Sinclair Broadcast Group Inc. Q1 2023 Earnings Call
Good to everyone and welcome to the Sinclair first quarter 2000 twenty-three earnings conference call.
At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
It is not my pleasure to transfer over to your house.
And as long as yours.
Mmm.
Participating on the call with me today are Chris Rapley, President and C E O and Rob White for President broadcast and Chief operating Officer.
I would like to also introduce our new Vice President of Investor Relations Christine who were excited is joining us Chris comes to US from Windstream Communications, where he was vice president of Investor Relations and before that Euro Health services, where he served as vice president of Investor Relations and financial.
Planning and analysis.
Before transitioning to the corporate side Christmas a senior equity research analyst with Stifel Nicholas.
Where he won numerous awards for his stock picking and earnings analysis in the T. M T space welcome Chris.
Before we begin I want to remind everyone that slides and supplemental information for today's earnings call are available on our web site S. B G. I dot net on the Investor information page and on the earnings webcast page.
Because we are currently soliciting proxies from our stockholders in connection with the previously announced holding company reorganization or statements regarding the reorganization will be limited to statements contained in Sinclair inks prospectus.
And Sinclair broadcast group's definitive proxy statement.
Each filed with the S. E C. On April 26, 2023, as well as the Reorganisation Q&A followed by Sinclair broadcast group with the F. C. C on April 2nd.
Our stockholders are urged to reach read these documents because they contain important information regarding degree organization now.
Now Billy Joe Mcintyre will make are 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 are filed.
The S E C and included in our first quarter earnings release, the company undertakes no obligation to update these forward looking statements. The company uses that the website keeps the rest of company information, which can be accessed at www Dot S. B G. I F dot net in accordance with regulation F. D. This call is being made available to the public.
[noise] frequently used by industry analysts investors and lenders as a measure of evaluation.
They're not formulated in accordance with gap and are not meant to replace gap measurements and may differ from other companies uses or formulations. The company does not provide reconciliations on a forward looking basis.
[noise] discussions and reconciliation that accompanies non-GAAP financial measures to comparable GAAP financial measures can be found on his website www dot S. B G I thought nah.
In addition, given the deconsolidation of Diamond on March 1st of 2022 and in order to have a meaningful discussion around comparative results and trends all discussions of prior financial reporting periods. During this call reflects Sinclair only pro forma numbers and thus exclude diamond in any intercompany transactions with them and it could businesses sold in the prior 12 months.
For actual results, including their periods. The Diamond was consolidated please refer to this morning's earnings release, Christopher plea will not give an update on the strategic direction of the company.
Thank you Billy Joe.
I want to begin or announcement to reorganize or I want to begin with her announcement to reorganize under a holding company.
Under the new structure, which we expect to close in June Sinclair, Inc. Will become the publicly traded parent of Sinclair broadcast and its subsidiaries, which will hold the pure play broadcasting assets and a new subsidiary Sinclair ventures that will hold this company's non broadcasting assets.
We believe this will provide greater flexibility for creating value within the company.
This simplifies the corporate structure and improves the transparency of financial results and disclosures on the value drivers of the business another.
Another way to think about the new structure.
Is that our broadcast assets or Maine, and Sinclair broadcast group, while our non broadcasting assets, including tennis channel can pulse and are non media assets like real estate venture capital private equity indirect investments will be adventurous.
While we're optimistic about the future prospects of our core broadcasting business and it's continued transformation through investments in news programming cloud and next Gen. Broadcast continued regulatory uncertainty is causing us to think differently about the allocation of capital.
With continued governmental restrictions on broadcasters ability to transact transform and negotiate.
We intend to allocate more capital to growing non broadcast holdings, such as future opportunities in India or Nextgen technologies are swiftly advancing.
This reorganization will allow more flexibility for transactions transparency around the sum of the parts.
Ultimately, creating a non broadcast division free to raise debt or equity financing to grow its assets and a broadcast division that is pure play and focused unlocking overall value for organization.
Speaking of value creation in recent weeks in advance and then maybe we made several exciting announcements around the batsman of Nextgen broadcast technology.
In particular, we announced that Sinclair, along with our partners cashed out error S. K telecom and thank you lapse will build and operate Nextgen broadcast data distribution core network.
This will create an interconnected platform available to all broadcasters to provide commercial services and solutions for <unk> for national data distribution.
This platform will manage data casting across the U S and will help stations capitalize on Nextgen.
Opportunities, which independent studies estimate at a 10 billion dollar revenue opportunity for the industry by 2030.
