Net Revenue Growth Drives 1Q Operating
Income of $57.9 Million up 52.8%, BCF of $98.1 Million up 29.5%,
Adjusted EBITDA of $82.3 Million up 28.4%, and Free Cash Flow of
$52.1 Million up 21.3%
Nexstar Broadcasting Group, Inc. (NASDAQ: NXST) (“Nexstar” or
“the Company”) today reported record financial results for the
first quarter ended March 31, 2016 as summarized below.
Summary 2016 First Quarter
Highlights
Three Months Ended March 31,
($ in thousands)
2016 2015
Change
Local Revenue $ 93,767 $ 84,524 +10.9 % National Revenue $ 35,450 $
35,578 (0.4 )%
Core Revenue $ 129,217 $
120,102 +7.6 % Political Revenue $ 11,754 $ 360
+3165.0 % Retransmission Fee Revenue $ 97,313 $ 66,564 +46.2 %
Digital Revenue $ 22,533 $ 19,312 +16.7 % Other $ 1,605 $ 1,201
+33.6 % Trade and Barter Revenue $ 11,417 $ 11,393 +0.2 %
Gross
Revenue $ 273,839 $ 218,932 +25.1 %
Less: Agency Commissions $ 18,181 $ 17,197 +5.7 %
Net
Revenue $ 255,658 $ 201,735 +26.7 %
Gross Revenue Excluding Political $
262,085 $ 218,572 +19.9 %
Income
from Operations $ 57,929 $ 37,904
+52.8 %
Broadcast Cash Flow(1) $
98,063 $ 75,728 +29.5 %
Broadcast Cash Flow
Margin(2) 38.4 % 37.5 %
Adjusted EBITDA(1) $ 82,252
$ 64,045 +28.4 %
Adjusted EBITDA
Margin(2) 32.2 % 31.7 %
Free Cash Flow(1) $ 52,120
$ 42,953 +21.3 %
___________
(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
operating and financial momentum continues in 2016 as we exceeded
consensus estimates with record first quarter net revenue, BCF,
adjusted EBITDA and free cash flow. The 26.7% rise in first quarter
net revenue was attributable to advertising strength in key
categories complemented by our ability to monetize the Super Bowl
through coordinated multi-platform revenue initiatives; political
advertising spending which exceeded our expectations; continued
robust retransmission fee growth; and, another quarter of double
digit digital media growth. Overall, we believe our record first
quarter results continue to highlight the value of our long-term
strategy to transform our traditional television operating model
into a diversified media entity with high margin revenue streams
while building scale through accretive acquisitions.
“With solid core advertising trends; upcoming special event
programming including the Rio 2016 summer Olympics; the cyclical
return of significant political spending; our expanded digital
media operations; and, visible retransmission revenue growth,
Nexstar is on track to generate record free cash flow throughout
2016 and our fifth consecutive year of record financial results. As
such we remain confident in our pro-forma 2016/2017 free cash flow
projection for 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 on a stand-alone basis.
“In addition to the record first quarter operating results, we
are making continued progress towards the completion later this
year of our acquisition of Media General, including regulatory and
SEC filings, financing-related rating agency meetings and reviews,
station divestiture marketing and post-acquisition integration,
facilities and personnel planning. The new Nexstar Media Group will
increase our legacy 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 transaction
is expected to more than double our revenue and adjusted EBITDA and
will be immediately accretive upon closing. Using what are
currently conservative expectations for the cost of financing the
transaction and identified year one synergies of $76 million,
Nexstar Media Group will generate over $500 million of average
annual free cash flow with annual free cash flow per share expected
to approximate $11.15 per year over the 2016/2017 period on a pro
forma basis. We intend to initially allocate free cash flow to
leverage reduction and expect covenant leverage to approximate 4.5x
by year end 2016, assuming no net proceeds from the incentive
auction.
“First quarter core ad revenue rose 7.6%, inclusive of 10.9%
first quarter growth in local spot revenue and we saw growth in
five of our top six, and six of our top ten ad categories, as well
as a 12.7% year-over-year increase in new business development.
