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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-28 · 109 added, 165 removed, 308 unchanged (47% of the section changed)

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2024 Highlights

• Net revenue was $4.9 billion for the year ended December 31, 2023.

• Returned approximately $796 million of capital to shareholders through repurchases of common stock of $605 million and dividends of $191 million, funded by cash on hand.

• Achieved a record $5.4 billion net revenue.

• Returned approximately $820 million of capital to shareholders through repurchases of common stock of $601 million and dividends of $219 million, funded by cash on hand, and announced a $1.5 billion increase to our share repurchase authorization.

• Reduced our debt by $327 million, funded by cash on hand.

• Reached multi-year distribution agreements for all agreements up for renewal in 2023.

• Renewed and extended multi-year affiliation agreements with Fox Network and MyNetwork.

• Launched The CW affiliations for three of its stations in the top 15 television markets, including WPHL-TV in Philadelphia (DMA #4), KRON-TV in San Francisco (DMA #10), and WTTA-TV in Tampa (DMA #12).

• Acquired several exclusive sports programming licenses at the CW including exhibition rights to the WWE NXT beginning in October 2024 through September 2029, broadcast rights to the NASCAR Xfinity Series beginning in 2025 through the 2031 racing season and broadcast rights to 50 Atlantic Coast Conference (ACC) college football and basketball games beginning in 2023 through the 2027 season.

• Expanded and extended CW network affiliation agreements with Hearst Television, Sinclair, Inc., and Gray Television, Inc.

• Expanded news programming at NewsNation, America’s fastest growing cable news network in primetime, to 24 hours per weekday of national news, analysis, and talk.

• Created a new advertising sales structure and to implement Nexstar’s new data and technology-driven, multi-platform strategy and accelerate the monetization of the Company’s platforms.

• Acquired certain assets of WSNN-LD, an MNTV-affiliated low power television station serving the Tampa, Florida market and KUSI-TV, an independent full power television station serving the San Diego, CA market, for a combined total purchase price of $38 million in cash.

• Filed the certificate of its amended and restated certificate of incorporation to reflect the amendments to its certificate of incorporation approved by its shareholders at the 2023 annual meeting, to, among other things, declassify its Board of Directors beginning at the 2024 annual meeting.

• Renewed affiliation agreements with CBS and with NBC.

• Expanded NewsNation news programming to 24 hours per day, 7 days per week.

• Achieved our near-term target of reaching over 50% of U.S.

television households with an ATSC 3.0, or NextGen TV, signal from a Nexstar or partner owned or operated station.

Overview of Operations

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In compliance with FCC regulations for all the parties, each of the consolidated VIEs maintains complete responsibility for and control over programming, finances and personnel for its stations.

We also own a 75.0% ownership interest in The CW, the fifth major broadcast network in the U.S., NewsNation, a national cable news network, two digital multicast networks, Antenna TV and Rewind TV, multicast network services provided to third parties, and a 31.3% ownership stake in TV Food Network.

Our digital assets include 140 local websites, 278 mobile applications, 25 connected television applications, and six FAST channels representing products of our local television stations, The CW, NewsNation, The Hill, and BestReviews and a suite of advertising solutions.

The largest portion of operating revenue of our Company is derived from distribution revenue, which relates to retransmission of Company stations’ signals and the carriage of our cable and broadcast networks by cable, satellite and other MVPDs and OVDs and, in the case of The CW, its local affiliates.

As of December 31, 2024, we also own a 77.1% ownership interest in The CW, the fifth major broadcast network in the U.S., NewsNation, a national news network, two multicast networks, Antenna TV and REWIND TV, multicast network services provided to third parties, and a 31.3% ownership stake in TV Food Network.

Our digital assets include 138 local websites and 229 mobile applications across local stations, NewsNation and The Hill.

The portfolio also includes eight connected television applications and three FAST channels from The CW and The Hill.

The largest portion of operating revenue of the Company is derived from distribution revenue, which relates to retransmission of Company stations’ signals and the carriage of our cable and broadcast networks by cable, satellite and other MVPDs and vMVPDs and, in the case of The CW, its local affiliates.

For the year ended December 31, 2024, the Company’s distribution revenue represented 54.1% of total net revenue.

Distributors generally pay for retransmission rights of local stations and for carriage of our networks on a per subscriber basis.

Distributors generally pay for retransmission rights of local stations and for carriage of our NewsNation on a per subscriber basis.

Distribution revenue is affected positively or negatively by the rate of growth or decline of subscribers and the growth in the per subscriber fee due to contract renegotiations or annual escalators in existing contracts.

Nexstar anticipates that retransmission fees will continue to increase until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.

We also generate distribution revenues from the affiliation fees that CW’s third-party local station affiliates pay to the network and from programmers who lease the use of our spectrum in selected local markets to air their content on our multicast streams.

We also generate revenue from core television advertising and digital advertising.

For the year ended December 31, 2023, the Company generated 33.7% of its net revenue from core advertising and 8.0% from digital advertising.

We also generate distribution revenues from the affiliation fees that CW’s third-party local station affiliates pay to the network and from programmers who use our spectrum in selected local markets to air their content on our multicast streams.

We also generate revenue from television advertising.

For the year ended December 31, 2024, the Company generated 44.7% of its net revenue from advertising.

Advertisers typically pay for advertising on our television and digital assets based on the number of impressions our programming or digital content delivers.

As a result, our core television and digital advertising is affected by a number of factors, including the size and demographics of the audience viewing our programming and digital content, economic conditions, demand for advertising and our sales effort.

Digital advertising that is not directly sold to advertisers through our in-house and third party sales teams, is sold via programmatic exchanges.

