Q4 2023 Nexstar Media Group Inc Earnings Call
Operator: Good day, and welcome to Nexstar Media Group's fourth quarter and full year 2023 conference. Today's call is being recorded. I will now turn the conference over to Joe Jaffoni, Investor Relations. Thank you.
Good day, and welcome to Nexstar media group's fourth quarter and full year 2023 conference call.
Today's call is being recorded I will now turn the conference over to Joe <unk> Investor Relations. Thank you. Please go ahead Sir.
Joseph N. Jaffoni: Thank you, John. 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 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 subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward-looking statements made during this call. For additional details on these risks and uncertainties, please see Nexstar's annual report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission, and Nexstar's subsequent public filings with the SEC. Nexstar 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 Chairman and CEO, Perry Sook. Perry, please go ahead.
Joe: Thank you John 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 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 subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward looking statements made during this call.
Joe: For additional details on these risks and uncertainties. Please see nexstar. Its annual report on Form 10-K for the year ended December 31st 2022, that's filed with the Securities and Exchange Commission and Nexstar subsequent public filings with the SEC next.
Nexstar undertakes no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Joe: With that it's now my pleasure to turn the conference over to your host Nexstar, Chairman and CEO Perry Sook Perry. Please go ahead.
Perry A. Sook: Thank you, Joseph, and good morning, everyone. We appreciate you joining us today to discuss Nexstar's fourth quarter and full year 2023 results. With me on the call this morning are Mike Baird, our President and Chief Operating Officer, and Leanne Gliha, our EBP and CFO. I'll start with a summary of recent highlights and developments, followed by Mike's operational review and Leanne's financial review, then we'll take your questions.
Perry A. Sook: Thank you Joseph and good morning, everyone.
Perry A. Sook: We appreciate you joining us today to discuss Nexstar is fourth quarter and full year 2023 results with me on the call. This morning are Mike Byrd, Our President and Chief operating Officer, and Leigh Ann Leehar, our EVP and CFO.
Perry A. Sook: I'll start with a summary of recent highlights and developments followed by Microsoft Racing Review and Leann Financial Review then we'll take your questions.
Perry A. Sook: Nexstar's fourth-quarter financial results outperformed consensus expectations in key financial metrics, including adjusted EBITDA and attributable free cash flow. Validating the enduring strength, reach, and appeal of broadcasting during the fourth quarter, we successfully completed all of our remaining distribution negotiations for Nexstar-owned stations as we had expected. I'm also pleased to report that our partner stations were back up on dish beginning in January.
Joe: Next our fourth quarter financial results outperformed consensus expectations, and key financial metrics, including adjusted EBITDA and distributable free cash flow validating the enduring strength reach and appeal of broadcast during the fourth quarter. We successfully completed all of our remaining distribution negotiations for Nexstar own.
Joe: Patients as we had expected I'm also pleased to report that our partner stations were back up on dish beginning in January.
Perry A. Sook: Nexstar's record fourth quarter and full year distribution revenues confirm once again that our distribution partners and their customers continue to value the highly rated broadcasts and fast growing cable news network programming that we provide. The completion of these agreements gives us solid visibility for our distribution revenues in 2024 and beyond. As we move into 2024, an election year, we look forward to once again demonstrating the value of broadcast television to both candidates and campaigns looking to communicate to the electorate through their political advertising on our television stations. But more on that in just a moment.
Joe: Next artist record fourth quarter and full year distribution revenue confirm once again that our distribution partners and their customers continue to value. The highly rated broadcast and fast growing cable news network programming that we provide.
Joe: Completion of these agreements give us solid visibility for our distribution revenues in 2024 and beyond.
Joe: As we move into 'twenty 'twenty, four and election year, we look forward to once again, demonstrating the value of broadcast television to both candidates and campaigns looking to communicate to the electorate three their political advertising on our TV stations more on that in just a moment.
Perry A. Sook: Our 2023 results extend Nexstar's long record of consistently generating substantial free cash flow, a trend that we expect to continue. On average, for the 2022-2023 cycle, Nexstar generated $1.8 billion of adjusted annual EBITDA and $1.2 billion of attributable free cash flow. Over that timeframe, we returned an average of $910 million each year to shareholders in the form of dividends and share repurchases, representing approximately 77% of our attributable annual free cash flow and 16% of our annual market capitalization.
Joe: Our 2023 results expand Nexstar has a long record of consistently generating substantial free cash flow a trend that we expect to continue on average for the 2022 2023 cycle Nexstar generated $1 $8 billion of adjusted annual EBITDA and $1 2 billion of attributable free.
Joe: Cash flow.
Joe: Over that timeframe, we returned an average of $910 million each year to shareholders in the form of dividends and share repurchases, representing approximately 77% of our any of our attributable annual free cash flow and 16% of our annual market capitalization devote.
Perry A. Sook: Our strong financial track record supports our commitment to our shareholder returns and the enhancement of our shareholder value. To that end, in January, we announced an increase in our annual dividend of 25%, our 13th consecutive annual increase. While there is and has been perpetual noise in our space, we remain highly confident in our business model, our growth opportunities, and our competitive positioning. And we've demonstrated time and again over the years that whatever is occurring in our industry or ecosystem, we are capable of managing Nexstar for free cash flow and the benefit of our shareholders. Broadcast television delivers the broadest reach and the greatest share of viewership within a market, given our compelling offering of the most popular local and national sports, news, and entertainment programming.
Joe: Our strong financial track record supports our commitment to our shareholder returns and the enhancement of our shareholder value to that end in January we announced an increase in our annual dividend up 25%, our 13th consecutive annual increase.
Joe: While there is and has been perpetual noise in our space, we remain highly confident in our business model, our growth opportunities and our competitive positioning.
Joe: And we've demonstrated time and again over the years that whatever is occurring in our industry. Our ecosystem. We are capable of managing nexstar free cash flow and the benefit of our shareholders.
Joe: <unk> TV deliveries broadcast the broadest reach and the greatest share of viewership within a market given our compelling offering of the most popular local and National Sports News and entertainment programming. There's no better example of the power of broadcast television than this year's Super Bowl, which was the most watched television programming.
Perry A. Sook: There's no better example of the power of broadcast television than this year's Super Bowl, which was the most watched television programming since the 1969 moon landing, which I also watched, by the way. The enduring strength of the broadcast platform is further demonstrated by the extraordinary local viewership generated in Kansas City and San Francisco, which achieved a record-breaking 80-plus share of TV viewing and a more than 75% share of TV viewing across the top 34 metered markets. And for all the hype surrounding the Peacock playoff game and its 23 million viewers on broadcast, a less competitive wildcard game that was moved to a Monday because of bad weather generated 31 million viewers.
Joe: Since the 1969 Moon landing, which I also watched by the way the enduring strength of the broadcast platform is further demonstrated by the extraordinary local viewership generated in Kansas City, and San Francisco, which achieved a record breaking 80, plus share of TV viewing and a more than 75% share of TV viewing across the top.
Joe: 34 metered markets.
Joe: And for all the hype surrounding the Peacock playoff game in its 23 million viewers on broadcast a less competitive wildcard game that was moved to a Monday because of bad weather generated 31 million viewers and the chiefs bills playoff game generated 50 million viewers more than twice the Peacock game, that's the power of broadcast television.
Perry A. Sook: And the Chiefs-Bills playoff game generated 50 million viewers, more than twice the Peacock game. That's the power of broadcast television. Mike, who is a Fox alum, will share our thoughts on sports streaming in a moment. And while it's true the industry is constantly evolving, the volatility in Nexstar's share price is not really reflective of what's actually going on in our business, and this has been the case for several years. We keep executing on our playbook, making return-focused growth investments and decisions, and delivering excellent results and returns for shareholders, and we plan to continue to do so. Before offering some comments on 2024, I'll briefly review a few key highlights from the quarter and the year. NewsNation remains the fastest growing cable news network in prime time and has now surpassed MSNBC in cable distribution.
Joe: Yeah.
Joe: Michael was a Fox alarm will share our sports on sports streaming our thoughts on sports streaming and in a moment and while it's true the industry is constantly evolving the volatility and next our share price is not really reflective of what's actually going on in our business and this has been the case for several years, we keep executing on our play book, making returns focused growth.
Joe: Investments and decisions and delivering excellent results and returns for shareholders and we plan to continue to do so.
Joe: Before I operating some comments on 'twenty 'twenty four I'll briefly review a few key highlights from the quarter and the year News nation remains the fastest growing cable news network in Prime and has now surpassed M. S N B C and cable distribution.
Perry A. Sook: The power and strength of our collective media assets enabled us to secure the final GOP presidential primary debate last year before the Iowa caucuses for News Nation, which we simulcast on The CW. That was an impressive feat for a three-year-old news network, especially considering that the prior debates were on Fox and NBC. The event delivered more than 4 million combined viewers, with NewsNation garnering the largest audience in its history. NewsNation continued to add programming and news talent throughout the year, and we're well on our way to becoming a 24-hour cable news network this year. The Hill remains the number one website for political news and views with 32 million unique monthly visitors, more than 50% bigger than each of our two largest competitors, Axios and Politico. Year over year, the Hill expanded its lead in competition over its competition by 7 million unique visitors during 2023.
