Q1 2024 Nexstar Media Group Inc Earnings Call

Participants

Lee Ann Gliha; Executive VP & CFO; Nexstar Media Group, Inc.

Michael Biard; President & COO; Nexstar Media Group, Inc.

Perry A. Sook; Founder, Chairman & CEO; Nexstar Media Group, Inc.

Aaron Lee Watts; Research Analyst; Deutsche Bank AG, Research Division

Alan Steven Gould; MD; Loop Capital Markets LLC, Research Division

Barton Evans Crockett; MD & Senior Internet Media Analyst; Rosenblatt Securities Inc., Research Division

Benjamin Soff; Research Analyst; Deutsche Bank AG, Research Division

Craig Anthony Huber; CEO, MD & Research Analyst; Huber Research Partners, LLC

Daniel Louis Kurnos; MD & Senior Equity Analyst; The Benchmark Company, LLC, Research Division

James Charles Goss; MD; Barrington Research Associates, Inc., Research Division

Jason Boisvert Bazinet; MD, Global Head of EMT & Analyst; Citigroup Inc., Research Division

John Kornreich

Steven Lee Cahall; Senior Analyst; Wells Fargo Securities, LLC, Research Division

Joseph N. Jaffoni; Founder & President; JCIR

Presentation

Operator

Good day, and welcome to Nexstar Media Group's First Quarter 2024 Conference Call. Today's call is being recorded. I will now turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.

Joseph N. Jaffoni

Thank you, Maria, and good morning, everyone. I'll read the safe harbor language, and then we'll get right into the call. All statements and comments made by management during this conference call other than statements of historical fact, may be deemed forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995.
Nexstar cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward-looking statements made during this call.
For additional details on these risks and uncertainties, please see Nexstar's annual report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission and Nexstar's subsequent public filings with the SEC. Nexstar undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
It's now my pleasure to turn the conference over to your host, Nexstar's Founder, Chairman and Chief Executive Officer, Perry Sook. Perry, please go ahead.

Perry A. Sook

Thank you, Joseph, and good morning, everyone. We appreciate you joining us today. This morning, with me on today's call are Mike Biard, our President and Chief Operating Officer; and Lee Ann Gliha, our Chief Financial Officer. I will start with a summary of recent highlights, followed by Mike's operational review as well as Lee Ann's financial review, and then we'll get to your questions.
Nexstar's first quarter results marked an excellent start to 2024 and what we expect will be another strong year for the company. We delivered record first quarter net revenue of $1.28 billion, driven by all-time high quarterly distribution revenue of $761 million.
Adjusted EBITDA and adjusted free cash flow once again exceeded consensus expectations and more importantly, underscore the strong profitability of our business model.
Our continued outperformance in the current environment is no surprise to us. We've been consistently clear in our view that broadcast is the bellwether of the pay-TV ecosystem. Consumers value the bundled programming offerings provided by pay-TV distributors that are anchored by our stations.
And as the largest local broadcaster and owner of one of the nation's 5 major broadcast networks, as well as the nation's fastest-growing cable news network, Nexstar's importance to the industry is clear and further validated by our consistently strong financial execution, free cash flow generation and shareholder returns.
I recently came across a Harvard Business Review article on the subject of disruption, which has been a recurring theme for many years now in the pay-TV industry. And in it, the authors note that corporate leaders have continually been told that the only way to innovate and grow is to disrupt their industries or even their own companies. But for disruption to be a success, there needs to be a clear trade-off between winners and losers.
Looking at our industry, it's now been more than 3.5 years since the majority of diversified media companies launched direct-to-consumer products, seeking to generate new value and profits in the digital world by disrupting their linear business models. To date, these products have generated billions of dollars of losses and market cap [disruption]. And because of the disruption, the linear business of these companies has also suffered, which, in our mind, is a lose-lose proposition.
As a result, we expect to see direct-to-consumer and pay-TV programming bundles, content spending and pricing all to be rationalized across the industry, going forward. Better models are being developed with broadcast as the anchor, as it always has been, given viewer demand for our must-have local and national programming, including sports and special event programming that relies on our unrivaled reach to maximize audiences.
The virtuous cycle of the broadcast business, combined with the strength of Nexstar's diversified portfolio of local and national media assets, including multiple growth drivers to support our long-term value proposition, will continue to fuel our financial momentum and strong shareholder returns.
Before turning the call over to Mike, let me briefly touch on some of those growth drivers, starting with the CW. Nexstar has owned the network for just over a year, and we're making excellent progress as we continue our march towards breakeven.
The CW's first quarter operating profit improved by $50 million year-over-year, driven by a $55 million reduction in programming costs. And for the full year, we expect the CW's operating profit to improve by over $100 million.
In terms of viewership, the CW delivered sequential ratings growth in the first 2 quarters of the '23, '24 broadcast season, the first broadcast season where Nexstar controlled the programming lineup. And we're confident that the positive viewership trends will continue throughout the year.
In fact, if I look back to this Tuesday, the most recent night for which overnight ratings are available, CW had its highest Tuesday performance of the season in both adults 18 to 49 and in total viewers, and Police 24/7 was the #1 new series premiere on the CW in the last 3 seasons.
We're especially excited about the accelerated launch of the NASCAR Xfinity Series on the CW, with the final 8 races of this season including all of the playoff races for this year, airing exclusively on the network beginning in late September as well as the WWE [NXT] launch on October 1.
We're also finding other opportunities for the CW to leverage the benefit of being part of the larger Nexstar enterprise. To date, we have added 12 CW affiliations to our station group, which has led to significant additional operating profit on the station side of the ledger.
And all of the work we have been doing to generate audience growth at NewsNation has begun to pay off as NewsNation has officially entered the zeitgeist.
You may have seen our network featured in the series finale of Curb Your Enthusiasm in last month in what may have been the funniest sketch on SNL in years, a NewsNation town hall event with Ryan Gosling as Beavis and Mikey Day as Butt-Head in the audience was, as we said, one of the funniest sketches on the network in years in Saturday Night Live. If you haven't googled it, I highly recommend it.
Significantly as of the May 2024 news report, NewsNation is now the second largest cable news network in pay-TV distribution, surpassing both CNN and MSNBC, as distributors recognize the value of NewsNation and what it brings to their consumer offering. And the consumers will get even more value for that distribution when we complete the News Nation expansion to 24/7 on June 1 of this year.
We continue to make progress on our ATSC 3.0 initiative, surpassing our goal of 50% of the U.S. population served by ATSC 3.0 signals from a Nexstar-owned or partner station following the conversions in Chicago and San Diego this past quarter. We believe the earliest revenues generated from this spectrum will be from business to business applications that require moving large amounts of data to multiple devices simultaneously.
We're also developing advanced applications for the [positioning] and timing industry, think GPS, if you will, where we think our terrestrial broadcast capabilities provide us some unique advantages compared to satellite-based systems.
In this regard, we are seeing interest from auto manufacturers, digital [signing] providers, device manufacturers and the Internet of Things industry and even content delivery networks, who are all looking to gain efficiency in the delivery of Internet data using our broadcast technology.
To commercialize our technology, we're pursuing new customers through our own business development activities as well as through joint ventures and with other broadcasters. Here's where the scale of our spectrum assets is our advantage as we are able to partner with 1 or maybe 2 other broadcasters to achieve nationwide coverage of spectrum.
Looking ahead, we remain confident that Nexstar will deliver another strong year of financial results in 2024, given the successful renegotiation of our distribution contracts in 2023, significant presidential election year political advertising and reduced losses related to the CW network.
We're focused on executing our strategy and leveraging the strengths of our platform to maximize every opportunity to drive continued strong growth and shareholder returns. Our confidence in the continued strength of Nexstar's business relative to our current valuation and our long-term growth prospects is further reflected by our capital allocation, including our recently upsized dividend as well as our now-announced first quarter share repurchases.
With all of that said, let me now turn the call over to Mike Biard.

