Nexstar reported its third-quarter 2023earningsWednesday, revealing TV ad revenue was down overall 23% for the July-September quarter. Meanwhile, the CW network made quarter-over-quarter progress on its path to profitability by narrowing its losses to $60 million.
Forthe 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 $60 million is an improvement over the $78 million loss the network posted in Q2 and the $83 million loss in Q1.
Nexstar’s core ad sales were $391 million in Q3, a decrease of 2.3% from the comparable year-ago quarter. Political ad sales fell 85.3% to $19 million from $129 million last year, when midterm elections spiked that categories revenue.
Total TV ad sales were $410 million, down 23% year-over-year from $529 million.
Distribution revenue was down 6.7% ($598 million vs. $641 million), digital climbed 15.1% (99 million vs. 86 million) and “other” rose 92.3% ($25 million vs. $13 million).
Free cash flow stood at $100 million, which rises to $136 million when excluding the CW. Net income was $8 million, down 97.2% year over year from $288 million in third-quarter 2022.
Wall Street forecastearningsper share (EPS) of $1.51 on $1.18 billion in revenue, according to analyst consensus data provided by Refinitiv. Nexstar reported diluted EPS of 70 cents on $1.13 billion in revenue.
“Third quarter financial results primarily reflect the year-over-year decline in cyclical political advertising as well as the distribution revenue impact related to our successful negotiations with a distribution partner,” Nexstar CEO Perry Sook said in a letter to shareholders. “We expect the favorable terms of new distribution agreements reached year-to-date, in 2022 and other upcoming renewals, to drive strong, high-margin distribution revenue growth. Our confidence in the strength and consistency of Nexstar’s business model and free cash flow generation is clearly highlighted by our active return of capital initiatives. During the third quarter and year-to-date, we allocated $199 million and $514 million, respectively, to repurchase shares, which we accelerated in September given the performance of our stock price. As a result, we reduced our share count to approximately 34.2 million shares as of September 30, 2023, marking a 25% reduction in our shares outstanding since the commencement of our share repurchase strategy in December 2019. We have ample capacity to continue to create shareholder value through repurchases with over $700 million remaining on our current authorization.
“Broadcast stations have the most watched television content, and we remain undercompensated for that viewership. Without significant audience reach, the broadcast model remains the only and best way to maximize viewership – something that broadcast networks and sports organizations understand. We believe that recent changes in the television ecosystem brought on by the Charter/Disney agreement will have a further positive impact on our model by creating stability in our subscriber base and freeing up programming spend from derivative cable networks to be reallocated to premium content like ours. The terms of our recent distribution and affiliation agreements reflect this viewpoint and we are very pleased with the outcome.
“We continue to be bullish about Nexstar’s future and the many exciting, near- and long-term organic growth opportunities for our business. Looking forward, we expect the balance of 2023 and full year 2024 to benefit from recently renegotiated distribution contracts. In 2024 Nexstar will realize upside from presidential election year political advertising, reduced losses related to The CW Network and an improving economic environment. We have a clear set of objectives for creating the greatest long-term value for our shareholders and will continue to deploy cash in a manner that will deliver the highest returns.”
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Nexstar stock closed Tuesday at $151.46 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.
