Q2 2022 Sinclair Broadcast Group Inc Earnings Call
Yeah.
Good morning, ladies and gentlemen, thank you for standing by welcome to the Sinclair broadcast Group, Inc. Second quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session I would now like to turn the call over to the host executive.
Vice President and Chief Financial Officer, Lucie Rudest Hauser. Please go ahead.
Thank you operator participating on the call with me today are Chris Ripley, President and CEO , Rob Whiteboard, President of broadcast and Chief operating Officer, and Steve Zenker, Vice President of Investor Relations.
Before we begin I want to remind everyone that slides and supplemental information for today's earnings call are available on our website.
B G I dot net on the Investor information page and on the earnings webcast page.
I also want to remind you that today's call is a sinclair only call.
As a result of the deconsolidation of Diamond Sports group on March 1st separate Diamond financials will be made available in a couple of weeks and a separate quarterly public call hosted.
Billie Jo Mcintire will make our forward looking statement disclaimer.
Certain matters discussed on this call may include forward looking statements regarding among other things future operating results such statements are subject to a number of risks and uncertainties actual results in the future could differ from those described in the forward looking statements as a result of various important factors such factors have been set forth in the company's most recent reports as filed with the.
The SEC and included in our second quarter earnings release, the company undertakes no obligation to update these forward looking statements. The company uses its website as a key source of company information, which can be accessed at www dot <unk> dot net in accordance with regulation FD. This call is being made available to the public or webcast replay.
They will be available on our website and will remain available until our next quarterly earnings release included on the call will be a discussion of non-GAAP financial measures, specifically adjusted EBITDA adjusted free cash flow and leverage the company considers adjusted EBITDA to be an indicator of operating performance of its assets. The company also believes that adjusted.
EBITA is frequently used by industry analysts investors and lenders as a measure of evaluation. These measures are not formulated in accordance with GAAP and are not meant to replace GAAP measurements and may differ from other companies uses or formulations. The company does not provide reconciliations on a forward looking basis further discussion and reconciliations of the company's non-GAAP financial measures.
The comparable GAAP financial measures can be found on its website www dot has pgi dot net Chris Ripley will now give you an update on the strategic direction of the company.
You Billy and good morning, everyone over the years Sinclair has evolved considerably from a large broadcaster that relied on advertising for the vast majority of its revenue.
Our larger and more diversified company that we are today.
We believe the diversity of our businesses embodies the future earnings power of our organization with revenue streams expected to come from a number of different areas, including certain investments that generate little to no revenue as of yet.
In addition to the advertising and distribution revenues that make up the bulk of our current revenue generation. We believe other areas will be we will be drivers of our business in the future. These include wireless data revenue from Nextgen <unk> technology that will enable us to more fully utilize our spectrum expansion of our national networks and the build out.
Archon pulse marketing services business, which utilize this new SaaS marketing technology that we have acquired and developed.
What will not change is our company's steadfast belief in local media news and sports and the value they bring to our customers viewers in the communities in which we operate.
Okay.
In regards to second quarter results, we met our revenue expectations and exceeded our adjusted EBITDA guidance political advertising revenues were not only very strong, but they were the highest second quarter and year to date political revenue in our company's history.
Year to date through the end of June political revenue was over double 2000, Eighteen's political revenue for the same period and up over 20% compared to 2020, which was a presidential election year.
Robin Lucy will talk more about the specifics and results.
We expect political revenue to derive total AD sales for the remainder of the year, resulting in growth over last year. It is important to note that while we're not in a position to forecast the state of the economy through the end of the year or in 2023, we expect that a strong year in political advertising helps cushion against any possible downturn in addition to disk.
<unk> levers on operating and capital expenditures that we can pull to mitigate such weakness.
More than ever consumers have more choices to view content, whether it's on traditional television sets mobile devices, social media or other platforms.
With our accumulative on air and online audiences, we are poised to deliver our content, how and where our audiences choose to view and assume it.
While overall video viewing is fragmenting and opportunity going forward is engaging with users of our content directly reaching and engaging audiences on all platforms and opening up incremental revenue opportunities digital is a big part of that equation digital viewing is growing with our current average monthly unique users of $80 million to $90 million, we are well position.
As a holder of first party data to develop these additional revenue opportunities, especially when third party engagement tools like cookies go away.
We have the ability to engage viewers beyond passive consumption encourage interaction and convert them to direct customers and we can utilize our content both newly developed and from our archives to drive these opportunities.
