We'll get started. Happy to have back at the conference from Sinclair, Chris Ripley, President and CEO. Chris, thanks for being here. Chris, you've been leading Sinclair through a period of significant strategic change, including portfolio optimization, a venture separation in progress, and active pursuit of industry consolidation. Maybe can you set the stage for investors on where the company sits today, and what you're most focused on as you look to the rest of 2026?
Thanks, Dan. Look, I think the focus for us is around core execution. You saw that in our Q1 results, where core advertising was up 4% year-over-year, retrans was up 2%, and adjusted EBITDA was up 12% year-over-year. We really do feel like we are executing exceptionally well on the core business, and we want to continue to do that. We of course also want to delever. You saw us do that in April, where we retired $165 million of term loans at a discount. We want to transform the business through M&A and AI. M&A, I think we'll probably talk a little bit more about that later on. Dan, I don't want to steal your thunder, but there are several opportunities that we see on the horizon that could yield significant synergies and we're very focused on that.
We think that there's a lot that can be done with the business through AI. When you think about media businesses in general, but specifically broadcast, there's a lot of people in front of computer screens, and we don't deal with any sort of atoms, right? We just deal with bits. We think we'll need creators in the field, learning and reporting and getting information about their local communities. Beyond that, a lot of what we do could be done with AI. Then our other objective is to grow ventures. We are very focused on Tennis Channel right now with the new leadership from Jeff Blackburn. He's revamping the whole digital strategy and the streaming app.
If he can take that streaming app from up to 1 million to 2 million subs, it's a huge value driver for Tennis Channel, and I think he's got runway to do that. Digital Remedy is also growing quickly, organically, and pursuing a number of inorganic opportunities. We basically over doubled the business last year via an acquisition. We want to double it again. It's a Rule of 40 company. We think that could be a billion-plus dollar asset. We want to continue to monetize our minority investments and look to redeploy into new secular growth areas where areas that fit our DNA, like roll-ups, low tech risk, low international risk, where we can develop new platforms.
That was a great overview. I think we'll circle back to a few of those topics. Let's start with ads. Q1 earnings, you reaffirmed your full-year core advertising guidance. I think you had also flagged a bit less visibility in parts of the market tied to the geopolitical uncertainty we're seeing. Can you help us understand what you're hearing from advertisers today, the latest, how the tone has shift, if at all, since April?
Hi, David. Narinder here. I'll take that one. Nice to be here.
Sorry. I should have introduced. He came up after we started. Narinder Sahai, CFO.
Yeah, David. Thanks for the question. The tone we flagged in Q1 was a real one, right? When we built our 2026 guide and we provided that full-year guide in February, we baked in a reasonable amount of caution on macro, right? What's evolved since then is the layering on of additional uncertainty, right? The Middle East conflict, elevated gas prices, ongoing tariff dynamics, which are weighing on a few specific categories. We are hearing more measured commentary from our advertisers forward visibility into the second half. The data is still consistent with our plan. While the tone is measured, we just don't want that tone to be viewed as alarming, right? As you referenced and as Chris mentioned, Q1 core was up 4% ahead of our internal expectations. The softness that we see is concentrated in consumer discretionary exposed categories, which are category specific.
It's not a broad cyclical retreat. We are not seeing large advertiser pullback on any of those categories. If you look at the upfronts and you look at the buyer's sentiment, that's very constructive. They are planning to spend more in advertising for the third consecutive year. Our second half is also structurally well-positioned, and we'll perhaps get an opportunity to touch on that a little bit. We are overweight on Fox, on the World Cup. Political crowd out will lift the rate in the back half of the year. Digital Remedy, our ad tech platform, is helping us capture demand across the digital and the connected TV platform, as well as linear. Our tone is appropriately watchful. We reaffirmed our full-year guide, we still feel very confident about that.
At least part of the back half, but it touches your second quarter as well as the World Cup, just weeks away. 70 matches on your Fox affiliates, I think 40 are in prime time. Can you walk us through how you see the World Cup flowing through to your business? How is demand shaping up relative to your expectations?
