NEXSTAR MEDIA GROUP Q1 FY26 earnings call NXST

Nexstar successfully closed the acquisition of TEGNA on March 19, 2026, after receiving all required regulatory approvals from the FCC and DOJ. However, the transaction is currently subject to litigation from DIRECTV and several state Attorneys General, leading to a 'hold separate' court order. This order mandates that TEGNA operates independently, including its own retransmission agreements, and Nexstar cannot integrate day-to-day management. Nexstar is confident in its legal arguments, citing the public interest in a stronger local broadcast industry and has engaged a formidable legal team to pursue appeals and trial proceedings.

Nexstar continues to build and grow the CW and NewsNation as national networks. NewsNation was the #1 fastest-growing network in prime time in March 2026, with an 85% increase in total viewers and 100% among adults 25-54 year-over-year. The CW network improved year-over-year profitability in Q1 and is on track to achieve overall profitability by Q4 2026, with full-year losses expected to improve by over 30%. The CW is expanding its sports programming with new multi-year partnerships, including the Mountain West Conference and additional Banana Ball games, significantly increasing its sports-related content hours.

Nexstar is evolving its digital strategy through key partnerships rather than solely building its own platforms. The company announced a deal with ESPN to make the ESPN app and website the exclusive streaming home for all CW sports, significantly extending reach and monetization opportunities. Additionally, a partnership with Roku will bring CW entertainment programming to The Roku Channel for next-day streaming, enhancing digital footprint and monetization capabilities by accessing over half of U.S. broadband households. These collaborations aim to expand reach and unlock new revenue streams in a rapidly evolving media landscape.

For Q1 2026, Nexstar reported record net revenue of $1.4 billion, a 13.1% increase year-over-year, including 13 days of TEGNA operations. Distribution revenue grew 9.8% to $837 million, while advertising revenue increased 19.1% to $548 million, driven by TEGNA contributions and higher political advertising. Adjusted EBITDA reached $470 million, and adjusted free cash flow was $420 million. Legacy Nexstar's nonpolitical advertising was flattish, with digital growth offsetting TV advertising declines. The company noted a general weakness in the Q2 advertising environment.

Nexstar returned $56 million to shareholders in Q1 through dividends and repaid $182 million in debt through April 30. The company's outstanding debt at March 31, 2026, was $12.1 billion, reflecting the TEGNA acquisition. Net first lien covenant ratio was 2.94x, well below the 4.75x covenant. Subsequent to quarter-end, Nexstar repaid a $150 million short-term Term Loan A and refinanced $1.725 billion of senior notes. The company prioritizes debt repayment with excess cash flow, maintaining its historical focus on deleveraging.

Management expressed strong views on the antiquated 39% national ownership cap for broadcasters, arguing it hinders growth compared to other media and tech companies. While the TEGNA acquisition was approved via a waiver, Nexstar believes the FCC is still on a path toward regulatory deregulation, potentially initiating a rulemaking to eliminate the cap. The company asserts that the current litigation against the TEGNA deal focuses on antitrust concerns, which are distinct from the FCC's purview regarding the ownership cap.