Net Revenue Growth Drives Record 3Q
Operating Income of $41.7 Million, Broadcast Cash Flow of $66.1
Million, Adjusted EBITDA of $57.4 Million, and Free Cash Flow of
$38.9 Million
Nexstar Enters Into Definitive Agreement to
Acquire CW Affiliate KCWI-TV in Des Moines, Iowa for $3.5 Million
in Accretive Transaction
Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) (“Nexstar” or
“the Company”) today reported record financial results for the
third quarter and nine months ended September 30, 2014 as
summarized below. The Company also announced that it entered into a
definitive agreement to acquire the assets of KCWI-TV, the CW
affiliate serving the Des Moines, Iowa market for $3.5 million in a
transaction that is expected to be accretive to Nexstar’s operating
results immediately upon closing.
Summary 2014 Third Quarter Highlights
($ in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2014 2013
Change 2014 2013
Change Local Revenues $ 65,828 $ 63,605 +3.50 % $ 201,931 $
190,270 +6.13 % National Revenues $ 25,572 $ 28,646
(10.73 )% $ 78,836 $ 80,596 (2.18 )%
Local and
National Core Revenue $ 91,400 $
92,251 (0.92 )%
$ 280,767 $
270,866 +3.66 % Political Revenues $ 18,179 $ 1,030
+1,664.95 % $ 28,928 $ 3,615 +700.22 % Retransmission Fee Revenue $
40,740 $ 25,586 +59.23 % $ 110,829 $ 74,304 +49.16 % Digital Media
Revenue $ 12,936 $ 10,058 +28.61 % $ 32,461 $ 24,223 +34.01 % Other
$ 1,170 $ 986 +18.66 % $ 3,282 $ 3,210 +2.24 % Trade and Barter
Revenue $ 7,629 $ 7,890 (3.31 )% $ 22,458 $
23,182 (3.12 )%
Gross Revenue $ 172,054
$ 137,801 +24.86 %
$ 478,725 $
399,400 +19.86 % Less: Agency Commissions $ 14,310 $
12,009 +19.16 % $ 40,218 $ 35,192 +14.28 %
Net Revenue $ 157,744 $ 125,792
+25.40 %
$ 438,507 $ 364,208 +20.40 %
Gross Revenue Excluding
Political Revenue
$ 153,875 $ 136,771
+12.51
%
$ 449,797
$
395,785
+13.65
%
Income from Operations $ 41,696 $ 25,153 +65.77 % $
104,338 $ 71,163 +46.62 %
Broadcast Cash
Flow(1) $ 66,095 $ 48,075 +37.48 % $ 175,408 $ 137,697
+27.39 %
Broadcast Cash Flow Margin(2) 41.90 %
38.22 % 40.00 % 37.81 %
Adjusted EBITDA(1) $
57,415 $ 41,393 +38.71 % $ 149,123 $ 117,403 +27.02 %
Adjusted
EBITDA Margin(2) 36.40 % 32.91 % 34.01 % 32.24 %
Free Cash Flow(1) $ 38,868 $ 21,590 +80.03 % $ 94,502
$ 54,722 +72.69 %
(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 record
third quarter financial results reflect ongoing benefits from our
results-focused operating disciplines, growing retransmission
consent revenues, expanded digital media platform and our
strategies to maximize the political revenue opportunity. These
factors, coupled with completed, value-building station and digital
media acquisitions and integrations, including the first full
quarter of operations of five television stations in Colorado and
Florida acquired in mid-June, drove record third quarter net
revenue, BCF, adjusted EBITDA and free cash flow.
“Nexstar remains on track to generate record free cash flow in
2014 while continuing to identify, structure and enter into
agreements that will grow future operating results through
accretive transactions. In this regard, we recently announced a
highly accretive transaction that upon completion will mark our
entrée into the Phoenix market, and this morning we are announcing
a smaller accretive transaction that will represent our second
station in Des Moines, both of which we expect to complete in early
2015. Earlier this week, we announced FCC approval of the license
transfer related to the seven stations soon-to-be-acquired from the
Grant Company. We also expect to close another significant pending
transaction later this year and one transaction early next year all
of which will meaningfully benefit 2015 operating results and
beyond.
“With the strong operating leverage in our business model, the
25.4% rise in third quarter net revenue generated 37.5% growth in
BCF, a 38.7% increase in adjusted EBITDA, and a 80.0% rise in free
cash flow. Third quarter television ad revenue inclusive of
political advertising grew 17.5% as Nexstar’s spot inventory
management initiatives resulted in a nearly 18-fold increase in
political revenue and flat core local and national spot revenue.