Yeah. As you referenced, the World Cup on Fox this year is the expanded format. It's in the same time zone. 40 of those matches will be in prime time, in the window that runs from June 11 to July 19th. I'll remind everyone that this is the first summer World Cup on U.S. soil since 1994, right? The last World Cup was not even in summer timeframe. Obviously, there's a lot of excitement around this. If you look at some of the numbers for Fox and Telemundo, their national in-game inventory is essentially sold out. You also hear about the additional expanded inventory that's available because of the hydration break that FIFA authorized. All of that has a spillover effect into local markets, and we are seeing demand form up there. We're super excited about that.
Obviously, we have an opportunity there to provide a cross-platform solution to our local advertisers around the World Cup. What could be an upside here if the U.S. men's team runs deep in this tournament. That could be very exciting and could open up some additional opportunities. We feel very good about where that's positioned. I think overall, if you look at the overall advertising revenue, it is still not a very large part of it. I just want to ground people in that while it's incremental, this year I mentioned this has not been on the U.S. soil, and the last one was not even in the summer. It is incremental, but it's not materially large.
Yeah. While the hydration break sounds like a small thing, it essentially introduces an ad pod into what was essentially, right, you had the pre-roll. You had the halftime.
Yeah. It's actually 10 additional hours.
Yeah.
Which is quite significant.
Yeah. Maybe switching gears to political. Your guidance calls for at least matching the 2022 pro forma figure with the prior midterms. We're now seeing early spending ramp. Curious, how has your assessment of this cycle evolved over the past couple of months?
Yeah. Good question. We are really encouraged with all of the signs we are seeing from fundraising, which is at record numbers. Spend, if you compare to last cycles, at comparable times in the cycle is ahead. All of those markers are positive. Our full-year guide, as you know, as you mentioned, is to at least match what we did in the 2022 cycle. I would say, the forward indicators are leaning positive, which is encouraging. I would also say that it is too early for us to call it any different than what we did at the start of the year. I think as we progress through time, especially the second quarter into the thi rd quarter, I think we'll probably have better visibility. If that necessitates we need to change our view and outlook, we'll talk about that.
We are very well positioned in the swing states. We have 26 stations in the swing states from all the major races in Michigan, and Maine, and Ohio, and North Carolina, to Texas, to Georgia, to Nevada. We are very well-positioned there. There's a lot of money being raised that will be spent there. All in all, very positive. If you look at, generally our viewers, and it's a very interesting fact, a third of them are Republicans, a third are Dems, and a third are Independents. They skew a little bit to the older side. These are the people that you actually want to reach when you want to have a good bang for your buck on your political ad spending. These are the people that are going to go out there and vote.
All of that sets up really well for us, and so we are super excited about that.
Maybe as a follow-up, Brad, any time you talk about political, there's always the attendant question around crowd-out. Sinclair did take concerted actions, I think in the last cycle, presidential cycle, to sort of limit that. Can you just maybe remind us on that?
Well, look, I think crowd-out's always an interesting topic. We have a yield team now that back in 2024 was fairly new. We didn't have that in 2020. We have found that if we are very active in managing not only pricing but inventory categories, we can do a good job of mitigating crowd-out. That being said, there always is crowd-out in the fourth quarter especially because you've got this doubling, right? Roughly speaking, Q3 is double Q2, and Q4 is double Q3. Q4 is only about a half a quarter of activity. Inevitably, there is crowd-out. It's unavoidable in Q4, and there should be some in Q2, Q3.
Got it. Let's shift over to distribution. At earnings, you had noted over 100 basis points of sequential improvement in traditional MVPD churn in the quarter. I guess, what's your take on the sustainability of this trend? On the virtual side, how do you view the potential impact of new skinny bundle offers like the ones we've seen from YouTube recently?
The short answer is that we think it's very sustainable, and we think it's just the start of a significant trend, which was sparked by Charter's rebundling strategy, what we term the Great Rebundling. When you take a look at the economics to the consumer, it has significantly changed the value proposition. The consumer is now paying about $20-$30 a month for legacy cable, which would be the broadcast channels and a handful of cable channels. The old value proposition was that was like $100. How you get there is all the streaming packages that are being bundled in. If you subtract the value of those streaming packages, which are coming included with expanded basic, you net those down, you get to $20-$30 a month. From a consumer perspective, the value proposition is completely different.
