Q3 2024 Sinclair Inc Earnings Call
Greetings and welcome to the Sinclair Inc. 3rd quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode, on a question and answer session before we'll be the formal presentation.
If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Please note this conference is being recorded.
Speaker Change: of a low-term conference over to your host, Chris King, Vice President of Investor Relations.
Speaker Change: Chris, you may begin.
Chris King: Thank you. Good afternoon, everyone. Thank you for joining Sinflyer's third order of 2024 earnings conference call.
Chris King: Joining me on the call today are Christopher Ripley, our President and Chief Executive Officer, Lucy Rutishauser, our Executive Vice President and Chief Director Officer, and Rob Weisbord, our Chief Operating Officer and President of local media.
Chris King: Before we begin I want to remind everyone that slides for today's earnings call are available on our website, SBGI.net On the events and presentation page of the Investor Relations portion of the site A webcast replay, we'll remain available on our website until our next quarterly earnings release
Chris King: Certain matters to Scott of Thundish call may include forward-looking statements regarding among other things, future operating results.
Chris King: 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 happen at forth in the company's most recent reports as filed with the SEC and included in our third quarter earnings release.
Speaker Change: The company undertakes no obligation to update these four looking statements.
Speaker Change: Included on the call will be discussed on the Don Gap Financial Measures, specifically adjusted to the EBITDA. This measure is not formulated in accordance with Gap and is not meant to replace Gap measurements and may differ from other companies' uses or formulations.
Speaker Change: for the discussions and reconciliation of the company's non-gap financial measures to comparable gap financial measures can be found on our website. Let me now come to call of the Chris Ripley.
Chris Ripley: Good afternoon everyone and thank you for joining us. I'll start on slide 3 by highlighting our third quarter financial results on a consolidated basis.
Speaker Change: We delivered solid third quarter results that we are well above our guidance given in August, but came in modestly below the increased guidance that we provided in mid-September.
Speaker Change: We were impacted by some late political ag cancellations from Nevada which occurred in the last week of the third quarter as contains moved monies to states and cities outside of our footprint where race is grew tighter.
Speaker Change: Total distribution revenue was in line with our guidance range thanks to solid outcomes on all distribution renewals. Core advertising revenues grew 1% in the third quarter, which is a first-person clear to have grown core at a time when political advertising was at an all-time high.
Speaker Change: Our sales team delivered strong growth in both core and political advertising which followed through to our adjusted EBITDA which came in near the high end of our guidance range for the quarter. Lucy will go into more details in a moment.
Speaker Change: On slide four, our venture portfolio received 5 million in total distributions during the quarter and made approximately 7 million in contributions.
Speaker Change: at Quarter End Ventures Hell 334 million in cash up 8 million from cash levels at the end of the second quarter.
Speaker Change: Turning to slide five.
Speaker Change: I wanted to take a minute to provide an update to the great Republican-linked thesis regarding the future of broadcast TV, which may better be better termed as the great revallion, as the value proposition of PTV has significantly improved for the consumer.
Speaker Change: In recent quarters, we've seen Charter Reach deals with Disney, Comcast, Paramount, Warner Brothers Discovery to include streaming services.
Speaker Change: and in their table to you packages. These streaming sessions are now a key part of M&PD content negotiations and represent a significant value to traditional M&PD subscribers. In fact,
Speaker Change: Chartered customers now receive more than $78 per month worth of streaming services for free in their select plus bundle, including 10-A-Shanel Plus.
Speaker Change: Not only does this accrete significant value to subscribers with the inclusion of these various premium streaming platforms, but it also significantly lowers the net effective rate for the traditional PATV bundle of broadcast plus cable channels.
Speaker Change: In fact, in the case of charter, we estimate that subscribers are now paying less than $40 a month for broadcast channels and traditional cable networks. After factoring in the value of discounts and streaming platforms.
Speaker Change: This is a 63% discount from what charter subscribers we're paying for broadcasting cable channels.
Speaker Change: Just a year ago and is a 49% discount over YouTube TV's base plan for essentially the same channels.
Speaker Change: As you can see on the slide, we believe the value proposition of the broadcast channels are only increasing brandy pd customers.
