Nexstar Media Group, Inc. (NXST) Earnings Call Transcript & Summary

Let's do it. Let's do it. I'm Nick Zangler at Stephens. I cover ad tech and media. And very happy to have Nexstar with us today. We've got Tom Carter, President and COO and Lee Ann Gliha, EVP and CFO. Just to start, I think the way we're going to do this is run through all the business segments. But before doing that, maybe just if you guys could level set us and talk about the broadcast station footprint across the U.S., maybe talk about your scale and just also mention the various networks like NewsNation that you guys have.

Sure. Good morning, everybody. Thanks, Nick. Yes. Nexstar is the largest broadcaster in the country, larger than any of the owned and operated groups of the networks. We cover -- we have 200 broadcast properties, 199 television stations and 1 radio station, WGN AM in Chicago. That's all I'm going to talk about radio. And we cover 68% of the population. So we're the -- we have the largest local reach of any broadcaster in the country. We also operate 400 websites and apps that are mainly local. There are a few national apps that we have, but we're really a local service business. We have relationships with 40,000 SMBs. We have a 1,500-person sales force. So there are a lot of assets that are embedded in our business that are used for various purposes. Additionally, as Nick said, we have a couple of national platforms, The Hill, which is a political news site focused on Washington, D.C.; NewsNation, which used to be the old WG in America and is a ubiquitously distributed linear cable news network among the plethora of MSNBC, CNN, Fox, News Max. The difference is we're unbiased. We're balanced from that perspective where our targeting is not the 15% of the political spectrum on either side of the right or left. We're targeting the 70% of America down the middle. And I think we're true to that mantra. If you look at some of the websites that judge bias and news reporting were right on the median. So we're true to our brand. We view -- also, we just recently purchased the CW Network. We're the largest CW affiliate group. So that makes more sense for us than anybody else. And we're going to turn that from a network that was really primarily focused on producing programming that could be then sold in the aftermarket through syndication. That channel has now changed to -- or recently changed to producing programming that was used on the 2 owners streaming products. It was previously owned by Warner Bros. Discovery and Paramount Global. We're changing it into a traditional broadcast network for the benefit of the network and the affiliated stations. Again, Nexstar is the largest affiliate group, but others as well, the Sinclairs and the Scripts and the Grays of the world. So it will be a more traditional network. It had been historically focused on scripted programming. We will change that to a more balanced approach, typical of what you'll see of other networks in scripted and unscripted, first run, second run, et cetera. So it will be a more balanced schedule from that perspective. And that's the playbook to make it profitable again. So from that perspective, those are some of our -- we also have a 31% stake in the Food Network. That's more of a passive interest for us at this point, but it is a profitable venture and one where we get annual cash payments. So that's a little bit about the station profile. Just with regard to the business in general, a couple of things from that perspective. Advertising revenue currently -- or traditional advertising revenue. Currently, and their station group makes up less than 50% of our total revenue. The majority of the revenue comes from retransmission and from distribution agreements we have with various pay television services. We're a large player in the political market, one that I think appropriately guides expectations with regard to what our take will be in any given year. And this last year, we just had our earnings call. A couple of weeks ago, we said where we were at as of that date, and that would have been right at the high end of our guidance for 2022. So we feel good about that perspective. Growth drivers continue to be retrans on the broadcasting side. The CW will be a growth driver over the next several years as we turn that into a profitable enterprise and the various benefits that it also provides to our station group. NewsNation is in its infancy. It's currently -- 2 years ago, it was WGN America. You may remember that. We now produce 17 hours a day of news programming, still running 7 hours a day of reruns by 2024, that will be a 24-hour, 7-day a week news offering. So that will be a growth driver for us going forward. And then the last of the 3 major growth drivers is ATSC 3.0, which is a new transmission technology what allows us to compress our signal and free up some bandwidth for not only enhanced television services, but more importantly, from our perspective, it's data transmission services, particularly high-speed data transmission on a one-way pipe. That's a very robust pipe because of the transition -- I'm sorry, the terrestrial signal that we have, and that will be generating new revenues starting in earnest sometime in 2024. So that's kind of the little bit longer than elevator pitch.

Yes, we just say holy cow time you took. You answered all my questions.

Well, thanks for [coming].

Just quickly though, on NewsNation. I thought it was pretty cool. You guys added Chris Cuomo from CNN -- just curious how that show is performing out of the gate?

