Good day, and welcome to the Nexstar Media Group's Fourth Quarter 2025 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, Rochelle, and good morning, everyone. Let me read the safe harbor language, and then we'll get right into the call. All statements and comments made by management during this conference call other than statements of historical fact, may be deemed forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Nexstar cautions that these forward-looking statements are 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 Nexstar's annual report on Form 10-K for the year ended December 31, 2024, as filed with the U.S. Securities and Exchange Commission and Nexstar's subsequent public filings with the SEC. Nexstar undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 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.

Thank you, Joseph, and good morning, everyone. Thank you for joining us today. Mike Biard, our Chief Operating Officer; and Lee Ann Gliha, our Chief Financial Officer, are with me on the call, as always. Nexstar's fourth quarter financial results capped a year marked by strong execution and bold strategic action to shape our future of the business. We delivered on all key operational priorities in 2025, including successfully reviewing and renewing distribution agreements representing over 60% of our subscriber base, further elevating The CW and NewsNation to top-tier networks, extending our affiliation agreements with both ABC and MyNetworkTV and pursuing regulatory reform through our landmark agreement to acquire TEGNA. These achievements, together with the return of midterm election political advertising in 2026, all set the stage for a very exciting year of growth ahead for Nexstar as reflected in our stand-alone Nexstar pre-TEGNA full year adjusted EBITDA guidance of $1.95 billion to $2.05 billion. The rationale for the Nexstar-TEGNA combination is becoming increasingly clear. Consolidation is accelerating across the broader media industry from the Hulu-Fubo transaction to the proposed Charter-Cox merger to the upcoming sale of Warner Bros. Discovery. Against this backdrop, our transaction represents a pivotal and critical opportunity to establish a framework for local television broadcasters to more effectively compete with big tech and with big media while strengthening our ability to deliver high-quality local journalism to our communities. I'm pleased to report that we remain on track and are making great progress on our path to closing. Our HSR filings and our FCC license transfer applications have all been submitted. We have responded to all inquiries from the DOJ, the FCC and the state attorneys general, and we continue to work with all regulatory and legal bodies to fulfill any remaining requests. Our explanation for close…

Thanks, Perry, and good morning, everyone. Nexstar delivered fourth quarter net revenue of $1.29 billion, a decline of 13.4% compared to the prior year, primarily reflecting the year-over-year reduction in political advertising, offset by better-than-expected growth in nonpolitical advertising revenues. Fourth quarter distribution revenue of $720 million increased $6 million or 0.8% compared to the prior year quarter and primarily reflects increased rates, growth in vMVPD subscribers and the addition of CW affiliations on certain of our stations, offset in part by MVPD subscriber attrition. In 2025, we renewed distribution agreements covering more than 60% of our subscribers, extended our network affiliation agreements with ABC and MyNetworkTV to 2027 and renegotiated affiliation and vMVPD agreements for The CW covering about 2/3 of its subscribers. Looking ahead, we have approximately 30% of subscribers up for renewal this year. In 2026, on a stand-alone Nexstar-only basis, we are projecting distribution revenue growth to be in the low single digits on a gross basis and in the mid-single digits on a net basis for the full year. Our projections are based on our current and expected contract terms and an improvement in the rate of subscriber attrition. Turning back to our results for Q4 2025. Advertising revenue of $549 million decreased $209 million or 27.6% over the comparable prior year, primarily reflecting $233 million year-over-year decrease in political advertising to $21 million. However, nonpolitical advertising was up 4.5% in the quarter, better than the expectation of a low single-digit decrease we mentioned in our last earnings call. We saw later-than-anticipated spending last quarter, driving broad-based improvement across all advertising segments, including local, national, network and digital. Top advertising categories in the quarter were gaming, banking, attorneys and sports betting driven by the legalization of online sports betting in Missouri. Auto was once again…

Thank you, Mike, and good morning, everyone. Mike gave you most of the details on the revenue side and on The CW. So I'll provide a review of expenses, adjusted EBITDA and adjusted free cash flow, along with a review of our capital allocation activities and our 2026 guidance. Combined fourth quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses, decreased by $7 million or 0.9%, driven primarily by reduced commissions from sale of political advertising revenue in Q4 of '24, reduced news and production expenses, reduced promotions from our operational restructuring initiatives and lower administrative and onetime expenses. Q4 2025 total corporate expense was $65 million, including noncash compensation expense of $20 million compared to $48 million, including noncash compensation expense of $20 million in the fourth quarter of 2024. The increase of $17 million is primarily due to onetime costs associated with our proposed acquisition of TEGNA and the impact of a reduction in the bonus reserve in the fourth quarter of '24 that was larger than the fourth quarter of '25. Q4 2025, amortization of broadcast rights included in our definition of adjusted EBITDA was $75 million, a reduction of $23 million from $98 million in the fourth quarter of '24, primarily due to timing of programming at The CW. Q4 2025 income from equity method investments, which primarily reflects our 31% ownership in TV Food Network reduced by amortization of basis difference, declined by $12 million in the quarter or 67%, primarily related to TV Food Network lower revenue. We also wrote down our investment in TV Food Network consistent with other companies in the entertainment cable network space. Putting it all together, on a consolidated basis, fourth quarter adjusted EBITDA was $433 million, representing a 33.6% margin and a decrease of…

[Operator Instructions] And we'll go on to our first question. We'll hear from Dan Kurnos with Benchmark StoneX.