We believed data distribution is the next step in the evolution of broadcasting, allowing us to continue to provide exceptional and enhanced video programming with interactive services. While at the same time repurposing the remaining capacity of our channels to meet the needs of data users nationwide.
These businesses did this use cases provide a data agnostic I P pipeline to serve communities better on market disrupting terms that can increase the value of spectrum for all broadcasters.
We expect our data distribution coordinate work and platform to go live in Q1 of 2024.
Also continuing to deploy Nextgen broadcast technology, an additional markets and.
In April des Moines in Rochester, where the latest of our markets to roll out the service with Sinclair, serving as Nextgen host in both markets.
Next Gen broadcast was also deployed in San Francisco and although it is not our market. We are pleased the technology is now increasingly available in the top 10 markets.
We used deployment spring Nextgen broadcast technology to nearly 70 markets covering over 60 per cent of the country with an industry goal of 75 per cent U S coverage by your end.
One of Nextgen broadcasts key features is advanced emergency information and we will be launching the nation's first pilot project. He used that capability to disseminate this critical service with enhanced broadcast features.
Through a partnership with a Metropolitan Washington Council of governments, we provide we will provide free over the air redundancy and enhancements to emergency messaging currently stamped by local governments via text email social media and other systems.
Initially the pilot launching this quarter will focus on Arlington, and Fairfax counties in Northern Virginia, and the district of Columbia, but will expand to other jurisdictions in the coming months.
We also announced an agreement for Watermarking technology that will allow owners of Nextgen capable T. V's to access the broadcast App experience no matter, how they get their broadcast programming over the air B F. A T V services. This increases the addressable market for T V homes that can access the broadcast app for.
Or full.
As part of Sinclair has continued evolution. We also are re imagining much of our operational workflow and adding enhanced capabilities to our technology newsgathering and media operation systems.
We have entered into partnerships with several providers and platforms that align with our vision for transformation.
We have begun migrating our existing media and play out operations to the cloud, which will help further our goal to create compelling multiplatform local news and sports content that could be distributed across fixed and mobile devices as well as interactive experiences for communities and fans.
It will also enable enhanced tools to be integrated across our networks for advertisers and partners.
To that end, we announced we will launch the first over their local broadcast station affiliate play out origination in the cloud, which is set to go live in Raleigh, North Carolina in June 2023.
Sinclair will also be adopting an innovative cloud based workflow for newsgathering integrated news production and software to increase the speed of news content delivery to our audiences reduced connectivity costs and enrich the flow of news metadata.
As mentioned last quarter. The cloud migration costs are included in our full your expense guidance.
We will be <unk> and be investment mode for the next 18 to 24 months and anticipate to generate a positive ROI thereafter as a company we continually seek to optimize our workflows for the best R Y N operational outcomes and believe these partnerships are another step towards our multiplatform transformation.
And Q1 of this year, we announced several partnerships agreements. Most recently with you tube T V to add carriage of tennis channel and T. Two two inch lineup beginning June 1st to coincide with Roland Garros the French open.
Agreement also adds charge and TVT to Youtube T V service offering and reused carriage a comment bringing all three of us in Claire's national multi cast television networks to you tube Tvs might've offering subscribers access to top fan favorite series and franchises.
In addition.
The agreement extend you two t's existing carriage of Sinclair C. B S and my T V affiliated television broadcast stations.
We also reached an agreement in principle with Hulu, which saw the return of our a b C stations to Hulu plus live T V.
Those stations began airing on Hulu platform, a couple of weeks ago.
Additionally, R. C. B S affiliated stations have returned to <unk>. After the C. B S affiliate Board Paramount and flew Bo reached agreement last month.
We recently released our first annual ESG report, which highlighted the continued upgrades, we are making to energy efficient equipment and our commitment to lowering our energy usage. Overall, we also expanded employee programs to further strengthen diversity in equal employment opportunities furthering.
[noise] art community outreach and enhanced governance and risk management.
Throughout our history Sinclair has prioritized, giving back with an unwavering commitment to the people and communities we proudly serve.
Through our latest Sinclair cares initiative, we partnered with the National Alliance on mental illness to launch Sinclair cares mental health support and help a company wide an air campaign to encourage mental health awareness and suggest resources with a particular focus on young adults.
Sinclair also entered into a multi year national agreement with U S. C show up Foundation, the Institute for visual history, and education to assist with the recording of interviews with genocide survivors as part of the Institute's last chance testimony collection initiative and effort to collect testimonies from the.
