Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) Q2 2023 Earnings Conference Call August 2, 2023 4:30 PM ET Company Participants Chris King - Vice President, Investor Relations Chris Ripley - President and Chief Executive Officer Lucy Rutishauser - Executive Vice President and Chief Financial Officer Rob Weisbord - Chief Operating Officer and President of Local Media Conference Call Participants Dan Kurnos - the Benchmark Company Aaron Watts - Deutsche Bank Steven Cahall - Wells Fargo Barton Crocket - Rosenblat ...

Financial Performance - For the three months ended March 31, 2023, total revenues decreased to $773 million from $1,288 million in the same period of 2022, representing a decline of approximately 40%[156] - Media revenues for the broadcast segment fell to $676 million, down 6% from $721 million in the prior year[157] - Operating income for the quarter was $21 million, a significant decrease from $3,466 million in the same quarter of 2022[156] - Net income attributable to Sinclair Broadcast Group was $185 million, compared to $2,587 million in the same period last year, marking a decline of approximately 93%[156] - Distribution revenue decreased by $12 million for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to a decrease in subscribers[159] - Advertising revenue decreased by $14 million for the three months ended March 31, 2023, compared to the same period in 2022, mainly due to a decrease in political advertising revenue[160] - Other media revenues decreased by $19 million for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to a decrease in revenue from the local sports segment[162] - Media revenues decreased by $24 million for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to a decrease in advertising revenue related to owned networks[174] Expenses and Costs - Media programming and production expenses increased by $8 million for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to a $6 million increase in fees pursuant to network affiliation agreements[163] - Corporate general and administrative expenses increased by $11 million for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to a $4 million increase in employee compensation costs[178] - The company experienced an increase in production and overhead costs, impacting cash flows from operating activities[190] Cash Flow and Liquidity - Net cash flows from operating activities decreased to $62 million in Q1 2023 from $70 million in Q1 2022, primarily due to decreased cash collections and increased production costs[189] - Net cash flows used in investing activities decreased to $(44) million in Q1 2023 from $(266) million in Q1 2022, mainly due to the removal of DSIH's cash balance following deconsolidation[189] - Net cash flows used in financing activities increased to $(279) million in Q1 2023 from $(102) million in Q1 2022, primarily due to the repurchase of Redeemable Subsidiary Preferred Equity[192] - Cash flows from distributions decreased significantly, with distributions from investments at $8 million in Q1 2023 compared to $70 million in Q1 2022[189] - The company anticipates sufficient liquidity for the next twelve months, relying on cash, cash equivalents, and borrowing capacity under the Bank Credit Agreement[188] - The company may consider issuing long-term debt or equity to meet long-term liquidity needs, although there are no assurances regarding the availability of financing[188] Shareholder Actions - The company repurchased approximately 3.6 million shares of Class A Common Stock for $53 million during the three months ended March 31, 2023, and an additional 5.2 million shares for $99 million since that date[153] - The company declared a quarterly cash dividend of $0.25 per share in February and May 2023[153] - The company declared a quarterly dividend of $0.25 per share in February and May 2023, with future dividends subject to the Board's discretion[193] Investments and Agreements - In February 2023, the company purchased the remaining 175,000 units of Redeemable Subsidiary Preferred Equity for $190 million, representing 95% of the remaining unreturned capital contribution[153] - The company entered into a distribution agreement with YouTube TV to add Tennis Channel and other networks, effective June 1, 2023[150] - The company has deployed NextGen TV, powered by ATSC 3.0, in 39 markets as of April 2023[151] - Income from equity method investments included a gain of $33 million on the sale of two real estate investments during the three months ended March 31, 2023[176] Tax and Interest - The effective tax rate for the three months ended March 31, 2023, was a benefit of 1870.7%, compared to a provision of 20.8% during the same period in 2022[182] - Interest expense decreased by $41 million for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to a decrease in DSG interest expense of $72 million[180] Other Developments - The company announced that its multicast networks COMET, CHARGE!, and TBD will add 2.4 million households, increasing total new coverage to nearly 17 million households since the start of 2022[150] - The company entered into an interest rate swap with a notional amount of $600 million at a fixed interest rate of 3.9%, effective February 7, 2023[195] - The company reported a deconsolidation impact that affected both cash flows and financial performance metrics[191]

Financial Data and Key Metrics Changes - The company ended the quarter with a cash balance of $623 million, leading to a total liquidity of almost $1.3 billion at quarter end [2] - Adjusted EBITDA for the second quarter is expected to be between $84 million and $104 million, down from $184 million pro forma last year, primarily due to lower revenue and higher programming fees [4] - Total debt at the end of the first quarter was $4.3 billion, with a first-lien indebtedness ratio of 3.5x and total net leverage of 4.4x [131] Business Line Data and Key Metrics Changes - Media revenues for the quarter were $766 million, achieving the high end of guidance, with core advertising meeting expectations and political and distribution revenues surpassing guidance [128] - Adjusted EBITDA decreased by 40% compared to the first quarter of last year, attributed to lower media revenues and higher corporate and media expenses [153] - The Tennis Channel saw a 33% increase in total subscribers year-over-year, with over 3.5 million hours streamed in the quarter [119] Market Data and Key Metrics Changes - The advertising environment is showing low single-digit percent increases in the automotive category, while there is softness in the insurance category [145] - Local advertising is outperforming national advertising, with strength in categories such as auto and legal [27] - The company expects media revenues to decline in the second quarter compared to the previous year due to the absence of political spending and continued subscriber churn [132] Company Strategy and Development Direction - The company is reorganizing under a holding company structure to improve transparency and flexibility for transactions, separating broadcasting assets from non-broadcasting assets [107][109] - There is a strategic focus on reallocating capital towards non-broadcast holdings, particularly in NextGen technologies and international opportunities [92] - The company is investing approximately $75 million in infrastructure this year, including cloud migration and NextGen technologies [157] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the core broadcasting business while acknowledging regulatory uncertainties affecting capital allocation [92] - The company anticipates a record-breaking political spending year in 2024, following strong political spending in Q1 [117] - There is ongoing uncertainty regarding macroeconomic conditions that could impact consumer behavior and advertising revenue [134] Other Important Information - The company has initiated a Sinclair Cares initiative to promote mental health awareness and community support [99] - The Tennis Channel is set to become a dedicated network for the French Open, airing over 2,000 hours of coverage [121] - The company is launching a white-label Tennis Channel shop to create a merchandising revenue stream [121] Q&A Session All Questions and Answers Question: Can you provide more details on the investments in ventures and the accounts receivable facility? - Management indicated that additional information about the holding company would be limited due to ongoing share exchange offerings, but more detailed disclosures are expected post-reorganization [9][10] Question: How is the ad environment trending in Q2? - Management noted that local advertising is outperforming national, with positive results in specific categories, while monitoring macroeconomic headwinds [27] Question: What is the expected impact of the Diamond bankruptcy on financial liabilities? - Management refrained from speculating on the Diamond bankruptcy's impact, stating that they would provide updates as more information becomes available [13] Question: How will the company balance stock buybacks against debt repayment? - Management acknowledged the undervaluation of debt and indicated that leverage targets remain in the high 3s to low 4s, with expectations to improve by the end of 2024 [81]

