Good day, everyone, and welcome to today's Nexstar Media Group 2017 First Quarter Earnings Conference Call. Just as a reminder, today's call is being recorded. At this time, I'd like to turn the call over to your host for today, Mr. Joseph Jaffoni, Nexstar Investor Relations. Mr. Jaffoni, please go ahead.

Thanks, Sarah. Good morning, everyone, and thank you for joining Nexstar Media Group's 2017 first quarter conference call. We'll get to management's presentations and comments momentarily, as well as your questions-and-answers, but first, I'll review the Safe Harbor disclosure. All statements and comments made by management during this conference call, other than statements of historical fact maybe deemed forward-looking statements. These forward-looking statements are based on our current expectations and projections about future events. Forward-looking statements include information preceded by, followed by or that include the words guidance, believes, expects, anticipates, could or similar expression. For these statements, Nexstar claims the protection of the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this communication concerning among other things, future financial performance including changes in net revenue cash flow and operating expenses, involve risks and uncertainties and are subject to change based on various important factors including the impact of changes in national and regional economies, the ability to service and refinance our outstanding debt, successful integration of acquired television stations and digital businesses including achievement of synergies and cost reduction, price fluctuations and local and national advertising, future regulatory actions and conditions in the television stations or operating areas, competition from others in the broadcast television markets, volatility and programming cost, the effective governmental regulations on broadcasting, industry consolidation, technological developments and major world news events. Nexstar undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties and assumptions, the forward-looking events discussed in this communication might not occur. You should not place undue reliance on these forward-looking statements, which speak only as of the date of today's conference call. For more details on factors that could affect these expectations, please see Nexstar's filings with the Securities and Exchange Commission. At this time, it's my pleasure to turn the conference over to your host, Nexstar Chairman, President, CEO and Founder, Perry Sook. Perry, please go ahead.

Thank you, Joe, and good morning, everyone. I'd like to thank you all for joining us today to review Nexstar's record 2017 first quarter operating results. Today, we will review the quarter's progress and our outlook, as well as other ongoing initiatives to drive free cash flow growth and shareholder returns in 2017 and beyond, including our strong progress towards realizing the year one Media General synergies and materially reducing our leverage. As always, our Chief Financial Officer, Tom Carter, is on the call with me this morning. 2017 is off to an excellent start for Nexstar as we significantly exceeded the analyst consensus estimates with record first quarter net revenue, BCF, adjusted EBITDA, and free cash flow, which came in at $102.2 million. Nexstar's record first quarter results highlight our expanded scale, our ongoing diversification, and our commitment to localism, innovation and growth as we capitalize on the many opportunities to serve our local market viewers and businesses. Our record first quarter net revenue led to record cash flows before the one-time transaction expenses, as we previewed on our fourth quarter call and Tom will give you more detail on those in a moment. A partial quarter's contribution from the Media General transaction and the continued strength of Nexstar's legacy operations led to triple-digit growth in all of our non-political revenue sources, and combined with our expense discipline and focus on managing our operations for cash flow resulted in BCF, adjusted EBITDA and free cash flow before transaction expenses of 91.9%, 97.6% and 80.5% growth respectively. Excluding transaction fees, our free cash flow was over $2.15 per share in the quarter based on 47 million shares outstanding. As I noted, in addition to the strong operating results, the Media General integration and our synergy plans are proceeding ahead of…

Thanks, Perry and good morning, everybody. I'll start with a review of Nexstar's Q1 income statement and balance sheet data, after which I'll provide an update on our capital structure and some points of guidance. First of all, as outlined in our press release this morning, Nexstar completed its acquisition of Media General and also closed on the divestiture of 13 stations on January 17. Our actual results for the three-month period ending 3/31/2017 reflect the company's legacy Nexstar Broadcasting and Digital operations, less the 73 days of results from the six Nexstar stations divested, and 73 days of results from Media General's operations net of their divestitures during that period. The comparable three-month period ending March 31, 2016, reflects just the legacy Nexstar Broadcasting and Digital operations. So that's a comparison in the numbers that you got. In conjunction with the Media General acquisition and station divestitures, we disclosed on our February 28 earnings call that we expected to record several one-time transaction expenses in the first quarter amounting to approximately $46 million, which came in actually at $47.7 million and is reflected in the results that you have. Now, turning to the Q1 income statement. Net income was $540 million compared to $256 million in the previous quarter of 2016. Core local and national was up over 100% to $280 million, with local coming in at $202 million and national at $78 million. Political revenues due to the off-cycle election year was $2 million compared to $12 million in the previous year and retransmission fees were $232 million for the three months ended 3/31/2017. Broadcast cash flow was $188 million. Adjusted EBITDA prior to the one-time expenses was $171.5 million, with GAAP adjusted EBITDA of $124 million. Free cash flow before the one-time expenses was $102 million, with…