Michael Biard

Thanks, Perry, and good morning, everyone. [Further remark] on our record first quarter net revenue of $1.28 billion, which compares to $1.26 billion in the prior-year quarter, an increase of $27 million or 2.1%, primarily due to growth in distribution revenue and partially offset by a slight decline in advertising and other revenue.
All-time high quarterly distribution revenue grew $33 million or 4.5% to $761 million, primarily due to our successful renewals in 2023 on terms favorable to the company, annual rate escalators and the return of our partner stations on one MVPD in January, partially offset by MVPD subscriber attrition.
As a reminder, Nexstar's distribution revenue includes retransmission revenue, carriage fees, affiliation fees and spectrum leasing revenue, which in aggregate accounted for approximately [59%] of Nexstar's first quarter revenue.
Excluding the impact of the removal of partner stations from certain MVPDs, subscribers grew in the quarter in the low single-digit range, reflecting the benefit of the increased carriage of our CW, MyNetwork and independent stations on YouTube TV and other vMVPDs, the addition of new CW affiliations at Nexstar stations and recent station acquisitions.
Overall, advertising revenue, which includes core television advertising, digital advertising and political advertising revenue decreased 1% or $5 million compared to the first quarter last year, reflecting a year-over-year reduction in core and digital advertising, offset in part by a year-over-year increase in election-year political advertising.
Excluding political, advertising declined 7% in the quarter, impacted by a continued challenging national advertising market and a slightly softer local advertising market as local advertisers and their customers show the strains of the high interest rate environment.
That negative comparison was exacerbated slightly this quarter by the Super Bowl airing on CBS versus Fox, which is less favorable to us.
So far, in Q2 2024, however, the trends are improving. We're seeing a much slower rate of decline versus the first quarter as we are currently pacing down in the low single digits as advertising headwinds begin to abate.
In particular, we are starting to see some green shoots on the national side as advertisers respond to the large aggregated audiences we deliver, particularly in live sports and special events. And on the local side, we are seeing improvement in core television while we continue to benefit from double-digit growth in local digital advertising.
And I'm pleased to report that we completed the seamless transition of national advertising sales in all 117 of our markets from third-party representation firms to our own sales force. We are already seeing dividends from this transition as we have an experienced, motivated sales force, creating new ways for advertisers to generate their best ROI while maximizing revenue across diverse sales channels in the full array of our unique asset mix.
In addition, we are optimistic that the big data measurement services enabled by our recently expanded agreements with Comscore and Nielsen, together with additional advertising measurement services available in the marketplace, will help modernize linear television measurement to better highlight the reach and reach at scale benefits our assets bring to our partners' messaging.
Turning to political. In the first quarter, political advertising of $39 million increased by $31 million over -- year-over-year but was down versus 2020 when the outsized primary runs by Bloomberg and [Steyr] boosted revenue during that presidential cycle.
Excluding the impact of those 2 campaigns, our political advertising was up 29% in the quarter versus 2020. Overall, our market share of total political television spending was in the mid-teens, slightly ahead of our expected market share for the full year.
Historically, the substantial majority of political television advertising spending comes in the 10 weeks to 12 weeks before election day. In fact, despite the relatively muted presidential primary season, in March, BIA increased its estimate for 2024 political advertising spending to over $11 billion versus the $10 billion previously projected. We're already seeing some of this in new spending on ballot issues such as reproductive rights.
In addition, a significant factor in the amount of political spending on our assets is control of the House and Senate as both are up for grabs in this election, driving campaigning that will benefit our bottom line.
As the saying goes, all politics is local, and campaigns in packs deploy the lion's share of their advertising spending on the media they know has proven to help them win, local television.
As we discussed on the last call, our audience overindexes on the actual electorate, with over 60% of voters in the last election aged 50-plus, according to Pew Research. Based on the experience of our station group in the last 4 election cycles, we expect to garner a low to mid -- mid-teens percentage of the political advertising spending on broadcast television.
And with that, I'll turn the call over to Lee Ann for the remainder of the financial review and update. Lee Ann?

