Good morning, ladies and gentlemen, and welcome to the Sinclair Broadcast Group’s Third Quarter 2021 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and we’ll open the floor for your questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host, Lucy Rutishauser, Executive Vice President and Chief Financial Officer. 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 Broadcast and Chief Advertising Revenue Officer; and Steve Zenker, Vice President, Investor Relations. 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 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 adjusted EBITDA, adjusted free cash flow and leverage.

The company considers adjusted EBITDA to be an indicator of the operating performance of its assets. The company also believes that adjusted EBITDA is frequently used by industry analysts, investors and lenders as a measure of valuation.

These measures are not formulated in accordance with GAAP and are not meant to replace GAAP measurements and may differ from other company’s uses our formulations. The company does not provide reconciliations on a forward-looking basis.

Further discussions and reconciliations of the company’s non-GAAP financial measures to comparable GAAP financial measures can be found on its website, www.sbgi.net. Chris Ripley will now take you through our operating highlights..

Good morning, and thank you for joining us today. Before I go over the quarter’s results and other development since our last earnings call, I want to address recent ransomware attack on our company.

On Sunday, On October 17, 2021, the Company identified that certain servers and workstations in its environment were encrypted with ransomware, and disruption of certain office and operational networks as a result of the encryption, and indications that data was taken from our network.

Promptly upon detection of the security event, senior management was informed and we began to implement incident response measures to contain the incident, conduct an investigation, and began to plan for restoration operations.

Legal counsel and cybersecurity forensic firm, and other incident response professionals were engaged, and law enforcement and other governmental agencies were notified. The investigation into the incident remains ongoing. Needless to say, we are ensuring that operations are back to where they need to be as quickly as possible.

We are working with internal resources and outside forensic accountants to help determine the financial impact of the incident. While we maintain insurance to cover losses related to cybersecurity risks and business interruptions, such policies may not be sufficient to cover the losses.

I want to thank our employees for their quick response and creative workarounds as we work through the recovery process. Their agility during this time is a testament to the ethos of our company, and we’re extremely proud of our team’s dedication to restoring our systems. Now I’ll turn to the quarter’s results.

The combined company’s third quarter adjusted EBITDA and adjusted free cash flow were at the high end of our guidance range. While third quarter media revenues were within our range when adjusting all for the one-time change in the distribution rebate of dollars tied to a shift in game counts in the calendar year by the leagues.

Looking at recent trends, we are seeing a majority of ad categories recovering quickly. However, the auto sector and other associated – others associated with the supply chain continue to lag impacted by lower inventories.

While it’s difficult to ascertain when the inventory shortages will be alleviated, we are seeing continued strength in our largest category services coupled with significant growth from sports betting companies that have helped mitigate the weakness in auto.

While we’re also starting to see early ad spending for the 2022 mid-term political cycle early indications from third-party research reports are for a robust 2022 political spending cycle. When coupled with even a slow improvement from auto and continued growth in sports betting as more states legalize, we are optimistic heading into 2022.

Speaking of the RSN business, we had a busy last couple weeks as far as sports rights renewals. On the MLB front, we renewed our exclusive local rights agreement with the Detroit Tigers. Tigers agreement includes direct-to-consumer and other digital rights similar to the other three MLB teams we have renewed over the past 12 months or so.

In regards to the NHL, we renewed our contract with the Detroit Red Wings, in regards to the NBA, we renewed our agreement with the Cleveland Cavaliers. I would like to address the recent chatter about our direct-to-consumer initiative that we continue to work on for the first half of next year launch.

Discussions continue with the leagues and on the structure and other specifics of the direct-to-consumer product. This is an important initiative for all parties and all our partners including the teams and leagues.

The evolution of viewer habits makes it imperative that our current product is extended so that it is attractive to all viewers in a team’s territory who can subscribe to it, whether traditionally through MVPDs or through direct-to-consumer. What’s important to note is that we have exclusive local rights for our teams.

And those rights cannot be infringe upon by any other party to launch a direct-to-consumer product without significant ramifications. So we continue to negotiate in good faith with all interested parties to make direct-to-consumer a reality.

