Nexstar Media Group (NXST) Q4 2018 earnings summary

Executive summary

• FY18 marked a seventh consecutive year of record results; net revenue reached $2.77B, adjusted EBITDA $1.02B, and free cash flow $684.2M.

• Record results reflected election-year political advertising, higher retransmission revenue, acquisitions, and operating leverage; local and national advertising at legacy stations declined.

Financial highlights

• Net revenue rose 13.8% to $2.77B; operating income was $757.8M, versus $505.6M in 2017.

• Net income attributable to shareholders was $389.5M, down from $475.0M; diluted EPS was $8.21 versus $10.07, reflecting the 2017 tax benefit.

• Adjusted EBITDA was $1.023B, up 37.7%; excluding $8.5M of one-time corporate transaction expenses, adjusted EBITDA was $1.032B, up 28.6%.

• Free cash flow was $684.2M, up 45.9%; excluding $8.5M of one-time transaction expenses, it was $692.7M, up 31.2%.

• Q4 net revenue was $798.0M, operating income $272.8M, attributable net income $153.1M, and diluted EPS $3.22.

Outlook and guidance

• Tribune acquisition was expected to close late Q3 2019, subject to shareholder, FCC and other regulatory approvals and customary conditions.

• Tribune transaction was expected to nearly double pro forma average annual revenue and adjusted EBITDA; pro forma free cash flow in the 2018/2019 cycle was projected at ~$900M per year.

• Estimated net leverage at closing was ~5.1x, with a target of ~4.0x by end-2020; required divestiture proceeds exceeded initial expectations by over 36%.

• 2019 growth drivers included initial Tribune contributions, double-digit combined retransmission and digital growth, contract renewals at year-end, and expected 2020 election spending.

• Quarterly dividend increased 20% to $0.45 per share beginning Q1 2019; capital priorities included shareholder returns, debt reduction, and strategic investment.