Q4 2024 Nexstar Media Group Inc Earnings Call
Speaker Change: Thank you Shirley and good morning, everyone and thank you for joining Nixdorf's fourth quarter conference call.
Let me read the Safe Harbor language, and then we'll get right into the call.
Speaker Change: All statements and comments made by management during today's call other than statements of historical fact may be deemed forward looking statements for purposes of the private Securities Litigation Reform Act of 1995.
Speaker Change: 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 today's call.
Speaker Change: For additional details on these risks and uncertainties. Please see next doors annual report on Form 10-K for the year ended December 31, 2023 as filed with the U S Securities and Exchange Commission and Nexstar subsequent public filings with the SEC next.
Speaker Change: Nexstar undertakes no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Speaker Change: With that it's now my pleasure to turn the conference over to your host Nexstar founder Chairman and Chief Executive Officer Perry Sook Perry. Please go ahead.
Speaker Change: And we.
Speaker Change: Our Chief Financial Officer.
Mike: I'll start with a summary of recent highlights followed by Mike's operations review and then we and financial review.
Mike: Our fourth quarter financial results marked a strong finish to another successful year for Nexstar in which we delivered $5 4 billion in total net revenue the highest in our company's 28 year history.
Mike: Our record fourth quarter and full year top line performance were driven by strong election year political advertising highlighting the effectiveness of local television broadcasting and our presence in nearly 85% of the contested election markets across the country.
Mike: In addition, we continue to grow distribution revenue a testament to our position as the largest owner of local broadcast television stations carrying the most the most watched programming.
Mike: For the full year Nexstar generated $2 billion of adjusted EBITDA and $1 $2 billion of adjusted free cash flow, we returned $820 million or 68% of adjusted free cash flow to shareholders through share repurchases and dividends, reducing our shares outstanding by nearly 9% during the year and by <unk>.
Mike: One third over the last five years.
Mike: Another $327 million was allocated toward debt reduction, resulting in record low net leverage of 291 times at year end, a historic low for the company, which positions our balance sheet well should there be any regulatory relief on the ownership front.
Mike: In January we announced the 12th consecutive annual increase in the quarterly cash dividend underscoring the durability of our cash flows and reflecting a near 5% yield placing nexstar in the 94th percentile of all S&P 400 companies.
Mike: The continued strength and consistency of our financial results in our shareholder returns in the face of what remains a dynamic marketplace environment highlights the value of our business model and the advantages of our unique competitive positioning as America's largest local television broadcaster.
Mike: Broadcast TV is the foundation for every multichannel pay TV service in every political campaign and over the past year. The landscape has evolved just as we had anticipated to.
Mike: To start the industry has made solid strides in adopting more financially sustainable models, including the re bundling at DTC products in the pay TV packages and the introduction of new value priced skinny bundles, including the broadcast stations at the same time other major media companies have doubled down on broadcast recognizing its unmatched viewership.
Mike: And audience reach while making the smart decision to scale back underperforming cable networks.
Mike: <unk>, leading data Aggregators like S&P global and Wall Street analysts indicate that subscriber trends are poised for improvement and we've already seen early signs of that with charters commentary regarding their new video packaging.
Mike: Above all broadcast continues to be the gold standard for sports and news programming. While much was made of the two Christmas games that aired on Netflix the ratings were 17% lower than the NFL matchups that aired on CBS and Fox the prior year, despite having the star power beyond say at half time.
Mike: And over at the NBA the five game Christmas lineup on ABC and ESPN saw an 84% increase in ratings from 2023 aided by all five games being available on ABC versus only two of the prior year.
Mike: Closer to home, we saw the phenomenal launch of the 2025 NASCAR Xfinity series racing on the CW broadcast network in Daytona on February the 15th where we achieved a total audience of $1 8 million viewers at 93% improvement from last year when the race aired on FX one.
Mike: And we repeated the success our second week in Atlanta, generating an audience of over $1 3 million viewers. The best performance for the Atlanta race in over eight years, that's the power of broadcast and with traditional media companies owning 90 plus percent of the major sports rights. It's clear that broadcast remains the best way to reach and engage the law.
Mike: <unk> audiences.
Mike: While sports is dominated much of the conversation about the benefits of broadcast we were all recently reminded about the importance of local news.
Mike: As communities across Florida, and North Carolina based devastating Hurricanes last September and residence in the greater Los Angeles area Battle destructive wildfires in January next hours local stations provided vital information updates and support to those in need in each case, our stations such as KTLA in Los Angeles That'd be F. L. A.
Mike: In Tampa, St Petersburg, Florida, and Debbie SBA and Spartanburg Ashville, we're there every step of the way demonstrating the power of local journalism to inform connect and offer aid during some of the most challenging moments experienced by our viewers.
Mike: The impact of these events on local communities made National news and we are proud of the crucial role that news nation play in delivering comprehensive coverage of these events to audiences all across America.
Speaker Change: Before reviewing some of the key achievements across our businesses in fiscal 2024, I would like to briefly address the potential for deregulation.
Speaker Change: And around M&A opportunities is palpable and we're actively working with ramaker is through the a b and our in house government relations team to create more equitable broadcast ownership rules.
Speaker Change: Will help level, the playing field and allow broadcasters to continue to serve their local communities with local journalism and also to compete effectively with big Tech and Big media, we have a proven playbook for executing accretive value driven M&A one.
Speaker Change: One we did on a smaller scale in January when we closed on the acquisition of <unk> TV in Cleveland, Ohio. This acquisition created a new duopoly with our existing Fox affiliate in the 19th largest television market and <unk> will become the CW affiliate for Cleveland in September of this year generating further synergies for Nexstar as.
