Nexstar Media(NXST) - 2024 Q3 - Earnings Call Transcript

Financial Performance - Nexstar achieved record Q3 2024 total net revenue of $1.37 billion, a 20.7% YoY increase, driven by growth in distribution and advertising revenue [7][29] - Adjusted EBITDA reached$ 510 million, a 37.3% margin, up $231 million YoY, primarily due to election year political revenue and favorable MVPD contract renewals [50] - Adjusted free cash flow was$ 327 million, with $233 million returned to shareholders via dividends and share repurchases, reducing shares outstanding by 3.1% [55][56] - The company reduced debt by$ 85 million in Q3, with total debt standing at $6.7 billion as of September 30, 2024 [57] Business Line Performance - Distribution revenue grew 20.2% YoY to$ 719 million, benefiting from favorable contract renewals, vMVPD subscriber growth, and CW affiliations [29][30] - Advertising revenue increased 22.2% YoY, driven by a record $154 million in political advertising, offsetting a 4.5% decline in non-political advertising [40][42] - The CW reduced operating losses by$ 36 million YoY and $119 million YTD, with 46% of 2025 programming hours dedicated to sports, driving higher viewership at lower costs [21][22][43] Market Performance - Nexstar's broadcast stations hold the 1 or 2 position in local news in 80% of their markets, with 200 stations generating the highest network ratings [12] - The CW saw record audiences for NASCAR Xfinity Series and WWE NXT, with 4.7 million viewers tuning in on October 5, 2024, for a multi-sport lineup [19][20] - NewsNation achieved 100% accuracy in calling the 2024 presidential election, leveraging local news resources from 116 markets and partnerships like Decision Desk HQ [24][25] Strategic Direction and Industry Competition - Nexstar emphasizes the value of broadcast networks and stations, particularly in sports and news, as key differentiators in the linear TV ecosystem [10][15] - The company is focused on deregulation to compete with big tech, advocating for ownership cap reforms and ATSC 3.0 adoption to preserve local journalism [66][69] - Nexstar's streamlined portfolio of linear TV assets, including The CW and NewsNation, positions it well against competitors with broader cable network exposure [14][15] Management Commentary on Operating Environment and Outlook - Management highlighted the resilience of Nexstar's business model, with strong free cash flow generation enabling shareholder returns and debt reduction [9][59] - The company expects continued growth in distribution revenue, supported by moderating pay TV subscriber attrition and increasing retransmission rates [34][39] - Political advertising revenue reached$ 491 million YTD as of Election Day, a record for a presidential election year, with local TV remaining the medium of choice for candidates [27][28] Other Key Information - Nexstar completed distribution and network affiliation agreements with CBS and Gray Media, expanding The CW's reach and securing favorable terms [32] - The company is streamlining operations to reduce costs and accelerate innovation, focusing on initiatives that directly impact viewers and partners [44] - Nexstar's leverage ratio, excluding The CW, was 3.26x at the end of Q3, well below the covenant limit of 4.25x, providing financial flexibility [58] Q&A Session Summary Question: Likelihood of regulatory changes and impact on capital allocation [65] - Nexstar is actively pursuing deregulation of ownership caps at both national and local levels, viewing it as a bipartisan issue with potential for multiple expansion [66][69] Question: NewsNation's potential benefits from advertiser concerns about brand safety [65] - NewsNation is positioned as a fact-based, unbiased news network, with growing audience and revenue, benefiting from a potential shift away from more polarizing news outlets [70][72] Question: Path to profitability for The CW [65] - The CW is nearing profitability, with significant distribution renewals in 2025 expected to drive revenue growth, alongside cost reductions and expanded sports programming [74][75] Question: Outlook for distribution renewals and pricing power [76] - Nexstar expects to maintain strong pricing power in distribution renewals, supported by the value of its programming and the increasing concentration of sports and news viewers in the pay TV ecosystem [77][79] Question: Core advertising trends and categories [80] - Auto advertising was the largest declining category, impacted by high interest rates and low dealer inventory, while local advertising remained more stable than national [82][83] Question: Full-year political advertising performance [85] - Nexstar achieved a low-teens market share in political advertising, with record revenue of $491 million YTD, despite late-cycle spending shifts in some markets [88][91] Question: Potential for M&A in cable networks [124] - Nexstar has limited interest in expanding its cable network portfolio, preferring to focus on broadcast opportunities that align with its core business model [125] Question: Alternative uses of spectrum [100] - Nexstar is exploring ancillary uses of spectrum, such as navigation and data offloading, with potential contracts expected in 2024, though no significant announcements are imminent [101][103]