NEXSTAR MEDIA GROUP, INC. Q4 2025 earnings call

Thank you, Rochelle, and good morning, everyone. Let me read the Safe Harbor language, and then we'll get right into the call. All statements and comments made by management during this conference call, other than statements of historical fact, may be deemed forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Nexstar cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward-looking statements made during today's call. For additional details on these risks and uncertainties, please see Nexstar's annual report on Form 10-K for the year ended December 31st, 2024, as filed with the U.S. Securities and Exchange Commission, and Nexstar's subsequent public filings with the SEC. Nexstar undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

It's now my pleasure to turn the conference over to your host, Nexstar Founder, Chairman, and Chief Executive Officer, Perry Sook. Perry, please go ahead.

Thank you, Joseph. Good morning, everyone. Thank you for joining us today. Michael Biard, our Chief Operating Officer, and Lee Ann Gliha, our Chief Financial Officer, are with me on the call, as always. Nexstar's fourth quarter financial results capped a year marked by strong execution and bold strategic action to shape our future of the business. We delivered on all key operational priorities in 2025, including successfully reviewing and renewing distribution agreements, representing over 60% of our subscriber base, further elevating The CW and NewsNation to top-tier networks, extending our affiliation agreements with both ABC and MyNetworkTV, and pursuing regulatory reform through our landmark agreement to acquire TEGNA.

These achievements, together with the return of midterm election political advertising in 2026, all set the stage for a very exciting year of growth ahead for Nexstar, as reflected in our standalone Nexstar pre-TEGNA full-year Adjusted EBITDA guidance of $1.95 billion-$2.05 billion. The rationale for the Nexstar TEGNA combination is becoming increasingly clear. Consolidation is accelerating across the broader media industry, from the Hulu-Fubo transaction to the proposed Charter-Cox merger, to the upcoming sale of Warner Bros. Discovery. Against this backdrop, our transaction represents a pivotal and critical opportunity to establish a framework for local television broadcasters to more effectively compete with big tech and with big media, while strengthening our ability to deliver high-quality local journalism to our communities. I'm pleased to report that we remain on track and are making great progress on our path to closing.

Our HSR filings and our FCC license transfer applications have all been submitted. We have responded to all inquiries from the DOJ, the FCC, and the state attorneys general. We continue to work with all regulatory and legal bodies to fulfill any remaining requests. Our explanation for close is by the end of second quarter of 2026. That remains unchanged. If we look at recent in-industry strategic activity, broadcast has been a consistently coveted asset because of the scale, reach, and results it delivers to premium programming, especially sports. The numbers speak for themselves. This past season, the NFL delivered its highest viewership in 16 seasons, up 7% year-over-year, largely driven by broadcast. In home and away markets, broadcast still delivers the majority of the NFL Thursday Night Football audience versus Amazon Prime.

The NBA's return to broadcast fueled a 16% year-over-year increase in regular season viewership through mid-February. That marks the highest average NBA audience at this point in the season since 2018. The NBA All-Star Game also benefited with the highest ratings in 15 years in its first year back on NBC. Finally, the Winter Olympics also delivered their strongest viewership in years. The data is clear when it comes to delivering scaled audiences for premium live sports and events. Broadcast remains unmatched. In this regard, Nexstar's own sports-focused programming strategy is delivering excellent results and enabled The CW to exceed our financial expectations in 2025. The CW finished the year as the 10th most-watched ad-supported network and the 2nd fastest-growing network overall, delivering a 19% year-over-year increase in viewership.

In 2025, we improved the network's cash flow by an impressive 32%, and we anticipate continued financial improvement for the network as we move through 2026, with profitability expected by the fourth quarter of this year. The continued success of our long-term strategic focus on high-impact news and sports programming is further validated by the performance of NewsNation, which posted its strongest year ever in total day, primetime, and daytime viewership, and in 2025, was the fastest-growing cable news network in the adult 25 to 54 demographic. Consumer awareness of NewsNation has increased to over 40%, its highest level to date, with over 50% awareness among viewers of news. These results reflect the fact that NewsNation's programming and unique fact-based reporting is resonating with viewers looking for a balanced and impartial take on the news.

Looking ahead, as we had anticipated and discussed on prior calls, we're beginning to see more stable subscriber trends. Smaller DTC platforms are being integrated into multichannel pay-TV packages, and distributors continue to launch new value-priced skinny bundles, many focusing on broadcast and news programming. In Q4, Charter posted sequential quarterly growth in video subscribers, and overall, the data is encouraging to Nexstar's distribution outlook. While we are focused on closing our proposed acquisition of TEGNA, we remain equally disciplined in executing against Nexstar's core business. Beyond maximizing the political advertising opportunities presented by the midterm elections, our top two priorities in 2026 are digital optimization and expense rationalization. Digital is a key growth engine, and we continue to expand our audience reach, including local CTV apps, now live in 108 markets, and broaden advertiser solutions across our owned and third-party inventory.

