Nexstar Media Group, Inc.

Good day and welcome to Nextstar Media Group's first quarter 2025 conference call. Today's call is being recorded. I will now turn the conference over to Joe Gioffoni, Investor Relations. Please go ahead, sir.

Thank you, Michelle, and good morning, everyone. We'll get to management's presentation and comments momentarily, as well as your questions and answers. During the Q&A session, we ask that everyone please limit themselves to one question and one follow-up. I'll now read the Safe Harbor language, and then we'll get right into the call. All statements and comments made by management during today's conference call, other than statements of historical fact, may be deemed forward-looking statements for purposes of the Private Securities and Litigation Reform Act of 1995. Nextstar cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those reflected by the forward-looking statements made during today's call. For additional details on these risks and uncertainties, please see Nextstar's annual report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission, and Nextstar's subsequent public filings with the SEC. Nextstar takes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, it's now my pleasure to turn the conference over to your host, Nextstar founder, chairman, and chief executive officer, Perry Sook. Perry, please go ahead.

Thank you, Joseph, and good morning, everyone. We appreciate you all joining us today. Mike Baird, our president and chief operating officer, and Leanne Gleha, our executive vice president and chief financial officer, are both with me on the call this morning. Nextstar's first quarter financial results mark a solid start to the year with net revenue, adjusted EBITDA, and adjusted free cash flow, all benefiting from record first quarter distribution revenue and disciplined expense management. Before reviewing the highlights, I'd like to begin where I ended our last earnings call on a topic that remains a key strategic priority for Nextstar in 2025, which is deregulation. In today's competitive landscape, where big tech and big media are afforded unbridled and ubiquitous reach, current restrictions on local broadcast ownership are outdated, arbitrary, and exclusionary, and no one can logically defend those rules. In my 45-plus years in the industry, I continue to believe that the prospect of meaningful broadcast ownership reform has never been better than it is today. As chairman and CEO of Nextstar, and in my role as chair of the joint board of directors of the National Association of Broadcasters, our trade association, achieving deregulation is my top priority. We are fortunate to have a strong FCC chair in Brendan Carr, who keenly understands the need for local broadcast deregulation and the relief that we and the industry need on both the national ownership cap and in-market local ownership rules. Once the fifth commissioner is confirmed, which could happen by early this summer, we anticipate Chairman Carr will begin to take action on his agenda. In addition to our deregulatory agenda to level the playing field and to enable consolidation, we are also seeking to obtain a firm transition date for ATSE 1.0 standards to ATSE 3.0 standards, which will support and advance our rollout of high-speed data transmission and other services to allow us to fully monetize ancillary uses of our spectrum. Given our strong financial position and balance sheet, we are prepared to capitalize on deregulation through M&A. Historically, this strategy has created tremendous shareholder value, helping drive our stock from $4.55 per share at the beginning of 2011, when the first consolidation wave began, to the mid-160s neighborhood that we're in as of this morning. As many of you know, Nextar has a well-defined M&A playbook. Once we identify attractive assets in strategic markets, our focus turns to evaluating synergies across these three key areas, retransmission revenue opportunities, operational and cost efficiencies, and the strategic value derived from increasing our scale. The most compelling transactions typically involve stations with opportunities for CW affiliations, those in larger markets, or stations located in the areas that overlap with our existing footprint. And we expect that all of these opportunities will present themselves in this current environment. The one big change from the last consolidation wave is the cost of capital. Our financial model will factor in both elevated interest rates, as well as reduced maximum leverage and the current valuations across the television sector. Since we have the ability to buy our own assets by buying back our stock, any new transactions being contemplated will have to be more accretive than that. Turning to our business outlook, our business model has evolved significantly, and the stability of our revenue streams remains underappreciated, in my view. Given questions surrounding the potential impact of proposed tariffs and the general economic uncertainty, I thought it might be helpful to take a step back and provide some perspective on just where Nextar derives its revenues, the sum of which is that the current conditions, combined with our business model, don't give us much cause for concern at this point in time. To begin with, in the first quarter, which will be a decent barometer for the year, 63% of Nextar's revenue came from distribution and other revenue sources. This revenue stream is driven by our growing retransmission rates multiplied by the number of subscribers serviced by our distribution partners. And last quarter, we guided for this revenue line to be relatively flat for the year, inclusive of subscriber attrition. The remaining 37% of our Q1 revenue was derived primarily from non-political advertising. About one-fifth of our non-political advertising revenue comes from digital advertising, which is comprised of digital, CTV advertising on our own inventory, as well as the sale of third-party digital and CTV advertising to our local clients. This is a revenue stream that has demonstrated consistent growth overall, and we do expect to see that trend continue this year. The other 80% of our advertising revenue comes from television advertising, and the majority of that is from stable local sources where advertising is closely tied to the revenue it generates for the client. Cut another way, only about 40% of non-political advertising revenue, or 15% of our total revenue, is tied to goods-based businesses that could potentially be impacted by tariffs. The remaining 60% of our non-political advertising revenue comes from services and paid programming, which actually grew during the 2018 trade war. I'm excluding comments on political advertising here, but as demonstrated again in 2024, Nextar remains a significant beneficiary of the two-year political ad cycle, given our geography and our scale. Turning to the CW, we continue to execute our strategy to drive profitability through a combination of top-line growth and expense reductions, as our refreshed and reconstituted program lineup continues to drive incremental revenue distribution and advertising revenues. It's clear that our new content strategy is resonating with audiences, as the 2025 first quarter marked the CW's strongest primetime performance in eight quarters. In fact, this season so far, the CW's primetime ratings have surpassed other broadcast networks 74 times across key demos. That's a notable increase compared to the just 17 times for the full 23-24 primetime season. WWE Next is a rating standout for us in primetime, as it generated a 19% increase in audience versus last year's first quarter results on cable. CW Sports is now a core pillar of our programming lineup at the network, and it has grown to include over 400 hours of live sports programming annually in 2025, representing over 40% of the CW's total programming hours. The NASCAR Xfinity Series racing has quickly become a consistent high performer, with the first 11 races averaging over 1.2 million viewers, representing an increase -over-year of 19% compared to last season. In fact, 2025 is the first time in nine years that each of the season's first 11 races delivered an average audience of more than 1 million viewers. And there are more sports coming. In addition to our existing agreement with the ACC for both football and basketball, we recently announced exclusive broadcast agreements with AVP Volleyball, the new Grand Slap Track Series, featuring names that you got to know at last summer's Olympics, as well as the renewal of our agreement with Pac-12 football. Turning to NewsNation, we celebrated the network's four-year anniversary this past quarter, following its successful rebrand in March of 2021. With the 24-7 programming rollout now complete, the network continues to build momentum, growing its audience every month of the first quarter of 2025. In fact, since December of 2024, NewsNation's ratings have outperformed MSNBC 24 times and CNN six times in the key adult 25 to 54 demo. Breaking news and special coverage continue to be key drivers of audience growth across both linear and digital, underscoring the unique competitive advantage of Nextar's deep and local footprint in facilitating premium -the-ground coverage of key national events. NewsNation's special programming is also gaining traction, last week's town hall with President Trump ranked among the network's top five rated broadcasts ever. While NewsNation's second interview special featuring Tucker Carlson and Chris Cuomo garnered more than two million total views across all platforms. In the first quarter, NewsNation was added to the White House press pool with our correspondents now asking key questions during daily briefings and aboard Air Force One. That's a significant additional milestone in establishing the network as a trusted national news source. In summary, Nextar's first quarter performance reflects a strong start to the year, driven by our stable diversified revenue base, disciplined operations and continued execution across our portfolio. As we move through the rest of 2025, our priorities remain unchanged. Renewing distribution agreements covering approximately 60% of our subscriber base, continuing the CW's path to break even, actively pursuing long overdue deregulation and preparing for elections again in 2026. With unmatched scale, strong pre-cash flow and a proven track record of value creation, we are well positioned to navigate today's challenges and capitalize on the significant opportunities ahead. With all of that said, let me now turn the call over to Mike.

