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

My name is Jason Bazinet. I do the Media and Entertainment coverage here at Citi, and I'm very pleased to have Nexstar Media at our conference. And with us is Perry Sook, who most of you know, founder and CEO of Nexstar. And Lee Ann Gliha, CFO. Thank you both for coming.

Thanks for having us.

We are -- I don't know when I'll do it, sometime during the presentation, but we're going to ask questions of you all, and you'll get to vote. So if you do want to participate in the poll just scan the QR code that we can log your answers.

So I'm going to start with a very simple high-level question. The sentiment across media, I would say, right now is generally pretty poor. We got cord cutting, streaming losses for a lot of firms, fears of ad recession, and yet, I look at the performance of your stock and it's done remarkably well. And so it's a high-level question, but can you just start with your philosophy strategically, how you operate the business and what do you think has allowed Nexstar to sort of distance itself from a lot of the, frankly, carnage that's in the broader media landscape?

Well, I think you have to separate linear television into two buckets. One is broadcast television and the other is cable television thing. And there is no question that cable television and the long tail cable network, companies that have long-tail cable portfolios, are under pressure. But I would say broadcast television, which is where we live primarily with what we do, is -- again, we just put up another record quarter, last quarter of net revenue growth. And there is no question that I feel like we are in an advertising recession, have been for about 1.5 years now. Just look at the national piece of our business, which is down double digits, that's the definition of an ad recession, but advertising is cyclical. If anything, we're seeing kind of the declines become less. And so that in and of itself could mean we're working our way out. But we are primarily broadcast, right? We have a broadcast network. We -- a small one, The CW. We have the largest portfolio of broadcast stations, which allows us outside influence and distribution negotiations, outside influence in our discussions with vendors, including networks and outside -- the ability to have outside influence with advertising community if we can bundle this all together, and the words that we keep hearing back from people are, you can do local activation at scale that I can't get from any other group. So there's a certain kerfuffle going on between a satellite company and a big content company right now, which, ironically, they have the smallest portfolio of broadcast stations and one of the largest portfolios of cable networks. And so it is not a surprise to us that they've -- the two parties are having a hard time coming to terms.

Okay. That distinction -- okay, can I push back on that just a bit, that distinction between cable television and broadcast television seems to be blurring as more of your revenues come from distribution fees, right? And so it seems like that's what you would call a distribution fee, a cable network would call an affiliate fee. So what is the -- I'll give you my hypothesis, that your affiliate fees have been underpriced relative to their true value or that's not true on a lot of the cable net side. Is that the simple distinction?

Yes, I think that's a good part, good analogy. If you sort of think about cable nets are overpriced relative to their viewership, broadcast nets are underpriced relative to their viewership. And so we've been able to kind of improve our position every single time we've gone back to the well in that regard. And I think we expect we will continue to be able to do that for some period of time. And so I think that's an important distinction, yes.

I read a piece of research, last night on the plane coming up, that has a projection of affiliate fees, cable networks, down 5% through the forecast period, which I think went through maybe '26, retransmission fees, which is broadcast, increasing 5% over that same period of time. And I think it's that divergence that you're seeing, and obviously, we get outsized returns, again, because of our scale fact that the predominance of what we're negotiating are for local broadcast stations and signals. And so I think we do see that continuing. We're not at parity. We're not at stasis to where we feel like we're getting our fair share. We're still working our way up.

That's going to lead to my first question. If I can figure out technologically how to make this work. Let's see if I can do this. So question -- yes -- Okay. I expect Nexstar's distribution fees to have a 3-year revenue CAGR of low single-digit declines, flattish, low single-digit growth, mid-single-digit growth, high single-digit growth, '24 to '27?

We get to vote too or?

You can, if you have a phone, you can scan the QR code and log in your answer. We aren't having a chance to vote. I can't figure out how much long time.

I feel like we're on like a talk.

Is everyone done voting? Yes. Okay.

Low single-digit growth.

Okay. 80% low single-digit growth.

I bet the over on that.

