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Edited Transcript of SBGI earnings conference call or presentation 6-Nov-19 2:00pm GMT

Q3 2019 Sinclair Broadcast Group Inc Earnings Call

Hunt Valley Nov 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Sinclair Broadcast Group Inc earnings conference call or presentation Wednesday, November 6, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Billie Jo McIntire

Sinclair Broadcast Group, Inc. - Manager of IR

* Christopher S. Ripley

Sinclair Broadcast Group, Inc. - President & CEO

* Lucy A. Rutishauser

Sinclair Broadcast Group, Inc. - Senior VP & CFO

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Conference Call Participants

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* Aaron Lee Watts

Deutsche Bank AG, Research Division - Research Analyst

* Daniel Louis Kurnos

The Benchmark Company, LLC, Research Division - MD & Internet, Publishing & Broadcasting Analyst

* Davis Hebert

Wells Fargo Securities, LLC, Research Division - Director and Senior High Yield Analyst

* Marci Lynn Walner Ryvicker

Wolfe Research, LLC - MD of Equity Research & Senior Equity Analyst

* Steven Lee Cahall

Wells Fargo Securities, LLC, Research Division - Research Analyst

* Zachary Alan Silver

B. Riley FBR, Inc., Research Division - Associate

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and thank you all for joining this Sinclair Broadcast Group Third Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, today's session is being recorded.

And now for opening remarks and introductions, I am pleased to turn the floor over to your host, Senior Vice President and CFO, Lucy Rutishauser. Please go ahead.

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Lucy A. Rutishauser, Sinclair Broadcast Group, Inc. - Senior VP & CFO [2]

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Thank you, operator. Participating on the call with me today are Chris Ripley, President and CEO; Steve Marks, Executive Vice President and Chief Operating Officer of our Television Group; Rob Weisbord, Senior Vice President and Chief Revenue Officer; and Jeff Krolik, President of FOX Sports Net.

Before we begin, Billie Jo McIntire will make our forward-looking statement disclaimer.

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Billie Jo McIntire, Sinclair Broadcast Group, Inc. - Manager of IR [3]

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Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors. Such factors have been set forth in the company's most recent reports as filed with the SEC and included in our third quarter earnings release. The company undertakes no obligation to update these forward-looking statements.

The company uses its website as a key source of company information, which can be accessed at www.sbgi.net. In accordance with Regulation FD, this call is being made available to the public. A webcast replay will be available on our website and will remain available until our next quarterly earnings release.

Included on the call will be a discussion of non-GAAP financial measures, specifically television BCFs, EBITDA, free cash flow and leverage. These metrics are not meant to replace GAAP measurements, but are provided as supplemental detail to assist the public in their analysis and valuation of our company. A reconciliation of the non-GAAP financial measures to the GAAP measures in our financial statement is provided on our website under Investors, non-GAAP measures.

Chris Ripley will now walk you through our operating highlights.

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [4]

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Good morning, everyone, and welcome to our third quarter earnings call, the first since our August closing of the Fox Regional Sports Network business. We are now industry leaders in local news and local sports, 2 of the most desired live content genres. While we focus on integrating the RSNs, our broadcast segment, which we now refer to as local news, had a spectacular quarter, beating our guidance ranges on revenue, EBITDA and free cash flow. Lucy is going to walk you through those results in detail.

But before I turn it over to her, I would like to talk about the opportunities for the $16 billion diversified media company that we're operating today. With the addition of the regional sports networks, we have deepened our commitment to local content, becoming the leading premium live local sports and news company in the nation, a path we embarked on almost 5 years ago. In fact, over 75% of our revenue is now generated from sports and news content. We believe the addition of the RSNs represents -- or presents advertising, production, programming and cross-promotional opportunities as well as new revenue streams associated with legalized sports betting.

On a total company basis, we now derive about 70% of our revenues from distribution, which are more stable versus ad revenues due to the long-term nature of the contracts. In this regard, our distribution team has been busy securing agreements for the TV stations, Tennis Channel, Marquee, Yes and the RSNs with such MVPDs as AT&T DIRECTV, Charter, COX and Mediacom. We appreciate our distribution partners and look forward to delivering to them and their subscriber’s best-in-class local content.

