Q1 2025 Nexstar Media Group Inc Earnings Call
Good day and welcome to Nexstar Media group's first quarter 2025 conference call. Today's call is being recorded I will now turn the conference over to Joe to Phony Investor Relations. Please go ahead Sir.
Speaker Change: Thank you Michelle and good morning, everyone, we'll get to management's presentation and comments momentarily as well as your questions and answers during the Q&A session. We ask that everyone. Please limit themselves to one question and one follow up.
Speaker Change: I'll now 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 up 1995, Nexstar cautions that these forward looking statements are subject to risks and uncertainties that could cause actual.
Speaker Change: Off to differ materially from those reflected by the forward looking statements made during today's call for additional details on these risks and uncertainties. Please see next door is the annual report on Form 10-K for the year ended December 31st 2024, that's filed with the Securities and Exchange Commission and Nexstar subsequent public filings with the SEC.
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.
Perry Sook: Thank you Joseph and good morning, everyone. We appreciate you all joining us today, Mike Byrd, our President and Chief operating Officer, and Leigh angry <unk>, Our executive Vice President and Chief Financial Officer are both with me on the call. This morning.
Perry Sook: Next our first quarter financial results Mark a solid start to the year with net revenue adjusted EBITDA and adjusted free cash flow all benefiting from record first quarter distribution revenue and disciplined expense management.
Perry Sook: We're reviewing the highlights I'd like to begin where I ended our last earnings call on a topic that remains a key strategic priority for Nexstar in 2025, which is deregulation.
Perry Sook: In today's competitive landscape, where big Tech and Big media are afforded unbridle than ubiquitous reach current restrictions on local broadcast ownership are outdated arbitrary and exclusionary and no one can logically defend those rules and.
Perry Sook: In my 45 plus years in the industry I continue to believe that the prospect of meaningful broadcast ownership reform has never been better than it is today as.
Perry Sook: As chairman and CEO of Nexstar and in my role as chair of the joint Board of Directors of National Association of broadcasters, Our trade Association, achieving deregulation is my top priority.
Perry Sook: We are fortunate to have a strong FCC chair and Brendan Kerr, who keenly understands the need for local broadcast deregulation and the relief that we and the industry need on both the national ownership cap and in market local ownership rules. Once the fifth Commissioner has confirmed which could happen by early this summer we anticipate chairman car will begin to take action.
Perry Sook: On his agenda.
Perry Sook: In addition to our Deregulatory agenda to level, the playing field and to enable consolidation. We are also seeking to obtain a firm transition date for Ats east rates, one Dido standards to <unk>, three <unk> standards, which will support and advance our rollout of high speed data transmission and other services to allow us to fully Mont.
Perry Sook: Ties ancillary uses of our spectrum.
Perry Sook: Given our strong financial position and balance sheet, we are prepared to capitalize on deregulation through M&A. Historically. This strategy has created tremendous shareholder value, helping drive our stock from $4 55 per share at the beginning of 'twenty 11, when the first consolidation wave began to the mid 100 Sixty's neighborhood.
Perry Sook: With that we're in as of this morning.
Perry Sook: As many of you know Nexstar has a well defined M&A playbook once we identify attractive assets in strategic markets. Our focus turns to evaluating synergies across these three key areas retransmission revenue opportunities operational and cost efficiencies and the strategic value derived from increasing our scale.
Perry Sook: The most compelling transactions typically involves stations with opportunities for CW affiliations those in larger markets where stations located in areas that overlap with our existing footprint and we expect that all of these opportunities will present themselves in this current environment.
Perry Sook: The one big change from the last consolidation wave is the cost of capital our financial model will factor in both elevated interest rates as well as reduced maximum leverage and the current valuations across the TV sector. Since we have the ability to buy our own assets by buying back our stock and the new transactions being contemplated will have to be more accretive than that.
Perry Sook: Yeah.
Perry Sook: Turning to our business outlook, our business model has evolved significantly in the stability of our revenue streams remains underappreciated in my view.
Perry Sook: Given questions surrounding the potential impact of proposed tariffs and the general economic uncertainty I thought it might be helpful to take a step back and provide some perspective on just where nexstar derives its revenues some of which is that the current conditions combined with our business model don't give us much cause for concern at this point in time.
Perry Sook: So again within the first quarter, which will be a decent barometer for the year of 63% that Nexstar is revenue came from distribution and other revenue sources. This revenue stream is driven by our growing retransmission rates multiplied by the number of subscribers serviced by our distribution partners and last quarter. We guided for this revenue line to be relatively flat for the.
Perry Sook: A year inclusive of subscriber attrition.
Perry Sook: The remaining 37% of our Q1 revenue was derived primarily from non political advertising about one fifth of our nonpolitical advertising revenue comes from digital advertising, which is comprised of digital CTV advertising on our own inventory as well as the sale of third party digital N C television advertising to our local clients.
Perry Sook: This is a revenue stream that has demonstrated consistent growth overall and we do expect to see that trend continue this year.
Perry Sook: The other 80% of our advertising revenue comes from TV advertising and the majority of that is from stable local sources, where advertising is closely tied to the revenue it generates for the client.
Perry Sook: Cut another way only about 40% of non political advertising revenue or 15% of our total revenue is tied to goods based businesses that could potentially be impacted by tariffs.
Perry Sook: Remaining 60% of our nonpolitical advertising revenue comes from services and paid programming, which actually grew during the 2018 trade War I mean.
Perry Sook: Comments on political advertising here, but as demonstrated again in 2020 for Nexstar remains a significant beneficiary of the two year political AD cycle, given our geography and our scale.
Perry Sook: Turning to the CW, we continue to execute our strategy to drive profitability through a combination of topline growth and expense reductions as our refreshed and reconstituted program lineup continues to drive incremental revenue distribution and advertising revenues.