Speaker Change: M&A has been the key driving factor of our stock over the last 15 years and as it becomes more of a possibility with the current FCC and the potential for deregulation. We look forward to further prepare our balance sheet for these kinds of opportunities and Leann, who will provide more color on that later in the call.
Speaker Change: In 2024 news nation firmly established itself as a formidable player in the cable news landscape with top tier talent and reliable unbiased reporting today news nation is at $24 Seven news network fully distributed across all platforms with nationwide distribution comparable to or better than the other more established cable news network.
Speaker Change: We've also achieved major news milestones by hosting the final RNC presidential debate last year and becoming the first news network to accurately call the national election for President Trump.
Speaker Change: I underscore is that on the depth and expertise of our data analysts, but it also evidences the trust that our peers and our viewers place in our reporting our.
Speaker Change: Our joint editorial relationship with the Hill has further strengthened our content offering providing insightful perspectives on key issues in terms of performance. Since December of 2024 News nation is out deliberate MSNBC 17 times and CNN twice in the 25 54 demo proving that our approach is resonating with viewers who worry about.
Speaker Change: For a fresh and balance to take on the news.
Speaker Change: The cdw's transformation into a top tier broadcast network continued in 2024, driven by our strategy focused on high quality Entertainment unscripted live events and sports programming.
Speaker Change: <unk> in NASCAR played key roles in reshaping the network's identity on October 5th we drew $4 7 million viewers across NASCAR, ACC and Pac 12 football in one afternoon Nash.
Speaker Change: NASCAR in particular helped attract 20, new advertisers to the CW so far these.
These accomplishments highlight the network's ability to drive both audience engagement and value advertising partnerships supporting our goals for continued growth and profitability in 2025, approximately 40% of it the programming hours delivered by the CW network will be live sports.
Speaker Change: Turning to Ace <unk> 3.0 in January 2025, we took a significant step toward harnessing the power and potential of <unk> three that out with the announcement of the edge being wireless consortium, a new joint venture consolidating our prior joint ventures into one entity among nexstar the EW Scripps company Grey media Ensign.
Speaker Change: Claire this collaboration will enable us to deliver wireless data via a PSE three in auto transmission to businesses across the nation.
Speaker Change: In total etch being wireless represents spectrum covering over 97% of the Continental U S and over 7 billion megahertz Pops.
Speaker Change: In addition, we're happy to report that the new joint venture did signed its first paying customer last year and the digital signage space demonstrating initial proof of concept.
Speaker Change: Looking ahead, we are energized by the significant price prospects before us and we remain laser focused on executing on our 2025 objectives, which include renewing distribution contracts covering approximately 60% of our subscriber base driving the CW further toward profitability and pursuing deregulation.
Speaker Change: With that we are providing adjusted EBITDA guidance for 2025, and the range of one five to 1.5 95 billion Mike.
Speaker Change: <unk> will provide more detail on that later in the call.
Speaker Change: Our record 2020 for revenue and our consistently strong financial results and outlook, especially in light of a dislocated broader media environment.
Speaker Change: Should be able to see our next <unk> unique positioning as increasingly able to bend the curve in our favor we have amassed a scaled portfolio of broadcast assets. Unlike any other our position as a top three affiliate group for each of the Big four broadcast networks makes us a key partner for the networks and for distributors.
Speaker Change: Owning the CW network allows us to control our own destiny by boosting both our owned and operated CW affiliate stations as well as the network profitability.
Speaker Change: Actually investments in news nation, and a PSE three in Idaho offer significant opportunities to deliver outsized growth and create outsized value going forward.
Speaker Change: Together, our assets generate consistently strong free cash flow, which we've used to create the clean balance sheet that we have today and to return capital to shareholders equal to 16% of our market cap in 2024.
Speaker Change: We invite you to watch and in fact join as we continue to bend the curve in our favor in 2025 and beyond.
Speaker Change: With all of that said, let me now turn the call over to Mike <unk>, Mike. Thank.
Mike: Thank you Perry and good morning, everyone Nexstar delivered record fourth quarter net revenue of $1 5 billion up 14% compared to the prior year, primarily reflecting growth in advertising revenue due to strong election year political advertising as well as continued growth in distribution revenue.
Mike: Our record fourth quarter distribution revenue of $714 million increased $10 million or one 4% over the comparable prior year quarter distribution revenue growth primarily reflects the benefit of distribution contract renewals in 2023 on terms favorable to the company annual rate escalators.
Mike: Growth in V N V. PD subscribers. The addition of CW affiliations on certain of our stations and the return of partner stations on one N V PD in January which more than offset mvpds subscriber attrition.
Mike: In January Nexstar, and our partner stations reached agreement with NBC to renew our affiliations in 33 markets.
Mike: And as previously announced we completed our CBS affiliation renewal in mid 'twenty four.
Mike: We view our relationships with the networks are symbiotic.
Mike: The broadcast affiliate model provides significant advantages to the networks by reaching the largest audience for their programming extending coverage to both pay TV households, and over the air homes, which they cannot do on their own.
Mike: The major sports, including the NFL are committed to serving the broadcast audience sorry, the broadest audience possible to drive fan engagement. So that means a commitment to broadcast television, which provides 14% additional reach over the pay TV ecosystem alone, reaching 100% of TV households. In addition.
Mike: With networks, only providing two to 12 hours of content daily affiliates provide the other 12 to 22 hours of programming through our highly rated local news and other local and syndicated programming, which helps increase overall viewership by offering a more complete product for our viewers.
