Nexstar Media Group (NXST) - President & COO Michael Biard, CFO Lee Ann Gliha

Thank you. Happy to be here.

Sure, I'll take that one. I think when you look back on the fall of '23, because you referenced the Charter-Disney kerfuffle, we looked at that and took a few things away, not just from the fact that there was a conflict but more from the resolution of that conflict. Briefly, the highlights we saw: First, the value or the fight wasn't over valuable programming; you didn't see Charter anywhere in their materials taking issue with the value of the premium programming inside the Disney portfolio. They didn't attack ESPN or ABC, for instance. In the end, that premium stuff got paid. Second, one of the things you did see Charter going after was the value of the long tail cable networks, the sort of stuff that nearly every objective observer looks at today and says these things really aren't providing value into the cable bundle. When the deal got done and the Disney networks were relaunched on Charter, a few didn't come back — largely derivative networks left out when the deal was struck. Third, and this was a critical piece for us, the DTC services were brought back into the bundle for the first time, allowing Charter to bundle DTC with their linear video. That was an important milestone because it essentially marked the end of an era where programmers could benefit from the bundled linear video business that was paying for all the DTC services while simultaneously undermining it with what they were doing with their DTC services. We thought then, and still do today, that those takeaways were all positive signals for broadcast. Nothing is more premium or more valuable to the bundle than broadcast, even versus ESPN. The calling of those long-tail cable networks was a good thing for us, taking cost out of the system where there's no value coming back in, good for consumers and good for us if it frees up dollars to be reallocated to services like ours that deliver value to the bundle. Third, the idea that DTC services come back in is also good, eliminating the temptation for programmers to take programming away from broadcast and put it on a DTC service. It provides the opposite incentive: if DTC and linear are now brought back together, a programmer wants to put big programming on the broadest reach, not separate it to try and get paid twice. So, you put it where you get the most advertising benefit. All those things we thought were good, and nothing in the interim has changed our mind. Developments at Comcast shedding their cable networks and refocusing on broadcast, the SkyDance folks saying CBS was critical to their vision of Paramount's future, and Fox not chasing original programming for their DTC product but delivering it as part of their bundled video — all strengthen our point of view.

Well, candidly, it's been a breath of fresh air to have an FCC chair that understands the value that broadcast, and in particular the local station, provides to the community. We're grateful that he understands that the regulatory scheme around broadcast is really an abject anachronism that needs to go away. Chairman Carr has been refreshingly practical and modern in recognizing that there's something seriously broken with a system that says a company like Nexstar and fellow broadcasters can't grow because we're capped, while big tech and big media with whom we compete for advertising and viewers can continue to grow without constraint under any similar regulatory scheme. The chairman has brought an urgency to the situation that is long overdue, and we're grateful for it.

Maybe I'll jump in there. We've historically created a lot of shareholder value through our M&A strategy. If you go back to the beginning of 2011 and look at where our stock price is today, we did that through over 20 deals, including doubling the size of the company in 2017 with the Media General acquisition and again in 2019 with the Tribune Media acquisition. That's driven a lot of good synergy for us. We have a number of layers of synergy from M&A, including retrans synergies, in-market operating expense and station-level synergies, and corporate overhead synergies. So, it can be a nice way to grow our free cash flow and be more creative on a free cash flow basis than just buying back stock. We'll have to see where the FCC goes in terms of deregulation, because as you noted, we are at the cap today, so we'd need relief to expand into new markets. The other component is relief in terms of the in-market duopoly rules. Right now, you cannot own two of the top four stations in a market. If there's relief there, it would provide additional ability to make acquisitions in the markets we're currently in and provide a new level of synergy. Given our success in the past, we'll look at all opportunities and try to find the best ones. Clearly, we'd have an interest in markets where we can put more CW stations, bigger markets, and markets where we currently have a presence. But there also has to be a willing seller and a willing buyer, and a favorable regulatory environment for all that to come together. So, we'll have to see. The first thing is for the FCC to get in position to make some moves on the deregulation they've been talking about, and then we'll follow on from there.

Look, our expectations are that once the FCC gets into a position where there's a Republican majority, we'll start to see some action, with Brendan Carr acting on his agenda at that point.