It's been great. His show is consistently the highest-rated show on NewsNation. Look, we're starting from scratch. We're starting from a rerun channel, which there are 100 general entertainment cable channels on the linear side, we were just one of those. And quite honestly, those -- we did not see the future being very bright for that. So we bit the bullet and changed into a news channel. As I said, we're currently running 17 hours a day of news. That will be expanded to 24, as I said. His ratings are great. Also added benefit is the referred ratings on either side of his show, both for Leland Vittert on the way in and for Dan Abrams on the way out. There are benefits to that as well. I would say the other thing that NewsNation has had some notoriety of late was we produced 50 debates throughout the NewsNation platform in this midterm cycle. And 3 of those were carried nationwide on NewsNation, and that was the Georgia Senate debate between Warnock and Herschel Walker, the Pennsylvania Senate debate between Fetterman and Oz and the Texas gubernatorial debate between Beto O'Rourke and Greg Abbott. Those were the 3 highest-rated shows in NewsNation history. Granted, short history. But those are the types of news products. We're not -- and we do some of this, but we're not putting a panel of talking heads up there that will analyze and tell you how you want to think about things, we will have -- if we have panels, it will be a balanced panel. It will be both sides of the issue represented so that it's not without bias, but it's meant to be fair and balanced.

Right. Right. Okay. Great. Getting into the segments, though, to talk about first, retrans revenue and distribution and just to frame up what's happening here. So you have subscribers from the traditional cable companies like Comcast and Charter, right? They're losing subscribers at like a 10% clip right now. At the same time, though, you've got like the YouTube TVs, the Fubo TV, Sling TVs these MVPDs that are winning subscribers, and they want access to your broadcast station feeds, right? So like subscribers there are going up. And then at the same time, also, you have streaming services like Peacock and Paramount Plus, who also want access to that feed and our [indiscernible] retrans fees there as well.

Correct.

All that considered those dynamics. In my opinion, your product is more distributed. There's more diversification in that distribution, which I think would be leverageable for negotiating those rates and whatnot. But I guess as we look out for like the trajectory of retrans given all these moving parts, what would you -- how would you classify that outlook? Can you maybe talk about this economics.

Sure. No, we're very bullish on it. You won't see the massive percentage gains in retrans revenue that we've historically seen that were as recently as 2 years ago, 25% annually. But we're -- that business continues to grow in spite of some of the challenges with regard to subscriber declines and attrition. Because you're right, we're on all the platforms. All the platforms understand that to have a competitive offering, they have to have the broadcast networks. And how do we know that? The survey that has been done shows that in a pay television household, 40% of the viewing is done on the broadcast networks, yet we only received 25% of the fees they pay for their programming services. So we over-deliver and over-index with regard to the value of our signal to the consumers in the pay television bundle. That's what gives us pricing power with regard to the ability to increase prices to offset the subscriber attritions that we are seeing and result in retrans revenue growth.

Is it also -- would also be the case, too, that if you were a vMVPD user, like value subscriber to YouTube TV. But then I also subscribe to Peacock, I also subscribe to Paramount, effectively, you're getting paid up to 3x.

We're getting paid 3x on those subscribers. Yes. And that's -- those are [ hundred cent dollars ].

But at the same time, so this is obviously a growing trend, but still, I think you guys talked about this before, less than 10% of the subscriber base is represented by the vMVPDs and the streaming services, but obviously probably increasing every quarter.

It is.

Okay. Great. And then just to touch on net retrans margin factoring in the affiliate fees that you pay, you guys are the highest in the group across the broadcasters.

I'm sorry, say that again?

The net -- the highest in the group. Yes, stressing that point. But just can you talk about like why that is? I'd imagine it's scale and the broad footprint, but can you just tell us like how you've derived at the highest retrans margin? And then also maybe just talk about on the flip side, when you pay those affiliate fees, like what conversations occur as far as like the leverage you have there in those negotiations, right, like...