Mike: In 2025, we expect both gross and net distribution revenue to be relatively flat with 2020 fours record levels with a very modest number of subscribers renewed in 2024, we expect the annual rate escalators in our contracts to be offset by continued subscriber attrition, although we remain optimistic that subscriber trends will improve.
Mike: True as we move deeper into the year.
Mike: Ever later this year, we have approximately 60% of our subscriber base up for renewal, which we expect to benefit distribution revenue beginning in the first quarter of 2026.
Mike: Fourth quarter advertising revenue of $758 million increased $173 million or 29, 6% over the comparable prior year quarter, reflecting a $223 million year over year increase in election year political advertising to $254 million, which more.
Mike: Than offset of $51 million year over year reduction in non political advertising revenue or approximately 9% due to market softness and political displacement, which we estimate account accounted for roughly half of that reduction.
Mike: And the 2020 for election year broadcast TV proved to be one of the few media to see growth with the overall market expanding from $796 billion in 2020 to $9 three 3 billion.
Mike: Specifically according to estimates from AD impact television revenue rose from $4 $4 6 billion to $4 $5 3 billion.
Speaker Change: Nextera maintained a solid 13% market share of all TV political advertising spending generating $491 million in political revenue an increase over the $479 million. We had previously reported through election day in 2020.
Speaker Change: Notably the absence of the Georgia runoff election, which had been a significant driver in 2020 resulted in a slight dip from our record breaking political revenue and that cycle. Nevertheless.
Speaker Change: Nevertheless, nexstar remains well positioned for continued growth and we're confident in our ability to capture a larger share of political AD dollars in future elections.
Speaker Change: Looking ahead to the first quarter Nonpolitical advertising is currently forecast to be down in the low to mid single digits on a year over year basis, a sequential improvement over both Q4 2024 on an as reported on a on an as reported basis and also when adjusting for the estimated impact of political displacement.
Speaker Change: While we continue to be impacted by a challenging television advertising market, including weakness in insurance advertising due to the recent natural disasters in Q4, and Q1 and continued weakness in automotive advertising, we are seeing sequential improvement both in local and national advertising.
Speaker Change: On the local side the rate of local advertising decline is improving in Q1 due to increased revenue related to the Super Bowl on Fox featuring the Kansas City Chiefs are market, where we have the Fox affiliated station.
Speaker Change: And double digit year over year growth in digital revenue.
Speaker Change: On the national side, the rate of National advertising decline improved primarily due to ratings and associated revenue from our new slate of programming.
Speaker Change: For the year Nonpolitical advertising is expected to be slightly up as weakness in TV advertising is expected to be offset by strong performance of the CW due to our new slate of programming featuring WWE, NXT and NASCAR Xfinity racing and local digital revenue growth as we aggressively focus on utilizing <unk>.
Speaker Change: Our over 1600 local sellers.
Speaker Change: And third party digital products.
Speaker Change: On the operating expense side as part of our ongoing efforts to enhance efficiency and drive long term growth nexstar implemented a strategic operational restructuring in Q4 that we mentioned on our November call.
Speaker Change: That initiative included the elimination of a few hundred positions across the various divisions streamlining and improved integration of the CW and the hill into the broader organization and reducing middle management within our AD sales Division.
Speaker Change: Additionally, we focused on streamlining work processes at our local markets to improve overall productivity. This restructuring is expected to generate savings in the low to mid eight figures in total operating expense in 2025 and will enable <unk> to focus on initiatives that more directly impact our viewers partners and customers as we can.
Speaker Change: Continue to prioritize initiatives that represent our best long term opportunities.
Speaker Change: Now turning to the CW.
Speaker Change: In 2024, we improved cash flow at the CW by $127 million exceeding our goal of more than $100 million of improvement, which reduced our 2023 losses by approximately 50%.
Speaker Change: With the substantial majority of cost reductions for the network related to programming costs and overhead efficiencies now executed in 2025, we are seeing our new programming investments begin to pay dividends.
Speaker Change: And just to put a few finer points on the new programming.
Speaker Change: In 2025, CW will have about 400 hours of sports or sports related programming, which accounts for approximately 40% of the hours provided by the network a dramatic change from the old CW that had no sports programming whatsoever.
Speaker Change: The 2025 schedule includes 52 weeks of WWE, NXT and 33 weeks of NASCAR Xfinity series races, both of which are proving to be strong ratings performers for us as Perry mentioned and the first Xfinity series race of the 2025 season, notably the first with our own production we have.
Speaker Change: <unk> had $1 8 million average viewers, peaking at over $2 2 million for the highest viewership of the Daytona race since 2020.
Speaker Change: To provide some context for those of you who may be more familiar with formula one.
Speaker Change: Our Daytona NASCAR Xfinity race garnered 24% more viewers than the average of the three U S. Based F. One races. In 2024 that aired on a b C at ESPN and nearly 70% better than the full formula one season average.
Speaker Change: And that Daytona momentum carried into the second race of the season last Saturday went over $1 3 million average viewers, peaking at over $1 5 million tuned into the Xfinity race in Atlanta.
And the process the CW delivered the best performance for the Atlanta race since 2017.
Speaker Change: Remarkably our Saturday race air to amidst a busy sports calendar and it performed better than the college hoops.
Speaker Change: Golf and NHL that aired across Fox CBS NBC and ABC.
Speaker Change: Similarly, the CW has raised the performance of WWE NXT with audience improvement of 12% to date versus its 2024 average on USA, marking a 105% year over year improvement over what the CW was airing in that time slot previously.
