Q3 2022 Nexstar Media Group Inc Earnings Call

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Ladies and gentlemen, please standby good day and welcome to the Nexstar Media Group third quarter 2022 results Conference call today's call is being recorded now.

Now I would like to turn the conference over to Jojo Pony Investor Relations. Please go ahead.

Thank you Jake and happy election day, everyone I'll read the Safe Harbor language and then we'll get right into the call all statements and comments made by management. During this conference call other than statements of historical fact may be deemed forward looking statements for purposes of the private Securities Litigation Reform Act of 1995, Nexstar cautions that these forward looking statements are.

Next is 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 additional details on these risks and uncertainties. Please see <unk> annual report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission and Nexstar subsequent public filings with the SEC.

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Extra undertakes no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.

It's now my pleasure to turn the conference over to your host Nexstar, Chairman and CEO Perry Sook Perry. Please go ahead.

Thank you Joe and good morning, everyone. We appreciate you joining us this morning on this election day to discuss next our record third quarter financial results with me on the call today are Tom Carter, our President and Chief operating Officer, Andy Yang our CFO .

Start with a summary of recent highlights and developments followed by Tom's operational review as well as financial review then we'll get to your questions.

Nexstar delivered another period of outstanding financial results and shareholder returns, including all time high third quarter net revenue adjusted EBITDA and free cash flow are.

Our record top and bottom line performance was led by strong year over year growth in political advertising distribution and digital revenue.

Our ability to deliver record results and excellent shareholder returns quarter over quarter and year after year underscored the benefits of scale and the strength and the resiliency of our operating model and our ability to consistently generate substantial levels of free cash flow.

As today is election day, we have pretty clear visibility into our 2022 political revenue excluding the impact of any potential run off elections I'm pleased to announce that we booked total net political revenue for the fourth quarter up $260 million, which equates to $500 million net for the year as of today and that represents a 103%.

Our election year of $2020 azoff election day.

2022 has not only been a record midterm election year for our political advertising, but it is nearing an overall record for our political advertising, including presidential election years.

Once again local TV remains the medium of choice for candidates to reach local boaters at scale.

And candidates are not alone in choosing broadcast as I'll talk about in a minute sports organizations like the NFL and team owners like Steve Balmer content creators and local advertisers all see the power and the broad reach of the local TV broadcast audience something next door is uniquely positioned to offer at scale across the country.

As part of our earnings call today I'll cover three areas that have been top of mind for investors first I'll discuss the impact of the economic environment and how nexstar as business is positioned well to offset these challenges.

I'll provide an update on our distribution renewals and why we continue to be confident of our ability to grow this revenue stream and.

And third I'll briefly touch on the longer term growth drivers of our business, including our recent acquisition of the CW and why Nexstar remains one of the best positioned media companies to succeed in today's marketplace.

Our business has several distinct competitive advantages that will enable us to continue delivering the financial performance cash flows and shareholder returns investors have come to expect from Nexstar.

We have a highly diversified revenue model for several years now over 50% of our total net revenue has been derived from distribution revenue.

This contractual and recurring revenue source has historically been resistant to periods of economic downturn.

And with less than one third of our third quarter revenue coming from core TV advertising, we are less dependent on advertising revenue than we ever have been before.

Our audiences are valuable today broadcast TV remains the only place where content creators sports organizations team owners and most importantly advertisers to access local audiences at scale. We have developed these audiences over decades by consistently providing top rated local news sports and entertainment content a great example of the power.

Broadcast is NFL Thursday night football, where we can see what audiences prefer Amazon prime our local broadcast we pulled the data from Nielsen for the first seven games and it shows that when NFL viewers have a choice of watching the game on Amazon prime or watching it on their local broadcast station on average 73% of the NFL viewers are choosing to watch those.

These gains on their local broadcast station. This comes as no surprise us local audiences prefer to watch station they have a relationship with with shoulder and ancillary programming that resonate and be a technology that has no delay and provide seamless delivery.

The attractiveness of our platform is further demonstrated by our new agreement with former Microsoft's CEO in L. A clippers owner, Steve Balmer, who is bringing the ally Clippers back to broadcast television to help reach audiences at the Clippers are currently not able to reach our number one L. A station K T L. A along with a number of our other California.

Base stations will air 15, NBA games of the Clippers exclusively over the air this season.

