Q1 2024 Sinclair Inc Earnings Call
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Good afternoon, everyone and welcome to city class first quarter 'twenty 'twenty four earnings conference call. At this time, all participants have been placed on a listen only mode and there will be open for questions. After the presentation. If anyone should require operator assistance. During this conference. Please press.
Star Zero on your phone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Chris.
Chris: Chris King V P of Investor Relations, Chris you may begin.
Chris: Thank you.
Chris: And then everyone and thank you for joining <unk> first quarter 2024 earnings conference call.
Chris: Joining me on the call today are Chris Ripley, our President and Chief Executive Officer, <unk>, <unk>, our executive Vice President and Chief Financial Officer.
Chris: Rob <unk> our.
Chris: Our chief operating officer, and President of local media.
Chris: Before we begin I want to remind everyone that slides and supplemental information for today's earnings call are available on our website <unk> dot net.
Chris: On the Investor information page on the earnings webcast page certain matters discussed on this call may include forward looking statements regarding among other things future operating results.
Chris: Statements are subject to a number of risks and uncertainties actual results 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 SEC and included in our first quarter earnings release, the company undertakes no obligation.
Chris: To update these forward looking statements.
Chris: Company uses its website as a key source of company information, which can be accessed at www dot SPG on that.
Chris: In accordance with regulation FD. This call is being made available to the public a webcast replay will be available on our website and will remain available until our next quarterly earnings release.
Chris: Included on the call today will be a discussion of non-GAAP financial measures specifically adjusted EBITDA. This measure it's not unrelated in accordance with GAAP and is not meant to replace GAAP measurements and may differ from other companies juices or formulations further discussions with reconciliations of the company's non-GAAP financial measures to comparable.
Chris: GAAP financial measures can be found on our website.
Chris: Finally, we note that the presentation of certain information in our first quarter Investor presentation may have changed from prior quarterly Investor presentation. We also expect that the presentation of certain information in our second quarter earnings release conference call and Investor presentation.
Chris: Different from our first quarter presentation due to an ongoing routine comment process with the securities and Exchange Commission, but we believe other publicly traded broadcasters are currently engaged in as well, let me now turn the call over to Christopher.
Christopher: Good afternoon, everyone and thank you for joining us I'll start on slide four by introducing an overview of our first quarter financial results.
Christopher: As you can see Sinclair delivered strong solid first quarter results that meet that met our guidance expectations and our local media segment, while tennis channel exceeded expectations for adjusted EBITDA within local media our distribution revenue came in slightly above the top end of our guidance range, while advertising revenue.
Christopher: It was slightly below the low end of our range.
Christopher: As a result, we were comfortably within the consolidated guidance ranges for total revenues and adjusted EBITDA.
Christopher: Turning to slide five I wanted to highlight our strong commitment to our stakeholders through our return of cash.
Christopher: Since the beginning of 2024, we have paid approximately $16 million to shareholders through our regular quarterly dividend, which has a dividend yield of 7% as of March 31.
Christopher: While also purchasing $27 million of debt in January for approximately $25 million in cash.
Christopher: Since the beginning of 2023, we bought back approximately $91 million in face value of our debt and retired another 35 million through amortization related payments.
Christopher: In early 2023, we also repurchased nearly 9 million shares of our class a common stock. In addition to the $81 million in dividend payments to our shareholders since the beginning of 2023.
Christopher: Our commitment to maximizing value for all of our stakeholders remains a top priority for the company.
Christopher: Turning to slide six we remain committed to the transformation of our traditional local media business, we believe Sinclair as well as the broader industry has multiple growth drivers.
Christopher: First excluding the impact of the 2020, Georgia run off we expect to see record breaking political advertising revenues in 2024th which equate to more than $350 million.
Christopher: We continue to see strong political advertising demand and we expect the strong growth of issue oriented and political advertising and what appears to be several close Senate and house races in our footprint to accelerate this growth significantly as we get closer to this year's general election.
Christopher: Given the lack of hyper competitive primaries, we do expect political advertising spend to be more heavily weighted to the third and fourth quarters. As we anticipate most of the spend at the presidential level will be focused on general election.
Christopher: Rob will cover this more in more detail shortly.
Christopher: Second our focus on high demand and differentiated local news and sports content continues to drive strong and loyal viewership with over 44% of your impressions across our station portfolio driven by non network content.
Christopher: In addition, with nearly all of our big four traditional subscribers renewing throughout 2024, we expect a mid single digit net retrans two year CAGR from 2023 to 2025.
Christopher: We have already renewed 42% of our big four traditional network subscribers as of the beginning of May with the remaining renewals coming up throughout the remainder of the year.
Christopher: Next Gen broadcasting is becoming a reality as well.
Christopher: Now have to read it or coverage in over half of our 86 markets and over 75% of the U S. In addition at the Nab Conference last month in Las Vegas, We launched broadband wireless our Nextgen data casting platform with our first go to market data casting market partner.
Christopher: AGL.
Christopher: Turning to slide seven for years, the broadcast industry often led by Sinclair has spoken about next gen broadcast opportunities that will represent a sea change for the traditional broadcast industry.
