# Nexstar Media Group, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Nexstar Media Group, Inc.](/companies/nxst.md) (CIK 1142417)
- Form: 10-Q
- Filed: 2023-11-08
- Accepted by EDGAR: Nov 8, 2023, 16:16 ET
- Period: 2023-09-30
- Accession: 0000950170-23-061149
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1142417/000095017023061149/nxst-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1142417/000095017023061149/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.13bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $3.63bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $281.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $808.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $94.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $477.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $6.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $83.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $25.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $232.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.70 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $6.37 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.71 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $6.47 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 35,367,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 36,370,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $817.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $113.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $145.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $509.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $150.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $1.34bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $12.05bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $852.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $9.70bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $6.74bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $124.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $2.33bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 49,329 characters.

*The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related Notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022.*

*As used in this Quarterly Report on Form 10-Q and unless the context indicates otherwise, “Nexstar” refers to Nexstar Media Group, Inc., a Delaware corporation, and its consolidated wholly owned and majority owned subsidiaries, the “Company” refers to Nexstar and the variable interest entities (“VIEs”) required to be consolidated in our financial statements; and all references to “we,” “our,” “ours,” and “us” refer to Nexstar.*

*As a result of our deemed controlling financial interests in the consolidated VIEs in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), we consolidate the financial position, results of operations and cash flows of these VIEs as if they were wholly-owned entities. We believe this presentation is meaningful for understanding our financial performance. Refer to Note 2 to our Condensed Consolidated Financial Statements for a discussion of our determinations of VIE consolidation under the related authoritative guidance. The following discussion of our financial position and results of operations includes the consolidated VIEs’ financial position and results of operations.*

### Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: the risks and uncertainties of current economic factors that are beyond our control, such as inflation, rising interest rates and supply chain disruptions; any projections or expectations of earnings, revenue, financial performance, liquidity and capital resources or other financial items; any assumptions or projections about the television broadcasting industry; any statements of our plans, strategies and objectives for our future operations, performance, liquidity and capital resources or other financial items; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and other similar words.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ from a projection or assumption in any of our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties, including those described in our Annual Report on Form 10-K for the year ended December 31, 2022 and in our other filings with the United States Securities and Exchange Commission (“SEC”). The forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we do not have or undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances.

### Executive Summary

### Nine Months Ended September 2023 Highlights

- Net revenue was $1.13 billion and $1.27 billion during the three months ended September 30, 2023 and 2022, respectively.
- During the three and nine months ended September 30, 2023, we returned approximately $246 million and $659 million, respectively, of capital to stockholders through repurchases of common stock and dividends, funded by cash on hand.
- During the nine months ended September 30, 2023, the Company repaid scheduled principal maturities of $93 million under its term loans.
- On September 18, 2023, our retransmission consent agreement with DirecTV was renewed after the previous contract expired on July 2, 2023.
- In September 2023, Nexstar, Mission and White Knight renewed and extended each of their multi-year affiliation agreement with Fox Corporation for their respective Fox-affiliated stations. Nexstar also launched The CW affiliations for three of its stations in the top-15 television markets, including WPHL-TV in Philadelphia (DMA #4), KRON-TV in San Francisco (DMA #10), and WTTA-TV in Tampa (DMA #13).
- In August 2023, The CW expanded and extended its network affiliation agreements with Hearst Television, Sinclair Broadcast Group, LLC, and Gray Television, Inc. Nexstar also renewed its affiliation agreement with MyNetworkTV for its affiliated stations.
- On July 20, 2023, Nexstar acquired certain assets of WSNN-LD, a MyNetworkTV affiliated low power television station serving the Tampa, Florida market, from Citadel Communications, LLC. On August 31, 2023, Nexstar acquired certain assets of KUSI-TV, an independent full power television station serving the San Diego, CA market, from McKinnon Broadcasting Company and Channel 51 of San Diego, Inc. The total purchase price of these acquisitions was $38 million, including working capital adjustments.
- In July 2023, The CW acquired exclusive broadcast rights to the NASCAR Xfinity Series beginning in 2025 through the 2031 racing season. The CW also acquired exclusive broadcast rights to 50 Atlantic Coast Conference (ACC) college football and basketball games beginning in 2023 through the 2027 season.
- In June 2023, Nexstar filed an amendment to its certificate of incorporation, approved by its shareholders at the 2023 annual meeting, to declassify its Board of Directors beginning at the 2024 annual meeting.
- On May 10, 2023, Mission entered into a definitive agreement to acquire the assets of WADL-TV serving the Detroit, Michigan market from Adell Broadcasting Corporation for $75 million in cash, subject to customary working capital adjustments. The proposed acquisition is subject to regulatory and other customary approvals, is expected to close once Mission receives regulatory approval, and would be Mission’s second entry into the state of Michigan.
- In April 2023, NewsNation, America’s fastest growing cable news network, expanded its news programming to 24 hours per weekday of national news, analysis and talk.
- During the first quarter of 2023, Nexstar created a new advertising sales structure and hired a new leadership team led by Chief Revenue Officer Michael Strober to implement Nexstar’s new data and technology-driven, multi-platform strategy and accelerate the monetization of the Company’s platforms.

