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Michael Biard

Thank you, Perry, and good morning, everyone. Nexstar delivered record fourth quarter net revenue of $1.5 billion, up 14% compared to the prior year, primarily reflecting growth in advertising revenue due to strong election year political advertising as well as continued growth in distribution revenue. Record fourth quarter distribution revenue of $714 million increased $10 million or 1.4% over the comparable prior year quarter. Distribution revenue growth primarily reflects the benefit of distribution contract renewals in 2023 on terms favorable to the company, annual rate escalators, growth in vMVPD subscribers the addition of CW affiliations on certain of our stations, and the return of partner stations on one MVPD in January, which more than offset MVPD subscriber attrition. In January, Nexstar and our partner stations reached agreement with NBC to renew our affiliations in 33 markets. And as previously announced, we completed our CBS affiliation renewal in mid-24. We view our relationships with the networks as symbiotic. The broadcast affiliate model provides significant advantages to the networks by reaching the largest audience for their programming, extending coverage to both pay TV households and over-the-air homes, which they cannot do on their own. Major sports, including the NFL, are committed to serving the broadcast audience, sorry, the broadest audience possible to drive fan engagement. So that means a commitment to broadcast television, which provides 14% additional reach over the pay TV ecosystem alone, reaching 100% of television households. In addition, with networks only providing 2 to 12 hours of content daily, affiliates provide the other 12 to 22 hours of programming through our highly rated local news and other local and syndicated programming, which helps increase overall viewership by offering a more complete product for our viewers. We expect both gross and net distribution revenue to be relatively flat with 2024's record levels. With a very modest number of subscribers renewed in 2024, we expect the annual rate escalators in our contracts to be offset by continued subscriber attrition, although we remain optimistic that subscriber trends will improve as we move deeper into the year. However, later this year, we have approximately 60% of our subscriber base up for renewal, which we expect to benefit distribution revenue beginning in the first quarter of 2026. Fourth quarter advertising revenue of $758 million increased $173 million or 29.6% over the comparable prior year quarter reflecting a $223 million year-over-year increase in election year political advertising to $254 million which more than offset a $51 million year-over-year reduction in non-political advertising revenue, or approximately 9%, due to market softness and political displacement, which we estimate accounted for roughly half that reduction. In the 2024 election year, broadcast television proved to be one of the few media to see growth, with the overall market expanding from $7.96 billion in 2020 to $9.33 billion. Specifically, according to estimates from Ad Impact, TV revenue rose from 4.46 billion to 4.53 billion. Nextar maintained a solid 13% market share of all television political advertising spending, generating $491 million in political revenue, an increase over the 479 million we had previously reported through Election Day in 2020. Notably, the absence of the Georgia runoff election, which had been a significant driver in 2020, resulted in a slight dip from our record-breaking political revenue in that cycle. Nevertheless, Nexstar remains well-positioned for continued growth, and we're confident in our ability to capture a larger share of political ad dollars in future elections. Looking ahead to the first quarter, non-political advertising is currently forecast to be down in the low to mid single digits on a year-over-year basis, a sequential improvement over both Q4 2024 on an as-reported basis and also when adjusting for the estimated impact of political displacement. While we continue to be impacted by a challenging television advertising market, including weakness in insurance advertising due to the recent natural disasters in Q4 and Q1, and continued weakness in automotive advertising, we are seeing sequential improvement both in local and national advertising. On the local side, the rate of local advertising decline is improving in Q1 due to increased revenue related to the Super Bowl on Fox featuring the Kansas City Chiefs, a market where we have the Fox-affiliated station, and double-digit year-over-year growth in digital revenue. On the national side, the rate of national advertising decline improved primarily due to ratings and associated revenue from our new slate of programming. For the year, non-political advertising is expected to be slightly up