Core Viewpoint - The suspension of Jimmy Kimmel's show by local affiliates Nexstar and Sinclair highlights the complex relationship between local TV stations and national broadcasters, particularly in the context of differing audience values and programming decisions [1][16]. Group 1: Company Overview - Nexstar Media Group operates 28 ABC affiliates and owns or partners with over 200 stations across 116 U.S. markets, including major cities like Nashville and New Orleans [5][6]. - Sinclair Broadcast Group operates 38 local ABC affiliates and owns or provides services to 178 TV stations in 81 markets, maintaining a conservative viewpoint in its broadcasts [7][8]. Group 2: Recent Developments - Nexstar announced a $6.2 billion deal to acquire TEGNA Inc., which owns 64 additional TV stations, pending changes to FCC rules on station ownership [6][17]. - Sinclair has decided to preempt Kimmel's show with local news programming, indicating ongoing discussions with ABC regarding the show's potential return [7][17]. Group 3: Industry Dynamics - Local affiliates rely on national broadcasters for programming while also producing their own local content, sharing advertising revenue [9][10]. - The balance of power may favor ABC over local affiliates, as the ABC network constitutes a small percentage of Disney's overall revenue, allowing for alternative distribution methods [15][16]. Group 4: Controversies and Influence - Sinclair faced backlash in 2018 for requiring local anchors to read identical statements, showcasing the influence of corporate directives on local news [12][17]. - The current situation with Kimmel reflects a broader tension between national programming and the values of conservative-leaning communities served by affiliates like Sinclair and Nexstar [15][16].

Acquisition Overview - Nexstar Media Group is acquiring Tegna for $6.2 billion in cash, creating a significant local TV broadcasting entity as the industry anticipates regulatory changes to facilitate consolidation [1][12] - The acquisition values Tegna shares at $22 each, reflecting a 31% premium over the company's average trading price prior to the announcement [1][9] Competitive Landscape - Nexstar outbid rival Sinclair, which had offered between $25 and $30 per share, despite Sinclair's lower market capitalization of $1 billion compared to Nexstar's $6.3 billion [2][3] - Sinclair is burdened with over $4 billion in debt, complicating its ability to pursue major acquisitions [3] Strategic Rationale - Nexstar's CEO Perry Sook emphasized that the deal aligns with the Trump administration's deregulatory policies, allowing local broadcasters to enhance their reach and compete against larger tech and media companies [4] - The merger will expand Nexstar's presence in key metropolitan areas such as Atlanta, Phoenix, Seattle, and Minneapolis, thereby strengthening its national coverage [4][11] Operational Synergies - The combination of Tegna's television properties with Nexstar's extensive station network is expected to reinforce Nexstar's dominance in local broadcasting [7] - Sook highlighted Nexstar's successful acquisition history, including the purchase of Tribune Media, and outlined strategies to enhance local programming and achieve cost efficiencies [7][8] Industry Context - The deal comes at a challenging time for traditional linear television, as broadcasters face competition from streaming platforms and tech companies for viewers and advertising revenue [12] - The merger is seen as a means for stations to better compete in a fragmented media landscape [12]

Group 1 - Sinclair Broadcast Group Inc. is launching a strategic review of its broadcast business, which may lead to a merger [1] - The company has engaged in discussions with potential merger partners, although no deal is guaranteed [2] - Sinclair is also considering spinning off its Ventures business, which includes the Tennis Channel, with board approval already obtained [2] Group 2 - The media industry anticipates deregulation under the Trump administration, particularly in the broadcast sector, potentially leading to increased mergers and acquisitions [3]

