Sinclair, Inc. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis provides qualitative and quantitative information about Sinclair's and SBG's financial performance and condition and should be read in conjunction with Sinclair's and SBG's consolidated financial statements and the accompanying notes to those statements. This discussion consists of the following sections: Summary of Significant Events — financial events during the three months ended September 30, 2024 and through the date this Report on Form 10-Q is filed. Results of Operations — an analysis of Sinclair's and SBG's revenues and expenses for the three and nine months ended September 30, 2024 and 2023. Liquidity and Capital Resources — a discussion of Sinclair's and SBG's primary sources of liquidity and an analysis of Sinclair's and SBG's cash flows from or used in operating activities, investing activities, and financing activities during the three and nine months ended September 30, 2024. SUMMARY OF SIGNIFICANT EVENTS Content and Distribution • In August and September 2024, Sinclair expanded its podcast division, launching a new slate of sports programming featuring top athletes, coaches, and experts including “The Triple Option,” hosted by Urban Meyer, Mark Ingram II, and Rob Stone and “Throwbacks” with Matt Leinart and Jerry Ferrara. • In the third quarter 2024, Sinclair entered into a multi-year renewal with Altice USA for continued carriage of SBG's broadcast stations and Tennis Channel on Altice's Optimum and Suddenlink owned systems. • In the third quarter 2024, Sinclair entered into a multi-year renewal with DIRECTV for continued carriage of SBG's broadcast stations and Tennis Channel across DIRECTV, DIRECTV Stream, and U-verse. • In October 2024, SBG launched the Rip City Television Network, a network of SBG affiliates throughout the Pacific Northwest to serve as the new television home of Trail Blazers starting with the 2024-25 season. • In October 2024, Sinclair announced the launch of a soccer-focused podcast, "Unfiltered Soccer with Landon and Tim," featuring former U.S. soccer stars Landon Donovan and Tim Howard. Corporate Social Responsibility • In July 2024, Sinclair awarded scholarships to 12 university students as a part of its annual Diversity Scholarship program. • In October 2024, Sinclair ran Sinclair Cares: Hurricane Helene Relief, a fundraising partnership with the Salvation Army and The United Way to assist with humanitarian relief efforts on the ground in Western North Carolina, South Carolina, Georgia, Florida, Virginia, and Tennessee in the aftermath of Hurricanes Helene and Milton. Including Sinclair's corporate donation of $50,000, the campaign raised nearly $1.3 million in donations designated for delivering emergency aid, including food, water, shelter, and cleanup kits. • To date in 2024, SBG's newsrooms have won a total of 196 journalism awards. 54 Table of Contents NextGen Broadcast (ATSC 3.0) • In 2024, Sinclair, in coordination with other broadcasters, and led by BitPath, its joint venture with another broadcaster, has deployed NextGen TV, powered by ATSC 3.0, in the two markets below. This brings the total number of our markets in which NextGen TV has been deployed to 45: Month Market Number of Stations Company Stations April 2024 Portland, ME 5 WGME (CBS), WPFO (a) (FOX) June 2024 Myrtle Beach, SC 4 WPDE (ABC) (a) The license and programming assets for this station are currently owned by a third party. SBG provides certain non-programming related sales, operational, and administrative services to this station pursuant to a service agreement, such as a JSA and SSA. Financing, Capital Allocation, and Shareholder Returns • In August 2024, Sinclair declared a quarterly dividend of $0.25 per share and in November 2024, Sinclair declared a quarterly dividend of $0.25 per share. 55 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS SINCLAIR, INC. RESULTS OF OPERATIONS Any references to the first, second, or fourth quarters are to the three months ended March 31, June 30, or December 31, respectively, for the year being discussed. As of September 30, 2024, we had two reportable segments for accounting purposes, local media and tennis. Seasonality / Cyclicality The operating results of our local media segment are usually subject to cyclical fluctuations from political advertising. In even numbered years, political spending is usually significantly higher than in odd numbered years due to advertising expenditures preceding local and national elections. Additionally, every four years, political spending is usually elevated further due to advertising expenditures preceding the presidential election. Also, the second and fourth quarter operating results are usually higher than the first and third quarters' because advertising expenditures are increased in anticipation of certain seasonal and holiday spending by consumers. The operating results of our tennis segment are usually subject to cyclical