Q1 2022 Nexstar Media Group Inc Earnings Call
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First quarter 2022 results call today's call is being <unk>.
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Now wait to turn the conference over to.
Joe.
Please go ahead Sir.
Thank you Anna and good morning, everyone. Let me just read the Safe Harbor language and then we'll get right into the call all statements and comments made by management during today's call other than statements of historical fact may be deemed forward looking statements for the purposes of the private Securities Litigation Reform Act of 1995, Nexstar cautions that these forward looking statements are subject to risks and uncertainties.
That may cause actual results to differ materially from those reflected by the forward looking statements made during the call for.
For additional details on these risks and uncertainties. Please see next door. It's annual report on Form 10-K for the year ended December 31st 2021 as filed with the Securities and Exchange Commission as well as Nexstar subsequent public filings with the SEC.
Extra undertakes no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise with that it's now my pleasure to turn the conference over to your host Nexstar founder Chairman and CEO Perry Sook Perry. Please go ahead.
Thank you Joseph and good morning, everyone. Thank you for joining US we appreciate your being with US here today to discuss <unk> record first quarter financial results, which include the highest quarterly free cash flow in the company's history.
With me on the call today are Tom Carter, President and Chief operating Officer.
Our CFO I'll start with a summary of recent highlights and developments followed by Toms Operation Review and Leann Financial review.
So while the equity market is testing new levels of volatility. It was another boring beat consensus expectations no drama quarter here at Nexstar. The type of performance investors should know to expect from us.
Outstanding results represented an excellent start to what we expect will be another year of record financial performance for our shareholders and for the Nexstar nation.
First quarter top and bottom line performance was driven by strong year over year growth across all of our revenue sources as well as the first quarter cash distribution from our TV food network ownership interests.
Revenue adjusted EBITDA and free cash flow all came in well ahead of our expectations continuing our track record of exceeding consensus expectations.
A recurring theme this earning season for companies across all industries and all market caps are wall street's concerns about the economic and business impact of supply chain issues high inflation and rising interest rates.
With that in mind, let me spend a few minutes reviewing why nexstar is entering the second quarter from a position of strength, which we will build upon to create new value for shareholders this year and going forward.
55% of our total net revenue is derived from distribution revenue, which is contractual. This is a recurring revenue source that provides us with a solid foundation for continued growth not only in Q2, but through the balance of this year and beyond.
As we've commented in quarters past, we continue to see stabilizing low single digit rates of subscriber attrition.
Second as you know 2022 was a political year, where we will benefit from strong shares of political advertising spending given our scale and our presence in many of the key battleground states.
Q1, we delivered strong early political results with revenue up 40% over pro forma Q1 of 2018, Importantly fund raising which is a key indicator for political AD spend increased 91% over Q1 of 2018. According to the federal elections Commission.
We expect fundraising levels to accelerate as we move through the year given these positive trends and recent events.
As America's largest local broadcasting company, we have the scale and resources to produce and distribute the most comprehensive political news and live debate coverage in our markets.
We are also realizing meaningful content synergies between our broadcast operations and news nation as well as our accretive acquisition of the hill. These distinct competitive advantages reinforced our confidence that nexstar will deliver record midterm election, net political advertising revenue in 2022 meaningfully exceeding our pro forma 2000.
18 levels.
Third in Q1 core advertising, which represents 35% of our net revenue was up 4%.
Of our core advertising revenue, 59% is from services, 26% is from food I'm, sorry from goods and 15% from auto.
Given that mix and large exposure to the services industry, we are somewhat insulated from the supply chain and inflation issues elsewhere.
And while it is true that auto continues to be a challenged category overall, we're pacing very close to last year in that category.
Looking forward there are many bright spots among our advertising categories experiential based businesses of entertainment and travel are back in a big way post pandemic and medical health care home repair manufacturing and fast food restaurants are also pacing up very nicely.
Fourth while a smaller percentage of our revenue our core digital and our digital agency services business is growing at a mid teens rate and that shows no signs of slowing.
Fifth our operating expenses are largely fixed and insulated from inflationary pressures, while our advertising rates can increase with inflation.
And last our balance sheet and our capital structure are both in great shape, our trailing 12 month Leverages three four times and we had a borrowing costs below 4% in the first quarter.
Looking a bit further out we continue to have excellent long term three year visibility on our growth trajectory.
In addition to political revenue this year and the presidential election in 2020 for 2023, and 'twenty 'twenty four will benefit from distribution agreement renewals from virtually all of our subscribers over this period, which we expect will materially benefit our cash flow.
