Sinclair Broadcast Group Inc

NASDAQ:SBGI

Earnings Call Analysis

Sinclair's Strong Q2 Performance and Future Projections

Sinclair showcased a robust second quarter, with revenues growing by 7% to $819 million, driven by a 4% increase in distribution revenues and $40 million from political advertising. Adjusted EBITDA surpassed expectations, increasing by 39% from the previous year. The company forecasts consolidated media revenues between $898 million and $929 million for the third quarter, an increase of 17% to 21%, with adjusted EBITDA projected at $229 million to $254 million. Political advertising revenue for the year is anticipated to reach $385 million to $410 million, reflecting up to 17% growth from 2020.

Strong Second Quarter Performance Sets the Stage

In the second quarter of 2024, Sinclair Broadcast Group showcased a robust financial performance with total revenues reaching $819 million, up 7% year-over-year. Driving this growth was a remarkable $40 million in political advertising revenue, which surpassed expectations significantly. As the landscape continues to shift, core advertising trends remained stable while distribution revenues experienced a 4% year-over-year increase, underlining the group's strong market position.

Political Advertising Fuels Growth Outlook

Sinclair is poised for a remarkable year in political advertising, targeting a full-year revenue between $385 million to $410 million. This marks an anticipated growth of 10% to 17% compared to the pre-Georgia runoff revenue of $350 million in 2020. As of August 1, the company had already secured $146 million in political ad bookings for the second half of the year, nearly double the same amount from the previous presidential election cycle.

Efficiency Drives Increased Adjusted EBITDA

Sinclair's focus on cost control and operational efficiencies paid off, resulting in an adjusted EBITDA of $158 million for the quarter, exceeding guidance by approximately $15 million. This reflects a 39% increase compared to last year. The adjusted EBITDA calculation was updated to account for program amortization rather than program payments, providing a more favorable view of profitability.

CapEx and Structural Changes Optimizing Financial Health

The company reported favorable capital expenditures (CapEx), projected now to fall between $93 million to $98 million, a reduction of $12 million from prior guidance. This includes permanent savings from a large facility build-out that came in under budget. Additionally, liquidity remains strong with consolidated cash at $378 million and total liquidity at $605 million, offering a solid buffer for forthcoming investments.

Guidance for Continued Growth in Q3

For the third quarter, Sinclair anticipates consolidated media revenues between $898 million and $929 million, representing a 17% to 21% year-over-year growth, predominantly driven by political advertising. Furthermore, core advertising revenue is expected to grow between 3% and 7%, complemented by a 5% increase in distribution revenue, further solidifying Sinclair's growth trajectory.

Long-Term Value Proposition and Market Positioning

Sinclair's portfolio boasts a well-diversified asset base with 183 stations, enabling them to capture 38% of U.S. television households. The company remains optimistic about core retransmission revenue growth, anticipating mid-single-digit yearly growth over the next two years, fueled by successful contract renewals and the ongoing value of broadcast television in an evolving media landscape.

Strategic Initiatives Enhancing Operational Efficiencies

With significant investments underway in cloud infrastructure and tennis channel expansions, Sinclair is positioning for future growth. Initial implementations already indicate operational expense savings of around $4 million, setting the stage for continued efficiencies. The move to these technologies reflects a proactive approach to keeping pace with industry trends while reducing costs.

Final Takeaways: Confidence Amidst Competitive Landscape

Overall, Sinclair Broadcast Group demonstrates a resilient performance amidst an evolving media industry. With substantial growth in political revenue, an emphasis on cost efficiency, and strategic investments, the outlook remains positive. Sinclair's strong revenue guidance, combined with its diversified media portfolio and steady audience engagement, positions the company favorably in the competitive landscape of broadcast media.

Earnings Call Transcript 2024-Q2

[Operator]

Good afternoon, everyone, and welcome to the Sinclair Broadcast Group's Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode and we will open for questions following the presentation. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Chris King, Vice President of Investor Relations. Chris, the floor is yours.

[Christopher King, executive]

Thank you. Good afternoon, everyone, and thank you for joining Sinclair's Second Quarter 2024 Earnings Conference Call. Joining me on the call today are Chris Ripley, our President and Chief Executive Officer; Lucy Rutishauser, our Executive Vice President and Chief Financial Officer; and Rob Weisbord, our Chief Operating Officer and President of Local Media.

