Q4 2024 Sinclair Inc Earnings Call
Speaker Change: Greetings. Welcome to the Sinclair fourth quarter 2024 earnings conference call. At this time all participants are in a listen-only mode.
Speaker Change: A question and answer session will follow 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. I will now turn the conference over to your host, Chris King, Vice President of Investor Relations. You may begin.
Chris King: Thank you. Good afternoon, everyone, and thank you for joining Sinclair's fourth quarter 2024 earnings conference call.
Speaker Change: Joining me on the call today are Chris Ripley, our President and Chief Executive Officer, Lucy Rutishauser, our Executive Vice President and Chief Financial Officer, and Rob Weisbord, our COO and President of Local Media.
Speaker Change: 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 will remain available on our website until our next quarterly earnings release.
I would also like to note
Speaker Change: Our prior release of certain fourth quarter local media financial information which we disclosed in late January prior to the launch of our refinancing.
Speaker Change: Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results.
Speaker Change: 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.
Speaker Change: Such factors have been set forth in the company's most recent reports as filed with the SEC and included in our fourth quarter earnings release. The company undertakes no obligation to update these forward-looking statements.
Speaker Change: Included on the call will be a discussion of non-GAAP financial measures, specifically adjusted EBITDA. These measures are not formulated in accordance with GAAP, are not meant to replace GAAP measurements, and may differ from other companies' uses or formulations.
Speaker Change: Further discussions and reconciliations of the company's non-GAAP financial measures to comparable GAAP financial measures can be found on our website. Let me now turn the call over to Chris Ripley.
Chris Ripley: Good afternoon everyone and thank you for joining us. I wanted to start with a bit of breaking news regarding NextGen Broadcast.
Speaker Change: Earlier today, the National Association of Broadcasters filed a petition with the FCC, which asked the Commission for a roadmap to sunset ATSC 1.0 in order to facilitate a full transition to ATSC 3.0.
Speaker Change: which would include transitioning the top 55 DMAs to 3.0 within three years, which covers 70% of the country. It also asks for the remaining markets to be converted to 3.0 within five years.
Speaker Change: As an industry, we believe that such an orderly transition will benefit the nation's consumers by offering significant improvements in picture quality, audio clarity, interactive features, and public safety capabilities.
Speaker Change: It would also support the long-term viability and global competitiveness of the broadcast industry by making significantly more spectrum available for additional content and data casting.
Speaker Change: We look forward to working with the NAB, the industry, Chairman Carr's FCC, and the Trump administration as the industry continues to make significant progress on next-gen broadcast and as we move towards a more equal competitive playing field for broadcasters.
Speaker Change: Turning to slide three, I wanted to highlight what was an active and successful year for Sinclair in 2024.
Speaker Change: Once again, we reported that what we believe will be the strongest core advertising performance amongst our broadcasting peers in 2024.
Speaker Change: In addition, we announced record-breaking political advertising revenues of $405 million, doubling the 2026 presidential year results.
Speaker Change: We also completed a successful year of distribution and network affiliation agreements with over 5% net retransmission growth year-over-year in 2024.
Thank you.
Speaker Change: In addition, as discussed last quarter, we launched several top-rated sports-related podcasts just prior to the football season, and they continue to perform extremely well with several new local and national podcasts being launched in the coming weeks.
Speaker Change: We also launched our Tennis Channel D2C product, which now offers our premium linear channel content on a streaming platform for the first time ever.
Speaker Change: On the venture side of the business, we received $209 million in cash in 2024 as we continue to reposition our minority investment portfolio towards more majority-owned assets.
Speaker Change: Lastly, this month we substantially completed a comprehensive refinancing of our balance sheets, which Lucy will provide an update on a bit later. Turning to slide four.
Speaker Change: I wanted to take a quick moment to reflect on our equity performance over the past two years. As you can see in the graph, our share price has outperformed our four publicly traded broadcast peers in both 2024 as well as for the two-year period beginning in 2023.
Speaker Change: For this sector that has had numerous misperceptions and market overreactions, we're proud of our relative outperformance over the past two years.
Speaker Change: We also note recent public statements and M&A activity from companies such as Disney, Skydance, and Comcast that are focused on the broadcast business as a key corporate asset going forward.
Speaker Change: On slide 5 we highlight certain of our key consolidated financial metrics for the year in comparison to our most recent guidance provided on our November earnings call.
Sorry, that slightly exceeded our forecast.
Speaker Change: Core revenues came in slightly below our expectations on late year macroeconomic related pressures in several categories.