### Overview of Operations

As of September 30, 2023, we owned, operated, programmed or provided sales and other services to 200 full power television stations and one AM radio station, including those owned by VIEs, in 116 markets in 39 states and the District of Columbia. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MyNetworkTV and other broadcast television networks. Through various local service agreements, we provided sales, programming and other services to 36 full power television stations owned by independent third parties, of which 35 full power television stations are VIEs that are consolidated into our financial statements. We also own a 75.0% interest in The CW, the fifth major broadcast network in the U.S., NewsNation, a national cable news network, two digital multicast networks, Antenna TV and Rewind TV, multicast network services provided to third parties, and a 31.3% ownership stake in TV Food Network. Our digital assets include 142 local websites, 286 mobile applications, 25 connected television applications, and six free ad-supported television channels representing products of our local television stations, The CW, NewsNation, The Hill, and BestReviews, and a suite of advertising solutions.

We (excluding The CW) guarantee full payment of all obligations incurred under Mission Broadcasting, Inc.’s (“Mission”) senior secured credit facility in the event of its default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes, due July 2027 and our 4.75% Notes, due November 2028. In consideration of our guarantee of Mission’s senior secured credit facility, Mission has among other things granted us purchase options to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent. These option agreements (which expire on various dates between 2023 and 2033) are freely exercisable or assignable by us without consent or approval by Mission or its shareholders. We expect these option agreements to be renewed upon expiration.

We do not own the consolidated VIEs or their television stations. However, we are deemed under U.S. GAAP to have controlling financial interests for financial reporting purposes in these entities because of (i) the local service agreements we have with their stations, (ii) our (excluding The CW) guarantee of the obligations incurred under Mission’s senior secured credit facility, (iii) our power over significant activities affecting the VIEs’ economic performance, including budgeting for advertising revenue, certain advertising sales and, in some cases, hiring and firing of sales force personnel and (iv) purchase options granted by each consolidated VIE which permit us to acquire the assets and assume the liabilities of each of these VIEs’ stations at any time, subject to FCC consent. In compliance with FCC regulations for all the parties, each of the consolidated VIEs maintains complete responsibility for and control over programming, finances and personnel for its stations.

See Note 2, “Variable Interest Entities” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for additional information on VIEs, including a discussion of the local service agreements we have with these independent third parties.

### Regulatory Developments

As a television broadcaster, the Company is highly regulated, and its operations require that it retain or renew a variety of government approvals and comply with changing federal regulations. On April 1, 2021, the U.S. Supreme Court issued a decision that reversed a lower court of appeals ruling and upheld the FCC’s elimination or modification of certain of its media ownership rules in the agency’s 2010/2014 quadrennial review of those rules. Among the regulations eliminated in 2021 as a result of the Supreme Court ruling was a rule providing that a television station licensee which sells more than 15 percent of the weekly advertising inventory of another television station in the same market under a JSA is deemed to have an attributable ownership interest in that station, as well as a requirement that at least eight independently owned television stations remain in a local television market for a party to acquire a second station in that market. While these restrictions are no longer in effect, the FCC’s 2018 quadrennial media ownership review is currently pending and a federal court of appeals recently ordered the FCC to complete that review by December 27, 2023 or show cause why a pending writ of mandamus should not be granted. Notwithstanding the pendency of the 2018 review, in December 2022 the FCC commenced its 2022 quadrennial review proceeding. An FCC proceeding is also pending to review the current national limit on television station ownership. The FCC could reinstitute its earlier restrictions or impose other limitations in these or any future reviews.

### Seasonality

Advertising revenue is positively affected by national and regional political election campaigns and certain events such as the Olympic Games or the Super Bowl. Advertising revenue is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday season. In addition, advertising revenue is generally higher during even-numbered years, when congressional and/or presidential elections occur and from advertising aired during the Olympic Games. As 2023 is not an election year, we expect a decrease in political advertising revenue to be reported in 2023 compared to 2022.