We're just at the beginning of this trend. Charter literally just put this in place last year. Their marketing campaigns have just commenced over the last 12 months. I would say that consumer awareness is still relatively low about this value proposition. We are very bullish about what they've done, about consumers realizing all the extra value that is now being deployed, about them continuing to improve the user interface and experience of being able to access this content, and then other MVPDs copying the strategy. We did benefit from improvements at Comcast, but Comcast really hasn't copied this strategy yet, but we think they will. We think other MVPDs will because it's just so apparent that Charter is outperforming everyone else. We're very bullish on that. We do think it's a sustainable trend. On your question around skinny bundles, bring them on. Right?
It would be great if YouTube TV launched more skinny bundles. From what we have, we understand the broadcast stations are in all those skinny bundles. To the extent that this allows more people to stay in the pay-TV ecosystem because there are lower prices, fantastic.
Sinclair has three major network affiliate renewals coming up later this year, I think in August, October, and December. The prior few years have seen broadcast network owners increase investment into streaming platforms, which share some content with you. How does that dynamic shift negotiations around programming cost?
Well, it's really central to the entire discussion. All of our network partners have a streaming platform now. Fox was the last one. They launched FOX One last year. When you analyze what content is being put on those streaming platforms and who pays for the content, essentially the answer is all the content is on the streaming platforms and on broadcast. Very little is paid for by the streaming division relative to the broadcast division. There is a big mismatch in terms of the allocation of cost for the content that is now being exploited on two different platforms. That right sizing is, we think, going to be beneficial in terms of managing the cost of our network relationships.
The timing of the affiliate deals is interesting, especially given the NFL's possible intention to reopen its rights agreements. Sinclair also has a large renewal footprint on the distribution side coming due in 2027. Look, it's certainly possible nothing will happen with the NFL, but assuming there was an increase in the NFL rights fee, how do you think about what the networks would ask the affiliates to pay? Then in turn, what you might ask of the MVPDs, and I guess it's a roundabout way of me asking, how do the economics of the NFL ultimately get pushed all the way through the ecosystem?
Look, I think it goes back to your prior question, my prior answer, that any increase in NFL payments are going to have to be largely absorbed by the streaming side of the house for these media companies. We saw that happen with the NBA. The best comp that I can point you to was the new NBA deal that NBC did, I guess it was a year and a half ago now. We set our expectations. That was 2024. We set our budget and expectations for our renewal with NBC at the beginning of 2024. The renewal was at the end of 2024, and the NBA deal was in the middle of 2024. One would have expected that NBA deal to have impacted the results of our renewal.
We ended up hitting and in some cases, in some areas, exceeding our expectations, which were set at the beginning of 2024. The reality is, we didn't know about this NBA deal when we set our expectations, and we still hit our expectations after the NBA deal was put in place. We are now benefiting from that NBA content being on our NBC stations. The only logical answer to all that is the streaming side of the house paid for the new NBA deal. We expect that to be the answer also with the NFL.
Maybe let's shift over to the regulatory environment. The industry is at a really interesting moment in that we've seen the FCC and DOJ approval of some major M&A, but also legal challenges to those deals. Where do you think the industry stands at this moment, and are there further actions that those agencies can take to help ease the go-forward process for others?
Yeah. Look, nothing short of a monumental change in the regulatory environment over the last few months and really highlighted by the change of the DOJ. The fact that there were no required divestitures on the Tegna-Nexstar merger is a complete sea change at the DOJ. We've been harping on this for probably the better part of a decade, on expanding the market definition. We finally got there. It's amazing, really. It's hard with regulators because they're always looking backwards, right? They're always looking in their rearview mirror. That was really momentous, and we're super excited about that shift. We already had a constructive FCC. There's still a little bit of work left to do with the FCC, right? We expect some of those rules to actually be changed, like the cap, for instance.
