Sinclair Broadcast Group, Inc (NASDAQ: SBGI) Q1 2023 Earnings Call dated May. 03, 2023, 9:00 a.m. ET
Corporate Participants:
Lucy A. Rutishauser — Executive Voice President, Chief Financial Officer
Billie-Jo McIntire — Assistant Vice President, Investor Relations
Christopher S. Ripley — President and Chief Executive Officer
Robert D. Weisbord — Chief Operating Officer and President of Broadcast
Analysts:
Stephen Cahill — Wells Fargo — Analyst
Ben soft — Deutsche Bank — Analyst
Dan Kurnos — Benchmark Company — Analyst
Courtney Bauman — Barclays — Analyst
Edward Reily — EF Hutton — Analyst
Avi Steiner — JPMorgan — Analyst
Barton Crockett — Rosenblatt — Analyst
David Karnovsky — JPMorgan — Analyst
Aaron Watts — Deutsche Bank — Analyst
Presentation:
Operator
Good day, everyone, and welcome to the Sinclair First Quarter 2023 Earnings Conference Call. [Operator Instructions]
It is now my pleasure to turn the floor over to your host, Lucy Rutishauser, Executive Vice President and Chief Financial Officer of Sinclair. Ma’am, the floor is yours.
Lucy A. Rutishauser — Executive Voice President, Chief Financial Officer
Thank you, Operator. Participating on the call with me today are Chris Ripley, President and CEO, and Rob Weisbord, President and Broadcast and Chief Operating Officer. I would like to also introduce our new Vice President of Investor Relations, Chris King, who we’re excited is joining us. Chris comes to us from Windstream Communications, where he was Vice President of Investor Relations, and before that, Curo Health Services, where he served as Vice President of Investor Relations and Financial Planning and Analysis. Before transitioning to the corporate side, Chris was a Senior Equity Research Analyst at Stiefel-Nicholas, where he won numerous awards for his stock picking and earnings analysis in the TMT space.
Welcome, Chris. Before we begin, I want to remind everyone that slides and supplemental information for today’s earnings call are available on our website, sbgi.net, on the investor information page, and on the earnings webcast page. I also want to remind you that today’s call is a Sinclair-only call. Because we are currently soliciting proxies from our stockholders in connection with the previously announced holding company reorganization, our statements regarding the reorganization will be limited to statements contained in Sinclair Inc’s Prospectus and Sinclair Broadcast Group’s definitive proxy statement, each followed with the SEC on April 26, 2023, as well as the reorganization Q&A followed by Sinclair Broadcast Group with the SEC on April 2. Our stockholders are urged to read these documents because they contain important information regarding the reorganization.
Now Billie-Jo McIntire will make our forward-looking statement disclaimer.
Billie-Jo McIntire — Assistant Vice President, Investor Relations
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 first 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 pre-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 or formulations.
The company does not provide reconciliations on a forward-looking basis. Further discussions and reconciliations of the company’s non-gap financial measures to comparable GAAP financial measures can be found on its website, www.sbgi.net. In addition, given the deconsolidation of Diamond on March 1st of 2022, and in order to have a meaningful discussion around comparative results and trends, all discussions of prior financial reporting periods during this call reflect Sinclair- Only pro-forma numbers and thus exclude Diamond in any intercompany transactions with them and exclude businesses sold in the prior 12 months. For actual results, including a period that Diamond was consolidated, please refer to this morning’s earnings release.
Chris Ripley will now give an update on the strategic direction of the company.
Christopher S. Ripley — President and Chief Executive Officer
Thank you, Billie-Jo. I want to begin our announcement to reorganize or I want to begin with our announcement to reorganize under a holding company. Under the new structure, which we expect to close in June, Sinclair Inc. will become the publicly traded parent of Sinclair Broadcast and its subsidiaries, which will hold the pure play broadcasting assets and a new subsidiary, Sinclair Ventures, that will hold this company’s non-broadcasting assets. We believe this will provide greater flexibility for creating value within the company. This simplifies the corporate structure and improves the transparency of financial results and disclosures on the value drivers of the business. Another way to think about the new structure is that our broadcast assets will remain in Sinclair Broadcast Group, while our non-broadcasting assets, including Tennis Channel, Compulse, and our non-media assets like real estate, venture capital, private equity, and direct investments will be in ventures. While we’re optimistic about the future prospects of our core broadcasting business and its continued transformation through investments in news programming, cloud, and NextGen Broadcast, continued regulatory uncertainty is causing us to think differently about the allocation of capital.