### Historical Performance

### Revenue

The following table sets forth the amounts of the Company’s principal types of revenue (dollars in millions) and each type of revenue as a percentage of total net revenue:

|  | Three Months Ended September 30, 2023 Amount% |  | 2022 Amount% |  | Nine Months Ended September 30, 2023 Amount% |  | 2022 Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Core advertising | $391 | 34.5 | $400 | 31.5 | $1,211 | 33.4 | $1,241 | 33.3 |
| Political advertising | 19 | 1.7 | 129 | 10.2 | 36 | 1.0 | 240 | 6.4 |
| Distribution | 598 | 52.8 | 641 | 50.5 | 2,023 | 55.7 | 1,956 | 52.5 |
| Digital | 99 | 8.7 | 86 | 6.8 | 288 | 7.9 | 253 | 6.8 |
| Other | 25 | 2.3 | 13 | 1.0 | 71 | 2.0 | 34 | 1.0 |
| Total net revenue | $1,132 | 100.0 | $1,269 | 100.0 | $3,629 | 100.0 | $3,724 | 100.0 |

### Results of Operations

The following table sets forth a summary of the Company’s operations (dollars in millions) and each component of operating expense as a percentage of net revenue:

|  | Three Months Ended September 30, 2023 Amount% |  | 2022 Amount% |  | Nine Months Ended September 30, 2023 Amount% |  | 2022 Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net revenue | $1,132 | 100.0 | $1,269 | 100.0 | $3,629 | 100.0 | $3,724 | 100.0 |
| Operating expenses (income): |  |  |  |  |  |  |  |  |
| Direct operating expenses | 537 | 47.5 | 511 | 40.3 | 1,613 | 44.4 | 1,503 | 40.4 |
| Selling, general and administrative expenses, excluding corporate | 229 | 20.2 | 208 | 16.4 | 659 | 18.2 | 626 | 16.8 |
| Corporate expenses | 52 | 4.6 | 52 | 4.1 | 149 | 4.1 | 149 | 4.0 |
| Depreciation and amortization expense | 220 | 19.4 | 142 | 11.1 | 731 | 20.2 | 431 | 11.6 |
| Other | - | - | - | - | - | - | (3) | (0.1) |
| Total operating expenses | 1,038 |  | 913 |  | 3,152 |  | 2,706 |  |
| Income from operations | $94 |  | $356 |  | $477 |  | $1,018 |  |

29

### Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy business units include those business units that we owned or provided services to for the complete quarter in the current and prior years. For our annual and year to date presentations, we combine the legacy business unit amounts presented in each quarter.

### Revenue

Core advertising revenue was $391 million for the three months ended September 30, 2023, compared to $400 million for the same period in 2022, a decrease of $9 million, or 2.3%, primarily due to a weaker advertising market, partially offset by incremental revenue from our acquisition of The CW (acquired on September 30, 2022). Excluding the impact of The CW, key advertising categories driving the decrease were radio/tv/cable/newspaper, gaming/sports betting, banks/savings/investments, drug stores/medication, and paid programming, among others, partially offset by increases primarily in automotive and home repair/manufacturing. Automotive, our largest advertiser category, represented approximately 20% and 16% of our core advertising revenue for the three months ended September 30, 2023 and 2022, respectively. Excluding The CW, automotive advertising revenues increased by approximately 13% during this quarter compared to the same period in 2022, primarily due to an increase in advertising spending as automobile inventory available to be sold to consumers has increased.

Political advertising revenue was $19 million for the three months ended September 30, 2023, compared to $129 million for the same period in 2022, a decrease of $110 million, as 2023 is not an election year.

Distribution revenue was $598 million for the three months ended September 30, 2023, compared to $641 million for the same period in 2022, a decrease of $43 million, or 6.7%. The decrease was primarily due to the temporary disruption of our distribution agreement with DirecTV from its expiration on July 2, 2023 to its renewal on September 18, 2023, continued MVPD subscriber attrition and the impact of the removal of partner stations from certain MVPDs related to continued negotiation, partially offset by renewals of contracts in 2022 providing for higher rates per subscriber, scheduled annual escalation of rates per subscriber, and the acquisition of The CW (acquired on September 30, 2022). We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.

Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $99 million for the three months ended September 30, 2023, compared to $86 million for the same period in 2022, an increase of $13 million, or 15.1%, primarily due to incremental revenue from our acquisition of The CW (acquired on September 30, 2022).

### Operating Expenses

Direct operating expenses, consisting primarily of programming, news and technical expenses, and selling, general and administrative expenses were $766 million for the three months ended September 30, 2023, compared to $719 million for the same period in 2022, an increase of $47 million, or 6.5%. This was primarily due to incremental operating expenses from our acquisition of The CW (acquired on September 30, 2022) and increased administrative expenses due to increased headcount, compensation and healthcare costs, increased digital sales expenses, and increased news programming at NewsNation.

Corporate expenses, related to costs associated with the centralized management of our stations, were flat at $52 million during each of the three months ended September 30, 2023 and 2022.

