Okay. All right, great. I'm happy to be kicking off the conference with Nexstar Media. We have Lee Ann Gliha, Executive Vice President CFO. Lee Ann, thanks for being here.
Thanks for having us.
Okay. Nexstar is about to turn 30 having turned from a single station to the largest local broadcaster. Maybe can you help set the stage for investors and how you see the company positioned today, and what excites you for the next 30 years?
Yeah, no, great. I appreciate it. Thanks for having us here. You know, I was just looking at an email I got from a former colleague who forwarded me something from an investor relations firm called Quartr, who looks at the top stocks that have been performing over the last 15 years. Nexstar is the number five performing stock over the last 15 years ranking just one spot below NVIDIA. I think that's, you know, it's pretty it's a good testament to what Perry and the team have been able to build over the years. That really has been built on the back of the broadcast business model.
At the end of the day, you know, we really believe that broadcast and that media is fundamental to how people view television. It's really fundamental to live sports, live content, and local news viewership. We really have been able to demonstrate that business has been really sustained, sustainable and will be sustainable into the future. The vision that we see for the company going forward is that, you know, no matter where you're gonna view your television content, whether you wanna view it over cable or satellite or over IP, you're gonna be viewing that via a Nexstar television station that's gonna be provided to you on those different services.
We really believe that that's, you know, kind of the sustainable piece of it. We think that we have a very strong local footprint, and that really has been helpful in driving the local news side of our business and the local sales side of our business. When you think about the overall investor landscape and all the different types of media companies that you are able to invest in, you know, just broadly speaking, we believe that we are the choice for investors when it comes down to the local segment. We see that really continuing to proliferate going forward.
We're getting into a variety of different new ways to service our local advertisers through providing a variety of different digital-type advertising services, expanding our business model out. We're looking to advance our ability to monetize our inventory via programmatic channels. We view those as kind of core growth engines to our core base business. You know, if you think about Nexstar as a broader company, we've got a number of different growth engines just within the business.
First of all, we've got a couple of networks. We have a broadcast network called The CW Network that we acquired in 2022, and we've been able to take that business from losing literally hundreds of millions of dollars to what we anticipate will be a profitable fourth quarter this year. We've been able to really transform that business into a very strong programming slate, including, I think nearly 50% of our programming hours are now sports and sports-related. We expect that business to continue to grow. We've got NewsNation, which is our cable news network, which is really meant to be an unbiased news network.
When you've got other networks out there on the left and on the right, you can come to NewsNation and really get the fact-based journalism that you're looking for. That business has done really phenomenally well over the last, since, you know, since we launched it, over the last four years. In the first quarter, was actually ranked as the 35th watched network of all networks. That's up from, you know, in the high 1980s to low 1990s at the last year. We're really seeing some good, strong growth with respect to viewership of that news network.
Then, you know, the other area that we think will be good for growth for us going forward would be the monetization of our spectrum. We've got a spectrum that, you know, pro forma for the TEGNA acquisition, 80% of the country. We are participating in a joint venture called EdgeBeam Wireless that, you know, together, has nationwide coverage of the entire country. EdgeBeam is now working on monetization alternatives to lease out that spectrum for high-speed data transmission services. It's really the same sort of high-speed data transmission service that you're gonna see that any, you know, wireless company can provide.
The only difference here is that we are can provide those services at a very low cost because we already have an infrastructure that is fully built out because our towers are everywhere. We really feel like we've got, you know, if you sort of boil it down, we've got a very solid core business that will continue to perform.
We've got a number of growth engines in terms of digital advertising and hyper-servicing our local customers, growing our networks of The CW, NewsNation, and then monetizing our spectrum. We view that, you know, there's a long trajectory here for the next 30 years. Hopefully, we'll continue to be on that Quarter list going forward.
Got it. That was a great overview. We'll cover some of that. Maybe we'll start with TEGNA. The deal closed on March 19.
Yeah.
Can you just briefly review events since then and where matters stand on the various related legal proceedings?
