Nexstar Media Group Inc (NXST) Reports Q3 Revenue Decline Amid Political Ad Cyclicity
Q3 net revenue fell to $1.13 billion, a 10.8% decrease compared to the previous year.
Political advertising revenue plummeted by 85.3% due to the off-cycle election year.
Adjusted EBITDA and attributable free cash flow declined by 51.9% and 66.2%, respectively.
Despite revenue challenges, Nexstar returned $246 million to shareholders in Q3 through repurchases and dividends.
On November 8, 2023, Nexstar Media Group Inc (NASDAQ:NXST) released its third-quarter financial results, revealing a net revenue of $1.13 billion, which marks a 10.8% decrease from the same period in the previous year. The company's performance was primarily affected by a significant drop in political advertising revenue, which is typical in non-election years. Despite the revenue challenges, Nexstar demonstrated a commitment to shareholder returns, repurchasing shares and paying dividends totaling $246 million during the quarter.
Financial Performance Overview
Nexstar's core advertising revenue saw a slight decrease of 2.3% year-over-year, settling at $391 million. The decline in total television advertising revenue was more pronounced at 22.5%, driven by the expected reduction in political advertising revenue, which fell by 85.3% to $19 million. Distribution revenue also experienced a dip of 6.7% to $598 million, influenced by negotiations with a distribution partner and the temporary removal of stations from an MVPD platform.
On a positive note, digital revenue increased by 15.1% to $99 million, reflecting the inclusion of The CW Network and growth in local digital advertising and agency services. Other revenue streams also saw a significant boost, with a 92.3% increase to $25 million.
Operational Highlights and Management Commentary
Chairman and CEO Perry A. Sook highlighted the company's strategic negotiations and renewals of distribution agreements, which are expected to drive future revenue growth. Sook also emphasized the company's confidence in its business model and cash flow generation, as evidenced by aggressive share repurchases that reduced the share count by 25% since December 2019.
Nexstar's operational highlights for the quarter included the appointment of new executives, the renewal of key distribution and affiliation agreements, and the acquisition of broadcast rights for college sports and NASCAR Xfinity Series. The company also closed acquisitions of KUSI-TV in San Diego and WSNN-LD in Tampa, expanding its market presence.
We continue to be bullish about Nexstars future and the many exciting, near- and long-term organic growth opportunities for our business. Looking forward, we expect the balance of 2023 and full year 2024 to benefit from recently renegotiated distribution contracts. In 2024 Nexstar will realize upside from presidential election year political advertising, reduced losses related to The CW Network and an improving economic environment," said Perry A. Sook.
Debt and Leverage Position
Nexstar's consolidated debt stood at $6.87 billion as of September 30, 2023, with a first lien net leverage ratio of 2.05x and a total net leverage ratio of 3.40x. The company continued to actively manage its debt, reducing it by approximately $31 million during the quarter.
Looking Ahead
While the third quarter of 2023 presented revenue challenges for Nexstar, the company's management remains optimistic about the future. With strategic initiatives in place to improve The CW Network's profitability and a focus on capitalizing on political advertising in the upcoming presidential election year, Nexstar is positioning itself for a rebound in performance and continued shareholder value creation.
For detailed financial tables and further information, readers can access the full earnings release on Nexstar's website.
To join Nexstar's earnings conference call or access the webcast replay, participants can find details on the company's website under the "Investor Relations" section.
Nexstar Media Group Inc (NASDAQ:NXST) continues to navigate the cyclical nature of the advertising market while maintaining a strong focus on shareholder returns and strategic growth initiatives.
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Explore the complete 8-K earnings release (here) from Nexstar Media Group Inc for further details.
This article first appeared on GuruFocus.