Before we begin, I want to remind everyone that slides for today's earnings call are available on our website, sbgi.net, on the Events and Presentations page of the Investor Relations portion of the site. A webcast replay will remain available on our website until our next quarterly earnings release. 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 second quarter earnings release. The company undertakes no obligation to update these forward-looking statements.

Included on the call will be a discussion of non-GAAP financial measures, specifically adjusted EBITDA. These measures are not formulated in accordance with GAAP, are not meant to replace GAAP measurements and may differ from other companies' uses or formulations. Further discussions and reconciliations of the company's non-GAAP financial measures to comparable GAAP financial measures can be found on our website.

Finally, we note the presentation of certain information in our second quarter earnings release and slides may have changed from prior quarters due to the completion of a routine common process with the SEC that we believe other publicly traded broadcasters were recently engaged in as well. For example, we have changed the definition of adjusted EBITDA to be based on programming amortization rather than programming payments which had a positive $2 million impact to adjusted EBITDA during the second quarter, and we have also eliminated adjusted free cash flow from our financial presentations. If you have any questions regarding these changes, please feel free to contact me directly.

Let me now turn the call over to Chris Ripley.

[Christopher Ripley, executive]

Good afternoon, everyone, and thank you for joining us. I'll start on Slide 3 by highlighting our second quarter financial results on a consolidated basis. We delivered strong second quarter results that met our revenue expectations across all major line items. Total distribution and advertising revenue were both in line with our guidance ranges which contributed to an in-line performance in total media revenues during the second quarter, while favorable expenses resulted in adjusted EBITDA exceeding our high end of our guidance range. Lucy will go into more details in a moment.

On Slide 4, our Ventures portfolio received $109 million total distributions during the quarter, including $105 million of exits. Net of $26 million in contributions, we received $83 million of cash from our minority investment portfolio in the quarter. At quarter end, Ventures held $326 million in cash, which reflects the 98 million Ventures contributed to our diamond selling payment in April.

Turning to Slide 5. I wanted to take a minute to provide an overview of our Local Media Broadcast assets and their value proposition, which tends to get overlooked in the broader media landscape. Sinclair is one of the largest and most diversified television broadcasters with national reach. As you can see, we have a well-diversified portfolio of assets by network affiliate mix, geographic location and by asset type, with 183 owned and operated stations covering over 38% of the U.S. television households today or 24% based on the UHF discount.

We are in 86 markets across the country with no single market representing more than 5% of our total advertising revenues. More than 50% of our news operations ranked #1 or #2 in their markets for local news. Moreover, we broadcast more [indiscernible] go into some additional details on our Local Broadcast assets as well as an update on our political expectations for the year.

[Robert Weisbord, executive]

Thanks, Chris. On Slide 6, I want to remind the investment community of some of the unique and value-driven characteristics of broadcast television. Our sector has been impacted in recent years by fears of cord-cutting trends. First, it's important to remember that broadcast TV has the highest reach of any communications platform in the country today. With 80% of adults, 18 years of age or older, spending time with broadcast television on any given day. How much time? Close to 4 hours per day for the average American adult. No other mass market communications meeting comes close to matching broadcast reach and viewership. Why is that? Let's take a look at a couple of differentiated programming assets.

One of the most important assets Broadcast TV has as an industry are live sports programming assets, which drive the highest viewing audiences of the year. As we noted last quarter, 97 of the top 100 most watched telecast in 2023 were on Broadcast TV, with the other 3 being College for [indiscernible] playoff games. 96 of the top 100 most watched telecast for sports programming content with the National Football League contributing 93 of the top 100.

In addition, while much has been made about additional sports content and in the streaming platforms, we also see a large amount of sports content coming back to Broadcast Television. Notably, the college profile championship game is moving from ESPN to ABC beginning with 2026, '27 season. Also, the NBA now has two broadcast network television partners for its upcoming rights deal, which begins in October of 2025. In addition, we have several professional franchises begin to shift more and more of their on-air games to local broadcast stations and away from cable and regional networks. We continue to expect to see strong sports rating from the biggest events of the year as evidenced by the Paris Summer Olympic ratings on NBC, which are almost 80% over the 2021 games.