Look, this is where scale really matters. And as we said before, scale from our perspective is 68% of the U.S. By the way, we're also the #1 CBS -- we're the largest CBS affiliate. We're the largest FOX affiliate, we're the #2 or 3 -- or the largest CW affiliate, as I said, either the second or third largest NBC and ABC affiliate. So I mean we have meaningful relationships and meaningful coverage and broadcast of all of the networks and their product. That's probably the biggest leverage point that we have. And by the way, it also holds true with the MVPDs in terms of how the signals that we provide them to their customers, that's what gives us the scale. And we see it all the time. We just went through a short blackout with Verizon. But what's meaningful from our perspective is the scale we have. So if you're a DirecTV or DISH and you don't reach an agreement with Nexstar, in 116 markets around the country, you're going to be off the air. And you're going to be off the air with primarily Big 4 affiliates. You want to see their call center switch board light up, take Nexstar off. And by the way, you wouldn't get that large reaction if you took the ABC owned and operated group off because we have multiple affiliations in multiple markets, and we have more reach than anybody. We reach more of the population than anybody else. So from that perspective, that's where scale matters. And by the way, it matters just as much on the affiliate side because, again -- and this will never happen because it's the mutual assured destruction is if we went off the air with CBS, they'd lose 12% of the country with just a flick of a switch. And oh, by the way, there's no -- there are -- in every one of those markets, there's not a place for them to go and certainly not at the flip of a switch. So it's more about scale than it is anything else. And oh, by the way, given regulatory environments and the rules currently replicating our scale would be -- to say it would be a challenge would be an understatement.

Right, right. And then so as we push forward here, I think going into 2023, 50% of your sub base is up for renewal. So all things considered here, we should expect this is a tailwind for retrans revenues...

And the same thing for '24 because 50% our subscribers are up right now between now and year-end, which will affect '23. Next year, 40% will be up largely in the fourth quarter, which will affect '24. That's why we feel good about our positioning for the next -- well, first of all, for fourth quarter of this year and for the next 2 years, combined with, obviously, we get another bite at the political apple in 2024.

Right. Have you committed to like -- or talked about just like an expected growth rate here?

No, we're reevaluating that right now, given we're in contract discussions. I think we'll have substantial new information and want to give the best guidance that we can.

Got it. Got it. All right. So relatedly then, I'll stress this one, too, Nexstar highest EBITDA margin in the group as well.

I won't ask you to repeat that part.

I would have to think that a lot of this is due to the amount of duopolies that you have in the markets. Can you just kind of define that, talk about it and talk about the economic benefit, I guess, maybe when you look at a particular market when you have a duopoly.

Sure. A duopoly basically means operating more than 1 television station in the market, whether we own both of them or own 1 and operate another. But essentially, what we're doing is we're operating 2 revenue streams off of on fixed cost base. You put them in the same building. You have different market-facing employees. So you have different sales forces. You have different news organizations or at least the talent on the news. So basically, everything that is market-facing separates the 2, but you don't need chief engineers. You don't need 2 general managers. You don't need different promotions people that are all working for both stations, but you don't see -- you see different product. We just recently looked at a station that we're not looking at anything other than just we're kind of exploring the order the possible -- and we took out about 50% of their nonvariable expense. I mean it is meaningful. It can be 10% to 15% higher combined margins than individual margins. And oh, by the way, that 15% is on the combined revenue of the duopoly as well. So we try -- we're doubled up in 65% of our markets. We'd love to be in 100% of our markets. It's just -- it's a tough needle to thread when you sometimes in markets you only have or other stations and maybe somebody already has doubled up. And so the opportunities are finite. But absolutely. That was Nexstar between 2012 and 2019, was rolling up and consolidating the space.

Right, right. Speaking more towards like the diversification of your product or at least the wider distribution of your product, CTV is proliferating, right? People are just watching TV through their operating system, whether it's like a Roku or Vizio. So you guys have pivoted as well to accommodate that via fast channels like The Hill. I think the News Nation is going to launch a fast channel as well. Can you talk about like how you play within, I guess, what would be that CTV OS bucket and just the economics attached to these fast channels because there's no retrans fee there, but there's advertising revenue, it's -- you want to have that broad footprint, but just...