Nexstar’s gross revenue growth in the first quarter excluding
political was a robust 19.9% while first quarter political revenue
rose to nearly $12 million marking a nearly three-fold rise over
first quarter 2014 levels during the last political cycle. Strong
gains in our core television operations were complemented by
continued significant growth in first quarter retransmission fee
revenue which rose 19.1% on a quarterly sequential basis and 46.2%
year-over-year to $97.3 million, which marks a record level of
quarterly revenue from this source.
“With the renewal of retransmission consent agreements
representing approximately 45.0% of our subscriber base in 2015 we
project highly visible and significant revenue growth from this
source throughout the year. Digital revenue growth was driven by
organic growth in our markets and contributions from LAKANA, our
digital media services company. In total, retransmission fee and
digital revenue grew 39.6% year-over-year to $119.8 million and
accounted for 46.9% of 2016 first quarter net revenue. By
comparison, and reflecting our continued progress in building our
non-core revenue pillars, total first quarter 2015 retransmission
fee and digital revenue comprised 42.6% of net revenue and 30.9% of
net revenue in the 2014 first quarter.
“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 core revenues
and the operation of 20 additional stations acquired in 2015. The
$4.1 million increase in corporate expense reflects increased
staffing and infrastructure to manage and operate the additional
stations but was higher than our expectations due to approximately
$4.3 million in non-recurring expenses associated with professional
fees related to the Media General transaction. Even with these
one-time expenses, first quarter adjusted EBITDA grew 28.4% while
free cash flow was up 21.3% over the prior year and rose over 106%
from first quarter 2014 levels when we last had a significant level
of political advertising.
“This June will mark Nexstar’s 20 year anniversary. Over the
last two decades the Company has been built through a disciplined
approach to acquisitions, a focus on enhancing the operating
results of acquired stations and digital media properties, and an
overarching commitment to localism. Consumers’ brand awareness and
purchasing decisions are every bit as strong, if not stronger,
locally, where businesses operate and transactions take place.
Local diversified media companies like Nexstar are highly
competitive in today’s multi-platform world because we provide
superior local content that is unique and relevant to each of the
local communities we serve across the United States while offering
local businesses, advertisers and brands unparalleled 24/7
marketing opportunities across all screens and devices.
“With significant and growing free cash flow and the expected
closing later this year of the Media General transaction, 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. As we continue to benefit from what are expected to be
record levels of political advertising in 2016, the ongoing 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.”
The consolidated total debt of Nexstar, its wholly owned
subsidiaries, Mission Broadcasting, Inc. and Marshall Broadcasting
Group, Inc. (collectively, the “Company”) at March 31, 2016, was
$1,514.2 million including senior secured debt of $721.9 million.
The Company’s total net leverage ratio at March 31, 2016 was 4.22x
compared to a total permitted leverage covenant of 6.75x. The
Company’s first lien net leverage ratio at March 31, 2016 was 2.00x
compared to the covenant maximum of 4.00x.
The table below summarizes the Company’s debt obligations:
($ in millions)
3/31/2016
12/31/2015 Revolving Credit Facilities $ 44.0 $ 2.0 First
Lien Term Loans $ 677.9 $ 682.2 6.875% Senior Unsecured Notes $
520.0 $ 519.8 6.125% Senior Unsecured Notes $ 272.3 $ 272.2
Total Debt $ 1,514.2 $ 1,476.2
Cash on Hand $
12.8 $ 43.4
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 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.
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 719/325-4891, conference ID 8790611 (domestic
and international callers). In addition, a live audio webcast of
the call will be accessible to the public on Nexstar’s web site,
http://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, non-cash representation contract termination fee
and loss on change in the fair value of contingent consideration,
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, non-cash representation contract termination
fee and loss on change in the fair value of contingent
consideration, 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 54 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, or a solicitation
of any vote or approval. 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 filed a Registration
Statement on Form S-4 with the U.S. Securities and Exchange
Commission (“SEC”) on March 22, 2016 that contains a joint proxy
statement/prospectus, as amended by Amendment No. 1 to Nexstar’s
Registration Statement on Form S-4/A, which was filed with the SEC
on April 27, 2016. These materials are not yet final and may be
amended. The Registration Statement on Form S-4 has not yet become
effective. Nexstar and Media General also plan to file other
documents with the SEC regarding the proposed transaction.