Yeah. We, you know, we closed the deal on March 19th. We had approval of both the, you know, the FCC and the DOJ. We had provided over, you know, 7 million pages of documents for the DOJ and the FCC to review. We then subsequently were challenged in court by DIRECTV and their owner, TPG, who have, you know, their own commercial business that they're trying to pursue. We've also Challenged by, you know, a number of states attorneys general. What we ended up having was a preliminary injunction put in place on our transaction, which means that we need to effectively hold separate the assets of TEGNA.
While we own the company and we have the ability to access the cash and pay down debt and, you know, continue to benefit in that regard, we do have to have those operations operated separately from the Nexstar stations. That means that TEGNA operates under its own retrans agreements. TEGNA operates its own operating strategies. We're not able to execute on any of the synergies that we had really planned save for, you know, a few opportunities like, you know, elimination of public company costs and those types of things.
We are, you know, in that process. It's a highly unusual process. You don't typically see something like this happen. I just caution everyone, we're gonna try to be as transparent as we can in telling you what's happening as it's happening. It's really we're in the hands of the courts at this point in terms of either the appeal at the Ninth Circuit or, you know, the ongoing trial in the Eastern District.
Got it. As it relates to the industry, it'd be great to hear your view of where you think the FCC is with regards to any action on the 39% ownership cap.
Yeah. You know, I think that the, you know, we can't put ourselves in the minds of Brendan Carr, but I can point you to everything that he said to this point, which has been very, very positive statements about, you know, the need for deregulation and the fact that the rules that are in place today, you know, limiting our access to only 39% of the country are very antiquated. You know, I would suspect that that's a rulemaking that's still coming, but we, you know, I don't have any particular insight into what, when that might happen.
Got it. All right, let's shift to the advertising market. At earnings, you had noted some incremental softness into Q2. More categories declining than growing. Maybe can you unpack what you're hearing from your marketing partners and how you expect items like higher gas prices are playing a role?
Yeah. You know, I think every quarter I look at, we have about 42 different categories of advertisers. About 60% of the volume of those advertising comes from services-based companies. About 40% comes from goods-based companies. I tend to track, you know, how many of those categories are up or down on any given quarter, just as a sort of a signal on, like, is this whatever happening in the quarter, you know, isolated to a couple of categories, or is it more broad-based? What we have seen in the going into the second quarter is that we've got about, you know, 2/3 of the categories declining versus about half in the prior quarter.
I think we're, you know, we're looking at a little bit of a weaker environment. I mean, when you see that many categories declining to me it's just much more of an overall arching economic sentiment, and you tend to see that, right? Advertising is very cyclical. As you're starting to see gas prices increase or you're seeing concerns about the economy, that's the one variable cost that companies can pull back on. We're seeing a little bit of that going into the second quarter.
On that 60/40 services to goods mix.
Yeah
I know you talked about that as a natural hedge during the tariff uncertainty last year. Any sense for how that mix lines up in a period of economic uncertainty?
You know, I think that in a period of economic uncertainty, it all gets taken into consideration sort of similarly. You know, you don't, the goods versus the services component really is much more apparent when you have sort of a supply chain issue, and that's where we have a little bit more of a hedge. I think in general, you do see a little bit of, you know, more cyclicality that happens just in general.
Having said all that, you know, we do have about 70% of our advertising comes from the local segment, and that segment tends to be much more resilient in times of economic uncertainty because you really are talking about companies that rely on advertising to get people to come into their store to buy their goods. If they do start to pull back on that advertising, they see it in their own bottom line. We see that sort of line being a little bit more stable than, you know, than the overall advertising as a whole.
Just beyond the category mix, has the booking pattern itself changed, right? Are advertisers committing later, you know, what does that mean for inventory management?
We're really not seeing that at all. No v ery similar to, you know, it has been in the past.
Got it. We understand that Nexstar is on track for digital revenue to surpass national television advertising this year. Maybe can you walk through the key drivers of digital and how you think about the growth runway?
When you think about our digital advertising, we have several components of digital advertising. I would say probably a little more than half of the revenue is coming from our O&O advertising. That would be our own properties, our websites, our own CTV apps, things like that. The other half is coming from sale of third-party inventory. Really that is, you know, when we go and we have our local sales force and they go out and they talk to an advertiser, the advertiser wants to buy the local television station because they know the benefit of that.
