Net Revenue Growth Drives Record 3Q
Operating Income of $129.1 Million and Net Income of $42.1
Million
Record BCF of $211.5 Million, Adjusted
EBITDA of $191.6 Million and Free Cash Flow of $119.6 Million,
Inclusive of One-Time Transaction Expenses
Repurchases 0.7 Million Shares During Third
Quarter
Nexstar Media Group, Inc. (NASDAQ: NXST) (“Nexstar” or “the
Company”) today reported record financial results for the third
quarter ended September 30, 2017 as summarized below.
Summary 2017 Third Quarter
Highlights
Three Months Ended
Nine Months Ended September 30,
September 30, ($ in thousands)
2017
2016 Change 2017 2016
Change Local Revenue $ 224,026 $ 94,878 +136.1 % $ 664,436
$ 286,253 +132.1 % National Revenue $ 89,568 $ 36,522 +145.2
% $ 258,342 $ 107,849 +139.5 %
Core Advertising Revenue
$ 313,594 $ 131,400 +138.7 %
$
922,778 $ 394,102 +134.1 % Political
Revenue $ 8,425 $ 25,500 (67.0 )% $ 16,876 $ 48,511 (65.2 )%
Retransmission Fee Revenue $ 257,517 $ 98,267 +162.1 % $ 742,511 $
293,717 +152.8 % Digital Revenue $ 56,180 $ 28,621 +96.3 % $
166,868 $ 76,011 +119.5 % Other $ 4,334 $ 1,480 +192.8 % $ 13,067 $
4,540 +187.8 % Trade and Barter Revenue $ 13,901 $ 11,595 +19.9 % $
39,704 $ 34,756 +14.2 %
Gross Revenue $
653,951 $ 296,863 +120.3 %
$
1,901,804 $ 851,637 +123.3 % Less: Agency
Commission $ 42,081 $ 21,204 +98.5 % $ 123,502 $ 58,326 +111.7 %
Net Revenue $ 611,870 $ 275,659
+122.0 %
$ 1,778,302 $ 793,311 +124.2 %
Gross Revenue Excluding Political $
645,526 $ 271,363 +137.9 %
$
1,884,928 $ 803,126 +134.7 %
Income
from Operations $ 129,072 $ 72,897
+77.1 %
$ 377,908 $ 194,833 +94.0 %
Net income $ 42,072 $
25,616 +64.2 %
$ 95,471 $ 72,689
+31.3 %
Broadcast Cash Flow(1)
$
211,532 $ 109,949 +92.4 %
$
626,681 $ 311,259 +101.3 %
Broadcast Cash
Flow Margin(2)
34.6 % 39.9 %
35.2 % 39.2 % Adjusted EBITDA
Before One-Time Transaction Expenses(1)
$ 194,431
$ 99,167 +96.1 %
$ 574,461 $
278,254 +106.5 %
Adjusted EBITDA(1)
$
191,623 $ 98,236 +95.1 %
$
517,615 $ 270,708 +91.2 %
Adjusted EBITDA
Margin(2)
31.3 % 35.6 % 29.1
% 34.1 % Free Cash Flow Before
One-Time Transaction Expenses(1)
$ 122,448
$ 59,470 +105.9 %
$ 370,442 $
166,933 +121.9 %
Free Cash Flow(1)
$
119,640 $ 58,539 +104.4 %
$
313,596 $ 159,387 +96.8 %
______________________ (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.
On January 17, 2017, Nexstar completed its acquisition of Media
General, Inc. and also closed on the divestitures of 13 television
stations. All actual results presented herein reflect the impact of
previously disclosed one-time merger and acquisition expenses of
$2.8 million and $56.8 million incurred in the three and nine
months ended September 30, 2017, respectively. The actual results
presented herein for the three months ended September 30, 2017
reflect the Company’s legacy Nexstar broadcasting and digital
operations (net of the six Nexstar station divestitures) and
results from the Media General stations (net of the seven Media
General station divestitures) and digital assets. The comparable
three month period ended September 30, 2016 reflects the Company’s
legacy Nexstar broadcasting and digital operations inclusive of the
six Nexstar stations which were divested simultaneous with the
closing of the Media General transaction.