In addition, we continue to engage in discussions with stakeholders around funding the direct-to-consumer product. Now I’d like to take a minute talk and four-minute about ATSC 3.0 or what has – what is also referred to as NEXTGEN Broadcast.

For those who are not familiar with it, this is a groundbreaking technology that is expected to transform the broadcast industry significantly, allowing it to move from just to purveyor of video and audio to a provider of data for a multitude of industries. I have talked in the past about its benefits.

The ability to transmit 4 to 5 times the video content through our existing spectrum, a higher quality immersive video and audio experience targeted advertising capabilities and a one to many platform to that is more reliable, efficient, secure, and cheaper for customers than many of the technologies they’re currently utilizing.

The NEXTGEN Broadcast platform will enable significant enhancements for communities around more robust emergency learning capabilities, not just the rudimentary warnings you see now for weather and such, and will then enable enhanced education opportunities for areas of the country where the internet is either unaffordable, unavailable, or unreliable.

And then there’s the technologies attributes around its mobility and portability precision GPS positioning and ultra low latency, which make it ideal for connected automotive applications like mapping and self-driving capabilities, which rely on a great deal of precise and timely data delivery that cellular and Wi-Fi have difficulty economic delivering.

There are a myriad of other datafication uses for the technology as well, including mass software updates, meter readings, remote monitoring, and maintenance of buildings and countless other uses.

I want to dig a little bit deeper to give you better insight into our current priorities for NEXTGEN Broadcast and the applications we and the industry are working on. One important priority is driving the enablement and adoption of NEXTGEN Broadcast by demonstrating the viability of data delivery as a service to potential customers.

Currently, there is testing going on in numerous markets and areas to confirm expectations around quality and versatility of NEXTGEN Broadcast services.

Initiatives in this area include encouraging trials of data delivery to automobiles, testing the precision GPS capabilities through the use of drones, testing of broadcast – NEXTGEN Broadcast reception with phones developed by our partner Saankhya Labs, infrastructure improvements developed by our Cast.era, joint venture with, SK Telecom, and distance learning initiatives utilizing the new technology.

Meaningful progress in testing in all of these areas is very encouraging and reinforces our belief that NEXTGEN Broadcasting is a game changing technology. That is the future of the broadcast spectrum and the broadcast industry.

So the question I’m sure everyone wants to ask is how far is it out before we begin to monetize the opportunity? The question – or sorry, the answer is that while the time line is not set just yet, the opportunities are starting to come together. The time line is approaching for broadcasters to begin to utilize this technology in the mass market.

As I stated earlier, the enablement and adoption of the technology at scale are key factors in getting monetization. The NEXTGEN Broadcast signal is currently expected to be available in approximately half of the TV viewing households by the end of 2021 and at least 75% by the end of 2022.

There are already 70 NEXTGEN TV models capable of receiving a new signal, including all Sony’s TVs with an expected over 2 million NEXTGEN capable TVs to be sold this year according to CTA. Meanwhile, testing continues on phones, and business-to-business use cases expected to follow soon thereafter.

Now I’ve previously talked about the value of this additional usage to our spectrum, $1.7 billion using the most recent auction pricing. Other ways we can monetize the spectrum are by utilizing it for our business use cases or wholesaling it out to third parties looking to transmit data to mass users.

Either way, it’s clear that NEXTGEN broadcast will be a game-changing technology for the broadcasting industry and for Sinclair, and we’re very excited that this technology is that much closer to being ready for monetization. I would also like to address some of the new programming that we are developing.

At the end of September, we launched an evening edition of our successful news program, The National Desk.

We have been very happy with the performance of the morning edition of The National Desk, which has added engaging news – an engaging news program with a distinctive style and tone on stations where previously running syndicated programming that garnered fairly low ratings in that day part.

Since the launch of the morning edition of The National Desk, we have seen its ratings and impressions trend up meaningfully. We have similar expectations for the evening edition of The National Desk, which will feature some new content features developed for the show.

This includes the fact check team in which a team of researchers on – working on air and onset with the TND anchor team fact-checking an issue of the day. These segments will delve into the details of an issue, a bill or other hot-button political government topics and explain in real time how it affects the American people.