And you're right. We have to be mindful of the fact that we have a $2 billion revenue stream from the pay television system that they pay for exclusivity in that signal. So the fast channels that we're doing -- first of all, The Hill is not an issue because it doesn't participate in that. But NewsNation gets retransmission and distribution fees from linear operators. So in order to be true to the mantra of their exclusivity, we have to change NewsNation a bit. And what you'll see in NewsNation, it will be clips as opposed to a live stream because the live stream is reserved behind the pay wall. You'll still be able to see NewsNation, but you have to authenticate through a pay television provider. But what The Hill is doing and what NewsNation will do is put on clips of news stories. And by the way, if you go to the NewsNation website, you can choose which clips you watch. If it's a fast channel, at least initially, it will be on a loop and will intersect new clips there. Now the 1 carve-out is for breaking news, which is a public service, we can interrupt the clip and go with live streaming on a fast channel. With regard to the fast channels, every fast channel provider, whether it be Roku or YouTube or any of the others, Vizio, et cetera, all have different models most are rev share, but we agree that connected TV ad demand is strong. And so we have some products there -- and oh, by the way, the CW has an AVOD service as well, will provide us additional owned inventory that we can sell. And obviously, our goal is to sell all of our own inventory ourselves and then we'll put the balance out for programmatic. But selling directly will yield us the maximum rate.

Right. Right. And then -- okay. So you mentioned it, but the further distribution, further diversification is the addition of the CW. So 75% equity stake there. No upfront consideration, you assume some debt.

I'm sorry, say that again? No upfront -- okay.

Stress that again. So $70 million in revenues per quarter, $70 million in adjusted EBITDA loss is kind of the economic breakdown there. But the CW is a linear channel. The CW is also an AVOD app. Can you just talk about the strategic rationale of acquiring the CW and just the plan to profitability, which you're targeting. I think '25, maybe?

Yes, 2025. Yes. Yes. I mean, look, I think the acquisition for no consideration was a good one, and it was really kind of a no-brainer for us given that we are the largest CW affiliate. We have significant revenues that are tied to the CW affiliation in terms of distribution and advertising revenues that we wanted to make sure that we've got a good healthy CW network in order to protect that. So just from a defensive play, this was a fantastic deal. I think from an offensive play, there's some really obvious things that we can do to improve the business. Right now, we've got some content that is on the network that is geared towards the 18- to 34-year-old audience, and we know that the average age of the linear network viewer is 58 years old. So hopefully, we'll be able to align that a bit, as Tom talked about earlier, and improve the ratings. The ratings right now are very low. And so we think there's a lot of -- quite a bit of upside that can be beneficial. And that not only will help the revenue of the network and the profitability network will actually help our CW affiliates at Nexstar as well because we can have a better lead in going into our local news, which will increase our viewership most likely of our news product and revenue and it's sort of a virtuous cycle from that perspective. It also gives us sort of a toehold. We already had 1 with respect to NewsNation, but it increases our exposure to the national advertising market, which, while a little bit more volatile, it's literally twice the size of the local advertising market. So to the extent that we can not only have access to that market from the network perspective, we will also be able to provide to our stations probably to the advertisers the ability to locally activate any sort of campaign that they have. And then I think the other piece of it from a synergy perspective was, as Tom mentioned, the AVOD app, there's almost 90 million downloads in embedded out there. So this really kind of puts us into the AVOD space in a very nice way. From a profitability perspective, we did say we're going to have a low 9-figure investment, and that's the -- our percentage ownership of the losses netted against -- we get the tax benefit of the losses at Nexstar, and so that's what that number reflects. But we're going to have -- most of those losses are going to happen in the fourth quarter of this year and through the first 3 quarters of next year because that's the 2022, 2023 broadcast season, which has that original programming that's generating the losses. Really in the fourth quarter of 2024 and then going into 2025, we'll be able to run our playbook, put our content on and that should hopefully be the beginnings of some light at the end of the tunnel in terms of where the profitability will be ultimately achieved. And then the other thing from a funding perspective, we did announce on our earnings call that we're in the process of selling one of the remaining real estate properties we had in Chicago, the largest for $155 million net of tax. So that goes a long way to funding the investment that we're going to have in the CW.

Yes. I actually live right next to that building that's now going to be a casino. So we'll see what happens to the neighborhood there, but maybe going to be fun. So alright, we've covered content. We've covered retrans. I'm going to move into the advertising bucket here. Advertising revenues are divided again get between core and political. So we'll first jump into core. Can you talk about, I guess, over your whole content footprint, the mix between local advertising revenues versus national advertising revenues? And then if you're seeing any difference in the recent trends within those 2 buckets?

Sure.