fluctuations due to the number and significance of tournaments that take place in the respective quarters during the year. The first and fourth quarter operating results are usually higher than the second and third quarters' because of the number and significance of tournaments that are played during those periods. Operating Data The following table sets forth our consolidated operating data for the periods presented (in millions): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Media revenues $ 908 $ 758 $ 2,519 $ 2,285 Non-media revenues 9 9 25 23 Total revenues 917 767 2,544 2,308 Media programming and production expenses 414 400 1,247 1,211 Media selling, general and administrative expenses 201 176 591 557 Depreciation and amortization expenses 63 66 189 204 Amortization of program costs 18 18 55 59 Non-media expenses 14 15 39 36 Corporate general and administrative expenses 41 45 149 165 Loss on deconsolidation of subsidiary — 10 — 10 (Gain) loss on asset dispositions and other, net of impairment (13) — (11) 11 Operating income $ 179 $ 37 $ 285 $ 55 Net income (loss) attributable to Sinclair $ 94 $ (46) $ 134 $ 50 56 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS Local Media Segment The following table sets forth our revenue and expenses for our local media segment for the periods presented (in millions): Three Months Ended September 30, Percent Change Increase / (Decrease) Nine Months Ended September 30, Percent Change Increase / (Decrease) 2024 2023 2024 2023 Revenue: Distribution revenue $ 383 $ 365 5% $ 1,151 $ 1,118 3% Core advertising revenue 283 281 1% 852 861 (1)% Political advertising revenue 138 11 n/m 202 20 n/m Other media revenues 41 40 2% 117 102 15% Media revenues (a) $ 845 $ 697 21% $ 2,322 $ 2,101 11% Operating Expenses: Media programming and production expenses 384 371 4% 1,149 1,111 3% Media selling, general and administrative expenses (b) 188 164 15% 549 514 7% Depreciation and amortization expenses 58 59 (2)% 174 185 (6)% Amortization of program costs 18 18 —% 55 59 (7)% Corporate general and administrative expenses 24 31 (23)% 94 109 (14)% Non-media expenses 2 3 (33)% 6 12 (50)% Gain on asset dispositions and other, net of impairment (11) (2) n/m (11) (5) n/m Operating income $ 182 $ 53 n/m $ 306 $ 116 n/m Interest expense including amortization of debt discount and deferred financing costs $ 78 $ 77 1% $ 230 $ 227 1% Gain on extinguishment of debt $ — $ 4 n/m $ 1 $ 15 (93)% Other income, net $ 2 $ 6 (67)% $ 35 $ 40 (13)% n/m - not meaningful (a) Includes $2 million and $7 million for the three and nine months ended September 30, 2024, respectively, and $2 million and $4 million for the three and nine months ended September 30, 2023, respectively, of intercompany revenue related to certain services provided to the tennis segment, which is eliminated in consolidation. (b) Includes $4 million and $9 million for the three and nine months ended September 30, 2024, respectively, and $2 million and $5 million for the three and nine months ended September 30, 2023, respectively, of intercompany expense related to certain services provided by other, which is eliminated in consolidation. Revenue Distribution revenue. Distribution revenue, which represents fees earned from Distributors for our broadcast signals, increased $18 million or 5% and $33 million or 3% for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023. Contractual rate increases favorably impacted period-over-period distribution revenue by high-teen percentages for the three months ended September 30, 2024 and by mid-teen percentages for the nine months ended September 30, 2024. The increase in distribution revenue was offset by a decrease in subscribers by low double-digit percentages for both periods, respectively. Core advertising revenue. Core advertising revenue increased $2 million and decreased $9 million for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, with no particular product/services category dominating the variance. Political advertising revenue. Political advertising revenue increased $127 million and $182 million for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily due to 2024 being a presidential political year, compared to 2023 which was an off-year election cycle, and therefore only had a small number of political races and correspondingly less political advertising spend. 