Net Revenue Growth Drives Record 1Q
Operating Income of $37.9 Million up 36.8%, Adjusted EBITDA of
$64.0 Million up 52.1%, and Free Cash Flow of $43.0 Million up
70.1%
Nexstar to Launch Lafayette, Louisiana’s
First NBC Affiliate and Waco, Texas’ First Stand-alone MyNetworkTV
Affiliate on July 1 Through Efficient Spectrum
Re-Allocations
Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) (“Nexstar” or
“the Company”) today reported record financial results for the
first quarter ended March 31, 2015 as summarized below.
Summary 2015 First Quarter
Highlights
($ in thousands)
Three Months EndedMarch
31,
2015 2014
Change Local Revenues $ 84,524
$ 65,642 +28.8% National Revenues $ 35,578
$ 27,189 +30.9%
Local and National Core Revenue
$ 120,102 $ 92,831 +29.4%
Political Revenues $ 360 $ 4,003 (91.0)% Retransmission Fee Revenue
$ 66,564 $ 35,129 +89.5% Digital Media Revenue $ 19,312 $ 6,277
+207.7% Other $ 1,201 $ 981 +22.4% Trade and Barter Revenue $
11,393 $ 7,128 +59.8%
Gross Revenue
$ 218,932 $ 146,349 +49.6% Less: Agency
Commissions $ 15,541 $ 12,516 +24.2%
Net
Revenue $ 203,391 $ 133,833 +52.0%
Gross Revenue Excluding Political Revenue $
218,572 $ 142,346
+53.5%
Income from Operations $ 37,904 $ 27,700 +36.8%
Broadcast Cash Flow(1) $ 75,728 $ 50,612
+49.6%
Broadcast Cash Flow Margin(2) 37.2%
37.8%
Adjusted EBITDA(1) $ 64,045 $ 42,108
+52.1%
Adjusted EBITDA Margin(2) 31.5% 31.5%
Free Cash Flow(1) $ 42,953 $ 25,255 +70.1%
(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.
New Network Affiliations
On July 1, 2015, Nexstar’s KLAF will launch as the NBC affiliate
serving the Lafayette, LA market (DMA 122). Previously, Lafayette
has not had an in-market NBC affiliate. KLAF will be operated in
conjunction with Nexstar’s KADN, the FOX affiliate in Lafayette.
Until midnight on June 30, 2015, KLAF will continue to operate as a
MyNetworkTV affiliate.
On July 1, 2015, Nexstar’s KYLE will launch as the MyNetworkTV
affiliate serving the Waco-Temple-Bryan, TX market (DMA 87). KYLE
will be operated in conjunction with Nexstar’s KWKT, the FOX
affiliate in Waco. Previously, there was no stand-alone MyNetworkTV
affiliate serving the market and KYLE and KWKT shared MyNetworkTV
and FOX affiliations.
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 2015 as reflected by
our record first quarter net revenue, BCF, Adjusted EBITDA and free
cash flow. We are well positioned to grow all of our non-political
revenue sources throughout 2015 and we expect 2015 to mark the
Company’s fourth consecutive year of record free cash flow as our
platform expansion and revenue diversification efforts have
eliminated the cyclicality associated with political
advertising.
“Nexstar’s operating, organic and M&A-fueled growth is being
complemented by shareholder value enhancing initiatives such as the
new network affiliations we are announcing today. With the creation
of the NBC affiliate in Lafayette and the MyNetworkTV affiliate in
Waco, we stand to further optimize the value of our platform
through our efficient re-allocation of Nexstar’s existing spectrum
assets. These actions will elevate advertising and retransmission
consent revenue and create two new duopolies with no incremental
M&A costs.
“Reflecting these new agreements, Nexstar’s projected pro-forma
free cash flow during the 2015/2016 cycle rises to approximately
$456 million, or average pro-forma free cash flow of approximately
$7.30 per share per year from our prior estimate of approximately
$450 million, or average pro-forma free cash flow of approximately
$7.25 per share per year with the gains weighted toward 2016 when
we have the full year benefit of these new affiliations.
