Nexstar Media Group, Inc. Price & Performance (NXST)

Let me read the Safe Harbor language and then we'll get right into the call. All statements and comments made by management during today's call other than statements 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 Nexstar report on Form 10 ks for the year ended 12/31/2023, 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 forward looking statements whether as a result of new information, future events or otherwise. With that, it's now my pleasure to turn the conference over to your host, Nexstar Founder Nexstar, Chairman and Chief Executive Officer, Perry Sook.

Perry, please go ahead. Our Chief Financial Officer.

I'll start with a summary of recent highlights followed by Mike's operations review and then Leanne's financial review. Our fourth quarter financial results marked a strong finish another successful year for Nexstar Nexstar which we delivered 5.4 the highest in our company's twenty eight year history.

Our record fourth quarter and full year top line performance were driven by strong election year political advertising highlighting the effectiveness of local television broadcast congested contested election markets across the country. In addition, we continue to grow distribution carrying the most watched programming. For the full year, Nexstar generated $2,000,000,000 of adjusted returned $820,000,000 or 68% of adjusted free cash flow to shareholders through share repurchases and dividends reducing our shares outstanding by nearly 9% during the year and by one third over the last five years. Another $327,000,000 was allocated toward debt reduction resulting in record low net leverage of 2.91 times at year end a historic low for the company which positions our balance sheet well should there be any regulatory relief on the ownership In January, we announced the twelfth consecutive annual increase in the quarter cash dividend underscoring the durability of our cash flows and reflecting a near 5% yield placing Nexstar in the ninety fourth percentile of all S and P 400 companies. The continued strength and consistency of our financial results and our shareholder returns in the face of what remains a dynamic marketplace environment highlights the value of our business model and the advantages of our unique competitive position as America's largest local television broadcaster.

Broadcast television is the foundation for every multichannel pay TV service and every political campaign. And over the past year, the landscape has evolved just as we had anticipated.

To start, the industry has made solid strides in adopting more financial sustainable models, including the re bundling of products into Pay TV packages and the introduction of new value price skinny bundles, including the broadcast stations. At the same time, other major media companies have doubled down on broadcast recognizing its unmatched viewership and audience reach while making the smart decision to scale back underperforming cable networks.

Estimates from leading data aggregators like S and P Global and Wall Street analysts indicate that subscriber trends are poised for improvement. We've already seen early signs of that with Charter's commentary regarding their new video packaging. Above all, broadcast continues to be the gold standard for sports and news programming. While much was made of the two Christmas games that aired on Netflix, the ratings were 17% lower than the NFL matchups that aired on CBS and Fox the prior year despite having the star power Beyonce at halftime. And over at the NBA, the five game Christmas lineup on ABC and ESPN saw an 84% increase in ratings from 2023, aided by all five games being available on ABC versus only two the prior year. Closer to home, we saw the phenomenal launch of the twenty twenty five NASCAR Xfinity Series racing on the CW Broadcast Network in Daytona on February 15. Where we achieved a total audience of 1,800,000 viewers a 93% improvement from last year when the race aired on FS1. And we repeated the success our second week in Atlanta generating an audience of over 1,300,000 viewers the best performance for the Atlanta race in over eight years.

That's the power of broadcast. And with traditional media companies owning 90 plus percent of the major sports rights, it's clear that broadcast remains the best way to reach and engage the largest audiences. While sports has dominated much of the conversation about the benefits [indiscernible] we were all recently reminded about the importance of local news. As communities across Florida and North Carolina faced devastating hurricanes last September and residents in the Greater Los Angeles area battled this stations provided vital information updates and support to those in need. In each case, our stations, such as KTLA in Los Angeles, WFLA in Tampa, St. Petersburg, Florida WSPA in Spartanburg, Asheville, were there every step of the way demonstrating the power of local journalism to inform connect and offer aid during some of the most challenging moments experienced by our viewers. The impact of these events on local communities made national news and we are proud of of these events to audiences all across America. Before reviewing some of the key achievements across our businesses and fiscal fiscal twenty twenty four, I would like to briefly address the potential for deregulation. The excitement around M and A opportunities is palpable and we're actively working with lawmakers through the NAB and our in house government relations team to create more equitable broadcast ownership rules.

This will help level the playing field and allow broadcasters to continue to serve their local communities with local journalism and also to compete effectively with big tech and big media. We have a proven playbook for executing accretive value driven M and A one we did on a smaller scale in January when we closed on the active This acquisition created a new duopoly with our existing FOX affiliate and the nineteenth largest television market and WBNX will become the CW affiliate for Cleveland in September of this year generating further synergies for Nexstar Nexstar.