In addition, we generate digital advertising revenue from the sale of advertising on third party sites and other local and national services.

In even years, we generate a substantial amount of revenue from political advertising.

For the years ended December 31, 2023 and 2022, the Company generated 1.3% and 9.7%, respectively, of our net revenue from political advertising.

Political advertising is affected by the number of competitive races there are and the extent to which the Company’s stations are located in the relevant competitive markets, the amount of funds raised by candidates, PACs and others, the availability and pricing of television advertising inventory and the availability of alternative media.

As a result, our advertising is affected by a number of factors, including the size and demographics of the audience viewing our programming and digital content, economic conditions, demand for advertising and our sales effort.

We also generate digital advertising revenue from the sale of advertising on third-party sites and other local and national services.

In addition, digital advertising that is not directly sold to advertisers is sold via programmatic exchanges.

Included in our advertising revenues is the impact of political advertising which, in even years, contributes a substantial amount to our total advertising revenue.

For the years ended December 31, 2024 and 2022, the Company generated 20.3% and 19.5%, respectively, of our net advertising revenue from political advertising.

Political advertising is affected by the number of competitive races there are and the extent to which the Company’s stations are located in the relevant competitive markets, the amount of funds raised by candidates, political action committees and others, the availability and pricing of television advertising inventory and the availability of alternative media.

Because of the scale of Nexstar, we typically have a presence in the substantial majority of markets with competitive political races.

All national revenue is derived from advertisements placed through advertising agencies.

Our primary operating expenses include programming, newsgathering, production and promotion, employee salaries and benefits, sales commissions, digital cost of goods sold and content creation costs, and other administrative and corporate expenses.

Programming costs are primarily related to fees paid to networks with which ours and our partners’ stations are affiliated and license fees for original and sports programming, in the case of The CW, and syndicated programming in the case of the stations and our networks.

Our primary operating expenses include third-party programming, news programming, production and promotion, sales, digital cost of goods sold and content creation costs, and other administrative and corporate expenses.

Third-party programming costs are primarily related to fees paid to networks with which ours and our partners’ stations are affiliated and license fees for original and sports programming, in the case of The CW, and syndicated programming in the case of the stations and our networks.

The largest contributor to news programming and other expenses are employee-related expenses.

A large percentage of the costs involved in our operations is relatively fixed.

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Supreme Court issued a decision that reversed a lower court of appeals ruling and upheld the FCC’s elimination or modification of certain of its media ownership rules in the agency’s 2010/2014 quadrennial review of those rules.

Among the regulations eliminated in 2021 as a result of the Supreme Court ruling was a rule providing that a television station licensee which sells more than 15 percent of the weekly advertising inventory of another television station in the same market under a JSA is deemed to have an attributable ownership interest in that station, as well as a requirement that at least eight independently owned television stations remain in a local television market for a party to acquire a second station in that market.

Among the regulations eliminated in 2021 as a result of the Supreme Court ruling was a rule providing that a television station licensee which sells more than 15 percent of the weekly advertising inventory of a non-owned television station in the same market under a JSA is deemed to have an attributable ownership interest in that station, as well as a requirement that at least eight independently owned television stations remain in a local television market for a party to acquire a second station in that market.

While these restrictions are no longer in effect, the FCC’s 2022 quadrennial media ownership review and an FCC proceeding to review the current national limit on television ownership are currently pending.

The FCC could reinstitute its earlier restrictions or impose other limitations in these or any future reviews.

Advertising revenue is positively affected by a strong economy.

Conversely, declines in advertising budgets of advertisers, particularly in recessionary periods, adversely affect the broadcast industry and, as a result, may contribute to a decrease in our advertising revenue.

In even-numbered years we generate substantial advertising revenue from the political advertising we sell to candidates, political action committees and political parties.

In even-numbered years we generate substantial advertising revenue from the political advertising we sell to candidates and non-candidate entities such as political action committees and political parties.

Advertising revenue is also positively affected by certain events such as the Olympic Games or the Super Bowl.

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Historical Performance

The following table sets forth the amounts of the Company’s principal types of revenue (dollars in millions) and each type of revenue as a percentage of total net revenue for the years ended December 31:

Core advertising

Political advertising

Total net revenue

Results of Operations

The following table sets forth a summary of the Company’s operations for the years ended December 31 (dollars in millions), and each component of operating expense as a percentage of net revenue:

Operating expenses (income):

Years Ended December 31,

Operating expenses:

Direct operating

Selling, general and administrative, excluding corporate

Selling, general and administrative

Depreciation and amortization

Goodwill and other long-lived asset impairments

Reimbursement from the FCC related to station repack

Goodwill and long-lived asset impairments

Total operating expenses

Income from operations

Gain on bargain purchase

Income from equity method investments, net

Interest expense, net

Pension and other postretirement plans credit, net

Gain on disposal of an investment

Other expenses, net

Income before income taxes

Income tax expense

Net loss attributable to noncontrolling interests

Net income attributable to Nexstar Media Group, Inc.

NM = Not Meaningful

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

The period-to-period comparability of our consolidated operating results is affected by acquisitions.

For each quarter we present, our legacy business units include those business units that we owned or consolidated into our financial statements for the complete quarter in the current and prior years.

For our annual and year to date presentations, we combine the legacy business unit amounts presented in each quarter.

Core advertising revenue was $1.66 billion for the year ended December 31, 2023 compared to $1.72 billion for the same period in 2022, a decrease of $58 million, or 3.4%.

Excluding the $63 million of incremental core advertising revenue from our acquisition of The CW (acquired on September 30, 2022), core advertising revenue decreased by 7.0% primarily due to a weaker advertising market and the absence of first quarter advertising revenue from the Olympics on our NBC affiliate stations, partially offset by an increase in advertising revenue during the first quarter from the Super Bowl aired on FOX, where we have more FOX-affiliated stations versus NBC-affiliated stations in the prior year.

