Nexstar Media Group, Inc. Q2 FY2025 earnings call

• Nexstar delivered solid financial results with net revenue, adjusted EBITDA, and adjusted free cash flow benefiting from better advertising revenue, stable distribution revenue, and strong expense management.
• Core advertising business is resilient; pay TV landscape evolves, with early signs of video subscriber trend improvement from large MVPDs.
• For first half of 2025, adjusted EBITDA was $770 million and adjusted free cash flow nearly $450 million. Returned $238 million to shareholders via repurchases and dividends.
• Refinanced credit facilities, strengthening capital structure. Regulatory reform developments, including FCC moving to refresh national ownership cap record and Eighth Circuit vacating Top-Four rule.
• Commitment to journalism: Local news teams earned 52 Regional Edward R. Murrow Awards, local TV news is #1 most trusted news source. NewsNation is #1 basic cable network for year-over-year growth; CW has 5 consecutive quarters of audience growth, sports now 40% of programming hours.
• CW saw profitability improve by $21 million year-over-year, renewals of Pac-12, PBA, and PBR partnerships, and moved 3 additional CW affiliations to owned stations.

Nexstar delivered second quarter net revenue of $1.23 billion, a decline of 3.2% compared to the prior year. Distribution revenue was $733 million, essentially flat year-over-year. Advertising revenue was $475 million, down 9% year-over-year. For the first half of 2025, Nexstar generated adjusted EBITDA of $770 million and adjusted free cash flow of nearly $450 million. Second quarter adjusted EBITDA was $389 million, and adjusted free cash flow was $101 million. Core advertising business remains resilient, while pay TV subscriber trends show early signs of improvement.

• Projected Q3 CapEx $25-30 million, interest expense ~$93 million, cash taxes $35-40 million, cash distributions from Food Network low to mid-single digits, programming payments excess of amortization by ~$25 million.
• Renew upcoming distribution agreements, continue CW's path to profitability next year, prepare for midterm election activity in 2026.
• Outlook for nonpolitical advertising in Q3 forecasted to be down low single digits year-over-year, with stable advertising outlook despite some economic headlines.

• Regulatory uncertainties, including potential challenges to transactions and the pace of regulatory reform outcomes.
• Ad market fluctuations, including impacts from tariff uncertainties and shifts in advertising spending across categories.
• Continued subscriber attrition in the pay TV landscape, though early signs of marginal improvement are noted.

Q: Dan Kurnos with Benchmark Company asked about Chairman Carr's letters to networks and M&A perspective.

A: Perry Sook said acquisition opportunity, balance sheet allows for potential acquisitions, and Chairman Carr's actions relate to balancing network relationships.

Q: Jason Bazinet with Citi asked about increasing O&Os in CW and transaction challenges.

A: Perry Sook said O&Os in CW are a byproduct of M&A, and transactions go through regulatory processes with waiver options and FCC proceedings.

Q: Steven Cahall with Wells Fargo asked about CW sports opportunities and ad market.

A: Perry Sook and Michael Biard said CW sports is growing with positive ad response, and national networks are performing better than expectations.

Q: Benjamin Soff with Deutsche Bank asked about virtual MVPDs and sports-centric streaming services.

A: Lee Ann Gliha and Michael Biard discussed economics of vMVPDs vs MVPDs and optimism on sports streaming services being neutral to pay TV.

Q: Craig Huber with Huber Research Partners asked about economic environment and CW losses.

A: Perry Sook said ad environment is performing as expected, and Lee Ann Gliha said CW losses improved and are on track to be down 25% for the year.

Q: Alan Gould with Loop Capital Markets asked about digital advertising and refresh proceeding.

A: Lee Ann Gliha said digital is growing, and Perry Sook discussed the refresh proceeding and regulatory efforts to eliminate unnecessary regulation.

Q: Patrick Sholl with Barrington Research asked about ad rates and market dynamics.

A: Michael Biard and Lee Ann Gliha talked about ad rates for CW sports and stable category performance in ad market.

Q: Khadir Richie with Richie Capital Group asked about M&A and leadership transition.

A: Perry Sook said he has no plans to retire and M&A activity is driven by shareholder value creation.