Speaker Change: However, media expenses were favorable to our forecast, driven largely by compensation and sales-related costs.
Speaker Change: As a result, we exceeded our adjusted EBITDA guidance range for the quarter. Lastly, our capital expenditures were also favorable to our forecasts, with roughly half of the variance due to timing and half permanent savings.
Turning to slide six.
Speaker Change: Our ventures portfolio continues to transform away from our minority investment holdings as we look to position the portfolio in more majority-owned assets over time.
Speaker Change: Total cash inflows during 2024 totaled $209 million, including $47 million in the fourth quarter.
Speaker Change: Ventures had 406 million of cash at year-end and after our comprehensive refinancing of SPG, we are now able to carefully examine the potential uses for the cash balance at Ventures.
Speaker Change: We continue to examine outside investments for ventures that would that we would be able to consolidate our results as well as potential for returning a portion of the cash to shareholders over time Be that a share buyback authorization or other shareholder friendly actions
Speaker Change: Lucy will provide more detailed breakdown of the business unit financials in a bit, but first I wanted to provide an update on the pay TV great rebundling which we've talked about in recent quarters before I turn it over to Rob for a broadcast update.
Speaker Change: On slide 7, we turn to the Charter Pay TV Bundle example once again.
Speaker Change: The streaming services now included in Charter's Select Plus Pay TV package have seen another $3 in incremental value as several of the streaming platforms have increased their retail pricing once again.
Speaker Change: Charter subscribers now enjoy more than $81 per month worth of streaming services which equates
Speaker Change: to a 59% discount versus YouTube TV and a 66% discount in net effective rate for pay TV over the past 12 months when taking into account those streaming services.
Speaker Change: Notably, even though Charter is just now launching an aggressive marketing campaign to highlight this revaluing, the company is already seeing positive impacts in its business.
as Spectrum reported its lowest net subscriber loss figure
Speaker Change: We continue to highlight the tremendous value available in the PayTV bundle.
Speaker Change: With that said, let me now turn it over to Rob to continue the discussion about our broadcast business.
Thanks, Chris, and good afternoon, everyone.
Rob Weisbord: Turning to slide 8, several weeks ago we made a significant marketing announcement by introducing AMP sales and marketing solutions and AMP media. This rebranding of our internal sales and content platforms is redefining how we connect with our customers and audiences.
Rob Weisbord: The rebranding is designed to do several things. First, we want to highlight the fact that we are more than a broadcast TV platform.
Rob Weisbord: We also have a strong digital product, highly ranked podcasts, and social verticals. We have found relevancy on all platforms.
Rob Weisbord: We want our sales forces to be focused on offering strategic solutions to advertisers to more effectively engage audiences wherever they may be and however they want to receive our content.
Rob Weisbord: In addition, the strategic evolution of our business will involve a revamping of our internal processes to build stronger sales teams with cutting-edge resources.
Rob Weisbord: This is part of our transformation strategy to migrate from a traditional broadcast company to a multi-platform media organization. We cannot be more excited of our potential and amplifying what we do.
Rob Weisbord: On slide 9, we had a very successful 2024 from a distribution perspective. We successfully renewed retransmission consent agreements, representing 80% of our traditional Big Four subscriber base.
Rob Weisbord: It is worth mentioning that, with respect to the remaining 20%, we remain in active negotiations with DizMVPD, and our fourth quarter results and first quarter guidance reflect accruals based on the current state of negotiations.
which continued to progress.
Rob Weisbord: We also completed a long-term renewal with NBC, our last network affiliation agreement renewal in this cycle. Combining successful renewals gives us greatly enhanced visibility in both our retransmission revenues as well as our network programming fees for the next several years.
Rob Weisbord: Notably, since we are frequently asked about our mid-single-digit two-year CAGR for net re-trans revenue guidance, it is worth noting that our 2024 net re-trans revenues are moved by more than 5% over 2023.
Rob Weisbord: Following our renewals, we have even greater visibility and reiterate our previously stated net retrans guidance.
Turning to slide 10.
Rob Weisbord: I just wanted to put a quick bulb on our political revenues for the year, as we discussed in our preliminary numbers on our last call.
Rob Weisbord: We recorded a record $405 million in political revenues in 2024.
Rob Weisbord: Not only was the full year a record for Sinclair, but we also broke our records in all four quarters of the year.