Okay. So yes, I mean, our local versus national breakout is, as Tom mentioned earlier, is very beneficial to stability in an uncertain economic environment. We've got about 70% of our core advertising is coming from the local business, which is much more of a sort of call to action, direct sort of response type of advertisement that's needed to engage. And we've got all of these local businesses, 40,000 local relationships that we have that really make up that revenue. And that's much more stable in recessionary environments or really all environments than the national advertising, which composes about 30% of our core advertising, and that national advertising is a lot of times more brand-driven. So it's not as much of a call to action. So that is the reason for the more of the volatility. But we feel very good about having that exposure to national, and I don't think we're seeing too much of a difference in terms of the local trend in the fourth quarter, although we do have quite a bit of political advertising revenue that will create some displacement in that fourth quarter.

Got it. I guess, and then within core, if I just were to think about maybe the tailwinds, headwinds as we look out, 1 potentially big tailwind would be if auto ad spend comes back, right? Because I think if I'm right, 15% of your core is auto, but if we go back to pre-COVID, maybe 20% to 25%. Obviously, there has been supply chain issues. But if those can be relieved, SAR goes back to $17 million, maybe we get back to that 20% to 25% mix. But just as of late, I think the message has been you've seen some resurgence and auto ad spend. So if you could talk about that potentially as a catalyst. Any other catalysts maybe like the gaming, gambling revenue, if you perceive that as a potential catalyst? And then just the headwinds, I don't know if I mean, obviously, it's a macro if there's anything else you can talk to.

Yes. I mean, look, I think auto for the first time in the third quarter was a bright spot for us is actually one of our top-performing categories. So we're hopeful that, that trend continues. We are seeing -- I think across the universe, you're seeing some positive output from the industry in terms of getting those levels of inventory back up. So we're feeling hopeful about that. And that really -- you're right on the numbers, it's around 14%, 15% now, and it was much, much higher historically. So we're hopeful that, that could be a tailwind. On the sports betting side, I think that's been a little bit of a mixed bag, but it was fabulous for us while auto was declining, that was increasing. And I think there's a number of states that are still out there that have not yet legalized. I think we noted, in particular, Ohio is a big state for us. And that will be coming legalized gambling on the first of the year. So we're hopeful that we'll have some positive impact from that. But I think it's a little bit of a question to be seen in terms of how that filters through the various states that are yet to legalize.

Got you. All right. So moving on from core into political, again, among the broadcast groups. You guys had the best results by far. And actually -- so you matched the 2020 result, right, and nobody else did that. And you even did it, I think, despite total advertising revenues within political being down like in totality across like the entire industry. Just to what do you credit the ability to match the revenues and come in with a very strong figure in the political round given that there were shortfalls in other areas?

Well, I think total advertising for political will be up this year.

From 2020 or 2018?

Hope, 2018.

2018, I'm sorry.

I was thinking '20. Originally, the thought was that we can match 2020.

Usually, in a presidential election, we see about 25% to 35% of the revenue being spent on the presidential side. You're right. So this time, we did, we matched 2020's total revenue for the year without that 20% or 25% layered on top what we normally see. That's the good news for 2024, right? We'll see that return, and we may have to contested primaries for President, which would be another boost. But really, the biggest determining factor in political advertising is campaign funding and raising money. And I think the unfortunately, maybe for the democracy, but both sides have issues that they feel like they can raise money off of. And so raising the money ends up translating into broadcast television. And it's interesting, broadcast television continues to be the vanguard of political advertising and people say, well, what about connected TV, et cetera. But if you think about it, the pay television universe is shrinking. Connected TVs are certainly increasing, but it's still a very small portion of the audience. And the only way to get your message to the entire market is through broadcast television. And not surprisingly, we do more news than anybody else on the broadcasting side. We do almost 300,000 hours a year of locally produced news -- largely new content. And that's where the majority of the political advertising dollars are spent are around the local news product because those are voting in tenders basically. Those are people that are leaned forward information gathering and likely to vote and politicians know that. So it's an important category for us. The bad news is that it only happens every other year. The good news is it happens every other year, and it continues to grow in a meaningful way.

Right. Right. So would you say then, in your view, the broadcast channel held its share of political advertising dollars this year?

I think that remains -- holding share, I think it remains to be seen, but is our absolute growth at high levels compared to historical trends, yes.

Is there any way to decipher whether or not any spend came out of like search and social that are going through some...

Well, I think all the -- the election was 2 weeks away or 2 weeks ago. I think we've got a little bit of after action reports to really determine what the share -- what the shares of various components were.