As you can see on Slide 7, every one of these sports leads has the broadcast networks at the heart of their licensing rights with most of those rights agreements in place for an extended period of time. With the earliest renewal not coming until after the [indiscernible] FIFA World Cup in 2026. More importantly, the National Football Leagues current rights agreements last for another 10 years. With limited exposure in near-term [indiscernible] across the sports landgate, we continue to expect sports programming to be an important driver of broadcast value proposition to our viewers for many years to come.

Turning to Slide 8. I want to do a deeper dive into another key driver of our viewership trends, local news. And this device of election year, public trust is crucial for any news organization. [ Rod ] has recently conducted a large study in U.S. news organizations and found local television news was the most trusted source of information, with 62% of adults trust in their local television news. This is nearly double the overall trust in the news in the U.S. In addition, on a weekly basis, adults interacted the most with local television news. Leading all other news organizations, and with most of those views tuning in more than 3 days a week.

On Slide 9, another recent viewership study highlighted that local news attracts a highly sought after politically balanced audience. Particularly when compared to cable news networks. We see this as crucial, especially in election [indiscernible] when campaigns look at target more independent, moderate and swing voters, particularly in the swing states where we have stations with local needs. And you can see that in Sinclair markets, the local news audience meet advertisers' needs by delivering the most politically balanced audience compared to the major news networks.

All of which leads to Slide 10, where you can see the strong growth in political advertising over the last 10 years, regardless of presidential and midterm election years. And we are confident this year we'll continue that trend and be another record political year for us. In fact, as of August 1, we had 146 million in political advertising booked for the second half of the year, which is almost double the amount we had booked on the same date in 2020. Third-party study endpoint estimates as high as over $12 billion for total political ad spend this year, which will represent an increase of 29% over 2020 levels with a significant portion of that amount going to Broadcast TV. And when you consider that we are in hotly contested markets across the country, over half our news content centers are right either #1 or #2 in their market, the warrants number of down ballot issues this year, the late changes on the Democratic Party residential ticket and the assassination of the attempt of former President Trump, then you have what we expect to be the makings of another record political spend here.

Taking those drivers into consideration, we are providing our full year political revenue guidance of $385 million to $410 million, a 10% to 17% increase over 2020's pre Georgia runoff amount of $350 million.

Let me now turn the call over to Lucy to provide a more granular update on our financial results and balance sheet.

[Lucy Rutishauser, executive]

Thank you, Rob. As Chris King mentioned at the start of the call, based on our recent SEC routine comment letter process, several non-GAAP items have changed. Adjusted EBITDA is now calculated deducting program amortization rather than program payments, which during the second quarter increased our Local Media and consolidated adjusted EBITDA by approximately $2 million for both actuals and guidance. In addition, we will no longer be discussing adjusted free cash flow, but it provided the same component line items that we have reported historically.

Turning to Slide 11. As Chris touched on earlier, we are pleased with our strong performance during the second quarter with revenues in line and adjusted EBITDA above guidance on a consolidated basis. Total advertising revenues were up 11% year-over-year, driven by $40 million in political revenues, which easily exceeded our expectations. Distribution revenues were up 4% year-over-year, driven by renewal rate step-ups and new carat agreements on Tennis Channel over the past year, partially offset by distributor subscriber churn.

Adjusted EBITDA exceeded the high end of our guidance, driven by media revenues and our continued laser focus on driving down costs and increasing efficiencies throughout the business. And CapEx was favorable to guidance. primarily on a large facility build-out coming in below estimates. As noted earlier, we also received $109 million in Ventures distributions.

Turning to Slide 12. Consolidated media revenues of $819 million were up 7% in the quarter on the higher political revenue as well as distribution revenues on recent renewals and added carriage, which exceeded subscriber churn impacts. As compared to guidance, the strong political revenues offset modest weakness in core advertising, while distribution revenues were in line with our expectations.

On Slide 13, adjusted EBITDA was $158 million, which exceeded the high end of our guidance range. Consolidated media revenues were in line to guidance and media expenses came in approximately $15 million lower than our expectations on a combination of both timing and permanent savings with approximately $4 million of the expense reduction attributable to timing and $11 million in permanent savings across a variety of departments and expense lines.

As compared to last year. Pro Forma adjusted EBITDA increased by 39% driven by the stronger political and distribution revenues and modestly lower corporate overhead, which was offset in part by higher network fees and sales cost on the higher revenue.