as weakness in television advertising is expected to be offset by strong performance at the CW due to our new slate of programming featuring WWE NXT and NASCAR Xfinity racing and local digital revenue growth as we aggressively focus on utilizing our over 1,600 local sellers to sell cars and third-party digital products. On the operating expense side, as part of our ongoing efforts to enhance efficiency and drive long-term growth, Nextar implemented a strategic operational restructuring in Q4 that we mentioned on our November call. That initiative included the elimination of a few hundred positions across various divisions, streamlining an improved integration of the CW and the Hill into the broader organization, and reducing middle management within our ad sales division. Additionally, we focused on streamlining work processes at our local markets to improve overall productivity. This restructuring is expected to generate savings in the low to mid eight figures in total operating expense in 2025, and will enable Nexstar to focus on initiatives that more directly impact our viewers, partners, and customers as we continue to prioritize initiatives that represent our best long-term opportunities. Now turning to the CW. In 2024, we improved cash flow at the CW by $127 million, exceeding our goal of more than $100 million of improvement, which reduced our 2023 losses by approximately 50%. With the substantial majority of cost reductions for the network related to programming costs and overhead efficiencies now executed, in 2025, we are seeing our new programming investments begin to pay dividends. And just to put a few finer points on the new programming, in 2025, CW will have about 400 hours of sports or sports-related programming, which accounts for approximately 40% of the hours provided by the network, a dramatic change from the old CW that had no sports programming whatsoever. The 2025 schedule includes 52 weeks of WWE NXT and 33 weeks of NASCAR Xfinity Series races, both of which are proving to be strong ratings performers for us. As Perry mentioned, in the first Xfinity Series race of the 2025 season, notably the first with our own production, we attracted 1.8 million average viewers, peaking at over 2.2 million. For the highest viewership of the Daytona race, since 2020. To provide some context for those of you who may be more familiar with Formula One, our Daytona NASCAR XFINITY race garnered 24% more viewers than the average of the three US-based F1 races in 2024 that aired on ABC and ESPN, and nearly 70% better than the full Formula One season average. and that Daytona momentum carried into the second race of the season last Saturday when over 1.3 million average viewers, peaking at over 1.5 million, tuned into the Xfinity race in Atlanta. In the process, the CW delivered the best performance for the Atlanta race since 2017. Remarkably, our Saturday race aired amidst a busy sports calendar and it performed better than the college hoops, PGA golf, and NHL that aired across Fox, CBS, , NBC, and ABC. Similarly, the CW has raised the performance of WWE NXT with audience improvement of 12% to date versus its 2024 average on USA, marking a 105% year-over-year improvement over what the CW was airing in that time slot previously, and regularly beating Big Four network programming head-to-head. In fact, Six weeks into 2025, NXT on the CW is enjoying its most broadly viewed quarter in the last five years. In 2025, we expect to cut losses at the CW by more than 25% from 2024 levels due primarily to growth in advertising driven by improved ratings and growth in distribution revenue. During 2025, we will reset affiliation agreements representing more than two-thirds of the CW's subscriber base positively impacting the fourth quarter of 2025 and 2026. Consistent with our prior guidance, we anticipate the impact of these resets in our advertising trajectory will enable the CW to achieve profitability during 2026. In addition, the company continues to benefit from moving CW affiliations to our owned and operated stations. During 2023 and 2024, we moved 17 affiliations to our stations, with more to come. In summary, 2024 was a standout year for Nexstar, and we remain excited about the company's future. As Perry mentioned, we believe the market is shifting in ways that will benefit broadcast television and that there is meaningful upside potential ahead of us, with potential deregulation and actionable growth catalysts in 2026 given our distribution renewal cycle, the midterm elections, and the Olympics. and consistent with our track record, we remain committed to delivering value to our shareholders in a thoughtful and disciplined manner. And we will continue to explore every opportunity to maximize that value over the long term. With that, it's my pleasure to turn the call over to Leigh Ann for the remainder of the financial review. Lee Ann?

