Nexstar Media Group, Inc. (NXST) Earnings

Management highlights

### Overall Financial Performance - Nexstar delivered record Q2 2026 results, with all-time high quarterly revenue of $2 billion, adjusted EBITDA of $633 million (31.8% margin), and adjusted free cash flow of $238 million, more than doubling YoY from $101 million. - Results were driven by the Tegna acquisition, strong political and sports advertising growth, and disciplined cost efficiency initiatives. ### Operational Milestones - Completed full deployment of ATSC 3.0 (Next Generation Broadcast Standard) across the top 20 U.S. DMAs with the launch in Cleveland, Ohio, enabled by the acquisition of WBNX-TV. - News Nation maintained its position as the fastest-growing U.S. cable news network, with 44% YoY total viewer growth in June 2026. - The CW ranked as the 9th most-watched ad-supported television network in total day, achieved its strongest ever quarter for CW Sports, and expanded reach via new distribution partnerships with ESPN and Roku. Added multi-year rights to 20 annual WWE NXT Premium Live events to its sports lineup. - Nexstar owned-and-operated stations won 34 regional Edward R. Murrow Awards for outstanding local journalism, and the company marked its 30th anniversary with expanded community charitable giving. ### Tegna Acquisition Update - Tegna remains in independent operations under Nexstar ownership, with a new leadership team appointed following the acquisition. Tegna operating performance is in line with expectations, with only slightly lower year-over-year distribution growth due to existing legacy contracts. ### Capital Allocation - Returned $57 million ($1.86 per share) to shareholders via dividends, representing an annualized yield of just under 4%. - Repaid $409 million of debt in Q2 2026, advancing the company's deleveraging goals. Total outstanding debt as of Q2 end was $11.7 billion, with a first lien leverage covenant ratio of 3.21x, well below the 4.75x regulatory limit. ### Legal & Regulatory Update on Tegna Antitrust Litigation - The U.S. Court of Appeals for the D.C. Circuit rejected all challenges to the FCC's order approving the Tegna acquisition. A bench trial on the merits of remaining state AG antitrust claims is scheduled to begin July 6, 2027, with oral arguments for an expedited appellate review expected in Q4 2026. - Management maintains the lawsuit is without merit, and has published a public factsheet clarifying that: 1) the acquisition received full FCC and DOJ approval; 2) Nexstar accounts for less than 5% of total U.S. TV viewing and owns less than 15% of U.S. full-power stations, remaining a small participant in the broader media landscape; 3) local broadcast remains free over-the-air, and pay TV retail pricing is set by distributors, not Nexstar; 4) local newsrooms retain full editorial independence, confirmed by independent third-party analysis; 5) the acquisition will strengthen local journalism, with Nexstar having increased local news hours by 18% following the prior Tribune acquisition, with similar plans for Tegna stations.

Guidance

- Full-year 2026 political advertising revenue is tracking ahead of internal and consensus expectations, with management continuing to bet on an overperformance relative to prior targets, driven by record cash-on-hand for candidates and super PACs in key battleground states, with Ohio expected to drive Q3 upside. The recent Supreme Court ruling eliminating federal coordinated spending limits is expected to have a modest at most positive impact, with no material change to full-year guidance. - Q3 2026 non-political advertising is expected to decline mid-single digits on a combined basis, an improvement from the 5.8% decline recorded in Q2 2026. Growth in local digital advertising will partially offset political crowd-out and broader competitive pressures. - The CW remains on track to achieve profitability in Q4 2026, with full-year 2026 net losses expected to improve by more than 30% year-over-year. - Nexstar expects to repay more than $1 billion of total Tegna acquisition-related debt from closing through the end of 2026, creating more than $33 per share of equity value. The company targets a return to pre-Tegna acquisition leverage levels by 2028. - Q3 2026 capital expenditure is projected to be approximately $50 million, cash taxes are estimated at $65 million, and quarterly run-rate interest expense is ~$185 million.

Segment performance

Nextar's consolidated Q2 2026 net revenue was $1.99 billion, a 62.2% increase year-over-year, with $697 million of this growth coming from the newly acquired Tegna segment. On a combined pro forma basis including Tegna in the 2025 comparable period, total net revenue grew 4.7% YoY. 1. Distribution segment: Q2 2026 revenue was $1.1 billion, a 52.3% YoY increase. $362 million of this revenue comes from Tegna, with legacy Nextar distribution revenue growing 3.1% YoY driven by higher affiliate rates and CW affiliation additions. On a combined pro forma basis, distribution revenue grew 1.3% YoY, as Tegna subscriber declines partially offset legacy growth. This segment makes up approximately 55.3% of total Q2 2026 revenue. 2. Advertising segment: Q2 2026 revenue was $862 million, an 81.5% YoY increase, with $331 million of this revenue from Tegna and a $75 million increase in political advertising at legacy Nextar. Political advertising alone reached $147 million in Q2 2026, up 8% vs 2022 and 99% vs 2024 on a combined basis. On a combined pro forma basis, non-political advertising declined 5.8% YoY due to political ad crowd-out, broader economic softness, and competitive pressures, partially offset by incremental FIFA World Cup ad revenue and strong local digital growth. This segment makes up approximately 43.3% of total Q2 2026 revenue. 3. CW Network segment: The CW achieved strong ratings growth in Q2 2026, with its NASCAR coverage delivering 14% YoY viewership growth, and 18 of 19 2026 races exceeding 1 million total viewers. The segment remains on track to reach profitability in Q4 2026, with full-year 2026 losses expected to improve by more than 30% YoY. 4. News Nation segment: As the fastest-growing cable news network in both prime time and total day, News Nation grew total viewers 44% YoY in June 2026, driven by its focus on objective, fact-based reporting.

