Good day, and welcome to Nexstar Media Group, Inc.'s fourth quarter 2024 conference call. Today's call is being recorded. I will now turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.

Thank you, Shamali, and good morning, everyone. Thank you for joining Nexstar Media Group, Inc.'s fourth quarter conference call. Let me read the Safe Harbor language, and then we will get right into the call. All statements and comments made by management during today's call other than statements of fact may be deemed forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Nexstar Media Group, Inc. 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. For additional details on these risks and uncertainties, please see our annual report on Form 10-K for the year ended December 31, 2023, as filed with the US Securities and Exchange Commission, and Nexstar Media Group, Inc.'s subsequent public filings with the SEC. Nexstar Media Group, Inc. undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. With that, it's now my pleasure to turn the conference over to your host, Nexstar Media Group, Inc. Founder, Chairman, and Chief Executive Officer, Perry Sook. Perry, please go ahead.

Thank you, Joe. I will start with a summary of recent highlights followed by Mike's operations review and then Lee Ann Gliha's financial review. Our fourth quarter financial results mark a strong finish to another successful year for Nexstar Media Group, Inc. in which we delivered $5.4 billion in total net revenue, the highest in our company's 28-year history. 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. 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-watched programming. For the full year, Nexstar Media Group, Inc. 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 one-third over the last five years. Another $327 million was allocated toward debt reduction, resulting in record low net leverage of 2.91 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. In January, we announced the twelfth consecutive annual increase in the quarterly cash dividend, underscoring the durability of our cash flows and reflecting a near 5% yield, placing Nexstar Media Group, Inc. in the 94th percentile of all S&P 400 companies. The continued strength and consistency of our financial results and 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 position…

In 2024, NewsNation firmly established itself as a formidable player in the cable news landscape with top-tier talent and reliable, unbiased reporting. Today, NewsNation is a 24/7 news network fully distributed across all platforms with nationwide distribution comparable to or better than the other more established cable news networks. We've also achieved major news milestones by hosting the final RNC president debate last year and becoming the first news network to accurately call the national election for President Trump. This underscores not only 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 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, NewsNation has out-delivered MSNBC's seventeen times and CNN twice in the 25-54 demo, proving that our approach is resonating with viewers who are looking for a fresh and balanced take on the news. The CW'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. WWE and NASCAR played key roles in reshaping the network's identity. On October 5th, we drew 4.7 million viewers across NASCAR, Ace, and Pac-12 football in one afternoon. NASCAR, in particular, helped attract twenty new advertisers to the CW so far. 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 the programming hours delivered by the CW network will be live sports. Turning to ATSC 3.0. In January 2025, we took a significant step toward harnessing the power and potential of ATSC 3.0 with the announcement of the Edge…

Thank you, Perry, and good morning, everyone. Nexstar Media Group, Inc. 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 record fourth quarter distribution revenue of $714 million increased $10 million or 1.4% 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, growth in VMVPD subscribers, the addition of CW affiliations on certain of our stations, and the return of partner stations on one MVPD in January, which more than offset MVPD subscriber attrition. In January, Nexstar Media Group, Inc. and our partner stations reached an agreement with NBC to renew our affiliations in thirty-three markets. And as previously announced, we completed our CBS affiliation renewal in mid-2024. We view our relationships with the networks as symbiotic. 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. Major sports, including the NFL, are committed to serving the broadest audience possible to drive fan engagement. That means a commitment to broadcast television, which provides 14% additional reach over the pay TV ecosystem alone, reaching 100% of television households. In addition, with networks only providing two to twelve hours of content daily, affiliates provide the other twelve to twenty-two 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. In 2025, we expect both gross and net distribution revenue to be relatively flat…

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, along with a review of our capital allocation activities, our 2025 guidance, and some perspectives on valuation. 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 programming and content costs were offset primarily by reduced product promotion costs in the quarter. Q4 2024 total corporate expense was $48 million, including non-cash compensation expense of $20 million compared to $45 million, including non-cash compensation expense of $16 million in the fourth quarter of 2023. The increase of $3 million is primarily due to one-time severance costs associated with our operational restructuring, while the increase in non-cash compensation expense is due to new restricted stock grants and the timing of grants offset in part by a release of reserves, among other factors. Q4 2024 depreciation and amortization was $220 million versus $210 million in the prior year quarter. An increase of $10 million. Of 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 costs as newly acquired programming premiered offset by a slight reduction of amortization of broadcast rights elsewhere at Nexstar Media Group, Inc. 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. So Q4 2024 income from equity method investments, which primarily reflects our 31% ownership in TV Food Network,…

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 two to remove yourself from the queue. Participants using speaker equipment, it may be necessary to pick up their handset before pressing the star key. One moment please while we pull for questions. Our first question comes from the line of Steven Cahall with Wells Fargo. Please proceed with your question.

