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Nexstar Ad Sales Grow More Than 18% in Q3, Political TV Spot Revenue Up 942% Ahead of Midterms

New CW network owner Nexstar reported its third-quarter 2022 earnings Tuesday before the bell, revealing TV ad sales were up more than 18% year over year overall, while revenue from political TV advertising, specifically, jumped 942.7% from Q3 of 2022.

Per Nexstar, the TV station group and parent company of NewsNation posted $399.7 million in core advertising revenue in Q3 and $129.3 million in political ad sales compared with $432.7 million and $12.4 million in the year-ago quarter.

That giant boost to political ad sales came during the July-September quarter, the last full quarter of the year ahead of the Nov. 8 midterm elections.

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Elsewhere, Nexstar’s distribution revenue was up 3.7% ($641.7 million vs. $618.8 million), digital revenue climbed 5.7% ($85.7 million vs. $81.1 million), and “other” revenue was up 5.8% ($12.7 million vs. $12 million).

Wall Street forecast earnings per share (EPS) of $5.41 on $1.29 billion in revenue, according to analyst consensus data provided by Refinitiv. Nexstar reported diluted EPS of $7.30 on $1.27 billion in revenue. While revenue missed projections, it was up 9.7% from the previous year’s July-September quarter.

Net income for the quarter was $287.5 million, up 70% from Q3 2021’s $169.1 million. Free cash flow rose 16.6% to $293.6 million.

In August, Nexstar announced it would be acquiring a majority stake in the CW network from Paramount Global and Warner Bros. Discovery, a deal which closed Sept. 30. Since then, Nexstar has been busy restructuring operations and overhauling the old guard at the broadcaster. According to Nexstar, “The transaction is expected to solidify the Company’s programming and revenue opportunities as the largest CW affiliate group, diversify its content outside of news, and establish it as a scaled participant in advertising video-on-demand (AVOD) services via The CW App.”

“Nexstar delivered another quarter of record financial results as third quarter net revenue rose 9.7%, led by strong growth in political advertising, distribution, and digital revenue,” Perry Sook, Nexstar’s chairman and chief executive officer, said in a prepared statement accompanying the financials. “Adjusted EBITDA and free cash flow were also third quarter records and we returned 85.2% of our free cash flow to shareholders through a combination of dividends and share repurchases.  Our focus on generating strong free cash flow and enhancing shareholder value are highlighted by our 2022 year-to-date return of $729.6 million to shareholders. Nexstar’s results continue to benefit from our diverse, scaled, efficient and low leverage business model. Over 50% of revenue is contractual and from non-advertising sources and approximately 70% of our core advertising is from local advertisers which are historically more consistent in their spend throughout economic cycles. Nexstar has built an unparalleled local moat with more than 1,500 local sellers and 40,000 advertiser relationships in the 116 local markets we serve across America. In addition, we are extremely well positioned to continue to benefit from record levels of political advertising spending which is not dependent on the economy.

“We expect the fourth quarter to benefit from a continuation of strong political advertising trends while 2023 will see distribution revenue upside from renewals of agreements representing more than half of our subscribers. Looking forward, we expect 2024 to benefit from another record year for political advertising due to the presidential election combined with the benefit of another wave of distribution agreement renewals for approximately 40% our subscribers. Longer-term, we believe implementing our plans for The CW Network, growing NewsNation and progressing towards the monetization of our spectrum through the deployment of ATSC 3.0 technology will complement our other growth initiatives to support the further enhancement of shareholder value.”

Nexstar stock closed Monday at $155.00 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 10:00 a.m. ET to discuss the quarter in greater detail.

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