Lee Gliha

Thank you, Mike, and good morning, everyone. Mike gave you most of the details on the revenue side and on the CW, so I will provide a review of expenses, adjusted EBITDA, and adjusted free cash flow along with a review of our capital allocation activities, our 2025 guidance, and some perspectives on valuation. Together, fourth quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses, were essentially flat, decreasing by $2 million. Increases in news and other programming and content costs were offset primarily by reduced promotion costs in the quarter. Q4 2024 total corporate expense was $48 million, including non-cash compensation expense of $20 million, compared to $45 million, including non-cash compensation expense of $16 million in the fourth quarter of 2023. The increase of $3 million is primarily due to one-time severance costs associated with our operational restructuring, while the increase in non-cash compensation expense is due to new restricted stock grants and the timing of grants offset in part by a release of reserves, among other factors. Q4 2024 depreciation and amortization was $220 million versus $210 million in the prior year quarter, an increase of $10 million. Of these amounts, included in our definition of adjusted EBITDA is $98 million related to the amortization of broadcast rights for Q4 2024 compared to $87 million for Q4 2023. The increase of amortization of broadcast rights by $11 million was primarily due to programming costs at the CW as newly acquired programming premiered offset by a slight reduction of amortization of broadcast rights elsewhere at Nexstar. Please note that while Q4 CW programming amortization was up year-over-year, we do not expect 2025 CW programming amortization to be higher than 2024. Q4 2024 income from equity method investments, which primarily reflects our 31% ownership in TV Food Network, declined by $5 million in the quarter, or 22%, primarily related to TV Food Network's lower advertising revenue. but better than what we originally anticipated. Putting it all together on a consolidated basis, fourth quarter adjusted EBITDA was $628 million, representing a 42.2% margin and an increase of $179 million from the fourth quarter 2023 of $449 million. Moving to the components of free cash flow and adjusted free cash flow, fourth quarter CapEx was $35 million, essentially flat to the fourth quarter of last year. Fourth quarter net interest expense was $104 million, a reduction of $11 million from fourth quarter of 2023. On a cash basis, this compares to $101 million in Q4 2024 versus $113 million in Q4 2023. The reduction in interest expense was primarily related to a reduction in SOFR and reduced debt balances. Fourth quarter operating cash taxes were $67 million compared to $26 million in 2023, an increase of $41 million primarily related to increased pre-tax operating income in 2024 related to increased election year political advertising. Payments for capitalized software obligations and pension credits, net of proceeds from disposal of assets and insurance recoveries, were $11 million versus $14 million last year. Cash contributions from our partners in the CW were zero in the quarter versus $15 million in Q4 2023. In Q4, programming amortization costs were actually greater than cash payments by $13 million as certain programming payments were deferred. Putting this all together, consolidated fourth quarter 2024 adjusted free cash flow was $411 million as compared to $245 million last year. Now turning to our guidance for 2025, we believe 2025 adjusted EBITDA will be in the range of $1.5 to $1.595 billion. Mike already provided some of the key assumptions that are embedded in our guidance, including one, our expectation for growth in net distribution revenue to be flattish in 2025 based on a slight improvement in subscriber attrition trends, , our expectation for non-political advertising revenue growth to be slightly up as increases at the CW are expected to partially offset some of the continued headwinds in national and local, and digital advertising growth is expected to more than offset the rest, , operating expenses will be reduced in the low to mid-eight figures of dollars due to our operational restructuring, and , we expect the CW will continue to reduce its losses by another 25% in 2024 from 2025 levels. Key factors differing from our current expectations could affect our outlook for adjusted EBITDA for 2025 either positively or negatively. Those factors include, among other things, the rate of growth or attrition of paid TV subs, the health of local and national advertising markets, our renegotiation of certain distribution and affiliation agreements on terms favorable to the company, and the attributable net income related to our 31.3% ownership stake in TV Food Network. We do not intend to update this guidance on a quarterly basis. As a few additional points of guidance with respect to adjusted free cash flow, we are currently projecting CapEx of $120 to $125 million for the year and $30 to $35 million in Q1. Based on the current yield curve, we anticipate full-year 2025 cash interest expense to be in the $375 to $380 million area and improvement of more than $55 million from 2024 levels at the midpoint. We project Nexstar's cash interest expense utilizing the spread on our floating rate debt instruments, the current SOFR forward curve, and the coupons on our fixed-rate debt, along with our expectations for debt repayment, which includes our mandatory amortization of approximately $125 million, plus a modest amount of additional repayment. Q1 interest expense is expected in the $95 million range. Full-year 2025 cash taxes are expected to be $260 to $270 million, an increase in the low 20s of millions versus 2024, as we are now using the annualization method for our federal income taxes, which