Christopher: I'm very pleased to announce that the time for Nextgen data distribution opportunity is now.
Christopher: Broadcast data distribution has many benefits such as a more efficient distribution of mass consumption data improved customer experience with lower latency and higher quality and lower cost for data delivery.
Christopher: Broadband will use the industry's three that our spectrum for data distribution to deliver a suite of data solutions to the market.
Christopher: The platform Centralizes data distribution management across multiple stations and markets allocate spectrum assets without disruption to the existing broadcast services and collect insights on executed data deliveries.
Christopher: Another business use case focuses on automotive connectivity services, which would allow the distribution of data two vehicles to include over the air software updates live broadcasting alerts high Fidelity audio and other features in addition, working in partnership with NGL, We have launched a new content distribute.
Christopher: <unk> service using streaming video offload, allowing a customer to seamlessly switch between over the air and over the top sources to offload bandwidth intensive traffic from traditional broadband networks.
Christopher: Broadband will also be able to deliver precise navigation, which is able to achieve up to three centimeters GPS accuracy accuracy by augmenting GPS data with real time kinematic position positioning error correction feeds. In addition, the broadcast positioning system.
Christopher: Bps is not satellite based which can offer crucial redundancies should anything happen to the existing GPS infrastructure that almost every industry relies on heavily today.
Christopher: We could not be more excited regarding the near term and long term business opportunities for next Gen broadcast and broadband and we're focused on remaining an industry leader in this exciting new technology.
Christopher: Turning to slide eight last week, we paid the remaining $445 million to Diamond Sports group further settlement with Diamond that we previously announced in January <unk>.
Christopher: <unk> contributed $347 million to the gross settlement figure well ventures contributed an additional $98 million. In addition to the 50 million ventures paid in March.
Christopher: These allocations were made following discussions between the two independent board of directors of STG in ventures after considering several different financial metrics, including revenue assets income EBITDA and free cash flow for the two new units among other considerations.
Christopher: Notably our net settlement cost estimate remains $250 million to $325 million, which reflects income tax benefits the increase in the NSF fees and other considerations.
Christopher: Of the net cost estimate we expect svd's portion of the total to be approximately 55% to 60%.
Christopher: Now, let me turn it over to Rob to discuss our local media strategy. Thanks, Chris turning to slide nine I wanted to begin by touching on the broad advertising environment, which came in slightly below our expectations for core advertising in the first quarter pro forma core advertising was down two 1% on a year.
Rob: Reported consolidated basis, however, the quarter was impacted by less premium sports exposure compared to the year ago period due to the Super Bowl will be broadcast on CBS This year versus Fox last year as well as the final four being based on cable. This year. In addition to a $6 million decline in this.
Christopher: Sports betting category absolutely.
Christopher: Absent those revenue streams in both years core revenue would have been up low single digits year over year, we do expect core advertising revenue growth to increase year over year in the second quarter with growth expected in the 2% to 6% range over last year's second quarter.
Christopher: No other categories services continue to be a top performer up year over year in the quarter, driven by home repair and homebuilder categories needle and pharmaceutical categories also showed nice growth year over year. However, as noted earlier, a sports betting fell materially year over year automotive all of them.
Christopher: Medical were the largest drivers of our slight miss versus our guidance for core advertising revenues.
Christopher: <unk> seen modest pressure as manufacturers and dealers see fewer sales primarily by the higher interest rates as we begin the second quarter retail services and entertainment pacings are strong while medical and pharmaceutical pacings are slightly softer than April last year also.
Christopher: Of note the sports betting, which was down almost 60% year over year and first quarter is pacing up almost 30% from the second floor.
Christopher: On slide 10, I wanted to provide a quick update on political AD spending as the political season is well underway and expected to be a record year.
Christopher: We booked $24 million in political advertising in the first quarter of 2024 within our guidance range.
Christopher: Strong fundraising trends, we continue to anticipate political revenues to be backend loaded this year based on both independent third party research and our internal data, notably is the big one we have pre bought over $77 million in political advertising for the sector.
Christopher: Half of the year through election day. This compares to $21 million as of the same date in 2020 and $28 million in 2022.
Christopher: Our proprietary pricing tool will help us to price properly versus demand throughout the political season to maximize revenue.
Christopher: Looking at the individual races, 23 of the 34 U S. Senate races. This fall will be in power markets. We forecast some of those states will have competitive races as opposed to eight in 2020, we have seven states in our footprint with the governor races, and we believe we have 24 competitive house races.
Christopher: This fall as opposed to 80 in 2020. This is in addition to 10 battleground states for the presidency within our footprint. We continue to see strong activity from packed with Super Pac fundraising and heavy spending is forecasted to continue for issue based advertising these days.
Christopher: <unk> need us to continue to expect political advertising revenues above $350 million in 2024.
Christopher: Now turning to slide 11, we have reached Retrans agreements with 42% of our traditional big four subscribers for new multiyear distribution agreement. So far this year nearly all of the remaining traditional big four network subscribers on agreements that expire between now and the end of 2024.