As M and A has been the key driving factor of our stock over the last fifteen years and as it becomes more of a possibility with the current FCC, and the potential for deregulation, we look forward to further prepare our balance sheet for these kinds of opportunities and Liane will provide more color on that later in the call. 2024, NewsNation firmly established itself as a formidable player in the cable news landscape with top tier talent and reliable unbiased reporting. Today NewsNation is a 20 fourseven news network fully distributed across all platforms with the final RNC presidential debate last year and becoming the first news network to [indiscernible] This underscores not only the depth and expertise of our data analysts but it also evidences the trust that our peers and our viewers place in our reporting. Our joint editorial relationship with The Hill has further strengthened our content off providing insightful perspectives on key issues in terms of performance, since December of twenty twenty four, NewsNation has out delivered MSD MSNBC 17 times and CNN twice in the 02/1954 demo proving that our approach is resonating with viewers who are looking for a fresh and balanced take on the news.

The CW's transformation into a top tier broadcast network continued into 2024, driven by our strategy focused on high quality entertainment unscripted live events and sports programming. WWE and NASCAR played key roles in reshaping the network's identity On October 5, we drew 4,700,000 viewers across NASCAR AC and Pac twelve football in one afternoon. NASCAR in particular helped attract 20 new advertisers to the CW so far. These accomplishments highlight the network's ability to drive both audience engagement and value advertising partnerships, supporting our goals for continued growth and profit by the CW network will be live sports. Turning to ATSC three point zero, in January 2025, we took a significant step toward harnessing the power and potential of ATSC three point zero with the announcement of the Edge Beam Wireless Consortium, a new joint venture consolidating our prior joint ventures into one entity among Nexstar, the EW Scripps Company, Gray Media and Sinclair. This collaboration will enable us to deliver wireless data via ATSC three point zero transmission to businesses across the nation. In total, Edge Beam Wireless represents spectrum covering over 97 of The Continental U. S. And over 7,000,000,000 megahertz POPs. In addition, we're happy to report that the new joint venture did sign its first paying Looking ahead, we are energized by the significant prospects before us and we remain laser focused on executing on our 2025 objective [indiscernible] which include renewing distribution contracts covering approximately 60% of our subscriber base, driving the CW further toward profitability and pursuing deregulation. '24 revenue and our consistently strong financial results and outlook especially in light of a dislocated broader media environment, you should be able to see how Nexstar's unique positioning is increasingly able to bend the curve in our favor.

We have amassed a scaled portfolio of broadcast assets unlike any other. Our position as a top three affiliate group for each of the big four broadcast networks makes us a key partner for the networks and for distributors. Owning the CW network allows us to control our own destiny, by boosting both our owned and operated CW affiliate stations as well as the network profitability. Additionally, investments in NewsNation and ATSC three point zero offer significant opportunities to deliver outsized growth and create outsized value going forward. Together, our assets generate consistently strong free cash flow, which we've used to create the clean balance sheet that we have today and to return capital to shareholders equal to 16% of our market cap in 2024. We invite you to watch and in fact join as we continue to bend the curve in our favor in 2025 and beyond. With all of that said, let me now turn the call over to Mike Beard. Thank you, Perry, and good morning, everyone. Nexstar delivered record fourth quarter net revenue of $1,500,000,000 up 14% compared to the prior year. Primarily reflecting growth in advertising revenue due to to strong election year political advertising as well as continued growth Record fourth quarter distribution revenue of $714,000,000 increased $10,000,000 or 1.4% over the comparable prior year.

Distribution revenue growth primarily reflects the benefit of distribution contract renewals in 2023, on terms favorable to the company annual rate escalators growth in VMVPD subscribers the addition of CW affiliations on certain of our stations and the return of partner stations on one MVPD in January. Which more than offset MVPD subscriber attrition.

In January, Nexstar and our partner stations reached agreement with NBC to renew our affiliations in 33 markets. And as previously announced, we completed our CBS affiliation renewal in mid twenty four.

We view our relationships with the networks as symbiotic The broadcast affiliate model provides significant advantages to the networks by reaching the largest audience for their programming, extending coverage to both [indiscernible] and over the air homes which they cannot do on their own. Major sports, including the NFL, are committed to serving the broadcast audience sorry, the broadest audience possible to drive fan engagement. So that means a commitment to broadcast television, which provides 14% additional reach over the Pay TV ecosystem alone reaching 100% of television households In addition, with networks only providing two to twelve hours of content daily, affiliates provide the other twelve to twenty two hours of programming through our highly rated local news and other local and syndicated programming which helps increase overall viewership by offering a more complete product for our viewers. In 2025, we expect both gross and net distribution revenue to be relatively flat with twenty twenty fours record levels a very modest number of subscribers renewed in 2024, we expect the annual rate escalators in our contracts to be offset by continued subscriber attrition. Although we remain optimistic that subscriber trends will improve as we move deeper into the year.