Rob Weisbord: excluding the impact of the Georgia senate runoff in 2020. The 405 million full year results represent a doubling over 2016 levels and a 16% increase over the 2023 Georgia runoff total.
Rob Weisbord: We are well positioned for what we believe will be highly competitive and contentious races in both the 2026 midterm elections and the dual open presidential election in 2028.
Chris: Now let me turn it back over to Chris to provide a couple of our industry updates.
Chris: Thanks Rob. On slide 11 I wanted to turn back to NextGen Broadcast to briefly discuss one of the more exciting industry developments for the technology.
Chris: Last month, we announced a joint venture with Scripps, Gray, and Nexstar to combine our commercial next-gen broadcast efforts under Edge Beam Wireless.
Chris: This joint venture allows us to create a nationwide spectrum footprint that no individual broadcaster could achieve on its own. In fact, EdgeBeam will start with ATSC 3.0 national coverage of approximately two-thirds of U.S. households.
Chris: Once the stations of all four partners are converted, we will be able to reach approximately 98% of all U.S. households.
Chris: such as streaming video offload, automotive connectivity services, and precision navigation, among many other potential use cases.
Chris: We view this announcement as a groundbreaking development for next-gen broadcast monetization, as well as for the broader broadcast industry, and we're very excited about the potential going forward.
Speaker Change: Speaking of excitement, the industry is optimistic on the political changes in Washington, specifically at the FCC with Chairman Carr at the helm.
Speaker Change: Turning to slide 12, we are hopeful that many of the woefully outdated FCC regulations that have hampered growth in the broadcast industry over the recent decades will be revisited, if not eliminated, in the coming months.
Speaker Change: While the timing and extent of these changes obviously remain to be seen, the industry is hopeful that most of the outdated ownership rules impacting the sector will be modified to allow sensible M&A and portfolio rationalization.
Speaker Change: In addition, we will be logging for other issues impacting the sector, particularly the rules that prohibit broadcasters from negotiating directly with virtual MDPDs.
Speaker Change: as well as the rules that will allow the industry to rapidly sunset ATSC 1.0 networks, which will help accelerate wide adoption of next-gen broadcast products and services, as evidenced by the industry's filing earlier today.
Speaker Change: On slide 13, I wanted to take a moment to highlight our 2024 Sinclair Cares Community Impact. During the year, we donated more than $7 million of on-air promotion time and supported over 400 different charitable organizations.
Speaker Change: In addition to raising over $24 million for those charities, we collected more than 4 million pounds of food, provided over 3.5 million meals, collected over 300,000 toys, provided over a quarter of a million diapers, and donated almost 6,300 pints of blood.
Speaker Change: I could not be more prouder of our viewers, advertisers, partners, and employees that help drive this significant community impact across our footprint every single year.
Speaker Change: Now let me turn it over to Lucy to discuss our financial results in more detail as well as our successful refinancing.
Lucy Rutishauser: Thanks Chris and good afternoon everyone. Turning to slide 14, I want to highlight our recent comprehensive balance sheet refinancing.
Speaker Change: The refinancing is the result of months of hard work by many people, but I want to specifically thank our debt holders and lenders for their support during this process.
Speaker Change: The centerpiece of our refinancing was a $1,430,000,000, 8-year, 8-8% first out, first lien loan.
Speaker Change: The broader refinancing not only addressed our $1.2 billion 2026 maturity, but also extended the maturities of certain of our other debt such that our weighted average maturity is now over six and a half years.
Speaker Change: Pro forma for the completed transactions, our first out first lien net debt leverage is below two times, with first lien net leverage at 4.2 times as of year end 2024.
Speaker Change: Our balance sheet is now not only the industry's longest in terms of maturity profile, but more importantly, well positions us to participate in what we hope will be a period of renewed M&A activity within the sector.
Speaker Change: Turning to slide 15, you can see the transformation of our balance sheet and the extended maturities across our various debt tranches over the coming years, with our closest meaningful maturity now not until the end of 2029.
Speaker Change: Slide 16 shares our year-end 2024 cap table and our pro forma cap table following the refinancing.
On slide 17, we highlight our fourth quarter consolidated results.
Speaker Change: I won't spend too much time here as Chris touched on most of the key drivers in his commentary relative to our November guidance, but I did want to highlight that Adjusted EBITDA beat our guidance range by approximately $5 million at the high end of the range.
Speaker Change: That was due to stronger distribution revenue on modestly lower subscriber churn, as well as lower immediate expenses on compensation and sales-related costs, partially offset by the slightly softer poor advertising in certain categories.