The industry and still working on getting that sort of done and dusted. The FCC is already in a very constructive place from an M&A perspective. Now what's going on on the state level, which is kind of a new attack vector that some of our commercial adversaries, like DirecTV, are utilizing to extract a tax on transactions. Now that we've seen the playbook, and this is a fairly new playbook that has been developed, I think we believe we can significantly mitigate it. To your point, Dan, you said are there other actions the agencies could take to also mitigate what's happening at the state level? Absolutely. For one, not relying on waivers, but having the rules changed at FCC is something that we're focused on, and that would help.
What's going on at the state level is primarily an antitrust issue, not an FCC issue. The argument that the marketplace for retrans is a DMA is preposterous, really. Carriage is negotiated on a national basis. We think that if this were to ever actually go to trial, I don't know whether it would, but that they would lose because the facts in the industry are just so vastly different. To go back to your question, what could the DOJ do? The DOJ could put out a white paper on its new market definition, which is clearly expanded. That's another area of focus for us as we think about larger transactions.
Just staying on that topic, you remain Scripps' I think their largest shareholder, and you've said recently the industrial logic of a deal there is unchanged. Just maybe update on where things stand, and in absence of that moving forward, how are you thinking about other potential opportunities?
Yes, we do remain the largest shareholder of Scripps. We reiterated in our last call, as you noted, Dan, that the industrial logic is still the same. It's very strong, and we are open to further engagement there. That being said, we're not sitting on our heels. We are focused on other opportunities. There are several other alternatives that could yield similar-sized synergy numbers to Scripps. Those are the ones that we're doing work on now and looking to bring those two ahead.
Got it. The Ventures separation work has been underway for several months, carve-out financials, audit work, et cetera. Can you give us a sense of where you are in that process? I think you've described the ideal sequence as a spin concurrent with the broadcast deal, but at what point would you consider proceeding with the spin independently if a transaction wouldn't materialize on your preferred timeline?
Yeah. Good question. Before I answer that, I just want to remind our listeners what Ventures actually is. Ventures has a Tennis Channel, which is wholly owned. We are seeing great traction with Tennis Channel, and I think that could very easily be a billion-dollar asset. It's got Digital Remedy, which is our performance advertising, digital advertising platform, which is DSP agnostic, which allows us to bring cross-platform solutions. It's growing very rapidly, has a large subset of acquisition opportunities and organic growth in front of it. That easily could be a billion-dollar asset in the next three to five years. Ventures has our intellectual property on ATSC 3.0, and I will tell you that all roads to commercialization and monetization of ATSC 3.0 runs through that IP that Sinclair has created.
You have $450 million of cash and roughly $500 million of minority investments, which as we have outlined, we are very focused on monetizing those minority investments and move to majority-controlled businesses which have stable cash generation, recurring revenue streams, and that process is underway. All this to say that we are very focused on unlocking the value in the ventures, which we don't believe is currently fully reflected in our stock price. The whole idea of separating ventures is geared towards that. The work is underway, as you mentioned. We have an accounting firm that's selected. They're working through preparation of the carve-out financials. The auditors are engaged to audit that work. We have internal teams formed working on different aspects of a separation.
All of that is proceeding as planned and gives us a lot of optionalities that when the time comes and we need to pull the trigger, that we are ready, that we have done the homework. Right. Having said that, our ideal scenario remains a broadcast combination, in conjunction and followed by a venture separation. We are saying that, and that is an ideal scenario because it allows us to preserve optionality of having Ventures in the portfolio. Couple of reasons. Ventures has cash, so if cash is needed to facilitate a broadcast transaction, that's there. As I referenced, Tennis Channel could be attractive in a broadcast combination transaction. We want to preserve that flexibility as long as possible. As Chris mentioned, we are working very hard on a broadcast combination.
In the future, if the paths diverge and we cannot reach our ideal scenario, then we'll be looking at all options to unlock the value in Ventures.
