Executive Summary / Key Takeaways

• Nexstar Media Group stands as the largest local television broadcaster in the U.S., underpinned by a resilient business model generating substantial free cash flow, primarily from stable distribution revenue and cyclical political advertising.
• Strategic initiatives, including the successful transformation of The CW Network with a pivot to sports and live events, are significantly reducing losses and are on track for profitability in 2026, while NewsNation continues to grow audience and establish itself as a credible national news source.
• The company is actively pursuing meaningful broadcast ownership deregulation, which, if successful, could unlock significant value through accretive M&A opportunities, leveraging its strong balance sheet and proven integration playbook.
• Nexstar is investing in and pushing for the adoption of ATSC 3.0 technology, forming a consortium (Edge Beam Wireless) to monetize spectrum for ancillary data services, creating a potential new long-term revenue stream and competitive moat.
• Despite market volatility and a perceived valuation disconnect (trading at ~6.3x 2024-2025 EBITDA and ~21% FCF yield), the company's financial discipline, consistent capital returns (including a 10% dividend increase and active share repurchases), and clear growth catalysts position it for potential rerating.

Setting the Stage: Scale, Strategy, and the Enduring Value of Broadcast

Nexstar Media Group, Inc. (NASDAQ:NXST) has built its foundation as America's preeminent local television broadcaster since its founding in 1996. Under the leadership of founder Perry Sook, the company has strategically grown its footprint through a series of accretive acquisitions, including transformative deals like Media General and Tribune Media Company. This history of consolidation has resulted in an unmatched scale, operating or providing services to 201 full power television stations across 116 markets in 40 states and D.C., reaching approximately 39% of U.S. television households after applying the FCC's UHF discount.

This expansive local presence is the bedrock of Nexstar's business model, generating revenue primarily through distribution fees from cable, satellite, and virtual MVPDs for retransmitting its signals, and through advertising sales to local, regional, and national businesses, as well as political campaigns. In an evolving media landscape marked by shifts in consumer behavior and intense competition, Nexstar's scale and diversified revenue streams provide a degree of resilience. The company's business model benefits from the enduring value of broadcast television, which remains the gold standard for live sports and local news – content that continues to command significant audiences and is foundational to the pay TV ecosystem.

Nexstar operates within a competitive environment that includes other large station groups like Sinclair Broadcast Group (SBGI), TEGNA Inc. (TGNA), and Gray Television (GTN), as well as facing increasing pressure from indirect competitors in the digital realm, such as streaming services (Netflix (NFLX), Hulu), online platforms (Google/YouTube (GOOGL)), and emerging digital advertising solutions. While competitors like SBGI and GTN also boast significant station counts, Nexstar distinguishes itself through its broader portfolio of network affiliations (ABC, NBC, FOX, CBS, The CW, MyNetworkTV), providing access to a wider array of premium content. Nexstar's scale also contributes to operational efficiencies, although competitors like GTN have demonstrated strong cost control in certain market segments. The company's strategic response to this competitive pressure involves leveraging its scale for negotiating power, investing in its national networks (The CW, NewsNation), enhancing its digital capabilities, and actively pursuing opportunities for further consolidation and technological advancement.

Technological Advancement: ATSC 3.0 and the Promise of Spectrum Monetization

A key differentiator and future growth driver for Nexstar lies in its commitment to advancing and monetizing its broadcast spectrum through ATSC 3.0, or Next-Gen TV technology. Unlike traditional broadcasting, ATSC 3.0 is an IP-based standard that enables broadcasters to deliver not only higher quality video and audio but also data services over the air. This technology provides tangible benefits, including enhanced picture quality (4K HDR), interactive capabilities, and mobile reception.

Crucially, ATSC 3.0 unlocks the potential for ancillary data broadcasting services. Nexstar, recognizing this opportunity, has been a leader in pushing for regulatory clarity and a firm transition date for the technology. In January 2025, the company, along with other major broadcasters, formed the Edge Beam Wireless Consortium. This joint venture aims to stitch together spectrum assets across the country to create a near nationwide footprint, covering over 97% of the continental U.S. and representing over 7 billion megahertz pops. The stated goal is to deliver wireless data services via ATSC 3.0 transmission to businesses, potentially serving sectors like connected cars, digital signage, and even contributing to national security through the Broadcast Positioning System (BPS) as a backup to GPS.

