NXST

Good day. Welcome to Nexstar Media Group's first quarter 2026 conference call. Today's call is being recorded. I will now turn the conference over to Joseph Jaffoni, Investor Relations. Please go ahead.

Good morning, everyone, and thank you, Stacy. I'll 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, 2025, as filed with the 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. We appreciate you all joining us today. Michael Biard, our Chief Operating Officer, and Lee Ann Gliha, our Chief Financial Officer, are with me on the call here as always. Nexstar hit the ground running in the first quarter of 2026, advancing our strategic priorities across multiple fronts. We closed our landmark acquisition of Tegna following FCC and DOJ approval, and we continued to build and grow The CW and NewsNation as national networks. We delivered strong quarterly net revenue, adjusted EBITDA, and adjusted free cash flow. This year marks the 30th anniversary of Nexstar's founding, starting with a single television station in Scranton, Pennsylvania.

From the very beginning, Nexstar's growth and success has always been grounded in our steadfast commitment to high-quality local broadcast journalism, which we believe is essential to the communities we serve and to American democracy. While our core mission has not wavered, the competitive landscape has changed dramatically in those 30 years. Big tech, legacy, big media, and distribution companies have grown exponentially, and despite consolidation within our industry, Nexstar still operates with a fraction of their ubiquitous reach and financial resources, prohibiting us and every other company in our industry from competing on a level playing field. Against this backdrop, our acquisition of Tegna represents an important step in solidifying our future and our ability to continue providing these valuable services to local communities across the United States. I'll now spend a few minutes bringing you up to speed on where we are today with the acquisition of Tegna.

I'll start by saying the situation that we are dealing with is unusual, and I would caution against attempting to draw legal conclusions at this stage. We will be as transparent as possible under the circumstances and share what we can at this time. As you know, the transaction closed on March the 19th after receiving all required regulatory approvals. As part of that process, we engaged extensively with the FCC and DOJ and provided more than 7 million pages of documentation in response to their inquiries. We also made meaningful concessions to secure our approvals, including agreeing to increase local news programming in 9 markets, divest stations in 6 markets within 2 years, and extend expiring retransmission agreements through November 30th of this year. Under ordinary circumstances, that process with the concessions and the regulatory approvals would allow us to move forward post-closing with our integration plans.

However, DirecTV, along with a number of state AGs, filed suit seeking to block the transaction. DirecTV is a sophisticated company owned by a private equity firm, TPG, with its own commercial interests, just as we have ours. That said, the issue before the courts is not the relative commercial negotiating positions of the parties. It is whether this transaction serves the broader public interest, including American consumers and in the preservation of local journalism. As such, we believe we will prevail on the merits of this case. We are confident in our arguments expressed in detail in the FCC's order approving the transaction that a stronger, more financially resilient local broadcast industry is in the public's best interest. We believe this is a fight worth having for us, for our industry, and for the future of local journalism.

Nexstar is a company built on localism, and our track record demonstrates that scale and operational strength are critical to sustaining high-quality local news programming. As the company has grown, we've consistently made meaningful investments in our station infrastructure and in expanding local news programming, which is the most viewed and the most valued programming that we offer. This transaction represents an opportunity to further our longstanding commitment to serving the communities of all sizes with high-quality, free over-the-air programming, fact-based journalism, and innovative digital and marketing solutions for both our viewers and our advertising partners. We're focused on presenting the strongest possible legal arguments to the court. To that end, we've engaged Beth Wilkinson of Wilkinson Stekloff to lead our trial and appellate efforts, supplementing our formidable antitrust counsel at Morrison Foerster.

Beth Wilkinson is one of the nation's most highly regarded trial lawyers, having recently led the defense team that secured a victory for the NFL and its 32 member teams in a major antitrust class action suit challenging the Sunday Ticket distribution and related media agreements. With our expanded legal team in place, we move forward now with complete confidence in the merits of our case and our ability to bring this process to a successful conclusion. As far as next steps are concerned, there are multiple legal proceedings underway. First, we filed our notice of appeal of the preliminary injunction before the Ninth Circuit Court of Appeals. Second, the trial in the U.S. District Court for the Eastern District of California. Finally, there is also a separate challenge to the FCC's approval of the transaction pending before the D.C. Circuit Court.

