- Net Revenue Growth Drives Record 2Q
Operating Income of $34.9 Million, Broadcast Cash Flow of $58.7
Million, Adjusted EBITDA of $49.6 Million, and Free Cash Flow of
$30.4 Million -
Nexstar Broadcasting Group, Inc. (NASDAQ: NXST) (“Nexstar”)
today reported record financial results for the second quarter and
six months ended June 30, 2014 as summarized below:
Summary 2014 Second Quarter
Highlights
($ in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2014 2013
Change 2014
2013 Change Local Revenues $
70,461 $ 66,731 +5.59 % $ 136,103 $
126,665 +7.45 % National Revenues $ 26,075 $ 28,575
(8.75 )% $ 53,264 $ 51,950 +2.53 %
Local and National Core Revenue $ 96,536
$ 95,306 +1.29 %
$ 189,367 $
178,615 +6.02 % Political Revenues $ 6,746 $ 1,823
270.05 % $ 10,749 $ 2,585 +315.82 % Retransmission Fee Revenue $
34,960 $ 24,922 +40.28 % $ 70,089 $ 48,718 +43.87 % Digital Media
Revenue $ 13,248 $ 7,665 +72.84 % $ 19,525 $ 14,165 +37.84 % Other
$ 1,131 $ 1,099 +2.91 % $ 2,112 $ 2,224 (5.04 )% Trade and Barter
Revenue $ 7,701 $ 7,874 (2.20 )% $ 14,829
$ 15,292 (3.03 )%
Gross Revenue
$ 160,322 $ 138,689 +15.60 %
$
306,671 $ 261,599 +17.23 % Less: Agency
Commissions $ 13,392 $ 12,478 +7.32 % $ 25,908
$ 23,183 +11.75 %
Net Revenue $
146,930 $ 126,211 +16.42 %
$
280,763 $ 238,416 +17.76 %
Gross Revenue Excluding Political
Revenue
$ 153,576 $ 136,866
+12.21
$ 295,922
$
259,014
+14.25
%
Income from Operations $ 34,942 $ 28,192 +23.94 % $
62,642 $ 46,010 +36.15 %
Broadcast Cash
Flow(1) $ 58,701 $ 49,825 +17.81 % $ 109,313 $ 89,622
+21.97 %
Broadcast Cash Flow Margin(2) 39.95%
39.48% 38.93% 37.59%
Adjusted EBITDA(1) $
49,600 $ 42,946 +15.49 % $ 91,708 $ 76,010 +20.65 %
Adjusted
EBITDA Margin(2) 33.76% 34.03% 32.66% 31.88%
Free Cash Flow(1) $ 30,379 $ 20,464 +48.45 % $ 55,634
$ 33,133 +67.91 %
(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 CommentPerry A. Sook, Chairman, President and Chief
Executive Officer of Nexstar Broadcasting Group, Inc. commented,
“Nexstar’s long-term strategy to complete and integrate accretive
acquisitions while building complementary revenue streams that
leverage our local content and relationships drove record second
quarter net revenue, BCF, adjusted EBITDA and free cash flow. Our
year-to-date financial results are in-line with our expectations
and we remain confident that Nexstar will generate record free cash
flow in 2014 based on core advertising trends and rising political
spending in the second half of the year, contractual retransmission
revenue growth and our expanded digital media operations. In
addition, later this year we expect to close pending transactions
which will result in the addition of 27 stations and benefit
operating results in late 2014 and beyond.
“Our 16.4% rise in second quarter net revenue generated 17.8%
growth in BCF, a 15.5% increase in adjusted EBITDA, and a 48.5%
rise in free cash flow. During the second quarter, television ad
revenue inclusive of political advertising rose 6.3% with core
local and national spot revenue increasing 1.3%, including a 4.0%
rise in same station automotive advertising and year-over-year
increases in six of our top ten categories. Reflecting our expanded
platform and presence in states with high levels of political
spending activity, 2014 second quarter political revenue rose by
270% compared to the same period last year and by 12.8% over
comparable 2012 second quarter levels.
“While political ad spending in our markets will accelerate in
the second half of 2014, Nexstar’s gross revenue growth in the
second quarter excluding political was healthy at just over 12% and
reflects the 40.3% rise in retransmission fee revenue and 72.8%
increase in digital media revenue. Recently renegotiated
retransmission consent agreements combined with the growth of our
digital publishing platform and digital agency services offerings
resulted in a 47.9% increase in Nexstar’s total second quarter
retransmission fee and digital media revenue to $48.2 million.
