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Edited Transcript of NXST earnings conference call or presentation 26-Feb-19 3:00pm GMT

Q4 2018 Nexstar Media Group Inc Earnings Call

Irving May 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Nexstar Media Group Inc earnings conference call or presentation Tuesday, February 26, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Perry A. Sook

Nexstar Media Group, Inc. - Chairman, President & CEO

* Thomas E. Carter

Nexstar Media Group, Inc. - Executive VP & CFO

* Timothy C. Busch

Nexstar Media Group, Inc. - President of Nexstar Broadcasting Inc

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Conference Call Participants

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* Craig Anthony Huber

Huber Research Partners, LLC - CEO, MD, and Research Analyst

* Daniel Louis Kurnos

The Benchmark Company, LLC, Research Division - MD

* David Carl Joyce

Evercore ISI Institutional Equities, Research Division - MD & Senior Analyst

* Dennis Howard Leibowitz

Act II Capital, LLC - CEO and Managing Member

* James Charles Goss

Barrington Research Associates, Inc., Research Division - MD

* Kyle William Evans

Stephens Inc., Research Division - MD

* Marci Lynn Ryvicker

Wolfe Research, LLC - MD of Equity Research

* Steven Lee Cahall

RBC Capital Markets, LLC, Research Division - Former Analyst

* Zachary Alan Silver

B. Riley FBR, Inc., Research Division - Associate

* Joseph N. Jaffoni

Jcir - Founder & President

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Presentation

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Operator [1]

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Good day, and welcome to Nexstar Media Group's 2018 Fourth Quarter Conference Call. Today's conference is being recorded.

I would now like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.

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Joseph N. Jaffoni, Jcir - Founder & President [2]

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Good morning, thank you for joining Nexstar's 2018 Fourth Quarter Conference Call. Statements and comments made by management during today's call may include forward-looking statements. Nexstar has based these forward-looking statements on its current expectations and projections about future events. Forward-looking statements include information preceded by, followed by or that include the words guidance, believes, expects, anticipates, could or similar expressions. For these statements, Nexstar claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in today's call concerning, among other things, the ultimate outcome and benefits of the announced transaction between Nexstar and Tribune Media and timing thereof, and future financial performance, including changes in net revenue, cash flow and operating expenses, involve risks and uncertainties and are subject to change based on various important factors, including the timing of and any potential delay in consummating the proposed transaction; the risks that are conditioned to closing of the proposed transaction may not be satisfied and the transaction may not close, the risk that a regulatory approval that may be required for the proposed transaction is delayed, is not obtained or is obtained subject to conditions that are not anticipated; the impact of change in national and regional economies; Nexstar's ability to service and refinance outstanding debt; successful integration of Tribune Media, including achievement of synergies and cost reductions; pricing fluctuations in local and national advertising; future regulatory actions and conditions in the television stations' operating areas; competition from others in the broadcast television markets served by Nexstar; volatility and programming costs; the effects of government regulation of broadcasting; industry consolidation; technical -- technological developments; and major world news events. Unless required by law, Nexstar undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed in today's communication may not occur. You should not place undue reliance on these forward-looking statements, which speak only of this date of this release. For more information or details on factors that could affect these expectations, please see Nexstar's filings with the Securities and Exchange Commission.

Thank you for your patience with that. And it's now my pleasure to turn the conference over to your host, Nexstar's Chairman, President and CEO, Perry Sook. Perry?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [3]

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Thank you, Joe. Good morning, everyone, and thank you for joining Tom Carter, our Chief Financial Officer and me today to review Nexstar's record financial performance and our outlook for 2018/2019.

With our record fourth quarter and full year 2018 financial results, the December announcement of the Tribune Media transaction, and our immediate work on the regulatory approval process and the development of our post-closing plans, it's been an active and productive time here at Nexstar. We believe what we've accomplished since the closing of the Media General transaction is an important guide for what we will achieve as we move toward the closing of the Tribune transaction expected later this year.

Nexstar had an outstanding 2018. Our strong fourth quarter and full year operating results mark our seventh consecutive year of record financial performance with all of our key metrics from net revenue to free cash flow growing at double-digit rates and coming in at the highest levels in the company's history for both the 3- and the 12-month periods. The 22.1% rise in fourth quarter net revenue and nearly 100% increase in operating income highlight the ongoing value of our strategies focused on leveraging our local content and community involvement to generate record shares of political spending in our markets as well as continued distribution and digital revenue growth.

Our ability to capture historic levels of mid-term election spending in our markets, combined with the strong operating leverage in our business model drove our record fourth quarter -- a record fourth quarter BCF, adjusted EBITDA and free cash flow.

For the full year, our enterprise-wide focus on managing operations for current and future cash flow enabled us to generate free cash flow of $692.7 million or about $15.20 per share, representing approximately a 30% -- 31% growth over 2017 levels.

By comparison, if you look back at the 2016 presidential election year and prior to the completion of the Media General transaction, Nexstar generated approximately $7.97 in free cash flow per share. So in just 2 years, we've grown that important metric by approximately 91%.

In 2018, we brought about $0.25 of every net revenue dollar to the free cash flow line allowing us to invest in our people, our local media platform and our complementary accretive acquisitions, while at the same time reducing net debt by approximately $400 million and returning over $120 million to shareholders in the form of share repurchases and dividends.

I'll do give a quick review of the quarterly highlights and then review some of the transaction initiatives underway after which Tom will go through the financials, including an update on our cap structure, 2019 expectations and other items of interest for those of you on the call.

Again, Nexstar's record fourth quarter financial results highlight our ability to maximize the political revenue opportunity in our markets as we continue to build new-to-television ad revenue and grow retransmission consent revenue, also combined with the ongoing benefits of our management and operating disciplines. 22.1% rise in fourth quarter net revenue resulted in BCF growth of 57%, adjusted EBITDA growth of 57.3% and free cash flow growth of 62.1%. In total, Nexstar's fourth quarter core local and national television ad revenue were down little over 1% at $4.7 million, that's all related to our heavy allocation of inventory to political as we booked over $140 million in political in Q4 or $127 million more than 2017.

