Acquisition Overview - Nexstar Media Group is acquiring Tegna for $6.2 billion in cash, creating a significant local TV broadcasting entity as the industry anticipates regulatory changes to facilitate consolidation [1][12] - The acquisition values Tegna shares at $22 each, reflecting a 31% premium over the company's average trading price prior to the announcement [1][9] Competitive Landscape - Nexstar outbid rival Sinclair, which had offered between $25 and $30 per share, despite Sinclair's lower market capitalization of $1 billion compared to Nexstar's $6.3 billion [2][3] - Sinclair is burdened with over $4 billion in debt, complicating its ability to pursue major acquisitions [3] Strategic Rationale - Nexstar's CEO Perry Sook emphasized that the deal aligns with the Trump administration's deregulatory policies, allowing local broadcasters to enhance their reach and compete against larger tech and media companies [4] - The merger will expand Nexstar's presence in key metropolitan areas such as Atlanta, Phoenix, Seattle, and Minneapolis, thereby strengthening its national coverage [4][11] Operational Synergies - The combination of Tegna's television properties with Nexstar's extensive station network is expected to reinforce Nexstar's dominance in local broadcasting [7] - Sook highlighted Nexstar's successful acquisition history, including the purchase of Tribune Media, and outlined strategies to enhance local programming and achieve cost efficiencies [7][8] Industry Context - The deal comes at a challenging time for traditional linear television, as broadcasters face competition from streaming platforms and tech companies for viewers and advertising revenue [12] - The merger is seen as a means for stations to better compete in a fragmented media landscape [12]

Group 1 - Sinclair Broadcast Group Inc. is launching a strategic review of its broadcast business, which may lead to a merger [1] - The company has engaged in discussions with potential merger partners, although no deal is guaranteed [2] - Sinclair is also considering spinning off its Ventures business, which includes the Tennis Channel, with board approval already obtained [2] Group 2 - The media industry anticipates deregulation under the Trump administration, particularly in the broadcast sector, potentially leading to increased mergers and acquisitions [3]

Financial Data and Key Metrics Changes - Total advertising revenue was within guidance range, with core advertising revenue up year over year on an as-reported basis [11] - Distribution revenues were below expectations, but still up year over year in the first half of the year and flat in the second quarter [11][30] - Adjusted EBITDA was comfortably above the midpoint of guidance range, driven by better-than-expected media expenses [11][31] - Consolidated media revenue was $777 million, slightly below guidance, reflecting expected industry dynamics in a non-political year [30] - Consolidated adjusted EBITDA was $103 million, exceeding the midpoint of guidance, but down $55 million year over year [31] Business Line Data and Key Metrics Changes - Local Media segment delivered adjusted EBITDA of $99 million, with distribution revenue of $380 million, down 1% year over year [28] - Tennis Channel generated adjusted EBITDA of $13 million, with total revenue of $68 million, up 1% year over year but below guidance [28] - Digital Remedy, now part of Sinclair, recorded $38 million in revenue and $7 million in adjusted EBITDA in the second quarter [30] Market Data and Key Metrics Changes - Multicast networks experienced record growth, with significant year-over-year coverage growth among Nielsen-rated broadcast networks [18] - Core advertising revenue was down 4.7% year over year, impacted by macroeconomic and tariff-related pressures [29] Company Strategy and Development Direction - The company is focusing on transforming its ventures portfolio towards majority-owned assets for greater operational control [11][14] - Sinclair is actively pursuing M&A opportunities following recent deregulation rulings, which are expected to enhance growth and synergies [20][21] - The company aims to leverage its strong balance sheet and financial flexibility to capitalize on M&A activity in the sector [27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic uncertainties but noted signs of improvement in certain advertising categories [19] - The regulatory environment is viewed positively, with recent rulings expected to provide growth opportunities [21][24] - Management expressed confidence in the company's ability to navigate challenges and capitalize on upcoming opportunities, particularly with the return of sports programming [54] Other Important Information - The company appointed a new CFO, Narinder Sahai, who brings extensive financial leadership experience [5][7] - The acquisition of Digital Remedy for approximately $30 million is expected to enhance Sinclair's capabilities in omni-channel media activation [12][30] Q&A Session Summary Question: Regulatory commentary and potential M&A activity - Management indicated a strong position for potential M&A activity following recent deregulation rulings, which are expected to accelerate growth opportunities [20][50] Question: Subscriber trends with virtual distributors - Management noted that a significant virtual MVPD lost subscribers in the second quarter, but expects a rebound with the upcoming football season [43][44] Question: Contribution from announced deals and guidance on retransmission - Management expects tens of millions of dollars in additional EBITDA from upcoming JSA buy-ins and has adjusted retransmission growth guidance to low single digits [51] Question: Core advertising performance outlook - Management remains cautiously optimistic about core advertising performance, anticipating improved demand as sports seasons commence [53][54] Question: Guidance clarification and Ventures monetization process - Management clarified that the sale of four stations impacted Q2 and will affect Q3, and discussed the evaluation process for monetizing Ventures assets [58][62]