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 the Registration Statement on Form S-4, including the joint
proxy statement/prospectus, and any 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, 2015, which was filed with the SEC on February 29,
2016, as amended on April 29, 2016. Information about Media
General’s directors and executive officers is available in Media
General’s Annual Report on Form 10-K for the year ended December
31, 2015, which was filed with the SEC on February 29, 2016, as
amended on April 29, 2016. 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, is contained
in the Registration Statement on Form S-4 and the preliminary joint
proxy statement/prospectus filed by Nexstar with the SEC on March
22, 2016, as amended by Amendment No. 1 to Nexstar’s Registration
Statement on Form S-4/A, which was filed with the SEC on April 27,
2016.
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 and Media
General claim 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 a 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. Nexstar and
Media General 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
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 SEC. 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 Ended March 31,
2016 2015 Net revenue $ 255,658 $ 201,735
Operating expenses: Corporate expenses 15,811 11,683 Direct
operating expenses, net of trade 87,946 66,150 Selling, general and
administrative expenses, excluding corporate 52,354 45,606 Trade
and barter expense 11,344 11,298 Depreciation 12,558 10,872
Amortization of intangible assets 12,079 13,060 Amortization of
broadcast rights, excluding barter 5,637 5,162 Total
operating expenses 197,729 163,831 Income from
operations 57,929 37,904 Interest expense, net (20,654 )
(19,293 ) Other expenses (136 ) (118 ) Income before
income taxes 37,139 18,493 Income tax expense (14,865 )
(6,581 ) Net income 22,274 11,912 Net (income) loss
attributable to noncontrolling interests (547 ) 995
Net income attributable to Nexstar $ 21,727 $ 12,907 Basic
net income per common share attributable to Nexstar $ 0.71 $ 0.41
Basic weighted average number of common shares outstanding 30,658
31,196 Diluted net income per common share attributable to
Nexstar $ 0.69 $ 0.40 Diluted weighted average number of common
shares outstanding 31,538 32,256
Nexstar Broadcasting Group,
Inc.Reconciliation of Broadcast Cash Flow and Adjusted
EBITDA (Non-GAAP Measures)UNAUDITED(in thousands)
Three Months Ended March 31, Broadcast Cash
Flow and Adjusted EBITDA: 2016 2015
Income from operations $ 57,929 $ 37,904 Add: Depreciation
12,558 10,872 Amortization of intangible assets 12,079 13,060
Amortization of broadcast rights, excluding barter 5,637 5,162
(Gain) loss on asset disposal, net (97 ) 802 Corporate expenses
15,811 11,683 Non-cash representation contract termination fee -
1,516 Loss on change in the fair value of contingent consideration
404 - Less: Payments for broadcast rights 6,258
5,271 Broadcast cash flow 98,063 75,728 Margin % 38.4
% 37.5 % Less: Corporate expenses 15,811
11,683 Adjusted EBITDA $ 82,252 $ 64,045 Margin % 32.2 %
31.7 %
Nexstar Broadcasting Group,
Inc.Reconciliation of Free Cash Flow (Non-GAAP
Measure)UNAUDITED(in thousands)
Three Months Ended March 31,
Free Cash Flow: 2016 2015 Income
from operations $ 57,929 $ 37,904 Add: Depreciation 12,558
10,872 Amortization of intangible assets 12,079 13,060 Amortization
of broadcast rights, excluding barter 5,637 5,162 (Gain) loss on
asset disposal, net (97 ) 802 Non-cash compensation expense 3,134
2,858 Non-cash representation contract termination fee - 1,516 Loss
on change in the fair value of contingent consideration 404 -
Less: Payments for broadcast rights 6,258 5,271 Cash
interest expense 19,707 18,408 Capital expenditures 7,581 5,524
Operating cash income taxes, net of refunds 5,978 18
Free cash flow $ 52,120 $ 42,953
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160503005632/en/
Nexstar Broadcasting Group, Inc.Thomas E. Carter,
972-373-8800Chief Financial OfficerorJCIRJoseph Jaffoni, Jennifer
Neuman212-835-8500nxst@jcir.com
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