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

Yes. So fourth quarter, just to remind people, was also positively impacted by the lack of crowd out. So in political years, in the third and fourth quarter, mostly the fourth quarter, there's a negative impact on our sort of traditional nonpolitical advertising revenue because we're just allocating so much to -- of our inventory to political. But what we saw kind of in the back half of the quarter really was more later buys than what we had typically seen, and we've seen some large advertisers kind of come back in the market that we weren't expecting. And we really saw kind of across the board, positive momentum across all of our different advertising categories. In the first quarter, we anticipate flattish in terms of the overall growth or lack thereof in the first quarter, which we still think is a positive signal. We haven't really had anything major be outliers with respect to categories. We've got -- auto is doing -- is less of a negative impact, and we've been really working hard to develop our digital solutions for the auto category, which have offset some of the pressure on the TV side of the business. So we're feeling like there's not really kind of any major standout positive or negative with respect to categories, but we're feeling that the market is just fine in the first quarter.

We obviously have a midterm election coming up later this year. That should be a big tailwind as usual. Can you remind us what you're expecting for this election cycle and what share you think Nexstar can capture from within the overall pool?

Yes. So our political expectation for the year is that we will do like a low double-digit percentage of whatever is ultimately spent on broadcast television. We can, we have -- because our portfolio is so broad, we generally are in 80% to 90% of the contested election markets. You pretty much can be sure that we'll collect a decent percentage of the political advertising because no matter where there's going to be a contested election, we're usually there. And so in the past few election cycles, as I mentioned earlier, we've generated about $0.5 billion of incremental revenue. And so we'll -- what we end up doing this year will be dependent on what actually gets spent in broadcast.

You mentioned digital a minute ago. That business grew high single digits in 2025. And you said you expect digital advertising to surpass your national business this year. Can you provide some more detail on your digital strategy and the factors driving growth in that business?

Yes. So digital, if you think about it, is really broken down into a couple of different components. We've got our sale of digital inventory that is our O&O inventory. So that will be our websites, our apps, the CW app. It will be the NewsNation app. It will be videos that we are able to monetize on third-party platforms. And then the other component of our digital revenue is selling third-party services. So to the extent that we can utilize our really great sales force to sell additional inventory, we've got an advertiser, we've got a relationship with them. They love the news product, but maybe they want a little more entertainment or they want something else. We can go get that and create it as an audience extension strategy for them. And that business has been really something we've been leaning into and at the local level has been growing kind of high single, low double-digit rate of growth, which is really kind of benefiting our overall digital breadth. That's a little bit counterbalanced by we've had some reductions at the CW, and that's by design because we've changed the programming there to be more focused on broad-based and sports programming, which is not as attractive in the OTC environment.

TEGNA has its own digital business, Premion. I know it's early, but I wonder how you see that complementing your platform.

Yes. So I think what's interesting there is right now, we use a third-party service to access third-party CTV inventory. They obviously own Premion and they have their own DSP, which we think is -- can be competitively advantageous. And so we think by putting our inventory together with TEGNA's inventory in the local market could really help us be more focused on that segment of the business, reduce the ad tax because we've got our own DSP and really drive growth by providing a bespoke service to our customers.

You recently guided to around $2 billion of EBITDA this year. We talked about some of the revenue drivers, but it sounds like you're working on some initiatives to bring down expenses as well. What are some of the areas of the business you're focusing on? And can you help frame for investors the potential impact from these initiatives?

Yes. So we are -- every year, we kind of just relook at our budget and lease. I think we're a little bit unique in that we do almost like a bottoms space zero-based budget where we kind of go back and we say, okay, can we be doing things better? What are we doing with spending with these vendors? How can we really kind of rationalize our costs and make sure we're doing the things that are the most efficient for the company. And so the last couple of years, we've taken a couple of different actions to really try to benefit from the scale that we have and really take advantage of looking at where best practices are. So this year, we're doing a few things like we have some very, very large organizations in our large markets that don't probably need to be as large as they are in order to generate the revenue that they've been able to generate. So we've taken some actions there. We're doing some additional consolidation of our marketing departments. Do you need to have creative people in every single market? Or can they be in the hub and so these are the types of things that we're realigning the sales compensation a little bit to be more focused on what driving and being compensated on what we are trying to achieve. So there's a variety of different actions there. And we do expect our overall expenses. So if you take -- I'm just -- when I say overall expenses, I just mean everything, direct ops, OpEx, SG&A, corporate, amortization of programming costs to be down, not a huge amount, but low single digits year-over-year in 2026.