Great. Appreciate all the color as usual. Perry, as you might imagine, given the presidential tweet recently, I think investor anxiety around when we might get an FCC cap elimination has increased a little bit. So any color you can give us around wording, timing and how that process might play out would be helpful. And then separately on the expense side, all of you really super helpful like kind of walk through the pieces. I guess, since you guys called out digital optimization and expense rationalization as your 2 priorities. Given all of the AI tools that are out there, what we're hearing from peers, what we're hearing from kind of the broader tech landscape, I mean how much of that is sort of embedded in the guide you've given this year? How much is applicable on, say, like content cost reduction for things like CW or NewsNation? Just any way you can help us frame up kind of the opportunity set you see there to continue sort of this expense reduction momentum would be helpful.

Dan, I'll take the first part. I would hope to not characterize investor anxiety around the elimination of the cap and approval of our deal. I would hope that, that anxiety would turn into enthusiasm. We certainly appreciate the support of the President vis-a-vis his tweet and follow-on comments by the Chairman of the FCC and his support for the deal. And as to timing, that's really the purview of the regulatory agencies. We are working very diligently to complete all of the information requests. As things go, the FCC shot clock would technically expire on June 1 of this year. So we remain consistent in our belief that the transaction will close before the end of second quarter. We are hopeful that we can close sooner than that, but we'll obviously continue to engage with the regulatory agencies to try and get to the to the desired result, not only on the national ownership cap, but the approval of our transaction.

On your questions about digital and expense, maybe I'll take digital first. I think that Nexstar has got a tremendous local sales force. We have over 1,500 sales folks across the country. Relationships with over 50,000 advertisers. Our advertisers really value our television products, but they also value our apps and our websites and they are also increasingly looking for audience extension opportunities. And because we have those great local relationships, we're able to sell more and sell a broader audience, not just including our local television audience, but if somebody wants more entertainment or they want more different demographics, we can sell that and add that on to the portfolio. So we've had good success with that, especially on our local side, and that really has been driving the growth. And as Perry mentioned, this will be a good year for us because we do expect our digital revenue to eclipse our national television advertising revenue, which digital has a different trajectory, which should actually really help our longer-term growth with respect to net revenue. On the expense side, we are continuing to just look at the business in ways to optimize the operations. And are there ways that we could do things in a different way that's more centralized or to use new technologies to help create efficiencies in our local operations and even more centrally. And so we are just continuing to reimagine that. And that's one of the benefits we have because of the scale of our business. We just have a good opportunity to be able to do some of those things. And you saw it in our 2025 results, and you'll see it again in our 2026 results.

Our next question, we'll hear it from Benjamin Soff with Deutsche Bank.

Another one on the regulatory side. Now that you're a bit deeper into that process, have there been any surprises so far in your conversations with regulators? And in particular, do you have a sense for how the DOJ might plan to view in-market consolidation? And what could that mean in terms of requiring any divestitures or not? And then I'm curious what you're seeing as far as the macro environment so far in 2026 as it relates to advertising.

Sure. As it relates to the regulatory process, I mean, we continue to engage vigorously with the DOJ, and I think it provided some excellent material to them regarding the definition of market or redefinition of video, which is where we really compete. Obviously, they have yet to render a decision. So we will obviously defer to their judgment. But I think that the information that we provided has been strong and we're laser-focused on that. So we feel very good about where we are, the dialogue we've had, the progress we've made, the endorsements that we've received. But as to transaction particulars, we're just not there yet in terms of those expectations. But as we've reported historically, we expect that if there are any divestitures, they would be de minimis to the overall value of the deal.

Yes. And then just on the overall macro environment, I think we're feeling decent about it. I think one of the things that we'd like to track is within our overall advertising categories is what percentage of the categories are increasing versus decreasing in terms of the revenue growth. And we're seeing in the first quarter versus the fourth quarter, a greater percentage that are increasing than we saw in the fourth quarter. So I think we're -- we had some guidance here of flattish in terms of our nonpolitical advertising in the first quarter. So we're feeling decent about the macro outlook.

And next, we'll move to Aaron Watts with Deutsche Bank.

Just 2 questions. Lee Ann, maybe one for you to start. Just based on your performance to close out '25 and your view into '26, any change in your outlook for pro forma leverage once you close the TEGNA deal?