57 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS Other media revenues. Other media revenues increased $1 million and $15 million for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily due to an increase related to providing certain services under management services agreements. The following table sets forth our primary types of programming and their approximate percentages of advertising revenue for the periods presented: Percent of Advertising Revenue for the Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Syndicated/Other programming 35% 39% 38% 39% Local news 31% 31% 31% 30% Network programming 17% 15% 17% 16% Sports programming 15% 10% 12% 11% Paid programming 2% 5% 2% 4% The following table sets forth our affiliate percentages of advertising revenue for the periods presented: Percent of Advertising Revenue for the Three Months Ended September 30, Nine Months Ended September 30, # of Channels 2024 2023 2024 2023 ABC 40 28% 30% 25% 30% FOX 55 22% 23% 22% 23% CBS 30 20% 19% 20% 20% NBC 25 16% 13% 20% 12% CW 47 5% 5% 5% 5% MNT 39 3% 4% 3% 4% Other 402 6% 6% 5% 6% Total 638 Expenses Media programming and production expenses. Media programming and production expenses increased $13 million and $38 million for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily due to an increase in fees pursuant to network affiliation agreements as a result of increased contractual rates. Media selling, general and administrative expenses. Media selling, general and administrative expenses increased $24 million for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to a $7 million increase in third-party fulfillment costs from our digital business as a result of increased digital revenues, a $6 million increase in national sale commissions due to an increase in national advertising sales, a $5 million increase in employee compensation cost, and a $2 million increase in both information technology costs and credit card processing fees due to the increase in advertising revenue. Media selling, general and administrative expenses increased $35 million for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to an $11 million increase in third-party fulfillment costs from our digital business as a result of increased digital revenues, an $8 million increase in national sale commissions due to an increase in national advertising sales, a $6 million increase in employee compensation cost, a $3 million increase in credit card processing fees due to an increase in advertising revenue, and a $1 million increase in trade related expenses. Amortization of program costs. The amortization of program costs remained flat for the three months ended September 30, 2024, when compared to the same period in 2023. The amortization of program costs decreased $4 million for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily related to reduced programming renewal costs. Corporate general and administrative expenses. See explanation under Corporate and Unallocated Expenses. 58 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS Interest expense including amortization of debt discount and deferred financing costs. Interest expense increased $1 million and $3 million for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily due to increased interest expense related to our variable rate debt resulting from higher interest rates. Other income, net. During the nine months ended September 30, 2024, we recognized a $26 million gain related to the sale of certain broadcast related assets and $9 million in interest income. Tennis Segment The following table sets forth our revenue and expenses for our tennis segment for the periods presented (in millions): Three Months Ended September 30, Percent Change Increase / (Decrease) Nine Months Ended September 30, Percent Change Increase / (Decrease) 2024 2023 2024 2023 Revenue: Distribution revenue $ 51 $ 49 4% $ 154 $ 140 10% Core advertising revenue 8 9 (11)% 32 32 —% Other media revenues 1 1 —% 4 2 n/m Media revenues 60 59 2% 190 174 9% Operating Expenses: Media programming and production expenses 30 29 3% 98 91 8% Media selling, general and administrative expenses (a) 13 11 18% 42 33 27% Depreciation and amortization expenses 5 5 —% 16 15 7% Corporate general and administrative expenses 1 1 —% 2 1 n/m Operating income $ 11 $ 13 (15)% $ 32 $ 34 (6)% n/m - not meaningful (a) Includes $2 million and $7 million for the three and nine months ended September 30, 2024, respectively, and $2 million and $4 million for the three and nine months ended September 30, 2023, respectively, of intercompany expense related to certain services provided by the local media segment, which is eliminated in consolidation. Revenue Distribution revenue. Distribution revenue, which is generated through fees earned from Distributors for the right to distribute Tennis Channel, increased $2 million or 4% and $14 million or 10% for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023. Contractual rate increases favorably impacted period-over-period distribution revenue by low double-digit percentages for both the three and nine months ended September 30, 2024. The increase in distribution revenue was offset by a decrease in subscribers by single-digit percentages for both periods, respectively. Core advertising revenue. Core advertising revenue is primarily generated from sales of commercial time within Tennis Channel programming. Core advertising revenue decreased $1 million for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to a shift in the 2024 tournament calendar compared to the 2023 tournament calendar. Core advertising revenue remained flat for the nine months ended September 30, 2024, when compared to the same period in 2023. Expenses Media programming and production expenses. Media programming and production expenses increased $1 million and $7 million for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily due to an increase in live production expenses related to an increase in the number of tournaments aired in the current periods versus the prior periods. 