Consistent with our revenue diversification objectives, these
higher margin revenue streams accounted for 32.8% of 2014 second
quarter net revenue up from 25.8% in the comparable period last
year and 22.2% in the 2012 second quarter, the last political
cycle.
“Looking forward, with distribution agreements representing over
40% of Nexstar’s subscribers up for renewal in 2014, we project
ongoing significant revenue growth from this source in the
remainder of 2014 and beyond. In addition, digital media revenue
growth in the second half of 2014 will benefit from the second
quarter accretive acquisitions of Internet Broadcasting Systems, a
digital publishing platform and digital agency services provider as
well as cloud-based content management solutions provider
Enterprise Technology Group (“ETG”). These strategic additions to
Nexstar’s existing digital platform and agency capabilities have
enabled us to expand the range of best of breed content publishing
and monetization tools that we offer to power our clients’ digital
media businesses and have expanded Nexstar’s digital business
portfolio to over $50 million in annual run rate revenues.
“During the second quarter, Nexstar remained active in executing
its long-term strategy to complete accretive transactions that
expand our operating and revenue base to drive free cash flow
growth. In this regard, we completed the acquisition of five
television stations in two markets for $35.0 million which follows
the completion in the first quarter of three stations in three
markets for $87.9 million.
“Throughout our history, Nexstar’s organization-wide commitment
to broadcasting excellence for local viewers and unparalleled
marketing results for our advertisers has been integral to our
success and growth. Reflecting this commitment, Nexstar and Mission
Broadcasting, Inc. stations have garnered over 340 broadcasting
awards over the past five years. We’ve also been market leaders in
addressing diversity in programming and the unique needs of the
communities where we operate. During the second quarter, Nexstar
initiated a transaction to promote diversity of media ownership
among minority operators through the sale and post-transaction
operational support of three network affiliated stations in three
markets to a minority controlled media company. We believe the
proposed transaction presents an innovative framework for
introducing and developing a new, minority-controlled entrant to
broadcasting, and for bringing additional news, information and
specialized programming to the Shreveport, LA, Odessa-Midland, TX
and Quad Cities, IA markets. This transaction is contingent upon
closing other pending transactions which we expect to complete
later this year.
“With our 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 second quarter
station direct operating expenses (net of trade expense) and
SG&A primarily reflects higher variable costs related to the
higher core and political revenues and the operation of acquired
stations and digital assets. The second quarter corporate expense
was slightly ahead of our expectations and reflects approximately
$0.7 million of one-time expenses related to legal and professional
fees for acquisitions and related initiatives.
“With the addition of eight new stations in 2014 to date and
expectations that we will complete all other announced transactions
by year-end which will result in the net addition of 27 more
stations, Nexstar would generate pro-forma 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. Our
current operations alone are pacing to generate blended free cash
flow of approximately $4.50 per share per year in the current
2014/2015 period and with the free cash flow generated from this
base of operations, we project that Nexstar’s net leverage will
decline to approximately 3.8x at the end of 2014.
“With significant and growing free cash flow, the benefit of
2014 political spending, the renewal by year-end of distribution
agreements covering over 40% of our subscribers, and the ongoing
expansion of our digital media platform, Nexstar remains well
positioned to selectively consolidate mid-sized markets, pursue
additional accretive digital media transactions and lower leverage
while returning capital to shareholders.”
The consolidated total debt of Nexstar, its wholly owned
subsidiaries, and Mission (collectively, the “Company”) at June 30,
2014, was $1,088.4 million and senior secured debt was $562.8
million. The Company’s total net leverage ratio at June 30, 2014
was 5.35x compared to a total permitted leverage covenant of 7.25x.
The Company’s first lien net leverage ratio at June 30, 2014 was
2.69x compared to the covenant maximum of 4.00x.
The table below summarizes the Company’s debt obligations:
($ in millions)
6/30/2014
12/31/2013 First Lien Term Loans $ 562.8 $ 545.4
6.875% Senior Notes due 2020 $ 525.6 $
525.7
Total Debt $ 1,088.4 $ 1,071.1
Cash
on hand $ 32.1 $ 40.0
DividendsOn July 25, 2014 the Board of Directors declared
a quarterly cash dividend of $0.15 per share of its Class A common
stock which will be paid on August 29, 2014 to shareholders of
record on August 15, 2014.
