Sinclair, Inc. (SBGI) Earnings Call Transcript

Good morning, everyone. I'm Steve Zenker, Vice President of Investor Relations for Sinclair Broadcast Group. I want to welcome everyone to our 2022 Investor Day, those who are here in person and those attending via our webcast. Over the next 4 hours, business leaders from many of our -- areas of our company will give you a deep dive into their businesses, discussing where we are today and where we are headed for the future. We will spend the first approximately 75 minutes on the current state of the company, concluding the first half of the event with a Q&A session. We will then break for a 30-minute lunch before launching the second half of the event, which will focus on Sinclair's future growth initiatives. We will then conclude the event with a second Q&A session. Please note that as we are trying to refamiliarize you with Sinclair, questions should be focused only on Sinclair and not on Diamond, which we have deconsolidated. Those of you listening to the webcast, you can submit your questions via the webcast platform. Before we start the presentation, I refer you to the safe harbor slides on Page 3 and 4 of the slide deck. Also, I want to remind everyone in the room to mute your electronic devices. With that, Chris Ripley, our President and CEO, will now present a company overview.

Thank you, Steve. Good morning, and welcome to Sinclair's Investor Day. Sinclair has diversified assets encompassing news, sports, technology, and marketing services across multiple platforms. We have scale, audience reach and financial strength, providing operating advantages to advertisers, audiences and employees. Our core business is being driven by growing advertising and net retrans trends. We have a focus on local news and an innovative culture, which have been key drivers for the company and its industry leadership position. Our growth opportunities in marketing services, multi-platform content, community and interactivity and data distribution will fuel future growth. We have very significant free cash flow utilized to innovate, invest and return value to shareholders. And last but not least, we have a strong balance sheet with no debt maturities until 2026 and liquidity of over $1.1 billion. Moving to our portfolio of assets and investments. Sinclair is comprised of broadcast stations producing award-winning local news, national and regional sports networks, streaming services, multicast networks, marketing solutions, innovative media technologies and an investment portfolio worth approximately $1.2 billion. Sinclair has a rich history of innovation and industry leadership that is instilled in the DNA of the company. We were the first broadcaster to utilize partnership agreements such as LMAs to unlock multi-station synergies while still complying with single station ownership regulations. We were also the first broadcaster to broadcast a digital multicast in 2006, which has facilitated the creation of a large and vibrant multicast sector with dozens of free channels for consumers to enjoy and the industry to monetize. Most significantly, we were the first company to execute a per subscriber fee cable retransmission consent agreement in 2005, spurring a multi-decade growth cycle for the industry. We were also the driving force behind the creation of ATSC 3.0, which led the U.S. and other countries to adopt the next-gen broadcast transmission standard. And as you'll hear today, we're just getting started with several innovations powering our future forward strategy. Next up, I want to spend a few slides talking about our strategy. And we are not trying to be the best broadcaster we can be. Instead, Sinclair's strategy repositions the company out of legacy growth challenged markets into future forward growth markets, utilizing strengths and core competencies it already possesses. It's based on 4 pillars or areas of focus, multi-platform content, marketing services, data distribution and community and interactivity. I will expand upon these pillars in the slides ahead, but you'll also notice them throughout today's presentation as common themes in everything that we do. In multi-platform content, we are evolving into multi-platform local content production centers. Every piece of content that we create is customized for multiple platforms, creating greater consumer touch points and monetization opportunities. You'll hear more about this in many areas, including the National Desk, NewsON, Tennis Channel and our local news operations throughout the country. In Marketing Services, we utilize a suite of proprietary best-in-class tools to drive client business growth. We don't just sell spots anymore, we sell omnichannel solutions. There is no reason for our clients to go to any other provider. We've automated the provisioning, management and reporting, making it more user friendly and cost effective. And now we offer this service to other local media companies and local agencies, leveraging sales forces across the country to access the massive digital marketing services marketplace. Examples of this strategy include Drive Auto, our dealership specific advertising platform, other specialized ad units such as Compulse Legal and, of course, our white label SaaS platform for the industry, Compulse 360. In data distribution, we are becoming a wireless data distributor to fixed and mobile devices. We are sitting on 1.7 billion megahertz pop of beachfront spectrum that adds little to no value to the business today. ATSC 3.0 or next-gen TV will better monetize the OTA population through interactivity, data and targeting, but will do so much more. Applications for mobile video, low-latency sports, IoT device control and enhanced GPS are just some of the use cases being developed that will unlock the true potential of our wireless spectrum. BIA recently estimated that the industry as a whole will have mid-case revenues of over $10 billion by 2030 from data casting applications alone. In community and interactivity, we are creating community hubs where neighbors and fans can interact with each other through content, games and commerce. Serving, entertaining and informing communities is at the heart of what we do at Sinclair. Now with new technologies, we have the ability to have a 2-way relationship with those communities. First-party consented data is a big value driver. But more than that, this allows for monetization opportunities from gamification and commerce. Areas in this pillar that you'll hear more about include our new customer database platform, giving us one view of the customer wherever and however they interact with us. Game centers and interactive elements we have rolled out to all of our properties, and watch and bet that we are developing through our Bally's partnership for our various sports properties such as Tennis Channel. So what does this all mean? Simply put, Sinclair is massively undervalued. Our Broadcast and other segment has a market value alone of $35 per share. And that's just based on an industry multiple of 7x our prior 2 years approximate average EBITDA of $900 million. This segment also includes Tennis Channel, Compulse, and NewsON, which are expected to grow meaningfully in the years ahead and warrant a higher multiple than the broadcast business. Our investment portfolio has a market value of $17 per share. This is based on a fair market value of approximately $1.2 billion, consisting of real estate, venture capital, private equity holdings and direct strategic investments valued at $764 million. Our strategic investment in Bally's Corp is valued at $211 million, and our Diamond Sports AR loan facility backed by high quality accounts receivable is worth $193 million. Then there's our wireless spectrum, which has an estimated market value of $23 per share. And that's based on just the prior FCC auction values of similar spectrum, which yielded around $1 per megahertz pop. As you can see from the chart on the right, this sums up to an intrinsic value of $75 per share, which is multiples more than our current trading value. Now I will turn it over to Rob Weisbord to -- for an overview of the Broadcast business.

Good morning. Thanks, Chris. Future forward has always been in the Sinclair's DNA. I've been lucky to work with the company for 25 years and have seen the large growth. It started with our Chairman, David Smith. David, almost 20 years ago, indicated in a broadcast and cable article that at some point in time the industry would be down to 7 broadcasters. And you would think that he was talking about today's world, but this was over 20 years ago that David stated that. We were the first company, and it was a wild ride. Over 3 years, we made a lot of acquisitions, and it was done by design to diversify us across the country as well as diversifying our network approach. So there wasn't any reliance on one specific network. I'm happy to live through the new world Fox days, the new world with CBS and one day, new world called [indiscernible] , and said we're switching. They said what market, and we said all our markets. And overnight, CBS stations became Fox stations, and it set the world upside down. So we wanted to make sure that we diversified. And today, we have 185 television stations in 86 markets. We control over 600 different channels. And what we're really proud about is our 2,500 hours plus of local news that we produce weekly. When you look at this diversification, as you can see in the left-hand pie chart, there isn't one network that accounts for more than 30% of our revenue. It gets spread out. And obviously, we have the mast of ABC, Fox, CBS stations, and we have the power of the Big 4 along with duopolies in many of our marketplaces. When you see the middle chart, it shows that less than 1/3 of our revenue comes from networks. So we've really controlled our destiny and we will continue to control our destiny and future forward through creative programming, additional news hours. We are -- be focusing, and you'll hear from our head of news later. But really in that future forward strategy focusing on not only the boomer generation but the next generation of these viewers as well. And in the last slide, which really is what we've addressed and what Chris stated, that we are not a legacy thinking broadcast company, but we are a media company thinking about all the different pies of revenue. And political, the last couple of cycles have been record year cycles, and it's projected that presidential cycle will again be record-breaking. And so we're positioned that way. We've created specialists in the political arena to be able to get to that revenue. And as everybody wants to talk about digital, we think we have the best-case scenario because we have the megaphone of our broadcast stations, along with many digital assets to be able to capture the TAM that I'll talk about that's available in our marketplace. So when you look at how we've overcome adversity, it was unprecedented with COVID, kind of changed the world. Now we try to figure out as a hybrid is return to work. I think everybody in this room faces that within your own companies, how is the culture growing. But despite that, on the trailing over 2 year performer, you see we're projecting '21, '22 to be our best over 5-year trailing years. So -- and that's because we're able to capture the digital and political revenue along with our core. So we really want to hit on this. When you look at the presidential growth of 79%, this midterm election will be anywhere from 29% to 32%. Those are significant growth that we're able to capture, along with the compounding CAGR that you see with digital. And we'll get into why we're bullish on this because for the last 8 years, we've been building our digital assets. I was lucky enough to start the digital division 15 years ago in a very perfunctory way. Eight years ago, we built our own content management system, our own video management system, which gives us agility to be able to publish and monetize through our unique visitors. So again, when you look at this TAM in the Sinclair markets alone, based on BIA/Kelsey, the market is expected to grow from advertising dollars by $11.1 billion or 18% by 2025. So we are well-positioned that we don't think of ourselves as going after our competitors in the broadcast space, but we're going after the total addressable market. And we've trained our sellers. We've trained our management, and we continue to educate them on how to secure what we call the share of wallet, which is the total available dollars from advertising because we have a solution. For all advertisers, we have an AI machine-learning product that actually learns over time what the best asset allocation is for the category, for the size of budget. So we're going to continue to bring in technology to make our sellers smarter to capitalize and acquire the total available dollars in the marketplace. So we maximize this yield as well with cross-platform sellers. We have a House of Brands team that sells across all our assets, our Sinclair media network goes after network dollars in an unwired fashion where we brought in other broadcasters, and our sports group unlocks the value of all our sports impressions across broadcast, Tennis Channel as well as the RSNs, and our digital sports network stadium. And as Chris mentioned, we went on this journey beginning about 6 years ago to go from general selling to specialization. So we brought in a team from the automotive industry to launch Drive Auto, and go after that Tier 3 digital dollars. So we are able to capture not only the broadcast dollars but the digital money that the dealers were spending in our marketplace. Compulse Legal is able to create -- and everyone leading the legal team have law degrees, know how to speak the legal language, have taught our sellers how to speak that legal language and unlock not just the personal injuries, but all classifications in the legal field. Compulse Med the same way, we deal with a lot -- with hospitals. We deal with the pharmaceutical companies. And we've hired from that field, again, to educate, to train, to speak their lingo. Ten years ago, everybody would be talking about huts and puts and rating points and impressions and -- we've moved away from that speak and more to our marketing and our sellers are known as marketing consultants. And they're true consultants versus account executives, which really doesn't state what their mission and goals are on a go-forwards basis. And there's tens of millions of dollars in government RFPs, and we've set up a government RFP team as well to be able to answer the RFPs, which could be 50 to 100 pages and be able to secure those dollars and unlock those dollars as well. We are focused, like I said, as a digital-first organization, to unlock our average revenue per user. And we have anywhere between 80 million to 90 million uniques a month on our broadcast websites, and we want to unlock the value that those uniques bring. And we'll unlock it through and you'll hear later what we plan to do on free-to-play games, on commenting sections, we will be in the e-commerce business, we'll be in watch and play, which is really real life betting. We're unlocking newsletters on broadcast and sports. We have the premium programming that will be digital only. And I'm not going to read every single word, but you could see all the various areas of entry to unlock and grow the average revenue per user. And again, if you want to go to a very simplistic math, if we have 80 million uniques, and we get $1 unique, that's $80 million that we can unlock, and the multiples go up from there. And now I'll turn it over to Will Bell, our Head of Distribution. And again, some of these sections, we're going to go into in much more detail when those business unit leaders come up. So thank you.

