Nexstar reported its second-quarter 2023 earnings Tuesday, revealing the TV stations group giant had turned a profit of $153 million in Q2, while its CW broadcast network posted a loss of $78 million for the April-June quarter.
For the CW, which was formally acquired by Nexstar in October 2022 from Paramount Global and Warner Bros. Discovery, a year-over-year comparison can’t be drawn based on the lack of financial results disclosed publicly by its former parent companies. But it’s long been known the old CW was not profitable, and this $78 million is an improvement over the $83 million loss the CW posted in Q1 of this year.
Nexstar CFO’s Lee Ann Gliha expanded on the CW’s performance during the earnings call Tuesday morning, stating that the CW generated $75 million in revenue in Q2, and, with some favorable adjustments accounting for a $3 million one-time expense attributed mostly to restructuring charges, took only a $74 million loss for the quarter.
That narrowing loss is an indicator of where Nexstar, which also owns NewsNation and The Hill, is at in its journey to reach profitability at the CW in 2025. On that front, the company is taking a “Moneyball”-inspired approach to content spend at the CW, per Nexstar CEO Perry Sook. The network has stacked its fall 2022 lineup — a schedule set amid the early days of the ongoing writers strike in May and somewhat tweaked as the actors guild joined the picket lines in July — with acquired dramas and comedies, new and acquired reality content and a whole lot of sports.
“To drive the growth of the network we are making, quote, ‘Moneyball’-inspired investments in content that matters to the broadcast viewer, including live sports, in order to grow our distribution and advertising revenues,” Sook said during the Q2 earnings call Tuesday. “In less than one year of ownership, we’ve already secured the rights to a variety of sports properties, including LIV Golf, ACC football and basketball coming to the CW this September, the NASCAR Xfinity Series starting its engine on the CW in February of ’25, and sports related programming such as ‘Inside the NFL,’ which will premiere at 8 p.m. on Sept. 5, and our sports documentary series ‘100 Days to Indy,’ all of which are expected to accelerate the viewership and revenue growth for the CW ecosystem. In fact, with just these three agreements, beginning in 2025, The CW will have 48 weekends per year of live sports programming. As our sports partners will tell you, broadcast television is the best medium for live sports, as it delivers the highest ratings and widest distribution to their fan bases while providing promotion and engagement at the local level to drive attendance and ancillary revenue streams.”
Sook said that “over time, the CW is increasingly looking like Fox, with the same number of hours of weekday programming and its growing live sports portfolio” — just before touching on the hiring of new COO Michael Biard, a Fox network vet who is replacing current Nexstar COO Tom Carter when he retires later this year.
Nexstar’s core ad sales were $404 million in Q2, a decrease of 2.2% from the comparable year-ago quarter. Political ad sales fell 89.7% to $9 million from $87 million last year, when midterm elections spiked that categories revenue.
Total TV ad sales were $413 million, down 17.4% year-over-year from $500 million.
Elsewhere, distribution revenue, digital revenue and “other” revenue fueled the good Q2: Distribution was up 7.7% ($696 million vs. $646 million), digital climbed 11.4% (98 million vs. 88 million) and “other” rose 200% ($33 million vs. $11 million).
Wall Street forecast earnings per share (EPS) of $2.35 on $1.24 billion in revenue, according to analyst consensus data provided by Refinitiv. Nexstar reported diluted EPS of $2.68 on $1.24 billion in revenue. That net revenue figure is down 0.4% from the $1.25 billion in Q2 2022.
Free cash flow stood at $100 million, which rises to $131 million when excluding the CW. Net income was $75 million, down 66.8% year over year from $226 million in second-quarter 2022.
“During the quarter, NewsNation marked a major milestone by becoming a 24/5 news network with the debut of new expanded daytime programming, the launch of the network’s political ensemble program, The Hill, and the addition of a new evening news program,” Sook wrote in a letter to shareholders accompanying the Q2 results Tuesday, adding: “Looking forward, we expect the balance of 2023 will continue to reflect our ability to outperform the overall advertising market and benefit from renegotiated distribution contracts representing more than half of our subscribers at the end of 2022, partially offset by the ongoing impact of negotiations with certain distribution partners. We are even more excited about 2024 as Nexstar will realize upside from presidential election year political advertising, additional distribution contract renewals this year, a slowing of losses related to The CW Network, as well as expectations for a declining interest rate environment and a recovering economy. Given Nexstar’s exciting growth initiatives, robust free cash flow generation, solid capital returns to shareholders and our modest leverage, we remain well positioned to deliver enhanced value to shareholders.”
