Net Revenue Growth Drives Record 3Q
Operating Income of $72.9 Million, BCF of $109.9 Million, Adjusted
EBITDA of $98.2 Million and Free Cash Flow of $58.5 Million
Nexstar Broadcasting Group, Inc. (NASDAQ: NXST) (“Nexstar” or
“the Company”) today reported record financial results for the
third quarter ended September 30, 2016 as summarized below.
Summary 2016 Third Quarter
Highlights
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
($ in thousands)
2016 2015
Change 2016 2015 Change
Local Revenue $ 94,878 $ 88,018 +7.8% $ 286,253 $ 266,533 +7.4%
National Revenue $ 36,522 $ 37,899 (3.6)% $ 107,849 $ 112,270
(3.9)%
Core Revenue $ 131,400 $
125,917 +4.4%
$ 394,102 $
378,803 +4.0% Political Revenue $ 25,500 $ 2,563
+894.9% $ 48,511 $ 4,829 +904.6% Retransmission Fee Revenue $
98,267 $ 80,045 +22.8% $ 293,717 $ 216,328 +35.8% Digital Revenue $
28,621 $ 20,127 +42.2% $ 76,011 $ 60,619 +25.4% Other $ 1,480 $
1,406 +5.3% $ 4,540 $ 3,986 +13.9% Trade and Barter Revenue $
11,595 $ 11,537 +0.5% $ 34,756 $ 34,715 +0.1%
Gross Revenue
$ 296,863 $ 241,595 +22.9%
$
851,637 $ 699,280 +21.8% Less: Agency
Commission $ 21,204 $ 18,564 +14.2% $ 58,326 $ 55,165 +5.7%
Net
Revenue $ 275,659 $ 223,031 +23.6%
$ 793,311 $ 644,115 +23.2%
Gross Revenue Excluding Political $ 271,363
$ 239,032 +13.5%
$ 803,126 $
694,451 +15.6%
Income from Operations $
72,897 $ 48,315 +50.9%
$ 194,833
$ 138,761 +40.4%
Broadcast Cash
Flow(1) $ 109,949 $ 84,290
+30.4%
$ 311,259 $ 245,379 +26.8%
Broadcast Cash Flow Margin(2) 39.9 %
37.8 % 39.2 % 38.1 %
Adjusted EBITDA(1) $ 98,236
$ 73,182 +34.2%
$ 270,708 $
212,114 +27.6%
Adjusted EBITDA Margin(2)
35.6 % 32.8 % 34.1 %
32.9 % Free Cash Flow(1)
$ 58,539 $ 46,243 +26.6%
$
159,387 $ 139,265 +14.4%
_______________
(1) Definitions and disclosures regarding non-GAAP financial
information including reconciliations are included at the end of
the press release. (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 were highlighted by solid core
revenue growth, our ability to maximize the Olympic and political
revenue opportunities, growing retransmission consent revenues,
impressive digital growth and the ongoing benefits of our
results-focused operating disciplines. These factors drove record
third quarter net revenue, which led to record third quarter
operating income, BCF, adjusted EBITDA and free cash flow, and we
brought about 21% of every net revenue dollar to the free cash flow
line. Reflecting the benefits of scale and the strong operating
leverage in our business model, Nexstar’s 23.6% rise in third
quarter net revenue resulted in 30.4% growth in third quarter BCF,
a 34.2% increase in adjusted EBITDA and a 26.6% rise in free cash
flow.
“We are optimistic as we look toward the completion of 2016
based on the fact that in the fourth quarter to date we’ve exceeded
our guidance of $100 million in full year political revenue while
simultaneously driving low single digit core revenue growth and
continued double digit growth from our retransmission and digital
revenue streams. As a result, we remain confident in our guidance
for Nexstar to generate record free cash flow in 2016, and on a
stand-alone basis, the company is well on pace to achieve our
guidance for annual average 2016/2017 free cash flow of $250
million – or average pro-forma free cash flow of $8.15 per share
per year.
“We are looking forward to the upcoming completion of the
acquisition of Media General and during the third quarter we priced
our $2.75 billion term loan B facility, which when combined with
the $900 million of senior notes issued earlier in the third
quarter, comprise all of the primary financing to complete the
transaction. Given that the cost of financing was below original
estimates, interest expense for the combined entity will be
approximately $60 million lower annually than the assumptions used
in establishing the combined entity’s initial pro forma guidance
for 2016/2017. On a tax adjusted basis the lower interest expense
will result in approximately $40 million of additional pro forma
annual free cash flow which increases our projected average annual
free cash flow for the new Nexstar Media Group (“NMG”) in the
2016/2017 cycle to over $540 million. The Company’s increased free
cash flow expectations assumes no changes in our clearly defined
year one synergies of $76 million which we believe we can build on
once we begin operating the combined entity and also assumes no net
proceeds from the incentive auction. Following the completion of
the acquisition, Nexstar Media Group will deliver free cash flow to
our shareholders that is over 45% higher than Nexstar’s record
stand-alone average pro-forma free cash flow per share per year of
$8.15 based on NMG’s approximately 47 million shares
outstanding.