Thanks, Rob. Good morning, everybody. Our distribution revenue continues to grow, primarily based on 2 important factors: the strength of our local news and our popular network programming. Scott Livingston will speak to our unrivaled news in a few minutes. Regarding network content, although we are certainly in an evolving marketplace with respect to where consumers watch, one constant is that the most in-demand popular content is on broadcast television. It is the bedrock of appointment television and, frankly, it along with our news is the single most important programming to viewers. In 2021, 95 of the top 100 individual programs were on Big 4 broadcast television. I'll say that again, last year, 95 of the top 100 programs were on our Big 4 broadcast stations. From sports, such as the NFL, Olympics, the World Series, NBA and NHL finals, and much more, to event-based programming such as the award shows, Macy's Thanksgiving Day Parade and the network's prime time lineups, most in-demand events are on broadcast television. When it comes to ratings, broadcast dominates. As you can see from the charts on the right, the Big 4 networks, the preeminent driver in ratings outranking all cable networks in both prime time and total day in the 25-54 demo. When it comes to prime time, the average audience for the Big 4 networks is more than 35% higher than ESPN, the highest-ranking cable channel, and more than double FOX News, the second highest performing channel. This is driven both by the popular network prime time lineups, but also our successful local news lead-ins, which has proven to be a powerful tool in delivering a strong viewer base heading into the network programming. This local to national combination has proved successful for decades and is a symbiotic relationship we see continuing to thrive going forward. In total day, the dominance is even more pronounced. The Big 4 stations outperformed the #1 cable channel by over 75% in terms of average audience in the 25-54 demo. There's a reason the NFL and Big Ten both recently signed long-term deals to ensure their premier product stays on broadcast television. They recognize the power of broadcast. This success has enabled us to grow our distribution revenue and annualized growth of over 9% per year since 2017, despite an overall decline in the number of pay TV households. This is primarily through increasing the consideration MVPDs paying us and capitalizing on the growing vMVPD market. In addition to our successful track record of growth, we believe there is still much more organic opportunity to grow both our gross and net retransmission revenue. Although programmers don't directly pay for ratings, the market has been rationalizing for years and consumers are unwilling to pay for content they do not watch. This puts us as the providers of the most in-demand content and a strong position to grow our share. This chart on the left shows that broadcast currently accounts for 22% of the fees MVPDs pay programmers, yet it delivers nearly 40% of the ratings. As you can see, retrans as an overall percentage of the fees MVPDs pay has steadily increased from less than 5% in 2010 to over 20% currently. As the providers of the premier content on television, we strongly believe that our revenue share should be over-indexing our ratings as our programming is what gathers the viewers and brings them to the bundle. At a minimum, however, we expect to continue to grow our portion of the overall programming fees until a percentage of retransmission revenue is more appropriately aligned with our equivalent rating share. That goes to say we are still incredibly optimistic on the outlook of our distribution business and we expect to continue to grow our broadcast distribution revenue. In 2023, we have over 50% of our big 4 MVPD subscribers up for renewal. When you expand this horizon to include '24, that number increases to over 90%. We expect these upcoming renewals to positively impact distribution revenue in '24 and '25 and deliver a 3-year CAGR in net distribution revenue in the low- to mid-single digits. I'll turn it over to Scott Livingston, our SVP of News.

