Sinclair, Inc. (SBGI) September 10, 2026 Conference Transcript

us today, Chris Ripley, CEO of Sinclair Broadcasting, and Narenda Sahai, CFO. Thank you for taking the time for joining us today.

It's great to be here.

Thanks, Marlene. So to start, obviously a big thesis, you know, to broadcast today is the regulatory environment, the FCC. So the first question is, you know, starting with the FCC voting to repeal the 39% ownership cap, could you pursue larger M&A before any legal challenges are resolved?

So the short answer to that is yes. The change in the cap has not hit the federal register yet, but we do expect that to happen shortly. There is already a challenge, I think, filed with one of the courts, which is expected. If we were to pursue a transaction that required that rule to have been changed, we would seek a prospective waiver as part of that approval. And that was used in the next Artegna transaction, for instance. And, you know, we don't know how the ultimate challenge will will play out but it probably will be over a significant period of time and we strongly believe the FCC has the better case there in terms of their ability to change the cap so that will play out over a long period of time probably through multiple courts and in the meantime you know the ability to transact should be there great and what you see as the next gating item to large-scale consolidation?

Is it financing, valuation, willing counterparties?

Well, we've never had a better regulatory environment for broadcast on the federal side than we have now. You just mentioned the cap being vacated. We also, earlier last year, we had the two big four rule be vacated by a court ruling. There may be further local ownership loosening in the quadrennual review. And most importantly, we've had a shift in the market definition at the DOJ, as evidenced by their approval of the Nexstar-Tegna transaction with no required divestitures. So it's really a great environment from a federal perspective, but then you also have this new issue that has been emerged by DirecTV and the state AGs, specifically acute in media, affecting Nextar Tegna, but also affecting Peace Sky, Warner Brothers. and we've learned a lot from looking at that transaction and how that playbook has been run and I do think there are ways that we can mitigate that attack vector on future transactions but it is undoubtedly an additional overhang on large-scale M&A And then there are, you know, as you mentioned, sort of counterparties need to be willing, right? Control issues need to be figured out. And so that's the other area within the industry. That's, I'd say, preventing, you know, bigger deals from hitting the market more than you've seen.

Right. Great. And does the remaining time under the current administration impact your M&A strategy, if at all?

It doesn't impact. Undoubtedly, we would love to get large-scale M&A done inside of this administration. We are doubling down right now on market-by-market optimization, and we think there's a lot to be done there. Previously, that wasn't our focus. We were We're focused on landing a bigger deal, but we have a very robust pipeline of market-by-market discussions there. We think those transactions can be very accretive where we're generally focused on overlap markets doubling up and sometimes tripling up, and those will be not only accretive to the equity but also deleveraging. and and so we think there's a lot that can be done in that area over the next two years and then we'll have to see what happens with the change in the administration where we are transactionally we'll certainly have on the books very favorable rules as we've already talked about and you know I think it's you just never know what the change of administration but it would be very intellectually dishonest to hold the industry back from continuing to transact.

Great. And at what level of leverage would you be comfortable in any M&A or combination scenario? What would you like to achieve from a balance sheet perspective, ideally?

Look, ideally, we would get back to high threes, low fours. And, you know, a large-scale transaction, like the Scripps transaction, we pursued late last year would have gotten us there in one fail swoop. But there's multiple ways for us to get there through the market-by-market transactions, further spectrum monetization, cash flow creation, which is going to be very big here in the fourth quarter with political. So, you know, that's our target, and certainly M&A, I think, will be an accelerant to get there. Great.

And no discussions of any kind to report at this point?

On the M&A front, we, again, we have a very robust pipeline on the market-by-market front, so I'd expect to see some news coming out there.

Okay, great. And then turning to political, obviously a bright spot for broadcasters this midterm election season. You recently raised your guide to at least 375,000. Are there any trends or updates that you can share today?

