Net Revenue Growth and 4Q Operating Income
of $67.3 Million Drives Record 4Q BCF of $104.6 Million, Adjusted
EBITDA of $93.0 Million, and Free Cash Flow of $69.0
Million
Record Full Year Operating Income of $206.1
Million, Adjusted EBITDA of $305.1 Million and Free Cash Flow of
$208.2 Million
Nexstar Establishes Guidance for
2016/2017
Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) (“Nexstar” or
“the Company”) today reported record financial results for the
fourth quarter and full year ended December 31, 2015 as summarized
below.
Summary 2015 Fourth Quarter and Full
Year Highlights
Three MonthsEnded December
31,
Twelve MonthsEnded December
31,
($ in thousands)
2015
2014
Change
2015
2014
Change
Local Revenue $ 102,780 $ 77,219 +33.1 % $ 369,313 $ 279,150 +32.3
% National Revenue $ 41,337 $ 31,094 +32.9 % $ 153,607 $ 109,930
+39.7 %
Core Revenue $ 144,117 $
108,313 +33.1 %
$ 522,920 $
389,080 +34.4 % Political Revenue $ 7,887 $ 35,366
(77.7 )% $ 12,716 $ 64,294 (80.2 )% Retransmission Fee Revenue $
81,695 $ 44,134 +85.1 % $ 298,023 $ 154,963 +92.3 % Digital Media
Revenue $ 29,283 $ 14,231 +105.8 % $ 89,902 $ 46,692 +92.5 % Other
$ 1,398 $ 1,232 +13.5 % $ 5,384 $ 4,514 +19.3 % Trade and Barter
Revenue $ 12,385 $ 8,756 +41.4 % $ 47,100 $ 31,214 +50.9 %
Gross
Revenue $ 276,765 $ 212,032 +30.5 %
$ 976,045 $ 690,757 +41.3 % Less:
Agency Commissions $ 24,503 $ 19,228 +27.4 % $ 79,668 $ 59,446
+34.0 %
Net Revenue $ 252,262 $
192,804 +30.8 %
$ 896,377 $
631,311 +42.0 %
Gross Revenue Excluding
Political $ 268,878 $ 176,666 +52.2
%
$ 963,329 $ 626,463 +53.8 %
Income from Operations $ 67,346 $
68,899 (2.3 )%
$ 206,107 $
173,237 +19.0 %
Broadcast Cash Flow(1)
$ 104,587 $ 94,500 +10.7 %
$
349,966 $ 269,908 +29.7 %
Broadcast Cash
Flow Margin(2) 41.5 % 49.0 %
39.0 % 42.8 % Adjusted
EBITDA(1) $ 92,996 $ 85,611
+8.6 %
$ 305,110 $ 234,734 +30.0 %
Adjusted EBITDA Margin(2) 36.9 %
44.4 % 34.0 % 37.2 %
Free Cash Flow(1) $ 68,979
$ 65,231 +5.7 %
$ 208,244 $
159,734 +30.4 % (1) Definitions and disclosures
regarding non-GAAP financial information are included on page 5,
while reconciliations are included on page 9. (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
fourth quarter and full year financial results mark the conclusion
of another successful and active year of growth for the Company.
Nexstar generated record fourth quarter and full year revenue, BCF,
Adjusted EBITDA and free cash flow, all of which exceeded consensus
expectations. During 2015, we completed or entered into agreements
to strategically expand our operating base, in accretive
transactions, to 104 full power stations while driving robust
retransmission distribution fee and digital media revenue growth.
In addition, we returned over $2.34 per share to shareholders in
2015 through quarterly cash dividends and opportunistic share
repurchases while lowering our leverage ratio from year-end 2014
levels.