Political advertising revenue was $66 million for the year ended December 31, 2023 compared to $506 million for the same period in 2022, a decrease of $440 million, as 2023 is not an election year.

Distribution revenue was $2.73 billion for the year ended December 31, 2023 compared to $2.57 billion for the same period in 2022, an increase of $156 million, or 6.1%.

Excluding the $53 million of incremental distribution revenue from our acquisition of The CW and the combined effect of the temporary disruption of a large MVPD for 76 days in the third quarter of 2023 and the impact of the removal of partner stations from certain MVPDs related to continued negotiation (5.6% decrease in revenue), distribution revenue increased by 9.6% primarily due to renewals of contracts in 2022 providing for higher rates per subscriber and scheduled annual escalation of rates per subscriber, partially offset by continued MVPD subscriber attrition.

We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.

In January 2024, our partner stations have successfully renewed one of the distribution agreements and have been restored on the MVPD’s service.

Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $395 million for the year ended December 31, 2023 compared to $365 million for the same period in 2022, an increase of $30 million, or 8.2%, primarily due to incremental revenue from our acquisition of The CW (acquired on September 30, 2022) of $32 million.

Operating Expenses

Direct operating expenses, consisting primarily of programming, news, and technical expenses, and selling, general and administrative expenses were $3.06 billion for the year ended December 31, 2023 compared to $2.91 billion for the same period in 2022, an increase of $147 million, or 5.1%.

The Company’s revenues increased 9.6% for the year ended December 31, 2024, compared to the same period in 2023, primarily due to higher revenues from political advertising and distribution, partially offset by lower revenue from non-political advertising.

Distribution revenue increased by $201 million primarily due to a dispute with an MVPD which caused Nexstar stations to be dark for 76 days during third quarter in 2023, the benefit of distribution contract renewals in 2023 on terms favorable to the Company, annual rate escalators, growth in vMVPDs 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.

Advertising revenue increased by $294 million primarily due to an increase of $426 million in political advertising as 2024 is an election year, offset in part by a decrease in non-political revenue of $132 million due to ongoing advertising market softness and political crowd-out.

Direct operating expenses, consisting primarily of programming, news and technical expenses, and selling, general and administrative expenses increased by $58 million primarily due to increased news expenses related to expansion of news programming, programming expenses primarily due to lower variable programming expenses in 2023 as a result of the period when Nexstar stations were dark, stock-based compensation expense from new restricted stock grants and the timing of restricted stock grants, and direct digital operating expenses, partially offset by lower expense from various administrative expenses.

Depreciation and amortization expense decreased by $133 million, as follows:

• Amortization of broadcast rights was $324 million for the year ended December 31, 2024 compared to $453 million for the same period in 2023, a decrease of $129 million, or 28.5%, primarily due to $117 million lower amortization of broadcast rights at The CW of $259 million in 2024 from $376 million in 2023.

• Amortization of intangible assets was $299 million for the year ended December 31, 2024 compared to $311 million for the same period in 2023, a decrease of $12 million, or 3.9%, primarily due to impairment of certain long-lived intangible assets of a digital reporting unit in 2023.

• No significant change in the depreciation of property and equipment ($185 million in 2024 compared to $176 million in 2023).

In 2024, we recorded $24 million of goodwill impairment of a digital business.

In 2023, we recorded $35 million of goodwill and intangible assets impairment of a digital business which resulted no remaining goodwill balance as of December 31, 2023.

These charges resulted from our annual impairment review of assets in the fourth quarter of each year.

Income from equity method investments, net decreased by $34 million primarily due to a decrease in net income of TV Food Network, our largest equity method investment.

TV Food Network’s net income decreased primarily due to a decrease in its advertising revenue.

For additional information on our investment in TV Food Network, refer to Note 6 to Consolidated Financial Statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.

In February 2024, Nexstar received $40 million in cash proceeds, and recorded a gain on disposal of an investment for the same amount, in connection with BMI’s sale to New Mountain Capital.

The effective tax rates during the years ended December 31, 2024 and 2023 were 28.8% and 32.7%, respectively.

Changes in the valuation allowance resulted in a 2.3% decrease to the effective tax rate.

Other permanent differences, including a reduction in losses related to the minority interest in The CW, resulted in a 3.1% decrease to the effective tax rate.

This is partially offset by provision to return and other reserve adjustments which resulted in a 1.6% increase in the effective tax rate.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

The Company’s revenues decreased 5.3% for the year ended December 31, 2023, compared to the same period in 2022, primarily due to lower revenue from political and non-political advertising, partially offset by higher revenues from distribution and incremental revenues from the acquisition of The CW on September 30, 2022.

Distribution revenue increased by $156 million primarily due to renewals of contracts in 2022 providing for higher rates per subscriber, scheduled annual escalation of rates per subscriber and incremental revenue from the acquisition of The CW, partially offset by the temporary disruption of a large MVPD for 76 days in the third quarter of 2023, the impact of the removal of partner stations from certain MVPDs related to continued negotiation and continued MVPD subscriber attrition.

Advertising revenue decreased by $468 million primarily due to a decrease of $440 million in political advertising as 2023 is not an election year and a decrease in non-political revenue of $123 million due to the combined effect of advertising market softness, the absence of first quarter advertising revenue from the Olympics on our NBC affiliate stations and an increase in advertising revenue during the first quarter from the Super Bowl aired on FOX, where we have more FOX-affiliated stations versus NBC-affiliated stations in the prior year, partially offset by incremental revenue from the acquisition of The CW of $95 million.