Thanks very much, Tom. As a reminder, today, Nexstar Media Group owns or operates 170 television stations in 100 markets and reflecting the reinstatement of UHF discount. On that basis, we serve 26% of all U.S. TV households, which leaves us with significant room for expansion. As one of the nation's leading local media companies with a portfolio of premier stations and digital assets, a strong balance sheet and attractive weighted average cost of capital and substantial annual free cash flow growth, we continue to have the financial flexibility, management expertise and enterprise-wide operating disciplines to drive organic growth and to consider future accretive M&A. We look forward to reporting on our continued growth and accomplishments in the next three months and on behalf of the more than 9,200 employees of the Nexstar Nation, we thank you for your continued interest and support and for joining us today. So now, let's open up the call to Q&A to address your specific areas of interest. Sarah?

Thank you. We'll go first to Dan Kurnos of Benchmark Company.

Great. Thanks. Good morning. Congrats on the solid results. Perry, if you can just talk about a little bit more on the forward outlook, obviously, a lot has been made, you made some pretty pointed comments about others impacting your outlook and it sounds like results are pacing pretty well heading into Q2. I know you don't give pacing, but if you can just give us some high level color on what you're seeing around core, obviously, national is a little bit soft, that will be a good start, and then, just obviously, if you're seeing any impact on your overall sub count? Thanks.

Sure. Tom reported our – on a same-station basis, our local ad revenue was up a little less than 1% in Q1 and our national revenue was down a little less than 7% in Q1. I can tell you, as I sit here in the middle of the quarter, that local is pacing to finish better than that in Q2 and national will be less down than our Q1 results in Q2. So we're pretty confident in our outlook and things improving here as the year goes on and our pace in May and June are substantially ahead of where we finished April. As it relates to sub counts, there has been very little movement. Obviously, we've reported the growth in gross revenues and, on a same-station basis that was up in excess of 35%. All of that would be baked in sub counts moving on. We've seen very little diminution. As a by-product of some of our agreements, the cable operators are not paying on out-of-market subs, so we don't give things away for free. So there are no out-of-market sub coverage or payments, which led to a little loss in revenue on a same-station basis, but again, that's baked into the 38% growth that we talked to you about.

Got it. Great. And then, if I could just ask one on the M&A environment. Obviously, with the deal Sinclair-Tribune yesterday, I think, Tom, in your prepared remarks, you mentioned selected accretive acquisitions. I'm just wondering, Perry, if this kind of changes your thought process at all on how you're thinking about possibly another transformative acquisition relative to waiting for maybe a further deregulatory and then going more end market. Thanks.

Sure. I would say, A, we would consider all of that. The very first hurdle any acquisition has to clear here is what would be the accretion of a stock buyback at the similar leverage points. And so, that's a fairly high bar to get over. And, obviously, if we find accretive acquisitions that are – where we're appropriately paid for taking on the additional risk with additional accretion and return to the shareholders, that's the kind of deal that we have done and that's the kind of deal that we would do. So I don't think our outlook has changed. As we've said in the past, appraise everything and we have very bright line walk-away prices for everything. So we're not going to do a bad deal for the sake of doing a big deal. We will continue to only do accretive deals.

Great. Thanks for the color.

We'll go next to Marci Ryvicker of Wells Fargo.

Thanks. I have a couple of questions. The first one is I'm going to ask you directly, because after the announcement yesterday, we were all asked do you have any intention of looking at Tribune and trying to top Sinclair's bid.

I don't have any attorneys in the room to advise me on how to answer that, but I think we made an appraisal of Tribune at some point. And I think you can safely assume since we weren't announced as the winning bidder yesterday, it's because the price crossed our walk-away threshold. So I think I'll just let that be the answer for now.

Thank you. And then, back to the fundamentals, you mentioned, Perry, that you came in well ahead of analysts' estimates, but you still just reconfirmed your free cash flow guide. So are you just being conservative or is there anything else that we should be aware of, maybe in the second quarter or any other time?

I think our job is to make sure we over-deliver the promises that we make to you, as evidenced by first quarter, and so, we certainly reiterate that guide and thought that was important in the face of all the noise that has been reported over the last week-and-a-half to two weeks, so – but I think that history would show that we do our best to make sure that if there is a surprise in our numbers, it's a pleasant surprise.