With continued governmental restrictions on broadcasters’ ability to transact, transform, and negotiate, we intend to allocate more capital to growing non-broadcast holdings, such as future opportunities in India where NextGen technologies are swiftly advancing. This reorganization will allow more flexibility for transactions, transparency around some of the parts, ultimately creating a non-broadcast division free to raise debt or equity financing to grow its assets and a broadcast division that is pure play and focused, unlocking overall value for our organization. Speaking of value creation, in recent weeks and in advance of NAB, we made several exciting announcements around the advancement of NextGen Broadcast Technology. In particular, we announced that Sinclair, along with our partners, CAST.ERA, SK Telecom and Saankhya Labs, will build and operate a NextGen Broadcast Data Distribution Core Network. This will create an interconnected platform available to all broadcasters to provide commercial services and solutions for national data distribution. This platform will manage data casting across the U.S. and will help stations capitalize on NextGen opportunities, which independent studies estimate at a $10 million revenue opportunity for the industry by 2030.
We believe data distribution is the next step in the evolution of broadcasting, allowing us to continue to provide exceptional and enhanced video programming with interactive services while at the same time repurposing the remaining capacity of our channels to meet the needs of data users nationwide. These business use cases provide a data agnostic IP pipeline to serve communities better on market-disrupting terms that can increase the value of Spectrum for all broadcasters. We expect our data distribution core network and platform to go live in Q1 of 2024. We’re also continuing to deploy NextGen broadcast technology in additional markets. In April, Des Moines and Rochester were the latest of our markets to roll out the service, with Sinclair serving as a NextGen host in both markets. NextGen broadcast was also deployed in San Francisco and although it is not our market, we are pleased the technology is now increasingly available in the top 10 markets.
These deployments bring NextGen Broadcast Technology to nearly 70 markets, covering over 60% of the country, with an industry goal of 75% U.S. coverage by year-end. One of NextGen Broadcast’s key features is advanced emergency information, and we will be launching the nation’s first pilot project to use that capability to disseminate this critical service with enhanced broadcast features. Through a partnership with the Metropolitan Washington Council of Governments, we will provide free, over-the-air redundancy and enhancements to emergency messaging currently sent by local governments via text, email, social media, and other systems. Initially, the pilot launching this quarter will focus on Arlington and Fairfax counties in Northern Virginia and the District of Columbia, but will expand to other jurisdictions in the coming months. We also announced an agreement for watermarking technology that will allow owners of NextGen capable TVs to access the Broadcast App experience no matter how they get their broadcast programming, over-the-air or via the pay TV services. This increases the addressable market for TV homes that can access the Broadcast App, fourfold.
As part of Sinclair’s continued evolution, we also are reimagining much of our operational workflow and adding enhanced capabilities to our technology, news gathering and media operation systems. We have entered into partnerships with several providers and platforms that align with our vision for transformation. We have begun migrating our existing media and play-out operations to the cloud, which will help further our goal to create compelling, multi-platform local news and sports content that can be distributed across fixed and mobile devices, as well as interactive experiences for communities and fans. It will also enable enhanced tools to be integrated across our networks for advertisers and partners. To that end, we announced we will launch the first over-the-air local broadcast station affiliate play-out origination in the cloud, which is set to go live in Raleigh, North Carolina in June 2023. Sinclair will also be adopting an innovative cloud-based workflow for news gathering, integrated news production and software to increase the speed of news, content delivery to our audiences, reduce connectivity costs and enrich the flow of news metadata.
As mentioned last quarter, the cloud migration costs are included in our full-year expense guidance. We will be in investment mode for the next 18 to 24 months and anticipate to generate a positive ROI thereafter. As a company, we continually seek to optimize our workflows for the best ROI and operational outcomes and believe these partnerships are another step towards our multi-platform transformation. In Q1 of this year, we announced several partnerships agreements, most recently with YouTube TV, to add carriage of Tennis Channel and T2 to its lineup beginning June 1 to coincide with Roland-Garros, the French Open. The agreement also adds CHARGE! and TBD to YouTube TV’s service offering and renews carriage of Comet, bringing all three of Sinclair’s national multicast television networks to YouTube TV’s lineup, offering subscribers access to top fan-favorite series and franchises. In addition, the agreement extends YouTube TV’s existing carriage of Sinclair’s CBS and MyTV affiliated television broadcast stations. We also reached an agreement in principle with Hulu, which saw the return of our ABC stations to Hulu + Live TV. Those stations began airing on Hulu’s platform a couple of weeks ago. Additionally, our CBS affiliated stations have returned to Fubo after the CBS Affiliate Board, Paramount and Fubo reached agreement last month.
We recently released our first annual ESG report, which highlighted the continued upgrades we are making to energy efficient equipment and our commitment to lowering our energy usage overall. We also expanded employee programs to further strengthen diversity and equal employment opportunities, furthering our community outreach and enhanced governance and risk management. Throughout our history, Sinclair has prioritized giving back with an unwavering commitment to the people and communities we proudly serve. Through our latest Sinclair CARES initiative, we partnered with the National Alliance on Mental Illness to Launch Sinclair CARES, Mental Health Support and Hope, a company-wide on-air campaign to encourage mental health awareness and suggest resources with a particular focus on young adults. Sinclair also entered into a multi-year national agreement with USC Shoah Foundation, the Institute for Visual History and Education to assist with the recording of interviews with genocide survivors as part of the Institute’s, Last Chance Testimony Collection Initiative, an effort to collect testimonies from the last living survivors and witnesses to the Holocaust and other genocides. And on April 12, we launched our first Sinclair Day of Service, an employee-led initiative encouraging all of our employees, company-wide, to dedicate the day to giving back to our local communities.
