Nexstar now looking to 2010


Q4 revenues came in 12.3% ahead of 2007, fueled, as you would expect, by political, although CEO Perry Sook also highlighted gains in retrans payments and E-media. He joked with analysts that the company needs T-shirts now that say “Survive ’09 – We will win in 2010.” But he’s not writing off 2009. Rather, he assured analysts that growth in retrans and E-media will fill a big piece of the gap this year from the lack of political advertising.

Sook proudly noted that the 12.3% gain to $80.3 million was at the high end of the company’s guidance. Broadcast cash flow increased 23.3% to $34.7 million. Excluding a significant non-cash impairment charge, yet to be finalized, net income for the quarter was $5.4 million, or 19 cents per share.

Nexstar is not giving any formal guidance, but indicated that Q1 is looking a lot like Q4, when local was down 11% and national spot 17%. In fact, national will be a bit worse.

While regular national and local spot business was down for the quarter, political was up, as was retransmission consent revenue, up 37% to $6.3 million, and E-media revenues, up 24% to $2.8 million. Sook told analysts that retrans will be up significantly in 2009 and again in 2010.

“Our E-media story continues to be compelling. We are selling hyper-local advertising on our community portals,” Sook explained. “We are not in the business of trying to sell the most page views and the most unique visitors to national advertisers. We are focused exclusively on a hyper-local strategy – and as we reported this morning, the revenues for 2008 were up 100% over 2007. Our online initiative is leveraging our brands and our content and the local relationships of our television stations to launch and build a separate business. Our online revenue growth has been nothing short of remarkable, I think, and we look for substantial double-digit growth in that revenue stream again in 2009,” Sook said.

“Matt is very actively reengineering our balance sheet,” the CEO said of CFO Matt Devine. Nexstar has been actively buying back its own debt at discounted prices – around 35 cents on the dollar for nearly $30 million face value already bought in Q1 after reducing total debt by nearly $20 million in 2008.

Like most businesses, Nexstar is still looking for ways to reduce overhead costs. Sook said the company is consolidating back office functions such as traffic, master control and accounting in regional hubs. He also noted that the company has instituted hiring freezes – “except for sales.”

In the Q&A session, one investor noted that the current share price is less than the company’s free cash flow per share, indicating that the market is saying that Nexstar may not survive without a bankruptcy reorganization. “Well, I first of all, try not to take it personally,” Sook replied, noting that all TV stocks have been beaten down by the market. “I would not bet against us,” he insisted.  

RBR/TVBR observation: Local, local, local! It’s what makes broadcast TV different from cable (with a few exceptions). Nexstar is not only focusing on finding new to TV on-air advertisers, but going hyper-local with its Internet business. That’s where local TV can compete with shoppers, the Yellow Pages and (shhhh, don’t mention this to our RBR side) radio.