enabled us to defer about $33 million of income tax from 2024 to 2025. For cash taxes, we use a 26% tax rate when calculating our estimated tax before one-time and other adjustments. The first quarter includes only a very small amount of state income tax in the $3 million range. As a reminder, we used the cash that we deferred from 2024 taxes into 2025 to optionally repay Term Loan B. We will pay this deferred income tax in the second quarter of 2025. In 2025, payments for programming are expected to be in excess of amortization by $40 to $45 million. due primarily to deferred programming payments from prior years and investment in programming for future years with approximately $7 million of that in Q1. Turning to capital allocation in our balance sheet, together with cash from operations generated in the quarter and cash on hand, we returned $230 million to shareholders comprised of $52 million in dividends and the repurchase of $178 million of stock at an average price of $167.30 per share reducing shares outstanding net of equity vestings by 2.7%. For the year, we returned $820 million or 68% of our adjusted free cash flow to shareholders in the form of $219 million of dividends and $601 million of share purchases. Nexstar's outstanding debt at December 31, 24 was $6.5 billion, a reduction of $181 million for the quarter as we made quarterly amortization payments of $31 million and optionally repaid $150 million of our term loan fee. Our cash balance at quarter end was $144 million, including $16 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 rate covenant ratio for Nexstar at December 31, 2024 was 1.68 times, which is well below our first lean and only covenant of 4.25 times. Our total net leverage for Nexstar was 2.91 times at quarter end. As is typical in non-political years, we expect leverage, which is calculated on an LTM basis versus a two-year average, to increase during 2025, as adjusted EBITDA falls in non-election years when political advertising is significantly lower. Our 2025 cash flow will be deployed first to fulfill our mandatory obligations, including debt repayments and pension and defined benefit plan contributions of approximately $145 million, the Cleveland Television Station acquisition for $22 million, and the anticipated 2025 dividend of approximately $225 million. In January, we announced our 12th consecutive increase in our dividend, increasing quarterly dividend rate by 10%, which based on our stock price, as of yesterday now represents an almost 5% yield, which as Perry mentioned, puts us in the 94th percentile of stocks in the S&P 400 for dividend yield. The remainder of our cash flow will be used to fund acquisitions should an opportunity become available. If no attractive strategic accretive acquisitions are available, we plan to repay debt and repurchase stock. In 2025, assuming no large-scale M&A, we plan to optionally repay an incremental amount of debt and not re-borrow the debt that was repaid during 2024 from the cash from deferred taxes. The additional optional deleveraging will prepare our balance sheet better for any potential M&A and should benefit us, even if there is no M&A, as many investors value us based on an EBITDA multiple. Based on that methodology, any debt reduction mathematically increases our equity dollar for dollar. We plan to continue to repurchase shares, which will continue to be the largest component of our capital allocation strategy, especially given our current valuation. In total, we anticipate returning almost two-thirds of free cash flow to shareholders in 2025, similar to the level we returned in 2024. Before I turn it over to the operator for questions, I'd like to address the value proposition in Nexstar stock. As Perry mentioned in his remarks, the scale and scope of Nexstar is unlike any other player in the broader media industry, enabling us to bend the curve to achieve results that other operators cannot achieve. While this has been the case with our record-setting revenue performance in 2024, it has not been the case with respect to our stock price over the last year. So that disconnect creates opportunity. Based on current street estimates and as of yesterday's closing stock price, We traded at a 6.3 times multiple of 2425 EBITDA and a 21% free cash flow yield below the midpoint of the pack of comparable broadcasters despite achieving top-tier margins and free cash flow conversion and the highest dividend yield and the highest overall return of capital to shareholders. A top-tier multiple of 7 to 7.5 times would imply a stock price of $197 at the midpoint, a 35% premium to yesterday's closing price, And if we applied the same valuation that Warner Brothers and Paramount did to their cable networks, which do not have the same prospects as the broadcast industry, nor the same trajectory of revenue that we've been able to accomplish, which, you know, those estimates included a 10.5% WAC and a negative 3% perpetuity growth rate, but assuming the consensus estimates for the average adjusted free cash flow of 24-25 for Nextar, applying those those metrics, the math implies a valuation of $210 per share, a 43% premium to yesterday's closing price. And if deregulation comes to fruition, and we are able to make accretive acquisitions as we have in the past, and pay TV subscriber attrition does flow, Nexstar and our industry should be re-rated. So it should be a win-win. Short-term growth to value us like the premium curve-bending company we are, and then a rising tide floating all media boats with DREG and slowing attrition. We are believers in the near and long-term value of our stock and will continue to deploy capital both to grow our business and maximize shareholder return by betting on ourselves. With that, I'll open up the call for questions. Operator, can you go to the first question?