We have built an unparalleled competitive moat around our economically resilient local advertising business over the last two and a half decades, we've developed a team of more than 1500 local sellers Interstate excuse me at our stations had cultivated over 40000, SMB and advertising relationships and 116 local markets, we serve reaching over.

68% of America on.

On the local level there is no one in the TV industry with greater sales resources and consumer reach the Nexstar. This isn't something that larger a broader streaming companies get easy easily replicate as requires both local scale and meaningful investment.

While some pure play streaming companies are now embarking on an effort to replicate our business model ours is proven and consistently and currently delivering today.

The results only a platform of our scale and our efficiency can deliver.

As I previously mentioned we.

We are a significant beneficiary of record setting political TV AD spend which is not dependent on the economy look at the last two election cycles and advertising revenues accounted for approximately political advertising revenue, which accounted for approximately 10% of our total net revenue on average.

Our focused approach to optimizing political advertising opportunity and our scale presence in our markets representing over 80% of contested races gives nextera distinct competitive advantage in capturing leading shares of our spending.

Third quarter political revenue increased 49% on a quarterly sequential basis and was up approximately 28% over pro forma Q3 of 2018 as I mentioned earlier, we are on track to deliver record midterm election year revenue in Q4.

We have an efficient operating model and we pay close attention to operating expenses on our balance sheet with only three two times net leverage is in great shape.

Taken together these factors continue to set nexstar apart from others in the media industry and other industries and will enable us to offset any near term challenges, while extending our strong long term record of growth and shareholder value creation.

Turning now to our distribution agreement renewals, we recently reached a comprehensive multiyear distribution agreement with Verizon files. They carry next our local TV stations, and 10 markets and Nexstar as fast growing National Cable News network News nation, and all Verizon markets. We remain in active negotiations with the remainder of our distribution partners with now slightly less.

And half of our total subscribers up for renewal before year end while.

While we did experience a slight uptick in the sub attrition rate in the third quarter, we continue to be confident in our ability to grow our distribution revenues even in the face of M. B P D subscriber ad attribution.

Attribution given the continued disparity between the percentage fees the broadcasters get paid versus the continuation of our stations to total viewership and the fact that we also get paid when a consumer moves to a virtual Mvpds service.

Moreover, our recent Leichtman research report found that 66% of TV households, and 73% of adults, aged 45 or older representing more than half of the adult population have a pay TV service, providing us with an excellent base of entrenched consumers.

Before I hand, the call over to Tom I want to briefly touch on three organic growth prospects that we believe can lead to material value creation for nexstar shareholders over the long term, including news nation, the CW network and a T. S E three pointed out.

Starting with news nation, we continue to make progress building out the nation's only unbiased National News Network News Nation. Now offers 17 hours of news programming per day and remains the fastest growing cable news network in the most watched genre of cable TV by appealing to the majority of the population looking for an unbiased source for news.

Turning to a recent Gallup poll over 40% of Gen X with over 50% of millennials and Gen Z view themselves as independent politically and Nexstar is building a profitable and differentiated National news network to serve those audiences. We will be at 24 five news network in Q2 of next year, and we anticipate being a 24 <unk>.

Cable news network by the end of 2024.

We continue to enjoy it valuable content synergies between news nation, our local stations and the hill and the months running up to the election several of our local television stations hosted the only televised debates for key U N U S Senate races, in Ohio, Georgia, and Pennsylvania, and Governor's races in Texas and Illinois.

We leveraged this exclusive to Nexstar content on news nation to drive increased ratings and awareness for the network Nexstar Digital also launched the Hill fast channel building on the Hill's success as an essential as Sen agenda, setting Reed for lawmakers policymakers and influential digital consumers from Capitol Hill to main Street.

Moving onto the CW on September 30th Nexstar closed its previously announced acquisition of a 75% ownership interest in the CW network. This transaction is expected to create value for nexstar shareholders by solidifying the company's revenue opportunities as the largest CW affiliate group diversifying our content outside of news and.

Nexstar as a participant in the advertising video on demand services via the CW App.

Operationally, we're off to an excellent start we appointed Dennis Miller to President of the network and as many of you know prior to his appointment Dennis served on the Nexstar Board for eight years and he's a seasoned TV executive with a long term record of success in our industry.

He knows nexstar in how we run our businesses and we are confident in his ability and focus to improve the CW ratings revenue and profitability.

GW is also continuing to make personnel appointments that will support our vision and goal. We're re imagining the CW with a focus on entertaining and profitable programming, both on air and through the CW App.