You bet the over so you're more like in the green bucket. All right. That's great. So let me ask a question about the two networks that you own. The CW, you described it as a small network, and I also want to ask about NewsNation. So CW, I think last year, plus maybe $260 million of EBITDA, and you guys have said, I think, breakeven by early '26 is sort of the glide path. My question is, can you talk about how you're going to achieve that? And are there sort of any undulations that the street should be aware of as you save money by getting rid of sort of the scripted programming and stand up sort of sports rights? I think you have a fair amount of sports rights now that are getting ready to kick in.

We do, if you look at the upcoming fall schedule, which is the here and now, we have gone from 100% entertainment programming on The CW at the time of acquisition to now 46% sports, 54% non-sports programming. So that's a remarkable pivot in 2 years' time. And by the way, we're programming an additional -- 400 hours more than just the Monday through Sunday, 2 hours a night of entertainment. And we're doing it all in for less than half the cost of what The CW was paying to program those 14 hours. So the cost piece has been pretty dramatic, and it's been not renewing shows that were too expensive and weren't making any money, renegotiating shows and negotiating the license fee down for -- in exchange for carriage, increasing the sports portfolio and doing so economically. And so there's still more cost to come out of the programming side of the ledger. There's also cost to come out of the SG&A side of the ledger there as we rightsize the organization. Then there's also for the affiliates that are not owned and operated Nexstar stations. I guess you could even consider us a Nexstar. As we prove our worth with more sports programming, growing the audiences, CW's entertainment audience or primetime audiences has shown now 3 consecutive quarters of growth under our watch. That's before the bulk of the sports programming has kicked in, the more worth we make to our affiliate partners, the more we can ask them to contribute in terms of reverse compensation. So those are the building blocks that are playing out in real time.

Okay. Anything you'd add, Lee Ann, to that?

No. I think from a timing perspective, we've talked about that we expect to generate an incremental more than $100 million of savings this year. Most of that will be done by the end of the third quarter because if you think about just from a timing perspective, the fourth quarter of last year was the first quarter we could put our programming on and that weren't burdened by the historical original programming slate that was already in process by the time we made the acquisition. So the fourth quarter is going to be the first quarter, we're going to have some of this incremental sports programming come on. And so we may give a little bit back of the savings, but we'll still end up at the more than $100 million of savings this year. And then I would say in the next couple of years, as Perry said, those more cost to come out of the business, but then also we expect to have improvement on the distribution line and on the revenue -- the advertising revenue line to kind of fill those gaps.

I will mention that in the upfront market, we take a tiny sliver of that with our two networks, our cable and broadcast, we have a dollar volume increase over last year. Now that's because we've been selling a growth story at The CW in terms of hours programmed as well as increased audiences and a growth story in terms of increased audience at NewsNation. Now, all being said, we take a small piece of the upfront dollars. But again, we're selling growth in a challenging and down market, but our dollar yield will be more than it was a year ago. And I think we're going to be one of the few folks that can actually say that.

When you say dollar yield, are you talking about the dollars that were committed in the upfront to The CW is up year-over-year? Or you're saying when the full year is...

No, to the dollars committed in the upfront, will be up.

Okay. Perfect.

The other thing I would just add, which I think we'd be remiss if we don't add is that, while we talk about the network, we like to think about the benefit to Nexstar as a whole from having The CW as part of the portfolio. And one of the things that we've been able to also achieve is we've -- you've seen a number of press releases where we put some of the affiliations back on our stations. And that's beneficial to us as a company because we're able to monetize that from a distribution perspective and an advertising perspective on the station side of the house. And so while we're all focused on getting the network to profitability, believe me, there's lots of profit that's already been generated on the other side of the ledger.

So what were -- those were TV stations that you owned that were affiliated with a network other than The CW that's shifting their affiliation to The CW?

In some cases -- for the most part, it's station or affiliates that were on what's called the [ DOT2 ], so they were on a secondary multicast tier. So we put them on our [ DOT2 ]. In some cases, we had an independent. We made it The CW affiliation, it just a mix of things.

Okay. Let's see if I'm technically adept enough to ask that second question. Let me get rid of this one, all right. Okay. I expect The CW, and here, we're just talking the network, to achieve EBITDA breakeven in 4Q '25, 1Q '26, 2Q '26? Nexstar is going to have trouble getting the network to achieve profitability.

