Good day, ladies and gentlemen, and welcome to the Sinclair Broadcast Group Fourth Quarter 2019 Earnings Conference Call.

All lines have been placed on a listen-only mode and the floor will be opened for your questions and comments following the presentation.At this time, it is my pleasure to turn the floor over to your host for today, Executive Vice President and Chief Financial Officer, Lucy Rutishauser. Ma'am the floor is yours..

Thank you, operator. Participating on the call with me today are Chris Ripley, President and CEO; Rob Weisbord, President of our Local News and Marketing Services Division and Jeff Krolik, President of our Sports Division.Before we begin, Billie Jo McIntire will make our forward-looking statement disclaimer..

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 fourth 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 adjusted EBITDA, adjusted 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 these non-GAAP financial measures to the GAAP measures in our financial statements is provided on our website under Investors, Non GAAP Measures.Chris Ripley will now walk you through our operating highlights..

Good morning, everyone, and thank you for joining our fourth quarter earnings call. We have a lot of positive news to share with you today starting with the results that met or exceeded our guidance estimates.

Lucy we'll take you through those details shortly.Sinclair ended 2019 as the largest provider of local sports and a leading provider of local news with 23 hours and brands and a 191 broadcast stations across our portfolio. We are the leading provider of locally relevant content.

As we finished an incredible 2019 we are looking forward to executing on a myriad of opportunities to drive both our local news and sports segments.We are intently focused on continuing recent successes in growing our share of political advertising dollars for our stations and now sports networks unique among our broadcast peers.

We intend to roll out investigative reporting in over 20 markets this year an effort that so far has been highly successful both in terms of acclaim as well as tangible community impact. Our RSNs will be rebranding in the coming months.

We are working on a new digital platform and there is significant opportunity around legalized sports betting, so more to come on those fronts.When we announced the RSN deal, we expect to legalize sports betting to lead to multiple beneficial impacts on the RSNs such as the new ad category, enhanced viewer engagement and new ways of monetizing our assets.

We are already starting to see some of those benefits play out with advertising dollars flowing to our networks in states that have made sports betting legal.On the distribution front we continue to enjoy productive relationships with our distributors and we are making very good progress on renewals for the RSNs and carriage of marque.

Approximately 70% of our total subscribers are locked in for multiple years significantly de-risking the company and for our sports segment it's over 70%.Just last week Marquee announced that mark -- that Hulu Live TV will carry the network.

We now have agreements in place for market-wide carriage of Marquee with more than 40 distributors including AT&T U-Verse, DirecTV, Mediacom, Charter and over-the-top providers Hulu and AT&T TV Now which means that 100% of the Cubs geographic footprint are able to watch Marquee.

Speaking of which Marquee had a successful launch last week with the start of the Cubs’ Spring Training.

And with opening day on March 26 we are ready to go with the beautiful new studio.We remain in negotiations with Comcast and ultimately given the value of these properties and demand for local viewers we are confident that we will come to an agreement and they will allow their subscribers to watch and enjoy their favorite home team.

We continue to have discussions with Dish for the carriage of the RSNs and remain confident that our two companies will eventually reach mutually acceptable carriage agreement.On the subscriber front, with the exception of one MVPD that is experiencing above average subscriber losses, our subscriber churn to the fourth quarter was less than 1% on annualized basis and we actually added subscribers sequentially when excluding this one MVPD.

We reached an agreement in principle with one team whose rights agreement recently expired while another team exercised this right to put their minority interest to us.In addition, we have an agreement in principle to renew 10 station affiliate agreements with Fox while another seven stations to which we provide services also renewed their Fox affiliations.

On the ATSC 3.0 front, now officially called NexGen TV, we have several initiatives in process that are moving forward. We had a successful CES and will be demonstrating many of the same technologies in NAV. We launched Cast.era, our joint venture with SK Telecom.We joined Pearl TV a broadcast industry organization, committed to advancing Next Gen TV.

And the industry is on track to deploy Next Gen in many markets this year, while the consumer electronics manufacturers have announced plans to bring in 20 Next Gen enabled TVs to the market this year.2020 is off to a strong financial start with political spending running well ahead of the 2016 spending for the same period.