They say, "Hey, you know what? Maybe I want a little bit more entertainment content, in my buy," or, "I would like to address a specific audience." Well, we can provide that as a total solution to those advertisers. That really has been in the form of, for the most part, CTV, third-party CTV inventory. That business has been growing, you know, very strongly. That's the piece that's kind of really taking off. The other, you know, the other piece of our inventory from an O&O perspective, aside from our local websites, is our national websites like The Hill and NewsNation, and The CW, which also have, are generating good advertising revenue, but not the same sort of strong level of growth that we're seeing on the local side.
Can we just talk through the CTV opportunity a bit more? I mean, what's the content strategy on those apps and, you know, how does that develop as, you know, you compete for national platforms also looking for those local dollars?
Yeah. No, for sure. I mean, we basically have launched apps, CTV apps across all of our television stations or all of our news-producing television stations over the last year. The purpose of that was really to just create more CTV inventory for ourselves. That was our owned O&O CTV inventory versus just selling third-party CTV inventory. The other piece of it is really trying to attract different audiences.
You know, if you can be online, you can create some content that is a little bit of a different, you know, feel look and feel than what you're seeing on television. Maybe a little different time periods in terms of, you know, how long you're watching a video clip. Those things tend to, you know, provide a little differentiation to advertisers and to the audience and help expand our overall base. Really that's been the plan and the point of it and it's been doing very well.
Okay, great. Maybe switching gears to political. At the start of the year, we thought there was some caution among broadcast groups regarding the 2026 outlook. However, the sentiment seems to be more upbeat in April and May. Maybe you can walk us through kind of what indicators you've seen so far and how your assessment of the midterm cycle has evolved.
Q1, we had a very good Q1, as did TEGNA, from a political perspective, and that was driven in large part by, you know, some outside spending in Texas. It's really hard to extrapolate what happens in any given quarter in a political cycle to the rest of the year because most of that spending does get done in the eight weeks kind of around the election. I would just caution everybody from getting overly enthusiastic, extrapolating what's happening in Q1 to the rest of the year.
I will say, you know, we do spend time looking at what some of the research firms are saying about the sector, and AdImpact is one that we spend a lot of time with. They've projected that for broadcast, the 2026 year will be slightly down from the 2024 year, but ahead of the 2022 year, which is the comparable cycle.
Got it. There is a potential Supreme Court ruling that could change how political advertising gets priced at a station level. Can you just walk us through how you see that playing out and whether that's something that raises concern?
This is really just, there's a requirement that candidates have to receive the lowest unit rate that we offer to advertisers, and that would be just expanding out that lowest unit rate to be applicable to more advertisers in the political segment. Really this comes down to a supply-demand question. As I just mentioned, you really are getting most of your dollars in that sort of eight weeks around the election. As you get closer and closer into the election time, there's more and more demand and less and less supply for that inventory. It's just a matter of properly managing what our lowest unit rate is and managing that process, which we think we can do.
Got it. Maybe going back to CTV, that's been the kind of fastest-growing channel for political spend. How is Nexstar positioned to capture some of those political dollars flowing towards connected television?
CTV is something that has been growing pretty quickly. That's actually the point that a part of the reason why we created all of these apps in our local markets is to try to capture more of those dollars. That's really the extent of how we will be able to benefit from that in this election cycle, and that's fairly limited at this point.
Got it. Why don't we shift to distribution? You recently expressed more optimism on subscriber attrition than in your original 2026 plan. Maybe can you unpack what's giving you that confidence, and are you starting to see, you know, skinny bundle launches or MVPD repackaging efforts show up in your sub counts?
I mean, it's looked great. We know we put together these summaries where we look at just the overall universe, and you guys can do the same because the information's available to you. You know, in the first quarter of last year versus the first quarter of this year, the year-over-year growth rate's better by more than a point. Or decline rather t hat's really driven in large part by, I would say, not as, you know, a variety of different strategies that the MVPDs have, most notably the charter strategy, which is not the skinny bundle I call it the more is more strategy, right?
They have taken all of the CTV content that's out there, the over-the-top, you know, Paramount Plus and Peacock and all of those, and rebundled it into a massive package that creates a lot of value for their consumers, and I graphed out their rate of attrition, and for a long time, it was like a ski slope, a green ski slope going down, but now it's like a, you know, vertical cliff kinda coming back up in terms of the rate of attrition. They've done really well and that strategy has worked to sort of make video very important to them again.