Why would that one be green?

Yes, I was going to say, you got the [indiscernible].

I think of success is [ Marine ]. That's not success.

Okay. Here we go...

Here we go. No.

Okay. So let's see if I can read this. So...

Half of the people...

1/3 said by 1 quarter '26. About 15% said 2Q '26 and half of responded said you're not going to achieve profitability at the network. You'll take the over on that too.

Yes, don't bet against us.

So far, we've done what we said we were going to do.

All right. What -- can I talk about one of the other networks, NewsNation. This was WGN, right, in the old days?

WGN America.

Right. You stood up NewsNation. Can you just start with like what was the thesis? What was the -- is the core thesis just news and sports as sort of the future, that's where most of the...

Yes. I mean it started really as we had a -- we looked at it as an asset of the company. It's a general entertainment network -- cable network that was fully distributed and had some distribution revenue. But very early on, and I think we learned what now everybody knows in talking to distributors, they said, listen, I've got literally 90 general entertainment basic cable networks. You're not differentiated. It's a fine network, but I really don't care -- if I carry it and I [ assures ] I don't want to pay for it if I do. And I'm thinking, okay, well, what is their not 90 replications of and it was news, right? And so we said, listen, we've got the largest local news gathering organization in the country in our local television station newsrooms, 5,500 employees that generate content every day. So we can pivot this to a local news network that gets a lot of its content from our stations in the middle of the country. We can go after the center of opinion, and my view is you've got 60% of the country that kind of thinks alike generally, we could agree on more than we disagree on. But the discussion, the debate and the political process has been hijacked by the 20% of the extremes that are on the left and the right. And I said, we need to provide a voice to the middle. And so that was -- that became our mission. It started as a counter-programming strategy. It became our mission, has now become our passion project in terms of building this out. So we just turned 4 on Saturday. And so we've been on the air for 4 years. We're fully distributed 24/7. We advanced our 24/7 coverage, which was filling out the weekends earlier than expected. We wanted to do it in October, we did it actually in June. And if we had not done that, we would have been airing Blue Bloods reruns when former President Trump was -- the attempted assassination, when current President Biden announced he was not going to seek reelection. And we were in live coverage. And quite frankly, some of the other cable networks were in taped programming at that time. And so we're proving our worth. When we started the company, I spent $20 million in an awareness campaign to let people know what NewsNation was 4 years ago. So we launched with about 11% awareness in the country. We're now at 36% awareness in the country of what NewsNation is. But that means we still need to knock on the door of 2/3 of the homes in the country and introduce ourselves. And so it's all about awareness, growing our awareness scores and then growing our audience because the advertisers follow the eyeballs. So it's a profitable network because of that embedded distribution revenue that we built on. And we just took the money we were spending on syndicated product. And when those contracts expired, we just cycled that right around into journalism, and we proved our thesis that we could program this as a 24/7 cable news network without increasing the operating cost of what it costs as a basic cable entertainment network. And so success for us is where CNN is today in terms of what it's worth as an operating business or Fox News is today. And anywhere between there and where we are today is success because it was all organic growth.

That's great. So you mentioned some of these situations where you've seen Disney in the disputes with distributors where the content has actually been taken down. I think we're in the middle of one of those right now. But what does that speak to? I mean we've seen takedowns. I mean we've seen disputes happen and takedowns happen. In the old days, they would last 1 or 2 days. It feels like we're now in a period where they can last longer, which, I guess, speaks to the contentiousness inside the negotiated room. But what are the implications of these takedowns for your firm, if any?