CEO Comment
Perry A. Sook, Chairman, President and Chief Executive Officer
of Nexstar Media Group, Inc. commented, “Nexstar again generated
record quarterly results and exceeded consensus expectations as our
expanded scale and the ongoing diversification of our revenue
streams, combined with operating and cost management disciplines,
offset the cyclical $17 million year-to-year decline in political
and non-recurring revenue on our NBC stations related to 2016
summer Olympics. Our record third quarter results highlight our
success in integrating the Media General broadcasting and digital
media properties into our platform while extracting anticipated
revenue and cost synergies and capitalizing on the many growth
opportunities throughout our portfolio. Reflecting the benefits of
scale and the strong operating leverage in our business model,
Nexstar’s record third quarter revenue drove operating income and
net income growth of 77.1% and 64.2%, respectively, resulting in
92.4% growth in third quarter BCF, a 96.1% increase in adjusted
EBITDA and a 105.9% rise in free cash flow (excluding transaction
expenses), and we brought about 20% of every net revenue dollar to
the free cash flow line. Importantly, year-to-date operating
results and fourth quarter trends continue to pace consistent with
our forecasts and as Nexstar prepares for what are expected to be
record levels of revenue and net income with the return political
advertising in 2018, we reiterate our projected pro-forma free cash
flow guidance of approximately $574 million during the 2017/2018
cycle, which will mark the Company’s sixth and seventh consecutive
years of record financial results and free cash flow.
“Our ongoing financial and operating momentum, enabled us to
take further action in the third quarter to enhance shareholder
value through our return of capital and leverage reduction
initiatives which in total amounted to approximately $100 million.
During the quarter, we allocated $40.7 million of cash from
operations to repurchase approximately 687,000 Nexstar shares at an
average purchase price of $59.2 per share, reducing our basic share
count to 45.6 million and year-to-date we have allocated
approximately $99 million of cash from operations to share
repurchases. We also paid our nineteenth consecutive quarterly cash
dividend and reduced our term loan borrowings by $45.5 million, and
we’ve made additional pre-payments in the fourth quarter
to-date.
“Contributions from our second full quarter of operations
including the Media General assets combined with continued strength
of Nexstar’s legacy operations offset non-recurring Olympic revenue
and the 67.0% year-over-year decline in third quarter political
advertising. Third quarter core television ad revenue increased
138.7%, while retransmission fee revenue and digital media revenue
rose 162.1% and 96.3%, respectively. The continued shift of our
revenue mix reflects our long-term initiatives to build scale and
diversify revenue through our focus on high growth retransmission
and digital opportunities. Of note, the $257.5 million in
retransmission fee revenue reached the highest ever quarterly level
in the Company's history. Reflecting transaction-related growth and
our success in managing the political ad revenue opportunity during
odd-year cycles, we reported third quarter political revenue of
approximately $8.4 million marking a 229% rise over the comparable
2015 period. Excluding political, gross revenue grew 137.9% in the
third quarter compared to the prior year.
“In line with Nexstar’s unwavering commitment to localism,
innovation and growth, we continued to successfully transition our
traditional television broadcasting operating model into a
diversified platform with multiple high margin revenue streams. In
this regard, combined third quarter digital media and
retransmission fee revenue of $313.7 million rose 147.2% over the
prior year period and accounted for 51.3% of net revenue,
illustrating the positive ongoing revenue mix shift from 2016 third
quarter levels when these operations accounted for 46.0% of net
revenue. The year-over-year increase in third quarter
non-television ad revenue reflects new distribution agreements
reached in late 2016 with multichannel video programming
distributors covering approximately 10 million subscribers, Media
General revenue synergies related to the after acquired clauses in
our retransmission consent contracts, and our expanded, profitable
digital operations.
“The rise in third quarter station direct operating expenses
(net of trade expense) and SG&A expense primarily reflects the
operation of acquired stations and digital assets and increases in
network affiliation expense. Third quarter corporate expense before
non-cash compensation expense and costs related to the Media
General transaction and certain divestitures was in line with our
expectations.