Thank you Perry and good morning everyone. Nextar delivered first quarter net revenues of $1.23 billion, a decline of .9% compared to the previous quarter. The record first quarter distribution revenue of $762 million increased by 1 million or .1% over the comparable prior year quarter. Distribution revenue growth primarily reflects annual rate escalators and other contractual increases, growth in VMVPD subscribers and the addition of CW affiliations on certain of our stations, which more than offset MVPD subscriber attrition. As Perry mentioned, approximately 60% of our total subscriber base is up for renewal in 2025. As the majority of those negotiations occur toward the end of the year, we would expect to see the benefit to distribution revenue beginning in the first quarter of 2026. While we continue to see subscriber attrition across the industry, recent earnings reports from our distribution partners suggest some marginal improvement in subscriber trends. We continue to monitor this closely as we work to secure agreements that are better aligned with the value Nextar delivers to our partners and their customers. Turning back to our first quarter performance, advertising revenue of $460 million decreased 52 million or .2% over the comparable prior year quarter, primarily reflecting a $32 million decrease in political advertising to 6 million, as well as a $20 million or .2% reduction in non-political advertising revenue due to advertising market softness. We continued to be impacted by a challenging television advertising market in Q1, with the most meaningful pullback coming from the insurance category. The automotive category were declined at the tier two and tier three levels, were partially offset by growth in spending from tier one OEMs, and the sports betting category, which faced a difficult -over-year comparison given North Carolina's legalization of sports betting in 2024 and no comparable markets coming online this year. On the upside, we saw growth in key categories, including attorneys, home repair, and travel, demonstrating the continued resilience of service-based and intent-driven advertisers. Further offsetting the declines was slight advertising growth in our national businesses, while our local businesses benefited from high single-digit growth in digital advertising. We also benefited from the Super Bowl airing on Fox this year versus on CBS in 2024, which had a positive impact on our first quarter advertising performance given Nextar's position as the largest owner of Fox-affiliated stations, including WDAFTB, the Fox affiliate in Kansas City. As mentioned, we generated approximately $6 million in political advertising revenue during the quarter, primarily driven by the high-profile Wisconsin State Supreme Court election. This marks a slight increase over the comparable post-presidential cycle in Q1 2021, which benefited from the Georgia Senate runoff that extended into the new year. I am pleased to report that with our newly created National Political Sales Division, we completed the process of bringing our advertising sales operation completely in-house. This strategic move enhances our control over pricing, inventory management, and client relationships during peak political cycles. By internalizing our advertising sales operation, we've streamlined coordination and workflows across our stations and centralized teams, allowing us to respond more quickly to demand, optimize yield, and maximize revenue opportunity.