As a result, we remain confident in our ability to generate pro forma average annual free cash flow in excess of $1 4 billion over the 'twenty two 'twenty three cycle and we will continue to deploy that cash flow to maximize shareholders' return.
In terms of our longer term prospects, we are positioned to benefit from both organic and inorganic growth opportunities on the organic breath news nation continues to move forward towards our goal of becoming a 24 seven cable news network ratings continue to grow every month as consumer awareness builds making news nation and the fastest growing national cable news network.
Further validating the value of our strategy to bring consumers balanced and unbiased news in this regard in the first quarter News nation was regarded and recognized by several media watchdog organizations, including AD front as media News guard and all sides for its trustworthiness and lack of bias.
In the first quarter, we further expanded our news nation programming and now offer 60 hours per week of live news analysis and talk.
The value of our news nation strategy was recently validated by Moffett Nathan sent in a research report, which highlighted that in 2021. The top three cable news networks were responsible for 59% of the viewing time of all of the top 20 cable networks with our early progress and achievements our commitment to profitably growing this asset remains.
Unchanged.
We also continued to lead the industry in launching Nextgen TV markets with a TSA Frito technology in Q1, we launched three more markets and a fourth one in April marking progress towards our goal of covering half of all U S television households, with an H T. S E readout OS signal by the end of this year.
That's one of the nation's largest holders of broadcast spectrum. We're excited about both the enhancements to our core business as well as the myriad new revenue opportunities that this technology upgrade will enable us.
The continued industry motion around it.
Momentum around a T. A C. Three that out was evident at the Nab show in April and we're analyzing more and more potential monetization models for this asset for example bit path a business in which we are an investor demonstrated the use of an a T. S. E. Three out of a broadcast network signal to improve and correct GPS signals.
Our powerful land based spectrum can overcome certain weaknesses inherent in our satellite signal. This could have wide application for delivery services driverless vehicles drones or any other service, where mobile devices must be positioned aware.
Shifting to new capital allocation, our disciplined approach allows us to capitalize on the best opportunities to create the greatest long term value for our shareholders in January we announced our ninth consecutive annual dividend increase to <unk> 90 per share per quarter, representing a compound annual growth rate of 25% since our dividend was initiated.
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We will continue to deploy cash for shareholder friendly focus through a mix of dividend payments share repurchases and debt reduction while also continuing to pursue accretive M&A and investing in our business for future growth.
Nexstar has consistently strong performance continues to validate the value creation potential of our current capital allocation strategy.
In summary, we remain confident in our near and long term growth opportunities <unk> powerful diversified platform produces and distribute some of the most compelling local and National News sports and entertainment content in America with the best margins in the broadcasting industry, we have excellent three year visibility on the business and our ability to deliver on our.
Free cash flow targets, given expected strong midterm presidential political advertising as well as distribution agreement renewals, representing a significant percentage of our subscribers over this period as such we have a solid foundation to continue driving near and long term growth and the enhancement of shareholder value in spite of the market and other world.
With that now let me turn the call over to Tom Carter for the operations review, Tom Thanks, Perry and good morning, everyone operationally Nexstar had a very strong start to the year, we delivered all time high first quarter net.
Revenue of one point to 1 billion driven by strong year over year increases across all of our core and political advertising distribution and digital revenue sources overall TV advertising revenue grew eight 3% versus Q1 of 'twenty, one and core TV advertising at $428 million was our first.
A record and increased 4% over the prior year quarter.
Healthy demand from advertisers aided by the Olympics resulted in solid growth in 19 of next our top 25 advertising categories.
Which more than offset continued weakness in automotive advertising.
Our top performing categories were entertainment medical healthcare travel Telecom and gaming sports betting. In addition, next <unk> local sales initiatives continue to deliver healthy levels of new business.
With our sales team is generating new to television revenue of $35 million, marking an increase of 27% over the prior year.
Sports betting in gambling continue to be a top five category for us in the first quarter.
Growth in the category was driven primarily by spending from land based casinos and from sports betting advertising in states, where online sports betting was recently legalized such as New York, Louisiana, Connecticut, and Illinois, offset in part by declines versus the first quarter 'twenty one.
In some states.
Gambling in sports betting is more mature.
Despite the public pressure on sports betting companies. We still believe this category has legs and there are a number of large stage such as Ohio, where we are virtually in every market in the state which are expected to legalize online sports betting in the near term as you know Nexstar has a presence in approximately 80% of the states where legalized sports.