“Nexstar’s third quarter core local and national television ad
revenue rose 4.4%, which we believe to be among the best in the
industry, as despite the allocation of inventory to political
advertisers we generated flat or increased television ad revenue in
four of our top six categories, including auto. In addition,
Nexstar’s television ad revenue inclusive of political advertising
grew 22.1% as our spot inventory management and pricing strategies
enabled us to deliver a nearly 10-fold increase in year-over-year
political revenue. Reflecting our expanded platform and presence in
states with high levels of down ballot political spending activity,
2016 third quarter political revenue rose by a robust 40.3% over
comparable 2014 third quarter levels and as noted, our 2016 fourth
quarter results will include over $50 million of political revenue
contributions, marking an end to a different but very successful
year for Nexstar on this front.
“Notwithstanding the strong political ad spending in our
markets, Nexstar’s gross third quarter revenue excluding political
grew an impressive 13.5% inclusive of the 22.8% rise in
retransmission fee revenue to $98.3 million and 42.2% increase in
digital revenue to $28.6 million. Ongoing renewals of
retransmission consent agreements combined with the growth of our
digital publishing platform resulted in a 26.7% year-over-year
increase in total third quarter retransmission fee and digital
revenue to $126.9 million. These higher margin revenue streams
increasingly diversify our revenue while complementing our core
television operations and accounted for 46.0% of 2016 third quarter
net revenue, up from 34.0% in the 2014 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 direct operating expenses (net of trade
expense) and SG&A primarily reflects higher variable costs
related to the higher television advertising 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 fully integrating acquired stations, extracting
synergies and enhancing operating results while improving service
to viewers and advertisers, Nexstar looks forward to completing the
highly accretive acquisition of Media General. Other than FCC
approval and certain other customary closing matters, Nexstar and
Media General have completed all of the steps and satisfied all of
the merger agreement conditions necessary to finalize the planned
transaction including securing Department of Justice and
Hart-Scott-Rodino approval, entering into agreements to divest
stations to achieve ownership and other regulatory compliance
approvals (with the result being an expansion of station ownership
in the US by minority operators upon closing), securing approvals
from each company’s respective shareholders and putting in place
substantially all of the necessary financing. During the third
quarter, Nexstar filed a supplement to its waiver request with the
FCC requesting prompt approval of its acquisition of Media General,
so that upon closing of the acquisition, Nexstar may continue its
initiatives across the combined entity, providing superior, unique
local content and services to viewers and businesses in each of the
communities it serves. If the FCC determines that it is in the
public interest to grant our waiver request, we would await the
completion of the FCC’s internal processing before the final
consent could be issued, though at present there are no assurances
from the FCC about when they might make a determination on the
waiver or issue the consent.
“Looking ahead, with distribution agreements representing
approximately 85% of Nexstar’s MVPD subscribers renewed in 2015 and
by 2016 year-end, we project visible ongoing revenue growth from
this source in 2017 and beyond. Similarly, Nexstar’s digital
revenue growth in the 2016 fourth quarter remains strong and we are
excited by the complementary nature of the combined Nexstar and
Media General digital operations, which we intend to aggressively
manage to profitability. With significant and growing free cash
flow and the upcoming closing of the Media General transaction,
Nexstar is positioned with the financial capacity and flexibility
to reduce leverage while returning capital to shareholders. We have
excellent visibility to delivering on or exceeding our free cash
flow targets in the current cycle and a clear path for the
continued near- and long-term enhancement of shareholder value
through the Media General transaction.”
The consolidated debt of Nexstar, its wholly owned subsidiaries,
Mission Broadcasting, Inc. and Marshall Broadcasting Group, Inc.
(collectively, the “Company”) at September 30, 2016, was $2,348.2
million including senior secured debt of $670.7 million. The
Company’s total net leverage ratio at September 30, 2016 was 3.74x
compared to a total permitted leverage covenant of 6.75x. The
Company’s first lien net leverage ratio at September 30, 2016 was
1.68x compared to the covenant maximum of 4.00x.
The table below summarizes the Company’s debt obligations:
($ in millions)
9/30/2016
12/31/2015 Revolving Credit Facilities $ 2.0 $ 2.0
First Lien Term Loans $ 668.7 $ 682.2 6.875% Senior Unsecured Notes
$ 520.5 $ 519.8 6.125% Senior Unsecured Notes $ 272.5 $ 272.2
5.625% Senior Unsecured Notes $ 884.5 $ -
Total Debt $
2,348.2 $ 1,476.2
Cash on Hand $ 29.3 $ 43.4
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 719/457-2631, conference ID 1969329 (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 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 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 television stations and
200 related digital multicast signals 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 nearly 39% of all
U.S. television households. For more information please visit
www.nexstar.tv.