Lee Ann Gliha

Thank you, Mike, and good morning, everyone. Mike gave you most of the details on the revenue side. So I'll provide a review of expenses, adjusted EBITDA and adjusted free cash flow, along with a review of our capital allocation activities.
Before I jump in, a quick note on our new earnings release format. In an effort to make it easier for investors to focus on the key items management is focused on and since we have now owned the CWs for over a year, so comparability is no longer an issue. We have simplified our reporting and our reconciliations. We will continue to provide you with key operating data in our MD&A commentary and on this call.
In addition, in an effort to create better comparisons to others reporting in our sector, in the first quarter of 2024, we adjusted our definition of adjusted EBITDA to add back stock-based compensation and onetime expenses related to restructuring actions and to subtract out noncash pension credits. Please note that the guidance we issued for the year on our last call was based on our prior definition, and the net impact of these changes is a positive $52 million.
We also adjusted our definition of adjusted free cash flow, which we previously referred to as attributable free cash flow, to subtract out noncash pension credits and payments for capitalized software obligations and to adjust for actual cash contributions from noncontrolling interest in lieu of adjusting for our partner share of losses in the CW, which we think gives you a better picture of our consolidated performance. The prior -- the comparative prior-year disclosures were also recast in the earnings release to conform with the current presentation.
Turning to expenses, together. First quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses, increased by $8 million. The increase was primarily due to the expansion of news programming and promotional expenses, offset by a reduction in severance at the CW by $7 million.
Also included in our calculation of adjusted EBITDA but not included in direct operating and SG&A expenses above are the payments for broadcast rights of our stations. That declined by $8 million in the first quarter due primarily to a reduced reliance on syndicated content at NewsNation as we continue the transition to 24/7 news.
Q1 2024 total corporate expense was approximately $55 million, including noncash compensation expense of [$18 million], compared to $48 million, including noncash compensation expense of [$14 million] in the first quarter of 2023.
Q1 2024 depreciation and amortization was $190 million versus $249 million in the prior year quarter, a reduction of $59 million, due primarily to lower programming expenses at the CW.
Please note that the CW's programming costs, which are included in our definitions of adjusted EBITDA and adjusted free cash flow, are accounted for in this line item as amortization of broadcast rights. For more information on this amount, please refer to the schedules in our earnings release and in our 10-Q.
We received $129 million in Q1 distributions from equity investments, primarily related to our 31% ownership interest in TV Food Network, which represents an 18% decrease from the prior-year quarter. The reduced amount reflects lower income at TV Food Network, primarily due to lower advertising revenue.
The distribution amount of $129 million includes $9 million related to the amortization of a portion of the distribution that was paid to us in the first quarter of last year related to the accounts receivable securitization and not included in our definition of adjusted EBITDA then.
Putting it all together on a consolidated basis, first quarter adjusted EBITDA was $542 million, representing a 42.2% margin, an increase of $46 million from the first quarter of 2023 adjusted EBITDA and an increase in margin of 270 basis points from 39.5%, which included improvements in our net distribution margin year-over-year.
First quarter CapEx was $44 million compared to $36 million in the first quarter of last year, an increase of $8 million primarily due to quarterly timing of capital projects.
First quarter net interest expense increased to $114 million from $107 million in the prior-year quarter due to higher SOFR rates applicable to our floating rate debt. Cash interest expense was $112 million for the quarter.
First quarter operating cash taxes, payments for capitalized software obligations and proceeds from disposal of assets and insurance recoveries netted to $2 million, primarily reflecting timing of payments.
During the quarter, we received $19 million of cash from our minority partners in the CW, reflecting amounts required to be contributed pursuant to the LLC agreement. And putting this all together, consolidated fourth quarter adjusted free cash flow was $403 million.
Together with the cash from operations generated in the quarter on hand -- in the quarter in cash on hand, we returned $168 million to shareholders, comprised of $57 million in dividends and the repurchase of $111 million of stock at an average price of $166.11, reducing shares outstanding net of equity vestings by 1.7%.
Nexstar's outstanding debt as of March 31 was $6.8 billion, slightly down for the quarter as we made our quarterly amortization payments of $30 million. Our cash balance at quarter end was $237 million, including $90 million of cash related to the CW.
Because we designated the CW as an unrestricted subsidiary, the losses associated with the CW are not accounted for in our calculation of leverage for purposes of our credit agreement. As such, our net first lien leverage ratio for Nexstar, excluding CW as of December -- sorry, as of March 31, 2024, was 2.21x, which is well below our first lien and only covenant of 4.25x. Our net leverage for Nexstar, excluding CW, was 3.73x at quarter end.
As of typical and nonpolitical years, we expect leverage, which we calculate on an LTM basis, versus a 2-year average default during 2024 as EBITDA will grow with the return of political advertising. As we move forward, we continue to strategically deploy our cash in a manner that is consistent with our commitment to creating the highest shareholder value.
Before turning the call back to the operator for questions, I want to frame some thoughts regarding our business industry position and valuation.
We continue to get questions based on the results, comments and capital structures of some of the other companies that operate in the local broadcast industry. While we understand the desire to compare notes in a sector where there are relatively small number of public companies, I know for those of you who've been around the sector for a very long time, Nexstar used to be just one of the pack.
But times have changed, and Nexstar has changed. We are a very large company now, significantly outscaling the other broadcasters. And we built our platform over the past 10 years or so, we consistently highlighted the benefits and necessity of scale, including operational efficiencies and increased negotiating leverage. And as our results continue to demonstrate, our vision was spot on.
Just to put it in perspective at the risk of stating the obvious, for the last 12 months ended March 31, 2024, we generated almost $5 billion of revenue. We have a market cap of $5.5 billion and an enterprise value of over $12 billion.
Our revenue is more than 40% greater than the next largest local broadcaster. Our market capitalization is more than 110% greater, and our enterprise value is more than 65% greater. In fact, our enterprise value of $12 billion puts us on a path to approaching something like Fox Corporation, which has an enterprise value of $20 billion.
Our LTM leverage was 3.7x and will be in the 2s by the end of the year. Our secured debt trades at or around par. The consensus annual free cash flow for Nexstar for the average of '24 and '25 of $1.1 billion could deleverage us by more than half a turn a year if we decided to do that and represents a whopping $33 per share on our stock price. Yet, we trade at only 6.4x '24, '25 consensus EBITDA multiple and a 21% '24, '25 free cash flow yield, both impacted by the short-term losses of the CW.
We believe this all adds up to an undervalued company, which is why we have been aggressively active on share repurchases, which deliver a substantial and tangible return.
We believe there is significant upside in our stock. Our free cash flow keeps flowing, and we are putting it to the best use to maximize shareholder returns. There is simply no comparable local broadcaster, and we will gladly put our record of operating execution and returns of capital and shareholder enhancement up against almost every company in the media telecom space.
With that, I'll open the call for questions. Operator, you can go to our first question. Thank you.