Another new feature being added to The National Desk will be a rapid response team, a dedicated staff of digital writers exclusively covering breaking news. The rapid response teams post will live on the TND social channels and site branded on The National Desk and syndicated across all Sinclair television station sites.

The ability to share content across our business and platforms is a key synergy that benefits our company. For example, we have a new show under development that is expected to launch at the beginning of next year, titled The Rally.

The show is planned to be a new, fast-paced 90-minute sports program covering all sports topics and is used with social influencers, interactivity and the voice of the fan.

The show utilize Sinclair’s sports talent from all of our platforms across the country, providing national coverage with a local authority and encouraging viewers to interact through contest, giveaways and commentary. The new program will be aired across our RSN stadium and STIRR platforms, engaging all cohorts of sports viewers.

And I would be remiss if I did not call out the growth of our Tennis Channel international platform, which has already expanded into the UK, India and Greece this year, with more countries coming soon. The platform was recently nominated for Platform of the Year for best original content and best digital first production.

So we’re very proud of our achievements in the tennis arena where our content and reach really sets us apart. Finally, we received quite a few calls from investors regarding the sum of the parts analysis we did in our last earnings call. I wanted to make sure people were clear on the pieces that make up that valuation.

I think the Bally’s investment is well understood, warrants and options to purchase up to 12.8 million shares, which at today’s price equates to approximately $600 million. The NPV of the tax yield as a result of the purchase of the RSNs is also fairly straightforward, which we estimate to be worth $1.2 billion over the remaining 13 years.

The other two big pieces are the 3.0 opportunity I discussed earlier on the call, which we believe to have a value of at least $1.7 billion based on previous spectrum options, as well as the non-core assets. I’ll give you a little bit more clarity on what resides in those non-core assets.

There are several areas in which we have made investments, including real estate, investments in venture capital and private equity funds, and direct investments in companies, mainly focused on technology content and advertising. The more meaningful of these investments include a minority stake in Playfly Holdings and Saankhya Labs.

Playfly is a marketing and multimedia rights holder, some of the most prestigious collegiate teams and sports ventures across the country, as well as a leader in collegiate esports. Saankhya Labs is a key partner in the development of ATSC 3.0 and market leading 5G products, including transmission hardware, receiver, chip sets, and mobile phones.

Our investments in venture capital and private equity funds allow us to be opportunistic around businesses, operating in new technologies, TMT adjacencies, and complimentary sectors to our core business.

In total, these assets that I have just outlined have a total value together that well exceeds our current market price, adding even at a conservative multiple for our 185 TV stations or Tennis Channel, news on STIRR as well as the RSNs and then subtracting out our debt gives you a value well over double that where we trade today.

So I hope I’ve given you some idea of how we look at the opportunities that lie ahead for Sinclair. While the broadcast industry continues to evolve, so do we. As we seek ways to grow organically in our television and sports businesses, through building content, partnering with others with that share our vision and seeking ways to engage our viewers.

With that, I’ll turn it over to Lucy for some deeper commentary on the financials.

Lucy?.

Thank you, Chris. Good morning, everyone. For the third quarter result for broadcast and corporate and other, adjusted EBITDA for the quarter was better than we guided, driven by lower than expected media expenses. With 2020, be in a presidential election year results versus last year were down as expected due to the lower political ad revenues.

Media revenues for the quarter were within our guidance range and down 3% versus the same period a year ago. Excluding the political ad impact, media revenues increased 10% on higher core advertising and distribution revenues.

For broadcast and other core advertising revenues in the third quarter increased 17% compared to the same period a year ago and were down 2% versus 2019 pro forma. While the automotive category continued to be weak, strength in the services and sports betting categories helped to offset the auto weakness.

Distribution revenues for broadcast and other increased 3% versus last year and was at the high end of our guidance range. Media expenses were 9% higher in this year’s third quarter versus last year on higher network programming fees and production expenses, particularly around more tennis tournaments.

Media expenses, however, were favorable to our guidance on both continued cost management efforts across multiple areas and timing of expenses.

