Aaron Watts

Aaron Watts questioned the current health of Gray Media's core advertising backdrop and the optimism for core ad growth throughout 2026, considering the robust political advertising cycle. He also asked about the potential NFL TV rights renegotiation, specifically if Gray Media views it as a positive, and any economic implications or content dilution to digital platforms, drawing parallels to learnings from the NBC/NBA renewal.

Answer

President and Co-CEO Pat LaPlatney noted that Q1 2026 core ad revenue is guided to be flat, with February showing strength due to the Olympics and Super Bowl on NBC affiliates. He acknowledged that heavy political advertising later in the year would impact core numbers. Regarding NFL rights, Mr. LaPlatney stated that extending NFL contracts is a significant positive for the industry as the NFL drives audience, and while there will be dialogue on costs, it will work through the ecosystem. He cautioned against comparing the NBC/NBA deal directly to other sports rights.

Aaron Watts asked about the health of the core advertising backdrop, specifically inquiring about the optimism for core ad growth throughout 2026, given the Q1 guidance and expected robust political advertising. He also questioned Gray Media's view on the potential NFL TV rights renegotiation, asking if it's still seen as a positive and if learnings from the recent NBC affiliation renewal could inform how sports rights price increases might affect local affiliates.

Answer

Pat LaPlatney (President and Co-CEO, Gray Media) noted that achieving core ad growth in a heavy political year can be challenging, with Q1 guided to be flat. He highlighted strong February performance due to the Olympics and Super Bowl on NBC affiliates. Regarding the NFL, LaPlatney stated that extending NFL contracts is a significant positive for the industry as it drives audience, and while there will be dialogue on costs, it will work through the ecosystem. He emphasized the critical importance of keeping the NFL on broadcast.

Aaron Watts asked for clarification on the potential margin lift from creating new duopolies and questioned the advertising outlook, asking whether the market is seeing cancellations or just booking hesitancy, and what verticals might show optimism in the second half of the year.

Answer

Chief Legal and Development Officer Kevin Latek explained that margin uplift from duopolies varies significantly and cannot be quantified with a single number. President and Co-CEO Patrick LaPlatney clarified that advertisers are showing hesitancy rather than cancellations. He identified services categories like legal and health, along with surprisingly strong political spending, as reasons for optimism. COO Sandy Breland also highlighted growth in new local direct business.

Aaron Watts asked about the outlook for core advertising, questioning if it could achieve full-year growth in 2025 and seeking a breakdown of the flat Q1 expense guidance, including the impact of cost savings versus new costs like sports rights.

Answer

President and Co-CEO Pat LaPlatney expressed cautious optimism for full-year core ad growth, citing encouraging Q2 pacing. Chairman and CEO Hilton Howell added that weakness in the auto sector due to tariff uncertainty is a major factor that should eventually resolve. CFO Jeff Gignac explained that 66-75% of the announced $60 million in cost savings will flow through in Q1, with offsetting factors including ordinary course salary increases for employees. Gignac stated the goal is to keep full-year expense growth below inflation.

Aaron Watts of Deutsche Bank asked for details on the Q4 core advertising guidance, the timing and scope of the announced $60 million in cost savings, and the company's capital allocation strategy regarding debt reduction and the dividend.

Answer

Patrick LaPlatney, Co-CEO & President, attributed the Q4 core ad outlook to political crowd-out and the shift in SEC football rights but noted some recent positive signs. Jeff Gignac, EVP & CFO, stated the cost savings are largely implemented and will 'bend the curve' on expense growth. Gignac confirmed that debt reduction remains the top priority, pursued through open-market repurchases, and that the dividend is reviewed quarterly.

Aaron Watts asked about any changes to Nexstar's outlook for pro forma leverage post-TEGNA deal closure and the impact of the growing programmatic buying marketplace on ad sales, including Nexstar's current and planned participation.

Answer

Lee Ann Gliha, EVP and CFO, confirmed no change in the pro forma leverage outlook. Perry Sook, Founder, Chairman, and CEO, highlighted the opportunity with TEGNA's Premion platform for CTV programmatic advertising and Nexstar's existing participation in linear programmatic through partners. He outlined a vision to develop a seamless programmatic linear solution to reduce frictional costs and integrate inventory for a unified buy-sell process.

Aaron Watts asked about any changes to Nexstar's pro forma leverage outlook after the TEGNA deal closes, based on 2025 performance and 2026 projections, and how the growing programmatic buying marketplace is impacting ad sales and Nexstar's strategy for participating in it.

Answer

EVP and CFO Lee Ann Gliha confirmed no significant change to the pro forma leverage outlook. Perry Sook, Founder, Chairman, and CEO, highlighted the acquisition of Premion (TEGNA's programmatic digital advertising platform) as an upside opportunity to integrate with Nexstar's inventory. He also discussed ongoing internal and external efforts to develop a programmatic linear solution to reduce frictional costs and achieve a seamless "pitch to pay" system for advertising inventory.