Yeah, so I think let's start with the size of the pie, because this cycle is historic. If you look at, you know, ad impact, they're projecting 25-26 political cycle to $11.6 billion in total political spending, which, you know, to put it in perspective, is higher than the 23-24 presidential cycle, which was at $11.2 billion, and 30% higher than the comparable midterm. So the pie itself is quite bigger. And I think critical for us, broadcast is a significant piece of that pie, roughly $5.6 billion. So that gives us a lot of confidence. I think number two, if you look at how we are positioned, and if you look at the top 10 markets, which are expected to be large political spenders, we are very well positioned in those markets, with six competitive Senate races in those markets, seven competitive governor races in those markets, and over 30 competitive House races. So we feel very good about our positioning in those markets. And also keep in mind that there is a local news component to it, which brings in a lot of trust halo, if you will. And I think that's important to reach those undecided borders. So I think that's very important to keep in mind. If you look at our second quarter, you know, political revenue compared to, you know, comparable cycle in 2022, it was up 9%. So I think the trajectory kind of points to our updated guide of at least $375 million for the cycle. So I think we feel good about where we sit today.

Great. And can you share what portion of, you know, that is already booked or the remaining opportunity is booked?

Yeah, so I think what I would say to that is, you know, as you get into these last eight weeks, I think it becomes more of a, you know, question of, you know, managing the yield and the pricing, because the demand is visible, it's there. And I think what swings some of these numbers is, you know, a few things. I think one is, you know, how competitive these races are, right? If you have races that tighten, you know, obviously more dollars kind of flow in. And if there are races that are breaking open, then you'll see some spending kind of pulled back and maybe redeployed in other markets. And if you look at, you know, fundraising, which is a big driver of this, it has been at historical levels. And that spending has occurred earlier in the cycle. So I would say, you know, all of these things kind of point to a record cycle. And like I said before, we feel good about, you know, where we sit on the at least $375 million guide for our political revenue.

Great. Thank you. And as you think about future cycles, what impact, if any, do you expect from, you know, recent legislative rulings around coordinated spending and the lowest unit rate eligibility on political advertising trends? I think there's especially a focus on 28 versus 28.

Yeah. Yeah, it's a very interesting question. And I think there's a lot of, you know, movement over the past, you know, 10 days, I would say two weeks on this. So let's just maybe level set there first. So the Fourth Circuit, you know, they set aside the Media Bureau's guidance in late August. And then Supreme Court kind of stayed the Fourth Circuit, you know, subsequent to that in early September. So what all of that means is that party-coordinated spending is back on to be eligible for lowest unit charge. So what that means is there's more spending that can take advantage of the preferential rate. So that's going to increase the demand for political spending, although it would put some pressure on pricing. So I think here the question is going to become more of managing yield and the pricing more than anything else. And we don't believe, you know, it's going to have a very significant impact, you know, positive or negative, one way or another in this cycle. And part of the reason is if you look at history and if you look at, you know, political party spending on these cycles, you know, that has been mid-single digits for us. So if you keep that in mind, you know, one way or another, it will have some impact, but we don't expect that impact to be very, very material. And I think the last thing I would say to you is that, and I think a lot of discerning listeners know this, lowest unit charge is not a single number. Lowest unit charge gets updated. It's across multiple time periods. There are rate cards around it. So there's a lot of science that kind of goes behind it, and those can be kept up to date. And that's what I mean by yield management as we kind of go through the cycle.

So you have flexibility to basically moderate price versus volume.

Yeah, within the predefined rules. You know, we can't just go in and change it simply because there's a higher demand. We will just have to manage it as we kind of go along. Okay, great.

And I think, you know, outside of the LUR, you know, a longer-term question around political is how broadcast will continue to compete and maintain its share of political revenue you just given all the other, you know, outlets of media and sort, you know, ways that you could actually advertise. So how does broadcast, you know, kind of maintain its 50% share roughly of overall political advertising revenue in your view?

Yeah, no, I think, look, broadcast is the largest in these media, although, you know, connected TV is taking share, which is focused on, you know, targeting. But when you look at, you know, when you look at political, there's a structural reason for broadcast because no one matches the broadcast reach. And if you look at how, you know, some of these races and elections are decided, you know, you want to reach the undecided borders versus, you know, targeting those who are already persuaded. And, you know, if you look at, you know, Sinclair's footprint, you know, and you look at, you know, who watches, you know, we have a third of our viewers which are Republican, a third of our viewers which are, you know, Democratic, and a third which are independent. And so it's a very, very good cross-section and broadcast kind of provides you, you know, that reach to reach those undecided voters, which can sway the election one way or another. And I touched on, I think, a very important point, that there is a local news adjacency to it. These are the people who trust local news. So there's a trust factor there that comes in that only broadcast can deliver. You know, CTV doesn't do that.