The day saw thousands of employees across the company volunteering their time and skills to local nonprofit organizations, including food banks, homeless shelters, veterans organizations, diaper banks, community cleanups and animal shelters in our local communities. The Sinclair Day of Service will return to our calendar each spring. By prioritizing sustainability, diversity and good governance, and an emphasis on giving back to our local communities, we are not only doing what is right for our neighbors, our people and our planet, but we are creating long-term value. Speaking of the long-term, I want to congratulate Tennis Channel, which celebrates its 20th anniversary this year. In just two decades, Tennis Channel has created an enduring business with exciting growth opportunities to build on their many past successes and solid financial performance.
Now I’ll turn it over to Rob for an operational update.
Robert D. Weisbord — Chief Operating Officer and President of Broadcast
Thanks, Chris. Coming off a record midterm election year in 2022, political spending has started off strong with over 3 million booked in Q1, which is double the spending of Q1, 2019. We are excited to see the strength and political candidate in the industry spending this early in the year and we are projecting political spend to continue and set us up nicely for our highly-contested Presidential race in 2024, which we expect to be record-breaking once again. Our success in selling high-profile time periods such as Super Bowl and March Madness resulted in advertising in the first quarter, achieving the high end of our guidance. Core advertising decreased slightly in the first quarter compared to the same period a year ago. The automotive category has been steadily rebounding since the beginning of the year, and we are seeing low signal digit percent increases in Q2 phase, along with the strength in legal and retail categories. These positives are offset by softness in the insurance category. Second quarter is expected to decline low signal digits, but in line with Q1 core when you exclude the Super Bowl and March Madness.
This quarter, we began rolling out the first phase of our unified ad platform, which combines all of Sinclair’s advertising, linear and digital assets, and allows our sellers to increase velocity of cross-platform ad campaigns by highlighting the combined reach and frequency. The technology makes us the first local broadcast at the consolidated all-sellable inventory into a single system. Our goal is to make sure all of our inventory is easy to package, price, and maximize revenue while meeting the goals of our clients. We’ve also completed the national rollout of our yield management platform with dynamic pricing. The platform uses artificial intelligence and machine learning, so the algorithms get smarter based on history, and pricing will be adjusted based on the current supply and demand. For ensuring pricing aligns with supply and demand of the marketplace will allow us to reduce preemptions, save time and make it easier for ourselves, folks, to figure out how much they should charge for campaigns, also allowing us to maximize revenue yield. Tennis Channel is off to a stellar start in Q1. We’ve seen increase in our audience in adults 25-54, which was up 15%, adults 18-49 up 8%, total view is up 8%, and households were up 7%. The strength of tournaments in Indian Wells and Miami led to March having the highest average audience in key demos since 2019, and it was the second-best march ever for both households and total views. Our second channel, T2, has also set records in 2023, with Indian Wells and Miami leading to March becoming the top month in its history in both users and hours watch.
Our live and VOD subscription service, Tennis Channel Plus, has more than 3.5 million hours streamed in the quarter and year-over-year. Total subscribers are up 33%. Outside of the U.S., Tennis Channel in the National has grown 73% in number of sessions year-over-year. International distribution has grown as well. We’ve added LG as a partner and now reach approximately two-thirds of the smart television sets in Germany, Austria, and Switzerland. At the end of May, Tennis will become a French-open dedicated network for two weeks, and we anticipate airing over 2,000 hours of the tournament across Tennis Channel, T2, Tennis Channel Plus. Off-air, we’re launching a partnership with a leading digital retailer to launch a white-label Tennis Channel Shop, which will allow us to create a merchandising revenue stream. TC Shop will launch sometime in second quarter. A broadcast stations continue to be recognized for their dedication to community advocacy journalism. As of March, our stations won dozens of local awards for their report. In Baltimore, WBFS-Investigated Unit Project Baltimore was honored with a National IRE Award for their investigation into the Baltimore Public School System, which was found to be denying students with disabilities a proper education and violating their federal education rights.
