Sinclair, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• NextGen Broadcast: The National Association of Broadcasters filed a petition with the FCC for a roadmap to sunset ATSC 1.0. Sinclair joined a joint venture with Scripps, Gray, and Nexstar to create a nationwide spectrum footprint with EdgeBeam Wireless, aiming to reach 98% of U.S. households once stations are converted.
• Financial Performance: In Q4, adjusted EBITDA was $330 million, $5 million above the high end of guidance. Distribution revenue exceeded guidance, core revenues were slightly below due to late-year macroeconomic pressures, but media expenses were favorable. For 2024, consolidated media expenses were $38 million better than original guidance, non-media expenses beat guidance, and CapEx was below original midpoint.
• Ventures Portfolio: Total cash inflows in 2024 were $209 million. Now able to examine potential uses for Ventures cash, including exploring outside investments and potential shareholder returns like share buybacks.
• Charter Pay TV Bundle: Charter subscribers enjoy over $81/month in streaming services at a 59% discount vs YouTube TV; Spectrum saw the lowest net subscriber loss in almost 3 years.
• AMP Sales and Marketing Solutions: Rebranding to emphasize multi-platform capabilities, with sales forces focused on strategic solutions to engage audiences across platforms.
• Community Impact: In 2024, Sinclair Cares donated over 7 million of on-air promotion time, raised over $24 million for charities, collected over 4 million lbs of food, and provided over 3.5 million meals.

Segment Performance

• Local Media: In Q4 2024, distribution revenues increased 5% compared to Q4 2023 due to contract renewals. Core advertising declined 9% year-over-year primarily due to political crowd out and macroeconomic softness in certain categories. However, local media adjusted EBITDA remained within guidance range.
• Tennis Channel: Total revenues grew 6% year-over-year, driven by digital advertising revenues doubling due to expanded distribution of Tennis Channel 2. Adjusted EBITDA for Tennis Channel exceeded forecasts due to lower production, marketing, and G&A expenses.

Guidance

• First Quarter 2025: Consolidated media revenues expected to be 2%-4% lower Y/Y primarily due to lower political revenues and core advertising softness. Core advertising revenue expected down ~3% midpoint; distribution revenues up 4% Y/Y. Consolidated adjusted EBITDA 90-102 million.
• Full Year 2025: Modest 2% increase in media programming production and SG&A expenses; CapEx flattish to 2024 levels; net cash interest expense ~$143 million including $75 million non-recurring refinancing fees.

Risks

• Regulatory Uncertainty: Outdated FCC regulations could hinder M&A activity and slow adoption of NextGen broadcast technologies.
• Macroeconomic Pressures: Core advertising softness persists due to macroeconomic factors affecting certain categories.
• Political Revenue Fluctuations: Dependence on political advertising revenues, which vary significantly by election cycle.

Question and Answer

Q: Thoughts on being a buyer or seller in consolidation and use of venture cash?

A: Christopher Ripley discussed M&A opportunities in JSAs, station swaps, and large-scale M&A; now reexamining venture cash for outside investments and potential shareholder returns.

Q: Impact of ATSC 3.0 over the next 2-3 years?

A: Christopher Ripley said revenue from ATSC 3.0 will be small in 2025 but build, with efforts to increase capacity through channel sharing and EdgeBeam uses leading to more revenue once ATSC 1.0 is sunset.

Q: Sub trends and core advertising outlook?

A: Robert Weisbord and Christopher Ripley noted sub trends improving, core advertising expected to turn positive with firming in Q1, and automotive softness likely to improve as interest rates decrease.

Q: Net retrans revenues and leverage?

A: Christopher Ripley and Lucy Rutishauser discussed net retrans growth expectations due to renewals and positive churn signs; leverage targets remain, with deleveraging expected through business natural trends and potential M&A.

Q: EdgeBeam TAM and competition?

A: Christopher Ripley discussed EdgeBeam's TAM in streaming offload, precision navigation, automotive connectivity, and unique value propositions giving Sinclair an edge in these large markets.