As expected, local and national ad revenue strengthened as we moved through Q4, and they remain up on a year-over-year basis in the 2019 period to date. November and December were the strongest months of 2018 for core advertising revenue, when excluding February, which benefited from the Super Bowl and Olympics-related spending. In Q4 of '18, we generated increased ad revenue in 3 of our top 5 categories and 5 of our top 10 overall. Core revenue continues to reflect healthy levels of new business with Q4 new-to-television ad revenue of $16.3 million, which is a 15.6% rise over the prior year.

Reflecting our expanded platform and presence in states with contested elections, we generated solid results in the political ad category in markets like Las Vegas, Tampa, Portland and Grand Rapids, to name a few, with a diversified mix from the House, the gubernatorial and senate candidates, as well as healthy contributions from PAC and issue spending.

Nexstar's fourth quarter television ad revenue growth was complemented by the combined fourth quarter retransmission and digital media revenue growth of 10.5% to a combined total of $349.6 million in the fourth quarter, and we grew 13.1% to $1.4 billion for the full year, marking the first time in the company's history that this combined distribution in digital metric has exceeded total television advertising revenue on an annual basis.

Overall, the year-over-year increase in fourth quarter and full year nontelevision advertising revenue reflects renewals of distribution agreements with MVPDs and initial contributions from distribution agreements with OTT providers and the early '18 accretive acquisition of LKQD as well as organic growth across our profitable digital operations.

Reflecting the ongoing benefits of our revenue diversification strategies and considering the magnitude of the Q4 '18 political revenue, total fourth quarter retransmission fee and digital media revenue represented 43.8% of our fourth quarter net revenue compared to 40.7% of total net revenue in 2016, the last even-year political quarter. At $284.5 million in the quarter, retransmission fee revenue reached the highest-ever level for a quarter in the company's history, and we expect our long-term distribution revenue growth to continue at a double-digit pace. We continue to see consistency in pay television subscriber levels in our markets with now meaningful growth in OTT subs for which we are beginning to be compensated.

With the renewal of retransmission consent agreements representing approximately 10% of our subscriber base in 2018 and approximately 70% in 2019, continued revenue growth from this source remains highly visible for 2019 and beyond. And given the after-acquired clauses in our retransmission consent agreements, once we complete the transaction, the Tribune stations are immediate party to our distribution agreements and our rates.

On Tribune, with our long-term strategic focus on completing accretive transactions to enhance our overall competitive position, we were delighted to announce in December our definitive agreement to acquire Tribune for $6.4 billion in an accretive all-cash transaction. Upon closing, Nexstar will be the largest local television group in the United States, and one of the nation's leading providers of local news, entertainment, sports, lifestyle and network programming across all devices.

Importantly, we have approached this transaction just as we did when we acquired Media General, namely we've identified and planned to divest of certain television stations necessary to obtain FCC and other regulatory approvals, which we believe will allow us to close the transaction sometime in the third quarter of 2019. This transaction highlights Nexstar's role as the industry's leading consolidator and represents the culmination of over 1.5 years of work. The proposed transaction is a strategically and financially compelling growth opportunity that further expands our geographic diversity and our audience reach. With 216 combined postdivestiture television stations in 118 markets and rapidly growing digital media operations, Nexstar will offer superior and great engagement across all devices and influence on consumers' purchasing decisions that will be unrivaled by other media, including now large-scale digital companies. Pro forma for the completion of the transaction, we will serve 15 of the nation's top 25 markets and 34 of the top 50 markets. And by adding Tribune, we will increase our audience reach by approximately 50% from 26% to 39% of U.S. television households, reflecting the FCC's UHF discount, and that audience reach is pro forma for the anticipated divestitures.

Pro forma for the completion of the transaction, Nexstar will generate approximately $900 million in average annual free cash flow pro forma for the 2018/2019 cycle. That anticipated 46% free cash flow accretion, afforded by the transaction relative to our last guide of $615 million for the average annual free cash flow in 2018/2019, clearly surpasses our stated criteria of evaluating strategic growth opportunities against the opportunity to repurchase our own shares.

Upon closing, we intend to allocate our free cash flow to rapid leverage reduction as well as the increased return of capital to shareholders and allow us to make additional investments in our business to improve our service to viewers and advertisers. Notably, we expect our net leverage ratio to approximate 5.3x at the closing of the transaction and to decline to approximately 4x by the end of 2020.

In fact, in the slightly more than 2 years since we closed Media General, we have, as expected, reduced our opening leverage from 5.5x at the closing of the transaction to 3.69x at 2018 year-end. So our vigilance with respect to managing leverage is obviously well documented. As with our past acquisitions, we've developed a comprehensive regulatory compliance plan for required station divestitures and a detailed integration plan that will resolve in significant synergy realization. Nexstar has committed financing for the transaction and has made all required FCC and other regulatory applications. And as you likely read in the press, Nexstar and Tribune are actively engaged in the process of reviewing our plan divestiture stations with respect of purchasers. We've also embarked on a battery of station due diligence visits with more to come even this week. And based on these meetings, our corporate management team and our executive team are refining our strategic plans for each station and business unit to ensure they operate with Nexstar's proven disciplines and adopt and implement best practices, enterprise-wide post-closing.

The common core principles underlying the Tribune transaction and the Media General deals completed in -- the Media General deal which we completed in January of '17 is that they both represent further steps along our path of growing our local marketing and content platform and free cash flow through accretive acquisitions. Our growth has been rapid, yet measured in each of our transactions. And while we've met or exceeded our synergy targets, we've also improved operations in margin significantly, and we've reduced the purchase multiple to what we acquired going in.

Importantly, with our track record of significant posttransaction synergy realization and the organic growth in front of us, including significant upcoming distribution renewals, as well as the 2020 presidential election and the continued growth of our digital platform, Nexstar will be posed for rapid leverage reduction and increased capital returns for shareholders and will be one of the nation's preeminent local and national brand builders. Nexstar will offer brands and advertisers a deep and truly diversified local marketing and content platform allowing us to compete even more aggressively in the dynamic and rapidly converging advertising markets.

And as an industry leader with the portfolio of premier stations and digital assets, a strong balance sheet and attractive weighted average cost of capital and significant free cash flow and free cash flow growth, we are also extremely well positioned to continue to build value for our shareholders. In January, we announced a 20% increase in the amount of our quarterly cash dividend, marking our sixth annual consecutive rise in our cash dividend. With the annual dividend rate now at $1.80 per share, approximately 45.6 million Nexstar Media Group shareholders and our $900 million of pro forma average free annual cash flow in 2018/2019, we'll be in a sweet spot for deleveraging as well as other shareholder-friendly initiatives, as I said.