Perry Sook: It is clear that our new content strategy is resonating with audiences as the 2025 first quarter Mark the CW strongest primetime performance in eight quarters. In fact this season, so far the CW primetime ratings have surpassed other broadcast networks 74 times across key demos that is a notable increase compared to the just 17 times.
Perry Sook: For the full $23 24 primetime season.
Perry Sook: WWE next is a rating standout for us in prime time as it generated a 19% increase in audience versus last year's first quarter results on cable.
Perry Sook: CW sports is now a core pillar of our programming lineup at the network and it has grown to include over 400 hours of live sports programming annually in 2025, representing over 40% of the CW total programming hours. The NASCAR Xfinity series racing has quickly become a consistent high performer with the first 11 races.
Perry Sook: Averaging over $1 2 million viewers, representing an increase year over year of 19% compared to last season. In fact 2025 is the first time in nine years that each of the season's first 11 races delivered an average audience of more than 1 million viewers and there are more sports coming in addition to our existing agreement.
Speaker Change: The ACC for both football and basketball, we recently announced exclusive broadcast agreements with AVP volleyball, the new Grand Slap track series featuring names that you got to know what last Summer's Olympics as well as the HBC you all star basketball game and the renewal of our agreement with Pac 12 football.
Speaker Change: Turning to news nation, we celebrated the neckwear networks four year anniversary this past quarter. Following a successful rebrand in March of 2021 with the 24 seven programming rollout now complete and that work continues to build momentum growing its audience every month of the first quarter of 2025 in fact since December of 2024.
Speaker Change: For news nation as ratings have outperformed M. S. N B C 24 times and C. N N six times in the key adult 25 to 54 demo.
Speaker Change: Breaking news and special coverage continue to be key drivers of audience growth across both linear and digital underscoring the unique competitive advantage of Nextera is deep and local footprint and facilitating premium on the ground coverage of key national events.
Speaker Change: These nations special programming is also gaining traction last week's townhall with President Trump ranked among the networks top five rated broadcast ever while news nation second interviews special featuring Tech Tucker Carlson and Chris Cuomo Garnier garnered more than 2 million total views across all platforms in the first quarter.
Speaker Change: News nation was added to the White House press pool with our correspondents now asking keep questions during daily briefings and aboard Air Force one that's a significant additional milestone and establishing the network as a trusted national news source.
Speaker Change: In summary, <unk> first quarter performance reflects a strong start to the year driven by our stable diversified revenue base disciplined operations and continued execution across our portfolio as we move through the rest of 2025, our priorities remain unchanged renewing distribution agreements covering approximately 60% of our subscriber.
Speaker Change: Base, continuing to Cdw's path to breakeven actively pursuing long overdue deregulation and preparing for elections again in 2026.
Speaker Change: Unmatched scale strong free cash flow and a proven track record of value creation, we are well positioned to navigate today's challenges and capitalize on the significant opportunities ahead with all of that said, let me now turn the call over to Mike.
Mike: Thank you Perry and good morning, everyone Nexstar.
Mike: Nexstar delivered first quarter net revenues of one point to $3 billion, a decline of three 9% compared to the prior year, primarily reflecting the year over year reduction in political advertising.
Mike: Record first quarter distribution revenue of $762 million increased by $1 million or 1% over the comparable prior year quarter distribution revenue growth, primarily reflects annual rate escalators into other contractual increases growth in dnb PD subscribers and the addition of CW affiliation uncertain.
Mike: Our stations, which more than offset mvpds subscriber attrition.
Mike: He mentioned approximately 60% of our total subscriber base is up for renewal in 2025 as the majority of those negotiations occur toward the end of the year, we would expect to see the benefit to distribution revenue beginning in the first quarter of 2026.
Mike: While we continue to see subscriber attrition across the industry recent earnings reports from our distribution partners suggest some marginal improvement in subscriber trends.
Mike: We continue to monitor this closely as we work to secure agreements that are better aligned with the value nexstar delivers to our partners and their customers.
Mike: Turning back to our first quarter performance advertising revenue of $460 million decreased $52 million or 10, 2% over the comparable prior year quarter.
Mike: Primarily reflecting a $32 million decrease in political advertising to $6 million as well as a $20 million or four 2% reduction in non political advertising revenue due to advertising market softness.
Mike: We continued to be impacted by a challenging television advertising market in Q1 with the most meaningful pullback coming from the insurance category.
Mike: The automotive category, where declines at the tier two and tier three levels were partially offset by growth in spending from tier one Oems and the sports betting category, which faced a difficult year over year comparison, given north Carolina's legalization of sports betting in 2024 and no comparable markets coming online this year on the.
Mike: <unk> side, we saw growth in key categories, including attorneys home repair and travel demonstrating the continued resilience service based and intent driven advertisers.
Mike: Further offsetting the declines was slight advertising growth and our national businesses, while our local business has benefited from high single digit growth in digital advertising.
Mike: We also benefited from the Super Bowl airing on Fox this year versus on CBS in 2024, which had a positive impact on our first quarter advertising performance given nexstar is position as the largest owner of a fox affiliated stations, including W. D. E. F T D. The Fox affiliate in Kansas City.
Mike: As mentioned, we generated approximately $6 million in political advertising revenue during the quarter, primarily driven by the high profile, Wisconsin State Supreme Court election. This marks a slight increase over the comparable post presidential cycle in Q1, 2021, which benefited from the Georgia Senate runoff that extended into the new year.
Mike: I am pleased to report that with our newly created National political sales Division, we completed the process of bringing our advertising sales operation completely in house. This strategic move enhances our control over pricing inventory management and client relationships during peak political cycles.
Mike: By internalizing, our advertising sales operation, we've streamlined coordination and workflows across our stations and centralized teams, allowing us to respond more quickly to demand optimize yield and maximize revenue opportunity.