Joe: The power and strength of our collective media assets enabled us to secure the final G. O P. Presidential primary debate last year before the Iowa caucuses for news nation, which we simulcast on the CW.
Joe: That was an impressive feat for a three year old news network, especially considering that the prior debates were on Fox and NBC.
Joe: The event delivered more than 4 million combined viewers with news nation, garnering the largest audience in its history.
Joe: News nation continue to add programming and news talent throughout the year and we're well are well on our way to become a 24 seven cable news network. This year.
Joe: The Hill remains the number one website for political news and views with 32 million unique monthly visitors more than 50% bigger than each of our two largest competitors axiom and politico.
Joe: Year over year, the hill expanded its lead in competition.
Joe: Over its competition by 7 million uniques during 2023 we also launched the hill branded political issues News program on news nation at six o'clock each night.
Perry A. Sook: We also launched the Hill branded political issues news program on News Nation at six o'clock each night. We expect that our political momentum there will continue in 2024 during the presidential election cycle. Turning to the CW, we made significant headway in 2023 on our path to profitability. First, we further streamed and streamlined the network operation.
Joe: We expand and they expect that our political momentum bear will continue in 2024 during the presidential election cycle.
Joe: Turning to the CW, we made significant headway in 'twenty to 'twenty three on our path to profitability first we further assist dream and streamed up streamline their network operations.
Perry A. Sook: Improving cash flow by almost $90 million versus 2022, which was under prior ownership for three-fourths of the year. We also implemented a compelling programming lineup, including a diverse mix of entertainment, unscripted programming, sports, and events. In fact, in the last few months, the CW has had a number of 1 million plus viewer nights, representing the highest levels reached in recent history for the network and clearly demonstrating that when you air compelling programming, viewers will watch. For example, in November, in the ACC, the Florida State versus North Alabama football telecast delivered the network's highest-rated Saturday night ever and the highest rating in more than five years across all days, with more than 1.3 million average viewers peaking at 1.9 million viewers.
Joe: Proven cash flow by almost $90 million versus 'twenty, 'twenty, two which was under prior ownership for three fourths of the year. We also implemented a compelling programming lineup, including a diversified mix of entertainment unscripted programming sports and events in fact in the last few months. The CW has had a number of 1 million plus fewer nights.
Joe: Representing the highest levels reached in the recent history for the network and clearly demonstrating that where you are compelling programming viewers will watch for example in November the ACC, Florida State are in N D. A C C. The Florida state versus North, Alabama football telecast delivered the network's highest rated Saturday night ever and the <unk>.
Joe: Highest rating in more than five years across all days with more than 1.3 million average viewers, peaking at 1.9 million viewers.
Perry A. Sook: In early December, as I mentioned, our RNC Debate simulcast with News Nation delivered more than 2.6 million viewers on The CW, peaking at over 3 million and beating NBC and Fox in one of their two primetime hours, generating the highest ratings on The CW since 2018. Later that month, the Arizona Bowl averaged 1.1 million viewers, and we beat CBS in the time period.
Joe: In early December as I mentioned, our RNC debates simulcast with news nation delivered more than $2 6 million viewers on the CW, peaking at over $3 million and beating NBC and Fox in one of their two primetime hours generated the highest ratings on the CW. Since 2018 later that month, the Arizona Bowl averaged.
Joe: 1.1 million viewers, and we beat CBS and the time period.
Perry A. Sook: In mid-January, the Critics' Choice Award delivered more than 1 million total viewers, up 14% over 2023, making it the most-watched show on The CW since 2020. And a week and a half ago, The CW's Sunday Night Prime beat Fox head-to-head, a feat we repeated again this past week. You'll notice a returning theme of growth as we start to beat our much larger network competitors with more frequency, driving the value of the network for advertisers and affiliates alike. We're excited for the future, particularly as we look at the launch of WWE Next on October 1st of this year and bringing the NASCAR Xfinity Series to Fox in, I'm sorry, the CW in 2025. On the distribution front, we launched the CW network affiliations on Nexstar-owned and operated stations in five markets, including three of the nation's top 15, and we expanded and extended the CW network affiliation agreements with several of our broadcast partners.
Joe: In mid January the Critic's Choice award delivered more than 1 million total viewers up 14% over 2023 making it the most watched show on the CW since 2020, and a week and a half ago. The CW Sunday night Prime beef Fox head to head a feat we are repeated again this past week.
Joe: You'll notice returning theme of growth as we start to beat our much larger network competitors with more frequency driving the value of the network for advertisers and affiliates alike.
Joe: We're excited for the future, particularly as we look at the launch of WWE next on October 1st of this year and bringing the NASCAR Xfinity series to Fox and to our I'm, sorry to the CW in 2020 five.
Joe: On the distribution front, we launched the CW network affiliations on Nexstar owned and operated stations in five markets, including three of the nation's top 15, and we expanded and extended the CW network affiliation agreements with several of our broadcast partners.
Perry A. Sook: In terms of advertising, we continue to focus on leveraging our collective media assets to increase monetization. In 2023, we completed our first upfront as a consolidated entity for all Nexstar national properties, including NewsNation, The CW, Antenna TV, and The Hill, as well as our digital offerings. We added 47 new advertisers across all platforms.
Joe: In advertising, we continue to focus on leveraging our collective media assets to increase monetization and 2023 we completed our first upfront as a consolidated entity for all next our national properties, including news nation. The CW antenna T V and the hill as well as our digital offerings.
Joe: We added 47, new advertisers across all platforms.
Perry A. Sook: Last quarter, we discussed our intention to bring our national sales in-house, and we successfully transitioned all 117 local television markets to our internal national sales organization. We're executing well on this initiative so far in 2024, and we look forward to sharing our successes in future calls. We also continue to lead the industry in the deployment of ATSC 3.0 or Next Gen TV, achieving our goal of reaching over 50% of the U.S. television households that now receive a Next Gen TV signal from a Nexstar-owned or partner station. Looking ahead to 2024, Nexstar is in a strong position to benefit from the anticipated record level of political spending in the presidential election cycle. First, with the broadest reach and the greatest share of local viewership, broadcast television continued to be the medium of choice for campaigns and PACs to efficiently reach and influence voters. Second, the voter demo is now the broadcast demo, with 64% of the people who voted in 2022 aged 50-plus, according to Pew Research.
Joe: Last quarter, we discussed our intention to bring our national sales in house, and we successfully transitioned all 117 local TV markets to our internal national sales organization, we're executing well on this initiative so far in 'twenty 'twenty four and we look forward to sharing our successes in future calls we also continue to lead.
Joe: The industry in the deployment of a T. S. C. Three point out where our next gen TV, achieving our goal of reaching over 50% of the U S. TV households that now receive an extra N T V signal from a nexstar owned or partner station.
Joe: Looking ahead to 2020 for Nexstar is in a strong position to benefit from the anticipated record level of political spending in the presidential election cycle.
Joe: With the broadest reach and the greatest share of local viewership broadcast TV continued to be the medium of choice for campaigns and packs to efficiently reach and influence voters second the voter demo is now broadcast them over 64% of the people who voted in 2022 aged 50, plus according to Pew research.
Perry A. Sook: We expect, thirdly, to see contested congressional races, more of them, actually, than ever before in both the House and the Senate, with both chambers up for grabs and several retirements creating new open seats to be contested. Finally, Nexstar's scale leaves us well-positioned regardless of where the money flows. We have stations covering 91% of this year's gubernatorial and Senate races and 82% of the House races. This election cycle is projected to generate in excess of $10 billion in political advertising reported on a gross revenue basis based on Ad Impact and Vivec's CMAC estimates, with about $5 billion of that total expected to be spent on television. Historically, Nexstar has captured a low teens percentage of local television broadcast spending, which we will book on a net basis after agency commission.
Joe: We expect third way to see contested congressional races more of them actually than ever before in both the house and the Senate with both chambers up for grabs and several retirement is creating new open seats to be contested.
Joe: Finally, nexstar scale leaves us well positioned regardless of where the money flows we have stations covering 90%, 91% of this year's gubernatorial and Senate races, and 82% of the house races.
Joe: This election cycle is project are projected to generate in excess of $10 billion in political advertising reported on a gross revenue basis based on AD impact and Vivek C. M. A C estimates with about $5 billion of that total expected to be spent on television historically nexstar has captured a low teens percentage of local television.
Joe: Broadcast spending, which we will book on a net basis after agency commissions.