The court has already denied a request for an emergency stay, finding that it lacked jurisdiction at this stage. Both we and the FCC have been directed to file our responses to the petition by May 11th. While we don't have control over the various courts' timelines, in the meantime, in compliance with the court order, Nexstar and Tegna are operating separately, and we are proud of both teams' continuing focus on execution and their local community commitments. Now let's turn to the first quarter highlights, which include 13 days of the results of Tegna. In the quarter, we delivered record net revenue of $1.4 billion and strong adjusted EBITDA and adjusted free cash flow of $470 million and $420 million, respectively.

At our legacy Nexstar business units, we made strong progress towards our goal of achieving additional operating expense savings, driven by further cost reductions at The CW Network and broader core operating efficiencies. The CW Network improved year-over-year profitability in the first quarter and is well on its way to achieving profitability by the fourth quarter of this year. Launched just 5 and a half years ago and featuring Nexstar's enterprise-wide commitment to unbiased and fact-based journalism, NewsNation was the number 1 fastest-growing network in prime time across all major broadcast and cable networks in the month of March of 2026, growing 85% in total viewers and 100% among adults 25-54 compared to the prior year. The network now ranked 35th in total household viewing for all of prime time ad-supported cable networks in the first quarter.

As you'll hear more from Lee Ann later, we continue to execute on our capital allocation plan. During the quarter, we returned $56 million to shareholders in the form of dividends and have maintained our $1.86 per share quarterly dividend, which represents a 3.7% yield, placing Nexstar in the top tier of all dividend payers in the S&P 400. We also remain focused on de-leveraging and repaid $182 million in debt through April the 30th. In closing, the free universal access offered by local broadcast television is not just convenience, it's an essential public service and central to Nexstar's mission. If local broadcasters are to continue providing these essential services for future generations, we must be allowed to operate our business in a manner that accurately reflects today's market realities.

Let me turn the call over to Lee Ann to provide a little more color on the transaction and the interim Tegna operations and our reporting until the court cases are heard. Lee Ann?

Thank you, Perry, good morning, everyone. I wanted to jump on the call today a little out of order to provide you some color on what you'll hear from us on the financials and operations given the current situation. Operationally, we're in a bit of an unprecedented place right now with the court order until we can be heard by the appellate court, go to trial, or settle the case. To be clear, we own Tegna. It is a subsidiary of Nexstar Media Inc., our primary operating subsidiary, and we can use excess cash flow for the combined debt repayment, as was our plan. As Perry re-noted, we repaid $182 million of debt through April 30th. We can also execute on whatever actions we need to accomplish our financial reporting and internal control oversight.

As described in the court order, we must hold separate the assets of the Tegna subsidiary. What this effectively means is Tegna is operating as it did prior to the transaction, including operating under its own retransmission agreement. All of this, however, remains in flux pending the natural progression of the litigation. In addition, the operations of Tegna will be under the purview of the team at Tegna rather than under Nexstar's day-to-day management. Given the number of variables, I'm sure you'll appreciate that for now, forward-looking guidance will be limited. We understand the market does not like uncertainty, we're gonna do our best to keep you up to speed as much as we can, given the constraints placed upon us.

The good news is Tegna was a public company, so there's plenty of comparable financial data for you to review along with the longer-term projections they provided in their proxy. I'm gonna turn the call over to Michael Biard to provide some color on our results, primarily on the revenue side of the P&L, and then I'll return for some more discussion on expenses and capital allocation. Michael Biard?

Thank you, Lee Ann, good morning, everyone. As noted in this morning's press release and Perry Sook's remarks, Nexstar's consolidated financial results for the 3-month period ending March 31, 2026, include 13 days of Tegna Inc. operations, while the comparable 2025 period reflects only Nexstar's legacy business units. The company delivered first quarter net revenue of $1.4 billion, an increase of $162 million or 13.1% compared to the prior year, primarily due to $106 million of revenue from Tegna Inc. and higher advertising and distribution revenue from our legacy business units.

First quarter distribution revenue of $837 million increased $75 million or 9.8% compared to the prior year quarter and primarily reflects $54 million of revenue from Tegna and 2.8% higher revenue from our legacy business due to increased rates, growth in MVPD subscribers, the addition of CW affiliations on certain of our stations, and our local Fox affiliates' participation in the launch of Fox One, offset in part by MVPD subscriber attrition. On a combined basis, assuming we own Tegna for the entire quarter, distribution revenue increased 1.6% year-over-year.