This includes initiatives such as podcast digital newsletters and other digital content as well as referring.
Users to partner sites to make transactions.
And all of these cases, we are and we'll be able to learn more about our users through consented data gathering as a first party provider to enhance the user experience, while opening up the door to additional revenue opportunities.
The content of the creation of new content continues to be a priority for our company.
On the heels of a successful launch and extension of the National Best franchise and are widely available news on platform. We are looking at other initiatives to you. Let you look utilize our vast resources around local news I mentioned podcast in just a minute ago. As one example in the second quarter. We debuted the first in a new.
Series, a podcast titled missing Erika Baker about the disappearance of a young child in Ohio. These bypass take a deep dive into stories of local and National interest Sinclair is in a prime position to produce such compelling storytelling. Thanks to our company wide commitment to investigative reporting and teams of talented journalists across.
Our expansive network of local news stations.
We've been encouraged by our first podcast performance, so far with consumers, giving them. The content favorable reviews. We are also developing new shows and series, including a debate show a game show and a dock your series based on noteworthy events covered by our local news stations.
The new content will appear on one or multiple into Sinclair platforms or might even be sold to third parties also we recently rolled out the national desk, whether to our local newscast at six am and six PM and on social media and we plan to launch a morning show that will tap into our lives coverage and weather content produced over the prior 20.
Four hours.
And we're working on gamification elements for our content.
Expect to hear more about all of these efforts as we progressed through the year.
Yes.
We continue to make solid progress on our marketing technology platform can pulse 360, we have built a comprehensive proprietary platform that we believe is the only entity of its kind focused exclusively on growing local agencies and local media companies offering an omni channel product that combines data driven media planning order.
Mint fulfillment and analytics into a single SaaS based solution. The result is an experience for the client that is efficient transparent and more profitable as it eliminates the middleman and allows the client to keep more of the media margin.
The platform offers not only broad access across Sinclair is diversify properties, but also from over 100 publishers with which we have partnerships with a reach to over 90 million unique connected TV households, we believe the opportunity here is significant as we are offering an omni channel solution that enables our partners.
To compete for the $240 billion in U S digital advertising budgets.
And by owning our technology versus licensing like many of our chief competitors. We believe we have a competitive advantage and making significant inroads in this marketplace.
On the Nextgen broadcasting front, another five Sinclair markets launched Nextgen in the second quarter, making 10, thus far for the year and 32 overall to date Nextgen TV is available in 60% of the households, and Sinclair has licensed footprint.
Meanwhile, <unk> is advancing globally. Just this week, we announced that we entered into memorandums of understanding with two top brand broadcast networks to collaborate on the development and implementation of Nextgen broadcast models and technologies in both the U S and Korea demonstrations of use cases for the technology ongoing and include auto.
Motive video applications and enhanced GPS that takes the GPS.
<unk> from three meters down to three centimeters.
We believe our joint efforts will allow for a greater efficiency in developing new business models around these future monetization opportunities.
And finally, we continue to look for ways to best provide value to our shareholders. In addition to growth initiatives that I've touched upon earlier in the year, we increased our quarterly dividend by 25% and in June we resumed our <unk> one share repurchase program buying back another 500000 shares or so through yesterday.
This makes close to 39 million shares repurchased since the beginning of 2018.
Or 38% of our total shares outstanding we also repurchased some of our STG notes at a discount in the open market, which Lucy will detail.
And we continue to utilize our free cash flow to invest in attractive and strategic investments that we believe will enhance our business in the years ahead.
Year to date, we've deployed $19 million of investments and received distributions of $44 million.
In 2021, those numbers were $125 million of investments and $48 million of distributions and since 2017, we have made $303 million investments and received distributions of $269 million.
And going back a bit further these investments we've purchased since 2014 have generated an over 20% IRR today.
This diversified portfolio of investments made up of holdings in real estate venture capital and private equity as well as strategic investments in companies has an estimated market value as of June 30 of $764 million or over $11 per share, adding and our valleys holdings the diamond facility.
And holding company cash the estimated market value is over $1 2 billion or over $17 per share.
On the corporate restaurants, and social responsibility front, we announced the annual winners of our diversity scholarships awarded to high achieving diverse students seeking careers in the broadcast industry. This year, we opened it up to applicants nationwide and awarded $50000 in scholarships since 2013, we've awarded over $250000 to help <unk>.