With that, let me turn the call over to Tom Carter, who I'd like to acknowledge for his insights, his vision and his tireless efforts as we move toward the execution of our definitive agreements with Tribune as well as the financing package. Tom?

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Thomas E. Carter, Nexstar Media Group, Inc. - Executive VP & CFO [4]

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Thanks, Perry, and good morning, everybody. I'll start with a review of Nexstar's Q4 income statement and balance sheet data, after which I'll provide an update on our capital structure and some points of guidance.

To start, as noted previously, effective 1/1 of 2018, the company adopted the new revenue accounting guidance issued by FASB. As a result, beginning on 1/1 of '18, the company presents local, national, digital and political revenues net of their related agency commissions. This morning's release also provided the 2017 Q4 and year-to-date local, national and political revenue comps adjusted to net out the sales commissions.

In addition, we no longer recognize barter revenue and barter expense related to the exchange of advertising time for certain program materials. These changes don't impact the company's past or future income from operations, net income, BCF, adjusted EBITDA or free cash flow. Also effective at the beginning of 2018, the company adopted an accounting standards update, which requires pension and other postretirement plans, cost or credit other than service costs, to be presented outside of income from operations. Thus, the income from operations during the 3 and 12 months ended 12/31/2018 was decreased by a pension -- I'm sorry, 12/31/2017 was decreased by a pension and other postretirement credit of $4.2 million and $13.1 million, respectively. And I'm pleased to say that's the last time I'll have to remind everyone of those accounting changes.

Now, turning to the Q4 income statement. Net revenues were $798 million, which was a 22% increase over the same fourth quarter -- over the same period the previous year fourth quarter of 2017. Total television ad revenue, local, national, political was up almost 39% to $438 million with local revenue down 1.5% to $216 million and national revenue at $81.9 million, which was down 1.8%.

Political revenue, as Perry mentioned, was a record high of $140.2 million for the fourth quarter, which is up over 1,000% over the same period in 2017, and digital revenues were up approximately 3%. Profitability metrics across the board were records with broadcast cash flow of approximately $380 million, adjusted EBITDA before onetime expenses of $358 million and free cash flow before onetime expenses of approximately $255 million.

On a same-station basis, our results were very comparable to the 2017/2018 reported results with net revenue up approximately 22%, total television ad revenue on a same-station basis, up 38%, local revenue on a same-station basis was down 2% as was national revenue and digital revenues were up 3%. Retransmission fee revenues on a same-station basis were very much comparable to the actual reported results and were up 12%.

As Perry mentioned, we recorded net political revenue of $140 million in the quarter, which exceeded our net political guidance for the full year. And to further emphasize the strength of the election spending in our markets during 2018 midterms, full year same-station political ad revenue came in 50% higher than the comparable 2014 period and 38% higher than the 2016 presidential election cycle.

Fourth quarter nontelevision advertising revenue increased 10.5%, including 12.3% in retransmission fee revenues and 3.3% in rise of digital revenues. While full year digital revenues were up 15.2%, fourth quarter was impacted by timing issues related to the implementation of the prior updates of our technology platform to comply with GDPR and authorized dealer seller -- digital seller specifications as well as rebranding and consolidation of certain digital businesses to focus on profitability.

During the fourth quarters of 2018 and 2017, we recorded noncash impairment charges of $19.9 million and $20 million, respectively, relating to goodwill and intangible assets of our digital businesses, including the last of the goodwill write-downs from legacy media general assets. Fourth quarter station direct operating expenses, net of trade expense, rose 5.5%, primarily reflecting the growth of broadcast ad sales as well as budget increase in network affiliation expense and expenses from LKQD. Same-station fixed expenses including programming expenses were down 1.3% year-over-year.

The 7.9% rise in fourth quarter G&A expense primarily reflects higher variable costs relating to the higher political revenues and our previously disclosed reclassification of certain digital administrative expenses to corporate expense. Nexstar's fourth quarter corporate expense was in line with our expectations at 20.9 -- $29.5 million, inclusive of $8.5 million in stock-based compensation and $5.5 million of onetime transaction costs relating to the Tribune merger. This was largely in line with our guidance for the fourth quarter recurring cash overhead, exclusive of stock comp of approximately $18 million to $19 million.

Overall, our significant fourth quarter revenue growth combined with ongoing expense management resulted in substantial increases in fourth quarter BCF and adjusted EBITDA margins, which rose to 47.6% and 44.2%, respectively.

Looking ahead to the 2019 first quarter, we project recurring corporate overhead of approximately $20 million, inclusive of -- exclusive of stock comp and Tribune-related transaction expenses. Noncash compensation is to be -- is projected to be approximately $7 million for the quarter and $37 million for the year, reflecting anticipated issuance of new equity incentive awards later this year. Cash transaction expenses, primarily severance and success-oriented fees, cannot be capitalized -- that cannot be capitalized are expected to be approximately $5 million to $7 million during the first quarter.

Turning to balance sheet, I'll review a couple of key items at 12/31/2018. Total net leverage at that date was 3.69x, which compares to 4.23 at the end of Q3 and 5.07 at the end of fourth quarter -- Q4 of '17. Covenant first-lien leverage was 2.11 versus a covenant of 4.25, which compares to 2.59 at the end of Q3 '18 and 3.20 at the end of Q4 '17. Our outstanding debt associated with the balance sheet amounted first-lien debt of $2.4 billion comprised of the term loans with a decrease from September 30, reflecting an additional $167 million in payments on the term loans in Q4 with cash from operations. Our 3 outstanding bond issues, the 6.125%, the 5.875% and the 5.625% remain outstanding at approximately $1.5 billion in total outstandings.

Net debt at 12/31/18 amounted to approximately $3.84 billion compared to $4.25 billion a year ago and $4.7 billion in January of '17 when we closed the MEG transaction. Thus, we quickly reduced debt by approximately $850 million since the closing of the Media General transaction through 8 quarters of operation even as we've allocated capital to serve other shareholder-enhancement initiatives.

As you will see in the 10-K, which is expected to be filed this evening, subsequent to quarter-end, we made additional principal payments of approximately $10 million and through the 13-month period ended January 31, 2019, $412 million in total debt repayments. We anticipate making additional principal payments on the senior facility over the next several months.