Mike: Looking ahead to the second quarter Nonpolitical advertising is currently forecast to be down in the mid single digits on a year over year basis similar to Q1 results.
Mike: Turning to the CW as expected the CW is profitability in Q1 declined by mid teens million due to additional sports programming amortization and the network didn't have in the same quarter last year. However.
Mike: However, our outlook for the year remains unchanged and we continue to project improved profitability in 2025 versus 2024 with expectations of achieving profitability sometime in 2026.
Speaker Change: To close let me reiterate our confidence in Nexstar as long term outlook and the enduring strength of the broadcast business model as Terry noted amid dynamic economic and industry landscapes more than 60% of our revenues come from subscription based revenue streams.
Speaker Change: Higher than many others in the media and entertainment space.
Speaker Change: We're staying focused on what we can control executing our strategy with discipline to ensure we are in the best position to capitalize on a meaningful tailwind ahead, including our upcoming distribution renewal cycle. The 2026 midterm elections and the Winter Olympics.
Speaker Change: The industry continues to evolve we see the momentum shifting in favor of broadcasters and we remain committed to pursuing opportunities that drive long term value for our shareholders.
Lee: With that it's my pleasure to turn the call over to Lee answer the remainder of the financial review man.
Lee: Thank you Mike and good morning, everyone. Mike gave you most of the details on the revenue side and on the seed Amit. So I'll provide an overview of expenses adjusted EBITDA adjusted free cash flow along with a review of our capital allocation activities and some additional perspectives on our valuation.
Lee: Together first quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses declined by $9 million or 1%, primarily driven by our operational restructuring initiatives undertaken in the fourth quarter.
Lee: Q1, 2025, total corporate expense was $52 million, including noncash compensation expense of $18 million compared to 55 million, including noncash compensation expense of $18 million in the first quarter of 2024 3 million dollar decrease is primarily due to lower legal expenses than the prior year.
Lee: Q1, 2025, depreciation and amortization was 205 million versus $190 million in the prior year quarter, an increase of $15 million of these amounts included in our definition of adjusted EBITDA is 88 million related to the amortization of broadcast rights for Q1, 2025 compared to 69 million for Q.
Lee: 1024, the increase of amortization of broadcast rights by $19 million was due to programming costs at the CW at newly acquired programming premieres.
Lee: Please note that while Q1 CW programming amortization was up year over year, we do not expect 2025, CW programming amortization to be higher than 2024.
Lee: Q1, 2025 income from equity method investments, which primarily flex our 31% ownership in TV food network declined by $11 million versus the prior year quarter, primarily related to TV food network's lower revenue.
Lee: Putting it all together on a consolidated basis first quarter adjusted EBITDA was 381 million, representing a 39% margin and a decrease of $71 million from the first quarter 2024, a $452 million.
Lee: Moving to the components of free cash flow and adjusted free cash flow first quarter Capex was $35 million a decrease from $44 million in the first quarter of last year, primarily due to timing of Capex projects.
Lee: First quarter net interest expense was $97 million a reduction of $17 million from the first quarter of 2020 for on a cash basis. This compares to $95 million in Q1 2025 versus $111 million in Q1 2020 for the reduction in interest expense was primarily related to a reduction in sulfur and nexstar has reduced.
Lee: Net balances.
Lee: First quarter operating cash taxes were $2 million is the only have small state tax payments due in the first quarter.
Lee: Payments for capitalized software obligations and pension credits net of proceeds from disposal of assets in the insurance recoveries were $11 million versus $7 million last year cash.
Lee: Cash distributions from the food network for $114 million in the first quarter, which amount is still captured in our free cash flow and our adjusted free cash flow definition. This amount reflects our pro rata share of cash from operations related to the food network's 2024 operating results, which had not been distributed to us during 2024 included in the first.
Lee: <unk> adjusted EBITDA, but excluded from free cash flow is $26 million of income before amortization from equity method investment, which is primarily our pro rata share of food network income net income in the first quarter of 2025.
Lee: Cash contributions from our partners and the CW with zero in the quarter versus $19 million in Q1 2024.
Lee: In Q1 programming amortization costs were higher than cash payments by $8 million of certain programming payments were deferred.
Lee: Putting this all together.
Lee: Consolidated first quarter 2025, adjusted free cash flow was $348 million as compared to $389 million last year a.
Lee: A few additional points of guidance with respect to adjusted free cash flow.
Lee: We're currently projecting capex of $30 million to $35 million in Q2.
Lee: Just on the current year yield curve and our mandatory amortization payments Q2 interest expense is expected to be in the $95 million range.
Lee: Q2 cash taxes are expected to be in the $150 million to $155 million range as we have to cash tax payments in the second quarter. In addition to the deferred cash tax payments from 2024 as a result of using the annulus nation method for our federal income taxes.
Lee: Q2, 2025 cash distributions from the food network are expected to be in the high single to low double digit range and payments for programming are expected to be in excess of amortization by about $15 million due primarily to deferred programming payments.
Lee: Turning to capital allocation and our balance sheet together with the cash from operations generated in the quarter and cash on hand, we used $22 million of cash to fund the acquisition of <unk>.
Lee: Independent station in Cleveland that will become a CW affiliate on September 1st we.
Lee: We also returned $132 million to shareholders comprised of $57 million in dividend and the repurchase of $75 million of stock at an average price of $169 99 per share reducing shares outstanding net of equity vesting by just under 1%.
Lee: <unk> outstanding debt at March 31, $25, $6 5 billion, a reduction of $28 million for the quarter estimate quarterly amortization payments of $31 million, which were partially offset by amortization of debt discount.
Our cash balance at quarter end was $253 million, including $20 million of cash related to the CW.
Lee: 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 first lien net first lien covenant ratio for Nexstar as of March 31, 2025 was 167 times, which is well below our first lien and only covenant of <unk>.
