Nexstar Media Group, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter report; the supplied filing text does not provide a complete set of Q4-only financial results. Amounts below are U.S. dollars unless stated otherwise. The consolidated statements include certain variable interest entities (VIEs), and The CW’s results are included from its September 30, 2022 acquisition date.
Business context
Nexstar operates or provides services to television stations in 116 U.S. markets, alongside NewsNation, digital media properties and a 75% interest in The CW. Its largest revenue sources are distribution fees from video distributors and television advertising. Nexstar also owns a 31.3% interest in TV Food Network, a significant source of equity income and cash distributions.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Net revenue | $5,211.0 million | $4,648.4 million | +12.1% |
| Income from operations | $1,312.1 million | $1,175.4 million | +11.6% |
| Net income | $943.5 million | $830.4 million | +13.6% |
| Net income attributable to Nexstar | $971.1 million | $834.5 million | +16.4% |
| Diluted earnings per share | $24.16 | $18.98 | — |
| Net cash from operating activities | $1,403.0 million | $1,214.8 million | +15.5% |
Reported operating income was approximately 25.2% of revenue in 2022 versus 25.3% in 2021. The difference between consolidated net income and income attributable to Nexstar reflects the reported net loss attributable to noncontrolling interests.
- Revenue mix: Distribution $2,571.3 million (49.3% of revenue, +4.0%); core advertising $1,718.3 million (33.0%, −2.5%); political advertising $505.6 million (9.7%); digital $364.6 million (7.0%, +13.0%).
- Cash flow and investment: Capital expenditures were $157.3 million. Investing activities provided $125.2 million, largely reflecting $241.8 million of proceeds from real estate sales. Cash, cash equivalents and restricted cash totaled $219.7 million at year-end, including $204.1 million of cash and cash equivalents.
- Debt: Total debt, net of financing costs and discounts, was $6,951.5 million, down from $7,415.1 million. Nexstar reported $542.6 million of unused revolving commitments available at year-end, net of stated standby-letter-of-credit amounts. It was in compliance with its credit-facility financial covenant, including the 4.25-to-1.00 maximum first-lien net leverage requirement.
- Interest and sensitivity: Net interest expense rose to $336.6 million from $282.7 million. Floating-rate loan rates were 5.86%–6.89% at year-end; management estimated a 100-basis-point increase in SOFR and U.S. LIBOR would raise annual interest expense and reduce operating cash flow by $42.8 million, before tax effects.
- Equity investment: TV Food Network contributed $153.4 million of net equity-method income after basis-difference amortization, and distributed $249.4 million in cash to Nexstar.
Material changes versus FY2021
- Revenue reached a record, driven in part by political advertising of $505.6 million versus $45.2 million in 2021, a non-election year. The filing describes 2022 political revenue as a record for a non-presidential election year.
- Distribution revenue increased on annual subscriber-rate escalators and contract renewals, partly offset by continued MVPD subscriber losses, temporary carriage interruptions during negotiations, and a distributor dispute settlement.
- Core advertising declined amid a weaker national market, the absence of NBC-affiliate Olympic advertising from 2021, and mix shifts between core and political advertising. Digital revenue increased, including contributions from acquisitions.
- Operating expenses increased, including programming and other costs associated with The CW and higher network affiliation costs. Interest expense also increased substantially as floating rates rose, despite debt repayments and refinancing.
- Nexstar acquired 75% of The CW for no purchase consideration, recognizing a $55.6 million bargain-purchase gain. From acquisition through year-end, The CW recorded $66.4 million in revenue and a $94.9 million operating loss. The acquisition included $33.0 million of transaction costs.
- Impairment charges totaled $132.9 million, including a $90.8 million goodwill impairment at a digital product-review business and a $36.8 million impairment on Chicago real estate held for sale. FY2021 included $23.0 million of real-estate impairment.
- Operating cash flow increased, while Nexstar returned more than $1.0 billion to shareholders: $880.7 million of share repurchases and $142.2 million of dividends. It also repaid debt and completed a $3.05 billion refinancing of near-term maturities.
Outlook, commentary and risks
- Management said available cash, positive working capital and revolving-credit availability were sufficient to support operations, capital expenditures and debt service for at least 12 months from the filing date. This assessment is subject to economic and market conditions.
- Nexstar expects distribution fees to continue increasing as contracts renew and subscriber rates rise, while acknowledging MVPD subscriber attrition and retransmission-consent negotiation risks. It renewed agreements representing over half its subscriber base in 2022.
- The CW strategy focuses on changing programming, growing digital monetization and reducing costs. NewsNation was expected to expand to 24 weekday news hours by the end of 2023 and 24 hours a day, seven days a week, by 2024. Nexstar targeted ATSC 3.0 coverage of about 50% of U.S. television households, up from 35% at year-end 2022. These are management plans, not guaranteed outcomes.
- Key risks include substantial leverage and variable-rate exposure; dependence on distribution revenue and advertising; audience migration to streaming and other media; network-affiliation renewals; FCC ownership and retransmission rules; and the possibility of further asset impairments.
- The qualified pension plans were underfunded by approximately $175.5 million at year-end. Pension asset performance and discount-rate changes can affect obligations and future funding needs.
- The IRS appealed a Tax Court decision finding no 2009 tax deficiency or penalty related to Tribune’s Chicago Cubs transactions; Nexstar filed a cross-appeal. Separate Tribune tax-audit matters remain contested. A local television advertising antitrust class action is also ongoing; Nexstar denies the allegations. Management stated ordinary-course litigation was not expected to materially affect results, but outcomes are uncertain.
- In January 2023, the board raised the quarterly dividend 50% to $1.35 per share. Future dividends and repurchases remain discretionary and subject to debt restrictions and business needs.
Important facts for investors to verify
- Review the full audited statements and debt disclosures, especially maturity schedules, interest-rate terms, covenant headroom and the Mission debt guarantee.
- Track retransmission renewals, MVPD subscriber trends, carriage disputes and the revenue contribution retained after network affiliation fees.
- Assess The CW’s operating losses, programming commitments, turnaround costs and the future call and put rights held by Nexstar and the Sellers.
- Monitor digital-business performance and assumptions underlying the $90.8 million goodwill impairment, as well as potential future impairment exposure.
- Follow the Chicago Cubs tax appeal, Tribune tax audits and local television advertising antitrust litigation for changes in potential exposure.
- Distinguish reported cash generation from shareholder returns, real-estate sale proceeds and political-advertising cyclicality when evaluating sustainable cash flow.