We also continue to make progress on the rollout of <unk> three point O and we are accelerating our discussions with potential technology and business partners for this service. We continue to believe the revenue opportunity for the applications of services using our spectrum could rival our retransmission revenues by the end of this decade.

In summary, Nexstar has consistently strong results in free cash flow generation remain one of our most powerful differentiators from our peers as well as other diversified media companies, we feel very good about our year to date results and what we see for the balance of the year, our resilient local advertising business, our ability to continue to grow distribution revenues.

And a stellar political advertising year as enabled us to achieve our 22 objectives. Despite market headwinds the absence of Olympics in the quarter versus last year, and an increasing interest rate environment is that more plainly we are pacing to over deliver on our 2022 free cash flow estimates that are embedded in our 'twenty two 'twenty three guidance.

We expect fourth quarter to benefit a continuation of strong political advertising trends, which we discussed earlier, while 'twenty 'twenty three will see distribution revenue upside from renewals of agreements representing more than half of our subscribers.

Looking forward, we expect 'twenty 'twenty four to benefit from another record year for political advertising due to the presidential election combined with the benefit of another wave of 2023 distribution agreement renewals for approximately 40% of our subscribers.

With that let me turn the call over to Tom Carter for our operational review, Tom Thanks, Perry and good morning, everyone. We generated another quarter of strong operating performance with all time high record third quarter net revenue of $1 $2 7 billion, reflecting strong year over year increases in total advertising revenue distribution and digital.

Revenues total television advertising revenue growth of 18, 8% was driven by record third quarter, political advertising revenue, which which more than offset declines in core advertising. We like other media companies saw our seven 6% year over year core TV advertising revenue decline.

Was primarily driven by double digit rates of decline in national spot advertising, which represents approximately 30% of our core television AD revenues the absence of Olympic and political inventory displacement also affected the quarter mitigating.

Mitigating the impact of National <unk>.

National advertising market was our local television advertising revenue, which represents approximately 70% of our core television AD revenues local television advertising declined just 2% year over year, despite significant inventory allocations towards political during the quarter. This is in line with the historical trend with low.

<unk> advertisers, maintaining more consistent levels of advertising spending throughout economic cycles in total about half of our categories increased versus the prior year quarter, including our top performing categories of drugstores slash medication.

Auto home repair manufacturing attorneys and entertainment.

We're extremely pleased to see automotive our largest advertising category in terms of dollar spent returned to growth in the quarter, increasing at a mid single digit percentage over Q3 of 2021.

In addition, nexstar as local sales initiatives continue to deliver healthy levels of new business and our sales teams generated new local TV advertising incentive program revenues of $36 1 million for the quarter, which was up 4% over the prior year. The key categories of responsible for four for core advertising revenue.

A client where sports betting and gambling, which I'll talk more about in a minute government services due to the marketing funds related to COVID-19, running out insurance direct response and medical healthcare.

The sports betting and gaming category declined by a mid single digit millions of dollars over year over year due to fewer state launches in the quarter, a general movement by larger sports betting operators.

Of their advertising dollars to the national market and reduced spending in more established markets.

Most impactful for the quarter. However was the redirection by sports betting and gaming companies of TV advertising dollars to voter propositions to legalize online sports game gambling in Colorado and California.

If we include the political advertising dollars Nexstar received related to those propositions, our sports games sports betting and gambling category would have been up.

We remain cautiously optimistic about this category as states continue to legalize online sports betting, Ohio, which is a large state for US comes online in January of 2023, Kansas came online in September of this year and Massachusetts is expected in 'twenty three as well.

Third quarter political advertising of $129 3 million was approximately 28% ahead of pro forma 2018, Q3 levels Nexstar benefited from strong spending around key races in primary elections for Senate seats in Nevada, Ohio, and Pennsylvania, and Governor races in Illinois.

Texas, Oregon, Rhode Island, Pennsylvania, New Mexico, Ohio and are there.

As a percentage of total political advertising pack issue spending accounted for 59% of revenue and candidates spending represented 41% of revenue.

Record third quarter distribution revenue rose three 7% from the prior year quarter to approximately $642 million, reflecting distribution agreement renewals in 2021 on improved terms and annual rate escalators more than offsetting subscriber attrition.

While we did experience a marginally faster rate of subscriber attrition during the quarter year over year sub growth and our retransmission fees and virtual mvpds and other direct to consumer services continue to offset mvpds declines.

