Sinclair, Inc.

Okay, we're going to get started. I'm Aaron Watts, the Media Cable Satellite Research Analyst at Deutsche Bank. Very pleased to have Sinclair back with us again this year. On the dais with me is Chief Executive Officer Chris Ripley and Chief Financial Officer Lucy Rudishauser. To both of you, thank you for being here. So it has been a topical year in the space. So I'm glad we have a chance to sit down to discuss not only Sinclair, but also industry themes as a whole. Sinclair has had a lot going on this past year, though, specifically including a corporate reorganization. And this came against a challenging advertising backdrop, continued secular changes across media as a whole. Chris, to kick us off and level set, how have you repositioned Sinclair now to navigate the evolving landscape Where's your focus and your priorities over the next year plus?

So on the broadcast side, we are very bullish about the year ahead and the future. We are going to have significant net retrans growth from here on forward. We have had, as we guided previously, 22 to 25 net retrans going to be up low single digits there has been a decline in net retrans in in 22 or sorry in 23 and and so you can see that in order for the for the guidance to to to play out that 24 and 25 are going to be robust we're also seeing the ad market firm up here which is a good sign for from the macro economic backdrop And the advertising market for political, we're expecting to be record-breaking in 2024. And on top of that, we're investing heavily in transformation for broadcast. We've got $65 million worth of spend here in 23, focused on cloud transformation, a new unified ad sales platform, all things that are going to make us much more efficient in the future. and much more effective at running our business. We're at peak investment in 23 around that transformation, and that investment spend will subside in 24 and not be there in 25. So you've got extra expenses burdening 23, which will have benefits in future years. You've got significant growth across the advertising business and the retrans business projected for 24 and 25. And then on top of that, you've got ATSC 3.0 starting to contribute in 24 as the market gets fully deployed here across the U.S. We're currently sitting at 65-70% coverage. We're finally starting to get traction on some of the use cases that we've been talking a lot about beyond broadcast, and we'd expect that to start contributing in 24 so we're very bullish on the broadcast business in the years ahead and we feel like we've you know we've taken we've taken our hits there over the last couple years but setting up for a good a good couple years ahead in terms of visibility and then on tennis channel we're very very bullish on tennis channel it's got a number of growth factors that are all coming together here in the next couple years. Direct-to-consumer, which we think is a massive opportunity for tennis. The research that we have conducted points to a subscriber potential in the millions, two to four million potential direct-to-consumer subscribers at over $100 per subscriber a year. is a very significant outcome for tennis. And that's going to be launched next year. International has been going great. We're in nine other territories now, just launched Spain. And we're starting to acquire other rights. We have the WTA rights in Germany, Austria, Switzerland. We're having active rights discussions in other territories. We have the opportunity to build a tennis channel in every single one of those territories of significance in tennis. So an entirely new business. And our fast channel strategy is taking off on tennis. We launched T2 on Samsung only. It's now moving to other fast platforms. It's free ad supported. We have plenty of match content and other content to supply it for a very low incremental cost. And it'll be our front of the funnel, if you will, For tennis and then we've also. Doing a lot more in pickleball will be launching pickleball TV. Here in the next quarter. And we're also looking at pedal. In in Europe. So there's a lot. Going on in tennis. To be excited about. And I didn't mention e-commerce. Or sports betting. Compulse has. Has had a really significant year. Turned profitable. this year it's invested heavily in its platform its platform is a best-in-class local digital marketing services platform and now it's all about just adding scale so we're looking at transactions that can add more scale we're obviously growing organically there but getting it to the point where it is best-in-class and it's profitable was a significant milestone that we passed this year and then Last but not least, you've got an investment portfolio that's worth about $1.3 billion, including cash on hand, and that increasingly is turning into cash. The investments in that portfolio have returned almost 20% IRR over the last 10 years. They've done incredibly well, but we are actively monetizing them, and we'll look to redeploy them in majority control investments so that investors can see the results on our income statement.

Okay, that's a great overview. We'll dive in on a lot of that further over our time here. I wanted to start, though, with current events. I think it's fair to say there's been a decent amount of hand-wringing that's gone on recently centered around the Disney Charter dispute, which ultimately got settled a couple weeks ago. As we've now had time for that dust to settle, it would be great to hear your thoughts on the new template set by the two companies, which obviously includes both D2C and linear and seems to preserve the cable bundle for now. What does it mean for local TV broadcasters broadly and for Sinclair specifically? Was this a good outcome?