And as a reminder, we expect 2020 to be our highest political revenue on record. For full year 2019, total company adjusted free cash flow was $607 million, and on a pro forma basis, almost $1.1 billion.

That equates to $11.48 per share and $14.14 averaged 2018 and 2019 pro forma adjusted free cash flow per share.I do want to mention that there has been some misinformation in the marketplace that has unfortunately depressed our stock evaluation.

In fact, if you do a sum of the parts on us, you will find that our current stock price describes no value to our Sports segment despite having over 70% of the RSN subscribers locked in, including multi-year deals completed with Charter, AT&T DIRECTV, MediaCom as well as 200 other completed deals with medium and small distributors, having very few team renewals on the horizon, $1.6 billion of liquidity as of year-end 2019, exclusive rights on linear and digital and future sports betting and synergy opportunities.Based on the current trading levels of our stock, it's hard to argue that there's a better return for us than repurchasing our own shares.

And while we repurchased over 4.5 million shares in 2019 at these trading levels, we will look to be more aggressive.Now, let me hand it over to Lucy to discuss our financial performance..

Thank you, Chris. We had very good fourth quarter results.

But before I get into the numbers, I wanted to thank our investors and analysts for their patience as we evolve our public disclosures to reflect our transformation into a diversified media company and provide you information to confidently value our two financing silos and consolidated company.

Our goal is to be as transparent as possible and reflecting the results and valuations of our businesses and we welcome any feedback you want to provide.I also want to introduce our new Vice President of Investor Relations Steve Zenker who recently joined to help increase our investor relations efforts and outreach.

Going forward, we will be referring to the RSNs as well as other sports related assets we report as part of this segment as our sports segment.The remaining business will be referred to as our legacy business, which includes our local news and marketing services segment and our corporate and other segment.

As we give you information related to the specific segment, it will be inclusive of the management and incentive fees paid by the sports segment to the local news and marketing services segment, so that you can do your sum of the parts and credit valuations on each silo.So while reflected in the individual segments, please note that these amounts eliminate in consolidation and therefore are not reflected in the total company consolidated results.

So again management and incentive fees will be included in the statement, but eliminated poor consolidation results.Turning to the results; consolidated Media revenues for the fourth quarter were $1.581 billion, an increase of 86% and at the upper end of our guidance range.

These results include the first full quarter the sports segment resorts which contributed $788 million of revenues for the quarter.Our legacy business media revenues which exclude the sports segment were $820 million in the fourth quarter versus $849 million in fourth quarter 2018 which was an election year.

The lower political revenue in Q4 of 2019 was offset in part by higher distribution and core advertising revenues.In fact core advertising was up approximately 7% for our legacy business in the fourth quarter and in line with our expectation of mid to high single-digit percents.

For the year core advertising for the legacy business was up approximately 3%.We book $23 million of political ad revenue in the fourth quarter which was above our guidance range of $15 million to $20 million and almost double what we booked in Q4 2015 pro forma. As Chris mentioned earlier we expect record political advertising revenue for 2020.

Total distribution revenues were $1.1 billion in the quarter meeting expectations with this sports segment contributing $724 million of the total.For the year consolidated total media revenues increased 39% to $4.46 billion due to the addition of the sports segment which contributed a $1.139 billion of media revenues.

Excluding the sports segment media revenues are to add at or our legacy business were up slightly as lower political revenues were offset by strong growth and in distribution revenues and core advertising gains.Our legacy business grew distribution revenues for the year by 13%. On a pro forma basis 2019 consolidated media revenues was $6,475 million.

Our Sports segment pro forma media revenues were $3,585 million and for the legacy business including the management incentive fees pro forma media revenues were $2,967 million consolidated media operating expenses in the fourth quarter defined as media production and media SG&A expenses were $1.80 million, up from the fourth quarter 2018 and that's primarily due to the acquisition of the RSNs.Including the management and incentive fees, our Sports segment media expenses were $597 million.

Corporate overhead in the quarter excluding $39 million of non-recurring transaction, legal, litigation and regulatory cost and $4 million of stock-based compensation is $27 million.