Speaker Change: And regularly beating Big four network programming head to head.
Speaker Change: In fact, six weeks into 2025 NXT on the CW is enjoying its most broadly viewed quarter in the last five years.
Speaker Change: In 2025, we expect to cut losses at the CW by more than 25% from 2024 levels due primarily to growth in advertising driven by improved ratings and growth in distribution revenue during.
Speaker Change: During 2025, we will reset affiliation agreements representing more than two thirds of the CW subscriber base positively impacting the fourth quarter of 2025 and 2026 <unk>.
Speaker Change: Consistent with our prior guidance, we anticipate the impact of these resets and our advertising trajectory will enable the CW to achieve profitability. During 2026. In addition, the company continues to benefit from moving CW affiliations to our owned and operated stations during 2023 and 2024, we moved 17 affiliations to our stations.
Speaker Change: With more to come.
Speaker Change: In summary, 2024 was a standout year for Nexstar and we remain excited about the company's future as Perry mentioned, we believe the market is shifting in ways that will benefit broadcast television and that there is meaningful upside potential ahead of us with potential deregulation and actionable growth catalysts in 2026.
Speaker Change: Given our distribution renewal cycle, the midterm elections, and the Olympics and.
And consistent with our track record, we remain committed to delivering value to our shareholders in a thoughtful and disciplined manner and we will continue to explore every opportunity to maximize that value over the long term.
Speaker Change: With that it's my pleasure to turn the call over to Leann for the remainder of the financial review. Thank.
Leann: Thank you Mike and good morning, everyone. Mike gave you most of the details on the revenue side and on the CW. So I will provide a review of expenses adjusted EBITDA and adjusted free cash flow along with a review of our capital allocation activities, our 2025 guidance and some perspective on valuation.
Leann: Together fourth quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses were essentially flat decreasing by $2 million increases in news and other programs and other programming and content costs were offset primarily by reduced promotion costs in the quarter.
Leann: Q4, 2024, total corporate expense was $48 million, including noncash compensation expense of $20 million compared to $45 million, including noncash compensation expense of $16 million in the fourth quarter of 2023.
Leann: The increase of $3 million, primarily due to one time severance costs associated with our operational restructuring while the increase in non cash compensation expenses.
Leann: New restricted stock grants and the timing of grants offset in part by a release of reserves among other factors.
Q4, 2020 for depreciation and amortization was $220 million versus $210 million in the prior year quarter, an increase of $10 million.
Leann: These amounts included in our definition of adjusted EBITDA is $98 million related to the amortization of broadcast rights for Q4 2024 compared to 87 million for Q4 2023, the increase of amortization of broadcast rights by $11 million was primarily due to programming.
W. As newly acquired programming mirrored offset by a slight reduction of amortization of broadcast rights elsewhere at next at Nexstar.
Leann: Please note that while Q4 CW programming amortization was up year over year, we do not expect 2025, CW programming amortization to be higher than 2024.
Leann: Q4, 2024 income from equity method investments, which primarily reflected a 31% ownership in TV food network declined by $5 million in the quarter or 22% primarily related to the <unk> networks lower advertising revenue, but better than what we originally anticipated putting it all together on a consolidated basis fourth quarter adjusted.
Leann: 628 million, representing a 42, 2% margin and an increase of $179 million in the fourth quarter 2023, 429 million moving to the components of free cash flow and adjusted free cash flow fourth quarter, Capex was $35 million essentially flat to the fourth quarter of last year fourth quarter net interest expense was 100.
Leann: $4 million, a reduction of $11 million from fourth quarter of 2023 on a cash basis. This compares to $101 million in Q4 2024 versus $113 million in Q4 2023. The reduction in interest expense was primarily related to a reduction in so far and reduced debt balances.
Leann: Quarter operating cash taxes were $67 million compared to $26 million in 2023, an increase of $41 million primarily related to increased pre tax operating income in 2024 related to increased election year political advertising.
Leann: Payments for capitalized software obligations and pension credit net of proceeds from disposal of assets insurance recovery were $11 million versus $14 million last year.
Cash contributions from our partners and the CW was zero in the quarter versus $15 million in Q4 of 2023.
Leann: In Q4 programming amortization costs were actually greater than cash payments by $13 million of certain programming payments were deferred.
Leann: Putting this all together consolidated fourth quarter 2024, adjusted free cash flow was $411 million as compared to $225 million last year.
Leann: Now turning to our guidance for 2025, we believe 2025 adjusted EBITDA will be in the range of one five to $1 $5 95 billion, Mike already provided some of the key assumptions that are embedded in our guidance, including one our expectation for growth in that distribution revenue to be flattish in 2025 based on a slight improvement.
Leann: And subscriber attrition trends to our expectation for non political advertising revenue growth to be slightly up and increases at the CW are expected to partially offset some of the continued headwind in national and local and digital advertising growth is expected to more than offset the rest three operating expenses will be reduced in the low to <unk>.
Leann: Mid eight figures of dollars due to our operational restructuring and four we expect the CW will continue to reduce its losses by another 25% in 2024 from 2025 levels Keith.
Leann: A key factor is different from our current expectations could affect our outlook for adjusted EBITDA for 2025, either positively or negatively those factors include among other things the rate of growth of attrition of our rate of growth or attrition of pay TV subs, the health of local and national advertising market or renegotiation of certain distribution and affiliated Asian <unk>.
Leann: <unk> on terms favorable to the company.
Leann: And the attributable net income related to our 31, 3% ownership stake in TV food network, we do not intend to update this guidance on a quarterly basis.