Turning to the Local Sports segment, as discussed on previous earnings calls, distribution revenues and sports rights payments in the Local Sports segment can be impacted by the actual number of games delivered versus minimum game guarantees, which can result in rebates to be paid to distributors or received from the teams.

As a result, our prior estimate of rebates due to our distributors was increased this quarter by $14 million as the number of local games expected to be delivered decreased for the NHL. The rebate results in a reduction of distribution revenues for the third quarter.

From a cash payment standpoint, there remains $201 million of distribution rebates to be paid, of which $15 million is expected to be paid in the fourth quarter of 2021 and $186 million expected to be paid in the first half of 2022.

Local sports adjusted EBITDA for the quarter was within our guidance range, despite the distributor rebate accrual taken during the quarter and fewer games provided by the teams than expected.

Adjusted EBITDA versus third quarter last year was down due to the net benefits of team and distributor rebates that favorably impacted last year’s third quarter. Media revenues for the Local Sports segment increased 4% to $759 million.

The increase was the result of higher distribution revenues, partially offset by the $14 million distributor rebate accrual taken in the quarter.

Ad revenues declined versus a year ago in part due to the auto category weakness as well as pent up advertiser demand last year, due to the absence of live sports for several months prior to them starting up again in the third quarter of 2020.

Distribution revenues came in higher as compared to Q3 of last year as the third quarter of 2020 included $128 million of distributor rebate accruals, which was offset by dropped carriage and continued subscriber churn. Excluding this quarter’s distributor rebate accrual, media revenues would’ve been within our guidance range.

Local sports media expenses for the third quarter were down 10% from a year ago on lower sports rights amortization due to the number and timing of gains last year. Media expenses, excluding sports rights amortization increased $17 million with increased primarily driven by cost associated with transitional services and production expenses.

Media expenses were favorable to our guidance in part due to timing and in part due to expense controls. Our local sports adjusted EBITDA for the third quarter, excluding the $20 million of non-recurring items was $264 million down from the prior year, but within our guidance range.

For the consolidated companies, Sinclair’s total media revenues for the third quarter were $1,526 million up slightly from the third quarter of last year. Adjusted EBITDA, which excludes $27 million of onetime expenses increased to $451 million. Compared to expectations.

Revenues were slightly below our guidance due to the rebate approval and adjusted EBITDA was within our guidance range. Third quarter consolidated adjusted free cash, which excludes the adjustments for the non-recurring items was $277 million, which was at the high end of our guidance range.

For the quarter, we had $0.25 diluted per share on $76 million weighted average common shares compared to $43.53 diluted loss per share a year ago, which included an impairment charge. Adjusted for the non-recurring items and the impairment, income per share was $0.52 for the quarter versus income per share of $2.13 a year ago.

Now turning to the consolidated company balance sheet, consolidated cash at the end of the quarter was $1,051 million, including $558 million at STG and $476 million at Diamond. Neither credit silos revolver was drawn during the quarter, and as of the end of the quarter, the balance barred under the accounts receivables facility was $183 million.

Total debt at the end of the third quarter was $12,530 million. The net leverage ratio for consolidated Sinclair quarter end was 6.9 times. Sinclair Television Group’s first lien indebtedness ratio on a trailing eight quarters was 2.7 times on a covenant of 4.5 and 3.9 times on a net leverage basis through the bonds, which is in our target range.

Diamond’s first lien indebtedness ratio on a tree on four quarters was 8.8 times on a covenant of 6.25 times, which only springs if the revolver is drawn over 35%. Diamond’s net leverage was $11.4 times. During the quarter, we paid down $15 million of debt and paid $16 million in common stock dividends.

Now, before I turn to our fourth quarter and full year guidance, I want to note that our expectations exclude the impact of the cyber incident and therefore guidance does not take into effect any cost or potential loss revenue from the event as the investigation is still ongoing and the financial impact not yet determined.

As Chris mentioned, we maintain insurance to cover losses related to cyber security risks and business interruption, but such policies may not be sufficient to cover all losses.

