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SINCLAIR BROADCAST GROUP -A  (NASDAQ:SBGI)
Q1 2019 Earnings Call
May. 08, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen and welcome to your Sinclair Broadcast Group First Quarter 2019 Earnings Conference Call. (Operator Instructions)

At this time, it is my pleasure to turn the floor over to your host Lucy Rutishauser, Senior Vice President and Chief Financial Officer. Ma'am, the floor is yours.

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Thank you operator. Participating on the call with me today are Chris Ripley, President and CEO; Steve Marks Executive Vice President and Chief Operating Officer of our Television Group; Rob Weisbord Senior Vice President and Chief Revenue Officer; and David Amy Vice Chairman.

Before we begin Billie-Jo McIntire will make our forward-looking statement disclaimer.

Billie-Jo McIntire -- Senior Manager, 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 are 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 television broadcast and cash flow, EBITDA, free cash flow and leverage. These metrics are not meant to replace GAAP measurements, but are provided as supplemental detail to assist the public in their analysis and valuation of our company. A reconciliation of the non-GAAP financial measures to the GAAP measures in our financial statements is provided on our website under investors/non-GAAP measures.

Chris Ripley, will now take you through our operating highlights.

Christopher Ripley -- President and Chief Executive Officer

Thank you, Billie. Good morning everyone and thank you for joining our first quarter earnings call. We have some great results to report on the heels of the even more exciting news we announced last Friday. Last week we announced the largest transaction in our company's history. We entered into a definitive agreement to purchase 21 regional sports networks from Disney for $9.6 billion, which is an implied $10.6 billion enterprise value. We are acquiring these assets at a very attractive and accretive 6.5 times multiple or 5.5 times, including the net present value of the step-up in the tax basis.

This is the largest collection of RSNs in the marketplace today and is highly complementary to our existing broadcast in sports. The RSN significantly expand our focus in local sports and diversity of our content sources and revenue mix. We see many growth opportunities through digital platforms, political advertising, cross promotion collaborations, remote production, legalized sports betting and programming enhancements to name a few.

While the RSNs represent a significant expansion of local sports, Sinclair's existing sports focused businesses have also done very well. Our commitment to producing and providing local sports to our communities ranked our high school sports production, alongside national and regional sports networks, as a national finalists in a synopsis sports media awards. We were the only locally produced program to have been nominated for this prestigious honor.

On top of this, Tennis Channel and Ring of Honor each have had impressive first to report. Tennis Channel's first full-length feature film Strokes of Genius has been nominated for two sports Emmy awards with the winners to be announced later this month. In Ring of Honor, our wrestling promotion just had historic a sellout at Madison Square Gardens on April 6.

We are very pleased with the progress we're making with Marquee Sports Network and are on track for a great launch for spring training in February of 2020. The Cubs have been tremendous partners to work with, We've been interviewing and hiring key positions and studio construction will kick off in earnest this month.

As the year progresses there will be a lots more to cover on with the Cubs fans can expect from Marquee and we are very excited to bring them wall to wall Cubs coverage and programming.

This year we were once again positioned to recognize-to be recognized for the quality news stories and deep investigative reporting by our newsrooms. To date, we have already been awarded prestigious accolades for our news operations with 192 news awards and counting.

Our commitment to serve our communities by sharing relevant information to alert, protect and empower audiences has been recognized by our peers who have awarded Sinclair stations this year with 30 regional Edward Earl [ph] Journalism awards.

Our station in Baltimore Fox 45, including the project Baltimore has been honored with six national awards, including an Investigative Reporters and Editors Award for Investigative Journalism . Another of our stations KSMB in Las Vegas won the ACLU of Nevada's esteemed 2019 Freedom of the Press Award for its investigative reporting.

These recognitions are a reflection of our entire news organization and the values practiced by all of our stations. We are one of the most awarded news content centers in the industry and are extremely proud of our impactful journalism. We congratulate all of our winners.

We are also pleased to welcome award-winning Lara Logan as a special correspondent for Sinclair. Lara will report on the crisis from the southern border. She is a resilient force who represents the best of our industry and we're beyond thrilled to have her join our growing new steam.

We are also excited that we launched a new commentary segment Cross Point with Ameshia Cross who offers an opposing viewpoint to our current segment Bottom Line with Boris. We believe our viewers will welcome and appreciate a wider range of perspective on matters of importance to our country and their communities.