Despite AI search headwinds, digital revenue grew high single digits in 2025 and double digits in our local business. In 2026, we expect digital revenue to surpass our national advertising revenue, an important milestone that strengthens our long-term non-political advertising trajectory. At the same time, we are further streamlining and centralizing our operations, automating select production functions, aligning incentive compensation closely with performance, actions which we expect will drive additional operating expense reductions and enhanced execution across the company. Touching briefly on political, AdImpact projects about $10.8 billion in total political advertising for the 2025-2026 election cycle, a record amount for the midterms, with broadcasting expected to capture nearly 50% of that total, or about $5.28 billion.

We expect to capture a low double-digit share of total broadcast political advertising spend for the current cycle, as our positioning remains excellent, with a presence in more than 80% of the contested election markets. In summary, our assets generate consistently strong free cash flow, which we've used to create the clean balance sheet that we have today, to return capital to shareholders and pursue highly accretive M&A, like TEGNA, have executed with our proven playbook and grounded in our steadfast community to localism. We are energized by the significant prospects before us, and we remain laser focused on executing our 2026 objectives, including closing our acquisition of TEGNA, capitalizing on the midterm election political advertising opportunity, and continuing to optimize our business operations, all of which we anticipate will contribute to shareholder value creation.

Now, with all that said, let me turn the call over to Michael Biard. Michael?

Thanks, Perry. Good morning, everyone. Nexstar delivered fourth quarter net revenue of $1.29 billion, a decline of 13.4% compared to the prior year, primarily reflecting the year-over-year reduction in political advertising, offset by better-than-expected growth in non-political advertising revenues. Fourth quarter distribution revenue of $720 million increased $6 million or 0.8% compared to the prior year quarter, and primarily reflects increased rates, growth in vMVPD subscribers, and the addition of CW affiliations on certain of our stations, offset in part by MVPD subscriber attrition. In 2025, we renewed distribution agreements covering more than 60% of our subscribers, extended our network affiliation agreements with ABC and MyNetworkTV to 2027, and renegotiated affiliation and vMVPD agreements for CW, covering about two-thirds of its subscribers.

Looking ahead, we have approximately 30% of subscribers up for renewal this year. In 2026, on a standalone Nexstar-only basis, we are projecting distribution revenue growth to be in the low single digits on a gross basis and in the mid single digits on a net basis for the full year. Our projections are based on our current and expected contract terms and an improvement in the rate of subscriber attrition. Turning back to our results for Q4 2025. Advertising revenue of $549 million decreased $209 million, or 27.6% over the comparable prior year, primarily reflecting $233 million year-over-year decrease in political advertising to $21 million.

However, non-political advertising was up 4.5% in the quarter, better than the expectation of a low single-digit decrease we mentioned in our last earnings call. We saw later than anticipated spending last quarter, driving broad-based improvement across all advertising segments, including local, national, network, and digital. Top advertising categories in the quarter were gaming, banking, attorneys, and sports betting, driven by the legalization of online sports betting in Missouri. Auto was once again our largest declining category, but our focus on developing new digital advertising products with auto dealers partially offset that decline. For the first quarter, non-political advertising is currently forecast to be flattish on a year-over-year basis, primarily due to the negative relative impact of the Super Bowl airing on NBC this year compared to Fox last year, where we have a stronger footprint.

This negative comparison will be partially offset by the incremental advertising from the Winter Olympics on NBC. So far this year, we've seen strong viewership and advertiser demand for marquee sports content, with more than a 20% increase in advertising for the 2026 Super Bowl and Milano Cortina Olympics, compared to the comparable 2022 Super Bowl and Beijing Olympics. On the political side, we generated approximately $21 million in political advertising revenue during the quarter, primarily driven by Virginia's statewide general election and general election spending and California's redistricting ballot proposition and early governor's race spending. With the return of the midterm election cycle in 2026. We look forward to once again demonstrating the value of broadcast television to candidates and campaigns looking to communicate to the electorate through political advertising on television.

As Perry mentioned, we expect to generate a low double-digit percentage of total broadcast political advertising for the year. As a reminder, industry advertising forecasts are provided on a gross basis, and Nexstar reports advertising revenue, including political, net of agency commissions. As in previous election years, we expect roughly 20% of our full-year political advertising revenue to be earned in the first half of 2026, with the remaining 80% in the second half. Political advertising is also expected to impact non-political advertising, driving displacement in the back half of the year.