More diversity to news and marketing teams throughout the country.
Finally, we just finished up our single Sinclair cares summer hunger relief fund raising campaign to help provide meals to needy families.
The campaign helped to provide approximately $1 8 million meals to children and families across the U S.
With that I will turn it over to Rob to review the operational highlights for the quarter. Thanks, Chris.
Political AD revenues were certainly a big driver during the quarter, surpassing our most bullish expectations and setting a second quarter record for political revenues, including presidential election years, as Chris pointed out combined with a strong first quarter political revenues year to date are up more than 100%.
Compared to 2018 and up over 20% versus 2020, we continue to expect strong third and fourth quarters for political spending which are typically the largest quarters for.
For a political aspect.
Think of it is fair to say that at this juncture political revenue for 2022 could possibly approached a record level, we had in 2020 political.
Political strength in the quarter helped media revenues grow 5% over the prior year, which was within our guidance range core AD sales were down low single digits coming in around the low end of our expectations on decreased revenues in the service category, particularly insurance and the sports betting.
Category versus a year ago.
In regards to our growth networks comet charge and TBD, we're in the process of adding 13 million households to their combined coverage.
Incremental rollout began late in the first quarter and we will go through September this will give the networks at a total combined coverage of over 95 million households, a 7% increase in households over the end of last year, we expect the added audiences to drive impression based sales.
Tennis Channel news, we were pleased with the viewing of this year's French open play from May 22nd June 5th.
May 31st Rafi on the down Novak Djokovic match Garden 666000 viewers most views ever for a tennis channel match eclipsing the old record by 30%.
Also during the French open on May 31.
Syndicated users made the tennis channel.
Number three paid sports app hitting an all time high during that the Dol Djokovic instant classic.
Tennis channel Dot Com website digital users grew double digits year over year as viewers found the French open on the go tennis channel also had another successful woman with household impressions up over $1 million. This year on tennis channel versus a year ago, and our new $24 72.
<unk> channel on Samsung TV, plus is reaching a brand new audience with over 700 live hours of tenants.
This launch.
I'll now turn it over to Lucy who will delve deeper into the Sinclair financials.
Rob given the deconsolidation of Diamond on March 1st of this year and in order to have a meaningful discussion around comparative results and trends.
Also I'm going to speak to our the Sinclair only pro forma numbers for all periods, which excludes diamond and excludes business is sold in the prior 12 months.
And you can follow along with our slide deck, where our financial supplement on our website for.
Our actual results, including the periods of the Diamond was consolidated please refer to this morning's earnings release.
Media revenues for the quarter were up 6% versus the same period, a year ago on a pro forma basis, driven by higher distribution and political AD revenues.
And that was offset in part by the deferred management fee and lower core advertising as Rob discussed.
Digital revenues increased 17% and the $831 million of media revenues was within the middle of our guidance range.
Distribution revenue increased 4% versus last year, but fell short of our guidance range, primarily due to higher than expected distribute jugular churn.
Subscriber churn was mid single digit percent versus last year.
Core advertising decreased low single digits in the second quarter compared to the same period, a year ago and was close to the low end of our expectations as Rob mentioned, we saw some weakness in the insurance category and some political crowd out.
Total advertising revenues were very strong when including political increasing 12% over last year and coming in at the upper end of the guidance range.
Media expenses were 7% higher in this year's second quarter versus last year on higher network programming fees digital expenses on the higher digital revenue and timing of tennis tournament.
Were favorable to guidance with about half of the favorability related to timing with the expenses expected to.
To be incurred in the back half of this year in part due to supply chain challenges and the other half the result of cost controls and open positions.
Adjusted EBITDA for the quarter decreased 6% over the second quarter of last year on the Diamond management fee deferral, and the higher expenses, which were offset in part by the strength and political revenues and growth in net retrans as.
As compared to guidance are $183 million of adjusted EBITDA more than exceeded the high end.
Although adjusted free cash flow in the quarter came in lower than our guidance. This was due to a delay in a large IRS cash tax refund, which we're now expecting later this year.
Excluding the delay of that refund we were within our second quarter adjusted free cash flow guidance range.
Adjusted free cash flow per share was $1.42 for the quarter, while diluted net loss per share was <unk> 17.
Our liquidity and balance sheet remained strong with $420 million of cash at the end of the quarter and with an undrawn revolver puts our liquidity at almost $1 1 billion at quarter end.