“Local broadcast television remains the most powerful place to
be within the media and advertising ecosphere and our strong local
platforms command the greatest share of audience reach within a
market. The enduring value of Nexstar’s unique, locally-produced
news programming and content married with marquee national network
content and access to new and emerging digital distribution
platforms is an unbeatable value proposition in the markets we
serve. During the quarter the company reached agreement with CBS
for participating in OTT offerings with the network. Nexstar now
has reached mutually satisfactory agreements with three of the big
four networks for participation in OTT services.”
“Looking forward, with the operating momentum across our
business and significant and growing net income and free cash flow,
Nexstar will continue to take a range of actions to enhance
shareholder value including our return of capital initiatives,
leverage reduction and pursuing opportunistic, accretive tuck-in
acquisitions. We also remain extremely well positioned for
continued significant financial growth in 2018 given key factors
including the Winter Olympics, Super Bowl on NBC, heavily contested
mid-term elections and new OTT agreements. As always, we remain
focused on actively managing our capital structure to provide the
financial flexibility to support our near- and long-term growth and
we continue to expect Nexstar’s net leverage, absent additional
strategic activity, to be in the high 4x range at the end of 2017
before declining to the mid 3x range by the end of 2018.”
The consolidated debt of Nexstar, its wholly owned subsidiaries
and its variable interest entities (“VIEs”) (collectively, the
“Company”) at September 30, 2017, was $4,390.1 million including
senior secured debt of $2,822.5 million. The Company’s total net
leverage ratio at September 30, 2017 was 4.67x and the first lien
net leverage ratio at September 30, 2017 was 2.95x compared to the
maximum covenant of 4.5x.
The table below summarizes the Company’s debt obligations (net
of financing costs and discounts):
($ in millions)
9/30/2017
12/31/2016 Revolving Credit Facilities $ 3.0 $
2.0 First Lien Term Loans $ 2,819.5 $ 662.2 6.875% Senior Unsecured
Notes $ - $ 520.7 6.125% Senior Unsecured Notes $ 272.9 $ 272.6
5.875% Senior Unsecured Notes $ 408.6 $ - 5.625% Senior Unsecured
Notes $ 886.1 $ 884.9
Total Debt $
4,390.1 $ 2,342.4 Cash on Hand
$ 135.8 $ 87.7
Share Repurchase Program
In the third quarter of 2017, Nexstar repurchased a total of
approximately 687,000 shares of its Class A common stock at an
average purchase price of $59.2 for a total cost of $40.7 million.
In the year-to-date period ended September 30, 2017 the Company has
repurchased a total of 1,689,000 shares of its Class A common stock
at an average purchase price of approximately $58.59 per share for
a total cost of $99.0 million. All share repurchases in the second
and third quarters of 2017 were funded from cash flow from
operations. Reflecting the shares repurchased in the nine-months
ended September 30, 2017, Nexstar has approximately 45.6 million
shares of Class A common stock outstanding (the only class of
shares outstanding) and has approximately $52.4 million available
under its expanded share repurchase authorization.
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 719/457-2607, conference ID 4916059 (domestic
and international callers). Participants can also listen to a live
webcast of the call through the “Events and Presentations” section
under “Investor Relations” on Nexstar’s website at www.nexstar.tv.
A webcast replay will be available for 90 days following the live
event at www.nexstar.tv.
Definitions and Disclosures Regarding non-GAAP Financial
Information
Broadcast cash flow is calculated as net income, plus interest
expense (net) loss on extinguishment of debt, income tax expense
(benefit), other (expense) income, corporate expenses,
depreciation, amortization of intangible assets and broadcast
rights (excluding barter), (gain) loss on asset disposal, non-cash
representation contract termination fee, change in the fair value
of contingent consideration and goodwill impairment, minus
broadcast rights payments. We consider broadcast cash flow to be an
indicator of our assets’ operating performance. We also believe
that broadcast cash flow and multiples of broadcast cash flow are
useful to investors because it is frequently used by industry
analysts, investors and lenders as a measure of valuation for
broadcast companies.