That it is or will be launched so we remain very well positioned to generate continued growth from this category as new states pass legislation.
As Perry mentioned the court TV advertising environment in Q2 remains healthy despite recent macro economic challenges and we're optimistic that these trends will continue to improve as we move throughout the year.
Political advertising got off to a strong start in Q1 with revenue of $24 million, which is approximately 40% ahead of pro forma 2018, Q1 level Nexstar benefited from strong spending around key races in primary elections for Senate seats in Ohio, and Pennsylvania, and Governor races in Illinois, Texas and.
Alabama as a percentage of our total first quarter political spending pack issue spending accounted for approximately 39% of revenue.
Inventory all in Senate candidates spending represented approximately 37% of revenue with all other political spending accounted for approximately the remaining 24%.
Record first quarter distribution revenue rose seven 5% from the prior year quarter to approximately $668 million, reflecting distribution agreement renewals at the end of 'twenty. One on improved terms and rate escalators, we continue to see stability and improvement in our subscriber trends aided by increased.
<unk> subscribers. In addition, we have good visibility into our net distribution economics with all of our big four affiliates come affiliations contracted through December of 2002, and only our ABC affiliate agreements up at the end of this year.
With more than half of our subscriber set to renew it at year end 'twenty. Two we continue to expect a higher rate of growth from this revenue source in 2003.
Q1, digital revenue increased 18, 5% year over year to approximately $79 million. This increase was driven by strong year over year growth in our local digital advertising revenue and agency services businesses and contributions from best reviews, and a full quarter contribution from the hill.
With the momentum of our content and audience development strategy, we expect strong digital revenue growth going forward.
The topline growth in our first quarter cash distributions from TV food network ownership from our television.
Food network ownership interest combined with our continued expense management drove record first quarter adjusted EBITDA of $643 million and an all time high quarterly free cash flow of $560 million.
Nexstar generated a 53% adjusted EBITDA margin and we converted approximately 87% of adjusted EBITDA to free cash flow.
And preparations for Nexstar as 2022 proxy and annual meeting we conducted an extensive outreach to our shareholders. During the first quarter to update them on the company's recent ESG initiatives, which were outlined on our last earnings call and solicited their feedback on these matters the input and a recommendation to shareholders who elected.
To engage with the company was presented to the board of directors for our consideration and a summary of these efforts was included in our 2022 proxy filed at the end of April .
Throughout the Companys history, the alignment of our commitment with our local communities and our commitment to our shareholders continues to be a key driver of our long term success. As a result, we will remain focused on evolving our ESG policies and disclosures and a thoughtful manner that supports our employees our communities as well as our goals for growth and the enhancement of shareholder value.
With that it's my pleasure to turn the call over to Leon for the remainder of the financial review and update Leann. Thank you Tom and good morning, everyone. We delivered another strong quarter results for our shareholders and remain very constructive on the opportunity ahead of us in 2020.
Im very gave you most of the details on the revenue side.
Jonathan.
First quarter direct operating and SG&A expenses, both increased primarily as a result of higher core political distribution and digital advertising revenues as well as a full quarter of expenses from the hill.
Corporate expense was approximately $46 million, including noncash compensation expense of approximately $13 million.
This number included approximately $1 million of one time expenses.
This increase.
With primary or sorry, the decrease from what we expected was primarily due to lower legal fees and expected.
First quarter Capex was approximately $28 million spectrum repack capex totaled approximately 750000.
$1 7 million of reimbursements from the FCC Capex.
Capex was lower than expected in the first quarter, primarily due to delays in receiving equipment due to supply chain disruption.
First quarter total interest expense declined 4% to approximately 69 million cash interest expense of approximately $66 million and compared to $68 million last year due primarily to lower first lien borrowings by approximately $347 million face value offset by higher LIBOR of approximately 15 basis points over the quarter and refinancing.
Emissions revolver with term loan B, which occurred in the second quarter of 2021.
First quarter operating cash taxes were $3 2 million, reflecting a small first quarter state tax payments.
We recorded a $193 million in distributions from equity investments related to our 31% ownership stake in TV food network in the first quarter with represents a $15 $3 million increase over the prior year quarter.
Looking ahead, we project corporate overhead exclusive of stock comp and transaction costs to be approximately $36 $5 million in the second quarter and we continue to expect corporate overhead in the $140 million area for the year.
Noncash comp is expected to be approximately $40 million for the second quarter and we continue to project $58 million for the full year, but will vary based on stock price and actual grant for.
