Record First Quarter Core TV Advertising,
Political, and Retransmission Revenue Drives Record 1Q Operating
Income of $27.7 Million, BCF of $50.6 Million, EBITDA of $42.1
Million and Free Cash Flow of $25.3 Million
Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) (“Nexstar”) today
reported record financial results for the first quarter ended March
31, 2014 as summarized below:
Summary 2014 First Quarter
Highlights
($ in thousands)
Three Months Ended
March 31,
2014 2013 Change
Local Revenues $ 65,642 $ 59,934 +9.5 % National
Revenues $ 27,189 $ 23,375 +16.3 %
Local and National Core Revenue $ 92,831
$ 83,309 +11.4 % Political Revenues $ 4,003 $
762 +425.3 % Digital Media Revenue $ 6,277 $ 6,500 (3.4 )%
Retransmission Fee Revenue $ 35,129 $ 23,796 +47.6 % Network
Compensation and Other $ 981 $ 1,125 (12.8 )% Trade and Barter
Revenue $ 7,128 $ 7,418 (3.9 )%
Gross Revenue $ 146,349 $
122,910 +19.1 % Less Agency Commissions $ 12,516
$ 10,705 +16.9 %
Net Revenue $
133,833 $ 112,205 +19.3 %
Gross
Revenue Excluding Political Revenue $ 142,346
$ 122,148
+16.5
%
Income from Operations $ 27,700 $ 17,818 +55.5 %
Broadcast Cash Flow(1) $ 50,612 $ 39,797 +27.2
%
Broadcast Cash Flow Margin(2) 37.8 % 35.5 %
Adjusted EBITDA(1) $ 42,108 $ 33,064 +27.4 %
Adjusted EBITDA Margin(2) 31.5 % 29.5 %
Free Cash Flow(1) $ 25,255 $ 10,162 +148.5 % (1)
Definitions and disclosures regarding non-GAAP
financial information are included on page 4, while reconciliations
are included on page 7. (2) Broadcast cash flow margin is broadcast
cash flow as a percentage of net revenue. Adjusted EBITDA margin is
Adjusted EBITDA as a percentage of net revenue.
CEO Comment
Perry A. Sook, Chairman, President and Chief Executive Officer
of Nexstar Broadcasting Group, Inc. commented, “Nexstar’s strong
operating and financial momentum continues in 2014 as reflected by
our record first quarter net revenue, BCF, adjusted EBITDA and free
cash flow. The 19.3% rise in first quarter net revenue again
highlights the value of our long-term strategy to complete
accretive acquisitions while evolving the traditional television
broadcasting operating model into a diversified entity with high
margin revenue streams. With strong core advertising trends, the
cyclical return of political spending, our expanded digital media
operations and visible retransmission revenue growth, we believe
Nexstar is on track to generate record free cash flow throughout
2014.
“Reflecting growth in four of our top five, and seven of our top
ten ad categories, as well as a 17.0% year-over-year increase in
new business development, first quarter core ad revenue rose 11.4%,
inclusive of 9.5% first quarter growth in local spot revenue and
16.3% growth in national spot revenue. Nexstar’s gross revenue
growth in the first quarter excluding political was a robust 16.5%
while first quarter political revenue rose over five-fold compared
to the same period last year and by 43.3% over comparable first
quarter 2012 levels.
“Strong gains in our core television operations were
complemented by significant double digit growth in first quarter
retransmission fee revenue which rose 31.0% on a quarterly
sequential basis and 47.6% year-over-year to $35.1 million, which
marks a record level of quarterly revenue from this source. With
the renewal of retransmission consent agreements representing
approximately 22.0% of our subscriber base in late 2013 we project
highly visible and significant revenue growth from this source
throughout the year. Digital media revenue declines were due to
non-recurring revenue at Inergize related to contract buyouts in
2013, while station-level digital revenue grew by 18.4%
year-over-year. Expected digital media revenue growth in 2014 will
reflect our accretive acquisition in April 2014 of Internet
Broadcasting Systems, a digital publishing platform and digital
agency services provider that strengthens our position as a leading
local technology and services provider for businesses. In total,
retransmission fee and digital media revenue grew 36.7%
year-over-year to $41.4 million and accounted for 30.9% of 2014
first quarter net revenue. By comparison, total first quarter 2013
retransmission fee and digital media revenue comprised 27.0% of net
revenue and 22.3% of net revenue in the 2012 first quarter.
“With a focus on generating free cash flow, we remain
disciplined in managing costs and in addressing our capital
structure, leverage and cost of capital. The rise in first quarter
station direct operating expenses (net of trade expense) and
SG&A primarily reflects higher variable costs related to the
significant increase in national and local revenues and the
operation of acquired stations. Similarly, the increase in first
quarter corporate expense reflect increased staffing and
infrastructure to manage and operate the additional stations as
well as the previously disclosed expected increase in non-cash
stock compensation expense of approximately $1.1 million.
“As a result, first quarter 2014 BCF and adjusted EBITDA grew
27.2% and 27.4%, respectively. Notably, first quarter 2014 free
cash flow grew 149% year-over-year and by approximately 100% over
the first quarter of 2012, the previous political period.