Leann: A few additional points of guidance with respect to adjusted free cash flow.
Leann: We're currently projecting capex of $120 million to $125 million for the year and 30% to $35 million in Q1.
Leann: Based on the current yield curve, we anticipate full year 2025 cash interest expense to be in the $375 million to $380 million area and improvement of more than $55 million from 2024 levels at the midpoint.
Leann: We project Nextera cap interest expense utilizing the spread on our floating rate debt instruments. The current silver forward curve and the coupons on our fixed rate debt along with our expectations for debt repayment, which includes our mandatory amortization of approximately $125 million plus a modest amount of additional repayment.
Leann: Q1 interest expense is expected in the $95 million range.
Leann: Full year 2025 cash taxes are expected to be $260 million to $270 million an increase.
Leann: In the low 20 millions twenties of millions versus 2024, and we are now using the annualized nation method for our federal income taxes, which enabled us to defer about $33 million of income tax from 2024 to 2025 for cash taxes, we use a 26% tax rate when calculating our estimated tax before onetime and other adjustments the first.
Leann: Quarter includes only a very small amount of state income tax and the $3 million range.
Leann: As a reminder, we use the cash that we deferred from for 2025 or 2020 for taxes into 2025 to optionally repay term loan b.
Leann: We'll pay this deferred income tax in the second quarter of 2025.
Leann: Yeah.
Leann: In 2025 payments for programming.
Leann: <unk> are expected to be in excess of amortization by $40 to $45 million due primarily to deferred programming payments from prior years and investment in programming for future years with approximately $7 million of that in Q1.
Leann: Turning to capital allocation and our balance sheet.
Leann: Together with cash from operations generated in the quarter and cash on hand, we returned $230 million to shareholders comprised of $52 million in dividend and the repurchase of $178 million of stock at an average price of $167 30 per share reducing shares outstanding net of equity vesting by two 7% for the year.
Leann: We returned $820 million or 68% of our adjusted free cash flow to shareholders in the form of $219 million of dividend and $601 million of share repurchases net.
Leann: <unk> outstanding debt at December 31, 24 was $6 5 billion a reduction of $181 million for the quarter as it made quarterly amortization payments of $31 million and optionally repaid $150 million of our term loan b.
Leann: Our cash balance at quarter end was $144 million, including $16 million of cash related to the CW.
Leann: Because we designated the CW is an unrestricted subsidiary the losses associated with the CW are not accounted for in our calculation of leverage for purposes of our credit agreement as such our net first lien covenant ratio for Nexstar at December 31, 2024 was $1 six to eight times, which is well below our first lien and only covenant of four <unk>.
Leann: Five times, our total net leverage for Nexstar with $2 91 times at quarter end.
Leann: As typical in non political years, we expect leverage which is calculated on an LTM basis versus a two year average to increase during 2025 and adjusted EBITDA falls in non election years, when political advertising is significantly lower.
Leann: Our 2025 cash flow will be deployed first to fulfill our mandatory obligations, including debt repayment and pension and defined benefit plan contributions of approximately $145 million the Cleveland TV station acquisition for $22 million and the anticipated 2025 dividend of approximately $225 million.
Leann: In January we announced our 12 consecutive increase in our dividend increasing quarterly dividend rate by 10%, which based on our stock price.
Leann: As of yesterday, now, representing almost 5% yield which as Terry mentioned puts us in a 90 in the 94th percentile of stocks in the S&P 400 for dividend yield.
Leann: The remainder of our cash flow will be used to fund acquisitions should an opportunity to become available if no attractive strategic accretive acquisitions are available we plan to repay debt and repurchase stock in 2025, assuming no large scale M&A, we plan to optionally repay an incremental amount of that and not borrow on the debt that was repaid during <unk>.
Leann: 24 from the cash from deferred taxes.
Leann: The additional optional deleveraging will prepare our balance sheet better for any potential M&A and should benefit us even if there is no M&A as many investors values based on an EBITDA multiple based on that methodology any debt reduction mathematically increases our equity dollar for dollar.
Leann: Finally, we plan to continue to repurchase shares which will continue to be the largest component of our capital allocation strategy, especially given our current valuation in total we anticipate returning almost two thirds of free cash flow to shareholders in 2025 similar to the level returned in 2024.
Leann: Before I turn it over to the operator for questions I'd like to address the value proposition of Nexstar stock.
Speaker Change: As Perry mentioned in his remarks, the scale and scope of Nexstar. Unlike any other player in the broader media industry, enabling us to bend the curve to achieve results that other operators cannot achieve while this has been the case with our record setting revenue performance in 2024. It has not been the case with respect to our stock price over the last year.
Leann: That disconnect creates opportunity.
Leann: Based on current street estimate and as of yesterday yesterday's closing stock price, we traded at a six three times multiple of 'twenty four 'twenty, five EBITDA and a 21% free cash flow yield below the midpoint of the pack of comparable broadcasters, despite achieving top tier margins and free cash flow conversion and the highest dividend yield in the highest over.
Leann: All return of capital to shareholders.
Leann: Talk to your multiple at seven to seven five times would imply a stock price of $197 at the midpoint of 35% premium to yesterday's closing price.
Leann: And if we applied the same valuation that Warner brothers, and Paramount did to their cable network, which do not have the same prospects as the broadcast industry.
Leann: Industry, nor the same trajectory of revenue that we've been able to accomplish.
Leann: Those estimates included a 10, 5% whack and a negative 3% perpetuity growth rate, but assuming the consensus estimates for the average adjusted free cash flow of $24 25 for Nexstar applying those.