Christopher: We also have only one big four network affiliation that expires before the back half of 2026, providing us with high visibility on our network compensation expenses over the 2024 through 2026 timeframe.
Christopher: With these negotiations schedules in mind, we continue to expect a mid single digit two year CAGR for net Retrans from 2023 to 2025.
Christopher: Another positive data point during the quarter comes from our over the air broadcast networks charge common TBD, which we referred to as the staff the stack set a new high end quarter in the quarter with primetime viewing up 38% year over year, reaching 73000 viewers and the covenant is 25%.
Christopher: Before age group in fact, the three networks combined said 62, all time high record ratings records during the first quarter turning to slide 12, our newsgathering operation continues to excel, while highlighting the importance of broadcast news to local communities as demonstrated by our coverage.
Christopher: As of March 26th collapses at Francis Scott Key bridge here in Baltimore.
Christopher: Baltimore, and Washington D. C station dominated the coverage locally with our Baltimore station Wcbs FM, providing wider coverage of the cloud.
Christopher: 30 minutes before any other states and the market was lot within 48 hours of the tragedy. Our two stations combined for $1 6 million page views on their websites over 2 million Youtube views more than 9 million social impressions and 300000 engagements illustrating our folks.
Christopher: On connecting with our viewers wherever they may be and how are they want to view our content.
Christopher: As seen on slide 13, we are also continuing to build and develop our audience social division and <unk>.
Christopher: Evolve the art of reporting and storytelling to engage with fans of sports Entertainment news and true crime.
Christopher: We have recently signed three time National Champion College football coach Urban Meyer and compensate our robstown hosted a new sports podcast focus on college football on and off season, which will launch this fall.
Christopher: Team is also in active negotiations with multiple top tier athletes and teams as we continue to build out our roster of podcast and audio.
Christopher: Look for an announcement in the coming weeks, which will detail. All we have planned for a rollout later this year now let me turn the call back over to Chris to provide an update on China as well as our broader adventure segment.
Christopher S. Ripley: Thanks, Rob.
Christopher S. Ripley: As seen on slide 14 tennis channel recorded another strong quarter was $63 million in total revenue, which was at the high end of our guidance and $26 million and adjusted EBITDA. After excluding $1 million in growth initiative net cost, which was comfortably above our guidance. We expect continued strong growth metrics from Tennessee.
Christopher S. Ripley: As we look forward to our live coverage of Roland Garros later this month.
Christopher: Moving to slide 15, the average number of households, watching tennis channel in the first quarter grew by 35% year over year, while total viewers grew by 27% and social media impressions grew by 141% year over year.
Christopher: Once again tennis shower ratings out growth outpaced all other English language sports networks in the world.
Christopher: The T C plus streaming platform increased monthly subscribers by 7% year over year, ending the quarter with its highest monthly subscriber total ever.
Christopher: The T. Two fast channel grew by 273% year over year. Thanks in large part to expanded distribution and it as its exclusive tennis content continues to drive strong growth across multiple delivery platforms and.
Christopher: In addition, tennis channel will launch a direct to consumer offering later this year, which should provide a significant new leg of growth. We also believe pickle ball coverage N. P. B T V will drive even stronger growth metrics for tennis channel in the coming quarters.
Christopher: Also of note for the first time Sinclair is participating in the sports upfront next week in New York. In addition, we will be offering opportunities for advertisers to be aggregated in stadium as well as through sponsorships for all U S based tennis tournament through Tennessee.
Christopher: Channel we remain excited about the many growth opportunities ahead for tennis channel.
Christopher: I wanted to provide a brief update on our ventures portfolio on slide 16 as of March 31st ventures held a cash position of $318 million of note during the quarter. The company received 49 million in exit distributions and $3 million in capital distributions, while making an additional.
Christopher: $2 million of capital contributions into the portfolio.
Christopher: As illustrated this quarter our goal over time is to translate a significant amount of these minority investments into other majority owned investments that we expect to have long term growth potential and consolidation opportunities as well as to provide greater visibility into the performance of venture's assets, we will continue to update our investors.
Christopher: On a regular basis as we transform this investment portfolio.
Speaker Change: Before I turn the call over to Lucy to discuss the financial results I wanted to highlight our awards and charitable endeavors on slide 17.
Speaker Change: Sinclair 128 different broadcast awards during the quarter, including three National Awards, and two regional Emmy Awards.
Lucy: On Earth day, we released our second annual corporate social responsibility report, which highlights our environmental and social efforts throughout the company on the charitable front, we held our second companywide day of service in April which saw over 300 employees volunteering their time to provide over 3700 hours of service.
Lucy: This during that single day, we collected over 1100 pounds of trash paired and served over 3800 meals impact more than 14000 daily products and more than 8500 boxes of food I want to take this opportunity to thank our employees for another successful day of service.
Lucy: In addition, I'm proud to announce that Sinclair donated $50000 to the Maryland, Baltimore strong key bridge fund, which will go towards helping our fellow mallow, Maryland errors that have experienced an economic hardship following the collapse of the key bridge here in Baltimore.