We continue to have discussions with DISH for the carriage to the RSNs, whose contract expired in late July. Since we can't predict whether or when we will get a carriage deal done with them for the RSNs, we've removed DISH affiliate fees from our forecast until we have a better sense of timing in terms of any such resolution.

I would like to point out that as part of the RSN acquisition, there was approximately $400 million purchase price reduction related to potentially protracted negotiations with DISH. Based on the length of the blackout, we don't expect that we will need to repay any of the adjustment amount to Disney.

Much has been written about subscriber churn of late, which has only been made worse by satellite companies' recent blackouts of various broadcaster stations and the RSNs. I do want to remind people that because of the reporting lag, we do not yet know the other side of the churn story, which is where subscribers migrated to. We should begin receiving those reports this quarter and expect them to reflect subscriber churn improvement when we report our fourth quarter.

Our third quarter advertising revenue -- core advertising revenue was better than expected, and we're expecting pro forma fourth quarter to be up even more, reflecting a positive growth story for the year. Looking ahead, data continues to point to 2020 as the biggest political ad spending year on record. Recent reports reflect that more funds have been raised by both parties at this point in time than in both 2015 and 2017.

Our pro forma total free cash flow guidance for 2019 is expected to be $1.038 billion to $1.065 billion. Pro forma 2018/2019 free cash flow is expected to be approximately $14 per share. Excluding DISH for the rest of 2019 and all of 2020, our 2019/2020 free cash flow guidance is now $11.50 to $12.50 per share.

We continue to evaluate our strong liquidity positions for both segments and our expected free cash flow generation with an eye to improving our overall cost of capital. With that in mind, we're contemplating redeeming a portion of the $1 billion of Diamond Sports Holdings preferred, which is callable at par for a 90-day window beginning later this month. The preferred has an L plus 50 cash dividend, which would increase our free cash flow if we partially redeemed it with excess cash on hand.

Now let me turn it over to Lucy to discuss our financial performance.

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Lucy A. Rutishauser, Sinclair Broadcast Group, Inc. - Senior VP & CFO [5]

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Thank you, Chris. Just to correct one thing. So the preferred is L plus [7 50].

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [6]

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Yes. Sorry.

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Lucy A. Rutishauser, Sinclair Broadcast Group, Inc. - Senior VP & CFO [7]

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Cash dividend. So as already mentioned, we overachieved this quarter in all key financial metric. But before I go into detail about each metric, please keep in mind that street consensus estimates are not comparable to either our third quarter reported results or our fourth quarter guidance. Because the RSN acquisition closed in late August, some analysts contributed estimates, including the RSNs, and some did not, which has resulted in an unusable consensus.

We have also received questions from the Diamond bondholders on how to receive their financial statements. As stated in the indentures, we have 75 days to provide the financials. We will be putting them on a secure website which the bondholders will be able to access via a link from our public website, sbgi.net, and we will also provide the trustee with the URL.

Now turning to the results. Media revenues for the third quarter were $1.070 billion, an increase of 47% or $340 million higher than third quarter 2018. These results include a partial quarter of the RSNs. Excluding the RSNs, media revenues were $719 million, which is $16 million above the high end of our guidance range.

Included in our third quarter media revenues are $679 million of distribution revenues, 105% increase over the prior year period. Excluding the RSNs, distribution revenues were $373 million, which is $7 million above the high end of our guidance range. Based on current contract expectations, we continue to expect net distribution revenue, excluding the RSNs, to grow low double-digit growth percents for this year.

Total company fourth quarter core advertising is expected to be up mid- to high single-digit percent. Political revenues were $6 million in the third quarter, and we are starting to see a pickup in the fourth quarter with an expectation of $15 million to $20 million in political. For the year, we expect 2019 to finish in the $26 million to $31 million range. And as previously stated, we expect 2020 to be our biggest political year on record.