Leann: Those.
Leann: Those metrics the math implies a valuation of $210 per share a 43% premium to yesterday's closing price.
Leann: And if deregulation comes to fruition and we are able to make accretive acquisitions as we have in the past and pay TV subscriber attrition does flow nexstar and our industry should be re rated so it should be a win win short term growth to the iOS like the premium curve bending company. We are and then a rising tide floating all media boats with.
Leann: T Reg and slowing attrition, we are believers in the near and long term value of our stock and will continue to play capital both to grow our business and maximize shareholder return by betting on ourselves.
Leann: With that I'll open up the call for questions. Operator can you go to the first question.
Leann: Thank you we will now be conducting a 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 your line is in the question queue. You May press star to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before questions sorry.
Leann: One moment, please while we poll for questions.
Speaker Change: Our first question comes from the line of Steven <unk> with Wells Fargo. Please proceed with your question.
Leann: Yes. Thank you so so just on M&A.
Speaker Change: Perry do you have a great acquisition history between media General and Tribune I don't recall, the free cash flow accretion off top my head of those deals, but I know it was significant.
Speaker Change: Nowadays your rates are higher but a lot of the peers are also higher. So do you still think there is a lot of similar levels of accretion for broadcast M&A opportunities is there have been historically, if we do see some deregulation and related to that do you look harder potentially at how spectrum assets fit together.
Speaker Change: Other.
Speaker Change: When you think about broadcast and consolidation over over the next decade.
Speaker Change: And then Leann just on the EBITDA outlook for the year.
Speaker Change: Impressive work that Youre doing on cost I'm. Just wondering if there is there any cost to achieve that is included in EBITDA or that impacts free cash flow.
Speaker Change: Or is all of that behind you and was largely done in 2024 with the benefits that eight figure number that you talked about rolling through in the guidance for 2025. Thank you.
Speaker Change: Well Stephen Thats, a lot let me, let me try and take take the first part of that as it relates to media General Lin Tribune, they were 40% and 60% accretive acquisitions, which you know.
Speaker Change: We think we're probably at the high watermark of what we would be able to achieve on scale M&A, having said that we have been consistent saying that any acquisition to clear our screen is going to have to be substantially more accretive than buying back our stock, which is a high teens to 20%.
Speaker Change: Yield on our equity so we will maintain that same discipline.
Speaker Change: We are we are obviously in conversations and out there looking.
Speaker Change: If theres a love connection and regulations change that would permit the acquisition to go forward.
Speaker Change: And it's highly accretive it's something we would strongly consider doing in the broadcast television space in the digital space, but if not we ends told you plan b would be to continue to buyback stock and pay down debt.
Speaker Change: Okay, and then Steve your other question the expenses related to those operating cost savings are really behind US you saw we test it.
Speaker Change: $12 million of one time restructuring charge in the fourth quarter that got added back to our EBITDA and that was really the cost to implement that.
Speaker Change: Great. Thank you.
Dan: Thank you. Our next question comes from the line of Dan <unk> with benchmark. Please proceed with your question.
Yes, thanks, good morning, very comprehensive guys.
Dan: Maybe first one just on the sports front, what do you guys make.
Major League baseball and ESPN parting ways do you expect if any opportunity for local broadcast to finally get access to the laggard child. So to speak and then just just to be clear I guess lean on the distribution or Mike I guess.
Dan: Are you assuming that the recent some trend holds for the year and can we just get a sense of the timing of the renewals we got the CW in Q4, but the other 60% is that all backend weighted.
Dan: I'll take the last one first yes, they are backend waited without being specific in the second half of the year.
Dan: With respect to sports.
Dan: Listen I think what Youre seeing.
Dan: We'll see where that where MLB shakes out, but we are confident that they will look for.
Dan: Broader platforms.
Dan: We did note that commissioner Manfred referred to cable is a shrinking platform.
Dan: So similar with what we saw with some of the deals that we've done also with the deal that NBA did the net migration vis vis broadcast has been to increase the number of games on broadcast rather than move.
Dan: Move to cable so we think.
Dan: There will be opportunities out there.
Dan: We're less interested in the local opportunities.
Dan: Given the fact that the RSM seem to have kind of gotten back on their feet and at least for the time being taken the lion's share of the local games, but at the national level. We think there will continue to be opportunities and we certainly think that our performance at the CW has put us on the map for any.
Dan: Any rights holder out there looking to do deals in the future.
Speaker Change: And then just to elaborate on what Mike said in response to your question in terms of subscriber trend our guidance assumes a slight improvement in the rate of subscriber attrition as it is consistent with what the market is expecting in general and then.
Dan: Those.
Dan: Contracts are all backend weighted and a substantial majority of the benefit will be in 2026.
Dan: Perfect. Thank you both.
Dan: Okay.
Dan: Thank you.
Speaker Change: Our next question comes from the line of Benjamin <unk> with Deutsche Bank. Please proceed with your question.
Benjamin: Good morning. Thanks for the question I'm wondering if you can talk about the progress you're seeing with respect to deregulation and what's your level of optimism that we could see changes in this year and then maybe could you talk a little bit more about the edge beam JV, how that helps you accomplish your goals and the progress you've made on ATSG to date. Thanks.
Benjamin: Well. Thank you yeah I've spent four different days in Washington D. C. Since the first of the year on the Hill.
Benjamin: With lawmakers regarding the need for deregulation and.
Benjamin: And I feel the prospect is as good as it has been in my career to see.
Benjamin: Meaningful ownership regulatory reform come to the broadcast industry.