We're also using AI in early days to reconcile payments and invoices. We think we can use it to streamline the research function and journalism to bring productivity enhancements, if you will, that ultimately could lead to either a rotation of jobs into either revenue or content creating as opposed to support functions, but also just overall efficiency of transaction friction and things like that. So early days, we're also trying to develop a tool that will allow a reporter while he or she is creating a story that would say, have you considered this context, this appears to be -- this adjective appears to be biased in one way or the other and just something that could give the reporters more to think about, not to dictate what they write, but to say, is crime up or down in D.C. Well, it depends on what statistics you look at and how you frame the discussion, again, to drive toward that North Star in the company, which is unbiased and objective reporting. And so those are all things that are productivity enhancements that are part of this overall impetus to continue to do things as efficiently as we can while maintaining and improving even the quality of what we do.

It's been a few years since you acquired the CW and you've since revamped the network's programming strategy. Live sports now account for almost 50% of the slate. At the same time, you've reduced operating losses in that business pretty meaningfully. Can you reflect on the progress you've made with the CW and talk about how that asset fits into the broader Nexstar portfolio?

Sure. Well, our interest in the CW was -- started with the fact that we were the largest distribution outlet for the CW. At that time, 35% of the U.S. was delivered by Nexstar stations. That number is now 50%. So for us, it was anything that can improve, the CW can improve the fortunes of those stations. And I think that's a fundamental difference. We approach the network is how can it do more for our stations as opposed to a network top-down approach. And so in addition to the distribution value that comes from being a part of the CW and Nexstar, we've given 800 hours of sports to stations that have never had -- been able to compete for sports dollars in their marketplace either locally or nationally. I think we've got most of the embedded overhead costs through the system. There's some money that was spent early on and prior to our arrival on content to drive app views for the CW that proved to be unprofitable. And we're -- as those agreements unwind, we're kind of letting them go. I think at this point now, it is improving distribution, improving distribution revenue. We're not on in this hotel, for example. It is looking for opportunities to expand our sports portfolio and continue to refresh that product. Selling sports better. I mean we know what the gap analysis is between the number of eyeballs we deliver among all of the networks and the number of dollars we receive on a percentage basis. And our job is to close that gap and then continue to drive the top line. So most all of the high dollar program expense is through the system. We're in the last year of a legacy agreement. And what we're finding is the things that perform very well for the CW for us in terms of building a linear and digital audience are obviously sports on the linear side. And the game shows. We are doing trivial pursuit and Scrabble, and Scrabble is now hosted by Craig Ferguson, who used to host the late show on CBS and his hosting ability as well as his name recognition has helped us to grow that game show now to 0.5 million viewers every time it's on. And it didn't hurt the fact that coming out of an ACC football -- I'm sorry, a NASCAR race, we aired an episode of that as the prime time show started our night that night. So that flywheel is beginning to work to our benefit. So the game shows, our police shows, obviously, wrestling works very well on Tuesday night. And so just building those green shoots that we can continue to build on. And so the bar is higher now. It used to be 3 -- 300,000 was a good night for the CW in terms of total viewers. Now anything less than 0.5 million is kind of a disappointment for us internally. And so we need to continue to raise that bar because there are nights that we beat the big 4 networks or one of the big 4 networks in an hour and I think all of last year, that happened a few times. It's happened in 2025, like maybe 5 dozen times. And so our job is to make sure that's a much more regular occurrence. And that's just trying to grow our audience in a mature environment. And with both NewsNation and the CW, we've been able to architect a story of growth in a very mature operating environment. So we're kind of a positive outlier to that effect.

Speaking of NewsNation, in recent years, you've achieved wider distribution and healthy growth. Can you talk through some of the recent wins for this business and your vision for NewsNation going forward?

Sure. We just recently, in February, expanded our live programming to 18 hours a day, Monday through Friday. So we're only in repeats overnight like every other cable network is, and we cume those talk show numbers, and that's what we sell into the advertising marketplace. Same story there. If you look at February over February, we're up 40% in total viewership and in the 25 to 54 demographic. And we keep track of the number of times that we beat one of the legacy cable news networks. And again, I think in 2024, that happened maybe 30 or 40 times. In 2025, that happened over 240 times. And so it's, again, green shoots showing our opportunity to continue to break through. I think it's our objective reporting, our unbiased reporting, the fact that we're live in news on the weekends when some of our more mature legacy competitors are in taped programming. So when things have happened on the weekends, we've been there live, and we're seeing that people are turning to us now for breaking news. And our audience grew during the State of the Union. They didn't abandon us for a legacy cable news network. So again, our job there is to continue to grow that audience. If I can do -- put stack 40% on 40% for a few years, and now we're rivaling some of the networks that have a 25- to 50-year head start on us with building an audience with viewers. So we're very pleased. I'd say I've made a career being often pleased but never satisfied. And that's the same for NewsNation. But I will tell you that we are very pleased at the growth that we're seeing recently, and our job is to make sure that streak continues.

