Good day, everyone, and welcome to the Nexstar Media Group 2017 Second Quarter Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Joseph Jaffoni, Nexstar Investor Relations. Please go ahead.

Thanks, Cathy. Good morning, everyone, and thank you for joining Nexstar Media Group's 2017 second quarter conference call. We'll get to management's presentation 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 may be 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 expressions For these statements, Nexstar claims the protection of the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in 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 the achievement of synergies in cost reduction, price fluctuations in local and national advertising, future regulatory actions and conditions in the television stations' operating areas, competition from others in the broadcast television market, volatility and programming cost, the effects of governmental regulation of broadcasting, industry consolidation, technological development and major world news events Nexstar undertakes no obligation to update or revise any forward-looking statement, 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 its release. For more details on factors that could affect these expectations, please see Nexstar's other filings with the Securities and Exchange Commission. With that, it's my pleasure to turn the call over to your host, Nexstar Chairman, President and CEO Perry Sook. Perry, go ahead, please.

Thank you, Joe, and good morning, everyone. Thank you for joining us to discuss Nexstar's record second quarter results. This morning, we will discuss our return of capital activities, our synergy and integration successes, our trajectory toward leverage reduction, our increased guidance, and our growth outlook, including the 2018 political opportunity which for Nexstar appears to be extremely healthy. Tom Carter, our Chief Financial Officer, will join me on the call this morning. Nexstar's consistent operating momentum and financial growth was evident again in the second quarter as we delivered another period of record financial results with triple-digit net revenue, BCF, adjusted EBITDA, and free cash flow gains, with each metric exceeding the analyst consensus expectations. Contributions from recently completed acquisitions, overall organic revenue growth, and our focus on managing operations for current cash flow and future growth have positioned the company for its sixth consecutive year of record financial results in 2017, and we have high visibility that 2018 will meaningfully surpass the 2017 results. Our record second quarter growth clearly demonstrates that Nexstar is differentiating itself in the industry based on our ability to leverage our expanded scale and our commitment to localism, innovation, and growth. Notably, 51% of our second quarter gross revenue was derived from non-core television advertising sources, and the continued shift over our revenue mix reflects our long-term initiatives to build scale and diversification through our focus on high-growth retransmission and digital revenue opportunities. In addition to the record second quarter operating results, Nexstar remains active on its commitment to enhance shareholder value through capital returns and capital structure improvements. During the quarter, we repurchased slightly over 1 million Nexstar shares with cash from operations. We also paid our 18th consecutive quarterly cash dividend, we made continued headway on debt reduction and more recently…

Thanks, Perry, and good morning, everybody. I'll start with a review of Nexstar's Q2 income statement and balance sheet data, after which I'll provide an update on our capital structure and some guidance points for the near term. As noted in this morning's release, actual Q2 results presented reflect the impact of previously disclosed one-time Media General-related transaction expenses of $6.1 million and $53.9 million incurred in the three and the six months ended June 30, 2017, respectively. The actual results for these three months ended June 30, 2017 reflect the company's legacy Nexstar broadcasting and digital operations, net of the six-station Nexstar divestitures, and the first full quarter result from Media General stations, net of the seven Media General station divestitures including the Media General digital assets. The comparable three-month period ended June 30, 2016 reflects Nexstar-only broadcasting digital operations inclusive of those six stations, which were divested simultaneously with the closing of the Media General transaction. So that's a bit of a scorecard with regard to what is included in the press release and in the income statement. Turning to the 2Q income statement, net revenue was up 139% to $626 million. Core revenue, which we define as local and national revenue, was up 146% to $329 million, that was divided into local revenue of $238 million and national revenue of $91.1 million. Political revenue, as Perry mentioned, was $6.5 million which we're very pleased with that result, but obviously compares against an election year in 2016 where we had $11.3 million in political revenue. Retrans revenue was up almost 158% to $253 million, and digital revenues were $64 million, which was up 158% also. Broadcast cash flow was a record of almost $227 million. Adjusted EBITDA before one-time expenses was $208.3 million and free cash flow before…