EBITDA for our non-media businesses was approximately $5 million in the quarter which was $4 million better than our expectations on timing of ONE media expenses and higher repack revenue activities.Total company adjusted EBITDA was $450 million, an increase of 32% and at the high end of our guidance range.

Including the management fees the Sports segment had adjusted EBITDA of $174 million and the legacy business had an adjusted EBITDA of $276 million.Pro forma company adjusted EBITDA for the year was $2.147 billion of which a $1.270 billion was from the sports segment and $876 million from the legacy business.

Consolidated adjusted free cash flow for the quarter adjusted for non-recurring items was $206 million exceeding the high-end of our expectations.

For the full year pro forma consolidated adjusted free cash flow was $1.68 billion.Diluted earnings per share on 93 million weighted average common shares was $0.47 in the quarter were $0.94 of income per share when adjusted for the non-recurring transaction fees legal litigation of regulatory.

We bought approximately 600,000 shares in the fourth quarter and over 4.5 million shares for the full year 2019 which represented approximately 7% of the Class A shares outstanding at the beginning of 2019.

As Chris stated the a current trading levels you should expect us to aggressively buy the shares.Turning to the balance sheet and cash flow highlights capital expenditures in the fourth quarter were $60 million including $26 million for the repack and for the full year CapEx was a $156 million including $66 million of repack.

For 2020 we expect CapEx of between $130 million and a $150 million plus another $90 million for the reimbursable repack spend.In the fourth quarter film payments were $22 million and sports rights payments were $460 million. And for 2020 we expect film payments to be $90 million and sports rights payments of $1.9 billion.

At December 31 total debt was $12 .438 billion.

Cash at December 31 was $1.333 billion of which $949 million was in the sports segment and $384 million in the legacy business.During the fourth quarter we redeem $300 million of diamonds preferred shares and another $200 million in January bringing the outstanding balance down significantly to $525 million from the original $1.25 billion.

This will generate approximately $15 million in the annualized cash dividend savings.Total net leverage through Sinclair at quarter end was five times. STG’s first lien indebtedness ratio on a trailing eight quarters was 2.5 times on a covenant of 4.5 times and 4.4 times on a total net leverage basis.

Diamond’s first lien indebtedness ratio on a trailing four quarters was 4.2 times and on a covenant of 6.25 times and 5.6 times on a total net leverage basis.Turning to our guidance for our first quarter and for the fiscal year 2020 consistent with our most recently provided guidance DISH is excluded from the sports segment for all periods until carriages reserved.

For the first quarter we are expecting consolidated total company media revenues to be between a $1.605 billion and a $1.633 billion as compared to pro forma first quarter 2019 media revenues of a $1.617 billion of which this -- that number last year includes three months of DISH and sling distribution revenues, which are not in this year's guidance.The guidance also includes $34 million to $46 million of political revenues versus $2 million last year and it includes a $1.160 billion to a $1.160 billion in distribution fees versus a $1.228 billion of pro forma distribution revenues last year.

Media revenues are expected to be $838 million to $843 million for the sports segment and $793 million to $870 million for the legacy business, which includes $27 million of management fees.For the first quarter, consolidated total company media expenses are expected to range from a $1.169 billion to a $1.179 billion compared to pro forma media expenses of $1.38 billion in the first quarter of 2019.

For the full year, consolidated total company media expenses are expected to be approximately $4.839 billion to $4.879 billion versus 2019 pro forma media expenses of $4.314 billion.The increase over pro forma 2019 is primarily driven by higher network fees, the addition of stadium which is now consolidated and more key which is a startup as well as sports rights amortization which are added back for EBITDA purposes.Consolidated total company adjusted EBITDA in the first quarter adjusted for $8 million in non-recurring costs is expected to be $241 million to $259 million as compared to pro form first quarter 2019 adjusted EBITDA of $414 million and that's adjusted for $2 million in non-recurring costs.Our Sports segment is expected to generate $30 million to $33 million of adjusted EBITDA and our legacy business is expected to generate $211 million to $226 million of the adjusted EBITDA.