Total debt at the end of the second quarter was $4 3 billion and Stg's first lien indebtedness ratio on a trailing eight quarters was three three times, while total net leverage through the bonds was four one times.
In April we closed on $750 million of new term loans that mature in 2029 with the proceeds used to redeem our five and seven 8% senior notes that were set to mature in 2026 and to refinance the term b one loans that were set to mature in <unk>.
Early 2024.
We also extended the maturity of 613 million of our revolving credit facility to 2027.
Should a downturn in the economy occur all of our near term debt maturities have been addressed with our next maturity not until 2026.
During the quarter, we repurchased in the open market of 118 million face value of our senior notes due 2027 at a 14 million dollar discount.
We also repurchased one 6 million common shares under our <unk>, one stock buyback program and an additional almost 500000 shares since June 30.
Year to date, we have repurchased approximately 6% of our total shares outstanding for $114 million.
Our total share count at the end of the quarter was approximately 70 million shares.
Turning to our third quarter guidance, we expect a another strong quarter for political which is the main driver for media revenues, increasing approximately 10% to 12% versus pro forma third quarter of last year.
Third quarter core advertising is expected to be flat to down low single digit percent versus third quarter of last year pro forma.
The downside of the range is driven by anticipated political crowd out the absence of Olympics and macroeconomic factors, while the high end is driven by growth of our digital revenues.
Third quarter adjusted EBITDA is expected to be between 197 and $215 million compared to $190 million pro forma last year with the increase primarily the result of higher political revenue, partially offset by the management fee deferral higher network programming fees.
<unk> technology and infrastructure upgrades sales cost on the higher revenues news content and Nextgen initiatives.
Adjusted free cash flow for the quarter is expected to be $162 million to $182 million were $2 32 to $2 60 per share.
For the year based on current assumptions and receipt of the delayed tax refunds, we expect adjusted free cash flow per share of approximately $11 90 to $12 70.
For 2022, excluding Diamond January and February results, and so with that I would like to open it up to questions.
Certainly.
The floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question you. Please pickup your handset if listening on a speaker phone to provide optimum sound quality. Please hold just one moment, while we poll for questions.
Your first question is coming from Dan Cornett with <unk> with the benchmark company. Please pose your question your line is live.
Great. Thanks, Good morning, Neil.
We can just talk a little bit I guess, maybe for Rob or Chris just around the interplay between.
Political in crowd out and what Youre seeing just overall, obviously, Chris in your prepared remarks, you mentioned no. One has a crystal ball, obviously, none of us do that would be great.
Just in terms of all of the commentary we've heard out there just around.
National softening, we've heard that local has held up better.
If I pull out political from both years and exclude tenants.
It looks like core was down a little bit worse, just within the broadcast segment.
So maybe just kind of talk through what you're seeing there you gave some category color, but just sort of expectations maybe on.
How that trends or how that holds up based on either cancellations or what youre seeing in the marketplace.
Yes, Dan this is Rob I'll take that.
We're seeing retail medical categories.
We're strong in first quarter and confusion.
In the second quarter as well as mentioned services, which is our largest category.
Saw some weakness due to the insurance.
Sub category within that category.
Auto.
It is now coming on a go forward basis.
Annualized it's come full circle with the chip shortage. So we.
Or a new normalized look until the chips.
Suppliers.
So that will not be a drain on our space.
Sports betting category will be down slightly what we're seeing is it's crossed the 50%.
Threshold. So dollars are moving the network and where our opportunities are is one in each state opens up and we expect Ohio to open up that's where we'll see the money coming in.
And.
Due to the fact that we built out a robust digital.
<unk>.
We believe that both on there in digital.
<unk> remain the buffer to keep a strong on a go forward basis, we will see some spot weakness on the court just due to the record political that that is coming in.
For the first half of the year is robust we have many races.
Going on in our key markets that will drive our business for the rest of the year and all of this is Dan I'll just add to that so when you think about <unk>.
Q2 core being down low single digits, but having a record political quarter insurance going through various issues auto still not back.
We're very pleased with that outcome and then looking forward Q.
Q3 will definitely have significant crowd out, but the political will be tremendous again as we anticipate and then Q4 will have a half a quarter of political but also we're going to be lapping.
The impact of the cyber event, we had last quarter. So that the year in terms of core advertising revenue in general looks very positive.
Going forward I'll add one last thing.
We've done extensive training on how to sell throughs down economy with our local sellers.