However, later this year, have approximately 60% of our subscriber base up for renewal we expect to benefit distribution revenue beginning in the first quarter of twenty twenty six.

Fourth quarter advertising revenue of $758,000,000 increased 173,000,000 or 29.6% over the comparable prior year quarter reflecting a $223,000,000 year over year increase in election year political advertising to $254,000,000 which more than offset a $51,000,000 year over year reduction in non political advertising revenue or approximately 9% due to market softness and political displacement, which we estimate accounted for roughly half that reduction. In the 2024 election year, broadcast television proved to be one of the few media to see growth. With the overall market expanding from $7,960,000,000 in 2020 to $9,330,000,000 Specifically, according to estimates from ADEMPACT, TV revenue rose from $4,460,000,000 to dollars Nexstar maintained a solid 13% market share of all television political generating $491,000,000 in political revenue an increase over the $479,000,000 we had previously reported through Election Day twenty twenty. Notably, the absence of the Georgia runoff election which had been a significant driver in 2020, resulted in a slight dip Nevertheless, Nexstar remains well positioned for continued growth, and we're confident in our ability to capture a larger share of political ad dollars in future elections. Looking ahead to the first quarter, non political advertising [indiscernible] on a year over year basis A sequential improvement over both Q4 twenty twenty four on an as reported basis and also when adjusting for the estimated impact of political displacement.

While we continue to be impacted by a challenging television advertising market, including weakness in insurance advertising due to the recent natural disasters, in Q4 and Q1, and continued weakness in automotive advertising we are seeing sequential improvement both in local and national advertising. On the local side, the rate of local advertising decline is improving in Q1 due to increased revenue related to the Super Bowl on Fox featuring the Kansas City Chiefs a market where we have the Fox affiliated station, and double digit year over year growth in digital revenue. On the national side, the rate of national advertising declined improved primarily due to ratings and associated revenue from our new slate of programming. For the year, non political advertising is expected to be slightly up as weakness in television advertising is expected to be offset by strong performance at The CW due to our new slate of programming, featuring WWE NXT and NASCAR Xfinity Racing, and local digital revenue growth As we aggressively focus on utilizing our over 1,600 local sellers and third party On the operating expense side, as part of our ongoing efforts to enhance efficiency and drive long [indiscernible] Nexstar implemented a strategic operational restructuring in Q4 that we mentioned on our November call.

That initiative included the elimination of a few hundred positions across various divisions, streamlining and improved integration of the CW and The Hill into the broader organization and reducing middle management within our ad sales division.

Additionally, we focused on streamlining work process at our local markets to improve overall productivity. This restructuring is expected to generate savings in the low to mid eight figures in total operating expense in 2025 and will enable Nexstar to focus on initiatives that more directly impact our viewers, partners and customers as we continue to prioritize initiatives that represent our best long term opportunities. Now turning to the CW. In 2024, we improved cash flow at the CW by $127,000,000 exceeding our goal of more than $100,000,000 of improvement which reduced our 2023 losses by approximately 50%. With a substantial majority of cost reductions for the network related to programming costs and overhead efficiencies now executed in 2025, we are seeing our new programming investments begin to pay dividends. And just to put a few finer points on the new programming. In 2025, CW will have about four hundred hours of sports sports related programming, which accounts for approximately 40% of the hours provided by the network. A dramatic change from the old CW that had no sports programming The 2025 schedule includes fifty two weeks of WWE NXT and thirty three weeks of NASCAR Xfinity Series races, both of which are proving to be strong ratings performers for us.

As Perry mentioned, in the first Xfinity Series race of the 2025 season, notably the first with our own production, we attracted 1,800,000 average viewers peaking at over 2,200,000. For the highest viewership of the Daytona race, since 2020. To provide some context for those of you who may be more familiar with Formula One, our Daytona NASCAR Xfinity race garnered 24% more viewers than the average of the three U. S.-based F1 races in twenty twenty four and nearly 70% better than the full Formula One season average. And that Daytona momentum carried into the second race of the season last Saturday when over 1,300,000 average viewers peaking at over 1,500,000 tuned into the Xfinity race in Atlanta.

In the process, the CW delivered the best performance for the Atlanta race since 02/2017, Remarkably, our Saturday race aired amidst a busy sports calendar and it performed better than the college hoops PGA Golf, and NHL that aired across Fox, CBS, CW has raised the performance of WWE Nexstar with audience improvement of 12% to date versus its 2024 average, on USA, marking a 105% year over year improvement over what the CW was airing in that time slot previously. And regularly beating Big four network programming head to head In fact, six weeks into 2025, NXT on the CW is enjoying its most broadly viewed quarter In the last five years. In 2025, expect to cut losses at the CW by more than 25% from 2024 levels due primarily to growth in advertising, driven by improved ratings and growth in distribution. [indiscernible] [indiscernible] positively impacting the fourth quarter of twenty twenty five and 2026. Consistent with our prior guidance, we anticipate the impact of these resets in our advertising trajectory will enable The CW to achieve profitability during 2026. In addition, the company continues to benefit from moving CWL affiliations to our owned and operated stations During 2023 and 2024, we moved 17 affiliations to our stations, with more to come.