Given what we are seeing in the numbers reported to us and the publicly reported subscriber counts from distributors, we are feeling more optimistic than our original plan for subscriber attrition for the year. However, as you know, we committed to the FCC in connection with the transaction to offer to extend current retransmission agreements until November 30 for MVPDs renewing with us before that date. Putting it all together, we do not expect a material change from the original distribution guidance we provided for Legacy Nexstar. Advertising revenue of $548 million increased $88 million or 19.1% over the comparable prior year, primarily reflecting $51 million incremental Tegna advertising revenue and higher political advertising revenue.

Excluding Tegna revenues, Legacy Nexstar non-political advertising revenue was flattish and in line with our expectations, growing 0.4% as growth in digital advertising offset declines in non-political television advertising. Top advertising categories in the quarter for Legacy Nexstar were department and retail stores, attorneys, and gaming and sports betting. While drugstores and medication, packaged goods, and radio, TV, newspaper, cable advertisers had the largest declines. There were no major category outlier in terms of positive or negative performance. On a combined basis, non-political advertising was up 1.2% as Tegna's large portfolio of NBC affiliations benefited from NBC's broadcast of the Super Bowl and the Olympics in the first quarter.

In addition, on a combined basis, overall digital advertising revenue increased a mid-single-digit percentage driven by strong local digital revenues, offset in part by continued declines at Tegna's Premion segment, due primarily to the loss of a major customer in 2025. For the 2nd quarter, including Tegna on an as-combined basis, non-political advertising is expected to decline mid-single digits due to a weaker advertising environment. Legacy Nexstar and Tegna both delivered strong 1st quarter political advertising revenue driven by strong primary and early gubernatorial spending. As reported, political advertising was $46 million, but on a combined basis, political advertising in Q1 was $78 million, up 89% versus 2022 and 19% versus 2024, driven by strong spending in key states of Texas, Illinois, California, Michigan, Georgia, and Maine.

According to AdImpact, industry-wide broadcast political advertising spending was up 79% in the first quarter versus the comparable election cycle in 2022 and up 13% versus 2024, demonstrating the continued importance of broadcast television for candidates and campaigns seeking to reach and engage voters. We anticipate a favorable 2026 political season consistent with our combined historical track records and are prepared at Legacy Nexstar to manage any changes regarding access to lowest unit rate by PACs and parties without materially impacting our performance. Turning to the CW. We continue executing our strategic plan and remain on track to achieve profitability in the fourth quarter with the expectation that we'll improve full-year losses by more than 30% in the year.

While we are facing some near-term advertising headwinds related to Nielsen's transition to big data measurement, improved distribution from our 2025 affiliation renewal cycle will more than offset those impacts. We are also further strengthening The CW's burgeoning sports programming with a multi-year broadcast partnership with the Mountain West Conference beginning this fall and continuing through the 2030-31 seasons. Under that agreement, The CW will televise 13 football games annually, along with 20 men's and 15 women's basketball games each season. In addition, we added 6 Banana Ball games to our schedule for May and June, broadening the network's overall appeal and audience reach. With 148 additional hours of programming airing in 2026, nearly half of The CW schedule will be sports or sports adjacent. Importantly, we are continuing to drive strong results from our sports investments.

The NASCAR O'Reilly Auto Parts series on the CW has delivered more than 1 million total viewers for each of its first 12 races in the 2026 season. In addition, ACC men's and women's basketball concluded the 2025-2026 season with record viewership, with total audiences increasing 6% for the men's games and 26% for the women's. On the digital front, the marketplace is increasingly endorsing the value of CW programming, and we are strengthening our brand equity by expanding distribution and unlocking new advertising opportunities through groundbreaking partnerships with leading digital platforms. We recently announced a deal with ESPN that will make the ESPN app and website the exclusive streaming home for all CW sports.

Beginning this summer, fans with an ESPN Unlimited subscription will be able to stream CW sports live across devices and platforms, complementing our free over-the-air broadcasts and MVPD and vMVPD distribution while significantly extending our reach to new audiences and advertisers through ESPN sports best-in-class platform. We also announced a partnership with Roku, the largest AVOD platform in the U.S., which will bring CW entertainment programming to The Roku Channel for next day streaming beginning with the broadcast season this coming fall. This partnership will provide access to more than half of U.S. broadband households through a dedicated CW branded vertical hub, further enhancing our digital footprint and monetization capabilities. To close, we are focused on expanding reach and unlocking new monetization opportunities across our portfolio by leveraging our growing sports programming, multi-platform distribution, and digital partnerships to drive incremental value.