Our digital businesses in the third quarter continued to overachieve, posting over 30% revenue growth. For fourth quarter, we expect that we are expecting total company -- total company media revenues to be approximately $1.565 billion to $1.587 billion, up 84% to 87% as compared to fourth quarter 2018. This assumes $15 million to $20 million of political revenues versus $150 million last year and includes $1.1 billion in distribution fees versus $334 million last year. Pro forma full year media revenues are expected to be almost $6.5 billion as compared to $6.7 billion in 2018, again, which was a political year.

Media operating expenses in the third quarter, defined as media programming and production and media SG&A expenses, were $745 million, up 62% from third quarter last year, primarily the result of the RSN acquisition for part of the quarter and higher programming costs. Excluding the RSNs, media expenses were $492 million, which is $8 million better than the low end of our guidance range due to lower G&A and sales expense. For the full year, total company media expenses are expected to be approximately $2.8 billion versus 2018 media expenses of $1.8 billion. The year-over-year increase is due primarily to the RSN acquisition for part of the year and higher programming fees and compensation. Pro forma full year media expenses are expected to be $4.3 billion as compared to $4 billion in 2018 due to higher network and sports programming fees, higher cost of sales on our digital revenue growth and miscellaneous G&A.

Corporate overhead in the quarter was $237 million, which includes $94 million in nonrecurring transaction fees, legal and regulatory, and an additional $120 million reserve, believed to be at this time a reasonable estimate of the potential loss exposure related to the Tribune litigation. I note that, that litigation remains fluid and the reserve remains subject to material change. Excluding those amounts and stock-based compensation, corporate overhead was in line with prior guidance. For the year, our corporate overhead is expected to be $80 million, excluding $250 million in nonrecurring transaction fees, legal litigation and regulatory and $19 million in stock-based compensation.

Non-media EBITDA was approximately $13 million in the quarter, $11 million better than our prior guidance on timing of ONE Media expenses, which will occur next year, and higher sales at our antenna company. EBITDA in the third quarter, including the 200 -- excluding the $214 million of nonrecurring costs and $76 million of net programming costs, was $374 million. Excluding the RSNs, we beat our EBITDA guidance by about $49 million.

Total company EBITDA in the fourth quarter, adjusted for $6 million in nonrecurring costs, is expected to be approximately $434 million to $455 million. I do want to point out that the RSNs traditionally experience their lowest EBITDA in both the first and fourth quarters due to advertising seasonality and contractual timing of the payments to the teams. Pro forma full year EBITDA is expected to be between $2.1 billion and $2.2 billion versus 2018 pro forma EBITDA of $2.6 billion. The decrease is driven primarily by the reduced political revenue and lower carriage fees at the RSNs due to a step down in an MVPD agreement that we assumed at closing and removing DISH from the last 5 months of 2019.

The diluted loss per share on 93 million weighted average common shares was $0.64 in the quarter, or $1.15 of income per share when adjusted for the nonrecurring transaction fees. Excluding the $214 million of nonrecurring expenses, we generated $203 million of free cash flow in the quarter. And excluding the RSNs, free cash flow was $125 million, exceeding the high end of prior guidance by $43 million.

Total company free cash flow in the fourth quarter is expected to be approximately $177 million to $203 million, and $578 million to $603 million for the full year. As Chris mentioned, we are increasing our average 2018/2019 pro forma expected free cash flow per share, including the RSNs, to approximately $14 per share from our prior guide of $12 per share. Our 2019/2020 average pro forma free cash flow is expected to be $11.50 to $12.50 per share versus a prior guide of $13, and that primarily reflects the DISH blackout, offset in part by lower interest expense on favorable financing terms and better 2019 performance on the legacy business.

Turning to the balance sheet and cash flow highlights. Capital expenditures in the third quarter were $35 million, including $16 million for the repack. For the full year 2019 total CapEx, before the repack and including the RSNs, is expected to be $95 million to $100 million. And for 2019, repack CapEx is expected to be $67 million.

