Business Overview

Nexstar Media Group, Inc. (NASDAQ:NXST) is a leading diversified media company that has consistently delivered exceptional financial performance and shareholder returns. With a focus on local broadcasting, Nexstar has established itself as the undisputed leader in the industry, leveraging its extensive network of television stations and digital assets to drive sustained growth and profitability.

The company’s history can be traced back to 1996 when Perry Sook founded Nexstar Broadcasting Group. Over the past 25 years, Nexstar has embarked on an impressive journey, strategically expanding its footprint and diversifying its operations to become a dominant force in the ever-evolving media landscape.

Nexstar has grown to become the largest local television broadcaster in the United States, owning, operating, programming, or providing sales and other services to 200 full power television stations and one AM radio station in 116 markets across 40 states and the District of Columbia. The stations are affiliates of major broadcast television networks such as CBS, FOX, NBC, ABC, The CW, and MyNetworkTV. This extensive network has allowed Nexstar to maximize its distribution and advertising revenue while maintaining strict cost controls.

A significant milestone in Nexstar’s growth trajectory was the acquisition of Tribune Media Company in 2019, which solidified its position as the nation’s largest local television broadcasting company. This acquisition, while expanding Nexstar’s television station portfolio, also presented challenges in terms of regulatory approvals and business integration.

Nexstar has also been proactive in addressing the ongoing shift in consumer viewing habits from traditional television to streaming platforms. The company has expanded its digital footprint by launching new streaming channels and applications, diversifying its revenue streams beyond traditional advertising.

Financials

One of Nexstar’s key strengths lies in its diversified revenue streams. The company generates revenue from distribution, advertising, and various digital initiatives. In the latest quarter, Nexstar reported record third-quarter net revenue of $1.37 billion, a 20.7% increase compared to the prior year period. This robust performance was driven by all-time high third-quarter distribution revenue of $719 million, a 20.2% year-over-year increase, as well as a 22.2% jump in advertising revenue, largely attributable to strong political advertising.

Nexstar’s financial metrics continue to impress, with the company reporting adjusted EBITDA of $510 million in the third quarter, representing a 37.3% margin. Additionally, the company generated $327 million in adjusted free cash flow, a significant increase from the $81 million reported in the same period last year. These strong financial results have enabled Nexstar to return substantial capital to shareholders, including $233 million in the third quarter through dividends and share repurchases.

The company’s strategic investments in its digital assets have also paid dividends, with Nexstar’s digital businesses, including local websites, mobile apps, and streaming platforms, contributing to its overall success. The acquisition of The CW network in 2022 has further strengthened Nexstar’s position, as the company has successfully transformed the network’s programming strategy, reducing operating losses by $119 million year-to-date.

Nexstar operates in two primary reportable segments: Broadcast and Other. The Broadcast segment, which includes television stations, related local websites, NewsNation, and digital multicast networks, generated $3.72 billion in net revenue for the nine months ended September 30, 2024, representing 95% of Nexstar’s total net revenue. The Other segment, which includes The CW network and digital businesses focused on the national marketplace, generated $229 million in net revenue for the same period.

For the full fiscal year 2023, Nexstar reported revenue of $4.93 billion, net income of $346 million, operating cash flow of $999 million, and free cash flow of $850 million. The company has maintained a strong 3-year revenue CAGR of 4.5% from 2020 to 2023, demonstrating its ability to navigate industry challenges and capitalize on emerging opportunities.

Liquidity

Nexstar’s growth is not limited to organic initiatives; the company has also demonstrated its ability to execute value-creating acquisitions. In 2023, Nexstar acquired the assets of WSNN-LD in the Tampa, Florida market and KUSI-TV in the San Diego, California market, further expanding its geographical reach and strengthening its local market dominance.

The company’s robust financial performance and strategic initiatives have positioned Nexstar for continued success. Looking ahead, the company remains optimistic about its prospects, driven by the increasing value of broadcast networks and stations, the growth of its national cable news network NewsNation, and the ongoing transformation of The CW network.

Nexstar’s management team, led by Founder, Chairman, and CEO Perry Sook, has consistently demonstrated its ability to navigate industry challenges and capitalize on emerging opportunities. The company’s strong free cash flow generation and disciplined capital allocation have enabled Nexstar to maintain a healthy balance sheet and provide attractive returns to shareholders.

As of the third quarter of 2024, Nexstar reported a debt-to-equity ratio of 3.02, cash and cash equivalents of $181 million, and an available credit line of $532 million net of outstanding letters of credit under the company’s senior secured credit facilities. The company’s current ratio and quick ratio both stand at 1.68, indicating a solid liquidity position.

Guidance and Future Outlook

Nexstar has provided guidance for the upcoming periods, reflecting the company’s confidence in its business model and growth strategies. For the fourth quarter of 2024, Nexstar expects nonpolitical advertising to be down in the low double-digit percentage range year-over-year, primarily due to political advertising displacement and the continued impact of a challenging advertising market.

The company has already achieved record results in political advertising revenue, booking $491 million year-to-date as of Election Day, surpassing the $479 million booked through Election Day in 2020. This performance underscores Nexstar’s strong position in the political advertising market during election years.

Regarding The CW network, Nexstar expects to continue improving its profitability in 2025, with a significant percentage of The CW’s distribution deals up for renewal that year. This positions the company well for further growth in 2026 and beyond. Nexstar has already made significant progress in reducing The CW’s operating losses, achieving a $119 million reduction year-to-date, surpassing their previously stated goal of improving the operating loss position by over $100 million this year.

Nexstar plans to use a portion of its fourth quarter 2024 free cash flow to optionally repay some additional debt, further strengthening its balance sheet and financial flexibility.

Conclusion

While the media industry continues to face headwinds, such as changing consumer preferences and industry consolidation, Nexstar’s focus on local broadcasting, strategic diversification, and operational excellence have positioned the company to weather these challenges and emerge as an even stronger industry leader.

Nexstar’s impressive track record, diversified revenue streams, and strategic initiatives make it a compelling investment opportunity in the dynamic media sector. The company’s ability to generate strong cash flows, execute value-creating acquisitions, and adapt to the evolving industry landscape positions it well for continued success.

As Nexstar continues to capitalize on its strengths, including its dominant position in local broadcasting, growing national cable news network, and improving performance of The CW network, investors can expect the company to remain a dominant force in the media industry for years to come. With a clear strategy for growth, strong financial performance, and a commitment to returning value to shareholders, Nexstar Media Group stands out as a leader in the broadcasting and media landscape.

Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.