I think I would add to that, Marlene, that if you look through history, there's always been something new that comes along. Last cycle was connected TV, which took 2 billion out of the 12. but and before that was you know social media and every cycle although that new area takes some share the dollars allocated to broadcast kept going up wasn't true in other mediums necessarily and so and that goes to what Nerinder was talking about we have the viewers that decide elections so those are the the people you want to target, those are the people you want to reach, and that's why dollars to broadcast continue to go up cycle over cycle. Great.

And turning to Core, is there any update you can give us, you know, since you reported anything notable in particular categories of advertising that's maybe changed or is notable?

Yeah, I think we have been very consistent in how we have messaged how Core is trending or how we expected it to trend. Even if you, you know, go back to late last year when we issued the preliminary guide for 2026, you know, we cautioned on macro. We were seeing, you know, some signs there. And as we kind of progressed through the year, you know, we continued to see, you know, those macro pressures, you know, materialize in the numbers. Although we held our guide in our, you know, first quarter results, we thought it was prudent to revisit that, you know, in the second quarter when we reset that guide, right? And it's not a broad-based impact. I mean, there's certainly a political crowd out that's impacting core, and that is to be expected. But the political cycle is very, very strong this time around as we just went through it. And if you look at just the core key categories, the impact is not broad-based. It's just concentrated in a very handful of, I would say, cost-pressured categories, which are very consumer-facing. which impact, you know, consumer confidence and consumer balance sheets. You know, those are the categories which we saw were lagging in the second quarter. And we have kind of continued to see that, you know, continue on in the third quarter as well. So there is not a huge significant change from what we observed in second quarter into the third. The trends have just persisted. So I think it was very prudent for us to go back and reset that.

And, you know, Nielsen revised, you know, their local TV methodology. So, you know, as they implement that into local TV currency, you know, do you expect any impact on audience measurement and advertising demand?

Yeah, so on Nielsen, I think they have made, you know, this would be the third measurement upgrade in two years from Nielsen. You know, they moved to big data and panel last September, as everyone knows. Then they expanded out-of-home measurement. And then most recently, you know, co-viewing measurement, which I think these are all, you know, positives and actually really, truly capturing, you know, the audiences, you know, who are viewing all of these different mediums. And I guess on magnitude, what I would say is the Nielsen's co-viewing pilot, which went into effect earlier this year, showed roughly a 4% lift for marquee events in broadcast, which I think is hugely positive. But I guess they still have some work to do to satisfy all the different parties. NFL will always say that it's still undercounting or not measuring those. But I think what matters for us is that advertising is clearly priced of measured audience. right? And all of this doesn't change overnight, but I think the trajectory is in the right direction. We've always felt that broadcast was undercounted. There are a lot more, you know, audiences that go to broadcast for appointment viewing, your marquee sports events. So I think all of that is very, very positive. I think it's very early for us to size, you know, the impact of that, you know, how it translates into revenue for us, but I think it's all moving in the right direction.

Great. On the retransmission side, you know, two major network renewals remaining this year. I think roughly two-thirds of subs renewing next year. You know, what do you think are the biggest drivers of future retrans growth? Is it pricing, churn, something else?