At The CW Network, this includes scaling live sports and extending distribution through partnerships like ESPN and Roku. At NewsNation, we continue to build a differentiated, fact-based national news offering that can be monetized across linear, digital, and on-demand platforms. Consistent with Nexstar's view that programming must reach audiences wherever they are, we are prioritizing broader distribution, improved ad monetization across platforms, and exploiting new revenue streams that position us to compete more effectively in a rapidly evolving media landscape. With that, it's my pleasure to turn the call back over to Lee Ann for the remainder of the financial review.

Hello again. Combined first quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses, increased by $76 million, driven primarily by $73 million of recurring incremental expense from the acquisition of TEGNA and $4 million in one-time expenses related to cost reduction initiatives taken at Legacy Nexstar. Excluding one-time expenses, first quarter recurring cash operating expenses were lower by $1 million for Nexstar's Legacy business unit. Q1 2026 corporate expense was $106 million, including non-cash compensation expense of $20 million, compared to $52 million, including non-cash compensation expense of $18 million in the first quarter of 2025. The increase of $54 million is primarily due to $38 million of one-time costs associated with our TEGNA acquisition.

Q1 2026 amortization of broadcast rights included in our definition of adjusted EBITDA was $72 million, a reduction of $16 million from $88 million in the first quarter of 2025, primarily due to timing of programming at the CW. Q1 2026 income from equity method investments, which primarily reflects our 31% ownership in Food Network, declined by $4 million in the quarter, or 50%, primarily related to Food Network's lower revenue. Putting it all together on a consolidated basis, first quarter adjusted EBITDA was $470 million, representing a 33.7% margin and an increase of $89 million from the 2025 first quarter of $381 million. Tegna operations accounted for $31 million of this difference, with the remainder due primarily to the political cycle. Excluding Tegna, Legacy Nexstar generated $439 million of adjusted EBITDA.

Moving to the components of free cash flow and adjusted free cash flow. First quarter CapEx was $22 million, a decrease of $13 million from $35 million in the first quarter of last year, primarily due to delayed spending given the pendency of and plans related to the Tegna acquisition. First quarter net interest expense was $120 million, an increase of $23 million from the first quarter of 2025, due primarily to $22 million of one-time commitment and funding fees associated with the temporary bridge loans in connection with the acquisition of Tegna and the refinancing of certain Tegna indebtedness. On a recurring cash basis, this compares to $94 million in the first quarter of 2026 versus $95 million in Q1 2025. First quarter operating cash taxes were $1 million, as the first quarter cash taxes are related to state taxes.

Payments for capitalized software obligations, net of proceeds from disposal of assets and insurance recoveries were $3 million, both in the first quarter of this year and last. In Q1, cash programming amortization costs were greater than cash payments by $10 million, as certain programming payments were deferred. We also received an $84 million distribution from Food Network related to the 2025 operating cash flows, greater than the $21 million of income from unconsolidated investments reported on our income statement. Putting this all together, consolidated first quarter 2026 adjusted free cash flow was $420 million as compared to $348 million last year. Excluding the impact of TEGNA, Legacy Nexstar generated $400 million of adjusted free cash flow. We are currently projecting CapEx in the $45 million range in Q2.

Second quarter cash taxes are estimated in the $152 million range. From an interest perspective, our run rate quarterly interest expense based on our current balances outstanding as of April 30th is about a hundred and eighty-seven and a half million dollars. That amount will fluctuate with SOFR rates and reduce as we repay debt. In Q2 2026, payments for programming are expected to be in excess of amortization by about $5 million. Turning now to capital allocation in our balance sheet. Together with the cash from operations generated in the quarter and cash on hand, we returned $56 million to shareholders in the form of dividends. We made no repurchases, and we used excess cash to fund the acquisition of Tegna and repay $28 million of mandatory amortization payments on our debt.

Nexstar's outstanding debt at March 31st, 2026 was $12.1 billion, an increase from $6.3 billion at year-end, reflecting the impact of the TEGNA acquisition. Our cash balance at quarter end was $379 million, including $12 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.

In addition, our credit agreement allows us to include the adjusted EBITDA of TEGNA as if we acquired the business on the 1st day of the period presented, to add back one-time expenses related to the deal and any operational restructuring, and to include the impact of any synergies we expect to realize within 18 months of the close of the transaction, which we continue to expect we will be able to do just on a delayed timeframe. As such, our net 1st lien covenant ratio at March 31st, 2026 for the last 8 quarters annualized was 2.94 times, which is well below our 1st lien and only covenant of 4.75 times.