In line with Nexstar's focus on actively managing our capital structure and cost of capital, we closed on the $2.7 billion repricing of our outstanding senior secured term facilities early in 4Q. The new terms represent a 25 basis point interest rate reduction compared to the company's prior senior secured term loans and revolving credit facilities, resulting in approximately a $7 million reduction in the company's annual interest expense, increasing net income and free cash flow by approximately $5 million on an annualized basis.

As it relates to our funding of the pending acquisition of Tribune Media, we intend to be opportunistic in tapping the markets and have a $6.4 billion committed financing facility initially provided by Bank of America Merrill Lynch, Crédit Suisse and Deutsche Bank to fund the transaction's cash consideration. Similar to our previous transaction, our intention to that is to have pro forma capital structure reflect a proper balance of fixed and floating debt and attractive weighted average cost of capital with prepayment and refinancing flexibility.

At closing, which is anticipated in 3Q of 2019, we expect our net leverage to be approximately 5.3x on an L8QA adjusted EBITDA basis after giving effect to the transaction, the occurrence of that transaction expenses, anticipated first year synergies of $160 million and net of the divestiture proceeds. With the free cash flow generated for base operations, we expect Nexstar's net leverage to decline to the 4x range by the end of 2020.

We remain committed to applying our growing free cash flow to drive shareholder returns and our record 2018 results, including full year cash flow of $693 million, enabled us to remain opportunistically active in taking action to enhance shareholder value through the year with our total return of capital and leverage reduction activities amounting to approximately $521 million, including net debt reduction of $400 million, dividend payments of approximately $70 million and share repurchases of approximately $50 million. In addition, we funded the $120 million accretive acquisitions in the digital and television space during the year.

Fourth quarter total interest expense approximated $53.9 million compared to $52.7 million in the prior year's period, while cash interest expense was $51.8 million compared to $50 million in the prior year. We expect cash interest expense to approximate $50 million in Q1 of 2019.

In Q4, we had operating cash taxes of approximately $32.7 million compared to $7 million of cash taxes in Q4 of '17. Full year operating cash taxes were approximately $90 million, including a net payment of $1.1 million relating to tax liabilities in an assumed acquisition and came in slightly below our full year guidance of approximately $100 million. We expect operating cash taxes to amount to between $110 million and $115 million for the year and $20 million for Q1 of 2019.

Nexstar's CapEx for the quarter totaled $42 million, of which $28.6 million was related to station infrastructure investments, our platform programming digital operations, with the remaining $13.3 million for station spectrum repack and relinquishment of spectrum costs, which are fully reimbursable. Through 12/31 of '18, we have spent $29.7 million included in CapEx, of which $29 million has been reimbursed as it relates to the income statement, both relating to the spectrum repack. We expect CapEx in Q1 of 2019 to approximate $20 million with an additional amount for repack CapEx.

Our Q4 cash flow was approximately $250 million, inclusive of the impact of $5.5 million of onetime transaction expenses, and this compares with consensus' estimates of approximately $230 million. With 2017/2018 average annual free cash flow of over $610 million before onetime expenses and projected to be slightly higher on a 2018/2019 basis, our near and long-term path to growth and enhancement of shareholder value remains on plan.

As it relates to management's focus on free cash flow generation, our record 2018 and positive outlook for Nexstar Media Group will follow the approach we've successfully deployed in terms of building the top line, maintaining close control of fixed and variable costs, and optimizing the balance sheet and capital structure. The plan will continue to support our goals of generating significant free cash flow, while allowing us to reduce leverage, pursue additional selective accretive acquisitions, pay dividends, repurchase shares and take other actions that can enhance shareholder value. Our focus on free cash flow is a key driver of our attraction to the Tribune assets and the value we can create by combining the companies. As Perry noted, we expect the transaction to result in approximately $900 million of average annual free cash flow in the 2018/2019 cycle or 46% more than our last guidance for Nexstar -- for legacy Nexstar of $615 million of annual free cash flow in the same period.

All of our pre-Tribune merger activities and due diligence continues to support our $900 million or $19.15 a share of free cash flow, but we recognize that our analysts and others continue to model Nexstar's stand-alone in the periods leading up to the Tribune closing later this year. As such, we reiterate the $900 million Tribune guidance and remind you that the 2 variables related to Tribune that we are aggressively working on every day are the divestitures and the financing, and we look forward to reporting to you as we finalize those items.

Now, I'll provide some guidance points for Nexstar's stand-alone over the next 2 years. First, as I mentioned before, we reiterate our guidance on 2018/2019 cycle of approximately $615 million per year or $13.40. Rolling that forward, today, we're establishing guidance for our average annual free cash flow in the 2019/2020 cycle of approximately $660 million or $14.40 a share or $1 more than the prior guidance. The 2019 guidance assumes that core advertising is up slightly in 2019 versus 2018, the trend that we have seen since the November post-election. Our guidance assumes that net political revenue in 2019 will decline almost $220 million compared to the 2018 period. With respect to the potential for early primary spending later this year, we're using historical data and not at this time, forecasting anything in the way of material changes from past prepresidential election cycle revenues.

As we have indicated previously, retrans and digital revenues will both grow low double digits in 2019 over 2018 levels, and again, we have a high percentage of renewals at the end of this year, which will show up in our 2020 retrans growth. 2020, of course, will be a political year. So we're -- we'll see the same type of inventory management we successfully exercised in 2018 to maximize this revenue opportunity. I'm not going to provide guidance for 2020 core, because it's just too far out, and our sites will be based on driving political dollars in that year.

In summary, Nexstar is executing well on all functions, including operations, integration, synergy realization, capital structure and service to our communities. Our disciplines in these areas have driven successful growth as well as consistency and visibility in our results. With our financial results and the value expected to derive from our pending accretive merger with Tribune Media, we continue to believe we have forged a clear path for the continued near- and long-term enhancement of shareholder value. As such, we're excited about our guidance for pro forma and annual average free cash flow in the 2018/'19 cycle of $900 million for the post-Tribune merger at approximately $19.15 per share per year. Our long-term experience in integrating acquired access -- assets and our success over the last 8 quarters and outperforming our synergy targets and driving other operating efficiencies related to the transaction of the Media General operations will serve us well as we add Tribune Media to our operating base upon closing this year.