Speaker Change: I was also very pleased to see that charter is planning a major marketing push next year to promote the more than 10 streaming services it is offering at no additional cost to customers.
Speaker Change: We are now seeing similar dynamics at play with the recent Direct TV Disney deal as well as the Charter Warner Brothers Discovery Deal which took place a year early.
Speaker Change: and turning to slide six, we're beginning to see the results of this great re-bundling. This data, which comes from Nielsen's monthly of the gauge report, shows the percentage of viewing minutes by platform on a monthly basis.
Speaker Change: What this church shows is that broadcast market share has grown each of the past two months and is now relatively flat with a year ago figure.
Speaker Change: Broadcast Sheriff viewing minutes has increased by 230 basis points over the past two months, while every other medium has lost share over the same timeframe.
Speaker Change: Broadcast viewership growth has been driven at least in part by live sports content on broadcast networks, such as the Summer Olympics and both NFL and college football.
Speaker Change: Which is why we're excited to continue to see more and more life sports rights moving back to broadcast TV And we're constantly looking for ways to work with MEPD to emphasize this value for subscribers
Speaker Change: Turning to slide 7, the broadcast industry continues to increase its sports content. Recently, Disney added more 6 more Monday night football games to ABC's programming, which will now have a total of 14 regular and post-season games televised on the network this season.
Speaker Change: In addition, during the quarter, we announced a partnership with the Portland Trailblazers to launch the Ripley City Television Network and Blazer Vision, which will carry 65 to 80 blazer games in the upcoming season.
Speaker Change: The Trailblazers joined the Utah Jazz with the vast majority of their telecasts on St. Clair Station's season.
Speaker Change: notably the Jazz and the Trailblazers join a long list of professional teams that have reached deals with over the Arab broadcast stations within the past couple of months in all major sports across the country.
Speaker Change: We believe this only supports the idea that Bridecast Television continues to be one of the most important mediums in the video industry today.
Speaker Change: In fact, we are excited to see.
Speaker Change: The announcement that Fox recently sold out its Super Bowl inventory for its February game more than three months early. As Fox is our largest network affiliation, we are looking forward to broadcasting the game and the remainder of the NFL regular season and playoffs.
Speaker Change: Let me now turn the call over to Rob Weisbord to go over some additional details about our distribution progress, as well as political advertising and exciting updates on our recent podcast launches.
Rob Weisbord: Thanks, Chris. On slide 8, I want to provide an update on a very busy third and fourth quarter today for our distribution team. Through the third quarter, we reach multi-year character agreements with all these and interact TV.
Rob Weisbord: We have now come to terms with MEPD's covering more than 78% of our big-for-cable telco and satellite subscribers so far this year without a block-up.
Rob Weisbord: As a reminder, we have one network affiliation agreement, NBC which expires that year-end with the remaining network agreements locked in to at least 2026
Speaker Change: As a result of the strong progress we have made throughout the year we are reiterating our guidance of a mid-singled digit cager for a net 3 transmission revenues from 2023 through 2025.
Speaker Change: Turning this slide nine.
Speaker Change: The 2024 political season has only reconfirmed the value of local broadcast and local news.
Speaker Change: For 2024, political revenue is grew 16% as compared to our pre-wann-off political total in 2020 of 350 million.
Speaker Change: During the third quarter we reported 130 million political advertising revenue and all time high, third quarter watermarked for us, which was 5 million lower due to late cancellations during the last week of the quarter, most of which occurred in the battle.
Speaker Change: Cancer Laces is continued in the fourth quarter as well. With another 21 million of cancer Laces due to late geographic shifts of existing and also new commitments to non-seclair markets.
Speaker Change: While political came in wider than our increased guidance anticipated, we'd have only been 10 million trapped hitting our 442 million estimates for the poll here, if not for the 26 million of cancellations.
Speaker Change: Of note, we experienced over 11 million cancellations from Nevada, and even though we are in several markets of Pennsylvania, those markets are 6 million cancellations, but some money is within the state shifted to Philadelphia, where we do not have a presence.
Speaker Change: We are now looking forward to what is likely to be a hotly contested midterm election in 2026 and the presidential race in 2028 with two open primaries as broadcast continues to be the dominant medium for political advertising.
Speaker Change: Following yesterday's election, the industry intense the turn of attention to several regulatory issues.