And our station in Cincinnati, WKRC, was named a finalist this year for reporting on radioactive contamination in Ohio. This is the fifth consecutive year that Sinclair Stations were honored with National IRE Awards and the fourth IRE Award for WBFS. We’re also seeing our Sinclair Cares Community Outreach Program receive recognition. This year, Sinclair received two Anthem Awards for Humanitarian Action for our 2022 fundraising campaign, Sinclair Cares Summer Hunger Relief. As Chris mentioned, we have a partnership with the National Alliance on Mental Illness and recently aired a town hall special to encourage mental health and awareness in teens. We’ll be expanding that partnership with the town hall special to address opioid addiction and the epidemic facing the country. Our news division will also be tackling the topical subjects of artificial intelligence as well as cybersecurity and identity theft prevention and upcoming town hall specials in response to our viewers’ request for information. Two of our local podcasts, Missy and Erica Baker about a missing child produced by our station in Dayton and on South Carolina, which focused on the Murdoch murders produced by our station in Charleston, South Carolina, employed a cross-platform strategy across YouTube, TikTok, and other social platforms which led to millions of views and downloads across the country. In Utah, news coverage of the destructive floods was shared across multiple platforms and the video was viewed over 15 million times on TikTok. It illustrates the power of local journalism and solid local reporting while using all platforms.
We’re incredibly proud of reporting on our communities and the work we are doing within the communities. I, like Chris, would like to thank our employees for the day of service and giving back to the communities that we live in and now turn it over to Lucy.
Lucy A. Rutishauser — Executive Voice President, Chief Financial Officer
Thank you, Rob. As a reminder, our slide deck and our financial supplements are on our website and we’ll help you follow along. The 766 million of media revenues came in at the high end of our guidance range with core advertising achieving expectation and political and distribution revenues surpassing the high end of guidance. The beat on distribution revenue was on slightly better subscriber term than expected. As compared to the first quarter of 2022, media revenues were down 6% driven by the absence of political ad revenues, subscriber churn, the diamond management fee deferral and core advertising. Adjusted EBITDA of 120 million for the quarter exceeded expectations due to media revenues coming in at the higher end of guidance and media expenses being better than expectation primarily on timing and to a lesser extent cost controls. For the quarter, adjusted EBITDA decreased 40% compared to the first quarter of last year. This was the result of the lower media revenues as discussed and higher corporate and media expenses. The driver of corporate overhead was group and general insurance cost, annual compensation, increases, and one time expenses for professional fees. The media expense list compared to last year was also due to annual compensation step ups as well as timing of tennis tournaments and investments in technology. This was partially offset by a reduction in sales expenses.
Media expenses were also impacted by higher programming fees to the networks. Speaking of which, and as a reminder on net retrans, we previously reported that since we don’t have material distributor contracts renewing until the latter part of this year and with continued subscriber churn of mid-single digits expected, our expectation is for net retrans in 2023 to be lower than in 2022, but then grow in 2024 and 2025 as distributor contracts renew over the next 12 months. As a result, our three-year net retrans growth rate is expected to be low-single-digit percent. Adjusted free cash flow of 71 million in the quarter also exceeded our guidance range with adjusted free cash flow per share of $1 for the quarter and diluted earnings per share of $2.64. We ended the quarter with a cash balance of 623 million combined with our undrawn revolver or liquidity was almost 1.3 billion a quarter end. Total debt at the end of the first quarter was 4.3 billion and STG’s first lien indebtedness ratio on a trailing eight quarters was 3.5 times while total net leverage through the bonds was 4.4 times.
As discussed on last quarter’s call, we do expect total net leverage to increase this year to mid-five times and then improve by the end of 2024, primarily on a strong political year. During the quarter, we repurchased approximately 3.6 million common shares under a 10b5-1 stock buyback program and an additional 5.2 million shares since March 31, representing approximately 13% of the total shares outstanding at the beginning of the year. Our total share count at the end of the quarter was $68 million. Turning to second quarter guidance, we expect media revenues to decline compared to second quarter 2022, due to the absence of political spending and continued year-over-year mid-single digit subscriber churn. Second quarter core advertising is expected to be down low single digit percents versus the second quarter of last year with the decline in core primarily driven by macroeconomic weakness as Rob discussed. Second quarter adjusted EBITDA is expected to be between $84 million and $104 million as compared to $184 million pro-forma last year primarily the result of the lower revenue, higher network programming fees, timing of expenses from the first quarter, and investment in technology enablers and NextGen and sales platform costs that Chris and Rob discussed.
Adjusted free cash flow for the quarter is expected to be negative $6 million to positive $16 million. And while we haven’t provided full year guidance for adjusted EBITDA or free cash flow, there are a few things you need to keep in mind as you think about 2023, which make it an atypical year. First, as we have noted on prior calls, due to the timing of distribution renewals, we are expecting net retrans to be down year-over-year. Second, we are investing roughly $75 million in our infrastructure this year such as moving to the cloud, NextGen technologies, and marketing services platforms that are expected to yield future returns. Finally, there is still uncertainty surrounding the macroeconomic conditions, which could impact the consumer generally and the advertising side of our business. We are seeing positive changes in auto and some other categories as Rob discussed, but there continues to be softness and services which is our biggest category and which will need to continue to monitor closely. Despite the uniqueness of this year, free cash flow is expected to be positive as we head into another expected record breaking political year in 2024.