Question and Answer Session

Operator

(Operator Instructions). Our first question comes from Dan Kurnos from Benchmark.

Daniel Louis Kurnos

Two high levels for Perry or Mike. Just on the core commentary, we keep hearing that core could be flat or better, even with crowd out in the back half of the year. So maybe just talk about some of the trends there.
And now that you guys have really scaled NewsNation, CW and some of the other external platforms you guys have added, maybe thoughts on political, maybe even outside of local. Just how we should be thinking about political in 2024? And then for Lee Ann, just on the expense side, the underlying expense growth thoughts would be super helpful.

Perry A. Sook

I'll start on political, and then I can turn it over to Michael to talk about core. And Lee Ann can provide the remainder of answers to your questions.
But as it relates to political, as you know, it is primarily a local medium, a local business because that's where the voters vote. And broadcast is the preferred medium of choice, as you know, local broadcast, to deliver those messages to the electorate.
Having said that, we recently expanded on NewsNation, Hill to a 6-day. Sunday morning was the addition. It's an hour-long Sunday morning talk and issue show. And we offer that out to the CW affiliates at no charge if they were interested in picking it up for an additional complement to their local programming, and we cleared it in over 82% of the country.
So we do think there will be moderate opportunities with both NewsNation and also with the CW to capture political dollars incrementally to what our stations are going to do.
But having said that, the stations will contribute by far, the largest percentage of our political revenue composition for this year.
But when it gets to the presidential race and perhaps some pack money and even some ballot initiatives across multiple states, we do expect that there could be a national conduit to deliver those messages out to the electorate.
Michael?

Michael Biard

Sure. With respect to core, I guess I'll start by making it clear that our core does not include digital. So there is some noise when you talk about comps with others in our space.
Having said that, as I mentioned in my remarks, we are seeing some green shoots in the current quarter. We are optimistic about the business model that's in transition here, as we -- as I mentioned also in my remarks, have launched our own internal sales force instead of using the external rep firms.
That is offering some positive momentum, as we head into the upfront for the first time. We are seeing some interest in -- at an upfront level, selling some of our local, national combined with our national business on an upfront basis, which historically has not been done inside local sales.
So that is one of those elements with our scale that gives us the ability to go to market in a way that is different than our peers.

Lee Ann Gliha

And then Dan, on our expense side of things, we don't usually provide sort of detailed granular-level forecast. But there's nothing sort of unusual or an incremental expense build that's going to happen in the course of 2024, and that is embedded in the guidance that we have provided previously.

Operator

Our next question comes from Benjamin Soff with Deutsche Bank.

Benjamin Soff

The first is a follow-up on political. I think last quarter, you guys said that you were expecting a low teens share of the market. And today, it sounded like your expectations for that have increased. So I'm just kind of wondering what you're seeing there and what that dynamic looks like?
And then for the CW, I think you guys said that you're expecting a $100 million improvement. Obviously, you guys saw a pretty healthy improvement in 1Q. So just curious if you could talk through that as well?

Perry A. Sook

I'll take the first question, and then Lee Ann will handle the -- I'll hand off the second one to you.
So I think what we're seeing on political in the experience in Q1 is the low to mid-teens is right in line with what we project for the rest of the year. I think I said in my opening remarks, slightly higher, and I'll emphasize slightly, marginally different. And really, from a 100,000 foot perspective, consistent on a percentage basis with what we expect for the full year. So we feel pretty good about that.

Lee Ann Gliha

Yes. And look, on the CW, I think you're starting to see just the benefit of our programming plan coming into fruition. We had a $50 million improvement in the first quarter. We expect over $100 million for the year.
I think some of that's just due to timing of content and when those different programming expenses hit over the course of the quarter. That's why we just have a little bit more in the first quarter than we will have through the rest of the year on a quarterly basis.

Operator

Our next question comes from Steven Cahall with Wells Fargo.

Steven Lee Cahall

Maybe first, just to expand on some of the advertising commentary. On local, I think you're different from your peers in terms of talking about local being a little softer in the quarter. It sounds like that's maybe starting to improve. So I was wondering if you could just expand on what you're seeing there?
And you're also a bit different in seeing the green shoots on national. So wondering if that's a direct response at the CW or if that's more broad-based national improvement?
Then just a political question, you talked about your new ad sales force and the improvements that's having. Should we assume that you'll have some of the same transformation in political, since I think you're guiding about kind of gross spend, but we model it on a net revenue basis? Is there any upside to the ability to flow that through using your own sales force?
And then lastly, Lee Ann, I appreciate your comments about how unique Nexstar is. You said you'll probably be in the 2s in leverage by the end of the year, as you think about the strength in political. So just wondering what your run rate basis leverage is that you're comfortable with? And given some of that frustration, would you ever think about adding a bit of leverage if you're already low to buy back even more stock?