Perry A. Sook: We have a well-established playbook for maximizing political revenue that our teams advance and refine with every election cycle. As America's largest local television broadcasting company, we have the scale and resources to produce and distribute the most comprehensive political news and live debate coverage in our market and across the nation. Further enhancing our political opportunity, in early January, we entered into a multi-year time brokerage agreement, KAC-TB, in Phoenix, the nation's 11th largest EMA and one of the more critically important markets in the 24-election cycle. Content synergies between our local and national assets, including News Nation, The Hill, and The CW, will also be positive contributors to these efforts. Together, the distinct competitive advantage reinforces our confidence that Nexstar will deliver strong political advertising revenue in 2024. In terms of guidance, we are initiating 2024 adjusted EBITDA guidance of $2.085 billion to $2.195 billion.
Joe: We have a well established playbook for maximizing political revenue that our teams advance and refine with every election cycle is America's largest local television broadcasting company, we have the scale and resources to produce and distribute the most comprehensive political news and live debate coverage in our market and across the nation further enhancing our political.
Joe: <unk> opportunity in early January we entered into a multiyear time brokerage agreement K S. E T be in Phoenix, the nation's 11th largest DMA and one of the more critical it would be important markets in the twenty-four election cycle.
Joe: Content synergies between our local and national assets, including news nation to Hill and the CW will also be positive contributors to these efforts.
Joe: Whether the distinct competitive advantage for our forces our confidence that Nexstar will deliver a strong political advertising revenue in 2024.
Joe: In terms of guidance, we are initiating 'twenty 'twenty four adjusted EBITDA guidance at 2.085 billion to 2.1 95 billion Leann will discuss the detail shortly but we changed the form of our guidance to be more aligned with other companies in our industry and other companies of our scale we have it.
Perry A. Sook: Leanne will discuss the details shortly, but we changed the form of our guidance to be more aligned with other companies in our industry and other companies of our scale. We have a track record of meeting or exceeding our guidance and believe the new EBITDA guidance will be more useful to shareholders who tend to value us on this metric. Even though the form has changed, as always, we will continue to provide you with our unvarnished take on the prospects for our business model, which we expect to continue to generate a significant amount of free cash flow for the foreseeable future. I trust that you share my enthusiasm in looking forward to 2024 and Nexstar Media Group's bright future. Our continued growth and our success are predicated on the unique strength and durability of our highly profitable operating model.
Joe: Track record of meeting or exceeding our guidance and believe the new EBITDA guidance will be more useful to shareholders, who tend to value us on this.
Joe: On this metric.
Joe: Even though the forum has changed as always we will continue to provide you with our unvarnished take on the prospects for our business model, which we expect to continue to generate a significant amount of free cash flow for the foreseeable future.
Joe: I Trust that you share my enthusiasm and looking forward to 'twenty 'twenty, four and Nexstar media group's bright future. Our continued growth and our success are predicated on the unique strength and durability of our high profitable operating model with the experience of our leadership team and our more than 13000 talented and diverse employees across the country.
Perry A. Sook: With the experience of our leadership team and our more than 13,000 talented and diverse employees across the country, we expect to build momentum through 2024, given the successful renegotiation of our distribution contracts in 2023, a significant presidential election year political advertisement, continuing to reduce the losses related to the CW network, and an improving economic environment. Nexstar has a clear set of objectives for creating the greatest long-term value for our shareholders, and we will continue to deploy cash in a manner that will deliver the highest return. So with that said, let me turn the call over to Mike Beard. Thank you, Perry. And good morning, everyone.
Joe: We expect to build momentum through 2024, given the successful renegotiation of our distribution contracts in 2020 three.
Joe: Difficult presidential election year political advertising.
Joe: I'm going to reduce the losses related to the CW network and an improving economic environment.
Joe: Star has a clear set of objectives for creating the greatest long term value for our shareholders and we will continue to deploy cash in a manner that will deliver the highest returns so with that said, let me turn the call over to Mike Mike.
Michael Brian Nathanson: Thank you Perry and good morning, everyone before reviewing our operating results in more detail I'll briefly.
Michael Biard: Before reviewing our operating results in more detail, I'll briefly address the sports-focused streaming product announced by Fox, ESPN, and Warner Brothers Discovery. As we and many industry analysts believe there was a significant misinterpretation and market overreaction, but it appears to have abated somewhat as more information and understanding of the product have become available.
Michael Brian Nathanson: To address the sports focused streaming product announced by Fox E. S. P N and Warner Brothers discovery as we and many industry analysts believe there was a significant misinterpretation and market overreaction, which appears to have abated somewhat as more information and understanding of the product has become available.
Michael Brian Nathanson: First with respect to the composition of the proposed product we have confirmation that it will function in the same manner as other D. M. D. P. DS that distribute our Fox and ABC affiliated stations to be clear Nexstar will have the option of opting in to secure carriage and compensation.
Michael Biard: With respect to the composition of the proposed product, we have confirmation that it will function in the same manner as other VMVPDs that distribute our FOX and ABC affiliated stations. To be clear, Nexstar will have the option of opting in to secure carriage and compensation for our ABC and FOX affiliates. As such, this would be an additive incremental revenue stream for Nexstar. The fact that the network's O&O and affiliate stations are a core piece of the product is no surprise, and it reaffirms the critical importance of the broadcast platform to sports rights and distribution. Moreover, we believe the three JV partners understand the value of the linear ecosystem; pay TV revenues remain vital to each. They've demonstrated this in their respective approaches to D2C, largely avoiding the strategies of some of their peers that have undermined the value of their own core linear network.
Michael Brian Nathanson: For our a b C and Fox affiliated stations.
Michael Brian Nathanson: As such this would be an additive incremental revenue stream for Nexstar.
Michael Brian Nathanson: The fact that the networks Ono and affiliate stations are a core piece of the product is no surprise and it reaffirms the critical importance of the broadcast platform to sports rights and distribution.
Michael Brian Nathanson: Moreover, we believe the three JV partners understand the value of the linear ecosystem as pay TV revenues remain vital to each of them.
Michael Brian Nathanson: They've demonstrated this in their respective approaches to D to C largely avoiding the strategies some of their peers that have undermined the value of their own core linear networks.
Michael Biard: We note that Lachlan Murdoch clearly stated that the sole purpose of the sports product, Target Coordinator, for those already outside of pay TV, in order to expand the audience for their sports programming and not shrink linear cash. The rumored pricing for the service supports this assertion, as it would not undervalue the linear services that carry and pay for the marquee sports that are the core of the office. Some other D2C products in the marketplace And since the product is focused on coordinators, we would welcome the opportunity to make Nexstar's local programming available to a new audience. All that said, to date, we have more questions than answers about the proposed product, including assurance that it will actually launch. We know launching a new streaming startup will be challenging, including potential regulatory hurdles, lawsuits, and other complicating factors surrounding the JV. So we'll have to see how this all plays out.
Michael Brian Nathanson: We note that Lachlan Murdoch clearly stated that the sole purpose of the sports product is to target cord Nevers those already outside of the pay TV ecosystem in order to expand the audience for their sports programming and not shrink linear cash flows.
Michael Brian Nathanson: Pricing for this service supports this assertion is it would not undervalue the linear services that carry and pay for the marquee sports that are the core of the offering like some other D to C products in the marketplace do.
Michael Brian Nathanson: And since the product is focused on coordinators, we would welcome the opportunity to make nexstar as local programming available to a new audience.
Michael Brian Nathanson: All that said to date, we have more questions than answers about the proposed product, including assurance it will actually launch.
Michael Brian Nathanson: We know launching a new streaming startup will be challenging including potential regulatory hurdles lawsuits and other complicating factors surrounding the JV. So we'll have to see how this all plays out.
Michael Biard: But there is no question that bundled linear video, particularly broadcast, continues to be the most effective distribution platform for sports content and the most attractive value proposition to customers for access to the most compelling sports, news, and entertainment, all in one place. As an aside, we believe these marketplace developments, combined with our recent ratings and successes, further validate our strategy for CW sports and the investments we've made to acquire sports rights, are already beginning to take root. Now, turning to the operating procedure.
Michael Brian Nathanson: But there is no question that the bundled linear video, particularly broadcast continues to be the most effective distribution platform for sports content and the most attractive value proposition to customers for access to the most compelling sports news and entertainment all in one place as.
Michael Brian Nathanson: As an aside we believe these marketplace developments combined with our recent ratings successes further validate our strategy for CW sports and the investments we've made to acquire sports rights, which we can see are beginning to take root already.
Michael Brian Nathanson: Now turning to the operating review.
Michael Biard: We delivered fourth-quarter net revenue of $1.3 billion compared to $1.5 billion in the prior year quarter. The Net Revenue Comparison primarily reflects the year-over-year variance in cyclical political advertising, offset in part by growth in distribution revenue. Excluding political advertising, net revenue increased 4.3% year-over-year. Core Television Advertising, which includes both our station group and our national networks but excludes any digital advertising revenue, declined 5.9% year-over-year to approximately $449 million. Excluding the CW, for consistent comparison purposes, core advertising declined 5.6%, marking a sequential improvement from the 2023 third quarter, which was down 6.8%. However, it continues to be impacted by a challenging national advertising market and a relatively high concentration of large market stations that continue to perform more like the national advertising market, to that point. Excluding our networks and top 10 markets, and including digital ad revenue, as many of our peers do, our station core television advertising revenue for the quarter was slightly up. ConsolidatedBase.