Yeah. Thank you. So just on M&A, Perry, you have a great acquisition history between Media General and Tribune. I don't recall the free cash flow accretion off the top of my head of those deals but I know it was significant. Nowadays, your rates are higher a lot of the peers are also higher. So do you still think there's a lot of similar levels of accretion for broadcast M&A opportunities 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 when you think about broadcast and consolidation over the next decade? And then, Lee Ann Gliha, just on the EBITDA outlook for the year, the impressive work that you're doing on cost. I'm just wondering if there is there any cost to achieve that is included in EBITDA that impacts free cash flow 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.

Well, Steven, that's a lot. Let me, let me try and take the first part of that. As it relates to Media General and Tribune, they were 40% and 60% accretive acquisitions, which, you know, we think we're probably at a high watermark of what we would be able to achieve on scale M&A. Having said that, you know, we have been consistent in saying, you know, 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% yield on our equity. So we will maintain that same discipline. We are obviously in conversations and out there looking. If there's a love connection and regulations change that would permit the acquisition to go forward, it's highly accretive. It's something we would strongly consider doing. In the broadcast television space and the digital space, but if not, Lee Ann Gliha's told you, you know, plan B would be to continue to buy back stock and pay down debt.

Yeah. And then, Steve, your other question, the expenses related to those operating cost savings are really behind us. You saw we took, it's about a $12 million one-time restructuring charge in the fourth quarter. That got added back to our EBITDA, and that was really the cost to implement that.

Great. Thank you.

Thank you. Our next question comes from the line of Dan Kurnos with Benchmark. Please proceed with your question.

Yeah. Thanks. Good morning. Very comprehensive, guys. Maybe first one, just on the sports front, what do you guys make of Major League Baseball and ESPN parting ways? Do you expect there's any opportunity for local broadcast to finally get access to the laggard child, so to speak? And then just to be clear, I guess, Lee Ann Gliha, on the distribution or Mike Biard, I guess, are you assuming that the recent subtrends hold for the year, and can we just get a sense of the timing of the renewals we got to see W in Q4, but the other 60%, is that all back-end weighted? Thanks.

I'll take the last one first. Yeah. They're back-end weighted, but not being specific. In the second half of the year. With respect to sports, listen. I think what you're seeing, we'll see where the MLB shakes out, but we are confident that they will look for broader platforms. We did note that Commissioner Manfred referred to cable as a platform. 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-a-vis broadcast has been to increase the number of games on broadcast rather than move to cable. So we think there will be opportunities out there. We're less interested in the local opportunities, given the fact that the RSNs seem to have kind of gotten back on their feet and at least for the time being, taking the lion's share of the local games. 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 rights holder out there looking to do deals in the future.

And then just to elaborate on what Mike said in response to your question in terms of subscriber trends. You know, our guidance assumes a slight improvement in the rate of subscriber attrition as is consistent with what the market is expecting. In general. And then, you know, because those contracts are all back-end weighted, you know, the substantial majority of the benefit will be in 2026.

Perfect. Thank you both.

Thank you. Our next question comes from the line of Benjamin Soff with what you mean? Please proceed with your question.

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 this year? And then maybe could you talk a little bit more about the Edge Beam JV, how that helps you accomplish goals, the progress you've made on ATSC to date. Thanks.

Well, thank you. Yeah, I've spent four different days in Washington DC since the first of the year. All on the hill visiting with lawmakers regarding the need for deregulation and I feel the prospect is as good as it has been in my career. To see meaningful ownership regulatory reform come to the broadcast industry, you know, no one can, with a straight face, defend the current rules. In the current environment. And, I think there's a real understanding that preserving local journalism at the local market level is in the national interest. And to do that, you've gotta have strong companies and strong companies need to be able to get bigger and grow and innovate. And so that message, quite frankly, is resonating on both sides of the aisle. I think you'll see continued movement both at the FCC and the DOJ in terms of understanding that current regulations are outmoded. And we are obviously 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 Carr has called this a break glass moment for local television. I know he is very interested in seeing the medium survive and have the ability to prosper and to continue to support local journalism and innovate. And so, you know, I think I take him at his word. Obviously, the commission is fully constituted with five commissioners, three Republicans, two Democrats. You'll see activity increase under his purview. As it relates to the next-gen TV generation and ATSC 3.0 and our consortium, you know, this is, you know, Nexstar Media Group, Inc. already reaches 75% of the US population. Our streaming and digital competitors are rapidly advancing, and without our ability to modernize and innovate, we…

Great. Appreciate the insight. Thank you.

Our next question comes from the line of Craig Huber with Huber Research Partners. Please proceed with your question.

Great. Thank you. I have a few questions. I'll just do them one at a time to make it easier. On ATSC 3.0, Perry, just talk a little bit further about your expectations, how the revenue ramp for your company and the rest of your consortium may play out. How many more years do you think it'll be to could be significant for you guys?