Part I [Business](index=7&type=section&id=ITEM%201.%20BUSINESS) Sinclair Broadcast Group is a diversified media company primarily focused on local television broadcasting, digital platforms, and technical services, with its local sports segment deconsolidated in 2022 [Segments](index=7&type=section&id=Segments) As of December 31, 2022, Sinclair operates primarily through its broadcast segment, having deconsolidated its local sports segment on March 1, 2022 - Effective March 1, 2022, the company deconsolidated its local sports segment (DSIH), shifting to a single **broadcast** reportable segment for year-end 2022, with only two months of local sports activity included in 2022 financials[34](index=34&type=chunk)[22](index=22&type=chunk) Broadcast Segment Overview (as of Dec 31, 2022) | Metric | Value | | :--- | :--- | | Television Stations | 185 | | Markets | 86 | | Total Channels | 636 | | Primary Network Affiliates | 236 (FOX, ABC, CBS, NBC, CW, MNT) | | Weekly News Production | >2,500 hours | - 'Other' business activities encompass owned networks (Tennis Channel, Comet), digital marketing (Compulse), technical services (Dielectric, ONE Media 3.0 for NextGen TV), and diverse non-media investments[36](index=36&type=chunk)[39](index=39&type=chunk)[42](index=42&type=chunk) [Operating Strategy](index=13&type=section&id=Operating%20Strategy) The company's operating strategy focuses on attracting viewership, controlling costs, and developing NextGen TV (ATSC 3.0) to create new revenue streams - A core strategy involves developing and deploying **NextGen TV (ATSC 3.0)**, enabling merged broadcast and broadband content for services like hyper-local news and dynamic ad insertion, deployed in **36 markets** by year-end 2022[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) - The company controls programming and operating costs via disciplined acquisition, centralized management, and original content creation like 'The National Desk'[57](index=57&type=chunk)[52](index=52&type=chunk) - Sinclair partners with Bally's Corporation to integrate sports betting technology with its media portfolio, aiming to enhance live sports gamification and monetize legalized sports betting[41](index=41&type=chunk)[66](index=66&type=chunk) [Federal Regulation of Television Broadcasting](index=18&type=section&id=FEDERAL%20REGULATION%20OF%20TELEVISION%20BROADCASTING) The television broadcasting industry is heavily regulated by the FCC, governing station ownership, licensing, and operational rules, including national and local ownership caps and retransmission consent - The company's national audience reach is approximately **24% of U.S. households** (with UHF discount), and ongoing FCC review of ownership rules could impact future acquisitions[83](index=83&type=chunk)[84](index=84&type=chunk) - The company uses Local Marketing Agreements (LMAs) and Joint Sales Agreements (JSAs), whose regulatory status is under ongoing FCC review, potentially impacting revenue and costs[86](index=86&type=chunk)[87](index=87&type=chunk) - Sinclair has elected **retransmission consent** for all its stations, allowing negotiation of fees for broadcast signals on cable and satellite systems[91](index=91&type=chunk) [Competition](index=23&type=section&id=COMPETITION) Sinclair faces intense competition for audience share and advertising revenue from traditional and digital media, including other broadcasters, cable networks, and OTT services - Competition spans audience share, advertising revenue (traditional and digital media), and distribution rights across cable, satellite, and OTT platforms[103](index=103&type=chunk)[108](index=108&type=chunk) - The company faces increasing competition from digital platforms like Google, Facebook, social media, and OTT services, which offer targeted advertising capabilities unavailable to traditional broadcasters[106](index=106&type=chunk) [Environmental, Social, and Governance (ESG)](index=25&type=section&id=ENVIRONMENTAL%2C%20SOCIAL%2C%20AND%20GOVERNANCE%20ACTIVITIES%20AND%20PRACTICES) Sinclair has formalized ESG efforts, focusing on employee well-being, community-focused journalism, environmental efficiency, and enhanced corporate governance - As of December 31, 2022, the company had approximately **7,900 employees**, emphasizing safety, ethics, and expanded benefits, including increased paid parental leave to **six weeks** in 2022[116](index=116&type=chunk)[126](index=126&type=chunk) - The 'Sinclair Cares' program and local station efforts raised over **$12 million** for non-profits, collected over **330,000 pounds of food**, and provided nearly **4.5 million meals** in 2022[132](index=132&type=chunk) - Recent governance enhancements include adding the first female (2021) and racially diverse (2022) board members, hiring a Chief Compliance Officer, and establishing a board cybersecurity subcommittee[135](index=135&type=chunk)[136](index=136&type=chunk) [Risk Factors](index=29&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section details significant operational, ownership, debt, and general market risks, including subscriber decline, digital competition, cybersecurity, and the deconsolidated Diamond Sports Group's financial distress [Risks relating to our operations](index=29&type=section&id=Risks%20relating%20to%20our%20operations) Operational risks include acquisition integration challenges, declining multichannel video subscribers, unfavorable distribution agreement terms, intense competition, and cybersecurity vulnerabilities - Declining subscribers to traditional and virtual MVPDs pose a material risk to revenues if 'cord-cutting' or shifts to smaller programming bundles continue[143](index=143&type=chunk)[145](index=145&type=chunk) - A significant cybersecurity incident on October 17, 2021, resulted in approximately **$63 million** in lost Q4 2021 advertising revenue and an estimated **$20 million** in unrecoverable net losses after insurance[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - Changes to FCC multiple ownership rules, especially the 'UHF discount' and attribution rules for JSAs and LMAs, could restrict future acquisitions or necessitate modifying current operating structures[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk) [Risks relating to our concentrated voting stock ownership](index=41&type=section&id=Risks%20relating%20to%20our%20concentrated%20voting%20stock%20ownership) The Smith family's concentrated ownership of approximately 80.8% of voting rights through Class B Common Stock allows them to control most stockholder votes - As of December 31, 2022, the Smith family controls approximately **80.8%** of the company's voting rights via super-voting Class B Common Stock, influencing most stockholder votes[205](index=205&type=chunk) [Risks relating to our debt](index=42&type=section&id=Risks%20relating%20to%20our%20debt) The company's substantial debt of **$4,265 million** as of December 31, 2022, poses risks related to servicing obligations, restrictive covenants, and interest rate fluctuations Debt Position (as of Dec 31, 2022) | Metric | Value | | :--- | :--- | | Total Debt | $4,265 million | | Shareholders' Equity | $681 million | | Variable Rate Debt | ~$2,733 million | - The company faces interest rate risk on its variable rate debt, and the transition from LIBOR to SOFR may adversely affect interest expense[214](index=214&type=chunk)[215](index=215&type=chunk) [General risk factors](index=46&type=section&id=General%20risk%20factors) General risks include adverse economic conditions and the significant financial distress of the deconsolidated Diamond Sports Group (DSG), which missed a **$140 million** interest payment - On February 15, 2023, the deconsolidated Diamond Sports Group (DSG) entered a 30-day grace period after missing approximately **$140 million** in interest payments, signaling significant financial distress potentially impacting Sinclair[226](index=226&type=chunk) [Unresolved Staff Comments](index=46&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the Securities and Exchange Commission - None [Properties](index=46&type=section&id=ITEM%202.