Sinclair, Inc. (SBGI) Earnings Call Transcript & Summary

Greetings. Welcome to the Sinclair Annual Meeting 2024. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Chris Ripley, President and CEO. You may begin.

Thank you. Good morning. I'm Chris Ripley, President and Chief Executive Officer of Sinclair Inc. As directed by the company's Board of Directors, I will be the acting Chairman of this Annual Shareholders Meeting. It is my pleasure to welcome you, whether you are attending remotely or in person. It is 10:00 a.m. June 11, 2024. And in accordance with the notice of the meeting, I call this Annual Meeting of Stockholders to order. On April 26, 2024, the Board issued its notice of this annual meeting and proxy statement by which all stockholders of record as of the close of business on March 18, 2024, were notified of the date and time of this annual meeting. For those stockholders wanting to attend this annual meeting in person, the board advised that there may be location capacity limits and therefore, admission to the annual meeting could not be promised. Consistent with past practice, the Board encourage all stockholders to vote their shares prior to the annual meeting. There are 2 primary reasons for that. Stockholders attending remotely are not able to vote or vote a proxy through the teleconference or webcast nor participate actively in the meeting. Stockholders attending in person could arrive at the meeting but not be admitted due to capacity limits or other reasons. Unless such stockholders are able to submit a completed proxy card prior to the commencement of the meeting, their votes will not be cast. For those stockholders attending in person and admitted to this annual meeting, when you registered this morning, each of you received a written copy of the rules of conduct for the annual meeting. Any stockholder introducing a proposal or making a presentation today would have also received a written copy of the rules of conduct for this annual meeting. However, no proposals were submitted, and no stockholder presentations will be made at this annual meeting. Stockholders attending the meeting via the live teleconference or webcast are not permitted to participate actively and therefore, have not received a copy of the rules of conduct. This annual meeting shall be conducted in accordance with the rules of conduct. Rex Morgan, the representative of the Inspector of Elections, has elected to attend the meeting in-person to make his presentation. Attending today's annual stockholders' meeting either in-person or remotely, are: David D. Smith, Director and Executive Chairman; Frederick G. Smith, Director and Vice President; J. Duncan Smith, Director, Vice President and Secretary; Robert E. Smith, Director; Daniel C. Keith, Director; Dr. Benjamin S. Carson, Sr. Director; Howard E. Friedman, Director; Benson E. Legg, Director; Laurie R. Beyer, Director; Rob Weisbord, COO and President of Broadcast; Lucy A. Rutishauser, Executive Vice President and Chief Financial Officer; David Bochenek, Senior Vice President, Chief Accounting Officer; David B. Gibber, Executive Vice President and Chief Legal Officer; Chris King, Vice President, Investor Relations; Billie-Jo McIntire, AVP Investor Relations; Jason R. Smith, Executive Vice Chairman; Justin L. Bray, Senior Vice President and Treasurer; Christopher Scott, ADP, Accounting, Sinclair Inc.; and Rex Morgan from BetaNXT Inc. Inspector of Elections. At this point in the meeting, I would like to provide a brief state of the union on our company. But first, Chris King will deliver the safe harbor statement.

Good morning. As a reminder, certain matters discussed on this call may include forward-looking statements, including future operating results, which are subject to a number of risks and uncertainties. I remind you that actual results in the future could differ materially as a result of various factors, which can be found in our SEC reports, including the risk factors in our annual report on Form 10-K. The company undertakes no obligation to update these forward-looking statements.