Got it. Got it. But just -- I mean, to the point you mentioned earlier, if you think about political ad spend like where it was and where it was like maybe in 2018, we're talking about $4 billion in ad spend then to 2020, $9.8 billion or $9 billion, something like that. So you could argue that political ads been exploded. And I think part of the reason was the emergence of low-dollar fundraising, it's easy to raise funds -- easy to raise and then obviously deploy. But I guess, what inning would you say we're in when it comes to the ability to raise a lot more money? Like okay, $9 billion is raised around now? Like how high can that get because of this emerging trend of low-dollar fundraising? And if it does continue to expand, would you expect that the campaigns start earlier, last longer? And then so political ad spend, maybe the seasonality within the year or 2-year cycle smooths out a little bit more so that it's not all back-end loaded and maybe this campaign...

I agree with all of that. But I will tell you, and we see this from time to time, if you have a great example probably our -- and we even said this, our most dynamic political market was Las Vegas, Nevada, not something that you would have thought about on a space, right? The good news is we're a CBS affiliate in Las Vegas, and we had a Raiders game on the Sunday afternoon before the election. We only had 8 spots in that game, and 6 of them went to political advertising and the numbers get crazy because it's a limited inventory. There's only so much. And the sales pitch is, well, if you want it, it's going to cost you, but don't worry, if you don't want it, you're a competitor will. And that's -- it's really about demand and the exclusivity of the inventory. So just because we really can't find much more ad space for political advertising, but what you'll see is the dollar cost will go up.

Right. because there's just so much of it.

And if they have the money, it becomes an arms race. That's all it is.

Right. Because if they have money, they'll spend it, they don't really care.

They don't want to have a dime in the bank on the day after the election. Doesn't do them any good.

So the ROI...

Except maybe if you're Hillary, but...

I did want to just talk about digital revenues, which you guys break out as well. Can you just talk about what comprises this segment and the outlook here? I think it gets a lot of the website revenue or stuff like that, right positive within the digital space?

Yes. So we've got -- if you sort of look in our financial reporting, we have 2 segments. We have our Broadcast segment and our other segment. And so you can see the digital revenues that are in our Broadcast segment, those are related to our local websites and then the digital revenues that are in our other segments. Those are related to our national businesses and our -- The Hill and best reviews and the businesses that we've recently acquired.

Got you. Okay. And then as far as free cash flow goes, you guys are generate 1.4 on average between the F '22 F '23 cycle. Can you just talk about deployment of capital where that cash is going to go should we -- from like the M&A stand front, like should we think about any potential acquisitions being more in that digital realm? And like just your thoughts on like what would be at play or what would be a good fit?

So from a capital deployment perspective, we do pay a dividend, so that comes off the top. We do have some mandatory amortization on our debt that must get paid and then we usually do a little bit of opportunistic deleveraging as well. And then the remaining amount of that cash after those contractual those or those committed requirements are sort of left open either share repurchases or M&A. And historically, if you look back, Nexstar's done a ton of M&A, and it's really been the driver for the stock price and driver for shareholder returns. So we will prioritize M&A to the extent that we find transactions that we think are going to be beneficial to the company. We obviously did that with the CW. We acquired that for nothing, although we do have some investment that we -- the free cash flow losses that we will -- we think is more of an M&A purchase price, a proxy for purchase price rather than just sort of ongoing losses. So going forward, I think from an M&A perspective, we do have an interest in doing more digital absolutely would be something that we would be very interested in because as you know, we have a small percentage, 7% of our overall revenue. I think it's 15% of our overall advertising revenue is from digital, and we all know that the overall advertising market, it's like 2/3 of the advertising market is digital. So to the extent that we can have more exposure into that segment, that would be definitely something we would look forward to content acquisitions, either from an operational perspective or from an acquisition perspective is things that we can utilize across our distribution platform. Other businesses that can be leveraged some of the infrastructure that we have, whether it be our Salesforce or Spectrum, things that we can operate together synergistically and utilize the platform to kind of create more value from those are the types of things we would look for. I will say we're in a sort of depressed M&A environment right now with the volatility in the markets and the higher cost of borrowing. So that sort of depressed I think, people. They don't have to do M&A. They're not going to sort of try to sell their company in this environment. But if they are, we're well positioned to take advantage of it given the health of our balance sheet.

Great. And then I figured we'd wrap on ATSC 3.0. Can you just talk about what it is the opportunities that you see available across data casting, I think as of now, across the broadcast group, maybe there's potential for some revenue recognition to start to occur within late 2023, early 2024, maybe. But just if you could just lay out the whole ATSC driven opportunity?