Aaron Watts asked about Nexstar's M&A priorities, specifically comparing national footprint expansion, in-market duopolies, and spectrum holdings, and inquired about the margin lift from creating a new duopoly.

Answer

Chairman and CEO Perry Sook emphasized that the primary focus is on accretive acquisitions that are more compelling than stock buybacks, but noted that growing the national footprint holds more strategic importance. He estimated the margin lift from a new duopoly could be 20-25 points, depending on the station combination, and clarified the recent Cleveland acquisition's accretion is mainly from distribution economics.

Aaron Watts of Deutsche Bank asked how high the company would be willing to take its leverage ratio to participate in potential industry consolidation following deregulation.

Answer

CFO Lee Ann Gliha responded that Nexstar is not looking to 'max out on leverage' or overextend itself. She emphasized that any decision would be made on a case-by-case basis, but the company does not plan to become highly leveraged, consistent with its historical approach to managing the balance sheet.

Aaron Watts asked about the core advertising performance in the TV Group, seeking clarification on whether the healthy Q4 finish reflected an improved ad environment or prior-year crowd-out effects, and current momentum. He also inquired about the percentage of auto advertising in 2025 and its outlook for 2026. Additionally, he questioned how leverage might impede strategic opportunities and the fungibility of cash from Ventures for TV group consolidation, referencing the Scripps offer.

Answer

Rob Weisbord, COO and President of Local Media, Sinclair, clarified that the Q4 ad performance was not due to crowd-out but a healthy return driven by live sports, with auto spend down mid-single digits in 2025 but expected to strengthen in 2026. Chris Ripley, President and CEO, added that Q2 and Q3 2025 saw economic uncertainty unwind in Q4. Mr. Ripley also stated that leverage has not been an impediment in M&A discussions, highlighting significant liquidity and cash, and reiterated that Ventures' resources could be used for transformative transactions, with a broadcast merger and Ventures spin remaining the ideal outcome.

Aaron Watts inquired about the healthy finish to the year for core advertising in the TV Group, asking if it reflected an improved ad environment or was more due to crowd-out comparison, and if momentum was sustained into the new year. He also asked for the percentage of auto in the 2025 book, its year-over-year trend, and the outlook for the category in 2026.

Answer

Rob Weisbord, COO and President of Local Media, clarified that the Q4 core ad growth was not due to crowd-out but a healthy return driven by advertiser demand for live sports. He noted that auto spend in 2025 was down mid-single digits due to tariffs and consumer confidence, but expected strong auto growth in 2026, particularly from NBCs. He also highlighted Sinclair's reduced dependence on automotive, with services and legal becoming top categories. Chris Ripley, President and CEO, added that Q4 saw an unwinding of economic uncertainty, leading to a more normal advertising market, and expressed optimism for Q2 and Q3 2026.

Aaron Watts from Deutsche Bank inquired about core advertising trends, specifically in the auto category, differences between national and local markets, and capital allocation priorities for the television group.

Answer

COO Rob Weisbord noted a trend toward auto leases over outright buys but has not yet seen a pre-tariff sales bump, adding that local and national ad markets are performing in parallel. EVP and CFO Lucy Rutishauser confirmed that deleveraging the local media group remains a top priority, evidenced by the recent repurchase of $66 million in debt at a discount.

Aaron Watts of Deutsche Bank questioned if Sinclair could achieve positive full-year core advertising growth in 2025 despite guiding Q1 down, and asked for a postmortem on 2024 political ad performance and Sinclair's competitive positioning against digital and CTV.

Answer

COO Rob Weisbord affirmed that Sinclair believes it can achieve positive core ad growth for the full year, driven by its new 'AMP' cross-platform sales strategy and an expected recovery in the automotive vertical. CEO Christopher Ripley added that business firmed up as Q1 progressed. On political advertising, Ripley and Weisbord highlighted broadcast TV's success, noting it was the only medium to grow ad dollars versus 2020 and that its strong ROI and local reach position it well for future election cycles.

Aaron Watts of Deutsche Bank asked about the potential impact of the recent NBA TV rights deal on network compensation fees from affiliates, especially with Sinclair's NBC renewal pending. He also asked for Sinclair's view on the announced DIRECTV and DISH merger and whether after-acquired clauses would affect its distribution fees.

Answer

President and CEO Christopher Ripley responded that he does not expect the NBA deal to materially change the trend of declining increases in reverse retransmission fees, similar to what occurred after the last NFL rights renewal. Regarding the DIRECTV-DISH merger, he views a healthier combined company as a positive for the industry but noted potential regulatory scrutiny in some rural markets. He stated that Sinclair does not anticipate any impact on its retransmission fees post-closing from the deal.