Speaker Change: that will be frightened to stand up for the coming months.
Speaker Change: These include outdated broadcast rules that include radiation-wide ownership cap and prohibit the ownership for more than two top four ranked TV stations in the same local market as well as next-gen broadcast standards including the prompt.
Speaker Change: managed sunseting a 1.0 signal transmission.
Speaker Change: We are optimistic on progress being made on needs and several other regulatory issues.
Speaker Change: On Slight 10, we were very excited to launch two sports for Lady Park F. in August and September, in conjunction with the start of the college football season.
Speaker Change: These podcasts, the triple option, with Irvine Meyer, Marking or Monroe Robbs Sound, as well as throw back to an outline and a jury for our, that consistently been ranked among Apple's top 10 sports podcasts.
Speaker Change: In the Diction.
Speaker Change: We just announced plans to launch a soccer focus podcast called Unfiltered Soccer with landed in Tim With former U.S. soccer stars, man in Donovan and Tim Howard We couldn't be more excited about the strong new growing lineup of sports related podcasts
Speaker Change: Before it turned the call over Lucy, I did want the highlight our announcement, made early today regarding the launch of our Tennis to Channel Direct to Consumer Product, which will be available nationwide in November 2012, and will be free to current tennis channels subscribers.
Speaker Change: The product of the law that's subscribed is complete access to our live, and the shallow feed for the first time. Let me now turn the call over to Lucy to provide a more granular update on our financial results and balance sheet.
Lucy Rutishauser: Thanks Rob. Turning to Slide 11, as Chris touched on earlier, we had solid third quarter results.
Lucy Rutishauser: Our 138 million in political ad revenues broke third quarter records for us, and we would have met our revised political guidance if not to the 5 million in late September cancellations.
Lucy Rutishauser: More Ever!
Lucy Rutishauser: Despite the record political third quarter, we through poor advertising revenues by 1% year over year.
Lucy Rutishauser: and almost unhorrid up accomplishment.
Lucy Rutishauser: and Reconfirming our CL strategies around pricing.
Lucy Rutishauser: Specialized sales categories and multi-platform offerings that consumers and advertisers care amount.
Lucy Rutishauser: Meanwhile, the distribution revenues were up 5% year over year, driven by renewable rate step-ups and new territory agreements on tennis channel over the past year. Partially all set by distributor, subscribe or turn.
Lucy Rutishauser: The Justice League of Doc came in within our guide and trained as media expenses were modestly lower than our forecast.
Lucy Rutishauser: Additionally, CapEx was favorable to guidance primarily on timing of payments now expected to occur in the fourth quarter.
Lucy Rutishauser: Turning the slide 12, consolidated media revenues of 98 million were up 20% in the quarter versus last year on the higher political revenue, as well as distribution revenues on the recent renewables in Addict Marriage, which exceeded subscriber-turn impact.
Lucy Rutishauser: As compared to guidance, distribution revenues were in line with our expectations.
Lucy Rutishauser: Approximately 5 million of political advertising cancellations late in September, resulted in us coming in 2 million under our revised increase political guidance.
Lucy Rutishauser: on poor revenues increased 1% year every year, modestly shy of our 2 to 4% revised guidance provided in mid-September. But as we pointed out now,
Lucy Rutishauser: Brought a poor advertising in the third quarter when we also have a record political quarter is a first force.
Lucy Rutishauser: On slide 13 consolidated adjusted event of, for third quarter, was $249 million, which was within our guidance range.
Lucy Rutishauser: Consolidated Media Revenues were just shy of our increased guidance and media expenses came in approximately 5 million favorable to our expectations at the midpoint on lower production, promotion and engineering costs.
Lucy Rutishauser: Archely Offset by higher than expected sales commissions on the higher revenue and employee cost associated with improved retention.
Lucy Rutishauser: As compared to last year, Justin E. Bedall increased by 72 percent, driven by the stronger political and distribution revenues, which were offset in part by corporate overhead expenses and sales costs on the higher revenue.
Speaker Change: Turning to slide 14 for the local media segment with delivered solid third quarter results with adjusted EBITDA coming in within our guide and change in spite of the late political cancellation.
Lucy Rutishauser: and Media expenses to were slightly higher on the increased revenues and improved employee retention.