In summary, 2024 was a standout year for Nexstar Nexstar. We remain excited about the company's future. As Perry mentioned, we believe the market is shifting in ways that will benefit broadcast television and that there is meaningful upside potential ahead of us with potential deregulation and actionable growth catalysts in 2026, Given our distribution renewal cycle, the midterm elections and the Olympics. And consistent with our track record, we remain committed to delivering value to our shareholders in a thoughtful and disciplined manner. And we will continue to explore every opportunity to maximize that value over the long term. With that, it's my pleasure to turn the call over to Liane for the remainder of the financial [indiscernible] Thank you, Mike, and good morning, everyone. Mike gave you most of the details on the revenue side and on the CW, so I will provide a review of expenses, adjusted EBITDA and adjusted free cash flow along with a review of our capital allocation activities, our 2025 guidance and some perspectives on valuation. Together, fourth quarter direct operating and SG and A expenses were essentially flat, decreasing by $2,000,000 Increases in news and other program and other programming and content costs were offset primarily by reduced promotion costs in the quarter.

Q4 twenty twenty four total corporate expense was $48,000,000 including non cash compensation expense of $20,000,000 dollars including non cash compensation expense of $16,000,000 in the fourth quarter of twenty twenty three. The increase of $3,000,000 is primarily due to one time severance costs associated with our operational restructuring while the increase in non cash compensation expense is due to new restricted stock grants and the timing of grants offset in part by a release of reserves, among other factors.

Q4 twenty twenty four depreciation and amortization was $220,000,000 versus $210,000,000 in the prior year quarter. An increase of $10,000,000 Of these amounts included in our definition of adjusted EBITDA, is $98,000,000 related to the amortization of broadcast As newly acquired programming premiered offset by a slight reduction of amortization of broadcast rights elsewhere at Nexstar. Please note that while Q4 CW programming amortization was up year over year, we do not expect 2025 CW programming amortization to be higher than 2020 Q4 twenty twenty four income from equity method investments primarily reflect our 31% ownership in TV Food Network, declined by $5,000,000 in the quarter or 22% primarily related to TV Food Network's lower advertising revenue but better than what we had originally anticipated. Putting it all together, a consolidated basis, fourth quarter adjusted EBITDA was $628,000,000 representing a 42.2% margin an increase of $179,000,000 from the fourth quarter twenty twenty three of four forty million. Moving to the components of free cash flow and adjusted free cash flow. Fourth quarter CapEx was $35,000,000 essentially flat to the fourth quarter of last year. Fourth quarter net interest expense was $104,000,000 a reduction of $11,000,000 from fourth quarter of twenty twenty three.

On a cash basis, this compares to $101,000,000 in Q4 twenty twenty four versus $113,000,000 in Q4 twenty twenty three. The reduction in interest expense was primarily related to a reduction in SOFR and reduced debt balances. Fourth quarter operating cash taxes were $67,000,000 compared $26,000,000 in 2023, an increase of $41,000,000 primarily related to related to increased election year political advertising. Payments for capitalized software obligations and pension credits net of proceeds from disposal of assets insurance recoveries, $11,000,000 versus $14,000,000 last year. Cash contributions from our partners in the CW, zero in the quarter versus $15,000,000 in Q4 twenty twenty three. Than cash payments by $13,000,000 as certain programming payments were deferred. Putting this all together, consolidated fourth quarter twenty twenty four adjusted free cash flow was $411,000,000 as compared to $245,000,000 last year. Now turning to our guidance for 2025. We believe 2025 adjusted EBITDA will be in the range of $1,500,000,000 to $1,595,000,000 Mike already provided some of the key assumptions that are embedded in our guidance. Including one, our expectation for growth in net distribution revenue to be flattish in 2025 based on a slight improvement in subscriber attrition trends two, our expectation for non political advertising revenue growth to be slightly up as increases at the CW are expected to partially offset some of the continued headwinds in national and local and digital advertising growth is expected to more than offset the rest.