We also continued to have good visibility into our net retrans into our net distribution economics with only our ABC affiliate up at the end of this year.

With approximately half of our subscribers renewing in the fourth quarter, we continue to expect a higher growth rate from this revenue source in 2023.

But taking a step back for a minute I wanted to provide some color on how our investors should think about our distribution revenues more generally nexstar generates distribution revenues from linear mvpds like Comcast and charter virtual Mvpds like Youtube, TV, and Hulu and other direct to consumer platforms like Paramount plus and Peacock.

For our linear mvpds relationships negotiate nexstar negotiates these contracts directly with the Mvpds for carriage. This is where our scale really comes into play and matters. We are by far the largest local broadcaster and typically the number one or number two affiliates in the broadcast networks and.

Our stations generate a significant portion of the viewership for the Mvpds services renegotiate these contracts with the Mvpds typically once every three years at that time of the contract renewal renewal, we have historically seen significant step up in rates, owing to the relatively higher percentage of viewership of our content delivers compare.

The relatively low share of fees paid to us by the Mvpds versus other content owners. We also typically have annual escalators in these contracts.

So you will see usually year over year increases in distribution revenues, especially in years like 2023, when we have renegotiated distribution contracts with more than half of our subscribers by the end of this year.

Currently we negotiated agreements with networks to pay them affiliate fees that returned a portion of the linear distribution revenues to them with respect to the virtual mvpds the broadcast networks, including the CW, which we now control negotiate carriage. So next <unk> paid a distribution fee that is net of the implied affiliation fee.

On an apples to apples basis for our big four affiliates that net subscriber rates. We received from the virtual Mvpds are about the same as the net revenue per sub rates after affiliation fees, we generate from our linear mvpds relationships.

Given our renewal cycle, we have a little more than half of our subscribers renewing at 'twenty, two which will drive distribution revenue growth, even with subscriber attrition in 'twenty three.

This growth will continue into 'twenty four as we will be renewing approximately 40% of our subscribers at the end of 'twenty. Three so we feel good about our growth on this line item and for the next two years and beyond now moving back to the rest of our revenue line items Q3 digital revenue increased five 7% year over year to approximately 86.

This increase was driven by strong year over year growth in our local digital advertising revenue and agency services business and a full quarter contribution from the hill.

Our top line growth and continued expense management drove record third quarter, adjusted EBITDA of $489 million and free cash flow of $294 million net.

Nexstar generated 39% adjusted EBITDA margins and we have converted approximately 60% of adjusted EBITDA to free cash flow.

Wow.

Executing well on our business, we continue to take a leadership role in supporting communities, where we operate on a journalism front Nexstar Media, Inc. Stations earned a Sigma Delta Chi Award for this from the society of professional journalists and for National Edward R. Murrow Awards from the radio television Digital News Association <unk>.

<unk> recognition for excellence in innovation, breaking news coverage digital and podcast everyday our newsrooms produce back based on unbiased content.

Next our high standards of journalistic integrity enable us to develop and maintain trusted relationships with our audiences and our communities in summary, our results reflect continued strong performance across key near term growth areas, including distribution political advertising, new local direct advertising and digital with even more.

Maximizing our growth opportunities, maintaining our capital structure, serving our customers and communities and delivering results for our shareholders with that it's my pleasure to turn the call over to Leann for the remainder of the financial review and update Leann. Thank you Tom and good morning, everyone. We've continued to build on our progress in Q3 executing on our.

<unk> delivering record results and returning significant capital to shareholders.

And then Perry gave you most of the details on the revenue side.

We'll jump to the expenses followed by some points of guidance on next our business and the CW network.

Together third quarter direct operating and SG&A expenses increased by $28 million or 4%, primarily as a result of higher variable costs related to higher revenues increased programming and other costs related to the move of news nation from syndicated programming to news programming, which is offset in our adjusted EBITDA calculation from reduced program.

<unk> payment related to syndicated content.

Well as a full quarter of expenses from the hill as a percentage of net revenues. Our total expenses declined given our focus on controlling expense growth and significant political revenue growth.

Our corporate expense was approximately $52 5 million, including noncash compensation of approximately $17 2 million, which grew due in part to new grants associated with the CEO of new contract and approximately $2 4 million of one time expenses associated primarily with the acquisition of the CW and various corporate development.

Activity.