Depreciation and amortization expense was $220 million for the three months ended September 30, 2023 compared to $142 million for the same period in 2022, an increase of $78 million, or 54.9%. Depreciation and amortization expense consisted of the following:

- Amortization of broadcast rights was $98 million for the three months ended September 30, 2023, compared to $25 million for the same period in 2022, an increase of $73 million, primarily due to incremental programming expenses from our acquisition of The CW (acquired on September 30, 2022) of $80 million.
- Depreciation of property and equipment was $44 million for the three months ended September 30, 2023, compared to $40 million for the same period in 2022, an increase of $4 million (no significant change).
- Amortization of intangible assets was $78 million for the three months ended September 30, 2023, compared to $77 million for the same period in 2022 (no significant change).

### Income from Equity Method Investments, net

Income from equity method investments, net was $24 million for the three months ended September 30, 2023, compared to $37 million for the same period in 2022, a decrease of $13 million, primarily due to a lower net income of TV Food Network.

### Interest Expense, net

Interest expense, net was $113 million for the three months ended September 30, 2023, compared to $89 million for the same period in 2022, an increase of $24 million, primarily due to increases in interest rates in the Company’s outstanding loans under its senior secured credit facilities, partially offset by decreases in interest expense from debt repayments. Interest rates on outstanding loans under the Company’s senior secured credit facilities ranged from 6.82% to 7.82% as of September 30, 2023, compared to interest rates ranging from 4.54% to 5.64% as of September 30, 2022. These interest rates were a mixture of SOFR plus CSA, or credit spread adjustment used to account for the difference between SOFR and LIBOR, plus applicable margin for the third quarter of 2023 compared to a mixture of SOFR plus CSA plus applicable margin and U.S. LIBOR plus applicable margin for the same period in 2022.

### Pension and Other Postretirement Plans Credit, net

Pension and other postretirement plans credit, net was $9 million for the three months ended September 30, 2023, compared to $11 million for the same period in 2022, a decrease of $2 million (no significant change).

### Income Taxes

Income tax expense was $6 million for the three months ended September 30, 2023 compared to $82 million for the same period in 2022. The effective tax rates were 43.2% and 22.2% for each of the respective periods.

Nexstar reported permanent differences, including an adjustment for losses related to the minority interest in The CW, resulting in a 34.2% increase to the effective rate for the three months ended September 30, 2023. State taxes were impacted by increased permanent differences resulting in a 4.4% increase to the effective rate. The gain on bargain purchase arising from the acquisition of The CW resulted in a 3.1% decrease to the effective tax rate in the prior year third quarter. The increases are partially offset by changes in the valuation allowance which resulted in a 10.2% decrease to the effective rate. Differences in excess benefit on stock options and restricted stock units exercised in 2023 compared to 2022 resulted in a 3.3% decrease in the effective rate. Prior year provision to return adjustments resulted in an 8.7% decrease to the effective rate.

The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections could result in significant adjustments to quarterly income tax expense in future periods.

### Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy business units include those business units that we owned or provided services to for the complete quarter in the current and prior years. For our annual and year to date presentations, we combine the legacy business unit amounts presented in each quarter.

### Revenue

Core advertising revenue was $1.21 billion for the nine months ended September 30, 2023, compared to $1.24 billion for the same period in 2022, a decrease of $30 million, or 2.4%, primarily due to a weaker advertising market and the absence of first quarter advertising revenue from the Olympics on our NBC affiliate stations. These decreases were partially offset by incremental revenue from our acquisition of The CW (acquired on September 30, 2022) and an increase in advertising revenue during the first quarter from the Super Bowl aired on FOX, where we have more FOX-affiliated stations versus NBC in the prior year. Excluding the impact of The CW, key advertising categories driving the decrease were radio/tv/cable/newspaper, gaming/sports betting, medical/healthcare, insurance, and banks/savings/investments, among others, partially offset by increases primarily in automotive and home repair/manufacturing. Automotive, our largest advertiser category, represented approximately 18% and 15% of our core advertising revenue for the nine months ended September 30, 2023 and 2022, respectively. Excluding The CW, automotive advertising revenues increased by approximately 12% during the current period compared to the same period in 2022, primarily due to an increase in advertising spending as automobile inventory available to be sold to consumers has increased.

Political advertising revenue was $36 million for the nine months ended September 30, 2023, compared to $240 million for the same period in 2022, a decrease of $204 million, as 2023 is not an election year.

Distribution revenue was $2.02 billion for the nine months ended September 30, 2023, compared to $1.96 billion for the same period in 2022, an increase of $67 million, or 3.4%. The increase was primarily due to renewals of contracts in 2022 providing for higher rates per subscriber, scheduled annual escalation of rates per subscriber, and the acquisition of The CW (acquired on September 30, 2022), partially offset by the combined effects of the temporary disruption of our distribution agreement with DirecTV from its expiration on July 2, 2023 to its renewal on September 18, 2023, the continued impact of the removal of partner stations from certain MVPDs related to continued negotiation and continued MVPD subscriber attrition. We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.

Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $288 million for the nine months ended September 30, 2023, compared to $253 million for the same period in 2022, an increase of $35 million, or 13.8%, primarily due to incremental revenue from our acquisition of The CW (acquired on September 30, 2022).