Lucy: Our Sinclair cares also completed a partnership with reading is fundamental which was a month long campaign during national reading month in March.
Lucy: Now, let me turn the call over to Lucy to provide additional details on our financial results in the quarter.
Lucy: Thank you, Chris and good afternoon, everyone.
Lucy: Beginning on slide 18 on a consolidated basis, we delivered media revenues during the first quarter that met our guidance range as distribution revenues exceeded our guidance political revenues came in near the upper end of our guidance range and core advertising was slightly below guidance due to.
Lucy: The reasons, Rob mentioned earlier.
Lucy: As compared to last year consolidated media revenues increased to $792 million during the quarter, primarily on the higher political revenues and an increase in distribution revenue.
Lucy: On.
Lucy: Slide 19 consolidated adjusted EBITDA was also within our guidance range with media expenses favorable to guidance as a result of sales promotion and G&A expenses coming in better than anticipated and corporate overhead higher due to primarily stock based compensation.
Lucy: And insurance.
Lucy: As compared to last year on a pro forma basis.
Lucy: Consolidated adjusted EBITDA in the quarter increased by 10% driven by the increase in higher media revenues and lower corporate overhead.
Lucy: <unk> expenses were up year over year, largely driven by annual compensation increases in network programming fees.
Lucy: Slide 20 walks through our balance sheet metrics with the next meaningful maturity more than two years away.
Lucy: Sinclair television group's first lien net leverage was four three times and total net leverage five three times at the end of the quarter on a trailing eight quarter basis interest coverage was two nine times as of March 31.
Lucy: As previously announced we repurchased 27 million in face value of debt for approximately $25 million in cash in January.
Lucy: Our consolidated cash position was 655 million at quarter end with $337 million at SPG and 318 million Adventures.
Lucy: Including our Undrawn revolving commitments total liquidity was more than one 3 billion.
Lucy: There were 66 million total shares outstanding at quarter end.
Lucy: Slide 21 introduces our second quarter guidance, which calls for total media revenues in the $813 million to $832 million range up 7% to 9% year over year in the quarter.
Lucy: This is driven primarily by political which we expect to be in the $29 million to $35 million range as well as 4% increase in distribution revenues.
Lucy: Core advertising as Rob mentioned is expected to grow 2% to 6% given continued strength in the services retail and entertainment categories.
Lucy: We expect adjusted EBITDA in the quarter to be in the range of $130 million to $255 million up from the pro forma $110 million of adjusted EBITDA in the year ago period, that's due to higher media revenues being modestly offset by higher production cost network programming fees sales cost on the higher.
Lucy: Revenue and tennis channel growth initiatives.
Lucy: Turning to slide 22, we pollute, our 2020 for full year guidance for certain expenses.
Lucy: The notable changes are an increase to interest expense on fewer fed rate cuts expected this year in.
Lucy: An acceleration of Q2 25 cash taxes into Q4 of 24, lower Capex lower media expenses, and an additional $10 million and ventures distributions received in the first quarter with that I'd like to turn the call back over to Chris for some closing comments.
Lucy: Yes.
Christopher S. Ripley: Thank you Lucy.
Christopher S. Ripley: Turning to our key takeaways on slide 23.
Christopher S. Ripley: Sinclair delivered solid first quarter results meeting guidance expectations, and our local media segment and exceeding adjusted EBITDA expectations that tennis channel.
Christopher S. Ripley: Core advertising trends remained solid in most categories with our effective yield management and sales training processes driving industry, leading core growth over the past several quarters, we anticipate second quarter year over year growth of between 2% and 6% in core advertising.
Christopher S. Ripley: We have significant retransmission agreements renewing this year of which we've already renewed 42% of the traditional big four subscribers.
Christopher S. Ripley: With only one network affiliation agreement remaining to be renewed we have good rate visibility into the next couple of years, leading us to forecast a mid single digit two year CAGR and net retransmission from 2023 to 2025.
Christopher S. Ripley: We announced the launch of broad spend our Nextgen data solutions brand that will deliver a unified suite of products to the marketplace and also announced our first nextgen corporate partner NGO.
Christopher S. Ripley: In summary, Sinclair is in a strong position for both the short and long term, our strategic focus aligns with the anticipation of record breaking political election here.
Christopher S. Ripley: Tribute into robust growth in adjusted EBITDA throughout 2024, we could not be more excited about the future in front of Sinclair.
Speaker Change: Lucy Rob and I will now open the call to questions. Thank you for joining us today.
Speaker Change: Thank you very much we will now be conducting a question and answer session.
Speaker Change: I'd like to ask a question. Please press star one on your phone keypad now all information time will indicate that your line is and the key he May press star two if you would like to remove your question from the key fed.
Speaker Change: Anyone using speaker equipment, it might be necessary to pick up the handset before you buy sticky.
Christopher S. Ripley: He's held a moment, whilst we poll for questions.
Christopher S. Ripley: Thank you. Your first question is coming from Dan <unk> of the benchmark rate Dan Your line is live.
Dan: Great. Thanks, good afternoon.