Last living survivors and witnesses to the Holocaust and other genocides.
And on April 12th we launched our first Sinclair day of service and employee led initiative encouraging all of our employees companywide to dedicate the day to getting back to our local communities.
The data thousands of employees across the company volunteering their time and skills to local non-profit organizations, including food banks homeless shelters veterans organizations diaper banks community cleanups and animal shelters in our local communities.
Sinclair day of service or return to our calendar each spring.
By prioritizing sustainability diversity and good governance, and an emphasis on getting back to our local communities. We are not only doing what is right for our neighbors, our people and our planet, but we are creating longterm value.
Speaking of the longterm I want to congratulate tennis channel, which celebrates its 20th anniversary. This year and just two decades tennis channel has created an enduring business with exciting growth opportunities to build on there are many past successes and solid prevent financial performance.
Now I'll turn it over to Rob foreign operational update thanks, Chris.
Coming off a record midterm election year 2022, political spending is sorted out strong with over 3 million booked into one which is double the spending a Q1 2019, we were excited to see this friends and political candidate an issue spending. This early in the year, we are projected political spend too.
Two new and set us up nicely <unk> presidential risk and the 20th 24, which we expect to be rugged blasi once again.
Our success in <unk> high profile time periods, such a superbowl in March madness resulted in advertising in the first quarter, achieving the high end of our guidance.
Core advertising decrease slightly in the first quarter compared to the same period a year ago. The.
You're automotive category has been steadily rebounding since the beginning of the year and we are seeing low single digit increases due to face along with this drug illegal in retail categories.
He has positives are offset by softness and insurance category.
Second quarters is expected to decline low single digits, but and one with two one cor when you exclude the superbowl and March madness.
This quarter, we began rolling out the first phase of our unified at platform, which combines all of Sinclair is advertising linear and digital assets and allows ourselves increased velocity cross platform AD campaigns by highlighting the combined reach and frequency.
The technology makes it the first local broadcasts that follow all sellable inventory into a single system Oh.
<unk> goal is to make sure all our inventory is usually the package.
Price and maximize revenue while meeting the goals of our clients also completed the national rollout or your management platform with dynamic pricing <unk>.
Platform uses artificial intelligence machine learning so the algorithms gets more of a baseball history and pricing will be adjusted based on the current supply and demand.
Ensuring pricing of lines with supply and demand of the marketplace will allow us to reduce reactions saves time and make it easier for ourselves.
<unk> <unk>, how much they should charge for getting paid.
Also allowing us to maximize revenue.
Tennis channel.
<unk> two one.
We've seen an increase in our audience in adults 25, 54, which was up 15% adults 18 to 49 up a percent total viewers up 8% and households were up 7% the stripes or torn a as in Indian wells and Miami led to March having the highest average audience.
Key demos since 2019 and it was the second best Mark ever for both household and total views.
Our second channel T. Two is also set records in the 20th 20th <unk> within a O L. As in Miami, leading to March becoming the top month and its history and both users and hours Walsh.
Are alive and via the subscription service <unk> more than 3.5 million hours screens in the corps and new year over year total subscribers are up 33%.
Outside of the U S <unk> aluminum nationalists grown 73% numbers sessions year over year.
International distribution has grown grown as well we've added L. G. As a partner now reach approximately two thirds of the sports television set in Germany, Austria and Switzerland.
At the end of May tennis will become a French open dedicated network for two weeks and we anticipate airing over 2000 hours of the tournament across them Astraddle T. Two sent Michele Foss.
There we are launching a partnership with a leading digital retailer launch a white label tennis channel shop, which will allow us to create and merchandising revenue stream.
P C shop will launch sometime in the second quarter.
Broadcast stations continue.
Continue to be recognized for their dedication to community advocacy journalism.
As of March or stations, one thousands of local awards for their report.
In Baltimore W. B F. Fs investigated <unk> project Baltimore was on it was a national Irve Award for the investigation to default Baltimore Public School system, which was found to be denying students with disabilities, a proper education and violating their federal education Brian .
And our station in Cincinnati W. K R. C was named a finalist this year reporting on radioactive contamination in Ohio.
This is the fifth consecutive year that Saint Clair stations were honored with National I R. E Awards and the fourth R. R. E Award for at W. B F F.
We're also seeing our Sinclair Care's community outreach program received recognition. This year Sinclair received two anthem awards for humanitarian action for our 20 twenty-two fundraising campaign, so Claire cares somewhere on your release.
Chris mentioned with partnership with the National Alliance on mental illness.