59 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS Media selling, general and administrative expenses. Media selling, general and administrative expenses increased $2 million for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to an increase in employee compensation cost. Media selling, general and administrative expenses increased $9 million for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to an increase in expenses related to certain services provided by the local media segment, which is eliminated in consolidation, and employee compensation cost. Corporate general and administrative expenses. See explanation under Corporate and Unallocated Expenses. Other The following table sets forth our revenues and expenses for our non-broadcast digital and internet solutions, technical services, and non-media investments (collectively, other) for the periods presented (in millions): Three Months Ended September 30, Percent Change Increase / (Decrease) Nine Months Ended September 30, Percent Change Increase/(Decrease) 2024 2023 2024 2023 Revenue: Media revenues (a) $ 9 $ 6 50% $ 24 $ 21 14% Non-media revenues (b) $ 10 $ 11 (9)% $ 30 $ 27 11% Operating Expenses: Media expenses (c) $ 6 $ 5 20% $ 16 $ 30 (47)% Non-media expenses (d) $ 12 $ 13 (8)% $ 36 $ 26 38% Operating income (loss) $ 1 $ (7) n/m $ (2) $ (31) (94)% Income from equity method investments $ — $ — n/m $ 93 $ 30 n/m n/m - not meaningful (a) Media revenues for the three and nine months ended September 30, 2024 include $4 million and $9 million, respectively, and for the three and nine months ended September 30, 2023 include $2 million and $5 million, respectively, of intercompany revenue related to certain services and sales provided to the local media segment, which is eliminated in consolidation. (b) Non-media revenues for the three and nine months ended September 30, 2024 include $1 million and $5 million, respectively, and for the three and nine months ended September 30, 2023 include $2 million and $4 million, respectively, of intercompany revenue related to certain services and sales provided to the local media segment, which is eliminated in consolidation. (c) Media expenses for the nine months ended September 30, 2023 include $2 million of intercompany expense primarily related to certain services provided by the local media segment, which is eliminated in consolidation. (d) Non-media expenses for the nine months ended September 30, 2024 include $3 million and for the three and nine months ended September 30, 2023 include $1 million and $2 million, respectively, of intercompany expense related to certain services and sales provided by the local media segment, which is eliminated in consolidation. Revenue. Media revenues increased $3 million for both the three and nine months ended September 30, 2024, when compared to the same periods in 2023, primarily due to an increase in advertising revenue related to our digital initiatives. Non-media revenues increased $3 million for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to an increase in broadcast equipment sales. Expenses. Media expenses increased $1 million for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to an increase in selling, general and administrative expenses related to our digital initiatives. Media expenses decreased $14 million for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to the sale of Stadium Network. Non-media expenses increased $10 million for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to an increase in expenses related to our technical services business and an increase in expenses associated with higher broadcast equipment sales. Income from equity method investments. During the nine months ended September 30, 2024, we recognized a gain of $93 million related to the sale of one of our investments, which is included in income from equity method investments in our consolidated statements of operations. During the nine months ended September 30, 2023, we recognized a gain of $33 million on the sale of two of our real estate investments, which is included in income from equity method investments in our consolidated statements of operations. 