On the expense side, we remain focused on continuously improving the operational efficiency of our business. In 2025, we reduced recurring cash operating expenses by 1.6% as a result of the operational restructuring we implemented in Q4 2024 and Q1 2025, and continued rationalization of programming costs at The CW. Looking ahead, as Perry mentioned, you can expect us to deliver additional cash operating expense savings across the business in 2026. Turning to The CW, audiences are consistently showing up for our live sports lineup. That momentum is translating into progress toward our financial targets. With its debut on CW Sports, the NASCAR O'Reilly Auto Parts Series, formerly the Xfinity Series, delivered its most-watched season in four years, up 10% year-over-year, averaging over one million viewers across 33 races.

College football also posted double-digit gains, averaging 456,000 viewers per week, with ACC matchups on The CW up 26%. ACC men's and women's basketball is also off to a strong start this season, with total viewers up 35% through the first 10 games. NASCAR on The CW has returned strong, with the NASCAR O'Reilly Auto Parts Series season opener at Daytona, delivering 2.3 million peak viewers, including more viewers in the 18 to 49 demo, for any edition of this race since 2018. The momentum continued last week in Atlanta, where we've delivered 1.4 million average viewers, representing the best performance for this race since 2016. With 100 additional hours of sports programming expected in 2026, nearly 47% of The CW schedule will be sports or sports adjacent.

At the same time, we're strengthening our prime time lineup with premium entertainment, including Wild Cards, the final season of All American, Police 24/7, and refreshed game shows, Scrabble, hosted by Craig Ferguson, and Trivial Pursuit, which will air not only on The CW, but will also be licensed for syndication downstream. Our overall programming strategy is delivering results, with The CW outperforming Big Four primetime telecasts 273 times across total viewers and key demos in the 2024/2025 season. That's up from just 45 times a year ago. Similarly, NewsNation continues to hit consistent ratings milestones. In 2025, NewsNation remained the number one fastest growing cable news network in the 25 to 54 demo.

For the year, NewsNation surpassed MS NOW 60 times and CNN 40 times in head-to-head telecasts across total viewers and in the 25 to 54 and 35 to 64 demos. This compares to the 2024 period, when NewsNation surpassed MSNBC 4 times and CNN 2 times in head-to-head telecasts. To close, I want to reiterate our confidence in our long-term outlook and the enduring strength of Nexstar's business model. Our programming strategy, anchored by live news and sports, continues to deliver results for the CW and NewsNation, and we remain committed to unlocking even greater value from these assets as our audiences grow.

Our local programming strategy is similarly anchored by our unrivaled live news product. The proposed TEGNA acquisition will create a substantial and immediate value for shareholders while advancing the public interest by strengthening local broadcast journalism and providing an expanded range of competitive broadcast and digital advertising solutions across our portfolio of local and national assets. With that, it's my pleasure to turn the call over to Lee Ann for the remainder of the financial review. Lee Ann?

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 a review of expenses, Adjusted EBITDA, and adjusted free cash flow, along with a review of our capital allocation activities and our 2026 guidance. Combined fourth quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses, decreased by $7 million, or 0.9%, driven primarily by reduced commissions from sales of political advertising revenue in Q4 2024, reduced news and production expenses, reduced promotions from our operational restructuring initiatives, and lower administrative and one-time expenses. Q4 2025 total corporate expense was $65 million, including non-cash compensation expense of $20 million, compared to $48 million, including non-cash compensation expense of $20 million in the fourth quarter of 2024.

The increase of $17 million is primarily due to one-time costs associated with our proposed acquisition of TEGNA and the impact of reduction in the bonus reserve in the fourth quarter of 2024 that was larger than the fourth quarter of 2025. Q4 2025 amortization of broadcast rights, included in our definition of Adjusted EBITDA, was $75 million, a reduction of $23 million from $98 million in the fourth quarter of 2024, primarily due to timing of programming at the CW. Q4 2025 income from equity method investments, which primarily reflects our 31% ownership in TV Food Network, reduced by amortization of basis difference, declined by $12 million in the quarter, or 67%, primarily related to TV Food Network's lower revenue.

We also wrote down our investment in TV Food Network, consistent with other companies in the entertainment cable network space. Putting it all together, on a consolidated basis, fourth quarter Adjusted EBITDA was $433 million, representing a 33.6% margin and a decrease of $195 million from the fourth quarter 2024 of $628 million. Moving to the components of free cash flow and adjusted free cash flow, fourth quarter CapEx was $54 million, an increase of $19 million from $35 million in the fourth quarter last year, primarily due to an investment in real estate at one of our properties. Fourth quarter net interest expense was $91 million, a reduction of $13 million from the fourth quarter of 2024.