Recently out of town, all special to encourage mental health and wellness and cheese will expand the expanding that partnership with a townhall special to drugs opioid addiction, and the epidemic facing the country.
Our news Division will also be tackling the topical subjects of artificial intelligence as well as cyber security and identify the entity theft prevention and upcoming Townhall special in response to our viewers requests for information.
Two of our local podcast was in Erika Baker about a missing child for this virus station in Dayton, and unsolved Carolina, which focus on the Murdoch murders produced by our station in Charleston, South Carolina, and Florida Cross platform strategy across you too take talk and other social plop form which led to millions of.
<unk> and downloads across the country.
Utah news coverage of the destructive floods across multiple platforms and the video was viewed over 50 million times on fixed up illustrates the power of local journalism and solid local reported while using all platforms were incredibly proud of reporting on our communities and the <unk>.
We are doing within the <unk> I like Chris would like to thank our employees for the date of service and giving back that it can be relieved that we live in and now I'll turn it over the Lucy thank.
Thank you Rob.
As a reminder, or slide deck and our financial supplements are on our website and we'll help you follow along.
The 766 million of media revenues came in at the high end of our guidance range with core advertising, achieving expectation and political and distribution revenues, surpassing the high end of guidance.
The beat on distribution revenue was on slightly better subscriber churn than expected as.
As compared to the first quarter of 2022 media revenues were down 6% driven by the absence of political AD revenues subscriber churn the diamond management fee deferral and core advertising.
Adjusted EBITDA 120 million for the quarter exceeded expectations due to media revenues coming in at the higher end of guidance and needy expenses, b and better than expectation, primarily on timing and to a lesser extent cost controls.
For the Kuwait or adjusted EBITDA decreased 40 per cent compared to the first quarter of last year. This waste. The result of the lower media revenues has discussed and higher corporate and media expenses.
The driver of corporate overhead with group in general insurance cost annual compensation increases and one time expenses for professional fees.
The media expense list compared to last year was also dude annual compensation stat bumps as well as the timing of tennis tournaments and investments in technology.
This was partially offset by a reduction in cl's expenses.
<unk> expenses were also impacted by higher programming fees to the networks.
Speaking of which and as a reminder, on net Retrans. We previously reported that since we don't have material distributor contracts renewing until the latter part of this year and with continued subscriber churn of mid single digits expect it.
Our expectation is for net retrans in 2023 to be lower than 2022.
Then grow in 2024 in 2025 as distributor contracts renew over the next 12 months as a result at three your net re transcribed rate is expected to be low single digit percent.
It just a free cash flow of $71 million in the quarter also exceeded our guidance range with the gesture free cashflow per share of one dollar for the quarter and diluted earnings per share of $2.64.
We ended the quarter with a cash balance of 623 million combined with our undrawn revolver, our liquidity with almost $1.3 billion a quarter and.
Total debt at the end of the first quarter was 4.3 billion in S. T. G. 's first lien indebtedness ratio on a trailing eight quarters with was 3.5 times, while total net leverage to the bonds was 4.4 times.
As discussed in last quarter's call. We do expect total net leverage to increase this year timid five times and then improve by the end of 2024, primarily on a strong political year.
During the quarter, we repurchased approximately 3.6 million common shares under 10, B five one stock buyback program and an additional 5.2 million shares since March 31st.
Presenting approximately 13% of the total shares outstanding at the beginning of the year.
Our total share count at the end of the quarter with 68 million.
Turning to second quarter guidance, we expect media revenues to decline compared to second quarter of 2022.
Due to the absence of political spending and continued year over year mid single digits subscriber churn.
Second Kurd, our core advertising is expected to be damn low single digit percent versus the second quarter of last year with the declining core primarily driven by macroeconomic weakness is rob discuss.
Second quarter adjusted EBITDA is expected to be between 84, and 104 million as compared to 184 million pro forma last year, primarily the result of the lower revenue higher network programming fees.
Timing expenses from the first quarter.
An investment in technology enablers and Nextgen in sales platform cause depression robbed discuss.
Adjusted free cash flow for the quarter is expected to be negative 6 million deposits of 16 million.
And while we haven't provided pull your guidance for adjusted EBITDA, We're free cash flow.
Few things you need to keep in mind as you think about 2023, which make it in a typical year.
First as we have noted on prior calls due to the timing of distribution renewables, we are expecting that retrans to be down euro per year <unk>.
Second we are investing roughly 75 million <unk> in our infrastructure this year, such as moving to the cloud Nextgen technologies and marketing services platforms that are.
