Nexstar Media Group, Inc.

Good day and welcome to the Nextar Media Group Third Quarter 2022 Results Conference Call. Today's call is being recorded. Now I would like to turn the conference over to Joe Giaffone, Investor Relations. Please go ahead.

Thank you, Jake, and happy Election Day, everyone. I'll read the Safe Harbor language and then we'll get right into the call. All statements and comments made by management during this conference call, other than statements of historical fact, may be deemed forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Nexstar cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward-looking statements made during the call. For additional details on these risks and uncertainties, please see Nexstar's annual report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission and Nexstar's subsequent public filings with the SEC. Nexstar undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. It's now my pleasure to turn the conference over to your host, Nexstar Chairman and CEO, Perry Sook. Perry, please go ahead.

Thank you, Joe, and good morning, everyone. We appreciate you joining us this morning on this election day to discuss Nexstar's record third quarter financial results. With me on the call today are Tom Carter, our President and Chief Operating Officer, and Leanne Gleha, our CFO. I'll start with a summary of recent highlights and developments, followed by Tom's operational review, as well as Leanne's financial review. Then we'll get to your questions. Next, I delivered another period of outstanding financial results and shareholder returns, including all-time high third quarter net revenue, adjusted EBITDA, and free cash flow. Our record top and bottom line performance was led by strong year-over-year growth in political advertising, distribution, and digital revenue. Our ability to deliver record results and excellent shareholder returns quarter over quarter and year after year underscore the benefits of scale and the strength and the resiliency of our operating model and our ability to consistently generate substantial levels of free cash flow. In the first nine months and in the third quarter of 2022, we returned $730 million and $250 million respectively to shareholders through share repurchases and dividends. The nine-month shareholder return represents a 48% increase over last year and approximately 68% of our free cash flow. As today is Election Day, we have pretty clear visibility into our 2022 political revenue, excluding the impact of any potential runoff elections. I'm pleased to announce that we booked total net political revenue for the fourth quarter of $260 million, which equates to $500 million net for the year as of today, And that represents 103% of our election year 2020 dollars as of election day. 2022 has not only been a record midterm election year for our political advertising, but it is nearing an overall record for our political advertising, including presidential election years. Once again, local television remains the medium of choice for candidates to reach local voters at scale. And candidates are not alone in choosing broadcast, as I'll talk about in a minute. Sports organizations like the NFL and team owners like Steve Ballmer, content creators, and local advertisers all see the power and the broad reach of the local television broadcast audience, something Nexstar is uniquely positioned to offer at scale across the country. As part of our earnings call today, I'll cover three areas that have been top of mind for investors. First, I'll discuss the impact of the economic environment and how Nexstar's business is positioned well to offset these challenges. Second, I'll provide an update on our distribution renewals and why we continue to be confident of our ability to grow this revenue stream. And third, I'll briefly touch on the longer term growth drivers of our business, including our recent acquisition of the CW and why Nexstar remains one of the best positioned media companies to succeed in today's marketplace. Our business has several distinct competitive advantages that will enable us to continue delivering the financial performance, cash flows, and shareholder returns investors have come to expect from Nexstar. We have a highly diversified revenue model. For several years now, over 50% of our total net revenue has been derived from distribution revenue. This contractual and recurring revenue source has historically been resistant to periods of economic downturn. And with less than one-third of our third quarter revenue coming from core television advertising, we are less dependent on advertising revenue than we ever have been before. Our audiences are valuable. Today, broadcast television remains the only place for content creators, sports organizations, team owners, and most importantly, advertisers to access local audiences at scale. We have developed these audiences over decades by consistently providing top-rated local news, sports, and entertainment content. A great example of the power of broadcast is NFL Thursday Night Football, where we can see what audiences prefer, Amazon Prime or local broadcasts. We pulled the data from Nielsen for the first seven games, and it shows that when NFL viewers have a choice of watching the game on Amazon Prime or watching it on their local broadcast station, on average, 73% of the NFL viewers are choosing to watch Thursday's games on their local broadcast station. This comes as no surprise to us. Local audiences prefer to watch via a station they have a relationship with, with shoulder and ancillary programming that resonates, and via a technology that has no delay and provides seamless delivery. The attractiveness of our platform is further demonstrated by our new agreement with former Microsoft CEO and LA Clippers owner Steve Ballmer, who is bringing the LA Clippers back to broadcast television to help reach audiences that the Clippers are currently not able to reach. Our number one LA station, KTLA, along with a number of our other California-based stations, will air 15 NBA games of the Clippers exclusively over the air this season. We have built an unparalleled competitive moat around our economically resilient local advertising business. Over the last two and a half decades, we've developed a team of more than 1,500 local sellers, and our stations have cultivated over 40,000 SMB and advertiser relationships in the 116 local markets we serve, reaching over 68% of America. On the local level, there is no one in the TV industry with greater sales resources and consumer reach than Nexstar. This isn't something the larger AVOD or streaming companies can easily replicate, as it requires both local scale and meaningful investment. While some pure-play streaming companies are now embarking on an effort to replicate our business