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01/11 03:08
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: while regulatory reforms and the TEGNA acquisition are promising, the decline in advertising revenue and EBITDA is concerning. The Q&A highlighted confidence in the TEGNA deal and political revenue growth, but also revealed uncertainties in core advertising growth and retrans revenue. These factors balance each other out, leading to a neutral sentiment.
Net Revenue $1.2 billion, a decline of 12.3% year-over-year, primarily due to a reduction in political advertising.
Distribution Revenue $709 million, down 1.4% year-over-year, primarily due to MVPD subscriber attrition and resolution of a nonrecurring disputed customer claim, offset by increased rates, growth in vMVPD subscribers, and addition of CW affiliations.
Advertising Revenue $476 million, a decrease of 23.5% year-over-year, driven by a $145 million reduction in political advertising. Nonpolitical advertising was flat, with growth in national advertising and local digital advertising offsetting declines.
Adjusted EBITDA $358 million, representing a 29.9% margin, a decrease of $152 million from the prior year, primarily due to the election cycle.
Direct Operating and SG&A Expenses Declined by $23 million or 3% year-over-year, driven by operational restructuring initiatives.
Corporate Expense $68 million, up $15 million year-over-year, due to one-time expenses related to a disputed customer claim and the TEGNA acquisition.
Depreciation and Amortization $190 million, unchanged year-over-year.
Income from Equity Method Investments Declined by $12 million year-over-year, primarily due to lower revenue from the TV Food Network.
Adjusted Free Cash Flow $166 million, down from $327 million in the prior year, impacted by changes in programming payments and lower adjusted EBITDA.
Net Interest Expense $94 million, a reduction of $19 million year-over-year, due to lower debt balances and reduced SOFR.
TEGNA Acquisition: Nexstar announced a definitive agreement to acquire TEGNA for $6.2 billion. This acquisition will add 64 top-performing stations, expand Nexstar's scale, and is expected to generate over $8 billion in revenue and $2.56 billion in adjusted EBITDA on a pro forma basis.
CW Sports Programming: CW Sports delivered record performance with strong viewership for NASCAR Xfinity Series, ACC, and Pac-12 college football. The CW achieved its sixth consecutive quarter of primetime ratings growth.
Broadcast Television Viewership: Broadcast TV viewership increased 20% from August to September, driven by NFL, NBA, and MLB events. Broadcast TV outperformed cable networks in audience reach.
NewsNation Growth: NewsNation ranked as the #1 basic cable network for year-over-year growth in Q3, surpassing MSNBC and CNN in head-to-head telecasts multiple times.
Revenue and EBITDA Performance: Nexstar reported Q3 net revenue of $1.2 billion and adjusted EBITDA of $358 million, reflecting stable distribution revenue and strong expense management.
Cost Management: Direct operating and SG&A expenses declined by $23 million or 3%, driven by operational restructuring initiatives.
Capital Allocation Strategy: Nexstar is conserving cash by pausing share repurchases to fund the TEGNA acquisition, which is expected to be more accretive.
Programming Strategy: Nexstar is focusing on live news and sports programming to drive growth, with plans to achieve breakeven for the CW by 2026.
TEGNA Acquisition Regulatory Hurdles: The acquisition of TEGNA faces regulatory challenges, including a second request letter from the DOJ and inquiries from state AG offices. FCC applications are also pending due to the federal government shutdown, potentially delaying the transaction closure.
Decline in Advertising Revenue: Advertising revenue decreased by 23.5% year-over-year, primarily due to a $145 million reduction in political advertising. Nonpolitical advertising was flat, but local advertising softness and tougher programming comparisons at the CW and national digital business are concerns.
MVPD Subscriber Attrition: Distribution revenue was impacted by MVPD subscriber attrition, which offset growth in vMVPD subscribers and increased rates. This trend could continue to pressure revenue.
CW Network Financial Losses: The CW Network continues to operate at a loss, though losses have been reduced by 24% year-over-year. The network is not expected to break even until 2026, posing ongoing financial challenges.
Economic Uncertainty Impacting Advertising: Economic uncertainties and advertising revenue softness, particularly in local markets, could impact future financial performance.
Debt and Interest Expense: Nexstar's debt balance remains high at $6.4 billion, with significant interest expenses. While leverage ratios are within covenant limits, the debt level poses financial risks.
Programming Costs and Prepayments: Programming costs exceeded amortization by $30 million in Q3 due to prepayments and deferred programming payments, which could strain cash flow.
TEGNA Acquisition Timeline: The acquisition of TEGNA is expected to close by the second half of 2026, pending regulatory approvals and shareholder votes.
TEGNA Acquisition Financial Impact: The transaction is projected to be more than 40% accretive to Nexstar's stand-alone adjusted free cash flow, with $300 million in anticipated synergies and a modest increase in pro forma net leverage.
CW Network Financial Outlook: Losses at the CW are projected to be lower by about 25% in 2025 compared to 2024, with breakeven expected sometime in 2026.
Nonpolitical Advertising Revenue: Nonpolitical advertising revenue is forecasted to decline in the very low single-digit range year-over-year in Q4 2025.
Political Advertising Revenue: Political advertising revenue in Q4 2025 is expected to be consistent with 2021 fourth quarter levels.
Capital Expenditures (CapEx): CapEx in Q4 2025 is projected to be approximately $32 million, with additional capitalized software payments of $6 million and a $21 million building acquisition.
Interest Expense: Q4 2025 interest expense is expected to be approximately $88 million.
Cash Taxes: Q4 2025 cash taxes are projected to be approximately $45 million.
Food Network Distributions: Cash distributions from the Food Network in Q4 2025 are expected to be in the low single-digit million-dollar range.
Dividends: Nexstar returned $56 million to shareholders in dividends during the third quarter of 2025.
Share Repurchase: Nexstar did not repurchase any shares during the third quarter of 2025 as the company is conserving cash for the acquisition of TEGNA, which is expected to be more accretive than a stand-alone share repurchase strategy.
The earnings report presents mixed signals: strong cash flow and shareholder returns are positives, but operational challenges and reliance on stable gold prices pose risks. The Q&A reveals some uncertainties, particularly around permits and production delays. While the CW network's profitability and sports programming expansion offer growth potential, the lack of clear guidance on certain issues tempers enthusiasm. Overall, the sentiment is neutral, balancing positive financial metrics with operational uncertainties.
The earnings call presents a mixed picture: while regulatory reforms and the TEGNA acquisition are promising, the decline in advertising revenue and EBITDA is concerning. The Q&A highlighted confidence in the TEGNA deal and political revenue growth, but also revealed uncertainties in core advertising growth and retrans revenue. These factors balance each other out, leading to a neutral sentiment.
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