Lee: Four to five times, our total net leverage for Nektar with 293 times at quarter end as is typical in non political years, we expect leverage which we calculate on an LTM basis versus the two year average to increase during 2025 as adjusted EBITDA and non election years, when political advertising is significantly lower.
Lee: For the remainder of 2025, assuming no M&A, we plan to optimally repay an incremental amount of debt and not with all the debt that was repaid during 2025 with cash from deferred taxes the.
Lee: The additional optional deleveraging will prepare our balance sheet better for any potential M&A and should benefit us if they're even if there is no M&A as many investors value us based on EBITDA multiple based on that methodology any debt reduction mathematically increases our equity value dollar for dollar.
Lee: We also plan to continue to repurchase shares which will continue to be the largest component of our capital allocation strategy, especially given our current valuation.
Lee: Before I turn it over to the operator for questions I'd, just like to make an observation about the volatility in our stock price.
Lee: Subsequent to report in Q4 in February our stock price rose to a high of just over 180, and then fell to $150 area and concerns about tariffs and economy that approximates $30 per share swing resulted in a loss of about $900 million in market cap.
Lee: Six to seven times multiple this implies an expected decline of about 140 to 140 540 to 150 million of EBITDA, which assuming an 80% contribution implies a $175 million to $190 million decline in non political advertising revenue that would meet our nonpolitical advertising with declined 9% to 10% during 2025.
Lee: We're not seeing that so far as our Q1 actuals and our Q2 expectations are both down low mid single digit in Terry's comment about that 2018 tariff with further indicate this impact is overstated.
Not to mention the upside we see from potential deregulation and follow on accretive M&A with that.
Lee: I'll open up the call for questions. Operator can you go to our first question.
Lee: Thank you well now be conducting a question and answer session. If you'd 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.
Lee: You May press star two if you'd like to have your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. One moment. Please okay. Paul for your question.
Speaker Change: Our first question comes from the line of Dan <unk> with the Benchmark Company. Please proceed with your question.
Dan: Great. Thanks, Good morning, also nice job on expenses.
Speaker Change: Terry Let me just let's just ask one broad regulatory question, let's say trustee hypothetically gets confirmed I don't know end of this month, you said summer.
Speaker Change: What would that mean to the timeline of when you think things start moving and given all of the commentary. We've now had from Kerr Who's got the Simonton Op. Ed now do we think an NPR and would be shortly forthcoming do you proactively test the market and how much do you think the FCC can accomplish versus what has to go to Congress.
Speaker Change: Yeah.
Speaker Change: Sure Dan I don't pretend to speak or know exactly whats on the mind of chairman car, but I would think that <unk> would be the most likely way.
Speaker Change: Hey to kick off.
Speaker Change: Re visitation of the rules, both local and national.
Speaker Change: They relate to our ownership so I would expect that could be one of the very first moves that the chairman could make.
Speaker Change: And I would anticipate.
Speaker Change: There was a a letter as you know delivered from from House members too to the FCC a couple of weeks ago. There is a Senate letter being delivered today was 22 senators signing on urging the.
Speaker Change: The FCC too to revisit and relax and eliminate ownership regulations as it relates to TV and there were also notably for public interest groups.
Speaker Change: That historically have been on the other side of this discussion that endorsed the need for ownership regulation. So we think the momentum in Washington continues we had our board meeting there last week and everything we heard from the administration and officials worried that.
Speaker Change: The path to deregulation.
Speaker Change: Would we.
Speaker Change: Would proceed.
Speaker Change: Our pace here once the fifth commissioner at the FCC is confirmed as to what the FCC can do I think they can do pretty much everything.
Speaker Change: Former chairman as I felt that the FCC has the authority to.
Speaker Change: Modify or eliminate the national cap as well as the end market ownership rules, we happened to ascribe to that rule or that point of view and so we think things could go pretty far pretty fast obviously any action that Congress would take would put.
Speaker Change: Put whatever those rule changes were.
Speaker Change: Out of reach of judicial review, which would be would be nice as well, but I also think that the chairman has indicated is.
Speaker Change: As a willingness to consider a waivers during dependency of rulemaking or waivers just in general So I think youll see all of those levers be pushed as time goes on this year and I do think youll see M&A activity.
Speaker Change: Come into focus as the year goes on.
Speaker Change: Thanks, very much Perry looking forward to it.
Speaker Change: Thank you. Our next question comes from the line of Steven Cahall with Wells Fargo. Please proceed with your question.
Speaker Change: Thank you maybe first just to follow up on Dan's question in your comments there Perry. So if we do get an N. P. R. M. I think theres precedent of deals being proposed under the conditionality of the FCC's.
New procedures under an N. P. R. M are you comfortable sort of putting pen to paper and.
Speaker Change: Beginning to transact when the process.
Speaker Change: Is at that phase, but maybe does still face some challenges in the courts.
Speaker Change: That's just the first one as we think about that that timeline and then secondly, and I know you don't update EBITDA guidance as we go through the year overall it seems like things are really performing pretty close to the trends that you had suggested when you gave the initial guide in February so as we just roll everything up.
Speaker Change: The AD market may be a little bit worse your expenses it looked pretty good the CW guidance didn't change so any meaningful puts or takes that you think we should be aware of in terms of how the overall year it looks to be trending. Thank you.
Speaker Change: Hey, Steve you're right, we do not update the EBITDA guidance.
Speaker Change: As we go but as we go through the year, we will continue to sort of give your kind of the.
Speaker Change: What we're seeing in terms of the current market environment I think as we talked about on the when I gave the guidance you know the puts and takes really I think the key thing that we don't have control of really what's going on in the advertising market and what's going on with subscriber attrition and so those are the two things I would <unk>.
Speaker Change: Have you sort of focus on with respect to any adjustments you want to make to your model as it relates to.
Speaker Change: The guidance that we gave at the beginning of the year.