60 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS Corporate and Unallocated Expenses The following table presents our corporate and unallocated expenses for the periods presented (in millions): Three Months Ended September 30, Percent Change Increase/ (Decrease) Nine Months Ended September 30, Percent Change Increase/ (Decrease) 2024 2023 2024 2023 Corporate general and administrative expenses $ 41 $ 45 (9)% $ 149 $ 165 (10)% Income tax (provision) benefit $ (29) $ 12 n/m $ (30) $ 236 n/m n/m - not meaningful Corporate general and administrative expenses. The table above and the explanation that follows cover total consolidated corporate general and administrative expenses. Corporate general and administrative expenses decreased $4 million and $16 million for the three and nine months ended September 30, 2024, respectfully, when compared to the same periods in 2023, primarily due to a decrease in legal, consulting, and regulatory costs, primarily related to the litigation discussed under Note 5. Commitments and Contingencies within Sinclair's Consolidated Financial Statements, partially offset by an increase in employee compensation cost. Income tax (provision) benefit. The effective tax rate for the three months ended September 30, 2024 was a provision of 23.0% as compared to a benefit of 20.7% during the same period in 2023. The change from benefit to provision is primarily due to a book loss in 2023 compared to book income in 2024. The effective tax rate for the nine months ended September 30, 2024 was a provision of 17.4% as compared to a benefit of 134.3% during the same period in 2023. The decrease in the effective tax rate for the nine months ended September 30, 2024, as compared to the same period in 2023, is primarily due to a release of the 2023 valuation allowance on deferred tax assets relating to deductibility of interest expense under the IRC Section 163(j) as a result of the change in the tax classification of the legal entity owning the DSG business because of the exit of the sole minority investor. 61 Table of Contents SINCLAIR BROADCAST GROUP, LLC RESULTS OF OPERATIONS SINCLAIR BROADCAST GROUP, LLC RESULTS OF OPERATIONS Any references to the first, second, or fourth quarters are to the three months ended March 31, June 30, or December 31, respectively, for the year being discussed. As of September 30, 2024, SBG had one reportable segment for accounting purposes, local media. Seasonality / Cyclicality The operating results of SBG's local media segment are usually subject to cyclical fluctuations from political advertising. In even numbered years, political spending is usually significantly higher than in odd numbered years due to advertising expenditures preceding local and national elections. Additionally, every four years, political spending is usually elevated further due to advertising expenditures preceding the presidential election. Also, the second and fourth quarter operating results are usually higher than the first and third quarters' because advertising expenditures are increased in anticipation of certain seasonal and holiday spending by consumers. Operating Data The following table sets forth SBG's consolidated operating data for the periods presented (in millions): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Media revenues $ 845 $ 697 $ 2,322 $ 2,203 Non-media revenues — — — 10 Total revenues 845 697 2,322 2,213 Media programming and production expenses 384 371 1,149 1,166 Media selling, general and administrative expenses 188 164 549 539 Depreciation and amortization expenses 58 59 174 194 Amortization of program costs 18 18 55 59 Non-media expenses 2 3 6 22 Corporate general and administrative expenses 24 31 100 147 Loss on deconsolidation of subsidiary — 10 — 10 (Gain) loss on asset dispositions and other, net of impairment (11) (3) (11) 7 Operating income $ 182 $ 44 $ 300 $ 69 Net income (loss) attributable to SBG $ 80 $ (22) $ 87 $ 62 Local Media Segment Refer to Local Media Segment above under Sinclair, Inc.'s Results of Operations for a discussion of SBG's local media segment, which is the same as Sinclair's local media segment for all of the three and nine months ended September 30, 2024 and 2023. 62 Table of Contents SINCLAIR BROADCAST GROUP, LLC RESULTS OF OPERATIONS Other The following table sets forth SBG's revenues and expenses for tennis, non-broadcast digital and internet solutions, technical services, and non-media investments (collectively, other) for the period presented, prior to the Reorganization (in millions): Nine Months Ended September 30, 2023 Revenue: Distribution revenue $ 76 Core advertising revenue 29 Other media revenues 3 Media revenues (a) $ 108 Non-media revenues (b) $ 11 Operating Expenses: Media expenses (c) $ 86 Non-media expenses (d) $ 10 Loss on asset dispositions and other, net of impairment $ 13 Income from equity method investments $ 31 (a) Media revenues for the nine months ended September 30, 2023 include $3 million of intercompany revenue related to certain services and sales provided to the local media segment, which is eliminated in consolidation. (b) Non-media revenues for the nine months ended September 30, 2023 include $1 million of intercompany revenue related to certain services and sales provided to