Aaron Watts from Deutsche Bank AG asked about the factors supporting the elevated margins in the Airports segment and their expected progression. He also inquired about any material cash flow benefits from recent tax legislation regarding interest deductibility or depreciation.

Answer

CFO David Sailer credited the strong airport margins to robust top-line growth, some site lease relief, and strong performance in premium verticals like banking and technology, projecting margins in the low 20% range for the second half of the year. Regarding the tax bill, Mr. Sailer stated the impact is not material, as while there are slight benefits, the company is not a significant cash taxpayer at the moment.

Aaron Watts from Deutsche Bank asked about the factors driving elevated margins in the Airports segment and their expected progression. He also inquired about any material cash flow benefits from recent tax legislation, specifically regarding interest deductibility and depreciation.

Answer

CFO David Sailer credited the strong airport margins to robust top-line growth and some residual site lease relief, guiding for margins in the low 20% range for the second half of the year. Regarding the tax bill, he noted the impact would not be huge, as it provides a slight benefit to interest deductibility and depreciation, but the company is not a material cash taxpayer at present.

Aaron Watts from Deutsche Bank inquired about the Airports segment's strong margins, asking what factors are supporting them and how they are expected to progress going forward. He also asked a housekeeping question about whether the 'big beautiful bill' would materially benefit the company's cash flow through interest deductibility or tax depreciation changes.

Answer

CFO David Saylor explained that strong airport margins were driven by excellent top-line growth, some residual site lease relief, and strong performance in premium verticals like banking and technology. He guided for airport margins to be in the low 20% range for the second half of the year. Regarding the tax bill, Saylor stated the impact is not significant for Clear Channel, as while it helps with interest deductibility and bonus depreciation, the company is not a material cash taxpayer.

Aaron Watts of Deutsche Bank AG requested clarification on the Americas segment growth, asking for the specific impact of the new MTA contract on the Q1 results and the Q2 guidance to better understand the underlying market strength.

Answer

CEO Scott Wells explained that the MTA contract contributes a 'couple of points' to full-year growth. He cautioned against over-analyzing the Q1 headline growth figure due to unique factors in February, suggesting that the combined performance of January and March was more indicative of the underlying market strength.

Aaron Watts from Deutsche Bank inquired about current advertising cancellation trends, which have historically been a leading indicator of downturns, and asked for early insights into 2025 client commitments. He also questioned if increased ad inventory from streaming services is creating headwinds for the national business.

Answer

CEO Scott Wells confirmed there has been no uptick in cancellation activity and that early conversations for 2025 renewals are encouraging, with some clients considering expanded commitments. On the national business, Wells acknowledged the competitive landscape but emphasized that the onus is on Clear Channel to prove out-of-home's value in amplifying other media. He noted that while the U.S. sees less TV budget allocation compared to other countries, which could be due to streaming, the company's focus is on proactive selling into new verticals and demonstrating ROI.

Aaron Watts from Deutsche Bank asked about the radio advertising environment, including the potential for a quick rebound, the performance of local versus national advertisers, and growth opportunities in digital audio and podcasting.

Answer

Executive Alfred Liggins expressed doubt about a significant ad rebound in the current year due to economic uncertainty, noting that national advertising is the primary source of weakness while local ads are more stable. Liggins identified improving local digital sales as a key growth opportunity. Executive Peter Thompson clarified that the local-to-national radio ad revenue ratio is approximately 2-to-1.

Aaron Watts sought clarification on the Q1 cost savings, asking if the $27 million was a run rate and about the cadence for the remainder of the year. He also asked about further cost-cutting potential and the impact of Nielsen's updated ratings methodology.

Answer

CFO Rich Bressler clarified the $27 million was the actual Q1 impact, not a run rate, and projected roughly $40 million in savings for each of the next three quarters. He affirmed the company continuously seeks efficiencies through technology and AI. CEO Bob Pittman responded that they are excited about Nielsen's update because more accurate listening data improves their positioning in media mix models, ensuring they receive proper credit for ad effectiveness.

Aaron Watts asked for an update on broadcast spot advertising sentiment moving through Q1 and into Q2, whether the ad pullback was radio-specific or a broader trend, and for the company's perspective on media deregulation and its potential participation.

Answer

CFO Francisco Lopez-Balboa explained that Q1 weakness continues due to advertiser uncertainty around tariffs and interest rates, and a change in those conditions is needed for improvement. He and CEO Mary Berner asserted the pullback is broad-based, not radio-specific, with Berner noting the large auto category's issues are macro-related. Lopez-Balboa stated the company is supportive of deregulation, as it would likely increase deal activity and benefit the industry, but could not speculate on Cumulus's specific role.