“Over the last two years, Nexstar has actively and effectively
executed its long-term strategy to identify and structure accretive
transactions that expand our operating and revenue base to drive
free cash flow growth. In March, Nexstar completed the acquisition
of three stations in Des Moines, Iowa, Quad Cities, Iowa and Sioux
City, Iowa from entities related to Citadel Communications, L.P.
for $87.9 million. The acquisition of these stations marks
Nexstar’s entrée into an important state for political advertising
activity. Prior to completing the transaction, Nexstar operated
these stations since last September pursuant to a Time Brokerage
Agreement and following a successful integration, the operations
and financial results are meeting our expectations. Last month, the
FCC approved Nexstar’s purchase of five stations in Colorado and
Florida which are being acquired for $33.5 million. These stations
are being acquired from an intermediate seller and we expect to
close this transaction as soon as practicable once all of the
seller’s conditions have been met. Beyond these transactions, we
have four transactions representing 29 stations pending before the
FCC which we expect to close in 2014.
“Pro-forma for the completion of all pending transactions we
believe Nexstar would generate free cash flow in excess of $350
million during the 2014/2015 cycle, or average pro-forma free cash
flow of approximately $5.85 per share per year, in this two year
period. Notwithstanding our confidence in completing all announced
transactions, our existing operations alone are expected to
generate blended free cash flow of approximately $4.40 per share
per year in the current 2014/2015 period. In addition, excluding
the financings for pending transactions, our free cash flow
generation from existing operations would result in Nexstar’s net
leverage declining to approximately 3.8x at the end of 2014.
“In summary, despite delays in closing some pending
transactions, our long-term strategies to enhance shareholder value
remain on plan and 2014 will see another period of record financial
results as Nexstar will benefit from its expanded scale, new
operating efficiencies and synergies related to recent and pending
acquisitions, the renewal in the 2013 fourth quarter of a
significant number of retransmission consent agreements, an
expansion of our digital media initiatives and the return of the
political cycle.”
The consolidated total debt of Nexstar, its wholly owned
subsidiaries, and Mission (collectively, the “Company”) at March
31, 2014, was $1,067.6 million and senior secured debt was $541.9
million. The Company’s total net leverage ratio at March 31, 2014
was 5.52x compared to a total permitted leverage covenant of 7.25x.
The Company’s first lien net leverage ratio at March 31, 2014 was
2.67x compared to the covenant maximum of 4.00x.
The table below summarizes the Company’s debt obligations:
($ in
millions)
3/31/14 12/31/13 First Lien Revolvers $ - $
- First Lien Term Loans $ 541.9 $ 545.4 6.875% Senior Notes due
2020 $ 525.7 $ 525.7
Total Debt $
1,067.6 $ 1,071.1
Cash on hand $ 50.6 $ 40.0
At March 31, 2014, the Company had deposits of $35.7 million on
pending acquisitions totaling approximately $410.3 million.
Dividends
On April 25, 2014 the Board of Directors approved a quarterly
cash dividend of $0.15 per share of Nexstar’s Class A common stock.
The dividend is payable on Friday, May 30, 2014 to stockholders of
record on Friday, May 16, 2014.
First Quarter Conference Call
Nexstar will host a conference call at 10:00 a.m. ET today.
Senior management will discuss the financial results and host a
question and answer session. The dial in number for the audio
conference call is 719/325-2315, conference ID 5990397 (domestic
and international callers). In addition, a live audio webcast of
the call will be accessible to the public on Nexstar’s web site,
www.nexstar.tv and a recording of the webcast will be archived on
the site for 90 days following the live event.
Definitions and Disclosures Regarding non-GAAP Financial
Information
Broadcast cash flow is calculated as income from operations,
plus corporate expenses, depreciation, amortization of intangible
assets and broadcast rights (excluding barter) and loss (gain) on
asset disposal, net, minus broadcast rights payments.
Adjusted EBITDA is calculated as broadcast cash flow less
corporate expenses.
Free cash flow is calculated as income from operations plus
depreciation, amortization of intangible assets and broadcast
rights (excluding barter), loss (gain) on asset disposal, net, and
non-cash stock option expense, less payments for broadcast rights,
cash interest expense, capital expenditures and net cash income
taxes.
Broadcast cash flow, adjusted EBITDA and free cash flow results
are non-GAAP financial measures. Nexstar believes the presentation
of these non-GAAP measures are useful to investors because they are
used by lenders to measure the Company’s ability to service debt;
by industry analysts to determine the market value of stations and
their operating performance; by management to identify the cash
available to service debt, make strategic acquisitions and
investments, maintain capital assets and fund ongoing operations
and working capital needs; and, because they reflect the most
up-to-date operating results of the stations inclusive of pending
acquisitions, TBAs or LMAs. Management believes they also provide
an additional basis from which investors can establish forecasts
and valuations for the Company’s business.
For a reconciliation of these non-GAAP financial measurements to
the GAAP financial results cited in this news announcement, please
see the supplemental tables at the end of this release.