the local media segment, which is eliminated in consolidation. (c) Media expenses for the nine months ended September 30, 2023 include $1 million of intercompany expense primarily related to certain services provided by the local media segment, which is eliminated in consolidation. (d) Non-media expenses for the nine months ended September 30, 2023 include $1 million of intercompany expense related to certain services and sales provided by the local media segment, which is eliminated in consolidation. The revenue and expense items noted above for the nine months ended September 30, 2023 represent activity prior to the Reorganization which occurred June 1, 2023, thus there is no activity presented for periods subsequent to May 31, 2023. See Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies within SBG's Consolidated Financial Statements. Corporate and Unallocated Expenses The following table presents SBG's corporate and unallocated expenses for the periods presented (in millions): Three Months Ended September 30, Percent Change Increase/ (Decrease) Nine Months Ended September 30, Percent Change Increase/ (Decrease) 2024 2023 2024 2023 Corporate general and administrative expenses $ 24 $ 31 (23)% $ 100 $ 147 (32)% Income tax (provision) benefit $ (25) $ 6 n/m $ (15) $ 236 n/m n/m - not meaningful Corporate general and administrative expenses. The table above and the explanation that follows cover total consolidated corporate general and administrative expenses. Corporate general and administrative expenses decreased by $7 million and $47 million for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily due to a decrease in legal, consulting, and regulatory costs, primarily related to the litigation discussed under Note 5. Commitments and Contingencies within SBG's Consolidated Financial Statements. Income tax (provision) benefit. The effective tax rate for the three months ended September 30, 2024 was a provision of 22.8% as compared to a benefit of 18.9% during the same period in 2023. The change from benefit to provision is primarily due to a book loss in 2023 compared to book income in 2024. 63 Table of Contents SINCLAIR BROADCAST GROUP, LLC RESULTS OF OPERATIONS The effective tax rate for the nine months ended September 30, 2024, was a provision of 13.6% as compared to a benefit of 144.6% during the same period in 2023. The decrease in the effective tax rate for the nine months ended September 30, 2024, as compared to the same period in 2023, is primarily due to a release of the 2023 valuation allowance on deferred tax assets relating to deductibility of interest expense under the IRC Section 163(j) as a result of the change in the tax classification of the legal entity owning the DSG business because of the exit of the sole minority investor. 64 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Liquidity and Capital Resources As of September 30, 2024, Sinclair had net working capital of approximately $646 million, including $536 million in cash and cash equivalent balances, and $650 million of available borrowing capacity. Cash on hand, cash generated by Sinclair's operations, and borrowing capacity under the Bank Credit Agreement are used as Sinclair's primary sources of liquidity. As of September 30, 2024, SBG had net working capital of approximately $238 million, including $202 million in cash and cash equivalent balances, and $650 million of available borrowing capacity. Cash on hand, cash generated by SBG's operations, and borrowing capacity under the Bank Credit Agreement are used as SBG's primary sources of liquidity. The Bank Credit Agreement of STG, a wholly-owned subsidiary of SBG, includes a financial maintenance covenant, the first lien leverage ratio (as defined in the Bank Credit Agreement), which requires such ratio not to exceed 4.5x, measured as of the end of each fiscal quarter, which is only applicable if 35% or more of the capacity (as a percentage of total commitments) under the revolving credit facility, measured as of the last day of each fiscal quarter, is utilized under the revolving credit facility as of such date. Since there was no utilization under the revolving credit facility as of September 30, 2024, STG was not subject to the financial maintenance covenant under the Bank Credit Agreement. As of September 30, 2024, the STG first lien leverage ratio was below 4.5x. The Bank Credit Agreement contains other restrictions and covenants with which STG was in compliance as of September 30, 2024. During the nine months ended September 30, 2024, STG purchased $27 million aggregate principal amount of the Term Loan B-2, due September 30, 2026, for consideration of $25 million. During the nine months ended September 30, 2024, Sinclair and SBG entered into agreements which increased estimated contractual amounts owed for network programming rights by $1,592 million which have terms that extend into 2027. There were no other material changes to Sinclair's or SBG's