%20PROPERTIES) Sinclair owns and leases various U.S. facilities, including offices, studios, and transmitter sites, all deemed in good operating condition and suitable for current business needs - The company owns and leases offices, studios, and transmitter sites across the U.S., which are considered in good operating condition and adequate for business operations[228](index=228&type=chunk) [Legal Proceedings](index=47&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in various lawsuits, claims, and regulatory matters, with specific details available in Note 13 of the financial statements - The company is party to various lawsuits and regulatory matters, with further details in Note 13 of the financial statements[229](index=229&type=chunk) [Mine Safety Disclosures](index=47&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - None Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=48&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Sinclair's Class A Common Stock trades on NASDAQ (SBGI), maintains a quarterly dividend, and repurchased shares in Q4 2022, with **$698 million** remaining for repurchases - The company intends to pay regular quarterly dividends, declaring **$0.25 per share** in February 2023[235](index=235&type=chunk)[236](index=236&type=chunk) Stock Repurchases (Q4 2022) | Period | Total Shares Purchased | Average Price Per Share | | :--- | :--- | :--- | | Oct 2022 | 256,594 | $18.61 | | Nov 2022 | 46,434 | $17.83 | | Dec 2022 | 0 | N/A | - As of December 31, 2022, the company had **$698 million** remaining under its share repurchase authorization program[240](index=240&type=chunk) [Reserved](index=50&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is reserved and contains no information - None [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=50&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Consolidated operating income surged to **$3.98 billion** in 2022, driven by a **$3.36 billion** gain from local sports segment deconsolidation, despite total revenue decline [Executive Overview](index=51&type=section&id=EXECUTIVE%20OVERVIEW) The 2022 executive overview highlights the deconsolidation of Diamond Sports, multi-year renewals of NBC and FOX affiliation agreements, and continued NextGen TV deployment in **36 markets** - The most significant 2022 event was the deconsolidation of the Diamond Sports Intermediate Holdings, LLC (DSIH) local sports segment, effective March 1, 2022, fundamentally altering reporting structure and financial results[249](index=249&type=chunk) - The company continued its NextGen TV (ATSC 3.0) rollout, deploying the technology in **14 additional markets** during 2022, reaching a total of **36 markets**[257](index=257&type=chunk) - Key commercial agreements renewed include multi-year affiliations with NBC and FOX, and a comprehensive distribution agreement with Charter Communications[249](index=249&type=chunk)[250](index=250&type=chunk) [Critical Accounting Policies and Estimates](index=55&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Critical accounting policies involve significant judgments and estimates for revenue recognition, impairment testing of goodwill and intangibles, program contract costs, investment fair value, and income tax accounting - Key estimates involve impairment testing of **goodwill ($2.09 billion)** and intangible assets, requiring management to forecast future market conditions and cash flows[267](index=267&type=chunk)[268](index=268&type=chunk) - Revenue recognition necessitates estimating subscribers for distribution revenue and managing deferrals for advertising arrangements with audience ratings guarantees[265](index=265&type=chunk)[266](index=266&type=chunk) - Significant judgment is required for income tax accounting, particularly in determining deferred tax asset realizability and establishing valuation allowances[273](index=273&type=chunk) [Results of Operations](index=58&type=section&id=RESULTS%20OF%20OPERATIONS) Consolidated operating income surged to **$3.98 billion** in 2022, driven by a **$3.36 billion** gain from local sports segment deconsolidation, while broadcast revenue increased **11%** to **$3.07 billion** Consolidated Operating Results (in millions) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Revenues | $3,928 | $6,134 | $5,943 | | Gain on deconsolidation | $3,357 | $0 | $0 | | Operating Income (Loss) | $3,980 | $95 | $(2,772) | | Net Income (Loss) to SBG | $2,652 | $(414) | $(2,414) | Broadcast Segment Revenue (in millions) | Revenue Type | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Distribution Revenue | $1,530 | $1,475 | 4% | | Advertising Revenue | $1,399 | $1,106 | 26% | | **Total Media Revenues** | **$3,071** | **$2,757** | **11%** | - The **26% increase** in broadcast advertising revenue in 2022 was primarily driven by higher political advertising and the non-recurrence of a approximately **$63 million** revenue loss from the 2021 cybersecurity incident[292](index=292&type=chunk) - The Local Sports segment's 2022 results, with **$482 million** in revenue and a **$4 million** operating loss, reflect only two months of activity before the March 1 deconsolidation and are not comparable to prior full-year results[301](index=301&type=chunk)[304](index=304&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of December 31, 2022, Sinclair maintained strong liquidity with **$884 million** in cash and **$650 million** in available borrowing capacity, sufficient for the next twelve months Liquidity Position (as of Dec 31, 2022) | Metric | Value (in millions) | | :--- | :--- | | Cash and Cash Equivalents | $884 | | Available Borrowing Capacity | $650 | | Net Working Capital | $1,075 | - In April 2022, the company amended its credit agreement to raise a **$750 million** Term Loan B-4, refinancing debt maturing in 2024 and 2026 to extend its debt maturity profile[332](index=332&type=chunk) Cash Flow Summary (in millions) | Cash Flow | 2022 | 2021 | | :--- | :--- | :--- | | From Operating Activities | $799 | $327 | | Used in Investing Activities | $(381) | $(246) | | Used in Financing Activities | $(353) | $(524) | [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate exposure on its **$2,733 million** variable-rate debt, with a **1%** rate increase estimated to raise annual interest expense by **$27 million** - The company is exposed to interest rate risk on **$2,733 million** of variable rate debt; a hypothetical **1%** rate increase would raise annual interest expense by an estimated **$27 million**[343](index=343&type=chunk) - To manage interest rate risk, the company entered into an interest rate swap in February 2023[342](index=342&type=chunk) [Financial Statements and Supplementary Data](index=69&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section incorporates by reference the company's audited consolidated financial statements and supplementary data filed as exhibits to the 10-K report - The financial statements and supplementary data required by this item are filed as exhibits to this report[344](index=344&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=69&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reported no changes in or disagreements with its accountants on accounting and financial disclosure for the year ended December 31, 2022 - There were no changes in or disagreements with accountants on accounting and financial disclosure during the year[345](index=345&type=chunk) [Controls and Procedures](index=69&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) As of December 31, 2022, management concluded that disclosure controls and internal control over financial reporting were effective, a conclusion affirmed by PricewaterhouseCoopers LLP - Management concluded that as of December 31, 2022, the company's disclosure controls and procedures were effective[350](index=350&type=chunk) - Management concluded that as of December 31, 2022, the company's internal control over financial reporting was effective, a conclusion audited and confirmed by PricewaterhouseCoopers LLP[351](index=351&type=chunk)[352](index=352&type=chunk) [Other Information](index=70&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company reported no other information for this item - None Part III [Directors, Executive Officers and Corporate Governance](index=71&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2023 Annual Meeting Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement to be filed within 120 days of the fiscal year-end[358](index=358&type=chunk) [Executive Compensation](index=71&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information on executive and director compensation is incorporated by reference from the company's 2023 Annual Meeting Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement to be filed within 120 days of the fiscal year-end[359](index=359&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=71&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information on security ownership by beneficial owners and management is incorporated by reference from the company's 2023 Annual Meeting Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement to be filed within 120 days of the fiscal year-end[360](index=360&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=71&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information on related person transactions and director independence is incorporated by reference from the company's 2023 Annual Meeting Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement to be filed within 120 days of the fiscal year-end[361](index=361&type=chunk) [Principal Accounting Fees and Services](index=71&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information on fees paid to the independent registered public accounting firm is incorporated by reference from the company's 2023 Annual Meeting Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement to be filed within 120 days of the fiscal year-end[362](index=362&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=72&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists financial statements and exhibits filed with the Form 10-K, with all financial statement schedules omitted - This item lists all financial statements and exhibits filed with the Form 10-K; all financial statement schedules have been omitted[364](index=364&type=chunk)[366](index=366&type=chunk) [Form 10-K Summary](index=75&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) This item is not applicable - Not applicable