Not really, no.

Okay. Great. And then secondly for me on the advertising side, Perry, this question is a bit of an offshoot of one I asked you at the time you announced the TEGNA deal. The programmatic buying marketplace continues to grow and gain influence, how do you see that impacting your ad sales overall over the near-term horizon? And how are you currently participating or planning to participate in that marketplace with your ad inventory?

Sure. Well, in terms of programmatic digital advertising, part of the acquisition of TEGNA will include the acquisition of Premion, which is their platform for programmatic digital advertising. We think there's some real opportunity there to overlay that technology and that sales force with our inventory, which currently is not on the Premion platform. So that is an upside in operating the business. I wouldn't necessarily characterize it as a synergy, but obviously, we think that will prove as time goes on. As to programmatic on linear, I mean, we already are in that business to a certain extent with companies like ITN and Cadent who basically are doing a very manual version of programmatic in linear. We are working internally and with external partners to develop a programmatic linear solution that we're in the early, early stages of trying to develop with other partners. We need to reduce the frictional cost of buying linear inventory. And I think technology is a way to do that. And I think that we'd like to get to the point where we have a single seamless system from pitch to pay regardless of where the impressions are located that you're attempting to access. And so that's my vision and where I would like us to get to. Obviously, When people ask me what we're going to do on day 2 of the TEGNA acquisition closing, it's to work on that project. And work has started already, and we've got pretty good task force together and I'm doing another update here in a couple of weeks. So we intend to try -- and obviously, as one of the largest purveyors of advertising in the world, I think that we were ranked by one analyst as the 18th largest purveyor advertising in the world. We have a lot to gain by getting that right and removing the frictional costs of buying linear television, trying to make it more akin to the buy-sell process of digital inventory. And at the end of the day, it's really should be one set of inventory, one process, seamless, as I said, from pitch to pay, and that's the gold standard that we're going to try and work to achieve.

And next, we'll move to Patrick Sholl with Barrington Research.

I guess maybe just a quick follow-up on advertising. Could you provide just a little bit more detail on some of the categories that were increasing or decreasing? And as we start to lap the initial tariff headwinds, if you're kind of seeing any greater enthusiasm from the Supreme Court ruling?

So with respect to just the categories, auto was our biggest decliner but not by like any sort of outstanding amount. But we did see the rate of decline being offset within that category by good growth on the digital side. And we're actually seeing a pretty nice improvement in that auto trend into the first quarter. So we're feeling good about that. With respect to the other top categories, we had gaming and sports betting that was a great category in the fourth quarter. That was mostly due to the Missouri legalization. And then anything kind of other than that, even on the downside, nothing really was distinguished. I think I mentioned earlier that we did see more categories increasing than decreasing overall, and we're seeing that trend continue into the first quarter and be even a little bit better in the first quarter. So things are looking okay, I would say. And but there's nothing really like to read into the various categories, no outliers that are driving the transaction or driving the outcome one way or the other. With respect to the tariffs, I don't know that we've seen anything in particular there. I would remind you, I think one of the points that we always like to make is it's about 60% of our advertising revenue comes from services categories versus good service -- goods categories. So we do have a little bit of a natural hedge there because we are much more service-focused than goods-focused. But I wouldn't say that there's been anything that people have been talking about with respect to tariffs as of yet, but we'll keep you posted.

And next, we'll go on to Craig Huber with Huber Research Partners.

I've got a broad question here. The uses of AI in your operations, can you just give us some examples of things that are moving the needle that you're excited about that AI is helping you, whether it be on the cost savings front or enhancing your product to speed up things, et cetera? Just some examples there would be helpful first.

Sure, Craig, I'll take that. We've actually deployed some AI tools across the organization inside our local newsrooms really to help us just on the workflow front, make the process a little bit more efficient. It allows us to take a story and optimize it for multi-platform, for instance, it allows us to efficiently find sources of information and leads across multiple places all at one time. So I think looking forward, we're in the middle of deploying some AI for our sales team that we expect will help with prospecting, sales development and also with workflow and operations in that front as well. So we -- early days yet, but we're optimistic about some of the potential that's out there as that technology starts to flow down into our industry.

And then my -- sorry, do you want to go ahead? Go ahead.

No, no, go ahead. Sorry, Craig.

Sorry, I wanted to also ask, just maybe an update on alternative uses of spectrum. I don't think we've heard about that lately. Maybe just sort of update us on what's happened in the last year and what maybe the plans are this coming year. I know it's a long way out to be meaningful for your company and your peers, but just sort of update on alternative uses of the spectrum, please.