Turning to Slide 14. For the Local Media segment, we delivered solid second quarter results that met our guidance expectations with adjusted EBITDA coming in close to the high end of our guidance range. Within Local Media, distribution revenue was at the midpoint of guidance and total advertising revenue in line on stronger-than-expected political revenues. Although core advertising came in under guidance, political revenue of $40 million easily exceeded the high end of our expectations for the quarter. So to summarize, our Local Media segment had a solid quarter achieving both total media revenue and adjusted EBITDA guidance.

Tennis Channel also had a strong quarter with media revenues up 12% year-over-year on distribution revenues, which grew 11% on renewals and added distribution carriage over the past year. Advertising revenues were flat over the prior year and were modestly softer than expected. Tennis Channel's adjusted EBITDA was slightly above our guidance, with expenses coming in favorable in part due to timing of promotional expenses that are expected to occur in the second half of the year. It is important to note that Tennis Channel's $7 million of adjusted EBITDA includes approximately $6 million of operating losses associated with future growth initiatives.

Turning to our balance sheet metrics on Slide 15. You can see our debt maturity stack profile with our next meaningful maturity 2 years in the future in September 2026. Sinclair Television Group's first lien net leverage was 4.5x and total net leverage 5.6x at the end of the quarter on a trailing 8-quarter basis. Interest coverage was 2.8x as of June 30. Our consolidated cash position was $378 million at quarter end with $52 million at [ SBG ] and $326 million at Ventures. Including our undrawn revolving commitments, total liquidity was $605 million. There were 66 million total shares outstanding at quarter end.

Slide 16 introduces our third quarter guidance. We are guiding for consolidated media revenues to be in the range of $898 million to $929 million, up 17% to 21% versus the year ago quarter, which is largely driven by political advertising growth. However, we also expect core advertising to grow 3% to 7% and distribution revenue to be up 5% year-over-year. Adjusted EBITDA is expected to be $229 million to $254 million, up 58% to 75% over the year ago levels.

Our full year 2024 media expense guidance on Slide 17 reflects a modest 5% increase over 2023 which includes the higher sales costs associated with the revenue growth and the cost for the various initiatives taking place, such as our move to the cloud, and Tennis Channel's direct-to-consumer launch and international expansion to name just a few. As compared to our prior guidance, media expenses are now $7 million lower at the midpoint.

In addition, non-media expense and net interest expense are each expected to be $4 million lower than our prior guidance level. And we expect capital expenditures to now be within a range of $93 million to $98 million, a reduction of $12 million from our prior guidance. Approximately $2 million of that decline is timing of projects expected to hit in 2025, and $10 million is from permanent savings, primarily a large building project that came in under plan as well as lower routine CapEx. In addition, our full year net cash tax payment guidance has been lowered by approximately $162 million which is timing and expected to be paid in the second quarter of 2025 due to the delay in the Diamond Sports bankruptcy process.

And finally, note, the $106 million increase in cash distributions from Ventures equity investments, which includes the $105 million received during the second quarter. In terms of political revenues, we are increasing our full year expectations given the strong results seen in the first half of the year as well as the dynamic shaping up in the presidential rates. Our full year political revenue expectation is for $385 million to $410 million, which is an increase from our previous guidance of at least $350 million. As you can see, we are bullish on the political spending environment in general as well as our geographic positioning in swing states and politically attractive news audiences.

With that, I'd like to turn the call back over to Chris for some closing comments.

[Christopher Ripley, executive]

Thank you, Lucy. Turning to our key takeaways on Slide 18. Sinclair delivered solid second quarter results with adjusted EBITDA exceeding the high end of our quarterly guidance range. Total advertising revenue was up 11% year-over-year. Distribution revenues were up 4% year-over-year, and core advertising trends remain solid. With approximately 60% of our Big 4 subscribers still to be renewed, our 2-year CAGR for net retrans remains forecasted at mid-single-digit percentage growth.

Political advertising revenue is on track for our largest year ever, which we estimate would be 10% to 17% growth over the 2020 presidential election year, excluding the [ Dogger ] run-up. In addition, we also received $105 million in cash proceeds related to the exit of a significant investment within our Venture investment portfolio during the quarter. As we head into the second half of the year, we have momentum on our side and multiple drivers for cash flow generation.

Lucy, Rob and I will now open up the call for questions. Thank you for joining us today.