“During the first quarter, the benefit of recently completed
accretive acquisitions and the successful execution of our
strategies to leverage the content chain and diversify our revenue
sources more than offset the $3.6 million year-over-year decline in
political advertising. Notably, our 52% first quarter net revenue
increase highlights the progress of our revenue diversification
strategies with combined digital media and retransmission fee
revenue of $85.9 million more than doubling over prior year levels
and accounting for 42.2% of net revenue -- their highest
contribution to our quarterly revenue mix since these revenue
streams were established -- and up substantially from 30.9% in the
first quarter of 2014.
“First quarter BCF, Adjusted EBITDA and free cash flow increases
of 49.6%, 52.1% and 70.1%, respectively, reflect the value of our
initiatives to actively expand our scale through strategic,
accretive acquisitions while managing costs. Our recently completed
value-building transactions added 27 stations as well as a leading
digital media advertising and programmatic technology provider to
our growth platform and all of these assets have been successfully
integrated into the Nexstar platform and operations and we are
harvesting the anticipated synergies and efficiencies we forecasted
at the time the transactions were announced.
“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. First quarter corporate
expense was in line with our expectations, as previously disclosed,
and included $1.9 million of expenses associated with our capital
markets and station group acquisition activity. First quarter 2015
free cash flow of $43.0 million grew more than 4.0 times over the
first quarter of 2013, the previous non-political period, clearly
highlighting the value being derived from our platform building and
revenue diversification strategies.
“Nexstar’s strong first quarter television ad revenue growth was
complemented by an 89.5% rise in retransmission fee revenue and a
207.7% increase in digital media revenue which both benefited from
organic growth as well as our recent accretive acquisitions. We
expect our long-term distribution revenue growth trend to continue
as in late 2014 additional contract renewals representing about 40%
of the Company’s MVPD subscribers were completed and another 35% of
our subscribers will be renewed in 2015.
“Recently closed accretive acquisitions will build upon the
leverage in our operating model throughout 2015 and beyond.
Specifically, in January 2015 we closed the largest acquisition in
the Company’s history, adding the net operations of 18 stations in
nine markets from Communications Corporation of America. This was
followed by the completion of single station transactions in
Phoenix and Las Vegas bringing our TV station portfolio to 107
stations under ownership or management, serving 58 separate
DMAs.
“Importantly, our station platform now reaches approximately 18%
of all U.S. television households leaving considerable headroom for
Nexstar to further expand our marketing solutions platform through
additional accretive station and digital media acquisitions, while
returning capital to shareholders through our quarterly dividend,
reducing leverage and pursuing other initiatives that enhance
long-term shareholder value.”
The consolidated total debt of Nexstar, its wholly owned
subsidiaries, Mission Broadcasting Inc. (“Mission”) and Marshall
Broadcasting Group, Inc. at March 31, 2015, was $1,544.0 million
and senior secured debt was $701.4 million. The Company’s total net
leverage ratio at March 31, 2015 was 4.34x compared to a total
permitted leverage covenant of 6.75x. The Company’s first lien net
leverage ratio at March 31, 2015 was 2.03x compared to the covenant
maximum of 4.00x.
The table below summarizes the Company’s debt obligations:
($ in millions)
3/31/2015 12/31/2014 Revolving Credit Facility $ 42.0
$ 5.5 First Lien Term Loans $ 701.4 $ 705.0 6.875% Senior Unsecured
Notes $ 525.6 $ 525.6 6.125% Senior Unsecured Notes $ 275.0
$ -
Total Debt $ 1,544.0 $ 1,236.1
Cash on Hand $ 44.6 $ 131.9
Notes Offering
On January 29, 2015, Nexstar Broadcasting Group, Inc.’s
wholly-owned subsidiary, Nexstar Broadcasting, Inc. (“Nexstar
Broadcasting”), completed the sale and issuance of $275.0 million
aggregate principal amount of 6.125% senior notes due 2022. The
Notes were priced at par and are senior unsecured obligations of
Nexstar Broadcasting and are guaranteed by the Company and Mission
and certain of Nexstar Broadcasting’s and Mission’s future
restricted subsidiaries on a senior unsecured basis.
Nexstar Broadcasting used the net proceeds from the offering to
fund the acquisition of two television stations in two markets from
Landmark Television, LLC and Landmark Media Enterprises, LLC,
Meredith Corporation and SagamoreHill of Phoenix, LLC, and the
digital company Yashi, Inc., and to pay related fees and
expenses.