Perry A. Sook

Let me answer the leverage question first. It's not been in our DNA to borrow money to buy back stock. We generate substantial free cash flow here. And nobody returns meaningful capital to shareholders like Nexstar does. Our annual dividend average since we instituted the dividend 11 years ago, has been in excess of 25% annual increases. And we're 2/3 of the way through our $1.5 billion buyback authorization in less than 2 years.
So and as was reported, Lee Ann retired 1.7% of the float in the first quarter. So we think we are appropriately aggressive, and we buy on the on the weakness in the marketplace and perhaps throttle back some as the stock price appreciates. But it's always a part of our calculus. But I would put our return of capital to shareholders up against any company that you cover. And I think we do quite well. So I think it would be fairly unlikely that we would borrow money to continue to buy back stock.

Michael Biard

I think on the -- with respect to the sales question, I think there's some noise in the respective numbers that I think render the comps with some of our fellow broadcasters a little bit difficult.
So starting with the station composition, the markets that we have are fundamentally different, particularly with respect to our presence in the large markets. So I think you combine that with the fact that there's -- in our core doesn't have digital. They do. There's been some additional products launched in the digital space, with some of those others that I think also make the comps difficult.
So I will say with respect to national and the larger initiatives, that's really where our focus has been. And with the addition of the new sales force, I mentioned the ability to go to market in a way that we haven't before, our focus is really on the larger initiatives that have the potential to move the needle for the business at our scale.
So when we think about political, both across local and national, and the fact that our sales force is selling all of that together, we are optimistic that it opens up new channels for us.

Perry A. Sook

I'll just mention on political that we do intend to bring that sales force in-house to sell our political advertising at the station level in 2025. Given the size of the dollars and the quantum of dollars we expected to receive this year, we chose to slow roll that transition to make sure we hit on all the metrics and delivered our revenue, a promise not only to ourselves but to our shareholders.
But I do think you'll see us stand up our political force as part of our national sales force representing our stations. All other political that we sell for any network or digital asset is all handled internally already. So you'll see that incremental change at the end of this year.
And I think any time we can go to market with our entire portfolio at one stop, it creates an opportunity for incremental benefit. At this point, I think it would be too early to quantify. And next year, we'll not have these tsunami of political dollars that this year does. So I think the next comparable period would be 2026 versus '22 and '28 versus '24 to really see where the proof is in the pudding.
But I would expect incremental revenue benefit, but who knows when we go to market with a unified package. What we're going to market with now nationally using our networks as well as local activation at scale using our stations is getting a great reception in the upfront market in the early going. However, no dollars are booked yet. So stay tuned.

Operator

Our next question comes from Craig Huber with Huber Research Partners.

Craig Anthony Huber

I'll just take my questions one at a time, if I could, please. On the CW, could you maybe share with us what the revenue percent change was there year-over-year? And maybe talk about some of the wins you're having on the programming side. That's my first question.

Lee Ann Gliha

Look, I would say, Craig, we're no longer going to externally disclose the CW numbers separately. It's now on a quarter. We've owned it for more than a year. So the quarter-over-quarter comparison is good. I would say, just anecdotally, it's still driven by national advertising market, which is still not a positive -- not in a positive place quite yet, even despite the green shoots.

Craig Anthony Huber

What about the programming?

Lee Ann Gliha

Yes. Look, on the programming side, I think you've seen us announce a number of new programming initiatives with respect to our new sports initiatives, and we've tried to put on some programming that is not just focused on kind of the 18 to 34 demographic but be more focused on the broader demographic of the CW. And that has benefited in the first 2 quarters of the broadcast year.
If you recall, we had the 2022, 2023 broadcast season was really already prebaked for us when we bought the company. So 23, '24, we've had 2 quarters now of sequential audience growth in prime time by virtue of the programming that we put on -- put forth.
So we feel good about it. We think it'll just continue to do well for the rest of the year because some of the sports programming that we've announced hasn't yet gone on the air, will be on later this year. So we're looking fairly positively at this on a go-forward basis, as evidenced by first quarter results.

Craig Anthony Huber

And then my second question. On NewsNation, can you maybe just give us a little further update there about how the ratings are trending there, how the profits are going?

Perry A. Sook

Sure. The network has been profitable from day 1 because as you remember, we're financing the journalism expansion with the money that used to go to syndicated program expense. So we will complete that transition on June 1.
We are the fastest-growing cable network in terms of total audience in prime time, which is where the bulk of the revenue lies. And as I reported in my remarks, we now are second only to the Fox News cable network in terms of cable news network distribution in the pay-TV universe with now more pay-TV homes than either CNN or MSNBC.
So reception is not the problem. Awareness is the opportunity. Right now, we have about a 35% awareness of the channel in the monthly awareness surveys that we do. And when we started NewsNation, that was 11%. And so the more we can grow awareness, the more we think we will continue to grow the audience.
We believe with the direct and indirect feedback that we get that our centrist approach, we call it the moderate majority, which is the demo and the folks we're trying to reach, and our balanced coverage coupled with the 5,500 journalists that are stationed in 40 states around the country that can be first on the scene for the tornadoes in Michigan or Oklahoma as well as our sizable Washington, D.C. Bureau that serves both our stations and our national assets; all of these things cumulatively, we think, continue to build on each other.
But my goal, and I focused our senior management team, was what can we do to increase awareness of the network. We know that when we have content that is exclusive and sought out like the fourth and final sanctioned Republican presidential debate that more than 1 million viewers will show up at any one point in time. And so we know that they have no problem receiving the channel.
Now our job is to continue to raise awareness, continue to put on content that is differentiated and interesting and that reaches the moderate majority that we believe comprises the majority of the viewers in this country.