Financial Data and Key Metrics Changes - Total media revenue was in line with expectations, with adjusted EBITDA exceeding the high end of guidance by approximately $9 million [6][24][30] - Distribution revenues increased by $15 million year over year, although they came in $2 million below guidance due to subscriber churn not catching up [7][24] - First lien net leverage was 1.8 times, total first lien net leverage at 4.2 times, and total net leverage at 5.8 times as of March 31 [22][23] Business Line Data and Key Metrics Changes - Local Media segment saw core advertising down 4.5% year over year, while distribution revenues grew year over year but were slightly below expectations [24][30] - Tennis Channel reported revenues and adjusted EBITDA in line with guidance, with total revenues growing by 9% year over year [25][30] - Adjusted EBITDA declined by $27 million year over year, driven by lower core political and management fee revenues [26] Market Data and Key Metrics Changes - Core advertising revenues were within guidance range, down low single digits year over year, with expectations for growth in the upcoming political season [12][13] - Net retransmission revenues grew by mid single digits year over year, with a two-year CAGR expected through the end of the year [14] - Subscriber churn has moderated, with Charter reducing video subscriber discounts by 55% year over year [14] Company Strategy and Development Direction - The company is transforming its ventures portfolio towards more majority-owned assets and is focused on expanding its digital and streaming footprint [8][10] - Regulatory optimism exists regarding potential changes to outdated FCC regulations that could facilitate M&A activity and strengthen local journalism [19][20] - The company is committed to elevating women's sports through new podcast launches and partnerships [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding core advertising growth despite reduced visibility due to macroeconomic uncertainties [40][41] - The upcoming political season is expected to drive advertising dollars, with competitive Senate and gubernatorial races anticipated [13][24] - The company is positioned for growth with a strong balance sheet and a comprehensive refinancing completed [22][31] Other Important Information - Lucy Rutishauser, CFO, announced her upcoming retirement after over 26 years with the company, with plans for a smooth transition [21][20] - The company repurchased approximately $66 million in face value of STG's 2027 notes for $62 million in early April [23][30] Q&A Session Summary Question: Comments on FCC regulations and retransmission rates - Management noted that the FCC has the ability to regulate network-affiliate relationships and that capping retransmission rates could level the playing field [36][37] Question: Visibility on core advertising and economic uncertainties - Management indicated that while they expect core advertising to grow year over year, visibility has decreased due to uncertainties in key advertising categories [39][40] Question: Trends in automotive advertising - Management has not seen a significant bump in automotive advertising but noted that Nissan is planning an aggressive ad campaign [46] Question: Capital allocation priorities and debt repayment - The focus remains on deleveraging the local media group, with continued debt paydown expected [50] Question: Details on the Compulse acquisition - Compulse is described as a best-in-class platform delivering double-digit growth, with plans to scale it significantly [70][72]