So they're having those conversations on contiguous basis with our with our local and regional clients and how to get through a potential recession. So we think were four to five to go forward.
Got it and just to be clear you're not seeing at least at this time any incremental cancellations or anything that would make you. Additionally concerns relative to what we've heard from many others.
No. It's some sporadic cancellations, but on the upfront.
Through our Sinclair Sports group themselves a house of brands, we've seen a linear ad.
Mid to high increase.
On spot.
43% increase in our digital spend so what was later during the upfront leads us to believe we will be okay.
Got it that's helpful. And then this world Cup to later, which could help television viewing and then just sort of on the Retrans side.
Mid singles is not.
A little bit better I think than broader industry, which has been the trend for broadcast just any thoughts on sort of sub trends or <unk> net re trends change in outlook for the balance of the year just want to get a sense of what you guys. How does that as you're looking going into 'twenty three.
Yeah, So I'll take that one Dan So we continue to forecast gross retrans to grow mid single digit percent this year.
That's assuming mid single digit percent subscribe, our churn, which is what we did see in in.
In second quarter, and then just.
While it's too early to provide any outlook for 'twenty three what I will say is we have in the fourth quarter of this year, we have our ABC affiliates, which renew.
And then on the distributors.
Distributor side, we have about just over 30% of our big four subscribers that renew in the back half of next year.
Alright.
That does it for me thanks, very much glad to see I'm not entirely crazy you can say broadcast a little bit sticky. So thanks guys.
Thanks, Dan.
Your next question is coming from Stephen Chahal at Wells Fargo. Please pose your question your line is live.
Thank you maybe first just on political could you add any more context to what drove such strong results in the second quarter I assume it's a lot of primary activity, maybe some state referendum.
It'd be great to maybe help us think about it versus either 2018 or 2020 in terms of what was candidate money doing and what was issuer Pac money doing.
And now that we're kind of through a lot of those primaries are you seeing the same sort of strength versus 18 or 20 kind of continue as you see the bookings come in for the third quarter, maybe just sounds like things are really really strong I'm just trying to get as much color as as we can there.
And then Lucy I was wondering if you could just provide us with a little more color on the cash tax refund does that impact your Nols at all is it separate.
And could any of that extend and could you see anything like that in 2023 as well. Thank you.
Yeah. So let me do the cash taxes for so.
So you have our forecast for this year, which is 138 million total for.
Refunds.
So what has not come in yet is 158 million.
Refunds, which the IRS has already approved it's just held up in their processing. So we had that in our second quarter guidance and Thats now pushed into the back half of the year and.
And so that's that's just timing and then Oh.
Again for 'twenty, three still too early to put out any kind of estimates for 'twenty three.
We do have a few.
Some other additional audits that are that are in process with the IRS, but again too early to say.
Outcome and timing of those.
But those audits to be clear do result in a further returns. We just are they still are in process.
And on the political side I'll set the macro first.
It was estimated at $5 7 billion was spent in 2018.
The cross screen media is most recent calls for $9 billion to be spent in 2022. So first half of the year. There were many issues that were driving it.
As well as.
Some of the primaries, but when we look at the issues on the ballot.
We have religion issues abortion issues gambling issues firearms amendment.
We have a board matter.
Sure.
Recreational minimum wage.
Citizens voting rights al.
Right to war. So we think all of those factors are going to drive where we're at.
The issues pop up.
That we don't see.
And in Florida, Christy just announced.
That is.
He's raised $20 million for the rates there so the money keeps coming in.
Across the country. So thats why were were very robust in our estimates.
Thanks, and maybe just one quick follow up.
Are you able to update us on how many bally shares are now owned it at PEGI or SPG and any progress on those performance warrants.
Okay.
Follow up in a SEC on the specific number I don't have that at the tip of my fingers, but in terms of.
Our performance metrics, which we believe are very low and we have 10 years to 10 years from the original date of the deal to to achieve them or rather bally's achieving them in terms of total users.
We continue to if they have launched in six markets now with their latest offering which takes the technology from from Europe .
And brings it to the U S and so they have made progress towards those objectives.
Performance.
Level, they have not reached them yet and we continue to believe that they will be easily achieved within.
The span of time.
The number of shares.
This $12 8 million share equivalents, yes, sorry, $12 8 million.
That's the total that's not subject.
Subject to performance levels.
