Nexstar Media Group’s Earnings Call: Mixed Sentiments and Strategic Moves

Nexstar Media Group ((NXST)) has held its Q3 earnings call. Read on for the main highlights of the call.

Nexstar Media Group’s recent earnings call painted a mixed picture for the company. While there were positive developments, such as the acquisition of TEGNA and growth in sports programming and NewsNation, the decline in net revenue and challenges in distribution and advertising revenues highlighted significant hurdles that the company must address.

Acquisition of TEGNA

Nexstar announced a definitive agreement to acquire TEGNA in a $6.2 billion cash transaction. This acquisition is expected to bolster Nexstar’s position as a leading local media company. It is projected to be more than 40% accretive to Nexstar’s stand-alone adjusted free cash flow, signaling a strategic move to enhance the company’s financial standing and market reach.

Strong Performance in Sports Programming

Broadcast television remains a robust segment for Nexstar, with a notable 20% increase in time spent watching from August to September. NFL viewership averaged 18 million viewers per game, and CW Sports delivered its best quarter since the launch of live sports programming, underscoring the strength of sports content in driving audience engagement.

NewsNation Growth

NewsNation emerged as a significant growth driver, ranking as the #1 basic cable network for year-over-year growth in the third quarter. It surpassed MSNBC 57 times and CNN 39 times in head-to-head telecasts across total viewers, highlighting its increasing influence and reach in the competitive cable news landscape.

Reduction in CW Losses

The CW network saw a reduction in losses by $5 million or 24% year-over-year in the third quarter. This was achieved through growth in distribution and advertising revenue, which offset lower licensing revenue, demonstrating Nexstar’s ability to manage and mitigate financial setbacks.

Decline in Net Revenue

Nexstar faced a 12.3% decline in net revenue compared to the prior year, primarily due to a reduction in political advertising. This decline underscores the challenges the company faces in maintaining revenue streams amid fluctuating advertising markets.

Distribution Revenue Challenges

The third quarter saw a slight dip in distribution revenue, mainly due to MVPD subscriber attrition and a nonrecurring disputed customer claim. Without these factors, distribution revenue would have been slightly up, indicating potential for stabilization in this revenue stream.

Advertising Revenue Decrease

Advertising revenue decreased by $146 million or 23.5% over the comparable prior year quarter, driven by a significant $145 million year-over-year decrease in political advertising. This highlights the volatility and dependency on political cycles for advertising revenue.

Forward-Looking Guidance

During the earnings call, CEO Perry Sook provided guidance on the TEGNA acquisition, emphasizing its potential to enhance Nexstar’s scale and community impact by adding 64 top-performing stations. The combined pro forma basis of Nexstar and TEGNA is expected to generate over $8 billion in revenue and $2.56 billion of adjusted EBITDA. The acquisition is projected to be more than 40% accretive to Nexstar’s stand-alone adjusted free cash flow, with anticipated synergies of around $300 million. Despite expected incremental interest expenses, the company anticipates only a modest increase in pro forma net leverage. The transaction is expected to close in the second half of 2026, pending regulatory approvals.

In summary, Nexstar Media Group’s earnings call highlighted both opportunities and challenges. The acquisition of TEGNA and growth in sports programming and NewsNation are positive developments, while declines in net and advertising revenues present challenges. The forward-looking guidance suggests optimism about the future impact of the TEGNA acquisition, positioning Nexstar for growth and enhanced shareholder value.