Thank you, Chris. We thank those investors for joining us today. There is much occurring at Sinclair, and I would like to give you an update on these exciting developments. As we continue our transformation from a traditional broadcast company to a diversified content and data distributor, we are committed to creating an even more efficient organization that can identify and accelerate growth opportunities while maintaining a strong commitment to content creation and technological innovation. We remain committed to the transformation of our traditional local media business. We believe Sinclair as well as the broadcast industry has multiple growth drivers. First, excluding the impact of the 2020 Georgia runoff, we expect to see record-breaking political advertising revenues in 2024, which equates to more than $350 million. We continue to see strong political advertising demand, and we expect strong growth of issue oriented and political advertising and what appears to be several close Senate and House races in our footprint to accelerate this growth significantly as we get closer to this year's general election. In addition, in 2023, we outpaced our publicly traded TV broadcast peers on core advertising revenue growth. Notably, we outperformed our broadcast cohorts in almost every quarter throughout the year. While year-over-year total advertising trends were as expected, lower on the lack of meaningful political revenues given that 2022 was a midterm election year. The $43 million in political advertising, we reported in 2023 was a record amount for us in an off-cycle political year. With strong fundraising trends, we continue to anticipate political revenues to be back-end loaded this year based on an independent third-party research and our own internal data. Notably, as of May 1, we have prebooked over $77 million in political advertising through election date. This compares to $21 million as of the same time in 2020 and $28 million in 2022. Our proprietary pricing tool will help us price properly versus demand throughout the political season to maximize revenue. We believe our core advertising outperformance is a function of our focus on creating multi-platform content to drive not only unique impressions, but keeping users on our platforms for longer periods of time as we engage with them in new and exciting ways. Whether through our local TV channels, digital product offerings, various social media applications, TV station websites, podcasts, newsletters and many more delivery methods. We are driving engagement where ever our viewers, readers are. And the more engaged people are with our content, the more valuable it becomes. For example, 44% of our viewer impressions across our station portfolio are driven by Sinclair content, such as local news and syndicated programming as opposed to network content such as prime time and other national broadcast. For years, the broadcast industry often led by Sinclair has spoken about NextGen broadcast opportunities that will represent a sea change for the traditional broadcast industry. I am very pleased to announce that the time for next-gen data distribution opportunity is now. Broadcast data distribution has many benefits, such as a more efficient distribution of mass consumption data, improved consumer experience with lower latency and higher quality and a lower cost for data distribution. Broadspan, our data delivery platform will use the industry's 3.0 spectrum for data distribution to deliver a suite of data solutions to the market. The platform centralizes data distribution management across multiple stations and markets to allocate spectrum assets without disruption to existing broadcast services and collects insights on executed data deliveries. Another business use case focuses on automotive connectivity services, which would allow the distribution of data to vehicles to include over-the-air software updates, live broadcasts and alerts, high-fidelity audio and other features. In addition, working in partnership with Edgio, our first go-to-market partner, we have launched a new content distribution service using streaming video offload, allowing a customer to seamlessly switch between over-the-air and over-the-top sources to offload bandwidth-intensive traffic from traditional broadband networks. Broadspan will also be able to deliver precision navigation and more accuracy than satellite positioning. We could not be more excited regarding the near-term and long-term business opportunities for NextGen Broadcast and Broadspan, and we are focused on remaining the industry leader in this exciting new technology. Building on a legacy of value creation, we remain committed to rewarding our stakeholders through a consistent return of capital policy Strategy aimed at driving robust returns for both debt and equity holders. The maximization of value for all company stakeholders continues to be a key focus of our management. In 2023, Sinclair returned $218 million in cash to our shareholders via cash dividends and share repurchases during the year. In addition, we repurchased $64 million of debt at a discount during the year with a cash outlay of $49 million. We remain steadfastly committed to all of our stakeholders. Serving our local communities is a part of our daily unwavering commitment to bring highly relevant and differentiated content and outreach to our communities. In fact, we received 260 regional awards for outstanding local news coverage and 16 national awards, including 67 Regional Emmy Awards, 24 regional Edward R. Murrow awards and 1 national Edward R. Murrow award in 2023. Our content centers continue to produce compelling multiplatform content that is making a difference in our communities. Our continued investment in local news has allowed the majority of our stations to remain ranked by audience and unique website viewers as the #1 or #2 newscast in their market, both on linear and digital platforms, and we're not stopping there. Our commitment to a positive influence in our markets led to our first ever company-wide day of service in April of last year. As part of this effort, we had almost 1,700 employees volunteer their time to provide over 4,800 hours of service. They collected almost 6,000 pounds of trash, prepared approximately 6,500 meals, packaged over 12,000 boxes of baby products and 26,000 boxes of food. In addition, we helped raise more than $29 million for nonprofit organizations, schools, communities, agencies, local disaster relief and other charitable contributions in 2023, while donating 124,000 minutes of on-air promotional time across our 68 market footprint. We collected over 2.3 million pounds of food, which provided more than 230,000 meals and collected 95,000 toys, 3,700 units of blood and more than 642,000 diapers during the year. Our annual diversity scholarship program has provided more than 300,000 in tuition assistance since 2013. Sinclair remains committed to supporting our neighbors and building our communities and generously giving our time, talent and financial resources to benefit our local communities. As we look to the future, we're excited about the opportunities that lie ahead. We will continue to invest in our people, processes and technology to drive innovation and growth with our continued focus on providing significant value to our shareholders. Thank you for your continued support. Mr. J. Duncan Smith, Corporate Secretary of the company, will you now report on the mailing of notices and other formalities.

Thank you, Mr. Chairman. I wish to submit the following: A copy of the printed notice of this meeting dated April 26, 2024, stating the time, purpose and place of meeting. The complete list certified by the company's transfer agent of holders of shares of common stock of the company as of the close of business on March 18, 2024, which is also the record date fixed by the Board of Directors for the shareholders entitled to notice of and to vote at this meeting. The affidavit of the company's transfer agent, showing that a copy of the notice of this annual meeting was mailed in accordance with bylaws of the company to all shareholders of record.