Speaker Change: But I would say Steve that you are right that we have not seen and I get questions. All the time are you seeing things just fall off a cliff and the answer is no first of all.
Speaker Change: We talked in my remarks about the percent of our AD revenue that is determined by.
Speaker Change: Services advertising, which is really not dependent or even related to tariffs.
And the amount that is tied to goods, whether it would be automotive or furniture, or others, which has a much lower percent of our AD revenue and a much lower percent than that of our total revenue. So our exposure is not not not anything that we would think would be extraordinary.
Speaker Change: Going back to 2008, when we were.
Speaker Change: Very highly dependent on advertising support that was a different story.
Speaker Change: So I think that we you know we were very.
Speaker Change: Very considered in the guidance that we gave and I think that things are unfolding pretty much as we had anticipated.
Speaker Change: There might be puts and takes on the margin, but the medically.
Speaker Change: Things aren't any different than what we had seen at the time, we gave the guidance than what we saw last year and and so we were not sanguine about it but I think we're very very clear eyed about it that we think things are unfolding pretty much. According to the the guidance that we gave as it relates to your question would be we'd be willing to put pen to paper.
Speaker Change: You know during the pendency of an NPR M I think.
Speaker Change: Then it depends on the circumstances and having a willing cargo counterparty that was willing to do so as well, but I think you've seen this company take.
Speaker Change: Risk acceptable risk calculated risk.
Speaker Change: And opportunity so I don't think you'd see any change in our behavior as we move through this year and the deregulation of our industry.
Speaker Change: Yeah.
Speaker Change: Thank you very helpful.
Speaker Change: Thank you. Our next question comes from the line of Benjamin <unk> with Deutsche Bank. Please proceed with your question.
Speaker Change: Good morning, everyone. Thanks for the question as you guys talked about we've seen the levels of cord cutting throughout the industry moderate again this quarter I am curious if and when do you think that will start to show up in results for Nexstar, if it hasnt already and what does that mean for your upcoming slate of renewals later this year and then appreciate all the color on advertising.
Speaker Change: Was hoping you could spend a little bit more time with what you're seeing more recently and I believe in the last quarter, you talked about aspiring to get positive growth in that line for the year is that still a reasonable expectation. Thank you.
Speaker Change: So I'll take the first question on subs I think we've seen a material change yet I think the commentary around it has been optimistic certainly coming from some of the Mvpds have reported and like others in the industry, we think that a rationalization of some of the mvpds products out there can only provide tailwind.
Speaker Change: Those trends right the rationalization, what I mean by that is the coming together of D to C with linear in ways that are more attractive.
Speaker Change: To subscribers and makes sense for really everyone involved.
Speaker Change: So in terms of impact on our <unk>.
Speaker Change: Results, yet we have not seen any.
Speaker Change: And as I said in the prepared remarks, I think we're cautiously optimistic that we may see that play out in the rest of the year in terms of the impact on our deals really no impact right now.
Speaker Change: We will approach our business the way we always do we continue to believe that the value that we deliver to distributors and therefore it to their customers continues to be underweight relative to our our.
Speaker Change: Our share of wallet, if you will.
Speaker Change: And then I guess on the advertising side.
Speaker Change: I think we're seeing what we said in the in the prepared remarks is our Q2 forecast at the current moment is is very similar to what you saw in the first quarter in terms of.
Speaker Change: The decline in non traditional advertise our nonpolitical advertising rather.
Speaker Change: With respect to the full year, we do expect to pick up in the back half of the year given the limited elimination of Ah crap out.
Speaker Change: Got it thank you.
Speaker Change: Thank you. Our next question comes from the line of Aaron Watts with Deutsche Bank. Please proceed with your question.
Aaron Watts: Hi, Thanks for having me on.
Speaker Change: On deregulation and consolidation I'm just curious with.
Speaker Change: In terms of your focus on the opportunities in the market how would you prioritize between expanding your national footprint, increasing end market duopolies or perhaps bringing in assets at and rich your underlying spectrum holdings and and on the end market option can you remind us what type of lift do you get from creating a new do all.
Speaker Change: In a given market or adding a CW affiliation to a market like you just did in Cleveland.
Speaker Change: Sure, Let me, let me try and unpack that a little bit here and I would say that the.
Speaker Change: Our focus here is first and foremost on accretive acquisitions.
Speaker Change: Our acquisitions are more accretive than buying back our stock and whether that takes the form of end market additional.
Speaker Change: Stations added to our roster or expanding our national footprint.
<unk> has strategic importance to the company I would say growing our national footprint has more strategic important span.
Speaker Change: Adding a second or third station in a market. If you look at our overall footprint today, we are duopolies or virtually duopoly in the majority of our markets already the opportunities that remain to do that are primarily in the top 10 markets, where we operate exclusively CW affiliates, so that would be.
Speaker Change: Interesting should there be actionable opportunities.
Speaker Change: I think that again underlying spectrum.
Speaker Change: I think we are the largest holder of commercial television spectrum.
Speaker Change: The country UHF TV spectrum and so.
Speaker Change: Adding to that footprint is the byproduct of acquisitions.
Speaker Change: With rare exceptions would we do a transaction just to acquire additional spectrum.
Speaker Change: We're focused on the operating business up top and the accretion from that vis vis distribution expense management.
Speaker Change: Again, putting stations together in markets, where we don't already have that opportunity.
Speaker Change: If the FCC were to eliminate the two to a market rule, then I think that opens up an even broader opportunity for us to look at in market consolidations and as it relates to margin lift there. It depends on the combination of stations. If you put two big four together youre going to have the opportunity I think.
Speaker Change: For cost Takeouts aside from the payments to the networks.
Speaker Change: Because you probably have to robust news operations to robust.
Speaker Change: <unk> operations and while our focus would be to preserve the journalistic layer. There. There's no reason you can't take the technical and production infrastructure and streamline that vis vis the automation.