Dan: Can you guys just dig a little bit deeper into the core guide for Q2, it's really healthy you guys give a little bit of color on it. It sounds like you know there is a little bit of uniqueness there like sports betting that Rob called out but beyond that it sounds like things are getting slightly better. So maybe you could talk through kind of what you're seeing.
Dan: On the core environment in Q2, as especially as we head into the back half of this year.
Dan: Sure Dan This is Rob.
Rob: Even though all of those trends.
Rob: Negative is a very small low single digit so it's starting to return to somehow.
Rob: They're going to have to get rid of the 'twenty four is coming up we expect some rebates there's been some softness in the first part of the year due to interest rates, but with our automotive specialist we've been able to offset some of that weakness in that category. Our services remains strong we haven't been.
Christopher S. Ripley: Big Al.
Christopher S. Ripley: Home purchase predictor out in the marketplace that is delivered key results for us to help drive our service category and we believe that with our proprietary pricing system, we're able to maximize the demand that is in the market with rates.
Speaker Change: Also I'd just add to that Dan.
Speaker Change: I think for reasons that Rob pointed out in his.
Speaker Change: Our prepared remarks.
Speaker Change: Q1 had some neck.
Speaker Change: Negative impacts from the lack of certain sports and sports betting coming off some high comps from the prior year.
Speaker Change: But that what we see in Q2 is really pretty consistent with what we have been performing at in terms of core growth in 2023 quarter. After quarter. So we've been consistently posting numbers that are industry, leading so.
Speaker Change: Obviously Q1, a little bit different for reasons, we described but where we were back on trend for Q2.
Speaker Change: Do you have a view on how the year kind of plays out not necessarily specific number but given some crowd out potential and the fact that you guys are already calling for a record political and I don't know if youre factoring in the Maryland, Craziness, that's already going on but not considered a competitive race.
Speaker Change: Yeah, we factored that in and that's why we've gone to the algorithm the approach to pricing our inventory in those markets, where we've seen significant pre books of those dollars. We've adjusted the rates based on that demand. So.
Speaker Change: In prior years.
Speaker Change: I love having them.
Speaker Change: He felt pricing system. It was kind of like a whack a mole, but now there's a weekly meetings with yield and pricing is planning team that goes through.
Speaker Change: What's happening with the system on a weekly basis. So we think we're better prepared now than ever to be able to handle that demand.
Speaker Change: Yeah and certainly.
Speaker Change: Sorry, I was just a second everything Rob said in terms of the record political advertising, we're expecting for this year would you would expect that to announce some amount of crowd out in the third and fourth quarter.
Speaker Change: But we're optimistic that.
Speaker Change: The trends, we have been putting up and at our new systems for managing pricing that will slow the so-called will hopefully stay positive through.
Speaker Change: That that political dilution.
Speaker Change: Don't want to understate.
Speaker Change: The signing of the urban Meyer as our first top sports.
Speaker Change: Cash personality it'll be in season, and obviously as an urban already has a series of top notch people lined up to come onto the podcast. So.
Speaker Change: That is definitely a growth area for us as well.
Speaker Change: Let me sneak one more in Chris.
Speaker Change: Nextgen I mean, you know you're saying it's here we've heard it for a while obviously you guys have been out front on this one is there any way to quantify the impact to the P&L from this are we talking like handfuls of millions next year, how should we start to think about the actual benefit from the initiatives that you guys are launching.
Speaker Change: And you have a very unique opportunity set both here and abroad. So love some color.
Speaker Change: Sure.
Speaker Change: Now as I said the time to actually.
Speaker Change: This opportunity real is now and.
Speaker Change: We're in one of the first product sets is gonna be CDN offload with our partner AGL I'm sure. Other CDN operators will be interested in that to automotive hot on its heels.
Speaker Change: Enhanced GPS.
Speaker Change: And some of those things are going to be coming live at the end of this year.
Speaker Change: And I think the dollars will start to come in.
Speaker Change: Windows Windows offerings become live I think this is going to be.
Speaker Change: A situation where.
Speaker Change: It is it sort of an exponential growth curve if you will.
Speaker Change: If you think about an S shape adoption curve and typical new technologies I would expect it to start off somewhat slow, but then pick up significant pace.
Speaker Change: As we get more adoption. So 2025, what you are asking about yes, it's probably not a very material amount of revenue, but as we get more penetration into these end markets, we'd expect that to pick up pace significantly.
Speaker Change: Got it Super helpful. Thank you.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Apologies Sir your next question is now coming from Aaron Watts of Deutsche Bank. Your line is live.
Aaron Lee Watts: Hi, Thanks for having me on I just had two questions. The first one.
Aaron Lee Watts: Another one around core advertising, we've heard from several AD driven media companies that while local it's been fairly steady and healthy it seems as though.
Aaron Lee Watts: That a sustained national AD recovery is proving elusive.
Aaron Lee Watts: Curious if that's the same experience you're having but also how you think about the drivers of that continued national softness does it.
Aaron Lee Watts: Go beyond simply macro rate concerns et cetera, causing large brands to hold back spending or is this maybe some early signs of all the AD inventory coming online from recently introduced streaming advertising peers, perhaps siphoning off share that used to flow into the traditional TV marketplace and if that's not happening yet is that an important.