Maybe just staying on ventures for a second. Tennis Channel had a strong quarter with viewership up meaningfully and DTC subs seeing traction after the launch on Amazon. Can you just walk us through where you see Tennis Channel in a few years' time and kind of what the investment roadmap looks like?
Tennis Channel, we think, is a very valuable growth asset in our portfolio. It has opportunities around direct-to-consumer, international, streaming channels like T2, and also Pickleballtv. It actually has an evergreen rights vehicle for the PPA and MLB.TV, which is a 50/50 JV. There's a lot to like about tennis. The rights are relatively inexpensive in sort of the sports landscape. The amount of interest and engagement in tennis has grown significantly here in the U.S. and continues to be on a great trajectory. The real opportunity that we see within specifically Tennis Channel is to grow the direct consumer streaming business more than anything else. We brought in Jeff Blackburn, who had an amazing career at Amazon. He basically created the Amazon ad business. He oversaw Prime Video, and he is revamping the whole digital strategy, redoing the apps.
It'll all be revamped by the end of the year. He is going to take that streaming business up to over 1 million subs, and if he does that, Tennis Channel financially and from a valuation perspective, looks entirely different. That's the near-term opportunity that we see on Tennis Channel.
Let's shift to ATSC 3.0. Right here in Boston, there's a company called EdgeBeam, where Sinclair is a joint owner with other broadcasters. EdgeBeam is in the market now for what it terms custom solutions for the last-mile connectivity. Can you help frame for investors what the commercial pipeline looks like today and what milestones we should be watching for?
Well, yeah. Edgebeam is really moving quickly and building a great team to commercialize what largely had been POCs that the industry had done. They're hardening those, they're building out the right sales and support, the whole organization that you need to go into these new areas. The areas of focus that they are focused on are positioning and timing, so precise time and position, and there's enhanced GPS, there's the backup to the GPS system, which ties into that. Digital signage is another area, public safety, and streaming offload and automotive. In each of these use cases, the TAM, when you sum it up, is greater than the entirety of the television broadcast sector. This is allowing us to expand into areas with a much bigger playing field than what we have today.
These are new areas, and it will take some time, but EdgeBeam is moving like a startup, quickly looking to scale, and I think the business will end up scaling to something quite significant over the next 5-10 years.
On Sinclair as an organization and earnings, Narinder, you highlighted the application of AI not merely as a cost reducer, but as a tool to fundamentally reinvent how the company executes. I'm curious, where are you finding the most current applications, and what are the main opportunities from here?
Yeah, great question. Thank you for that, David. As I mentioned, AI's value at Sinclair isn't just headcount rationalization. It's actually fundamentally reinventing and reimagining and rewiring our core processes. Cost discipline is one output, but the more interesting applications of AI sit on the revenue side. To recap what we have been doing there, we have meaningful applications already in production. We were the first broadcaster to implement live AI-powered language translation of local newscasts running in four different markets. We are translating podcast content, specifically with Tracy McGrady and Vince Carter, into Chinese for distribution in China, which opens international audiences for the U.S.-only content. On the Digital Remedy platform, artificial intelligence is key there because it helps with running the entire campaign start to finish with optimization and attribution built in.
We have obviously AI productivity tools rolled out across the workforce, bottoms up and top down. I guess, looking ahead, the most meaningful opportunities are in repurposing content into multiple formats and languages, which AI will be very efficient in doing. Hyperlocal personalization at scale, advertising stack optimization, as I mentioned, using AI in how we manage yield and how we present proposals to our advertisers. Obviously, the obvious ones are operational productivity across finance and scheduling and traffic. I do want to stress here is that AI won't replace the foundational input. What is the foundational input in our business? It's the local journalist doing the original reporting. The feet on the street and the trusted local relationships. That's where the value originates. That cannot be replaced with AI. AI will amplify it, but it doesn't generate it.
Content creators are the differentiators for us, and then editorial judgment is going to matter here. There's lots to like here with AI. We are not in the experimentation phase. We have made some strides to step into the production phase, and I expect us to make step changes here.
Okay, great. With that, we're out of time. Chris, Narinder, thank you for being here.
Thank you, David.
Thanks, Dan.