Operator. Your next question is coming from Aaron Watts at Deutsche Bank. Please pose your question your line is live.
Good morning, everyone. Two questions from me I guess first Lucy you were able to take advantage of discounted bond prices in this past quarter could we see more of that and.
Hoping to hear your updated thoughts around leverage for the station group now a question I ask in light of a large portion of the management teams from Diamond now being deferred that were previously paid in cash you see that impacting leverage in and where do you see leverage living over the near term horizon.
Yeah, So look Erin.
Here at the company, we've been opportunistic over time, whether it's on the share shares or the bond side. So you could see us continue to be opportunistic on that front.
I would say.
When you think about our liquidity today.
End of the quarter, which was almost $1 1 billion and our total net leverage low fours, which is in our target range.
And then going into the back half of the year, which is when the height of the political season will take place.
The cash tax refund.
And we will we expect to end 2022, and a very strong balance sheet and liquidity position.
Both from a leverage and liquidity and so when you think about heading into 'twenty three in a non political cycle and if there is any kind of a.
<unk> downturn in the economy, we feel very confident that we are we would enter that period in a very strong position and very strong leverage levels and then not dimension.
<unk>.
We strengthened the balance sheet further by taking out any of the near term maturity. So.
Ended up being any kind of financial.
Marketplace stress, we don't have any debt maturities to come up for another four years. So so again very strong position that we've been working towards.
For this year strong free cash flow that we'll generate this year and that will put us in a very good position heading into 'twenty three.
Okay, Great. That's really helpful. And then my second question. It's been some time since I've asked about tennis channel, but you highlighted some themes. So I thought I could follow up.
With Serena seemingly close to retirement and a couple of the big three players playing less or also sadly nearing the end of their professional careers.
How is that impacting viewership throughout the year and for the network and then also adoption of the App and then.
Secondly, given how competitive bidding for sports rights has gotten can you remind us how long the key deals are locked up for a tennis channel and then.
Finally, as tenants now generating positive EBITDA for you and does it fit strategically with the states and group going forward.
Sure so.
We have seen some ratings clients recently with some of the bigger players playing less as you mentioned, but we have a lot of optimism around the new crop of men.
That are coming through the system and.
On the women's side like Coca Golf, and Naomi Osaka. So there is a new generation of stars being born as we speak and.
We think as they match rate into the process.
So that'll be good for viewership and in terms of App and streaming.
That has been a huge area for growth.
With tennis authentic added streaming is up something like 200% this year the the S five product.
Which does not include the main content on tennis channel.
That'll be something sort of end of 'twenty three beginning of 'twenty, four that will or rollout, but the extra content on PC plus has reached new highs. This year in terms of subscribers. So there is a huge opportunity on streaming.
Generally speaking and not to mentioned T two being.
Top three sports channel on Samsung TV once that one year of subsidies over it's going to expand into other.
Fast channel platforms is also going to expand internationally.
We have that challenge in some of our international markets, but the rest.
We will also expand into a into the SaaS channel environment. So there's a lot of growth vectors.
That we're very excited about four for tennis and your second question in terms of.
How long.
These contracts are I mean, it goes it really varies.
And all the way from <unk>.
2022, all laid out to 2035.
And one of the one of the things that we really like the things we like about tennis is that it's a fragmented industry. So we don't rely on one single.
Our party for Reits, we have multiple counterparties for Reits.
And that means that tennis channel has a stronger position within the value chain as the aggregator within this space.
And so we don't worry about necessarily any one.
Rights deal when it comes to tennis because of that fragmented value chain. So it really is a good industry setup for us.
And in terms of your question on EBITDA.
It is positive I mean, its admit that it's more than paid for itself since.
Since the acquisition tennis channel, but it is it's less than 10% of our total EBITDA within.
<unk> SPG.
As I mentioned before it really has multiple growth vectors that we're quite excited about including international where it's in eight countries total.
With more being added in the future and in those countries. We are starting to add live rights like in Germany, Austria, Switzerland, We added the WTO rights, we will start to do that in other territories, we will have as spot platforms and SaaS platforms in these other countries.
It is it.
Got it great multi platform strategy with tennis Dot com being at the center of the digital strategy that'll go multi language across the globe.
Tennis by the way has felt the same in <unk>.
Just about every language that matters.
Strong non S five strong on batch channels.
And as I mentioned that at some point in the not too distant future. We will also have a direct to consumer strategy here in the U S for.
For the main product in.