Three, operating expenses will be reduced in the low to mid-eight figures of dollars due to our operational restructuring. And four, we expect the CW will continue to reduce its losses by another 25% in 2024 from 2025 levels. Key factors differing from our current expectations 2025 either positively or negatively Those factors include, among other things, the rate of growth of attrition of rate of growth or attrition of pay TV subs, the health of local and national advertising markets, our renegotiation of certain distribution and affiliation agreements on terms favorable to and the attributable net income related to our 31.3% ownership stake in TV Food Network. We do not intend to update this guidance on a quarterly basis. As a few additional points of guidance with respect to adjusted free cash flow, we are currently projecting CapEx of $120,000,000 to $105,000,000 for the year. $30,000,000 to $35,000,000 in Q1. Based on the current yield curve, we anticipate full year 2025 cash interest expense to be in the $375,000,000 to $380,000,000 area an improvement of more than $55,000,000 from 2024 levels at the midpoint. We project Nexstar's cash interest expense utilizing the spread on our floating rate debt instruments, the current sulfur forward curve and the coupons on our fixed rate debt along with our expectations for debt repayment.

Includes our mandatory amortization of approximately $125,000,000 plus a modest amount of additional repayment. Q1 interest expense is expected in the $95,000,000 range. Full year 2025 cash taxes are expected to be $260,000,000 to $270,000,000 an increase in the low $20,000,000 for and millions versus 2024 and we are now using the annualization method for our federal income taxes, which enabled us to defer about 33,000,000 of income tax from 2024 to 2025. For cash taxes, we use a 26% tax rate when calculating our estimated tax one time and other adjustments. The first quarter includes only a very small amount of state income tax in the $3,000,000 As a reminder, we used the cash that we deferred from 2025 or 2024 taxes 2025 to optionally repay Term Loan B. We will pay this deferred income tax in the second quarter of twenty twenty five. In 2025, payments were programming are expected to be in excess of amortization by $40,000,000 to $45,000,000 due primarily to deferred programming payments from prior years and investment in programming for future years, Turning to capital allocation on our balance sheet. Together with cash from operations generated in the quarter and cash on hand, we returned $230,000,000 to shareholders comprised of $52,000,000 in dividends and the repurchase of $178,000,000 of stock at an average price $167.3 per share reducing shares outstanding, net of equity vestings by 2.7%.

For the year, we returned $820,000,000 or 68% of our adjusted free cash flow to shareholders in the form of $219,000,000 of dividends, and $6.00 $1,000,000 of share repurchases. Nexstar's outstanding debt December 3124 was $6,500,000,000 a reduction of $181,000,000 for the quarter as we made quarterly amortization payments of $31,000,000 and optionally repaid $150,000,000 of our Term Loan B. Our cash balance at quarter end was $144,000,000 including $16,000,000 of cash related to the Because we designated the CW as an unrestricted the losses associated with the CW are not accounted for in our calculation of leverage for purposes of our credit agreement. As such, our net first lien rate covenant ratio for Nexstar at 12/31/2024 Nexstar 1.68x, which is well below our first lien and only covenant of 4.25 times. Our total net leverage for Nexstar was 2.91 times at quarter end. As is typical in non political years, we expect leverage which is calculated on LTM basis versus a two year average to increase during 2025, as adjusted EBITDA falls in non election years when political advertising is significantly lower. Our 2025 cash flow will be deployed first to fulfill our mandatory obligations plan contributions of approximately $145,000,000 the Cleveland television station acquisition for $22,000,000 and the anticipated 2025 dividend of approximately $225,000,000 In January, we announced our twelfth consecutive increase in our dividend increasing quarterly dividend rate by 10% which based on our stock price, as of yesterday, now represents an almost 5% yield, which as Perry mentioned, puts us in the ninety fourth percentile of stocks in the 400 for dividend yield.

The remainder of our cash flow will be used to fund acquisitions, should an opportunity become available. If no attractive strategic accretive acquisitions are available, we plan to repay debt and repurchase stock. In 2025, assuming no large scale M and A, we plan to optionally repay an incremental amount of debt and not reborrow the debt that was repaid during 2024 from the cash from deferred taxes. The additional optional deleveraging will prepare our balance sheet better for any M and A should benefit us even if there is no M and A as many investors value us based on an EBITDA multiple Based on that methodology, any debt reduction mathematically increases our equity dollar dollar. Finally, plan to continue to repurchase shares, which will continue to be the largest component of our capital allocation especially given our current valuation. In total, we anticipate returning almost two thirds of free cash flow to shareholders in 2025 similar to the level we returned in 2024. Before I turn it over to the operator for questions, I'd like to address the value proposition in Nexstar Nexstar. As Perry mentioned in his remarks, the scale and scope of Nexstar is unlike any other player in the broader media industry.

Enabling us to bend the curve to achieve results that other operators cannot achieve. While this has been the case with our record setting revenue performance in 2024, it has not been the case with respect to our stock price over the last year. So that disconnect creates opportunity. Based on current street estimates and as of yesterday's yesterday's closing stock price, traded at a 6.3x multiple of 24.25 EBITDA and a 21% free cash flow yield. Below the midpoint of the pack of comparable broadcasters despite achieving top tier margins and free cash flow conversion, and the highest dividend yield and the highest overall return of capital to shareholders. A top tier multiple of seven to 7.5 times would imply a stock price of $197 at the midpoint a 35% premium to yesterday's closing price. And if we applied the same valuation that Warner Brothers and Paramount did to their cable networks, which do not have the same prospects as the broadcast industry nor the same trajectory of revenue that we've been able to accomplish. Which those estimates included a 10.5% WACC and a negative 3% perpetuity growth rate, But assuming the consensus estimates for the average adjusted applying those [indiscernible] those metrics, the math implies the valuation of $210 per share a 43% premium to yesterday's closing price.