Yes. I mean, look, we've dealt with these blackout periods for a long period of time. We had one last year with DirecTV. We had one in 2019 with DirecTV. So this is a tactic that we've seen happen. And yes, look, it is a bare-knuckle brawl type of negotiation, everyone's saying things that are going to benefit their book of business and to try to accomplish this. I think we would -- we're going to continue to be as difficult or as aggressive as a negotiator as we've historically been to try to get what we think is right. We've said this before, we think that we are underpaid relative to the viewership we bring. I think the other benefit that Nexstar brings to the table in these negotiations is we have a fairly clean set of assets, right? We have the premium stuff. We've got the broadcast stations. We've got a broadcast network. We've got the premium type of content that the consumers want. If you -- we've done this analysis back last year, if you look at the top 4 rated networks, it's the 4 broadcast networks, of which we are one of the top 3 affiliates of, and each of those broadcast networks generates 4x the viewership of ESPN. So in terms of the leverage and the negotiating leverage that we've got, we've got a lot that we think we can bring to bear that benefits us. I think what you're seeing now with some of these Charter and DirecTV got discussions with Disney has been more about kind of that long tail and what the stuff that is maybe not as needed in terms of the consumer value proposition.

Okay. So I want to talk about the consumer value proposition. So I think you've suggested in the past broadcasters deliver 45% of the viewership but only collect 25% of the affiliate fees. I'll be honest with you, when I hear that statistic, it seems like a red herring to me. So I'll give you my -- I'll give you this dumb story. I was on an earnings call years ago and Zaslav at the time of Discovery said, "Here's the percentage of viewership we get and here's the percent of affiliate fees we get." And it was a huge disparity implying the affiliate fees were too low. And so I dutifully went, did a scatter plot of all the media companies, share of viewership, share of affiliate fees. And every company that was earning more in affiliate fees than viewership had sports, and everyone that was earning less in affiliate fees and viewership had no sports. So then I went down this rabbit hole of like, okay, but why is it that distributor is willing to pay so much for sports? And so I went and looked at all the Nielsen viewership and you looked at ESPN, and it was like very little of the viewership on average, but there were moments in time when everyone watched ESPN. So then I went back and I regressed, what is the affiliate fee that a cable network gets, measuring its peak engagement relative to its average. And the more peaky it was, the more the affiliate fee was. And I thought about that, I'm like, well, that makes perfect sense because I'm a distributor. What I'm afraid of is if I don't have that content, someone's going to leave? How do I measure my risk? It's the peak viewership. It's not the average viewership. So does that resonate with you that it's more about peakiness of network's viewership as opposed to the average? Or does that seem wrong? I don't know if what I said made sense to the audience.

No, I think it all makes sense. But where do most of the peaks occur, they occur on broadcast television, right? And not necessarily cable. And so yes, I don't think that that's totally irrelevant. I don't know why it would be a red herring, though, because the only thing that would limit us from getting to parity would be that we don't give 2 minutes an hour to the local MVPD to sell like we do with NewsNation. Charter and others get 2 minutes an hour of local inventory to sell. But again, if you don't have our content, it is a decidedly inferior value prop to the consumer that you're asking to underwrite all of this. And so, again, I go back to look at, we have the preponderance of our inventory is local broadcast, smallest piece of inventory we have is cable. And so anyone not in that position is going to have a tougher road. And I think that people need to start to pull the two apart. We're not immune from advertising. We're not immune to cord cutting. But we have some statistics, which Lee Ann can cite for you, where the bulk of the folks that are non-sports, non-news viewers have kind of already left the pay TV ecosystem. And so what's left is that -- and I take some solace in the fact that I think it's approximately 70% of the people over the age of 45 have a pay TV subscription of some sort. That people do want to come home, prop up, turn the TV on and watch something rather than have to figure out where to find it. They don't want to have to work that hard. So I think inertia is a generational thing, and it seems to be -- so we do see a flattening out of the attrition to kind of a baseline number. And then we'll see if there's new household formation, which has traditionally driven the penetration numbers of pay TV higher if that becomes a thing in our country again, then who knows if it could be an upswing. But we do think the rate of decline will moderate here probably in the next year or so.