Now as highlighted last quarter the sports segment traditionally experiences its lowest EBITDA in the first and fourth quarters due to contractual timing of team payments.So with the baseball season beginning in March team payments are at their highest for the year in the first quarter which you can see in our guidance.

So more than one third of the full year payments -- more than one third will occur in the first quarter alone and the gap between the payments and the amortization -- and the amortization is in the media expense that's driving some of the analyst models to be too high on EBITDA for the sports segment and first quarter.So again while Q1 guidance includes $487 million of sports rights amortization, payments are expected to be $644 million resulting in an EBITDA be lower by the difference of that $157 million.

However and this is important for the year payments are expected to be lower than the amortization by a $153 million.

So really any – any difference that you're seeing in Q1 consensus is primarily going to be related to timing of the payments versus the amortization in 2020.And then finally consolidated total company adjusted free cash flow in the first quarter is expected to be approximately $50 million to $73 million.

We are increasing our adjusted free cash flow per share range for 2019 and 2020 to an average of between $11.75 and $12.40 from our prior guidance of $11.50 to $12.50.So with that, I’d like to open it up to questions..

[Operator Instructions] We'll move first to Aaron Watts at Deutsche Bank..

Hey, everyone. Thanks for having me on. I have one on the TV station side and then a couple on the Diamond side.

On the TV side does it sound like a good strong quarter for core ads in the fourth quarter can you talk about how that's trending in the first quarter and also how auto played into that in the fourth quarter and first quarter?.

Yes it's trending as a carry over into first quarter. We're off to a very good start on core and auto was slightly down in fourth quarter and the expectation is to be flat in the Q1 of 2020..

Okay. Got it. Thank you. And on Diamond curious on the seasonality you were just talking about Lucy clearly more impact on the cost side.

Anything we should think about the cadence of seasonality on the revenues as we think about the full year?.

No there's no real seasonality on the revenue side for these sports..

Okay.

And with the discussions you're having Chris I know you talked about DISH and Comcast, are those specifically for our key or are they more fulsome discussions on potentially with DISH kind of bringing back all the RSNs or with Comcast extending all of with the RSNs?.

Typically these are wide ranging negotiations that include all of our assets..

Okay. Got it.

And one clarifier on the subscriber trends you're seeing on the DSPORT side, can you just cover again what were the themes kind of in the fourth quarter on the declines you saw both on the vMVPD and traditional MVPD side and maybe any color you have so far for first quarter?.

Yeah. So as we mentioned Aaron, if you exclude one MVPD who's been churning a lot higher than what the averages have been. We only churned across the whole company by less than 1% on a year-over-year annualized basis.

And in fact if you look sequentially from Q3 to Q4, we actually added subscribers which is something we talked about last call because of a lot of the black outs that were occurring in the industry in Q3 and then the reporting lag for the virtual.So we saw that that catch-up in fourth quarter versus third quarter.

But again outside of just the one vMVPD we're churning less than – less than 1% across all the segments..

Okay. That's helpful. And one last one for me, appreciate the time. Lucy this I think is directed your way. You redeemed preferred stock and I heard you say a couple of times that you think your stock is attractive now in terms of being a target for buybacks but your debt – your debt securities are trading on the DSPORT side at a discount to par value.

How attractive are those to you in terms of potentially buying them back and how open would you be to using cash towards that end?.

So we really think about our cash in two different buckets like as because we have the two different silos and the STG -- SGB silo cash we're focusing in on our shares right now as one of the more attractive investments and for the DSPORTs the emphasis is deleveraging and of course we're considering the preferred there and the senior notes as well..

We'll move next to Dan Kurnos at The Benchmark Company..

Great thanks. Good morning. Can we just maybe start on TV or actually just take broader distribution.

I think our RSN distribution a little bit higher and I guess you guys assume that goes maybe even a little bit better if you get Comcast and or DISH.But just on the TV side in particular I know Lucy you called out kind of the sub churn issue just trying to understand sort of a step up or a limited step up between 1Q and 4Q.

And then maybe an update just on kind of net retrains expectations given sort of what's going on in the sub environment through both 2020 and maybe even to 2021?.