Michael Brian Nathanson: We delivered fourth quarter net revenue of $1 3 billion compared to $1 5 billion in the prior year quarter.
Michael Brian Nathanson: Net revenue comparison, primarily reflects the year over year variance and cyclical political advertising offset in part in part by growth in distribution revenue.
Michael Brian Nathanson: Excluding political advertising net revenue increased four 3% year over year.
Michael Brian Nathanson: Core television advertising, which includes both our station group and our national networks, but excludes any digital advertising revenue declined five 9% year over year to approximately $449 million, excluding the CW for consistent comparison purposes core advertising declined five 6% marking is.
Michael Brian Nathanson: Sequential improvement from the 2023 third quarter, which was down six 8%, we continue to be impacted by a challenging national advertising market and a relatively high concentration of large market stations continued to perform more like the national advertising market.
Michael Brian Nathanson: That point, excluding our networks and top 10 markets and including digital AD revenue as many of our peers do our station core TV advertising revenue for the quarter was slightly up.
Michael Brian Nathanson: On a consolidated basis in Q1 2024, we are seeing a slightly greater rate of decline of our overall core TV advertising over what we saw in the fourth quarter again, primarily as a result of weak national advertising and due to the Super Bowl airing on CBS versus Fox, which is not as favorable for us.
Michael Biard: In Q1 2024, we are seeing a slightly greater rate of decline in our overall core television advertising over what we saw in the fourth quarter, again, primarily as a result of weak national advertising and due to the Super Bowl airing on CBS. This is Fox, which is not as favorable for us. Including the CW, for consistency of comparison purposes, our top performing categories in the quarter were home repair, manufacturing, Packaged Goods, and Air Conditioning Heating. However, Automotive, our largest advertising category in terms of dollars spent, was essentially flat, given a challenging year-over-year comparison. The categories most responsible for the core advertising revenue decline were gaming sports betting, insurance, and radio, TV, and cable news. Turning to politics,
Michael Brian Nathanson: Yes.
Michael Brian Nathanson: Excluding the CW for consistency of comparison purposes, our top performing categories in the quarter were home repair manufacturing packaged goods and air conditioning heating.
Michael Brian Nathanson: Automotive our largest advertising category in terms of dollar spent was essentially flat given the challenging year over year comparison.
Michael Brian Nathanson: The categories most responsible for the core advertising revenue decline, we're gaining sports betting insurance and radio television cable newspaper.
Michael Brian Nathanson: Turning to political.
Michael Biard: Q4 political advertising $30 million was ahead of Q4 2021 political advertising $19 million and just behind Q4 2019 political advertising $36 million. This is the primary election cycle, slightly less active versus 2019. As Perry mentioned, we remain optimistic, nonetheless, about our growth prospects for political advertising revenue in the 2024 election cycle, which we expect to exceed each of 2022 and 2020. Given our extensive footprint, covering over 80% of contested elections, we are extraordinarily well positioned to take share and dollars locally and nationally. Moving on to distribution, Nexstar delivered 4th quarter distribution revenue of approximately $704 million, up 14.3% versus the prior year. Distribution revenue growth was driven by the renewal of our distribution agreements in 2022 and 2023 on approved terms and annual rate escalation, as well as growth in virtual MVPD revenue, offset in part by continued traditional MVPD subscriber attrition and the removal of partner stations from certain MVPDs. Scribers grew in the quarter in the low single-digit range, excluding the impact of the ongoing removal of partner stations from certain MVPDs. Thank you for watching.
Michael Brian Nathanson: Q4, political advertising of $30 million was ahead of Q4 2021 political of $19 million and just behind Q4 of 2019 political of $36 million.
Michael Brian Nathanson: With the primary election cycle.
Michael Brian Nathanson: Slightly less active versus 2019 as Perry mentioned, we remain optimistic nonetheless about our growth prospects for political advertising revenue in the 2024 election cycle, which we expect to exceed each of 2022 and 2020.
Michael Brian Nathanson: Given our extensive footprint covering over 80% of contested elections, we are extraordinarily well positioned to take share and dollars locally and nationally.
Michael Brian Nathanson: Moving on to distribution.
Michael Brian Nathanson: Nexstar delivered fourth quarter distribution revenue of approximately $704 million up 14, 3% versus the prior year distribution.
Michael Brian Nathanson: Revenue growth was driven by the renewal of our distribution agreements in 2022, and 2023, unapproved terms and annual rate escalators as well as growth in virtual Mvpds revenue offset in part by continued traditional mvpds subscriber attrition and the removal of partner stations from certain Mvpds.
Michael Brian Nathanson: Subscribers grew in the quarter in the low single digit range, excluding the impact of the ongoing removal partner stations from certain mvpds, reflecting the benefit of the increased carriage of our CW My network and independent stations on Youtube TV and other Mvpds. The addition of new CW affiliations at Nexstar.
Michael Biard: The addition of new CW affiliations at Nexstar stations and recent station acquisitions. Looking forward, we have no significant distribution renewals, and only one major affiliation agreement up during the year that will impact 2024. With our partner stations back on DISH and an easier comparison later in the year as we lap the DirecTV service disruption in the third quarter, we expect continued growth of our distribution revenues, tempered by subscriber attrition, in line with the overall pay TV market. Specifically, we expect the full-year growth rate for our distribution revenues to be in the high single-digit range.
Michael Brian Nathanson: Stations and recent recent station acquisition.
Michael Brian Nathanson: Looking forward, we have no significant distribution renewals and only one major affiliation agreement up during the year that will impact 2024.
Michael Brian Nathanson: With our partner stations back on dish and an easier comparison later in the year as we lap the Directv service disruption in the third quarter. We expect continued growth of our distribution revenues tempered by subscriber attrition in line with the overall pay TV marketplace.
Michael Brian Nathanson: Specifically, we expect the full year growth rate for our distribution revenue to be in the high single digit range and our full year growth rate for our net distribution revenue to be in the low teens.
Michael Biard: Full Year Growth Rate for our Net Distribution Revenue to be in the low. Fourth quarter digital revenue increased 5.4% year over year to approximately $106 million. Digital revenue was impacted primarily by weakness in national digital advertising, partially offset by year-over-year increases in Nexstar's local digital advertising revenue and agency services business.
Michael Brian Nathanson: Fourth quarter digital revenue increased five 4% year over year to approximately $106 million.
Michael Brian Nathanson: Digital revenue was impacted primarily by weakness in national digital advertising, partially offset by year over year increases in Nexstar is local digital advertising revenue and the agency services business.
Michael Biard: As Perry mentioned, the strides we are making at the CW are noteworthy and underscore our optimism for the value that can be created from this aspect. Q4 revenue of $55 million declined from last year's $66, given weakness in the overall advertising market and the impact of the rider. Adjusted EBITDA improved by $14 million compared to the prior year to an adjusted EBITDA loss of $50 million. As Perry mentioned, in 2023, we reduced the CW losses by nearly $90 million over the year and remain on track to continue to bend the cost and revenue curves favorably in 2024 toward break-even in the next couple of years. CW remains one of the most exciting long-term growth opportunities at the company, and we expect our programming and sales strategy, All of these programs can drive viewership and increase the overall value proposition to our affiliates, distributors, and advertisers.
Michael Brian Nathanson: As Perry mentioned the strides we are making at the CW are noteworthy and underscore our optimism for the value that can be created from this asset.
Michael Brian Nathanson: Q4 revenue of $55 million decline from last year's $66 million given weakness in the overall advertising market and the impact of the writer's strike however adjust.
Michael Brian Nathanson: Adjusted EBITDA improved by $14 million compared to the prior year to an adjusted EBITDA loss of $50 million as Perry mentioned in 2023, we've reduced the CW losses by nearly $90 million over the year and remain on track to continue to bend the cost and revenue curves favorably in 2024.
Michael Brian Nathanson: Toward breakeven in the next couple of years.
Michael Brian Nathanson: The CW remains one of the most exciting long term growth opportunities of the company and we expect our programming and sales strategies to drive viewership and increase the overall value proposition to our affiliates distributors and advertisers.
Michael Biard: For example, the simulcast of the NewsNation presidential debate on the CW was a success for both brands, and we expect to leverage additional organic synergies across our station and network portfolio going forward. As we mentioned on the last call, our CW-affiliated stations are the most profitable of our network relationships, both in terms of margin and gross dollars. We are laser focused on fortifying that performance for the long term by acquiring more CW affiliations for Nexstar stations and focusing our programming investment on content that matters to the Broadcast Viewer, including Live Sport. With that, it's my pleasure to turn the call over to Leanne for the remainder of the financial review.
Michael Brian Nathanson: For example, the simulcast of the news nation presidential debate on the CW was a success for both brands and we expect to leverage additional organic synergies across our station and network portfolio going forward.