Aaron Lee Watts: Packed you're expecting to see.
Speaker Change: Yeah.
Speaker Change: So I'll take that so we started off the year nationally slow, but it has rebounded and is pacing positive for us in the second quarter.
Speaker Change: In addition, we struck a very unique deal to be able to visa exclusive seller of Netflix and our local markets as well so and then the impact we're screaming might take place we've taken some of the AD dollars, we position ourselves to have premium streaming.
Speaker Change: Inventory to sell with our local sellers so I.
Speaker Change: They get Fortifies us both locally and nationally.
Speaker Change: Okay. Thank you that's helpful and then.
Speaker Change: Secondly around capital allocation does the focus continue to land on debt reduction going forward and Relatedly have you bought back any debt since the end of the first quarter and as we think about you moving towards your leverage target of high three times low four times area.
Speaker Change: There'll be clearly healthy cash inflows this year from political but as you move into next year that obviously cycles off are there ways. You can help us think about perhaps center went organic ways to help accelerate your journey towards your target.
Speaker Change: Yeah. So look the we were still focused on.
Speaker Change: A few different priorities.
Speaker Change: Priorities within our within broadcast Theres, a decent amount of transformation spending going on around cloud and <unk>.
Speaker Change: Unified Ad sales.
Speaker Change: And.
Speaker Change: They'll there'll be significant savings coming out of those transformation efforts, which should come to flourish in over the next year or so.
Speaker Change: And on on ventures.
Speaker Change: As I've stated before they're there we're looking for new opportunities, but in terms of the capital structure, we will continue to be opportunistic.
Speaker Change: Depending on where debt and equity markets trade.
Speaker Change: Our emphasis right now is for SPG on the deleveraging side and.
Speaker Change: Certainly that buybacks are.
Speaker Change: Or something that are going to be high on our list for that excess cash flow that is being produced and as we've always stated.
Speaker Change: Where we have no sacred cows are we want to unlock there.
Speaker Change: The sum of the parts valuation that we think were.
Speaker Change: Grossly undervalued for and.
Speaker Change: To the extent that asset sales makes sense.
Speaker Change: In order to unlock that value and help us Delever, then that's something that we'd be open to as well.
Speaker Change: Okay. Thanks, Chris Thanks, everyone.
Speaker Change: Thank you very much. Your next question is coming from Steven Cahill of Wells Fargo. Stephen Your line is life.
Steven Cahill: Thank you first Christian Lucy just on the Q2 Retrans guide, it's about 384 million I think that's flat with what you had in Q1.
Steven Cahill: So you've done a lot of renewals year to date I was wondering if you can just update us on what youre seeing in those renewals and pricing coming in the way you would expect I think we thought that you might see a little bit of acceleration quarter to quarter and Retrans. So would love. It if you could unpack those trends a bit.
Speaker Change: And then on tennis channel really strong EBITDA in Q1. The guide is much lower in Q2, just trying to understand is that timing of programming is that investments in DTC.
Speaker Change: Els and then just lastly kind of following up on Aaron's question. As you think about refinancings that you've got ahead, you've got a lot of assets adventures.
Speaker Change: You've always been very I think particular in how you've structured the company in terms of what's at STG and Watson Adventures.
Els: So as kind of creditors move into the refinancing and see the leverage at STG.
Els: You see those assets as fungible or do you really think that the silos are going to be kind of going their separate ways increasingly as you get into the refinancings. Thank you.
Speaker Change: Okay.
Speaker Change: Great. Thanks, Steve So first on on Retrans.
Speaker Change: All of the deals that we've done so far have met or exceeded our expectations I think the.
Speaker Change: What youre seeing in terms of your.
Speaker Change: Your expectation of acceleration just might be a timing issue in terms of when the Mvpds, we're coming up because we will see that acceleration this year and as we indicated that that dovetails with our guidance of mid single digit growth from our 2020 four and 'twenty five.
Speaker Change: So.
Speaker Change: I think what Youre seeing there is just a timing issue in terms of when those deals are going.
Speaker Change: The bulk of the deals come up.
Speaker Change: And then your second question sorry, Steve what was your second question again.
Speaker Change: Just on tennis channel's kind of lumpy quarter to quarter, yes, I'm trying to get kind of a.
Speaker Change: Untenable.
Speaker Change: I'll, let lucie chime in on this but tenants.
Lucie: Tennis channel.
Lucie: Is his seasonally lowest in Q2 because of mainly because of Roland Garros. So that's the French open. It's it's it's our biggest event. It's it's one of the majors there is a lot of production spend.
Lucie: In that quarter.
Lucie: And I don't know if Lucy you want to add anything yeah, I would just add Steve that there's there's also timing of rights payments are around tennis.
Lucy: As well as.
Lucy: Yeah. They have upcoming there are direct to consumer launch later this year. So there is some initiatives spending around that that happens in Q2 as well.
Lucie: Right.
Lucie: And then in terms of your last question look our expectation now is that both of ventures and SPG.