Looking

ahead to the second quarter, non-political advertising is currently forecast to be down in the mid-single digits on a -over-year basis, similar to Q1 results. Turning to the CW, as expected, the CW's profitability in Q1 declined by mid-teens millions due to additional sports programming and amortization the network didn't have in the same quarter last year. However, our outlook for the year remains unchanged, and we continue to project improved profitability in 2025 versus 2024, with expectations of achieving profitability sometime in 2026. To close, let me reiterate our confidence in Nextar's long-term outlook and the enduring strength of the broadcast business model. As Perry noted, amid dynamic economic and industry landscapes, more than 60% of our revenues come from subscription-based revenue streams, higher than many others in the media and entertainment space. We're staying focused on what we can control, executing our strategy with discipline to ensure we're in the best position to capitalize on the meaningful tailwinds ahead, including our upcoming distribution renewal cycle, the 2026 midterm elections, and the Winter Olympics. As the industry continues to evolve, we see the momentum shifting in favor of broadcasters, and we remain committed to pursuing opportunities that drive long-term value for our shareholders. With that, it's my pleasure to turn the call over to Leanne for the remainder of the financial review. Leanne?

Thank you, Mike, and good morning, everyone. Mike gave you most of the details on the revenue side and on the CW, so I'll provide an overview of expenses, adjusted EBITDA, adjusted free cash flow, along with a review of our capital allocation activities and some additional perspectives on our valuation. Together, first quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses, declined by $9 million, or 1%, primarily driven by our operational restructuring initiatives undertaken in the fourth quarter. Q1 2025 total corporate expense was $52 million, including non-cash compensation expense of $18 million, compared to $55 million, including non-cash compensation expense of $18 million in the first quarter of 2024. The $3 million decrease is primarily due to lower legal expenses than the prior year. Q1 2025 depreciation and amortization was $205 million versus $190 million in the prior year quarter, an increase of $15 million. Of these amounts included in our definition of adjusted EBITDA is $88 million related to the amortization of broadcast rights for Q1 2025 compared to $69 million for Q1 2024. The increase of amortization of broadcast rights by $19 million was due to programming costs at the CW as newly acquired programming premiered. Please note that while Q1 CW programming amortization was up year over year, we do not expect 2025 CW programming amortization to be higher than 2024. Q1 2025 income from equity method investments, which primarily reflects our 31% ownership in TV Food Network, declined by $11 million versus the prior year quarter, primarily related to TV Food Network's lower revenue. Putting it all together, on a consolidated basis, first quarter adjusted EBITDA was $381 million, representing a .9% margin and a decrease of $71 million from the first quarter 2024 of $452 million. Moving to the components of free cash flow and adjusted free cash flow, First quarter CAPEX was $35 million, a decrease from $44 million in the first quarter of last year, primarily due to timing of CAPEX projects. First quarter net interest expense was $97 million, a reduction of $17 million from the first quarter of 2024. On a cash basis, this compares to $95 million in Q1 2025 versus $111 million in Q1 2024. The reduction in interest expense was primarily related to a reduction in silver and NETSTAR's reduced debt balances. First quarter operating cash taxes were $2 million, as we only have small state tax payments due in the first quarter. Payments for capitalized software obligations and pension credits net of proceeds from disposal of assets and insurance recoveries were $11 million versus $7 million last year. Cash distributions from the Food Network were $114 million in the first quarter, which amount is still captured in our free cash flow and our adjusted free cash flow definitions. This amount reflects our pro rata share of cash from operations related to the Food Network's 2024 operating results, which had not been distributed to us during 2024. Included in the first quarter's adjusted EBITDA, but excluded from free cash flow, is $26 million of income before amortization from equity method investments, which is primarily our pro rata share of Food Network's income, net income in the first quarter of 2025. Cash contributions from our partners in the CW were zero in the quarter versus $19 million in Q1 2024. In Q1, programming amortization costs were higher than cash payments by $8 million, as certain programming payments were deferred. Putting this all together, consolidated first quarter 2025 adjusted free cash flow was $348 million as compared to $389 million last year. A few additional points of guidance with respect to adjusted free cash flow. We are currently projecting capex of $30 to $35 million in Q2. Based on the current year yield curve and our mandatory amortization payments, Q2 interest expense is expected to be in the $95 million range. Q2 cash taxes are expected to be in the $150 to $155 million range, as we have two cash tax payments in the second quarter. In addition to the deferred cash tax payment from 2024 as a result of using the annualization method for our federal income taxes. In Q2 2025, cash distributions from the Food Network are expected to be in the high single to low double digit range, and payments for programming are expected to be in excess of amortization by about $15 million due primarily to deferred programming payments. Turning to capital allocation on our balance sheet. Together with the cash flow operations generated in the quarter and cash on hand, we used $22 million of cash to fund the acquisition of WBNX, an independent station in Cleveland that will become a CW affiliate on September 1st. We also returned $132 million to shareholders, comprised of $57 million in dividends and the repurchase of $75 million of stock at an average price of $169.99 per share, reducing shares' outstanding net of equity bestings by just under 1%. Next year's outstanding debt at March 31st, 2025 was $6.5 billion, a reduction of $28 million for the quarter, as we made quarterly amortization payments of $31 million, which were partially offset by amortization of debt discounts. Our cash balance at quarter end was $253 million, including $20 million of cash related to the CW. Because we designated the CW as an unrestricted subsidiary, the losses associated with the CW are not accounted for in our calculation of leverage for purposes of our credit agreement. As such, our first lien covenant ratio for Nextar as of March 31st, 2025 was 1.67 times, which is well below our first lien and only covenant of 4.25 times. Our total net leverage for Nextar was 2.93 times at quarter end. As is typical in non-political years, we expect leverage, which we calculate on an LTM basis versus a two-year average to increase during 2025, as adjusted dividend falls in non-election years when political advertising is significantly lower. For the remainder of 2025, assuming no M&A, we plan to optionally repay an incremental amount of debt and not re-borrow the debt that was repaid during 2025 with cash from deferred taxes. The additional optionality leveraging will prepare our balance sheet better for any potential M&A and should benefit us even if there is no M&A, as many investors value us based on EBITDA multiple. Based on that methodology, any debt reduction mathematically increases our equity value dollar for dollar. We also plan to continue to repurchase shares, which will continue to be the largest component of our capital allocation strategy, especially given our current valuation. Before I turn it over to the operator for questions, I'd just like to make an observation about the volatility in our stock price. Subsequent to reporting Q4 in February, our stock price rose to a high of just over $180 and then fell to the $150 area on concerns about tariffs in the economy. That approximate $30 per share swing resulted in the loss of about $900 million in market cap. At a 6 to 7 times multiple, this implies an expected decline of about $140 to $150 million of EBITDA, which assuming an 80% contribution implies $175 to $190 million decline in non-political advertising revenue. That would mean our non-political advertising would decline 9 to 10% during 2025. We're not seeing that so far as our Q1 actuals and our Q2 expectations are both down low-mid single digits. And Perry's comment about the 2018 tariff would further indicate this impact is overstated, not to mention the upside we see from potential deregulation and follow-on accretive M&A. With that, I'll open up the call for questions. Operator, can you go to our first question?