Yeah. So really step ups are really just going to be a function of what contracts come up for renewal and really for this year the big one is going to be Comcast later this year for both the broadcast and the RSN division. So any step-ups is really just going to be then outside of renewal it's going to be related to just annualized increases.

And then on the net so I'm glad you asked that question, Dan, because the networks have moved primarily to fix programming fees that aren't tied to retrench.And so looking at a net retrench number is really no longer a good indicator of the distribution margins.

So we actually you know are going to just be reporting on gross distribution numbers because again this – it’s really not a reverse payment that the networks are charging it's more of just a fixed programming fee..

Okay. Got it. Thanks.

And then maybe just on – on political if there's any timing we've heard about some pull forward into Q1 and it didn't sound like Chris you're willing to sort of put your – you know put the line in the sand anywhere but just if there's any sort of thoughts on order of magnitude over pro forma either 2016 or 2018 would be helpful?.

Well we did – we did say that you know we expect this to be the highest year on record and our previous high was on a pro forma basis 266..

All right. And then I guess just one last one. Chris I – you know I just – I'm not trying to read between the lines, but the press release talked a lot about more focus it seemed on organic.

I don't know if that means that you're less focused on doing M&A but just wanted some clarity from you on that?.

Well I think that that's really in reference to a number of initiatives that we have ongoing like the digital reboot of the RSN digital footprint, sports betting. And then also you know additional sports rights which could be organically acquired.

And so you know they just are a number of organic opportunities that we have in the Hopper, not to say that we are still active on the M&A front, but very disciplined on valuation as always..

Your – and Lucy, just so I'm clear, just on the full year, what – is there a full-year one-time transaction impact to – I guess I’m trying to triangulate EBITDA, is there any noise in there that would impact that number?.

For 2020?.

Yeah..

Yeah. It'll be minimal. We are looking at call it about maybe $25 million to $30 million of one-time non-recurring..

Got it. Super helpful. Thanks, guys..

Okay..

We’ll move next to Zack Silver at B. Riley FBR..

Okay. Great. Thanks for taking the question.

The first one, just in some of the recent retrans that you've done and getting carriage of the RSNs as well, can you talk about your willingness in upcoming deals to potentially subsidize the RSN carriage via lower retrend step-ups on the TV station side?.

Well, we really, from a practical perspective, can't do that. We have an arrangement between the two silos, not to discriminate between the two. And the way the contract – the contracts work and the history there is really what drives the negotiation..

Okay. Fair enough.

And then, just given some of the – your recent renewals with some of the teams, given the MLB putting the end market streaming rights back to the teams, have the talks with them changed at all? And can you I had a follow-up on that, there’s been some report and that you guys are entering into a deal a technology partnership with Deltatre you know as a sports streaming tech platform.

Just curious to see you know how that potentially impacts your thoughts on a DTC – a DTC streaming service going forward?.

So yes that the talks have started to change this is a new thing for MLB we already have the direct consumer rights for NHL and NBA.

And so you know that's a new area that we're currently exploring with the teams and supports any new deal that we do will include these.And as it relates to you know the – that the Deltatre rumor the – you know the – no decisions have been made there, I'll know although but we are doing a lot of work around a digital reboot which we think is a fantastic opportunity to create something on the scale of ESPN Digital.And not only would that include various different content types now aside from just video but what it would be the ideal launching point for any direct consumer offering be that a super fan up-sell packages or you know straight up out you know the entirety of the artist and on a consumer base which is not being done today.

We had no plans to do that but certainly the new digital footprint that we're building out would be fully capable of doing that..

Got it. Thank you, Chris..

We'll move next to Kyle Evans at Stephens..

Hi. Thanks.

Few TV legacy questions and as a follow-up to Barron's 4Q and 1Q auto, can you update us on where auto is a percent of your non-political legacy core and kind of speak to the 2020 outlook?.

It is on a continuous basis, we’re less reliant on auto. Our sale structure has been to focus on many different categories. So we're looking for a full year to be flat to slightly up and but our services business from legal to pharmaceutical to insurance, we’re seeing big success in those categories.

So in terms of the percentage of the whole, it's still running at about a quarter of the ad sales and non-political ad sales. But as Rob points out we see that declining over time as we grow some of these our segments..