Speaker Change: And in fact, writing two newspapers off the same printing press so the margin lift there can be.
Speaker Change: 20 points 2025 points, depending on the combinations and the status of the stations and.
Speaker Change: In Cleveland, adding a CW affiliations through an independent station gives us an immediate distribution lift in revenues and then taking a very powerful organization in which is our Fox affiliate in Cleveland are very good content operation and a very very good sales operation and overlaying.
Speaker Change: That on the assets of the CW will give us you know.
Speaker Change: <unk> long term down the road, but the accretion of that acquisition is primarily through the distribution economics. Once it becomes a CW affiliate later this year. So I hope that's responsive to your question I know there was a lot in that.
Speaker Change: Really helpful. Thanks Mary.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from the line of Jason Bazinet with Citi. Please proceed with your question.
Speaker Change: I also had a regulatory question.
Speaker Change: Is your sense that the that the industry that there is broad agreement among.
Speaker Change: Potential sellers the consolidation should happen and therefore in your you may have the choice of pursuing several different paths in terms of M&A.
Speaker Change: In other words.
Speaker Change: The short answer is yes, I mean, I <unk> sure.
Speaker Change: The joint Board of directors and prior to that I chaired the Nab television Board and this is the first time in history that the entire board voted unanimously that.
Speaker Change: The national cap elimination and in market.
Speaker Change: Ownership restrictions be eliminated hasnt always been the.
Speaker Change: The case, but I think that is.
Speaker Change: A notable achievement in the ability to get the industry organized.
Speaker Change: Under one one set of marching orders and that's certainly is impactful at the regulatory agencies and on Capitol Hill that the industry is speaking with one voice as it relates to that issue. So I think that you know the Nab television Board is made up of Representatives, Mike Baird represents us on the NAV.
Speaker Change: T V Board, so a very large group and there are very small market group of operators that also have a voice on that board and I think everyone realizes that without.
Speaker Change: The ability for strategics to expand and potentially private equity to enter this space because of the Deregulatory nature.
Speaker Change: And that there may not be much of a bid for their family assets are generational assets. So I think everyone is sees the need for deregulation to allow the industry to reach its full value potential.
Speaker Change: Can I ask one follow up and this may be too legal, but I'm going to try.
Speaker Change: Heard your point about the FCC potentially doing the waivers and about the NPR am.
Speaker Change: The one thing that I don't know how to think about is I think it was last year, the Supreme Court sort of pushed back on Chevron deference, meaning.
Speaker Change: Robbing the expert agencies with some of the power that they have historically had.
Speaker Change: And sort of forcing Congress to be more explicit about changes that take place as opposed to just pushing it down to an expert agency like the FCC to do the rulemaking.
Speaker Change: Do you feel that that shift at the Supreme Court is a potential fly in the ointment that would require.
Speaker Change: Congressional action as opposed to relying on the FCC every expert agency or does that sort of a red herring.
Speaker Change: Yeah well.
One man's opinion is it's a red herring, we actually read the chevron.
Speaker Change: Ruling as a positive for industry, beating that.
Speaker Change: There could be judicial review of regulatory agency sanctions that they couldnt just happened in a vacuum and debt.
Speaker Change: And that there could be a question for the need of those.
Speaker Change: So we see it as a positive I don't see that as a red herring necessarily I think the entire administration as well as both houses of Congress certainly are focused on streamlining government.
Speaker Change: Intrusiveness into private business and so.
Speaker Change: I think that at this point in time I don't see that as an impediment in fact theres been very little at this point a reaction to the chevron ruling as it relates to.
Speaker Change: The day to day operations of businesses and the government. So.
Speaker Change: Our perspective, I don't see that as a as an impediment on a going forward basis.
Speaker Change: I would just add to that I think the letters have you seen from both houses.
Congress would indicate that.
Speaker Change: Leaders are encouraging the SEC to act as well so certainly they don't.
Speaker Change: See the FCC is being limited here.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Patrick Sholl with Barrington Research. Please proceed with your question.
Patrick Sholl: Hi, good morning.
Patrick Sholl: A question on the AD market.
Patrick Sholl: You mentioned the growth in the services sector in the last trade War and this is kind of.
Patrick Sholl: Curious.
Patrick Sholl: How much of that was increased.
Patrick Sholl: Penetration of getting new advertisers onto television and just within the various service categories, where you feel tedious relatively underutilized from those advertisers.
Patrick Sholl: Thanks, I think the from a from the last in 2018, there wasn't really like new advertisers that were coming on it was just sort of same are seeing group that was just a continuation of the.
Patrick Sholl: The trend of.
Patrick Sholl: The benefits of advertising right. These are companies that are.
Patrick Sholl: Really ringing the cash register because someone has heard their AD and they came into the store or they hire hire them too.
Patrick Sholl: Where their lawsuit whatever whatever that was and so it's a very stable piece of the pie and a nice a nice.
Patrick Sholl: It's nice from our from our advertising composition perspective to be a significant percentage of our app.
Patrick Sholl: And I think this time this time around it's really no different I mean, we're seeing a definite difference in terms of the rate of decline of <unk>.
Patrick Sholl: Good versus the services category.
Patrick Sholl: Significant.
Speaker Change: Thank you. Our next question comes from the line of Barton Crockett with Rosenblatt Securities. Please proceed with your question.
Barton Crockett: Hi, great. Thanks for taking the question.
Barton Crockett: I guess, if I cut you, but the first one is really on this regulatory question. So.
Barton Crockett: I get the FCC, but I'm wondering about the Doj and antitrust.
Barton Crockett: How much of an impediment could that be and then kind of within that question.
Barton Crockett: Historically, I think theres been.
Barton Crockett: Very reasonable thought that they should include in the market definition.
Barton Crockett: These things that have been accused by the government of monopoly like search and social.
