NEXSTAR MEDIA GROUP, INC. Q3 FY2024 earnings call

Recent Highlights

• Nexstar achieved the highest third quarter total net revenue in company history, including record distribution and advertising revenue, including record political advertising revenue. It was the third consecutive reporting period of record total net revenue and fourth consecutive reporting period of record distribution revenue.
• Yielded $1.4 billion of adjusted EBITDA and $792 million of adjusted free cash flow year-to-date, with 74% of adjusted free cash flow returned to shareholders.### Operations Review
• The CW has transformed its profile with increased sports-related programming, reducing operating losses by $36 million year-over-year in the third quarter and $119 million year-to-date. Five additional Nexstar stations became CW Network affiliates and an independent station in Cleveland will become the market's CW affiliate in 2025.### Financial Review
• Second quarter direct operating and SG&A expenses (excluding depreciation, amortization and corporate expenses) increased by $22 million or 3% mainly due to increased programming costs and expansion of news programming. Depreciation and amortization in Q3 2024 was $190 million, down $30 million from the prior year quarter.

Nexstar achieved record third quarter net revenue of $1.37 billion, up 20.7% from the prior year quarter. Distribution revenue reached an all-time high of $719 million in the third quarter, growing 20.2% year-over-year, driven by favorable distribution contract renewals, growth in vMVPD subscribers, addition of CW affiliations, etc. Advertising revenue increased 22.2% year-over-year, with political advertising being a key driver while non-political advertising declined. Adjusted EBITDA for the third quarter was $510 million, representing a 37.3% margin, a significant increase from $279 million in the third quarter of 2023.

Forward-looking Guidance

• Fourth quarter non-political advertising is pacing down on a year-over-year basis at a low double-digit percentage rate due to significant fourth quarter political advertising and challenging advertising market.### CW Outlook
• More than two-thirds of The CW's affiliations are up for renewal in 2025, positioning well for 2026.

Risks

• Regulatory risk: Antiquated ownership caps for broadcasters do not reflect current competitive media environment, need for deregulation.
• Advertising market risk: Ongoing advertising market softness and political displacement impacted non-political advertising.
• Subscription attrition risk: Although expecting subscription attrition rate to normalize, still a concern.

Q: Dan Kurnos asked about the likelihood of regulatory changes, impact on capital allocation, NewsNation's benefit from brand safety concerns and CW's profit path.

A: Perry Sook said they will push for ownership reform at both legislative and administrative levels; NewsNation is working to dispel negative views and has audience and revenue growth; Lee Ann Gliha said CW's losses have decreased year-to-date and will continue to improve in 2025 with many affiliate renewals in 2025.

Q: Benjamin Soff inquired about the ecosystem during the 2025 renewal cycle and core advertising categories and local vs national.

A: Mike Biard said they will sell linear products as usual with content continuing to resonate; Lee Ann Gliha said about 54% of categories were down in the quarter, improvement over Q2, largest declining category was Auto, local digital revenue grew double-digits.

Q: Steven Cahall asked about full-year political number context and CW's net retrans and profit time.

A: Lee Ann Gliha said it was in line with low single-digit market share guidance; CW's profit is limited by internal distribution agreements and will provide 2025 guidance in year-end results.

Q: Jason Bazinet asked about whether regulatory related is through legislation or administrative approach.

A: Perry Sook said it's a mix of both, will push for ownership reform at agencies and parliament.

Q: Craig Huber asked about progress of spectrum alternative uses, drivers of CW loss reduction and Q4 advertising revenue trend.

A: Perry Sook said work is ongoing; CW loss reduction is due to cost savings and new revenue opportunities; Lee Ann Gliha said Q4 is better than previous months but details of pacing are not disclosed much.

Q: Jim Goss asked about growth from cost efficiency or revenue growth, local affiliate on app situation and possibility of relaxing ownership limit.

A: Perry Sook said there are multiple factors, will pursue efficiency and new revenue opportunities; Mike Biard said expanding app products with local programming, cooperation with big networks has challenges; Perry Sook said there is opportunity to relax ownership limit but needs FCC waiver.

Q: Barton Crockett asked about prospect of ownership cap elimination and impact on M&A, interest in cable network M&A.

A: Perry Sook said ownership cap elimination is a bipartisan issue and will push for reform; has little interest in expanding cable network portfolio, more focused on broadcast portfolio.