Second Quarter Conference CallNexstar 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
719/325-2435, conference ID 6333592 (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
InformationBroadcast 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 80 television stations and 20 related digital
multicast signals reaching 46 markets or approximately 13.1% 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, LATV and an independent station. Nexstar’s 48
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 107 television stations and related digital multicast
signals reaching 56 markets or approximately 16.0% of all U.S.
television households.
Forward-Looking StatementsThis 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 -
UNAUDITED(in thousands, except per share amounts)
Three Months EndedJune
30,
Six Months EndedJune 30,
2014 2013 2014
2013 Net revenue $ 146,930 $ 126,211 $ 280,763
$ 238,416 Operating expenses: Corporate
expenses 9,101 6,879 17,605 13,612
Station direct operating expenses, net of
trade, depreciation and amortization
43,185 34,408 83,564 66,999 Station selling, general, and
administrative expenses, net of depreciation and amortization
34,695 30,686 67,231 59,453 Trade and barter expense 7,581 7,608
14,723 14,965 Depreciation 8,543 8,213 16,962 16,193 Amortization
of intangible assets 6,112 6,914 12,305 14,904 Amortization of
broadcast rights, excluding barter 2,771 3,311
5,731 6,280
Total operating expenses
111,988
98,019 218,121 192,406
Income from operations 34,942 28,192 62,642 46,010 Interest
expense, net (15,339 ) (16,903) (30,509 ) (33,452 ) Loss on
extinguishment of debt (71 ) - (71 ) -
Other expenses
(127 ) (84) (255 ) (168 ) Income before
income taxes 19,405 11,205 31,807 12,390 Income tax expense
(8,461 ) (4,838) (13,510 ) (5,318 ) Net
income 10,944 6,367 18,297
7,072 Basic net income per share 0.36
0.22 0.60 0.24 Basic weighted average number of common shares
outstanding 30,641 29,604 30,622 29,533 Diluted net income
per share 0.34 0.20 0.57 0.23
Diluted weighted average number of common
shares outstanding
31,932 31,325 31,921 31,189
Nexstar Broadcasting Group,
Inc.Reconciliation of Broadcast Cash Flow and Adjusted
EBITDA (Non-GAAP Measures)UNAUDITED(in thousands)
Three Months EndedJune
30,
Six Months EndedJune 30,
Broadcast Cash Flow and Adjusted EBITDA: 2014
2013 2014 2013 Income
from operations $ 34,942 $ 28,192 $ 62,642 $
46,010 Add: Depreciation 8,543 8,213 16,962 16,193
Amortization of intangible assets 6,112 6,914 12,305 14,904
Amortization of broadcast rights, excluding barter
2,771
3,311
5,731
6,280
Loss (gain) on asset disposal, net 161 (5 ) 146 2 Corporate
expenses 9,101 6,879 17,605 13,612 Less: Payments for
broadcast rights 2,929 3,679
6,078 7,379
Broadcast cash flow 58,701 49,825 109,313 89,622 Less:
Corporate expenses 9,101 6,879
17,605 13,612
Adjusted EBITDA $ 49,600 $ 42,946
$ 91,708 $ 76,010
Nexstar Broadcasting Group,
Inc.Reconciliation of Free Cash Flow (Non-GAAP
Measure)UNAUDITED(in thousands)
Three Months EndedJune
30,
Six Months EndedJune 30,
Free Cash Flow: 2014 2013 2014
2013 Income from operations $ 34,942 $
28,192 $ 62,642 $ 46,010 Add:
Depreciation 8,543 8,213 16,962 16,193 Amortization of intangible
assets 6,112 6,914 12,305 14,904 Amortization of broadcast rights,
excluding barter 2,771 3,311 5,731 6,280 Loss (gain) on asset
disposal, net 161 (5 ) 146 2 Non-cash stock option expense 1,913
499 3,556 994 Less: Payments for broadcast rights 2,929
3,679 6,078 7,379 Cash interest expense 14,677 16,054 29,157 31,772
Capital expenditures 5,063 5,703 9,032 9,976 Cash income taxes, net
of refunds 1,394 1,224
1,441 2,123 Free
cash flow $ 30,379 $ 20,464 $
55,634 $ 33,133
Nexstar Broadcasting Group, Inc.Thomas E. Carter,
972-373-8800Chief Financial OfficerorJCIRJoseph Jaffoni,
212-835-8500nxst@jcir.comorJennifer Neuman,
212-835-8500nxst@jcir.com
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