Good morning. It's great to be here. You heard Chris and Rob talk about the transformation. The transformation of Sinclair from a broadcast company to a media company. That's exactly what's happening in our newsrooms across the country. We're truly transforming our traditional newsroom to be content centers, changing workflows that we -- so we can be more agile to produce content on multiple platforms. And we're seeing some great success. We're able to maintain our relevancy and our value on the linear side where we're #1 or #2 in the AM and PM in 40 of our markets, and we're #1 or #2 in the PM in 43 markets. But the real growth is on the digital and social side. As Rob mentioned, we have more than 80 million unique monthly visitors to our websites. On the social side, year-to-date, we have more than 1.9 million -- excuse me, 1.9 billion, that's with a b, 1.9 billion social video views across Sinclair, and 180 million social engagements so far to date. And we did -- we're doing this by changing our workflows. We've created a content hub at the corporate level, where we're producing content on the social, digital and OTT platforms. We're also contributing content to the linear side, content for all of our newscast across the country, and we're creating content for The National Desk and The National Weather Desk. This buys back time. This allows our stations to focus on hyper local content on the social and digital platforms. So we're truly transitioning our purpose and process for modern journalism. This slide showcases some of the interaction with our audience. It's now an interactive experience. It's not just sharing news, it's also communicating with news viewers and news consumers across the country. We do this by showcasing distinctive content. We really believe in unique content, content you can't find anywhere else with a disciplined approach that allows for disruption. We define disruption as that growth on the digital and social side. Our news DNA, we're focused on stories of high interest and we allow our journalists to dig deeper. We want to go more than a centimeter deep. And we want to make sure that we're producing content for the targeted platforms. We focus on holding government accountable, asking the tough questions our viewers would ask. We're relentless in our follow-ups, we're relentless of sharing content on all platforms. We really want to give a voice to the voiceless, follow the money going to be that advocate for taxpayers as well. The bottom line is we want to have an impact in the communities we serve. And we're not just focusing on being relevant today. We're spending a lot of time to make sure that we're still relevant in the future. In Dayton, Ohio, we have an ABC Fox station. And our goal there is to be a real-time innovation lab. We're changing how we do things in real time so that we can be relevant down the road. So far, we've adapted our newscast to be more snackable, to be faster pace, to be conversational, to really showcase our personalities on all platforms. We've seen some significant growth. In just the past few months, we're up more than 20% year-to-year with our ratings based on Comscore data. We've expanded our content creation on the social platforms. We had a strong presence on Twitter and Facebook. Now we're adjusting and creating more content for YouTube, Instagram and TikTok. We've created a TikTok following basically from scratch. We have over more than 13,000 organic followers in just 9 months. And again, this is in one market, this is in Dayton, Ohio. And then we're also transitioning to the audio side to really understand how we can produce compelling content and using -- by creating a podcast. So using some of those great elements that we capture that we typically share in the news cast, now we're expanding them to long-form content on the audio side. A podcast we just released in Dayton was on a missing girl in 1999, Erica Baker went missing in Dayton, Ohio. So we produced a 6-part series on that cold case. It's earned more than -- I got an update over the weekend, that number is actually 100,000 downloads. So really impressive to see how we're changing things. So again, we can be more relevant in the future. Part of what we're doing is taking some of the great content that we have across Sinclair and creating a unique experience at the national level as well. 18 months ago, we launched The National Desk. It's a newscast of discovery. It's really built on the ground up. We're leveraging the resources and assets and content in our local markets to provide some clarity to emerging stories at the national level. The National Desk airs in 65 of our markets. We reach about 28% of the country. The audience is a little more than 2 million per week. So we're really pleased with that. When you do a comparison to one of our competitors, NewsNation, in the morning time period, we have 3x the audience. And it's also profitable after 1 year, which is -- that's always a good thing. When you look at the feedback from the audience, it's really positive. We've done 3 research projects with Magid. 85% of news consumers say they would keep watching The National Desk. They believe it's new, it's different, it's fresh, it's high quality, it has an unbiased approach. We're straightforward with the news and they come away with, their word, smart news, which, again, all great attributes for a news product. We're also expanding The National Desk. We own the weather space in the local markets. We have more than 200 meterologists across the country. This is a real opportunity for us to leverage that content and that expertise and create a unique product, both on all platforms. On Linear, we just launched a 30-minute weather show last Monday. Our timing was perfect with the situation down south. But our real focus is on the social platforms. We're producing unique content for all the social platforms to really create a unique experience for consumers. It's not about forecasting, it's really about showcasing, I use the word, cool weather stuff. It's all that great content that we have across Sinclair and also leveraging our expertise across Sinclair. I'm really proud that our newsrooms continue to get recognized for outstanding work, impactful reporting with a local focus. In the last 6 years, we've earned more than 2,000 awards, including 75 National awards, more than 200 Edward R. Murrow Awards, 500 Emmy awards. It's just really great to see our commitment to quality journalism. That success is built on our commitment to impactful journalism. I think KOMO in Seattle is one of our best examples. We really focus on keeping government accountable. Our focus there is a project that we launched -- an initiative that we launched, which is a single topic initiative, where we focus on key topics relentlessly on all platforms. In Seattle, we focus on Project Seattle, which is an in-depth look at the homeless situation and then Operation Crime & Justice is looking at the crime issue and the quality of life issue. Our goal is not just to expose problems, it's to expose those issues, but it's also to find solutions. And I'm really proud of our effort in Seattle, and we've launched 25 other single topic initiatives across Sinclair. We're also making sure that we produce unique content for the social and digital platforms. So we're not just producing content for the news cast. We are finding ways to connect the viewer on these other platforms. For Project Seattle, we launched 2 documentaries -- we produced 2 documentaries, Seattle Is Dying and the Fight for the Soul of Seattle. We have more than 16 million views on YouTube and Facebook for our Seattle Is Dying documentary. So when we acquired KOMO 8 years ago, we were #3 in the marketplace, and today we are #1. And it's because we're doing significant distinctive content. And again, the single topic initiative is part of the Sinclair's DNA. We're doing that in 25 markets across the country. And we're also really focused on giving a voice to the voiceless. Really proud of our work all across Sinclair, but in Albany, New York, our anchor reporter Anne McCloy has been recognized for her great work during the pandemic, where she was relentless in her questioning of the former governor about unemployment benefits. And because of her reporting, checks were issued, were cut for thousands of New Yorkers, their unemployment benefits. And then in WGME in Portland, Maine, again, another proud moment for our news organization, their newsroom discover the problem with a veteran suicide hotline. That hotline was connected to outdated websites. So when emergency first responders would respond to an issue where a veteran may have been in crisis, it was connected to a wrong address. So because of our reporting, Senator King and Senator Collins introduced legislation that closed that loophole. We also were recognized with a national investigative award. And then WBFF, BFF is our flagship station Baltimore, Maryland, our investigative reporter Mikenzie Frost was honored as Baltimore's Best TV Reporter for her fearless reporting, really asking those questions that our viewers would ask and focusing on being that advocate, learning protecting and empowering. The bottom line here is we continue to take significant steps to ensure we are relevant and distinctive on all platforms in the future. I'll turn it back to Rob, and Rob can highlight a little bit more about the broadcast and also talk about some of the new businesses.

Thanks, Scotty. So as we get into a little recap before we get into our other businesses, it's the large megaphone that we control, 185 stations in 86 U.S. markets with 4 O&O networks that we have as well. No single affiliate derives more than 30% of our revenue, which allows us that diversification and not a reliance on any one network for our revenue. Non-networking program is more than 2/3 of our revenue. So again, we believe in controlling our destiny. Scott just went through that future forward and where we're going with our news that will allow us to be able to launch other types of content. The amount of content and [ b role ] we take over the year that doesn't even make it to on-air is enormous. And that [indiscernible] can lead to docuseries, it could lead to numerous other long form that we will be focused on. Political and digital, I want you to keep this on the front and low of our compounding and driving revenue, and it leads us to sales specialization as well. The sales specialization allows us to unlock the TAM. And that focus of share of wallet is on everybody's front and low from our general managers, our corporate staff down to our marketing consultants that are out in the field. We spend an enormous amount of time training our sellers to prepare them for that future forward and not live in yesterday's cost per point world. Net broadcast distribution, as Will spoke, revenue is positioned to continue growth through unrivaled popularity of the local and national programming. You could just recently look at -- when Amazon streamed one of the football games, half of their audience on that first exhibition came from 2 local broadcast stations. So that couch and watching from the fixed position TV is not going anywhere anytime in the near future. The flexibility in building a bridge to allow those viewers to watch how they want is there, and we've addressed that as well. And we've addressed that a long time ago by creating our own OTT products by creating STIRR and being able to have that flexibility through our own proprietary CMS and video management system. Our nationally recognized news, and big congratulations to Scott, have won an enormous amount of awards. Our long form has broken through with Seattle Is Dying and we will continue to innovate and to be able to capture not only the boomer audience, but the next-gen audience as well as we unlock different types of formats to bring them into the broadcast world. We are not of any belief that millennials on down do not want to watch broadcast, but they want to watch content that they like, they want long-form content. They believe that the content gets cut, and there's a biased view. We believe in showing the full content and Scott and his team will elaborate as the years go on, as the months go on to give that audience and that subset the content that they are looking for as well, and we'll bridge the gap between the boomers and the next-generation audience. And we will stay true to our strengths. We're actively transforming, building agility into that newsroom. I could tell you that Scott and I went on a journey over 10 years ago when we said we would break news first on social media. We were accosted that the Big J was being violated and -- no longer does that account. The expectations are you break on social and you use our broadcast stations for the so what and bring that long form the video and bring their viewers out to other. It was the hurricane that we just covered or any presidential election, Scott's team does many town halls on relative subjects. We hold people accountable and that is what the next gen is looking for. So I'll briefly get into some of our other businesses that we're very bullish on, and you'll hear from those business leaders a little bit later on today. Tennis Channel, I'll tell you a good story about. I'm a big tennis fan, big tennis player. I've been playing since I could walk. And so when we're looking at buying this asset, I wasn't actually looking at the balance sheet. I was looking at, can I get credentials, swag, and -- I said, we'll figure out the revenue afterwards. But -- what I'm bullish about tennis is the U.S. open was just played here a month ago, and we saw the great champion Serena's last match here in Flushing Meadows. I was asked on an analyst call last quarter of the belief with the aging of the Big Three, of Nadal, Djokovic and Federer, who just retired at Labor Cup, where the sport was at? And I happen to mention there was a young kid called Carlos Alcaraz, who is next-gen, who will win the hearts. It's sad to see the legends go, but the great thing about sports, there's always somebody coming up, and lo and behold, Carlos won the U.S. Open. Youngest champion at 19, youngest #1 at 19. And we're led by the biggest evangelists of the sport that you'll hear later, Ken Solomon, who lives, eats, drinks, tennis, gets me my swag that I so desire. But our goal is to own the sport of tennis. The Chairman even has a tennis court in his backyard, which is always nice for Ken. When he comes to town, he gets to hit balls. But quickly after we bought Tennis Channel, we bought the URL tennis.com because it's worldwide and international. And tennis, we always had wanted and had thoughts of going international. And Ken will speak to how many markets we've broken and not go. But -- we've also gone expansively, we launched FAST Channel T2 on Samsung. We gave the first year's exclusivity. It will branch out to other OEMs. And you're seeing matches and content you won't see on Tennis Channel. So it allows us to diversify that content and still give the main matches to the primary channel, Tennis Channel, but you would have found Carlos when he was 16 on T2. So there's a Carlos out there somewhere playing on T2 right now. Ken's created this massive, Linear channel and Center Court, and we could go worldwide to 8 different tournaments if 8 different tournaments are going on, and pick the best match that's playing. So it's always relevant to give the stars their due and up and comers on T2. There's a big opportunity in e-commerce, we own it. The new gear has always launched wrapped around the thousands and grand slams. So we're able to feature that better than anybody and really move the merchandise out the door. We are collecting data right now, and we're doing free-to-play and the vision is watch and play and have betting on the sport. It's the #2 betting sport in the world, and we think we can unlock that potentially here in the United States. As I said, International is now operating in 7 countries, and growing. Ken will talk about his trip to India, where we have a great ambassador sitting in India that helped break us there. Audio is a big focus on our future forward, and TC is already into the podcast world with 18 owned or operated podcasts. They have 8 separate social media handles. We broadcast through OTT and TVE, the linear channel, and we own the world's #1 tennis magazine called Tennis Magazine. The big takeaways on tennis is 300-plus days of live tennis. There really isn't anybody that saturates to support the way Tennis Channel saturates that sport. Over 1,800 matches a year are shown live accumulating with 3,200-plus of live matches. We are the home to the ATP and WTA tours, 93% of all live tennis is seen on Tennis Channel. We've already accumulated 1.1 million podcast downloads, and we have 340 million plus social impressions. So you could see on this future forward that we are leaning in with a digital-first mentality, just -- and that will amplify our broadcast opportunities. In the digital marketing world that Chris had alluded to earlier is Compulse. And you'll hear from Martin Kristiseter a little bit. but we brought Martin in to lead our innovation and building a platform that is meant for local advertisers as well as local agencies to be utilized. It is best of class, it focuses on local. It's transformative in the way we're changing how media is bought and sold. And it's very comprehensive based on the technology services and capabilities that enable us to go for a one-stop solution. So you come in, you can have a proposal, you can have your buy, it all takes place in one ecosystem. And we have the platforms, the O&O platforms that we're operating on. And Martin, in the afternoon session, will take you through the road map of where these platforms are going. And this really will showcase unlocking that big pie that I showed earlier from BIA/Kelsey that where we're going for a share of wallet. We're not just focused on broadcast dollars, but we're focused on all advertising dollars in the marketplace. With our RSNs, we are the leading purveyor of local sports. We have 42 NBA, NHL and NBA teams. We have 19 RSN brands, 15 of the top -- and 15 of the top 25 DMAs. We have over 5,000 live professional sporting events. And really what unlocks this potential in the ad community is 8.8 billion linear ad impressions, adults 25-54. Our capacity currently before launching Bally Sports+ was 857 million digital impressions, and that will be growing as we unlock Bally Sports+ as well. So we're really robust in not only that but the cross-selling and unlocking all our sports assets from broadcast. We are home to the Super Bowl, we're home to the World Series. We're on to a plethora of college sports. We just went through the tennis slides and the 3,000-plus -- 1,800-plus matches. So we've really saturated the sports world, and that was part of the future forward strategy. Also, the growth in networks taking advantage of over-the-air television. It's really -- Scott Ehrlich is running that business, but it was really our way to think about giving viewers what was once called basic cable. And Comet really is our home to Sci-Fi programming, charges our action network, and TBD focuses on what's going viral. So it's a little bit of everything for everyone. And we will continue to expand on those growth network opportunities as well. So we're really bullish. They do really well from a revenue standpoint, they're profitable, and we believe that there is an audience for these growth networks. NewsON, this is an amalgamation. This shows you the power of local in no better terms. A lot of our broadcast brethren are part of this. It is the #1 local news on Roku, and those is consistently at top 5 total news app in the Roku store. There's 2 billion digital ad impressions coming out on NewsON. We have 18 participating broadcast groups that have united together. What's really cool is the average session, which is over an hour. So it's those that are into the long form and really are the news junky. So when the ad community is looking to make a purchase, this is one of the assets they look at due to the length of time that the audiences there. It's very hard to find a digital audience for over an hour, but NewsON does that. This will show you the depth and breadth of it. We cover 92% of the United States with our broadcast partners. We most recently signed on CBS News O&O stations and the Scripps group. And you'll see TEGNA, COX, Hubbard all participating. So you see those major groups that have all believe in the power of 1 unified news platform. So we're really bullish on this, and we'll continue to iterate on this asset. And now I'm going to turn it over to Lucy Rutishauser, our CFO.