I expected to yield future returns.
Finally, there is still uncertainty surrounding the macro economic conditions, which could impact the consumer generally and the advertising side of our business.
We are seeing positive changes in order when some other categories is robbed discussed, but there continues to be softness and services, which is our biggest category in which will need to continue to monitor closely.
Despite the uniqueness of this year free cash flow is expected to be positive as we head into another expected record breaking political year in 2024, and with that operator, I'd like to open it up to questions.
Certainly at this time it will be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.
Once again, if you have any questions or comments. Please press star one on your phone please.
Please hold while I pull for questions.
Your first questions coming from Steven K Hall from Wells Fargo, you're lying is live.
Oh, there we go thank you so I I've I've got a few maybe just to start off on the leverage going to the mid five you bought back a lot of stock in the quarters. So let me just think about the moving parts to leverage is a lot of that cash coming off the balance sheet for investments in.
In stock repurchases combined with some of the investments dragging EBITDA, but we just wanted to get the components of the change to leverage from the four point for this quarter to the to the mid five.
Yeah, so what what's in their speed and is yeah <unk>. The second quarter stock repurchases is a piece of that and then as I talked about just the direction of adjusted EBITDA. This year, which again is a nonpolitical year net retrans being down.
And then the absence political so and the <unk> and the infrastructure. So those are those are the things that are Sunni driving the EBITDA and then you do have the second quarter.
We purchased in there and then that five and a half also assumes a successful closing for hold cow and tennis shifting AD on C. S. T. G attributable EBITDA for leverage and N. As we said in our <unk> around told cause that was worth.
<unk> three 0.3 turns of leverage.
Okay.
Got it that's very helpful. And then Chris you've talked a lot about the value of the investments and ventures in that marketing that you've got at 1.3 billion could we expect any incremental financial disclosure to understand the components of that I'm thinking specifically about real estate and P E in the venture.
It'll investments and just how we might think about those and and Relatedly. How do we think about the accounts receivable facility given diamonds current financial condition.
Sure. So we have to be careful about additional information around holding company cause we do have an outstanding share change offering. So we really can't say anything more than what is in that document without triggering an amendment requirement. So I would point you to that Ah document for.
Your questions. There, we do we will once that closes which is expected to be voted on may 24th and and then the closing in June 1st we will come out with a more detailed.
You know vision around ventures, and you know enhance disclosure is definitely part of the plan. So.
You know we <unk>.
You know what's driving this this this move as as I mentioned in my comments is is this big dislocation between are some of the parts and what's in the in the public marketplace and you can see we put our money where our mouth was repurchasing the stock recently because of the.
<unk> and and so we're very focused on how do we how do we get the right <unk>.
<unk> and the right information in your hands, so that we can get properly valued and and so we're we're looking.
Looking at all options in that regard.
And and then in terms of your question around the air facility I would expect.
You know that a our facility to to get refinanced at some point in the future.
And you know it is a it's it's we're happy to continue to hold it provides a reasonably good returns and it has high quality.
Security in the form of a R. So.
But but our expectation is at some point that would be refinanced.
And then just just the last one for me I think the recent reorganization filing did have a new risk factor that wasn't in the 10-K, suggesting that the diamond bankruptcy could mean, either legal action or adverse tax consequences can you just help us frame any material risk that you see at this point or a financial liability.
Related to the Diamond bankruptcy.
Mmm.
We really can't speculate at this point as it relates to Diamond you know it would be just pure speculation.
And we'll we'll.
We'll be back when we know more in terms of diamond future an emergency.
Great. Thank you.
Thank you. Your next question is coming from bin sauce from Deutsche Bank. Your line is life.
Hey, guys. Thanks for the question just a couple of quick ones. So first I was wondering if you could help us quantify the impact of the expenses shifting from one <unk> and I also noticed that the value of the investment portfolio went up so I was just kind of curious <unk>.
Which asked that saw their value increase and maybe if you could talk a little bit more about that dynamic. Thanks.
Okay.
Sure. It's six then I'll take the first one Saturday sequentially on the the expenses are increasing from media expense is increasing from two one to teach them.
And then also you need to recognize that tennis channel has a different seasonality profile than the broadcast asset. So where is for broadcast you know our biggest quarter is is typically in the fourth quarter, the revenue and expense wise.
For tennis their biggest expense quarter is the second quarter, because that's when Roland Garros happens that's their big tournament and a lot of production costs around that and suggested it cause we haven't <unk> tennison in a few years, but just to kind of <unk>.