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, Lily-Pole, for your question. Our first question comes from the line of Dan Kernow with the Benchmark Company. Please proceed with your question.

Great. Thanks. Good morning. Also, nice job on expenses, Leigh Ann. Perry, let me just, let's just ask one broad regulatory question. Let's say trustee hypothetically gets confirmed, I don't know, end of this month, you said summer. What would that mean for the timeline of when you think things start moving? And given all of the commentary we've now had from CAR, we've got the Simonton Op-Ed now, do we think an NPRM would be shortly forthcoming? Do you proactively test the market? And how much do you think the FCC can accomplish versus what has to go to Congress?

Sure, Dan, I don't pretend to speak or know exactly what's on the mind of Chairman CAR, but I would think that an NPRM would be the most likely way to kick off a revisitation of the rules, both local and national, as they relate to ownership. So I would expect that could be one of the very first moves that the Chairman could make. And I would anticipate there was a letter, as you know, delivered from House members to the FCC a couple of weeks ago. So there's a Senate letter being delivered today with 22 senators signing on urging the FCC to revisit and relax and eliminate ownership regulations as they relate to television. And there were also notably four public interest groups that historically have been on the other side of this discussion that endorse the need for ownership regulations. So we think the momentum in Washington continues. We had a board meeting there last week and everything we heard from the administration and officials were that that the path to deregulation, I think, would would proceed a pace here once the fifth commissioner at the FCC is confirmed. As to what the FCC can do, I think they can do pretty much everything. You know, former Chairman Ajit Pai felt that the FCC had the authority to modify or eliminate the national cap as well as the in-market ownership rules. We happen to ascribe to that rule or that point of view. And so we think things could go pretty far, pretty fast. Obviously, any action that Congress would take would put put whatever those rule changes were out of reach of judicial review, which would be would be nice as well. But I also think that the chairman has indicated his his willingness to consider waivers during either the dependency of rulemaking or waivers just in general. So I think you'll see all of those levers be pushed as time goes on this year. And I do think you'll see M&A activity come into focus as the year goes on.