Reflecting our expanded platform and presence in states with high
levels of political spending activity, 2014 third quarter political
revenue rose by a robust 79.1% over comparable 2012 third quarter
levels. With Election Day behind us, we are confident that 2014
fourth quarter results will similarly benefit from healthy
political revenue contributions.
“Notwithstanding the benefits we are deriving from strong
political ad spending in our markets, Nexstar’s gross revenue
excluding political grew in the third quarter an impressive 12.5%
and reflects the 59.2% rise in retransmission fee revenue to $40.7
million and 28.6% increase in digital media revenue to $12.9
million. Ongoing renewals of retransmission consent agreements
combined with the growth of our digital publishing platform
resulted in a 50.6% year-over-year increase in total third quarter
retransmission fee and digital media revenue to $53.7 million.
Nexstar’s 2014 year-to-date retransmission consent revenue of
$110.8 million and digital media revenue of $32.4 million already
exceed full year 2013 levels. These higher margin revenue streams
continue to diversify and complement our core television operations
and accounted for 34.0% of 2014 third quarter net revenue, up from
32.8% in the 2014 second quarter, 28.3% in the comparable 2013
period, and 21.8% in the 2012 third quarter, the last political
cycle.
“With our focus on growing free cash flow, we remain disciplined
in managing costs and driving BCF and Adjusted EBITDA margins. The
rise in third quarter station direct operating expenses (net of
trade expense) and SG&A primarily reflects higher variable
costs related to the higher local and political revenues and the
operation of acquired stations and digital assets while total third
quarter corporate expense was slightly lower than budgeted.
“With significant and growing free cash flow, an attractive,
declining weighted average cost of borrowings and long-term record
of success in integrating newly acquired stations, extracting
synergies and enhancing operating results while improving service
to viewers and advertisers, Nexstar remains well positioned to
further consolidate mid-sized markets and pursue additional
accretive digital media transactions while continuing to lower
leverage and return capital to shareholders. Last month, Nexstar
announced a definitive agreement to acquire KASW-TV, the CW
affiliate serving Phoenix for $68.0 million plus working capital.
In the first twelve months following the closing of the
transaction, KASW-TV is expected to generate approximately $14.0
million in BCF and is expected to provide free cash flow accretion
in the first year of ownership of approximately $0.30 per share.
This morning we are announcing a definitive agreement to acquire
KCWI-TV, the CW affiliate in Des Moines for $3.5 million, which
upon closing will complement our existing ownership of the ABC
affiliate in the market and add approximately $1 million in
incremental BCF.
“Looking ahead, with distribution agreements representing
approximately 60% of Nexstar’s MVPD subscribers renewed in 2013 and
by 2014 year-end, and another 25% of Nexstar’s subscriber
households up for renewal in 2015, we project visible ongoing
revenue growth from this source in 2015 and beyond. Similarly,
digital media revenue growth in the remainder of 2014 and in 2015
will further benefit from our recent accretive acquisitions of
Internet Broadcasting Systems and Enterprise Technology Group.
These strategic additions to Nexstar’s existing digital platform
and agency capabilities have expanded Nexstar’s digital business
portfolio to over $50 million in annual run rate revenues. As such,
inclusive of the two recently announced station transactions and
assuming the completion of all other announced transactions,
Nexstar would generate pro-forma free cash flow in excess of $365
million during the 2014/2015 cycle, or average pro-forma free cash
flow in excess of $6.00 per share per year. Our current operations
alone are tracking to generate blended free cash flow of
approximately $4.50 per share per year in the current 2014/2015
period and with just the free cash flow generated from this base of
operations, we expect Nexstar’s net leverage to decline to
approximately 4.0x at the end of 2014.”
The consolidated total debt of Nexstar, its wholly owned
subsidiaries, and Mission (collectively, the “Company”) at
September 30, 2014, was $1,087.4 million and senior secured debt
was $561.8 million. The Company’s total net leverage ratio at
September 30, 2014 was 4.82x compared to a total permitted leverage
covenant of 7.25x. The Company’s first lien net leverage ratio at
September 30, 2014 was 2.34x compared to the covenant maximum of
4.00x.