<unk> back in front of everybody.
From an EBITDA standpoint, historically, two one would be the best quarter.
Followed by two four <unk>.
<unk> three those are kind of typically close to each other doubt and then two two is there love with <unk> and that's because they're expenses are highest around somebody slams and tournaments and production paw. So so that's gonna be a big driver that sequential to want to cheat.
To move.
And in terms of the investment portfolio there was.
It's hard for me to point to any one asset there were several assets that went up in value in in Q1.
He would've just <unk>.
Improve performance under on the underlying fundamentals <unk>.
And and then we also had a realization in the quarter of 36, <unk> and those were really high returns you know great <unk> apartment buildings that were sold in Q1 and and so they were more conservative.
<unk> March before exited at a higher values and.
You know are now sitting in cash so so the combination of those realizations.
With you know several assets just continuing to perform increase the value.
Would you guys be willing to share a little bit more color about the EBITDA the tennis channel is generating just roughly.
That will come out and in our quarters to come here. After we you know finish the.
The holding company reorder.
Okay awesome. Thanks, guys.
Thank you your next question's coming from Dan Chronos from the Benchmark Company. Your line is life.
Good morning Christmas your gracious enough to give us a little more color around sort of division going forward, maybe I'll ask it that way and try to keep it high level and just note that your peer group has.
Obviously invested in things that are tangential typically to broadcast or have synergistic properties with it you clearly have a more diversified portfolio and what will eventually be adventurous and I'm. Just wondering if you think about sort of future capital allocation you know how important it is to you that.
<unk> in or around sort of core competencies or historical legacy buckets versus new opportunities.
Yeah, you know it's a it's a it's a great question when we take a look at the performance of our investment portfolio, which is currently sitting at <unk> about 19% since.
2013.
That you know without.
It is kind of an obvious statement to say that that's outperformed our equity value over that same period.
And so you know.
And that and that really is it quite diversified set of acids private equity real estate.
There are some assets in there that are complementary to our core business like play fly for instance, which is focused on college and Omar.
And thank you labs, which is focused on.
Next Gen broadcast technologies, <unk>, so <unk>, but when it when we take a look at what we've been able to do their it's you know, it's obvious to us and especially given the regulatory backdrop that I mentioned in my comments that.
There are you know <unk>.
Better returns for our capital in in other areas and so we're not limiting ourselves just to.
Adjacencies within our core business, though if we do find.
Good investment opportunities. There, we will will be you know that that have you that is a cherry on top if you will so it is a more diversified outlook and I think it's it's instructed by our our history and success in those areas.
But there.
If we can find the adjacencies are synergies with our core business. Then then we'll we'll be all over that.
Got it that's Super helpful. And then just distribution, particularly around 10 S E.
You deal I thought I heard you say that the you know the Hulu station issue you had an agreement in principle, but I don't know if they took Kenneth how do we just think about kind of the <unk>.
Opportunity for incremental tennis carriage from here.
Will look at it I think it's a it's a very significant when for the company that you two T V is going to be carrying.
Tennis shell and and and all are multi cast N T. Two.
We we will update you on the agreement in principle with Hulu once once it's inked.
But I can't really get into more details there.
But I think there is there are incremental opportunities for tennis, you know it it had not been on the Virtuals for.
A few years and <unk> it was really sort of the the only one that had now it's adding you to T V. So I I'm optimistic about.
Ensuring that tennis channel is fully distributed on all platforms.
Got it and then maybe just the last kind of odd one for your rubbed his stomach the writers' strike, if there's any kind of a nice flow through or anything.
Curious your opinion.
Back.
Yeah, we're not really concerned about the writers strike if it happens the networks and a lot of library ready to go as well as they could spend up reality shows fairly quickly and the reality shows are right now are travelling with higher ratings. So we don't see that impacting us at all.
Alright, perfect. Thanks for all the collar guys really appreciate it.
Thanks, Dan.
Thank you your next question's coming from Courtney Bowman from Barclays. Your line is live.
Hi, Good morning, guys. Thanks for the question and congrats on the results I have a little bit more of a general question. How do we think about kind of the upcoming negotiations you guys have scheduled for the second half of 23 in the context of what you already might've negotiated earlier this year or they can track alright.
The contracts and I know that you guys are probably limited in what you can disclose but are the contracts. Both kind of you know mmm a function of subscriber matrix or is it is are part of them fixed how <unk> how are those structured.
I assume you're referring to R. M V P D contracts, which yep.