For cash taxes, we use a 26, 5% tax rate when calculating our estimated taxes for one time and other adjustments as a reminder, in terms of timing for the remaining tax payments.
Payments are typically made in the second quarter with one in each of the third and fourth quarters, we expect that cash taxes will be closer to you.
$390 million to $395 million range for the year, given current expectations for the business.
Cash capex should come in around $35 million in the second quarter, and we still expect $150 million for the full year.
As a reminder, we typically spend more in capex and even numbered political years than non political years.
We expect that next <unk> cash interest expense to approximate 75 million for the second quarter and 320 million for the year, reflecting updated estimates for LIBOR and expectations for debt repayment.
Turning to the balance sheet Nexstar as outstanding debt at March 31, 2022 was $7 6 billion total net debt amounted to approximately 7 billion at quarter end down from $7 2 billion at December 31, 2021, and net debt first lien covenant purposes with $4 3 billion.
Our net first lien covenant ratio at March 31, 2022, with $2, one which is well below our first lien and only covenant of four five times. Our total net leverage at quarter end was three four times down from $3 seven at December 31, 2021.
We expect leverage to reduce by the end of 2022 due to a combination of allocating a portion of our free cash flow to reduce indebtedness and increasing EBITDA given our outlook for the year.
In the first quarter, we returned $195 million or <unk> 35 per cent of our free cash flow to shareholders through share repurchases and dividends, we allocated another $155 million or 28% of our free cash flow towards debt reduction.
We will continue to strategically deploy our cash in a manner that is consistent with our commitment to creating the highest shareholder value.
Our business continues to perform at an exceptionally high level and this is clearly evident in our Q1 results, we remain well positioned to deliver strong growth in 2022 and confident in our ability to deliver on our pro forma average annual free cash flow guidance of approximately 1.4 billion over the 2022 2023 cycle.
That concludes the financial review for the call operator can you. Please open the line for questions.
Yes, ma'am, thank you and if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
Using a speaker phone please make sure your mute function is turned off.
Sorry equipment.
Once again that is star one if you would like to ask a question.
And we'll take our first question from Dan <unk> with the benchmark company.
Great. Thanks, good morning.
Oren quarter pardon me.
I'll leave the core Sky following questions for everybody else it doesn't seem to be the case here and just ask one on retrans.
Given the real strong start to the year and what we've heard from kind of all of you guys know is DMV TD op side, you guys had guided growth kind of mid to high singles for the year.
Is there any change to either the gross or the net outlook given kind of the strong start to the year and then on political.
Given the drought and everything else and what we've seen on raising even in the last couple of weeks in last few days I guess I should say.
We expanded some forecasts out there around.
'twenty two is looking more like 'twenty, rather than 18, so I don't know if thats the right benchmark, it's too early in the cycle, but just help us think Peru.
How much closer we might be getting to that yardstick.
I'll take the political question and we obviously.
If you follow the company you know that we like to.
Under promise and over deliver on our political forecast because obviously, we don't control the money until it is raised but.
Everything would indicate that it will be a record.
<unk> year mid year mid term election for us from a revenue perspective.
We think it will be.
Substantially ahead of 2018.
But we are not yet ready to go there to say that it would be to the 2020 levels, but as you know more than half the money will come in a six week period between labor day and election day and so.
Until we get closer to that date and anything that we would do would just be to fuel speculation. So we're comfortable with what we said on the call thus far and I'll, let Tom talk about the distribution revenue sure.
Good morning, Dan Thanks for the question yes.
We're pleased with the distribution performance and with especially with regard to attrition, saying at moderated levels and quite honestly levels that were better than we had.
Budgeted for but it's little too early for us to change our guidance with regard to the entire year. After the first quarter. So I think we're going to stick with where we were which was kind of.
Mid single digits.
Okay, and maybe just Perry or Tom just if I could sneak one more in just on capital allocation, just given sort of the uncertainty is out there, but also perhaps the opportunity that might provide I know you guys have.
<unk> long track record of generating shareholder value with any deals you've done there is certainty.
Plenty of speculation out there I'm just wondering if.
There is any kind of difference in change of balance on how you would allocate capital obviously the stocks working today.
The market continues to be a little bit more finicky, just how we should think about.
Your cash hoarding and share repurchase activity versus.
Anthony.
Right.
Yeah look I think we're.
Always said from an M&A perspective, that's going to be a priority for the company. That's how we've created the most shareholder value historically and how we.