Michael Brian Nathanson: As we mentioned on our last call. Our CW affiliated stations are the most profitable of our network relationships. Both in terms of margin and gross dollars. We're laser focused on fortifying that performance for the long term by acquiring more CW affiliations for nexstar stations, and focusing our programming investments and content that matters to the.
Michael Brian Nathanson: <unk> viewer, including live sports.
Michael Brian Nathanson: With that it's my pleasure to turn the call over to Leann for the remainder of the financial review and update Dan. Thank you, Mike and good morning, everyone. Mike gave you most of the details on the revenue side and on the CW I'll provide a review of expenses adjusted EBITDA attributed free cash flow along with a review of our capital allocation activities and our 2020 for guidance.
Lee Ann Gliha: Thank you, Mike. And good morning, everyone. Mike gave you most of the details on the revenue side and on the CW, so I'll provide a review of the expenses, adjusted EBITDA, tributal free cash flow, along with a review of our capital allocation activities and our 2020. Together, fourth quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses, increased by $4 million. There were a couple of one-time items in Q4 of 2022 which affected Transcripts provided by Transcription Outsourcing, LLC. The expansion of new programming and expenses related to our in-house national sales force prior to launch, offset by reduced commissions from the reduction of political revenue in a non-profit. Also included in our calculation of adjusted EBITDA, but not included in direct operating and SG&A expenses above are the payments for broadcast. Transcription by CastingWords. In addition, there was $20 million of savings for a 22% reduction in amortization of broadcast rights at the CW as we were able to reduce programming costs with the start of the 2023-2024 broadcast season as part of our program.
Leann: Together fourth quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses increased by $4 million. There were a couple of onetime items in Q4 of 2022, which impacted the comparison, excluding those items direct operating and SG&A expenses for corporate increased by $16 million, primarily due to increases in affiliation fees and other.
Leann: Ramming expenses the expansion of new programming and expenses related to our in house National sales force prior to launch offset by reduced commissions from the reduction of political revenue in a non election year.
Leann: Also included in our calculation of adjusted EBITDA, but not included in direct operating and SG&A expenses are the payments for broadcast rate of our stations and network, excluding the CW, which declined by $10 million in Q4, due primarily to reduced the lines on syndicated content. In addition, there was $20 million of saving or 22% reduction in amortization.
Leann: Broadcast rights as the CW at the CW as we were able to reduce programming costs, starting to 2020 three 'twenty 'twenty four broadcast season as part of our cost reduction strategy.
In Q4 2023, total corporate expense was approximately $45 million, including non-cash compensation expense of $16 million, compared to $49 million, including non-cash compensation expense of $18 million in the fourth quarter. Q4 2023 depreciation and amortization was 210 million versus 231 million in the prior year. The CW's programming costs, which are included in our definitions of adjusted EBITDA and attributable free cash flow, are accounted for in this line item as amortization costs. For more information on this amount, please refer to the schedules in our, We received $12 million in Q4 distributions from equity investments related primarily to our 31% ownership in TV Food Network, which represents a 20% decrease from the prior year quarter. Our Q4 distribution from TV Food Network is a tax. The reduced amount reflects lower income at TV Food Network, related primarily to lower advertising revenue.
Leann: In Q4, 2023 total corporate expense was approximately $45 million, including noncash compensation expense of $16 million compared to 49 million, including noncash compensation expense of $18 million in the fourth quarter of 2022.
Leann: Q4, 2023, depreciation and amortization was $210 million versus 231 million in the prior year quarter due primarily to the reduction in programming expenses at the CW I mentioned a moment ago. Please note that the CW programming costs, which are included in our definition of adjusted EBITDA in attributable free cash flow are accounted for in this line item as amortization.
Leann: Broadcast right.
Leann: For more information on this amount please refer to the schedules in our earnings release.
Leann: We received $12 million in Q4 distributions from <unk> from equity investments related primarily to our 31% ownership in TV food network, which represents a 20% decrease from prior year quarter, our Q4 distribution from <unk> network and the tax related distributions reduced amount reflects lower income at the television.
Leann: Work related primarily to lower advertising revenue.
So putting it all together, on a consolidated basis, 4th Quarter Adjusted EBITDA was $411 million, representing $31.5 billion... Including the CW losses, fourth quarter adjusted EBITDA was $461 million, representing a progressive, 36.6. Fourth quarter CapEx was $36 million, a reduction of $10 million from our expectations, primarily due to timing of payments. Fourth quarter cap backs of $36 million compared to
Leann: So putting it all together on a consolidated basis fourth quarter, adjusted EBITDA was $411 million, representing a 31, 5% margin excluding the CW office fourth quarter, adjusted EBITDA was $461 million representing approximately.
Leann: 36, 6% margin.
Leann: Fourth quarter, Capex was $36 million, a reduction of $10 million from our expectations, primarily due to timing of payments, which moved to 2024.
Leann: Fourth quarter Capex of $36 million compared to $57 million of Capex in the fourth quarter last year for the year Capex was 149 million versus $156 million last year, excluding a small amount of capex associated with B pack.
Leann: Fourth quarter net interest expense increased to $115 million from $103 million in the prior year quarter due to the impact of higher silver rates applicable to our floating rate debt cash interest expense was 113 million for the quarter slightly lower than our expectations given the lower silver rate.
Leann: Fourth quarter operating cash taxes were $26 million and putting this all together consolidated fourth quarter attributable free cash flow was $265 million.
Leann: Together with the free cash flow generated in the quarter and cash on hand, we returned $137 million to shareholders comprised of $46 million in dividends and the repurchase of $91 million of stock at an average purchase price of $145 and 13%.
Leann: This is a smaller amount of repurchases versus the prior quarter as we use the cash available to accelerate repurchases in the prior quarter given the dislocation in the stock price that for.
Leann: For the full year, we repurchased $605 million of stock at an average price of $160 enforced then taking advantage of the low prices. We saw during the last two quarters of the year and reducing shares outstanding for the year by eight 7%. This compares to nine 7% reduction in shares outstanding that we were able to accomplish last year.
Leann: Including dividends for the full year, we returned $796 million or 94% of attributable free cash flow in 2023 compared to 68% of attributable free cash flow in 2022.
Leann: As Perry mentioned for the 2022 2000, Twenty's recycle we returned $910 million of capital to shareholders on average per year, representing a dollar average at 77% of our attributable free cash flow and an actual 16% cash return on our average market capitalization over that period.
Leann: In 2023, we also repaid $125 million of debt and acquired two stations for $38 million Nexstar as outstanding debt as of December 31, 2023, with $6 8 billion down.
Leann: Down slightly for the quarter as we meet quarterly amortization payments of $32 million.
Leann: Our cash balance at quarter end was $135 million, including $52 million of cash related to the CW.
Leann: Because we have designated the CW in an unrestricted subsidiary losses associated with the CW are not accounted for in our calculation of leverage for purposes of our credit agreements as such our net first lien covenant ratio for Nexstar, excluding CW as of December 31, 2023 was $2 two five times, which is well below our first lien and only covenant.
Leann: A four to five times.
Leann: Our total net leverage for Nexstar, excluding the CW was 376 times at quarter end.
Leann: As is typical in non political years, we expect leverage will be calculated on an LTM basis versus the two year average, but not our quantum of debt tick up in 2023, but the fall again in 'twenty 'twenty four is EBITDA walk around with a return of political advertising.
Leann: Our plan this year, which is a political year is to repay a portion of our debt instrument or a portion of that incrementals of our mandatory payments, while we continue to use cash for dividends and repurchases.
Leann: In January 2024, we announced our 13th consecutive increase in our dividend increasing the 'twenty 'twenty four quarterly dividend rate by 25%, which based on our stock price isn't yesterday now more than a 4% dividend yield are achieving our goal of a greater than a 3% yield even at this yield the dividend represents less than a 20% claim on a free cash flow this year.
Leann: We move forward, we will continually Ah well continue to strategically deploy our cash in a manner that is consistent with our commitment to creating the highest shareholder value now.
Speaker Change: Now turning to guidance.
Speaker Change: This year, we are initiating 2024, adjusted EBITDA guidance in a range of 2.085 to $2 195 billion and we know that 2024 Street estimates averaged to one 8 billion.
Speaker Change: On average for 2024.
Speaker Change: And Perry already provided some of the key assumptions that are embedded in our guidance, which include one that we expect nexstar share of total broadcast television average TV political advertising to be in line with historical levels or a low teens percentage and please note that the industry close these figures on a gross basis, but we book revenue on a net basis.
Speaker Change: After Agency Commission.
Speaker Change: Our expectation for growth in that distribution revenue growth to be in the high single digit and low teens areas, respectively, and three we continue to expect to get the CW to breakeven in the next couple of years the.
Speaker Change: The guidance also considers our current expectations for the year for the amount of political fundraising spend allocated to TV advertising in our markets the rate of attrition of pay TV subscribers. The health of the local and national advertising market the ability to renegotiate affiliation agreements on favorable terms and the level of distributions related to our 31.
Speaker Change: 3% ownership stake in TV food network among other things, we do not intend to update this guidance on a quarterly basis going forward.