I now order that the materials submitted by the Secretary to be made a part of the minutes of this meeting. BetaNXT Inc. has been appointed as Inspector of Elections to tabulate the shares of common stock represented in-person or by proxy at this meeting as well as to tabulate the votes cast for each proposal to come before the meeting. I would like to introduce Rex Morgan, the representative of BetaNXT Inc. As indicated earlier, Mr. Morgan is attending in-person at the meeting. Mr. Morgan, are you prepared to report on the number of shares of common stock that are present either in person or by proxy?

Mr. Chairman, as of the record date of March 18, 2024, there were 42,231,84 shares of the Class A common stock and 23,775,56 shares of Class B common stock entitled to vote on each of the proposals. Each of such Class A shares is entitled to 1 vote on each of the proposals and each of the Class B shares is entitled to 10 votes on each other proposals. There are [ 58,045,160 ] Class A shares and Class B shares present in person or represented by valid proxy at this meeting.

As noted in the proxy statement, stockholders attending this meeting via the live teleconference or webcast are not deemed present at the meeting unless they are represented by a valid proxy. A quorum will be present if 139,990,825 votes are represented at the annual meeting, either in person or by stockholder or by proxy. Based on the report of Mr. Morgan, I hereby declare that a quorum is present at this meeting. The 3 proposals submitted for stockholder action at this meeting are fully explained in the proxy statement dated April 26, 2024. As noted in the proxy statement, stockholders attending this meeting via the live teleconference or webcast are not able to vote via the live teleconference or webcast nor are they able to revoke their proxy. However, any previously submitted proxies are deemed voted and will be included in the tabulation of the voting. The next order of business is the election of 9 directors to serve for 1-year term and until their successors are duly elected and qualified. The 9 directors who receive the most votes will be elected. This is called the plurality. If you have withheld your vote on the proxy card, your vote will not count for or against the nominee. Broker nonvotes are not counted as votes cast for nominees and will not affect the outcome of the proposal. I will call on the Secretary J. Duncan Smith, who will present the names of those persons nominated by management.

Thank you, Mr. Chairman. Those nominated for election as directors of the company to serve for a term of 1 year and until their successors are duly elected and qualified are the following: David D. Smith, Frederick G. Smith, J. Duncan Smith, Robert E. Smith; Laurie R. Beyer, Benjamin S. Carson, Sr., Howard E. Friedman, Daniel C. Keith, and Benson E. Legg.

You've heard the motion. Are there any other nominees? Hearing none, I declare the nominations closed. Is there a second?

I second.

We will now move forward with this vote. [Voting]

The next proposal originally submitted to the stockholders for action is the ratification of the Audit Committee's appointment of PricewaterhouseCoopers LLP as the independent auditor for the company. An affirmative vote of the majority of the votes cast is required to ratify this proposal. If you abstain from voting, your abstention will not count as a vote for or against the proposal. The Audit Committee previously recommended to the Board of Directors that the Board ratified the Audit Committee's appointment of PricewaterhouseCoopers LLP as the company's independent auditors for the year ending December 31, 2024, and the directors have also unanimously done so. Laurie Beyer, the Chair of the Audit Committee, is in London, England and is unable to attend today's meeting. Benjamin S. Carson Sir, another member of the Audit Committee, will address stockholders in Mr Beyer's absence. I now call upon management Benjamin S. Carson, Sr. to further address the stockholders at this time.

The Audit Committee was assigned the responsibility of appointing the independent auditor for the company. The audit committee discussed the proposal received from PricewaterhouseCoopers with members of the firm and we're satisfied that they have the qualifications and experience they have in audit of the company and its various subsidiaries. Based on these discussions with management, the Audit Committee agreed that it was in the best interest of the company to engage PricewaterhouseCoopers LLP as independent auditors and so notified the Board of its decision. Based upon the recommendation of the audit committee, Board unanimously ratified the appointment and has recommended PricewaterhouseCoopers LLP as the independent auditors for the company and its subsidiaries for the year ending December 31, 2024. The Audit Committee will continue to work closely and regularly with the company's independent auditors and will periodically evaluate their work to assure its quality. I move for the ratification of stockholders of the appointment of PricewaterhouseCoopers LLP as the independent auditors of the company and its subsidiary.

You have heard the motion for ratification of the Audit Committee recommendation. Are there any questions or further discussions needed? Hearing none, is there a second?

I second.