Question and Answer Session

Operator

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing . One moment, please, while we poll for questions. Our first question comes from the line of Stephen Cahall with Wells Fargo. Please proceed with your question.

Stephen Cahall

Yeah, thank you. So just on M&A, Perry, you have a great acquisition history between Media General and Tribune. I don't recall the free cash flow accretion off the top of my head of those deals, but I know it was significant. Nowadays, your rates are higher, but a lot of the peers are also higher. So do you still think there's a lot of similar levels of accretion for broadcast M&A opportunities as there have been historically, if we do see some deregulation? And related to that, Do you look harder, potentially, at how spectrum assets fit together when you think about broadcast and consolidation over the next decade? And then Leanne, just on the EBITDA outlook for the year, impressive work that you're doing on cost. I'm just wondering, is there any cost to achieve that is included in EBITDA or that impacts free cash flow? Or is all of that behind you and was largely done in 2024? with the benefits, that eight-figure number that you talked about rolling through in the guidance for 2025. Thank you.

Perry Sook

Well, Steven, that's a lot. Let me try and take the first part of that. As it relates to Media General and Tribune, they were 40% and 60% accretive acquisitions, which we think were probably at the high-water mark of what we would be able to achieve on scale M&A. Having said that, we have been consistent in saying that Any acquisition to clear our screen is going to have to be substantially more accretive than buying back our stock, which is a high teens to 20% yield on our equity. So we will maintain that same discipline. We are obviously in conversations and out there looking If there's a love connection and regulations change, that would permit the acquisition to go forward. And it's highly accretive. It's something we would strongly consider doing in the broadcast television space and the digital space. But if not, Leanne's told you, you know, Plan B would be to continue to buy back stock and pay down debt.

Lee Gliha

And then, Steve, your other question, the expenses related to those Operating cost savings are really behind us. You saw we took about a $12 million one-time restructuring charge in the fourth quarter that got added back to our EBITDA, and that was really the cost to implement that.

Stephen Cahall

Great. Thank you.

Operator

Our next question comes from the line of Dan Kurnos with Benchmark. Please proceed with your question.

Dan Kurnos

Yeah, thanks. Good morning. Very comprehensive, guys. Maybe first one, just on the sports front, what do you guys make of Major League Baseball and ESPN parting ways? Do you expect there's any opportunity for local broadcasts to finally get access to the laggard child, so to speak? And then just to be clear, I guess, Leanne, on the distribution, or Mike, I guess, are you assuming that the recent subtrend holds for the year? And can we just get a sense of the timing of the renewals? We got the CW in Q4, but the other 60%. Is that all back-end weighted? Thanks.