It sounds like the NFL negotiating window could be opening up later this year. And given how important that programming is to the broadcast ecosystem, I wanted to ask if you had any thoughts or predictions on how that might shake out.

Well, sure. I think that the NFL is going to get their collective bargaining agreement done, so they know whether they have an 18th game to put into a package or whatever. Having said that, I think that each of the legacy networks has a perfectly good binding contract through 2029 -- [indiscernible] season. And so I think there's no catalyst to tear that up unless there's an incentive to tear that up. And I have been negotiating NFL and what that means to Fox affiliates or for Nexstar since the first NFL deal on Fox for the 94 season. And there's always -- we're paying for this, we want you to help. And affiliates have contributed roughly in totality, 15% of the right speed that the networks paid for the NFL. Collectively, the affiliates have deferred, which kind of tracks what we get about 10% of the inventory in an NFL game. So I don't see any of that changing. And so I think that in an ordinary course negotiation for the NFL, they begin to talk about a new contract 18 to 24 months before the current contract expires, which means for a '29 expiration, they begin to talk about it in 2027. So maybe we're 6 months early to when that would normally start. So I don't know what the outcome will be. I would predict the outcome would be that the big 4 networks would retain their legacy packages that games could get skimmed out of that, not reducing the total number, but CBS on the 1:00 game on a Sunday could have 7 different games going out to different parts of the country or 5. Maybe now it's 4 because one of those went into an international package that comes on the air at 9:00 or 8:00 on Sunday morning, which is hard for local stations to clear because they're in news or contracted religious programming or something of the other. But I think the downstream effect is if the costs go up on a step function to the networks that each of them may be looking to rationalize their entire sports portfolio to pay for that, and that could create opportunities for the CW and our local stations. And this happened with NBC during the 2024 Summer Olympics from Paris that they literally had no room for some of their NASCAR telecasts. And so they sublicensed to us on a very attractive basis, 7 races that we were able to use to get NASCAR up and running on the CW. And so whether it's through the linear packages or the digital packages, I think you'll see more opportunities for us to co-venture, perhaps joint venture, perhaps windowing certain assets that creates more original supply for the CW and our local stations, both of which could be a downstream benefit to Nexstar.

And to wrap up, I wanted to ask about ATSC 3.0. It represents one of the more exciting levers for longer-term growth for your business. Can you talk about the progress you've made with ATSC to date and how you think about the path towards commercializing that opportunity?

Well, we are receiving money for commercialization of our spectrum right now. We're part of a 4-company consortia called EdgeBeam Wireless. We have a very good CEO of that business that is based in Boston, and we're receiving money now for commercial uses of our spectrum, high-speed data transmission. And it's not life changing. I wouldn't buy everybody in this room lunch at this point, but it's -- money begin to flow. And there are any number of proofs of concept out there, whether it's lower-cost 5G network replacements or location-based, whether it's precision agriculture or fleet management using our GPS to auto correct a terrestrial GPS system, connected car entertainment and navigation. And so there are any number of those kinds of applications. And I think as the FCC moves toward first eliminating the simulcast requirement, which we're there on that, I think, eliminating ultimately the 1.0 carriage requirement, which would then cause the set manufacturers to have to design the 3.0. I think right now, Sony is the only set manufacturer that puts 3.0 tuners in every one of their sets. It could help bring the consumer market along. But quite honestly, the monetization opportunity is in B2B and not necessarily B2C. I think we could provide as an industry, a backup GPS system for the United States. And we're the largest industrial and maybe even the only industrialized country in the world that does not have a backup GPS system. Now most other countries have two satellites in the air, one primary, one backup that could both be taken out by the same dirty bomb. If we were providing a terrestrial-based system, it's, we think, superior, and we've done a lot of work on, GPS is all about timing. And so we have our own atomic clock, and we're in sync with NIST, which is in Colorado with one of our full power stations. That's a translator to our Denver stations that we're using to and we've shown that our performance is, far exceeds the standards for GPS. So this is a viable alternative, a national benefit, the President and the Department of Transportation, I think even DoD have all weighed in saying a backup GPS system is the national benefit for the country. It's now just campaigning to get our technology and our system approved and that not only would we be paid for it like the current GPS system is paid for, but we would provide a national benefit, a public interest benefit by using our spectrum assets, which I think is obviously in the country's best interest.

That seems like a pretty good place to wrap it. Thanks, guys.

Thank you for having us. Appreciate it.

Appreciate it.