Business Overview

Nexstar Media Group, Inc. (NXST) is a leading diversified media company that has firmly established itself as the largest local television broadcasting group in the United States. With a robust portfolio of over 200 owned or partner stations across 116 markets, Nexstar has carved out a dominant position in the industry, delivering consistent financial performance and shareholder returns.

Nexstar's origins can be traced back to 1996 when it was founded by Perry Sook. Over the past 28 years, the company has undergone a remarkable transformation, evolving from a single television station in Pennsylvania to the preeminent player in the local television broadcasting space. Nexstar's success is underpinned by its ability to identify and capitalize on emerging trends, consistently adapting its business model to stay ahead of the curve.

The company's growth strategy has been primarily driven by strategic acquisitions. In 2003, Nexstar made a significant leap forward with the purchase of the Quorum Broadcasting station group, adding 22 television stations to its portfolio and substantially increasing its market reach. This was followed by the acquisition of the Citadel Communications station group in 2013, further solidifying Nexstar's position in the industry.

A pivotal moment in Nexstar's history came in 2019 with the acquisition of Tribune Media Company. This transformative deal not only made Nexstar the largest owner of local television stations in the country but also brought additional assets, including a 31.3% ownership stake in the TV Food Network. This diversification has enhanced Nexstar's revenue streams and market presence.

The company's core operations revolve around its network of television stations, which are affiliated with leading networks such as CBS, FOX, NBC, and ABC. These stations not only provide high-quality local news and programming but also serve as crucial platforms for political and national advertising. In 2024, Nexstar generated $5.41 billion in total net revenue, with 54.1% coming from distribution and 44.7% from advertising.

Nexstar's strategic focus on building a diverse revenue stream has been a key driver of its financial resilience. The company's distribution revenue, derived from retransmission and carriage agreements with MVPDs and vMVPDs, provides a stable and predictable income source. Meanwhile, its advertising revenue, boosted by strong political spending in even-numbered years, offers additional growth opportunities.

Beyond its traditional television business, Nexstar has also made strategic investments in digital assets, including The Hill, a leading political news platform, and NewsNation, a national cable news network. These ventures have not only diversified the company's revenue streams but also enhanced its relevance in the evolving media landscape.

Financial Performance and Capital Allocation

Nexstar's financial performance has been exemplary, with the company delivering record results in 2024. The company reported total net revenue of $5.41 billion, up 9.6% year-over-year, driven by strong growth in both distribution and advertising revenue. Adjusted EBITDA for the year reached $2.21 billion, representing a margin of 40.9%.

The company's robust cash flow generation has enabled it to maintain a disciplined capital allocation strategy. In 2024, Nexstar returned $820 million, or 68% of its adjusted free cash flow, to shareholders through share repurchases and dividends. This aggressive capital return program has reduced the company's shares outstanding by nearly 9% over the past year and by one-third over the last five years.

Alongside shareholder returns, Nexstar has also allocated capital towards debt reduction, resulting in a record-low net leverage ratio of 2.91x as of the end of 2024. This strong balance sheet position provides the company with the financial flexibility to pursue strategic growth opportunities, should regulatory changes create favorable conditions for industry consolidation.

Regulatory Landscape and Growth Opportunities

The television broadcasting industry is heavily regulated, and Nexstar's operations are subject to various FCC rules and guidelines. However, the company has been actively engaged in advocating for regulatory reform, recognizing the importance of creating a more equitable playing field for local broadcasters.

Perry Sook, Nexstar's Founder, Chairman, and CEO, has been vocal about the need for deregulation, emphasizing the vital role that local journalism plays in serving communities across the country. The company's government relations team and industry associations, such as the NAB, are working closely with lawmakers to push for changes that would allow broadcasters to better compete with larger media conglomerates and tech giants.

Should regulatory changes materialize, Nexstar is well-positioned to capitalize on the resulting opportunities. The company's scale, diversified revenue streams, and proven track record of successful acquisitions position it as a formidable player in the consolidation of the industry. Moreover, Nexstar's investments in innovative technologies, such as ATSC 3.0, could unlock new revenue streams and enhance its competitive advantage.

Risks and Challenges

While Nexstar's outlook remains positive, the company faces several risks and challenges that warrant consideration. The continued decline in traditional pay-TV subscribers, a trend that has impacted the entire industry, could potentially affect Nexstar's distribution revenue. Additionally, the company's reliance on political advertising revenue, which can be volatile, introduces an element of uncertainty to its financial performance.