Financial Data and Key Metrics Changes - In Q4 2022, media revenues increased by 19% year-over-year, driven by higher political ad revenues and core advertising, despite lower distribution revenues and management fees [42][51] - For the full year, media revenues were up 10%, or almost 8% when adjusted for cyber incident impacts [42][51] - Adjusted EBITDA for Q4 was $309 million, at the high end of guidance, while pro forma adjusted EBITDA for the year was $890 million [89][90] - The company ended Q4 2022 with a cash balance of $884 million, contributing to total liquidity of over $1.5 billion [65] Business Line Data and Key Metrics Changes - Core advertising is expected to be flat to down mid-single-digit percent in Q1 2023, primarily due to mild macroeconomic weakness [45][60] - Media expenses in Q4 2022 were up 7% year-over-year, attributed to higher programming fees and sales expenses [43] - Compulse is expected to turn profitable in the latter half of 2023 while maintaining high growth [20] Market Data and Key Metrics Changes - The advertising environment is showing mixed trends, with local advertising remaining strong while national advertising is experiencing weakness [123] - Political ad sales for 2022 surpassed the previous midterm election year by over 30%, indicating strong demand for political advertising [51] Company Strategy and Development Direction - The company is focusing on investments in technology, including next-gen broadcast technology, ad-tech, and cloud operations, with a total spend of approximately $75 million in 2023 [52][31] - The company expects net retransmission revenues to decline in 2023 but grow in 2024 and 2025, projecting a three-year CAGR of low single digits [33][94] - The company is committed to monetizing its assets, with an estimated $1.2 billion in fair market value from investments not reflected in the stock price [35] Management's Comments on Operating Environment and Future Outlook - The management expressed caution regarding the economic environment, noting uncertainty about a potential recession and its impact on consumer demand [37] - The company anticipates lower EBITDA and free cash flow in 2023 due to strategic investments and the absence of political revenues [55][108] - Management is optimistic about the upcoming political season in 2024, expecting it to be record-breaking [108] Other Important Information - The company has made significant contributions to charitable causes, raising close to $12 million in 2022 [36] - The company is transitioning to more energy-efficient solutions, with plans to analyze energy usage and set targets for future savings [57] Q&A Session Summary Question: Can you provide additional color on the retransmission negotiations with Fubo? - The company indicated that the situation with Fubo is not financially impactful, but there is a growing consensus in the industry that the negotiation dynamics with virtual distributors need to change [69] Question: What is the outlook for net retransmission revenues? - The company expects a down year for net retrans in 2023 but anticipates growth in 2024 and 2025, with a three-year CAGR projected to be low single digits [94][141] Question: How is the advertising environment shaping up for 2023? - The company noted that local advertising remains strong, while national advertising is weaker, with expectations for orders to improve towards the end of March [123] Question: What is the expected impact of the new investments on future profitability? - The $75 million investment is primarily for transformation efforts, with significant cost savings expected starting in 2024 [95] Question: Can you provide insights on the performance of Compulse? - Compulse is expected to achieve profitability in the second half of 2023 while continuing to grow [20]

o Total advertising revenues for the quarter were record highs, up almost 60% over 2021 or up 31% adjusting for the cyber incident o Record total advertising revenues of $1.57 billion, up 23%, driven by strong political results $975 Note: Guidance as provided on the Company's November 2, 2022 Earnings Call Note: Sinclair Broadcast Group Media Revenues and Adjusted EBITDA outlook comparisons are to prior year Pro Forma Media Revenues and Pro Forma Adjusted EBITDA that exclude Diamond as if deconsolidation oc ...

Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) Q3 2022 Earnings Conference Call November 28, 2022 9:00 AM ET Company Participants Billie Jo McIntire - Associate Vice President of Investor Relations, Sinclair Chris Ripley - President and Chief Executive Officer, Sinclair Rob Weisbord - President of Broadcast and Chief Operating Officer, Sinclair Scott Shapiro - Chief Financial Officer and Chief Operating Officer, Diamond Sports Conference Call Participants Avi Steiner - JPMorgan David Hamburger - Morgan Stanle ...

[Front Matter](index=1&type=section&id=Front%20Matter) [FORM 10-Q Details](index=1&type=section&id=FORM%2010-Q%20Details) This section details the filing information for the Quarterly Report on Form 10-Q for Sinclair Broadcast Group, Inc. for the period ended September 30, 2022, confirming its status as a large accelerated filer - The filing is a Quarterly Report on Form 10-Q for the period ended September 30, 2022[1](index=1&type=chunk) - Sinclair Broadcast Group, Inc. is registered under Commission File Number **000-26076**[2](index=2&type=chunk) Registrant Status | Status | Checkmark | | :---------------------- | :-------- | | Large accelerated filer | ☒ | | Accelerated filer | ☐ | | Non-accelerated filer | ☐ | | Smaller reporting company | ☐ | | Emerging growth company | ☐ | [Securities Registered](index=1&type=section&id=Securities%20Registered) The company's Class A Common Stock is registered on The NASDAQ Stock Market LLC under the trading symbol SBGI Securities Registered Pursuant to Section 12(b) of the Act | Title of each class | Trading Symbol | Name of each exchange on which registered | | :-------------------------------- | :------------- | :---------------------------------------- | | Class A Common Stock, par value $0.01 per share | SBGI | The NASDAQ Stock Market LLC | [Registrant Status](index=1&type=section&id=Registrant%20Status) The registrant has filed all required reports in the preceding 12 months and has been subject to filing requirements for the past 90 days, also submitting all required Interactive Data Files - The registrant has filed all required reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days[3](index=3&type=chunk)[4](index=4&type=chunk) - The registrant has electronically submitted every Interactive Data File required by Rule 405 of Regulation S-T during the preceding 12 months[4](index=4&type=chunk)[5](index=5&type=chunk) - The registrant is not a shell company[6](index=6&type=chunk)[7](index=7&type=chunk) [Shares Outstanding](index=2&type=section&id=Shares%20Outstanding) As of November 4, 2022, the company had 45,850,774 shares of Class A Common Stock and 23,775,056 shares of Class B Common Stock outstanding Shares Outstanding as of November 4, 2022 | Class of Stock | Number of Shares Outstanding | | :----------------- | :--------------------------- | | Class A Common Stock | 45,850,774 | | Class B Common Stock | 23,775,056 | [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed notes, highlighting the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH) effective March 1, 2022 [CONSOLIDATED BALANCE SHEETS](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) The consolidated balance sheets show a significant decrease in total assets and liabilities from December 31, 2021, to September 30, 2022, primarily due to the deconsolidation of DSIH, with shareholder's equity shifting from a deficit to a positive balance Consolidated Balance Sheet Highlights (in millions) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :---------------------- | :----------------- | :----------------- | | Total assets | $6,605 | $12,541 | | Total liabilities | $5,775 | $14,050 | | Total equity (deficit) | $640 | $(1,706) | - The decrease in total assets and liabilities is largely attributable to the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH) effective March 1, 2022[14](index=14&type=chunk)[15](index=15&type=chunk)[35](index=35&type=chunk) [CONSOLIDATED STATEMENTS OF OPERATIONS](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The consolidated statements of operations reflect a substantial gain on deconsolidation of