Sinclair's Q3 2025: Contradictions Emerge on Advertising Environment, Cost Efficiency, and M&A Strategy

Business Commentary:

• Strong Financial Performance:
• Sinclair Broadcast Group reported total revenue of $773 million for Q3 2025, surpassing the high end of their guidance range.
• The company's core revenues increased by 7% year-over-year on an as-reported basis.

• This was driven by operational discipline and focused cost management across the business.

  

• Station Portfolio Optimization:

• Sinclairclosed 11 partner station acquisitions and has 12 awaiting final closing after receiving FCC approval, with 10 acquisitions pending SEC approval.
• These acquisitions are expected to generate at least $30 million in incremental annualized adjusted EBITDA``` with minimal upfront capital requirements.

• The company aims to reach the full run rate EBITDA benefit by the second half of 2026.

• Regulatory Environment and Industry Consolidation:

• Recent regulatory changes, including the elimination of restrictions on Big Four local market ownership and potential removal of the 39% nationwide ownership cap, have created favorable conditions for consolidation.
• Sinclair launched a strategic review of its broadcast business and an evaluation of separating ventures to optimize value creation.

• The company is actively evaluating opportunities for broader industry consolidation, which could unlock significant synergies.

• Political Revenue Outlook:

• Sinclair provided an early outlook for record-breaking political advertising revenue in 2026, with expectations to equal or surpass the $333 million record from 2022.
• This outlook is supported by competitive races in key states and Sinclair's strong station footprint in competitive districts.

• The company is also preparing for a strong political cycle in 2028, marked by a dual open presidential primary.

• Technological Advancements and Next-Gen Broadcast:

• The FCC has proposed greater flexibility for broadcasters to transition from ATSC 1.0, opening significant spectrum capacity for next-gen TV services.
• Sinclair's joint venture, EdgeBeam, is expanding its leadership team and securing strategic commercial partnerships, with a showcase event at CES in January.
• These advancements are expected to drive improved video offerings and data casting use cases, enhancing Sinclair's competitive position in the market.

Contradiction Point 1

Advertising Environment and Sports Impact

It involves differing perspectives on the advertising environment and the impact of sports programming on local broadcasters, which are critical for understanding revenue expectations and strategic positioning.

Can you outline the expected improvements in the local stations' advertising environment for Q4 and early 2026? - Aaron Watts(Deutsche Bank AG, Research Division)

2025Q3: Strong ratings in live sports are driving demand. - Robert Weisbord(COO)

Can you clarify the accretion from announced M&A transactions and risks to retrans guidance from subscriber trends and reverse comp? Can you also detail core ad trends? - Steven Lee Cahall(Wells Fargo Securities, LLC, Research Division)

2025Q2: Sports programming is expected to return to normal demand levels. - Robert D. Weisbord(COO)

Contradiction Point 2

Efficiency and Cost Discipline

It reflects differing views on the level of cost efficiency and discipline within the company, which is crucial for understanding financial management and growth strategies.

What is the impact of YouTube and Disney developments on the MVPD universe, and how much cost efficiency remains? - Daniel Kurnos(The Benchmark Company, LLC, Research Division)

2025Q3: The current team is excellent, driving cost discipline. - Narinder Sahai(CFO)

How aggressive can you be in buyer activity and will you receive remedies on the network side? Can you elaborate on the virtual distributors' situation? - Daniel Louis Kurnos(The Benchmark Company, LLC, Research Division)

2025Q2: We have execute on sales opportunities begun to sharpen our efficiency focus, reducing expenses where possible. - Narinder Sahai(CFO)

Contradiction Point 3

YouTube and Disney Dispute Impact

It highlights differing perspectives on the impact of the YouTube and Disney dispute, which could affect content distribution and viewership, as well as regulatory actions to address the issue.

Regarding YouTube and Disney's situation, how is this impacting the MVPD universe? Also, how much cost efficiency can still be achieved? - Daniel Kurnos (The Benchmark Company, LLC, Research Division)

2025Q3: YouTube and Disney's dispute is affecting local broadcasters negatively, limiting content distribution. This practice needs to be stopped, harming local viewers and journalism. We're working with regulators to address this issue. - Christopher Ripley(CEO)

Can the FCC cap retransmission fees and how might this affect the industry's trajectory? - Daniel Kurnos (Benchmark)

2025Q1: The FCC does have the ability to regulate relationships between networks and affiliates. Capping a major expense like retransmission fees could help level the playing field with big tech and big media. There's a groundswell of deregulatory support for the broadcast industry, and we're seeing this with the FCC stepping in to help. - Christopher Ripley(CEO)

Contradiction Point 4

Advertising Environment and Outlook

It involves differing views on the advertising environment and outlook, which is crucial for financial performance and investor expectations.

Can you discuss the core advertising environment for local stations, particularly expected improvements in Q4 and early 2026? - Aaron Watts (Deutsche Bank AG, Research Division)

2025Q3: We expect Q4 core to be up 10%. Positive growth is anticipated for 2026. - Christopher Ripley(CEO)

Can you discuss advertiser trends and your outlook for core advertising this year? - Daniel Kurnos (Benchmark)

2025Q1: We still expect core advertising to grow year-over-year, but with reduced visibility. Large companies in key categories have pulled their financial guidance due to economic and tariff uncertainties. While we're cautiously optimistic, the visibility is reduced as uncertainty has increased. - Robert Weisbord(COO)

Contradiction Point 5

M&A Strategy and Regulatory Environment

It highlights differing perspectives on the regulatory environment and M&A strategy, which are key factors in determining growth opportunities and financial outcomes.

What obstacles do you see in consolidation among leveraged broadcasters, and what does it mean for the separation between local and ventures? - Steven Cahall(Wells Fargo Securities, LLC, Research Division)

2025Q3: The recent deregulatory rulings allow for more growth opportunities, and we expect to see increased transaction activity. - Christopher S. Ripley(CEO)

How aggressive can you be with buyer activity, and will there be remedies on the network side? Can you elaborate on the virtual distributors' issues? - Daniel Louis Kurnos(The Benchmark Company, LLC, Research Division)

2025Q2: We expect to continue being active in acquisitions as the regulatory environment supports our growth strategy. - Narinder Sahai(CFO)