I expect we'll continue to create shareholder value going forward and so that we can find good accretive transactions that are complementary to our existing business that will be what we use our cash for I think absent that we definitely will look at Opportunistically do we use the dollars to pay down debt or do we use the dollars to repurchase shares I think.
You probably noticed we have a little bit of an extra cash balance on our balance sheet as of the end of the quarter. We also noticed there start where our stock is today so.
From from that from that perspective, we obviously are very.
You know looking looking forward to making sure we're allocating that capital in the right way that's going to be the best for our for our company and our shareholders.
Awesome solid response from the full try and Brad I. Appreciate it. Thank you very much guys and congrats on the quarter.
Well take our next question from Steven <unk> with Wolfe.
As farnell.
Thanks, and good morning, maybe just first you held the free cash flow guidance for the 2022 2023 cycle.
When you were listing off some of the cash guidance line items. The one that really seem to have the most was cash interest I think going from about 300 to 320, that's kind of small in the context of your free cash flow overall, though so just wondering if those are the sort of things that are keeping you a little more conservative at the moment or if it is anything else like the AD.
Right.
Yeah.
Yeah, No I think that's absolutely right I mean, we.
The LIBOR curve continues to move against us.
I think in the.
Uh huh.
Both for 2022 and 2023, you know the outlook is for higher rates going forward. So that's one of the factors going against us as well as.
Obviously, a little bit of increase in terms of the taxes as a result of improved.
Expected performance, but.
I think that.
Good where we offer right now and as the year progresses, we'll continue to revisit that.
Thanks, and then.
Perry, we talked a little bit about NAV about retrans rates and I'm kind of backing into some rates. This quarter are probably over five bucks on average per sub I know there are some markets, where you have some mix of stations. So that's not necessarily a big four rate, but it does seem like retrans is getting to rates that was probably not.
Contemplated a few years ago.
Your Big four affiliate network friends are also driving those rates a lot higher do you. All think that there is a ceiling out there is sports rights continue to go up you know do you feel like stabilization of the ecosystem supports a lot of rate increase ahead, just love to kind of get your view as to where we are in the rate cycle.
Well first of all we certainly contemplated the rates you spoke about a few years ago and what I've said is that.
Recently I have moved the goalposts as to what I think is in the art of the possible given how valuable live local news is to bundle and to the consumer enter the value proposition that we present in our communities I think we can go farther than than perhaps I thought we could you know three or four years ago.
So.
Is there a ceiling I ultimately, it's a negotiation so it's what the market will bear and what two parties can agree too but.
Think we can go further than certainly where I thought we could ultimately reach a few years ago, and certainly well beyond the numbers that you.
Stated earlier in your question.
Thanks, and then lastly for me Fox said this morning, they expect to keep their key sports content exclusive to <unk>.
<unk>.
Linear broadcast and did not license it like some of the other big four networks have.
Going forward do you see a difference in your relationship may be with Fox and those companies that are launching Ala carte streaming services with with broadcast content on it.
Could that affect the way you think about reverse comp.
Well as I've said historically.
We have good relationships with all of our network.
Partners.
But one of the things we pay for us exclusivity in that content on a market by market basis and to the extent that content is less and less exclusive.
It would follow that it would have less and less value now each network provides more programming or less programming than the others. So those discussions are nuanced, but obviously, we're paying for the rights to bundle the network programming with our local programming for resell to advertisers and to distributors and to the extent.
That.
As I said some of that programming is less exclusive then it inherently has less value to us and we'd be willing to pay less for it.
Thank you.
And we'll take our next question from Alan Gould with loop capital.
Thanks for taking the question two here, Tom you mentioned that the sports gaming in the more mature markets offset some of the growth in the older markets.
What do you see and can you quantify what change you see as sports gaming becomes more mature in our marketplace.
And secondly, can you discuss what sort of a crowd out effect, we should expect from the political advertising as the year goes on with credit affected as noncore.
Sure I'll take the political question and then ill throw sports betting for Leann.
We will see some crowd out in the fourth quarter, but our expectation is that we will see growth.
In Q3, and Q4 over 21 levels, even with the crowd out.
And then we're just talking about how much growth, what we see but I think were were.
Very confident and optimistic with regard to the back half of the year overall, even with a pretty sober view on auto advertising.
Let leann tackle.
Spending yes.
Well that was the first one I like that.
I think sports betting I think and I've said this in quarters past its just too early and there is just like a lot of different moving pieces with new states coming online and the different operators doing different things in the market, but what continues to be a driver for us is new states launching obviously, Tom talked about New York, Louisiana.