About Nexstar Broadcasting Group, Inc.
Nexstar Broadcasting Group is a leading diversified media
company that leverages localism to bring new services and value to
consumers and advertisers through its traditional media, digital
and mobile media platforms. Nexstar owns, operates, programs or
provides sales and other services to 74 television stations and 19
related digital multicast signals reaching 44 markets or
approximately 12.9% of all U.S. television households. Nexstar’s
portfolio includes affiliates of NBC, CBS, ABC, FOX, MyNetworkTV,
The CW, Telemundo, Bounce TV, Me-TV, Live Well and independent
stations. Nexstar’s 43 community portal websites offer additional
hyper-local content and verticals for consumers and advertisers,
allowing audiences to choose where, when and how they access
content while creating new revenue opportunities.
Pro-forma for the completion of all announced transactions
Nexstar will own, operate, program or provides sales and other
services to 108 television stations and related digital multicast
signals reaching 56 markets or approximately 16.0% of all U.S.
television households.
Forward-Looking Statements
This news release includes forward-looking statements. We have
based these forward-looking statements on our current expectations
and projections about future events. Forward-looking statements
include information preceded by, followed by, or that includes the
words "guidance," "believes," "expects," "anticipates," "could," or
similar expressions. For these statements, the Company claims the
protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
The forward-looking statements contained in this news release,
concerning, among other things, changes in net revenue, cash flow
and operating expenses, involve risks and uncertainties, and are
subject to change based on various important factors, including the
impact of changes in national and regional economies, our ability
to service and refinance our outstanding debt, successful
integration of acquired television stations (including achievement
of synergies and cost reductions), pricing fluctuations in local
and national advertising, future regulatory actions and conditions
in the television stations' operating areas, competition from
others in the broadcast television markets served by the Company,
volatility in programming costs, the effects of governmental
regulation of broadcasting, industry consolidation, technological
developments and major world news events. Unless required by law,
we undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this news
release might not occur. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
of this release. For more details on factors that could affect
these expectations, please see our filings with the Securities and
Exchange Commission.
Nexstar Broadcasting Group,
Inc.
Condensed Consolidated Statements of
Operations
(in thousands, except per share amounts -
unaudited)
Three Months Ended
March 31,
2014 2013 Net revenue $ 133,833
$ 112,205 Operating expenses: Station direct
operating expenses, net of trade, depreciation and amortization
40,379 32,591 Station selling, general and administrative expenses,
net of depreciation and amortization 32,536 28,767 Trade and barter
expense 7,142 7,357 Corporate expenses 8,504 6,733 Amortization of
broadcast rights, excluding barter 2,960 2,969 Amortization of
intangible assets 6,193 7,990 Depreciation 8,419
7,980 Total operating expenses 106,133
94,387 Income from operations 27,700 17,818
Interest expense, net (15,170 ) (16,549 ) Other expenses
(128 ) (84 ) Income before income taxes 12,402 1,185 Income
tax expense (5,049 ) (480 ) Net income $ 7,353
$ 705 Basic net income per share $ 0.24 $ 0.02
Basic weighted average number of common shares outstanding 30,603
29,461 Diluted net income per share $ 0.23 $ 0.02 Diluted
weighted average number of common shares outstanding 31,909 31,054
Nexstar Broadcasting Group,
Inc.
Reconciliation of Broadcast Cash Flow
and Adjusted EBITDA (Non-GAAP Measures)
(in thousands - unaudited)
Three Months Ended
March 31,
Broadcast Cash Flow and Adjusted EBITDA: 2014
2013 Income from operations: $ 27,700 $ 17,818 Add:
Depreciation 8,419 7,980 Amortization of intangible assets 6,193
7,990 Amortization of broadcast rights, excluding barter
2,960
2,969
(Gain) Loss on asset disposal, net (15 ) 7 Corporate expenses 8,504
6,733 Less: Payments for broadcast rights 3,149
3,700 Broadcast cash flow 50,612 39,797
Less: Corporate expenses 8,504 6,733
Adjusted EBITDA $ 42,108 $ 33,064
Nexstar Broadcasting Group,
Inc.
Reconciliation of Free Cash Flow
(Non-GAAP Measure)
(in thousands - unaudited)
Three Months Ended
March 31,
Free Cash Flow: 2014 2013 Income
from operations: $ 27,700 $ 17,818 Add: Depreciation 8,419
7,980 Amortization of intangible assets 6,193 7,990 Amortization of
broadcast rights, excluding barter 2,960 2,969 Loss on asset
disposal, net (15 ) 7 Non-cash stock option expense 1,643 495
Less: Payments for broadcast rights 3,149 3,700 Cash
interest expense 14,480 15,718 Capital expenditures 3,969 6,780
Cash income taxes, net of refunds 47 899
Free cash flow $ 25,255 $ 10,162
Nexstar Broadcasting Group, Inc.Thomas E. Carter,
972-373-8800Chief Financial OfficerorJCIRJoseph Jaffoni / Jennifer
Neuman, 212-835-8500nxst@jcir.com
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