Well, I think as most new businesses evolve, they start slowly and then grow suddenly. There are a number of things that have to happen. We need to be able to sunset the ATSC 1.0 or current transmission schema requirement, which would free up more spectrum for innovation. We have to complete the transition to 3.0 would enable all stations in the market to fully participate in any data casting opportunities that might present themselves. And again, I think that if we are able to meet the transition date of February 28th that we proposed along with NAB in the petition for rulemaking, that's 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, as well as providing service updates with a better completion rate than the current satellite-based updates provide. There's also the opportunity to develop a stronger national security with the BPS system, which is the broadcast positioning system which would be a backup to our current GPS system. The United States is the only industrialized country in the world without a backup to its GPS system. And, you know, I don't have to tell you what happens if GPS goes out but we can provide a terrestrial-based system that would be a backup to the current satellite-based system. Less vulnerable to disruption and we have developed the proof of concept of the timing element of this already within atomic clock in Colorado with mist and I won't get into the wonky weeds of all the development that's going on there, but both the DOT and the DOD have said it's in our national interest to have a backup GPS system and we think that this transition would enable this industry, our industry, to provide this and it would be superior to a second satellite-based system. So, again, I think you'll see announcements of clients and trials beginning and continuing throughout this year and the next couple and I think that it would be probably 2028 if we were able to affect the transition of the top fifty markets, top fifty-five markets to a full ATSC 3.0 transmission schema, I think that's when you'll see revenue take a step forward.

And then more near-term question. You guys just talk a little bit further about core advertising trends near term. Are there any maybe national advertising categories that you guys just see any green shoots and any significant change there against positive or negative?

There's nothing 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.

So maybe if you could just talk a little bit further about what you're expecting for overall core advertising trends in the first quarter year over year?

So what we talked about was that the first quarter advertising trends are gonna be down in the low single-digit range.

So what is it that you're seeing that's obviously a much better number than you guys were able to do last all four quarters last year? Obviously, part of it was hurt by crowding out, but what are you seeing better in particular that you want to highlight?

It's slightly, you know, it's just a general improvement in the trend. It's not like anything hero up. You know, I think 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, you know, just shy of 5% decline in the fourth quarter. Which, you know, low single digits is not too much of a difference from there, but we also have the benefit of improving CW performance given all the new great sports content we've got on the air now.

And sorry if I just ask one more. On the CW losses, you guys talked about it being down 25% or perhaps more. In the New Year. They'll probably put it down loss roughly $100 million, maybe a little bit better than that. How are you feeling about the point in time when you might be able to get to breakeven, you still think by late this year, early next year, you feeling about that, please?

Yeah. We, you know, what we've said is, you know, we think we expect to get to profitability at some point during 2026. And that's still part of our outlook and what we're striving to achieve. We're on target for it.

Okay. Great. Thanks, both of you.

Thank you.

Thank you. Our next question comes from the line of Aaron Watts with Deutsche Bank. Please proceed with your question.

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 on your whole cap stack. Because, 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 and your commentary there today, maybe I can 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?

You know, I don't think we're looking to max out on leverage and overextend ourselves in any way. So, you know, I think the question is what is the comfortable leverage that the market could bear. And, you know, I know that the rating agencies always give you a little bit of an eighteen-month sort of time period to kind of get your leverage back down to maintain ratings. But, you know, I think we'll have to just look and see that on a case-by-case basis, and look at the deal, but we're not looking to create new headlines regarding being highly leveraged. That's, you know, one of the things that we have not done at the company historically.

Okay. Got it. Thanks, Lee Ann Gliha.

Thank you. Our next question comes from the line of Patrick Barrington Research. Please proceed with your question.

Hi. Thank you. With the CW and 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, could you maybe talk about any benefits you're seeing on the distribution side and the contribution that those rights are creating for either your affiliate partners or for your distribution revenue so far?

Well, I think to date, we're in the life cycle of the CW. I guess I would think of it as we're in the show-me phase of the life cycle. 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 it's been gratifying over the last couple of weeks, but even longer than that over the last couple of months as NXT came online and we saw the end of last year's performance with NASCAR on the last eight races that we sublicense from NBC. So in 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'll move into the monetization phase going forward. So yeah, no surprise. The value of programming in the distribution world is heavily centered in live programming. Right? That distinguishes linear programming from SVOD programming. And the value in linear is in live news and sports. Right? And certainly, from the sports side, you can see that notwithstanding headlines on subscriber erosion, big-time sports continue to draw significant audiences. Most recently with the Super Bowl setting yet another record. Alright? So we're optimistic with the performance of the programming that will translate into performance in the distribution deals that we have on the near horizon.

And I would just want to supplement something Mike Biard said because he's talking prospectively and talking about the differential between what we get for CW versus affiliations, we actually have been able to grow our distribution revenue with the CW to date with the new programming slate. We just think there's more to come.

Agree.

Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to Perry Sook for closing remarks.

Thank you very much. In closing, I'd like to just tell you all we remain confident in Nexstar Media Group, Inc.'s positioning to continue 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 all positioned us very well for continued success and free cash flow growth. You look at the immense value we've created over the years and our future prospects, Nexstar Media Group, Inc.'s share price has never been more attractive even with the early moves today. We've consistently proven our ability to outperform, and if history's taught us anything, it's that with the long term, don't bet against Nexstar Media Group, Inc. There's a lot more to come. I'd like to ask you all to stay tuned and 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.

And this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.