model, ours is proven and consistently and currently delivering today. The result is only a platform of our scale and our efficiency can deliver. As I previously mentioned, we are a significant beneficiary of record-setting political television ad spend. which is not dependent on the economy. Look at the last two election cycles, and advertising revenue is accounted for approximately, political advertising revenue is accounted for approximately 10% of our total net revenue on average. Our focused approach to optimizing political advertising opportunity and our scaled presence in our markets representing over 80% of contested races gives Nexstar a distinct competitive advantage in capturing leading shares of our spending. Third quarter political revenue increased 49% on a quarterly sequential basis and was up approximately 28% over pro-former Q3 of 2018. As I mentioned earlier, we are on track to deliver record midterm election year revenue in Q4. We have an efficient operating model and we pay close attention to operating expenses and our balance sheet with only 3.2 times net leverage is in great shape. Taken together, these factors continue to set Nexstar apart from others in the media industry and other industries and will enable us to offset any near-term challenges while extending our strong long-term record of growth and shareholder value creation. Turning now to our distribution agreement renewals, we recently reached a comprehensive multi-year distribution agreement with Verizon Fios to carry Nexstar local television stations in 10 markets and Nexstar's fast-growing national cable news network NewsNation in all Verizon markets. We remain in active negotiations with the remainder of our distribution partners with now slightly less than half of our total subscribers up for renewal before year end. While we did experience a slight uptick in the subattrition rate in the third quarter, we continue to be confident in our ability to grow our distribution revenues, even in the face of MVPD subscriber attribution, given the continued disparity between the percentage fees the broadcasters get paid versus the continuation of our stations to total viewership, and the fact that we also get paid when the consumer moves to a virtual MVPD service. Moreover, a recent Lightman research report found that 66% of TB households and 73% of adults age 45 or older, representing more than half of the adult population, have a paid TB service, providing us with an excellent base of entrenched consumers. Before I hand the call over to Tom, I want to briefly touch on three organic growth prospects that we believe can lead to material value creation for Nexstar shareholders over the long term, including News Nation, the CW Network, and ATSC 3.0. Starting with News Nation, we continue to make progress building out the nation's only unbiased national news network. News Nation now offers 17 hours of news programming per day and remains the fastest growing cable news network in the most watched genre of cable television by appealing to the majority of the population looking for an unbiased source for news. According to a recent Gallup poll, over 40% of Gen X and over 50% of millennials and Gen Z view themselves as independent politically, and Nexstar is building a profitable and differentiated national news network to serve those audiences. We will be a 24-5 news network in Q2 of next year, and we anticipate being a 24-7 cable news network by the end of 2024. We continue to enjoy valuable content synergies between News Nation and our local stations, and The Hill. In the months running up to the election, several of our local TV stations hosted the only televised debates for key U.S. Senate races in Ohio, Georgia, and Pennsylvania, and governor's races in Texas and Illinois. We leveraged this exclusive to Nexstar content on NewsNation to drive increased ratings and awareness for the network. Nexstar Digital also launched The Hill Fast Channel, building on the Hill's success as an essential agenda-setting read for lawmakers, policymakers, and influential digital consumers from Capitol Hill to Main Street. Moving on to the CW, on September 30th, Nextar closed its previously announced acquisition of a 75% ownership interest in the CW network. This transaction is expected to create value for Nextar shareholders by solidifying the company's revenue opportunities as the largest CW affiliate group diversifying our content outside of news, and establishing Nexstar as a participant in the advertising video on-demand services via the CW app. Operationally, we're off to an excellent start. We appointed Dennis Miller to president of the network, and as many of you know, prior to his appointment, Dennis served on the Nexstar board for eight years, and he's a seasoned television executive with a long-term record of success in our industry. He knows Nexstar and how we run our businesses, and we are confident in his ability and focus to improve the CW ratings, revenue, and profitability. The CW is also continuing to make personnel appointments that will support our vision and goal for reimagining the CW with a focus on entertaining and profitable programming, both on air and through the CW app. We also continue to make progress on the rollout of ATSC 3.0, and we are accelerating our discussions with potential technology and business partners for this service. We continue to believe the revenue opportunity for the applications of services using our spectrum could rival our retransmission revenues by the end of this decade. In summary, Nexstar's consistently strong results and free cash flow generation remain one of our most powerful differentiators from our peers, as well as other diversified media companies. We feel very good about our year-to-date results and what we see for the balance of the year. Our resilient local advertising business, our ability to continue to grow distribution revenues, and a stellar political advertising year has enabled us to achieve our 22 objectives despite market headwinds, the absence of Olympics in the quarter versus last year, and an increasing interest rate environment. Said more plainly, we are pacing to over-deliver on our 2022 free cash flow estimates that are embedded in our 22-23 guidance. We expect fourth quarter to benefit a continuation of strong political advertising trends, which we discussed earlier, while 2023 will see distribution revenue upside from renewals of agreements representing more than half of our subscribers. Looking forward, we expect 2024 to benefit from another record year for political advertising through the presidential election, combined with the benefit of another wave of 2023 distribution agreement renewals for approximately 40% of our subscribers. With that, let me turn the call over to Tom Carter for our operational review. Tom?