Craig Anthony Huber

And then, Perry, my last question. I appreciate your opening remarks about the state of the TV landscape, the streaming landscape, the [DDC] products out there, et cetera. Maybe can you just maybe finish up your thoughts there and -- how do you think this all plays out here longer term, in terms of all these various streaming products out there versus the legacy products trying to compete here?

Perry A. Sook

Well, I think the announcement that you saw last night is further evidence of a rebundling of the assets in the industry, and I said we've gone around the corner -- around the world to go around the corner. And what we're doing is repeating basic cable, basically, if you will.
And the one thing, again, basic cable has that an amalgamation of apps doesn't have as seamless navigation, which for viewers of a certain age, being able to change channels is something we grew up doing, it's something we still like to do.
So I think you'll see pricing rationalize. I see there was an announcement of that, streamers are raising their prices. And I think the consumer now looks at the cost of an a la carte broadband package. And all of the streaming or other pay services they want to add on, it can quickly eclipse the cost of the traditional bundle, and you don't have, again, seamless navigation and some of the other things you make. You probably don't have the number of content choices that you do in a traditional bundle.
So we'll continue, obviously, to support the bundle and support our distribution partners as best we can. But the main reason we're not in streaming is because we just don't think it's a good business. And so it's not a business that we want to get into to lose money. And so we think there are any number of ways that we can reach the consumer.
Everyone wants to stream because they don't have broadcast assets that are free over the air that can reach 100% of the population. I mean, so they're trying to expand outside of that traditional pay-TV universe, but we've been there for time in memoriam. So the more things change, the more they start to look the same, is my personal view.

Craig Anthony Huber

I'm sorry, one more quick thing. Lee Ann, your expectation to get the breakeven profitability on a sustained basis for the CW, is that still late 2025, maybe early 2026?

Lee Ann Gliha

Yes. We haven't changed anything on our point of view there.

Operator

Our next question comes from Jason Bazinet with Citi.

Jason Boisvert Bazinet

I just had two quick questions. Lee Ann, I was struck by your comment about getting down to [2x] leverage. I was just looking at my model. And I guess I had you down to sort of high 2s in the political year and -- were you really saying 2.0 or just something with the 2...

Lee Ann Gliha

No. No. I said in the 2s, in the 2s.

Jason Boisvert Bazinet

In the 2s. Okay. Sorry, I missed that. And my second question, do you mind just sort of -- to the extent you can just talking about, I think, between last quarter and this quarter, the FCC came out around your CW in New York City, your ownership of that station. Do you mind just sort of summarizing your position in the FCCs and how you anticipate this all sort of playing out?

Lee Ann Gliha

Yes. I mean, look, we put out a response. I think you're referring to the FCC comment around [PICCs]. We put out a response. We think that the -- we feel like it's really kind of an unvalidated request by the FCC. It's based on -- not a lot of things that we think are accurate. And so we have filed a response, and we're going to defend it vigorously, and we will continue to see how that process plays out. It will take some time to get through that process is what we believe.

Operator

Our next question comes from Aaron Watts with Deutsche Bank.

Aaron Lee Watts

Two questions, if I may. The first, perhaps in parallel with, Perry, some of your remarks you've made already. But with the recent introductions of a couple notable streaming ad-supported offerings that are bringing more targeted video inventory online, do you see that as being a headwind for your business today or in the future? And maybe perhaps contributing to the lack of sustained momentum on the national side?
And then secondly, I appreciate this isn't necessarily a new phenomenon, but perhaps topical with some of the NBA headlines. With sports commanding an even greater share of viewership, attracting the largest audiences and rights holders continuing to seek higher rights fees, how does that dovetail with commentary suggesting growth in network compensation should be moderating for you and other affiliate partners?

Perry A. Sook

Well, let me start with that, and then I'll turn it over to Michael.
The CW compensation from affiliates is not a significant number. And what we're trying to do is build value in those affiliation agreements not only for our value in the network that we can then attempt to further monetize those agreements at a fraction of what each affiliate group might be paying any of the big 4. But success for us is a different bar.
But when I look at sports, we -- our NASCAR deal goes in excess of 7 years. We did a 4-year deal with ACC Basketball. We've got a multiyear deal with WWE [NXT].
So we've made -- we have over -- when people talk about sports, we, as a company, Nexstar has contracted for over 500 hours of sports that will flow primarily through our CW network and the largest CW affiliate group, which are our stations, which reach the CW in excess of 35% of the country.
So it is obvious to us and I think -- by our actions and by the vision we've laid out for the industry that live news and live sports. And by the way, we're not the only one saying this, and I think you're seeing other networks that are maybe either taking their queue or attempting to mimic what we have already done, but live news and live sports is what drives eyeballs, drives distribution, drives value creation.
So I think we've been very active in that. And 500 hours of sports and multiyear agreements, we feel pretty good about the CW's place in that ecosystem. And again, the only thing that has aired on the CW so far is 1 season of ACC and now our second season of [LIV].
So all of the big event programming is still yet to come. So we think things will get pretty exciting pretty quickly as we approach and get into the fall.
Michael?

Michael Biard

Yes, I'll just add to that. I think if your question is really directed at the potential impact on reverse comp as a result of potential NBA deals, I guess I'll just reiterate what we've said in the past on that with respect to exclusivity, right? The value from our perspective vis-a-vis our network partners is exclusivity.
I've said many times, exclusivity is the coin of the realm in our business, and it remains to be seen. I think what happens with those deals when they're announced and the value that ultimately is delivered to our affiliated stations.
So turning to your question on advertising, I think, listen, it's early days. I think the reports on the Street are that some of the newer entrants into the ad business and their ad-supported streaming services have healthy aspirations with respect to the CPMs that haven't necessarily been met by the marketplace. So I think it remains to be seen how that shakes out.
But for our business, I'll just return to the strength of sports, right, particularly as it relates to the CW. That is where a lot of our investment in the future is turning to sports and our ability to not only drive audience but drive advertising revenue there. I think that you only have to look back as far as the most recent quarter, right?
In the first quarter, we saw a consistent and dramatic demonstration of the enduring strength of sports. NFL set new records, college football set new records. We saw women's basketball set new records.
So sports continues to demonstrate strength. I think our programming will distinguish itself and our ability to monetize it will be different -- materially different than the advertising in the SVOD products, based on our ability to aggregate audiences in live programming.