[Operator]

Thank you very much. We will now be opening the floor for questions. [Operator Instructions] Your first question is coming from Dan Kurnos of the Benchmark Company.

[Daniel Kurnos, analyst]

Maybe just start with Chris, just on Ventures, I appreciate the update on the distribution. Just love some more color on kind of the progress you're making towards some of the initiatives you talked about, whether consolidating investments or kind of rebuilding the Ventures in the way that you see it going forward?

[Christopher Ripley, executive]

Thanks, Dan. So as you saw, we had a very significant exit in Q2 that generated $105 million. So we're very pleased with that. We've got other monetization opportunities in the queue. I think we've done an excellent job so far of picking our spots. And by the way, exiting with great returns, that exit was I think it was around a 40% IRR that we had in Q2.

And so we're very focused on monetization and turning more of that portfolio into cash of which we now are sitting on about $330 million in Ventures. We are looking at opportunities for reinvestment into consolidated opportunities in areas that fragmented marketplaces where that have high-growth opportunities. So -- but we're being very disciplined in terms of our selection and our criteria. So we're not in a rush. We're looking for the right areas. And in the meantime, there's a big emphasis on monetization as you can see.

[Daniel Kurnos, analyst]

Got it. And then just on distribution, just maybe a housekeeping. The timing of the 60% that's left. Is that like later in Q3, I mean, we kind of have an idea of what's up, but just any kind of help around the timing of when that hits?

[Christopher Ripley, executive]

Yes. So look, most of the remainder of our distribution deals will come up in the next several months.

[Daniel Kurnos, analyst]

Okay. And then last, I guess, I'll follow up with you on that. But on core, I just -- the Q3 guide is super impressive in light of political crowd out. We heard obviously some weakness from others in Q2, but in Q3 to guide up against crowd out. I know you guys have been talking about this. I don't know if it's rate, I don't know exactly what's driving that, but I love additional color categories, whatever -- what have you in terms of the strength in Q3 encore.

[Robert Weisbord, executive]

Yes. The first thing is what we've been talking about for several quarters, our AI pricing algorithm system that we have put in place that allows us to capture the demand ahead of time and to match the pricing to demand, which minimizes our crowd out and preemptions. So that helps us drive our core business. And again, we've seen automotive -- we'll see some strength in automotive in Q3, Q4. First half of the year, the Tier 3 auto has struggled due to the fact with high interest rates and sticker prices increasing, but you're going to see the dealers on the Tier 3 local level have to get rid of the '24 to make room for the '25. And we're looking to look at rebates. And so we look for auto to remain positive. It's currently positive in the third quarter, and we expect it to remain positive throughout the rest of the year.

We've put a major [indiscernible] on Home Services category, and we've seen mid-teen increases in that category as well. And what really makes us feel optimistic is the fact that not one category was down dramatically in the second quarter. They were all pretty much de minimis with a drag outside of [indiscernible] , and we expect formula return as well in the back half of the year.

[Christopher Ripley, executive]

I'll just add to that. This has been a multiyear effort around transforming our sellers into true marketing consultants and focusing on share of wallet, not just share of spot sales. And we're really seeing the fruits of that labor over multiple years of upgrading the tools that they use, the products that they sell, and that's contributing to the overall revenue momentum that we're seeing.

[Robert Weisbord, executive]

And just one last thing is as we get into the podcast/audio business, we had a very strong upfront for our 2 national shows. They spoke a little bit about -- [indiscernible] and [ Robson ] hosting the show as well as [ Jerry Ferrara ], best known as [ Chetan Antara ] and [indiscernible] former high swim winner. And so we're really, really optimistic based on the upfront sales that we're headed in the right direction. So as we diversify into it more and more into a cross-platform media company, we're seeing a lot of success.

[Daniel Kurnos, analyst]

That's super helpful, guys. Really appreciate the color.

[Christopher Ripley, executive]

Thanks, Dan.

[Operator]

Your next question is coming from Benjamin Soff of Deutsche Bank.

[Benjamin Soff, analyst]

I wanted to follow up on the core advertising performance. And in particular, did you see any impact this quarter from the auto hack? And did that maybe push anything into 3Q? And then I just wanted to double-click on the better-than-expected operating expenses. Is there any color you can add on sort of the initiatives you're working on and the strength you're seeing in margins there?