On the other hand, you do have, you know, companies like YouTube that are creating what I call the less is more strategy, which is a skinny bundle and that seems to be working well as well. Both of those things together I think are gonna be beneficial to the pay TV ecosystem and to Nexstar.
Great. On the net retransmission side, you've guided to mid-single-digit growth this year. I think Perry has framed reverse compensation as on a downward trajectory, to use his words. Maybe can you speak to the dynamics around content exclusivity that kind of underlie your confidence here? You know, what have the conversations with network partners been like on this point?
I mean, you know, over time, what you have seen is these, as I just mentioned, these, you know, sort of direct-to-consumer platforms that have been created by the networks that have made our content or made the content that they provide to us less exclusive because they're providing that content available to the consumers over those platforms as well. You know, previously, when we were getting that content exclusive, that was, you know, there's one price point for that, and there's another price point when that content becomes less exclusive. You can just see it in the numbers, and you can see it in our guidance for the year in terms of what the success that we've been able to have by using that rationale with the networks.
Got it. Staying on content exclusivity.
Yeah.
The potential for the NFL to open its rights window early has received a lot of attention. Certainly possible we see nothing happen or no change. In the scenario of networks paying more in return for, say, guaranteed rights through 2033, how do you think about the flow-through impact to your stations?
Yeah. You know, if you look back in time at, you know, prior cycles when the NFL increased their rates, we didn't really see a similar commensurate increase in our rates. Sort of just what I was talking about a minute ago, you know, you can kind of think about what's the package of inventory or package of programming that is being provided to us by the networks. There's, you know, sports programming which is doing well from a ratings perspective and entertainment programming which is doing not as well from a ratings perspective. You know, over time how do we end up paying for this content? Do we pay maybe more for sports and less for entertainment inside that bundle?
You know, we're not entirely worried about, you know, that incremental cost on the sports rights coming back to us dollar for dollar because there's other things that that network is providing to us that is maybe, that are maybe less valuable. The other thing we think could be interesting is, you know, as some of these networks are maybe paying more for premium sports content are they gonna have to rationalize some of their, you know, other sports content that The CW could potentially benefit from by, you know, providing an outlet for that content on our air.
Yeah. We'll come back to the CW Sports in a second.
Yeah.
Maybe just staying on this point, though. We've seen recently, some retransmission disputes where local sports content has become a sticking point. I think you and Perry have previously expressed some skepticism on the RSN model.
for broadcast.
Yep.
You do have some rights contracts now as a result of M&A.
Yep.
As the regional sports model kind of further unravels, how are you thinking about the place of kind of stations to add some of this game content?
Yeah, I mean, I think we're still pretty limited in terms of the amount of local sports content that we have. Just given the way of the nature of how retransmission gets negotiated, we really have to look at each of these, you know, local sports contracts on a case-by-case basis and make sure that they pencil out from a profitability perspective. I don't think our point of view has really changed on that. You know, we are seeing some dislocation of that RSN model and, you know, I think that, you know, there'll be some opportunity for us to pick up some sports rights, but I don't know that they'll, you know, that'll be super meaningful.
Got it. All right, moving to the CW. The ESPN and Roku partnerships.
Yeah
It seemed like a new chapter for the network. Maybe can you walk through the strategic logic of putting CW Sports inside ESPN's platform and entertainment on Roku Channel? Then, I don't know, to the extent you can elaborate how the partnerships are structured financially.
Yeah. Yeah, you know, we've been working very hard to transition The CW into a sports destination, and so far it's been we think, very successful. We're gonna have, I think by, you know, for the 2026, 2027 broadcast year 800 hours a year of sports content, which is unbelievable in terms of where we started. You know, we had started at a network that sports had never been on the network before. On the weekends, I think we've north of, you know, 13 or 14 hours on average on the weekend. Very, very important part of our programming strategy.
Having said that, we're still really, we're early on, and we thought that, in terms of looking at places to put our content that could attract the most possible audience, you know, what better place to go than the number one sports name, which is ESPN? They were really looking to create a product that could be a destination for multiple different types of sports rights owners. This is proof of that concept for them, and we think will be really beneficial to just adding to the potential audience for CW Sports.