Speaker Change: On slide 18, our consolidated media revenue results in the quarter were up 21% compared to 2023, driven by growth in political and distribution revenues, while core advertising was down due to the political crowd-out effect.
Speaker Change: Turning to slide 19. Adjusted EBITDA grew by 83% year over year in the fourth quarter.
Speaker Change: Driven by higher political and distribution revenues, which more than offset a modest increase in media expenses associated with the additional incremental media revenues.
Speaker Change: On slide 20, we present our fourth quarter financials by segment. I do wanna remind everyone that we pre-announced our local media results on January 27th, prior to the launch of our refinancing.
Speaker Change: As compared to the fourth quarter of 2023, distribution revenues were up 5% driven by our contract renewal cycle in 2024.
Speaker Change: Court advertising declined 9% year-over-year, primarily on political crowd-out, as well as some modest softness in several macroeconomic-sensitive categories late in the quarter.
Speaker Change: However, local media adjusted EBITDA was within our guidance range for the quarter as a result of the better distribution revenues and favorable media expenses.
Turning to Tennis Channel, results.
Speaker Change: Total revenues were up 6% year-over-year, slightly above our expectations, due to digital advertising revenues, which more than doubled.
Speaker Change: due in large part to the dramatically expanded distribution of Tennis Channel 2, which is formally T2.
Speaker Change: Justin Ibidal for Tennis Channel also came in above our forecast due primarily to lower production, marketing, and G&A expenses.
Speaker Change: When I look back on our consolidated full year, 2024 performance, as compared to our original guidance presented in February of last year,
We overachieved on expense items across the board.
Speaker Change: Notably, as seen on slide 21, consolidated media expenses came in $38 million better than the midpoint of that original four-year guide.
Speaker Change: While our non-media expenses beat our original guide by approximately $10 million, and CapEx of $84 million for the year is well below our original midpoint guide of $114 million.
Speaker Change: As we stated throughout 2024, this was a company-wide focus on managing costs, and we thank all of our employees for embracing and continuing to execute in this regard.
Speaker Change: Turning to slide 22, we introduce our first quarter 2025 guidance.
Speaker Change: We expect first quarter media revenues to be lower by 2-4% year-over-year on a consolidated basis.
Speaker Change: due primarily to significantly lower political revenues in a non-election year as well as some continued softness in a few core advertising categories.
Speaker Change: We anticipate core advertising revenue to be down by approximately 3% at the midpoint of our guidance range, while distribution revenues are expected to be 4% higher year-over-year.
Speaker Change: Our consolidated adjusted EBITDA is expected to be within a range of $90 to $102 million versus $139 million in the year-ago period, again impacted by the absence of material political revenues in this off-cycle election year.
Speaker Change: Net cash interest expense of $143 million includes $75 million of non-recurring fees and expenses associated with the refinancing that we do not anticipate being able to capitalize. Again, that $75 million is non-recurring.
Speaker Change: Slide 23 contains our full year expense guidance, which includes a modest 2% increase in media programming, production, and SG&A expenses year over year.
Speaker Change: CapEx, while flattish to 2024's levels, would be declining, if not for a carryover from 2024.
Speaker Change: We expect approximately $28 million in increased net cash interest expense.
in 2025.
based on current interest rates.
Speaker Change: and reflecting the recent refinancing and excluding the non-recurring $75 million of Q1 refinancing fees and expenses.
Speaker Change: We are forecasting cash tax payments in 2025 of $216 million at the midpoint of guidance.
Speaker Change: And that's largely driven by approximately $170 million in forecasted cash tax payments associated with Diamond's emergence from Chapter 11 protection in early January. I'll now turn it back to Chris for some closing remarks before we open it up to Q&A.
Thanks, Lucy.
Speaker Change: As you have seen, it was a very active and successful year for Sinclair on many fronts.
Turning to slide 24 to summarize the year in review.
Speaker Change: We have seen continued strength in the broadcast TV business model.
Speaker Change: 93 of the top 100 most watched telecasts in 2024 were on broadcast TV.
Speaker Change: And two and a half weeks ago, Fox delivered the most-watched telecast in the history of American television in Super Bowl LII, with 127.7 million total viewers, besting the record previously held by last year's Super Bowl.
Speaker Change: In fact, to further highlight the power of broadcast television, Nielsen recently reported that our telecast of the Portland Trailblazers led the NBA in audience growth year over year through the All-Star break.