Lucy Rutishauser: tennis channel also has a strong quarter with media revenues up 2% year over year on distribution revenues which grew 4% on renewals and added carriages over the past year.
Lucy Rutishauser: 10 is channels advertising revenues, sold by 7% in the quarter, but ever we knew a $1.5 million net change in non-cached audience deficiency units.
Lucy Rutishauser: is excluding the non-tash 80Us. tennis channels ad revenue would have been up 10%.
Lucy Rutishauser: Ted is channels who just to be bedowed with evolved guidance when the expense is coming in favourable in part due to lower production costs and timing of expenses related to their direct consumer product launch announced this morning.
Lucy Rutishauser: and BEDIT in tennis-channel 16 million of adjusted EBITDAs approximately 2 million of operating losses associated with future growth initiatives.
Lucy Rutishauser: Turning to our balance sheet metrics on slide 16, you can see our death maturity stack profile with our next meaningful maturity in September, 2020-6.
Lucy Rutishauser: St. Claire television groups first-leaning net leverage was 4.2 times and total net leverage 5.3 times at the end of the corridor on a trailing 8-quarter basis.
Lucy Rutishauser: and yours coverage was 2.8 times as of September 30.
Lucy Rutishauser: Our consolidated cash position was 536 million at quarter end, with 202 million at SBG and 344 million at ventures.
Lucy Rutishauser: including our under on-revolving commitments total liquidity was 1.2 billion. There were 66.4 million total shares outstanding acquitter ends.
Lucy Rutishauser: Died 16 introduces our fourth quarter guidance.
Lucy Rutishauser: We are guiding consolidated media revenues to be in the range of 992 million to 1 billion, up 21 to 22% versus a year ago poiter, which is largely driven by the record political advertising growth.
Lucy Rutishauser: Poor advertising is expected to decline by 5 to 7% largely on political proud out of the normal advertisers.
Lucy Rutishauser: However, this declining poor is roughly two thirds of what recent historical levels have been in the fourth quarter of a political year. Again, showcasing that our sales strategies and content offerings are working.
Speaker Change: Politable for the quarter came in a approximately 204 million, which was another record quarter, pre-ron-off, despite the 21 million in late cancellations, as Rob said, money shifted among key states.
Lucy Rutishauser: For the year, political approach, 466,000, through 16% of her 2020s, 360 million, pre-tourger run off total, and again, would have been 26 million higher if not for those cancellations.
Lucy Rutishauser: Distribution revenue was expected to be up 3% year over year at the midpoint of our guidance range and adjusted e-pidials expected to be 314 to 325 million in the quarter up 74 to 81% over the year ago levels.
Lucy Rutishauser: Turning to slide 17, we expect to finish the year with poor advertising down 2% which is roughly half of what our pro-forma historical core has declined in political years.
Lucy Rutishauser: For 2024 political revenue is approximately 406 million.
Lucy Rutishauser: Distribution revenue is expected to be up 4% and media expenses are 5% for 2023.
Lucy Rutishauser: which includes the Higher Sales Corps associated with the revenue growth.
Lucy Rutishauser: Now as compared to our initial four year 2024 guidance given in February.
Lucy Rutishauser: Media expenses are estimated to be 25 million favorable compared to the midpoint of our February guidance. And that's driven by our enterprise-wide focus this year on cost controls across a variety of expense lines.
Lucy Rutishauser: In addition, non-mediacs fences are expected to be 8 to 10 million lower than our original four-year guidance due to time in a certain expenses moving to 25.
Lucy Rutishauser: Capital expenditures are also expected to be lowered than our original forecast by 20 million at the midpoint of the February guidance range.
Lucy Rutishauser: And finally, of the 224 million cash distributions expected this year, 188 million has already been received. And so with that, I'd like to turn the call back to every press for some closing comments.
Speaker Change: Thank you Lucy.
Speaker Change: Turning to our key takeaways on slide 18, St. Clair delivered solid third quarter results as core advertising revenues grew year-of-year during a quarter with record-collocal revenues, a first for St. Clair and a closed-weir.
Lucy Rutishauser: Political advertising revenues set records for the company during the third quarter, fourth quarter as of the election day and full year.
