primarily reflects higher variable costs related to the significant increase in core revenues and the operation of 33 stations acquired since late 2014. The $2.7 million increase in corporate expense was consistent with our expectations and includes approximately $2.6 million in non-recurring expenses associated with professional fees and recently announced strategic transactions. Notwithstanding these one-time expenses, fourth quarter adjusted EBITDA grew 8.6% while fourth quarter 2015 free cash flow was up 5.7% over the prior year despite the nearly $28 million decline in political revenue.

“Throughout 2015 and in the fourth quarter, Nexstar actively executed its long-term strategy to identify and structure accretive transactions that expand our operating and revenue base to drive free cash flow growth. In November, Nexstar entered into a definitive agreement to acquire the assets of three CBS- and one NBC-affiliated television stations in West Virginia for $130.0 million in a transaction that is expected to be immediately accretive to Nexstar’s free cash flow upon closing later this year. Earlier this year we completed another previously announced accretive acquisition of four CBS-affiliated stations in North Dakota.

“For Nexstar, the fourth quarter marked a strong end to what was already a record year of free cash flow. As we begin to benefit from what are expected to be record levels of political advertising in 2016, the ongoing, staggered renewal of our retransmission consent agreements and completion of smaller transactions announced in the second half of 2015, 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. With significant and growing free cash flow and the closing of the acquisition of Media General expected in late Q3/early Q4, Nexstar is positioned with the financial capacity and flexibility to reduce leverage while returning capital to shareholders and in January we announced a 26.3% increase in the amount of our quarterly cash dividend.”

Read the company’s report here.