Nexstar shines bright in Q1 2012


Perry SookNexstar’s Perry Sook has reason for optimism moving forward into 2012 – and he can also point with pride to the quarter already on the books. Name the metric, and it likely is recorded with a splash of black ink in the Nexstar ledgers. The numbers did benefit from contributions from new acquisitions.

However, anybody interested in the state of the company’s stated plan to explore options including the sale of the group will just have to remain curious – the company announced from the outset that it would not be discussing that matter, nor would it take any questions on that matter.

Sook noted that PAC spending is outpacing actual candidate spending in the political arena thus far, which he said was remarkable compared to past election seasons during which the candidates accounted for two thirds of the spending.

However, it had a very good story to tell about Q1. Revenue is up, political revenue is way up already, retransmission and digital cash is up – whatever it is, it is likely up. Automotive advertising is up about 9%, which Sook said is both great for the immediate moment and even better, leaves room for further growth.

Here is a look at the numbers (in thousands), comparing Q1 2012 to Q1 2011:
* Local Revenues to $45,433 from $43,257 (+5.0%)
* National Revenues to $17,406 from $15,061 (+15.6%)
* Local and National Core Revenue to $62,839 from $58,318 (+7.8%)
* Political Revenues to $2,794 from $560 (+398.9%)
* e-Media Revenue to $4,133 from $3,673 (+12.5%)
* Retransmission Fee Revenue to $14,496 from $8,517 (+70.2%)
* Management Fee Revenue to $1,961 from $500 (+292.2%)
* Network Comp, Other to $792 from $841 (-5.8%)
* Trade and Barter Revenue to $4,988 from $4,887 (+2.1%)
* Gross Revenue to $92,003 from $77,296 (+19.0%)
* Less Agency Commissions to $8,361 from $7,351 (+13.7%)
* Net Revenue to $83,642 from $69,945 (+19.6%)
* Income from Operations to $17,505 from $9,166 (+91.0%)
* Broadcast Cash Flow to $34,050 from $24,833 (+37.1%)
* Broadcast Cash Flow Margin to +40.7% from +35.5%
* Adjusted EBITDA to $28,636 from $20,015 (+43.1%)
* Adjusted EBITDA Margin to 34.2% from +28.6%
* Free Cash Flow to $12,685 from $3,627 (+249.7%)

Sook provided detailed color. He said, “Nexstar’s growth and operating momentum is accelerating in 2012. In the first quarter we generated significant increases from all of our revenue sources leading to record net revenue, adjusted EBITDA and free cash flow. Nexstar’s 19.6%)rise in first quarter net revenue again highlights the value of our long-term strategy to transition the traditional television broadcasting operating model and our locally focused content and advertiser relationships into a diversified model of high margin revenue streams.

“Nexstar’s continued leadership in new business development resulted in a 7.8%)rise in first quarter core local and national revenue inclusive of a 5.0%)first quarter increase in local spot revenue and a 15.6%)rise in national spot revenue. The 2012 first quarter marks the sixth sequential increase in our quarterly core revenue growth rate and our tenth consecutive quarter of core television advertising revenue growth. While we look forward to the benefit of growing political advertising activity throughout 2012, Nexstar’s gross revenue growth in the first quarter excluding political was a robust 16.3%)inclusive of a 9%)rise in automotive category ad spending.

“Strong gains in our core television operations were complemented by the expected significant double digit growth in first quarter retransmission fee revenue which rose 70.2%)to $14.5 million, a record level of quarterly revenue from this source. With the renewal of more than 130 retransmission consent agreements in 2011 we project significant revenue growth from this source throughout the year. Double digit revenue growth also continues in our e-Media operations which posted a 12.5%)increase in revenues to $4.1 million, representing our twenty first consecutive period of revenue growth for the Company’s community web portal strategy. Similarly, we expect to extend our e-Media revenue growth throughout 2012 as we benefit from a full year’s contribution from Internet technology provider GoLocal.Biz which was acquired mid-2011 in an accretive transaction, as well as our expanded mobile offerings which bring local advertisers new marketing solutions that yield high interactivity and ROI.

“In addition to the solid year-over-year revenue growth related to our success in leveraging and strategically expanding our broadcast platform, Nexstar recorded approximately $2.0 million of management fee revenue in the 2012 first quarter representing the termination payment due the company following the completed sale of the Four Points stations to Sinclair Broadcast Group earlier this year. In total, the higher margin retransmission fee, e-Media and management fee revenue grew by 62.3%)year-over-year and accounted for 24.6%)of 2012 first quarter net revenue compared with 18.1%)of revenue in the comparable year ago period.

“On the expense side, total first quarter station direct operating expenses (net of trade expense), SG&A (net of depreciation and amortization), and corporate expenses rose by approximately $5.1 million compared with year ago levels. The increase largely reflects the integration of the recently acquired CBS affiliates in Wisconsin and Michigan and the ABC affiliate in Indiana and higher sales and e-Media related expenses related to higher revenue levels as well as higher legal and professional fees related to the ongoing strategic review process which was announced last July. Approximately $4.5 million of the expense increase was for station level operating expenses, (net of trade expense) and about 75%)of that increase was attributable to the aforementioned acquisitions.

“Overall, Nexstar’s significant quarterly revenue growth coupled with the operating leverage in our model and continued focus on achieving further efficiencies resulted in record 2012 first quarter operating income of $17.5 million and free cash flow of $12.7 million.

“During and subsequent to the first quarter, and reflecting the strong cash flows expected throughout 2012, we took further actions to reduce leverage. In the first quarter we repaid approximately $18.0 million of borrowings under the credit facility and in April we called for the redemption of $34 million of Nexstar’s 7%)senior subordinated notes due 2014. We will likely partially fund the redemption from cash on hand or from operations and a portion from our revolving credit facility and the annualized cash interest savings, at a minimum, is projected to total $850,000.

“In summary, Nexstar’s record first quarter results again highlight the value of our focus on generating new local direct advertising and revenue diversification as well as completing select accretive station acquisitions. Nexstar is well positioned to remain an industry leader in driving core advertising increases and 2012 presents prospects for continued growth from all of our revenue sources, including significant political advertising revenue contributions. The expected revenue increases combined with operating and cost efficiencies and annual cap-ex commitments of approximately $17 million positions Nexstar to generate record free cash growth over the record 2010 levels of $60.1 million.”