Yeah and in the latter half of the back half of this year, we have about 50 per cent.
Our big for subs coming up with the N D. T DS and then another 40% actually front end loaded to the beginning of 2024. So it's a big period of time, they're back half twenty-three beginning of 24.
There are a lot of our big for subscribers get re priced and those are done on a per subscriber basis with the M. D T DS.
Okay and on the national side or the majority of the contracts fixed are also on a per subscriber basis. So they're kind of moving with you know any subscriber attrition that you're seeing on the M V. P D side.
Yeah. So on the network side and we've got a couple of Ah two big negotiations coming up at the end of this year.
Those it's not universal, but there are more fixed than variable and.
We we do those <unk>.
Every two to three years and are just as subscriber.
<unk> change.
Thank you. Thank you have your next question is coming from Edward Riley from E. F. Hutton Your line is live.
Hi, guys are just some housekeeping on the 75 million in fact infrastructure spending on the sphere, how how much has been <unk> in the first quarter.
And is this is this bucketed in the corporate you in a line within the other in corporate segment.
And so should.
So we spend about 10 million on it and.
In the first quarter and you're gonna see that in media expenses, what what's driving the the corporate.
You know down versus guidance was really around group in general insurance in the quarter.
Okay, Okay gotcha.
Okay.
[laughter].
Thank you. Your next question confirm Avi Sterner from J P. Morgan your line is locked.
Thank you for taking my question.
To hear just telling me an apartment and I apologize if I missed the opening remarks, but can you just talk about how it turned in queue to better or worse.
Maybe.
Local national and then talk about some categories and then I've got one more follow up thank you.
Yeah.
We were watching the headwinds, but right now like we gave him the gardens low single digits local is outperforming nationals, which tends to be that way when the macro economics.
Have some head was but we have a shrimp on our local side by Crazy special units in order of legal we're we're seeing positive those results from those categories. So again won't keep our eye on it but we're not see much differentiation from first quarter and we aren't taking any major.
Cancel is.
I appreciate that color and then one last one for me.
Chris.
And.
I'm trying to paraphrase he was the best I can relocation of investment capital.
Broadcast holdings.
Is M&A.
Hello.
Going to be funded by the T V silo or do you envision raising that potentially at Sinclair Adventures and I have to talk to you in the context of leverage and everything else. Thank you.
Sure so.
You know there are significant resources on both sides.
Sides of the house, if you will and you know there there is no need for you know either side to be supporting the other and so we'll have to just take it as it as it comes in terms of you know what opportunities there are and where.
You know each division is in terms of its schools around leveraged et cetera.
Thank you.
Thank you. Your next question is coming from Barton Crockett from Rosenblatt. Your line is alive.
Okay, great. So.
One of the things I I was curious about was you know last quarter. There was a discussion about <unk>.
<unk> and the designer of.
Now you know you're striking deals with a b M. P DS.
Unable to negotiate directly or is that still not something you're able to do any prospect for that to change at some point.
No we are not able to negotiate directly as of now.
And you know we as I stated in the last quarter and you've probably heard from many in the industry believe that is a wrong that needs to be right at <unk>.
And and feel that you know there is change your foot when it comes to.
You know looking at this sector, which was sort of at least in the beginning viewed as an upstart you know small area that has now grown into a pretty significant part of the ecosystem and <unk>.
And the rules of the road need to be conformed to you know the change and maturity and Scott size and scope of what the Virtuals are so we're very much focused on that you know that you know from the both a regulatory perspective and also just how our relationships.
Work with the networks.
You know there's sort of two ended the coin that we're we're focused on you know getting getting that right sized.
Okay, Alright, and then one of the other things that that came out last quarter. Those curious for an update if there's any was.
The need the desire to have the F. C C drop this requirement too.
Broadcast.
The.
The current kind of H S D versus the next gen.
So you have you were able to kind of more fully tapped that capacity.
Is there any progress there or anything to say you know how long do you think it might take for for there to be some action on that front.
They're actually has been quite a significant event as it relates to to that question. While we were at an a b chairman chairwoman, Jessica <unk> announced that the F. C. C. At the request to the industry specifically in a P. R industry Association.
Is forming a task force.
To accelerate the and complete the deployment of <unk> in the marketplace and and that's something that we we were very focused on getting as an industry.
And the details of that task force are being worked on now.
But certainly sunsetting. The one that I was signals is will be a key area.
Engagement on that task force and the the the there's really two important things from our perspective and really the industry's perspective on the task force one is that it shows.
The F C C who you know is largely.