Speaker Change: The change in the form of our guidance this year for a number of reasons first no. Other company in our industry provides a two year outlook for their financial performance in fact, Merck limit their outlook for the next quarter or fiscal year with many providing new guidance at all second when we established the two year average free cash flow guidance literally a decade.
Speaker Change: In February 2014, we were trying to better educate the market on the strength of our free cash flow generation by smoothing out the impact of the two year political cycle. We were also doing a lot of debt finance station M&A over that time frame that was difficult to pro forma and this guidance was helpful to investors in understanding the financial impact on current and future period and how quick.
Speaker Change: We need to be able to deleverage.
Speaker Change: Today, the market understands the political cycle and we have not done material M&A transactions since Tribune, which closed in September 2019, we have a healthy balance sheet relatively low leverage and three full years of clean historical data for investors to look at.
Speaker Change: Third while most large and mid cap media companies do not provide guidance at all we felt it was important to continue to offer some level of guidance. We've done extensive research on best practices within and outside our sector and believe that annual adjusted EBITDA guidance is the metric most investors use for us better aligns us with other companies of our.
Speaker Change: <unk> track record and it's more reliable measure of our operating performance and strength in the current interest rate environment.
Speaker Change: This change in form of guidance is buy in by no way.
Speaker Change: A change in what we believe to be the future prospects of Nexstar.
Speaker Change: We understand that some naysayers may take the opportunity to quote unquote read into this guidance change that we somehow don't believe in the future of Nexstar.
Speaker Change: Let them do it we continue to have confidence in our business model growth opportunities and expectations for significant free cash flow generation for the foreseeable future as evidenced by our capital allocation strategy, which prioritizes delivering strong shareholder returns.
Speaker Change: Right ourselves on our transparency and will continue to provide a fair and honest assessment of our businesses and growth prospects.
Speaker Change: And for those of you projected free cash flow, which we hope as all of you. We will continue to provide color on how we model our free cash flow.
Speaker Change: So with respect to free cash flow. We're currently projecting capex of 135 million to 145 million for the full year.
Speaker Change: We project, an extra cash interest expense using the spread on our floating rate debt instruments and the current silver forward curve and the coupons on our fixed rate debt along with expectations for debt repayments, which includes our mandatory amortization of approximately $125 million was a modest amount of additional optional repayment, giving excess cash loving to political.
Speaker Change: Yeah.
Speaker Change: For cash taxes, we use a 26, 5% tax rate when calculating our estimated tax after one time and other adjustments.
Speaker Change: As a reminder, the first quarter only include a very small amounts of state income tax payments.
Speaker Change: And for those of you wondering we did receive $40 million from the BMI failing in February.
Speaker Change: Finally, a few comments on our ESG initiatives, while we are executing well on our business ESG also remains a priority for Nexstar and we continue to take actions with all of our practices and disclosures to include our profile. This year, our board of directors adopted a new policy separating the role of the chairperson and CEO upon carrier departure from the company and the board.
Speaker Change: And in preparation for Nexstar as 2020 for proxy and annual meeting will be launching our annual shareholder outreach initiative, shortly where we discuss our initiatives and hear feedback from our top shareholders and as in the past we will provide the results of this process in our annual proxy statement.
Speaker Change: And with that I'll open the call for questions. Operator can you go to our first question.
Speaker Change: Thank you we will now be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two to remove a question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, while we poll for questions.
Speaker Change: And the first question comes from the line of Benjamin soft with Deutsche Bank. Please proceed with your question.
Benjamin Soft: Hey, guys. Thanks for taking the question I appreciate all the color.
Benjamin Soft: I was wondering on the distribution side, if you could parse out the organic growth rate after stripping out Directv and the <unk>.
Speaker Change: Addition back of the partner stations.
Benjamin Soft: And then I was just wondering if you could drill a little bit more into how youre thinking about capital allocation and how you plan to utilize the excess cash from this political cycle. Thank you.
Speaker Change: Yes, so on the on the first question about the pro forma.
Speaker Change: Did provide some decent amount of color on our third quarter call that will allow you to kind of back into that but I'll just tell you the.
Speaker Change: The high single digit growth rate dropped down to mid single digits, when you pro forma out that.
Speaker Change: That impact on a year over year basis.
Speaker Change: With respect to our capital allocation.
Speaker Change: Our strategy is going to continue to be to be opportunistic with respect to share repurchases to the extent that we can.
Speaker Change: We have the cash to accomplish that and there's not other better uses of that cash.
Speaker Change: Obviously, we saw we increased our dividend by 25%. This year, we do have mandatory amortization of about $125 million in terms of debt repayment will probably repay a little bit more of that.
Speaker Change: This year and just because it's a political year and we have a little bit more excess cash flow.
Speaker Change: And then we'll use the remainder of that cash if we don't have M&A to do tip to buy back stock.
Speaker Change: We can see got it thank you.
Speaker Change: They value it.
Speaker Change: And the next question comes from the line of Jason Bazinet with Citibank. Please proceed with your question.
Jason Bazinet: I just had a quick question on the CW do you guys are making good progress.
Jason Bazinet: Narrowing the losses, I think Ive said the.
Jason Bazinet: The goal is to get to breakeven by the fourth quarter of 'twenty five.
Speaker Change: Is there anything you'd call out that's meaningful.
Speaker Change: You should be aware of in terms of quarters, where we might see the losses widen even though youre a long term.
Speaker Change: Objectives are still on track and I'm thinking specifically if some of these.
Speaker Change: Sports rights sort of those costs would have come into the into the P&L. Thanks.
Speaker Change: Yeah, I think we were still on track and as Michael said you know in the next couple of years and whether that's exactly Q4 of 25 or with the writers strike that kind of moves into the first part of 2026, I think is irrelevant, where we're adding value creating value there with the.
Speaker Change: Growth in audience the.
Speaker Change: Beating our competitors head to head.
Speaker Change: Upon occasion, I mean, those are all things that we hope to do and again, adding sports on the weekend meaningfully impacts our CW stations that reach about 40% of the country because thats a day part that they werent competing.
Speaker Change: For sports cost per points or with live programming. So it's all good we don't really factor that into our analysis, how were doing at the local stations, but theres been meaningful upside there in terms of.
Speaker Change: Our local sales of the national sports product that we put on the CW.
Speaker Change: As it relates to the peaks and valleys I mean, obviously nexstar I'd be NASCAR will come in in 2025.
Speaker Change: Which will increase our payments for programming, but Youll also see and 25% continued offset of our decrease in commitments to entertainment programming. So we think that Youll see program expense relative in total be realm.
Speaker Change: Tivoli static I don't know, Mike if you have anything else you'd like to add to that no I think that's right I think we'll manage the cost.
Michael Brian Nathanson: Existing business as we take on incremental cost with new rights that emerge.
Speaker Change: Okay. Thank you.
Speaker Change: And the next question comes from the line of Dan Carnose with benchmark. Please proceed with your question.
Dan L. Kurnos: Thanks, So two for me first Perry, obviously, a lot of noise as you mentioned in your prepared remarks in the space, but on the Retrans side.
Dan L. Kurnos: Sort of a rehash of the fears around getting towards peak appreciate the.
Dan L. Kurnos: Pro forma it seems like you guys. The guide for this year is kind of better than what others have been saying and I know that there is some incremental carriage from CW embedded in there, but if you could give you a sort of updated thoughts on how.
Speaker Change: Gross and net proceed from here and parsing that out maybe big four and the impact of virtual with just overall, how you think about that.
Speaker Change: That line item would be helpful to start with on the follow up on national after.
Speaker Change: I think Mike was pretty clear in his commentary and as it was in terms of kind of both the gross and net Retrans guide here.
Speaker Change: You know there are puts and takes will lap ourselves on Directv. The partner stations are back on dish you know, we we budget for attrition.
Speaker Change: Pretty aggressively and so that's embedded in our guide.
Speaker Change: And so I think the parse it much more than that it might be interesting, but I'm not sure really meaningful because we're one company and.
Speaker Change: All of these factors work together to get to the number that's embedded in what we what we've talked about if you have specific questions weekend I.
Speaker Change: I guess decide whether we want to answer them or not but.
Speaker Change: Yeah, I think that you know.
Speaker Change: <unk>.
Speaker Change: What both Mike and I had said already.
Speaker Change: Descriptive as to how we think about it but is there is there anything in particular, that's on your mind.
Speaker Change: I guess Perry is really just more on sort of the broader outlook here for you know given the issues that have been raised around getting towards peak and the ability to raise rates faster than sub attrition in your guide doesn't imply that in the near term, but just broader or longer term thoughts would be helpful for me.
Speaker Change: I just want run one company here and I know what our results are like and we were very pleased with.
Speaker Change: Where we ended up with our negotiations and our rate increases continue to out pace the pace of.
Speaker Change: Cord cutting to deliver the net and gross increases that we have talked about on the call and so you know all I can tell you is we're able to achieve that.
Speaker Change: Whether others can or not as quite frankly, not my concern we hope everybody does well on the ecosystem continues to prosper.