Illinois being good markets for us, but we continue to have as we look at sort of our top five state.
Three of them are dates that launched early on in the early on in the process. So we continue to see spend but we're obviously in a little bit of a dynamic market here and are focused on.
You state that as they come online and we think we mentioned, Ohio could be could be large I think California's got something on the ballot. So theres a number of other states that we will look forward to seeing growth that growth and going forward and we think that the local broadcasters are really at an advantage here because as sports betting moves into new states you can talk.
Those states and for example, I think I mentioned, we're in every market in Ohio saves too.
We're in basically every market in North Carolina, so win win.
Sports betting firms target those states they don't have to buy nationally to achieve their goals. They can buy locally and we think that given that we're at 80% of the states where sports betting either is legal or expected to be legal that we will benefit disproportionately from that.
Thanks, and can you just remind us what percentage of your core sports betting represents these days.
Is it is.
It's like five or 6% I'm, just trying to find the number here on my.
Yes, it's a little it's a.
Little over that's about 7% for the quarter.
Thank you.
That's gaming and sports betting altogether.
And once again that is star one if you would like to ask a question.
I'll now take a question from Craig Huber with Huber Research partners.
Great. Thank you.
Can you guys, maybe just talk a little bit further about the advertising environment just expand upon what you said before and it would be curious if you could maybe give us a core advertising pace number for the second quarter year over year is it tracking up to three 4% I mean, how is that looking so far maybe talk about auto as well if you would please.
Sure I'll start and then others can add we actually saw a slight acceleration in April results versus increases over the prior year versus our Q1 finish.
Broadcast digital and networks were all up versus the prior year versus their percentage increase versus the prior year in Q1. So we think thats a positive sign obviously april's in the books.
And I would say thematic Lee the quarter from a from a core and category perspective looks a lot like first quarter I mean automotive is.
Is trending slightly down from the prior year, but not as much as maybe some others have reported.
And the other categories that have been driving our growth of entertainment and gaming and services and all of that continue to drive that you know.
So in the first quarter six of our top 10 categories showed increases to the prior year and 19 of our top 25. So we don't see things dramatically that much different in second quarter, given that we have one month of the quarter in the books. So.
We see continued growth in core.
Along the lines of what we saw in first quarter.
So basically.
All the macro issues out there so far youre not still feel like you're feeling the pinch on that numbers speak for itself. Your commentary does but just to inflation higher interest rates, obviously, Ukraine issue supply chain issues, obviously hurting to certain categories and stuff, but you are powering right through that advertising is quite strong as is the message youre, saying here.
That was all here.
Yes that was all there in first quarter and we posted the results. We did so it's all there in the second quarter.
Living with.
The current rate of inflation in the price of gasoline, 5% mortgages and the results are what they were in the first quarter nothing really has changed.
As we have moved into the second quarter. So.
Yeah.
When you track 50 categories.
Some are going to be up some are going to be down on a comparative basis, but again, if I look at if I look at our pacing through throughout the quarter. It's.
It looks a lot like first quarter in terms of where we think we will end up.
Great and my last question if I could.
For the digital side of things would be if you could talk a little bit further about the organic revenue growth there and maybe separate between the local side versus national with how the performance this quarter and maybe what your outlook is in the second quarter. Please sorry for that thanks Kurt.
As I think we mentioned local was very strong from a local digital perspective seeing double digit increases.
Both in our digital agency services, which is our selling.
Rod websites as well as our owned and operated websites national was.
Less robust in the in the first quarter because of some of those issues. The hill in particular with the Ukraine comp.
Conflict saw a decrease in advertising for a period of timing at the beginning of that subsequent to that over in the last half of April and early may that the.
<unk> revenue has returned there because people advertising just didn't want to be associated with with that news. So I would say thematic Lee that local is performing as or better than expected and national is probably slightly behind our expectations, but still positive.
Great. Thank you.
And once again that is star one if you would like to ask a question.
And we will now take a question from Jim Goss with Barrington Research.
Thank you.
One question I have involves the <unk>.
<unk>, though in terms of the monetization.
Devices you plan to use for example, you brought up the notion of improving and correcting GPS signals.
How would you get paid for their the deliver delivering information on sort of a consultancy or some other way.
On a related basis, I think you framed out in the past that.
All of the things you can do with this new technology.
Have a.
A potential opportunity over time on a scale of retrans than that mistaken could you tell me if that was correct recollection.
Yes, Jim we think that over time and that means probably end of this decade that <unk>.
Total revenue from <unk>.
Monetization of.