Lucy Rutishauser: Distribution revenues were up 5% year-over-year during the quarter as over 78% of our big four network, MDPD, linear subscriber base are now on new retransvation consent agreements.
Lucy Rutishauser: since the beginning of the year, helping us reaffirm our guidance of estimated net retrans growth of mid-single digits for the 2023 to 2025 two-year tager.
Lucy Rutishauser: Full year EBITDA guidance reflects a growth rate of 53% to 55% year-over-year.
Lucy Rutishauser: In summary,
Lucy Rutishauser: We are pleased to deliver both core revenue growth in the third quarter and record political revenue growth this year.
Lucy Rutishauser: We believe our results demonstrate the continued strengths of both Sinclair's operations as well as the broader broadcast industry. And following last night's election results, we are optimistic for a more constructive regulatory environment for the industry.
Lucy Rutishauser: We have positioned the company well to take advantage of these opportunities and could not be more excited about its future.
Lucy Rutishauser: Lucy, Rob, and I will now open the call to questions. Thank you for joining us today.
Lucy Rutishauser: Thank you.
Speaker Change: Thank you. At this time we'll be conducting our question and answer session. If you would like to ask a question please press star one on your telephone keypad.
Lucy Rutishauser: A confirmation tone will indicate your line is in the question queue, and you may press star 2 if you would like to remove your question from the queue.
Lucy Rutishauser: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment please, while we poll for questions.
Lucy Rutishauser: Thank you.
Lucy Rutishauser: Our first question is coming from Stephen Cahal with Wells Fargo. Your line is live.
Stephen Cahal: Maybe just first, Chris, can you.
Stephen Cahal: talk a little bit about the decision to pre-announce on political. I think back in 2022 there was some late-breaking timing shifts on the political front.
Stephen Cahal: And so, you know, you decided to give the pre-announced outlook for the year, and then things kind of shifted again. So we'd just love to understand, you know, how things broke so much different than you expected, and if this was different from 2022.
Stephen Cahal: And then second, you know, there was some prior reports that your stations could be for sale and you talked a bit on the call about some of the
Lucy Rutishauser: positive regulatory changes that could happen, especially as the new FCC comes into effect.
Lucy Rutishauser: Should we think about Sinclair as more likely a buyer, or a seller, or a little bit of both? You know, if we do get into a point in time when the cap is higher. And then just finally on distribution revenue, up 5% in Q3. I think it's implied up 3% in Q4. So is Q3 the high point after all these successful renewals, or is there still some room for it to grow? Thank you.
Speaker Change: Okay. Thanks, Steve.
Speaker Change: So I'll look on the first question when we took a look at what was happening in Q3 and we compared that to historical trends.
Lucy Rutishauser: you know, be it 2022 or even, you know, further.
Lucy Rutishauser: back, it was pointing to a significantly higher
Lucy Rutishauser: number for Q4, which unfortunately didn't materialize because of the shift from some big cities or out of smaller cities into big cities.
Lucy Rutishauser: from some states to other states where we weren't.
Lucy Rutishauser: located. So it was that sort of shift of that size is not something that we've
Lucy Rutishauser: we had previously experienced and we had some cushion even you know with the implied guidance that we that we gave so that's why we yeah that's how we changed the guidance when we did.
Lucy Rutishauser: Look, we're very excited about...
Lucy Rutishauser: We intend to, as we've always said consistently over the last...
Lucy Rutishauser: few years, we intend to participate in that
Lucy Rutishauser: in the M&A, in the...
Lucy Rutishauser: in the industry, be it as a buyer, as a seller, or a merger partner. So, you know, whatever we can do to unlock some of the parts valuation is really what we're focused on. And this
Lucy Rutishauser: new regulatory environment that we're about to come upon we think will greatly facilitate that.
Lucy Rutishauser: And then on your last question, as it relates to...
Speaker Change: Top Line Wrote
Lucy Rutishauser: I don't have those numbers right in front of me, but we wouldn't necessarily give that level of detail for upcoming quarters.
Speaker Change: But we still have 28% of our subscribers to go on renewal, and so we're expecting strong growth well into 2025.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is coming from Dan Kornos with the Benchmark Company. Your line is live.