Speaker Change: We think that the whole Disney charter discussion.
Speaker Change: That validated the value of local broadcast stations because they were never at issue and as you know most franchise agreements for traditional mvpds require the local stations to be carried in if we elect retrans require that they be paid to remain carried and then everybody else that wants the competitor.
Speaker Change: A program offering is going to have to provide the same services. So you know, we actually think that validated.
Speaker Change: Our place in the ecosystem, which is at the top of the food chain.
Speaker Change: And then also the.
Speaker Change: <unk>.
Speaker Change: Discussion about the new sports JV, if that truly does bring more people into the pay TV universe in some way shape or form and we have the ability to opt in and be paid to be a part of that offering that's good too if on the margin.
Speaker Change: Incremental subscriber growth then we're all for it.
Speaker Change: And the next question comes from the line of Steven Koh Hall with Wells Fargo. Please proceed with your question.
Speaker Change: Thank you. So maybe just first the distribution revenue outlook and net outlook was very very helpful. I'm trying to do the math quickly here, but I think it implies that reverse is only going to be up about mid single digit and I think you have an unfavorable comp there from the blackout plus the Fox renewal and another big four.
Speaker Change: This year. So it looks like maybe you are starting to see some deceleration in the rate of kind of organic growth and reverse compensation expense. One of your peers have talked about that as well. So I'd love if theres any commentary on maybe longer term reverse easing.
Speaker Change: And then Mike. Thank you for the information on the sports JV a lot of US had been left to speculate on that so that's very helpful. As you just continue to see probably in the future more rotation to both the mvpds and streaming services like Paramount and Peacock. How do you think about when you can kind of go back to the framework and reestablish your rates on a lot of them.
Speaker Change: These services since theres, probably going to be more subs on those let's say five years from now than there are today. It's been an issue that has kind of been percolating in this industry in a long time I don't think we've seen anything changes yet. So just wondering if there is any initiatives on that thank you.
Speaker Change: I think both of your questions get to the nature of our relationships with our.
Speaker Change: With our network partners and I think those those relationships are unique none of them are identical inside each of those relationships. There. They are multifaceted with lots of moving pieces, but economic and noneconomic you mentioned the relationship in two cases.
Speaker Change: With the D to C products that they have and our participation inside those.
Speaker Change: I think that gets to the fact that.
Speaker Change: Across our relationships each of them, we're not managing to a single feature.
Speaker Change: There's been some discussion about certain aspects of certain network affiliation agreements, we're not going to talk about any particular, one because that's not the way we approach those relationships, we approached them holistically and manage across the entire relationship.
Speaker Change: So our net cost that you can see reflected in the guidance that we provided.
Speaker Change: And the next question comes from the line of Alan Gould with loop capital markets. Please proceed with your question.
Alan Gould: Thanks for taking the question I've got two first Leon I noticed you said, you're paying down some debt do you have ambitions to become investment grade rated.
Alan Gould: You haven't in the past, but yeah, the balance sheet, certainly getting you in that direction.
Alan Gould: And secondly on the sports front is as next door assigned to any of the local a local teams away from the IRS and so I was wondering what the economics of that would be.
Alan Gould: Just the one deal that I think we've given a lot of visibility to our station in Los Angeles in our southern California stations have put together a package of.
Alan Gould: La Clippers games basketball with Steve bombers organization.
Alan Gould: And that we're in our second year of that.
Alan Gould: Just renewed the deal for another year or two.
Alan Gould: And I can tell you that it is profitable assets, depending on the year, a total package of approximately 15 games, plus or minus and depending on how many pre season games, we decided we want to put into that package, but.
Alan Gould: But the arrangement is profitable for our flagship station for those games K T L. A as well as the affiliate stations throughout southern and Central California.
Speaker Change: And I'll just say on the investment I mean, that's a great question.
Speaker Change: We're not <unk>.
Speaker Change: Actively working to try to get the company upgraded to investment grade I think that has a lot to do with <unk>.
Speaker Change: <unk> specific intentions about our balance sheet, which.
Speaker Change: We are not.
Speaker Change: Not there yet but.
Speaker Change: Yeah, and I also don't think from a.
Speaker Change: Cost of capital perspective, it's that differentiated in terms of where we are now versus where it would be.
Speaker Change: But you know what we are.
Speaker Change: We're looking to kind of stream streamline kind of our political and nonpolitical years, a little bit with respect to the to the share repurchases.
Speaker Change: No.
Speaker Change: You know just a modest amount of debt repayment incrementally this year in a political year omi of excess cash flow.
Speaker Change: Thank you.
Speaker Change: And the next question comes from the line of Aaron Watts with Deutsche Bank. Please proceed with your question.
Aaron Watts: Hi, everyone. Thanks for having me on covered a lot of ground I just had one follow up on the network relationship side.
Aaron Watts: We currently have a mix of fixed and variable compensation agreements with your partners given the pressures on subscriber growth do you see a realistic path to moving all of your reverse comp arrangements to a more variable structure is that something that's been discussed at all today.
Speaker Change: Well I think that you have to understand that our agreements are more nuanced even than that even where we have what you might consider to be fixed arrangements. Maybe there are colors around you know the bandwidth of both growth and contraction then.
Speaker Change: And and.
Speaker Change: And there are all kinds of elements that.
Speaker Change: Go into baking the cake with each of our network rankings as Michael said I mean, they are multifaceted, they're very complex take a long time to negotiate and and money isn't always the only thing we talk about so.
Speaker Change: I don't want to speculate on our business relationship with any one network or any any number of networks.
Speaker Change: And Michael if you want to add any more to that but there's there's a lot of pieces to that I think that what we are what we have said consistently is we pay you for programming and exclusivity of that programming to the extent the program is becoming less exclusive it is less valuable to us and we potentially.
Aaron Watts: We will pay you less overtime and what form that takes.
Michael: I think would be to be determined, but they're dynamic discussions happening in real time, and I would just say that everyone. At the table is aware of what's going on in the industry and that the sands are shifting under our feet in.
Michael: And there is a sensitivity to that.
Michael: All around the table.
Aaron Watts: Michael I don't know if you have anything you want to add.
Aaron Watts: To add having been on both sides of the table for those discussions.
Michael: I think I have a.
Michael: Probably unique appreciation for.
Speaker Change: The fact that they they are each very different complex and as I said before I think focusing on a single aspect.
Michael: Of those relationships I think misses the point certainly misses the point from our perspective, which is where we're going to manage the entire relationship to the net loss and I know there's been focus on the fixed cost aspect that some have talked about at the right price I would take fixed cost. It's all about how that cost works through our business.
Michael: And that's what we're focused on.
Speaker Change: Okay. That's really helpful. And then just lastly, Atlanta.
Speaker Change: I heard your comments.
Michael: So another question around around investment grade, whether you had that way or not but maybe I can ask that a different way just.
Michael: Given the increased scrutiny around leverage in the space.
Michael: And what is your leverage comfort zone, maybe it's where you're at today and and where would you like to see that level trend over the next couple of years.
Michael: We're very comfortable with where our leverage is today.
Michael: We obviously have a an uneven year impact here, but you know I don't think we have any need to really kind of do any major deleveraging.
Michael: You know given the relative level of risk.
Michael: This is a question that we get asked a lot and we're gonna be.
Michael: It will be less than three times levered in total this year.
Michael: So.
Michael: Like I think this is actually one of the generating factors. We think that we have as a company I think a lot of it we get a lot of questions about our leverage but.
Michael: That's because unfortunately some of our peers in our group are much more levered than we are and you know I think.
Michael: When we started to just keep pointing to our free cash flow and saying look you know this is a differentiated business and we feel very we feel very good about where we are from a business model perspective and from our 11th perspective.
Michael: And I don't think that the question is you know the questions that we get we think are kind of more a bounce back of maybe some questions that are happening with some of our peers that don't have the balance sheet that we have.
Speaker Change: Yeah Fair point I appreciate the time.
Speaker Change: And the next question comes from the line of Craig Huber with Huber Research Partners. Please proceed with your question.
Craig Anthony Huber: Great. Thank you a few questions I'll go one at a time here can you just talk a little further about your TV station <unk>.
Craig Anthony Huber: Core advertising trends, what youre seeing in the first quarter versus what you saw in the fourth quarter, particularly what categories are doing significantly better or worse, just how things are trending that please.
Speaker Change: Yeah, Hey, Craig it's Leann.
Leann: Our advertising in the first quarter is you know.
Leann: Do you want a slightly worse from a year over year percentage decline basis in the first quarter as it wasn't that in the fourth quarter. There is no specific category that is necessarily driving that it's more of the same sort of level of a broad based decline that we've seen across our categories. In the last few quarters I would say we can.
Leann: <unk> to be impacted on the national side and on in our larger markets, which are more challenged than some of our smaller markets, but there.
Leann: There isn't anything in particular that you can point to to say hi.
Leann: It was.
Leann: Sports betting that's been declining for some time now so.