And if new regulation comes to fruition, we are able to make accretive acquisitions as we have in the past and pay TV subscriber attrition does slow Nexstar and our industry should be re rated. But it should be a win win. Short term growth to value us like the premium curve bending company we are and then a rising tide floating all media boats with Dreg and slowing attrition. We are believers in the near and long term value of our stock and we'll continue to deploy capital both to grow our business and maximize shareholder return by betting on ourselves. With that, I'll open up the call for questions. Operator, can you go to the first question? Our first question comes from the line of Stephen Cahaw with Wells Fargo.

Please proceed with your question. Yes. Thank you. So just on M and A, Perry, you have a great acquisition history between Media General and Tribune. I don't recall the free cash flow accretion off top of my head of those deals but I know it was significant. Nowadays, your rates are higher but a lot of the peers are also higher. So do you still think there's a lot of similar levels of accretion for broadcast M and A opportunities as there have been historically if we do see some deregulation And related to that, do you look harder potentially at how spectrum assets fit together, when you think about broadcast and consolidation over the next decade? And then Lianne, just on the EBITDA outlook for the year, impressive work that you're doing on cost I'm just wondering if there is there any cost to achieve that is included in EBITDA or that impacts free cash flow Or is all of that behind you and was largely done in 2024? With the benefits that eight figure number that you talked about rolling through in the guidance for 2025? Well, Stephen, that's a lot. Let me Let me try and take the first part of that.

As it relates to Media, General and Tribune, they were 4060% accretive acquisitions, which we think were probably at the high watermark of what we would be able to achieve on scale M and A. Having said that, we have been consistent saying that any acquisition to clear our screen is going to have to be substantially more accretive than buying back our stock, which is a high teens to 20% yield on our equity. So we will maintain that same discipline We are obviously in conversations and out there looking if there's a love connection and regulations change that would permit the act something we would strongly consider doing. In the broadcast television space and the digital space.

But if not, Leanne's told you, plan B would be to continue to buy back stock [indiscernible] And then Steve, your other question, the expenses related to those operating cost savings are really behind us. You saw we took it's about a $12,000,000 one time restructuring that got added back to our EBITDA and that was really the cost to implement that.

Great. Thank you. Thank you.

Our next question comes from the line of Dan Kurnos with Benchmark.

Please proceed with your question. Yes. Thanks. Good morning. Very comprehensive guys. Maybe first one, just on the sports front, what do you guys make of Major League Baseball and ESPN parting ways? Do you expect there's any opportunity for local broadcast to finally get access to the laggard child, so to speak. And then just to be clear, I guess, Leanne, on the distribution or Mike, I guess, are you assuming that the recent sub trends hold for the year? And can we just get a sense of the timing of the renewals? We got to CW in Q4, but the other 60%, is that all back end weighted? Thanks. Yes, I'll take the last one first. Yes, they're back end weighted. But not being specific.

In the second half of the year. With respect to sports, Listen, I think what you're seeing we'll see where the where MLB shakes out, but we are confident that they will look for broader platforms. We did note Commissioner Manfred referred to cable as a shrinking platform.

So similar with what we saw with some of the deals that we've done, also with the deal that NBA did The net migration vis a vis broadcast has been to increase the number of games on broadcast rather than move to cable. So we think there will be opportunities out there. We're less interested in the local opportunities, given the fact that the RSN seem to have kind of gotten back on their feet and at least for the time being, taken the lion's share of the local games. But at the national level, we think there will continue to be opportunities and we certainly think that performance at the CW put us on the map for any rights holder out there looking to do deals in the future.

And then just to elaborate on what Mike said are response to your question in terms of subscriber trends. Our guidance assumes a slight improvement in the rate of subscriber attrition as is consistent with what the market is expecting.

In general. And then then because those contracts are all back end weighted, the substantial majority of the benefit will be in 2026.

Perfect. Thank you. Our next question comes from the line of Benjamin Solf with please proceed with your question. Good morning. Thanks for the question.