Thank you. Good morning, everyone. So before I start, I just want to give a huge shout out to Steve, Billy Joe, Ethan Suzanne in our graphics department. These things are never easy to put together, so I think they did a fabulous job and I want to thank them for helping us today to put our story forward to all of you. So corporate social responsibility or ESG, it's an important topic for investors and consumers alike. And at Sinclair, we're not only focused on being good corporate citizens, but working hard to instill those values in all that we do, and we are doing a lot. So let me walk you through some of those activities and initiatives. So led by our Head of IR, Steve Zenker, we established an ESG Committee that Chris, Rob and myself, a few other executives, plus one of our Board members participate on. And among one of the first things that we did was to establish mission statements around environmental, social and governance and what they mean to us. Now these are abbreviated here, but they can really be summed up as doing our part to improve the environment, our communities, our employees' experience all while minimizing risk and increasing transparency for our investors. For the environment, we're implementing strategies to lower our carbon footprint by reducing electricity consumption increasing recycling, using eco-friendly supplies and limiting waste. So among some of the things that we have in process, and we have a lot that's in process, we're replacing over time our broadcast transmitters, building lighting and HVAC with energy-efficient products. Now these steps not only reduce greenhouse gas emissions but reduce our electricity cost as well. In the case of the LED lighting alone, early estimates are that we can save 14 gigawatt hours, which is the equivalent to the yearly electricity used by 1,300 homes. We also moved Tennis Channel in the West Coast RSN operations to a new state of the art production facility, which not only gives us room to grow but is green certified. We're increasing recycling across the company, including a company-wide battery recycling initiative. We use a lot of batteries for our news cameras. And we've run campaigns informing the viewers how to recycle household batteries. We're also purchasing eco-friendly supplies. In fact, last year, we were one of only 19 companies recognized by Office Depot for greener purchasing. Now in addition to the items that are already in process, there are several others that we have on the horizon that we're evaluating, such as the deployment of solar panels to reduce reliance on supplied electricity and to also give us an additional hedge against rising electricity cost. We're also exploring opportunities to use land at our transmitter sites for solar or battery farm operators to help them generate and store renewable energy. We're evaluating the replacement of our news vehicles with electric vehicles, and we're better analyzing our energy usage and identifying opportunities to reduce energy consumption. So you can see that even though our primary business is to sell airtime, we have many opportunities at cost attractive ways to improve the environment. Supporting communities, it is at the core of what we do at Sinclair. And as local broadcasters, it is where we shine the strongest. Our social responsibility takes many forms, such as delivering impactful news stories that inform, educate and hold government accountable. By providing weather alerts and critical town halls, we take news seriously, and it shows in the over 300 awards that we won last year alone. But we also support local charities through meaningful fundraising. We donate the charitable causes and disaster relief through our Sinclair Cares program, and we've distributed over $0.25 million through our Broadcast Diversity Scholarship program. We sponsored and helped collect meals, coats, toys, school supplies and supported veteran, blood and food programs. Not to mention the meaningful amount of airtime that we've donated to promote these important causes. Our TV stations and all of our business units are committed to the community now more than ever, and this year is already shaping up to be another incredibly impactful year. Sinclair, it's a great place to work. and it shows in our compensation packages, our rewards and recognition programs and the resources that we have to enhance our employees' learning and development. We've worked hard to ensure a workplace where everyone can feel that they belong. We plainly state that our objective is to be the employer of choice in our industry. In 2021, we were recognized as a top place to work by the Baltimore Sun. And in 2022, recognized by LinkedIn as a top employer in media and entertainment. Our benefit packages are among the best in the industry, recognition that our employees are our greatest asset. We actively promote from within and support employees to take on new career opportunities within the company. And letting people know that they're valued is important to us. That's why we regularly recognize employees for their efforts and wins. We also take a strategic approach to talent development. We provide on-the-job training, foster creative collaborative work environment, and we even have a Sinclair University for training and access to a vast collection of learning and development content. Innovation is at the heart of who we are. And our employees are critical to that success. Our goal is to generate thoughtful ideas that move the company forward, eliminate inefficiencies, improve workflow processes, increase profitability and challenge how we have operated historically. We encourage employees of all levels to participate in innovation because we truly believe that the next best idea can come from anyone. Now today's Investor Day is to refamiliarize you with Sinclair in our strategy, but it's also to provide more transparency around some of the innovative things that we're doing and highlight some of the areas where we've strengthened such as governance. In particular, in the past 2 years, we've hired several senior positions around security and compliance. We've added Board oversight, and we've stood up ESG and Risk committees. We've also added female and minority Board members because we've recognized that a Board with diverse thoughts, skills and experience can be an important driver of innovation and profitability. So I think you'll agree that we are doing a lot around corporate social responsibility and ESG. Going forward, you should expect even more from us as we establish, measure and communicate our targets and outcomes for the benefit of the environment, our communities, our employees and our stakeholders. Turning to the financial highlights. As Chris mentioned, Sinclair has a history of leading and innovating for the benefit of ourselves, but also for the industry. And throughout our years of consolidation, transformation and investment, we have delivered consistently strong free cash flow that has strengthened the balance sheet and enhanced shareholder returns. But moreover, we believe there is meaningful upside opportunities in the stock price. Over the past decade, through organic and inorganic activities, we have delivered high-teen growth rates for our key financial metrics of media revenue, adjusted EBITDA and adjusted free cash flow. But more importantly, over half and more recently, over 70% of our adjusted EBITDA has been converted into adjusted free cash flow, demonstrating our attractive cost of capital, tax planning strategies and cash returns from our investments. Now even though the mix of revenue and between advertising and distribution has changed over time, both revenue streams are growing. Total revenue has grown on recurring record political and strong digital revenues. Now the recent leveling off for the ad revenues, we believe, is more of a function of COVID and the impact of the cyber incident last fall. Distribution revenue continues to grow and has meaningful rate expansion runway as the industry works to exceed parity for its audience delivery. As Will spoke about earlier, we continue to grow, expect to grow net retrans by low to mid-single-digit percent over the coming 3 years, but that is not going to be in a linear trend. Because 2023 distribution renewals are back-end loaded, we expect 2023 net retrans to be down low single-digit percent, and then increase in 2024 and 2025, such that over the 3 years, net retrans grows low to mid-single-digit percent. Now for the third quarter, early estimates indicate that we'll come in a little bit below our media revenues guidance due to timing of political monies, which we expect to capture in Q4, some softness in a few digital categories, but those categories are still up year-over-year, crowd out from select top political races and slightly higher distributor churn, although we still expect it to be within the mid-single-digit range. And while we have not yet closed on September's expenses, July and August, preliminary expenses were favorable to guidance such that broadcast cash flow for those 2 months came in better than our guidance indicated. Political is a consistent growth ad category for us. And even though we compare like years to like year, so a mid-term versus mid-term, the reality is, is that it has been growing every 2 years, representing an over 10% CAGR to our 2022 expectation. Now this year is a mid-term election year, and it has not disappointed. The first half of the year was a record period for us, double what we did in the same period in 2018 and 20% more than what we did in 2020. For third quarter, political came in at approximately $89 million. And while that was slightly below our guidance of $95 million, it was still a very strong quarter. And as I mentioned, we expect to recapture those dollars in the fourth quarter. For the first 9 months of the year, this is important, political was roughly on par with 2020's political for the same period. That's unheard of, that a mid-term election year would be on par for first 9 months of the year with the presidential year, which was already a record year. And third-party research is estimating 2022's political fundraising of almost $10 billion, which depending which research you look at is almost twice what it was in 2018. And the best part is once those monies are raised, they have to be spent. They don't return them. And when you look at our footprint, we overlap in states where there are toss-up or lean races. So for the year, we're expecting political advertising of $325 million to $350 million, with the low end of the range more than 129% of 2018's mid-term election and the high-end at an unprecedented matching of 2020's pre-Georgia runoff record presidential year. But more importantly, early indications by third parties are that 2024 is going to be another record year. And so when you think about it, the strength of our political really speaks to the importance of our local news our large audiences, diverse platforming -- platforms and messaging capabilities. So we talked about the top line growth, but how are we doing as it relates to expense management. Now even though media expenses adjusted for network programming fees, tennis rights and onetime items have increased an average of 4% per year over the past 4 years, we had actually reduced media expenses around the core. And that's really coming from automation, workflow efficiencies and general cost control. So where the expense lift is occurring is from the initiatives that Chris, Rob and others are speaking about today. So while we've controlled and reduced cost on the core business, we are investing in initiatives to drive future profitability. Growth in the top line. Growth in adjusted EBITDA with a very high conversion rate means that we're generating significant free cash flow. And that has been used to enhance shareholder returns through opportunistic share repurchases and increasing dividends, to delever the balance sheet through debt repayments, but more importantly to reinvest in our future through core acquisitions, nonmedia investments and growth initiatives. Our free cash flow margins are roughly 20% of total revenue on average, and we're generating a 40% free cash flow yield -- over 40% free cash flow yield compared to 5% on average for the S&P 500 for the past 10 years. And again, this is an indication of our free cash flow, our share repurchases and our discounted stock price. As I've mentioned, we've used some of the free cash flow to return to shareholders through opportunistic share buybacks. Since 2018, we've repurchased almost 40% of the then outstanding shares. But we're also delivering a meaningful dividend. Earlier this year, we increased the quarterly dividend rate by 25% to $1 per share annualized. At the end of June, that represented approximately 5% yield. With the decline in the stock market, it's even higher now. So with our dividend yield increasing, 19% on average over the past 5 years, we have consistently outperformed the S&P 500 dividend yield over the same period. So while our yield grew 19%, the S&P 500 yield declined 3%. And within the broadcast space, our dividend yield is twice as high as the next broadcasters'. When considering the number of acquisitions we've done over the years, several economic downturns, the pandemic, the cyber incident, investments in adjacent businesses and shareholder returns, our total net leverage has been stable and in our target range of high 3s, low 4x. The balance sheet is strong. especially when you consider that we have over $1 billion of liquidity and attractive cost of debt, no debt maturities for the next 4 years and an almost 6x interest coverage ratio. Should the economy worsen, we would enter that period with a strong credit and liquidity profile. And as Chris covered this morning, our current share price of $18 trades at a significant discount to our sum of the parts. Assuming industry multiples, our core business should be approximately $35. And when adding the value of our nonmedia assets and estimated value of ATSC 3.0, that would imply a sum of the parts value of $75. So you can see there is meaningful upside in our share price today. So in summary, we are delivering on all key financial metrics and generating significant free cash flow, which we're using to reinvest in future focused growth initiatives to enhance shareholder returns, to reduce debt and delever the company and to enhance our credit profile, all while having upside opportunity in the current share price. Okay. So we've covered a lot this morning from our history of innovation and leadership to our pillars of growth and strong financial drivers. So with that, we're going to take questions, then we're going to break for lunch, and we're going to come back for a deeper dive into the future growth initiatives. Now for those listening to the webcast, you can submit questions via the online platform. So if I can have Chris and Rob come back up.