Operator

Our next question comes from John Kornreich, J.K. Media.

John Kornreich

If you extrapolate out about 3 years, given how you're trending now and given no change in station rules, you're going to be down very close to 2x in leverage and 25 million shares. Is there any point to going below 2x? Is there any benefit to it at all?

Lee Ann Gliha

I mean, look, I think at that point in time, we would have to kind of reevaluate what our capital strategy would be. We obviously believe that a levered return gives shareholders a better total return. But we would have to see what the market looks like at that point in time. But that would be a very low leverage number, I agree.

John Kornreich

Okay. I mean, the way things are going now, you're sort of in a slow-going private mode, frankly. And Perry, I mean where do you see this company in 3 or 4 years?

Perry A. Sook

Well, I see our basic mission, John, not changing of providing content and helping local businesses sell stuff. I mean, that's our reason to exist. And when you strip away all the noise, it is a very simple business model that we operate on here.
Given the discount at which the stock trades compared to its fundamentals, we continue to believe there's a lot of way for investors to win. And if we're the principal acquirer of our stock, then obviously, the company will win and investors in the company win.
But I'd point back to that article that was talking about the 100 [baggers] over the last 15 years. And John, you were around during that time. I remember you asking me on the call, isn't your free cash flow per share higher than your share price in 2008? And it was.
And those that joined the party in 2009 and stayed with it through the end of last year, which is what this article was all about, would have seen in excess of a 300% return over that 15-year period on their equity, which is the third largest return of any public stock with a market cap over $500 million.
So I think that long investors have been rewarded by this company. With that amount of unused powder, we look at the balance sheet as an asset of the company. And one of the ways we produce that outsized return was through -- taking some big swings, Media General and Tribune.
So we will continue to look at -- we're being very patient right now given not only the cost of capital but -- the opportunities that are out there, but we will continue to look at opportunities to grow the company and create additional value for shareholders beyond the embedded 20% return of us buying back our stock.
And if we feel there's a risk-adjusted return via an acquisition out there of any scale, then we would certainly diligence the heck out of that and try and get to the finish line if everything proved.
But I think the company looks a lot like it does. If I had to bet, I would bet the company will be larger 3 years from now than it is today. What acquisition will lead to that in combination with our organic growth? I can't really say, but I'm excited to run out those ground balls and find out.

Operator

Our next question comes from Jim Goss with Barrington Research.

James Charles Goss

I wonder if you might talk a little bit more about the Comscore, Nielsen effort to develop the linear and cross-platform audience measurement, information that should inform your national sales organization that you're now working with. Is there some measurable impact? Or is this primarily a supportive effort to the targeting efforts and pricing on the ends? Is there a way to look at it in some identifiable way?

Lee Ann Gliha

I'll just answer this. Obviously, we reported that we struck new deals with both Comscore and Nielsen, and we're excited about the new data that they've got coming into their services that are hopefully going to be able to provide us with better insights and information about who's watching and be able to kind of talk to the advertisers about the breadth of our audience and the reach of our audience that is -- we think is second to none.
But I think from a tangible impact perspective, I think it's to be determined. We are continuing to work with these providers to get us the best information that we can then utilize with our clients.

James Charles Goss

Okay. And should provide some upward bias to your ad revenues though, I would imagine?

Perry A. Sook

Well, we've gone to the market in the upfront and said that Comscore would be our preferred currency upon which to transact. But I've found out in 45 years in the broadcast business, you can't make a lot of money trying to tell your clients what to do. So the clients will by and large big term dictate the currency, and we will obviously react and adjust as best we can.
But Comscore is a much larger data set. And not surprisingly, we think it provides better numbers over the long term. But we will transact with our customers on the basis that they would like to transact upon.

James Charles Goss

Okay. One smaller thing. I was wondering, are there any other Nexstar stations to transition to the CW? Or are you pretty much through that process?

Lee Ann Gliha

From the perspective of -- there are additional opportunities out there, as you saw that we even bought a station that we intend to make into a CW network at (inaudible) San Diego. So if there's other opportunities, we just will look at those on a case-by-case basis as we move forward.
But that you're -- I'm glad you brought it up because it's an important point for us because we've been able to already transition 12 markets, and that generates significant EBITDA for us on the stations out of the ledger, which just goes to our overall thesis around making this acquisition.

James Charles Goss

Okay. And the last thing, you made a note that NextGen is now over 50% when you added, I think, with Chicago and San Diego. I was wondering if -- are there any priority applications now that you're at this stage? You've talked about TV versus data over time. And you've also been ambitious about ramping up monetization. I wonder if you might give us an update on that area as well?

Perry A. Sook

Well, it's an area where I'm spending a fair amount of my time as well as Brett Jenkins, our CTO. We do have dedicated BD personnel that are involved in exploratory conversations on behalf of our company, but also in concert with the 2 partnerships we've historically been involved with, one with Sinclair and one with Scripps.
And so the -- there is high interest. We just completed a test with an auto manufacturer in one of our markets and -- regarding both data and video delivery to an automobile. And the preliminary results were that they were impressed with the picture quality and the stability of the signal using our 3.0 as a delivery mechanism.
So this is long tail development, as you can imagine, because there's got to be proof-of-concept, test trials before people are willing to put pen to paper and spend a lot of money with us, but that's the phase in which we're in. And I continue to believe that you'll -- you'll hear about commercial clients before this year is out, and you'll see money continue to start to flow from some of these new applications as early as later this year, but more likely next year and then meaningful money as -- if we are able to sunset the simulcast requirement to free up more bandwidth to be able to do more things then we'll be able to generate more money. So there's a regulatory piece as well that has to play into all of this.
But the velocity of the conversations, if that's any consolation to you or help to you, have dramatically increased the amount of time we're spending in meetings with people on this topic is, I would say, more than double of what it was a year ago. So the cadence has increased.