There's really three big trends happening as it relates to our net retrans. And thankfully, they are all moving in a positive direction for the company. Number one is we are seeing churn improve. And we've seen that through several quarters now, driven by new strategies rolled out by Charter and others who are bundling in more streaming packages into their base pay TV offerings to consumers. And they're very significantly changing the value proposition from a consumer perspective. I'd love to point out that if you take a look at the charter offering and you subtract the cost of all the bundled-in streaming services, the cost of what legacy pay TV would be, which would be the broadcast channels, ESPN, and some cable channels, is less than $30 a month on a net basis. You compare that to the prior offering where they didn't bundle in all these streaming platforms, that was $100. So you've significantly changed the value proposition to staying with a pay TV provider like Charter, and that's why I think you're seeing other MBPDs follow suit with a similar strategy, and that's why you're seeing the consumer react and saying, wait a second here, this is a significantly different value. And beyond the value, they're also making it easy to have all your video in one place. You can't underestimate the incentives and the power of simplicity in having all your video in one place. And you're starting to see that in the numbers translate through. and you're seeing this bottoming happening in the pay tv ecosystem which has been long predicted that it would happen and now you're actually seeing in the numbers so that's the first trend the second is from a broadcast perspective we are and continue to be the most important channels in PayTV. We have the best content, be it sports or news or even our entertainment content, and we are one of only a handful of the must-haves on PayTV. So when we are up for renewal with our MVPDs, we still deliver much more audience than the percentage that we take in terms of the PayTV payment pool and that enables us to get favorable renewals and you know we're expecting that to happen next year as we come up with two-thirds of our subs and then on the network side all the networks now provide all of our content on streaming platforms the last of which was Fox launched last year Fox one those streaming platforms now generate significant amounts of revenue and they benefited from this implicit subsidy from broadcast where our content moved over there helped build those businesses up and those businesses really didn't pay for the content and and there's a rebalancing that's happening with the networks where you know the burden of the content cost needs to shift more towards streaming. So those are the three big trends that are moving our net retrans in a positive direction going forward.

So you do think you'll continue to grow price or that price will continue to increase?

I do think so, yeah.

And then you touched on this, Chris, as we do think about sports rights in particular and that rising cost, you know, just thinking about it from the network side, flow through the MVPD side and how that ultimately affects you and how you pass that along, for lack of a better term?

Well, it doesn't look like we're going to have to answer that question as it relates to the NFL. So the only experience that we can point to in recent history was the NBA deal with NBC, where a significant amount of fees were agreed to by NBC to bring the NBA back to broadcast. It's been a phenomenal success for the NBA and for NBC in terms of viewership and reach. I think both sides are very happy with the outcome. But it was a big step up in terms of what was paid to the NBA. And we lapped a renewal with NBC where our expectations were set at the beginning of the year, the renewals at the end of the year. And in between, setting our expectations and renewing with NBC, they signed the MBA deal and you would think, or sort of the natural question is the question that you're asking right now, are they going to pass that cost through to us as an affiliate who would benefit from that content? Well, all I can tell you is that we exceeded our original expectations that were set before the existence of the NBA deal ever was known. And so in our recent history, it would point to our ability to push back on this pass-through concept of the cost. And it goes back to what I mentioned earlier, which is that same content is also on Peacock, that NBA content. So the reality is where that cost got allocated was to Peacock, not to broadcast. And it's going to be the same discussion to the extent that there's more having to be paid for NFL.

You know, turning to Spectrum, you recently highlighted that, you know, your portfolio is maybe worth up to $4.1 billion through auction, negotiated lease, or sale. You know, what are the practical steps or timeline to actually extract value from your Spectrum assets?

Just to put a finer point on the $4.1 billion number, which I mentioned on our last earnings call, when you take a look at the 2017 incentive auction, the average price per megahertz pop was a dollar. But if you take a look now at recent comps in low band, it would point you to $250. And so the 250 is just applying that to our total megahertz pop within all the stations that we own. And in a world where we've sunsetted 1.0, which is in an MPRM in front of the FCC right now, which the whole industry is pushing to have that happen, you only need 25-ish percent of your total spectrum to do what the core business is today, which leaves 75% to do other uses. You could obviously put out more content, which some broadcasters may choose. We and other large broadcasters have formed EdgeBeam to work on data casting applications to fill that excess spectrum with more revenue-generating opportunities, and that includes things like enhanced GPS, digital signage distribution. It also includes Merquette Solutions, which was spun out of NAB, which is a backup for GPS, and they're working closely with DHS and DOT to get acceptance as the backup for GPS, which is sorely needed in the US. And there's other applications under development around automotive and autonomous vehicles. So that's another way to monetize our spectrum. And then the third way is something that was sparked by a recent Wells Fargo research report citing this sort of dynamic that I mentioned earlier, that the market value of the spectrum that we have is a lot higher than what the last auction would imply. And could a certain amount of our spectrum be repurposed for wireless users like a T-Mobile, Verizon, one of the new Leo players on the satellite side? And the short answer to that is yes. There's certainly historical precedence to that. That's essentially what happened in the 2017 auction. There is no auction authority granted by Congress around another auction for our spectrum, but something could be done on a negotiated basis, and I do think there would be interest from wireless players in that sort of arrangement. And in terms of what would have to happen to get there, you would need FCC approval. you would need some amount of clearing of certain bands of broadcast stations and then you would have to have a counterparty obviously and I don't think the industry is interested in doing another auction and you'd have to go to Congress to get that approval it's a bunch of uncertainty last time around big bidders like Verizon and AT&T didn't show up and that's one of the reasons why the outcome was not as was not what people had, you know, expected it to be. And I think there is an opportunity going forward to do something like that. But, you know, there are things that – there are steps that need to happen in order to unlock that.