For our broadcast and other segments, fourth quarter guidance reflects the absence of political, which is the main driver for media revenues to be down approximately 11% to 13% or $861 million to $880 million versus the fourth quarter of last year. Compared to pro forma, fourth quarter of 2019 media revenues would be up 7% to 9%.

Excluding the impact of political ad revenue, fourth quarter core advertising is expected to be up low double digit percent versus Q4 of last year and up low single digit percent versus Q4 of 2019. For the four year media revenues are expected to decrease 1% to 2% or increased 10% excluding politic ad revenues.

Fourth quarter adjusted EBITDA is expected to be between $240 million and $256 million compared to $408 million last year, primarily on the absence of the political revenue. Full year adjusted EBITDA is expected to be $792 million.

For the Local Sports segment, fourth quarter media revenue is expected to be up 33% to 34% to $703 million to $712 million versus Q4 of 2020. As a reminder, last year’s fourth quarter included a distribution revenue rebate accrual of $168 million. For the full year, media revenues are expected to be up 14% to 15%.

Fourth quarter adjusted EBITDA is expected to be negative $8 million to positive $1 million, due primarily the timing of sports rights payments associated with the start of the NBA and NHL seasons and continued subscriber churn.

As compared to fourth quarter of last year, the decline is driven primarily by $120 million of net rebate benefits booked in Q4 of 2020 continued subscriber churn as well as distributor carriage dropped during the fourth quarter of last year. Full year adjusted EBITDA is expected to be $505 million to $514 million.

For the consolidated company, fourth quarter media revenues are expected to be up 2% to 7% to $1,544 million to $1,572. Fourth quarter adjusted EBITDA is expected to be $232 million to $257 million and fourth quarter adjusted free cash flow $33 million to $58 million. Full year media revenues are expected to be $6,159 million to $6,187 million.

Adjusted EBITDA of $1,298 million to $1,322 million and adjusted free cash flow of $8.08 to $8.41 per share. Now with that, I would like to open it up to questions.

Operator?.

Certainly. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions].

Operator, just checking on the questions..

Certainly. Please stand by one moment. The next question is coming from Dan Kurnos from Benchmark. Dan, your line is live. Please ask your question..

Can you guys hear me?.

We can.

Can you hear us?.

Great. Thanks. Yes, I can hear you back now, Chris. I don’t know what’s going on this morning. But anyway, certainly, I think you rightly called out the amount of noise in the media around what’s going on with the RSNs. I’d just love to hear from you rather than from them, you kind of laid out some options, I guess.

So to the extent you certainly addressed your firm belief that they can’t circumvent you from a DTC perspective. So you’d have to be involved in the conversations.

But maybe what’s on the table in terms of – do you have sufficient rights to be the leader in this, would it have to be a group effort? Just kind of help us think through how you’re trying to tackle this problem with the leads. And attached to that, obviously, I think there’s a lot of speculation out there.

And I have to take a shot, Chris, around the DISH negotiations being tied to some outcome around that. I don’t know if you care to comment on the factual nature of that statement or not, but anything kind of helpful is I think you’re still now going week-to-week, but this should be really helpful..

So I guess I’ll address DISH first. We are in very short-term renewals at this point, and we don’t comment on live negotiations. So that’s what I’ll say on that question.

And then as it relates to the leagues that we have, for MLB, we have linear and authenticated streaming rights for all teams, and we have direct-to-consumer rights now for four teams, which are all the teams that we’ve renewed post acquisition. And our expectation there is that we will accumulate more direct-to-consumer rights as teams renew.

And then for NHL and NBA, we have always had linear authenticated streaming and DTC rights. And those are under current renewal discussions as a part of a larger deal, which includes market expansion, authenticated streaming and direct-to-consumer rights.

So that’s where we stand from a rights perspective, and we do think we have critical mass in terms of rights to launch a product. And that’s what we intend to do..

Do you think that – I mean the leagues – having critical mass, I mean, is there any pushback from the league in terms of trying to have a unified product? Or obviously, you’re interested in the other RSNs before.

But to the extent that it requires more of a joint effort or something of that nature, I mean, is that being contemplated? Or do you really believe that regardless of how that goes forward, you can get the product out in the front half of next year?.