Dan Kornos: Great, thanks. Can I just, Chris, just quickly follow up on Steve's last question just on distribution and just...
Lucy Rutishauser: I'd maybe ask it a different way and say we know that some of your peers maybe have some timing elements in some of these, you know, just to make sure that there were no blackouts. So I'm not asking for like specifics, but.
Lucy Rutishauser: I just wanted to understand if you're getting sort of full renewal in the current and out quarter on distribution. And then for Rob, maybe you can just kind of talk about
Lucy Rutishauser: underlying core trends post-election. I mean obviously there's World Series in there and I'm curious how much, if at all, you think Trump presidency given your Fox exposure would help or not from a core perspective. Thanks.
Lucy Rutishauser: So, Barton, can you say your first question again? I'm not sure I quite really understand what you mean.
Barton: Yeah, hey Chris, Dan, anyway, I'm just asking, so like, for example, if you have, you know, so you did direct in Altice in the quarter, and I was just curious if, you know,
Lucy Rutishauser: terms around some of the renewals done in Q3. If you get the immediate step up, if there might be some timing elements like, you know, incremental step ups next year.
Lucy Rutishauser: You know, just trying to make sure that we understand how much of the renewals are hitting in this quarter and how much we should be expecting sort of next year once you bake in the next 28%.
Speaker Change: Right, okay yeah I think I understand your question now Dan. So again I can't get into the specific terms of any one agreement but generally speaking we do have step-ups that kick in as soon as we renew.
Lucy Rutishauser: and we also have significant annual renewal step-ups that happen as well.
Speaker Change: And Rob has a court question. I'll hand it over to Rob.
Rob Weisbord: Yeah, Dan, a couple things. As Lucy pointed out, we're currently trending at 2 3rds of being down versus traditional through the crowd out. And that goes to what I've been talking about for the past year of our.
Lucy Rutishauser: pricing system using algorithms and the efficiencies of running our spots as they're bought.
Lucy Rutishauser: Obviously in fourth quarter we had the World Series, our largest group is Fox, but college football across our networks are doing well. You're seeing marquee matchups every single week.
Lucy Rutishauser: witnessed early in the season. And so, going into next year, with our Fox stations having the Super Bowl, we think we'll carry over our successes into the first quarter of next year.
Lucy Rutishauser: flat to down 1% even with all the crowd out so
Lucy Rutishauser: We are cautiously optimistic that we're seeing the return of eyeballs.
Lucy Rutishauser: words on the street that the younger people don't watch broadcasts, but in the World Series, the 18-34 demo was up 100% in this year's World Series, so as Chris was iterating on, we're bullish that sports is bringing eyeballs back to broadcasts.
Speaker Change: Got it. Super helpful. Thanks guys.
Speaker Change: Thank you. Our next question is coming from Burton Crockett with Rosenblatt. Your line is live.
Burton Crockett: Hi, thanks for taking the question. I was interested in the commentary around the regulatory environment and, you know, because I, you know, as I recall you guys had some issues with the FCC under the former Trump administration with your Tribune deal.
Lucy Rutishauser: And so I'm just wondering if there's been anything specific that's been said or that you've seen That gives you the confidence that you you'd get you know some You know hope for kind of loosening of the regulatory situation there. There's anything you can point to other than Just your hopes
Speaker Change: Sure, actually there's something I think very salient to point out there so I'm glad you asked this question. If you remember
Lucy Rutishauser: Chairman Pai enacted new rules, did a certain measure of deregulation when he was in power.
Lucy Rutishauser: And those rules were then, you know, the rules of the day. Now, all that time until that was all sorted out, you know, largely ate up most of that.
Lucy Rutishauser: FCC's Term and so shortly thereafter we had a changeover In in government in the White House and a changeover in the FCC So so we we from our perspective. We really haven't lived
Lucy Rutishauser: in a world where even the current rules have been in effect or at least followed by the FCC. So just that alone...
Lucy Rutishauser: adjudicating the rules as they currently stand is a huge benefit for the industry.
Lucy Rutishauser: and we're hopeful that there'll be further relief as it just isn't consistent with a level playing field versus big tech or big media. And I think the Republican Party understands that.