On tennis channel and then lastly, it also is expanding into other sports.
If you've watched tennis channel recently, Youll see pickle ball coverage.
Which is the fastest growing sport in America, and we're going to get more involved in that sport as well as other lifestyle sports to continue to expand.
Raising production capabilities that we've built out for tennis channel. So we're we couldn't be more excited about tennis channel in terms of its future.
And.
It does it's not necessarily strategic to the television group, but it is a great asset that we think is worth it.
An incredible amount of value.
So Aaron also I'll add is that there's always this cycle of generations arena up until Wimbledon haven't played for 12 months and the others.
You have the U S open story with the British.
<unk>, who is now playing in a DC.
D C right now you have Carlos Alvarez.
As the next generation Spaniard coming up.
It is considered to be more advanced than where Rockwell was now rafa.
Sure.
Credible career, so you don't know where that careers going but even in Indian wells, which is considered the fifth major American tower Fritz one thats one of them and so there is a next generation coming up on both sides of the women and men.
People tune there'll be the next idle.
All the kids that are playing across the country.
Yes sure sure your enthusiasm about the younger crop I appreciate all the details.
And the time thank you.
Thank you.
Your next question is coming from Barton Crockett of Rosenblatt Securities. Please pose your question your line is live.
Okay. Thank you.
I was wondering if you could talk a little bit more about what youre seeing in pacing so far in the third quarter I understand you talk about what your guidance reflects but what do you what does that how does that kind of outlook compared to what youre seeing right now and just more generally I mean with all this nervousness about the macro I know you talked about insurance I don't know if that's macro related to what degree are you seeing.
Macroeconomic headwinds or not.
In your ads business.
Yeah, I could give you some some color.
We're pacing the outlook, we're pretty confident with us again.
With the.
Extensive political artificially will tighten up.
Our supply which will lead to two.
The increase rates corresponding with the diminished inventory.
On the macro level like I said, we're coming around the corner. So we will have apples to apples pace with the chip shortage. So we'll have some normalized environmental pace with auto which.
<unk> had been a drag for the last several quarters.
<unk>.
Again, we are selling through this tougher economy and local advertisers continued to be strong.
Upfronts, we saw strong activity and again im not ready to call, where where the economy is going to go long term.
Due to the strength of all our digital assets that we've built in our portfolio that sells.
Cross platform, we feel we're in a good position.
I'll just add to that despite significantly more political coming in in Q3 whats embedded in our guidance is not really any.
The material.
Reduction in the core advertising.
In Q2, so I think that is a pretty strong statement right there.
And whatever weakness we have seen like in insurance.
That.
Certainly is driven by some macro concerns a lot of insurance companies.
Ended up having reduced profitability due to various environmental.
Disasters and whatnot that have hit there.
Underwriting profitability.
That is.
Pretty unique to apt to insurance.
Auto situation is pretty unique to auto given the chip shortage.
So we're not we're not really seeing broad macro pullbacks.
And in the advertising market, it's more industry specific based on various supply chain issues or <unk>.
Industry specific issues.
Okay, and then if I could just follow up on one category that you guys have highlighted which was sports betting.
It sounds like from what Youre, saying that the pressure there is really allocation of dollars to national networks, because they are now large enough and presence and footprint for sports betting to do that just want to make sure I understood that correctly and then.
It sounds like Youre, saying that the growth driver from here, it's going to be new markets opening up like Ohio.
But then it sounds like over time that that movie will be the year to date gone tomorrow it looks to national.
So I'm just wondering if this has been seen as a big growth category.
Not just for openings, but overall.
Should we feel about sports betting as a growth category for local television from here do you think.
Yes, I think its flatten the cost of acquisition has gone over $1000 and.
I think we have to wait because of mine.
My subjective opinion.
It's been on the street is that there'll be some consolidation because the cost to acquire.
On active better.
No.
On the broadcast side, they might buy some high profile sports but.
We see it flattening, but when we get into our sports segment in a couple of weeks is a much more robust in the sports segment.
So, but I would add on the sports betting like theirs and a new category like this.
There is always ups and downs of volatility, but bigger picture. This is a category that did not exist a few years ago.
And.
Is set to become somewhere I don't know where maturity will be somewhere between five and 10% of our total mix.
Well, that's a pretty significant category that didn't exist three years ago and.
I think that it will end up maturing and end up being.
At 5%, 10% category, which is huge.
The other thing.