Direct operating expenses, consisting primarily of programming, news, and technical expenses, and selling, general and administrative expenses increased by $148 million.

Excluding the incremental $74 million of operating expenses from our acquisition of The CW, direct operating and selling, general and administrative expenses increased by 2.5% primarily due to an increase in station programming costs from network affiliation renewals and annual increases in network affiliation costs, increased news programming at NewsNation and our local stations as well as increased digital sales and administrative expenses, partially offset by a decrease in commission incurred from national representation due to a decrease in political advertising revenue.

Corporate expenses, related to costs associated with the centralized management of our stations, were $193 million for the year ended December 31, 2023 compared to $198 million for the same period in 2022, a decrease of $5 million, or 2.5% (no significant change).

Depreciation and amortization expense was $941 million for the year ended December 31, 2023 compared to $662 million for the same period in 2022, an increase of $279 million, or 42.1%.

Depreciation and amortization expense consists of the following:

• Amortization of broadcast rights was $453 million for the year ended December 31, 2023 compared to $193 million for the same period in 2022, an increase of $260 million, or 134.7%, primarily due to incremental programming expenses from our acquisition of The CW (acquired on September 30, 2022) of $286 million, partially offset by a reduction in the television stations’ broadcast rights costs of $26 million.

• Amortization of intangible assets was $311 million for the year ended December 31, 2023 compared to $309 million for the same period in 2022, an increase of $2 million, or 0.6% (no significant change).

Depreciation and amortization expense increased by $279 million, as follows:

• Amortization of broadcast rights was $453 million for the year ended December 31, 2023 compared to $193 million for the same period in 2022, an increase of $260 million, or 134.7%, primarily due to incremental programming expenses from our acquisition of The CW of $286 million, partially offset by a reduction in the television stations’ broadcast rights costs of $26 million.

• Depreciation of property and equipment was $176 million for the year ended December 31, 2023 compared to $160 million for the same period in 2022, an increase of $16 million, or 10.0%.

The increase was primarily due to newly capitalized assets.

• No significant change in the amortization of intangible assets ($311 million in 2023 compared to $309 million in 2022).

In 2023 and 2022, we recorded $35 million and $96 million, respectively, of goodwill and intangible assets impairment on our product review and recommendation platform reporting unit.

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In 2022 certain real estate properties located in Chicago were sold and written down to their estimated fair value, less cost to sell, resulting in the Company’s recognition of impairment charges of $37 million in the fourth quarter of 2022.

Income from equity method investments, net

Income from equity method investments, net was $104 million for the year ended December 31, 2023, compared to $153 million for the same period in 2022, a decrease of $49 million.

Our largest equity method investment is TV Food Network in which we own a 31.3% interest.

We record our equity in TV Food Network’s net income, less our share in the amortization of basis difference related to the investment, as income from equity method investments.

In 2023, TV Food Network’s net income decreased by $159 million resulting to our share in its income to decrease by $50 million.

TV Food Network’s lower net income was primarily due to a decrease in its advertising revenue driven by a weaker advertising market.

There was no significant change to our share in the amortization of basis difference associated with our investment in TV Food Network.

For additional information on our investment in TV Food Network, including the accounting for basis difference, refer to Note 6 to our Consolidated Financial Statements.

Interest Expense, net

Income from equity method investments, net decreased by $49 million primarily due to a decrease in net income of TV Food Network, our largest equity method investment.

TV Food Network’s net income decreased primarily due to a decrease in its advertising revenue driven by a weaker advertising market.

For additional information on our investment in TV Food Network, refer to Note 6 to Consolidated Financial Statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.

Interest expense, net was $447 million for the year ended December 31, 2023 compared to $337 million for the same period in 2022, an increase of $110 million, or 32.6%, primarily due to increases in interest rates in the Company’s outstanding loans under its senior secured credit facilities, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022.

Interest rates on outstanding loans under the Company’s senior secured credit facilities ranged from 6.85% to 7.85% as of December 31, 2023, compared to interest rates ranging from 5.86% to 6.89% as of December 31, 2022.

These interest rates were a mixture of Secured Overnight Financing Rate (“SOFR”) plus Credit Spread Adjustment (“CSA”) used to account for the difference between SOFR and London Interbank Offered Rate (“LIBOR”), plus applicable margin in 2023 compared to a mixture of SOFR plus CSA plus applicable margin and U.S.

These interest rates were a mixture of SOFR plus Credit Spread Adjustment (“CSA”) used to account for the difference between SOFR and London Interbank Offered Rate (“LIBOR”), plus applicable margin in 2023 compared to a mixture of SOFR plus CSA plus applicable margin and U.S.

LIBOR plus applicable margin in 2022.

Pension and other postretirement plans credit, net

Pension and other postretirement plans credit, net was $36 million for the year ended December 31, 2023 compared to $43 million for the same period in 2022, a decrease of $7 million (no significant change).

Income tax expense was $131 million for the year ended December 31, 2023 compared to an income tax expense of $274 million for the same period in 2022, a decrease of $143 million.

The effective tax rates during the years ended December 31, 2023 and 2022 were 32.7% and 22.5%, respectively.

Nexstar reported permanent differences, including an adjustment for losses related to the minority interest in The CW, resulting in an incremental income tax expense of $44 million or 7.2% increase to the effective tax rate.

Also, changes in the valuation allowance resulted in an incremental income tax expense of $15 million, or a 2.9% increase to the effective tax rate in 2023.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

The period-to-period comparability of our consolidated operating results is affected by acquisitions.

For our annual and year to date presentations, we combine the legacy business unit amounts presented in each quarter.