Our covenant increased from 4.25 to 4.75 for this quarter and for the next three consecutive fiscal quarters after the acquisition, as permitted under our credit agreement. Our total net leverage for Nexstar was 3.84 times at quarter end using the same calculation methodology. Subsequent to quarter end, we repaid in full our $150 million short-term Term Loan A and made $4 million in mandatory amortization payments. We also closed on the refinancing of our 2027 senior notes with new $1.725 billion of 7.25% senior notes due 2034. Our Q2 2026 cash flow will be deployed first to fulfill our mandatory obligations, including debt repayments, pension and defined benefit plan contributions, our dividend, and then optionally repay any additional debt with excess cash flow.

With that, I'll open up the call for questions. Operator, can you go to the first question?

Thank you. Your first question comes from Daniel Kurnos with StoneX. Please go ahead.

Great, thanks. Good morning. First, Perry, appreciate your willingness to be as open and straightforward with us on the process. I guess first part of the question is, you gave us all of the current existing pieces. Are there any other rulings, actions, or events that you foresee in the ecosystem, either from the FCC or others, that could influence the trial outside of a settlement or your appeal process? As Lee Ann mentioned, I think you guys pulled back a little on CapEx. Is there any difference in day-to-day operations or focus on incremental cash preservation while this process unfolds? Just a quick one for Lee Ann. I totally appreciate that you can't give guidance under the circumstance.

I guess you're kind of directing us to look at what you have said publicly around 26 and what TEGNA had put out previously as sort of the yardstick, if that's right. That would just be helpful to get some clarity there. Thank you.

Dan, I'll take the first part and then turn it over to Lee Ann. I think we gave you the complete laundry list of all threatened impending litigation that we're aware of at this time. We're not aware of anything else that is in the offing. I think you know everything we know in terms of what's in front of us at this time. I'll turn it over to Lee Ann on capital preservation.

Yeah

The other aspects of your question.

I think, Dan, I think on the CapEx side, we just had a little bit of delay in the CapEx because we had anticipated, you know, some different strategies when we combined with Tegna, that will all catch up over the course of the year. I think you can think of Nexstar as continuing to execute on our plan, doing as, you know, an excellent operational job as we normally do on a go-forward basis. We're completely dialed in and focused on executing on the Nexstar plan, I think Tegna similarly is focused on executing their plan. You know, we're not gonna be providing any sort of, you know, longer term guidance with respect to either company at this point.

Okay, fair enough. Thanks, guys, and good luck.

Thank you.

Next question, Patrick Sholl with Barrington Research. Please go ahead.

Hi. Thanks for taking the questions. Just, you know, just another follow-up on the M&A or, I guess, the litigation. Holding the two companies separately, has that provided, like, any sort of, like, update on how informing how you would want to approach operating them together and, if the litigation's resolved successfully?

Well, the hold separate order also requires that TEGNA operate within the interim operating covenants that were in place prior to the closing of the transaction. We do have those guardrails. I think, you know, we have the ability to have conversations with TEGNA. Obviously, they are required and have done an excellent job of doing so, even in the stub period, of providing financial information so that we can present consolidated financials for all of the entities that we own. Other than that, I, you know, I don't think there's any additional read-through in terms of how we'll operate things, you know, post hold separate order. I think that plan's pretty well baked in place. Lee Ann?

Yeah. I will just echo that. I think, you know, if and when we get this resolved, you know, we will be executing on our plan, as we had originally intended, subject to whatever, you know, comes out of that, the process in the interim.

Okay. Then just in terms of just the general environment, like is there any, like, sort of impact from the resolution of the tariff issue in terms of advertiser enthusiasm? Or has other events kind of offset some of any potential benefits on that side?

Not in particular, no. I think what we are seeing is a little bit of a weaker advertising environment in the second quarter than we did see in the first quarter. I wouldn't say there was anything in particular with respect to the tariffs. I would also just remind you that we've got about, you know, 60% of our advertising is coming from services-based companies, which were not impacted by the tariffs.

Okay. Thank you.

Thanks.

Next question, Aaron Watts with Deutsche Bank. Please go ahead.