As we think about the number of candidates already announcing their candidacy for President and the latest industry research, we believe that 2020 presidential cycle will result in yet another record-breaking political year for us. As our stations continue to support their communities in times of crisis, we partnered with the Salvation Army to support relief efforts for the unprecedented Midwest flooding. Our Nebraska and Iowa stations promoted fundraising efforts to be used by the Salvation Army in the effective communities from these devastating storms.

On the ATSC 3.0 front great strides are being made with broad support from leaders within the NAV and the STC. On the operations front we and Spectrum Co. are on plan to initiate the deployment of ATSC 3.0 in 20 to 30 of our markets in 2019 and the industry is working to deploy the top 40 markets by the end of 2020. And I'm happy to say that the Single Frequency Network rollout in Dallas is now fully operational with the main signal and three additional SFN sites broadcasting in 3.0.

Before I turn the call over to Lucy, I'd like to give a special thanks to Dave Amy, our Vice Chairman, who will retire later this month after 35 years today with the company. Dave was instrumental in growing Sinclair from two stations to the leading broadcaster that we are today. Dave, good luck with your retirement and thank you for all that you've done for the company.

Now, I'll hand it over to Lucy.

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Thank you, Chris and I'd also like to reiterate Chris' sentiment. Dave, thank you for your leadership through the years. You and I worked together for over 20 years in about 80 earnings calls. I appreciate the mentorship you've given me and I would like to honor you by giving you the floor to introduce Sinclair's quarterly financial results one more time before your retirement.

David Amy -- Vice Chairman

Thank you, Lucy and thank you Chris. For this my last earnings call with the company and the Street, I am pleased to continue with the positive news and report that we exceeded our first quarter guidance in all key financial metrics.

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Excellent, Dave. Media revenues for the first quarter were $673 million, an increase of 5% or $30 million higher than first quarter 2018 and at the high end of our guidance. Included in our first quarter media revenues is $352 million of distribution revenue a 12% increase over the prior-year period. We are still on track for net retrains to grow by low 2% this year.

Political revenues in the first quarter were $2 million versus $7 million in the first quarter of last year an election year and in line with our guidance. Media operating expenses in the first quarter defined as media production and media SG&A expenses were $479 million, up from first quarter last year, primarily the result of higher reverse retrains fees and costs related to our growth initiatives.

Our reported media expenses were $3 million favorable to our previous guidance. For the full year media expenses are expected to be approximately $1.987 billion to $1.990 billion. Now as compared to our prior guidance the 1% increase is primarily due to bringing forward expenses that were reflected in our 2020 forecast and to a lesser extent some IT system enhancements.

Corporate overhead in the quarter was $28 million and includes $2 million in legal, regulatory and other nonrecurring costs and $8 million of stock based compensation. Excluding those costs, corporate overhead came in at guidance.

For the year corporate overhead is expected to be $72 million, excluding $11 million in nonrecurring costs and $17 million in stock based compensation. Non-media EBITDA was approximately $10 million in the quarter which is $9 million better than our prior guidance on higher sales at our antenna company and lower ONE Media expenses.

EBITDA in the first quarter adjusted for the $2 million of legal, regulatory and other nonrecurring costs was $166 million, that's million higher than in the low end of our prior guidance range on the higher non-media EBITDA, higher revenues and lower media expenses. Pro forma for our cost-cutting program EBITDA would have been another $6 million higher than ads [ph] reported number.

Net interest expense for the quarter was $50 million. Equity method investments for the quarter were a loss a $14 million. Diluted earnings per share on $93 million weighted average common shares was $0.23 in the quarter. We repuchased at 3.5 million shares in the first quarter at an average price of approximately $30.

Excluding the $2 million of one-time expenses, we generated $101 million of free cash flow in the quarter or approximately $105 million on a pro forma basis and exceeding the high end of prior guidance by $25 million. During the quarter we repurchased $105 million in shares, paid down $11 million of debt and distributed $18 million in dividend.

Free cash flow in the second quarter is expected to be approximately $63 million to $70 million. Now please note that if compared to the Street estimates the difference is due to timing of first quarter CapEx now estimated in the second quarter, as well as the 2018 tax extension payment which the Street model to be paid over Q2 to Q4 but was paid in April.