“With 2015 actual free cash flow of approximately $6.80 per
share, our near- and long-term path to growth and the enhancement
of shareholder value remains on plan and we will achieve our fifth
consecutive year of record financial results in 2016. Nexstar’s
2016 financial growth will reflect our expanded scale, new
operating efficiencies and synergies related to recent and
to-be-completed acquisitions, the 2015 renewal of a significant
number of retransmission consent agreements, an expansion of our
digital media initiatives and the return of the political cycle and
highly rated special event programming such as the Rio 2016 summer
Olympics.
“Reflecting these factors, we are initiating a pro-forma
2016/2017 free cash flow projection for legacy Nexstar of
approximately $250 million of average annual free cash flow, or
average pro-forma free cash flow of approximately $8.15 per share
per year. Our disciplined operating and cost management practices,
revenue diversification initiatives and the success we are
achieving in identifying, financing and integrating accretive
acquisitions all contribute to Nexstar’s consistent industry
out-performance. With our long-term strategic focus on completing
accretive transactions that expand our scale and free cash flow
growth, we were delighted to announce last month that we reached a
definitive agreement to acquire Media General. The combined entity
will be named Nexstar Media Group to highlight our broadened base
of local operations and capabilities as the transaction will
increase Nexstar’s broadcast portfolio by approximately two thirds
and more than double our audience reach while presenting
opportunities related to the increased scale and complementary
nature of the combined digital media operations which we intend to
aggressively manage to profitability.
“Financially, the Media General transaction is expected to more
than double our revenue and adjusted EBITDA, will be immediately
accretive upon closing and will result in over $500 million of
average annual free cash flow which we intend to allocate to
leverage reduction, additional strategic growth investments and the
return of capital to shareholders. Nexstar Media Group’s annual
free cash flow per share is expected to approximate $11.15 per year
over the 2016/2017 period, and we initially plan to allocate free
cash flow to leverage reduction with a target of approximately 4.5x
covenant leverage by year end 2016 – a level only slightly higher
than where we ended 2015. Nexstar has committed financing for the
transaction and has made all required FCC and other regulatory
applications, and subject to securing approvals we expect to
complete the transaction late in the third quarter/early in the
fourth quarter of 2016.
“Fourth quarter results benefited from accretive station and
digital media acquisitions completed in late 2014 and early 2015,
our revenue diversification initiatives, and ongoing focus on
building new local direct advertising. Fourth quarter core ad
revenue rose 33.1% which was complemented by an 85.1% rise in
retransmission fee revenue and a 105.8% increase in digital media
revenue which collectively more than offset the impact of a $27.5
million, or 77.7%, year-over-year reduction in political
revenue.
“In addition to the strong core ad revenue growth, total
combined fourth quarter retransmission fee and digital media
revenue rose 90.1% to $111.0 million, representing nearly 45% of
2015 fourth quarter net revenue. By comparison, total fourth
quarter retransmission fee and digital media revenue comprised
30.3% of total net revenues in the year-ago period and 24.2% of
fourth quarter net revenue in 2013.
“The rise in fourth quarter station direct operating expenses
(net of trade expense) and SG&A primarily reflects higher
variable costs related to the significant increase in core revenues
and the operation of 33 stations acquired since late 2014. The $2.7
million increase in corporate expense was consistent with our
expectations and includes approximately $2.6 million in
non-recurring expenses associated with professional fees and
recently announced strategic transactions. Notwithstanding these
one-time expenses, fourth quarter adjusted EBITDA grew 8.6% while
fourth quarter 2015 free cash flow was up 5.7% over the prior year
despite the nearly $28 million decline in political revenue.
“Throughout 2015 and in the fourth quarter, Nexstar actively
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 November, Nexstar entered into a
definitive agreement to acquire the assets of three CBS- and one
NBC-affiliated television stations in West Virginia for $130.0
million in a transaction that is expected to be immediately
accretive to Nexstar’s free cash flow upon closing later this year.
Earlier this year we completed another previously announced
accretive acquisition of four CBS-affiliated stations in North
Dakota.