Speaker Change: Okay, yeah I mean it's clearly not the same. But I was also wondering, switching gears a little bit, you know, Fox was reporting some deceleration in the pace of subscriber decline. Can you guys update us on what you're seeing, anything like that, or just give us what the numbers are?
Speaker Change: So we're still around mid-single digits for our overall churn. That hasn't changed in a while.
Lucy Rutishauser: We do see results in arrears in terms of the submissions that come to us.
Lucy Rutishauser: because most MDPDs pay us and remit in 60 to 90 days after.
Lucy Rutishauser: But, I will note that both Charter and Comcast exceeded expectations on video sub-churn in this most recent quarter that they announced.
Lucy Rutishauser: That tends to lead the information that we receive. And so we were very heartened to see the trends of the two largest MDPDs improve.
Lucy Rutishauser: there, and then as we pointed out in the presentation...
Speaker Change: The Charter Streaming Bundling Strategy
Speaker Change: is really just getting going. You know, they're going to start a big marketing push next year. And when you take a look at the net...
Speaker Change: effective price of pay TV being less than $40 a month it's a massive change in the value proposition and as they implement that in terms of a user experience and they promote it to their customers we think
Speaker Change: The dynamic of a subscriber and their choice set of whether they would cut their subscription to Charter or not is significantly different. So we're anticipating that to have a very dramatic effect.
Speaker Change: That's great. And then just one final question. In your guide, can you give us any sense, you know, for this quarter and maybe even beyond your guide, of the impact of this DTC launch with tennis? You know, is there anything material in the guide and how should we think about that impacting the financials?
Speaker Change: © The Bulletproof Executive 2013
Speaker Change: It will have some measure of expense that's built into the guide that we gave you for fourth quarter.
Speaker Change: And 2025 for the DDC product will be an investment slash build year, not significant in the grander scope of Sinclair, but we do think, given that we are already paying for the rights
Speaker Change: for the DVC rights. So there's no incremental content cost here and we're opening up a significantly improved streaming product to consumers. We think that this will be an incremental contributor in a very short period of time to the results of Tennis Channel.
Speaker Change: Yeah, I think you'll see an enhanced viewership. We'll be able to go to a multi-view. So when there's multiple tournaments that are running at the same time, you could have the best video the whole world is.
Speaker Change: viewing of the multiple tournaments and not being stuck just to what's showing up on the linear feed on the channel. So those tennis enthusiasts and even the recreational, there'll be something for everyone inside the app.
Speaker Change: Okay, that sounds cool. Thank you guys very much.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: Thank you. Our next question is coming from David Hamburger with Morgan Stanley. Your line is live.
David Hamburger: Thank you very much. Maybe you could talk a little bit about capital allocation. So you have $536 million of consolidated cash.
Speaker Change: You have nearly $1.2 billion of debt maturating in 2026. You have talked in the past about keeping SPG cash and Ventures cash separate as you think about funding for the different parts of the capital structure.
Speaker Change: So I'm wondering if you talk about how you approach 2026 debt maturity and maybe you could do that as well in the context of your M&A comments or about consolidation, because in the past you've also, you know, been willing to avail yourself of financial flexibility in your credit docs.
Speaker Change: to move assets around, as you did with the Ventures transaction previously, and have said you might find it useful to use that in the future as well.
Speaker Change: So could you kind of talk about, you know, not just capital allocation, but asset allocation, how, you know, you approach the balance sheet, you approach leverage, you approach, you know, the potential consolidation, and how from, you know, from that perspective, you're looking at the 2026 and even 2027 maturities.
Speaker Change: Thanks.
Speaker Change: So we think we have several options to address those upcoming maturities.
Speaker Change: and we're looking for that will deliver both the lowest cost of capital and the most flexibility from an M&A perspective and that's not
Speaker Change: to move assets around necessarily as you implied. That is to be a participant in whatever transaction may come here in the future. I do expect...
Speaker Change: that the industry will look at consolidation opportunities, and if that means that we're a buyer or a seller or a merger partner, we would want a capital structure that, you know, contemplates doing that in an efficient manner.
Speaker Change: Okay, I mean you can't elaborate further on what sort of capital structure, I mean you've talked about leverage which is now at 5.3 times being, you know, I guess you had a leverage target that was a little bit lower than that.
