Net Revenue Growth Drives Record 2Q
Operating Income of $64.0 Million, BCF of $103.2 Million and
Adjusted EBITDA of $90.2 Million
Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) (“Nexstar” or
“the Company”) today reported record financial results for the
second quarter ended June 30, 2016 as summarized below.
Summary 2016 Second Quarter
Highlights
Three Months Ended June 30, Six Months
Ended June 30, ($ in thousands)
2016
2015 Change 2016
2015 Change Local Revenue $ 97,608 $ 93,991 +3.8 % $
191,375 $ 178,515 +7.2 % National Revenue $ 35,877 $ 38,793
(7.5 )% $ 71,327 $ 74,371 (4.1 )%
Core Revenue $
133,485 $ 132,784 +0.5 %
$
262,702 $ 252,886 +3.9 % Political
Revenue $ 11,257 $ 1,906 +490.6 % $ 23,011 $ 2,266 +915.5 %
Retransmission Fee Revenue $ 98,137 $ 69,719 +40.8 % $ 195,450 $
136,283 +43.4 % Digital Revenue $ 24,857 $ 21,180 +17.4 % $ 47,390
$ 40,492 +17.0 % Other $ 1,455 $ 1,379 +5.5 % $ 3,060 $ 2,580 +18.6
% Trade and Barter Revenue $ 11,744 $ 11,785 (0.3 )% $ 23,161 $
23,178 (0.1 )%
Gross Revenue $ 280,935
$ 238,753 +17.7 %
$ 554,774 $
457,685 +21.2 % Less: Agency Commission $ 18,941 $ 19,404
(2.4 )% $ 37,122 $ 36,601 +1.4 %
Net Revenue $
261,994 $ 219,349 +19.4 %
$
517,652 $ 421,084 +22.9 %
Gross
Revenue Excluding Political $ 269,678 $
236,847 +13.9 %
$ 531,763 $
455,419 +16.8 %
Income from Operations
$ 64,007 $ 52,542 +21.8 %
$
121,936 $ 90,446 +34.8 %
Broadcast
Cash Flow(1) $ 103,247 $
85,361 +21.0 %
$ 201,310 $
161,089 +25.0 %
Broadcast Cash Flow Margin(2)
39.4 % 38.9 % 38.9 %
38.3 % Adjusted EBITDA(1)
$ 90,220 $ 74,887 +20.5 %
$
172,472 $ 138,932 +24.1 %
Adjusted EBITDA
Margin(2) 34.4 % 34.1 %
33.3 % 33.0 % Free Cash
Flow(1) $ 48,728 $ 50,069
(2.7 )%
$ 100,848 $ 93,022 +8.4 %
(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 long-term
strategy to leverage our local content and relationships through
accretive, scale-building acquisitions while creating complementary
revenue streams drove record second quarter net revenue, BCF and
Adjusted EBITDA, while free cash flow was impacted by the timing of
2016 cash tax payments, a situation that will self-resolve over the
remainder of the year.
“Year-to-date core, political, retransmission and digital
revenue are largely tracking consistent with our expectations and
Nexstar generated $3.29 in free cash flow per share through June
30. With rising political spending in the second half of the year,
upcoming special event programming including last week’s start of
the Rio 2016 summer Olympics, contractual retransmission revenue
growth, our expanded digital operations and the realization of our
actual cash tax rate for the full year, we remain confident that
Nexstar will, on a stand-alone basis, generate record free cash
flow in 2016, and is 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. In addition,
we continue to make progress toward the completion of the Media
General transaction later this year which we expect will result in
approximately 37% growth in our annual average pro forma 2016/2017
free cash flow relative to what we are generating from our current
operations.
“Reflecting the operating leverage in our model, our 19.4% rise
in second quarter net revenue generated 21.0% growth in BCF and a
20.5% increase in Adjusted EBITDA. During the second quarter,
television ad revenue inclusive of political advertising rose 7.5%
with core local and national spot revenue increasing 0.5%,
including a 1.0% rise in same station automotive advertising.
Reflecting our expanded platform and presence in states with high
levels of political spending activity, 2016 second quarter
political revenue outpaced our budgets and rose by 491% compared to
the same period last year and by 67% over second quarter 2014
levels.
“Nexstar’s gross revenue growth in the second quarter excluding
political was healthy at almost 14% and reflects the 40.8% rise in
retransmission fee revenue and 17.4% increase in digital revenue.
Our ongoing renegotiations of retransmission consent agreements
combined with the growth of our leading, locally focused, digital
content management system, agency services, mobile and programmatic
offerings resulted in a 35.3% increase in Nexstar’s total second
quarter retransmission fee and digital revenue to $123.0 million.