At September 30, total debt was $12.5 billion and cash was $1.4 billion. Total net leverage through the holding company at quarter end was 4.8x. STG's first lien indebtedness ratio on a trailing 8 quarters was 2.7x on a covenant of 4.5x, and 4.6x on a total net leverage basis. Diamond's first lien indebtedness ratio on a trailing 4 quarters was 3.7x, and 4.9x on a total net leverage basis. Absent the DISH blackout, total net leverage for Diamond would have been about 4.7x. I do want to remind everyone of our near-term target leverage for the Sinclair division of high 3s to low 4x and for Diamond of low to mid-4x.

And so with that, I would like to open it up to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we'll take our first question from the line of Davis Herbert (sic) [Davis Hebert] with Wells Fargo.

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Davis Hebert, Wells Fargo Securities, LLC, Research Division - Director and Senior High Yield Analyst [2]

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I just wanted to ask on the Diamond Sports balance sheet. With the $1.1 billion of cash on hand, is -- I believe the YES transaction already closed. Is there anything else we should adjust for, whether it's a team put option or anything of that nature?

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Lucy A. Rutishauser, Sinclair Broadcast Group, Inc. - Senior VP & CFO [3]

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Yes. So Davis, if you recall, we -- there is a put by the raise, which could be put early in 2020. So we did prefund that amount. That's almost $400 million. And so you should assume that $400 million of that is earmarked. And then as Chris said, we are evaluating, looking to redeem a portion of the preferred stock, which is again our highest cost of capital. So that will generate free cash flow going forward.

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Davis Hebert, Wells Fargo Securities, LLC, Research Division - Director and Senior High Yield Analyst [4]

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Okay, that's helpful. And then if you do indeed redeem some of that preferred, does that preclude you from taking part in further RSN M&A going forward?

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [5]

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No. No, it doesn't. We have ample resources on hand to tackle what's in the marketplace today. And we're very excited about additional tuck-ins being very incremental in generating synergies for us.

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Davis Hebert, Wells Fargo Securities, LLC, Research Division - Director and Senior High Yield Analyst [6]

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Excellent. And when I look at the cash at Diamond Sports of $1.1 billion, I think you closed with $800 million. Does that imply that you generated free cash flow at Diamond Sports to build that cash balance up?

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [7]

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Well, there's 2 components that drove that. One was this purchase price adjustment that I referenced of approximately $400 million. And the rest is free cash flow generation.

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Davis Hebert, Wells Fargo Securities, LLC, Research Division - Director and Senior High Yield Analyst [8]

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Okay. And last question before I turn it over. Has anything changed in terms of -- Lucy, you gave your leverage targets, but with the DISH being blacked out and subscriber declines, et cetera, do you anticipate your leverage forecast, I think it was low to mid-4x at Diamond Sports within 18 months, is that -- do we -- should we see a little bit of a lag in getting to that target leverage?

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [9]

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So -- look, I think the way you should think about leverage is that depending on what happens with DISH, which as we said, we don't know what will happen with DISH, we view it as a temporary issue. Either we come to a deal with DISH or their relevance in the industry will be reduced over time. But that will create elevated leverage at Diamond for some period of time, but really it's a temporary issue. And DISH foregoing the RSNs is the equivalent, from a viewership perspective, foregoing the top 10 entertainment programs combined. So it's really foregoing a key piece of the bundle. And that's only going to be exasperated over time as sports betting moves through the country and sparks even greater interest in engagement with our content.

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Operator [10]

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And next, we'll hear from the line of Marci Ryvicker at Wolfe Research.

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Marci Lynn Walner Ryvicker, Wolfe Research, LLC - MD of Equity Research & Senior Equity Analyst [11]

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I have a couple of questions. The first one, Lucy, with the new pro forma EBITDA guide, the $2.1 billion to $2.2 billion versus the 2018 $2.6 billion, you mentioned lower carriage that was anticipated at closing. I assume you're talking about the old step down that had been discussed in November of '18, that there is no new step down to arrive at that number.