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 the definitive joint proxy
statement/prospectus of Nexstar and Media General and Media
General’s and Nexstar’s other filings with the SEC.
Nexstar Broadcasting Group,
Inc.
Condensed Consolidated Statements of
Operations
(in thousands, except per share amounts,
unaudited)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2016 2015 2016
2015 Net revenue $ 275,659 $ 223,031 $ 793,311 $ 644,115
Operating expenses: Corporate expenses 11,713 11,108 40,551
33,265 Direct operating expenses, net of trade 98,168 76,589
276,139 213,614 Selling, general and administrative expenses,
excluding corporate 51,889 45,318 156,988 137,007 Trade and barter
expense 11,392 11,334 34,648 34,273 Depreciation 12,877 13,076
38,174 35,250 Amortization of intangible assets 11,505 11,351
34,903 35,648 Amortization of broadcast rights, excluding barter
5,218 5,940 17,075 16,297 Total
operating expenses 202,762 174,716 598,478
505,354 Income from operations 72,897 48,315 194,833 138,761
Interest expense, net (29,622) (20,396) (70,853) (60,080)
Other expenses (126) (115) (409) (383)
Income before income taxes 43,149 27,804 123,571 78,298 Income tax
expense (17,533) (10,649) (50,882)
(29,331) Net income 25,616 17,155 72,689 48,967 Net (income) loss
attributable to noncontrolling interests (817) 127
(1,634) 1,543 Net income attributable to Nexstar $
24,799 $ 17,282 $ 71,055 $ 50,510 Basic net income per
common share attributable to Nexstar $ 0.81 $ 0.55 $ 2.32 $ 1.62
Basic weighted average number of common shares outstanding 30,695
31,262 30,678 31,261 Diluted net income per common share
attributable to Nexstar $ 0.78 $ 0.54 $ 2.25 $ 1.57 Diluted
weighted average number of common shares outstanding 31,698 32,151
31,619 32,263
Nexstar Broadcasting Group, Inc.
Reconciliation of Broadcast Cash Flow and Adjusted EBITDA
(Non-GAAP Measures) UNAUDITED
(in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
Broadcast Cash Flow and Adjusted EBITDA: 2016
2015 2016 2015
Income from operations $ 72,897 $ 48,315 $ 194,833 $ 138,761
Add: Depreciation 12,877 13,076 38,174 35,250 Amortization of
intangible assets 11,505 11,351 34,903 35,648 Amortization of
broadcast rights, excluding barter 5,218 5,940 17,075 16,297 (Gain)
loss on asset disposal, net (249) (5) (518) 922 Corporate expenses
11,713 11,108 40,551 33,265 Non-cash representation contract
termination fee - - - 1,516 Change in the fair value of contingent
consideration 1,392 - 3,483 - Less: Payments for broadcast
rights 5,404 5,495 17,242 16,280
Broadcast cash flow 109,949 84,290 311,259 245,379 Margin % 39.9%
37.8% 39.2% 38.1% Less: Corporate expenses 11,713
11,108 40,551 33,265 Adjusted EBITDA $
98,236 $ 73,182 $ 270,708 $ 212,114 Margin % 35.6% 32.8% 34.1%
32.9%
Nexstar Broadcasting Group,
Inc.
Reconciliation of Free Cash Flow
(Non-GAAP Measure)
UNAUDITED
(in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
Free Cash Flow: 2016 2015
2016 2015 Income from operations
$ 72,897 $ 48,315 $ 194,833 $ 138,761 Add: Depreciation
12,877 13,076 38,174 35,250 Amortization of intangible assets
11,505 11,351 34,903 35,648 Amortization of broadcast rights,
excluding barter 5,218 5,940 17,075 16,297 (Gain) loss on asset
disposal, net (249) (5) (518) 922 Non-cash compensation expense
2,913 2,853 9,002 8,515 Non-cash representation contract
termination fee - - - 1,516 Change in the fair value of contingent
consideration 1,392 - 3,483 - Less: Payments for broadcast
rights 5,404 5,495 17,242 16,280 Cash interest expense 28,530
19,456 67,861 57,324 Capital expenditures 10,357 7,842 25,057
19,076 Operating cash income taxes, net of refunds(1) 3,723
2,494 27,405 4,964 Free cash flow $
58,539 $ 46,243 $ 159,387 $ 139,265 (1) Exclude
payments totaling $18.5 million in taxes during the nine months
ended September 30, 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/20161108005269/en/
Nexstar Broadcasting Group, Inc.Thomas E. Carter,
972-373-8800Chief Financial OfficerorJCIRJoseph Jaffoni, Jennifer
Neuman212-835-8500nxst@jcir.com
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