Thank you, Tom. Notably, our operations generated over $246 million in free cash flow year-to-date before the one-time transaction costs which equates to approximately $5.32 per share in free cash flow. With accelerating growth in the back half of the year and the full benefit of the 2018 new affiliation and retrans renewals combined with our ability to capture large shares of political advertising in our markets, we have excellent visibility towards achieving our free cash flow, deleveraging and return of capital targets. We're remaining opportunistic with respect to accretive value-building acquisitions without materially altering our leverage profile. For Nexstar and our shareholders, free cash flow is our priority performance metric. I hope that our results today and my comments this morning highlight why we believe we have highly visible prospects to generate in excess of $574 million of free cash flow in the current two-year cycle and the effectiveness of our equity given that expectation. We look forward to reporting on our continued growth and our accomplishments in three months' time, and on behalf of the more than 9,200 employees of the Nexstar Nation and our management team, I'd like to thank you for your continued interest, support and for joining us this morning. Now, let's open the call to Q&A to address your specific areas of interest. Cathy?

Thank you. And we'll take our first question from John Janedis with Jefferies. Please go ahead.

Thank you. Perry, the comments from you and your peers, I guess, seem a little bit less correlated than usual and I guess your end comments seem a little more bullish. And I'm wondering to what extent it's related to maybe your affiliations, your markets revenue mix or to some extent, are you seeing some early revenue benefit from the Media General stations?

I would say all of the above probably contribute to baking that cake, John. I would say that with the 26 new general managers that have been named across the hundred markets in the Nexstar Nation, they are having a substantial impact on stations that perhaps were without management in the historic period. So we are seeing great responses from – and the majority of those are Media General markets or historically Media General markets. I would say that I think management teams matter and our focus and dedication, I think, is evident in the results that you see quarter after quarter. Beyond that, I don't know the geography or affiliation mix necessarily would play into it. It could be somewhat of a factor. But as I think we mentioned, July was the best core advertising revenue month of the year thus far with local up in the mid-single digits and national flat with the prior year and we haven't reported that in either of the first two quarters on a quarterly basis. So I think that overall, we see the economy accelerating slightly and I think we're the beneficiaries of that. But we're also laser focused in capitalizing on those opportunities as they present themselves.

Yeah. I'm sorry if I missed it, Perry, but did you say either what August is looking like or the quarter in general in terms of the – on the core front?

Well, we are currently forecasting to substantially exceed our budget in August. Having said that, August was where the Olympic fell in 2016 and for NBC stations in total, we're budgeting to be behind prior year in total ad revenue. However, the increase in retrans will almost make up for loss of Olympic revenue from our NBC affiliates in the month of August.

Okay. And maybe one other quickie. Look, as you know there's been some concern in the market about reverse comp and with your FOX and ABC deals behind you and I'm assuming others coming up, could you talk about visibility on net retrans over the next couple of years? It seems like at this point, there shouldn't be much uncertainty maybe through the end of the decade? Is that right?

Well, John, this is Tom. I'll take that. You're exactly right. I mean, we have very little unknowns in terms of that economic equation through the end of 2018 and on into 2019. Vast majority of the affiliation agreements are done, a high percentage of the retrans agreements are done. So there's not open points in terms of what that economic looks like – economic equation looks like. And we expect it won't be a straight line growth but we expect a CAGR of low double-digit net retrans growth through the end of the 2019 period. It will be higher in 2017 and 2019 and a little bit lower in 2018. But if you average them out, it'll be low double digits.

John, just to add a little color to that, we have a few of the legacy Media General NBC affiliates that we – that are up for renegotiation at the end of this year, and that's the only thing between us now and the end of 2019 in terms of affiliation renewals. So, there is stability and visibility in that revenue and expense stream.

Great. Thanks a lot, guys.

And we'll take our next question from Aaron Watts with Deutsche Bank. Please go ahead.