That concludes the financial review, and now I'll turn the call back over to Perry for some closing remarks before Q&A.

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [5]

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Thanks very much, Tom. In the almost 23 years since Nexstar was founded, we've remained true to our mission to deliver premium local programming and content as well as advertising solutions at the local level, now with the growing scale for advertisers as well as political campaigns. This focus has proven to be good business for Nexstar as it consistently has positioned us to continue to invest in our business as well as reducing leverage and aggressively returning capital to shareholders and building shareholder value.

Consumers brand awareness and purchasing decisions are every bit as strong, if not stronger at the local level, where businesses operate and transactions take place. Local diversified media companies like ours are uniquely positioned to thrive in the today's multiplatform world, because we provide superior local content that is unique and relative to each of the local communities that we serve across the U.S., while offering local businesses, advertisers and brands unparalleled 24/7 marketing opportunities across all screens and all devices. At the same time, our development of complementary retrans and digital revenue streams have materially diversified our revenue mix, and we continue to focus on implementing new standards and technologies to monetize the unrivaled reach, trust and influence of our leading local platform. The fourth quarter marked a strong end to a record year of financial performance for Nexstar, as well as the beginning of what we expect to be a tremendous period of growth for the company with our pending acquisition of Tribune Media.

As we begin to benefit from initial contributions from Tribune later this year, as well as the continued double-digit growth of combined retransmission and digital revenue and a large number of distribution contract renewals up at the end of the year and what many expect to be a very substantial and possibly unprecedented spending level related to the 2020 presidential election cycle, we have excellent visibility to delivering on or exceeding our free cash flow targets and a clear path for the continued near- and long-term enhancement of shareholder value through our commitment to localism, innovation and growth.

With that, I'd like to turn the call over to our operator to express and hear from you as to your specific areas of interest. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question will come from Marci Ryvicker with Wolfe Research.

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Marci Lynn Ryvicker, Wolfe Research, LLC - MD of Equity Research [2]

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I'm surprised by the core guide for '19. So curious what's driving positive core. Is this Nexstar specific? Is it just an overall better environment? Is it a contribution from auto? Or is it growing in spite of auto?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [3]

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I would say, it's a little bit of all of the above, Marcy. We budget conservatively for core growth this year, but I would say the absence of political has inventory back into our base that we can resell to local advertisers. Automotive is better than what we saw ending the Q4 period and 2018, and I think it's just a combination of things. I think, at Main Street, there's a pretty good level of confidence in the economy and so we're also beating the business for new business. So I think it's a combination of things that are driving the growth. And with January and February in the books, we are over budget on core -- our core revenue budgets for this year. And obviously, in February, we budgeted down because of the Olympics last year, but we have exceeded our goals in the first 2 months of the year, small sample size, but it's the beginning of a streak.

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Marci Lynn Ryvicker, Wolfe Research, LLC - MD of Equity Research [4]

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Got it. In terms of the Tribune deal, I have a couple of questions. It feels like you're still on par to close in Q3 despite the government shutdown. I assume that means that conversations with the regulators are going well. And then can you also update us on the timing of station divestitures? Is that forthcoming in the next couple of weeks?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [5]

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Sure. The station divestiture process is robust. There are a number of participants that are moving forward and have advanced into our next round. We do anticipate being in a position to announce the divestiture buyers and stations and markets and all of those details by the end of the quarter and maybe a little sooner than that.

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Marci Lynn Ryvicker, Wolfe Research, LLC - MD of Equity Research [6]

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Got it. Any conversation with the FCC or DOJ or anything you can comment on?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [7]

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No, other than we have made a commitment that we will deliver to them a "clean transaction." We won't be asking for any waivers of any existing regulations, and we're keeping our eye on the prize of closing the big deal.

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Marci Lynn Ryvicker, Wolfe Research, LLC - MD of Equity Research [8]

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Got it. And then last question. Does your net leverage or any commentary on synergies related to Tribune include the real estate sales coming from Tribune?

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Thomas E. Carter, Nexstar Media Group, Inc. - Executive VP & CFO [9]

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Not in 2019, but in 2020. And, really, all it is, is a -- it would be a cash inflow and a debt reduction, because the economics of the real estate really don't materially affect the EBITDA of Tribune, in our view.

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Operator [10]

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The next question will come from Dan Kurnos with Benchmark.

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Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD [11]

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Just quickly to go back on the core, I think the bigger surprise in the quarter was Q4 core strength. Perry, you talked about November and December being particularly strong, and we're kind of trying to do the math or crowd out. I know it's never really a clean number, but if you could give us a sense of kind of what December was up. And kind of what you think sort of ex crowd out Q4 looked like, that would be helpful.

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [12]

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Well, I can tell you core December was up mid-single digit and the crowd-out thing is almost impossible to quantify, because the last passenger on the plane pays the highest rate. So some of the political rates were multiples of what regular advertisers pay on a 52-week basis. So it's hard -- you would have to assume a static demand quarter-over-quarter, year-over-year, and of course, that's not the case. So I'd hesitate to comment on that because I wouldn't want to lead you down an exit ramp that goes nowhere, but we did see mid-single growth in core and as I look at Q1 core revenue, again with the comparison of February out of the mix, if I look at January and March taken together, it's a mid-single-digit pacing increase on core business right now.

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Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD [13]

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Perfect. That's really helpful. And then obviously, you had a bit of a protracting negotiation with TDS, which got resolved. I know you guys talked about a pretty healthy retrans outlook. I don't know if those negotiations are getting any more contentious, but it doesn't sound like your outlook has been changed. But if you care to comment on sort of the landscape that you're seeing there?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [14]

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There's a deal of contention in every negotiation, and ultimately, a constructive conversation. So I don't think that -- certainly, we feel that this is a business and a revenue stream that we pioneered, that we pay a lot of attention to it, treat it with respect and do a lot of planning and analysis before we begin the negotiations. So I -- the outage is the exception rather than the rule if you look at our track record here, and I don't think that 2019 renewals will be any different from that from where we sit today.

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Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD [15]

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Great. And then just last. Tom, I don't know if I maybe misheard you, but you said retrans up double digits. I'm assuming that was gross as your outlook -- your guys outlook changed at all for net for this year or next?

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Thomas E. Carter, Nexstar Media Group, Inc. - Executive VP & CFO [16]

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No.