Third quarter Capex was approximately $36 $7 million again, capex was lower than expected primarily due to delays in receiving equipment due to supply chain disruption.

Third quarter total interest expense increased to approximately $89 million lower than expected as interest rates did not increase as much as the forward curve predicted at the time of our last earnings call.

Cash interest expense was approximately $86 million and compared to $767 million last year, due primarily to increasing interest rates offset in part by debt repayments and lower spreads on a portion of our debt from our refinancing in Q2.

Third quarter operating cash taxes were $95 million okay.

We recorded $11 million in distributions from equity investments related to our 31% ownership in TV food network in the third quarter, which represents a 29% decrease over the prior year quarter. These interim distributions are primarily for tax payments and are due to lower operating income this year versus last year.

Looking ahead, excluding the impact of the CW, we project corporate overhead exclusive of stock comp and transaction costs to be approximately $32 million in the fourth quarter, and we expect corporate overhead around $130 million for the year.

Noncash comp is expected to be approximately $18 million for the fourth quarter and in the $62 million area for the full year.

But will vary based on stock price and actual gram.

For cash taxes, we used at 26, 5% tax rate when calculating our estimated tax before one time and other adjustments.

Now expect the cash taxes will be around $336 million for the year before any tax benefit from the losses at the CW attributable Nexstar given current expectations for the business.

Shipment has been delayed due to supply chain issues Capex spend has been pushed into the fourth quarter. As a reminder, we typically spend more capex in even numbered political years than non political years.

Next our Hasnt attributable interest of 75% in these figures and we will be able to offset a portion of the losses against taxes payable at Nexstar.

Two and continue to generate returns for our shareholders in the future.

That concludes the financial review for the call operator, Please open the line for questions.

Of course, ladies and gentlemen, if you would like to ask a question. Please signal by pressing star one on your telephone keypad just keep in mind. If you are using a speaker phone. Please make sure. Your mute function is released so you shouldn't look for each of our equipment. Once again star one for questions. We will pause for just a moment to allow everyone an opportunity to signal.

And we will begin with Dan Kronos with the benchmark company.

I'll start with the easy one you guys are the only broadcaster to report above.

I had heard from everyone else that there were geographic share shifts. Obviously, you guys have done a great job and gotten a lot of very positive press around the exclusivity in the debate and I don't know if you are getting incremental dollars.

From that but just any incremental thoughts you have around why you guys outperformed on political.

Well I think Dan if you if you remember back to 2016, we had a similar situation where we were the only company that achieved its political guidance for the year I think it's because we take a very disciplined approach to <unk>.

Our forecast model and certainly as it relates to political the broadcast leadership team and our FTAA folks do a very deep dive into each race each ballot initiatives how much money has been raised who the candidates are what happened. The last time. This race was.

<unk> tested and.

And Theres a lot of work that goes into it we just don't apply a factor to the past and come up with an estimate and I'm not saying that that's what other folks do but there was a lot of work I have a book that is three inches thick and in my office that is our political buildup for 2022, and we will have a similar one for 2024 so.

And obviously staying close to your business.

It sounds like no change here.

<unk> forecast and I'm wondering if there's anything underlying you guys. Obviously have scale in the Mvpds side I'm wondering if you get some incremental benefit on the reverse side too that might help.

Keep the blended average of linear and net closer than maybe the peer group.

Well I think you've heard US say many times scale does matter in terms of negotiations on any one of a number of fronts I'm not going to comment specifically with regard to any specific network or MVP D, but with regard to 'twenty three no change in our expectations at this time.

We're evaluating 23 going forward, obviously, we have a number of subscriber agreements with mvpds that are up between now and year end.

Also as we mentioned before we are seeing a slight uptick in attrition all of that goes into the calculus with regard to 'twenty three.

We're we're not changing our 'twenty three guidance at this point.

As you know, we always give reiterated guidance and updated guidance in the first quarter of the year and we will be doing that on a more informed basis as we move through the.

Negotiation cycle here and we have more data with regard to subscriber attrition trends.

Leann mentioned, we are on track to over deliver on 'twenty two free cash flow. So in terms of the 'twenty two 'twenty three guidance, we're in a really good spot.

That's really what I was just going to get to at the end I mean, we had if we exclude the.

Do you have any view on blended to 'twenty two 'twenty three.

We will exceed our 2022 free cash flow projections that go into the guide.

We're still gathering information because it is a free cash flow guide, we feel very good operationally, but we want yet to get a handle on interest rates and particularly interest rate increases for next year.