Okay. So once again, I would ask you to keep your questions focused on Sinclair since that is the focus of today. We've got a mic here. Billy Jo has a mic there for anyone in the room who has a question. So please raise your hand here in the audience and ask your question, and we'll bring a mic over to you. Over there.

It's Barton Crockett from Rosenblatt Securities. I was wondering if you could talk a little bit about what you're seeing in the current macro environment in terms of the impact on your ad trends currently. Obviously, that's top of mind in terms of concern for people.

Sure. So I'll let Rob speak about categories. As you heard from Lucy, the impact has been very mild so far in terms of macro concerns. We did see a little bit of weakness hit some digital ad categories here in the third quarter, as Lucy indicated, and I'll let Rob kind of take you little through a little bit more the category color.

Yes. Due with the bullish of the political, it's offsetting any deep dive we can do with the macro. What's -- I'll go with the positive and then where maybe the concern might be, but the positive is we've come full year cycle with automotive. So they still have a chip shortage, but now they have a metal shortage. So Toyota announced that it will be Maybe 18 months before they could produce a minivan. So that was a new one to me that I picked up last week. But we've come full cycle and the auto, that's the one category that's creating some growth opportunities for the digital side, even though digital was up, and it's been up for the last 10 years and compounding growth. So we're still bullish on the digital categories. But the concern is we'll be able to get a better feel once political the election happens, and we come out of that, and it becomes apples-to-apples. The one category that is off, we mentioned it on the last call is the insurance category. And coming out of the hurricane, there will be some depletion of some of those profits from the insurance industry. So that probably will remain off for a while. But due to the fact that we're looking at the TAM, it helps offset any weakness because we've been prepared if there is some weakness just in the pure spot business that the other silos are picking up for that. But we'll have more clarity coming out of the election and when the crowd-out is not there.

Okay. Next question.

David Karnovsky from JPMorgan. Just I was wondering if you could expand a bit on the net retrans outlook through 2025. What assumptions you've made in terms of churn, and I don't know how much information you can give on your affiliate discussions, but how that kind of plays into your outlook on the net retrans side?

Right. So our outlook, our long-term 3-year outlook, which is new information today is a 3-year CAGR of low to mid-single digits on net distribution revenues. That assumes mid-single-digit churn, and on the gross retrans side, our expectation is that the growth will be slightly higher on gross distribution revenue versus net distribution revenue. I think just the other important point I'd make on that is that we -- from a negotiating leverage point and an industry dynamic standpoint, we have seen a significant shift in the negotiating leverage between us and the networks. And that's really made us a lot more bullish on our ability to manage reverse retrans, and we still have significant pricing with the MVPDs as we really are the pillar within the Pay-TV ecosystem.

Sorry. I'd love to hear you just speak a little bit more about that shift between you and the networks. Is that all just due to streaming and a lot of the content shifting over? Anything you ...

Look, I can only tell you what we've experienced, empirically, what the why part, we can -- we all have different theories as to why. But certainly, changes in exclusivity have something to do with that, focus on streaming, have something to do with that focus on streaming, have had something to do with that. But also mathematics, I mean, we had a major period of catch-up where reverse retrans was essentially implemented 5 years after gross retrans was invented, and there was this period of accelerated sort of catch-up, if you will, that happened, and we're through that now. And we're entering sort of a more stable period as well. So there are significant amounts of compensation that go towards the networks from the affiliates. And the need to continue to increase that and sort of the relative ability to increase that has leveled off quite significantly. Any questions on the room? Aaron?