While still in its early stages, the consortium signed its first paying customer in the digital signage space in 2024, providing an initial proof point for the technology's commercial viability. The industry, through the NAB, has petitioned the FCC for a two-phase transition plan, targeting full ATSC 3.0 transmission in the top 55 markets by February 2028 and remaining stations by February 2030. For investors, the "so what" of ATSC 3.0 is the potential for entirely new, high-margin revenue streams that are independent of traditional advertising and distribution models. This technological edge, combined with Nexstar's vast spectrum holdings, could create a significant competitive moat and contribute meaningfully to long-term growth, differentiating it from competitors who may lag in adopting and commercializing this technology at scale.

Strategic Pillars: Consolidation, Content, and Efficiency

Nexstar's strategy is multifaceted, built upon pillars designed to enhance its competitive position and drive shareholder value. A primary focus remains on capitalizing on potential deregulation to pursue accretive M&A. Management believes the prospect for meaningful broadcast ownership reform, including changes to the national ownership cap and in-market rules, is currently the best it has been in decades, citing bipartisan support and interest from FCC leadership. The company has a proven playbook for integrating acquired assets, identifying synergies in retransmission revenue, operational efficiencies, and increased scale. While higher interest rates present a different cost of capital environment than past consolidation waves, Nexstar maintains that any new transaction must be more accretive than buying back its own stock, which currently offers an attractive yield. The recent $22 million acquisition of WBNX-TV in Cleveland in January 2025, intended to become a CW affiliate and create a duopoly, exemplifies this continued focus on strategic, accretive market additions.

Content strategy is another critical pillar, particularly evident in the transformation of The CW Network. Since acquiring majority ownership in Q4 2022, Nexstar has aggressively pivoted the network's programming mix away from expensive scripted originals towards more cost-effective, higher-viewership live events and sports. Programming costs for The CW were significantly reduced from $560 million in 2022 to an expected $270 million in 2024, even while expanding programming hours. This shift includes adding major sports properties like NASCAR Xfinity Series, WWE NXT, LIV Golf, ACC Football and Basketball, and PAC-12 Football, which are expected to comprise over 400 hours (>40%) of the network's programming in 2025. This new content strategy is resonating, with Q1 2025 marking The CW's strongest primetime performance in eight quarters and specific sports broadcasts delivering significant year-over-year audience growth. The goal is clear: drive profitability. The CW improved cash flow by $127 million in 2024, exceeding its target, and is projected to cut losses by over 25% in 2025 compared to 2024, with profitability targeted for 2026. Furthermore, Nexstar is strategically moving CW affiliations to its owned and partner stations (54 total covering ~46% of U.S. HH as of Q4 2024), generating operating profit on the station side.

NewsNation, the company's national cable news network, represents another content investment aimed at diversification and growth. Having completed its expansion to a 24/7 format in June 2024, NewsNation leverages Nexstar's extensive local news footprint and ownership of The Hill to provide fact-based, unbiased reporting. The network is gaining audience momentum, with primetime viewers up over 200% in Q2 2024 versus Q2 2021 and notable instances of outperforming established cable news competitors in key demographics. NewsNation is also positioning itself as a brand-safe environment for advertisers, a potential advantage in a polarized news landscape.

Underpinning these strategic initiatives is a consistent focus on operational efficiency and disciplined expense management. The company implemented a strategic operational restructuring in Q4 2024, expected to generate savings in the low to mid-eight figures in 2025 by streamlining operations and reducing management layers. This focus on cost control enhances profitability and cash flow generation, even in challenging revenue environments.

Financial Performance and Liquidity: A Cash Flow Powerhouse

Nexstar's financial performance reflects the strength of its diversified model and disciplined execution. The company achieved record total net revenue of $5.4 billion in 2024, the highest in its history, driven by robust election year political advertising and continued growth in distribution revenue. Full year 2024 adjusted EBITDA reached $2 billion, with adjusted free cash flow of $1.2 billion.

The first quarter of 2025, as expected for a non-election year, saw a decrease in total net revenue, down 3.9% year-over-year to $1.234 billion. This was primarily due to a $52 million decline in advertising revenue, including a $32 million drop in political advertising and a $20 million decrease in non-political revenue attributed to ongoing market softness. However, distribution revenue remained stable, growing slightly by 0.1% to $762 million, supported by contractual escalators and vMVPD growth offsetting subscriber attrition. Operational discipline was evident, with direct operating and SG&A expenses decreasing by $12 million in Q1 2025 due to restructuring benefits. Depreciation and amortization increased by $15 million, largely due to higher programming amortization at The CW related to new sports content. Interest expense decreased by $17 million (14.9%) due to lower rates and reduced debt. Net income attributable to Nexstar decreased to $108 million from $175 million in Q1 2024, resulting in Adjusted EBITDA of $381 million, down from $452 million.

