Nexstar Sees Distribution Strength Despite Q4 2023 Revenue Decline

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TL;DR:

• Nexstar’s Q4 revenue dropped 12.3% to $1.3B, driven by plunge in political ads; rose 4.3% excluding political ads
• Distribution revenue hit record $704M, up 14.3% on improved contract terms; now over half of total revenue
• Core ad revenue fell 5.9% to $449M, digital ads also down 5.4% amid market softness
• Adjusted EBITDA $411M; attributable free cash flow $265M
• For 2024, projects adjusted EBITDA of $2.085B-$2.195B; shares lag S&P 500 over last year but offer value

IRVING, Texas – Nexstar Media Group’s net revenue for the fourth quarter of 2023 declined 12.3% year-over-year to $1.3 billion, the company reported today. The drop was driven primarily by a plunge in political advertising spending compared to last year’s midterm election cycle. Excluding political ads, Q4 revenue actually rose 4.3%.

The results highlight both lingering softness in Nexstar’s legacy advertising business as well as the resilience of its distribution revenue amid industry upheaval. With over half of total Q4 revenue stemming from distribution and subscription fees, Nexstar continues to transition toward a more diversified business model.

“The completion of distribution agreements in 2022 and 2023 provide solid visibility for our distribution revenues in 2024 and beyond,” said Perry Sook, Nexstar’s Chairman and CEO. “As we move into 2024, an election year, we look forward to once again demonstrating the value of broadcast television to candidates and campaigns.”

Nexstar’s Distribution Revenue Climbs 14.3%

Bolstered by recent contract renewals, Nexstar’s distribution revenue jumped 14.3% year-over-year to a quarterly record $704 million. The growth comes despite ongoing pay TV subscriber losses across the industry. Nexstar has mitigated the cord-cutting impact through improved terms in its retransmission consent deals.

Sook credited the successful renewals for “positioning Nexstar to deliver further annual distribution revenue growth.” With election season on the horizon, political advertising is also expected to rebound after last year’s lull.

Sluggish Core Ad Revenue

Nexstar’s core ad revenue, comprising sales from its local TV stations, fell 5.9% from last year to $449 million. The company again cited softness in the advertising market amid broader economic uncertainty. Digital ad sales similarly declined, dropping 5.4% year-over-year.

On the plus side, Nexstar saw increases in local digital ad revenue as well as sales from its digital agency services and e-commerce divisions.

Moving Forward

For full-year 2024, Nexstar projects adjusted EBITDA in a range of $2.085 billion to $2.195 billion. The forecast factors in growth potential from political advertising and a $1.4 billion revenue backlog. Nexstar also owns a 31.3% stake in Food Network, which continues to deliver steady distributions.

Despite macro headwinds, Nexstar generates substantial free cash flow – averaging $1.2 billion per year over the last two years. The company has a long track record of returning money to shareholders, paying out 77% of attributable free cash flow through dividends and buybacks in 2023.

Earlier this year, Nexstar raised its annual dividend by 25 percent for the 13th straight year. With distribution revenue now comprising over half of total sales, Nexstar has set itself apart from other local broadcasters with a more diversified business mix.

While cord-cutting poses an existential threat for many station groups over reliant on retransmission fees, Nexstar has taken a proactive approach in forging new carriage agreements under favorable terms.

The company’s expanded platform including national cable network NewsNation and a stake in Food Network provides additional stability. As Sook noted, Nexstar has consistently generated substantial free cash flow, enabling a robust capital return program.

With shares lagging the S&P 500 over the past year, Nexstar’s stock may offer an appealing value play for investors. Despite near-term choppiness, distribution revenue seems likely to continue growing while political advertising makes a comeback in 2024.

Coupled with its cash generation focus and commitment to shareholders, Nexstar appears well-positioned amid the shifting pay TV landscape… at least for now.

Nexstar's Q4 distribution revenue rose 14% to a record $704M, even as ad sales declined with Q4 revenue dropping 12.3% $NXST #Nexstar Share on X