Well, ATSC 3.0 is a transmission standard that's currently in use in Korea. So there's a test bed that has been successful. It's the next generation. Think of the current technology is ATSC 1.0. So we kind of skipped 2.01 right to 3.0 because 1.0 was put in place in '09. So obviously, with advances in technology, there's been substantial improvements. And one of the improvement is a more efficient use of the spectrum. So we will continue to do what we do with broadcasting. And there are enhancements to the broadcasting signal and the quality of what you receive such as we could transmit in 4K rather than just HD or standard definition. We can put additional information involved there and as well as we can have a return path through a connected television that's IP-based so they can be more targeted advertising. There is an element of ATSC 3.0, which is an enhancement to our existing business. And there are revenue opportunities around that. We're more excited about the high-speed data delivery because part of what we're doing here is a compression technology that if you think about the existing -- think about it as like real estate. Our existing footprint allows us to have 3 homes on the lot. The new technology will allow us to build 15 homes on that same real estate. So we keep doing the 3 homes that we're doing, and we hive off essentially what amounts to 80% of the bandwidth to do high-speed data transmission. And this is whereas television is a B2C offering, this would, in our way of thinking, be a B2B offering, using our spectrum. And other companies do this right now with regard to whether it be on the 5G bandwidth, which is a 2-way, ours is a one-way spectrum. But satellite also is one-way data delivery, et cetera. So this is an existing business model. It's not making anything -- it's not groundbreaking from that perspective. And we think that there are a number of applications. There's a study out there from BIA, which is a recognized media research firm and a firm that does market testing and they have determined or at least believe that by the end of this decade, that revenues from ATSC 3.0 data delivery could rival what retrans is currently for the entire sector and for Nexstar, obviously, because we have more spectrum than anybody else in our business and cover more footprint. And so that would be a $1 billion new line item for the sector by the end of the decade and in excess of $2 billion for Nexstar right now at a higher contribution margin than retrans because we don't have network partners that we have to share anything with. This is our spectrum. As a matter of fact, some of the networks are participating with us in ATSC 3.0 rollout in some of their markets. But the -- there are a number of use cases, and I'll point you to the BIA study, but it could be fleet management, could be distributed energy, could be agriculture, could be distance learning. There are a number of automated autonomous vehicles. I bought a brand-new '22 vehicle the other day, and I went in to start it up in the driveway and the computer screen flashed on and says, congratulations your software has been updated, right? I didn't do anything, didn't ask for it, but they had to deliver it, and this would be a perfect way because we have a superior delivery method because we are a single point to multi-point, and we have a superior bandwidth that penetrates buildings like this. I don't know if you've -- how everybody's individual experience has been with 5G, but it's kind of been underwhelming from a delivery perspective. And ours penetrates buildings just fine because that was what was originally intended to do. So we're very bullish on this. We've put -- the good news from our perspective, it doesn't take a lot of capital to upgrade these. Really, what it takes is a like-minded other broadcaster in the market to co-utilize spectrum to -- because you have to continue to distribute your signal in 1.0 for the legacy station, legacy sets and you have to set up a second signal for 3.0, so that takes shared spectrum. And it will take time for handsets to have a 3.0 chip and for consumer adoption of new televisions to bring on, you can buy a television right now, but not all of them come with 3.0 chips, but some of the higher-end televisions do. So it's a consumer adoption view from the legacy television broadcasting, but the B2B, the data delivery is a fertile field right now.

Do have any trial relationships on that?

The only trials that we're doing are in-house, no out of house. But I think that's really -- I think our CEO said he expects there to be some commercial application trials either late in '23 or '24.

Got it. and that would be where the potential revenue start?

Look, we've seen demonstrations and the one that's kind of telling is satellite-delivered GPS is usually accurate to about 2 meters. If you're in an autonomous vehicle, you don't want to be 2 meters off because that's in the lane next to you. So an enhanced GPS, utilizing satellite GPS and our signal as an enhancer to that can be down to centimeters. And we put a device in a car and drove it around Washington, D.C. for 4 hours. And you can see that about 2 or 3 of the times, it ended up in the Potomac if it was not -- if it didn't have the enhanced GPS in it. So just be mindful of that when you're getting into a driverless vehicle.

Awesome. Well, thanks so much, guys. I think we're out of time, but I really appreciate you guys participating.

Thank you.

Thank you so much.

Thanks everyone.