The table below summarizes the Company’s debt obligations:
($ in millions)
9/30/2014
12/31/2013 First Lien Term Loans $ 561.8 $ 545.4 6.875%
Senior Notes due 2020 $ 525.6 $ 525.7
Total Debt $ 1,087.4 $
1,071.1
Cash on hand $ 68.7 $ 40.0
Dividends
On October 24, 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 November 21, 2014, to shareholders of record on
November 7, 2014.
Third 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 719/325-2376, conference ID 6711166 (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 80 television stations and 21
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, LiveWell, LATV, and Weather
Nation Utah. 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 109 television stations and related digital multicast
signals reaching 57 markets or approximately 17.3% 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
September 30,
Nine Months Ended
September 30,
2014 2013
2014 2013 Net revenue $ 157,744
$ 125,792 $ 438,507 $ 364,208
Operating expenses: Corporate expenses 8,680 6,682 26,285 20,294
Station direct operating expenses, net of trade, depreciation and
amortization 46,257 35,557 129,821 102,556 Station selling,
general, and administrative expenses, net of depreciation and
amortization 34,972 30,905 102,203 90,358 Trade and barter expense
7,736 7,636 22,459 22,601 Depreciation 8,838 8,598 25,800 24,791
Amortization of intangible assets 6,392 7,996 18,697 22,900
Amortization of broadcast rights, excluding barter 3,173
3,265 8,904 9,545
Total operating expenses 116,048 100,639
334,169 293,045 Income from
operations 41,696 25,153 104,338 71,163 Interest expense,
net (15,530 ) (16,900 ) (46,039 ) (50,352 ) Loss on extinguishment
of debt - (1,048 ) (71 ) (1,048 ) Other expenses (172 )
(84 ) (427 ) (252 ) Income before income taxes
25,994 7,121 57,801 19,511 Income tax expense (10,590 )
(3,526 ) (24,100 ) (8,844 ) Net income
$ 15,404 $ 3,595 $ 33,701 $ 10,667
Basic net income per share $ 0.50 $ 0.12 $ 1.10 $
0.36 Basic weighted average number of common shares outstanding
30,888 30,048 30,711 29,706 Diluted net income per share $
0.48 $ 0.11 $ 1.05 $ 0.34 Diluted weighted average number of common
shares outstanding 32,067 31,509 31,970 31,297
Nexstar Broadcasting Group,
Inc.
Reconciliation of Broadcast Cash Flow
and Adjusted EBITDA (Non-GAAP Measures)
UNAUDITED
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Broadcast Cash Flow and EBITDA: 2014
2013 2014 2013
Income from operations $ 41,696 $ 25,153 $ 104,338 $ 71,163 Add:
Depreciation 8,838 8,598 25,800 24,791 Amortization of intangible
assets 6,392 7,996 18,697 22,900 Amortization of broadcast rights,
excluding barter
3,173
3,265
8,904
9,545
(Gain) Loss on asset disposal, net (7 ) 33 139 35 Corporate
expenses 8,680 6,682 26,285 20,294 Non-cash representation contract
termination fee 353 - 353 - Less: Payments for broadcast
rights 3,030 3,652 9,108 11,031
Broadcast cash flow 66,095 48,075 175,408 137,697
Less: Corporate expenses 8,680 6,682
26,285 20,294 Adjusted EBITDA $ 57,415 $
41,393 $ 149,123 $ 117,403
Nexstar Broadcasting Group,
Inc.
Reconciliation of Free Cash Flow
(Non-GAAP Measure)
UNAUDITED
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Free Cash Flow: 2014 2013
2014 2013 Income from
operations $ 41,696 $ 25,153 $ 104,338 $ 71,163 Add:
Depreciation 8,838 8,598 25,800 24,791 Amortization of intangible
assets 6,392 7,996 18,697 22,900 Amortization of broadcast rights,
excluding barter 3,173 3,265 8,904 9,545 (Gain) Loss on asset
disposal, net (7 ) (33 ) 139 35 Non-cash stock option expense 1,928
586 5,484 1,580 Non-cash representation contract termination fee
353 - 353 - Less: Payments for broadcast rights 3,030 3,652
9,108 11,031 Cash interest expense 14,850 15,996 44,007 47,769
Capital expenditures 4,790 4,373 13,822 14,349 Cash income taxes,
net of refunds 835 20 2,276
2,143 Free cash flow $ 38,868 $ 21,590
$ 94,502 $ 54,722
Nexstar Broadcasting Group, Inc.Thomas E. Carter,
972-373-8800Chief Financial OfficerorJCIRJoseph Jaffoni, Jennifer
Neuman212-835-8500nxst@jcir.com
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