### Operating Expenses

Direct operating expenses, consisting primarily of programming, news, and technical expenses, and selling, general and administrative expenses were $2.27 billion for the nine months ended September 30, 2023, compared to $2.13 billion for the same period in 2022, an increase of $143 million, or 6.7%. This was primarily due to incremental operating expenses from our acquisition of The CW (acquired on September 30, 2022), an increase in station programming costs due to network affiliation renewals and annual increases in network affiliation costs, increased news programming at NewsNation and our local stations as well as increased digital sales and administrative expenses.

Corporate expenses, related to costs associated with the centralized management of our stations, were flat at $149 million for each of the nine months ended September 30, 2023 and 2022.

Depreciation and amortization expense was $731 million for the nine months ended September 30, 2023 compared to $431 million for the same period in 2022, an increase of $300 million, or 69.6%. Depreciation and amortization expense consisted of the following:

- Amortization of broadcast rights was $367 million for the nine months ended September 30, 2023, compared to $80 million for the same period in 2022, an increase of $287 million, primarily due to incremental programming expenses from our acquisition of The CW (acquired on September 30, 2022) of $307 million, partially offset by a reduction in the television stations’ broadcast rights costs of $20 million.
- Depreciation of property and equipment was $131 million for the nine months ended September 30, 2023, compared to $119 million for the same period in 2022, an increase of $12 million. The increase was primarily due to newly capitalized assets.
- Amortization of intangible assets was $233 million for the nine months ended September 30, 2023, compared to $232 million for the same period in 2022 (no significant change).

### Income from Equity Method Investments, net

Income from equity method investments, net was $82 million for the nine months ended September 30, 2023, compared to $110 million for the same period in 2022, a decrease of $28 million, primarily due to lower net income of TV Food Network.

### Interest Expense, net

Interest expense, net was $332 million for the nine months ended September 30, 2023, compared to $233 million for the same period in 2022, an increase of $99 million, primarily due to increases in interest rates in the Company’s outstanding loans under its senior secured credit facilities, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022. Interest rates on outstanding loans under the Company’s senior secured credit facilities ranged from 6.82% to 7.82% as of September 30, 2023, compared to interest rates ranging from 4.54% to 5.64% as of September 30, 2022. These interest rates were a mixture of SOFR plus CSA, or credit spread adjustment used to account for the difference between SOFR and LIBOR, plus applicable margin for the third quarter of 2023 compared to a mixture of SOFR plus CSA plus applicable margin and U.S. LIBOR plus applicable margin in 2022.

### Pension and Other Postretirement Plans Credit, net

Pension and other postretirement plans credit, net was $27 million for the nine months ended September 30, 2023, compared to $33 million for the same period in 2022, a decrease of $6 million (no significant change).

### Income Taxes

Income tax expense was $83 million for the nine months ended September 30, 2023 compared to $206 million for the same period in 2022. The effective tax rates were 32.9% and 21.2% for each of the respective periods.

Nexstar reported a decrease in income tax benefit for the nine months ended September 30, 2023 of $26.5 million attributable to excess benefit on stock options and restricted stock units exercised in 2022. This resulted in a 1.3% increase to the effective tax rate in 2023 compared to 2022. Changes in the valuation allowance resulted in an incremental income tax expense of $13.3 million, or a 3.9% increase to the effective tax rate in 2023. Other permanent differences, including an adjustment for losses related to the minority interest in The CW, resulted in a 4.9% increase to the effective rate. The gain on bargain purchase arising from the acquisition of The CW resulted in a 1.2% decrease to the effective tax rate in the prior year third quarter.

The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections could result in significant adjustments to quarterly income tax expense in future periods.

### Liquidity and Capital Resources

The Company is leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond the Company’s control. The Company believes it has sufficient unrestricted cash on hand, positive working capital, and availability to access additional cash under its revolving credit facilities (with a maturity date of June 2027) to meet its business operating requirements and capital expenditures and to continue to service its debt for at least the next 12 months as of the filing date of this Quarterly Report on Form 10-Q. As of September 30, 2023, the Company was in compliance with the financial covenants contained in the amended credit agreements governing its senior secured credit facilities.

Any future adverse economic conditions, including those resulting from the COVID-19 pandemic, heightened and sustained inflation and higher interest rates, could adversely affect the Company’s future operating results, cash flows and financial condition.