Aaron from Deutsche Bank. Chris, you showed us some 10-year CAGRs on one of the slides for revenue and EBITDA. I'm just curious as Sinclair evolves and you grow the opportunities you've outlined today. How does the margin and free cash flow profile look as you move along that 10-year horizon? And in the end, how do you think it looks compared to what we're used to seeing from the legacy business?

Well, there's no doubt that a lot of our growth opportunities, which we will be hitting in more detail this afternoon have much lower margins because they're still in scale mode. In fact, some of them like Compulse, for instance, has a negative margin. So you're seeing that sort of impact our overall results, but many of our growth opportunities are starting to scale, and their margins are improving over time. I think our target for most of them is 20% to 30% sort of margins longer term as they scale, which historically, I would say, is a little bit lower than what we've seen in broadcast. But we think in the long term, retrans, which is currently over 50% of our revenue will be reduced to below 1/3 once these new growth opportunities start to scale over the years to come. So it's -- there'll be significant contributors over say, 4, 5 years from now. And that's really -- that diversification is what we're after. But I think it shouldn't be lost that, the core business is in great shape. And what we -- what I want to make sure it wasn't missed today is the fact that political and digital are now both well over $200 million a year. In fact, political is 300-plus. And those have been compounding. So not only are they large revenue numbers, but they've been compounding over the years. And when they grow double digits, which is what they've been doing, they have accelerated the total ad business into growth. And the fact this last '21, '22 is a new record for our total ad business on the broadcast side. So you've got a growing overall ad business, powered by these compounding large revenue drivers in digital and political and you've got growing net retrans for the next 3 years. So I think the combination of that core trend plus scaling within our growth opportunities is going to result in a very advantageous financial outcome.

Chris, I have a couple from the Internet.

Okay?

The first one is, can you detail your CapEx priorities going forward? Is M&A part of the plan?

So I'll let Lucy speak a little bit about our total free cash flow priorities. I'll just say on the M&A front, we are always active. I mean Sinclair's DNA is a consolidator. It's a roll-up. Our priorities have shifted over time, large-scale broadcast M&A, we do not think is regulatorily a possibility at this point in time, but we continue to look to optimize the portfolio. And we're very focused within our 4 pillars: multi-platform content, data distribution, marketing services, community interactivity. Within each one of those, we've got various targets and opportunities that we're looking at because it's not just about organic also about inorganic growth and how we can accelerate those pillars. So we're looking in each of those areas on the acquisition front as well. Lucy, do you want to talk about free cash flow?

Sure. I'll talk to free cash flow and CapEx. So the nice thing about broadcasters is the amount of free cash flow that they generate, and I went through that in the presentation, which means that there is enough free cash flow to meet really all the stakeholders' needs. So whether it's been the opportunistic share repurchases, opportunistic debt repurchases, increasing the dividend but more importantly, really reinvesting back in the company. And so everything that we're talking to you about today with the initiatives is really to make the investment to grow us over the long term, make us more profitable over the long term and to expand into the 4 pillars that Chris mentioned from the -- so those will continue to be the priorities for us. On the CapEx side, our base CapEx probably runs maybe about $50 million. And so everything over and above that is really to go into the initiatives or to go into automation and technical make us more secure, make sure that we have better workflow processes. And as you'll hear a little bit later on our customer data platform because data will be critical as we move forward. And so the CapEx priorities are really around the initiatives, security as well as technical enhancements in automation.

Okay. I think I saw a hand up there, right.

Avi Steiner, JPMorgan. You spent a fair bit of time talking about some investments and the value that's not being recognized. And I think you've talked about on conference calls as well. Thoughts around potentially monetizing that if the market doesn't accord that value that you see in those investments? And maybe as a debt guy, how do we think about potential proceeds?

Sure. So we do have regular monetization events within the investment portfolio. I think over the last 5 years, we've approached almost $300 million worth of realizations or distributions from that investment portfolio. And a lot of those just happen because their investments that mature, they get monetized. Oftentimes, it's not necessarily distinctly our decision of when they get monetized. And so the investment portfolio is there for return. And so we will exit positions as we seek to maximize that return. And we do realize that it is an unusual thing for us to have on our balance sheet. And we've spent a lot of time trying to educate people about that portfolio and the value, but it's not lost upon us that the value of our investment portfolio nearly equals our market cap today. And that, of course, makes zero sense. So we are looking to fix that, and we're thinking about how we can realize that value, at very least get shareholders to give us credit for that value. And if it takes more than just education, then those are some of the things that we're looking at today.

It's Barton Crockett again. So I wanted to be respectful of the idea that this is Sinclair Television Group focused and our Diamond Sports Group focused, but there is an intersection between the 2 companies that I wanted to ask about. And to this end, they spend some reporting, it may be accurate, it may not about capital structure evaluations at Diamond Sports Group. And I was just wondering if there's anything happening there that could be impactful for the accounts receivable that you have at Sinclair Television or the Bally Sports stakes or anything that could require some meaningful incremental capital injection from Sinclair Television to Diamond?

Sure. So referring to some press reports about the hiring of Moelis & Company and LionTree. Those 2 advisers have been working for Diamond for the last 2 years. And their efforts resulted in the financing we did back in March. And they continue to work, and their focus is no different than it was 2 years ago when they got originally hired, which is let's figure out ways to delever and strengthen the balance sheet and potentially bring in strategic partners. So they continue to work on that. And we, along with Diamond, are very focused on those objectives. In terms of events that could affect Sinclair, certainly, the A/R facility, I mean, that, I don't see any impact on the A/R facility that there is a first lien on that facility on the A/R directly. There's only funding when that A/R gets created. So it's a very safe, high-quality loan. And in terms of future fundings, I don't see any fundings coming out of Sinclair to Diamond, if that's what you're asking. And to the extent that there was one in the future it would happen, it would only be if there was a return for Sinclair.

And in terms of the Bally Sports stakes, is there anything that could impact in terms of deliverables for that you're obligated to do for some of those options to invest in the warrants divest?

So those warrants are triggered off of Bally's Corp. users or first-time depositors overall. So they really do not tie back to specifically what happens with the Bally Sports, regional sports networks or Tennis Channel or our broadcast stations. They are tied to the overall performance of Bally's.

Okay. And then one other question just on your comment just a moment ago about evaluating options to highlight the value of your investments to the markets. Can you elaborate on what types of structures one could contemplate as you look at this process?

I can't speculate. I'll just tell you that it's something that we're very focused on, you all are smart financial people. I'm sure you can figure out some of the things that we would be thinking about. It just we recognize, a, that it's a bit of an unusual situation that makes it hard to get credit, full credit for; and b, that it's become so observedly lopsided that if the market won't recognize that, then we'll have to take steps to ensure that we do our credit for it.

I have another one from the Internet. Can you give more detail on forecast for mid-single-digit subscriber churn with MVPDs reporting subscriber churn that is closer to 10%?

So that's correct. The traditional MVPDs have been showing, on average, about high single digits. When we quote mid-single digits, we're blending in the results from the virtual MPVDs which have been growing. So you add the 2 together, and that's what gets you to mid-single dates.

I have a another one from the Internet. To follow up on the prior retrans question, the broader group is forecasting net retrans to grow mid-single digits over a 3-year period. You have called for low to mid-single. Is there any reason why your forecast might be more conservative? Do you skew more virtual than the peer group? Investors have also asked if the RSN deconsolidation could ultimately lead to an acceleration of pickup in gross growth under the assumption that stations could be negotiated separately now.

Look, I do think our forecast is conservative. I can't give you a direct comparison. I don't know what their assumptions are in terms of their outlook. We are -- that's fully burdened for mid-single-digit churn. And we wanted to give you a range since it's over 3 years, a lot can change over 3 years. So we think it's conservative. And without knowing their assumptions, it's really hard for me to compare to others. What was the second question, Steve?

It was about the investors have asked that the RSN deconsolidation could ultimately lead to an acceleration of pickup in gross growth under the assumption the stations could be negotiated separately now.

Again, that's a speculative question. I probably can't directly answer, but there is significant amount of leverage that is used at Sinclair in order to keep the RSNs carried. That's a part of why Sinclair receives the management fee that it does. Whether not having to do that in the future will result in greater retrans for the stations is theoretically possible. I can understand why you would ask that question. But until it happens, it's not a question that's knowable.

I'll do another one from the internet here. Is the shift in negotiating leverage relevant for all networks? Or is FOX more difficult because it has not embraced streaming as such?

Yes, it is -- the statement I made, I think, applies to all networks, but every -- there's a Kona variance within the network. So some are in different positions. But I'd say in general, our negotiating leverage and our ability to reduce increases that they have been asking for applies to all networks. Okay. I don't see any more questions. So why don't we wrap here for and grab some lunch. We'll be back in the afternoon to talk about our growth opportunities, and there will be another chance for more Q&A after that. So thank you. [Break]

Okay. So we're going to get started on the afternoon program where we'll be focused more on the details on Sinclair's growth initiatives. This afternoon, you're going to hear from Martin Kristiseter, who runs Compulse. You're going to hear from Scott Erlich about multi-platform content and growth networks. And you're going to hear from JR McCabe on our community and interactivity initiatives. Ken Solomon on the Tennis Channel, Kevin Cotlove on our new customer data platform. And last but not least, from Del Parks on our media and technology transformation efforts. So with that, I'll ask Martin to come to the stage to talk about Compulse.