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Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD [17]

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And what was that outlook? If you care to reiterate, Tom?

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Thomas E. Carter, Nexstar Media Group, Inc. - Executive VP & CFO [18]

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It'll be low-double-digit growth in net retrans this year and slightly more than that next year.

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Operator [19]

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The next question will come from David Joyce with Evercore.

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David Carl Joyce, Evercore ISI Institutional Equities, Research Division - MD & Senior Analyst [20]

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If you could just provide some more color on a couple of the revenue items. I was just wondering why digital was down, was there some political impact in that somehow? And what should we think about that contributing going forward? And then secondly on the new-to-TV advertisers, what should we think about in terms of the upside from there? Are those advertisers who are allocating to the local media or they just literally newer companies in your footprint? If you could provide some more color there would be great.

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [21]

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Sure. When you look at our digital revenue number, as reported, there are 2 components there, local site revenue and then there's Nexstar Digital, which is our digital operating company. Nexstar's site revenue for the quarter was up high single digits and that's usually high-single, low-double-digit growth consistently for us. Nexstar Digital, basically, the revenue was flattish, but let me read the financial statements from the bottoms up. In 2017 Q4, we had negative operating income of about $3 million for Nexstar Digital and in Q4 of 2018, we had positive operating income of approximately $5 million. So the lower top line growth was a conscious decision not to chase unprofitable revenue and also the cessation of certain unprofitable lines of business, and you did see we took an impairment charge in the fourth quarter related to some of those legacy businesses that will no longer be contributing. I think on a going-forward basis, if I again look at site revenue, January's growth was double-digit, and we anticipate that being the case for the quarter on our site revenue, and we're off to a good start in Nexstar Digital, and I think you'll see a return to a consistent high-single, low-double-digit growth, as the year progresses on the combined metric.

Your second question was on new-to-television advertising, if I remember. And these are literally -- in our local marketplaces, we probably do business consistently with somewhere between 5% and 10% of the registered businesses in the marketplace. And so our greenfield opportunities, the other 90% of the businesses that exist in the local market that don't do business with us. And so there is a tremendous incentive to develop new business, a tremendous commission potential and so it's just part of our culture. And quite frankly, I think it will be a driver of postclosing growth in the Tribune acquisition, because they've not focused as much on business development in their markets, as I think they will under Nexstar.

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Operator [22]

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Your next question will come from Kyle Evans with Stephens.

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Kyle William Evans, Stephens Inc., Research Division - MD [23]

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You guys posted 50% cycle growth, it sounds like, in '18 off of '14. Can you help us think back on the '12 and '16 cycles and give us presidential contribution as a percent of total political for those periods?

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Thomas E. Carter, Nexstar Media Group, Inc. - Executive VP & CFO [24]

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'12 is a little far back from a reach perspective for me. I don't have that information. But on '16, I want to say that it was traditionally low relative to other presidential elections and it was probably somewhere in the 20% to 25% contribution of total political and before, it had been closer to 30%.

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [25]

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Yes. I was going to say almost closer to 40% contribution from presidential. But remember in 2016, President Trump didn't spend a lot of money on his own behalf because of all the free media that he was getting at the time. We don't anticipate that being the case in 2020, but, again, for being conservative, we're basically using historical numbers for 2020 compared to '16 and the end of '15. So that parallel would be '19 into '20.

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Kyle William Evans, Stephens Inc., Research Division - MD [26]

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Could you -- I'm sorry, could you say that last statement one more time?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [27]

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I'm just saying, we're basically -- we're not assuming huge growth in political revenue in '20 over '16 on a pro forma basis at this point in time.

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Kyle William Evans, Stephens Inc., Research Division - MD [28]

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Okay. Got it. And then I know you can't make detailed commentary here, but I'm interested from a high-level kind of your views on Apollo's Cox transaction, how that either does or doesn't change your kind of operating perspective?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [29]

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Well, I think it's a net positive for shareholders to have private equity interested in the business, because that should help to firm up valuations. My understanding -- although we dropped out of the Cox process when we acquired Tribune because we couldn't acquire Cox under the national ownership cap, but my understanding is that the headline price will be a healthy multiple, probably above where the space is trading today, but time will tell. And the documents will need to be made public before we can know for sure, but we see it as a net positive in the space that there's private equity interest and anytime there's another buyer that should help values.

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Operator [30]

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The next question will come from Zach Silver with B. Riley FBR.

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Zachary Alan Silver, B. Riley FBR, Inc., Research Division - Associate [31]

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I just wanted to kind of discuss local viewership and given how compelling the 2018 election cycle was, it seems like that could have provided a nice lift for a local news viewership. Can you provide an update on how viewership trends were during the election? And if you have available, how they're pacing in December as well as maybe year-to-date?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [32]

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Yes. As you know, we subscribed to comScore primarily, and it's not huge users of Nielsen. It's nice to say, there was enhanced interest in local news during the election cycle. We produced 83 debates across our footprint that were well viewed during the election cycle. We don't get a rating book -- or November rating book until now, and we're in a rating period in February that we won't see the results until April. So kind of hard for me to comment on current trends here. But again, we've expanded our local news footprint even within our local group and launched additional news broadcasts since the beginning of the year. And so we, obviously, believe it's a good business and will continue to grow our footprint, which will grow our gross aggregate eyeballs just because of more time periods being programmed for local news.

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Zachary Alan Silver, B. Riley FBR, Inc., Research Division - Associate [33]

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Got it. Perry, and then one more, if I could. Can you just give us an update on the TIP Initiative and when we may see that providing some lift to core advertising?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [34]

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Sure. The -- that's the television interface practices and project or whatever you'd want to use for the initials, but the whole focus there is to provide more automation to the buy/sell process with local television stations to make the business more profitable for the agencies to do business with us. We are attempting to automate all of the back end processes, the reconciliations, slog times and all of that. We've not focused on the front end of the buy/sell process, but it's more of the automation of all the processes around make goods and invoicing and those kinds of things. And we had a press release, which you should have seen, earlier this year that talked about milestones that we'd achieved and our roadmap of what we look to achieve in 2018, and our goal is to have the whole back end process automated and vendors designing to that process, which they are now. And these -- it's basically open standards. Here are the business rules, here's how we see going about it, let the market determine who are the winners and losers from a technology standpoint, but at least have business rules and common standards. My goal is ultimately searchable APIs, but at this point we're just taking it a step at a time. But I think if we can remove the friction out of the reconciliation part of the process, that will be a huge saving for agencies, and we hope that money will flow back to -- and an increasing money will flow into spot television because of its superior value proposition for the advertiser. We just have to make it profitable for the agency to do business with us. So more will come as the year goes on, and our goal is that we'll have the whole back-end process automated by the end of the year, and then obviously, now it's -- it will be up to agencies to adopt those standards and to implement them when -- and that's our ultimate goal.