subsidiary for the nine months ended September 30, 2022, leading to significant net income compared to a net loss in the prior year, with revenues decreasing due to the deconsolidation of the local sports segment Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $843 | $1,535 | $2,968 | $4,658 | | Operating income (loss) | $154 | $73 | $3,727 | $(70) | | Gain on deconsolidation of subsidiary | $— | $— | $(3,357) | $— | | Net income (loss) attributable to Sinclair Broadcast Group | $21 | $19 | $2,597 | $(325) | | Basic earnings (loss) per share | $0.32 | $0.25 | $36.59 | $(4.33) | - A gain of **$3,357 million** was recognized on the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH) for the nine months ended September 30, 2022[17](index=17&type=chunk)[36](index=36&type=chunk) [CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) The consolidated statements of comprehensive income show a significant increase in comprehensive income attributable to Sinclair Broadcast Group for the nine months ended September 30, 2022, primarily driven by the net income reported Consolidated Statements of Comprehensive Income Highlights (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $29 | $17 | $2,639 | $(285) | | Comprehensive income (loss) attributable to Sinclair Broadcast Group | $21 | $20 | $2,600 | $(319) | [CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20EQUITY%20(DEFICIT)%20AND%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) Shareholders' equity transitioned from a deficit of $(2,460) million at December 31, 2021, to retained earnings of $84 million at September 30, 2022, largely due to the net income from the deconsolidation of a subsidiary, with the company also repurchasing Class A Common Stock and paying dividends Consolidated Statements of Equity Highlights (in millions) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :----------------------------------------- | :----------------- | :----------------- | | Retained earnings (accumulated deficit) | $84 | $(2,460) | | Total Sinclair Broadcast Group shareholders' equity (deficit) | $706 | $(1,770) | - For the nine months ended September 30, 2022, the company repurchased **4,547,370 shares** of Class A Common Stock for **$114 million**[23](index=23&type=chunk) - Dividends declared and paid on Class A and Class B Common Stock totaled **$53 million** for the nine months ended September 30, 2022[23](index=23&type=chunk) [CONSOLIDATED STATEMENTS OF CASH FLOWS](index=11&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash flows from operating activities increased significantly for the nine months ended September 30, 2022, primarily due to the deconsolidation of DSIH, while investing and financing activities both resulted in net outflows driven by debt repayments and share repurchases Consolidated Statements of Cash Flows Highlights (in millions) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :----------------------------- | :----------------------------- | | Net cash flows from operating activities | $458 | $235 | | Net cash flows used in investing activities | $(352) | $(231) | | Net cash flows used in financing activities | $(318) | $(205) | | Net decrease in cash, cash equivalents, and restricted cash | $(212) | $(201) | | Cash, cash equivalents, and restricted cash, end of period | $607 | $1,061 | - Operating cash flows increased due to partial period payments for production, overhead, distributor rebates, and sports rights, partially offset by reduced cash collections from distributors and advertisers, all stemming from the DSIH deconsolidation[228](index=228&type=chunk)[229](index=229&type=chunk) - Financing cash outflows increased due to Class A Common Stock repurchases (**$114 million**), redemption of STG's Term Loan B-1, STG 5.875% Notes, and partial redemption of STG 5.125% Notes, partially offset by proceeds from Term Loan B-4 issuance[233](index=233&type=chunk) [NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS](index=12&type=section&id=NOTES%20TO%20UNAUDITED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes provide detailed explanations of the company's operations, significant accounting policies, and the impact of key events such as the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH), covering revenue recognition, income taxes, share repurchases, acquisitions, debt, and related party transactions [1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines Sinclair Broadcast Group's business as a diversified media company, primarily focusing on its broadcast segment, detailing the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH) on March 1, 2022, which significantly altered the company's segment reporting and financial structure, and summarizing key accounting policies - Sinclair Broadcast Group is a diversified media company with a primary focus on its broadcast segment, consisting of **185 broadcast television stations** in **86 markets**[30](index=30&type=chunk)[31](index=31&type=chunk) - Effective March 1, 2022, Diamond Sports Intermediate Holdings LLC (DSIH), which comprised the local sports segment, was deconsolidated from the company's financial statements due to a change in governance structure and loss of voting control[31](index=31&type=chunk)[35](index=35&type=chunk) - Upon deconsolidation, the company recognized a pre-tax gain of approximately **$3,357 million**[36](index=36&type=chunk) [2. ACQUISITIONS AND DISPOSITIONS OF ASSETS](index=17&type=section&id=2.%20ACQUISITIONS%20AND%20DISPOSITIONS%20OF%20ASSETS) The company recorded gains from FCC spectrum repack reimbursements, which partially offset capital expenditures related to channel reassignments, with these reimbursements covering the majority of incurred repack costs Spectrum Repack Reimbursements and Capital Expenditures (in millions) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :----------------------------- | :------------------------------ | :----------------------------- | | Gains from reimbursements | $1 | $3 | $3 | $22 | | Capital expenditures related to repack | $0.1 | $1 | $1 | $10 | [3. OTHER ASSETS](index=17&type=section&id=3.%20OTHER%20ASSETS) Other assets decreased significantly from December 31, 2021, to September 30, 2022, primarily due to the deconsolidation of DSIH, which impacted equity method investments, with the company also holding other investments measured at fair value or NAV, and a note receivable from DSIH Other Assets (in millions) | Asset Category | As of Sep 30, 2022 | As of Dec 31, 2021 | | :------------------------ | :----------------- | :----------------- | | Equity method investments | $131 | $517 | | Other investments | $418 | $567 | | Note receivable | $193 | $— | | Total other assets | $949 | $1,408 | - The investment in DSIH was reflected at a nominal fair value upon deconsolidation on March 1, 2022, and no equity method loss was recorded as the carrying value is zero[65](index=65&type=chunk) - The company holds a note receivable of approximately **$193 million** from Diamond Sports Finance SPV, LLC (DSPV), an indirect subsidiary of DSIH, as of September 30, 2022[69](index=69&type=chunk) [4. NOTES PAYABLE, FINANCE LEASES, AND COMMERCIAL BANK FINANCING](index=18&type=section&id=4.%20NOTES%20PAYABLE,%20FINANCE%20LEASES,%20AND%20COMMERCIAL%20BANK%20FINANCING) Sinclair Television Group, Inc. (STG) refinanced debt by raising $750 million in Term B-4 Loans, maturing on April 21, 2029, using proceeds to repay existing Term Loan B-1 and redeem senior notes, and also repurchased and canceled $118 million of STG 5.125% senior notes due 2027 - STG raised **$750 million** in Term B-4 Loans, maturing April 21, 2029, to refinance Term Loan B-1 and redeem STG 5.875% senior notes due 2026[72](index=72&type=chunk)[130](index=130&type=chunk) - The company repurchased and canceled **$118 million** aggregate principal amount of STG 5.125% senior notes due 2027 for **$104 million**, recognizing a gain on extinguishment of **$13 million**[73](index=73&type=chunk)[131](index=131&type=chunk) - The debt of DSIH was deconsolidated from the balance sheet as part of the Deconsolidation[74](index=74&type=chunk) [5. REDEEMABLE NONCONTROLLING INTERESTS](index=19&type=section&id=5.%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) Redeemable noncontrolling interests primarily consist of Redeemable Subsidiary Preferred Equity, which accrued dividends of $3 million and $9 million for the three and nine months ended September 30, 2022, respectively, with a subsidiary equity put right related to DSIH being deconsolidated Redeemable Subsidiary Preferred Equity (in millions) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :------------------ | :----------------- | :----------------- | | Balance, net of costs | $190 | $181 | | Liquidation preference | $194 | $185 | - Dividends accrued to the Redeemable Subsidiary Preferred Equity were **$3 million** and **$9 million** for the three and nine months ended September 30, 2022, respectively[79](index=79&type=chunk) - A redeemable noncontrolling interest related to DSIH's subsidiary equity put right was deconsolidated as part of the DSIH deconsolidation[81](index=81&type=chunk) [6. COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=6.