[Robert Weisbord, executive]

Yes. With regards to auto, we were down low single digits, so not a major impact. We have a big [indiscernible] on auto with the auto division inside Sinclair. So we're able to do cross-platform solutions with our auto group and we've made our sellers at normal marketplaces, automotive experts as well. So it helps minimize some of the weakness from just playing traditional advertising. So we're comfortable in the direction we've built this business and it helps mitigate some of the softness that you might be seeing.

[Christopher Ripley, executive]

And I do think it's fair to say that the that happened did have an impact on Q2, and we're definitely seeing more strength in Q3.

[Lucy Rutishauser, executive]

Yes. And I'll go ahead and I'll talk about the expenses. So you're correct in that our expenses have come down as we've gone through the year. As I said in my scripted remarks, we have a focus on cost controls, and also increasing efficiencies to make us work smarter and eliminate some waste out of our processes. And so you're seeing the effects of that. As far as some of the initiatives, and I know I mentioned some, we have the cloud, we have Tennis has those series around direct-to-consumer and international and [indiscernible] and we have fast channels. And but what I would say is, if I just hate the cloud project itself and granted, we will be in an investment mode for the next couple of years as we continue to move all of our stations to that.

But for instance, here in '24, we have already seen some OpEx savings of about $3 million, $4 million as well as CapEx cost avoidance about a little over $7 million. So just to give you a sense of when we talk about these being growth initiatives or return-generating initiatives for the future, this is exactly what we're referring to.

[Operator]

Your next question is coming from Avi Steiner of JPMorgan.

[Avi Steiner, analyst]

I've got a couple here. Just one, if we could talk about core. Is that range you gave solely for the local TV group? Or is there some at the other assets? And then while we're talking about core, what are you guys seeing from the consumer perhaps in your markets, small, medium-sized businesses given all the noise economically out there? And then I've got a couple of follow-ups.

[Lucy Rutishauser, executive]

Yes. So for the core, that range is whether it's for a total consolidated company or for the Local Media, we're still going to be in that -- expected to be in that 3% to 7%.

[Christopher Ripley, executive]

And I'll let Rob speak a little bit more about the consumer and what he's seeing in terms of categories and whatnot. But the -- we're not seeing a major impact in terms of what we see from the advertising revenues. If you follow our performance so far this year, we're actually expecting our strongest core growth in Q3 when you compare that to Q1 or Q2.

So undoubtedly, there's certainly concerns about the consumer slowdown but so far, I think that's a lot of just handwringing I don't think we've really seen it show up in terms of our performance, but I'll let Rob chime in on that.

[Robert Weisbord, executive]

Yes. I think that when you see one of our top categories in Home Services, having mid-teen growth is where we have high interest rates that might slow down. But again, with automotive, they're going to have to unload those 24. Obviously, we're not seeing as many homes sold, but we're capitalizing on the fact that people are improving their own properties and doing upgrades to the homes.

And so -- and then on a continued advertising basis, we have from large solutions to smaller solutions to keep those advertisers continuing to advertise despite what the economy is.

[Avi Steiner, analyst]

Appreciate that. And then just if I can turn to sort of the balance sheet here. So you had this nice exit at Ventures. I think you had mentioned there are some potential exits in the [ Hopper ]. I don't know if you can size that roughly. And then how do you think about the enhanced liquidity overall and at that entity in the context of your debt maturities at the television entity?

[Christopher Ripley, executive]

So we're not prepared to give specific guidance on exits. It's obviously the nature of such activity is somewhat lumpy and unpredictable depending on whether transaction is going to happen or not. We do have more in the [ Hopper ], and we're -- we've got a plan for just about every asset in that portfolio and when we take will be the appropriate time to monetize it. So I just -- I think you're going to see sort of a somewhat steady flow because there's quite a few assets in there. So that was sort of balance out and they'll continue to monetize.

As I mentioned before, monetization is of the minority portfolio that we really don't think we're getting much credit for at all. From a Wall Street perspective is a top priority, and we're being very disciplined in terms of looking at new reinvestment opportunities. And sort of I think what you were alluding to was sort of use of resources between the 2 credit stacks. And as we've said many times before, we don't think that's needed. They're meant to be self-sufficient. It certainly is possible, but it's not something that we foresee.

[Operator]

Your next question is coming from David Hamburger of Morgan Stanley.