Okay. The Roku Entertainment?
Yeah.
Yeah.
Roku, similar thing, right? On entertainment, you know, we have two types of content within CW. We have sports content, and we have entertainment content. Again, you know, Roku is the number one AVOD destination. To create a, you know, separate CW channel inside The Roku Channel, will just provide an incremental opportunity to just have more access to more audience, which is what we're trying to drive at this point. It's all about driving audience, driving advertising dollars on a go-forward basis.
Okay. To put it in perspective on sports, you started with LIV Golf, I think.
Yes.
To your point on the NFL, you see opportunities to sort of level up CW Sports brand too.
We've been
Yeah
we've been leveling up as we go. You know, we, you know, we have the NASCAR O'Reilly Auto Parts series, which is, you know, doing really well for us. We've got ACC. We've got Mountain West. You know, we've got the Professional Bowlers Association and the PBR. It's, you know, we're continuing to provide, you know, kind of a variety of, you know, sports programming that is, you know, not the sort of top-tier sports programming, but very watchable and with dedicated audiences. We just feel like we've created a great bundle here and are gonna continue to grow it as we can.
Okay. As it relates to CW, I think you've mentioned, possible near-term headwind from Nielsen's transition to a different measurement methodology.
Yeah.
Can you just help us understand what that means commercially for the Network?
You know, look, at the end of the day, The CW is still relatively small from a for Nexstar as a percentage of our overall advertising revenue, so it's not, like, super meaningful in terms of our consolidated figures. When you drill down into The CW, we have been seeing some headwinds with respect to the transition to the big data methodologies. We are working through that and, you know, trying to make sure that we are putting ourselves in the best position to sell that advertising going forward.
Okay. You talked earlier to profitability arriving in Q4. You know, beyond break even. How do you think about the longer term margin structure of The CW and what kind of contributor it can become?
Yeah, look, The CW, when we acquired it, was really meant for, you know, two different purposes. First purpose was really a defensive play to make sure that we continued to have CW programming because Nexstar is the largest affiliate of The CW, we've only grown that position over time. The benefit that we're seeing from The CW is really a couple fold on e is the fact that we've been able to take the network from, you know, losing money to being profitable by the end of this year.
We've also been able to expand the number of affiliates, CW affiliates that we have on Nexstar stations, which we've been able to monetize very effectively. On a go-forward basis, you know, from here, we do expect, you know, the network to continue to be profitable. That's assuming that we don't make a reinvestment in some other, you know, content right that, you know, would be an investment play going forward.
Got it. All right, you covered this a little earlier, but NewsNation, I think, was the fastest growing network in prime time in March. Up significantly across demos. Maybe just talk about what's driving that inflection, where the network sits today in terms of financial contribution?
You know, I think this has just been a story of just kind of steady growth. If you kind of look back over time at NewsNation's, you know, growth in terms of the audience, it's just been kind of steadily growing quarter after quarter after quarter. You know, sometimes you catch, you know, some news that people tune into, that really then makes them knowledgeable of the station and the channel and the work that we're doing, causes them to kind of continue to retune in. We're expecting that to continue to perform. Very excited about the increase in the rating ranking. It is gonna take some time to kind of monetize it over time, right?
You know, every year you have the upfront that's based on what you had done historically and what you expect to do w e just had that. You know, we'll have amounts that we can monetize in the scatter market. You know, next year and the next upfront, you know, hopefully we'll be in a much better position. The network from day one has been profitable, y ou know, if you look at it, you compare it to any one of our television stations, it's, you know, one of the better performing stations in terms of profitability. You know, we anticipate that, you know, that profitability will only continue to grow as we grow the audience.
As far as developing that model, I assume the midterms probably or that cycle plays a role.
Not so much, I would say. You know, we always say this, but it actually is true all politics is local. At the end of the day the dollars get more spent on the local.
Right
side of the equation.
Okay. I meant more on the developing the audience.
Oh, I see.
The audience reach. Yeah.