On a cash basis, this compares to $89 million in Q4 2025 versus $101 million in Q4 2024. The reduction in interest expense was primarily related to reduction in SOFR and reduced debt balances. Fourth quarter operating cash taxes were $33 million, compared to $67 million in 2024, a decrease of $34 million, primarily related to decreased pre-tax operating income in 2025, related to decreased non-election political advertising. Payments for capitalized software obligations, net of proceeds from disposal of assets and insurance recoveries were $6 million versus $4 million last year. In Q4, cash programming amortization costs were greater than cash payments by $19 million versus lower by $13 million in 2024, as certain programming payments were prepaid.

Pulling this all together, consolidated fourth quarter 2025 adjusted free cash flow was $214 million, as compared to $411 million last year. Turning to our 2026 guidance. We believe Nexstar standalone 2026 Adjusted EBITDA will be in the range of $1.95 billion-$2.05 billion. Perry and Mike already provided some of the key assumptions that are embedded in that guidance, including, one, our expectation for growth in net distribution revenue growth to be up low in mid-single digits, respectively, based on contract renewals completed in 2025 and expected in 2026, and an improvement in subscriber attrition trends. Two, political advertising revenue should be an amount equal to a low double-digit market share of broadcast political advertising and will have a displacement impact on non-political advertising in the back half of the year.

Three, total operating corporate expense, corporate expenses and amortization of broadcast rights, excluding one-time charges, will again decline year-over-year due to our continued plans to affect our business by focusing on efficiencies and reducing programming costs. And four, we expect The CW will continue to reduce its losses by another 30% in 2026 from 2025 levels and achieve profitability in the fourth quarter. Key factors differing from our current expectations, which could affect our outlook for Adjusted EBITDA for 2026, either positively or negatively. Those factors include, among other things, the rate of growth or attrition of pay TV subscribers, the health of the local and national advertising markets, our renegotiation of certain distribution and affiliation agreements on terms favorable to the company, and the attributable net income related to our 31.3% ownership stake in TV Food Network.

We do not intend to update this guidance on a quarterly basis. As a few additional points of guidance with respect to adjusted free cash flow, we are currently projecting CapEx of $125 million-$130 million for the year and $30 million-$35 million in the first quarter. Based on the current yield curve, we anticipate full year 2025 cash interest expense to be in the $355 million-$365 million area, an improvement of $11 million versus 2025 levels at the midpoint. We project Nexstar's cash interest expense, including the spread on our floating rate debt instruments, the current SOFR forward curve, and the coupons on our fixed-rate debt, along with our expectations for debt repayments, which includes our mandatory amortization of approximately $111 million.

Q1 interest expense is expected in the $85 million range. Full year 2026 cash taxes are expected to be approximately $315 million-$325 million range, an increase versus 2025 of $208 million due to an expected improved income, primarily a result of the election year. For cash taxes, we use a 26% tax rate when calculating our estimated tax before one-time and other adjustments. The first quarter includes only a very small amount of state income tax in the $2.6 million range. As a reminder, we will use the annualization method for tax, meaning tax related to the fourth quarter of 2026 will be largely deferred to 2027.

In 2026, payments for programming are expected to be in excess of amortization by $25 million-$30 million, due primarily to an investment in programming for future years, with approximately $1 million of that in the first quarter. Turning to capital allocation in our balance sheet. Together with cash from operations generated in the quarter and cash on hand, we returned $56 million to shareholders, comprised entirely of dividends, as we are conserving cash for our acquisition of TEGNA. For the year, we returned $351 million or 42% of our adjusted free cash flow to shareholders in the form of $226 million of dividends and $125 million of share repurchases, reducing our year-end shares outstanding by 1% to 30.3 million.

Nexstar's outstanding debt at December 31st, 2025, was $6.3 billion, a reduction of $26 million for the quarter as we made quarterly amortization payments. Our cash balance at quarter end was $280 million, including $13 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 Nexstar as of December 31st, 2025, for the last eight quarters annualized was 1.71x, which is well below our first lien and only covenant of 4.25x. Our total net leverage for Nexstar was 3.09x at quarter end.

Our 2026 cash flow will be deployed first to fulfill our mandatory obligations, including debt repayments of $111 million and $36 million of pension and defined benefit plan contributions, the anticipated 2026 dividend of approximately $228 million, and to build cash balances to fund the acquisition of TEGNA. In January, we announced our dividend, maintaining the same level as 2025, as excess cash will be used to fund the acquisition of TEGNA. Based on our stock price as of yesterday, our dividend represents a 3.2% yield, which puts us in the 73rd percentile of all dividend-paying stocks in the S&P 400 for dividend yield. With that, I'll open up the call for questions. Operator, can you go to our first question?