Lucie: Our self funded and we don't see a need for.
Lucie: The assets to be moved from one or the other.
Lucie: And.
Lucie: Obviously, if to the extent that you.
Lucie: Circumstances were to change then that's a that's something we could do but we don't foresee that being needed.
Speaker Change: Great. Thank you for that.
Lucie: Thanks.
Lucie: Thank you very much. Your next question is coming from Boston Crockett of arrays, but Boston Your line is life.
Barton Evans Crockett: Okay, great. Thank you.
Barton Evans Crockett: I wanted to just drill down on a couple of the key numbers you guys talked about so <unk>.
Barton Evans Crockett: Terms of subscriber churn in the industry could you give us a sense of what you're seeing now I know.
Barton Evans Crockett: Fox I think spoke earlier about minus 8%.
Speaker Change: People have different takes so I'm just wondering what youre seeing.
Speaker Change: Paid us on that and then in terms of the AD market you touched on this a little bit but.
Speaker Change: I'm just curious just in broad kind of feeling that we're in an environment, where we have interest rates that are kind of higher for longer than I think people were hoping even a couple of months ago.
Speaker Change: It sounds like that might have impacted your advertising a bit that maybe that impact is fading now just what are your feelings on that kind of macro backdrop, if anything in your ad business.
Speaker Change: Yeah, So Barton I'll take the first one to we are.
Speaker Change: To see mid single digit percent churn across our subscriber base.
Speaker Change: That's so the traditional or down the virtual has been growing average is mid single digit churn.
Speaker Change: From advertising from the advertising we continue to watch.
Speaker Change: The interest rate, how it's impacting the economy.
Speaker Change: Through second quarter, we're you know halfway through it.
Speaker Change: We kind of see how it's playing out the business has become a month to month business Budd.
Speaker Change: We have the Olympics coming up in third quarter that will stimulate our NBC stations political will be hitting about that time as well and then we go into <unk>.
Speaker Change: NFL and college football were robust.
Speaker Change: The Prime book College football coming up this season to go along with Prime NFL, So starting Friday nights through all the way through Sunday night.
Speaker Change: He hasn't announced but the indications are the fed Monday night football games will air on AMC as well as a simulcast.
Speaker Change: Carries us through the year and through political.
Speaker Change: Is this how I look at it and just to.
Speaker Change: Add on to that Robin mentioned that.
Speaker Change: <unk> auto, which is particularly interest rate sensitive.
Speaker Change: That was down a little bit or is down a little bit and but what we've been able to do is fill in and out with other categories and other areas and continue to have that overall core growth that we've been reporting on even if there is some weakness showing up because of interest rates and I'll remind everybody. It's several years ago, we've brought in specialists from key categories.
Speaker Change: Oh that had his background in those categories as the training or the rest of our sales group.
Speaker Change: To make a knowledgeable to not have that reliance on automotive. So we've been well prepared to go out into the marketplace as full consultant versus just selling spots and Bob.
Bob: Okay, that's great and then just.
Bob: One other kind of check the box question.
Bob: Is there any exposure that you guys would have now or non if the valleys kind of bankruptcy emergence doesn't you know it doesn't develop as everyone hopes given the Comcast outage. There I think there's more questions about that than there might have been.
Speaker Change: But you guys are not exposed to that and correct. It doesn't matter for your settlement or anything at this point.
Speaker Change: Oh, Yeah, no Barton, we now that we've paid the settlement.
Speaker Change: There there should be no impact to whatever happens to diamond in the future.
Speaker Change: Okay, great. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you very much. Your next question is coming from David Hamburger.
Morgan Stanley: Morgan Stanley David Your line is live.
David Michael Hamburger: Thanks for taking the question could you help us with the timing of the income tax benefit the MSA fee increase and various other considerations with regard to the Diamond sports.
David Michael Hamburger: Settlement.
David Michael Hamburger: So on the tax side it should be a it depends on when.
David: When diamond actually exits, but that'll either.
David: <unk> have an impact at the end of 'twenty four into 25 mm and the the next biggest category is MSA fees and those those were already collecting at the higher rate and we were guaranteed to have at least six months are those post payments.
Speaker Change: Could go longer.
Speaker Change: But.
Speaker Change: And again, that's where the previous question about <unk>.
Speaker Change: Whether diamond.
Speaker Change: <unk> or not.
Speaker Change: Could have had some.
Speaker Change: Impact on whether they how long they want to be on our management services I guess this is in fairness.
Speaker Change: To that prior question, but at least they're committed to at least six months.
Speaker Change: And and maybe longer.
Speaker Change: After that.
Speaker Change: And that all happens that's obviously a time dependent boats in 2024.
Speaker Change: Okay. That's helpful. So post settlement and it looks like there is.
Speaker Change: You've exhausted most of the cash at the television group.
Speaker Change: I mean, obviously, we'll generate more free cash flow this quarter and.
Speaker Change: And there was about $220 million of residual cash ventures.