Would determine any deviation from our established guide.

Our next question will come from Craig Huber with Huber Research partners.

Yeah.

As I mentioned the way that we calculate it includes mvpds virtual mvpds, the digital ads and the streamers that has increased approximately 1% since the June quarter end.

And then talk a little bit more about the political advertising.

Political advertising for yourself and your peers generally has come in lower than people were expecting.

Third quarter fourth quarter is looking like what exactly is going on there from your perspective, I mean people talk about shifting to other markets overall fund raising lower than expected.

We have 103% of what we had on the books at election day of 2020.

As we sit right now we've got more money on the books for 2022 than we did at this time for 2020 now we had a two month runoff election in Georgia actually two of them in 2020, and depending on who you talk to will there will either be or not be a runoff election in Georgia After tonight. So.

But again, we gave you our political number it's slightly over $500 million for the year.

Absent any run off activity and again.

We follow this closely and we know that when races become noncompetitive that money APAC money and other money will be shifted to other markets and we've been the beneficiary of that in some and it's caused us to come up short of our expectations in a particular state, but overall again we.

We are at and slightly ahead of our political guidance embedded in our guide.

My other question guys. Your comment earlier about La Clippers, and Los Angeles 15, NBA games is teaching you can show there and you should.

Hopefully be able to do that elsewhere and what is it sort of meets the regional sports networks, where those gains came from.

And it was done in consultation with and ultimately consent with the IRS and the <unk> will have the rest of these games. These are not simulcast they receive exclusive over the year and.

And I think Steve Balmer is a well respected owner in the NBA and we have subsequent had conversations with two.

Two other owners in the NBA about creating this similar type of I guess, you would call kind of a welcome mat package right that could introduce to the over the year audience that may not receive that does not receive an RSM.

A package of games that might have an interest in.

Perhaps at RSA package or perhaps in a ticket package. So I do think youll see more of this as time goes on and we have been engaged in some early discussions with other teams in markets, where we have.

Slate of games.

And then my final question guys talk in the trade press about NBC potentially pulling their 10 P M.

Our local affiliates if that does happen what do you think that means for your financials overall would it be neutral good bad how do you view the whole development potentially oh that'd be good will make will make more money with an hour of news at 10, and then we do with an hour of network programming. We're a we have all the inventory and be I would expect the NBC goes from.

81% 82 hours a week of network program time that we pay them less so.

But all around listen we have a number of Fox and CW and my network stations at program News is in that last hour of prime and they are extremely profitable.

Very good thank you.

Now we will move to a question from Jim Goss with Barrington Research.

Okay. Thanks.

Couple of things first on the CW I was wondering.

If you could characterize the timeframe of the programming shift away from the Paramount.

That'd be the content and how our biggest share they might have.

When you get to the end game.

So.

The programming for the CW is in place.

You'll see that programming.

With what the program has been historically on the air through that timeframe. During this over the course of the next year, we're really working to develop our slate, which will then come online in the 2023 24 broadcast season.

We will have some carryover commitment for the CBS .

Debbie BD programming in that year, but it's minimal at that way.

Yes, Warners and Paramount are not precluded from selling as programming, it's just going to have to be.

At a financial deal that we that we like and there may be a couple of shows that distinguish themselves. This year that we want to roll over into next year.

I can tell you that Dennis Miller hired a very gifted program executive Brad Schwartz.

Brad Schwartz on a much smaller budget and we've given them at the CW was able to find and develop a show called hits Shits Creek, which we bought them. Your job is easy just go find a couple more of those and we'll be in fine shape at the CW, but he he has a very creative mind very creative deal making.

And it has a sharp eye for talent so.

I like the direction that we're headed and I think you'll I think you'll like the shows that we think will appeal to a broader audience more of a mix of scripted and unscripted than we than we have today, but but.

But I'm very excited at the progress in the early days.

Alright, Thanks, and then one other thing I was going to ask about.

News nation as we get to the end of the political season is this a competitive benefit to you.

Moving into sort of a post election cycle or do you think political will still.

I have an important role.

On news nation as you go through the years.

Well obviously.

In times of a big new cycle, all cable news networks benefit and we certainly saw that in our seeing that but we're still in a build mode. Here. So we're gaining share of audience and gaining share of revenues as we as we build out here. So.