Hey, guys. Thanks. Two questions for me. On the whole, we're seeing consistent primetime ratings decline for the networks. What, if any, impacts are you feeling from that at your stations?

Not much. I mean, if you just follow the math, network primetime is roughly 20% of our ad-supported revenue, that is approximately 49% of our total revenue. If it's down 10%, that would be a point. I don't think it's down 10%, and we get very little inventory to sell. So, I don't think there's a direct correlation between those ratings and our unit rates. And as you know, as we've said time and again, we make half of our ad-supported revenue on the television stations from our local news products, and we're much more concerned with what the 10:00 lead-in does to our local news than the 10:00 show itself. I mean, the marquee programming is nice to have, and it's a superior value proposition in the bundle when you marry the local content and the marquee national content. But it's a much bigger issue to network owners than it is to local station owners.

Okay. Got it. And then my last question was just on the affiliation agreements. You just re-upped with Fox and ABC. I guess specifically on those agreements, would they be impacted if you were to make an acquisition that materially grew your footprint and I guess more generally, do you believe any of the networks would take issue or action if you were to make such a move in the future?

Based on our discussions with the networks, I would say, no. I mean there is no ability or any inclination or any communication that would indicate in any acquisition we've made to date or any we might contemplate that current affiliate agreements would be reopened. And I would characterize our relationships with our network partners as excellent as evidenced by the fact that we've been able to announce agreements in the affiliation space, in the OTT space. Those haven't been easy negotiations and they've all certainly been long, but we've been able to get to the point where both parties can do business. So I'm not concerned that acquisitions would create any additional degree of difficulty.

Okay. Thanks, Perry.

And we'll take our next question from Marci Ryvicker with Wells Fargo. Please go ahead.

Thanks, I have a couple. The first, what exactly drove the strength in July because I think you're the only one that's really talked about strong July so far?

Well, I think it's a number of factors. Again, I would highlight new management positively impacting the results at the stations they now manage and everybody's been in place now for a month or more and then some folks six months, and management really does matter at the local level. And I do think that you had some political revenue with half the amount of political revenue in the month that we had the year prior, so we're starting to be up against the effect of those comps. But beyond that, I just think it is focused execution that is driving the results.

Okay. And we're sort of dancing around the questions, I'm just going to ask you your thoughts on the FOX-ION joint venture and if that's real and if that would impact you at all.

I can offer an opinion. Only FOX and ION would know for sure, but I would notice the same reporter that commented on FOX and Blackstone as part of the Tribune auction process. I would comment that I don't think that that combination really works in the long term, and ION would have to basically sacrifice its business to become a FOX surrogate. And according to the head of ION, who I'm told was wandering through vineyards in Tuscany last week, I'm not sure you can engage substantively in negotiations then, but I would say that he has indicated he's not interested in selling off pieces of the company. It would be a whole company transaction or none at all. And I think FOX has stated that they're at this point most focused on closing the Sky transaction and maintaining their leverage profile and not in deploying more money at this current time into the station business. Has FOX looked at ION? Yes. Has Nexstar looked at ION? Yes. So there is a kernel of truth that there could have been discussions and that people may have looked at the information on ION. But I don't believe it's an actionable transaction.

Great. We all very much appreciate that. A few more quick ones. I'm going to ask you again about your view on transformative transactions at this point.

Well, if they present themselves and they beat buying back our own stock as accretion, then those are the kinds of things we will lean into. Whether it is the divestitures out of the Sinclair Tribune which are fairly substantial, that's an opportunity. There may be whole company opportunities down the road. I can promise you there will be more opportunities like Providence, probably larger than that, for us to acquire scale in marketplaces and we'll look at all of them. But Tom and I have this conversation probably three times a day because whether it's Greg Raifman in digital or Tim Busch in broadcast or the shareholders' dividend or repurchase opportunities, everybody competes for capital on the same playing field. And the decisions are made on a dollar-denominated basis, and it's the highest and best use of the capital, and the most accretive use of that capital is what wins the day.