“For Nexstar, the fourth quarter marked a strong end to what was
already a record year of free cash flow. As we begin to benefit
from what are expected to be record levels of political advertising
in 2016, the ongoing, staggered renewal of our retransmission
consent agreements and completion of smaller transactions announced
in the second half of 2015, we have excellent visibility to
delivering on or exceeding our free cash flow targets and a clear
path for the continued near- and long-term enhancement of
shareholder value. With significant and growing free cash flow and
the closing of the acquisition of Media General expected in late
Q3/early Q4, Nexstar is positioned with the financial capacity and
flexibility to reduce leverage while returning capital to
shareholders and in January we announced a 26.3% increase in the
amount of our quarterly cash dividend.”
The consolidated debt of Nexstar and its wholly owned
subsidiaries, Mission Broadcasting, Inc. and Marshall Broadcasting
Group, Inc. at December 31, 2015, was $1,476.2 million including
senior secured debt of $684.2 million. The Company’s total net
leverage ratio at December 31, 2015 was 4.32x compared to a total
permitted leverage covenant of 6.75x. The Company’s first lien net
leverage ratio at December 31, 2015 was 1.94x compared to the
covenant maximum of 4.00x.
The table below summarizes the Company’s debt obligations:
($ in millions)
12/31/2015
12/31/2014(1) Revolving Credit Facilities $ 2.0 $ 5.5 First
Lien Term Loans $ 682.2 $ 696.0 6.875% Senior Unsecured Notes $
519.8 $ 518.9 6.125% Senior Unsecured Notes $ 272.2 $ -
Total
Debt $ 1,476.2 $ 1,220.4
Cash on Hand $ 43.4 $
131.9 (1) The Company early adopted a recent accounting
standard related to the presentation of debt financing costs in its
consolidated balance sheets which requires cost to third parties
that are directly attributable to issuing a debt instrument to be
presented as a direct deduction from the carrying value of debt as
opposed to an asset. As such the amounts previously reported as
debt as of December 31, 2014 were decreased by a total of $15.8
million.
Nexstar Enters into Definitive Agreement to Acquire Media
General
On January 27, 2016, Nexstar and Media General, Inc. announced a
definitive agreement whereby Nexstar will acquire all outstanding
shares of Media General for $10.55 per share in cash and 0.1249 of
a share of Nexstar Class A common stock for each Media General
share. The agreement includes potential additional consideration in
the form of a contingent value right ("CVR") entitling Media
General shareholders to net cash proceeds as received from the sale
of Media General's spectrum in the Federal Communication
Commission’s upcoming Incentive Auction, reduced to account for the
indirect benefit former Media General shareholders will receive as
shareholders in the combined company from (i) the net proceeds from
the disposition of Nexstar’s spectrum in the Incentive Auction and
(ii) the net proceeds from the disposition of Media General’s
spectrum in the Incentive Auction.
The transaction will enable Nexstar and Media General
shareholders to participate in the near- and long-term upside of a
pure-play broadcasting company with expanded audience reach, a more
diversified portfolio, and a significantly stronger financial
profile, including substantial free cash flow per share, led by a
proven broadcast and digital media management team.
The transaction, expected to close late in the third
quarter/early in the fourth quarter of 2016, has been unanimously
approved by the boards of directors of both companies and is
subject to a vote by stockholders of Media General and Nexstar, FCC
approval and other regulatory approvals (including expiration of
the applicable Hart-Scott-Rodino waiting period) and other
customary closing conditions. The merger is not subject to any
financing condition and Nexstar has received committed financing
totaling $4.7 billion from BofA Merrill Lynch, Credit Suisse and
Deutsche Bank to provide the debt financing to consummate the
merger and the refinancing of certain of the existing indebtedness
of Nexstar, Media General and certain of their variable interest
entities (with such amount to be reduced by proceeds from asset
sales required by FCC).
BofA Merrill Lynch is acting as financial advisor and Kirkland
& Ellis LLP is acting as legal counsel to Nexstar in connection
with the proposed transaction.
