Nexstar turns in record-breaking Q2 results


Nexstar Broadcasting GroupCore advertising revenue was up 6.7% for television group Nexstar – and add in political and the gain skyrockets to 17.7%. Gains in broadcast cash flow and adjusted EBITDA were even more impressive.

The company announced high-single digit gains in e-Media income and a 77.7% gain in retransmission consent income.

Perry A. Sook, Chairman, President and Chief Executive Officer of Nexstar Broadcasting Group, Inc., commented, “Nexstar’s corporate and operating teams are generating strong returns from our existing base of operations with another quarter of record operating results including net revenue, EBITDA, free cash flow and margins. Of significance to our shareholders, last month Nexstar and Mission announced the accretive acquisition of twelve additional stations which will expand our operating base and lead to substantial free cash flow growth without materially affecting our leverage profile. With expectations for free cash flow accretion in the first year of ownership of the new stations approximately 45% over the levels expected to be generated by Nexstar’s and Mission’s existing operations, we are highly confident that the Company will be positioned to aggressively address outstanding debt while potentially deploying free cash flow for shareholder enhancing actions.”

Here are some of the highlights from the company’s Q2 performance:
* Local Revenues: $47,359 (+3.7%)
* National Revenues: $18,829 (+15.1
* Local and National Core Revenue: $66,188 (+6.7)
* Political Revenues: $5,982 (+194.4 %)
* e-Media Revenue: $4,426 (+8.4 %)
* Retransmission Fee Revenue: $15,283 (+77.7 %)
* Net Revenue: $88,864 (+17.7 %)
* Broadcast Cash Flow: $39,668 (+32.3 %)
* Adjusted EBITDA: $34,549 (+35.7 %)
* Free Cash Flow: $19,338 (+92.7 %)

Sook had a lot to say about Nextar’s Q2. “Nexstar achieved record second quarter net revenue based on the strength of our core television operations and rising contributions from our retransmission and e-Media revenue streams. The record second quarter net revenue marks the Company’s eleventh consecutive quarter of core television advertising revenue growth while highlighting our strategies for garnering leading shares of political billings in our markets. Nexstar’s core and political revenue strength was again complemented by our continued success in leveraging the traditional television broadcasting operating model and our locally focused content and advertiser relationships into a diversified model of high margin revenue streams.

“Our 17.7% rise in second quarter net revenue combined with the operating leverage in our business model, resulted in 32.3% growth in second quarter BCF, a 35.7% increase in EBITDA, and a 92.7% rise in free cash flow. During the second quarter, core local and national revenue increased 6.7% — including a 16% rise in automotive advertising, while television ad revenue inclusive of political advertising rose 12.7%. While we expect political advertising growth to accelerate in the second half of 2012, Nexstar’s gross revenue growth in the second quarter excluding political was healthy at just over 13%.

“Beyond the strong gains in our core television operations, second quarter results extended the growth of Nexstar’s subscription based mobile and e-MEDIA revenue sources. In total, Nexstar’s second quarter retransmission fee and e-MEDIA revenue rose 55.4% to $19.7 million and these higher margin revenue streams accounted for 22.2% of 2012 second quarter net revenue. Our revenue diversification progress continues to be notable as in the 2011 second quarter revenue outside of our core television advertising operations accounted for 17.5% of Q2’11 net revenue which compared to 14.9% in the 2010 second quarter.

“Positive core advertising trends, revenue diversification initiatives and growing scale combined with a company-wide focus on expense management continue to bring strong operating leverage to our business model leading to significant year-over-year cash flow and margin growth. Second quarter 2012 station direct operating expenses, (net of trade expense) and SG&A rose primarily based on higher variable costs related to the significant rise in national, local and political revenues and the operation of new stations in Wisconsin, Michigan and Indiana, while corporate expense increased largely related to costs associated with the Newport transaction and the completion of the strategic review process. Our significant revenue growth combined with ongoing expense management resulted in second quarter BCF and adjusted EBITDA margins improving substantially to 44.6% and 38.9%, respectively.

“Additionally, reflecting the strong cash flows expected throughout 2012, we took further actions to reduce leverage and early in the second quarter called for the redemption of $34 million of Nexstar’s 7% senior subordinated notes due 2014. We funded the redemption from cash on hand, cash from operations and a draw on our revolving credit facility. The annualized cash interest savings, prior to the refinancing we will do in conjunction with the Newport station acquisitions, amounts to over $850,000. In total, net debt at June 30, 2012 declined by nearly $36 million since the end of 2011. Most importantly, 2012 second quarter free cash flow rose 92.7% to $19.3 million, from $10.0 million in the prior year.

“Our current platform is on track to generate the highest annual free cash flow in the Company’s history as expected revenue increases combined with operating and cost efficiencies and annual cap-ex commitments of approximately $16 to $17 million positions Nexstar to generate record free cash flow growth over the record 2010 levels of $60.1 million. We look forward to the completion of the Newport station acquisitions later this year or early next year which will increase to 67, the number of stations that Nexstar owns, operates, programs or provides services to. Since our 2003 IPO, Nexstar has achieved a 37% compound annual growth rate of free cash flow for the two year cycle starting with 2003/2004 through the two year cycle that included 2009/2010 and we are highly confident the increased scale and operating leverage to be derived from the new stations will extend this record and allow us in the short-term after completing the transaction to significantly reduce our leverage ratio while allowing for the potential to return capital to shareholders.”