Nexstar Broadcasting Group Q1 2010 Earnings Call Transcript

Nexstar Broadcasting Group Q1 2010 Earnings Call Transcript
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Nexstar Broadcasting Group (NXST)

Q1 2010 Earnings Call

May 12, 2010 10:00 am ET

Executives

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Perry Sook - Founder, Executive Chairman, Chief Executive Officer, President, Chief Executive Officer of Nexstar Broadcasting Inc, President of Nexstar Broadcasting Inc and Director of Nexstar Broadcasting Inc

Thomas Carter - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Aaron Watts - Deutsche Bank

James Boyle - Gilford Securities Inc.

Stephen Weiss - Analyst

Harry DeMott - King Street Capital Management

Matthew Swope

Barry Lucas - Gabelli & Company, Inc.

Presentation

Operator

Good day, and welcome to Nexstar Broadcasting Group's 2010 First Quarter Conference Call. [Operator Instructions] All statements and comments made by management during this conference, other than statements of historical fact, 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 is 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 be discussing non-GAAP information during this call. In compliance with Regulation G, reconciliations of these 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

Thank you, Karen, and good morning, everyone. Thank you all for joining us to review Nexstar's 2010 First Quarter Operating Results. Tom Carter is with me this morning here in the room, and after our brief remarks we will open the floor to Q&A.

2010 is off to an excellent start for Nexstar with another strong quarter led by robust growth in all of our financial and operating metrics. Nexstar's solid first quarter 2010 results confirm our view that the initial increases in core advertising activity generated in late 2009 are gaining momentum in 2010. In addition, Nexstar's commitment to leveraging our local platform by building out on our quadruple play of revenue drivers continues to serve as well and our record first quarter net revenue reflects solid growth from all of our revenue sources. Furthermore, we believe that our 23.7 rise in first-quarter net revenue will be a high watermark in the industry and is even more impressive as we also significantly exceeded industry revenue performance in the year ago period. In addition to record first quarter revenue, we also posted record broadcast cash flow, record EBITDA and record free cash flow. These results highlight growing margins and the significant operating leverage in our diversified business model, as well as the initiatives we undertook throughout 2009, positioned Nexstar to benefit from the strengthening economy and the strengthening and improving ad environment.

Tom and his team have been very active in the year-to-date period with further success in reengineering our balance sheet to improve liquidity, extend our bank maturities and eliminate pricing increases on certain pieces of our capital structure and Tom will review that activity in just a moment.

Nexstar generated total first quarter net revenue of $68.6 million, a 23.7% rise from the year ago period. With the increase being broad based with a strong growth in local, national, political, retries [retransmission], e-MEDIA and revenues from our management contract. During the first quarter, we generated a 17.6% year-over-year increase in aggregate local and national revenue and a 23.1% rise in gross ad revenue which would be inclusive of our political advertising.

Speaking to the strength of our core television operations and our market positions, Nexstar generated a 16.2% year-over-year increase on local spot revenue and a 21.8% rise in national spot revenue. As well as a 40.9% increase in total revenues derived from retransmission consent, e-MEDIA and management fees. In total, the high-margin revenue from retrans, e-MEDIA and management services increased to $10.8 million in the first quarter and we will see continued growth from all of these sources as we move throughout 2010.

Our continued focus on expense management and achieving further operating efficiencies resulted in record 2010 first quarter operating income of $9.8 million and free cash flow of $8.9 million compared to negative free cash flow in the year ago period attributable to the loss from operations related to expenses incurred for the exchange offer completed in the first quarter of 2009.

Reflecting the success of our diversification efforts, we've successfully transitioned the traditional television revenue model from a one-legged, ad-supported, distribution-dependent entity into a multi-tier business model that uses our core on-air television advertising operations as a foundation. With most of our peers having now reported, we believe that our first quarter results demonstrate once again our pursuit of new revenue opportunities and the expansion of our local platform to include revenue drivers and traditional media, subscription-based revenue, e-MEDIA and station management services agreements as a path to near and long-term growth.

Our focus on building brands by leveraging localism is embraced throughout Nexstar and it will be reflected in our results throughout the year. With the ad environment improving and auto and many other key advertising categories increasing, upcoming quarters will benefit from higher levels of overall ad spending also from significant political revenue and continued growth of total revenue derived from retrans, e-MEDIA and management agreements.

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