“Our strategy is to expand our reach and scale over the past 23 years are married to a commitment to enhance value for shareholders.”
That’s a direct quote from Nexstar Media Group founder and President/CEO Perry Sook, who made the comment late last week during his company’s Q3 earnings call.
With approximately 60% free cash flow accretion to be arrived from Nexstar’s acquisition of Tribune Media, the company he founded roughly a quarter-century ago with the purchase of a Scranton, Pa., TV station is riding high.
“We view this as best of the 36 transactions we’ve done in our history,” he said of the deal Sinclair Broadcast Group couldn’t get done, but Nexstar did.
Of the Q3 accomplishments Sook singled out, “obviously” at the top of the list was the completion in mid-September “of a highly accretive Tribune Media acquisition.”
Also in the mix: the deal’s associated divestitures and what Sook calls Nexstar’s “increased guide for the synergies that we’re generating as we combine the operations.”
With 197 full power owned and serviced television stations and “meaningful contributions” from its roughly 31% stake in TV Food Network — combined with “significant positive cash flow” from once bloated cable network WGN America, “Nexstar is now entering its next growth cycle,” Sook said.
Thank the return of the “UHF discount” by the GOP-led FCC for some of this growth, as Nexstar’s U.S. reach is now at 63%.
Sook is well aware of just how close Nexstar is to reaching the national cap as it stands today.
“We previously noted that, even with the Tribune transaction-related divestitures, we are very near the national ownership cap as defined by the FCC, but that we saw opportunities to continue to refine our portfolio; free up some ownership cap space; and, in some instances, position us in new strategic markets or markets where we believe there is greater upside and growth,” Sook noted.
In this regard, Nexstar moved forward with a freshly inked deal that sees it deleverage while gaining a duopoly in the Queen City of the South: Charlotte.
As RBR+TVBR first reported Nov. 6, Nexstar will purchase from Fox Corporation its FOX-affiliated WJZY-46 in Belmont, N.C., and MyNetwork TV affiliate WMYT-55 in Rock Hill, S.C., for “approximately $45 million in cash.” The stations serve the Charlotte DMA and were purchased in January 2013 from Capitol Broadcasting Corp. for $18 million.
At the same time, Nexstar has agreed to sell to FOX KCPQ-13, the FOX affiliate, and MyNetworkTV Affiliate KZJO “JOEtv” in Seattle-Tacoma; and the Milwaukee FOX affiliate, WITI.
“With our expanded and diversified operating base, expectations for a significant 2020 political spending and the benefit of recent soon to be completed distribution agreement renewals, we remain confident in generating record levels of free cash flow next year, while reducing our leverage,” Sook said.
Investors seem to agree. At 3pm Eastern on Monday (11/11), NXST was trading up 1.77% to $107.83, its best performance in four months. It also signals that Nexstar shares could be ramping up to rise to a fresh five-year high. That was achieved in late April, with a $116.85 closing price.
For the 2019 full year, Nexstar continues to expect low single-digit growth in same-station nonpolitical television advertising revenue versus the comparable 2018 period. “Overall, third quarter broadcast cash flow, adjusted EBITDA and free cash flow before onetime transaction expenses and onetime revenue losses and expenses related to the AT&T distribution negotiations were in line with our internal expectations,” Sook said, adding that in the quarter four of the legacy top 9 ad categories were up and five of the nine ad categories grew at the former Tribune stations.
Seeking details on Nexstar’s Q4 forecast was Wolfe Research analyst Marci Ryvicker. She was told by Sook that the company anticipates low single-digit growth “in core.” Why? “Obviously, political becomes less a factor once you get past this first week of November,” he explained.