Hey, everyone. Thanks for having me on. two questions. Just a follow-up on advertising. Dan, where are you seeing the softness amongst your large verticals as you look at two Q, three Q? What's the messaging from your ad partners and how they're thinking about the ad environment right now?

Aaron, there's really not any kind of one category or any major categories to flag. Mike, in his comments, gave you kind of our top and bottom categories, there's not any sort of major differential. What I tend to look at, I look at our categories, and I look at which ones are increasing versus decreasing on a quarter-over-quarter basis. Last quarter was about 50/50, this quarter it's about 2/3 decreasing and 1/3 increasing. I think it's just kind of a general overall weakness. I don't think we have any particular, you know, aha moment in terms of any specific category. It's just a across-the-board sort of general trend.

Aaron, I would just add to that saying that, you know, we have a, you know, one large home improvement advertiser that has gone silent for a period of time that's affecting our numbers. We have some pharma advertising that has not returned as of yet. You know, if the Mets were playing better, our numbers would be better on PIX and our ad sales would be better there. There's a lot of little things, but as Lee Ann said, I don't think there's any one big thing.

I will say, as I was driving to the office this morning, I drove past the gas stations that I pass every day and, you know, for the first time saw a 4 handle to the left of the decimal point in terms of the price per gallon. I think that is having some effect. My understanding that people getting tax refunds that are at the lower end of the socioeconomic ladder, that money hasn't flown back into the economy at this point. I think people are holding on to that money longer, and perhaps to see how things turn out in terms of oil prices and things of that sort. I think there's just a conservatism at this moment in time, but I don't think there's anything overarching beyond that.

Okay. That's helpful context. If I could get one more in, one question around capital allocation and leverage. You know, at the close of Tegna, you agreed to sell certain stations, and in tandem with getting that deal approved, you set synergy targets, you outlined near-term capital allocation policies, and laid out pro forma leverage goals, based on the deal construct. To the extent assumptions that went into all of that were to change, whether it's required station divestitures, synergies, et cetera, how might capital allocation move with it? You know, appreciating the debt paydown you highlighted today, how important is it to you to maintain the conservative leverage profile you have historically, even if it means delaying other potential outlets for your cash?

Aaron, we can't really necessarily comment on what might be, what could be, but I think our track record is that we really look to deleverage the business, use our excess cash flow to deleverage. We don't want to be over-levered. We know, you know, the public market appreciates lower leveraged companies, and so our focus is gonna be to, you know, to continue on that plan and with our historical track record of deleveraging post-transaction. Clearly we're still paying down debt in this environment. We've paid down $150 million optionally after the end of the quarter.

That's, you know, I think you're gonna continue to see that, especially as we flow through 2026 as a political year and have a lot of additional cash flow to achieve that.

Thank you for the time, as always.

Next question, Steven Cahall with Wells Fargo & Company. Please proceed.

Thanks. You outlined some of the ways that, you know, you won't be able to integrate Tegna. Can you talk about some of the things that you can do that are arm's length? I don't know if there's collaborations like through Premion or digital content or news reporting, or, you know, do the terms right now, you know, really require it to be almost a beyond arm's length subsidiary? Lee Ann, I just wanted a clarification. You said you have access to Tegna's excess free cash flow, which you can use for debt repayment. Is that, you know, essentially their free cash flow, or are there any more limitations that get to excess free cash flow as we just think about how much of their cash generation would be available for you to sweep up for debt reduction?

Thanks.

I'm gonna take that last question first, and then I'll turn it back to Perry on the first question. I just say excess free cash flow because there needs to be enough cash at the operating companies to operate. We, you know, obviously have to continue to have an operation. I just meant, you know, subject to minimum cash balance requirements that we just have from an operating perspective. All of the debt obligations of the company are joint and several between us and Tegna. All the debt excess cash flow that we see fit will be used to repay to repay that debt. I'll turn it back to Perry.

Yeah. Steve, I would say there are certain commercial agreements that Michael Biard and I have been talking about that we could enter into on an arm's length basis with Tegna under the order, which could include and involve Premion. You know, for example, in Houston, we contracted our CW station contracted with a station in the market to produce a 10 o'clock news, and we sent termination notice of that during the dependency of the Tegna acquisition. You know, we could talk to the Tegna station in Houston and/or our incumbent news producer, you know, in terms of establishing another commercial agreement to produce news for that station.

There are some things like that we can do, and I think we'll pursue those where they make sense during this whole separate period.

Great. Thank you.