Core advertising revenue was $1.72 billion for the year ended December 31, 2022 compared to $1.76 billion for the same period in 2021, a decrease of $44 million, or 2.5%, primarily due to a weaker national advertising market, the absence of third quarter advertising revenue from the Olympics on our NBC affiliate stations and changes in the mix between our core and political advertising revenues of $70 million, partially offset by incremental revenue from our acquisition of The CW of $27 million.

Political advertising revenue was $506 million for the year ended December 31, 2022 compared to $45 million for the same period in 2021, an increase of $461 million, as 2022 was a mid-term election year.

Distribution revenue was $2.57 billion for the year ended December 31, 2022 compared to $2.47 billion for the same period in 2021, an increase of $98 million, or 4.0%.

The increase was primarily due to scheduled annual escalation of rates per subscriber, renewals of contracts in 2021 providing for higher rates per subscriber and incremental revenue from our acquisition of The CW of $17 million, partially offset by continued MVPD subscriber attrition, a few periods during the negotiation of new contracts with our MVPD partners where our partners’ stations were not available and a settlement of a dispute in connection with a new contract with one of our distributors.

We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.

Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $365 million for the year ended December 31, 2022 compared to $322 million for the same period in 2021, an increase of $43 million, or 13.0%, primarily due to growth in our television stations digital advertising and services revenue, incremental revenue from our acquisitions of The CW in September 2022 of $17 million and a digital business we acquired in the third quarter of 2021 of $22 million, offset by weakness in the national digital advertising market and ecommerce.

Operating Expenses

Direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses were $2.91 billion for the year ended December 31, 2022 compared to $2.71 billion for the same period in 2021, an increase of $197 million, or 7.3%.

This was primarily due to an increase in cost related to incremental operating expenses from our acquisitions of The CW in September 2022 of $70 million and a digital business we acquired in the third quarter of 2021 of $16 million, an increase in variable costs associated with the increase in net revenue, an increase in station programming costs due to network affiliation renewals and annual increases in network affiliation costs, and increased promotion costs, partially offset by a reversal of an accrual in connection with a settlement of a dispute in connection with a new contract with one of our distributors and some administrative savings, primarily related to healthcare.

Corporate expenses, related to costs associated with the centralized management of our stations, were $198 million for the year ended December 31, 2022 compared to $176 million for the same period in 2021, an increase of $22 million, or 12.9%, primarily due to an increase in stock-based compensation of $15 million.

Depreciation and amortization expense was $662 million for the year ended December 31, 2022 compared to $589 million for the same period in 2021, an increase of $73 million, or 12.5%.

Depreciation and amortization expense consists of the following:

• Amortization of broadcast rights was $193 million for the year ended December 31, 2022 compared to $121 million for the same period in 2021, an increase of $72 million, or 59.3%.

The increase was primarily due to incremental amortization from our acquisition of The CW of $90 million, partially offset by a reduction in NewsNation ’s costs of $9 million as it continues to shift its focus from syndicated programming to national news programs .

• Amortization of intangible assets was $309 million for the year ended December 31, 2022 compared to $301 million for the same period in 2021, an increase of $8 million, or 2.8% (no significant change).

• Depreciation of property and equipment was $160 million for the year ended December 31, 2022 compared to $167 million for the same period in 2021, a decrease of $7 million, or 4.0% (no significant change).

In the fourth quarter of 2022, we recorded a $96 million goodwill and intangible assets impairment on our product review and recommendation platform reporting unit.

The Company’s assessment indicated that the reporting unit’s carrying amount exceeded its fair value, and therefore an impairment loss was identified.

In 2022 and 2021, certain real estate properties located in Chicago were classified as held for sale.

Due to designations as held for sale assets, the properties’ carrying amounts were written down to their estimated fair value, less estimated cost to sell, resulting in the Company’s recognition of impairment charges of $37 million and $23 million in the fourth quarter of 2022 and 2021, respectively.

Gain on bargain purchase

Gain on bargain purchase of $56 million for the year ended December 31, 2022 pertains to our acquisition of The CW, representing the excess of the fair value of the net assets acquired over the $0 purchase consideration and the fair value of noncontrolling interests.

For additional information on this acquisition, see Note 3, “Acquisitions and Dispositions” to our Consolidated Financial Statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.

Income from equity method investments, net

Income from equity method investments, net was $153 million for the year ended December 31, 2022, compared to $125 million for the same period in 2021, an increase of $28 million.

Our largest equity method investment is TV Food Network in which we own a 31.3% interest.

We record our equity in TV Food Network’s net income, less our share in the amortization of basis difference related to the investment, as income from equity method investments.

In 2022, certain components of such basis difference reached the end of the estimated amortization life resulting to a decrease in our share in the amortization of $55 million (increase in income).

This was partially offset by a decrease in our share in TV Food Network’s net income of $27 million.

For additional information on our investment in TV Food Network, including the accounting for basis difference, refer to Note 6 to our Consolidated Financial Statements.

Interest Expense, net

Interest expense, net was $337 million for the year ended December 31, 2022 compared to $283 million for the same period in 2021, an increase of $54 million, or 19.1%, primarily due to increases in interest rates in the Company’s outstanding loans under its senior secured credit facilities, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022.

Interest rates on outstanding loans under the Company’s senior secured credit facilities ranged from 5.86% to 6.89% as of December 31, 2022, compared to interest rates ranging from 1.60% to 2.60% as of December 31, 2021.

These interest rates were a mixture of SOFR plus CSA used to account for the difference between SOFR and LIBOR, plus applicable margin and U.S.

LIBOR plus applicable margin in 2022 compared to U.S.

LIBOR plus applicable margin only in 2021.