Yes. Just -- I mean, just to that point, this is -- we pulled some of this data, we did some work with Altman Solon and I think you had them at this conference at some point. And they do a survey every year of video users of 5,000 people, and they've done it for the last, I think, 10 or 15 years. And so if you look at their data and you look at 5 years ago, what percentage of the pay TV ecosystem subscribers were sports and news fans. And so -- and just to kind of back up for one second, to your point about sports, the other piece that we offer is news and the overlap between what also does sports fans like, 90% of them also like news. And so it's a great sort of combination. So if you look at the composition of the pay TV ecosystem that was sports and news fans in 2019, it was 51%. Now what is that in 2023, it's 68%. And the actual quantum of sports and news subscribers has actually increased. Now if you look at people that are not interested in sports or news, so nobody is -- the content is not really kind of our bread and butter. That's decreased from 14% in 2019 to 4% in 2023. So a large portion of that attrition that's been happening has been the folks that are not interested in sports or news. So we're now at this point where are we at the point where those people are out of the ecosystem and maybe we have a moderation. You would look at that data and go, no, that sounds like that could be a thesis that would make sense. And then that's supplemented by the second thesis, which Perry talked about, which is the age, the demographics. So if you look, almost 2/3 of the pay TV ecosystem now is people that are 45 plus. And if you look 5 years ago, it was 59% of the population. So again, you've seen sort of the people that are the demographic, the younger demographic that wanted to leave have left. And so now do we get this sort of overlap of some firewalls here of declining sort of rate, we hope so. And we think that sort of will be a very good positive change for our business if that were to the case.

Okay. The thesis is all of the people that didn't care about news and sports and get satisfied with some streaming service more of those have left and therefore, fewer of them are still remaining in the pay TV ecosystem. It's interesting.

Yes. Yes. Right.

And I would just -- one last postscript for that is in the face of all the cord cutting that we've had recently, right, and cord-shaving, whatever, Nexstar has been collecting distribution checks from MVPDs since 2005, and we had -- we continue to post linear growth. So the rate of change in unit rate is, has been sufficient to outrun the decline in the universe, right? And that has been a part of our thesis. Again, why? Because the bulk of what we're negotiating for are broadcast stations and not cable networks.

Understood. Can we talk about reverse compensation for a bit. Can you just talk a bit about how your negotiations have evolved over time with the networks?

Well, we talk about a lot of things and a lot of it has to relate with exclusivity. And when you look at -- what does the network affiliation really mean? It means you have the right of first call, the first option for any network program that's broadcast. And if you reject it, they can shop it elsewhere, and you have geographic exclusivity to monetize that vis-a-vis distribution vis-a-vis advertising in your geographic area. The extent that the programming is less and less exclusive, it has less and less value to us. And I think we made that plainly known to all the regimes we talked to at CBS in our most recent negotiation, we're able to come to terms and I think you will continue to see that happen with our current negotiation with NBC. I mean it's a symbiotic relationship, right? They -- we delivered The CW network in 45% of the country, no other big 5 network has owned and operated stations that reach more than about 1/3 of the country. So if they want nationwide distribution, they have to contract with us, right? And so we each have things we want out of those discussions and the negotiations are how much can you achieve? And how much are you willing to live without? And that's on both sides of the table. And we've already had conversations with decision-makers at NBC, and they track very closely what happened with CBS and figure, they'll probably -- we will probably end up in the same place that we'll be able to reach agreement.

Okay. And what about the other two you didn't talk about, Fox and ABC?

Those are next year.

Yes, those are not until '26. We just did those.

The audience have any questions for Nexstar? If you do, raise your hand, we'll get you a mic. Okay. Let me -- I want to ask if you'll indulge me for a bit to just educate us on the distinction between in MVPDs and virtual MVPDs. So can we just start by maybe you giving us the distinction just to make sure we're all on the same page?

I don't see a distinction between MVPDs and virtual MVPDs. So my answer is pretty short on that subject. If it walks and quacks like a duck, I think you pretty much assume it's a duck.

Okay. So I -- you can correct me if I'm wrong. When the '92 Cable Act came out, there was no such thing as a virtual MVPD, like YouTube TV or Hulu TV, and so the language was written just about MVPDs, right? And then as virtual MVPD showed up, there's some sort of distinction that some of the players in the ecosystem are making. Is that sort of I would say follows this letter of the law, but maybe not the spirit of the law. Is that the right way to put it?

