Nexstar beats Q3 expectations


Nexstar Broadcasting GroupOne way to increase revenue in a political off year is to increase the number of stations you own and/or operate, and that has definitely been the modus operandi for Nexstar Broadcasting Group. On top of that, it was able to beat expectations.

The company currently owns and/or operates 75 stations in 44 markets, and when all pending deals close, those numbers will increase to 96 stations in 51 markets reaching 14.6% of total US TV households – a percentage far below the national penetration cap, therefore leaving ample room for further growth. The group will have multiple station operations in 33 of the markets.

Net revenue for the quarter was $125.8M, a 39.8% increase. Wells Fargo’s Marci Ryvicker considered that to in fact be a 3% gain, but said it beat her company’s prediction of $123M and the consensus prediction of $125M.

Local revenue increased from $44.7M to $63.6M; and national increased from $19.3M to $28.6M; resulting in a core advertising increase from $64.1M to $92.3M.

Political was, of course, way down, falling from $10.2M to $1.0M – Ryvicker said Wells Fargo was expecting a bit less damage, with  a $2M political payday this year.

Retransmission income increased from $15.1M to $25.6M and digital increased from $4.5M to $10.1M.

Chairman/CEO Perry A. Sook commented, “Nexstar’s record third quarter financial results reflect contributions from recently completed accretive station acquisitions as well as our revenue diversification initiatives and success in generating new local direct advertising.”

Sook continued, “Consistent with our long-term strategic objective to identify and execute accretive transactions that expand our revenue, scale and operating base, during the third quarter Nexstar and Mission Broadcasting, Inc. were active and successful in further building the platform for continued growth and the return of political advertising revenue in 2014. In September, we and Mission entered into definitive agreements to acquire five television stations in three new markets for total consideration of $103.25 million in transactions that are expected to be immediately accretive to Nexstar’s free cash flow in the first full year of operations following closing in early 2014. ”

Looking ahead, Sook said, “Since the Company’s initial public offering ten years ago, through accretive acquisitions Nexstar has grown from 42 stations that it owned, operated, programmed and provided services to, and we have consistently enhanced the operating results of acquired stations as reflected by our long-term record of free cash flow growth on a two year cycle. At the same time, our focus on the capital structure and reducing our cost of capital have positioned Nexstar with the financial capacity and flexibility to further consolidate mid-sized markets and return capital to shareholders while maintaining a favorable leverage profile. As a result, Nexstar expects to generate record revenue and free cash flow in the 2014/2015 period which will also begin to reflect the benefit from the renewal late this year and in early 2014 of a significant number of our retransmission consent agreements.”