Speaker Change: with a 68% growth rate as our broadcast signals now cover 100% of the Portland market as opposed to the team's prior telecasts on Root Sports.
Speaker Change: We also benefited from record political revenues in 2024 of $405 million, a 16% over our pre-runoff 2020 revenues and a doubling over 2016 political revenues.
Speaker Change: We anticipate continued political revenue strength in 2026 with highly competitive congressional races and control of Congress hanging in the balance, in addition to 2028, which will see dual open presidential primaries for only the second time since 2000.
Speaker Change: Core advertising trends have been improving throughout the first quarter following some softness in late in the year and an early January around specific categories.
Speaker Change: We are confident that with our multi-platform content strategy, effective yield management, and sales optimization processes, we will continue to drive best-in-industry growth in core revenues as we have consistently done so over the past several quarters.
Speaker Change: In addition, our distribution team had a very busy and successful 2024, which greatly enhanced our visibility on our net retransmission revenues for the next several years, thanks to our recent agreements with MVPDs, as well as renewing our last network affiliation agreement until 2026.
Speaker Change: This led to more than 5% growth for the full year.
Looking forward.
Speaker Change: We are seeing regulatory optimism for the first time in several years with hopeful expectations for loosening M&A restrictions and next-gen spectrum relief to sunset ATSC 1.0. And lastly,
Speaker Change: If we do usher in a new age of M&A opportunities, our balance sheet is now well prepared for it. With the longest maturity profile in the industry, a weighted average of over six and a half years following our recent refinancing.
Speaker Change: while our financial priority for the local media segment remains delivering our balance sheet.
Speaker Change: After our comprehensive refinancing, we now are able to carefully explore the potential uses for cash balances at Ventures.
Speaker Change: We continue to examine outside investments that we would be able to consolidate in our results as well as the potential for returning a portion of the cash to shareholders over time.
Be that a share buyback authorization or other shareholder-friendly actions.
Speaker Change: We will continue to keep the investment community updated on this topic. Add it all up.
Speaker Change: And we could not be more optimistic about the future of the industry and Sinclair's position as an industry leader.
Speaker Change: Thank you very much for joining us today and your interest in Sinclair. Rob, Lucy, and I will now take your questions.
Speaker Change: Thank you. At this time we will be conducting a question and answer session.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment.
Speaker Change: The first question comes from Stephen Cahill with Wells Fargo. Please proceed.
Speaker Change: This is Debra on for Steve. Our question is, there's a lot of optimism that the new FCC could act to relax local station ownership rules.
Speaker Change: Should we think of Sinclair as more of a buyer or more of a seller if there's room for consolidation? And if a buyer, how much of the cash Adventurers would you be willing to commit for dry powder versus other investments or returns to shareholders?
Great. Thanks for the question.
Speaker Change: So, look, as I mentioned in my prepared remarks, we are very optimistic, as I think the rest of the industry is, for deregulation, you know, the timing and degree of which will have to be seen.
Speaker Change: But as I think about M&A, there are three buckets of opportunities that we are considering. One is, the first bucket I would characterize as sort of cleanup. Buying in our JSAs, for instance.
Speaker Change: That would be immediately accretive to both leverage and evaluation, produce a bunch of synergies, and require minimal cash out the door. The second bucket is station swaps.
Speaker Change: That's where, say, us and another large broadcaster would trade stations in overlap markets.
Speaker Change: And those can be done with low to no cash as well and would generate a significant amount of synergies. So again, very creative to both our valuation and to our leverage multiples. And then the third bucket is large-scale M&A. The good news is...
Speaker Change: I think all three of those opportunities are in play currently.
Speaker Change: even with the rules as they are currently drafted. This administration, I think, will follow the rules as drafted. That was not the case in the prior administration. So we're looking forward to just taking advantage of the rules as they exist today.
Speaker Change: And, as I said, we're hopeful that there will be further loosening in the future. But I guess my message here today is that just with what we have, there's a lot that can be done. And so we're very excited about that. In terms of whether we would be a buyer or a seller...
Speaker Change: We're either. We're here to maximize value for the shareholders, and so we're flexible. And certainly you can see that in the example of station swaps, where we'd be both a buyer and seller at the same time.
And your reference to venture cash.
Speaker Change: As I mentioned in the remarks, now that we have done the comprehensive refinancing and STG has the best balance sheet in the business,
Speaker Change: We are re-examining those cash balances, and we are looking for new investments for ventures, but we're also looking at potential shareholder returns as well, like I mentioned.