Financial Data and Key Metrics Changes - Total media revenue was in line with expectations, with total advertising revenues within guidance range, excluding the impact from an acquisition by Compulse [5][11] - Distribution revenues increased by $15 million year over year, but came in $2 million below guidance due to subscriber churn not catching up [6][21] - Adjusted EBITDA exceeded the high end of guidance by approximately $9 million, driven by better-than-expected media expenses [6][25] Business Line Data and Key Metrics Changes - Local Media segment saw core advertising down 4.5% year over year, while distribution revenues grew year over year but were slightly below expectations [21][23] - Tennis Channel reported strong performance with revenues and adjusted EBITDA in line with guidance, growing by 9% year over year [23][70] Market Data and Key Metrics Changes - Net retransmission revenues grew by mid single digits year over year, with expectations of a two-year mid single-digit CAGR through the end of the year [13][21] - Subscriber churn moderated slightly, with Charter reducing video subscriber discounts by 55% year over year, indicating success in reducing churn [13][21] Company Strategy and Development Direction - The company is transforming its ventures portfolio towards more majority-owned assets, with a focus on strategic acquisitions and partnerships [6][70] - Regulatory optimism exists regarding potential changes to outdated FCC regulations that could benefit the broadcast industry, including easing M&A restrictions [18][58] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding core advertising growth despite reduced visibility due to macroeconomic uncertainties [39][40] - The upcoming political season is expected to drive advertising dollars, with numerous competitive races anticipated [12][21] Other Important Information - The company completed a comprehensive refinancing, extending the debt maturity profile with a weighted average maturity of more than six years [21][30] - Lucy Rutishauser, the CFO, announced her upcoming retirement after over 26 years with the company, with plans for a smooth transition [20][30] Q&A Session Summary Question: Can you address the FCC's ability to cap retransmission rates? - Management indicated that the FCC has the ability to regulate relationships between networks and affiliates, and capping retransmission fees could level the playing field [36][37] Question: What is the visibility on core advertising for the year? - Management noted that while they expect core advertising to grow year over year, visibility has decreased due to uncertainties in key advertising categories [39][40] Question: How did the auto category trend in Q1 and what is expected for Q2? - Management reported no significant bump in auto advertising but noted that Nissan is planning an aggressive ad campaign [47][48] Question: Can you provide insights on the Compulse acquisition? - The acquisition of Compulse is seen as a best-in-class platform delivering double-digit growth, with plans to scale it significantly [70][71] Question: What are the expectations for subscriber churn? - Management confirmed that subscriber churn is expected to remain in the mid-single digits, with year-over-year growth in distribution revenues [78][80]

Q1 2025 Performance - Total revenue reached $770 million, aligning with guidance[5] - Adjusted EBITDA exceeded guidance at $112 million due to lower media expenses[5, 6] - Ventures received $10 million in cash distributions[7] - Ventures made cash outflows of approximately $38 million, including $30 million for Compulse acquisition[7] Strategic Updates - Jeff Blackburn was hired as Chairman and CEO of Tennis Channel to lead strategic growth[10] - YouTube TV agreement was extended[16] Financial Position - Total Sinclair Television Group (STG) debt at the end of 1Q25 was $4.2 billion[24] - Consolidated cash at the end of 1Q25 was $631 million ($277 million at SBG, $354 million at Ventures)[24] - The company repurchased approximately $66 million in face value of STG's 2027 notes for $62 million in early April[24] Q2 2025 Guidance - Adjusted EBITDA is projected to be between $91 million and $107 million[43] - Media revenue is expected to range from $778 million to $798 million[46] Full Year 2025 Outlook - Estimated cash taxes of $121 million, including approximately $83 million in estimated forecasted cash tax payments associated with Diamond Chapter 11 emergence[49]