November 6, 2017 Last Updated 7:21 am

Nexstar, which broke up Meredith merger deal, reports record revenue in Q3 report

This is a publishing website, so many readers may have already forgotten all about Nexstar Media Group. But that was the broadcasting company that broke up the merger between Meredith and Media General. One still wonders what might have happened to all those Meredith magazine titles had the merger gone through, likely either a spin-off or outright sale.

But the merger did not go through as Nexstar successfully beat out Meredith and itself merged with Media General.

Today they reported record revenue in their third quarter earnings report.

Of course, when you make an acquisition it is pretty easy to record higher revenue, earnings are the hard part. But there, too, it seemed to have a good quarter.

Here is their report (later this week Time Inc and News Corp report earnings):

IRVING, Texas — November 6, 2017 — Nexstar Media Group, Inc. today reported record financial results for the third quarter ended September 30, 2017 as summarized below.

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):

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.

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