Well, if you’re alluding to bringing in other groups like the Comcast RSNs or the AT&T RSNs, but I’ve always thought that consolidation of the rest of the industry makes sense. I mean the – we’re in a much better position than anyone else to move forward on direct-to-consumer, because we’ve been planning for this and for quite some time.

It’s not something you can just close to switch on overnight. But I do think ultimately adding in rights from other groups like Comcast and AT&T makes sense. Whether you do that through transaction partnerships, contracts, consortiums, that is all, I think, things that will be contemplated in a stage two..

Got it. That’s helpful. And then, obviously, I’m sure you’re aware of where the unsecureds are trading.

Just any kind of incremental thoughts on restructuring within the artist and silo?.

Yes. We continue to believe that a new money deal is possible, and discussions with the credit advisers are continuing with earnest – in earnest. And we’re also simultaneously contained discussion – discussions with our various commercial partners around that financing..

Okay. Fair enough and good luck getting past the stuff that’s never pleasant..

Thanks, Dan..

Your next question is coming from Steven Cahall from Wells Fargo. Your line is live..

Thank you. Maybe first, just a follow-up on Dan’s questions about restructuring the RSN silo. Could you maybe put a little more color on the liquidity position of Diamond today? Is that anything that you think is cause for concern? And you mentioned those constructive discussions.

Do you think you’ll need to draw any more liquidity as they’ll get done? Or do you feel pretty comfortable about where Diamond is from a liquidity standpoint? And then, Lucy, could you put some color around the implied retrans sequential growth in the fourth quarter? It looks like, it’s pretty solid.

And I know we’ve talked a little bit about how net retrans has been negatively impacted by some of your renewal timing this year. So could we start to look at Q4 as accelerating net retrans profile into 2022? Thanks..

Great, Steve. I’ll address on the liquidity side, there is ample liquidity at Diamond. And we are good for the next 12 months, so we’re comfortable there..

And Steve, on the retrans. So as we reported this morning, gross retrans revenue we’re expecting to grow low to mid-single digits from this year, which we’ve talked about for multiple calls the reasons why, which is primarily just having the one renewal in the back half of this year.

And then that also assumes mid-single-digit percent subscriber churn for broadcast. And on the churn side – and then I’ll get to net retrans. On the churn side, we did see as you saw in the numbers for both broadcast and the RSN slight improvement in churn.

You saw that in the revenues, but not really enough for us to change our full year outlook, which again is mid-single-digit churn on broadcast, high single digit on the RSN. And then on the net retrans, again, as we’ve discussed for multiple quarters on the earnings calls, net retrans we continue to expect to decline mid-single digits this year.

Again, that’s due to the modest increase in the gross retrans as well as the mismatch in both the network and MVPD contracts that renewed this year and then timing of those contracts.

So – and then at this point, we’re not really ready to talk about 2022 or beyond, but what I will say is we have approximately 25% of our subs renewing next year with a vast majority of those coming up early in the year.

And then we have about 25% of the network subs coming up next year, but those are spread some at the beginning of the year, some later in the year..

Great. Thank you..

Thank you. Your next question is coming from David Hamburger from Morgan Stanley. Your line is live..

Hi, thanks for the questions. I just wanted to clarify, you mentioned the direct-to-consumer product offering launching in the first half of next year.

Just to clarify, is the plan to have a direct-to-consumer streaming product in the market for the baseball season next year, so by April?.

Our launch expectations have not changed. Obviously, if there were a change in our rights versus the status quo, we would may make that adjustment, but that is – it doesn’t look like what’s going to happen here. So that – our plans on launch timing are remain the same..

Okay. And if I go back to your comments on the first quarter earnings call. You had mentioned specifically there that you had the streaming rights for the vast majority of our teams, and you did qualify that and maybe have that and say we are in discussions with the leads and the teams on enhancing some of those rights to make the product even better.

I was wondering, just to clarify your comments now, you’re saying that you have direct-to-consumer rights for four baseball teams.