And with that operator I would like to open it up to questions.
Questions and Answers:
Operator
Certainly. At this time, we will be conducting a question-and-answer-session. [Operator Instructions] Your first question is coming from Stephen Cahill from Wells Fargo. Your line is live.
Stephen Cahill — Wells Fargo — Analyst
Oh, there we go. Thank you. So I’ve got a few maybe just to start-off on the leverage going to the mid-fives. You bought back a lot of stock in the quarter so as we just think about the moving parts to leverage is a lot of that cash coming off the balance sheet for investments and stock repurchases combined with some of the investments dragging EBITDA, but we just love to get the components of the change to leverage from the 4.4 this quarter to the mid-fives?
Lucy A. Rutishauser — Executive Voice President, Chief Financial Officer
Yes, so what’s in there Stephen is the second quarter stock repurchases is a piece of that and as I talked about just the direction of adjusted EBITDA this year which again is a non-political year net retrans being down and then the absence political and the investments and the infrastructure so those are the things that are sort of driving the EBITDA and then you do have the second quarter repurchase in there. And then that 5.5 also as soon a successful closing for HoldCo and Tennis shifting out of the STG attributable EBITDA for leverage. And as we said in our Q&A around HoldCo that was worth 0.3 trans [Phonetic] of leverage.
Stephen Cahill — Wells Fargo — Analyst
Got it. That’s very helpful. And then Chris you’ve talked a lot about the value of the investments and ventures and that marketing that you’ve got at 1.3 billion. Could we expect any incremental financial disclosure to understand the components of that. I’m thinking specifically about real estate and PE and the venture capital investments and just how we might think about those? And relatedly, how do we think about the accounts receivable facility given diamonds current financial condition?
Christopher S. Ripley — President and Chief Executive Officer
Sure. So, we have to be careful about additional information around holding company because we do have an outstanding share exchange offering. So we really can’t say anything more than what is in that document without triggering an amendment requirement. So I would point you to that document for your questions there, we do — we will once that closes which is expected to be voted on May 24, and then the closing in June 1, we will come out with a more detailed, you know, vision around ventures and enhanced disclosure is definitely part of the plan. So we it’s just — what’s driving this move as I mentioned in my comments is, this big dislocation between our some of the parts and what’s in the in the public marketplace.
And you can see we put our money where our mouth was repurchasing the stock recently, because of that and so we’re very focused on how do we get the right assets and the right information in your account so that we can get properly valued. And so we’re looking at all options in that regard. And then in terms of your question around the AR facility, I would expect that AR facility to get refinanced at some point in the future. And it’s a — we’re happy to continue to hold it by to a reasonably good return and it has high quality security in the form of AR. So but our expectation is at some point that would be refinanced.
Stephen Cahill — Wells Fargo — Analyst
And then just the last one for me. I think, the recent reorganization filing did have a new risk factor that wasn’t in the 10-K suggesting that the Diamond bankruptcy, could mean either legal action or adverse tax consequences? Can you just help us frame any material risk that that you see at this point or financial liability related to the Diamond bankruptcy?
Christopher S. Ripley — President and Chief Executive Officer
We really can’t speculate at this point as it relates to Diamond, you know, it would be just pure speculation. And we’ll be back when we know more in terms of Diamond’s future and emergence.
Stephen Cahill — Wells Fargo — Analyst
Great, thank you.
Operator
Thank you. Your next question is coming from Ben soft from Deutsche Bank. Your line is live.
Ben soft — Deutsche Bank — Analyst
Hey, guys, thanks for the question. Just a couple quick one. So first I was wondering, if you could help us quantify the impact of the expenses shifting from 1Q into 2Q. And I also noticed that the value of the investment portfolio went up so I was just kind of curious, which assets saw the value increase? And maybe if you could talk a little bit more about that dynamic? Thanks.
Lucy A. Rutishauser — Executive Voice President, Chief Financial Officer
Sure. So then I’ll take the first one. So the sequentially on the expenses increasing from — media expenses increasing from Q1 to Q2, so there is some timing from Q1 probably about 10 million of timing from Q1’s favorable variance that goes into Q2. And then also you need to recognize that Tennis Channel has a different seasonality profile than the broadcast asset. So whereas for broadcast, our biggest quarter is typically in the fourth quarter the revenue and expense wise. For tennis, their biggest expense quarter is the second quarter because that’s when Roland-Garros happens that’s their big tournament a lot of production costs around that. And so just so that because we haven’t talked tennis in a few years but just to kind of put their seasonality back in front of everybody.
From an EBITDA standpoint historically, Q1 would be their best quarter followed by Q4, then Q3 those are kind of typically close to each other though and then Q2 is their lowest EBITDA quarter. And that’s because their expenses are highest around some of the slams and tournaments of production costs. So that’s going to be a big driver that sequential Q1 to Q2 move.
