Nexstar Broadcasting Group, one of the industry’s fastest growing television groups rode the political wave to record impressive gains in net revenue and operating income. Retrans and digital were also strong growth areas.
The dark cloud: national.
Q4 revenues soared 39.6% to $192.8M. Core was flat, with a 2.8% gain in local offset by a 5.3% loss in national.
But political was up 2200.98% (from $1.5M to $35.4M); retrans was up 64.6% and digital was up 114.9%.
For the record, local did better for the year as a whole, with a gain of 5.2%.
Q4 operating income increased 114.8%, rising from $32M to $177.7M; and broadcast cash flow soared 70.1% from $55.3M to $94.5M.
Perry A. Sook, Chairman, President and Chief Executive Officer of Nexstar Broadcasting Group, Inc. commented, “The 39.6% rise in fourth quarter net revenue concluded what was already a record year financially for Nexstar. Fourth quarter BCF, Adjusted EBITDA and free cash flow increases of 70.9%, 73.8% and 116.0%, respectively, reflect margin growth related to the significant operating leverage in our model as well as the value of our initiatives to maximize the political advertising opportunity, manage costs and actively expand our scale through strategic, accretive acquisitions. These factors, coupled with recently completed value-building transactions which added 27 stations as well as a leading digital media advertising and programmatic technology provider, have positioned Nexstar for continued near- and long-term growth. We expect 2015 to be the Company’s fourth consecutive year of record free cash flow as our platform expansion and revenue diversification efforts have eliminated the cyclicality associated with political advertising.
“During the fourth quarter, we successfully managed inventory to maximize our share of election spending in our markets. Fourth quarter television ad revenue inclusive of political advertising grew 31.2% as Nexstar’s spot inventory management initiatives resulted in a 23-fold year-over-year increase in political revenue and flat core local and national spot revenue. Reflecting our expanded platform and presence in states with high levels of political spending activity, 2014 fourth quarter political revenue rose by 29% over comparable 2012 fourth quarter levels. Notably, excluding political, gross revenue in the fourth quarter grew over 17% from the same period in 2013, reflecting Nexstar’s further success in leveraging the value of our television broadcasting operating model and content creation capabilities into a diversified platform with multiple high margin revenue streams.
“Nexstar’s strong fourth quarter television ad revenue growth was complemented by a 64.6% rise in retransmission fee revenue and a 114.9% increase in digital media revenue which benefited from organic growth as well as our mid-year accretive acquisitions of a leading digital publishing and agency services platform and the provider of cloud-based CMS, engagement and monetization solutions. Nexstar’s annual retransmission revenue growth of 53.3% reflects both the 2013 contract renewals with our distribution partners and escalators. We expect our long-term distribution revenue growth trend to continue as in late 2014 additional contract renewals representing about 40% of the Company’s MVPD subscribers were completed and another 30% of our subscribers will be renewed in 2015. Fourth quarter 2014 net revenue rose 66% over the same period in 2012, the last Presidential election year, while free cash flow, our most important financial performance metric, was up over 127% over the same period which clearly illustrates the value creation related to our revenue diversification and platform building strategies.”
“The combination of our operating successes and accretive station transactions has positioned Nexstar to return capital to shareholders through cash dividends while reducing leverage throughout 2015. Tomorrow, we will pay the first quarterly cash dividend of $0.19 per share of our Class A common stock following the Board’s authorization last month to increase the quarterly cash dividend by 26.7 percent. Importantly, we believe the total annual capital allocation for dividends of approximately $23.7 million relative to our projected free cash flow continues to afford the Company the liquidity and financial flexibility to further expand our marketing solutions platform through additional accretive station and digital media acquisitions, while reducing leverage and pursuing other initiatives that enhance long-term shareholder value.
“Looking forward, we project that with the addition of the 27 new stations and Yashi, Nexstar will generate pro-forma free cash flow of approximately $450 million during the 2015/2016 cycle, or average pro-forma free cash flow of approximately $7.25 per share per year as we ended 2014 with 30.8 million basic outstanding shares. Furthermore, with the free cash flow generated from this base of operations, we expect Nexstar’s net leverage, absent additional strategic activity, to be in the mid 4x range at the end of 2015 and to decline to the low 3x range by the end of 2016.”