Great. And then, can you just talk about whether or not you have signed deals or streaming deals with ABC and/or NBC? Thanks.

We have not signed anything yet, but we are very, very close with a couple of networks and deals both with the network and with the opt-in of the individuals. As I tell each of the networks, listen, whatever we're discussing with you, figure, it's times four other networks that we're having these same kind of discussions with and it's a bit of a bandwidth issue. We did disclose a $4.6 billion acquisition, but the discussions have been constructive and I think you could expect announcements shortly.

Great. Thank you so much.

You bet.

Deutsche Bank's Aaron Watts has our next question.

Hey, guys. Thanks for having me on. Just two questions on the advertising front, and I apologize if I missed this. Can you talk specifically about the auto category, how that looked in the first quarter, how it's trending relative to that in the second quarter?

Sure. Auto was down ever so slightly in the first quarter and is trending slightly better than that in the second quarter. I think that in and around, a flat area is probably a good way to think about it and it won't deviate more than a point or two beyond that. What we did say, Aaron, it's about 26% of our television ad revenues. And again, I just want to point out in the prepared remarks for the first quarter ever, TV ad revenue for Nexstar Media was less than 50% of total net revenue. And with the growth trajectories at each of our revenue streams, I think you can see that gap continue to widen over the time. So we are accomplishing our goal of becoming a diversified media company. And as of this call, we are slightly less than 50% dependent on total ad revenue for total net revenue.

Okay. That's helpful. And then, kind of the second part of that, and maybe your answer just kind of preempts this question, but Perry, you've been around a long time, certainly long enough to see the ups and downs and ups of the economy in the ad cycle as it impacts television broadcasting. But the start of the year, certainly, had some mixed commentary around the strength of the ad environment, certainly national a little weaker than local. But as you kind of taken all your data points from the local and national marketplaces that you have your hands into, as you look out on this year, do you feel like the slowdown for some to start the year is just a short-term impact? Or do you view this as more of a longer-term trend?

Well, a couple of ways I would answer that. One is that I think the comps get easier as the year goes on, because political displaced more core revenue in Q3 and Q4. If I just look at categories and all I can comment on is our results. But we said, the top five categories for us in TV ad revenue, when we're exactly flat to the prior year on a same-station basis. If I look at the next 5, 3 of the 5 categories were either flat or up. And then, if I go to my next 15 categories, 9 of 15 categories are flat or up. And so, I tend to think that revenue growth will accelerate in the back half of the year, some of it is the math of the comp. But also remember that we made a point on the call of detailing that we have added additional sales resources into the former Media General markets and that's obviously having some effect on our results.

Okay. Great. I appreciate the perspective.

We'll move next to Kyle Evans of Stephens.

Hi. Thanks. Tom, for the purposes of the free cash flow guidance, could you remind us what our cash tax and CapEx assumptions would be for 2017 and 2018?

I don't think that they changed. I think cash taxes are somewhere in the – for 2017, I want to say it's in the mid-20s from a percent perspective and for 2018 would be somewhere in the mid-30s from an effective cash tax rate. And CapEx is the $55 million for 2017 and $65 million for 2018, and the biggest difference is the effect of the MEG building sale in Richmond, which is expected to close in the summer, and netting that really against our capital budget. So I don't think those have changed.

Great. Thanks. I think on a conference recently, you talked about roughly 20% broadcast OpEx growth for 2017. You were a little bit less than that in 1Q. Do you expect that to ramp up as the year goes on?

I'm not sure I recall that.

Including programming expense.

Oh, including programming expense? Maybe, I don't know, but I'm not sure I ever speak in those terms. So you'd have to remind me of exactly what the context of that was. But I think from a fixed perspective, we expect our results to be on a same-station down. So I'm not sure exactly the genesis of that. I'm happy to talk about it further, but I'm not sure.

Great. I'll double back with you after the call on that one.

Yeah. That'd be great.

And then, it sounds like good progress on the OTT front with ABC, NBC. Any view on the other half of the big four and when we expect to see some decent deals from them?

Well, I didn't specifically name the networks that we're making progress with. One of them is one of the ones you've named and the other one is maybe one that you didn't name. And so, maybe that gives you your answer. We're working with all of them, all five of the major networks, and they're in various stages of gestation, if you will. It kind of depends on when the agreements came in as to one we started working on them. And so, some networks are ahead of others. But again, I think we will be making some announcements here in the not too distant future. I don't think that from a financial perspective, it's going to change our standard of living, certainly, in the short to medium term, but we are interested in partnering with our networks and exploring some of these new opportunities.