Michael Biard

Yeah, I'll take the last one first. Yeah, they're back-end weighted, but I'm being specific in the second half of the year. With respect to sports, Listen, I think what you're seeing, we'll see where MLB shakes out, but we are confident that they will look for broader platforms. We did note that Commissioner Manfred referred to cable as a shrinking platform. So similar with what we saw with some of the deals that we've done, also with the deal that NBA did, the net migration vis-a-vis broadcast has been to increase the number of games on broadcast rather than move to cable. So we think there will be opportunities out there. We're less interested in the local opportunities given the fact that the RSNs seem to have kind of gotten back on their feet and, at least for the time being, taken the lion's share of the local games. but at the national level we think there will continue to be opportunities and we certainly think that our performance at the CW has put us on the map for any rights holder out there looking to do deals in the future.

Lee Gliha

And then just to elaborate on what Mike said and respond to your question in terms of subscriber trends, our guidance assumes a slight improvement in the rate of subscriber attrition as is consistent with what the market is expecting in general and then because those contracts are all back-end weighted. The substantial majority of the benefit will be in 2026.

Dan Kurnos

Perfect. Thank you both.

Operator

Our next question comes from the line of Benjamin Soff with Deutsche Bank. Please proceed with your question.

Benjamin Soff

Good morning. Thanks for the question. I'm wondering if you can talk about the progress you're seeing with respect to deregulation and what's your level of optimism that we could see changes this year? And then maybe could you talk a little bit more about the EdgeBeamJV, how that helps you accomplish your goals and the progress you've made on ATSC to date? Thanks.

Perry Sook

Well, thank you. Yeah, I've spent four different days in Washington, D.C. since the first of the year, all on the Hill visiting with lawmakers regarding the need for deregulation and and I feel the prospect is as good as it has been in my career to see meaningful ownership regulatory reform come to the broadcast industry. No one can, with a straight face, defend the current rules in the current environment and I think there's a real understanding that preserving local journalism at the local market level is in the country's national interest and to do that you've got to have strong companies and strong companies need to be able to get bigger and grow and innovate. And so that message, quite frankly, is resonating on both sides of the aisle. I think you'll see continued movement both at the FCC and the DOJ in terms of understanding that current regulations are outmoded and we are obviously pressing pressing for progress on all fronts. And I think you'll see evidence of progress being made as the year goes on. Obviously, at the FCC, Chairman Carr has called this a break-glass moment for local television. I know he is very interested in seeing the medium survive and have the ability to prosper and to continue to support local journalism and innovate. and so I think I take him at his word obviously as the year goes on and the commission is fully constituted with five commissioners, three Republicans, two Democrats, you'll see activity increase under his purview. As it relates to the NextGen TV generation and ATSE 3.0 and our consortium, NextGen already reaches 75% of the US population. . Our streaming and digital competitors are rapidly advancing, and without our ability to modernize and innovate, we risk, local broadcasters risk, falling behind, ultimately putting the future of our free local service and local journalism at jeopardy. And individual broadcasters can't complete this transition alone, which is why we developed a consortium with Scripps and Gray and Sinclair. And there was a question earlier from Steven about Spectrum. This consortium stitches together Spectrum that reaches 97%, which we view as a virtual nationwide footprint that will allow us to innovate and a set transition date would provide certainty to all the stakeholders, allowing the TV set manufacturers as well as the broadcasters, the pay TV operators, all to plan effectively. And as you know, at this point, the NAV's petition for rulemaking, which is fairly unprecedented and certainly as it relates to the spectrum, contemplates a two-phase transition plan which would ensure an orderly implementation. Phase one would be in February of 2028. Stations in the top 55 markets which reach about 70% of the US population would complete the transition fully to ATSC 3.0 and remaining stations would complete that transition on or about February 2030. I think it's important to note that not only is regulatory clarity essential to completing this shift It's time-sensitive because our competitors are continuing to advance. We want to be free to be able to innovate and provide additional services not only for viewers but for businesses and the public at large. But that the industry, the broadcast industry, is fully united behind this effort. And so we think with all of those factors coming together, the prospect of spectrum monetization that I've been talking about for half a dozen years, I think, is upon us. And this consortium has a first-mover advantage having stitched together a spectrum that is a near nationwide footprint. So we're very optimistic that progress will come both to deregulation and to innovation of next-gen TV under the current administration.