Kristin.
Sir Tidbit on on sports betting is that.
On the <unk> side.
<unk> continues to grow and the incredibly strong. So there is the that is.
Any of that sort of points that Rob made.
About national and that would not be applicable to the our census, there sort of a tailor made fit for.
For for sports betting.
The other thing to think of us as we progress through the year, we'll be adding game centers to the broadcast websites.
That'll be opportunities for sponsorships and.
Again to increase our first party data as well so we believe in a lean forward strategy. So the key issue.
<unk>.
Broadcast them on our sports side will become prevalent.
Okay. That's helpful. Thank you.
Your next question is coming from Edward finally at E. F. Hutton. Please pose your question your line is live.
Hey, guys. Thanks for taking my question just to.
Piggyback on <unk> question I was wondering if you could give some more color.
On the strength in digital.
For them.
Yes look.
We believe obviously our station websites with.
Monthly averaging between 80 and 90 million uniques.
Gives us a huge opportunity to <unk>.
Launch many different business opportunities from that gamification to e-commerce to marketing affiliates to.
Launching some of our own products that will be sold directly to our core audiences.
Well.
As we said we had record audience.
This channel Dot com during the French open so our whole thesis is that we're going to give our audience an opportunity to receive our content, where they want it how they want it so.
We feel really strongly about that and then compulsory our SaaS business. There is a major focus on growing that business in <unk>.
Being a dominant player in the local space.
Okay.
Challenging to acquire additional customers given kind of the macro weakness here for <unk> specifically.
Now because we.
We don't believe so because of the SaaS business people will be in there you're seeing this percentage of budgets going to CTV.
And so, especially during the political crowd out we expect the money to be shifting that.
That would've gone to some of the core go into digital expenditures.
And then the other thing to remember about compulsory 60 is that it's unique in that it offers transparency and flow through pricing in a mall.
Place that's dominated by arbitrage pricing.
So as people.
Seek to make to have more transparency to be more efficient to keep more of the media margin for themselves.
Can pulse answers all those questions and does so in an automated.
Efficient way so that value proposition is very very strong and I think it will only get stronger.
As you know as things potentially get tighter.
Great. Thank you.
Your next question is coming from David Hamburger with Morgan Stanley . Please pose your question your line is live.
Hi, Thanks, just a couple of questions and noticed the BSG management fee deferral resulted in $16 million produced revenue in the quarter.
Wonder if that a good run rate that we should think about going forward for that number and then can you tell us kind of you mentioned that also in the EBITDA results, what sort of margin should we expect on that team.
Yeah. So on the so on the management fee.
Because again, we're booking on a cash basis.
As opposed to the total.
So I would I think you're gonna be safe. If you just build in similar run rate, which was about $10 million for each of the quarters going forward.
Okay.
And what sort of margin for EBITDA purposes should we be thinking about on that.
It's pretty much a 100% flow through yes.
Yes.
Okay, Great and then just to reconcile.
Cash and no debt.
DSG our facility by about $400 million was about $163 million drawn last quarter.
Can you tell us how much either a decrease or increase in that outstanding.
Effected Sinclair as cash balances.
Since.
The counterparty to that somebody else's.
Increased earnings.
Once it is around $200 million.
I'll turn it over here.
Three I think.
Hold on a minute David we.
It just didn't have that number handy.
Yes.
But that.
That number.
That facility is not in our cash number.
But do you have the counterpart of the footprint.
Yes, so it went from $163 million drawn at the end of last quarter too.
$93 million drawn this quarter and again, that's going to fluctuate based on base.
Based on their AUR that's outstanding.
Okay.
I know usually you give.
It kind of.
And then the question was asked before and maybe elaborate a little bit.
The deferred tax asset.
From Diamond.
The refunds I guess, it's more of a just a timing issue how.
How much remains.
The deferred tax asset.
But you are holding on Sinclair was balance sheet.
As a result.
Because I know diamond with be consolidated for accounting purposes, like and for tax purposes.
Sure look there.
We don't have that we can follow up David with okay with that.
Number is but there is still significant.
Tax benefits flowing through from from that ownership.
Right.
Okay. Thank you very much okay. Thank you.
There are no further questions in queue at this time I would now like to turn the floor back over to the President and Chief Executive Officer, Christopher Chris Ripley for any closing comments.
Thank you all for joining US today, if you should need more information or have additional questions. Please don't hesitate to give us call.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.