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Operator [35]

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The next question will come from Craig Huber with Huber Research Partners.

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Craig Anthony Huber, Huber Research Partners, LLC - CEO, MD, and Research Analyst [36]

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I have a few questions. Maybe -- I think you said, January and March TV pacings are up mid-single digits. If you included February, are you sort of suggesting it's up, say, 1%, 2% for the whole quarter year-over-year as it stands right now?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [37]

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Well, let me look. Yes, it's up slightly, probably on the order of about 1% here as we sit today.

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Craig Anthony Huber, Huber Research Partners, LLC - CEO, MD, and Research Analyst [38]

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And then, how would you characterize auto relative to that? Is it better or worse?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [39]

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I would -- I have not drilled down into category pacing by category yet. But Tim Busch is in the room. He can comment on that. Tim, do you want to talk about auto pacing for the quarter?

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Timothy C. Busch, Nexstar Media Group, Inc. - President of Nexstar Broadcasting Inc [40]

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Auto pacing has been slowly improving and certainly over prior quarter.

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [41]

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Hopefully, that's helpful to you.

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Craig Anthony Huber, Huber Research Partners, LLC - CEO, MD, and Research Analyst [42]

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Yes, that's -- appreciate that. You're paying TV subs, like, say, in the fourth quarter, what was that number on a year-over-year basis? Was it flat, up a little bit, down a little bit?

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Thomas E. Carter, Nexstar Media Group, Inc. - Executive VP & CFO [43]

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I would say down a little bit.

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Craig Anthony Huber, Huber Research Partners, LLC - CEO, MD, and Research Analyst [44]

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Okay. And then also wanted to jump over -- now that you're basically 2 years after the Media General deal, can you remind us, please, how much was the original synergies you told us what you thought you'd get out of the Media General deal? And what does it come in at, now you look back on it?

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Thomas E. Carter, Nexstar Media Group, Inc. - Executive VP & CFO [45]

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The original synergies, when we announced the deal, were $75 million. When we closed the deal, we upped that to $81 million. And I would say, obviously, we stopped keeping count after a little while, but in the first 9 months, we totaled between $85 million and $87 million in synergies.

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [46]

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And I think we elaborated in the commentary at that time that there would be additional synergies in years 2 and 3, which we have realized on the order of single-digit million dollars of contract runouts and lease cancellations and things like that. So we've realized that as part of our '19 guidance as well.

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Craig Anthony Huber, Huber Research Partners, LLC - CEO, MD, and Research Analyst [47]

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And do you think the $116 million, I think, you've talked about for Tribune has potential upside to, I know it's early, but do you feel pretty conservative about that number?

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Thomas E. Carter, Nexstar Media Group, Inc. - Executive VP & CFO [48]

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Well, it is what it is until it's something different.

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Operator [49]

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The next question will come from Steven Cahall with Royal Bank of Canada.

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Steven Lee Cahall, RBC Capital Markets, LLC, Research Division - Former Analyst [50]

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Maybe first, Perry, just to drill down on what you said on the 2020 presidential election. I think a lot of us intuitively agree that it probably won't look like 2016, but we're just wondering if you could help us sleep a little better with why you think that's the case. Are you hearing that from some of your ad agencies, are you hearing that from the parties that are putting money to work? So any way you could couch that would be helpful. And then, Tom, just on the debt. I think in December, you said about the Tribune debt and refinancing it, that we should stay tuned. Just wondering if you have any updated thoughts on how you're thinking about the Tribune debt. And just relatedly when it comes to debt reduction, is there any value or transaction you think is possible for Food Network?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [51]

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Well, that's a lot. Let me first start with political. Tim Busch, who's President of Nexstar Broadcasting is in the room, just made a tour of all of the major political agencies in Washington. So let me -- let him remark on their pulse of things.

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Timothy C. Busch, Nexstar Media Group, Inc. - President of Nexstar Broadcasting Inc [52]

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I would tell you that the presidential election is probably going to come earlier this year, meaning, for the primary races than we have seen in prior cycles. It will also be more robust, because you will have a larger field of candidates and you may have opposition on the incumbents' party. And so you're also going to see spending that will need to occur from our President, which we did not see in 2016 to that degree. And then lastly, PAC in party monies, that should be more robust to support eventual candidates beyond the primary. So you're going to just see overall activity larger than what we saw in 2016 on both sides of the parties in addition to Bernie Sanders.

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [53]

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So, we've never disappointed on political guidance, and I think you should just take us at our word, that we -- as we have more information, we will give more clarity on our guidance. But we're -- I would say, you can probably always bet the over on our guidance, but we're going to do data-based and fact-based projections here and not just put a finger in the wind. So, as we get closer and have more data, you will likely see our guidance on political improve as it has historically. And again, we tend to try and over deliver on our promises. As it relates to Food Network, that's not even on the to-do list of things to be thinking about right now. We're looking for clean divestitures and maximizing that value, regulatory approval, integration. And that's -- we're happy to get a check that we don't have to do a lot work for as part of our EBITDA, but there's really nothing in the wind regarding Food Network, not even on our radar screen to talk about. I'll let Tom answer the debt questions.

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Thomas E. Carter, Nexstar Media Group, Inc. - Executive VP & CFO [54]

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Sure. On the debt, we're -- we feel a lot better about the debt capital markets now than we did at year-end. We're not quite back to the levels we were in late November or early December when we did our -- when we got our indications at that time from the -- from our financing sources, but clearly the market continues to grind back to more acceptable levels. And I'm not going to -- we're not going to give interim updates on the synergy number on Tribune until we have more absolutes known. We're doing ongoing diligence on the operating synergies, the financing synergies and the financing costs will be worked into that, as well as the divestitures. So as soon as we have more knowns, then we will give more guidance with regard to the synergies.