Sure. I think to underscore what you said it is a long way out before it's meaningful for us or our peers. So in the last year, as you know, we formed a joint venture with 3 of our fellow broadcasters EdgeBeam Wireless. That organization is really just at the early stages of formulating its management team and its go-to-market strategy. I think you'll see them in the coming year be in the market with products. They're out there right now talking with customers. I think, again, early days, but we're starting to see some early orders flow. Some of that is proof of concept. Some of it is actual revenue. But we're optimistic that, that business will take off and really demonstrate to the market the unique the unique broadcast or benefits of a broadcast spectrum for high-speed data transmission.

And Steven Cahall with Wells Fargo will have our next question.

And I joined a little late, so I apologize if I ask anything that causes you to repeat yourself. On the regulatory process around TEGNA, the press has had a lot of information about the direction of the FCC. I think that one seems increasingly clear at least of the conclusion we're going to get. The DOJ is a little more of a black box, and I think the initial commentary is you expect minimal divestitures. I was just wondering if you could give us the latest and greatest on what your perception is as to how the DOJ is now looking at markets and what sort of a precedent this transaction could be kind of the future of how the DOJ looks at broadcast ownership within markets. And then also just a question on synergies. TEGNA has some good digital advertising businesses. I'm guessing that scale helps in political cycles. I don't think any of those benefits are in your synergy guidance. Do you have any experience with these from deals like Tribune or even CW that you could share in terms of where there could be some opportunities for kind of 1 plus 1 equals more than 2 in some of those revenues over time?

Craig -- I'm sorry, Steven, on the regulatory front, as I said earlier, we have provided reams of information to DOJ and studies from economists that we've hired that talk about the definition of the marketplace and the need for a redefinition of video, which is where we compete. And obviously, we provided that information, but we, at this point, have not had any definitive feedback as to how they're interpreting that information. As to the topic of divestitures, we have had no conversations about divestitures at all at this point in the process. Not to say that it won't come up later in the process. But again, we continue to maintain that if there were divestitures, it would be a minimal percentage and not meaningful to the deal. And so I think the agencies -- the DOJ is meant to be a black box, disclosures there are not required to be public. But I have read the information that we provided and the economic studies that I think are highly, highly credible and very, very convincing. But it is obviously up to the folks at the DOJ, and there's been some change in personnel there. And so other folks are getting up to speed, but it's up to the DOJ and to the FCC to render their opinion and ultimately to come to a decision. But we feel very good about the work that's been done, the information that's been provided, the endorsements we've had and the stage at which we are in the process. So we're very confident that we will get to a finish line in the time frame that we outlined.

And then on the synergies, I would just say, Steve, on the digital side, as Perry mentioned earlier, TEGNA has this business, Premion, which is really focused on the CTV end market, which we know is growing very nicely. And so we're excited about the opportunity to bring our stations to bear in that market in a little bit of a bigger way. So we're feeling positive about that. But you're correct. We have not put any revenue synergies other than the retrans synergies that we've talked about previously into our synergy number. And then with respect to political, I think we -- it all -- as you know, that all comes down to what market is it, where there's a contested election and where do the dollars need to go. And so to the -- one of the things that we thought was going to be beneficial about this transaction is it does give us more exposure to some of those political markets. We have a presence in Georgia, but we didn't have a presence in Atlanta. They've got some great stations in Maine that is a contested election market. They've got a station in Toledo, Ohio, which could also be a good political market for us. So -- and Phoenix, Arizona is the other one where they have a larger market or a larger station than we do there. So all of those things, we think, should accrue to the political picture going forward, and we're optimistic on getting this deal closed in advance of the cycle this year.

And next, we'll hear from Jason Bazinet with Citi.

Okay. At risk of sharing my own ignorance, I'm going to ask this question. I think you said on the call that you think that digital ads will exceed your national ad revenues. And I think the last time you disclosed digital ad revenues is around $400 million. And I sort of think of your national ad revenues as being at The CW network and would have said it's already bigger than your national ads. So what am I missing?

Yes. So I think all you're really missing there is that CW is national advertising, but it's really like a subsegment of that, right, network national advertising. We also have significant national advertising at our stations, which are national buyers that then look to place their ads in local markets. So those are -- that's the other piece that we refer to as national.

That will conclude the question-and-answer session. I would now like to turn the floor back to Perry Sook for closing remarks.

Thank you, operator. I appreciate everyone joining us today, and we're very pleased at the results that we were able to post for 2025, strong financial results solidly in line with our expectations that we set last year at this time. Despite the changing media landscape, our performance demonstrates that we have both durability and stability in our broadcast model and the operational execution expertise of this management team. We look forward to closing our pending acquisition of TEGNA and bringing that operational expertise to bear on our synergy plan and reinforcing our position as the largest local broadcast company in the United States. Thank you for your continued support over the last 22 years of quarterly earnings calls, and we look forward to updating you on our next earnings call in about 90 days' time. Thank you. Have a great day.

Thank you. This does conclude today's teleconference. You may now disconnect your lines.