Despite the year-over-year decline in Q1 due to the political cycle, cash flow generation remained strong. Net cash provided by operating activities increased by $61 million to $337 million in Q1 2025, primarily reflecting favorable changes in operating assets and liabilities. The company maintains a solid liquidity position, with $253 million in cash and cash equivalents as of March 31, 2025, and ample availability under its revolving credit facilities. Total outstanding debt stood at $6.5 billion. Nexstar's leverage ratios remain well within covenant limits, with a net first lien leverage ratio of 1.67x (against a 4.25x covenant) and total net leverage of 2.93x as of March 31, 2025. While leverage is expected to increase in 2025 due to the lower political EBITDA on an LTM basis, this is a typical cycle effect.

The company recently completed refinancings of its credit facilities on June 30, 2025, extending maturities and enhancing flexibility.

Nexstar is committed to returning capital to shareholders. In 2024, the company returned $820 million, or 68% of adjusted free cash flow, through $219 million in dividends and $601 million in share repurchases. In January 2025, the board approved a 10% increase in the quarterly cash dividend to $1.86 per share, marking the twelfth consecutive annual increase. Share repurchases continue to be a key component of capital allocation, with $75 million executed in Q1 2025 and an additional $32 million from April 1 to May 8, 2025, leaving $1.4 billion remaining under the current authorization. For the remainder of 2025, the company plans optional debt repayment and continued share repurchases, prioritizing accretive M&A if opportunities arise.

Outlook, Guidance, and Risks

Nexstar's outlook for 2025 reflects a year of strategic execution and preparation for future growth cycles. The company provided Adjusted EBITDA guidance in the range of $1.5 billion to $1.595 billion for the full year. This guidance is based on key assumptions, including relatively flat net distribution revenue (assuming a slight improvement in subscriber attrition trends), slightly positive non-political advertising revenue growth (driven by CW strength and local digital offsetting TV headwinds), operating expense reductions in the low to mid-eight figures from restructuring, and a reduction in CW losses by over 25% compared to 2024.

Specific guidance for Q2 2025 includes CapEx of $30 million to $35 million, cash interest expense around $95 million, and cash taxes between $105 million and $150 million. Payments for programming are expected to exceed amortization by about $15 million in Q2. The company anticipates returning approximately two-thirds of free cash flow to shareholders in 2025.

While the outlook is positive, several risks could impact performance. The company's leverage, though currently manageable and within covenants, makes it vulnerable to changes in economic conditions and interest rates. Litigation, including the ongoing Local TV Advertising Antitrust Litigation and Tribune-related tax contingencies, presents unpredictable outcomes. Regulatory risks persist, including the FCC's Notice of Apparent Liability regarding the WPIX station, which could require divestiture or other actions. Ongoing advertising market softness and MVPD subscriber attrition, while showing signs of moderation, remain headwinds. However, management believes its diversified revenue base, operational discipline, and strategic initiatives position it to navigate these challenges.

Conclusion

Nexstar Media Group is a fundamentally strong, cash flow generative business operating at unmatched scale in the U.S. local television market. Its core distribution revenue provides a stable base, complemented by the significant upside of cyclical political advertising. The company's strategic transformation of The CW Network, pivot to high-value sports content, and expansion of NewsNation are creating new growth avenues and improving profitability. Concurrently, investments in ATSC 3.0 technology through the Edge Beam consortium offer the potential for significant long-term spectrum monetization.

Despite facing industry headwinds like subscriber attrition and advertising market volatility, Nexstar's disciplined expense management and strategic focus on accretive M&A, contingent on potential deregulation, position it for future value creation. The company's commitment to returning capital to shareholders through consistent dividend increases and active share repurchases underscores its confidence in its financial strength and future prospects. Trading at a discount relative to its performance and peers, Nexstar presents a compelling investment case for those who recognize the enduring value of broadcast, the potential of its strategic growth initiatives, and the significant upside catalysts on the horizon, particularly from regulatory reform and a potential market rerating.