Reflecting continued success against our revenue diversification
goals, these higher margin revenue streams accounted for 46.9% of
2016 second quarter net revenue up from 41.4% in the comparable
period last year and 32.8% in the 2014 second quarter, the last
political cycle.
“The rise in second quarter station direct operating expenses
(net of trade expense) and SG&A primarily reflects higher
variable costs related to the significant increase in advertising
revenues, expanded local programming on our existing stations and
the operation of stations acquired in 2015 and 2016. The $2.6
million increase in corporate expense reflects increased staffing
and infrastructure to manage and operate the additional stations
including approximately $2.0 million in non-recurring
transaction-related expenses. Inclusive of these one-time expenses,
second quarter Adjusted EBITDA grew 20.5% while adjusted BCF margin
expanded by approximately 50 basis points to 39.4%. Cash income
taxes of $17.7 million were above our expectations for the quarter
largely due to the timing of the payments of 2016 taxes. This
situation will self-resolve over the second half of 2016 and as a
result does not affect our 2016 free cash flow guidance, as implied
in our annual average 2016/2017 free cash flow of $250 million – or
average pro-forma free cash flow of $8.15 per share per year.
“In addition to the record first half operating results,
progress towards the completion later this year of our acquisition
of Media General is tracking consistent with our timeline. During
the quarter, shareholders of both Nexstar and Media General
approved Nexstar’s acquisition of Media General, and we announced
the execution of agreements providing for the divestiture of 13
stations for total consideration of $548 million. Last month, we
completed an offering of $900 million of new 5.625% senior notes
which fully addresses the portion of the planned financing for the
transaction that we expect to do outside of the secured loan
market. We believe these asset sales bring the Nexstar/Media
General transaction into compliance with Federal Communication
Commission and Department of Justice requirements for approval. The
divestiture proceeds and the cost of capital of the senior notes
were key assumptions in the Company’s 2016/2017 free cash flow
guidance for the combined entity and both exceeded the assumptions
in our guidance.
“When the Media General transaction is completed, 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 operations. I continue
to visit the Media General stations, a practice which has proven
over time to ensure that we integrate acquisitions quickly and with
operating and financial results that meet and in many cases exceed
the expectations we provide at the time they are announced. Based
on these meetings which continue into the third quarter, I am
confident that Nexstar Media Group will have outstanding operating
teams and the disciplines necessary to realize the tremendous
upside presented by this transaction. Financially, the transaction
is expected to more than double our revenue and Adjusted EBITDA and
will be immediately accretive upon closing. Using what we believe
are conservative expectations for the cost of financing the
transaction and identified year one synergies of $76 million, where
there may also be upside, Nexstar Media Group is expected to
generate over $500 million of average annual free cash flow with
annual free cash flow per share expected to be approximately $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,
which assumes no net proceeds from the spectrum auction.
“Nexstar celebrated its 20 year anniversary on June 17 and over
these last two decades we have grown the Company through a
disciplined approach to acquisitions, a focus on enhancing the
operating results of acquired stations and digital properties, an
overarching commitment to localism and the creation and fostering
of a retransmission revenue stream. Consumers’ brand awareness and
purchasing decisions are every bit as strong, if not stronger,
locally, where businesses operate and transactions take place.
Reflecting these factors, 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. 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 through the Media General transaction.”
The consolidated total debt of Nexstar, its wholly owned
subsidiaries, Mission Broadcasting, Inc. and Marshall Broadcasting
Group, Inc. (collectively, the “Company”) at June 30, 2016, was
$1,487.8 million including senior secured debt of $695.2 million.
The Company’s total net leverage ratio at June 30, 2016 was 3.99x
compared to a total permitted leverage covenant of 6.75x. The
Company’s first lien net leverage ratio at June 30, 2016 was 1.83x
compared to the covenant maximum of 4.00x.