Okay. My last question, I got this from a couple of investors this morning is why wouldn't you be more aggressive at these valuations in terms of buying back stock given where that trades and how high your visibility is through 2018?

Well, let me just say that, first of all, if you follow the leverage statistics, our leverage remained flat during – between Q1 and Q2 on a total basis. The only way you do that when you're losing political revenue is to pay down debt. And we paid down a substantial amount of debt in Q2. And as we – you'll see and we've mentioned, we continue to pay down debt subsequent to the end of Q2, in addition to allocating almost $60 million of cash for stock buybacks in Q2. So the cash flow is definitely there. We are taking an opportunistic view of buying back stock, but we definitely have shown a willingness and a capacity to do that. But at the same time, we're committed to deleveraging, and the only way that we're going to deleverage is to actually pay down debt. Until we get into 2018 when political will return, in which case we'll be able to deleverage because of increases in EBITDA, but we're committed to actually reducing the quantum of debt, but we can walk and chew gum at the same time, and I think we experienced that and demonstrated that in Q2.

Thank you so much.

And we'll take our next question from Kyle Evans with Stephens, Incorporated.

Hi. Thanks. You gave pacing for the quarter on local and national. Could you walk us through auto in 2Q and talk about what you're seeing in 3Q so far?

Sure. Auto was down a couple of percentage points. Let me go back and just start, and I think I said this on the call, but if you look at our top 10 category, 5 of our top 10 categories were up and the other 5 were down, but no category was down more than 3 points versus the prior year. Auto was down a couple of points in Q2, our Toyota, Nissan, Honda, GM, and Volkswagen spending were up. Volkswagen was way up. The laggards were the domestic plays of primarily Ford and Chevrolet. Dealer spending was slightly down, kind of in line with the overall decline across the quarter. And I would say Q3 at this point, now again, we did have a fair amount of automotive advertising in the Olympics last year on our NBC stations, but we are not seeing a departure from those kinds of numbers in Q3, granted we only have a month and a week in the books at this point. But the conversations with our local dealers remain healthy and productive. And I think that automotive will be thematically a lot like Q3 than what we reported in Q2 which is an improvement over where we were in Q1. So we see kind of status quo on automotive with the possible caveat of the carve-out of Olympic dollars that were taken off the top last year.

Okay. Perry, you mentioned that the sub-count numbers were not cause for concern. Would you put a number or a bracket around that one?

Sure. So it's year-to-date through seven months for which we have that information. Absolute sub count loss is less than 0.5% across our footprint on a year-to-date basis. So, you could impute a run rate of significantly less than 1% loss for a full year if the current sub count trends continue. And again, that's before any – these OTT agreements were just struck and they're not launched in most of our markets. And so, there are no OTT subs to counterbalance that. So, that's a pure number. And I would point out that against that on a year-to-date basis, our retrans revenue was up 4,800 and 48%.

Okay. Lastly, I know it's too early to be seeing actual impact of the OTT deals. But internally, as you think about that, when do you expect that or if and when do you expect that to become kind of a material component of your sub count?

I don't know if it'll ever become a material component of our sub count. I think that our markets – and a lot of these are maybe launching in the top 50 markets and there's one that's only launching in the top 10. And of course, we're participating in a more limited view in some of those, but I would expect that we will have some revenue from OTT maybe in the fourth quarter of this year, but in 2018 – but I don't see it in any time horizon here over the next two or three years being anything I would call material.

Okay. Thank you.

And we'll go to our next question from Dan Kurnos from The Benchmark Company. Please go ahead.

Great. Thanks. Good morning. Just two real quick ones for me. Perry, you mentioned in your prepared remarks that all of the Media General business, the digital business were profitable now. Have you shuttered all the businesses you're going to shutter at this point and kind of what's sort of the growth trajectory there? And then separately, I know you guys are a sort of major provider of spectrum to Katz, with them being acquired by Scripps. Is there going to be any change there now that it's owned by Scripps?

Well, just an increase in their credit profile, so we feel pretty good about the counter-party risk now in terms of the revenue they pay us. And your first question was...?

