Nexstar Media Group, Inc. Q3 FY2025 earnings call

Acquisition of TEGNA

• Announced definitive agreement to acquire TEGNA in a cash transaction valued at $6.2 billion. The proposed acquisition will strengthen Nexstar's position as the nation's leading local media company, adding 64 top-performing stations primarily in the top 75 DMAs. On a combined pro forma basis, Nexstar and TEGNA generated over $8 billion in revenue and $2.56 billion of adjusted EBITDA. The transaction is projected to be more than 40% accretive to Nexstar's stand-alone adjusted free cash flow.

Financial Results

• Third quarter net revenue was $1.2 billion, down 12.3% compared to prior year, primarily due to reduction in political advertising. Distribution revenue was $709 million, flat with prior year quarter. Advertising revenue was $476 million, down 23.5% compared to prior year quarter, with nonpolitical advertising essentially flat.

CW Performance

• CW Sports delivered record performance, driven by strong viewership of NASCAR Xfinity Series and college football season. CW had sixth consecutive quarter of primetime ratings growth and year-to-date surpassed competitive Big 4 primetime telecast 250x across total viewers among the 18 to 49 and 25 to 54 demos.

NewsNation Performance

• NewsNation ranked as the #1 basic cable network for year-over-year growth in the third quarter, continuing its trend from Q2, surpassing MSNBC and CNN in head-to-head telecasts year-to-date.

In the third quarter, Nexstar delivered net revenue of $1.2 billion, a 12.3% decline compared to the prior year. Distribution revenue was $709 million, down 1.4% compared to the prior year quarter, primarily reflecting MVPD subscriber attrition and the resolution of a nonrecurring disputed customer claim, offset in part by increased rates and other contractual commitments. Advertising revenue was $476 million, a decrease of $146 million or 23.5% over the comparable prior year quarter, primarily due to a $145 million year-over-year decrease in political advertising. However, nonpolitical advertising was essentially flat. The CW's Sports delivered record performance with the best quarter since Q1 2023, reducing losses by $5 million or 24% year-over-year. NewsNation ranked as the #1 basic cable network for year-over-year growth in the third quarter, surpassing MSNBC 57x and CNN 39x year-to-date in head-to-head telecasts across total viewers and the adult 25 to 54 demo.

Adjusted Free Cash Flow

• Projecting CapEx in the $32 million range and capitalized software payments in the $6 million range in Q4. Expecting Q4 interest expense in the $88 million range, cash taxes in the $45 million range. Cash distributions from the Food Network expected in the low single-digit million-dollar range in Q4. Payments for programming expected to be in excess of amortization by about $30 million in Q4.

Capital Allocation

• Returned $56 million to shareholders in dividends, repaid $25 million in mandatory debt repayments, and did not repurchase any shares as conserving cash for acquisition of TEGNA.

Regulatory Risks

• Submitted HSR filing on September 30 and received second request letter from DOJ on October 30 as well as inquiries from state AG offices. FCC applications ready to go once federal government reopens, but acquisition transaction has uncertainties related to regulatory approvals.

Q: Dan Kurnos asked about the deal timing and granularity of distribution revenue.

A: Perry Sook said the pieces are falling in place with Eighth Circuit mandate eliminating top 4 ownership rule, and Michael Biard said the distribution item was a nonrecurring anomaly not lingering into Q4.

Q: Benjamin Soff inquired about the industry's future and political cycle outlook.

A: Perry Sook said Nexstar will be a poster company for the industry's future, and projected substantial political revenue in 2026 with broadcast likely dominant for political advertising but CTV advertising growing fastest.

Q: Steven Cahall asked about priorities post TEGNA acquisition and CTV market.

A: Perry Sook said focus on getting TEGNA deal done, looking for accretive acquisitions, ATSC 3.0 spectrum monetization, and improving business processes; on CTV, over-the-air TV is core and CTV will be an additional competitive factor.

Q: Craig Huber asked about TEGNA acquisition synergies and news programming.

A: Perry Sook and Lee Gliha talked about $300 million synergies, including net retrans and operations efficiencies, and opportunities to enhance news programming in TEGNA markets.

Q: Aaron Watts asked about 2026 political advertising and NFL media rights.

A: Perry Sook said 2026 political revenue will be prodigious, Michael Biard said on balance optimistic about NFL media rights negotiations as broadcast is gaining strength