Next question, Craig Huber with Huber Research Partners. Please go ahead.

Good morning. Thank you. My first question about the 39% ownership cap. I personally was very surprised that the FCC did not change the 39% ownership cap first. Then by way of that, your Tegna acquisition could have gone through. As opposed to what they did do was just give you guys a waiver and stuff. There's certainly, as you know, been some talk in the trade press, et cetera, about the FCC at the commission level, potentially, I don't know, reversing out their approval of the deal and stuff. I mean, can you touch on that at all? The first part about where we think we're at with this 39% ownership cap. Do you think it's ever gonna get done? What kind of timeline are we on here?

Why do you think they didn't just change that first? Who cares if it was an extra couple of months to get that done first, then do the Tegna acquisition approval for you guys after that?

Sure. Well, you know, the Tegna acquisition was approved. We do own the assets. I want to start there, and we feel it went through a fulsome approval process at both the FCC and the DOJ, the two expert agencies that regulate this industry, as opposed to the state AGs that have shown no real concern or support for local media, local journalism, local television until this election year. I think that, and I don't presuppose to be in the mind of Chairman Carr, if you go back and look at public statements that he's made since he was a commissioner, whether his party was in power or out of power, he has said these rules are antiquated relics of the past and they need to go.

He is consistent in that position, I believe, to this day, and I don't rule out that he will start a proceeding, perhaps in this quarter or the next quarter that would be a rulemaking to eliminate the national ownership cap. You know, imagine if you were Netflix or Google or Amazon, and you were told you could only reach 39% of the country with your business. I think there'd be some hue and cry around that. Why should those rules apply only to broadcast? We are the only part of the media ecosystem that has a government-mandated cap on our ability to grow. I think that Chairman Carr is totally aware of market realities, why he's taking the actions that he has taken.

I think we are still on a path to regulatory deregulation, and we're, you know, very thankful that we were able to make a persuasive case to qualify for a waiver during the pendency of those proceedings. You know, it's not just as simple as putting out a press release and saying the rules have changed. There's a lot of legal work that has to go into that, a lot of wordsmithing, a lot of consultation with advisors. I would not suppose or presume that those actions are off track. It's just there's obviously a lot going on, a lot of M&A, in addition to ours, that is under consideration at the FCC and the DOJ.

I just think these things are moving through the pipeline, but I would not presume that they have stopped or will not move through the pipeline ultimately.

I appreciate all that, and I certainly agree with that. Again, just that it just seems like to me personally, and things were done backwards here, that they should have changed the 39% ownership cap first and then go through all the process to approve your deal as well, but to get that finalized after the 39% ownership cap was done. They didn't do that. Does that put you in a little bit tougher position here with these court cases out there that you're just enclosed on a waiver as opposed to the regulation changing first and then them doing all the due diligence and then approving it. What's your thought on that, please?

Hey, Craig, it's Michael Biard. I'll take that. I don't think if you look at the claims that have been made in the litigation that the order with respect to the cap would change anything. The claims being made by the plaintiffs essentially are outside the FCC purview. They come from an antitrust perspective, which is really a different analysis entirely than the FCC. I think the FCC could have gilded a waiver, a complete elimination of the rules in gold and served it up on a platter, and the plaintiffs still would have found reason to complain in this case.

Next question, Benjamin Swinburne with Deutsche Bank. Please go ahead.

Good morning. Thanks for the question. I had two. First, I wanted to ask about the partnerships with ESPN and Roku. Does this represent a shift in Nexstar's digital strategy? How are you thinking about balancing growing your digital business versus the opportunity to partner with other platforms? Then on divestitures, I appreciate there's a lot of uncertainty right now, but can you help us think about how a potential divestiture would impact the synergy buckets you've outlined, whether it's retrans, corporate overhead or operational efficiencies? Thank you.

I'll take the first question. I don't think it represents a shift in our thinking. I think I'm speaking with respect to the deals that we struck with ESPN and Roku. We look at those as less of a shift and more of an evolution, right? I think when you look at the challenges of trying to build digital platforms in the current environment, they are enormous. One only needs to look at the balance sheets of major media companies that have launched those digital platforms and look at the essentially long, you know, history of losses associated with that. Those businesses are hard to build. They're, you know, capital-intensive. They require a lot of ongoing maintenance.