Thank you, Chris, and good afternoon. There we go. So a quick overview on Compulse. Compulse at the core is a technology company. We provide an ad-buying platform to local media companies agencies as well as brands, and we offer them a platform to handle omnichannel media planning, execution as well as reporting for the campaigns that they run on behalf of their customers. We talked about this a little earlier, but it's an industry platform, not just for Sinclair, but for the overall industry as well that we bring this platform out to market. Quick look at Compulse by the numbers. We are early in the build. That said, we've gotten some meaningful traction already. We power about 27,000 advertisers already. We do north of 70,000 campaigns a year. Already got real scale here in the U.S. with north of 200 million consumers in our identity graph. We reached over 80 million unique CTV households. In the month of the August, we had paid campaigns running in over 200 DMAs in U.S. And we employ 189 people as of last week, and we are projected to do over $100 million this year in gross billing. We are currently targeting a very large TAM. It's an exciting market to be in that Compulse is playing in. And we're on both sides of this one. But looking at U.S. digital ad spend as a starting point, the total U.S. ad spend is estimated to be $290-plus billion in '24, which is nearly doubling what we did in 2020. This year, U.S. digital is up over 14%. Over last year, if you look at 2020, up 57%. And within digital, Connected TV or CTV, we saw a very large increase in usage and revenue during the pandemic. So if you dig into CTV spend or Connected TV spend a little bit more, it is the fastest-growing digital channel, not just in the industry as a whole, but also here at Compulse. We estimate to reach $28 billion in the U.S. by '24. And this year, Connected TV is expected to grow about 34% over '21 and over 100% increase over 2020. So as you look at this one, this is probably not news to any of you guys, but if you look at the overall value chain of digital, even though it's a rapidly growing pie and there's a tremendous amount of dollars flowing into digital, we see a significant amount of inefficiencies in how the business is conducted. And within their lies a big opportunity. So if you look at $1 invested in media, only about $0.30-plus in every dollar that comes in from the advertiser actually goes towards working media. So the lion's share or the majority of the spend actually disappears to all these middlemen in the middle, whether they're technology companies or managing services operations that basically siphon off the vast majority of the spend. Within there, we think there's a big opportunity because we don't see this mall being sustainable in the long term. And the way we want to go to market and really change the arbitrage problem is in two ways. One is that the business needs a new business model, right? So if $0.70 in every dollar is disappearing, we want to go to market and basically put in place a more fair and equitable business model. That brings more money back to both the publisher as well as the advertiser to make sure that we have a viable future-proof business. And the way to do that is also through the product to basically provide a vertical stack or a platform that can eliminate a lot of the middlemen that we see providing efficiencies as well as bring cost savings back to the customers. We offer our platform in two ways. One is self-serve. For large companies that are out there that might have in-house teams, they would like to have hands-on keyboards. They can utilize our platform to run their media in-house. And they can also take advantage of our managed services operation. In our managed services operation, we have about 80-plus folks on the India site that do ad operations for most of our customers at $0.10 on the dollar. So for companies that would like to lower their fees accordingly, most of them are using us for managed service to actually run their overall digital operations. And we buy the whole Internet. So different than maybe the Trade Desk and some of the other DSPs you guys, or demand side platform, you might be following, we have our own demand side platform that we acquired about 18 months ago, but we also do omnichannel advertising on behalf of our customers. So in addition to programmatic like OTT and display and online video, we also do search, social, streaming audio. We even just launched linear TV on behalf of our customers to enable them to grab a larger share of wallet. And the way we go to market is through the Compose 360 platform. This is our flagship platform, encompasses three core pillars. One is media planning, the other one is execution, as well as a reporting UI to basically visualize all the performance we're running on behalf of those campaigns. Digging into these a little deeper. The media planner is really unique. So if you think of yourself. If you work at a media company or an agency, putting together a media plan is very cumbersome to grab data from different systems to put in place a media plan that's actually going to make sense to tie to an outcome. This platform is data-driven. It's automated. It's self-served. So by putting in a few inputs, a lot of the account executives that our customers' companies are able to generate a media plan in minutes versus what used to take hours or even days prior to this. So what that means is more proposals out the door, higher close ratio, would build better campaigns from the get-go. And as a plan comes through the system, we have our own demand side platform, like I mentioned. We acquired this 18 months ago. That basically does the fulfillment on behalf of our customers. It's a DSP that's built for local, so compared to some of the larger national platforms out there that like the Trade Desk, Xander and others, this one is purpose-built for local, which is unique. We bring prenegotiated deals to our partners that they can tap into. So if you are a smaller broadcaster or even a smaller agency, they're saving upwards of 30% coming on to this platform because they get to tap into the economies of scale of Sinclair and our partners, where we are pre-buying a lot of the inventory from our partners. Last but not least, we have an omnichannel reporting UI that basically integrates over 100 different marketing technology companies into one single UI, it's white labeled. It's a marketing dashboard, not only showcasing the metrics on the campaigns you ran, but also insights to our partners. And it's MRC accredited. So as we try to bring more trust and transparency into this black box of digital, we partnered with Oracle to basically make sure that they verify every single campaign and every single impression that we do. We think this one is important. So even though we're young, we already power some of the largest media companies and independent agencies in the U.S. So aside from Sinclair and Bally Sports, we are also the white label provider to large media companies like Univision, Estrella TV, on the radio side Lotus and many, many more. So just to highlight everything here that we just went through. At Compulse, we do provide a technology platform for local media, agencies as well as brands. It's both self-serve, it's managed service. We do omnichannel on behalf of those customers. Critical is that we bring to market, not only the platform but also a new business model that's more fair and equitable where every dollar that gets invested more of that will go towards working media and future-proof our company as well as our customers. And we're targeting a very large TAM. So with that, Scott Ehrlich.

Morning, afternoon. So original content could be a broad and daunting undertaking. We're not trying to boil the ocean. Our focus in development is on content and formats that we already know well. And to that point, not necessarily in order of importance, our archives are full of rich storage. Everybody remembers Tiger King, early pandemic hit on Netflix. Our Oklahoma Station, KOKH, had interviewed Joe Exotic many times. As we look across our more than 75 news markets, every one of them has a compelling story, at least one, most of them have many, that can be adapted into the docuseries formats that are really, really popular on the streamers. So to realize the opportunity, we partnered with established top-tier storytelling talent. That was the missing link. People that could create high gloss, high production docuseries that we can bring to SVOD platforms and other premium content platforms. And the first of them will be headed out to market later this year. Earlier, you heard from Scott Livingston about workflows that buyback time from the local content centers. We're also creating programming to help that effort as well. Currently, well down the development path are a day and date topical talk show that will draw heavily upon the news of the day that's produced by not just the stations but also the national desk and they'll focus on the engaging and entertaining stories of the day. As been discussed earlier this morning, whether it's Missing Erica Baker, The Rally, Live on the Line and featuring a lot of the talent that we have significant social profiles, we're already well along in creating original content here at Sinclair. We also see an opportunity on our own stations to create content for the time periods that historically have been filled with shows from third-party syndicators. Alongside the talk show, we're also creating a game show, a format we know very well. And we've historically programmed game shows in the stations across prime access, late fringe and other key time periods. The first game show, we'll be bringing out leans in interactivity, has broad-based appeal. We'll be unveiling that early in 2023. So moving on to the growth networks or going back to our social talent. Within our own footprint, we have social talent that has massive followings. Kevin Cotlove is going to talk a bit more about how we're building that business. Now moving on to the growth networks. So Comet, Charge! and TBD have grown and continue to grow significantly. They've added more than 13 million homes in 2022 and are looking to continue that trajectory into 2023. In the aggregate, the stack, which is how we market the trio, we market them as a package to advertisers, they reach an unduplicated audience of more than 54 million with each network individually reaching on average more than 35 million. As we always hope and expect in the network business, increased distribution leads to increased revenue. The premium content mix of the stack supports both general market and direct response sales against our Nielsen ratings and long-form advertising sales. So there's a mix of content types -- mix of advertising types that we've been riding to success. And now Ken Solomon.