Pension and other postretirement plans credit, net

Pension and other postretirement plans credit, net was $43 million for the year ended December 31, 2022 compared to $81 million for the same period in 2021, a decrease of $38 million, primarily due to lower estimated expected return on plan assets of $19 million, higher estimated interest cost of $7 million and a $13 million settlement gain from the purchase of an annuity contract related to certain participants of a qualified pension plan during the fourth quarter of 2021.

Income tax expense was $274 million for the year ended December 31, 2022 compared to an income tax expense of $263 million for the same period in 2021, an increase of $11 million.

The effective tax rates during the years ended December 31, 2022 and 2021 were 22.5% and 24.1%, respectively.

The decrease in the effective tax rate is primarily related to changes in the valuation allowance resulting in an incremental income tax benefit of $24 million, or a 2.1% decrease to the effective tax rate in 2022.

The gain on bargain purchase arising from the acquisition of The CW resulted in a 1.1% decrease to the effective tax rate.

Liquidity and Capital Resources

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Income taxes paid, net of refunds (2)

(1) In 2023, 2022 and 2021, the investing activities included total capital expenditures of $149 million, $157 million and $151 million, respectively, of which none, $1 million and $10 million, respectively, were reimbursed from the FCC in connection with the station repack.

(1) In 2024, 2023 and 2022, the investing activities included total capital expenditures of $145 million, $149 million and $157 million.

(2) In 2024, income taxes paid, net of refunds, includes $11 million in tax payments related to a gain from disposal of an investment.

In 2022, income taxes paid, net of refunds, includes $48 million in tax payments related to various sales of real estate properties.

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Cash Flows—Operating Activities

Net cash provided by operating activities increased by $251 million during the year ended December 31, 2024 compared to the same period in 2023.

This was primarily due to an increase in sources of cash from (i) an increase in operating income (excluding non-cash transactions) of $432 million and (ii) a decrease in payments for broadcast rights of $92 million, partially offset by (i) a decrease in distribution from our equity investment in TV Food Network of $116 million, (ii) higher income taxes paid of $85 million and (iii) timing of receipts and payables of $78 million.

Operating income increased primarily due to higher revenue from political advertising and distribution, partially offset by a decrease in non-political advertising revenue.

Payments for broadcast rights decreased primarily due to the acquisition of less expensive programming, partially offset by new sports programming, at The CW.

Distribution from our equity investment in TV Food Network decreased primarily due to a decrease in the investee’s operating cash flow driven by a weaker advertising revenue market.

Net cash provided by operating activities decreased by $404 million during the year ended December 31, 2023 compared to the same period in 2022.

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These decreases were partially offset by sources of cash resulting from timing of payments to our vendors of $110 million, lower income tax payments of $201 million and an increase in distribution from our equity investment in TV Food Network of $20 million.

Operating income decreased primarily due to lower revenue from political and non-political advertising, partially offset by higher revenues from distribution.

The increase in payments for broadcast rights was due to incremental payments from our acquisition of The CW (acquired on September 30, 2022) of $211 million, partially offset by a decrease in payments for our syndicated programming of $38 million.

The increase in interest payments was primarily due to higher interest rates, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022.

Net cash provided by operating activities increased by $188 million during the year ended December 31, 2022 compared to the same period in 2021.

This was primarily due to an increase in operating income (excluding non-cash transactions) of $357 million, sources of cash resulting from timing of accounts receivable collections of $108 million, and an increase in distributions from our equity investment in TV Food Network of $10 million.

These increases were partially offset by an increase in payments for broadcast rights of $77 million, use of cash from timing of payments to our vendors of $107 million, higher interest payments of $57 million, higher tax payments of $50 million and other items.

The increase in payments for broadcast rights was due to incremental payments from our acquisition of The CW of $119 million, partially offset by a decrease in payments for our syndicated programming of $42 million.

Cash paid for interest increased primarily due to increases in the effective interest rates in the Company’s outstanding floating rate loans under its senior secured credit facilities due to the increase in SOFR and LIBOR, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022.

The increase in tax payments was primarily due to the sale of certain real estate properties in 2022 resulting in tax payments of $48 million.

The increase in interest payments was primarily due to higher interest rates on our floating interest rate loans under our senior secured credit facilities, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022.

The decrease in tax payments was primarily driven by lower operating results and tax payments in 2022 from the sale of certain real estate properties.

Cash Flows—Investing Activities

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Net cash provided by investing activities during the year ended December 31, 2022 was $125 million.

In 2023, we spent a total of $149 million in capital expenditures and $38 million in the acquisitions of KUSI-TV and WSNN-LD, partially offset by a deposit received associated with a proposed sale of a real estate asset of $10 million.

In 2022, we received proceeds from the sale of certain real estate properties of $241 million, received a deposit associated with a proposed sale of real estate property of $10 million and recorded cash acquired from The CW acquisition of $29 million, partially offset by capital expenditures of $157 million.

In 2021, we spent a total of $151 million in capital expenditures and $138 million to acquire television stations, a digital business and certain license assets.

These decreases were partially offset by the proceeds from the sale of stations and business units and asset disposals of $20 million, reimbursements from the FCC related to station repack of $20 million and deposits received associated with the sale of real estate assets of $13 million.

Net cash flows used in investing activities decreased by $71 million during the year ended December 31, 2024, compared to the same period in 2023.

This was primarily due to the proceeds received from the disposal of an investment in connection with BMI’s sale to New Mountain Capital of $40 million and a decrease in uses of cash from payment of acquisitions of $38 million.

Net cash flows used in investing activities increased by $298 million during the year ended December 31, 2023, compared to the same period in 2022.