Probably hard to answer, but, I mean, what could be, you know, a reasonable timeline where we could see some form of cash flow generated from your Spectrum assets?

There already is revenue being generated. by EdgeBeam, but it's early days. Those are new applications and new markets that are going to have to go through a development curve. A key component to really unlocking that is sunsetting 1.0. The MPRM that's currently in front of the FCC calls for a sunset February 15th of 2028. We're hoping to get the FCC to act on that MPRM post-midterms. that date probably moves around based on, you know, what the final NPRM looks like. But that is really the key unlock for a lot more revenue, be it through data casting or be it through, you know, what was talked about earlier in terms of leasing to other players for their use.

Great. You know, turning to ventures, how quickly could venture assets be monetized? And second, do you still prefer a venture spin to occur alongside a larger broadcast transaction?

We've been actively monetizing venture's assets over the last several years. We're roughly $500 million in cash now and $500 million of minority investments. We continue to chip away at those minority investments and monetize those when opportunities become available. Some of them, we'll just have to wait for them to naturally go through their life cycle. Digital Remedy is not something we're looking to monetize anytime soon. It's growing very nicely from an organic perspective. We're looking to actually add inorganically acquisitions like we did last year that have been very accretive. So we're looking to scale that company up. And then Tennis Channel, again, not looking to monetize that either. That's going through a whole streaming transition, much like what ESPN is doing right now. It's got a great new leader in Jeff Blackburn. He's revamping the entire digital platform to be relaunched in Q4 of this year, so we're expecting really great things out of those new apps. He's got a great rights portfolio, a lot of excitement around tennis in terms of participation and viewership and getting the streaming subs up on that business up significantly, which we think Jeff can do that, will dramatically change the valuation of Tennis Channel. So no plans to necessarily do anything on those two big portfolio companies. And then on the minority investment side, we're always looking for opportunities to monetize those because we do think it's pretty hard to get credit for those from Wall Street. And then in terms of your question on spinning, that work is still proceeding on that front. Our preference is to do a spin merge where we find a merger partner for broadcast. We've not been shy about talking about that publicly, and that is still our preference. And we're going to keep the optionality of ventures and its resources in play until we figure out what the right path is for the broadcast side.

Great. And you touched on this earlier, Chris, but what do you think is the appropriate long-term leverage target for the broadcast business?

Yeah. So in terms of leverage target, what we have said is it should be kind of for us in the high threes to low fours over the medium term. And I would say, you know, if you take a look at it, you know, over the much longer horizon, I think it has to be in the threes and the mid threes. We obviously have taken significant steps to, you know, delever the broadcast balance sheet, as you know, Marlene, you know, since the start of the year, we have retired or repaid, you know, $320 million of debt, and we also have just, in early July, repurchased $25 million of term loan, and we fully intend to use, you know, the free cash generated in this political cycle and in the 28 political cycle to continue to delever the balance sheet. Plus, you know, I think Chris mentioned in the M&A section, there are multiple other levers to delever the balance sheet from, you know, in-market optimizations, portfolio optimizations. We have executed a significant amount of JSA buy-ins. And then, you know, any large-scale M&A or any, you know, spectrum optionality will significantly delever that as well.

And, you know, Narendra, in 2Q of this year, you know, $320 million of term loan and AR facility was paid down. So what is your preference on a go-forward basis in terms of, you know, the float versus fixed mix?