Thank you, Scott. How is everybody? You got the post lunch? First of all, I have to -- how many have or have seen Tennis Channel in the room? We used to -- there used to be a moment where it was -- we had to explain why we were even going to do this, and now we're a little bit further along. It's exciting to be here. Many of you know us from a prior life and the chance to bring what we had begun building to Sinclair. You heard it from Rob, started on a tennis court with David Smith. I think I was 24 years old. He said, "I hope you got better", when I broached the idea with him, and he meant tennis, not the network itself. And it's been a fantastic journey. So we're here to talk a little bit about the growth plans. And there's a lot of them. We were born in the crucible of a changing media environment. So we've always had to think about growth. And we just finished three days of meetings where what you're going to see is actually being put into action right now or being put into overdrive. But you heard about what we have already assembled. And we sort of have the full ecosystem covered for the sport, including about 93% to 95% of the live tennis in the world. But just know that there's a building out in Los Angeles that Sinclair and Del Parks right here help build that really was designed to do everything we could ever want. And every single match in the world that is televised is coming into that building and something is being done with it to be maximized. And no one has ever done that before. So whether it's linear, SVOD, podcast, social, it's happening 24/7 365 in that building. If you show up at 3 in the morning, there's going to be people with cameras on. So I'm going to just jump in. I don't know if everyone can see this, but the primary areas of growth are: International; what we're doing here in the United States on two fronts, both FAST and with the launch of TC Direct, which we're incredibly excited about; betting and gamification; and then expansion into other categories and other passion sports and taking the model to other places, including pickleball, which everyone seems to be wanting to talk about right now. But we're going to start with world domination. That is -- our fiendish plot is to bring what we have here. What you can enjoy, what everybody raised their hands gets to do here in the United States. Guess what? No one else in the world can do. The reality is that before we started this, way back when I was begging Jackie to just consider what we were thinking about, the idea that you could see every match in the world, had a linear center to that that's telling you that storyline and then pushing you through was crazy. People didn't even think it could happen. And now we have taken the New York-New York strategy of if we could make it here in the United States, we could make it everywhere. And we have well made it here and are growing. So we have already launched. And during COVID started in Germany, Austria and Switzerland, said, "Hey, let's put it up there with an SVOD service." We partner with the local federations, the equivalent of the USTA in each one of these countries. We know them all well. We're in business with everyone, everywhere in the globe. In fact, we've been in business globally, we've just only broadcast domestically. So Tennis Deutschland was happened to be our partner and a huge base directly to their SVOD and we've marketed SVOD there. But then this crazy thing happened. Samsung came to us and said, we're launching FAST channels in Germany. Next thing you know, we were in 6 million homes in Germany. I don't think that's an official number, but I read it in the paper somewhere and continue to grow. So we are now rolling out. We've already -- I just got back from India. As Rob mentioned, remarkable history of tennis there, Vijay Amritraj is our partner. I'm going back soon, that's all I can tell you. We've launched in India. We had millions of viewers in the first month without any real live tennis on even. So that's kind of a good indicator, a forward indicator. And the goal ultimately is -- by the way, we're -- in addition to Germany, Austria, Switzerland, Greece, the Netherlands and the U.K., we really have begun discussions with the entire world. And the hope and the goal is to take what we've done here and go with one sport, one world, one brand globally. We can do it with VOD. We can do it with all popular platforms. It's happening in a tremendous amount of in-language content that's being produced for each of these as well. But let's just come back here because we ain't done yet by any stretch. The growth has been precipitous. It's been breathtaking. Another tip of the hat to Sinclair. And the best part is that the best is yet to come because we have been waiting for 20 years to be able to offer tennis channel directly to consumers. So about 40% now of that cord cutting, cord network universe or a universe that we just never got to because our ascension was sort of coinciding with the softening of -- and the, let's call it, the rightsizing of the MVPD universe. We've got the 60%. The 40% will be opened up beginning in -- at the beginning of 2024. So at virtually every single person in home, who has a connection of any sort will be able to get Tennis Channel for the first time ever, opening up a massive opportunity of growth domestically in our basic subscriber model. That's the first half of what we're trying to do or what we will be doing in terms of growth here in the U.S., which has continued. And the second half is something that's happening right now, which as Rob mentioned, T2. So we saw FAST as an opportunity. In fact, I'll take a step back. We started 8 years ago with our Plus. I believe, if you check me, everybody here is good on research, that we were the first Plus in the history of the world of pluses, right, in SVOD service to complement our linear service. And it's done really well. However, I think we've all come to know what the limits of the growth of that universe is. It's not a replacement for television. It's not simultaneous mass viewing. It's a great complement. It's the home entertainment business. That's not the same thing as TV. So we went to Samsung because in part of our experience in Germany and said, what if we go to -- what if we could give you a live professional always-on second tennis channel exclusively for a year to help you launch Samsung TV Plus in the United States? They didn't believe we would do it, and we did. And I'd urge you if you have a Samsung set, to take a look at T2. We launched in March in 30 -- this is 30 million to 35 million homes, now 35 million homes. Took me 16 years to get there the first time around. We did it in the first day. Those numbers will grow dramatically as our exclusivity with Samsung expires mid-February of next year, and you're going to see significant growth of this platform, free, ad-supported T2 live tennis matches, and it's not just young and up and comers. We've got, at any given time, 4 or 5 different events going on in different places all over the world with multiple courts at each. So we have a tough time picking what's going to get on Tennis Channel alone. And the chance to be able to have a full linear second channel to then roundtrip audiences back and forth to with Tennis Channel is very exciting. This is really funnel opening for us. You buy the set, you put it on the wall, you plug it into your data and the first sports network you're going to see and very often one of the first networks you're going to see, because Samsung is using it as a Trojan horse because they're showing you live sports and showing you that their service is relevant, is going to be T2. So very, very exciting as we move forward. You can bet on it. People ask us about betting in tennis and what's it like and what's going to happen. It's about time is the answer for us. Tennis is -- this is the only country in the world where they haven't been betting on tennis. We have traveled the world as we produce. You go to Wimbledon and anyone who's been there knows that it strawberry's creams maybe a pins cup and you're going to make a bet, right? It's part of the game. The prop bet was, I think, born with a game set match sort of rigor that -- or a format that tennis has. We have been for 9 years, preparing for the moment that is now here upon us, and Sinclair has set us up beautifully. We are already -- and you're going to hear from JR McCabe in a minute, deep, deep, deep into every day, making the fun engagement of betting part of what we do or where it is, where it can be done, real money betting. But consider this, tennis is the second most gambled upon sport in the world. Why? It's a universal standard. It's always on. So we can have sustained repeated engagement every day, 24 hours a day, 7 days a week. There's something to get excited about because there's always a match being played and always another one and they all inform each other. So we have multiple parts to this business that are generating significant revenue growth. The first is obviously advertising. Where would you go? You would go to the place that has the #2 most bet-upon sport in the world completely 24 hours a day, 7 days a week, if you were looking to try to advertise your new betting or gaming company or service, and we have. And we're in business with 4 of the top already and with literally as much room in inventory as we can create in that business. The second and the thing that we've been most excited about is the creation of original IP around betting. It's the creation of the games. It's another way to program. And people say, well, how does that fit with tennis? And I will only tell you this. We're already broadcasting in a way that is very, very similar because one of our great analysts, the Jim Carriers, the Martina Navratilovas, the Lindsay Davenports, the Hall of Famers who live on our area every day doing, they're bringing their experience and they're bringing their knowledge of the statistics to predict for you what may happen next. Sound familiar? So predictive analytics, owning our data streams, we are -- when you have every match in the world coming into one building, it puts us into a very unique position to be able to create great games and engaging content. And again, you're going to hear about all that we're doing right now to move forward ahead of everybody else and to lead the charge. And the great news is that the model works not just for tennis. There are so many sports and passion categories that don't have the ability because their associations just don't quite have the lift. They can't quite get the advertisers. They certainly can't leverage to create their own channels. They may be stuck in a media time-buy scenario that they can't do what we have done. The model for tennis of creating a destination across all platforms where people who enjoy that particular sport or vocation can go and then use that as a funnel opening opportunity makes sense for a very long list of other categories. And it's going to start with this one here. It's already started. You can't get out of the way of pickleball and we don't want to. We're right in the way of it. We're already broadcasting many, many, many hours on Tennis Channel. We are completely redefining how you broadcast it. We're partnering with the tours. We're even producing for the other platforms. So the last day you may have caught on CBS, the tournament out at Riviera or The SKECHERS Open, we produce that. Why? Hub and spoke, just like Tennis Channel. We don't have to have everything. We want to be the place that the person who loves that category comes 24 hours a day, 7 days a week. And if we don't happen to have it because we're going to a larger platform to try to create broader awareness, we'll point you there and have you come back. It's pickleball today. Think about things like volleyball, surfing, skiing, equine sports, professional sailing, which is incredibly exciting, drag racing on the water, nowhere to go if you're a fan. Nowhere to go if you think you might like it. We're going to be the place for that. Come out to Los Angeles and visit the new Sinclair build -- facility that we have out there. It's 21 tents all in the cloud. It is absolutely beautiful. It's got Del Parks' name on it all over it and we will show you a very, very, very good time. This is really just the tip of the iceberg because falling off all of these categories, growth domestically with both FAST and with direct to the consumer and where we haven't been able to get to those subscribers before, taking the world and giving it the same approach that we've had here, capitalizing on what's inherently our birthright in betting and gamification and then expanding the model to other sports has many, many dominoes that fall from that. And the beautiful thing is that the infrastructure of what we had built the Tennis Channel dovetails so perfectly with Sinclair, what has been their business all along. And as you're seeing here today, where they've invested in growth. So very, very excited about that and on to the next. JR McCabe, ladies and gentlemen.