Benjamin Soff

Great. Appreciate the insight. Thank you.

Operator

Our next question comes from the line of Craig Huber with Huber Research Partners. Please proceed with your questions.

Craig Huber

Great, thank you. I have a few questions. I'll just do them one at a time to make it easier. On ATSC 3.0, Perry, just talk a little bit further about your expectations, how the revenue ramp for your company and the rest of your consortium may play out. How many more years do you think it'll be? It could be significant for you guys.

Perry Sook

Well, I think as most new businesses evolve, they start slowly and then grow suddenly. There are a number of things that have to happen. We need to be able to sunset the ATSC 1.0 or current transmission schema requirement, which would free up more spectrum for innovation. Then we have to complete the transition to 3.0, which would enable all stations in the market to fully participate in any data casting opportunities that might present themselves. And again, I think that if we are able to meet the transition date of February 28 that we've proposed along with NAB in the petition for rulemaking, that's when I think you could see meaningful progress being made. In the meantime, we have signed clients and we have a lot of interest from others, particularly in the automotive space, about the connected car and video and television in the car. as well as providing service updates with a better completion rate than the current satellite-based updates provide. There's also the opportunity to develop a stronger national security with the BPS system, which is the Broadcast Positioning System, which would be a backup to our current GPS system. The United States is the only industrialized country in the world without a backup to its GPS system. and I don't have to tell you what happens if GPS goes out, but we can provide a terrestrial-based system that would be a backup to the current satellite-based system, less vulnerable to disruption and we have developed the proof of concept of the timing element of this already with an atomic clock in Colorado with NIST and I won't get into the wonky weeds of all the development that's going on there, Both the DOT and the DOD have said it's in our national interest to have a backup GPS system, and we think that this transition would enable this industry, our industry, to provide this, and it would be superior to a second satellite-based system. So, again, I think you'll see announcements of clients and trials beginning and continuing throughout this year and the next couple, and I think that it would be probably 2028 if we were able to effect the transition of the top 50 markets, top 55 markets, to a full ATSC 3.0 transmission schema, I think that's when you'll see revenue take a step function forward.

Craig Huber

And then more near-term question. You guys just talked a little bit further about core advertising trends near-term. Are there any maybe national advertising categories that you guys have seen any green shoots and any significant change there against positive or negative?

Lee Gliha

There's nothing specifically to call out positive on the advertising side. I think on the negative side, we talked about insurance and auto being two categories that have been more negative for us in the first quarter.

Craig Huber

Maybe you could just talk a little bit further about what you're expecting for overall core advertising trends in the first quarter year-over-year.

Lee Gliha

So what we talked about was that the first quarter core advertising trends are going to be down in the low single-digit range.

Craig Huber

So what is it that you're seeing? That's obviously a much better number than you guys were able to do all four quarters last year. Obviously, part of it was hurt by crowding out, but what are you seeing better in particular that you want to highlight?

Lee Gliha

It's just a general improvement in the trend. It's not like anything heroic. I think we said that about half of the fourth quarter core decline is related to crowd out. So if you back that out, you get to something just shy of 5% decline in the fourth quarter, which low single digits is not too much of a difference from there, but we also have the benefit of improving CW performance given all the new great sports content we've got on the air now.

Craig Huber

And sorry, if I could just ask one more. On the CW losses, you guys talked about it being down 25% or perhaps more in the new year. That would probably put it down to a loss of roughly $100 million, maybe a little bit better than that. How are you feeling about the point in time when you might be able to get to break even? Do you still think by late this year, early next year? How are you feeling about that, please?