Yeah, we obviously, you know, fixed and floating mix is not a static number. As you know, it's a function of the rate environment. We are currently at 70% fixed and 30% variable. If you take into account the interest rate hedges that we have on the book, so I think that kind of makes sense. In terms of deploying capital where we go, I think we will take a look at it obviously from returns perspective and what minimizes the interest expense as well, as well as, you know, we're going to place, you know, emphasis on nearer maturities. And I think if you think about it that way, I think you will see that the floating rate exposure kind of makes it to the top of the list, although there are, you know, opportunities in our second out notes as well.

And, you know, after several years of cost initiatives, you know, is there meaningful opportunity for further cost optimization?

Yeah, that's a great question. I, you know, I don't think about, you know, cost optimization as kind of a one-off exercise. I think we continue to look at, you know, the business we are in, the long-term, you know, trend lines in the business that we have discussed, and we ask ourselves the question, you know, if we started from zero, what should the cost structure look like? You know, how would we go to market with the top line that we have? And I think that drives, you know, different set of conversations than, you know, just trying to optimize, you know, one department or another. And I think, you know, Sinclair and perhaps, you know, others have done a fabulous job, you know, centralizing a lot of those, you know, functions over the years. I think the opportunity now is to see how can we make these workflows, which were, you know, centralized in their silos, kind of talk to each other. You know, how do we make these workflows, you know, end to end and cross those silo boundaries? And we are obviously, you know, working on that. And as Chris likes to say, you know, when we think about cloud, that we have paid our tuition there. you know, we have moved a significant amount of our operations to the cloud, which obviously, you know, increases the operating expenditures, but, you know, relieves, you know, your capex on an ongoing basis, right? So I think there's significant leverage to be gained there as we've kind of gone to, you know, media cloud play out, working on, you know, significant transformation of our news operations and content centers and deploying the cloud workflows. I think there's a significant opportunity there. I think everybody talks about, you know, automation. I think, yes, you know, that is table stakes. And then, you know, artificial intelligence. I think the way I think about this is, you know, just reinventing and reimagining and rewiring our core businesses, right? You know, how can we deploy this technology to move at speed, be better at what we do, and, you know, deploy our resources in the most efficient manner. And I think we started that, you know, several years ago. We are in the thick of it. We just don't, you know, talk about it, you know, in a very visible fashion. But, you know, rest assured, the team is very, very focused on, you know, executing on those initiatives.

I just want to underscore something that Nerinder alluded to there, which is that it took us over three years and tens of millions of dollars to transition to the cloud. No other broadcast of peer has done so. And once you get there, which we've just getting there, we're going to finish by the end of the year all of our stations, it then unlocks a significant amount of transformation ability for automation, for AI, not only just in terms of streamlining workflows but also getting your content into new endpoints and using things like AI to version it for different platforms, for instance. So I do think on a relative basis, you're going to see more out of us in the years to come because we paid that tuition and we spent those years and the extra money to do it. And, you know, our peers haven't done that.

Great. With one minute left, what do you think the market currently underappreciates about Sinclair?

A lot of things. Much more than a minute worth. So, look, from an equity perspective, you know, we're clearly mispriced. We talk about this a lot. But, you know, we don't think we're getting much, if any, credit for a minority interest portfolio on the venture side. The true value of digital remedy and tennis channels also being sort of lost in the fact that, you know, we have this holding company corporate, which ends up canceling out a lot of the EBITDA there, which is, you know, I think a totally different valuation profile than the broadcast side. And then on the broadcast side, we really have gone through several years of heavy investment, like we mentioned the cloud, but there's been other initiatives rolling through, which we think are going to have big impacts on the business going forward. And the positive trends that I mentioned earlier around the core business on re-trans, We didn't spend a lot of time talking about the advertising side, but we've done significant work on digital and audio and podcasting, which is starting to bend the curve upwards on core ad growth. So there's a lot of positive trends that have taken a while to succeed, but they're going to start playing out over the years to come in the core business. And if you buy us now, you're basically getting ventures for free.

Well, Chris Norender, thank you for the time.

Thank you, Marlene.