### Cash Flow Summary

The following tables present summarized financial information management believes is helpful in evaluating the Company’s liquidity and capital resources (in millions):

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $817 | $1,185 |
| Net cash used in investing activities | (137) | (11) |
| Net cash used in financing activities | (736) | (1,018) |
| Net increase (decrease) in cash, cash equivalents and restricted cash | $(56) | $156 |
| Cash paid for interest | $335 | $243 |
| Income taxes paid, net of refunds | $142 | $273 |

|  | As of September 30, 2023 | As of December 31, 2022 |
| --- | ---: | ---: |
| Cash, cash equivalents and restricted cash | $164 | $220 |

### Cash Flows – Operating Activities

Net cash flows provided by operating activities decreased by $368 million during the nine months ended September 30, 2023, compared to the same period in 2022. This was primarily due to a decrease in operating income (excluding non-cash transactions) of $249 million, an increase in payments for broadcast rights of $225 million, higher interest payments of $92 million and timing of payments to our vendors of $50 million. These decreases were partially offset by sources of cash resulting from timing of accounts receivable collections of $89 million, lower income tax payments of $131 million and an increase in distribution from our equity investment in TV Food Network of $24 million. The increase in payments for broadcast rights was due to incremental payments from our acquisition of The CW (acquired on September 30, 2022) of $252 million, partially offset by a decrease in payments for our syndicated programming of $27 million. The increase in interest payments was primarily due to higher interest rates, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022.

### Cash Flows – Investing Activities

Net cash flows used in investing activities were $137 million and $11 million during the nine months ended September 30, 2023 and 2022, respectively. During the nine months ended September 30, 2023, we spent a total of $113 million in capital expenditures and $38 million in the acquisitions of KUSI-TV and WSNN-LD, partially offset by a deposit received associated with a sale of real estate asset of $10 million.

For the nine months ended September 30, 2022, we spent a total of $100 million in capital expenditures, partially offset by the proceeds from a sale of real estate of $45 million, cash acquired from The CW acquisition in September 2022 of $29 million and deposits received associated with the sale of real estate assets of $13 million.

### Cash Flows – Financing Activities

Net cash flows used in financing activities were $736 million and $1,018 million during the nine months ended September 30, 2023 and 2022, respectively.

In 2023, we repaid scheduled principal maturities of $93 million of our term loans, paid dividends to our common stockholders of $145 million ($1.35 per share per quarter), repurchased common shares of $509 million, paid cash for taxes in exchange for shares of common stock withheld of $24 million resulting from net share settlements of certain stock-based compensation and payment for capitalized software of $14 million. These outflows were partially offset by a contribution from noncontrolling interests amounting to $47 million.

In 2022, we received $2,420 million of proceeds (net of capitalized lenders’ fees of $5 million) from the issuance of a Term Loan A due 2027 and used $2,414 million to repay our then outstanding Term Loan A due 2023, Term Loan A due 2024, Term Loan B due 2024 and a portion of Term Loan B due 2026. We prepaid a portion of the outstanding principal balance of our Term Loan B due 2024 of $175 million and made scheduled principal payments on term loans of $53 million, repurchased and cancelled $29 million of our senior unsecured notes all funded by cash on hand, paid dividends to our common stockholders of $108 million ($0.90 per share per quarter), repurchased common shares of $621 million, paid cash for taxes in exchange for shares of common stock withheld of $13 million resulting from net share settlements of certain stock-based compensation, paid contingent consideration in connection with a past acquisition of $14 million and paid for software obligations of $11 million. Mission also drew $62 million under its 2022 Mission Revolving Credit Facility and utilized the proceeds to repay all of its $62 million of outstanding borrowings under its then outstanding 2018 revolving loan.

### Subsequent Investing and Financing Activities

On May 10, 2023, Mission entered into a definitive agreement to acquire the assets of WADL-TV serving the Detroit, Michigan market from Adell Broadcasting Corporation for $75 million in cash, subject to customary working capital adjustments. The proposed acquisition is subject to regulatory and other customary approvals, is expected to close once Mission receives regulatory approval, and would be Mission’s second entry into the state of Michigan.

From October 1, 2023 to November 7, 2023, we repurchased 267,321 shares of our common stock for $38 million, funded by cash on hand. In October 2023, we also paid $5 million for certain of our common stock that we repurchased in September 2023. As of the date of filing this Quarterly Report on Form 10-Q, the remaining available amount under the share repurchase authorization was $706 million.

On October 27, 2023, Nexstar’s Board of Directors declared a quarterly cash dividend of $1.35 per share of its common stock. The dividend is payable on November 27, 2023 to stockholders of record on November 10, 2023.

Our senior secured credit facility may limit the amount of dividends we may pay to stockholders over the term of the agreement.