So is it essentially saying for the other 10 baseball teams, you do not have explicit direct-to-consumer streaming rights in place or an agreement in place with those 10 other teams? And then with the NBA and NHL last earnings call, you had highlighted that maybe the beginning of the NBA and NHL seasons this year would be kind of a finish line, if I can quote what you said, for negotiating those renewals.

But just to clarify here, so essentially, it would seem you have explicit stream rights for only four of your teams at this juncture.

Is that fair?.

Well, I think I would add to that, that the – we expect to get to the finish line with the NHL and NBA on those renewal discussions. So that’s over 30 teams there..

And then with baseball, I guess, because you’re launching for the baseball season, any clarity on the other 10 teams to the extent that you have those rights? I mean it sounded like that the MLB Commissioner gave recently was that you don’t have those sports rights..

On the 10 teams, that is correct. And so how that has been working is that those rights have been rolled in as we renewed the master agreement, and that is our current expectation..

Okay. And then just quickly on the financing for this product offer, I believe on the last call when we discussed this, you are looking for new money as part of this launch effort. And it seems that at least to date, you have not been successful getting new money from existing Diamond Sport creditors.

I’m wondering what avenues you might pursue with Sinclair be willing to put new money into this venture if that were needed? Or do you still hope that you’ll be successful in maybe negotiating with Diamond Sport creditors? Or could there be another potential equity investor here?.

Look, I think that’s all possible, but we believe that a new money deal is still possible with the creditors, and we continue to have constructive discussions with that.

In that regard, as it relates to other sources of capital Sinclair or otherwise, that – those were not – we wouldn’t exclude those from any possible solution here, but those would have to – each party would have to have something in it for them to make such investments..

And just so we have a sense of expectations here, when would we expect to hear some developments? I mean April is not that far off, and we’re wondering how you communicate to the market that you have sufficient, both financial flexibility, new money investment that you have enough of a runway or time here to launch this product offering and sell into the market..

Well, I think what’s important to note is that we already do have an app, and this is a product extension of what we’re already building. So on the technical side, there’s a lot of work and effort around making enhancements to that experience and making it available to be switched on to – for purchase on a direct-to-consumer basis.

So things are moving in tandem in order to hit our timing. And as soon as we settle with the leagues, we will lay out more specifics at that time..

Just one quick follow-up on this, the last question.

With regard to your renewals with the distributors decided Suddenlink and Optimum, I know you did a Cox Communications earlier this year, were there any part of those renewal discussions? And I imagine they might be part of the discussions with DISH about the direct-to-consumer product offering and how that fits into the existing relationships you have with those distributors?.

Yes. Where applicable, we have built in what I’ve referred to in the past in terms of pricing protection for the distributors where they get to buy on a wholesale basis and the consumer will buy on a retail basis.

And so there’s a significant margin there in terms of price differential that is in every one of our renewals over the last couple of years, we have implemented were needed that provision..

Okay. Thank you very much..

Thank you. Your next question is coming from Aaron Watts from Deutsche Bank. Your line is live..

Everyone, thanks for having me on.

Chris, is it fair to say that the takedown on the top end of guidance for Diamond for the full year in EBITDA mainly reflects DISH not coming back this year? And I guess, relatedly, as we’re now approaching the midpoint of the NFL season, which I at least view as the time of year when you probably have peak negotiating leverage with distributors.

I guess I’m just trying to understand like your willingness to provide extensions at this point in contrast maybe to some of your peers right now and kind of what agreements or terms have maybe been laid down that give you comfort in providing extensions this deep into the NFL season with DISH..

Yes. Aaron, so there’s not a lot I can say on DISH, because it is still an active negotiation. As I mentioned, we are in very, very short-term renewals at this point in time for a lot of the dynamics that you just mentioned. And our expectations – our guidance reflects sort of what our current expected outcome is..

Okay. All right. And one follow-up on kind of the launch of a D2C platform in the first half of next year.

Would that – would it be your plan to launch that with just the four MLB teams you currently have the D2C rights to? Or is it your expectation that by that launch, there would be some further traction on rights with the teams and/or the league?.

That certainly is a possibility. But at this point, things are still fluid. So I wouldn’t want to commit one way or the other to how that might play out..