I think they're all very impactful. It depends on the target company and which will be more impactful to us. If you go back, we've provided a lot of detail historically on the three buckets. On our website, we have our old investor decks from Tribune and Media General, so you can see how that pencils out. But all three categories can be impactful to us.

Sure, I'll jump in. I don't agree that we have pricing power. I think that's a term of art in some circles that we don't necessarily agree with. We certainly have enough scale to be taken seriously, and the heart of your question is really about scale. The media business, particularly on the distribution side, has always been a scaled business. But notwithstanding our ranking as the largest broadcaster, we're competing with big tech all the time, so more scale is always better, especially considering who our competition is. As Leanne mentioned, scale provides not only negotiating leverage but operating leverage, which is critically important to us. With respect to your specific question on retrans, we'll continue to pursue a share of the wholesale fees that better reflects the share of the value we deliver. If you think about it from a ratings perspective, compare share of wallet — what percentage of fees we pull out of the system versus share of viewership — there's still a disparity, on the order of about 40%. There's 40% upside to our retrans if those two things level out. That's been the marker we've been pursuing for some time. We think there's still upside there, and we'll continue to pursue that.

Sure. Let me break those down separately. The notion that reverse retrans payments — what affiliated stations pay to their networks — would be capped or regulated came from one commissioner who will resign as of tomorrow, in an op-ed. I guess we haven't seen a lot of traction around that idea, and we don't spend a lot of time thinking about it as being very operative. On the ATSC front, yes, that is important. This is a proposed rulemaking that the NAB has proffered: a mandatory cutoff date converting from 1.0 to 3.0, making everything we do over the air more efficient. We think that has a lot of legs and should be adopted. Coupled with that, a quick end to the requirement that we simulcast what we put out on our primary signal on 1.0 onto 3.0 as well. That's just duplicative, inefficient, and taking up spectrum we could use for other purposes.

I'll start with the headline that we think fundamentally broadcast television remains the most important medium for engaging live sports audiences. Look at the last year: despite all the rumors of the demise of broadcast TV, it keeps chugging along and setting new records. The Super Bowl, Kentucky Derby, just a couple of weeks ago the Indy 500 set a new record for the last 19 years, the Final Four, the Masters, the NFL Draft — all centered on broadcast, some with a little streaming augment. You don't see stories like that about events exclusively on cable. The new records are centered on broadcast as the cornerstone of distribution. We like where we are in that regard. If you think about our portfolio, break it down into three buckets. One: we get programming from our big four affiliated networks on our affiliated stations. We don't have much to do with the acquisition of that programming; we look at how it's distributed to us and how much is exclusive through the network, which factors into a complex, multifaceted relationship with the networks. The other two buckets — what we have on the CW and what we acquire locally for our stations — we control directly and are judicious about what we do in each market. The common thread is that the platform we offer our partner, whether a league, team, or conference, has unparalleled reach. There's no other platform that can match that. We recognize that's an asset and use it as consideration in negotiations. Every league or conference thinking about broadcast as a distribution platform increasingly recognizes its preeminent place. The history of alternative platforms like cable or streaming is now long enough that every rights holder can look back and see what was a good deal or not. In the case of MLS going exclusively to Apple, I'm not sure that turned out to be a great deal for them. Others looking at streaming think there's a big check available, but is that fundamentally going to help grow the brand, product, and fan base? When you compare the successes on the broadcast side against events that went exclusively to streaming, we see a drop-off of typically around 20% — whether that's NFL on Netflix, NASCAR on Prime, or Thursday Night Football. You're not seeing anywhere close to year-over-year comparisons; you're seeing a significant drop-off.

Sure. I'll start with the importance of our 54 CW-affiliated stations. That really is a meaningful business for us. The reason we're in the CW business was because we were the largest CW affiliate when that business came to market three years ago. While the CW as a network may not be the most material contributor to the company's finances, the stations are increasingly important to us, and the CW as an asset is strategically valuable. It gives us the ability to control our own destiny on a vertically integrated network all the way down. By comparison with the big four networks, on the CW we can control every platform we go to. We have a seat at the table with every distributor for carriage of our stations, whether virtual MVPD or traditional. Having control of the programming allows us to program it in a way that benefits broadcast, which is the business the CW has always been in, but its partners were in different businesses driving different strategic decisions. By transforming the programming away from niche comic book and superhero programming into programming that resonates with the broadcast viewer, starting with sports, we have an opportunity to grow our distribution and advertising and make it a business positioned in a much different way.

