NEXSTAR MEDIA GROUP, INC. Q1 FY2025 earnings call

• Deregulation is a key strategic priority; FCC Chair Brendan Carr is supportive, and action is expected once the fifth commissioner is confirmed.
• First quarter financials were strong with net revenue, adjusted EBITDA, and free cash flow benefiting from record distribution revenue and disciplined expense management.
• The CW is executing to drive profitability with a refreshed program lineup, strong primetime ratings, and increased sports programming.
• News Nation celebrated its four-year anniversary, grew its audience, and had notable special coverage.
• M&A strategy focuses on accretive acquisitions, evaluating retransmission, operational efficiencies, and scale, considering current cost of capital.

Nexstar's first quarter net revenues totaled $1,230,000,000, a 3.9% decline from the prior year. Distribution revenue was $762,000,000, a 0.1% increase, making up 63% of total revenue. This growth was driven by annual rate escalators, vMVPD subscribers, and CW affiliations offsetting MVPD attrition. Advertising revenue was $460,000,000, a 10.2% decline, primarily due to lower political advertising and nonpolitical softness, though categories like attorneys, home repair, and travel showed growth. The CW had strong primetime performance with its refreshed programming, and News Nation continued to grow its audience month over month in Q1 2025.

• Q2 CapEx is projected to be $30,000,000 to $35,000,000.
• Q2 interest expense is expected to be in the $95,000,000 range.
• Q2 cash taxes are expected to be in the $15,000,000 to $105,000,000 range.
• Food Network cash distributions in Q2 are expected in the high single to low double-digit range.
• Leverage is expected to increase in 2025 due to lower political advertising in non-election years.

• Regulatory uncertainties, including potential court challenges to FCC actions.
• Advertising market softness, particularly in categories like insurance and automotive.
• Subscriber attrition in the MVPD industry, though some improvement noted in partner subscriber trends.

Q: Good morning. Also, nice job on expenses, Lee Ann. Perry, let me just ask one broad regulatory question. Let's say trustee hypothetically gets confirmed, I don't know, end of this month. You said summer. What would that mean for the timeline of when you think things start moving? And given all of the commentary we've now had, from Carr, we've got the Simonton op-ed now. Do we think an NPRM 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?

A: Sure, Dan. I don't pretend to speak or know exactly what's on the mind of chairman Carr. But I would think that an NPRM would be the most likely way to kick off a revisitation of the rules, both local and national, as they relate to ownership. So I would expect that could be one of the very first moves that the chairman could make. And I would anticipate there was a letter, as you know, delivered from house members to the FCC a couple of weeks ago. There's a senate letter being delivered today with 22 senators signing on urging the FCC to revisit and relax and eliminate ownership regulations as they relate to television. And there were also notably four public interest groups that historically have been on the other side of this discussion that endorse the need for ownership regulations. So the momentum in Washington continues. We had a board meeting there last week. Everything we heard from the administration and officials were that the path of deregulation I think, would proceed apace 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. You know, former chairman Ajit Pai felt that the FCC had the authority to modify or eliminate the national cap as well as the in-market ownership rules. We happen 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 whatever those rule changes were out of reach of judicial review, which would be nice as well. But I also think that the chairman has indicated his willingness to consider waivers during either dependency of rulemaking or waivers just in general. So I think you'll see all of those levers be pushed as time goes on this year. And I do think you'll see M&A activity come into focus as the year goes on.

Q: Great. 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'm curious if and when you think that will start to show up in results for Nexstar if it hasn't already. And what does that mean for your upcoming slate of renewals later this year? And then appreciate all the color on advertising. I was hoping you could spend a little bit of 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?

A: I'll take the first question on subs. I don't think we've seen a material change yet. I think the commentary around it has been optimistic, certainly coming from some of the MVPDs who've reported. And like others in the industry, we think that a rationalization of some of the MVPDs products out there can only provide tailwinds to those trends. Right? The rationalization, what I mean by that is the coming together of DTC with linear in ways that are more attractive to subscribers and make sense for really everyone involved. So in terms of impact on our results yet, we have not seen any. And as I said in the 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, we'll approach our business the way we always do. Continue to believe that the value that we deliver to distributors and, therefore, to their customers continues to be underweight relative to our share of wallet, if you will. And then, Ben, I guess, on the advertising side, you know, I think we're seeing what we said in the prepared remarks is our Q2 forecast at the current moment is very similar to what you saw in the first quarter in terms of the decline in nontraditional advertising or nonpolitical advertising rather. You know, with respect to the full year, you know, we do expect a pickup in the back half of the year given the elimination of crowd out.