Nexstar Media(NXST) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Nexstar reported first quarter net revenues of $1.23 billion, a decline of 3.9% compared to the prior year, primarily due to a reduction in political advertising [17] - Adjusted EBITDA for the first quarter was $381 million, representing a decrease of $71 million from the previous year [25] - Adjusted free cash flow for the first quarter was $348 million, down from $389 million in the prior year [27] Business Line Data and Key Metrics Changes - Distribution revenue reached a record $762 million, an increase of $1 million or 0.1% year-over-year, driven by retransmission rate growth and new CW affiliations [17] - Advertising revenue decreased to $460 million, down $52 million or 10.2% year-over-year, with a notable decline in political advertising [18] - The CW's profitability declined by mid-teens millions in Q1 due to increased sports programming amortization, but improved profitability is expected in 2025 [21] Market Data and Key Metrics Changes - Approximately 63% of Nexstar's revenue in Q1 came from distribution and other revenue sources, while 37% was derived from non-political advertising [9] - Non-political advertising revenue is forecasted to decline in the mid-single digits year-over-year for Q2, similar to Q1 results [21] - The CW's primetime ratings have surpassed other broadcast networks 74 times across key demographics in Q1, a significant increase from the previous season [11] Company Strategy and Development Direction - The company is focused on deregulation as a key strategic priority, aiming to reform local broadcast ownership rules [5] - Nexstar plans to capitalize on deregulation through mergers and acquisitions, with a well-defined M&A playbook targeting attractive assets in strategic markets [6] - The company is also pursuing a transition to ATSC 3.0 standards to enhance high-speed data transmission and monetize ancillary spectrum uses [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of revenue streams, with 63% of revenues coming from subscription-based sources [9] - The company remains optimistic about the advertising market, noting growth in service-based advertising despite challenges in goods-based categories [19] - Management highlighted the importance of upcoming distribution renewals and the 2026 midterm elections as significant opportunities for revenue growth [22] Other Important Information - Nexstar's outstanding debt as of March 31, 2025, was $6.5 billion, a reduction of $28 million for the quarter [29] - The company returned $132 million to shareholders, including $57 million in dividends and $75 million in stock repurchases [29] - The first lien covenant ratio was 1.67 times, well below the covenant limit of 4.25 times [29] Q&A Session Summary Question: What would the confirmation of the fifth commissioner mean for deregulation? - Management expects an NPRM to be one of the first moves by the new chairman, which could lead to revisiting ownership rules [35] Question: Are you comfortable beginning transactions during the NPRM phase? - Management indicated that it would depend on circumstances and the willingness of counterparties, but they are open to calculated risks [41] Question: When do you expect to see the impact of cord-cutting moderation? - Management has not seen a material change yet but is cautiously optimistic about potential positive trends in the future [49] Question: How would you prioritize M&A opportunities? - The focus is on accretive acquisitions, with a preference for expanding the national footprint over adding additional stations in existing markets [58] Question: What is the outlook on the advertising market? - Management noted that while non-political advertising is expected to decline in the near term, they anticipate a pickup in the second half of the year [54] Question: How does the DOJ view potential consolidation? - Management believes there is a consensus that current rules are indefensible and does not see DOJ as an impediment to in-market opportunities [82]