Likeable watchable, new and in many cases, well known talent to the network as we expand our program schedule, but I will tell you that the ability to take what the broadcast division developed in these debates in Ohio, and Pennsylvania, and Texas and Illinois.

And Georgia, and being able to stream those on our news nation App as well as broadcast three of them nationwide on the linear cable channel.

Gave us gave us huge credibility in the political arena, we did 50 debates as a company and thats across the across the country.

No other.

Broadcaster can even come close to that so I think that in Washington people see we are committed to the political process and airing these debates unvarnished, we're not going to tell you what I think we're going to put them out there and let you determine what you want to think and I think they have been and will be impactful in this election cycle. So.

My hope is that that will continue to elevate our stature as a place to go for as an honest broker of information that will show both sides to be fair to both sides and let people determine what they think without with an unvarnished.

Opinion on it.

I think that was a very smart way for you to insert yourself into the discussion.

So that's all I had thank you very much.

Now, we'll hear from Aaron Watts with Deutsche Bank.

Well, it's it's.

And just two quick ones for you, but I believe your cap stack is around 60% floating versus fixed now correct me if I'm wrong, but do you have any great hedges in place and then finally, if you think about the CW. Once you are able to achieve breakeven there are sustaining would the plan be folded into the restricted group with the television station.

Portfolio or is it more most likely to remain separate so the duration.

Low interest rate.

History has really impacted positively the business being more floating index, we don't have that in place for going from this point forward.

Get it to.

Okay, great. Thanks very much.

We'll now take a question from Steven Cahill with Wells Fargo.

I think pretty much every quarter, except COVID-19. So just to be clear at the moment are you reiterating the free cash flow guidance that you've given before <unk>.

Excluding the CW and same question on Retrans, because you've given a quantitative I think mid teens retrans guidance for 2023, so should we assume that is reiterated as well. Thank you.

And with regard to Retrans Theres no change to our guidance for 'twenty three at this time, we will be reevaluating that between now and year end as we get more information on these contract renewals and more information and more in depth information on subscriber trends.

Gotcha and then.

Kind of any sense between.

Let me, let me take a stab at that I think what we're seeing and it's pretty much across the board in broadcasting cable networks and national spot National digital as well as direct response national advertisers are are demonstrating some caution and some pullback in anticipation of consumer weakness however, low.

And again.

Biggest question I think as interest rates and.

And we will have more information we'll share more information when we are confident that we have good information to share.

Thanks, Perry and maybe a last one just on what you talked about with Ats three point being as big as it could be by the end of the decade do you at this point have any beta trials or test cases.

I think you can expect.

Thank you.

Moving on to a question from Barton Crockett with Rosenblatt Securities.

Okay, sorry can you hear me now.

I wanted to ask you a couple of questions about the kind of near term numbers to make sure I understand what youre seeing and what Youre, saying.

The subscriber churn you said, one percentage point I assume additional kind of deceleration.

I think you were talking to around a 2% kind of decline in subs.

That's gone to about 3%, so I want to confirm that I'm hearing those numbers in the ballpark of correct.

In core.

Particularly after the political maybe November December what Youre seeing in terms of patients.

I'll take the first one and then I'll, let <unk> handle the second what we said on the second quarter call. In August was we had a low single digit attrition rate for all subscribers are all.

It would be more along the lines of.

That's helpful. Thanks for that carrier splitting its important right now I appreciate that.

Yes, I would just say we have to start with the fact that we announced this morning, we have doubled the political revenue on the books in the fourth quarter that we did in third quarter. So obviously, there will be displacement in core.

That will cause core revenue comparisons to the prior year to be lower than the third quarter, but you should expect that in the fourth quarter with that level of political advertising, but thematically I don't think we see much difference.

In the categories. The Tom reported on that are up and down it's pretty much. The same story in fourth quarter and it'll be a slightly greater order of magnitude given that we had twice the political revenue on the books than we did in with what we've reported this morning for third quarter.

But in terms of after political so from here forward do you any sense of the pacings are they.

Still on track still the same.

We don't usually give pacing on a monthly.

By month basis, but yes December pacing better than than October absolutely.

In core.

Okay, Alright, great. Thank you.

Next up we have Nick <unk> with Stephens.

Yeah, Hey, guys congrats on the quarter here.

Matched the political AD spend or AD revenue from the prior election, and just coming off the Scripps call. They had suggested that the total political AD spend is coming in around $8 billion for the year.

No the stores, but just curious if you agree or disagree with that statement because obviously if true.