This was primarily due to a decrease in sources of cash from the proceeds received from the sale of certain real estate properties of $241 million and cash acquired from The CW acquisition of $29 million in 2022.

In 2023, we spent $38 million in the acquisitions of KUSI-TV and WSNN-LD.

Cash Flows—Financing Activities

Net cash used in financing activities for the years ended December 31, 2024, 2023 and 2022 was $1,151 million, $899 million and $1,515 million, respectively.

In 2023, the Company repaid scheduled principal maturities of $125 million of our term loans, paid dividends to our common stockholders of $191 million ($1.35 per share per quarter), repurchased common shares of $605 million, paid cash for taxes in exchange for shares of common stock withheld of $24 million resulting from net share settlements of certain stock-based compensation, and paid for capitalized software of $19 million.

These outflows were partially offset by a contribution from noncontrolling interests amounting to $62 million.

We also borrowed $20 million under our revolving credit facilities which was repaid in full in 2023.

In 2022, we received $2,420 million of proceeds (net of capitalized lenders’ fees of $5 million) from the issuance of a Term Loan A, due June 2027 and used $2,414 million to repay our then outstanding Term Loan A, due October 2023, Term Loan A, due September 2024, Term Loan B, due January 2024 and a portion of Term Loan B, due September 2026.

We prepaid a portion of the outstanding principal balance of our Term Loan B of $333 million, made scheduled principal payments on term loans of $84 million, repurchased and cancelled $71 million of our senior unsecured notes all funded by cash on hand, paid dividends to our common stockholders of $142 million ($0.90 per share per quarter), repurchased common shares of $881 million, paid for software obligations of $16 million, paid contingent consideration in connection with a past acquisition of $14 million, and paid cash for taxes in exchange for shares of common stock withheld of $13 million resulting from net share settlements of certain stock-based compensation.

These decreases were partially offset by contribution from noncontrolling interests of $30 million.

Mission also drew $62 million under its 2022 revolving credit facility and utilized the proceeds to repay all of its $62 million of outstanding borrowings under its then outstanding 2018 revolving loan.

In 2021, we prepaid a portion of the outstanding principal balance of our Term Loan B, due January 2024 of $280 million and made scheduled principal payments on our Term Loan A, due September 2024 of $21 million, paid dividends to our common stockholders of $118 million ($0.70 per share during each quarter), repurchased common shares of $537 million, paid cash for taxes in exchange for shares of common stock withheld of $11 million resulting from net share settlements of certain stock-based compensation, and paid finance lease and software obligations of $18 million.

These outflows were partially offset by the proceeds from the exercise of stock options during the year amounting to $8 million.

Mission also received $299 million (net of $2 million discount) from its new Term Loan B, due June 2028 and utilized $268 million to repay a portion of its revolving loans.

We also borrowed $20 million under our revolving credit facilities which was repaid in full in 2021.

Net cash flows used in financing activities increased by $252 million during the year ended December 31, 2024, compared to the same period in 2023.

This was primarily due to the prepayment of Term Loan B of $203 million, a $43 million decrease in contributions from noncontrolling interests and a $28 million increase in common stock dividends paid, offset in part by a lower cash paid for shares withheld for taxes of $16 million.

Net cash flows used in financing activities decreased by $616 million during the year ended December 31, 2023, compared to the same period in 2022.

This was primarily due to the lower debt payments of $363 million (in 2022, we prepaid a portion of the outstanding principal balance of our Term Loan B of $333 million, made scheduled principal payments on term loans of $84 million, repurchased and cancelled $71 million of our senior unsecured notes compared to $125 million payment of scheduled principal maturities of our term loans in 2023), a decrease in stock buybacks of $276 million and an increase in contributions from noncontrolling interests of $32 million, offset in part by an increase in common stock dividends paid of $49 million.

Material Cash Requirements

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(7) Future minimum payments for license agreements for which the license period has not commenced and no liability has been recorded.

In January 2024, we entered into a multi-year time brokerage agreement with KAZT, L.L.C., the owner of television station KAZT-TV in Phoenix, Arizona, and acquired the station’s non-license assets.

From January 1 to February 27, 2025, we repurchased 112,582 shares of our common stock for $17 million, funded by cash on hand.

As of the date of filing this Annual Report on Form 10-K, the remaining available amount under the share repurchase authorization was $620 million.

As of the date of filing this Annual Report on Form 10-K, the remaining available amount under the share repurchase authorization was $1.5 billion.

On January 29, 2025, our board of directors approved a 10% increase in the quarterly cash dividend to $1.86 per share of our common stock beginning with the dividend declared for the first quarter of 2025.

The dividend was paid on February 26, 2025 to stockholders of record on February 12, 2025.

In February 2024, we received $40 million in cash in connection with Broadcast Music Inc.’s sale to New Mountain Capital.

Long-term debt

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Based on the results of such qualitative impairment tests, the Company concluded that it was more likely than not that the reporting unit’s fair value would sufficiently exceed the related carrying amount.

With respect to goodwill allocated to the cable network reporting unit and the two digital reporting units, the Company elected to perform quantitative impairment tests due to recent performance and uncertain economic conditions.

The Company’s assessment indicated that the cable network reporting unit’s fair value exceeded the related carrying amount by approximately 14%, therefore no impairment was recorded.

Goodwill allocated to this reporting unit was $400 million as of December 31, 2023.

The fair value estimate is management’s estimate based on a valuation report prepared by a third-party valuation firm who used a combination of an income approach, which employs a discounted cash flow model, and a market approach, which consider earnings multiples of comparable publicly traded businesses and comparable market transactions.

With respect to goodwill allocated to the cable network reporting unit and a digital reporting unit, the Company elected to perform quantitative impairment tests due to recent performance and uncertain economic conditions.