Digital. We did shutter a couple of legacy Media General businesses in Q2. So, you'll see obviously reduced revenues from those businesses going forward. Those will trail off in Q3 as well. But the growth trajectory of the remaining businesses, I will tell you, the station website business remains very strong and the other digital businesses are all growing. And on a consolidated business – on a consolidated basis, that business continues to have positive growth and positive EBITDA.

Great. Very good.

The Federated Media I think we announced was shuttered in Q1; and Dedicated Media, we discontinued operations at the end of Q2.

Got it. Thanks, guys.

And we'll take our next question from Leo Kulp from RBC Capital Markets. Please go ahead.

Hi. Good morning. Thanks for taking the questions. I had two. First, I'm assuming you can't discuss specifics, but how do the economics of the FOX and the ABC OTT deals compare to what you generate on a net retrans basis from the traditional MVPDs?

Well, we won't discuss the specifics, but we will say what we have said and that is that on a net basis, whether we collect from the MVPDs and then pay the networks, what we keep in that situation versus the OTT where the networks are making a direct payment to us, on a net basis, the OTT deals are worst case equal to and best case better than our current net retrans position from traditional MVPDs.

Okay. And just to confirm, that includes Fox, too, correct?

That includes Fox.

Got it. Okay. And then my – thank you. My second question is, it seems like there's been an uptick in discussions around private equity looking to get back into the broadcast space. Can you provide an update on your thoughts around taking private equity investments, either for the entire company or to – or as an equity stake to fund a larger-scale acquisition?

Well, I had a private equity partner that was a majority owner of the company up until 2013, and they have exited, so we certainly understand that experience. I think there has been increased activity. I don't know how far anybody has leaned in. We've had a few phone calls and taken a couple of meetings, but again, if that was in the best interest of shareholders, we would consider that, but it's only one of the things we consider on any given day. I do think that if you look at private equities' debt risk profile, it probably is an appetite substantially beyond what the public markets are comfortable with. And then when you look at – I've seen the thesis that you could take a company like Nexstar private, lever it up to 6 or 6.5 times, dividend recap it a couple of times, and make your 20-plus percent internal IRR even if you exit at the same multiple that you enter at. So I think the math is there. It's just I don't know whether anyone is prepared to step up the curve in any of these scenarios. Again, obviously, a private equity buyer is not going to have any synergies in a jump ball acquisition where companies like Nexstar certainly have synergies and so might have a competitive advantage. But if you could lever – if you're prepared to lever up more, then maybe you could pay as much or more. The proof will be in the pudding, with anything that comes downstream if private equity is a player or not. On the other side of that, private equity would tend to push up multiples for the entire space and that's not a bad thing even if it becomes more competitive from an M&A perspective.

Got it. Thank you for the color.

And we'll take our next question from Jim Goss from Barrington Research. Please go ahead.

Thanks. You noted earlier on, as you have I think in prior calls, you've now edged above 50% in terms of the share of revenues that are not advertising-driven. And I was wondering what your ultimate objective might be in that regard. Also, does that count retrans as gross or net basis? And to the extent that you've been creating local content, could you discuss the monetization of that content beyond local ad sales? Perhaps that's one of the things that would get you to a higher share in non ad-driven revenues.

Sure. Well, I think if you just look at the growth characteristics of each of those revenue lines and retrans because we're talking about revenues, it would be on a gross basis because it is a gross revenue basis that the only people that think of net retrans primarily are the financial and analyst community because that's really a programming fee for the networks and the geographic exclusivity to sell ads and to sell distribution. But having said that, if you look at the top line growth characteristics of digital and retrans, both being double-digits and retrans being well in excess of 20%. Take that out three more years against a single-digit growth, low growth or no growth core revenue line, and those numbers are going to get to 60/40 in the not-too-distant future and may continue beyond after that. So we don't have a stated objective. It's just kind of the way the math works with our continued push to get our fair share on retrans which we have several innings of that ballgame yet to play and our intent to try and grow core ad revenue in an environment where we admit that that's a slower growth trajectory than any other revenue line that we have. I think if you look down the road to monetization, I mean, we had a meeting with the heads of our digital company as well as the heads of the broadcast company and we spent the entire afternoon yesterday talking about monetization opportunities for local video content beyond what we're doing today. There's no question that the substantial opportunity, upside opportunity is on mobile video, and we are working and racing to move toward that direction to supplement our digital revenue stream both for Nexstar digital and for our local market sites because we see that where the action is and that's where the bulk of the viewing is coming from on digital devices.