Financial Data and Key Metrics Changes - Total advertising revenue was within guidance range, with core advertising revenue up year over year on an as-reported basis [11] - Distribution revenues were below expectations, but still up year over year in the first half of the year and flat in the second quarter [11][30] - Adjusted EBITDA was comfortably above the midpoint of guidance range, driven by better-than-expected media expenses [11][31] - Consolidated media revenue was $777 million, slightly below guidance, reflecting expected industry dynamics in a non-political year [30] - Consolidated adjusted EBITDA was $103 million, exceeding the midpoint of guidance, but down $55 million year over year [31] Business Line Data and Key Metrics Changes - Local Media segment delivered adjusted EBITDA of $99 million, with distribution revenue of $380 million, down 1% year over year [28] - Tennis Channel generated adjusted EBITDA of $13 million, with total revenue of $68 million, up 1% year over year but below guidance [28] - Digital Remedy, now part of Sinclair, recorded $38 million in revenue and $7 million in adjusted EBITDA in the second quarter [30] Market Data and Key Metrics Changes - Multicast networks experienced record growth, with significant year-over-year coverage growth among Nielsen-rated broadcast networks [18] - Core advertising revenue was down 4.7% year over year, impacted by macroeconomic and tariff-related pressures [29] Company Strategy and Development Direction - The company is focusing on transforming its ventures portfolio towards majority-owned assets for greater operational control [11][14] - Sinclair is actively pursuing M&A opportunities following recent deregulation rulings, which are expected to enhance growth and synergies [20][21] - The company aims to leverage its strong balance sheet and financial flexibility to capitalize on M&A activity in the sector [27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic uncertainties but noted signs of improvement in certain advertising categories [19] - The regulatory environment is viewed positively, with recent rulings expected to provide growth opportunities [21][24] - Management expressed confidence in the company's ability to navigate challenges and capitalize on upcoming opportunities, particularly with the return of sports programming [54] Other Important Information - The company appointed a new CFO, Narinder Sahai, who brings extensive financial leadership experience [5][7] - The acquisition of Digital Remedy for approximately $30 million is expected to enhance Sinclair's capabilities in omni-channel media activation [12][30] Q&A Session Summary Question: Regulatory commentary and potential M&A activity - Management indicated a strong position for potential M&A activity following recent deregulation rulings, which are expected to accelerate growth opportunities [20][50] Question: Subscriber trends with virtual distributors - Management noted that a significant virtual MVPD lost subscribers in the second quarter, but expects a rebound with the upcoming football season [43][44] Question: Contribution from announced deals and guidance on retransmission - Management expects tens of millions of dollars in additional EBITDA from upcoming JSA buy-ins and has adjusted retransmission growth guidance to low single digits [51] Question: Core advertising performance outlook - Management remains cautiously optimistic about core advertising performance, anticipating improved demand as sports seasons commence [53][54] Question: Guidance clarification and Ventures monetization process - Management clarified that the sale of four stations impacted Q2 and will affect Q3, and discussed the evaluation process for monetizing Ventures assets [58][62]

Financial Data and Key Metrics Changes - Total media revenue was in line with expectations, with adjusted EBITDA exceeding the high end of guidance by approximately $9 million [6][24][30] - Distribution revenues increased by $15 million year over year, although they came in $2 million below guidance due to subscriber churn not catching up [7][24] - First lien net leverage was 1.8 times, total first lien net leverage at 4.2 times, and total net leverage at 5.8 times as of March 31 [22][23] Business Line Data and Key Metrics Changes - Local Media segment saw core advertising down 4.5% year over year, while distribution revenues grew year over year but were slightly below expectations [24][30] - Tennis Channel reported revenues and adjusted EBITDA in line with guidance, with total revenues growing by 9% year over year [25][30] - Adjusted EBITDA declined by $27 million year over year, driven by lower core political and management fee revenues [26] Market Data and Key Metrics Changes - Core advertising revenues were within guidance range, down low single digits year over year, with expectations for growth in the upcoming political season [12][13] - Net retransmission revenues grew by mid single digits year over year, with a two-year CAGR expected through the end of the year [14] - Subscriber churn has moderated, with Charter reducing video subscriber discounts by 55% year over year [14] Company Strategy and Development Direction - The company is transforming its ventures portfolio towards more majority-owned assets and is focused on expanding its digital and streaming footprint [8][10] - Regulatory optimism exists regarding potential changes to outdated FCC regulations that could facilitate M&A activity and strengthen local journalism [19][20] - The company is committed to elevating women's sports through new podcast launches and partnerships [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding core advertising growth despite reduced visibility due to macroeconomic uncertainties [40][41] - The upcoming political season is expected to drive advertising dollars, with competitive Senate and gubernatorial races anticipated [13][24] - The company is positioned for growth with a strong balance sheet and a comprehensive refinancing completed [22][31] Other Important Information - Lucy Rutishauser, CFO, announced her upcoming retirement after over 26 years with the company, with plans for a smooth transition [21][20] - The company repurchased approximately $66 million in face value of STG's 2027 notes for $62 million in early April [23][30] Q&A Session Summary Question: Comments on FCC regulations and retransmission rates - Management noted that the FCC has the ability to regulate network-affiliate relationships and that capping retransmission rates could level the playing field [36][37] Question: Visibility on core advertising and economic uncertainties - Management indicated that while they expect core advertising to grow year over year, visibility has decreased due to uncertainties in key advertising categories [39][40] Question: Trends in automotive advertising - Management has not seen a significant bump in automotive advertising but noted that Nissan is planning an aggressive ad campaign [46] Question: Capital allocation priorities and debt repayment - The focus remains on deleveraging the local media group, with continued debt paydown expected [50] Question: Details on the Compulse acquisition - Compulse is described as a best-in-class platform delivering double-digit growth, with plans to scale it significantly [70][72]