Risks & headwinds

- Ongoing antitrust litigation related to the Tegna acquisition has required Nexstar to maintain Tegna as a separate operation pending court resolution, delaying full integration and expected synergy realization. The litigation has also resulted in higher-than-expected one-time and ongoing legal and professional fees, increasing corporate expenses. - Paramount (CBS) has increased pressure on broadcast affiliate agreements, seeking higher fees for less content, and has reclaimed affiliations in smaller markets to improve negotiating leverage, creating ongoing affiliation risk for broadcast stations. - DirecTV rejected an FCC-mandated extension of the expiring distribution agreement, increasing the risk of a distribution blackout that could impact revenue and viewer relationships. - MVPD subscriber attrition continues to pressure distribution revenue growth, partially offsetting higher affiliate rate increases. - Broader economic softness and increased competition from digital and CTV advertising has led to declining non-political advertising revenue, with this pressure expected to persist through Q3 2026. - Increased regulatory scrutiny of M&A transactions across all industries, including media, creates uncertainty for future strategic acquisition activity and lengthens approval timelines for potential transactions.

Analyst Q&A

• Q: If the FCC votes to eliminate the national broadcast ownership cap as expected, how will this impact the ongoing Tegna antitrust trial, and what is the current outlook for 2026 political advertising? What is the nature of Nielsen's planned August methodology change? /

  A: The elimination of the national ownership cap removes regulatory uncertainty for future M&A but is expected to have only marginal impact on the current antitrust trial, which centers on antitrust competition issues rather than regulatory ownership limits. Political advertising is tracking ahead of both internal management and consensus analyst expectations, with management increasing internal targets multiple times in the last quarter. Nielsen will align its local TV viewership measurement with national measurement, lowering the minimum viewing threshold from 5 minutes to 1 minute per quarter hour, which management expects will increase measured local ad impressions. (357 characters)

• Q: What is your outlook for smaller market-by-Market broadcast M&A in the near term, and what have been your early impressions of Tegna's operations under the current hold-separate framework? /

  A: Management does not expect the M&A window for smaller transactions to close, as small transactions have continued through the Tegna litigation process. Nexstar will prioritize clearing the current litigation and gaining full integration certainty before pursuing additional M&A or portfolio optimization, though the company regularly receives inquiries for station swaps and small transactions. Due to the hold-separate requirement, management has not had direct interaction with Tegna's local operations, but overall Tegna performance is in line with expectations, with only distribution revenue growth slightly behind legacy Nexstar due to existing legacy contracts. (412 characters)

• Q: What non-obvious benefits come from converting more station affiliations to the CW, and what is your capital allocation priorities for the next 18 months? /

  A: The core non-obvious benefit of the CW is that Nexstar controls all of the network's intellectual property and distribution rights, unlike Big Four network affiliations where Nexstar rents content and faces strict distribution and rights restrictions. Full IP control gives Nexstar full flexibility to monetize CW content across all platforms (broadcast, streaming, mobile) with no external restrictions. The company's top priority for the next 18 months is aggressive debt paydown to reach pre-acquisition leverage levels by 2028. Share repurchases will only be considered after the balance sheet is sufficiently deleveraged, with decisions dependent on Nexstar's valuation and stock price at that time. (439 characters)

• Q: What is the path for potentially settling the Tegna litigation earlier than the 2027 trial date, and how do you balance confidence in a positive outcome with the time and opportunity cost of delayed integration? /

  A: Management is extremely confident it will prevail on the merits of the case, and since the acquisition has already closed, Nexstar continues to receive all of Tegna's operating cash flow which can be used for debt reduction. While any outcome including an out-of-court settlement is possible, management has no specific timeline or lean toward a settlement at this point, as the company faces no urgent pressure to resolve the case before the scheduled 2027 trial. The extended regulatory scrutiny of the Tegna transaction reflects a broader new trend of heightened M&A scrutiny across all industries that will require all companies to adjust strategic planning for longer approval timelines and higher uncertainty. (468 characters)