Fourth 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 719/457-2552, conference ID 1666314 (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), (gain) loss on
asset disposal and non-cash representation contract termination
fee, 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), (gain) loss on asset disposal, non-cash
compensation expense and non-cash representation contract
termination fee, less payments for broadcast rights, cash interest
expense, capital expenditures and net operating 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 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 104 full power television
stations reaching 62 markets or approximately 18.1% of all U.S.
television households. Nexstar’s portfolio includes primary
affiliates of NBC, CBS, ABC, FOX, MyNetworkTV and The CW. 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.
Pro-forma for the completion of all announced transactions
Nexstar will own, operate, program or provide sales and other
services to 171 television stations and their related low power and
digital multicast signals reaching 100 markets or approximately 39%
of all U.S. television households. For more information please
visit www.nexstar.tv.
Additional Information
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities. In connection with
the Agreement and Plan of Merger, by and between Nexstar
Broadcasting Group, Inc. (“Nexstar”), Media General, Inc. (“Media
General”) and Neptune Merger Sub, Inc. (“Merger Sub”), Nexstar and
Media General intend to file relevant materials with the U.S.
Securities and Exchange Commission (“SEC”), including a
Registration Statement on Form S-4 to be filed by Nexstar that will
contain a joint proxy statement/prospectus. INVESTORS AND SECURITY
HOLDERS OF NEXSTAR AND MEDIA GENERAL ARE URGED TO READ THE
REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS AND OTHER
DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY
BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION. Investors and security holders will be
able to obtain free copies of these documents (when available) and
other documents filed with the SEC by Nexstar or Media General
through the web site maintained by the SEC at http://www.sec.gov.
In addition, the joint proxy statement/prospectus (when finalized)
will be mailed to stockholders of Nexstar and Media General.
Certain Information Regarding Participants
Nexstar and Media General and their respective directors and
executive officers may be deemed to be participants in any
solicitation with respect to the proposed transaction under the
rules of the SEC. Security holders may obtain information regarding
the names and interests of Nexstar’s directors and executive
officers in Nexstar’s Annual Report on Form 10-K for the year ended
December 31, 2014, which was filed with the SEC on March 2, 2015,
and Nexstar’s proxy statement for the 2015 Annual Meeting of
Stockholders, which was filed with the SEC on April 24, 2015.
Information about Media General’s directors and executive officers
is available in Media General’s definitive proxy statement, dated
March 13, 2015, for its 2015 annual meeting of shareholders. These
documents can be obtained free of charge from the web site
indicated above. Additional information regarding the participants
and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the Form S-4
and the joint proxy statement/prospectus that Nexstar will file
with the SEC when it becomes available.
Forward-Looking Statements
This communication 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, Nexstar 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 communication,
concerning, among other things, the ultimate outcome and benefits
of any possible transaction between Nexstar and Media General and
timing thereof, and future financial performance, including 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 timing to consummate the proposed
transaction; the risk that a condition to closing of the proposed
transaction may not be satisfied and the transaction may not close;
the risk that a regulatory approval that may be required for the
proposed transaction is delayed, is not obtained or is obtained
subject to conditions that are not anticipated, the impact of