Adjusted EBITDA is calculated as broadcast cash flow less
corporate expenses. We consider Adjusted EBITDA to be an indicator
of our station assets’ operating performance and a measure of our
ability to service debt. It is also used by management for
strategic acquisitions and investments, maintain capital assets and
fund ongoing operations and working capital needs. We also believe
that Adjusted EBITDA is useful to investors and lenders as a
measure of valuation and ability to service debt.
Free cash flow is calculated as net income, plus interest
expense, net, loss on extinguishment of debt, income tax expense
(benefit), other (expense) income, 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, change in the fair value
of contingent consideration and goodwill impairment, less payments
for broadcast rights, cash interest expense, capital expenditures,
proceeds of disposals from property and equipment, and net
operating cash income taxes. We consider Free Cash Flow to be an
indicator of our assets’ operating performance. In addition, this
measure is useful to investors because it is frequently used by
industry analysts, investors and lenders as a measure of valuation
for broadcast companies, although their definitions of Free Cash
Flow may differ from our definition.
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.
With respect to our forward-looking guidance for the 2017/2018
cycle, no reconciliation between a non-GAAP measure to the closest
corresponding GAAP measure is included in this release because we
are unable to quantify certain amounts that would be required to be
included in the GAAP measure without unreasonable efforts and we
believe such reconciliations would imply a degree of precision that
would be confusing or misleading to investors. In particular,
reconciliation of forward-looking Free Cash Flow to the closest
corresponding GAAP measure is not available without unreasonable
efforts on a forward-looking basis due to the high variability,
complexity and low visibility with respect to the charges excluded
from these non-GAAP measures such as the measures and effects of
non-cash compensation expense specific to equity compensation
awards that are directly impacted by unpredictable fluctuations in
our stock price and other non-recurring or unusual items such as
impairment charges, transaction-related costs and gains or losses
on sales of assets. We expect the variability of these items to
have a significant, and potentially unpredictable, impact on our
future GAAP financial results.
About Nexstar Media Group, Inc.
Nexstar Media 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 170 television stations and related digital
multicast signals reaching 100 markets or nearly 39% 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. 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 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, 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 impact of changes in
national and regional economies, the ability to service and
refinance our outstanding debt, successful integration of acquired
television stations and digital businesses (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 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 Nexstar’s
other filings with the SEC.
Nexstar Media Group, Inc. Condensed Consolidated
Statements of Operations
(in thousands, except per share amounts,
unaudited)
Three Months Ended Nine Months
Ended September 30, September 30,
2017 2016 2017 2016 Net
revenue $ 611,870 $ 275,659 $ 1,778,302 $ 793,311 Operating
expenses: Corporate expenses 19,909 11,713 109,066 40,551 Direct
operating expenses, net of trade 253,914 98,168 718,854 276,139
Selling, general and administrative expenses, excluding corporate
117,399 51,889 346,829 156,988 Trade and barter expense 14,509
11,392 41,064 34,648 Depreciation 25,979 12,877 74,497 38,174
Amortization of intangible assets 33,986 11,505 120,701 34,903
Amortization of broadcast rights, excluding barter 17,102 5,218
47,099 17,075 Gain on disposal of stations, net - -
(57,716 ) - Total operating expenses 482,798