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Lucy A. Rutishauser, Sinclair Broadcast Group, Inc. - Senior VP & CFO [12]

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That's correct, Marci. That's the contract that was negotiated by 21 CF that we assumed at closing.

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Marci Lynn Walner Ryvicker, Wolfe Research, LLC - MD of Equity Research & Senior Equity Analyst [13]

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Okay, perfect. And then when you mentioned the core advertising in Q4 being up mid- to high single digits, is that TV stations only? Or does that include RSNs?

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Lucy A. Rutishauser, Sinclair Broadcast Group, Inc. - Senior VP & CFO [14]

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So that includes the RSNs, but remember for the RSN business, advertising is really only about 10% of their business. So in the scheme of the whole company, what you're really seeing there is driven by the broadcast performance.

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Marci Lynn Walner Ryvicker, Wolfe Research, LLC - MD of Equity Research & Senior Equity Analyst [15]

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Okay. And then for the updated free cash flow guide for '19/'20, the $11.50 to $12.50, what is contributing to the range? Meaning, what gets you to the low end versus the high end?

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Lucy A. Rutishauser, Sinclair Broadcast Group, Inc. - Senior VP & CFO [16]

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Well, I mean right now, it's really just a range, Marci, because we're still in our -- finalizing our 2020 budgets. And so it's really just putting a range in there as we normally do, right? You're used to us always coming out with a range because you have -- we don't have a lot of visibility on advertising as well.

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [17]

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Yes. Things like political for 2020, which historically is harder to predict, but we think it's going to be a massive year, obviously drives some of the range.

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Marci Lynn Walner Ryvicker, Wolfe Research, LLC - MD of Equity Research & Senior Equity Analyst [18]

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Okay. So it's just normal range. And then one last clarification question. Does the current balance sheet from Q3 include the $400 million for the raise?

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [19]

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Yes.

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Lucy A. Rutishauser, Sinclair Broadcast Group, Inc. - Senior VP & CFO [20]

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Yes.

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Operator [21]

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Next, we'll hear from Aaron Watts at Deutsche.

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Aaron Lee Watts, Deutsche Bank AG, Research Division - Research Analyst [22]

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One quick one on the core ad environment. It sounds like you're seeing some momentum heading into the end of the year. Can you talk about some of the drivers of that? And if you have any early kind of indications on how 2020 might start, that would be helpful as well.

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Unidentified Company Representative, [23]

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Yes. We're seeing the strength of pharmaceuticals, attorneys, insurance driving our business. So as -- we're introducing new categories and new solutions that are driving, and our focus on selling 360 solutions has solidified the core.

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Aaron Lee Watts, Deutsche Bank AG, Research Division - Research Analyst [24]

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Any color around the auto category?

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Unidentified Company Representative, [25]

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Auto category for third quarter was down low single digits, and we expect to see the same results in Q4.

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Aaron Lee Watts, Deutsche Bank AG, Research Division - Research Analyst [26]

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Okay. Got it. And Chris, one more on DISH. I'm just curious, you have been able to reach new distribution agreements with some other large players in the space recently, very recently. Any color you can give around what the hang up is with DISH? Is it purely price? Are they asking for something unique or different? And I guess, has your optimism at reaching an agreement with them changed over the past few weeks?

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [27]

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I really can't get into the specifics on the negotiation, just for a myriad of reasons. We don't talk about that level of specifics. And I would say that I'm still in the same place that I've always been. Our value proposition is very strong, as I mentioned. The viewing is -- for these RSNs, are greater than the top 10 entertainment programs combined and oftentimes are the top program in prime time. So it's just a matter of making sure that DISH recognizes the true value of the RSNs.

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Aaron Lee Watts, Deutsche Bank AG, Research Division - Research Analyst [28]

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Okay. And if I could, just one last big picture question for you, Chris. With several well-publicized and heavily promoted streaming services starting up this month as well as next year a couple more getting added to the mix, be curious to hear your thoughts on what impact that could have on your business overall, whether it's from an audience rating standpoint or more pressure on cord cutting. Anything you can give us on your thoughts would be helpful.

