Nexstar Media Group, Inc. Common Stock 2026 Q2 Earnings Call

Thank you, Sachi, good morning, everyone. I'll read the safe harbor language, 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 this 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, 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. You'll be hearing from Mike Biard, our chief operating officer, Lee Ann Gliha, our chief financial officer, after my opening remarks this morning. Nexstar delivered record second quarter results, including an all-time high quarterly revenue number of $2 billion, adjusted EBITDA of $633 million, year-over-year free cash flow of more than doubling to $238 million for the quarter. Our outstanding performance was driven by the TEGNA acquisition, advertising revenue growth, disciplined operating execution that has long been a hallmark of this company. Advertising revenue benefited from strong midterm election political advertising, incremental FIFA World Cup sports advertising, continued growth in legacy local streaming advertising. On the cost side, we continue to drive efficiencies and improve profitability by centralizing station marketing, automating content production, realigning our sales incentives.

I'll briefly review a few of the operating highlights, after which I'll provide a brief update on our litigation matters. Starting with NewsNation, the network continues to distinguish itself through its commitment to objective, fact-based reporting and balanced perspectives, maintaining its position as the fastest-growing cable news network in prime time and total day, with total viewers in June 2026 growing 44% over the comparable prior year period. The CW also achieved impressive results, ranking as the ninth most-watched ad-supported television network in the total day, with CW Sports achieving its strongest quarter ever. In addition, The CW accelerated its growth strategy by entering into new distribution partnerships with both ESPN and Roku, expanding our reach to new streaming services. In July, we launched ATSC 3.0 in Cleveland, Ohio, completing the deployment of the next-generation broadcast standard now across the top 20 industry DMAs.

This most important milestone was made possible by Nexstar's acquisition of WBNX-TV, which removed the structural constraints that had previously hindered deployment in that market. In addition to delivering superior picture quality and immersive audio, ATSC 3.0 leverages broadcast spectrum more efficiently to support high-speed data transmission and enhanced services, providing meaningful benefits for both viewers and local communities. In terms of local programming and community engagement, during the quarter, our owned and operated stations earned 34 regional Edward R. Murrow Awards for outstanding journalism and exceptional locally produced news programming. These awards represent and reflect the hard work of our teams and the crucial impact of quality local journalism on the communities that we serve nationwide. We also celebrated Nexstar's 30th anniversary on June 17th by giving back to our local communities through our annual Founder's Day of Caring, which provides employees with paid time off to volunteer locally.

This year, we expanded our commitment through the Nexstar Media Charitable Foundation's 30 Days of Giving initiative, which awarded grants to 60 employee-nominated nonprofit organizations across our local television markets. On the capital allocation side, Nexstar returned $57 million, or $1.86 per share, to shareholders in the form of dividends, representing an annualized yield of just under 4%. In addition, during the quarter, we made significant progress towards our debt reduction goals by repaying $409 million in debt, which equates to a little bit more than $13 per share of equity value. Looking ahead, we are well positioned for strong free cash flow generation in the second half of 2026, and we remain committed to defending our acquisition of TEGNA against baseless attacks. To that end, we continue to focus on defending our position in the ongoing litigation and continuing our full compliance with the preliminary injunction issued last April.

Now I'll spend a few minutes bringing you up to speed on where we are today. In May, TEGNA appointed experienced broadcast executive Patrick Paolini to CEO, where he is responsible for leading the company and overseeing all aspects of its business, including operations, local journalism, revenue growth, and strategic initiatives. Since then, Patrick has promoted or hired several executives to serve in various leadership roles spanning legal, finance, human resources, technology, and programming, affirming TEGNA's independent operations under Nexstar ownership. Nexstar remains resolute that a complete factual record will demonstrate that the DirecTV and states attorneys general lawsuit is without merit, and the company is committed to resolving the matter as expeditiously as the legal process will allow. With that, I'll briefly review the key milestones in the litigation to date, along with related regulatory developments.

On May 20th, 2026, Nexstar filed its opening brief with the U.S. Court of Appeals for the Ninth Circuit, seeking an expedited appellate review to narrow the scope of the preliminary injunction and to dismiss the state plaintiffs with oral arguments now anticipated in the fourth quarter of 2026. On July 9th, 2026, the U.S. Court of Appeals for the D.C. Circuit rejected all challenges to the Media Bureau's order approving Nexstar's acquisition of TEGNA, concluding that the appellants have not met their burden to show irreparable harm. Today, the FCC is scheduled to vote on a proposal to eliminate the national broadcast station ownership cap and replace it with a case-by-case review process for M&A in the future. Finally, on July 6th, 2027, the bench trial for the U.S. District Court for the Eastern District of California is scheduled to begin.

The court has allocated approximately 15 days for trial to consider the merits of the antitrust claims, with equal time provided for each side. We recognize that several claims have been made about the TEGNA acquisition by the state's attorney general and others. The facts tell a very different story. That's why we posted a new presentation on our website, nexstar.tv, to clarify the details for our investors and the public at large. While we encourage you to review this presentation on your own, I'll spend a few minutes just touching on the main points. First, this transaction underwent extensive review by both the FCC and the Department of Justice before receiving regulatory approval, with the FCC concluding that the acquisition serves the public interest. Second, Nexstar remains a relatively small participant in the broader media landscape.

Some pundits have confused the reach of our television stations with our market share. The signals of Nexstar's television stations and those of our partner stations now reach 80% of the U.S. population, compared with 70% before the TEGNA acquisition. Our stations account for less than 5% of the total viewing, and we increasingly compete against significantly larger technology, media, and distribution companies. In terms of ownership, Nexstar owns less than 15% of full power U.S. television stations. Third, the free universal access afforded by local broadcast television is not just a convenience, it is an essential public service and central to Nexstar's mission. Our stations have always been available to consumers for free over-the-air, and they remain so today. Prices paid for paid TV subscriptions are determined by the satellite, cable, and streaming television providers and not by Nexstar.

Fourth, our commitment to independent fact-based journalism, local journalism in particular, has not changed, and our local newsrooms continue to retain editorial independence as always. Underscoring this fact is the analysis from independent watchdog group Ad Fontes, which confirms time and again that Nexstar provides unbiased and reliable news. Finally, this acquisition strengthens and not weakens local journalism. Nexstar has a long track record of expanding local news following acquisitions, increasing local news hours by 18% since the Tribune acquisition, and we have plans to do so with the TEGNA stations as well. Most recently, we announced the launch of new daily primetime local newscasts in Dallas and in Phoenix. Greater scale enables us to invest more in local journalism, create differentiated programming, and better serve the communities in which we operate.

In summary, as these various processes play out, we remain committed to maintaining the same level of professionalism, integrity, and respect that has defined Nexstar and earned us the trust of our viewers, our partners, and our stakeholders for more than three decades. Taking the high road does not mean remaining silent in the face of commercial and politically motivated attacks. We will continue to respond appropriately and decisively with transparency and the facts in a manner that is consistent with the values that we have upheld since our founding. We have a depth of executive leadership and legal expertise to help address these matters while continuing to operate the business at a high level as our results prove today. Our focus remains on executing our strategy, serving our communities, and meeting or exceeding our financial targets.