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Operator [55]

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We have a question from Jim Goss with Barrington Research.

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James Charles Goss, Barrington Research Associates, Inc., Research Division - MD [56]

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First, I was wondering, the broad national scope and increased penetration in larger markets with the Tribune acquisition makes me wonder that despite your historical version to entertainment programming and maybe that would continue, are there other -- that or other programming initiatives you think would be a better consideration for you just because they would give you a greater chance to monetize your base of operations?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [57]

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Tim Busch and I have visited, so far, 7 markets that -- of the Tribune markets that we will be retaining. And I think we've identified opportunities to increase local programming in every one of those markets along the way. And we'll be in Des Moines and Oklahoma City later this week and the roadshow will continue through the first week of April. So I would say, I still -- we still have an aversion to national entertainment programming creating that, but I do think that we can potentially monetize our local programming as a day part or potentially an upfront or an unwired network of our own doing. We've just paid an unwired networks with our rep firms and other parties, event specific, but perhaps we can do that under our own power, given the national reach we have. This will be a company with a national scale, but focused on local markets. And I think that's the thing to remember and that's what we're good at and that's what we'll continue to strive to get better at.

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Operator [58]

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The next question will come from [Barton Crockett] with [DCF Stocks].

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Unidentified Analyst, [59]

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I haven't heard much from you guys about ATSC 3.0 on this call. And I was just wondering if you could update what you see the landscape looking like for ATSC 3.0 in 2019 in terms of rollout, in terms of potential building base for monetization. Or is there still reason to be excited about that? Or does it look like it's taking a little bit longer than maybe it had been hoped at one time?

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [60]

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Well, I think we've been encouraging folks to kind of tap the brakes on monetization, because we've got to go through a repack and then a conversion to ATSC 3.0. Most folks are doing that or spending money to get ATSC 3.0 ready when they do the repack and spending incremental money. And I think we have earmarked probably $20 million of our CapEx this year and next for ATSC 3.0 improvements beyond what the FCC would reimburse. And so that's how this will begin. The first market to participate in the full market conversion is Phoenix. We will be the first ATSC 3.0 lighthouse station. Others will provide the 1.0 lighthouse. We're still waiting on some approvals from the FCC to license mods to allow us to do that. So there's a lot of organization, but our goal is that we have between the Pearl consortium and the spectrum consortium. And again, we're the only company in -- with a foot in both of those camps, have 20 markets converted by the end of this year. That may be ambitious, but as you know, it's a voluntary transition, you have to get all the parties to agree and then you got to negotiate reciprocal tower leases. I mean, there's a lot that goes into this and Brett Jenkins, our Chief Technical Officer, is probably spending 30% to 40% of his time on ATSC and repack-related issues here. But you have a coalition of the willing. It's just the repack itself will take 3 years plus from where we sit here and then we'll begin the path to monetization once markets do the voluntary conversion to 3.0 transmission technology. So all of which is to say, we think it's like having mineral rights and there is value here to be unlocked by the right technology. And while it took 20 years to monetize shale oil and gas and by improved technology, it's not going to take 20 years, but it's going to take 5 to 10 before this is a real meaningful contributor. But again, I think it is the next huge value lever for local television, because we're the ones that can control and can monetize our spectrum. And I think the potential is as big as retrans, probably, which is a $10 billion -- almost $11 billion industry at the local station level in 2018. So we think it has that potential, but you're just going to have to pace. It's going to take time.

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Operator [61]

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The next question will come from [Ryan Bond] with Needham.

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Unidentified Analyst, [62]

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Tom, you mentioned the -- I'm sorry, Perry mentioned that the $10 billion or $11 billion, I actually have a retrans question for you. So you've talked about double-digit growth for years to come. I'm just curious, how do you think about that? Whether it's coming from virtual MVPD sub growth? Or is it the distribution options, what, the pricing expands? Or is it coming from some of the lower viewership channels that are getting bumped off of certain packages, fully recognizing the bigger picture that broadcast is under earning relative to what cable is getting today, is the big picture question there.

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [63]

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Yes, if you look at 2019, the estimate is that total distribution payments are $50 billion, and we're getting, let's call it, $10 billion or $11 billion. So we're somewhere between 20%, 22% of the pie and that's for all television stations in aggregate. And all television stations in aggregate, typical MVPD home, generate 35% of the cumulative viewing. So I would say, that's your bid and ask to begin with, we won't even get into quality of content, premium content and what people really want, which is the local television stations. But we're right now at about $1.6 million in OTT subcounts and that number is probably a little less than the actual, because there's a payment lag on that from the networks who are paying us to be part of their offering. And so that is a growth driver. Again, we've seen our subcount declines really level off. I think people kind of get the bundle and the value of the bundle and they don't want to have 4 remotes on the coffee table again. And so broadband plus video and navigation is pretty powerful. And so -- but I think the primary driver is going to be from getting our fair share of the distribution bundle, and I think that will occur over the next couple of cycles, which would be 3 to 6 years basically.

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Operator [64]

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The final question will come from Dennis Leibowitz with Act II Partners.

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Dennis Howard Leibowitz, Act II Capital, LLC - CEO and Managing Member [65]

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Yes, wouldn't the same factors that are causing you to raise your free cash flow estimates, moving from '18/'19 to '19/'20 for the core apply to the Tribune stations as well, meaning that the total 19 50 or even 20 50 would be higher than that?

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Thomas E. Carter, Nexstar Media Group, Inc. - Executive VP & CFO [66]

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We're not prepared to comment on Tribune, '19/'20 free cash flow guidance yet. There's a lot of moving parts that goes into that. I think we want to do it once, and we want to do it with full information from synergies, from diligence, from financing, from divestitures, et cetera, but we're just speaking for the Nexstar at this point.

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Operator [67]

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Thank you, speakers. This concludes the Q&A portion. I'll turn it back to you for closing remarks.

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Perry A. Sook, Nexstar Media Group, Inc. - Chairman, President & CEO [68]

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Well, thank you all for joining us today and celebrating our record Q4 '18 and full year 2018 results. We look forward to gathering again in 3 months' time not only to report on our Q1 results but to update you on the Tribune divestiture process and the Tribune process overall. So thank you for joining us today, and we look forward to catching up down the road.

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Operator [69]

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Thank you. Ladies and gentlemen, this concludes today's event. You may now disconnect your lines.