202,762 1,400,394 598,478 Income from
operations 129,072 72,897 377,908 194,833 Interest expense, net
(53,605 ) (29,622 ) (188,527 ) (70,853 ) Loss on debt
extinguishment (1,221 ) - (34,348 ) - Other expenses (161 )
(126 ) (1,168 ) (409 ) Income before income
taxes 74,085 43,149 153,865 123,571 Income tax expense
(32,013 ) (17,533 ) (58,394 ) (50,882 ) Net
income 42,072 25,616 95,471 72,689 Net loss (income) attributable
to noncontrolling interests 4,403 (817 ) 1,045
(1,634 ) Net income attributable to Nexstar $ 46,475 $
24,799 $ 96,516 $ 71,055 Basic net income per common share
attributable to Nexstar $ 1.01 $ 0.81 $ 2.11 $ 2.32 Basic weighted
average number of common shares outstanding 46,107 30,695 45,753
30,678 Diluted net income per common share attributable to
Nexstar $ 0.98 $ 0.78 $ 2.05 $ 2.25 Diluted weighted average number
of common shares outstanding 47,452 31,698 47,029 31,619
Nexstar Media 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
Adjusted EBITDA: 2017 2016
2017 2016 Net income $ 42,072 $ 25,616
$ 95,471 $ 72,689 Add: Interest expense, net 53,605 29,622
188,527 70,853 Loss on extinguishment of debt 1,221 - 34,348 -
Income tax expense 32,013 17,533 58,394 50,882 Depreciation 25,979
12,877 74,497 38,174 Amortization of intangible assets 33,986
11,505 120,701 34,903 Amortization of broadcast rights, excluding
barter 17,102 5,218 47,099 17,075 Loss (gain) on asset disposal,
net 2,375 (249 ) (56,220 ) (518 ) Corporate expenses 19,909 11,713
109,066 40,551 Change in the fair value of contingent consideration
- 1,392 - 3,483 Other 161 126 1,168 409 Less: Payments for
broadcast rights 16,891 5,404 46,370
17,242 Broadcast cash flow 211,532 109,949 626,681 311,259
Margin % 34.6 % 39.9 % 35.2 % 39.2 % Less: Corporate
expenses, excluding one-time transaction expenses 17,101
10,782 52,220 33,005 Adjusted EBITDA
before one-time transaction expenses 194,431 99,167 574,461 278,254
Margin % 31.8 % 36.0 % 32.3 % 35.1 % Less: Corporate
one-time transaction expenses 2,808 931 56,846
7,546 Adjusted EBITDA $ 191,623 $ 98,236 $ 517,615 $
270,708 Margin % 31.3 % 35.6 % 29.1 % 34.1 %
Nexstar Media 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:
2017 2016 2017
2016 Net income $ 42,072 $ 25,616 $ 95,471 $ 72,689
Add: Interest expense, net 53,605 29,622 188,527 70,853 Loss
on extinguishment of debt 1,221 - 34,348 - Income tax expense
32,013 17,533 58,394 50,882 Depreciation 25,979 12,877 74,497
38,174 Amortization of intangible assets 33,986 11,505 120,701
34,903 Amortization of broadcast rights, excluding barter 17,102
5,218 47,099 17,075 Loss (gain) on asset disposal, net 2,375 (249 )
(56,220 ) (518 ) Non-cash compensation expense 6,203 2,913 17,512
9,002 Change in the fair value of contingent consideration - 1,392
- 3,483 Corporate one-time transaction expenses 2,808 931 56,846
7,546 Other 161 126 1,168 409 Less: Payments for broadcast
rights 16,891 5,404 46,370 17,242 Cash interest expense(1) 50,954
28,530 161,144 67,861 Capital expenditures 21,155 10,607 48,846
25,642 Proceeds from disposals of property and equipment (1,874 )
(250 ) (16,449 ) (585 ) Operating cash income taxes, net of
refunds(2) 7,951 3,723 27,990 27,405
Free cash flow before one-time transaction expenses 122,448
59,470 370,442 166,933 Less: Corporate one-time transaction
expenses 2,808 931 56,846 7,546
Free cash flow $ 119,640 $ 58,539 $ 313,596 $ 159,387
______________________ (1) Excludes payments of $19.6
million in one-time fees during the nine months ended September 30,
2017 associated with the financing of the Company’s merger with
Media General. (2) Excludes the payment of $47.4 million in taxes
during the nine months ended September 30, 2017 related to tax
liabilities resulting from various sale of stations and $145.9
million related to the proceeds received to relinquish the spectrum
of certain stations.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171106005256/en/
Nexstar Media Group, Inc.Thomas E. Carter, 972-373-8800Chief
Financial OfficerorJCIRJoseph Jaffoni / Jennifer Neuman,
212-835-8500nxst@jcir.com
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