A Solid Q1 For A Much Bigger Nexstar


Nexstar Media Group released its first Q1 earnings report following its merger with Media General, and on a combined basis, Nexstar had a stellar first three months of 2017.

Net revenue soared 111.3%, to $540.3 million — despite a 83% dip in political revenue.

Gross revenue excluding political climbed 120%, to $575.6 million.

But, due to integration expenses, net income attributable to Nexstar slid to $6.1 million (13 cents per diluted share), from $21.7 million (69 cents).

Using unaudited non-GAAP measures, Broadcast Cash Flow grew to $188.2 million, from $98 million. Adjusted EBITDA rose to $123.8 million, from $82.3 million.

Both local revenue and national revenue were up significantly, with local rising 116%, to $202.4 million, and national climbing 119%, to $77.7 million.

Meanwhile, retransmission fee revenue — the new go-to for big profits for broadcast TV companies — surged 138%, to $231.9 million.

Offsetting this gain were corporate expenses, which surged to $64.4 million, from $15.8 million, and direct operating expenses, which catapulted to $109.9 million, from $52.4 million.

The results were instantly met with approval from investors on Tuesday morning (5/9). At 9:43am Eastern NXST shares were already up 2.6%, to $62.80. Nexstar stock has been on a hot streak since December 2016, and hasn’t closed below $60 after bottoming out at $47.20 a share on Nov. 3, 2016.

Nexstar President/CEO Perry Sook, arguably the leader of the broadcast TV industry who also serves as Chairman of the TVB (the TV industry’s ad sales advocacy group that’s the equivalent to the radio industry’s RAB), explained the jump in expenses.

“The rise in Q1 station direct operating expenses (net of trade expense) and SG&A expense primarily reflects the operation of acquired stations and digital assets, and increases in network affiliation expense,” Sook said.

It’s the first hint that the Big Four network are putting more pressure on affiliates, which are demanding greater retransmission fees than ever before.

Sook noted that Nexstar’s Q1 corporate expense was in line with its overall guidance and its expected transaction costs.

Meanwhile, Nexstar’s actual results for Q1 reflect the impact of $47.7 million of one-time transaction expenses incurred in the quarter.

That’s a bit of a ding, if Nexstar were to have one in the quarter. The company disclosed and estimated this one-time expense at $46 million on the company’s Q4 and fiscal 2016 conference call with analysts.

Furthermore, the Q1 results reflect the company’s legacy Nexstar broadcasting and digital operations (less seventy-three days of results from six Nexstar station divestitures) and seventy-three days of results from the Media General stations (net of divestitures).

A year-over-year look at the legacy broadcast and digital performance was not provided by Nexstar.


In prepared comments ahead of his company’s 10am Eastern earnings call with financial analysts, Sook said, “A partial quarter’s contribution from the Media General transaction and the continued strength of Nexstar’s legacy operations led to triple-digit growth in all of our non-political revenue sources and, combined with our expense discipline and focus on managing operations for cash flow, resulted in broadcast cash flow, adjusted EBITDA and free cash flow growth before transaction expenses of 91.9%, 97.6%, and 80.5%, respectively.”


While radio industry pure-play Beasley Media Group suffered from a less-than-optimal Q1 as it deals with integration issues in Philadelphia from its merger with Greater Media, Sook says his company’s Media General integration and synergy realization plans are proceeding ahead of schedule.

“To date we have harvested approximately 85% of the $81 million of Year One synergies we previously identified,” he said. “With the operating momentum across our business and our integration initiatives proceeding according to plan, we remain confident in Nexstar’s ability to meet or exceed our targets for average annual free cash flow in the 2017/2018 cycle of approximately $565 million, or approximately $12 per share, per year.”

Overall, Sook said the Media General transaction is meeting his company’s expectations and will result “in excess of 55% growth in Nexstar’s annual average pro forma 2017/2018 free cash flow per share relative to the record performance of our legacy operations in 2016.”

Yet, consolidated debt could be an issue. As of March 31, Nexstar’s debt was $4.5 billion — including senior secured debt of $2.9 billion. Its total net leverage ratio at the end of Q1 2017 was 4.7x.

With $72.9 million on hand, any blockbuster deal that would put Nexstar on par with Sinclair would therefore need to rely on borrowings.