Benjamin: No one can with a straight face defend the current rules in the current environment and I think theres, a real understanding that preserving local journalism at the local market level as in the country's national interest sensitive that you've got to have strong companies and strong companies need to be able to get bigger and grow and innovate and.
Benjamin: So.
Benjamin: That message quite frankly is resonating on both sides of the Io I think Youll see continued movement both at the FCC.
Benjamin: And the Doj in terms of understanding that the current regulations are outmoded.
Benjamin: And we are obviously pressing.
Benjamin: Pressing for progress on all fronts, and I think you'll see evidence of progress being made as the year goes on obviously at the FCC Chairman car has called this a break grass moment for local TV I know he is very interested in.
Benjamin: Seeing the medium survive and have the ability to prosper and to continue to support local journalism and innovate.
Benjamin: And so.
Benjamin: Think I take him at his word obviously as the year goes on and the commission is fully constituted with with five commissioners III Republicans do Democrats Youll see activity increase.
Benjamin: Under his purview.
Benjamin: As it relates to the Nextgen TV generation and ACC, three auto and our consortium.
Benjamin: This is a nexgen already reaches 75% of the U S population.
Benjamin: The our streaming and digital competitors are rapidly advancing and without our ability to modernize and innovate we risk local broadcasters risk falling behind putting the future of our free local service and local journalism at jeopardy, and individual broadcasters can't compete complete this transition alone.
Benjamin: Which is why we develop the consortium with Scripps and Gray and Sinclair and there was a question earlier from Steven about spectrum.
Benjamin: This consortium statistic together spectrum that reaches 97%, which we view as a virtual nationwide footprint that will allow us to.
Benjamin: Innovate.
Benjamin: And if set transition date would provide certainty to all the stakeholders, allowing the TV manufacturers as well as the broadcasters the pay TV operators all to plan effectively.
Benjamin: And as you know at this point the NAV.
Benjamin: Petition for rule, making which is fairly unprecedented as certainly as it relates to the spectrum contemplates a two phased transition plan, which would ensure an orderly implementation phase one would be in February of 2028 stations in the top 55 markets, which reached about 70% of the U S population with.
Benjamin: Complete the transition fully to <unk>.
Benjamin: And remaining stations would complete that transition on or about February 2030, I think it's important to note that not only is regulatory clarity essentially completing this shift it's time sensitive because our competitors are continuing to advance we want to be free to be able to innovate and provide additional services not only for <unk>.
Benjamin: But for businesses and the public at large but that the industry. The broadcast industry is fully United behind this effort and so we think with all of those factors coming together the prospect of spectrum monetization that I've been talking about for.
Benjamin: Half a dozen years I think is upon us in this consortium has a first mover advantage, having stitched together spectrum that is a near nationwide footprint. So we're very optimistic that progress will come both to deregulation and to innovation of Nextgen TV under the current administration.
Benjamin: Great I appreciate the insight.
Benjamin: Thank you.
Speaker Change: Our next question comes from the line of Craig Huber with Huber Research Partners. Please proceed with your question.
Craig Huber: Great. Thank you I have a few questions I'll just do them one at a time to make it easier.
Craig Huber: On a T C. III pointed out periods, just talk a little bit further about your expectations, how the revenue ramp for your company and the rest of your consortium may play.
Craig Huber: How many more years, you think youll be able to be significant for you guys.
Craig Huber: Well I think as most of your businesses evolve they start slowly and then grow suddenly.
Craig Huber: There are a number of things that have to happen.
Craig Huber: We need to be able to sunset, the <unk> or current transmissions schema requirement, which would free up more spectrum for innovation then we have to complete the transition through three dato, which would enable all spaces in the market to fully participate in any data casting opportunities that might present themselves.
Craig Huber: And again I think that if we are able to meet the transition date of February 28 that we've proposed along with NAV.
Craig Huber: A petition for rule, making.
Craig Huber: When I think you could see meaningful progress being made in the meantime, we have signed clients and we have a lot of interest from others, particularly in the automotive space about the connected car and video and television in the car.
Craig Huber: Well as providing service updates with them with a better completion rate than the current satellite based updates are provided there is also the.
Craig Huber: The opportunity to.
Craig Huber: Develop a stronger national security with the bps system, which is the broadcast positioning system, which is a would be a backup to our current GPS system in the United States as the only industrialized country in the world without a backup to which GPS system and I don't have to tell you what happens if GPS goes out.
Craig Huber: But we can provide a terrestrial based system that would be back up to the current satellite based system less vulnerable to disruption and and we have developed the proof of concept of the timing element of this already with an atomic clock in Colorado with mist and I won't get into.
Speaker Change: Warnke weeds of all the development, that's going on there but.
Speaker Change: The Dod and the Vod have said, it's in our national interest to have a backup GPS system, we think that.
Speaker Change: This transition would enable this industry our industry to provide this and it will be superior to a second satellite based system. So again I think youll see.
Speaker Change: Announcements of clients and trials beginning in continuing throughout this year in the next couple and I think that it would be probably 2028, if we were able to effect the transition of the top 50 markets up 55 markets.
Speaker Change: Two a full ATC atc's III auto transmissions schema, I think thats when youll see revenue take a step function forward.
And then more near term question you guys just talk a little bit further about core advertising trends near term.
Speaker Change: Maybe national advertising categories that you guys are seeing any green shoots in any significant change there I guess positive or negative.
Speaker Change: Sure.
Speaker Change: There is nothing on a.
Speaker Change: Specifically to call out positive on the advertising side I think on the negative side, we talked about insurance and auto being two categories that have been more negative for us in the first quarter.