When we looked at, you know, expanding our footprint in a digital, in a digital environment. We essentially had three options available to us, right? Build, buy or partner. You know, for obvious reasons, we went with the latter of those options. We were able to strike deals with, you know, essentially the largest platforms available to us in each of those spaces. You know, particularly with respect to CW and the sports on ESPN, I think, you know, where we are in the life cycle of building a sports brand, the opportunity to have our sports, you know, available and visible inside the ESPN platform, inside a dedicated CW vertical environment, will reap rewards for us, not just in terms of building the brand equity, but also our ability to monetize viewership on those platforms.

We're extremely excited about that. Similarly with respect to Roku, you know, trying to build a digital business and really maintain one at a CW-only branded environment is extremely challenging in the current environment. You're going up against, you know, behemoths that invest literally billions and billions of dollars every year into their platforms. You know, being able to tuck into the, you know, the most popular AVOD platform out there, again, with a CW-branded vertical environment, we think will deliver benefits not just in terms of near-term monetization, but long-term brand equity.

On the divestiture side, Ben, I mean, it's premature. I think if you were to look at our synergies, there were a number of components to that. I think the, you know, obviously retrans and in-market synergy type of synergies would have to be reduced. Corporate, maybe not so much, but we'd have to take a look at it. It's, I think, a little premature to kind of even think about what that impact could be.

Got it. Thank you.

Next question, Jason Bazinet with Citi. Please go ahead.

In all my years, I've never really come across a situation where shareholders own an asset and can't manage it. I just had a quick question. Can you elaborate on those guardrails that you talked about earlier? Second, is there any incentives that exist on the part of the Tegna assets to sort of either for their sales force or anything else that sort of minimizes the risks for Nexstar shareholders in this period where we're sort of in limbo or suspended animation?

If you go back to the interim operating covenants, and it's not public in the order as well, they're primarily financial. You know, transactions above a certain size would have to be approved by the board of Tegna, which is comprised of Nexstar executives and Nexstar management team. That's been approved by the courts that we have the ability to appoint management inside of Tegna. I think all of those things taken together are the governance that will guide us during this hold separate period. They operate as a subsidiary. We can have conversations with them. The executives running the entity report to the board.

We just can't basically influence decision-making. Again, decisions beyond a certain level require board involvement and board approval. We were very comfortable in the way Tegna was operated during the pendency of the transaction from the time of signing to closing. It's basically those same covenants, if you will, govern our relationship with Tegna during the hold separate period. As to sales, I'm not quite sure I understood that part of the question.

I just get nervous about, you know, somebody at Tegna, you know, they don't really know if they have a job, if they're gonna get eliminated in some synergy number, and they get distracted, and so they're not as focused on, you know, their core day-to-day job, and then the sales numbers fall apart on the Tegna side of the house. I guess it sounds like from your answer, the limitation is more around integration, and there's really not a lot of operational day-to-day risk that Nexstar shareholders face on the Tegna side of the house.

I think that's fair, and I think that, you know, if you read the judge's hold separate order, we are not, and Tegna is not allowed to reduce headcount during the pendency of this TRO. At this point, you know, we were comfortable in the results and the performance of Tegna during the pendency of the transaction when we were operating under the same structure that we're operating under now. We have, you know, prior to closing is when anxiety is at its highest, right? I would say that is in the overlap markets would have been on our side of the ledger as well. If there are two of me, you know, what assurances do I have?

I think people look at the environment around them and look at the layoffs at Meta and other companies and going on. I think everybody is likely concerned about their job, particularly if they're not doing a good job. I don't think that this transaction, this industry or these two companies are immune from the world economy. From that perspective, you know, we track our levels of attrition and, you know, did not see any appreciable changes during the pendency of the transaction. We'll continue to track levels of attrition during this whole separate period to determine if there are trends. We haven't seen it thus far.

I would say that, you know, the Tegna results for the first quarter were very excellent. We only got the benefit of 13 days of them, but we obviously had the financial information for the entire quarter. They performed very well, as did Nexstar by the results we reported this morning.

Yeah. I would echo that. I would say the first quarter, you know, if there's any expectation or indication that we'd have a problem, you would see it in most likely in that first quarter number, and Tegna definitely had a stellar first quarter.

That's great. Thank you.

I will now turn the floor over to Perry for closing remarks.

Well, thank you everyone for joining us this morning. We look forward to reporting our Q2 results in early August, which will be our first full quarter of results reporting the combined consolidated results of the new Nexstar. Thanks everyone. Have a great rest of your day.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.