Nexstar Media Group, Inc. — Q1 2022 Form 10-Q
Business context and reporting period. Unaudited results cover the three months ended March 31, 2022, compared with Q1 2021. Nexstar operated, programmed or provided services to 199 full-power TV stations and one AM radio station across 116 markets, alongside NewsNation and digital businesses. The company also owns a 31.3% interest in TV Food Network. Financial statements consolidate certain variable-interest entities (VIEs), although Nexstar does not own those entities.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Net revenue | $1,210.1 million | $1,113.9 million; up 8.6% |
| Operating income | $329.4 million | $284.9 million |
| Operating margin | 27.2% | 25.6% |
| Net income attributable to Nexstar | $251.6 million | $200.9 million |
| Diluted EPS | $5.99 | $4.42 |
| Net cash from operating activities | $518.9 million | $448.3 million |
| Capital expenditures | $28.9 million | $32.1 million |
| Cash, cash equivalents and restricted cash | $341.8 million | $206.5 million at Dec. 31, 2021 |
| Total debt, net carrying amount | $7,260.3 million | $7,415.1 million at Dec. 31, 2021 |
Revenue mix included distribution of $667.9 million, core advertising of $428.1 million, digital of $78.7 million and political advertising of $23.7 million. The effective tax rate was 17.3%, versus 23.1% in Q1 2021, including a $25.8 million tax benefit related to equity awards. Working capital was approximately $748.5 million. Nexstar reported $363.2 million of unused revolving commitments available to borrow, subject to covenant compliance.
Material changes versus Q1 2021
- Distribution revenue rose $46.7 million, or 7.5%, reflecting rate escalations and contract renewals, partly offset by MVPD subscriber attrition.
- Political advertising increased $18.3 million as 2022 is a midterm-election year. Core advertising rose 4.0%, reflecting recovery and new business, partly offset by weaker automotive advertising.
- Digital revenue increased 18.5%, including $8.7 million from a digital business acquired in 2021.
- Operating expenses increased to $880.7 million from $829.0 million. Direct operating costs rose with programming fees, sales and promotional spending, pandemic recovery and NewsNation news costs.
- Operating cash flow increased $70.6 million. Nexstar cited stronger operating income, collections timing, higher TV Food Network distributions and lower broadcast-rights payments, partly offset by vendor-payment timing.
Capital allocation, outlook and risks
- Nexstar prepaid $150.0 million of 2024 Term Loan B principal and made $8.7 million of scheduled Term Loan A repayments during the quarter. Debt represented 71.3% of combined capitalization; the company was in compliance with its financial covenant.
- The company repurchased 917,923 shares for $158.1 million and paid $37.1 million in dividends. The quarterly dividend was increased 29% to $0.90 per share. After quarter-end, it repurchased another 370,619 shares for $65.0 million through May 9, 2022.
- No numerical earnings or revenue guidance is provided. Management expected political advertising to rise in 2022 and anticipated continued increases in retransmission fees. Advertising is generally seasonally stronger in Q2 and Q4 and in even-numbered election years.
- Management said COVID-19 had not materially affected liquidity and believed available cash, working capital and revolver access would meet needs for at least the next 12 months. It cautioned that pandemic developments and supply-chain disruption remain uncertain.
- Automotive advertising fell approximately 24% year over year amid semiconductor and chip shortages. Other risks include MVPD subscriber attrition, substantial leverage and variable-rate debt: a 100-basis-point increase in U.S. LIBOR was estimated to add $45.3 million to annual interest expense, before tax effects. Nexstar reported no interest-rate hedges.
- Contingencies include ongoing local-TV advertising antitrust class-action litigation and the acquired Tribune tax disputes related to the Chicago Cubs transactions and 2014–2015 tax audits. The filing describes potential tax exposure if the IRS prevails; outcomes, including the appeal and penalty issues, remain uncertain.
- TV Food Network paid Nexstar $192.8 million in cash distributions in Q1, primarily treated as a return of capital in cash-flow reporting. The partnership agreement includes a specified December 31, 2022 dissolution date unless continued or reconstituted; Nexstar said it intends to renew the agreement.
Most important facts for investors to verify
- Whether distribution-revenue growth can persist despite MVPD subscriber attrition, and how political advertising develops through the 2022 election cycle.
- Debt reduction, interest-rate sensitivity, covenant headroom and the availability of revolving credit.
- How much operating cash flow depends on TV Food Network distributions and whether the partnership agreement is renewed.
- Developments and potential financial effects of the antitrust litigation and Tribune-related tax matters.
- Whether share repurchases and the higher dividend remain sustainable alongside debt service and capital needs.