Just that you guys were able to post a flat result relative to F 'twenty versus a material decline for the overall market and then just related to be obviously, given your results and commentary.

The resulting commentary from others. There was it suggests that there were some pretty weak.

AD spend yourself with some states, but again given your result, it would imply that maybe some states experienced.

Pretty strong growth above and beyond what they did in 2020. So just wondering if you saw that as well.

Well, yes, I mean, we don't look at the macro other than our macro so in state suite I cannot opine on Arizona political because we don't have a state their station there I will tell you that the number one billing state for us.

Our station right now is in Nevada.

A single station will build more political revenue there than any other.

In our company and Thats because of obviously, a very contested Senate race there.

But it states that were good for US I think you heard Tom say, Ohio, Pennsylvania, Nevada, California, and California had all kinds of things going on you know the.

The sports betting referendum as well as as candidate races up and down the dial we had more political in Texas and I think we anticipated given a governor's race in some of the.

House races that are purple at this point and turning blue Blue to read, particularly in South, Texas, where we have a number of stations. So.

This happens right. So Pac money will move around to support candidates when races become competitive when they fall out of being a competitive race or outside of the margin of error that money will go somewhere else Youll see the same thing in 2020 for once the presidential candidates are chosen for each party that they that <unk>.

We'll follow the competitive states state falls out of of of being.

Being competitive that money will move will dry up immediately so it's the fact that we reach.

Literally 68% of the country with our broadcast signals and and have over 80% of all competitive races, I think thats one of the reasons and the fact that we.

We really do a deep dive into forecasting and updating our forecast I think that's why you see our political performance, where it is and so.

And it's interesting.

We have more money on the books today as I said earlier for 2022 than we had on the books. This day election day in 2020, we had a.

A very important runoff in Georgia that was going to determine control of the Senate to races, there as well as.

No.

Two runoffs going on there and then went on for two months. If there was a runoff in Georgia. It will be for one month and where our stations are in Savannah, Augusta and Columbus, we're not in Atlanta. So it will have incremental impact if there is.

If there is.

Another race coming on.

A runoff race, but again to be literally within $20 million of our 2020 total for a.

Off year or mid year election cycle is something we would call heroic I think in terms of the performance and my compliments to our broadcast management team as well as our station and sales managers for maximizing this opportunity.

Yeah, No I totally agree do you think that broadcast.

<unk> was a beneficiary of any potential shifts from outside channels like do you think search and social media has been was diverted and maybe into broadcast can you see that or feel that.

No. Its the story that gets sold every year.

And broadcast.

Every year continues to take the lion's share of all political dollars spent.

We will do probably it'll be less than $20 million in political revenue across all of our digital platforms.

And Thats.

Primarily get a fund raising its not.

The Internet has been seen as a fairly effective fundraise.

<unk> raising mechanism, but not necessarily a great get out the vote mechanism.

<unk>.

The politicians time and again prove that local TV works.

And if you.

And.

That's as close to <unk>.

Direct response, if you spend the money and get elected it's kind of an affirmation that the system works.

Got it last one for me that conversion that you talked about.

Mvpds to <unk>.

Linear mvpds into the Mvpds is there like a.

Is there like a negative one or a negative 2% embedded.

Headwind in your Retrans growth because of that impact again I understand the profitability is unchanged, but just on the top line. There just so I understand that thanks.

We had I haven't done that level of detail are not in a position to comment with regard to the specific math on retrans revenue, but you are correct. It will affect retrans revenue, but will not affect our contribution from the distribution ecosystem from that perspective.

Led by our planar NAND.

Less than 10% of our Retrans revenue is coming from that source. So it's a small number.

Got it alright very helpful. Thanks, guys.

Ladies and gentlemen, this will conclude your question and answer session I'll turn the call back over to Perry for closing remarks.

Thank you very much and thank you all for joining us today underpinning our performance this quarter and every quarter is our strong financial framework and the cash generative nature of our business, which has enabled nexstar to consistently deliver prodigious levels of free cash flow. Looking ahead, we continue to execute against our long term strategies, taking the necessary.

The actions and making the required investments to shape the future of Nexstar, while delivering long term growth and outsized returns to our shareholders. Thanks again for joining US today, we look forward to speaking to you again next February when we report on our fourth quarter results.

Have a great afternoon.

Ladies and gentlemen, this does conclude your conference for today. Thank you for your participation you may now disconnect.

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