Christopher S. Ripley — President and Chief Executive Officer
And in terms of the investment portfolio, there was a — it’s hard for me to point to any one asset there were several assets that went up in value in Q1 due to just improved performance under underlying fundamentals. And then we also had realizations in the quarter of 36 million and those were really high returns great moakes apartment buildings that were sold in Q1. And so they were more conservatively marked before and exited at higher values and you are now sitting in cash. So the combination of those realizations with several assets just continuing to perform increase the value.
Ben soft — Deutsche Bank — Analyst
Got it. And would you guys be willing to share a little bit more color about the EBITDA that Tennis Channel is generating, just roughly?
Christopher S. Ripley — President and Chief Executive Officer
That will come out in our quarters to come here after we finish the holding company reorg.
Ben soft — Deutsche Bank — Analyst
Okay. Awesome. Thanks guys.
Operator
Thank you. Your next questions coming from Dan Kurnos from the Benchmark Company. Your line is live.
Dan Kurnos — Benchmark Company — Analyst
Good morning. Chris, since you were gracious enough to give us a little more color around sort of the vision going forward. Maybe I’ll ask it that way and try to keep it high level and just note that your peer group has obviously invested in things that are tangential typically to broadcast or have centered just specific properties with it you clearly have a more diversified portfolio and what will eventually be and I’m just wondering if you think about sort of future capital allocation. How important it is to you that things be in or around sort of core competencies or historical legacy buckets versus new opportunities?
Christopher S. Ripley — President and Chief Executive Officer
Yes. It’s a great question. When we take a look at the performance of our investment portfolio, which is currently sitting at an IRR of about 19% since 2013 that without — it is kind of an obvious statement to say that that’s outperformed our equity value over that same period. And so then that and that really is a quite diversified set of assets, private equity, real estate, there are some assets in there that are complimentary to our core business, like, Playfly for instance which is focused on college and MMR. And Saankhya Labs which is focused on NextGen Broadcast technologies that so — but when we take a look at what we’ve been able to do there it’s obvious to us and especially given the regulatory backdrop that I mentioned in my comments that there are better returns for our capital in other areas. And so we’re not limiting ourselves just to adjacencies within our core business though if we do find good investment opportunities there. We will be that view that as a cherry on top if you will. So it is a more diversified outlook and I think it’s and it’s instructed by our history and success in those areas, but there if we can find adjacencies or synergies with our core business then we’ll be all over that.
Dan Kurnos — Benchmark Company — Analyst
Got it. That’s super helpful. And then just on distribution particularly around tennis you announced a two deal. I thought, I heard you say that the Hulu station issue you had an agreement in principle but I don’t know if they took tennis, how do we just think about kind of the opportunity for incremental tennis carriage from here?
Christopher S. Ripley — President and Chief Executive Officer
Well look, I think, it’s a very significant win for the company that YouTube TV is going to be carrying Tennis Channel and all our multicast and T2 we will update you on the agreement in principle with Hulu once it’s inked but I can’t really get into more details there but I think there are incremental opportunities for tennis it had not been on the virtuals for a few years and Fubo was really the only one it had now it’s adding YouTube TV. So I’m optimistic about ensuring that Tennis Channel is fully distributed on all platforms.
Dan Kurnos — Benchmark Company — Analyst
Got it and then maybe just the last odd one for you or Rob just on the writer strike if there’s any nice flow through or anything just be curious your opinion there if there’s any impact.
Robert D. Weisbord — Chief Operating Officer and President of Broadcast
Yeah we’re not really concerned about the writer strike if it happens the network a lot of library ready to go as well as they could spin up reality shows fairly quickly and the reality shows are right now are trending with higher ratings so we don’t see that impacting us at all.
Dan Kurnos — Benchmark Company — Analyst
All right perfect thanks for all the call guys really appreciate it.
Robert D. Weisbord — Chief Operating Officer and President of Broadcast
Thanks Dan.
Operator
Thank you. Your next questions coming from Courtney Bauman from Barclays. Your line is live.
Courtney Bauman — Barclays — Analyst
Hi morning guys thanks for the question and congrats on the results. I have a little bit more of a general question how do we think about the upcoming negotiations. You guys have scheduled for the second half of ’23 in the context of what you already might have negotiated earlier this year. Are the contract or the contracts and I know you guys are probably limited in what you can disclose but are the contracts both a function of subscriber metrics or is it are part of them fixed. How are those structured?
Christopher S. Ripley — President and Chief Executive Officer
I assume you’re referring to our MVPD contracts which in the latter half of the back half of this year we have about 50% of our big four subs coming up with MVPD and then another 40% actually front and loaded to the beginning of 2024. So it’s a big period of time there back at ’23 beginning ’24 where a lot of our big four subscribers get reprised and those are done on a per subscriber basis with the MVPDs.