changes in national and regional economies, the ability to service
and refinance our outstanding debt, successful integration of Media
General (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, volatility in programming costs, the effects of
governmental regulation of broadcasting, industry consolidation,
technological developments and major world news events. Unless
required by law, Nexstar undertakes 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 communication 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 Media General’s and Nexstar’s
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 EndedDecember
31,
Twelve Months EndedDecember
31,
2015 2014 2015 2014 Net
revenue $ 252,262 $ 192,804 $ 896,377 $ 631,311 Operating
expenses: Corporate expenses 11,591 8,889 44,856 35,174 Direct
operating expenses, net of trade 79,674 48,960 293,288 178,781
Selling, general and administrative
expenses,excluding corporate
50,617 38,052 187,624 140,255 Trade and barter expense 12,378 8,874
46,651 31,333 Depreciation 11,972 9,247 47,222 35,047 Amortization
of intangible assets 12,827 7,153 48,475 25,850 Amortization of
broadcast rights, excluding barter 5,857 2,730
22,154 11,634 Total operating expenses 184,916
123,905 690,270 458,074 Income from operations 67,346
68,899 206,107 173,237 Interest expense, net (20,440 )
(15,920 ) (80,520 ) (61,959 ) Other expenses (134 )
(129 ) (517 ) (627 ) Income before income taxes
46,772 52,850 125,070 110,651 Income tax expense (19,356 )
(22,001 ) (48,687 ) (46,101 ) Net income
27,416 30,849 76,383 64,550 Net (income) loss attributable to
noncontrolling interests (242 ) - 1,301
- Net income attributable to Nexstar $ 27,174 $ 30,849 $ 77,684 $
64,550
Basic net income per common share
attributable toNexstar
$ 0.89 $ 1.00 $ 2.50 $ 2.10
Basic weighted average number of common
sharesoutstanding
30,622 30,962 31,100 30,774
Diluted net income per common share
attributable toNexstar
$ 0.86 $ 0.96 $ 2.42 $ 2.02
Diluted weighted average number of common
sharesoutstanding
31,580 32,102 32,091 32,003
Nexstar Broadcasting Group,
Inc.
Reconciliation of Broadcast Cash Flow
and Adjusted EBITDA (Non-GAAP Measures)
UNAUDITED
(in thousands)
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
Broadcast Cash Flow and Adjusted EBITDA: 2015
2014 2015 2014 Income from
operations $ 67,346 $ 68,899 $ 206,107 $ 173,237 Add:
Depreciation 11,972 9,247 47,222 35,047 Amortization of intangible
assets 12,827 7,153 48,475 25,850 Amortization of broadcast rights,
excluding barter 5,857 2,730 22,154 11,634 Loss on asset disposal,
net 1,187 499 2,109 638 Corporate expenses 11,591 8,889 44,856
35,174 Non-cash representation contract termination fee - - 1,516
353 Less: Payments for broadcast rights 6,193
2,917 22,473 12,025 Broadcast cash flow
104,587 94,500 349,966 269,908 Margin % 41.5 % 49.0 % 39.0 % 42.8 %
Less: Corporate expenses 11,591 8,889
44,856 35,174 Adjusted EBITDA $ 92,996 $ 85,611 $
305,110 $ 234,734 Margin % 36.9 % 44.4 % 34.0 % 37.2 %
Nexstar Broadcasting Group,
Inc.
Reconciliation of Free Cash Flow
(Non-GAAP Measure)
UNAUDITED
(in thousands)
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
Free Cash Flow: 2015 2014
2015 2014 Income from operations
$ 67,346 $ 68,899 $ 206,107 $ 173,237 Add: Depreciation
11,972 9,247 47,222 35,047 Amortization of intangible assets 12,827
7,153 48,475 25,850 Amortization of broadcast rights, excluding
barter 5,857 2,730 22,154 11,634 Loss on asset disposal, net 1,187
499 2,109 638 Non-cash compensation expense 2,885 2,114 11,400
7,598 Non-cash representation contract termination fee - - 1,516
353 Less: Payments for broadcast rights 6,193 2,917 22,473
12,025 Cash interest expense 19,444 15,161 76,768 59,167 Capital
expenditures 6,321 6,478 25,397 20,300 Operating cash income taxes,
net of refunds(1) 1,137 855 6,101 3,131
Free cash flow $ 68,979 $ 65,231 $ 208,244 $ 159,734 (1)
Excludes the payment of $23.0 million in taxes during 2015
related to tax liabilities assumed in or resulting from various
station acquisitions and sales.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160225005302/en/
Nexstar Broadcasting Group, Inc.Thomas E. Carter,
972-373-8800Chief Financial OfficerorJCIRJoseph Jaffoni, Jennifer
Neuman, 212-835-8500nxst@jcir.com
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