Great. Thank you.

We'll go next to John Janedis of Jefferies.

Thank you. Two questions. First, just going back to the synergies for MEG, now that you've owned the stations for a few months, is your team starting to talk more about potential revenue synergies on top of the initial cost outlook? And then, separately, as you know, most of your peers have reported results and your core number seemed to be at the top of the peer group. And I was wondering how much of that is not being in some at the larger markets where there's more fragmentation and how does the relative market growth impact your thoughts around or about future M&A given your current footprint.

Well, first of all, thank you on the first quarter results. We tend to agree. We're in markets like Phoenix and Tampa and Portland and other markets like that. And if you have good management and we do in every one of those markets and our results from Tampa and Phoenix and San Francisco and Portland are very satisfactory at this point in time. And in three of those four markets, we've installed new general managers in the not too recent past. So I will tell you that that, I think, is a bit of the key. I don't know what you can draw from market-to-market. The national business is somewhat challenged. There are no new product categories and the business is expensive to do business with just from a process perspective and as Chair of TVB, I'm trying to work with groups and vendors to try and solve that problem, because I think every advertiser would tell you that it's a superior value proposition, it's just less profitable for the agency to do business with us, the way we do business today. So I'm working on it, in conjunction with everything else, but I will tell you that I'm very proud of the fact that we have announced and hired 22 new general managers, which filled all the vacant positions and then some people got promoted up and that created another opening, but we have spent the early innings of this consolidation ballgame focusing on management and people, and that's the key to our results and will continue to be the key to our results.

And just as it relates to how we model from a forecasting perspective, clearly, the national business, as Perry just mentioned, is challenged and in the larger markets, a larger percentage of the business is national. So we take that into account whenever we look at any sort of opportunity and market size. It's not so much that results are different, it's just that the revenue mix is different in some of the larger markets, and we take that into account. But, as Perry mentioned, that's part of the job of the GMs is to diversify away from national business and get as much local business as we can, because we think that's stickier and gives us an opportunity to do more marketing and less quoting from a price perspective.

Anything further?

Anything, just on the revenue synergies?

Oh, revenue synergies, well, what we have done is now, if you look at our footprints, we're in every market in the State of New York with the exception of New York City. We're in every market in Pennsylvania except for Pittsburgh and Philadelphia. We're in most every market in Tennessee with the exception of Chattanooga and maybe one other. So we are now working with those stations, and we have seven regional vice presidents that each have a geographic slug of the country. And part of their job is to look at opportunities that we can present to advertisers in those regions, in those states that nobody else can compete with. For example, can you go to the state lottery or to an advertiser that has fast food locations and say, let's design this program around high school sports or weather sponsorships or whatever, and we'll send you one invoice and you can cut us one check to try and cut through some of the things, particularly where you have like-minded affiliations, we've got a lot of ABC affiliates in Tennessee. And so, are there things that we can do around college football or professional sports or our news or sponsoring our sports desk or something along those lines that we can sell platform wide, I can tell you that it works better regionally than it does nationally even with our expanded scale and our RVPs, that's their charge. We also have four directors of local content development that basically work with the news product, how can we develop superior content offerings to our local marketplace that the competition just can't compete with, because we've got more resources in the state or we've got resources in Washington or whatever. So it is a theme of the company is how can we use this scale to generate more.

And I would say also, we pride ourselves at Nexstar with regard to our ability to generate new to television business. I think if you go back and look at some of our results over the past several years, you'll see that a fair amount of the local business that gets generated and the increase in the revenue comes from new to local business and we're rolling that focus out to the new – to the legacy Media General stations as well. And I think that that will serve us well in the not too distant future.

Thanks, guys.

From Barrington Research, we'll hear from Jim Goss.

Thank you. One question I have is what you were just talking about with some of the locally generated or even nationally generated content. To the extent that you've doubled the size of your D.C. News Bureau, will that totally be an advantage to the Nexstar stations or is there any thought of going beyond the Nexstar platform in the markets in which you're not currently competing to have an additional monetization avenue?