Taking up time, you know regulating much larger industry is than ours. You know is on the same page as the industry in terms of advancing the three day no standard which is a very.
You know positive from a consumer perspective from a competitive competition perspective. So there is you know alignment there between us and the regulators, where there might not be a line and on other issues like ownership for instance.
And but that is important I think statement and and then the second part is having a task force of both industry participants and regulators that are focused with the goal of accelerating Street I know, we believe will accomplish that goal of accelerating <unk>.
Getting it over the hump getting it through to the rest of the of the country figuring out when we can sunset one day, though and when you can sunset one dot O is when you're going to open up a significant amount of spectrum capacity.
That will really unlock the revenue and value opportunities that we've been talking about <unk> as it relates not only to better higher quality and interactive programming for our communities, but also to data casting.
Opportunities around things like enhanced G. P S I.
I O T devices.
Low latency sports mobile video. These are all we think excellent use cases that that will that will now two significant economic opportunities for the industry and it's it's a big reason why we announced that we're building the for a network to be able to facilitate those.
Use cases at scale you need to have a network an operating system. If you will if you're going to do that.
But the the the last piece of the puzzle is opening up much larger amounts of capacity.
To do those use cases and that's.
That's that's gonna do mean sunsetting window and we thank the task force is a big step.
Towards getting that done and I'll reference back to blockbuster earlier is independent studies to value that as being a 10 billion unlocking of revenue for broadcasters. So we can't lose sight of.
Once one the other good sunsetted whatsapp revenue potential this.
Thank you.
Thank you. Your next question is coming from David Karnofsky from J P. Morgan.
Your line is <unk>.
<unk> does she just want on the queue to guide can you just confirm if other media revenue line includes a management fee from Diamond and if it does how do we think about any risks of that going forward just given diamonds chapter 11 process. Thanks.
Yeah sure there is a management team that's in the Air you know based on status quo from the the March 2022 restructuring and in terms of you know they yeah <unk>, where it's currently paying at the level that was agreed to back in March of 22, which is the deferred on a deferred basis.
Just to make set that to continue until a new agreement is reached with diamond and there isn't a new agreement at this point in time, so until that happens we can't speculate.
Okay. Thank you.
Okay.
Thank you your next question's coming from Aaron Watch from Deutsche Bank. Your line is alive.
Alright, Thanks for getting me and I covered a lot of ground I just had two quick ones one really a clarifier as you as you move past the $75 million of infrastructure investments you highlighted that you'll be making this year Wilson Claire ventures be self funding via cash flows are distributions or should we expect cash.
From the stations.
Continue to provide support.
So there there was two different things there and you know the 75 million dollar investment doesn't really have anything to do with ventures per se. That's that's.
That's focused on our <unk> broadcast operations in investing in their transformation. So I want to make sure. We don't conflate those too but in terms of your <unk> question on ventures, you will see a much fuller financial picture of that once we complete.
The re Oregon June but it is expected that that entity will be self sustaining.
Okay, Great and then maybe pointed at it let me see what this last one just given the current environment macro backdrops secular evolution to continue to play out in the industry has your mindset around where you'd like.
Leverage to live for the business changed at all and you talked about how you bought back stock in the corner and posts corner and how do you balance that opportunity against buying back you're dead, which is currently trading at a discount depart value.
Yeah, Sir Aaron that's that's actually great question, because the dead is also massively undervalued from from where it <unk>. So that's something that we're taking a look at and to your leverage target question look R. R for <unk>.
Broadcast S. T G. The target remains high three smiled force.
As I said you know we are going to be over that this year and then it will start to come back down next year with political and one thing to to just keep in mind from a leverage can't point, because it's a trailing eight <unk> calculation. So what you have going on also implies this year instead of <unk>.
P threes EBITDA, it's less than 21.
But then even when we get into next year with 24 political year, we expected to be higher than 22 is we still have this drag from twenty-three and they are so you know so we've got to kind of deal with.
You know everything that's happening and we've talked about quite a bit around you know to make it a nap retrans an absence of political on the investment we'll need to live with that T. R. Three the end of 24 in that leverage calculation, but it doesn't mean that the fundamentals of the business and the returns can we.
Get on on some of the things that we're doing now are are playing out so.
Can focus for broadcast will be to get back down over time to that target leverage.
Okay. Thanks, Lucy Thank God.
Mmm.
Thank you.
Thank you that concludes our Q&A session Oh, now hand, the conference back to Chris Ripley, President and CEO for closing remarks. Please go ahead.
Okay.
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Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.