Lee Gliha

Yeah, we, you know, what we've said is, you know, we think we expect to get to profitability at some point during 2026, and that's still part of the Our outlook and what we're striving to achieve. We're on target to achieve that.

Craig Huber

Okay, great. Thanks, both of you.

Operator

Thank you. Our next question comes from the line of Aaron Watts with Deutsche Bank. Please proceed with your question.

Aaron Watts

Hi, thanks for having me on. You've covered a lot of ground, so I'll just have one question. I've asked you in the past about moving towards investment-grade status on your whole cap stack, because certainly your stewardship of the balance sheet has opened the door for that discussion. But in light of the speculation around deregulation in the space and your commentary there today, maybe I can ask about the balance sheet in a different way. How high would you be willing to take your leverage in the current environment to participate in industry consolidation?

Lee Gliha

I don't think we're looking to max out on leverage and overextend ourselves in any way. I think the question is, what is the comfortable leverage that the market could bear? I know that the rating agencies always give you a little bit of an 18-month sort of time period to get your leverage back down to maintain ratings. I think we'll have to just look and see this on a case-by-case basis and look at the deal, but we're not looking to create new headlines regarding being highly leveraged. That's one of the things that we have not done as a company historically.

Aaron Watts

Okay, got it. Thanks, Leigh Ann.

Operator

Thank you. Thank you. Our next question comes from the line of Patrick Scholl with Barrington Research. Please proceed with your question.

Patrick Scholl

Hi, thank you. With the CW, and you mentioned you have a lot of renewals coming up later this year, with all of the sports rights that you have added to that network, could you maybe talk about any benefits you're seeing on the distribution side and the contribution that those rights are creating for either your affiliate partners or for your distribution revenue so far?

Michael Biard

Well, I think to date, in the lifecycle of the CW, I guess I would think of it as we're in the show-me phase of the lifecycle, right? And that's exactly what we're doing. We've been talking about programming that we've acquired and what was coming for quite a while, and it's been gratifying really over the last couple of weeks, but even longer than that, over the last couple of months as NXT came online and we saw the end of last year's performance with NASCAR on the last eight races that we sub-licensed from NBC. So in the world of distribution, you need to prove it out before you can actually monetize it. That's been our experience. And so we're in the proving out phase, and we'll move into the monetization phase going forward. So no surprise, the value of programming in the distribution world is heavily centered in live programming. It distinguishes linear programming from SVOD programming. And the value in linear is in live news and sports. And certainly from the sports side, you can see that notwithstanding headlines on subscriber erosion, big-time sports continue to draw significant audiences, most recently with the Super Bowl setting yet another record. So we're optimistic with the performance. of the programming that will translate into performance and the distribution deals that we have on the near horizon.

Lee Gliha

And I would just want to just supplement something Mike said because he's talking prospectively and talking about the differential between what we get for CW versus some of the other affiliations. We actually have been able to grow our distribution revenue with the CW to date with the new programming slate. We just think there's more to come.

Michael Biard

Agreed.

Patrick Scholl

Okay. Thank you. Thank you.

Operator

And we have reached the end of the question and answer session. I would like to turn the floor back to Perry Sook for closing remarks.

Perry Sook

Thank you very much. In closing, I'd like to just tell you all we remain confident in Nexstar's positioning to deliver and continue to deliver long-term growth and value for our shareholders. Our financial results and competitive positioning in the industry, coupled with organic growth opportunities, as well as the potential of deregulation, all position us very well for continued success and free cash flow growth. When you look at the immense value we've created over the years and our future prospects, Nexstar's share price has never been more attractive, even with the early moves today. We're consistently proving our ability to outperform, and if history's taught us anything, it's that, with the long term, don't bet against Nexstar. There's a lot more to come. I'd like to ask you all to stay tuned. I want to thank our teams for their hard work and dedication, as well as our partners and shareholders for our ongoing support. We look forward to updating you on our next earnings call. Thank you very much, everyone.

Operator

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