Barton Crockett: Does that need.
Barton Crockett: We need to change do you see any prospects that that could change.
Speaker Change: Under this administration.
Speaker Change: Yes, and one where it would be.
Speaker Change: Folks that are GR team has spoken to at D O J.
Speaker Change: Have have said have not gone on record, but has said in private conversations that no. One can defend the current rules that.
Speaker Change: Television station advertising as a discrete market as its radio station advertising nobody believes that nobody can defend that with a straight face and so I do not see that as an impediment to.
Speaker Change: In market.
Speaker Change: Opportunities to consolidate let's just assume you have 50% of the TV revenue in our marketplace, but let's talk about the part of the iceberg that's below the water level, which is every other form of advertising that our local sellers compete with.
Speaker Change: There's a line out the door at the car dealership with a furniture store people into sell digital.
Speaker Change: Advertising connected television advertising pens with your company's name on it.
Speaker Change: Out of home advertising Billboards.
Speaker Change: So ads in the high school yearbook, I mean, those are all compete for the one advertising budget that business owners have and to believe anything other than that ignores the realities of what our salespeople encounter in the marketplace every day so.
Speaker Change: Again pretty high up the food chain at the Doj I think people understand that and are willing to address marketplace realities in transactions that might be propose going forward I'll just add that to the extent that you thought that rule or is that really not a rule, but that interpretation of the marketplace made any sense.
Speaker Change: Eric Lee certainly changes in the marketplace recently.
Speaker Change: With really undermining what I mean by that is the introduction of advertising television advertising in particular across Netflix and Amazon Prime I think you can look at those in the flood of inventory that they brought to the market as a fundamental change in the marketplace. It absolutely should compel a different a different view of that.
Speaker Change: Now if I can ask kind of a.
Speaker Change: An adjacent question.
Speaker Change: To what degree in Nexstar, specifically in local TV generally.
Speaker Change: Is this.
Speaker Change: Emerging kind of form of programmatic and connected TV advertising this.
Speaker Change: Part of what Netflix is doing and just a lot of momentum around that generally that we see at the national networks.
Speaker Change: Where are you guys talking about that locally or see it that much and to what degree is that kind of change should it change can change.
Speaker Change: Well and again I don't want to open our playbook, so everybody can read it but I mean, we certainly are cognizant of the fact that the vast majority of advertising all digital all national advertising is sold on an impression based basis and here is.
Speaker Change: TV selling demography and.
Speaker Change: And so I think that we are.
Speaker Change: At at a forefront of having discussions that would.
Speaker Change: Enable us to be selling.
Speaker Change: More of our inventory.
Speaker Change: On an impression based basis, we can control the rate at which those orders are accepted in and all of that but it also with advertising agencies.
Speaker Change: Make less money, placing linear television ads than they do placing digital ads and until we address that structural and equity it's going to be hard to talk about sustained growth in this business.
Speaker Change: At the at the advertising support levels. So we're totally cognizant of it and focus on it and discussions are ongoing behind the scenes and obviously, if we have something to announce we will announce it but.
Speaker Change: We are focused on crew.
Speaker Change: Creating removing all structural impediments in any other impediment in doing business with our company and in our industry I think that's where everyone should be focused so we are we get it and are taking moves to.
Speaker Change: Two two.
Speaker Change: Evolve the way, we sell our advertising to be as compatible as possible everyone understands the superior value proposition, but if it's hard to buy and less profitable to buy.
Speaker Change: Can understand why people may move their money in other places. So we're we're straight up addressing it ourselves and expect that the industry will ultimately follow.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Craig Huber with Huber Research Partners. Please proceed with your question.
Speaker Change: Great. Thank you I wanted to ask you Perry belt. This proposal is off debt out there about capping reverse retrans that's 30%.
Speaker Change: Retrans revenues for your companies and stuff that sort of thing.
Speaker Change: Think about it won't kill you comment on this we could please.
Speaker Change: We've been talking about for years and years about deregulating.
Speaker Change: Your stuff out there in market rules, a 39% ownership capital of a sudden now versus potential out there.
Speaker Change: <unk>, 30% cap on the reverse retrans side of things here I mean, when I sit back and think about the FCC. The Trump administration and Congress that they got involved here.
Speaker Change: They're either deregulatory.
Speaker Change: Leave us alone.
Speaker Change: Or they're not I mean, why does it makes sense to get rid of 39% ownership cap, which I am sympathetic with Indian market rules totally on board with that as well, but then why put in place a cap on the retrans payments side of things here surely benefit.
Speaker Change: You guys on the surface, but theres, an unintended consequence of a thing because the networks I would think logically which has pulled back how much money. They spent on program that they put on your TV stations and your peers out there and stuff. So can you just comment on that because it seems totally inconsistent to me I'm just baffled by the whole thing frankly.
Speaker Change: Well listen we have a great deal respect for commissioner Symington and his approach to free markets and deregulation.
Speaker Change: Would say that his thoughts were expressed in an op, Ed, which I would characterize as one man's opinion I will tell you having spent a I think I've been on capital seven times, so far this year.
Speaker Change: There is very little interest in getting involved in.
Speaker Change: And the commerce between stations and networks other than there has been an increasing interest in.
Speaker Change: The asymmetrical approach to virtual Mvpds and traditional mvpds.
Speaker Change: Given that.
Speaker Change: To promote themselves as the third largest mvpds, but yet there are virtual mvpds. So our rules of engagement are different and I don't think anyone feels that that makes much sense, but.
Speaker Change: Listen, yes, we our.
Speaker Change: Largest affiliate groups and among the largest affiliate groups of all of the big four.
Speaker Change: We happen to own the big five and you know it would not be handcuffed by a 30% rule should it come into effect in terms, we aspire to a 30% distribution revenue for the CW from our affiliates, but at this point in time, I think there'll be very little traction.