Sure. The common thread with NewsNation and CW is that these were businesses we were adjacent to, and we've transformed them to be a better complement to our core business. With CW, we were an affiliate and then took over the network and transformed it completely. With NewsNation, it came to us as WGN America through the Tribune acquisition in 2019. We looked at it and thought the world didn't need another general entertainment network focused on original scripted programming trying to compete with big tech and streamers. Instead, it could benefit from a fact-based, nonpartisan cable news network, which is in our wheelhouse. We employ the largest number of journalists across the country — over 5,000. We do news better than anybody else at scale. We thought a cable news network with those characteristics would resonate with viewers, and we have the ability to execute on that in a way nobody else does given our local news in hundreds of markets. It's a business that is still growing. Quarter on quarter, month on month, certainly at the beginning of this year, we see growing ratings. We've only been 24/7 news for about a year, so it's still in a growth cycle. Notwithstanding that, we had the last Republican debate last year on NewsNation. We're increasingly going head-to-head with established brands that have been around for 30 to 40 years. We feel good about the trajectory and are proud of the product we're putting out every day.

Yeah. On the core advertising side, our non-political advertising — just to step back — about 70% comes from our local advertisers, which tend to be more stable, call-to-action type advertisers, more stable than the national side. So the lion's share comes from that segment. If you look at our overall non-political advertising pie, about 20% comes from digital, which has been growing nicely on the local side. Breaking it down by categories, about 60% of our non-political advertising comes from services-based businesses rather than goods-based businesses. There's been concern about supply chain with tariffs, but our advertiser pie is very diverse, segmented 60% services and 40% goods. Our biggest advertiser is auto, but our second biggest category is attorneys, which is not supply chain focused. In the first quarter, our non-political advertising was down about 4.2%, and we guided for the second quarter down again in the low to mid single digits, similar to the first quarter. We haven't seen a major falloff or big change in the overall advertising sector as a result of tariffs or macro perspective. Categories that have been a little more difficult lately are auto and insurance, but nothing else sticks out as particularly impactful. So we feel pretty good with our overall advertising portfolio and the resiliency of our relationships.

I'll jump in there. Start with the nature of our footprint. It's so extensive that we typically have a presence in 80 to 90% of contested markets. That gives us a level of stability and expectation that year on year we'll garner about the same share of the spend in our footprint — think low teens. As the overall spend in television continues to grow, and we saw growth in the 2020-2024 presidential cycle, our percentage of that pie was consistent. So we expect similar trends will continue into next year for the midterms and into 2028.

Yeah, I'll take that one. Each of them is a little bit different in terms of how they're structured, both in the business model with us and the role our affiliated stations play inside that product. Let's start with Fox, because that's the one I know best given my history. Fox will come out with a product that will include Fox broadcast, but Fox broadcast is only expressed in each market through their local stations, whether O&O or affiliate. When you buy the product and watch Fox, you'll see the feed from those local stations, assuming they've gotten a deal done with each station. We expect to have a deal done with them in that regard. So, yes, we will get paid for each of those subscribers. We have a similar relationship with Peacock. Peacock has complexity with two different tiers: one level does not include local stations including their O&Os, the other does include O&Os and ours as well. Same with Paramount. The economic relationship regarding DTC products is one facet of a complex relationship with our networks, with a lot of moving pieces and puts and takes. Ultimately, I'll come back to the importance of broadcast. I think your question is, do we see those as a threat? The way I think of it is those products are centered on their broadcast networks first and foremost. If they move away from broadcast, we know what those models look like. If they want to do deals directly with distributors and bypass broadcast, that's called a cable network. If they go directly to consumers exclusively, they can compete with Netflix. So they are doing an augmented version of both. But to be a broadcast network and reach the entire country — and that reach is the secret sauce to the rights they acquire and viewership they garner — requires having affiliates in every market. That's where the role we provide and our scale come back to being a critical asset in all those discussions.

All right. Thank you.