Why Did Nexstar Fall So Short In Q3?


By Adam R Jacobson

It’s just not enough to see record net revenue in a quarter anymore.

Nexstar Broadcasting released its Q3 earnings report on Tuesday, and the company enjoyed a 23.6% revenue climb to $275.7 million — a new best for the company that is merging with Media General.

Nevertheless, Nexstar missed the consensus estimates of four analysts surveyed by Zacks. They predicted revenue of $276.5 million.

Net income in the quarter climbed from $17.2 million (54 cents per diluted share) to $25.6 million (78 cents).

But, the average estimate of five analysts surveyed by Zacks Investment Research was for earnings of 86 cents per share.

Investors seemed pleased with Nexstar’s results, as the stock was up some 2.6% in mid-afternoon trading on Tuesday.

Still, there was one noticeable weak spot for Nexstar: National revenue.

In Q3, National dollars dipped 3.6%, to $36.5 million.

That was perhaps the lone negative story, as Free Cash Flow rose by 26.6%, to $58.5 million, while adjusted EBITDA improved by 34%, to $98.2 million. Broadcast cash flow was up 30.4%, to $110 million.

Political dollars played a factor in Q3 for Nexstar, with some $25.5 million in revenue attributable to election advertising. This helped net revenue jump 23.6%, to the $275.7 million figure the company is widely sharing.

Gross revenue minus political revenue was $271.4 million, up 13.5%. This indicates that, after expenses, political provided a small boost to the company.

Perry A. Sook,  Nexstar’s President/CEO, was practically cheery in his prepared remarks, stating Nexstar’s results were highlighted “by solid core revenue growth, our ability to maximize the Olympic and political revenue opportunities, growing retransmission consent revenues, impressive digital growth, and the ongoing benefits of our results-focused operating disciplines.”

Little was said about a possible Rio bump, as this will provide tough comparables in 2017.

Instead, Sook played up the company’s ability to surpass its year-to-date estimates of $100 million in political ad dollars and its Q4 guidance for record FCF.

Political was a nice addition to already solid category activity for Nexstar: Its Q3 core local and national television ad revenue rose 4.4%, which Sook says is “among the best in the industry.”

Additionally, despite the allocation of inventory to political advertisers, Nexstar generated flat or increased television ad revenue in four of its top six categories, including auto.