Okay. Thanks, Perry. And one other one then. What – which of the regulatory relief elements that are being talked about would be most beneficial to your M&A ambitions? Would it be the top two out of four? Would it be – obviously you have room under the existing ownership reach. Are there anything – any other things that are important to you right now?

Well, I think the reinstitution of the old JSA rules, the pre-2014 JSA rules coupled with the elimination of the eight-voice test and the elimination of the two of the Top Four being a per se violation of local ownership rules would, taken together, do the most to create M&A opportunities for ourselves and others as we can build scale in the markets that we're in. And you're right, we still have room under the national cap, and that will be revisited at some point. But these local ownership rules – when you look at OTA television, which is just over-the-air television, as a percent of local revenue in all 210 markets, it's about 14% of all the local ad revenue that's spent, which competes with digital, which competes with direct mail, which competes with radio. And the fact that it is thought of as its own market is such a backward thought in terms of being relevant that it's obviously not even accurate. And I would say that that applies to the way DOJ views the local markets as well as the FCC. I think the FCC is ahead of the DOJ in realizing that their current rules don't reflect reality. But I think, taken together, those local ownership rules would create substantial opportunity for ourselves and others to rationalize the portfolio and to create additional scale in markets that we all individually care about.

All right. Thank you very much.

We'll take our next call from Barry Lucas from Gabelli & Company. Barry L. Lucas - Gabelli & Company: Thank you and good morning. Perry, I was hoping, as we get closer to adoption of ATSC 3.0, you could provide a little bit of color. The initiative with Sinclair and the consortium, how important is that? How many more people do you need? What's the pace of the rollout then, and when do you think revenues from both ATSC 3.0 sources become visible and then material.

Well, between – thank you, Barry – between Sinclair with Tribune and Nexstar and Univision, we reached in excess of 90% of the U.S. I've got calls this afternoon and tomorrow with other broadcast companies that are interested in learning more to determine if they want to sign on as affiliate members. But our goal is to, again, aggregate a nationwide footprint of spectrum and then see who might be interested in that. And we have hired a search firm to look for a CEO to lead this venture that the founding partners would fund. And that person will then spend full time, as opposed to my continuous personal attention, on looking for additional members to aggregate more spectrum in individual markets to create more opportunities, but also try and fill out that nationwide footprint to literally a universal nationwide footprint. So, we – the transition to ATSC 3.0 needs to happen before spectrum monetization can become a reality in a big way. We think that the spectrum repack post-auction will be a catalyst to jumpstart people's investment in ATSC 3.0 technology. We, as a company, have made the commitment that if we have to replace a piece of equipment, if it costs incrementally 20% to make sure it's 3.0 compatible and also ATSC 1.0 compatible, we'll spend that extra money because the initial investment in the ATSC 1.0 is going to be reimbursed by the government. And if we have to put a new antenna up, we're going to make sure it's ATSC 3.0 compatible even if the antenna cost more than the government will reimburse because the FCC is reimbursing us for the tower climb. So, I think most broadcasters are thinking that way, so that the installed base on the approximate 1,000 of 1,700 television stations in…

Thank you. That concludes today's question-and-answer session. At this time, I will turn the conference back over to Perry Sook.

Thank you very much everyone for joining us today. We appreciate your continued interest in the company and your support and we look forward to reporting on our Q3 results in the early part of November. Have a great afternoon.

Ladies and gentlemen, this does conclude today's call. Thank you for your participation, and you may now disconnect.