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 719/325-2464, conference ID 2668262 (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), loss (gain) on
asset disposal and non-cash representation contract termination
fee, 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,
non-cash compensation expense and non-cash representation contract
termination fee, 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 107 television stations and
related digital multicast signals reaching 58 markets or
approximately 18.0% of all U.S. television households. Nexstar’s
portfolio includes affiliates of NBC, CBS, ABC, FOX, MyNetworkTV,
The CW, Telemundo, Bounce TV, Me-TV, LATV, RTV, Estrella, This TV,
Weather Nation Utah, Movies!, and News/Weather. Nexstar’s 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.
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 EndedMarch
31,
2015 2014
Net revenue $ 203,391 $ 133,833
Operating expenses: Corporate expenses 11,683 8,504
Station direct operating expenses, net of
trade, depreciationand amortization
67,806
40,379
Station selling, general and
administrative expenses, net ofdepreciation and amortization
45,606 32,536 Trade and barter expense 11,298 7,142 Amortization of
broadcast rights, excluding barter 5,162 2,960 Amortization of
intangible assets 13,060 6,193 Depreciation 10,872
8,419 Total operating expenses 165,487
106,133 Income from operations 37,904 27,700
Interest expense, net (19,293 ) (15,170 ) Other expenses
(118 ) (128 ) Income before income taxes 18,493 12,402
Income tax expense (6,581 ) (5,049 ) Net income $
11,912 $ 7,353 Net loss attributable to noncontrolling interests*
995 - Net income attributable to
Nexstar $ 12,907 $ 7,353 Basic net income per
share attributable to Nexstar $ 0.41 $ 0.24 Basic weighted average
number of common shares outstanding 31,196 30,603 Diluted
net income per share attributable to Nexstar $ 0.40 $ 0.23 Diluted
weighted average number of common shares outstanding 32,256 31,909
* The net loss attributable to noncontrolling
interests represents the loss attributable to the owner of White
Knight Broadcasting, Inc., a variable interest entity consolidated
into Nexstar Broadcasting Group, Inc.’s results.
Nexstar Broadcasting Group,
Inc.Reconciliation of Broadcast Cash Flow and Adjusted
EBITDA (Non-GAAP Measures)UNAUDITED(in thousands)
Three Months EndedMarch
31,
Broadcast Cash Flow and Adjusted EBITDA: 2015
2014 Income
from operations $ 37,904 $ 27,700 Add: Depreciation 10,872 8,419
Amortization of intangible assets 13,060 6,193 Amortization of
broadcast rights, excluding barter
5,162
2,960
Loss (gain) on asset disposal, net 802 (15 ) Corporate expenses
11,683 8,504 Non-cash representation contract termination fee 1,516
- Less: Payments for broadcast rights 5,271
3,149 Broadcast cash flow 75,728 50,612 Margin
% 37.23 % 37.82 % Less: Corporate expenses 11,683
8,504 Adjusted EBITDA $ 64,045 $ 42,108
Margin % 31.49 % 31.46 %
Nexstar Broadcasting Group,
Inc.Reconciliation of Free Cash Flow (Non-GAAP
Measure)UNAUDITED(in thousands)
Three Months Ended
March 31,
Free Cash Flow: 2015
2014 Income from operations $ 37,904 $
27,700 Add: Depreciation 10,872 8,419 Amortization of
intangible assets 13,060 6,193 Amortization of broadcast rights,
excluding barter 5,162 2,960 Loss (gain) on asset disposal, net 802
(15 ) Non-cash compensation expense 2,858 1,643 Non-cash
representation contract termination fee 1,516 - Less:
Payments for broadcast rights 5,271 3,149 Cash interest expense
18,408 14,480 Capital expenditures 5,524 3,969 Operating cash
income taxes, net of refunds(1) 18 47
Free cash flow $ 42,953 $ 25,255
____________________________________________
(1) Excludes the payment of $5.906 million in taxes
related to the tax gain on sale of a station to Marshall
Broadcasting.
Nexstar Broadcasting Group, Inc.Thomas E. Carter,
972-373-8800Chief Financial OfficerorJCIRJoseph Jaffoni / Jennifer
Neuman, 212-835-8500nxst@jcir.com
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