contractual cash obligations as of September 30, 2024. Sinclair and SBG anticipate that existing cash and cash equivalents, cash flow from the local media segment's operations, and borrowing capacity under the Bank Credit Agreement will be sufficient to satisfy the local media segment's debt service obligations, capital expenditure requirements, and working capital needs for the next twelve months. Sinclair anticipates that existing cash and cash equivalents and cash flow from SBG, the tennis segment and other's operations will be sufficient to satisfy SBG's, the tennis segment and other's debt service obligations, capital expenditure requirements, and working capital needs for the next twelve months. However, certain factors, including but not limited to the war in Ukraine, conflict in the Middle East, and other geopolitical matters, natural disasters, and pandemics, and their resulting effect on the economy, Sinclair's and SBG's advertisers, and Sinclair's and SBG's Distributors and their subscribers, could affect Sinclair's and SBG's liquidity and first lien leverage ratio which could affect Sinclair's and SBG's ability to access the full borrowing capacity under the Bank Credit Agreement. In addition to the sources described above, Sinclair and SBG may rely upon various sources for long-term liquidity needs, such as but not limited to, the issuance of long-term debt, the issuance of Sinclair equity, for Sinclair only, the issuance of Ventures equity or debt, or other instruments convertible into or exchangeable for Sinclair equity, or the sale of assets. However, there can be no assurance that additional financing or capital or buyers of assets will be available, or that the terms of any transactions will be acceptable or advantageous to Sinclair or SBG. In January 2024, Sinclair announced that it had agreed to a global settlement and release of all claims associated with the litigation filed by DSG and DSG’s wholly-owned subsidiary, Diamond Sports Net, LLC, in July 2023 and on March 1, 2024, the court approved the settlement. The settlement terms included Sinclair’s cash payment to DSG of $495 million. Additionally, under the terms of the settlement, Sinclair would provide transition services to DSG to allow DSG to become a self-standing entity going forward. An initial payment of $50 million was made in the first quarter of 2024 and the remaining $445 million was paid in the second quarter of 2024. Of the total $495 million settlement amount paid, $347 million was paid by STG and $148 million was paid by Ventures. 65 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Sinclair, Inc. Sources and Uses of Cash The following table sets forth Sinclair's cash flows for the periods presented (in millions): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net cash flows from (used in) operating activities $ 210 $ 1 $ (100) $ 143 Cash flows (used in) from investing activities: Acquisition of property and equipment $ (17) $ (30) $ (61) $ (70) Purchases of investments (9) (5) (41) (44) Distributions and proceeds from investments 1 1 185 205 Other, net 1 2 3 6 Net cash flows (used in) from investing activities $ (24) $ (32) $ 86 $ 97 Cash flows used in financing activities: Repayments of notes payable, commercial bank financing, and finance leases $ (9) $ (38) $ (52) $ (76) Dividends paid on Class A and Class B Common Stock (16) (16) (49) (50) Repurchase of outstanding Class A Common Stock — — — (153) Repurchase of redeemable subsidiary preferred equity — — — (190) Distributions to noncontrolling interests, net (3) (2) (8) (10) Other, net — 2 (3) (2) Net cash flows used in financing activities $ (28) $ (54) $ (112) $ (481) Operating Activities Net cash flows from Sinclair's operating activities increased for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to an increase in cash collections related to political revenue and Distributors, partially offset by an increase in production and overhead costs. Net cash flows used in Sinclair's operating activities increased for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to the payment of the DSG settlement and an increase in production and overhead costs, partially offset by an increase in cash collections related to political revenue and Distributors. Investing Activities Net cash flows used in Sinclair's investing activities decreased for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to a decrease in the acquisition of property and equipment in the current period, partially offset by an increase in purchases of investments in the current period. Net cash flows from Sinclair's investing activities decreased for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to a decrease in the distributions and proceeds from investments in the current period, partially offset by a decrease in the acquisition of property and equipment in the current period. Financing Activities Net cash flows used in Sinclair's financing activities decreased for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to a decrease in the repayment of debt in the current period. Net cash flows used in Sinclair's financing activities decreased for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to the repurchase of outstanding Common Stock and the redeemable subsidiary preferred equity in the prior period and a decrease in the repayment of debt in the current period. 