Leann: I wouldn't say, there's anything in particular that's.
Leann: I would call out.
Speaker Change: Thank you for that my second question on the fact that I apologize aside from the Super Bowl impact that Mike spoke about.
Speaker Change: In the first quarter.
Speaker Change: Okay. My second question. Please.
Speaker Change: I'm curious if you're budgeting for the distributions you're expecting to get this year from equity method investments, you're expecting a significant change one way or the other versus what you got last year.
Speaker Change: Now with distribution.
Speaker Change: Yes, exactly that all of that stuff without careful because yes.
Speaker Change: What's different this year youre thinking.
Speaker Change: That's a national television network rate, we see what's going on in our business. So we saw what happened last year or so.
Speaker Change: We expect that to be down this year.
Speaker Change: Versus last year.
Speaker Change: And we've been talking about what the rate of decline has been all year.
Speaker Change: Just to refresh you know the first quarter payment, which was not received yet is.
Speaker Change: You know the bulk of the <unk>.
Speaker Change: The distribution from last year's earnings.
Speaker Change: So it sort of lagged a little bit.
Speaker Change: The remaining payments, we get for the rest of the year, our tax payments related to.
Speaker Change: The current years.
Speaker Change: The current year's income.
Speaker Change: And the next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question.
James Charles Goss: Alright. Thanks.
James Charles Goss: His position.
James Charles Goss: Particularly well it appears then.
James Charles Goss: I think I saw recently that the electorate is something like 27% Democrat, 27% Republican and 42% independents.
James Charles Goss: Wondering if you might talk about exploiting that.
James Charles Goss: Potential going into this political year.
James Charles Goss: I know you've done debates and that's been particularly good and ready to have visibility.
James Charles Goss: And also in terms of programming costs. So I think a lot of the competitors in the news.
Speaker Change: Category.
Speaker Change: To repeat the latter programming rather than have all originals.
Speaker Change: Wonder how you look at that and finally.
Speaker Change: In terms of I was wondering if you've been able to identify a certain demographics you've been attracting.
Speaker Change: With news nation and advertiser.
Speaker Change: Advertiser groups that might be.
Speaker Change: To that demographic.
Speaker Change: Jim I will.
James Charles Goss: <unk> to cover that if I Miss something let me know.
Speaker Change: As it relates to the repeat factor, we do repeat our prime time.
Speaker Change: Talking opinion shows overnight.
Speaker Change: They they actually do pretty well on the West coast, who were watching goes in primetime.
Speaker Change: And in real time, and so the kume of that audience is something that's useful for sales. The only other thing we repeat is on Sunday nights and Saturday nights. When we're in live news and early prime on the East Coast, we repeat that broadcast for basically for the West coast immediately thereafter, but the rest of the program.
Speaker Change: Grabbing us.
Speaker Change: As all original and as we expand we see really no no difference.
Speaker Change: No different pattern as to what we plan to do there and we will be 24 seven.
Speaker Change: With news programming here.
Speaker Change: Literally are ahead of schedule in 2024 and earlier in the year than we had originally anticipated.
Speaker Change: As it relates to the demo the audience for cable news the audience for TV in general Skus generally older linear TV and we're no exception to that.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: The primary pockets of.
Speaker Change: Our bodies that were focused on is the 35% to 64 demographic slightly older than $25 54, we're trying to bring advertisers along to that we also think the the two plus audience is a value to some advertisers and we report that number as well.
Speaker Change: As it relates to the.
Speaker Change: Skewing of the audience to the electric we have said since the founding of this that we thought the biggest swim Lane in America, where those people that were not on the lunatic laughter. The lunatic right, which is about 60% of America that.
Speaker Change: We can agree on more than we disagree on.
Speaker Change: And our job is just building awareness when we started the network with a pretty substantial prelaunch publicity campaign we.
Speaker Change: We launched with a 10 or 11% awareness of news nation that awareness is now up to a number in the mid thirty's, but that still means that you know.
Speaker Change: Yeah.
Speaker Change: 60% of the country, we still need to introduce ourselves to the.
Speaker Change: Two the viewer.
Speaker Change: Distribution is not the issue it is because.
Speaker Change: Because we now are we are fully distributed and have a larger distribution base then MSNBC.
Speaker Change: <unk> for a network that is less than four years old.
Speaker Change: In its current form.
Speaker Change: So it's all about building awareness for our product and getting people to change their habits and come to us and we see these green shoots of you know nights, where we are competitive with and in fact beat our more established.
Speaker Change: Ablest competitors and we just need more of those in.
Speaker Change: It's a process I am very pleased with the progress. We've made we're ahead of schedule on where I thought we would be and pivoting. This network to news from General Entertainment.
Speaker Change: Thank God that we did.
Speaker Change: That is what what what people are interested in watching and not so much the general entertainment networks that as you know in basic cable are in free fall.
Speaker Change: So from our perspective, it was an opportunistic pivot made it absolutely the right time and and like I said, we're ahead of schedule in terms of all the growth metrics that I look at but it is a you know this is a long term build and long term value creation play that.
Speaker Change: That we are financing organically.
Speaker Change: With the.
Speaker Change: Programming expense.
Speaker Change: Underwriting the journalism expense as we continue to complete this pivot.
Speaker Change: Yes.
Speaker Change: Alright.
Speaker Change: Thanks, very much Greg comments, I think I'll leave it go at that.
Speaker Change: And the next question comes from the line of Barton Crockett with Rosenblatt Securities. Please proceed with your question.
Barton Evans Crockett: Hi, Thanks for taking the question.
Barton Evans Crockett: I was curious about the competitive dynamics in the AD market. So.
Barton Evans Crockett: Some pressures, particularly in national in the bigger cities.
Barton Evans Crockett: We're all aware that there's a lot of new inventory that's coming in on some of the streaming services taking at Netflix.
Barton Evans Crockett: Amazon Prime taking ads and.
Barton Evans Crockett: Some of the past services still growing.
Barton Evans Crockett: That.
Barton Evans Crockett: How competitive is that a meaningful factor in the AD market do you think that's.
Barton Evans Crockett: Part of what's weighing on the market at this point. So if you could comment on that I'd be interested and then <unk>.
Speaker Change: Second question is just.
Barton Evans Crockett: There's a lot of discussion about.
Barton Evans Crockett: Some of the Big <unk>.
Barton Evans Crockett: Our team at <unk>, perhaps restructuring there was a flurry of activity before about Disney and ABC now Theres, a flurry of talk around Paramount maybe.
Barton Evans Crockett: Potentially thoughts potentially Comcast.
Barton Evans Crockett: In general if there was a broadcast network for sale.
Speaker Change: What's your level of interest what's the potential for you guys to be able to make something like that work. If it were to become available. Thank you.
Speaker Change: I'll I'll speak to the last question first and then let Mike speak more to our advertising, but I would just say.
Speaker Change: We buy things and we build things if you look at the company.
Speaker Change: The stations drive our network that we own today and distribution uses all of that to gain distribution as well as distribution revenue for the entire portfolio, it's kind of like one building block on another.
Speaker Change:
Speaker Change: In theory, we could own a big four broadcast network. In addition to the CW.
Speaker Change: And you would like to you know I think we would say never say never but it would have to be like everything else. We've ever bought an actionable transaction at a value that would make sense for us.
Speaker Change: So I think I would just leave it go with that but we.
Speaker Change: We would not have an allergic reaction to having that discussion, but again it would have to be the same kind of opportunistic acquisition that we have made.
Speaker Change: And the 27 year history of the company.
Speaker Change: And I'll just.
Speaker Change: The new entrants into the AD market or have tiny audiences at this point.
Speaker Change: So they're not really a factor I would just say that.
Speaker Change: We're in.
Speaker Change: Some phase of a recession here and whether we have a soft landing a hard landing you know a hockey stick recovery or whatever.
Speaker Change: Advertising is generally a leading economic indicator and that is weighing more heavily on the market than any of these new entrants from my perspective, Michael If you can add some color I would add to that on the advertising point that I think our portfolio both in terms of.
Michael: Where we focus our advertising and the lion's share of our advertising is local not national and I think our sales force, which covers the country generally.
Michael: <unk> gives us a distinct competitive advantage versus the platforms that you mentioned also with respect to our growing portfolio of sports.
Speaker Change: Both with respect to that local TV stations.
Speaker Change: And our National networks live programming gives us another advantage relative to where we think those other platforms will focus their advertising efforts.
Speaker Change: Okay. Thank you.
Speaker Change: Yes.
Speaker Change: And there are no further questions at this time I would like to turn the floor back over to Mr. <unk> for any closing comments.
Speaker Change: Thank you very much operator.
Speaker Change: Just to close out our business fundamentals, our financial track record and our free cash flow generation continue to remain strong and we're confident that our capital allocation strategy will continue to drive industry, leading returns for our shareholders in 2024 and beyond thanks very much for joining us everyday everyone. We look forward to speaking with you again in three months time.
Speaker Change: When we report our first quarter 2024 results have a good day.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: [music].