Nexstar Media Group, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless stated otherwise. Nexstar operates television stations, networks and digital media properties. Its portfolio included 201 full-power television stations and a 75% interest in The CW. Financial statements are unaudited.
Key financial results
| Metric | Q1 2024 | Q1 2023 | Change / context |
|---|---|---|---|
| Net revenue | $1.284 billion | $1.257 billion | Up 2.1% |
| Distribution revenue | $761 million | $728 million | Up 4.5% |
| Advertising revenue | $512 million | $517 million | Down 1.0%; political advertising rose $31 million, offset by a $36 million decline in core and digital advertising |
| Operating income | $275 million | $204 million | Up 34.8%; operating margin was 21.4%, versus 16.2% |
| Net income attributable to Nexstar | $175 million | $111 million | Diluted EPS was $5.16 versus $2.97 |
| Operating cash flow | $276 million | $494 million | Down $218 million |
| Capital expenditures | $44 million | $36 million | Cash purchases of property and equipment |
| Cash, cash equivalents and restricted cash | $237 million | $147 million at Dec. 31, 2023 | Q1 increase of $90 million |
| Total debt, net of financing costs and discounts | $6.810 billion | $6.837 billion at Dec. 31, 2023 | Principal outstanding was $6.842 billion |
Financial position and capital allocation
- At March 31, 2024, current assets were $1.494 billion and current liabilities were $831 million. The company reported $544 million of unused revolving commitments, all available under its covenant calculations; $20 million of standby letters of credit reduced Nexstar facility availability.
- Debt maturities include $93 million for the remainder of 2024, $124 million in 2025, and $5.344 billion in 2026–2027. Nexstar was in compliance with its financial covenants, including a maximum first-lien net leverage ratio of 4.25 to 1.00.
- Interest expense was $114 million, up from $107 million. A 100-basis-point increase in SOFR would raise annual interest expense and reduce operating cash flow by an estimated $41 million, excluding tax effects. Nexstar reported no interest-rate hedges.
- The company repurchased 666,574 shares for $111 million and paid $57 million in dividends during the quarter. The board raised the quarterly dividend 25% to $1.69 per share. Through May 8, Nexstar repurchased a further 275,532 shares for $45 million.
Period-over-period changes and drivers
- Distribution revenue grew $33 million, chiefly from favorable renewals, scheduled subscriber-rate increases and a partner station’s return to one MVPD; subscriber attrition partly offset growth.
- Lower core and digital advertising reflected continued market softness. Political advertising increased in the 2024 election year.
- Operating expenses fell 4.2%, principally because depreciation and amortization declined $59 million. The decrease was largely lower amortization of The CW broadcast rights, not a comparable reduction in cash operating costs.
- Net income included a $40 million gain on the sale of Nexstar’s BMI investment. Equity-method investment income declined to $19 million from $25 million, primarily reflecting lower TV Food Network earnings.
- Operating cash flow fell amid less favorable timing of receipts and payables, including prepayment of KAZT-TV TBA fees, and $106 million less in distributions from TV Food Network. Lower broadcast-rights payments partly offset these factors.
Outlook, commentary and risks
- No specific financial guidance or quantified full-year forecast is provided. Management expects political advertising revenue to increase in 2024 compared with 2023, and expects distribution fees to continue increasing, while noting ongoing subscriber attrition.
- Management stated that available cash, positive working capital and revolving-credit availability should be sufficient for operating needs, capital expenditures and debt service for at least the next 12 months. It also cautioned that leverage makes the company vulnerable to economic conditions, inflation and higher interest rates.
- The FCC issued a Notice of Apparent Liability concerning WPIX, alleging unauthorized transfer of control and violation of the national television ownership limit. The FCC proposed forfeitures and potential divestiture alternatives. Nexstar and Mission contest the allegations; the company said the possible financial impact cannot be reasonably estimated.
- The appeal of the IRS dispute over Tribune’s 2009 Chicago Cubs transactions was argued in February 2024; Nexstar expected a ruling in the second half of 2024. Separately, if the IRS prevails on disputed 2014–2015 tax-basis adjustments, Nexstar estimates a $16 million increase in taxes payable and a $70 million increase in deferred tax liability. The filing describes the ultimate outcomes and timing as uncertain.
- Nexstar intends to renew its TV Food Network partnership agreement before its specified December 31, 2024 dissolution date. The investment’s book value was $836 million at quarter-end.
- The company guarantees Mission’s senior secured debt; $354 million of Mission principal was outstanding. Ordinary-course litigation and the local television advertising antitrust class action remain pending; Nexstar denies the allegations. The filing reports no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether political advertising growth offsets continued weakness in core and digital advertising, and how retransmission revenue evolves with subscriber attrition.
- Whether operating cash flow normalizes after lower TV Food Network distributions and working-capital timing effects.
- Debt-service capacity, refinancing needs and covenant headroom given substantial debt and exposure to floating interest rates.
- Developments in the FCC WPIX proceeding, the Cubs tax appeal and other tax disputes, including any financial or station-ownership consequences.
- Renewal and economics of the TV Food Network partnership agreement before its specified year-end 2024 date.
- Reported earnings comparability: Q1 profit benefited from the $40 million BMI gain and lower noncash broadcast-rights amortization; the filing does not provide a clear normalized earnings measure.