Courtney Bauman — Barclays — Analyst
Okay and on the national side or the majority of the contracts fixed are also on a per subscriber basis so they’re moving with any subscriber attrition that you’re seeing on the MVPD side.
Christopher S. Ripley — President and Chief Executive Officer
Yeah so on the network side and we’ve got a couple of too big negotiations coming up at the end of this year. Those it’s not universal but they are more fixed than variable and we do those every two to three years and adjust as subscriber trends change.
Courtney Bauman — Barclays — Analyst
Okay no that’s helpful. Thank you.
Christopher S. Ripley — President and Chief Executive Officer
Thank you.
Operator
Thank you. Your next question is coming from Edward Reily from EF Hutton. Your line is live.
Edward Reily — EF Hutton — Analyst
Hi guys just some housekeeping on the $75 million in tech infrastructure spending on this year. How much has been outlaid in the first quarter and is this bucketed in the corporate G&A line within the other in corporate segment.
Lucy A. Rutishauser — Executive Voice President, Chief Financial Officer
So we spent about 10 million of it in the first quarter and now you’re going to see that in media expenses. What’s driving the corporate down versus guidance was really around group and general insurance in the quarter.
Edward Reily — EF Hutton — Analyst
Okay. Got you.
Operator
Thank you. Your next question is coming from Avi Steiner from JPMorgan. Your line is live.
Avi Steiner — JPMorgan — Analyst
Thank you for taking the question to here just on the ad environment and I apologize if I missed this in the opening remarks but can you just talk about how it’s trending Q2 better or worse. Maybe parse it out local national and then talk about some categories and then I’ve got one more follow up. Thank you.
Robert D. Weisbord — Chief Operating Officer and President of Broadcast
Yeah. We were watching the headwinds but right now like we gave the guidance low single digits. The vocal is outperforming national which tends to be that way when the macro economics have some headwinds. But we have a strength on our local side by creating specialty units and auto legal where we’re seeing positive results from those categories. So again we’ll keep our eye on it but we’re not seeing much differentiation from first quarter and we aren’t taking any major cancellations.
Avi Steiner — JPMorgan — Analyst
Appreciate that color. And then one last one for me. Chris you noted the regulatory backdrop and reallocation. I’m trying to paraphrase you as best I can. Reallocation of investment capital to non-broadcast holdings is M&A in that silo going to be funded by the TV silo or do you envision raising debt potentially in Sinclair Ventures and I asked this obviously in the context of leverage and everything else. Thank you.
Christopher S. Ripley — President and Chief Executive Officer
Sure. Sure. So there are significant resources on both sides of the house if you will and there’s no need for either side to be supporting the other. And so we’ll have to just take it as it comes in terms of what opportunities there are and where each division is in terms of its goals around leverage etc.
Avi Steiner — JPMorgan — Analyst
Thank you.
Operator
Thank you. Your next question is coming from Barton Crockett from Rosenblatt. Your line is live.
Barton Crockett — Rosenblatt — Analyst
Okay great. So one of the things I was curious about was last quarter there was the discussion about Fubo and the desire of the affiliate groups to negotiate directly with the virtual MVPD versus being represented by the broadcast networks. You know now your striking deals with the VMBPs. Are you able to negotiate directly or is that still not something you’re able to do and any prospect for that to change at some point.
Christopher S. Ripley — President and Chief Executive Officer
No we are not able to negotiate directly as of now. And we as I stated in the last quarter and you probably heard from many in the industry believe that is a wrong that needs to be righted and feel that there is change of foot when it comes to. You know looking at this sector which was at least in the beginning viewed as an upstart small area that has now grown into a pretty significant part of the ecosystem and. And the rules of the road need to be conformed to the change in maturity and size and scope of what the virtuals are so we’re very much focused on that. You know that from both a regulatory perspective and also just how our relationships work with the networks. You know the two ends of the coin that were focused on getting that right sized.
Barton Crockett — Rosenblatt — Analyst
Okay all right and then one of the other things that they came out last quarter though is curious for an update if there’s any was the need the desire to have the FCC drop this requirement to broadcast. The current ATSC versus the next gen so you have you’re able to more fully tap that capacity. Is there any progress there anything to say how long do you think it might take for there to be some action on that front.
Christopher S. Ripley — President and Chief Executive Officer
There actually has been quite a significant event as it relates to that question while we were at NAB chairman chairwoman Jessica Rosenberg announced that the FCC at the request of the industry specifically NAB our industry association is forming a task force to accelerate the and complete the deployment of 3.0 in the marketplace. And that’s something that we were very focused on getting as an industry and the details of that task force are being worked on now. But certainly sun setting the 1.0 signals is will be a key area of engagement on that task force and there’s really two important things from our perspective and really the industry’s perspective. On the Task Force one, is that it shows that the FCC who you know is largely taking up time you know regulating much larger industries than ours. You know is on the same page as the industry in terms of advancing the 3.0 standard which is very. You know, positive from a consumer perspective, from a competitive competition perspective.