66 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Sinclair declared a quarterly dividend of $0.25 per share in August 2024 and $0.25 per share in November 2024. Future dividends on Sinclair's shares of common stock, if any, will be at the discretion of Sinclair's Board of Directors and will depend on several factors including Sinclair's results of operations, cash requirements and surplus, financial condition, covenant restrictions, and other factors that Sinclair's Board of Directors may deem relevant. Sinclair Broadcast Group, LLC Sources and Uses of Cash The following table sets forth SBG's cash flows for the periods presented (in millions): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net cash flows from (used in) operating activities $ 226 $ 50 $ (86) $ 172 Cash flows (used in) from investing activities: Acquisition of property and equipment $ (17) $ (30) $ (61) $ (71) Purchases of investments (2) — (4) (37) Distributions and proceeds from investments 18 — 44 204 Other, net (1) 2 1 6 Net cash flows (used in) from investing activities $ (2) $ (28) $ (20) $ 102 Cash flows used in financing activities: Repayments of notes payable, commercial bank financing, and finance leases $ (8) $ (39) $ (51) $ (76) Dividends paid on Old Sinclair Class A and Class B Common Stock — — — (18) Repurchase of outstanding Old Sinclair Class A Common Stock — — — (153) Repurchase of redeemable subsidiary preferred equity — — — (190) Distributions to noncontrolling interests, net (3) (3) (8) (10) Contributions from (distributions to) member, net (63) (69) 48 (429) Other, net — — — (3) Net cash flows used in financing activities $ (74) $ (111) $ (11) $ (879) Operating Activities Net cash flows from SBG's operating activities increased for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to an increase in cash collections related to political revenue and Distributors, partially offset by an increase in production and overhead costs. Net cash flows used in SBG's operating activities increased for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to the payment of the DSG settlement and an increase in production and overhead costs, partially offset by an increase in cash collections related to political revenue and Distributors, as well as the impact of the Reorganization, as discussed in Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies within SBG's Consolidated Financial Statements. Investing Activities Net cash flows used in SBG's investing activities decreased for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to an increase in distributions and proceeds from investments and a decrease in the acquisition of property and equipment in the current period. Net cash flows used in SBG's investing activities increased for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to the $193 million A/R Facility principal payment received from DSPV in the prior period, offset by a decrease in the purchases of investments in the current period, as a result of the Reorganization, as discussed in Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies within SBG's Consolidated Financial Statements , and a decrease in the acquisition of property and equipment in the current period. 67 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Financing Activities Net cash flows used in SBG's financing activities decreased for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to a decrease in the repayment of debt in the current period. Net cash flows used in SBG's financing activities decreased for the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to a decrease in the repayment of debt in the current period and an increase in net contributions from member in the current period, as a result of the Reorganization, as discussed in Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies within SBG's Consolidated Financial Statements, and the repurchase of outstanding Old Sinclair Common Stock, dividends paid on Old Sinclair Class A and Class B Common Stock, and the repurchase of the redeemable subsidiary preferred equity in the prior period. CRITICAL ACCOUNTING POLICIES AND ESTIMATES There were no changes to the critical accounting policies and estimates from those disclosed in Critical Accounting Policies and Estimates under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report on Form 10-K for the year ended December 31, 2023. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes from the quantitative and qualitative discussion about market risk previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.