Speaker Change: Needing to use that for M&A I don't think will be needed but you know that flexibility is always maintained.
Okay, the next question comes from
Dan Kernas with Benchmark, please proceed.
Great, thanks. Super comprehensive, guys.
Speaker Change: Long, long overdue on the sun setting of 1.0. Obviously we've been waiting for a while for that and then kind of the go forward steps here. I think we're all still kind of eyeing 27 as the real revenue year, but there's a lot more that you guys have announced and you guys have some extra initiatives that are unique to you. So how do we think about the impact of ATSC3 over the next two to three years?
Speaker Change: Yeah, thank you for that. You know, it is like this is a watershed day.
with the filing from the NAB.
Speaker Change: putting in place, hopefully if accepted by the FCC, a sunset of 1.0, which
Speaker Change: We'll significantly increase the revenue opportunity that we have within 3.0 because there will be so much more spectrum
Speaker Change: to be used, which could be used for more content, but also be used for all the data casting opportunities that we've been talking about and that we formed EdgeBeam Wireless with our broadcasting partners to go pursue.
Speaker Change: So, we think it's a huge development that the sunset is being put in place.
Speaker Change: As I've stated before, I do think there will be some amount of revenue generated.
Speaker Change: in 2025 as it relates to 3.0, but it'll be small.
Speaker Change: and it will build from there. The other good news is that between now and...
Speaker Change: 70% of the country, which is the plan where the top 55 markets would transition completely by February of 2028.
We are working on other strategies to increase
Speaker Change: additional 3.0 capacity within the markets that we've already transitioned and actually complete you know the 20 or so percent of the markets that we have yet to transition. And we can do that through additional channel sharing, improvements in compression.
And as Edgebeam develops more uses for our spectrum...
which are honestly, you know, popping up every other day.
Speaker Change: the need for more capacity is going to become the limiter. And so between now and.
Speaker Change: and 2028 we'll be working on increasing that capacity so that we can generate more revenue.
Speaker Change: and then when all of 1.0 is sunset that's when a real volume of new revenue will start to come in to the industry.
Speaker Change: Got it helpful and then just one more You gave color on some of the stuff. We're seeing the charter. We've heard positive
Speaker Change: kind of re-bundling Comcast as well, substained ecosystem, maybe pacing a bit better. Just what are your thoughts on sub-trends? And I know you guys don't have Reverse up until the end of 26, but I think your peers may start to talk about Reverse.
Speaker Change: coming down. So just how should we think, you gave some pretty strong comments on that, but just maybe put those two pieces together for people. Thank you.
Thank you.
Speaker Change: Yeah, thanks. Look, I'm more optimistic about pay TV than I have been in a long time.
Speaker Change: strategy of bundling and streaming we think is a winner and we're already seeing good signs of that with their they had a really great report in Q4. Now we won't see the results of that in our business till for a quarter later.
because we're in arrears.
Speaker Change: But even Comcast, who hasn't copied the Charter of Strategies, saw an improvement.
Speaker Change: in their last quarter churn trend. So when you add up the combination of our new contracts, which we, you know, put in place over the course of 2024, which I think really improved, you know, the outlook for our retrends, plus
Speaker Change: improving churn which you're starting to see in some of these bigger players as they as they counter as they actually react to what's happening in streaming and streaming becomes more expensive and less convenient and you know all the other things that we've talked about.
Speaker Change: We are, you add that up, and we think our net re-trans outlook is extremely positive. As you noted,
Speaker Change: On the network side, you know, we don't have much up, so I think we were very successful.
Speaker Change: in resetting expectations through our last cycle, but I wish our competitors well in their next cycle. And, you know, I think that the dynamics within the industry are positive towards the affiliates in that regard.
Great. Thanks, Chris. Appreciate it.
Speaker Change: The next question comes from Aaron Watts with Deutsche Bank. Please proceed.
Afternoon, everyone. Thank you for having me on. Two questions.
first.
Speaker Change: You're guiding first quarter at a core ads down around 3% I heard your comments that it feels like there's
Speaker Change: Some firming up as the quarter unfolds. Based on what you're seeing in the marketplace today, do you think you can grow core advertising for the full year? And maybe you can talk to some of the key factors and verticals playing into your outlook. And then I've got one more, but thank you.
Rob Weisbord: Yeah this is Rob and the answer is yes we do think we could turn it into a positive. That's one of the reasons why we rebranded our sales team. We have national scale and we can hit local geo targets so thus the name AMP sales and marketing solutions.
and because we have a cross-platform solution.