And ancillary uses of our spectrum, we believe could rival.
Current distribution revenue, which for this company is something north of $2 $5 billion. This year.
So.
We think it is a substantial value creator and we think it's the the greatest opportunity to create value in our business today as we know it which is why we talk so much about it why we're focused so much on it.
We I looked at two demonstrations at NAV.
One was as you mentioned on correcting GPS signals and when you think of.
Just look out your office window, and anything that you need to know where it is or it needs to know where it is I mean that that addressable market is potentially huge.
Other.
Demonstration I saw centered around distributed power.
So that has all sorts of applications. It could just be b to b and utilities talking with itself.
But it also could be utilities talking with consumers and offering incentives during peak periods of the day to raise your thermostat and get $25 off your bill and there's just.
Real walkie real fast, but the.
We think our myriad.
We see ourselves as.
As having the toll road that other folks can can drive on to execute their vision as to what they can do with this spectrum.
The Bitpass consortium that we that we invest in in our part of put together kind of a developer's toolkit, which we view as being basically open source, which has got all of the dongles in the bird's nest and all of the things.
That are a part of the.
The necessary toolkit to be able to enable uses of the spectrum and so we see it as being an open source and let the market decide the highest and best use of the spectrum, but we see ourselves as operating the turnpike.
Okay.
Great analogy.
The toll road idea.
But in terms of the way you would collect those totals have you.
Have you gotten as far as thinking of how that sort of thing could work are there any examples you've come up with to the stage.
Sure I mean, we could lease.
A sliver of our spectrum in every market that would reach 68% of the country too.
Netflix if they felt that they needed higher speed delivery or were being throttled by conventional providers in that point to every point wireless mobile on the go.
And we would just be straight out lease payments, but.
I don't know.
Although I wouldn't rule it out, but we might invest in some of these businesses with use cases, but.
But I think again we.
We make money today leasing out our spectrum on an ancillary basis four digits either ones, we own that we monetize vis vis advertising or we just lease slivers of our spectrum to others for division net distributions so I <unk>.
The future is potentially analogous to that and again spectrum is generally valued on a per pop basis in retrans is valued on a per sub basis. So the comparisons are not wholly dissimilar, but but again, we think that when you look at the connected car and digital signage and.
Telemedicine interactive TV I mean, theres, just any any number of.
Potential use cases, what we want to do is let the market decide the highest and best use of the spectrum provide the tools for developers that want to develop for this market.
And then and then like I said, we'll determine the business relationship I think as these.
As these use cases come about but you don't need you just need the <unk> three data signal on the air to be able to <unk>.
<unk> now you are somewhat restricted during a transition period because of the lighthouse situation of not having extra spectrum to be able to create on one and then shut off the other and then here. We go right now we're kind of light housing each others want auto threet auto signals to be able to to develop this the transition, but ultimately that's why I say.
By the end of the decade here, we are hopeful that there there are all kinds of opportunities whether it's you know.
Education and distance learning in Gist.
Again, I think of us as the wireless interconnector of the Internet of things and when you think about that.
How how many different things can you think about and I think there are a lot. So.
We are bullish on <unk> deployment and will lead the industry with.
Stations, reaching 50% of the population with a $3 three.
300 OS signal available by the end of this year and we will continue to hopefully be at the forefront of development of the business case, the use case and the monetization efforts as well.
Okay, great. Thanks for that embellishment.
One other question and just sort of curious is carved out a neutral.
The situation with the news nation and I am wondering if you at summit.
Summit.
Unique position, if not or at least we're positioned to maybe he'll panels, where you live.
A view from different points of view on the spectrum political spectrum that might attract.
Parties from both of those.
The sides of the competitive landscape here.
Jim do you mean from a revenue or from a content perspective from a content perspective.
Interest viewers.
I think one of the issues with the.
And carbon neutral as you.
It can be helpful to anyone but a lot of the viewers tend to go to whatever base. They tend to focus on whether they're liberal or conservative.
It'd be positioned in the middle and maybe able to get people from either side and I wonder if that might be a way to get create content.
Create advertising activity that would be.
Matt attract viewers from the other.
Other competitors.
Sure.
We are doing that today and if you watch our primetime programming, we will have people on from.
Opposing point of view to discuss.
And make their points with our hosted moderators offering.
The referees and.
Where appropriate injecting their own opinion, clearly labeled as such I would tell you, though I mean, the the opportunity with news nation is not only that but it is to cover the stories that other.
Their networks aren't covering.
The first on the scene in the first interview the car wash operator in the.