### Long-term debt

As of September 30, 2023, the Company had total outstanding debt of $6.866 billion, net of unamortized financing costs, discounts and premium, which represented 74.6% of the Company’s combined capitalization. The Company’s high level of debt requires that a substantial portion of cash flow be dedicated to pay principal and interest on debt, which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes.

|  | As of September 30, 2023 | As of December 31, 2022 |
| --- | ---: | ---: |
| Nexstar senior secured credit facility | $3,834 | $3,925 |
| Mission senior secured credit facility | 356 | 358 |
| 5.625% Notes, due July 2027 | 1,714 | 1,714 |
| 4.75% Notes, due November 2028 | 1,000 | 1,000 |
|  | 6,904 | 6,997 |
| Less: Unamortized financing costs, discounts and premium, net | (38) | (46) |
| Total outstanding debt | $6,866 | $6,951 |
| Unused revolving loan commitments under senior secured credit facilities (1) | $544 | $543 |

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(1) Based on covenant calculations as of September 30, 2023, all of the $531 million and $14 million in unused revolving loan commitments under the respective Nexstar and Mission senior secured credit facilities were available for borrowing.

The following table summarizes the principal indebtedness scheduled to mature for the periods referenced as of September 30, 2023 (in millions):

|  | Total | Payments Due by Period Remainder of 2023 | 2024 | 2025-2026 | 2027-2028 | Thereafter |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Nexstar senior secured credit facility | $3,834 | $30 | $121 | $1,804 | $1,879 | $- |
| Mission senior secured credit facility | 356 | 1 | 3 | 6 | 346 | - |
| 5.625% Notes, due July 2027 | 1,714 | - | - | - | 1,714 | - |
| 4.75% Notes, due November 2028 | 1,000 | - | - | - | 1,000 | - |
|  | $6,904 | $31 | $124 | $1,810 | $4,939 | $- |

We (excluding The CW) guarantee full payment of all obligations incurred under Mission’s senior secured credit facility in the event of its default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes, due July 2027 and our 4.75% Notes, due November 2028.

We make semiannual interest payments on the 5.625% Notes, due July 2027 on January 15 and July 15 of each year. We make semiannual interest payments on our 4.75% Notes, due November 2028 on May 1 and November 1 of each year. Interest payments on our and Mission’s senior secured credit facilities are generally paid every one to three months and are payable based on the type of interest rate selected.

The terms of our and Mission’s senior secured credit facilities, as well as the indentures governing our 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028, limit, but do not prohibit us or Mission, from incurring substantial amounts of additional debt in the future.

The Company does not have any rating downgrade triggers that would accelerate the maturity dates of its debt. However, a downgrade in the Company’s credit rating could adversely affect its ability to renew the existing credit facilities, obtain access to new credit facilities or otherwise issue debt in the future and could increase the cost of such debt.

The Company’s ability to access funds under its senior secured credit facilities depends, in part, on its compliance with certain financial covenants. Any additional drawings under the senior secured credit facilities will reduce the Company’s future borrowing capacity and the amount of total unused revolving loan commitments. Any economic conditions, including those resulting from the COVID-19 pandemic, heightened and sustained inflation and higher interest rates, could adversely affect our future operating results and cash flows and may cause us to seek alternative sources of funding, including accessing capital markets, subject to market conditions. Such alternative sources of funding may not be available on commercially reasonable terms or at all.

Our credit agreement contains a covenant which requires us to comply with a maximum consolidated first lien net leverage ratio of 4.25 to 1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on the Company’s combined results, excluding the operating results of The CW, which Nexstar designated as an unrestricted subsidiary under its credit agreements and indentures. The Mission amended credit agreement does not contain financial covenant ratio requirements but does provide for default in the event we do not comply with all covenants contained in our credit agreement. As of September 30, 2023, we were in compliance with our financial covenant. We believe the Company will be able to maintain compliance with all covenants contained in the credit agreements governing its senior secured facilities and the indentures governing Nexstar’s 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028 for a period of at least the next 12 months from September 30, 2023.

### Off-Balance Sheet Arrangements

As of September 30, 2023, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or VIEs, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. All of our arrangements with our VIEs in which we are the primary beneficiary are on-balance sheet arrangements. Our variable interests in other entities are obtained through local service agreements, which have valid business purposes and transfer certain station activities from the station owners to us. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

As of September 30, 2023, we had outstanding standby letters of credit with various financial institutions amounting to $20 million, of which $16 million was in support of the worker’s compensation insurance programs. The outstanding balance of standby letters of credit is deducted against our unused revolving loan commitment under our senior secured credit facility and would not be available for withdrawal.

### Issuer and Guarantor Summarized Financial Information

Nexstar Media Inc. (the “Issuer”) is the issuer of 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028. These notes are fully and unconditionally guaranteed, jointly and severally, by Nexstar Media Group, Inc. (“Parent”), Mission (a consolidated VIE) and the Subsidiary Guarantors (as defined below). The Issuer, Subsidiary Guarantors, Parent and Mission are collectively referred to as the “Obligor Group” for the 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028. “Subsidiary Guarantors” refers to certain of the Issuer’s restricted subsidiaries (excluding The CW) that guarantee these notes. The guarantees of the notes are subject to release in limited circumstances upon the occurrence of certain customary conditions set forth in the indentures governing the 5.625% Notes, due July 2027 and the 4.75% Notes, due November 2028. The 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028 are not registered with the SEC.