We will now move forward with the vote. [Voting]

In accordance, the Dodd-Frank Wall Street Reform Act and the Consumer Protection Act of 2010, the company has submitted an advisory say-on-pay resolution for stockholder consideration. This resolution is contained in Proposal 3 of the proxy statement. The company believes that its executive compensation is tied to individual and company performance and is designed to support the company's long-term success by attracting and retaining talented senior executives and aligning their interest with the interest of our stockholders. We have provided detailed information on our executive compensation policy and procedures as well as the actual compensation paid to our named executive officers and the compensation discussion and analysis and in the related tables and narratives in the proxy statement. All compensation programs for named executive officers are reviewed by the Compensation Committee. The Board of Directors and the Compensation Committee both value the opinions of our stockholders and will consider any stockholder concerns and whether any actions are necessary to address those concerns. With this in mind, we currently conduct an advisory vote on executive compensation every year. And following the 2024 Annual Meeting of Stockholders, we expect to conduct the next advisory vote at the 2025 Annual Meeting. This say-on-pay vote is advisory only and is not binding on the company. For all the reasons stated in the proxy statement, the Board unanimously recommends that the stockholders vote for the resolution contained in Proposal 3 of the proxy statement and approved on an advisory basis the compensation of the named executive officers as disclosed in the proxy statement. The affirmative nonbinding vote for the majority of votes cast is required to approve on an advisory basis, the say-on-pay resolution contained in Proposal 3. If you abstain from voting, your abstention will not count as a vote for or against the proposal. You have heard the resolution for the nonbinding advisory vote on our executive compensation. Are there any questions or further discussions needed. Hearing none, is there a second?

I second.

We will now move forward with the vote. [Voting]

Will the representative of the inspectors of elections, please report the results of the balloting.

Thank you, Mr. Chairman. Each nominee for director nominated by the Board of Directors has received a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors and are duly elected. The majority of the shares present in person or represented by proxy entitled to vote have voted to ratify the appointment of PricewaterhouseCoopers LLP as the company's independent auditors for fiscal year ending December 31, 2024. The majority of the shares present in person or represented by proxy and entitled to vote have been voted on an advisory basis for approval of the company's executive compensation.

I now declare that: one, the nominees for directors have been duly elected; two, the appointment of PricewaterhouseCoopers LLP to audit the financial statements of the company and its subsidiaries for the year ending December 31, 2024, has been ratified; and three, the nonbinding advisory vote on the company's executive compensation was approved. I direct that the results certified by the inspectors of elections be attached to the minutes of this meeting and be made a part thereof. Now we come to the part of the agenda for general questions and discussion. Does anyone present have questions. If so, please submit them now or raise your hand to be recognized. If we are prohibited from responding now or from recognizing you at this meeting, please reach out to our Investor Relations department with your inquiry.

3 questions, please. Simple one is [indiscernible]; two, I understand the incorporation is considering selling off 130 substations. Maybe you're discussing that [indiscernible] common stock was at $5 per share. So...

First question on the clock. It's right twice a day. Second question, we don't comment on media speculation about -- there's been nothing officially announced. And so what you're reading about is just that speculation. But what I can say about potential sales within our portfolio is that we are very focused on closing the gap between our sum of the parts valuation and where we trade today. And there's a very big gap there. When we do the sum of the parts, we easily get to $50, $60 a share. And as you noted in your third question, we're nowhere near that. And so we're keenly aware of that gap. And as I've stated many times, there's no sacred cows for the right price -- anything can be sold in our portfolio. And we think to the extent that opportunities are out there to transact that would help close that valuation gap. On your third question, that certainly is near and dear to all of our parts right here as you're looking at some of the -- you are looking at the largest shareholders of this company. So we are 100% aligned with you, including myself here. And it kind of goes back to my answer on the second question. I will note that over the last -- over 2023 and over the last 12 months and year-to-date, we have -- we are one of the better performing media stocks in the sector. But I understand that relative performance doesn't pay the bills. And -- but that is only to point out that there has been a re-rate of the media sector at large, and we've gotten caught in that downdraft. We've fared better than most. But we do recognize that as the Board of Directors and management team, it's our duty to continue to deliver for our shareholders regardless of the broader environment, and it's our commitment to do that for you. Any other questions? C'mon, I know you've got one.

I would like to point out that percentage-wise, the dividend is about 3x what it was 3 years ago. I also would like to point out that we can probably buy 3x many shares of the stock at a relatively similar price -- that's my second question.

Look, it's not a question, but it's a great point. An incredible dividend yield right now on the stock. And from our perspective, we think where we're training at is this deal, which is what you pointed out. So thank you for those observations. Any other questions in the room? If there are no other business, the chair will entertain a motion to adjourn. Is there a second?

I second.

All in favor. Before the adjournment, I would like to express my sincere appreciation to the stockholders who attended this meeting in person or remotely as well as those who have submitted their proxies and were unable to present -- to be present in person or remotely. We appreciate your support. Be safe and stay healthy. The meeting is adjourned.

This concludes today's event, and you may disconnect at this time. Thank you for your participation.