I'm wondering if you can talk about the progress you're seeing with respect to deregulation and what's your level of optimism that we could see changes this year And then maybe could you talk a little bit more about the Edge Beam JV, how that helps you accomplish [indiscernible] Well, thank you. Yes, I've spent four different days in Washington, D. C. Since the first of the year, all on the Hill visiting with lawmakers regarding the need for deregulation and and I feel the prospect is as good as it has been in my career to see meaningful ownership regulatory reform come to the broadcast industry no one can with a straight face defend the current rules. In the current environment. And I think there's a real understanding that preserving local journalism at the local market level is in the country's national interest and to do that you've got to have strong companies and strong companies need to be able to get bigger and grow innovate. And so that message quite frankly is resonating on both sides of the aisle. I think you'll see continued movement both at the FCC and the DOJ in terms of understanding that current regulations are outmoded and we are obviously pressing pressing for progress on all fronts.

And I think you'll see evidence of progress being made as the year goes on. Obviously, at the FCC, Chairman Carr has called this a break grass moment for local television. I know he is very interested in seeing the medium survive and have the ability to prosper and to continue to support local journalism and innovate And so I think I take him at his word, obviously, as the year goes on and the commission is fully constituted with with five commissioners, three Republicans, two Democrats. You'll see activity increase under his purview. As it relates to the next gen TV generation and ATS three point zero and our consortium, This is NextGen already reaches 75% of The U. S. Population. The our streaming and digital competitors are rapidly advancing and without our ability to modernize and innovate we risk local broadcasters risk falling behind ultimately putting the future of our free local service and local journalism at jeopardy And individual broadcasters can't complete this transition alone, which is why we developed the consortium with Scripps and Gray and Sinclair. And there was a question earlier from Steven about Spectrum. This consortium stitches together spectrum that reaches 97%, which we view as a virtual nationwide footprint that will allow us to innovate and a set transition date would provide certainty to all the stakeholders allowing the TV set manufacturers as well as the broadcast the pay TV operators, all to plan effectively.

And as you know at this point, the NAVs petition for rulemaking, which is fairly unprecedented and certainly as it relates to spectrum, contemplates a two phase transition plan which would ensure an orderly implementation Phase one would be in February of twenty twenty eight Stations in the top 55 markets, which reach about 70% of The U. S. Population, would complete the transition fully to ATSC three point zero and remaining stations would complete that transition on or about February 2030. I think it's important to note that not only is regulatory clarity essential to completing this shift, it's time sensitive because our competitors are continuing to advance. Services not only for viewers, but for businesses and the public at large. But that the industry, the broadcast industry is fully united behind this effort. And so we think with all of those factors coming together, the prospect of spectrum monetization that I've been talking about for half a dozen years, I think is upon us and this consortium has a first mover advantage having stitched together we're very optimistic that progress will come both to deregulation and to innovation of Nexstar gen TV under the current administration.

Great. Appreciate the insight.

Thank you. Our next question comes from the line of Craig Huber with Huber Research Partners.

Please proceed with your question. Great.

Thank you. I have a few questions. I'll just do them one at a time to make it easier.

On AT SC three point zero, Perry, just talk a little bit further about your expectations, how the revenue ramp for your company and the rest of your consortium may play out? How many more years you think it'll be to be for you guys.

Well, I think as most new businesses evolve, they start slowly and then grow suddenly.

There are a number of things that have to happen We need to be able to sunset the ATSC one point zero or current transmission schema requirement, which would free up more spectrum for innovation. We have to complete the transition to three point zero should enable all stations in the market to fully participate in any data casting opportunities that might present themselves. And again, I think that if we are able to meet the transition date of February 28 that we proposed along with NAB in the petition for rulemaking. That's when I think you could see meaningful progress being made. In the meantime, we have signed clients and we have a lot of interest from others particularly in the automotive space about the connected car and video and television in the car. As well as providing service updates with a better completion rate than the current satellite based updates provide. There's also the the opportunity to to develop a stronger national security with the BPS system, which is the broadcast positioning system which is a would be a backup to our current GPS system. The United States is the only industrialized country in the world without a backup to its GPS system.

And I don't have to tell you what happens if GPS goes out but we can provide a terrestrial based system that would be a backup to the current satellite based system less vulnerable to disruption and we have developed the proof of concept of the timing element of this already with an atomic clock in Colorado with Mist and I won't get into the wonky weeds of all the development that's going on there. But both the DOT and the DOD have said it's in our national interest to have it backup GPS system and we think that this transition would enable this industry, our industry to provide this and it would be superior to a second satellite based system. So again, I think you'll see announcements of clients and trials beginning and continuing throughout this year and the next couple And I think that it would be probably twenty twenty eight if we were able to affect the transition Of the top 50 markets, top 55 markets, to a full ATSC three point zero transmission schema think that's when you'll see revenue take a step function forward.

And then more near term question. Can you guys just talk a little bit further about core advertising trends near term? Are there any maybe national advertising categories that you guys are seeing any green shoots and any significant change there? Positive or negative?