I think, initially, we want to make sure we're giving best-in-class service to our 100 television markets, which is one of the reasons for driving the expansion to make sure we could provide that level of service. That content is rather than the shot with the state capital over your shoulder that every national news network and every cable news network has, and we have the ability to do, we're in the same building. It's what does this legislation mean to the people of Peoria or Binghamton, New York or Fresno, California, and running over to the capital to get commentary from those legislators, tell me what this means at home. We think the more we can localize what's happening in Washington, the more people will be involved at the local level. And again, it takes a company with resources to field a dozen-person news bureau on the nation's capital. It's not cheap. But when you advertise it across 100 markets, it makes it possible.

Okay. That's great insight. And political, looking into 2018, do you have an adjusted comp for 2014, the last midterm, that we can use as a stepping-off point? And are there any particular things that happened a couple of years ago in the markets you're serving that would be likely non-repeatable?

We don't have a comp and we do not have a number, but we have our first meeting on 2018 political before the end of the month if that gives you any insight, because we're going to start working on building that model. You've got a third of The Senate, all of The House in the midterms. And at this point, I think it's anybody's guess that Democrats have more seats to defend than the Republicans. And we have statewide races and governor's races in some big states that will be impactful. We haven't started to put a number on it, but we are going to start this month to develop our thoughts around that. And Tim Busch and our team will lead that effort to have a very informed view on 2018 political.

And our process has served us well historically. So we're confident in what we can provide.

Now, you were closest to the pin last time I think in a very tough challenging environment. The last question I'd ask is, I know upfront doesn't directly impact your businesses, but it might tangentially and you're an educated observer of such things, I'm wondering if you have any thoughts on how that is likely to break broadly and maybe a degree of variability by networks since you have exposure among all of them.

You want my predictions on the upfront? Is that basically what you're looking for, Jim?

Yeah. That's basically it. Yes.

Well, as you know the dance has already started. I always tell people this is the toughest time of year, because everybody negotiates initially through the press. And so, TV is going away, CPMs are going to be up double-digits, and it's just the whole dance and unfortunately, we get the phone calls when somebody says something that people want to know more about. It has no effect on us. I would predict that CPMs will be up probably in the mid single-digits and I think it will be spread fairly evenly across the board. There are networks playing hotter hands than others in scripted programming, but you've got to remember the Olympics which air in the first quarter next year, and so, there's a lot of puts and takes. But I think that with the prospect of a tax cut, I think people are going to be somewhat optimistic.

All right. Thanks for your thoughts.

We'll move next to Barry Lucas of Gabelli and Company.

Thank you and good morning. Could you just remind us here what the pace of renewals for your retrans would look like 2017, 2018, 2019, maybe a proportion of subs that come up?

The proportion in 2017 and 2018 is relatively low. I want to say it's around 20% in those two years and then a big step-up in 2019.

Okay. Thanks, Tom. I don't even know if we can call this early innings it's sort of pregame, but you did sign an MOU with Sinclair regarding development, exploitation of ATSC 3.0. So I was hoping you could just expand upon that a little bit, Perry, and what do you think the two of you can do together, what it means and when this will become a business?

We're having phone calls, Sinclair and I, with other interested parties almost on an every third day basis. And our view is that we just wanted to hang a shingle out and say okay, if you want to talk to somebody that has the ability to aggregate spectrum in what – up until yesterday, was about 56% of the country. It's now about mid-80% of the country with Sinclair's expanded footprint, but here's a place to talk and have discussions. We do plan to hire somebody to run this consortia. And it will be run literally like a limited liability company or limited partnership. Others will have the opportunity to buy in if they so choose or just affiliate it if they so choose. But we think that with the repack comes a great opportunity to do a lot of the spadework. We've got to repack 90 stations out of 170. And we can get a lot of the work done to advance to ATSC 3.0 at the time during the repack and the FCC will reimburse you for your ATSC 1.0 costs. So, if a tower climb is required. That's paid for. Why not go ahead and put the ATSC 3.0 in when somebody's paying for part of the upgrade there, meaning, the government. So we are enthusiastic about it. Others have been enthusiastic and some are groups that you may not think of that are substantial. But maybe in a slightly different business than Sinclair and Nexstar in today traditional network affiliates. But I think more announcements will come. And I think monetization is – we've got 39 months for the repack and that's when you could do a bulk of the work. I still think we're probably looking five years down the road for true monetization opportunities,…

Great. Thanks, Perry.

And it appears that is all the time we have for questions today. I would now like to turn the call back over to Mr. Sook for closing remarks.

As always, thank you for your time this morning and thank you for your interest in Nexstar. And we look forward to reporting on our Q2 results in about 90 days' time. Have a great day, everyone.

And again, that does conclude today's conference. We thank you all for joining.