Speaker Change: So maybe if you could just talk a little bit further about what youre expecting for overall core advertising trends in the first quarter year over year.
Speaker Change: So what we talked about was that the first quarter core advertising trends are going to be down in the low single digit range.
Speaker Change: So what is it that youre seeing that that's obviously a much better number that you guys are able to loss of four quarters last year, obviously part of it was hurt by crowding out, but what are you seeing better in particular did you want to highlight.
Speaker Change: It's slightly you know, it's just a general improvement in the trend, it's not like anything here rollout.
Speaker Change: We said that about half of the fourth quarter core decline is related to crowd out. So if you back that out you get to something just shy of 5% decline in the fourth quarter.
Speaker Change: Low single digits is not too much of a difference from there, but we also have the benefit of.
Speaker Change: We are improving CW performance given the all the new great sports content.
Speaker Change: On the air now.
Speaker Change: And sorry, if I could ask one more on the CW losses, you guys talked about it being down 25%, perhaps more in the new year, they'll probably put it down to a loss of roughly 100 million, maybe a little bit better than that how are you feeling about that.
Speaker Change: Point in time, when you might be able to get to breakeven do you still think it by late this year early next year. How are you feeling about that please yeah.
Speaker Change: <unk>.
Speaker Change: What we've said is we think we expect to get to profitability in 2000 and at some point during 2026, and that's still part of the.
Speaker Change: Our outlook and our what we're striving to achieve.
Speaker Change: We're on target.
Speaker Change: Okay, great. Thanks, both of you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Aaron Watts with Deutsche Bank. Please proceed with your question.
Speaker Change: Hi, Thanks for having me on you've covered a lot of ground. So I'll just have one question I've asked you in the past about moving towards investment grade status and your whole cap stack certainly your stewardship of the balance sheet has opened the door for that discussion, but in light of the speculation around deregulation in the space in your commentary there today, maybe I can.
Speaker Change: Ask about the balance sheet in a different way how high would you be willing to take your leverage in the current environment to participate in industry consolidation.
Speaker Change: I don't think were looking to.
Speaker Change: Maxed out on leverage and overextend ourselves by any in any way. So I think the question is what is the comfortable leverage that the market can bear.
Speaker Change: And I know that the rating agencies always give you a little bit of.
Speaker Change: 18 months during a time period to kind of get your leverage back down to maintain maintain ratings, but.
Speaker Change: I think we'll have to just look and see this on a case by case basis and look at the at the deal, but we're not looking too.
Speaker Change: Create new headlines regarding being.
Speaker Change: Being highly leveraged that's one of the things that we have not been at the company historically.
Speaker Change: Okay got it thanks a lot.
Speaker Change: Okay.
Speaker Change: Thank you.
Operator: Our next question comes from the line of Patrick <unk> with Barrington Research. Please proceed with your question.
Speaker Change: Hi, Thank you.
Speaker Change: With with the CW and you mentioned you have a lot of renewals coming up later this year with all of the sports rights that you have added to that network can you maybe talk about.
Speaker Change: Any benefits you're seeing on the distribution side and the contribution that those Reits are trading for.
Speaker Change: Your either your affiliate partners or.
Speaker Change: For your distribution revenue so far.
Speaker Change: Well I think to date.
Speaker Change: And the lifecycle of the CW I guess I would think of it as we're in the show me phase.
Speaker Change: Our lifecycle right and that's exactly what we're doing we've been talking about programming that we've acquired and what was coming for quite a while and its been gratifying over the last really over the last couple of weeks, but.
Speaker Change: Even longer than that over the last couple of months is NXT came online and we saw the end of last year's performance with with NASCAR in the last eight races that we sub license from NBC. So.
Speaker Change: The world of distribution you need to prove it out before you can actually monetize it that's been our experience and so we're in the proving out phase and we will move into the monetization phase going forward. So.
Speaker Change: No surprise the value of programming and the distribution world is heavily centered in live programming right distinguishes linear programming from asphalt programming and the value and linear is in live news and sports right and certainly.
Speaker Change: From the sports side, you can see that notwithstanding headlines on subscriber erosion.
Speaker Change: Big time sports continue to draw significant audiences. Most recently with the Super Bowl setting yet another record right. So we're optimistic with the performance.
Speaker Change: The programming that will translate into performance in the distribution deals that we have on the near Horizon and I would just want to just supplement that they might think because he is talking prospectively and talking about the differential between what we get for CW versus some of the other affiliations, we actually have been able to grow our distribution revenue at the CW to date with the new programming slate. We just think there is.
Speaker Change: More to come.
Speaker Change: Great.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And we have reached the end of the question and answer session I would like to turn the floor back to.
Speaker Change: Perry Sook for closing remarks.
Speaker Change: Thank you very much in closing I'd like to just tell you. All we remain confident in Nexstar is positioning to deliver and continuing to deliver long term growth and value for our shareholders, our financial results and competitive positioning in the industry, coupled with organic growth opportunities as well as the potential of deregulation.
Speaker Change: All positioning us very well for continued success and free cash flow growth. When you look at the immense value we've created over the years and our future prospects next our share price has never been more attractive even with the early moves today, we're consistently proven our ability to outperform and if history has taught us anything it's that.
Speaker Change: With long term don't bet against Nexstar Theres, a lot more to come I would like to ask you all to stay tuned I want to thank our teams for their hard work and dedication as well as our partners and shareholders for our ongoing support we look forward to updating you on our next earnings call. Thank you very much everyone.
Speaker Change: And this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
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