Operator

Our next question comes from Alan Gould with Loop Capital.

Alan Steven Gould

Perry, going back to the concept of big swings. The press is reporting that if Apollo and Sony are successful going after Paramount, I know it's a big if, they would then intend to sell the CBS stations. One, I know you guys looked at ABC when Bob Iger [threw] that no doubt there that it was potentially for sale. I know CBS has a lot bigger coverage. Would that even be a possibility just physically to do that? And two, what is the value of stations without the network?

Perry A. Sook

Well, let's see. There's a lot to unpack there. First of all, I don't know that we ever commented on looking at ABC. Others commented on our behalf, but I don't think we ever have or ever would confirm or deny rumors about what we may or may not be considering vis-a-vis acquisitions.
Obviously, given our station footprint, the digestion of CBS station assets would be a tough [put], particularly under this regulatory environment and regime. If that were to change, maybe our opinion would change, but that certainly would have to happen, I think, for anyone to have confidence they could pursue a complicated regulatory transaction in the current environment.
What is the value of stations without -- well, WGN in Chicago is an independent television station. It will be rejoining the CW network. It produces 109 hours a week of local news and is generally the #1 or #2 biller in that marketplace without the benefit of a network affiliation for more of its commercial life, then it had a brief association with the CW and will be coming -- the CW will be coming back home this fall.
Quite frankly, that will benefit the network more than it will benefit WGN. I mean they'll love having the sports, but they've had some of that -- most of that on a hybrid situation in that marketplace since we began programming sports on the network.
But strong stations -- and I tell our people all the time, there were television stations before there were TV networks, and there'll be television stations after there are TV networks.
And from my point of view, if you're serving your community with a robust local news and commerce opportunities, you're going to be in business. It doesn't matter what programming you rent and from whom you rent it to fill the times when you're not programming locally, and that's basically what a network affiliation is at this point.

Operator

Our next question comes from Barton Crockett with Rosenblatt Securities.

Barton Evans Crockett

Okay. Great. I wanted to drill down a little bit on the advertising commentary. And I was just wondering if you could give us a little bit more granularity on what is driving the inflection to kind of a better trend in the second quarter versus the first quarter.
Is it largely kind of bringing up your national sales force? Is it largely kind of getting past some of the Super Bowl-type comp issues? Or is there just a feeling that the ad market is firming up maybe because the macro feels better, maybe people are just getting more accepting of this higher-for-longer interest rate environment? And within that, you gave kind of local national trending. Can you give us -- remind us again the split of that in your ad revenues?

Lee Ann Gliha

Yes. So local revenues are just under 70%. It's kind of -- somewhere between 65% and 70% of our advertising revenue, excluding political, comes from our local business. I would say, in general, I think our thought process on the national side is it is kind of a firming of the market, which is a positive after many quarters of decline. We're starting to see some of that kind of growth come back, especially in the back half of the year, where the comps will be a lot easier.
I would say also, there's a few categories like sports betting that are now kind of down to a low number that are -- there's positivity in terms of some of those comps on a go-forward basis.
But I think in general, from a national perspective, it's more kind of a firming of the overall market than anything else.

Barton Evans Crockett

Okay. And is there anything you can elaborate at the local level? You said things were -- I guess for...

Lee Ann Gliha

[But still], local has been pretty resilient. I mean I think that we saw a little bit of weakness in the first quarter and -- but it's not anything to [tout], and that's why we haven't [touted] it, because it's been a very stable sort of environment on the local side in the face of the economic issues in terms of the advertising market.

Barton Evans Crockett

Okay. And then switching gears on the distribution revenue. One of the things underlying -- your commentary there is that you talked about low single-digit growth in homes and -- which is partly some new carriage. How sustainable is that? I mean is there 3 or 4 quarters where we comp that and you'll revert to the industry trend? Or just thoughts about the sustainability, that would be interesting.

Lee Ann Gliha

Yes. No, you're absolutely -- I mean, you're right. I mean we're going to comp it. I think you saw that we put out some press releases as we've acquired stations. We put out press releases as we got carriage on the vMVPDs for our [CW's], our [minds] and our independents. And so you can kind of look at the timing of those releases and see when those are going to roll off in terms of a year-over-year comp.
But look, I think as we've said before, at the end of the day, we -- as the market goes, we kind of go because the lion's share of our revenue is really tied to kind of the overall pay-TV market and just the trends, the organic trends in that part of the business.

Operator

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Perry for closing comments.

Perry A. Sook

Thank you, operator. Nexstar's consistent record of operating execution, cash flow growth and capital allocation, prioritizing strong shareholder returns continues to differentiate Nexstar from its peers and it's largely diversified media companies.
And as I mentioned earlier, we were recently recognized by the Investor Relations service provider quarter ranking the 15 best stocks over the last 15 years for companies in the European Union and North America with a market cap of over $500 million. Nexstar was ranked #3 on that list with more than 300x return.
Obviously, the only media and telecom company on that list. So while we look to the past to focus our goals for the future, it is one step at a time. We expect to build momentum through the second half of fiscal '24, and we remain excited about the many opportunities ahead of us to deliver long-term value to our employees, partners and shareholders.
Thank you, everyone, for joining us today. We look forward to speaking with you again when we report our second quarter results.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.