Cash flowed freely into Nexstar during Q3


Nexstar Broadcasting GroupAdd television owner and operator Nexstar Broadcasting Group to the list of companies benefitting from the 2012 election year. The company’s local revenue was up modestly, national was up double digits, and political was through the roof. Looking ahead and true to its name, the company is set to reach for the stars.

Any way you care to slice it, Nexstar was up in Q3. Local was up 3.4% to $44.743M; national was up 18.4% to $19.038M; political was up 487.9% to $19,308M; retrans was up 51.3% to $15.102M; add these and other categories together and the company’s net revenue was up 20.2% to $89,952M.

Broadcast cash flow grew 56.9% to $40,968; adjusted EBITDA was up 66.9% to $35,077M; and free cash flow was up 279.5% to $19.840.

The company has pending deals to acquire 12 Newport Television stations, and just announced another acquisition of stations in Fresno CA, Bakersfield CA and Burlington VT. It is also selling one in Beaumont-Port Arthur TX.

Chairman, President and Chief Executive Officer Perry Sook commented, “The third quarter marks the Company’s twelfth consecutive quarter of core local and national television advertising revenue growth and we continue to attract leading shares of political spending in our markets. Quarterly core television ad revenue rose 7.4%, inclusive of a 30% rise in automotive advertising while political revenue grew nearly six-fold over last year reflecting our strategies to manage inventory to maximize the political revenue opportunity. Television ad revenue in the quarter inclusive of political advertising rose 20.9% and we are pacing toward another period of record political advertising in the fourth quarter of 2012.”

Sook said of the company’s pending acquisitions, “We look forward to the completion of the Newport station acquisitions later this quarter and the recently announced acquisitions of five stations in California and Vermont in the first quarter of 2013 which will increase to 71, the number of stations that Nexstar owns, operates, programs or provides services to and remain highly confident that our expanded platform will allow to improve our free cash flow profile while allowing for the potential to return capital to shareholders.”

Commenting on the company’s plans to finance acquisitions and restructure its balance sheet, Sook noted that the strategy was to minimize the addition of leverage and maximize the company’s ability to move on further stations acquisitions. He said, however, that the company sets a high bar on acquisitions, looking for accretive acquisitions.

Q4 political is coming in at the high end of the company’s projections, and pacings on core advertisers are picking up in November over October, and December is looking better than November.

Asked what Nexstar and the broadcast industry will look like a few years down the road, Sook said he’s expecting the business to continue to consolidate. He thinks it will probably boil down to 10-12 major companies. There will be the four big content producers and six-eight major distribution platforms. Nexstar is looking to be a $1B-per-year company. That said, Sook isn’t concerned with how big Nexstar is, he’s concerned with how valuable it is.

The company is highly unlikely to participate in spectrum auctions. He said, however, that most companies will look at it and see if there is any value there at some level.

RBR-TVBR observation: Keep your eyes on this company – it clearly thinks it has room to grow. Structuring to buy. Planning to be a spectrum auction spectator rather than participant. Aiming for the big B as in a billion dollars in annual revenue.

One thing seems to be certain – if you have a television station you’re interested in selling and are prepared to offer a deal, there would appear to be some willing listeners at Nexstar Broadcasting Group.