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in various legal and regulatory matters, including pending FCC litigation regarding sponsorship identification rules, retransmission consent negotiations, and children's television programming limitations, with an accrual of $3.4 million made for potential fines related to children's programming violations - The company agreed to pay **$48 million** to resolve FCC matters related to sponsorship identification rules, a Tribune acquisition investigation, and a retransmission matter in May 2020[85](index=85&type=chunk) - An accrual of **$8 million** was included in consolidated financial statements for additional expenses related to FCC forfeiture orders against consolidated VIEs for retransmission consent negotiations in 2021[87](index=87&type=chunk) - As of September 30, 2022, the company accrued **$3.4 million** for a proposed FCC fine related to violations of commercial matter limitations in children's television programming[88](index=88&type=chunk) [7. EARNINGS PER SHARE](index=22&type=section&id=7.%20EARNINGS%20PER%20SHARE) Basic and diluted earnings per share attributable to Sinclair Broadcast Group increased significantly for the nine months ended September 30, 2022, primarily due to the net income resulting from the deconsolidation gain Earnings Per Common Share Attributable to Sinclair Broadcast Group | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic earnings (loss) per share | $0.32 | $0.25 | $36.59 | $(4.33) | | Diluted earnings (loss) per share | $0.32 | $0.25 | $36.59 | $(4.33) | | Basic weighted average common shares outstanding (in thousands) | 69,907 | 75,472 | 70,981 | 75,068 | | Diluted weighted average common and common equivalent shares outstanding (in thousands) | 69,907 | 75,516 | 70,985 | 75,068 | [8. SEGMENT DATA](index=22&type=section&id=8.%20SEGMENT%20DATA) Following the deconsolidation of the local sports segment on March 1, 2022, the company now reports one reportable segment: broadcast, which saw increased operating income for both the three and nine months ended September 30, 2022, compared to the prior year - For the quarter ended September 30, 2022, the company had one reportable segment: broadcast; prior to deconsolidation, it had two: broadcast and local sports[92](index=92&type=chunk) Broadcast Segment Operating Income (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating income | $152 | $126 | $367 | $294 | - The local sports segment's activity is only reflected for two months in the nine months ended September 30, 2022, due to the deconsolidation[95](index=95&type=chunk)[97](index=97&type=chunk) [9. VARIABLE INTEREST ENTITIES](index=25&type=section&id=9.%20VARIABLE%20INTEREST%20ENTITIES) The company consolidates certain broadcast stations as Variable Interest Entities (VIEs) where it is the primary beneficiary, providing programming, sales, and administrative services, with regional sports networks previously consolidated as VIEs no longer included after the DSIH deconsolidation - The company consolidates VIEs where it has the power to direct activities significantly impacting economic performance and absorbs losses or receives significant returns, primarily through Local Marketing Agreements (LMAs) and Joint Sales Agreements (JSAs) with broadcast stations[99](index=99&type=chunk) VIE Assets and Liabilities (in millions) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :-------------- | :----------------- | :----------------- | | Total assets | $113 | $217 | | Total liabilities | $26 | $72 | - The assets of consolidated VIEs can only be used to settle their own obligations, and most liabilities are non-recourse to the company, except for debt of certain VIEs[102](index=102&type=chunk) [10. RELATED PERSON TRANSACTIONS](index=26&type=section&id=10.%20RELATED%20PERSON%20TRANSACTIONS) The company engages in various transactions with its controlling shareholders and related entities, including leases, charter aircraft services, and agreements with Cunningham Broadcasting Corporation, with post-deconsolidation transactions with DSIH, such as management services and a note receivable, also detailed - Lease payments to entities owned by controlling shareholders were **$5 million** for the nine months ended September 30, 2022[106](index=106&type=chunk) - The company guarantees **$33 million** of Cunningham Broadcasting Corporation's debt, a related entity where non-voting stock is owned by trusts for the benefit of controlling shareholders' children[109](index=109&type=chunk)[110](index=110&type=chunk) - The Broadcast segment recorded **$49 million** of revenue for management services provided to DSG (a DSIH subsidiary) for the nine months ended September 30, 2022, with a portion of fees deferred[118](index=118&type=chunk) [11. FAIR VALUE MEASUREMENTS](index=29&type=section&id=11.%20FAIR%20VALUE%20MEASUREMENTS) This note details the fair value measurements of financial assets and liabilities, categorized into Level 1, Level 2, and Level 3 inputs, highlighting significant changes including the deconsolidation of DSG's debt and fair value adjustments to investments in equity securities, particularly warrants and options related to Bally's Corporation Fair Value of Financial Assets and Liabilities (in millions) | Category | Asset/Liability | As of Sep 30, 2022 (Fair Value) | As of Dec 31, 2021 (Fair Value) | | :------- | :-------------- | :------------------------------ | :------------------------------ | | Level 1 | Investments in equity securities | $5 | $5 | | Level 1 | Deferred compensation assets | $38 | $48 | | Level 1 | STG Money market funds | $467 | $265 | | Level 2 | Investments in equity securities | $59 | $114 | | Level 2 | STG 5.500% Senior Notes due 2030 | $359 | $489 | | Level 3 | Investments in equity securities | $152 | $282 | - The debt of DSG was deconsolidated from the balance sheet as part of the DSIH deconsolidation[128](index=128&type=chunk) - Fair value adjustment losses of **$0.2 million** and **$130 million** were recorded for the three and nine months ended September 30, 2022, respectively, related to warrants and options to acquire common equity in Bally's Corporation[131](index=131&type=chunk) [12. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS](index=31&type=section&id=12.%20CONDENSED%20CONSOLIDATING%20FINANCIAL%20STATEMENTS) This note provides condensed consolidating financial statements for SBG, STG, KDSM, LLC, guarantor subsidiaries, and non-guarantor subsidiaries, detailing the allocation of assets, liabilities, operations, and cash flows across these entities, highlighting STG as the primary obligor for significant debt and SBG as a guarantor - STG is the primary obligor for the Bank Credit Agreement and various senior notes, with SBG and its guarantor subsidiaries providing full and unconditional guarantees[133](index=133&type=chunk)[134](index=134&type=chunk) - As of September 30, 2022, consolidated total debt, net of deferred financing costs and debt discounts, was **$4,269 million**, with **$4,253 million** related to STG and its subsidiaries, of which **$4,222 million** was guaranteed by SBG[133](index=133&type=chunk) [13. SUBSEQUENT EVENTS](index=39&type=section&id=13.%20SUBSEQUENT%20EVENTS) In November 2022, the Board of Directors declared a quarterly dividend of $0.25 per share, payable on December 15, 2022 - A quarterly dividend of **$0.25 per share** was declared in November 2022, payable on December 15, 2022[155](index=155&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=40&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance and condition, highlighting the impact of the DSIH deconsolidation, segment-specific results, liquidity, and capital resources, also discussing forward-looking statements and critical accounting policies [FORWARD-LOOKING STATEMENTS](index=40&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines various risks and uncertainties that could impact the company's future results, including those related to COVID-19, industry conditions, regulatory changes, company-specific factors, and general economic conditions, emphasizing that actual results may differ materially from forward-looking statements - Forward-looking statements are subject to risks including COVID-19 impacts (e.g., reduced consumer spending, supply chain disruptions, wage inflation), industry risks (e.g., subscriber churn, programming costs, network strategies), regulatory risks (e.g., FCC rules, retransmission consent), and company-specific risks (e.g., debt obligations, technology deployment, acquisition integration)[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - The war in Ukraine and cybersecurity incidents are also identified as general risks that could affect operations[164](index=164&type=chunk) [Summary of Significant Events](index=42&type=section&id=Summary%20of%20Significant%20Events) Key events include the expansion of NewsON, new creative partnerships, a multi-year ABC network affiliation agreement, and