Thanks very much, Perry. Looking forward to it.

Thank you. Our next question comes from the line of Stephen Cahal with Wells Fargo. Please proceed with your question.

Thank you. Maybe first just to follow up on Dan's question and your comments there, Perry. So if we do get an NPRM, I think there's precedent of deals being proposed under the conditionality of the FCC's new procedures under an NPRM. Are you comfortable sort of putting pen to paper and beginning to transact when the process is at that phase, but maybe does still face some challenges in the courts? So that's just the first one as we think about that that timeline. And then secondly, and I know you don't update EBITDA guidance as we go through the year. Overall, it seems like things are really performing pretty close to the trends that you had suggested when you gave the initial guide in February. So as we just roll everything up, you know, the ad market may be a little bit worse. Your expenses have looked pretty good. The CW guidance didn't change. So any meaningful puts or takes that you think we should be aware of in terms of how the overall year looks to be trending? Thank you.

Hey, Steve, you're right. We do not update EBITDA guidance as we go. But, you know, as we go through the year, we will continue to sort of give you kind of the what we're seeing in terms of the current market environment. I think as we talked about on the when I gave the guidance, you know, the puts and takes really, I think the key things that we don't have control of are really what's going on in the advertising market and what's going on with subscriber attrition. And so those are the two things I would have you sort of focus on with respect to any adjustments you want to make to your model as it relates to the guidance that we gave at the beginning of the year.

But I would say, Steve, that you're right that we have not seen. I get questions all the time. You know, you're seeing things just fall off a cliff. And the answer is no. First of all, we talked in my remarks about the percent of our ad revenue that is determined by services advertising, which is really not dependent or even related to tariffs. And the amount that is tied to goods, whether it be automotive or furniture or others, which is a much lower percent of our ad revenue and a much lower percent than that of our total revenue. So our exposure is not not anything that we would think would be extraordinary. Going back to 2008 when we were, you know, very highly dependent on advertising support. That was a different story. So I think that, you know, we, you know, we were very, very considered in the guidance that we gave. And I think that things are unfolding pretty much as we had anticipated. You know, there might be puts and takes on the margin, but thematically, you know, things aren't any different than what we had seen at the time we gave the guidance than what we saw last year. And and so we were not sanguine about it, but I think we're very, very clear-eyed about it that we think things are unfolding pretty much according to the guidance that we gave as relates to your question would be willing to put pen to paper. You know, during dependency of an NPRM, I think, you know, again, depends on the circumstances and having a willing current counterparty that was willing to do so as well. But I think you've seen this company take risk, acceptable risk, calculated risk for an opportunity. So I don't think you'd see any change in our behavior as we move through this this year and the deregulation of our industry.

Thank you. Very helpful.

Thank you. Our next question comes from the line of Benjamin soft with Deutsche Bank. Please proceed with your question.

Good morning, everyone. Thanks for the question. As you guys talked about, we've seen the levels of cord cutting throughout the industry moderate again this quarter. I'm curious if and when you think that will start to show up in results for next star if it hasn't already. And what does that mean for your upcoming slate of renewals later this year? And then appreciate all the color on advertising. I was hoping you could spend a little bit more time with what you're seeing more recently. And I believe in the last quarter, you talked about aspiring to get positive growth in that line for the year. Is that still a reasonable expectation? Thank you.

I'll take the first question on subs. I think we've seen a material change yet. I think the commentary around it has been optimistic, certainly coming from some of the MVPDs who've reported. And like others in the industry, we think that a rationalization of some of the MVPD products out there can only provide tailwinds to those trends. The rationalization, what I mean by that is the coming together of D to C with linear in ways that are more attractive to subscribers and make sense for really everyone involved. So in terms of impact on our results yet, we have not seen any. And as I said in the prepared remarks, I think we're cautiously optimistic that we may see that play out in the rest of the year. In terms of the impact on our deals, really no impact right now. We'll approach our business the way we always do. We continue to believe that the value that we deliver to distributors and therefore to their customers continues to be underweight relative to our share of wallet, if you will.

And then Ben, I guess on the advertising side, I think we're seeing what we said in the prepared remarks is our Q2 forecast at the current moment is very similar to what you saw in the first quarter in terms of the decline in non-traditional advertising or non-political advertising rather. You know, with respect to the full year, we do expect to pick up in the back half of the year, given the elimination of crowd out.

Got it. Thank you.

Thank you. Our next question comes from the line of Aaron Watts with Deutsche Bank. Please proceed with your question.

Hi, thanks for having me on. On deregulation and consolidation, I'm just curious with in terms of your focus on the opportunities in the market, how would you prioritize between expanding your national footprint, increasing in-market duopolies, or perhaps bringing in assets that enrich your underlying spectrum holdings? And on the in-market option, can you remind us what type of lift you get from creating a new duopoly in a given market or adding a CW affiliation to a market like you just did in Cleveland?