Got it. I think I've got a follow-up. I think this is probably a Rob question. The National piece of non-political course kind of been a drag on the business over the last three years to five years.

It sounds like we're hearing some, some green shoots and signs of growth there, any commentary on national and then one more follow-up please?.

Yeah. National is off to a very robust start ex-political. So just on our core and we expected to see this throughout the year. So we're very bullish on what we're seeing coming out of the National holding companies and ad agencies..

Got it. Great. And that's probably Chris just an update on STIRR and Compulse and kind of a growth that you've seen 2019 and maybe what you're roughly looking for in 2020? Thanks..

Yeah. I’ll let Rob speak to the growth we're seeing in digital marketing services which is you know power bike and pulse.

And there we have spent a lot of effort and time over the last five years making sure that we have best-in-class digital marketing services so that we can offer all of our advertisers a full suite of one stop shop solution on an integrated campaign and that has been a very powerful offering to the marketplace and this has been a big part of our digital growth story that will continue into 2020.STR is a different strategy from that.

It is our ad supported direct-to-consumer AVOD platform. It's been growing very nicely and open for about a year and the usage continues to climb and we're adding more and more content, we’re over 100 channels now.

It has more channels based on what markets you’re in which are soon going to be adding on the syndicated programming of various stations, so we're happy with the usage progress on STR.And what it does it’s provide additional ONO, OTT ad inventory that we are very successful in selling into local businesses as part of our compulse offering, so that up ties into compulse and it generates additional inventory for us to sell in to those sales channels.So we have a continuous training program 52 weeks and the focus is not to just focus on the selling the course box that's part of our 360 solution.

So when we do our neat analysis in the local markets for our clients it’s to include all the digital assets as part of the solutions. And OTT is kind of the flavor of the day, but we have 80 assets in our bucket and they come into play at some point in time based on the needs of the clients..

Great. Maybe, maybe just one more. Lucy, what I heard you say is that the net retrans margin is I guess less meaningful given fixed programming agreements with the networks going forward.

I understand exactly what you're saying there, but if you guys could kind of step back and characterize network relationships, you know today versus say 2016 when CBS told everybody they were going to get two thirds on the dollar, just kind of update us on how friendly or unfriendly the network relationships are? Thank you..

Yeah. There's been no real trend change to note of in terms of network relations. We continue to have very productive relationships with them.

They of course want maximum dollars for their programming and you know we use our scale and importance to try to minimize that, but really I wouldn't know of any specific change in the way they operate over the last several years..

[Operator Instructions] We’ll move next to Davis Hebert at Wells Fargo..

Good morning, everyone. Thanks for taking the questions. On your Q1 guidance, Lucy you talked about the difference between amortization and the cash payments. Do you think the right approach would be to get a more normalized EBITDA for the RSNs to adjust that higher by a $157 million to give a more normalized number..

When you say adjust -- what is it in that case?.

Oh! Sorry the $30 million to $33 million of EBITDA guidance for the first quarter and then adding the difference between the amortization and the cash payments?.

Yeah so I think what you are saying is whether or not we should just use the sports rights amortization as opposed to the sports rights payments when we're – when calculating EBITDA..

Correct. Exactly. To get a more normalized ….

Yeah..

… look at it?.

Yeah I mean look I mean what I would say is as investors let us know we can do it either way. Just let us know which one you would prefer. I mean certainly the amortization adds more – adds less volatility within the year when trying to calculate EBITDA.

But I mean look we can take this offline and we can get feedback from people for which way they would prefer us to calculate it..

Okay that's helpful. And then as you think about attributable EBITDA on the RSN side adjusting for things like the YES distributions.

How do you think about the leverage outlook for the Diamond Sports side in 2020?.

Well I mean so far Diamond is outside of the DISH blackout. Diamond is on track for what we – we've indicated all along and so really the way we think of it because we don't believe DISH, RSNs and DISH is at a permanent state. You're really just looking at an elevated temporary elevated leverage until they come on.

But outside of that, we really are on track for all of the estimates that we originally expected..

Okay.

And on the balance sheet for Diamond Sports, I think you have $949 million of cash there, should we adjust that for the raise put, and then, the preferred redemption? Are those the only two adjustments we should make for the first quarter?.