Okay. And if I could just ask two others. On the station side, given some of the actions being taken by your network partners to bolster their own streaming services such as placing content on those services that used to be exclusive to broadcast.

Do you see any opportunity during the next round of renewals with the networks to push back on increases in reverse comp? And I guess, relatedly, how should we think about where the margin is today on retransmission fees and where that might be headed over the next few years, especially in light of the new long-term NFL broadcast deal?.

Look, we’re – and as we’ve I think stated many times, margin isn’t really something that we focus on. We focus on growing the net dollars, because we don’t create EBITDA with a percentage margin. We created by adding incremental dollars. And we had sort of tough timing this year on net retrans, which we talked a lot about, so I won’t repeat it.

And we think we’ll be able to get back on the growth trend after we get through this adjustment year. And really, that’s what matters at the end of the day in terms of how we grow additional profitability.

And we see big upside on retrans still existing given the relative strength of broadcast versus what’s happened to cable channels over the following – over the last few years..

Okay. Got it. One last one and I appreciate the time. Just around the capital allocation policy for the TV station group. I believe there’s been a little bit of an overhang at least on the STG credit side due to worries about direct and/or implied support for Diamond encompassing cash distributions or retransmission fees.

I would appreciate your latest thoughts on how to – how much support direct or otherwise you see the TV station group providing Diamond going forward. And thanks, again..

Thanks, Aaron. So as we’ve stated many times, the two silos, we view them quite independently in terms of their capital structure and funding their business plans going forward. To the extent that Sinclair or sort of the TV side were to support the Diamond, they would have to be a strong financial reason to do so.

So just think about it as two innovative parties, and the investment makes sense, then obviously, it could happen. But if it doesn’t….

Thank you. Your next question is coming from Lance Vitanza from Cowen. Your line is live..

Thanks, guys. I wanted to go back to the recent New York Post story, and the way it was written suggests that MLB is thinking about moving ahead on direct-to-consumer and possibly doing it without Diamond or Sinclair. But my read is a little different.

I mean I would think that MLB, their incentive, right, is just to ensure that consumers have bought access to live games online, not only for guys that are in Diamond RSN territories, but for all of the teams in its leagues.

And in other words, the league won’t be content with Bally Sport doing a great job, for example, if AT&T and NBC are failing to promote their own app.

So am I crazy to think that all parties actually could be better off – all parties, including the RSNs? Instead of each RSN having its own local sports app, there was some sort of national MLB app that essentially plugged in to each of the RSNs local content? The RSNs could still get paid for providing the content but could benefit from Major League Baseball branding and promotion and that kind of thing.

Or do you think that league really is just trying to disintermediate the RSNs?.

Look, we are big believers in scale in general, but very specifically in direct-to-consumer. And that – in order to be successful in direct-to-consumer long-term, we think you need scale well beyond a team or just a league. And that’s why a multi-sport offering makes a lot of sense.

That’s why we’ve always said this direct-to-consumer extension that will – we’re planning on launching is just the start in terms of where we would go. And you’re going to be a market leader in the U.S.

in direct-to-consumer sports thinking that you could do that with only one league, we think, is – it doesn’t make sense and certainly dovetails with everything I’ve said about wrapping in the other RSN content and also the other direct-to-consumer rights over time..

Okay. Thanks. And then maybe just a quick follow-up.

So how much of Major League Baseball’s concerns do you think center around the overleveraged balance sheet at Diamond? I mean if the balance sheet were cleaned up, does that – is it basically game on at that point? Or are there other issues that the league is concerned about?.

Look, I think getting additional financing would be helpful for all parties. I mean that’s sort of undeniably true. So – and I think you’re spot on in that observation..

Okay. Thanks, guys..

Thank you. There are no further questions in the queue. I will now hand the conference back to Chris Ripley, President and CEO for closing remarks. Please go ahead..

Thank you all for joining us today. If you should need more information or have additional questions, please don’t hesitate to give us a call..

Thank you, ladies and gentlemen. This concludes today’s event. You may disconnect at this time, and have a wonderful day. Thank you for your participation..