Financial Data and Key Metrics Changes - Total media revenue was in line with expectations, with total advertising revenues within guidance range, excluding the impact from an acquisition by Compulse [5][11] - Distribution revenues increased by $15 million year over year, but came in $2 million below guidance due to subscriber churn not catching up [6][21] - Adjusted EBITDA exceeded the high end of guidance by approximately $9 million, driven by better-than-expected media expenses [6][25] Business Line Data and Key Metrics Changes - Local Media segment saw core advertising down 4.5% year over year, while distribution revenues grew year over year but were slightly below expectations [21][23] - Tennis Channel reported strong performance with revenues and adjusted EBITDA in line with guidance, growing by 9% year over year [23][70] Market Data and Key Metrics Changes - Net retransmission revenues grew by mid single digits year over year, with expectations of a two-year mid single-digit CAGR through the end of the year [13][21] - Subscriber churn moderated slightly, with Charter reducing video subscriber discounts by 55% year over year, indicating success in reducing churn [13][21] Company Strategy and Development Direction - The company is transforming its ventures portfolio towards more majority-owned assets, with a focus on strategic acquisitions and partnerships [6][70] - Regulatory optimism exists regarding potential changes to outdated FCC regulations that could benefit the broadcast industry, including easing M&A restrictions [18][58] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding core advertising growth despite reduced visibility due to macroeconomic uncertainties [39][40] - The upcoming political season is expected to drive advertising dollars, with numerous competitive races anticipated [12][21] Other Important Information - The company completed a comprehensive refinancing, extending the debt maturity profile with a weighted average maturity of more than six years [21][30] - Lucy Rutishauser, the CFO, announced her upcoming retirement after over 26 years with the company, with plans for a smooth transition [20][30] Q&A Session Summary Question: Can you address the FCC's ability to cap retransmission rates? - Management indicated that the FCC has the ability to regulate relationships between networks and affiliates, and capping retransmission fees could level the playing field [36][37] Question: What is the visibility on core advertising for the year? - Management noted that while they expect core advertising to grow year over year, visibility has decreased due to uncertainties in key advertising categories [39][40] Question: How did the auto category trend in Q1 and what is expected for Q2? - Management reported no significant bump in auto advertising but noted that Nissan is planning an aggressive ad campaign [47][48] Question: Can you provide insights on the Compulse acquisition? - The acquisition of Compulse is seen as a best-in-class platform delivering double-digit growth, with plans to scale it significantly [70][71] Question: What are the expectations for subscriber churn? - Management confirmed that subscriber churn is expected to remain in the mid-single digits, with year-over-year growth in distribution revenues [78][80]

Q1 2025 Performance - Total revenue reached $770 million, aligning with guidance[5] - Adjusted EBITDA exceeded guidance at $112 million due to lower media expenses[5, 6] - Ventures received $10 million in cash distributions[7] - Ventures made cash outflows of approximately $38 million, including $30 million for Compulse acquisition[7] Strategic Updates - Jeff Blackburn was hired as Chairman and CEO of Tennis Channel to lead strategic growth[10] - YouTube TV agreement was extended[16] Financial Position - Total Sinclair Television Group (STG) debt at the end of 1Q25 was $4.2 billion[24] - Consolidated cash at the end of 1Q25 was $631 million ($277 million at SBG, $354 million at Ventures)[24] - The company repurchased approximately $66 million in face value of STG's 2027 notes for $62 million in early April[24] Q2 2025 Guidance - Adjusted EBITDA is projected to be between $91 million and $107 million[43] - Media revenue is expected to range from $778 million to $798 million[46] Full Year 2025 Outlook - Estimated cash taxes of $121 million, including approximately $83 million in estimated forecasted cash tax payments associated with Diamond Chapter 11 emergence[49]