So, we did have one team that exercised their put. So that happened in the first quarter. We did take out the $200 million of the craft. So, those would be the two large items to adjust for..

Okay. Got it.

And then, lastly, before I hand it over, you have – you had a dispute, I guess, with SuBo TV, where you're no longer on that platform, I know that's relatively small, but does that have any impact on your guidance for this year? And then, are there any other virtual contracts, virtual MVPD contracts we should be aware of like YouTube or Hulu or anything near term?.

So, we did take SuBo out of our guidance. And – but it was immaterial, as you noted. And we just recently added Hulu, Marquee onto Hulu and YouTube is an active negotiation that's near term..

Great. Thank you so much..

We'll move next to Steven Cahall with Wells Fargo..

Thank you. Maybe first just a question on the guidance, you raised 2019-2020 free cash flow.

Could you just help us maybe think about where that raise come from, did it come in 2019, is it your expectation for 2020 and if we look at it as the kind of the divisional level that the increase or outperformance come from legacy Sinclair or the Regional Sports Networks?.

Yeah. So look the legacy business had you know a phenomenal fourth quarter. And so you're seeing the free cash flow increase primarily coming from that. But again the sports segment is done exactly what we thought it would – it would do impacted it also be – its revenue and EBITDAR internal guidance there.

And so it's – so that's a driver but look our political numbers are coming in a lot higher than even what we budgeted for it internally in the first quarter. So we're seeing that driver is well flow through..

Great.

And then on the RSNs, could you maybe just take a longer term view when you look at this business, how should we think about the revenue growth rate over the medium-term? And I think you've talked in the past about low single-digit cost growth you had some recent renewals are you still confident in the low single-digit cost growth and kind of how does that compare to your long-term revenue expectations to give us a bit of like an algorithm around run rate EBITDAR free cash flow growth?.

Yeah. So yeah we are still confident in our ability to keep expense growth in the low single-digit area.

And you know despite even you know renewals flowing through there obviously 90% of the revenue is distribution so in near to medium term, it’s going to be highly influenced by subscriber trends, but that will be offset by mid-single digit escalators.And then you know the things that we're working on top of that, like sports betting, we think we'll have a large new revenue pool associated with that.

We think ultimately will be bigger than advertising, but not as bigger subscript as subscription.

Though it does help viewership which helps advertising and viewership which helps you with your MVPD negotiations, those are tangential.We see a new revenue stream forming around sports betting which ultimately we think will be a bigger opportunity even advertising.

And then we've got our digital rebuild which there really isn't much revenue right now digitally for any of these assets and we think that's a very significant opportunity to there in an order of magnitude of what ESPN digital is.

And on the ad side, although ads are only 10%, so moving up their yield will be more of a, you know an incremental process.We're already seeing progress there in terms of just doing better basics around local selling and yield management. Political obviously is going to be a growth area.

We are already seeing that come through with the stations being in the flow and sharing that flow with the RSNs, and then bringing our top tier suite of digital marketing services to local sellers that the RSNs will also add to the yield.And then on top of that, you've got DTC opportunities which could include add-on subscriptions to the RSNs or cost synergies which are well underway, and then, better are non-game programming as well.

And as we go through renewals, I think we’re going to have an opportunity to actually be fairly aggressive with our rights cost management, given how much of a payer that we are to the teams in the leagues. And so, really that's sort of the – how we look at eSports.

But as I pointed out, they're really – in the near term, they're really – a large part of the revenue will be driven by subscriber trends..

Great. And lastly, I know that you've got the businesses siloed from a leverage standpoint than debt standpoint. Is the cash between them fungible? I mean should we think about overall company free cash flow as being available for both debt repay down at both silos and for share repurchases over the next year? Thanks..

The cash really is siloed as well. And as I mentioned earlier, we think about it that way as well. In terms of what the – what are the priorities with eSports, which is focused on deleveraging right now, and then, there's different priorities for STG..

Thank you, ladies and gentlemen. That will conclude today's conference. We thank you for your participation. You made just disconnect at this time and have a great day..

Thank you, everyone..