Well, YouTube now from a subscriber basis, refers to themselves as the third largest MVPD, right? And so the differences in the distribution mechanism, right? You're not using either fiber copper wire or satellite to distribute the signal you're using some sort of digital internet distribution, but you're basically doing the same thing. So it's a distinction without a difference, in my view, and trying to convince the regulatory authorities about that has become a big part of my job. And then so when the virtual MVPDs came on the scene and came into existence, they were nothing, right? They had no subscribers. The network said, listen, this is new technology, we'll negotiate on your behalf and then we'll cut you in for a piece of what we negotiate for. And at the time, most station group operators didn't see it as a thing and said, okay, big mistake, big mistake, right? Because what it allows and it affects companies like ours is, they're negotiate on behalf of all of their freight, everything they want the virtual MVPDs to clear. And then we get an opt-in, do you want to be part of this as a CBS affiliate, yes, no? Well, I can't talk to them about all the freight that I want to clear, right, which might be NewsNation, which might be Antenna TV, which might be a third digital multicast channel or something of that sort. So we've been able to get clearance of our multicast and our CW and our NewsNation product, literally by stressing that we won't opt into this on behalf of CBS or whatever because we don't have the contractual rights to negotiate on behalf of any network affiliates, except for CW because we are the network. So I would argue it has retarded the growth of the virtual MVPDs because of this tortured process. It's not a market-based negotiation. But again, the distinction, I think, has very little difference in today's world.

Is there -- do you think there's a potential for this distinction to be recognized in law? So there's some sort of -- something that puts you back in the driver's seat, if a consumer goes out and wants to buy a virtual MVPD, you're actually negotiating as opposed to YouTubes of the world or the Hulus of the world? Or is that a far-fetch notion?

Well, no. I mean I think that the problem is, is that Republicans would see this as additional regulation on virtual MVPDs. And there's a third rail of no additional regulation. Democrats would be -- might be for it, but in the scheme of a larger, who owns YouTube TV, okay? It's one of those big 3 A's out there, right? That in the solar system of market cap, those are Suns and we're all smaller than Pluto, right? So -- and if Congress can't figure out a way to regulate big tech, maybe it needs to deregulate broadcasting to preserve the local journalism, I would argue is in the best interest of the Republic.

That's interesting. I like that answer. Okay. I'm going to shift unless you have anything to add Lee Ann?

No, it's good.

Okay. On political advertising, when you mentioned earlier, you thought we were already in a recession, an ad recession, given the weakness in national. And we're coming out. And I think if I ask most people on the buy side, they would say, it hasn't even started yet. Like we might enter one. So my question to you is, do you really feel like we're in a national ad recession today?

I think we have been for 2 years...

2 years?

Yes, absolutely. If you look at our numbers.

And if you look at double-digit declines in national revenue, that's the definition. Double-digit decline for the sustained period would be my definition of an ad recession.

Can I push back?

Sure.

I could say you could see declines in national advertising because there are secular changes that are going on with national advertisers that are preferring alternative ad mediums to television but it's not a macroeconomic recession. It's a secular shift.

Well, first of all, all of that additional inventory has very little individual audience to it. I think that what it has done is that it has upset the supply-demand equation if you've got static demand and a whole bunch of additional supply.

You're talking connected TV now?

Yes, connected TV, Amazon and the other inventory that was added in market, Netflix. Additional demand static supply -- static demand additional supply craters pricing, right? And I think you saw that happen in the upfront primarily in areas of national digital and it affected the cable networks that are also sold kind of on a tonnage basis, right? So I think that's -- it had -- it took the floor out from underneath pricing. But I kind of smiled when I heard that candidate Harris was going to spend more money on digital than she was on linear TV. That may be a strategy. I'm not sure it's a strategy that gets you elected, and we'll see if that strategy holds throughout the campaign.

Okay. I'm going to do a pole question here. So this is a macroeconomic one. In the next 12 months, the likelihood of the real recession is less than 25%, 25% to 50%, 50% to 75%, 75% to 100%?

Again, the worst outcome is in green. Graphic card has must been compromised.

That's why it's happening. Okay, here we go. Evenly split, so 1/3 less than 25%. 1/3, 25% to 50% and 1/3, 50% to 75%. No one at the 75% to 100%. Go ahead.