[David Hamburger, analyst]

If I could just a couple as well. Maybe on the distribution revenue growth guidance. First, can you give us a churn of what you're seeing in churn of subscribers? And then in the guidance, I was curious, the 60% that you have coming up for renewal, a couple of large distributors that have been somewhat aggressive in the past with some of your peers in renewals. One of them has actually even dropped a couple of your peers during the negotiation process.

So I'm just wondering if you could give us a little color how you're so confident that you're going to get mid-single-digit CAGR growth over the next 2 years? And then maybe even if we could step back a second, what's your expectation after the next couple of years for some of the distribution revenue trends, maybe just from like kind of a high-level perspective.

[Christopher Ripley, executive]

Sure. So for your first question, churn is still in the mid-single digits overall. I will say that in terms of the summer impacting Q3 specifically. There's some seasonality in virtual MVPDs through the end of the second quarter and into Q3 before football starts. The verticals tend to be pretty slow in terms of net adds and then they really pick up when football starts again. So that does have some impact there.

And look, all I can say, I can't speak to future negotiations. And as a policy and from a competitive standpoint, we wouldn't want to reveal anything about current or future negotiations. But we've had many renewals so far this year. And from very large MVPDs to small MVPDs, and they all have met or exceeded our expectations so far. So our confidence is based on our very recent history of successful negotiations and with no blackouts, as I may add. And so not to say that we wouldn't be ready to black out if we don't feel like we're getting fair compensation for what we're offering, but so far, so good. And that gives us a very good read on the market and gives us confidence to give you the guidance that we've given.

Now obviously, once we get through this year, I don't expect -- we won't have any major negotiations for quite some time. So it's who knows what the market will look like at that point. I think it's a little too far out. We're going to have great certainty, which is a very nice place to be for several years. And I think when you take a look at where the broadcasters are today and the shift to sports back on to broadcasting, and just it's undoubtedly to me that the value proposition of broadcasting within the [ PayTV ] Universe is going up, not down. I don't see that trend changing. And so if you want to be in the [ Pay-TV ] business, you're going to have to have the broadcast channels. I don't see that changing in the future. And so I think that bodes well for the next cycle, but that's certainly outside the scope of any sort of guidance that we can give you.

[David Hamburger, analyst]

And maybe just a follow-up on the sports question. I mean you mentioned the NBA. I think NBC has said they plan to exclusively stream half of their regular season games on Peacock. We hear that the NFL is doing 2 Christmas games, on Netflix. Amazon next year will have a wildcard gain similar to what Peacock last year. What are your thoughts about simulcasting, exclusivity of more and more sports program, which seems to be the case, although you do mention there are instances, obviously, of some sports coming back to broadcast, but it seems like a fairly splintered or more fragmented distribution strategy going forward? Maybe again, just from a strategic perspective, can you talk a little bit about some of these recent developments in streaming of sports?

[Robert Weisbord, executive]

Yes. I think we're actually more bullish with the NBA. It's from appearances and conversations, it appears that once NFL is over, there'll be Sunday Prime and Tuesday Prime on the network, and then Monday would be a stream on Peacock. And we do live in this duality world and even if there's simulcast, we show the strength of broadcast each time that there's a simulcast. You can look at the Amazon Thursday games, what kind of numbers the local markets pull that are playing and it's the new reality. But again, when you look at the reach, you look at the Paris Olympic numbers, the tune is to the networks because there's nobody that has a great reach than broadcast at this current time.

[Christopher Ripley, executive]

Another great example is the past Super Bowl made new records about 120 million viewers on broadcast. And when you take a look at all the other places that existed, it was a pit in terms of what it keeps up to what it added to the overall viewership.

[Robert Weisbord, executive]

When you look at just the announcement today in the New Orleans NBA about [ Smelting ] Pelicans went back to broadcast television. So you're seeing this more and more as a prevalence to be able to get the greatest reach the teams and the various leads are recognizing that they need to be on free-over-the-air broadcast. Thank you.

[Operator]

We appear to have reached the end of our question-and-answer session. So I will now turn the call back over to Chris Ripley, the President and CEO, for closing remarks.

[Christopher Ripley, executive]

Thank you, operator, and thank you all for joining our second quarter earnings call. To the extent you have any questions or follow-ups, please do not hesitate to reach out to us. Thanks.

[Operator]

Thank you very much. This does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful rest of the day. Thank you for your participation.