The Company’s assessment indicated that the cable network reporting unit’s fair value exceeded its carrying amount by approximately 15%, therefore no impairment was recorded.

The fair value estimate is management’s estimate based on a valuation report prepared by a third-party valuation firm who used a combination of an income approach, which employs a discounted cash flow model, and a market approach, which considers earnings multiples of comparable publicly traded businesses and comparable market transactions.

The income approach was based on a five-year projection model which included assumptions regarding continued growth of viewership at a declining rate of growth over time and monetization thereof, continued growth in distribution revenues and annual increases in operating expenses.

The income approach utilized the Company’s income tax rate, a 10% discount rate based on an analysis of comparable companies and a modest terminal growth rate typical of mature cable network businesses.

The market approach market based the valuation on earnings multiples of comparable publicly traded businesses with cable networks and comparable cable network transactions.

The income approach utilized the Company’s income tax rate, an 11% discount rate based on an analysis of comparable companies and a modest terminal growth rate typical of mature cable network businesses.

The market approach based the valuation on earnings multiples of comparable publicly traded businesses with cable networks and comparable cable network transactions.

The likelihood of a material impairment is mitigated by the maturity of the network and its significant contractual distribution revenue.

With respect to digital reporting units, the Company’s assessment indicated that one of the digital reporting units exceeded the carrying amount by 2.5%, and therefore no goodwill impairment was identified.

Goodwill associated with this reporting was $69 million as of December 31, 2023.

The income approach was based on a three-year projection model which included assumptions regarding the recovery of the business from a low in 2023 due to market and other factors to a full recovery to 2022 levels between year 2 and year 3 and then growth thereafter.

With respect to the digital reporting unit, the Company’s assessment indicated that its fair value was less than its carrying amount, therefore the Company recorded a goodwill impairment of $24 million.

The remaining goodwill associated with this reporting unit was $45 million as of December 31, 2024.

The income approach was based on a five-year projection model which included assumptions regarding the recovery of the business from a low in 2024 due to market and other factors to a full recovery to 2022 levels between year 3 and year 5 and then growth thereafter.

The income approach utilized the Company’s income tax rate, a 12% discount rate based on an analysis of comparable companies and a modest terminal growth rate typical of mature digital businesses.

The market approach based the valuation on earnings multiples of comparable publicly traded digital media businesses and market net revenue multiples of comparable digital media transactions.

The likelihood of a material impairment is mitigated by the amount of goodwill recorded.

In the second digital reporting unit, the Company identified a goodwill impairment of $19 million (and $16 million impairment on definite-lived intangible assets) and a goodwill impairment of $91 million (and $5 million impairment on definite-lived intangible assets) during the fourth quarter of each calendar years 2023 and 2022.

As of December 31, 2023, this second digital reporting unit has no remaining goodwill and no material long-lived intangible assets balance.

The likelihood of a material impairment is mitigated by the remaining amount of goodwill.

During the years ended December 31, 2023 and 2022, the Company recorded a goodwill impairment of $19 million (and $16 million impairment on definite-lived intangible assets) and a goodwill impairment of $91 million (and $5 million impairment on definite-lived intangible assets), respectively, attributable to another digital unit.

As of December 31, 2023, this reporting unit has no remaining book value of goodwill and definite-lived intangible assets.

Our quantitative goodwill impairment tests are sensitive to changes in key assumptions used in our analysis.

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The Company performed its annual impairment assessment on FCC licenses for each television station market using the qualitative impairment test.

Except for three station markets that indicated unfavorable trends, the Company concluded that it was more likely than not that their fair values exceeded the respective carrying amounts.

For the stations that indicated unfavorable trends, management extended its procedures and performed a quantitative impairment test.

As of December 31, 2023, the FCC licenses of these stations had a total balance of $64 million, none of such individual FCC licenses had carrying value that were material.

The Company’s quantitative impairment test of these assets indicated that each of their estimated fair values (Greenfield Method) exceeded the respective carrying amounts.

Thus, no impairment was recorded.

Based on the results of such qualitative impairment tests, the Company concluded that it was more likely than not that their fair values would sufficiently exceed the related carrying amount.

The Company also evaluated its definite-lived intangible assets and other long-lived assets whether events or changes in circumstances indicate that such assets may be impaired.

Based on our estimate of undiscounted future pre-tax cash flows expected to result from the use and eventual disposition of these assets, the Company determined that the carrying amounts are recoverable other than the long-lived intangible assets of a digital reporting unit for which an impairment was recognized (discussed above).

No other events or circumstances were noted in 2024 that would indicate impairment.

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• expected contributions

As of December 31, 2023, the effective discount rates used for determining pension benefit obligations were 4.78% to 4.79%.

During 2023, the assumptions utilized in determining net periodic benefit credit on our pension plans were (i) 5.53% to 6.38% expected rate of return on plan assets and (ii) 4.98% to 4.99% effective discount rates.

As of December 31, 2024, the effective discount rate used for determining pension benefit obligations was 5.45%.

During 2024, the assumptions utilized in determining net periodic benefit credit on our pension plans were (i) 5.26% to 6.05% expected rate of return on plan assets and (ii) 4.78% effective discount rates.

As of December 31, 2024, our pension plans’ benefit obligations were $1.6 billion.

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Distribution Revenue

We earn revenues from MVPDs and OVDs for the retransmission of our broadcasts and the carriage of NewsNation.

We earn revenues from MVPDs and vMVPDs for the retransmission of our broadcasts and the carriage of NewsNation.

These revenues are generally earned based on a price per subscriber of the distributor within the retransmission or carriage area.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis