Nexstar’s Political Ad Sales Skyrocket in Q4 With Midterms as the CW Network Takes $94 Million Loss

Nexstar reported its fourth-quarter 2022 earnings Tuesday, revealing its core ad sales fell 3.3% from Oct. 1-Dec. 31, the quarter following the finalization of its purchase of 75% of the CW Network, but political ad revenue was up 1,306.9% due to the 2022 midterm elections.

The TV station groups giant reported core advertising revenue at $477.5 million for the quarter, down from $493.7 million in the comparable 2021 period. Meanwhile, political ad sales were at a whopping $265.9 million versus $18.9 million last year.

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Overall, Nexstar’s total TV ad sales were up 45%, coming in at $743.4 million compared to $512.60 million in Q4 2021.

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Distribution revenue was flat versus the prior year at approximately $616 million. Digital revenue was up a record 10.1% at $112 million, growth Nexstar attributes to “contributions from the CW” and Nexstar’s increase in local digital ad revenue and agency services business.

Wall Street forecast earnings per share (EPS) of $8.26 on $1.5 billion in revenue, according to analyst consensus data provided by Refinitiv. Nexstar reported adjusted EPS of $5.30 on $1.5 billion in revenue.

Nexstar reported a Q4 profit of $178 million. Excluding the CW Network, which lost $94.3 million from Oct. 1-Dec. 31, Nexstar says its net income totalled $272 million.

Free cash flow for the quarter increased 27.8% to $422 million. Excluding the CW, that amount rose to $458 million.

For the full year 2022, Nexstar reported revenue of $5.21 billion (+12.1% year over year). If the CW is excluded, the company says the revenue increase would have only been 10.8%. Core TV ad sales were down 2.5% year over year while distribution revenue grew 4% and digital revenue rose 13%.

“2022 was a monumental year for Nexstar as we generated $5.2 billion of revenue as well as record levels of Adjusted EBITDA and free cash flow,” chairman and CEO Perry Sook said in a letter to shareholders. “We returned approximately 68% of our 2022 attributable free cash flow, or a record $1.02 billion, to our shareholders in the form of share repurchases and dividends. Our ability to deliver record results and excellent shareholder returns — including being one of the best performing media and entertainment stocks in 2022 — underscores the benefits of our unique scale, the strength of our operating model and our ability to consistently generate substantial free cash flow.

“Our strong financial results are a referendum on the power of the broadcast model and its ability to deliver audiences at scale and strong levels of free cash flow. Our portfolio of local and national media assets provide nationwide reach on par with other broadcast networks and local activation at a greater scale than any other broadcast network owner, creating a differentiated and attractive value proposition for advertisers, brands and content owners in an increasingly fragmented marketplace. We are focused on the continued expansion of our capabilities and leveraging our linear, digital, mobile and streaming assets in new ways to deliver new levels of monetization, growth and shareholder returns.

“Looking ahead, 2023 will benefit from the 2022 renegotiation of our distribution contracts representing more than half of our subscribers, and 2024 will benefit from presidential election year political advertising and additional distribution contract renewals. For the 2023/2024 cycle, we expect to generate pro forma average annual attributable free cash flow of approximately $1.25 billion, inclusive of $90 million of attributable losses and associated tax benefit from The CW. Our strong free cash flow enables us to not only increase the percentage of capital returned to shareholders in the form of dividends but also continue to opportunistically repurchase shares, as well as reduce debt and pursue other strategic opportunities to further enhance shareholder value.”

Nexstar stock closed Monday at $192.30 per share. The regular U.S. stock markets will reopen at 9:30 a.m. ET.

Sook and other Nexstar executives will host a conference call at 10 a.m. ET to discuss the quarter in greater detail.

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