The following combined summarized financial information is presented for the Obligor Group after elimination of intercompany transactions between Parent, Issuer, Subsidiary Guarantors and Mission in the Obligor Group and amounts related to investments in any subsidiary that is a non-guarantor. This information is not intended to present the financial position or results of operations of the consolidated group of companies in accordance with U.S. GAAP.

#### Summarized Balance Sheet Information for the Obligor Group (in millions):

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Current assets – external(1) | $1,123 | $1,358 |
| Current assets – due from consolidated entities outside of Obligor Group | 7 | 39 |
| Total current assets | $1,130 | $1,397 |
| Noncurrent assets – external(1)(2) | 9,546 | 9,748 |
| Noncurrent assets – due from consolidated entities outside of Obligor Group | 75 | 74 |
| Total noncurrent assets | $9,621 | $9,822 |
| Total current liabilities(1) | $702 | $742 |
| Total noncurrent liabilities(1) | $8,830 | $8,994 |
| Noncontrolling interests | $- | $- |

(1) Excludes the assets and liabilities of The CW as it is not a guarantor of the 4.75% Notes, due November 2028 and 5.625% Notes, due July 2027. On September 30, 2022, Nexstar acquired a 75.0% ownership interest in The CW.

(2) Excludes Issuer’s equity investments of $946 million and $1,119 million as of September 30, 2023 and December 31, 2022, respectively, in unconsolidated investees. These unconsolidated investees do not guarantee the 4.75% Notes, due November 2028 and 5.625% Notes, due July 2027. For additional information on equity investments, refer to Note 5 to our Condensed Consolidated Financial Statements.

#### Summarized Statements of Operations Information for the Obligor Group (in millions):

|  | Nine Months Ended September 30, 2023 |
| --- | ---: |
| Net revenue – external | $3,436 |
| Net revenue – from consolidated entities outside of Obligor Group | 15 |
| Total net revenue | 3,451 |
| Costs and expenses – external | 2,720 |
| Costs and expenses – to consolidated entities outside of Obligor Group | 23 |
| Total costs and expenses | 2,743 |
| Income from operations | $708 |
| Net income | $316 |
| Net income attributable to Obligor Group | $316 |
| Income from equity method investments, net | $82 |

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### Critical Accounting Estimates

Our Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements and reported amounts of revenue and expenses during the period. On an ongoing basis, we evaluate our estimates, including those related to business acquisitions, goodwill, indefinite-lived intangible assets, definite-lived intangible assets and other long-lived assets, equity investments, distribution revenue, pension and postretirement benefit plans and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.

Information with respect to the Company’s critical accounting estimates which it believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management is contained in our Annual Report on Form 10-K for the year ended December 31, 2022. Management believes that as of September 30, 2023, there has been no material change to this information.

### Recent Accounting Pronouncements

Refer to Note 2 of our Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements, including our expected date of adoption and effects on results of operations and financial position.

## Market risk

As filed, 1,314 characters.

### Interest Rate Risk

The Company’s exposure to market risk for changes in interest rates relates primarily to its long-term debt obligations.

The term loan borrowings under the Company’s senior secured credit facilities bear interest at rates ranging from 6.82% to 7.82% as of September 30, 2023, which represent (i) the base rate, the SOFR plus (ii) a credit spread adjustment, and (iii) the applicable margin, as defined. Interest is payable in accordance with the credit agreements.

Based on the outstanding balances of the Company’s senior secured credit facilities (term loans and revolving loans) as of September 30, 2023, an increase in each of SOFR by 100 basis points would increase our annual interest expense and decrease our cash flow from operations by $42 million (excluding tax effects). A decrease in each of SOFR by 100 basis points would decrease our annual interest expense and increase our cash flow from operations by $42 million (excluding tax effects). Our 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028 are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of September 30, 2023, the Company has no financial instruments in place to hedge against changes in the benchmark interest rates on its senior secured credit facilities.

## Controls and procedures

As filed, 1,439 characters.

### Evaluation of Disclosure Controls and Procedures

Nexstar’s management, with the participation of its Chairman and Chief Executive Officer along with its Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report of the effectiveness of the design and operation of Nexstar’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

Based upon that evaluation, Nexstar’s Chairman and Chief Executive Officer and its Chief Financial Officer concluded that as of the end of the period covered by this report, Nexstar’s disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to Nexstar’s management, including its Chairman and Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

As of the quarter ended September 30, 2023, there have been no changes in Nexstar’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

## Risk factors

As filed, 219 characters.

There have been no material changes to the risk factors that were previously disclosed in Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023.

Filed Nov 8, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-061149. Last ingested by Listed: Oct 30, 2026, 12:23 ET. No prices; not investment advice.