Furthermore, Nexstar's digital initiatives, such as NewsNation and The Hill, are still relatively new and untested. The company's ability to successfully integrate these assets and drive profitability will be crucial in diversifying its revenue sources and maintaining its competitive edge.

Nexstar has faced some challenges over the years, including increased competition from alternative media and changing regulations in the television industry. In 2018, the company was involved in an antitrust investigation by the Department of Justice related to the exchange of certain information among local broadcasters. Nexstar ultimately settled the matter without admitting any wrongdoing, demonstrating its ability to navigate complex regulatory environments.

Financials

Nexstar's financial performance has been strong, with the company consistently delivering robust results. In 2024, the company reported total net revenue of $5.41 billion, representing a 9.6% increase year-over-year. This growth was driven by strong performance in both distribution and advertising revenue segments. The company's adjusted EBITDA for the year reached $2.21 billion, with a margin of 40.9%, highlighting its operational efficiency and profitability.

For the fiscal year 2024, Nexstar reported annual net income of $722 million, annual operating cash flow of $1.25 billion, and annual free cash flow of $1.10 billion. The most recent quarter (Q4 2024) saw revenue of $1.49 billion and net income of $241 million. Revenue increased 14.1% year-over-year, primarily due to a $223 million increase in political advertising revenue to $254 million, which more than offset a $51 million decrease in non-political advertising revenue.

Liquidity

Nexstar maintains a strong liquidity position, supported by its robust cash flow generation and disciplined capital allocation strategy. The company's aggressive share repurchase program and dividend payments demonstrate its commitment to returning value to shareholders. Additionally, Nexstar's focus on debt reduction has resulted in a record-low net leverage ratio of 2.91x as of the end of 2024, providing the company with significant financial flexibility to pursue strategic growth opportunities.

As of December 31, 2024, Nexstar had $144 million in cash and cash equivalents, and $531 million in available unused revolving loan commitments under its senior secured credit facilities. The company's debt/equity ratio stood at 29.78, while its current ratio and quick ratio were both 1.66.

Business Segments

Nexstar operates in two main business segments: Broadcast and Other.

Broadcast Segment:

The Broadcast segment is Nexstar's primary business, including its television stations and related local websites. As of December 31, 2024, Nexstar owned, operated, programmed or provided sales and other services to 201 full power television stations and one AM radio station in 116 markets across 40 states and the District of Columbia. In 2024, this segment generated $5.13 billion in net revenue, representing over 94% of Nexstar's total net revenue. The segment reported a profit of $2.11 billion in 2024.

Other Segment:

The Other segment includes The CW network (77.1% stake), NewsNation, two owned and operated multicast networks, and various digital businesses focused on the national marketplace. This segment generated $317 million in net revenue in 2024, down from $339 million in 2023. The segment reported a net loss of $130 million in 2024, an improvement from the $253 million loss in 2023.

Future Outlook and Guidance

For 2025, Nexstar is providing adjusted EBITDA guidance in the range of $1.5 to $1.595 billion. The company expects net distribution revenue to be relatively flat compared to 2024's record levels, as annual rate escalators are expected to offset continued subscriber attrition. Non-political advertising revenue is anticipated to be slightly up, with increases at The CW partially offsetting continued headwinds in national and local advertising, while digital advertising growth is expected to more than offset the rest.

Nexstar plans to reduce operating expenses by a low to mid-eight figure amount in 2025 due to the operational restructuring implemented in Q4 2024. The company expects The CW to continue reducing its losses by more than 25% in 2025 compared to 2024. For 2025, Nexstar projects capital expenditures of $120 to $125 million, cash interest expense of $375 to $380 million, and cash taxes of $260 to $270 million.

The company intends to continue its shareholder-friendly capital allocation strategy, planning to return around two-thirds of its free cash flow to shareholders in 2025 through dividends and share repurchases.

Conclusion

Nexstar Media Group, Inc. has firmly established itself as a leader in the local television broadcasting industry, displaying a remarkable ability to adapt and thrive in a rapidly evolving media landscape. The company's diversified revenue streams, disciplined capital allocation, and strategic investments position it well for continued success.

Despite the challenges posed by industry trends and regulatory uncertainties, Nexstar's proven track record, strong balance sheet, and experienced management team suggest that the company is well-equipped to navigate the future. As the industry landscape continues to shift, Nexstar's ability to "bend the curve" in its favor will be a key determinant of its long-term growth and shareholder value creation.