So, there is you know alignment there between us and the regulators where there might not be alignment on other issues like ownership for instance. And but that is an important I think statement and then the second part is having a Task Force of both industry participants and regulators that are focused with the goal of accelerating 3.0.We believe will accomplish that goal of accelerating 3.0 getting it over the hump, getting it through to the rest of the of the country figuring out when we can Sunset 1.0 and when you can Sunset 1.0 is when you’re going to open up a significant amount of spectrum capacity that will really unlock the revenue and value opportunities that we’ve been talking about on 3.0 as it relates not only to better higher quality and interactive programming for our communities but also to data casting. Opportunities around things like enhanced GPS IoT devices. Low latency sports mobile video these are all we think excellent use cases that, that are that will amount to significant economic opportunities for the industry. And it’s a big reason why we announced that we’re building the core network to be able to facilitate those use cases.
At scale you need to have a network an operating system if you will if you’re going to do that. But the last piece of the puzzle is opening up much larger amounts of capacity to do those used cases and that’s going to mean Sunset 1.0. And we think the Task Force is a big step towards getting that done. And I’ll reference back to what Chris said earlier is independent studies have valued it as being a 10 billion unlocking of revenue for broadcasters. So, we can’t lose sight of once 1.0 gets sunsetted what that revenue potential is.
Operator
Thank you. Your next question is coming from David Karnovsky from JPMorgan. Your line is live. Thank you.
David Karnovsky — JPMorgan — Analyst
Lucy just one on the Q2 guide. Can you just confirm if other media revenue line includes a management fee from Diamond and if it does how do we think about any risk to that going forward just given Diamonds Chapter 11 process. Thanks.
Lucy A. Rutishauser — Executive Voice President, Chief Financial Officer
Yes, so there is a management fee that’s in there based on status quo from the March 2022 restructuring.
Christopher S. Ripley — President and Chief Executive Officer
And in terms of, you know, they, yeah, where it’s currently paying at the level that was agreed to back in March of 22, which is the deferred on a deferred basis and we expect that to continue until a new agreement is reached with Diamond. And there isn’t a new agreement at this point in time. So, until that happens, we can’t speculate.
David Karnovsky — JPMorgan — Analyst
Thank you.
Operator
Thank you. Your next question is coming from Aaron Watts from Deutsche Bank. Your line is live.
Aaron Watts — Deutsche Bank — Analyst
Hi. Thanks for getting me in. I covered a lot of ground. I just had two quick ones. One really a clarifier as you as you move past the $75 million of infrastructure investments you highlighted that you’ll be making this year. Will Sinclair Ventures be self-funding via cash flows or distributions? Or should we expect cash from the stations to continue to provide support?
Christopher S. Ripley — President and Chief Executive Officer
So, there was two different things there, Aaron. You know, the $75 million investment doesn’t really have anything to do with ventures per se. That’s focused on our broad main broadcast operations and investing in their transformation. So, I want to make sure we don’t conflate those two. But in terms of your question on ventures, you will see a much fuller financial picture of that once we complete the re-org in June. But it is expected that, that entity will be self-sustaining.
Aaron Watts — Deutsche Bank — Analyst
Okay, great. And then maybe pointed at Lucy with this last one. Just given the current rate environment, macro backdrops, secular evolutions continue to play out in the industry. Has your mindset around where you’d like leverage to live for the business changed at all? And you talked about how you bought back stock in the quarter and post quarter end. How do you balance that opportunity against buying back your debt, which is currently trading at a discount to par value?
Lucy A. Rutishauser — Executive Voice President, Chief Financial Officer
Yes, so Aaron, that’s actually a great question because the debt is also massively undervalued from where it should trade. So, that’s something that we’re taking a look at. And to your leverage target question, for broadcast STG, the target remains high threes, low fours. I mean, as I said, you know, we are going to be over that this year. And then it will start to come back down next year with political and one thing to just keep in mind from a leverage standpoint because it’s a trailing eight quarter calculation. So, what you have going on also in part this year is that ’23 is less than ’21.But then even when we get into next year with ’24 political year, we expect to be higher than 22s.
We still have this drag from ’23 in there. So, you know, so we’ve got to kind of deal with, you know, everything that’s happening and we’ve talked about quite a bit around, you know, the negative net returns and absence of the political and the investments. We’ll need to live with that here through the end of ’24 in that leverage calculation, but it doesn’t mean that the fundamentals of the business and the returns that we get on some of the things that we’re doing now are playing out. So, the focus for broadcast will be to get back down over time to that target leverage.
Aaron Watts — Deutsche Bank — Analyst
Okay. Thanks, Lucy.
Operator
Thank you. That concludes our Q&A session. I’ll now hand the conference back to Chris Ripley, president and CEO for closing remarks. Please go ahead.
Christopher S. Ripley — President and Chief Executive Officer
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.
Operator
[Operator Closing Remarks]