For 2018, 2019 we are reconfirming our free cash flow guidance range of $1. 150 billion to $1.220 million or $6.25 to $6. 63 of free cash flow per share on 92 million shares. We are also reconfirming our 2019, 2020 free cash flow guidance of $1.2 billion to $1.3 billion or $6.45 to $6.99 of free cash flow per share on 93 million shares. These estimates are pre the RSN acquisition. And as we discussed on our investor call on Monday, the consolidated free cash flow including RSN is expected to be about $12 per share of pro forma 2018, 2019 and about $13 for pro forma 2019, 2020.

Turning to the balance sheet and cash flow highlights. Capital expenditures in the first quarter were $29 million, including $13 million for the repack. For the full year 2019 we are maintaining our non-CapEx guide of $110 million to $120 million. In addition, we are reducing the 2019 full year expected repack CapEx slightly from $140 million to a revised $136 million.

Cash programming payments during the first quarter were $24 million and for the year we expect programming payments to be $95 million in line with our prior guidance. The net cash tax benefits in the first quarter was $1 million. And for 2019 we are estimating cash taxes paid to be approximately $34 million with $31 million of that occurring in the second quarter.

For second quarter and full year free cash flow purposes be sure to add back the $4 million of taxes related to the 2018 spectrum sales. The effective tax rate in 2019 is expected to be approximately 10%. This reflects the lower statutory federal income tax rate, as well as tax credits related to sustainability initiatives.

At March 31 total debt was $3 883 billion including $20 million non-guaranteed NVIE debt. Cash at March 31 was approximately $975 million. In addition, we had $484 million available on our revolver bringing total liquidity to roughly $1.5 billion.

In April we paid in full the remaining $92 million of term A loans with cash on hand. Total net leverage through the holding company at quarter end was 3.4 times on a trailing eight quarter basis, excluding the VIE and non-guaranteed debt and net of cash. The first lien indebtedness ratio on a trailing eight quarters was 1.2 times on a covenant of 4.25 times. And as mentioned, we repurchased 3.5 million shares in the first quarter and another 500,000 shares in the second. We have approximately $743 million remaining on our share authorization.

Steve Marks will now take you through our operating performance.

Steven Marks -- Executive Vice President and Chief Operating Officer

Thank you, Lucy and good morning everybody. We continue to see strengthening in our core advertising with first quarter down slightly as we guided in February. Second quarter expected to be flat to up, and Q3 and Q4 expected to be positive as well.

For the year we expect core revenues to be up. I'll repeat that for the year, we expect core revenues to be up. We are preparing for a strong start to the upcoming political cycle, which will drive broadcast media spending as early as the end of this year. I've said it before, 2020 is shaping up to be an unprecedented year for political advertising.

Our Digital business continues to perform very well with revenues growing 10% in the first quarter, as compared to the same period last year. Our CompulseOTT product that we launched last summer is one of our fastest-growing digital offerings.

Now turning to our outlook. For our second quarter we are expecting media revenues to be approximately $716 million to $725 million, up 3% to 4% as compared to second quarter 2018. This assumes $4 million to $5 million of political revenues versus $28 million last year and includes between $365 million and $368 million in distribution fees versus $319 million last year.

Core advertising revenues in the second quarter, excluding political are expected to be flat to up low single digit percent versus the same period last year. On the expense side, we are forecasting media expenses in the second quarter to be approximately $506 million to $508 million versus $452 million in the second quarter of 2018 with the majority of the increase coming from reverse retrains and growth initiatives.

For the year media expense guidance is estimated between $1.987 billion and $1.990 billion versus 2018 media expenses of $1.821 billion. The year-over-year increase is due primarily to higher reverse retrains annual compensation increases and growth initiatives.

Adjusted EBITDA, adjusted for legal, regulatory and our other nonrecurring costs in the second quarter is expected to be approximately $176 million to $182 million versus second quarter 2018 EBITDA of $203 million. The decrease is driven primarily by reduced political revenues, growth initiative investments and tennis rights, partially offset by an increase in net retrains and tennis expenses.

With that, I would like to open it up to questions.+ +

Questions and Answers:

Operator

(Operator Instructions) And we have our first question from Marci Ryvicker from Wolfe Research. Please go ahead.