Speaker Change: Can you help us think about like what's the minimum cash balance you'd like to maintain what would be the uses of cash the 200 million plus cash sitting adventures. If you were to use any cash or how you think about allocating as he spoke about assets between the two different silos.
Speaker Change: Would you.
Speaker Change: Envision managing cash between them.
Speaker Change: Mhm.
Speaker Change: Well, there's there is theres a lot of liquidity at our SB.
Speaker Change: SPG STG is a does have positive cash on the balance sheet that cash will build significantly through the rest of this year. It has a fully undrawn.
Speaker Change: Over $600 million revolver so.
Speaker Change: Minimum cash for this business is not very high.
Speaker Change: I'll, let you know Lucie chime in on that if she wants to give a specific number there.
Lucie: There is whatever is coming in the door.
Lucie: I'm here now and whats on the balance sheet is excess cash could be used for shareholder return. It can be used for debt buybacks as I mentioned before which is the likely priority going forward and then of course, we are as I mentioned at least as it relates to SPG very focus on transfer.
Lucie: Asian, and investing in certain areas that will pay off in the years to come on the ventures.
Lucie: Syed.
Lucie: We have been advertising or monetizing our minority investments, we monetized approximately $50 million in Q1.
Lucie: And we will continue to do so so we would expect cash to continue to build adventures. We're in no rush to redeploy it are we.
Lucie: We're looking for.
Lucie: Our new majority control of investments that are alright area and fragmented industries with a good secular growth trends and.
Speaker Change: But again no rush too.
Speaker Change: To deploy that are where we're going to be.
Speaker Change: Okay.
Speaker Change: Disciplined in our approach to the marketplace there.
Speaker Change: Okay, and if I could just one housekeeping question. It sounded like you had said that you were to your interest expense guidance previously you were.
Speaker Change: During it more fed cuts than they anticipated now.
Speaker Change: What are you estimating now for for for that.
Speaker Change: It's a higher number two let's say David we always you know we always model based on the forward curve. So.
Speaker Change: When we reported back in February the forward curve had estimated and I wouldn't say it was probably like the fed was probably indicating six fed cuts for the year now I think they're down to about two so whatever the forward curve is what we use in our model.
Speaker Change: Okay.
Speaker Change: Thank you so much.
Speaker Change: Thank you very much.
Benjamin Self: And your next question is coming from Benjamin self of Deutsche Bank Benjamin Your line is live.
Benjamin Self: Hey, guys. Thanks for taking the question just to follow up on the minority investments I. Appreciate the commentary that you guys are looking to switch from the minority investments to the majority of investments when I look at your guidance. It implies that there is not much distributions are left for the rest of the year and I'm just kind of wondering why that would be and then.
Speaker Change: A house keeping question can you remind us what the value is of the Bally stake and then the other pieces of the investment portfolio I think that there was some real estate and private equity in there.
Speaker Change: <unk>.
Speaker Change: Sure. So we don't forecast.
Speaker Change: Sure.
Speaker Change: Any.
Speaker Change: Monetization or distributions explicitly so thats why youre not seeing that.
Speaker Change: In any of our projections.
Speaker Change: That's not to say that we don't think there will be in fact, you know there are most certainly will be.
Speaker Change: But since it's not something that comes out of a regular operating business that it's harder to project.
Speaker Change: Naturally it's sort of lumpy so we do not project.
Speaker Change: That explicitly but we do expect there to be further monetization as the year.
Speaker Change: 10 years and.
Speaker Change: Sorry, what was your next question.
Speaker Change: Just if you could share the value of the different items in the portfolio.
Speaker Change: So the Bally stake is currently at $1 55 about.
Speaker Change: And then when you sum up.
Speaker Change: The.
Speaker Change: The rest of the minority assets theyre sitting at around $600 million.
Speaker Change: And Avi.
Avi: Okay. Thank you and then just yet.
Speaker Change: And Hey, Dan Let me just also clarify because I know historically, we've given that number including cash the number.
Speaker Change: Chris is quoting is excluding.
Speaker Change: The cash that's sitting adventures.
Speaker Change: Yes, that's a slip in cash.
Speaker Change: <unk> got the their investments and then you've got cash.
Speaker Change: They all test all that tallies up to around $1 1 billion.
Speaker Change: Okay got it and then I guess just a quick follow up like what do you expect the amount of distributions you get going forward to accelerate as you guys kind of more actively look at that.
Speaker Change: Undergoes this transition.
Speaker Change: Okay.
Speaker Change: Yeah, I mean look at it it's lumpy as I said, that's one of the reasons, we don't put it in our models and projected but we're actively working on.
Speaker Change: Several opportunities to monetize.
Speaker Change: Those that group of assets that 600 million or so that I that I mentioned is we're in the.
Speaker Change: And the target list to be monetized and I would expect that we do have.
Speaker Change: Some level of amortization continuing through this year.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Okay.
Speaker Change: Thank you. Thank you very much that appears to be the end of our question and answer session I will now hand back over to Chris for any closing comments.
Chris: Thank you operator, and thank you all for joining us today to the extent you have any further questions or comments, please do not hesitate to reach out to us.
Chris: Thank you very much. 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.