It's not one-stop shopping.
Rob Weisbord: And we're coming up with unique activations across our platform that will drive it. Automotive, right now, in the fourth quarter, somewhat soft and entered first quarter soft.
Rob Weisbord: But you're going to see heavy inventories on the local dealers, the Tier 3. And at a given point, the dealers are going to have to activate. And we project.
Rob Weisbord: buying down the interest rates. Right now there was softness due to the high interest rates, and it's our belief that the interest rates will
Rob Weisbord: will soften and be more attracted to go and lease or buy a car. We're seeing our service category and legal category up.
Rob Weisbord: And so we expect as the consumer confidence grows that we'd be able to turn this into a positive year for us.
Rob Weisbord: Yeah, Aaron, and just to put a finer point on that too, we definitely saw...
A firming in the business as the quarter has progressed.
Rob Weisbord: from some of the late weakness we saw in late Q4, early Q1, and so we see that as a positive sign.
Rob Weisbord: The general economy is certainly sending mixed signals to people, but we've seen affirming there. And then, also remember, for the year...
Rob Weisbord: Most of the crowd out is in the back half of the year, so that is going to you know augur well for the back half of the year. And in addition, we were selling our sports very successfully on a Fox-to-Fox comparison 23 to 25.
Speaker Change: We're up 1.9 million in revenue year over same like year with the affiliates
Speaker Change: We are facing to be up as well with the March Madness
Speaker Change: And so we're capitalizing on our two largest affiliate-based groups having these SmartKey events in first quarter and March Madness leads over into somewhat early April as well.
Speaker Change: Okay, very helpful guys. I appreciate all that. If I could ask one more, a bit of a political advertising post-mortem. You're coming off a record year.
Speaker Change: That said, as you've now had time to digest how it all shook out, how do you feel about broadcast TV and Sinclair specifically defending your share against digital, CTV, etc., as we think ahead to the next round, 2026, 2028?
Yeah, thanks for that, Aaron. You know, I think the...
Speaker Change: The last political session was a resounding success for broadcast TV and just reaffirmed how important we are.
in the ecosystem.
Speaker Change: We were the only media that increased dollars versus 2020. We're up 9% as an industry.
Speaker Change: And, you know, clearly there was a new player on the scene, connected TV, OTT ads.
Speaker Change: which took about $2 billion of spending, but it largely took that from digital media, cable, radio, and other.
Speaker Change: you know, sources. So, you know, and then as you further dissect what happened in the last election cycle, Republicans spent 53% of their budget on broadcast.
Speaker Change: and Democrats only spent 39% on broadcast. And so I think that just underscores the ROI that is delivered by broadcast when you take a look at how the last
Speaker Change: 2024 political season played out. And I'd also say we're the only ones that can touch the local communities.
Speaker Change: Thus the name change is because we offer these solutions across all platforms on a go-forward basis, and we did it
in the last election cycle, so coming off a
Speaker Change: We don't see anything slowing down. We'll have a very competitive midterm, leading into the first time in a long while, as we both, Chris and I, iterated on, that there will be open primaries for both the Dems and the Republicans.
Very helpful. Thanks again, guys.
Speaker Change: Once again, if you have a question or a comment, please indicate so by pressing star 1. The next question comes from David Hamburger with Morgan Stanley. David, please proceed.
David Hamburger: Hi, thank you very much. If I could ask a couple questions and then one housekeeping.
David Hamburger: And then I know this is not apples to apples, so that's where maybe hoping you could provide some guidance. I see for the year you're guiding media programming production, SGA expense up 2% year-over-year.
David Hamburger: Can we think about that as about, you know, that net retrans revenues this year will be up, say, about 2% versus, you know, the more than 5% last year? And maybe in that context...
David Hamburger: Looks like you did 80% of your retrans renewals, but it looks like Comcast has not renewed. And maybe you've been on kind of one-year extensions or something with Comcast, and maybe you can highlight what your anticipation is for...
for that renewal.
David Hamburger: remaining MVPD that the 20% or so that we're still in active negotiations. We we have put in our fourth quarter and first quarter in our fourth quarter results in our first quarter guidance.
David Hamburger: those reflect accruals that are based on the current state of negotiations and so we have been in short-term renewals and we're making progress. We'll have that wrapped up soon.
David Hamburger: Yeah, so, so David, we don't have full year revenue guidance on the street, but what I would tell you is, you know, we, we expect.
growth in the net retrans. Remember with with broadcast
The rates kick in, the step-ups, renewals kick in.