Yes. Well, no, it's interesting. I think we do, you know, obviously do our fair share of political coverage. We have an asset that is, you know, the number one website that people go to for inside the beltway information, which is The Hill. We've got programming content that's on NewsNation that is reflective of that. I would say, you know, a lot of times, you know, NewsNation is kinda counter-programming all the political content that is out there. We're focused on things that Americans care about other than just politics.
Got it. I wanna ask on EdgeBeam, which is located here in Boston.
Yeah.
The venture has paying customers. I think at some point you had described the revenue opportunity maybe somewhere down the line as potentially rivaling distribution.
Yeah.
Maybe just walk us through, what the commercial pipeline looks like right now and, kind of what are the milestones that investors should be focused on?
Yeah. You know, as I mentioned, we have this joint venture with a number of our partners, and that really has been, I think, a huge positive event for development of ATSC 3.0. If you think about it, you know, people say, "Oh, you've been talking about it for a long time." Well, I think we've been, had to have been talking about it for a long time because it wasn't until we kind of got to creating this joint venture that we could have that scale, that nationwide scale that can be monetized then, to potential counterparties that can utilize that spectrum on a nationwide basis.
We've got a great CEO, Conrad Clemson, who runs EdgeBeam Wireless, and so we're all now speaking with one voice to the entire, you know, potential user base for the for this spectrum. There's, you know, people talk about what are the use cases. The use cases are endless th e use cases are exactly the same thing that you're using wireless data for. We think that there's a variety of different things that are kind of near-term. One thing that we're spending time on is digital signage t hat's an area where, you know, we can get low-cost access to the infrastructure.
Perry has talked about having a backup GPS system. If you think about. How does our spectrum work? Well, we are actually, you know, meant to be for television sets we go through walls. We can have very good receptivity. We're a terrestrial-based service, you don't have cloud cover issues when you're looking at trying to figure out, you know, where the spectrum is. It ends up being incredibly much more accurate signal in terms of trying to figure out, you know, from a GPS perspective. We're looking at that, we're looking at, you know, any number of other alternatives there.
Okay. Maybe, one on the cost and operation side. You've started deploying AI across newsrooms w here are you seeing the most tangible productivity gains so far, and where do you think AI moves the needle in your business?
I, you know, like people say AI, but I also think of it as automation in some regards. I think in a lot of cases we are the anti-AI company in the sense that we actually have reporters that go out and talk to, you know, your mayor or go and, you know, look at the oil spill and tell you whether it's, you know, still there or has been cleaned up. I think from a, you know, societal perspective, you know, it's important for our company to continue to thrive and to provide those type of local news services. That doesn't mean we can't benefit from automation and from generative AI to help our processes improve.
That, you know, that can be anywhere from helping our sales force to, you know, helping automate, you know, if we wrote a script, can it go onto a news article a re there automation that we can do with just our newsroom floors and help, you know, improve the ability to be a little bit more efficient in terms of how we bring the news to the consumer. I would say that, you know, from a productivity perspective, it's been on the margin so far, and we're still experimenting and trying to develop, you know, the best possible generative AI solutions to help processes.
Got it. I think we got time for one more. Maybe just to wrap up. Lee Ann, is there anything you'd wanna highlight that you think is underappreciated about the Nexstar story?
Well, you know, I think that what tends to be underappreciated is, you know, what we believe is the longevity of our business model. You know, if you look at our stock price, and you do a discounted cash flow analysis, and you, and you know, just look at what that perpetuity growth rate implies if you look at our stock price it actually implies a negative perpetuity growth rate in the high single digits. We don't believe that that is the case. You know, we think that we have a really good business model that will sustain into the future.
If you were to, you know, just move that perpetuity growth rate up, you know, to, you know, low percentage decline or to zero, you know, there's a lot of opportunity with respect to the stock price longer term. We think that broadcast television is here to stay, right? It's the, you know, we think it's a virtuous cycle in terms of being able to provide local news and live events to, you know, the entire country. The fact that we have an over the air solution that is, you know, free to the consumer really we think is beneficial, not only for, you know, our business model, but for society, and we think it will continue to perpetuate and, you know, help us generate cash flows and revenue streams for the long term.
Okay. Great.
Okay.
Lee Ann, thanks so much for being here.
Yeah. Thank you. Thank you.