Sure. Let me try and unpack that a little bit, Aaron. I would say that, you know, our focus here is first and foremost on creative acquisitions, acquisitions that are more creative than buying back our stock and whether that takes the form of in-market additional duopolies. So, whether it's additional stations added to our roster or expanding our national footprint, both have strategic importance to the company. I would say growing our national footprint has more strategic importance than adding a second or third station in a market. If you look at our overall footprint today, we are duopolized or virtually duopolized in the majority of our markets already. The opportunities that remain to do that are primarily in the top 10 markets where we operate exclusively CW affiliates. So, that would be interesting should there be actionable opportunities. I think that, again, underlying spectrum, I think, you know, we are the largest holder of commercial television spectrum in the country, UHF television spectrum. And so, adding to that footprint is the byproduct of acquisitions. With rare exceptions, would we do a transaction just to acquire additional spectrum? You know, we're focused on the operating business up top and the accretion from that -a-vis distribution, expense management, and again, putting stations together in markets where we don't already have that opportunity. If the FCC were to eliminate the -a-market rule, then I think that opens up an even broader opportunity for us to look at in-market consolidations. And as it relates to margin lift there, it depends on the combination of stations. If you put two big four together, you're going to have the opportunity, I think, for cost takeouts aside from the payments to the networks because you probably have two robust news operations, two robust production operations. And while our focus would be to preserve the journalistic layer there, there's no reason you can't take the technical and production infrastructure and streamline that -a-vis automation and, in effect, running two newspapers off the same printing press. So the margin lift there can be, you know, 20 points, 20, 25 points, depending on the combinations and the status of the stations. In Cleveland, you know, adding a CW affiliation to an independent station gives us an immediate distribution lift in revenues and then taking a very powerful organization, which is our Fox affiliate in Cleveland, a very good content operation and a very, very good sales operation and overlaying that on the app. So, you know, the acquisition of the assets of the CW will give us, you know, a lift down, long-term down the road. But the accretion of that acquisition is primarily through the distribution economics once it becomes a CW affiliate later this year. So I hope that's responsive to your question. I know there was a lot in that.

Really helpful. Thanks, Perry.

Thank you. Our next question comes from the line of Jason Basnett with Citi. Please proceed with your question.

I also had a regulatory question. Is your sense that the industry, that there's broad agreement among potential sellers, the consolidation should happen and therefore in your seat, you may have the choice of pursuing several different paths in terms of M&A? In other words,

the short answer is yes. I mean, I chair the NAB joint board of directors and prior to that, I chaired the NAB television board. And this is the first time in history that the entire board voted unanimously that the national capital elimination and in market ownership restrictions be eliminated. And I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point. I think that's a very important point.

I think that's a very important point. I think that's a very important point. I think that's a very important point. And I think Friday is year overwhelming. And I think Friday is year overwhelming. And I think Friday is year делеng I don't serve on here for And I think perhaps it was our mistake, sort of pushed back on Chevron deference, meaning robbing the expert agencies of some of the power that they've historically had and sort of forcing Congress to be more explicit about changes that take place as opposed to just pushing it down to an expert agency like the FCC to do the rulemaking. Do you feel that that shift at the Supreme Court is a potential flying ointment that would require congressional action as opposed to relying on the FCC as the expert agency? Or is that sort of a red herring?

Yeah, well, one man's opinion is it's a red herring. We actually read the Chevron ruling as a positive for industry, meaning that there could be judicial review of regulatory agency sanctions that they couldn't just happen in a vacuum and that there could be a question for the need of those. And so we see it as a positive. I don't see that as a red herring necessarily. I think the entire administration as well as both houses of Congress certainly are focused on streamlining government intrusiveness into private business. And so I think that at this point in time, I don't see that as an impediment. And in fact, there's been very little at this point reaction to the Chevron ruling as it relates to the -to-day operations of businesses and the government. So from our perspective, I don't see that as an impediment on a going forward basis.

I would just add to that. I think the letters that you've seen from both houses of Congress would indicate that the legislators are encouraging the FCC to act as well. So certainly they don't see that

the FCC is being limited here. Thank you very much.

Thank you. Our next question comes from the line of Patrick Scholl with Barrington Research. Please proceed with your question.

Hi, good morning. A question on the ad market. You mentioned the growth in the services sector in the last trade war. I was just kind of curious how much of that was increased penetration of getting new advertisers onto TV. And just with the fact that you're talking about within the various service categories where you feel TV is relatively underutilized from those advertisers.

Thanks. I think from the last, in 2018, there wasn't really new advertisers that were coming on. It was just sort of our same group. It was just continuation of the trend of the benefits of advertising. These are companies that are really bringing the cash register because someone has heard their ad and they came into the store or they hired them to, for their lawsuit, whatever that was. And so it's a very stable piece of the pie and a nice, it's nice from our advertising composition perspective to be the significant percentage of our ad. And I think this time, this time around it's really no different. I mean we're seeing a definite difference in terms of the rate of decline of goods versus the services category.

Significant.

Thank you. Our next question comes from the line of Barton Crockett with Rosenblatt Securities. Please proceed with your question.