continued deployment of NEXTGEN TV in additional markets, with the company also repurchasing Class A Common Stock and increasing its quarterly cash dividend - NewsON, the company's streaming service for local news, added **13 CBS local stations**, expanding coverage to over **250 stations** and **92% of U.S. households**[170](index=170&type=chunk) - The company announced a multi-year ABC network affiliation agreement with Disney Media & Entertainment Distribution covering **30 markets**[170](index=170&type=chunk) - NEXTGEN TV (ATSC 3.0) was deployed in **12 additional markets** in 2022, bringing the total to **34 markets**[171](index=171&type=chunk) - For the nine months ended September 30, 2022, the company repurchased approximately **five million shares** of Class A Common Stock for **$114 million**[173](index=173&type=chunk) - Quarterly cash dividend increased by **25%** over 2021 dividends to **$0.25 per share**[174](index=174&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) The company's operating results were significantly impacted by the deconsolidation of the local sports segment, with the broadcast segment showing revenue growth driven by political advertising and increased contractual rates, while overall consolidated revenues decreased due to the absence of the local sports segment for most of the period [Seasonality / Cyclicality](index=44&type=section&id=Seasonality%20/%20Cyclicality) The broadcast segment experiences cyclical fluctuations from political advertising, with higher spending in even-numbered years, while the former local sports segment also had seasonal fluctuations based on professional sports league schedules - Broadcast segment operating results are subject to cyclical fluctuations from political advertising, with significantly higher spending in even-numbered years[176](index=176&type=chunk) - The former local sports segment's operating results were subject to cyclical fluctuations based on MLB, NBA, and NHL seasons, typically higher in the second and third quarters[177](index=177&type=chunk) [Operating Data](index=44&type=section&id=Operating%20Data) Consolidated total revenues decreased for both the three and nine months ended September 30, 2022, compared to 2021, primarily due to the deconsolidation of the local sports segment, however, operating income and net income attributable to Sinclair Broadcast Group saw substantial increases for the nine-month period due to the deconsolidation gain Consolidated Operating Data (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $843 | $1,535 | $2,968 | $4,658 | | Operating income (loss) | $154 | $73 | $3,727 | $(70) | | Net income (loss) attributable to Sinclair Broadcast Group | $21 | $19 | $2,597 | $(325) | - The gain on deconsolidation of subsidiary was **$3,357 million** for the nine months ended September 30, 2022[178](index=178&type=chunk) [The Impact of COVID-19 on our Results of Operations](index=45&type=section&id=The%20Impact%20of%20COVID-19%20on%20our%20Results%20of%20Operations) The COVID-19 pandemic continues to create uncertainty, impacting operations, workforce, and potentially leading to wage inflation and difficulties in finding qualified employees, though the company's business is designated as essential, allowing continued service - The national state of emergency related to COVID-19 remains in effect, creating significant uncertainty and disruption[179](index=179&type=chunk) - COVID-19 has disrupted operations, heightened the risk of workforce illness, and contributed to wage inflation and difficulty in finding qualified employees[180](index=180&type=chunk) [BROADCAST SEGMENT](index=45&type=section&id=BROADCAST%20SEGMENT) The broadcast segment experienced revenue growth for both the three and nine months ended September 30, 2022, driven by increased political advertising and contractual rates for distribution, with operating income also increasing significantly Broadcast Segment Revenue and Operating Income (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Distribution revenue | $381 | $372 | $1,158 | $1,096 | | Advertising revenue | $339 | $283 | $937 | $830 | | Media revenues | $753 | $701 | $2,206 | $2,053 | | Operating income | $152 | $126 | $367 | $294 | - Advertising revenue increased by **$56 million** (**20% YoY**) for the three months and **$107 million** (**13% YoY**) for the nine months, primarily due to a **$77 million** and **$139 million** increase in political advertising revenue, respectively[184](index=184&type=chunk) - Media programming and production expenses increased by **$15 million** (**4% YoY**) for the three months and **$44 million** (**4% YoY**) for the nine months, mainly due to higher network affiliation agreement fees[187](index=187&type=chunk) [LOCAL SPORTS SEGMENT](index=48&type=section&id=LOCAL%20SPORTS%20SEGMENT) The local sports segment, comprising Bally RSNs, Marquee, and a minority interest in YES Network, was deconsolidated on March 1, 2022, resulting in no reportable activity for this segment for the three months ended September 30, 2022, and significantly reduced activity for the nine-month period compared to the prior year - The local sports segment was deconsolidated on March 1, 2022, resulting in no reportable activity for the three months ended September 30, 2022[192](index=192&type=chunk)[194](index=194&type=chunk)[196](index=196&type=chunk) Local Sports Segment Revenue and Operating Loss (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Media revenue | $— | $759 | $482 | $2,365 | | Operating loss | $— | $(39) | $(4) | $(368) | - Income from equity method investments for the local sports segment was **$10 million** for the nine months ended September 30, 2022, primarily from the YES Network[193](index=193&type=chunk)[201](index=201&type=chunk) [OTHER](index=49&type=section&id=OTHER) The 'Other' segment, including owned networks, digital solutions, and technical services, saw a decrease in media revenue for the three months but an increase for the nine months, driven by digital advertising initiatives, while non-media revenue decreased due to the sale of Triangle Sign & Service, LLC and winding down of the FCC's repack process Other Segment Revenue and Operating Income (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Media revenues | $95 | $106 | $335 | $305 | | Non-media revenues | $8 | $11 | $33 | $40 | | Operating income (loss) | $8 | $(9) | $18 | $15 | - Media revenue decreased by **$11 million** (**10% YoY**) for the three months due to owned networks' distribution revenue, but increased by **$30 million** (**10% YoY**) for the nine months due to digital advertising initiatives[206](index=206&type=chunk) - Income from equity method investments increased by **$33 million** and **$50 million** for the three and nine months, respectively, primarily due to the sale of one of the company's investments[208](index=208&type=chunk) [CORPORATE AND UNALLOCATED EXPENSES](index=50&type=section&id=CORPORATE%20AND%20UNALLOCATED%20EXPENSES) Corporate general and administrative expenses decreased due to lower legal, consulting, and regulatory costs, and reduced employee compensation, while interest expense significantly decreased due to the DSIH deconsolidation, and other income (expense), net, fluctuated due to fair value changes in investments Corporate and Unallocated Expenses (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Corporate general and administrative expenses | $30 | $35 | $115 | $132 | | Interest expense including amortization of debt discount and deferred financing costs | $59 | $155 | $228 | $466 | | Other income (expense), net | $10 | $(4) | $(155) | $59 | | Income tax (provision) benefit | $(109) | $91 | $(756) | $169 | - Corporate G&A expenses decreased by **$5 million** (**14% YoY**) for the three months due to lower legal, consulting, and regulatory costs, and by **$17 million** (**13% YoY**) for the nine months due to reduced employee compensation[209](index=209&type=chunk)[210](index=210&type=chunk) - Interest expense decreased by **$96 million** (**62% YoY**) for the three months and **$238 million** (**51% YoY**) for the nine months, primarily due to the deconsolidation of DSG interest expense[212](index=212&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=52&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains strong liquidity with $875 million in net working capital and $607 million in cash, having refinanced debt, repurchased Class A Common Stock, and expects existing cash, operations, and borrowing capacity to meet short-term needs, with long-term liquidity potentially involving debt issuance, equity, or asset sales - As of September 30, 2022, the company had net working capital of approximately **$875 million**, including **$607 million** in cash and cash equivalents[219](index=219&type=chunk) - The STG first lien leverage ratio was below **4.5x** as of September 30, 2022, and the company was not subject to the financial maintenance covenant as the revolving credit facility was not utilized[220](index=220&type=chunk) - Total debt was **$4,269 million** as of September 