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [29]

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Well, the streaming wars are in a different -- are in a very interesting dynamic in our industry. They are the reason we have pivoted towards our focus on local sports and local news. We think the relevance of general entertainment will continue to be diminished because of the streaming wars and all these new entrants. So the value of sports and news will increase over time as the value of any one entertainment program continues to be diminished by oversupply. And so we think that's a positive trend. In terms of where we pivoted, with over 75% of our revenue now coming from sports and news, it's really that being quite weighed heavily towards sports.

So that as well as sports betting, which I mentioned, just to remind you a few facts on that. You've got people who view sports regularly. 38% indicate they'd watch more if they could bet on it. And of those who don't watch regularly, 25% say they would watch more if they could bet on it.

So we're set up to have a huge increase in engagement around our sports properties. And we're the ones that actually provide the tonnage, the over 5,000 games a year that we produce. So we're the primary beneficiary of that increased engagement. And we see the value of those sports properties going up over time on a relative basis, especially on a relative basis, given what's going on in general entertainment.

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Operator [30]

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(Operator Instructions) We'll hear next from Steven Cahill (sic) [Steven Cahall] at Wells Fargo.

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Steven Lee Cahall, Wells Fargo Securities, LLC, Research Division - Research Analyst [31]

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Maybe just first, another question on DISH. When I look at that change in the dollar per share of free cash flow in your '19/'20 guidance, I'm backing into around 5 million subscribers on DISH to the RSNs. And I think that's only about half of their total sub footprint. So I'm just wondering if that all sounds in the ballpark, and if that is part of the challenge that their RSNs -- your RSNs don't cover all of their subscribers.

And then maybe separately, on the political side of things, I think you've talked about maybe starting to drive some political ad revenue into the RSNs in 2020. So I know you haven't had a lot of time with them, but where are you kind of on that path? And do you think that you could see some meaningful political revenue on those networks next year?

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [32]

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Sure. So you're broadly in the right ballpark, if you will, for DISH. They're less than 10% of our subscriber base on the RSNs, and they weren't fully penetrated there. They were partially penetrated, which is pretty standard for most MVPDs. We don't -- we're not in the full basic package on the RSNs for most MVPDs.

And then on the -- on political, we've started to connect the dots with our RSN folks, with our broadcast folks who are in the flow in a big way on the political spending. So it's hard to quantify for you. But since we're in the flow on a significant amount of ad dollars coming in from political next year, we believe we will be able to substantially increase the amount of ad dollars that go to the RSNs, especially in hot markets where (inaudible) additional highly rated inventory.

And then what also is going to be a big tailwind for the RSNs from an advertising perspective, and we're starting to see it hit certain markets here where sports betting has been legalized, is that we've taken significant orders in, in some markets at significant premiums where sports [betting] has turned on because the RSNs are the -- one of the ideal places for them to start advertising. So some of those orders, you're seeing that hit the New York market, if you're paying attention to what's going on with MSG. It's benefiting YES. And there's other markets in the RSN portfolio where those orders are starting to hit. And they're not just -- they are at pretty healthy premiums to what we normally sell at. So that's going to be a nice tailwind into next year.

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Steven Lee Cahall, Wells Fargo Securities, LLC, Research Division - Research Analyst [33]

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Maybe some quick follow-ups on those. Could you give us any sense on what the percentage of overlap is of states that have legalized sports betting where you have networks? And then what do we think about as just the like long-term rights cost growth at your new sports segment as we try to put all this together under the new helpful reporting structure?

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [34]

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So right now, there's just a handful of our RSNs that have what a core market overlaps with those that are -- that have gone legal and are actually up and running operationally. So as more states turn on, that's going to be a much, much bigger impact, but right now there's literally, I think I can count them on one hand, how many have core market overlaps that -- of states that are operational. Not just legalized, but also operational. And in terms of the expense growth, we are in sort of -- we expect on the low side of mid-single digits for our expense growth going forward on the RSNs.