Hi, great. Thanks for taking the question. I guess if I could too, but the first one is really on this regulatory question. So I get the FCC, but I'm wondering about the DOJ and antitrust. How much of an impediment could that be? And then kind of within that question, historically I think there's been this very reasonable thought that they should include in the market definition these things that have been accused by the government of monopoly like search and social. Does that need to change? Do you see any prospects that that could change under this administration?

Yes, in one word, the folks that our GR team has spoken to at DOJ have said, have not gone on record, but have said in private conversations that no one can defend the current rules that television station advertising is a discrete market as is radio station advertising. Nobody believes that, nobody can defend that with a straight face. And so I do not see that as an impediment to in market opportunities to consolidate. Let's just assume you have 50% of the television revenue in a marketplace, but let's talk about the part of the iceberg that's below the water level, which is every other form of advertising that our local sellers compete with. There's a line out the door at the car dealership or the furniture store, people in to sell digital advertising, connected television advertising, pens with your company's name on it, out of home advertising, billboards. So ads in the high school yearbook, those are all compete for the one advertising budget that business owners have and to believe anything other than that ignores the realities of what our salespeople encounter in the marketplace every day. So again, pretty high up the food chain at the DOJ, I think people understand that and are willing to address marketplace realities in transactions that might be proposed going forward.

I'll just add that to the extent that you thought that rule, or really not a rule, but that interpretation of the marketplace made any sense historically, certainly changes in the marketplace recently would really undermine it. What I mean by that is introduction of advertising, television advertising in particular, across Netflix and Amazon Prime. I think you can look at those and the flood of inventory that they brought to the market as a fundamental change in the marketplace that absolutely should compel a different view of that.

Now if I could ask kind of an adjacent question, to what degree in Nextar, specifically in local television generally, is this emerging kind of form of programmatic and connected TV advertising that's part of what Netflix is doing and just a lot of momentum around that generally that we see at the national networks. I don't really hear you guys talking about that locally or see it that much and to what degree is that kind of change? Should it change? Can it change?

Well, and again, I don't wanna open our playbook so everybody can read it, but I mean, we certainly are cognizant of the fact that the vast majority of advertising, all digital, all national advertising is sold on an impression-based basis and here is television selling demography. And so I think that we are at a forefront of having discussions that would enable us to be selling more of our inventory on an impression-based basis. We can control the rate at which those orders are accepted and all of that, but it also, listen, advertising agencies make less money placing linear television ads than they do placing digital ads and until we address that structural inequity, it's gonna be hard to talk about sustained growth in this business at the advertising support level. So we're totally cognizant of it and focused on it and discussions are ongoing behind the scenes. And obviously if we have something to announce, we'll announce it, but we are focused on creating, removing all structural impediments and any other impediment in doing business with our company and in our industry, I think that's where everyone should be focused. So we get it and are taking moves to evolve the way we sell our advertising to be as compatible as possible. Everyone understands the superior value proposition, but if it's hard to buy and less profitable to buy, we can understand why people may move their money in other places. So we're straight up addressing it ourselves and expect that the industry will ultimately follow.

Okay,

great, thank

you.

Thank you, our next question comes from the line of Craig Huber with Huber Research Partners. Please proceed with your question.

Great, thank you. I want to ask you Perry about this proposal or this op-ed out there about capping reverse retrans at 30% of retrans revenues for your companies and stuff. And you sort of think about it, I want to hear your comment on this if you could please. We've been talking about for years and years about deregulating your stuff out there in market rules, the 39% ownership cap, and all of a sudden now, there's this potential out there of a 30% cap on the reverse retrans side of things here. I mean, when I sit back and think about the FCC, the Trump administration, Congress, that they got involved here, they're either deregulatory, leave us alone, or they're not. Why does it make sense to get rid of the 39% ownership cap, which I am sympathetic with, and in market rules, certainly I'm bored with that as well. But then why put in place a cap on the retrans payment side of things here? It would surely benefit you guys on the surface, but there's an unintended consequence there, I think, because the networks, I would think, logically, would just pull back how much money they spent on programming that they put on your TV stations and your peers out there and stuff. So can you just comment on that because it seems totally inconsistent to me. I'm just, I'm baffled by the whole thing, frankly.

Well, listen, we have a great deal of respect for Commissioner Symington and his approach to free markets and deregulation. I would say that his thoughts were expressed in an op-ed, which I would characterize as one man's opinion. I will tell you, having spent, I think I've been on Capitol Hill seven times so far this year, there is very little interest in getting involved in the commerce between stations and networks other than there has been an increasing interest in the asymmetrical approach to virtual MVPDs and traditional MVPDs, given that YouTube now promotes themselves as the third largest MVPD, but yet there are virtual MVPDs, so our rules of engagement are different, and I don't think anyone feels that that makes much sense. But listen, we are largest affiliate groups and among the largest affiliate groups of all of the big four, we happen to own the big five, and would not be handcuffed by a 30% rule should it come into effect in terms we aspire to a 30% distribution revenue for the CW from our affiliates. But at this point in time, I think there'll be very little traction for that taking hold, so I would take it as the op-ed that it was, but I don't know that I see it gaining much traction in Washington or in the marketplace.

