DALLAS — “Nexstar delivered another period of solid financial results, building on our strong start to the year,” company founder and Chairman/CEO Perry Sook said of Nexstar Media Group‘s second quarter earnings results.
But, did the company meet or exceed Wall Street expectations?
No. This led some investors to sell their shares, leading to a 4% dip in “NXST” value as the company’s 9am Central earnings call commenced.
Net revenue grew by 2.3% to $1.269 billion from $1.24 billion, as the company’s net income attributable to Nexstar Media Group Inc. surged to $118 million ($3.54 per diluted share) from $96 million ($2.64).
While the EPS came within the range of 7 analysts polled by Yahoo! Finance, it is officially a miss, with the consensus earnings per share coming in at $4.17. The bigger issue is the revenue, which did not come within the range of 9 analysts who chimed in to Yahoo! Finance. The low earnings estimate was $1.28 billion, with the high estimate being $1.39 million.
Operating expenses were down slightly to $1.029 billion from $1.061 billion.
Adjusted EBITDA rose to $398 million, from $335 million, in Q2.
Thus, like peer Gray Television, Q2 was a quarter where the growth simply wasn’t as robust as what Wall Street had anticipated.
In fact, Sook took a positive take on the quarter, noting in prepared comments ahead of the company’s earnings call, said, “Following a first quarter in which Nexstar generated record first-quarter distribution and total net revenue, we did it again, generating our highest-ever second-quarter distribution and total net revenue.”
Sook also noted reduced operating losses at The CW, the broadcast TV network it controls.
However, unlike Gray, Nexstar’s Q2 revenue was driven not by advertising revenue but by distribution revenue — a.k.a. retransmission consent fees. In the second quarter, record revenue of $734 million was achieved, rising from $696 million a year earlier.
The growth, Nexstar shared, primarily reflects the impact of distribution contract renewals in 2023 “on terms favorable to the company” and annual rate escalators; growth in vMVPD subscribers; the addition of CW affiliations on owned stations; and the return of our partner
stations on a MVPD it had a carriage dispute with in January 2024. That, Nexstar said, “more than offset MVPD subscriber attrition.”
Distribution revenue includes retransmission revenue, carriage fees, affiliation fees, and spectrum leasing revenue.
Second quarter advertising revenue grew by 2.2%. But, it came in at $522 million, rising from $511 million. As such, groups such as the American Television Alliance and ACA Connects could take aim at Nexstar for its retransmission consent fee prowess, as the pro-MVPD groups disdain the entire concept of retrans.
The Q2 ad revenue includes a $37 million year-over-year increase in political advertising to $45 million. This “more than offset” a $24 million year-over-year reduction in non-political
advertising revenue due to “ongoing advertising market softness.” Answering an analyst’s question on the earnings call, Sook noted that Furniture, Automotive and Entertainment are weak categories, and are down. Direct Response was down due to the lower discretionary spending of the consumer, he added. “We were happy to see that our digital advertising revenue, both from direct and national accounts, were all up in Q2 and are pacing double-digits ahead in Q3,” Sook said.
Automotive is pacing down further in the third quarter, CFO Lee Ann Gliha said to analyst Craig Huber on the earnings call.
As advertising revenue includes television and digital revenue primarily from businesses and political advertisers, some market observers could put heightened scrutiny on the core advertising challenges for the biggest broadcast TV station owner in North America.
Meanwhile, in a disclosure included in the Nexstar’s Q2 2024 results, the consolidated debt of Nexstar and Mission Broadcasting Inc., an independently owned variable interest entity, as of June 30 was $6.78 billion, including senior secured debt of $4.07 billion.