Listen, there's some things going on in the economy that affect consumer spending, which I think drives the economy, right? I read a piece over the weekend that Fidelity reported the number of 401(k) millionaires has increased 31% over -- year-over-year. But yet, you talked to people in Middle America and in the lower income group buying a bag of chips for their kids has become a luxury purchase because they're so straight -- even though rate of inflation is coming down, the prices are still high. So -- and wages, while they've grown, they haven't kept up with inflation, and I don't think that's been talked about enough. People in this room are somewhat immune to that equation, but a lot of America is not. And so I do think with credit card debt now north of $1.1 trillion, which is the highest number since the Fed began keeping score in 1999, that the stimulus checks and the PPE loans and people pretty much spent that. And so I think you'll see consumer spending patterns shift. And the Fed always, in my view, I'm not an economics professor, but they react too much and wait too long, and I think we're right smack in the middle of that right now. So I think you can get to a soft landing or a less bumpy landing, but you're going to have to start to be more aggressive because high interest rates and high prices and blow out spending bills that have caused this inflation, that's what needs to be dealt with.

Makes perfect sense. So I'm going to ask a question on M&A. So you -- I think everyone would agree that it looks at your track record, you've been phenomenally successful with M&A in the past and generated a lot of returns for shareholders. It seems like we're in an environment where more M&A just in general, is more difficult given the way the federal regulators are looking at things. My question is, do you agree with that, that more M&A is going to be difficult for you either given sort of the rules that exist today or fears about doing something else from the M&A side? And if it is more difficult, what do you think you'll do with your cash flow you guys generate a ton of cash?

I'll speak to the first part of that. I'll let Lee Ann speak to the second part of that. There's no question. Listen, if two grocery stores that operate on a 1.5% margin can't merge. If two bankrupt airlines can't merge. Listen, there's M&A that's out there in our space that was actionable, is actionable from a scale perspective, but we look at it and say, well, if we know that we could not get this transaction through the regulatory authorities today, then do we really want to spend time, money, attorney fees, ticking fees on loans in the hope that there's a single point of change, which would be a change of administration that might allow this to happen, that's betting too much on a single outcome. So a long way of saying we agree totally that M&A in every business, including ours, is challenged, anything at scale. Now we bought a couple of stations this year. We have a couple more in the hopper that we'll bring out here as time goes on, but they're tack-ons. They're not going to move the needle. So I think scale M&A is challenged, not only because of the cost of capital, the higher the cost of capital, the lower the quantum of capital that we are willing to take on. But I think I'll kick the rest of that answer in terms of capital allocation to our very accomplished CFO.

Yes. And look, I think from that perspective, we -- what we [indiscernible] the remaining amount of our free cash flow then. We have some requirements, we've got about $125 million a year of debt repayment that we have to do. We've got, I think, $200 million, $220 million of dividends that get paid, but then that leaves a lot of cash left to hopefully, if we had M&A to do that, but there isn't. And so that means we've got to use that capital either to optionally repay additional debt or to buy back stock. And we've been -- we look at that on a couple of different bases. We look at it on a free cash flow basis. I'm a purist, I tend to look at it on that basis and buying back our stock at a 20% -- north of 20% free cash flow yield is very, very accretive, and that's where we spend the lion's share of our additional capital, but we have some people that value our stock on an EBITDA multiple basis. And given our debt to cap, it's almost as accretive on that basis to pay down debt. So we're going to look at a mix of those things, but I think more heavily weighted to the repurchases, and we also are mindful of looking at the -- there is a discrepancy in terms of our odd and an even year cash flows. And so trying to kind of maybe streamline that a little bit over time is a focus for us as well.

When you say streamline it...

Well, just -- historically, what we've done is chase the stock price up as we had more free cash flow, in this -- and we were -- political year and buying back stock at a higher price, it's probably better for us to kind of conserve some of that cash, maybe pay down a little bit more debt in a political year than we otherwise would. So we could have more cash than in the odd year.

That makes perfect sense. Perry, Lee Ann, thank you so much. This was great.

Thanks for having us.

Great. Thank you.

Yes. Yes. Absolutely.