David Hamburger: based on when the renewal occurs, right? So it's not like in cable where everything happens on the first day of the year. These occur as you're cycling through. So we had a lot of renewals in 24, so we will see
David Hamburger: the effect of those year one renewals as we go through 2025, as well as some nice annual escalators that take place as well. So we do expect net retrans to grow in 25.
Okay, that's helpful.
David Hamburger: just curious if you maybe if you take a longer time frame how you think about you know how should we think about the growth in net retrans as we go through the year and into next year
David Hamburger: So, David, we're not giving explicit guidance beyond 2025 right now. However, as we noted, we've seen some positive signs on the churn front. We think that the charter strategy is already working and will work even better once they really start to publicize it.
David Hamburger: and we think other MVPDs will follow when they see that success. That, you know, coupled with the new deals that we put in place, which I think more appropriately
David Hamburger: deal with, you know, the current environment in terms of how we spread the rates around. We add all that up and and we believe that net retrans will grow going forward.
Speaker Change: Okay, thanks. And just on leverage, can you just kind of reiterate what your leverage targets now are? And you know now you have first lien and second lien debt as we think about secured leverage overall versus
David Hamburger: total leverage and maybe talk a little bit about how you think when you might achieve those targets and how.
David Hamburger: Yeah, so the leverage for total net has not changed. It's still high 3, low 4 times.
David Hamburger: We certainly are not going to get there this year in a non-political year and given the tax payment that we have related to the diamond emergence. However,
We will we will look that the business will
David Hamburger: naturally de-lever, right? 26 is, as we said, we expect to be a big midterm election year.
David Hamburger: as we run through our podcasting strategy, right, which we just really launched a year ago.
that will contribute to the EBITDA.
David Hamburger: All those kinds of things will help de-lever the company, as well as the ability to go out and also buy in some of the debt that's trading it at discounts.
Okay, thank you very much.
Up next is Benjamin Saf with Deutsche Bank. Please proceed.
Benjamin Saf: Good afternoon. Thanks for the question. Really exciting stuff with the balance sheet transactions and then the commentary about potentially returning cash to shareholders. I'm wondering what you would want to see in the business before you begin that process. Thank you.
Well,
I think white
Benjamin Saf: What we're saying on the call is we already see it in the business, so there's nothing more that we need to see.
Benjamin Saf: Getting the comprehensive refinancing done at STG was a major milestone that we wanted to get done before we made any big commitments one way or the other.
And now that it's done, we have the flexibility.
Benjamin Saf: to You know both invest in new control investments, which is our strategic intent
Benjamin Saf: but also take advantage of what we think is a woefully undervalued
Benjamin Saf: share price where we still are way way below are some of the parts so you know that is very much on our mind
Speaker Change: And then you highlighted a pretty large TAM for Edgebeam. How do you think about competition for that TAM from other industries? And what do you think broadcast's fair share is of that opportunity?
Speaker Change: Well the three areas that Edgebeam is going to be focused on first is streaming offload, CDN, market.
Speaker Change: Precision Navigation and Automotive Connectivity. Those are just three of the first use cases which already have POCs
Speaker Change: pilot clients, you know, a lot of work's been done by the various partner.
Speaker Change: broadcasters in those areas. And so EdgeBeam is coming in with a running start and is going to take all that work and start commercializing those into, you know, real revenue.
and the TAM within those three is about $50 billion.
Speaker Change: By the way, the entire TAM of the broadcast industry is about $40 million.
Speaker Change: So, the idea is to play into different pools of opportunities, and I don't think that we're just going to be limited to those three other markets. There'll be others as we develop the asset.
and if you...
Speaker Change: just assume a small percentage share in those much larger markets in totality, it's significant revenue for the industry. And we have value propositions within each of those which are unique. Either we can do something at a much lower cost,
Speaker Change: or we can do things that other wireless systems just simply can't do.
Speaker Change: and so it remains to be seen what we ultimately grab in terms of share but you don't have to make a very, you know, Herculean assumption for a lot of revenue to start flowing our way.
Okay, appreciate the color.
Hello.
Thank you.
Speaker Change: We have reached the end of the question and answer session, and I will now turn the call over to Chris Ripley, President and Chief Executive Officer, for closing remarks.
Thank you.
Speaker Change: Thank you, Operator, and thank you all for joining us today and your support of Sinclair to the extent that you have any questions or comments, please don't hesitate to reach out to us.