And then, thank you for that, and then Leigh Ann, if you could just comment if you would on the CW losses year over year in the first quarter, was it ballpark, maybe roughly $10 million worse in the first quarter here because of the higher sports program, I understand, and what is your outlook, if you could quantify that, what your outlook is for the CW losses for the full year, thank you.

Yeah, our outlook for the CW losses for the full year are consistent with what we said on the last call, which was about a quarter better, 25% better than what it was in 2024. We did see an increase in the amortization of broadcast rights in the first quarter, which was about, substantial increase over the first quarter of 2024, you can see that number, and the losses did increase by more than $10 million in the first quarter, but again, that's an anomaly, a seasonality anomaly, and we still are on track to get where we think we're gonna get, we had planned to get to for the full year.

Great, thank you both.

Thank you, our final question comes from the line of Alan Gould with Loop Capital Markets, please proceed with your question.

Thanks for taking the question too, please. Perry, speaking of the Fifth Network, just wondering where you stand in repricing your CW fees to your station partners, your affiliates, and secondly on advertising, just curious how big a difference there is on your advertising in terms of your sports product versus your news product versus your general entertainment product, thank you.

Well, listen, we're working on repricing our value proposition to our CW affiliates, and the way we do that is by demonstrating the value of the CW affiliation through investment and programming, and most importantly, that programming paying off in terms of increased eyeballs to the network. Our affiliates are over the moon at our investments in sports programming, what it brings to them, the additional inventory that they don't have to program, and so our discussions with those affiliates as well as our own station group, which is the largest customer of the network in terms of we are the largest CW affiliate group, people recognize the value we're bringing, and now it's, and we told them it was coming, and so they've had a couple of years now to get out in front of that with distribution negotiations on their own behalf, so I do expect that one of the value levers to break even of the CW affiliation, the CW network over the next two years, 25 and 26, will be through increased remuneration -a-vis distribution payments to the network from its affiliate base, so it's an ongoing process. When we first took over the network, we said all the great things we were gonna do and asked for big increases, and they said, well, wait a minute, I haven't done anything yet. That's fair, now we have, and I think now it's our turn, and as relates to the second part of your question, I forget what that was, can you remind me again?

Sure, when you're selling advertising, how big a difference are you seeing selling advertising on sports content versus news content versus general entertainment content?

Well, I would probably put them in that order, right? I mean, sports programming is of the moment right now, and that's why we've added additional sports programming. There's a big demand for sports because it's live, it's lean forward, I would say, as it relates to demand for local news, we've seen no affect in that, I mean, that is where local advertisers want to be for all the same reasons. You're talking about my local community, people are interested in that, my ads get more attention there, and I would say that unfortunately, because we produce some very good scripted programming, that's third in the batting order, that's not generally consumed live, it's consumed by appointment whenever I'm ready to see it through a streaming or on my DVR, and so that is probably the least in demand of the three categories that you talked about, and if you look at the mix from a network perspective that we've orchestrated at the CW, scripted entertainment programming comprises a lower percent of the total hours of prime time and total hours programmed by the network, and I think it's in addressing that marketplace reality, so it wasn't just to cut costs, it was to mirror more what the television audience is looking to consume, which is live programming, event programming, and sports programming. We still have a healthy, we will have on the network in this upcoming season, a Dick Wolf police procedural, that's kind of a watershed event for the CW when you think we're in business with one of the most prolific and successful program producers in television, and I'm excited about that, and both hope and think that that show will do well, but we're not abandoning scripted, we're just evolving the programming mix to represent marketplace realities. I think if you look at, right now, Wednesday night is scripted night, and Friday night is Penn and Teller night, and Tuesday night's wrestling night with WWE, and I think that thematically, that's how we're, Brad Schwartz and his team and Sean Compton are building the network, and we think that it will over time pay significant dividends to both the network, the affiliates, of which we're the largest, and our counterparties as well. Okay, thank you.

Thank you, we have reached the end of our question and answer session, I'd like to turn the call back over to Mr. Sook for any closing remarks.

Thank you very much, operator. In closing, networks, local advertising, our political advertising, and our distribution revenue streams all provide us with a stable and growing foundation across all economic cycles. Our uniquely scaled portfolio of local and national media assets continue to generate substantial free cash flow to support our value enhancing capital allocation strategy that we had described earlier. With our proven financial track record, our best in class balance sheet, and additional upside from potential regulatory reform, we believe that Nexstar offers a rare combination of consistency, flexibility, as well as growth. Simply put, we have the platform, the people, and the momentum to continue to deliver long-term shareholder value, and as Nexstar's third largest shareholder, I might add, no one is more personally committed to that mission than I am. Thank you all for your continued support, and we look forward to updating you again on our second quarter earnings call in August. Have a good day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.