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Nexstar Broadcasting Group, Inc. Q2 2010 Earnings Call Transcript

Nexstar Broadcasting Group, Inc. Q2 2010 Earnings Call Transcript

Nexstar Broadcasting Group, Inc. (NXST)

Q2 2010 Earnings Call

August 4, 2010; 10:00 am ET


Perry Sook - President and Chief Executive Officer

Tom Carter - Chief Financial Officer


Bishop Cheen - Wells Fargo

James Boyle - Gilford Securities, Inc.

Matt Swope - Gleacher

Aaron Watts - Deutsche Bank

Jonathan Levine – Jefferies

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Edward Atorino – Benchmark

Lance Vitanza - CRT Capital

Andrew Finkelstein - Barclays



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Good day, and welcome to Nexstar Broadcasting Group’s 2010 second quarter conference call. Today’s call is being recorded. All statements and comments made by management during this conference, other than statements of historical facts, may be deemed forward-looking statements within the meaning of Section 21 of the Securities Act of 1933 and Section 21A of the Securities and Exchange Act of 1934.

The company’s future financial conditions and results of operations as well as forward-looking statements are subject to change. The forward-looking statements and comments made during the conference call are made only as of the date of today’s conference call. Management will also be discussing non-GAAP information during this call.

In compliance with Regulation G, reconciliations of this non-GAAP information to GAAP measurements are included in today’s news announcement. The company does not undertake any obligation to update forward-looking statements reflective of changes and circumstances.

At this time, I’d like to turn the conference over to your host, Nexstar President and CEO, Perry Sook. Please go ahead.

Perry Sook

Thanks, Howard and good morning everyone. Thank you very much for joining us to review the 2010 second quarter operating results for Nexstar Broadcasting Group. Tom Carter, our CFO, is on the call here with me this morning, and after our brief remarks open the phone lines for your Q-&-A.

Nexstar’s focus on building brands by leveraging localism has been proven to be a blueprint for both near and long-term growth for the company. Our record second quarter and first half 2010 results reflect the strength of our core television operations and the ongoing success of our quadruple play of revenue drivers as the company again achieved growth in all financial and operating metrics, and solid increases from all of our revenue sources for the quarter.

Our Q2 financial results benefitted from the broad-based advertising recovery and acceleration of the growth of national revenue and our success in garnering leading shares of political billings in our markets. Our 19.9% rise in second quarter net revenue was impressive given that we significantly exceeded the industry revenue performance in last year’s second quarter.

And with our focus on managing the business for cash and paying down debt, we generated 53% growth in second quarter broadcast cash flow, a 62% increase in Q2 EBITDA, and 118% rise in free cash flow all of which highlight what we feel as the tremendous operating leverage in our business model.

Importantly, while we clearly demonstrated our positioning for emerging from the adverse session with a highly diversified business model is yielding strong year-over-year revenue margin and cash flow growth, the best part of our return to growth and de-leveraging story will be evidenced in the second half of this year.

Our third quarter bookings to date are pacing ahead of where we were at the same point in both Q1 and Q2 and we continue to see strong demand on inventory from national and political advertisers which is driving higher rates at our stations.

Nexstar generated total second quarter net revenue of $74.5 million, which as I mentioned was a 19.9% rise from the year-ago period. The increase being broad based as illustrated by strong growth in both, local and national as well as political, retrans, e-MEDIA and mobile revenues and another quarter of contributions from our management services contracts.

During the second quarter, we generated 13.6% year-over-year increase in aggregate local and national revenue, and when you include political, our revenue increase for the quarter was 24.6% in total television ad revenue.

Speaking to the strength of our core television operations, market positions and news operations, we posted a 32.6% year-over-year increase in national spot revenue and a 7.8% rise in local spot revenue. Our increase in total revenue drive from retransmission consent fees, e-MEDIA revenues and management fees was 12.8%.

In total, the high margin revenue from retrans, e-MEDIA and management services increased to $11.1 million in the second quarter and in addition to the core revenue growth we are expecting, we also see continued growth from those forces in the back half of 2010.

Beyond the top line, our continued focus on expense management and achieving further operating efficiencies contributed to excellent year-over-year cash flow and margin growth, excluding one-time charges and gains in 2010 and 2009 second quarters, our 2010 second quarter operating income increased 255% to $15.5 million.

In addition, our BCF margin improved to 41.2%, an increase of 880 basis points and our adjusted EBITDA margin grew to 36.3%, an increase of 940 basis points versus the prior year.

Reflecting the significant year-over-year operating income and growth and a reduction of capital expenditures, our 2010 second quarter free cash flow rose to $10.9 million from $5 million in the comparable year earlier period.

Looking at our balance sheet, Tom and his team have continued to be very active in the six month, year-to-date period with further progress in reducing debt and improving liquidity and Tom will review those specifics in just a moment, but let me first review some of the other quarterly and recent highlights.

Second quarter retransmission consent key revenues were $7.3 million, consistent with Q1’s quarterly record level and exceeding Q2 of ‘09 levels of $6.4 million by 14.1%. Q2 e-MEDIA and mobile revenue came in at $3.3 million surpassing last year’s second quarter by 12.4% and marking the 15th consecutive quarter of growth for Nexstar's community web portal strategy.

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