The recent drama with the you know the.
Former correction.
Worker as well as the as well as the convicts. She was on the run with that would not have been possible without our context in Huntsville, Alabama, where the jailbreak occurred in Florence, and then in Evansville, Indiana, where we obviously have station presence and.
We were interviewing people live on the air when other cable networks, we're doing phone interviews with anybody that could get a hold of and Thats, where our local course knowledge really plays in a couple of weeks ago was truck week on news nation, where we profiled the American trucker talked about the trucking industry its importance to the country talked about when.
<unk> entering entering the workforce of being big rig drivers and Youre not going to see those stories on on other cable news networks, we're covering a large part of the country and stories and a large part of the country that debt.
Perhaps.
Others don't pay attention to so.
We think that's where we can really show our stuff as well as being unbiased and political and we will have a show on the air before the end of the year called the Hill.
Because we own.
The digital asset the hill and that will be necessarily kind of a Washington D. C panel type show, but I don't think youll see the entire lineup made up of those but we think.
<unk> mix, we had our highest demographic ratings, 5% to 11 PM last week since we started and it's every week, we see green shoots in one program or another the ratings are small, but they are growing and I said don't focus on the ratings focus on the growth and this is a long. This is a marathon it's not a win sprint.
But I'm proud of what we put on the Air every day I've never been embarrassed by our second of Whats gone out over the year, we think it's a great environment for.
<unk> smart viewers to come in.
Be informed and not pandered to and we also think it's a smart environment for advertisers because the content itself is professionally produced and definitely not toxic.
Okay, great. Thanks, so much.
As a final reminder, that is star one if you would like to ask a question.
Well pause for just a moment.
And again that is star one if you would like to ask a question.
Well hearing no more questions operator, thank you very much to everyone for joining us this morning.
I'm sorry.
You do have some colors. Thank you we'll take a question from a follow up question from Craig Huber with Huber Research partners.
Oh, great. Thank you I wanted to hear your comments about uses of spectrum down the road here.
Obviously, youre, saying you think you'll be at 50% reach of the U S population by the end of this year. Your television shows the total as you said reached 68% or so.
When would you expect to start Inking, maybe your first contract with this new use of renting out the spectrum.
Well it is possibly.
Well, we make about $80 million a year on ancillary uses of our spectrum right now so we're already monetizing and it flows through the distribution line or in the case of different net advertising throat flows through the advertising line. So it's not as if it's laying fallow today and that's with a mix of <unk> and <unk>.
Spectrum available.
But as I said I think youll see.
I think I mentioned on our last call. If you look at the overlay of scripts and their spectrum and Nexstar and our spectrum, we have an undue implicated reach of 92% of the United States population.
You can build a business on that and so we are in the early stages of having conversations about things we could do together that wouldn't require a consortium or a committee or anything else. So.
You've got to have two parties to agree.
But I do think that you'll see.
Once we get to 50% on our own and could reach maybe 90% of the population with a partner or two I think then youll begin to see use cases, and I think thats going to be within the next two years.
Great. Thank you.
And we will take our next question from John Kornreich with JK Media did I Miss.
The food network distribution amount to the.
For the first quarter, and then I have a couple of follow ups on that.
Yes.
Food network distribution amount.
The.
Earnings release, and you can see at the $193 million and that was up.
No that was it.
And that was up $15 million.
Yes, okay.
Does that.
Representing roughly 90% or so of what youre going to eventually received for the year.
So the distributions are lagging right so that that relates to the earnings for the food network from the prior year.
And it does represent the distributions that his analysis at the partnership. So if you look historically the first quarter has been less than 90% of the total.
Less than that.
We know exactly what the number is but my guess is probably closer to 75% or 80% of the total.
Okay.
Finally.
The distributions that are made by food network.
They represent virtually 100% of all their free cash flow, where do they retain something.
It's based on their pre tax earnings and we get 31.
3% of that of the pre tax earnings Okay. Thank you that's it.
And it appears there are no further telephone questions I'd like to turn the conference back over to our presenters for any additional or closing remarks.
Thank you operator.
And thank you all for joining us today in periods of market uncertainty. One thing has remained true thoughtful investors, who have taken advantage of market volatility to by Nexstar shares have never been disappointed given our continued our consistent financial outperformance our industry, leading free cash flow generation and our low leverage. So thanks, everyone for joining us today, we look forward to speaking.
With you again, when we report our second quarter results have a great day.
And once again that does conclude today's conference. We thank you for your participation you may now disconnect.
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