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Operator [35]

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(Operator Instructions) We'll hear next from the line of Zach Silver with B. Riley FBR.

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Zachary Alan Silver, B. Riley FBR, Inc., Research Division - Associate [36]

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Okay, great. I wanted to follow up on DISH a bit. And just, I guess Altitude, they were dropped from a couple of MVPDs. And I think that one of the reasons is that they didn't really have any other programming besides the RSNs. You guys had just done a deal with DISH at the end of 2018 for the broadcast channels. And I'm just wondering how the RSNs would factor in to your next round of broadcast negotiations with DISH?

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [37]

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Sure. I think that's a very relevant point. Coming to market with more programming is always a better position as it relates to negotiations with the MVPDs. So that's going to be something that, to the extent we have not done a deal with DISH by then, that will be a very relevant factor by then.

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Operator [38]

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(Operator Instructions) We'll hear next from Dan Kurnos with The Benchmark Company.

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Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD & Internet, Publishing & Broadcasting Analyst [39]

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Chris, I guess then just on sort of adding programming. You guys announced Ring of Honor onto the RSN. You guys talked about adding other programming there. Can you just maybe update us on where you are with sort of all the initiatives that you were talking about that you could do with the RSNs, whether it's DTC or adding programming timing of all of that?

And then just on -- it's a lot smaller, but you're kind of getting a little bit deeper into the AVOD space and not specifically SVOD streaming. There's a lot of properties out there. I know you're a lot more focused on the RSNs. I don't know if you want to get a lot deeper in with STIRR or if it's really more just an adjacency. But just kind of your thoughts on sort of building that out from maybe a more M&A perspective.

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Christopher S. Ripley, Sinclair Broadcast Group, Inc. - President & CEO [40]

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So we have -- we're about to increase our ownership in Stadium, which is one of our multicast sports channel or sort of post cable network that focuses on sports. And it really will supply upgraded content to the RSNs at a cheaper price or -- sorry, less expensive price than what's on there today. So starting at about the 1-year mark from our acquisition, we expect to start achieving some of the synergies we spoke about when we announced the RSNs. The $100 million-plus of synergies will be powered by content from Stadium, which will be an upgrade from what is on there today outside of the game, the pre and the post, and will be at a lower cost. We're also investigating other programming strategies, especially in local markets where we can find local news and local sports, to create additional revenue opportunities. But the backdrop, if you will, will -- it looks like it will be coming from Stadium, and that will generate cost savings for the RSNs.

And we're particularly excited about some of the experimentation we'll do with the combination of local sports and local news. We think bigger picture, that is the North Star for us. Whatever the future business model may hold is offering a package, a local bundle, if you will, to the marketplace of local sports and local news. And we're poised to be the dominant local news provider in every market in the country, if you have the tent-pole of local sports, which is really the only exclusive content that exists in the ecosystem. And so that weighs heavily into our thinking about where we're headed in terms of supplying that local bundle. And things that we're doing on STIRR, they all play a role in that longer-term vision. STIRR right now is ad-supported. It's growing quickly. It's adding channels. Right now, it's positioned as our free offering, free ad-supported offering, which will be the top of the funnel into subscription-based offerings. That's the current thinking on STIRR and it's ramping nicely. And now we're turning our attention to what would be the -- what would be the subscription-based offerings that we can add on top of that.

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Operator [41]

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That does conclude the Q&A session for today. I'd like to turn it back over to you, Ms. Rutishauser, for any additional or closing remarks.

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Lucy A. Rutishauser, Sinclair Broadcast Group, Inc. - Senior VP & CFO [42]

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Thank you, operator. So again, we appreciate everyone joining us on this call this morning, our first day going forward, much different, diversified media company. And as usual, if anyone has any questions, please feel free to give us a call.

Thank you.

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Operator [43]

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Ladies and gentlemen, this does conclude today's earnings release, and we do thank you all for your participation.

You may now disconnect your lines, and we hope that you enjoy the rest of your day.