2010 looking good for Nexstar


Q4 2008 was a record quarter for Nexstar Broadcasting, so Q4 2009 saw revenues drop 7.9%. But excluding political the company’s core ad business was up 7.2% and while not giving any specific guidance, CEO Perry Sook told analysts they would not be offbase to take that as an indication of where Q1 2010 is going.

Nexstar’s net reveues fell 7.9% to $74 million in Q4, but there were a lot of positive numbers hiudden under that negative one. Local revenue rose 5.9% to $44 million and national was up 10.5% to $17.5 million. So, core ad revenue, excluding political, was up 7.2% to $61.5 million. That means, of course, that political was down a lot, falling 81.1% to $3.7 million. But 2010 is another political year and Sook noted that there are more contested races for Governor, Senator and Representative in Congress in Nexstar’s markets this year than ever before. And the number seems to keep growing. He noted that two congressional seats seen as “safe” recently became competitive with their current occupants deciding not to run for reelection.

Where is growth coming from? The economy is improving and the auto business is picking up. But Sook said the media mix is changing as well in local markets, with ad spending that went to newspapers and Yellow Pages before the downturn heading to TV “on a direct path” as the advertising marketplace recovers.

Aside from TV ad sales, Nexstar also reported that retransmission consent fees grew 62% to $6.4 million – with Sook noting that annual escalators will increase fees again in 2010 – e-Media revenues grew 19.6% to $3.4 million and the new category of of “management fee revenue” for its deal to manage the Four Points Media group produced $700K for Q4. That included a $200K bonus for exceeding targets.

Asked about whether Nexstar is pursuing other deals like that with Four Points, Sook said there have been conversations, but he noted that Nexstar is not interested in being the low-cost provider in that realm and will only do deals with worthwhile upside for his company.

With Nexstar and most other TV groups returning to growth in 2010, analysts wanted to know whether M&A activity will also pick up. “As we look out going forward, I’m not so sure that we’ll see a lot of strategic activity. I do think you could see conversations between private equity and folks that don’t have current legacy portfolios and some of the unnatural holders of companies that have just come through or are in the bankruptcy process. I think that you’ll see those two sides push closer together. And quite frankly, we’ve bee contacted by more than one private equity sponsor to determine if we would have interest in potentially managing a portfolio if they were successful in, as we used to say in the car business, moving the wheels over the curb. So, certainly there are more discussions now than there were a year ago, but I think it will take the first transaction before we can discern any trend,” Sook said.