Speaker Change: You know, given that next year is not a political year, and then 2026, you'll be facing, you know, some of the debt maturities as they're stacked. Can you provide us any kind of guardrails or a sense as to, you know, how you look to manage the balance sheet, maybe overall leverage, maybe from that perspective?
Speaker Change: No, we're definitely focused on moving overall leverage down back to our target.
Speaker Change: So that's a focus. We think we will have no issue dealing with the maturities that we...
Speaker Change: have upcoming and to the extent that there are transactions, strategic transactions, that come about in into next year, those will likely be significant synergy generators and you know, just depending on the formulation of the transaction, that should also help
Speaker Change: Drive
Speaker Change: further deleveraging on top of the myriad of growth initiatives that we have running through the system.
Speaker Change: like our cloud transformation, like our podcasting division and our social.
Speaker Change: divisions. So there's a lot that will help leverage move down naturally over time and then M&A I think will just accelerate that.
Speaker Change: Is capturing discounts and debt securities part of the, you know, the deleveraging that you expect?
Speaker Change: We've been opportunistic in our buybacks. We bought $74 million of debt that had a $91 million par value since the beginning of 2023.
Speaker Change: in the capital structure, we will definitely, you know, look to take advantage of that.
Speaker Change: Okay, thank you very much. I appreciate it.
Speaker Change: Thank you.
Speaker Change: Our next question is coming from Aaron Watts with Deutsche Bank. Your line is live.
Aaron Watts: Hi, thanks for having me on. Two questions.
Speaker Change: NBA TV rights deal and NBC's inclusion there was a positive for the broadcast TV space, including Sinclair. My question is whether Comcast looked to its affiliate partners
Speaker Change: to help foot the bill for those rights at a time when I know you and your peers are looking to moderate network compensation growth. What are your latest thoughts on that and especially as you head towards a renewal of MVC at the end of this year?
Speaker Change: And then secondly, DirecTV and DISH recently announced an agreement to come together.
Speaker Change: While that deal is yet to get done, and may not get done, curious if you view...
Speaker Change: this as a positive or a negative for Sinclair and the local TV broadcasters more broadly? And as part of that, can you comment on whether after acquired clauses would have an impact on your distribution fees, if and when that deal was to be able to close?
Speaker Change: Thank you. Thank you.
Speaker Change: Sure. Thanks, Aaron. So look, I think the most recent example you can point to for your MBA question would be the last...
Speaker Change: round of NFL contracts that went up, that did not...
Speaker Change: create an appreciable change in trend, even though the prices paid were quite significantly higher, that did not create a significant bump for the affiliates.
Speaker Change: and we don't expect that to be the case for the NBC-NBA deal either.
Speaker Change: that we're certainly supportive of.
Speaker Change: them pursuing a more broadcast-centric distribution model. We think it's beneficial for the league, it's beneficial for NBCU, and we're happy to facilitate that as good partners.
Speaker Change: So, but our expectation is that that won't materially change the trend, which has been declining increases over time for reverse re-trends. And then as it relates to DirecTV Dish.
Speaker Change: to the extent that the combined company is healthier.
Speaker Change: You know, we think that's probably a positive for the industry. Anytime you've got a major player that is distressed,
Speaker Change: as DISH has been for a while, it just creates, I think, we think...
Speaker Change: you know, weird incentives. So, so, so we're, we're, we're, you know, to the extent that they create synergies, rationalize the capital structure, we think that will create a better functioning economy.
Speaker Change: industry. Now certainly there are some competition issues which will have to be looked at as it relates to some rural markets.
Speaker Change: where choice is limited for consumers.
Speaker Change: to only those two, and that will have to be looked at from a regulatory perspective. But we also, to your last question as it relates to this, we don't anticipate any impact to our retransmission fees post-closing.
Speaker Change: Appreciate the thoughts, Chris. Thanks.
Chris King: Thanks, Aaron.
Speaker Change: Thank you. As we have no further questions in queue at this time I would like to hand it back to Mr. Ripley for any closing remarks.
Speaker Change: Thank you. And thank you all for joining us today. To the extent you have any questions or comments, please feel free to reach out to us and the IR team. Thank you.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you ladies and gentlemen. This does conclude today's conference and you may disconnect your lines at this time and we thank you for your participation.