Speaker Change: For for that taking hold.
Speaker Change: So I would take it as you know.
Speaker Change: The op Ed that it was but I don't know that I see it gaining much traction in.
Speaker Change: In Washington or in the marketplace.
Speaker Change: And then thank you.
Speaker Change: Liane if you could just comment if you would on the CW losses year over year in the first quarter was.
Speaker Change: Ballpark, maybe roughly $10 million.
Speaker Change: Worse in the first quarter here because of the higher sports programming I understand but what is your outlook. If you could quantify that what your outlook is for the CW losses for the full year. Thank you.
Speaker Change: Yes.
Speaker Change: Our outlook for the CW losses for the full year are consistent with what we said on the last call, which was about about a quarter better or 25% better than what it was in 2024.
Speaker Change: We did see.
Speaker Change: The increase in the amortization of broadcast right.
Speaker Change: In the in the first quarter, which was.
Speaker Change: About.
Speaker Change: Angela increase over the first quarter of 2024, you can see that number and the losses did it did increase by more than more than $10 million in the first quarter, but again we.
Speaker Change: That's an anomaly of seasonality anomaly and we still are on track to kind of get where we think we're going to get we had planned to get to for the year.
Speaker Change: Earlier.
Speaker Change: Great. Thank you both.
Speaker Change: Thank you. Our final question comes from the line of Alan Gould with loop capital markets. Please proceed with your question.
Speaker Change: Yeah.
Speaker Change: Thanks for taking the question two please.
Speaker Change: Speaking of the fifth network, just wondering where you stand in repricing your CW.
Speaker Change: Fees to your station partners your affiliates and secondly on advertising just curious how big a difference there is on your advertising your sports product versus year news product versus your general Entertainment product. Thank you.
Speaker Change: Well listen we're working on repricing our value proposition to our CW affiliates.
Speaker Change: And the way, we do that is by demonstrating the value of the CW affiliation through investment in programming and most importantly that programming paying off in terms of increased eyeballs to the network.
Speaker Change: Our affiliates are over the moon at our investments in sports programming, what it brings to them the additional inventory that they don't have to program.
Speaker Change: And so on.
Speaker Change: Our discussions with those affiliates as well as our own station group, which is the largest customer of the network in terms of we are the largest CW affiliate group.
Speaker Change: People recognize the value we're bringing in now.
Speaker Change: And we told them it was coming and so they've had a couple of years now to get out in front of that with distribution negotiations on their own behalf.
Speaker Change: So I do expect that one of the value levers to breakeven of the CW affiliation. The CW network over the next two years 25, and 26 will be through increased remuneration vis vis distribution payments to the network from its affiliate base.
Speaker Change: It's an ongoing process.
Speaker Change: When we first took over the network. We said all the great things, we were going to do it asked or big increases and they said well wait a minute im done anything yet that's.
Speaker Change: That's fair now we have and I think now it's our turn.
Speaker Change: And as it relates to the second part of your question I forget what that was can you can you remind me again.
Speaker Change: Sure. When you are selling advertising how big a difference are you seeing selling advertising on sports content versus news content versus general entertainment content.
Speaker Change: Well I would probably put them in that order right I mean sports programming is at the moment right now and that's why we'd be added additional sports programming.
There's a big demand for sports because it's live it's lean forward I would say.
Speaker Change: As it relates to demand for local news, we've seen no no FX in that I mean that is where local advertisers want to be for all the same reasons youre talking about my local community people are interested in that my ads get more attention there and I would say that unfortunately, because we produce some very good scripted programming at third into.
Speaker Change: Adding order thats not generally consumed live.
Speaker Change: It is consumed by appointment whenever I'm ready to see it through a streaming or on my DVR and so.
That is probably the least in demand of the three categories that you that you've talked about and if you look at the mix from a network perspective that we've orchestrated at this at the CW.
Speaker Change: Gripped in entertainment programming comprises a lower <unk>.
Speaker Change: Percent of the total hours of primetime and total hours program by the network and I think it's in addressing that marketplace realities. There wasn't just to cut costs. It was two <unk>.
Speaker Change: More what the TV audience is looking to consume which is live programming event programming and sports programming.
Speaker Change: We still have a I hope we will have on the network in this upcoming season, a <expletive> Wolf police procedural that's kind of a watershed event for the CW. When do you think we're in business with one of the most prolific and successful program producers.
Speaker Change: In television.
Speaker Change: And I'm excited about that and you know both hope and think that that show will do well, but we're not abandoning scripted where just evolving the programming mix to represent marketplace realities.
Speaker Change: I think if you look at right now Wednesday night is scripted night, and Friday night, as Penn and Teller night, and and Tuesday Night's Wrestling with WWE and I think that.
Speaker Change: The medically Thats, how were Brad Schwartz and his team and Sean Compton are building the network and we think that it will overtime pay significant dividends to both the network the affiliates of which we're the largest and at our Counterparties as well.
Okay. Thank you.
Speaker Change: Thank you we have reached the end of our question and answer session I would like to turn the call back over to Mr. <unk> for any closing remarks.
Mr. <unk>: Thank you very much operator in closing networks local advertising, our political advertising in our distribution revenue streams, all provide us with a stable and growing foundation across all economic cycles are uniquely scaled portfolio of local and national media assets continue to generate substantial free cash flow to support our value enhancing cap.
Mr. <unk>: Allocation strategy that we and described earlier with our proven financial track record our best in class balance sheet and additional upside from potential regulatory reform. We believe that Nexstar offers a rare combination of consistency flexibility as well as growth.
Speaker Change: Simply put we have the platform the people and the momentum to continue to deliver long term shareholder value and as next our third largest shareholder I might add no. One is more personally committed to that mission than I am.
Speaker Change: Thank you all for your continued support and we look forward to updating you again on our second quarter earnings call in August have a good day.
Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Okay.