The table below summarizes the Company’s debt obligations:
($
in millions)
6/30/2016 12/31/2015 Revolving Credit
Facilities $ 22.0 $ 2.0 First Lien Term Loans $ 673.2 $ 682.2
6.875% Senior Unsecured Notes $ 520.2 $ 519.8 6.125% Senior
Unsecured Notes $ 272.4 $ 272.2
Total Debt $ 1,487.8 $
1,476.2
Cash on Hand $ 27.2 $ 43.4
Second 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 719/325-2140, conference ID 9987439 (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 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 Ended June 30,
Six Months Ended June 30,
2016 2015 2016 2015 Net
revenue $ 261,994 $ 219,349 $ 517,652 $ 421,084 Operating
expenses: Corporate expenses 13,027 10,474 28,838 22,157 Direct
operating expenses, net of trade 90,025 70,875 177,971 137,025
Selling, general and administrative expenses, excluding corporate
52,745 46,083 105,099 91,689 Trade and barter expense 11,912 11,641
23,256 22,939 Depreciation 12,739 11,302 25,297 22,174 Amortization
of intangible assets 11,319 11,237 23,398 24,297 Amortization of
broadcast rights, excluding barter 6,220 5,195
11,857 10,357 Total operating expenses 197,987
166,807 395,716 330,638 Income from operations 64,007
52,542 121,936 90,446 Interest expense, net (20,577 )
(20,391 ) (41,231 ) (39,684 ) Other expenses (147 )
(150 ) (283 ) (268 ) Income before income taxes
43,283 32,001 80,422 50,494 Income tax expense (18,484 )
(12,101 ) (33,349 ) (18,682 ) Net income
24,799 19,900 47,073 31,812 Net (income) loss attributable to
noncontrolling interests (270 ) 421 (817 )
1,416 Net income attributable to Nexstar $ 24,529 $ 20,321 $
46,256 $ 33,228 Basic net income per common share
attributable to Nexstar $ 0.80 $ 0.65 $ 1.51 $ 1.06 Basic weighted
average number of common shares outstanding 30,680 31,325 30,669
31,260 Diluted net income per common share attributable to
Nexstar $ 0.78 $ 0.63 $ 1.46 $ 1.03 Diluted weighted average number
of common shares outstanding 31,620 32,382 31,579 32,319
Nexstar Broadcasting Group,
Inc.
Reconciliation of Broadcast Cash Flow
and Adjusted EBITDA (Non-GAAP Measures)
UNAUDITED
(in thousands)
Three Months Ended June 30, Six Months Ended June
30, Broadcast Cash Flow and Adjusted EBITDA: 2016
2015 2016 2015 Income
from operations $ 64,007 $ 52,542 $ 121,936 $ 90,446 Add:
Depreciation 12,739 11,302 25,297 22,174 Amortization of intangible
assets 11,319 11,237 23,398 24,297 Amortization of broadcast
rights, excluding barter 6,220 5,195 11,857 10,357 (Gain) loss on
asset disposal, net (172 ) 125 (269 ) 927 Corporate expenses 13,027
10,474 28,838 22,157 Non-cash representation contract termination
fee - - - 1,516 Loss on change in the fair value of contingent
consideration 1,687 - 2,091 - Less: Payments for broadcast
rights 5,580 5,514 11,838 10,785
Broadcast cash flow 103,247 85,361 201,310 161,089 Margin % 39.4 %
38.9 % 38.9 % 38.3 % Less: Corporate expenses 13,027
10,474 28,838 22,157 Adjusted EBITDA $
90,220 $ 74,887 $ 172,472 $ 138,932 Margin % 34.4 % 34.1 % 33.3 %
33.0 %
Nexstar Broadcasting Group,
Inc.
Reconciliation of Free Cash Flow
(Non-GAAP Measure)
UNAUDITED
(in thousands)
Three Months Ended June 30, Six Months Ended June
30, Free Cash Flow: 2016 2015
2016 2015 Income from operations
$ 64,007 $ 52,542 $ 121,936 $ 90,446 Add: Depreciation
12,739 11,302 25,297 22,174 Amortization of intangible assets
11,319 11,237 23,398 24,297 Amortization of broadcast rights,
excluding barter 6,220 5,195 11,857 10,357 (Gain) loss on asset
disposal, net (172 ) 125 (269 ) 927 Non-cash compensation expense
2,955 2,804 6,089 5,662 Non-cash representation contract
termination fee - - - 1,516 Loss on change in the fair value of
contingent consideration 1,687 - 2,091 - Less: Payments for
broadcast rights 5,580 5,514 11,838 10,785 Cash interest expense
19,624 19,460 39,331 37,868 Capital expenditures 7,119 5,710 14,700
11,234 Operating cash income taxes, net of refunds(1) 17,704
2,452 23,682 2,470 Free cash flow $
48,728 $ 50,069 $ 100,848 $ 93,022 (1) Exclude
payments totaling $15.172 million in taxes during the six months
ended June 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/20160809005322/en/
Nexstar Broadcasting Group, Inc.Thomas E. Carter,
972-373-8800Chief Financial OfficerorJCIRJoseph Jaffoni, Jennifer
Neuman212-835-8500nxst@jcir.com
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