30, 2022, including **$43 million** in current debt, following the deconsolidation of DSIH's debt[223](index=223&type=chunk) - The company anticipates existing cash, cash flow from operations, and borrowing capacity under the Bank Credit Agreement will be sufficient for the next twelve months[225](index=225&type=chunk) [Sources and Uses of Cash](index=53&type=section&id=Sources%20and%20Uses%20of%20Cash) Net cash flows from operating activities increased for both the three and nine months ended September 30, 2022, primarily due to the DSIH deconsolidation, while investing and financing activities both resulted in net cash outflows Cash Flows (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net cash flows from operating activities | $251 | $247 | $458 | $235 | | Net cash flows used in investing activities | $(23) | $(90) | $(352) | $(231) | | Net cash flows used in financing activities | $(41) | $(64) | $(318) | $(205) | [Operating Activities](index=53&type=section&id=Operating%20Activities) Net cash flows from operating activities increased for both the three and nine months ended September 30, 2022, primarily due to the partial period of payments for production, overhead, distributor rebates, and sports rights following the DSIH deconsolidation - Net cash flows from operating activities increased due to the partial period of payments for production and overhead costs, distributor rebate payments, and sports rights as a result of the DSIH deconsolidation[228](index=228&type=chunk)[229](index=229&type=chunk) [Investing Activities](index=53&type=section&id=Investing%20Activities) Net cash flows used in investing activities decreased for the three months ended September 30, 2022, primarily due to lower investment purchases, while for the nine-month period, the increase in cash used was primarily due to the DSIH deconsolidation, partially offset by increased distributions from investments - Net cash flows used in investing activities decreased for the three months ended September 30, 2022, primarily due to lower purchases of investments[230](index=230&type=chunk) - For the nine months, the increase in cash used was primarily due to the DSIH deconsolidation, partially offset by increased distributions from investments and decreased purchases of investments[231](index=231&type=chunk) [Financing Activities](index=54&type=section&id=Financing%20Activities) Net cash flows used in financing activities decreased for the three months ended September 30, 2022, due to lower distributions to noncontrolling interests, but increased for the nine months due to Class A Common Stock repurchases and debt redemptions, partially offset by new Term Loan B-4 proceeds - Net cash flows used in financing activities decreased for the three months ended September 30, 2022, primarily due to decreased distributions to noncontrolling interests, partially offset by Class A Common Stock repurchases[232](index=232&type=chunk) - For the nine months, cash used in financing activities increased due to Class A Common Stock repurchases, redemption of STG's Term Loan B-1, STG 5.875% Notes, and partial redemption of STG 5.125% Notes, partially offset by proceeds from Term Loan B-4 issuance[233](index=233&type=chunk) - A quarterly dividend of **$0.25 per share** was declared in August and November 2022, representing a **25% increase** over 2021 dividends[234](index=234&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=54&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) There were no material changes to critical accounting policies and estimates from the prior Annual Report on Form 10-K, however, the ongoing COVID-19 pandemic and the war in Ukraine continue to introduce significant uncertainty, requiring increased judgment in estimates related to revenue recognition, goodwill, intangible assets, and income taxes - No material changes to critical accounting policies and estimates were made from the Annual Report on Form 10-K for the year ended December 31, 2021[235](index=235&type=chunk) - The COVID-19 pandemic and the war in Ukraine continue to create significant uncertainty, requiring increased judgment and carrying a higher degree of variability and volatility in estimates for revenue recognition, goodwill, intangible assets, and income taxes[236](index=236&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=54&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) There have been no material changes to the quantitative and qualitative disclosures about market risk since the Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to market risk disclosures have occurred since the Annual Report on Form 10-K for the year ended December 31, 2021[237](index=237&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=54&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures and internal control over financial reporting as of September 30, 2022, concluding that disclosure controls were effective at a reasonable assurance level, with no material changes to internal control over financial reporting occurring during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022[238](index=238&type=chunk)[241](index=241&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2022[242](index=242&type=chunk) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and have inherent limitations[243](index=243&type=chunk) [PART II. OTHER INFORMATION](index=56&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=56&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various lawsuits and claims in the ordinary course of business, with no material judgments rendered, and further details on pending lawsuits are provided in Note 6 to the Consolidated Financial Statements - The company is a party to lawsuits and claims in the ordinary course of business, with no material judgments rendered[246](index=246&type=chunk) - Further discussion on certain pending lawsuits is available in Note 6. Commitments and Contingencies[246](index=246&type=chunk) [ITEM 1A. RISK FACTORS](index=56&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2021[247](index=247&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=56&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased 489,051 shares of Class A Common Stock during the quarter ended September 30, 2022, under a publicly announced program, with $704 million remaining authorized for repurchases as of September 30, 2022 Class A Common Stock Repurchases (Quarter Ended September 30, 2022) | Period | Total Number of Shares Purchased | Average Price Per Share | | :---------------- | :------------------------------- | :---------------------- | | 07/01/22 - 07/31/22 | 422,018 | $20.60 | | 08/01/22 - 08/31/22 | 67,033 | $21.83 | | 09/01/22 - 09/30/22 | — | $— | - All repurchases were made in open-market transactions under an SEC Rule 10b5-1 plan[248](index=248&type=chunk) - As of September 30, 2022, the total remaining purchase authorization under the share repurchase program was **$704 million**[249](index=249&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=56&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[250](index=250&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=56&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) There were no mine safety disclosures required for the reported period - No mine safety disclosures were reported[251](index=251&type=chunk) [ITEM 5. OTHER INFORMATION](index=56&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information was reported in this section - No other information was reported[252](index=252&type=chunk) [ITEM 6. EXHIBITS](index=57&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and the company's consolidated financial statements in iXBRL format - Exhibits include certifications by the CEO (Christopher S. Ripley) and CFO (Lucy Rutishauser) pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[253](index=253&type=chunk) - The company's Consolidated Financial Statements and related Notes for the quarter ended September 30, 2022, are filed in iXBRL format as Exhibit 101[253](index=253&type=chunk) [SIGNATURE](index=58&type=section&id=SIGNATURE) The report was duly signed on November 9, 2022, by David R. Bochenek, Senior Vice President/Chief Accounting Officer, on behalf of Sinclair Broadcast Group, Inc. - The report was signed on November 9, 2022, by David R. Bochenek, Senior Vice President/Chief Accounting Officer[256](index=256&type=chunk)[258](index=258&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . COMMISSION FILE NUMBER: 000-26076 SINCLAIR BROADCAST GROUP, INC. (Exact name of Registrant as specified in its charter) Maryland 52-1494 ...

SINCLAIR 1 S e c o n d Q u a r t e r 2 0 2 2 C o n f e r e n c e C a l l A U G U S T 3 , 2 0 2 2 Chris Ripley President & Chief Executive Officer Lucy Rutishauser EVP, Chief Financial Officer Rob Weisbord Chief Operating Officer President of Broadcast NON-GAAP FINANCIAL MEASURES 2 This presentation contains certain financial measures, including Adjusted EBITDA and Adjusted Free Cash Flow, which are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP") (collectively, the "non ...