There's nothing on a specifically to call out positive on the advertising side. I think on the negative side, we talked about insurance and auto being two categories that have been more negative for us in the first quarter. And maybe if you could just talk a little bit further about what you're expecting for overall core advertising trends in the first quarter year over year?

So what we talked about was the first quarter advertising trends are going to be down in the low single digit range.

So what is it that you're seeing that's obviously a much better number than you guys were able to last all four quarters last year? Obviously, part of it was hurt by crowding out, but what are you seeing better in particular that you want to highlight? It's like It's slightly it's just a general improvement in the trend. It's not like anything hero up. I think we said that about half of the fourth quarter core decline is related to Crowdout. If you back that out, you get to something just shy of 5% decline in the fourth quarter. Which low single digits is not too much of a difference from there, but we also have the benefit of improving CW performance given the all the new great sports content we've got on the air now.

And sorry if I could just ask one more. On the CW losses, you guys talked about it being down 25% or perhaps more in the New Year, that would probably put down a loss of roughly $100,000,000 maybe a little bit better than that. How are you feeling about the [indiscernible] point in time when you might be able to get to breakeven, do you still think by late this year, early next year? How are you feeling about that, please? Yes. What we've said is we think we expect to get to profitability at some point during 2026. And that's still part of the our outlook and our what we're striving to achieve. We're on target to achieve.

Okay, great. Thanks both of you.

Thank you.

Thank you. Our next question comes from the line of Aaron Watts with Deutsche Bank.

Please proceed with your question. Hi, thanks for having me on. You've covered a lot of ground. So I'll just have one question. I've asked you in the past about moving towards investment grade status on your whole Cap Stack. Certainly your stewardship of the balance sheet has opened the door for that discussion. But in light of the speculation around deregulation in the space and your commentary there today, maybe I can ask about the balance sheet in a different way. How high would you be willing to take your leverage in the current environment to participate in industry consolidation.

I don't think we're looking to maxed out on leverage and over extend ourselves by any in any way. So I think the question is, is what is the the comfortable leverage that the market could bear And I know that the rating agencies always give you a little bit of a eighteen months sort of time period to kind of get your leverage back down to maintain ratings. But I think we'll have to just look and see this on a case by case basis and look at the deal, but we're not looking to create new headlines regarding being highly leveraged, that's one of the things that we have not done as a company historically. Okay, got it. Thanks, Lian.

Thank you.

Our next question comes from the line of Patrick Barrington Research. Please proceed with your question. Hi, thank you. [indiscernible] With the CW and you mentioned you have a lot of renewals coming up later this year. With all of the sports rights that you have added to that network, could you maybe talk about any benefits you're seeing on the distribution side and the contribution with those rights are creating for either your affiliate partners or for your distribution revenue so far?

Well, I think to date, we're in the lifecycle of the CW, I guess I would think of it as we're in the show me phase. Lifecycle, right? And that's exactly what we're doing. We've been talking about programming that we've acquired and what was coming for quite a while and it's been gratifying over the last really over the last couple even longer than that over the last couple of months as NXT came online and we saw the end of last year's performance with NASCAR on the last eight races we sublicense from NBC. [indiscernible] in the world of distribution, you need to prove it out before you can actually monetize it. That's been our experience. And so we're in the proving out phase and we'll move into the monetization phase going forward. So no surprise, the value of programming [indiscernible] distribution world is heavily centered in live programming. [indiscernible] linear programming from SVOD programming. [indiscernible] the value in linear is in live [indiscernible] right? And certainly, from the sports side, you can see that notwithstanding headlines on subscriber erosion, big time sports continue to draw significant audiences. Most recently with the Super Bowl setting yet another record.

Right? So we're optimistic with the performance of the programming will translate into performance in the distribution deals that we have on the near horizon.

And I would just want to just supplement something Mike said, because he's talking prospectively and talking about the differential between we get for CW versus some of the other affiliations, We actually have been able to grow our distribution revenue CW to date with the new programming slate. We just think there's more to come.

Agreed.

Okay.

Thank you. We have reached the end of the question and answer session. I would like to turn the floor back to Perry Sook for closing remarks.

Thank you very much. In closing, I'd like to just tell you all we remain confident in Nexstar's positioning to deliver and continue to deliver long term growth and value for our shareholders. Our financial results and competitive positioning in the industry with organic growth opportunities as well as the potential of deregulation all positions us very well for continued success and free cash flow growth. When you look at the immense value we've created over the years and our future prospects Nexstar's share price has never been more attractive even with the early moves today. We We're consistently proven our ability to outperform and if history has taught us anything, it's that with the long term, don't bet against Nexstar Nexstar. There's a lot more to come. I'd like to ask you all to stay tuned I want to thank our teams for their hard work and dedication well as our partners and shareholders for our ongoing support. We look forward to updating you on our next earnings call.

And this concludes today's conference. You may Thank you for your participation.