Marci Ryvicker -- Wolfe Research -- Analyst

Thank you. I have a couple. I'm going to start with distribution revenues which seem like they're accelerating into Q2. Can you Lucy talk about what's driving that? Is that tennis or retrans renewals or anything else?

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Yes. So we do have some renewals this year that are reflected in there. But the other thing I would say also Marci is part of it is timing. As you recall, as we came out of, I think those broadcasters came out last year with some of the decline on some of the traditional MVPD. We had talked about give us a chance for the reporting of the payments to make its way through from the virtual side to us. And so you know, we are seeing this lag on what we lose with the traditional churn that's getting picked up by the virtual churn, sorry, the virtual ad.

Marci Ryvicker -- Wolfe Research -- Analyst

Okay. So you're seeing sub. Are you seeing overall sub increases flat?

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Yes. I would say the subs are flattish on a consolidated traditional and virtual combined.

Marci Ryvicker -- Wolfe Research -- Analyst

Okay. And then for 2019 expenses, I know you have growth initiatives and reverse comp in there. But is there anything related to the RSNs in the 2019 expense guide right now?

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Yes. There are some legal costs for EBITDA and free cash flow purposes we backed those out. But otherwise we haven't built anything into the RSNs. There is a little bit of a-as we talked about historically a little bit of small CapEx and working capital related to the launch of Marquee.

Marci Ryvicker -- Wolfe Research -- Analyst

Okay. And then I would assume that share purchase activity would be suspended at this point in time just due to the RSN acquisition?

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

That's correct. Yeah, we got big transaction coming up which we expect to close in the third quarter. So our focus is going to be getting that funded and then post that focus on deleveraging the company.

Marci Ryvicker -- Wolfe Research -- Analyst

Okay. And last just a comment Dave Amy, congrats on your retirement. It was great knowing you and talking to you over the years..

David Amy -- Vice Chairman

Thank you, Marci. Likewise you've been terrific in terms of covering the industry and...

Marci Ryvicker -- Wolfe Research -- Analyst

Thank you.

Operator

Our next question comes from Alexia Quadrani with JPMorgan. Please go ahead.

Alexia Quadrani -- JPMorgan -- Analyst

Hi. Thanks so much. Just a couple of questions. The first one just if you could elaborate a bit, give us a bit more color on your positive outlook on core, some key categories, specifically the strength you're seeing in the service sector, what's behind that and how sustainable it is?

And then I just had a follow-up question, maybe on recent DOJ forum [ph] on the local ad market that comes last week. I'm curious if you think the broadcasters made any headway in getting the DOJ to sort of reconsider the definition in the market?

Steven Marks -- Executive Vice President and Chief Operating Officer

They were very excited about the core, as we talked about in the opening comments. We do have quite a few more categories that are up in the second quarter that were down in first. Retail in particular was down in the first quarter and now is showing a nice place for second quarter, we'll have a very good second quarter.

Services continues to be just through the roof for us. That's our second biggest billing category next to automotive and retail is the third and we believe in second quarter our top three categories will fall into the plus column including automotive which is straddling between flat and slightly up.

Clearly we're going to be up in retail. Clearly we're going to be up in services again. And what's driving services is the lawyer category, insurance category, banking category. They continue to be very strong through the first six months of this year, which gives a cause to think that. And as I mentioned earlier, we believe we're going to continue to roll with this right through the remainder of the year. And we do believe our core will be up when you count it all up probably the year end and we'll walk to a really good start with it.

So, again we've got more categories in the plus column in second quarter than we did on the first. We expected that, but it is coming through and we are optimistic about the back half of the year as well.

Alexia Quadrani -- JPMorgan -- Analyst

And on the DOJ forum. First off just my hats off to the DOJ and specifically making (inaudible) for being forward-looking and organizing the forum to look at this issue. I thought they did an excellent job of getting the right industry participants to speak at the forum and I was there on a panel. I thought the second day in particular was exceptional. Dave Luji [ph] did a panel with participants from Comcast and Facebook. It was it was excellent. It was-he did an excellent job, all the panelist did an excellent job at really hitting at the heart of the matter, which is the market definition treating TV broadcast separate from from cable and separate from online video.

And I it was just an excellent forum overall and I think made it very, very strong case for unifying those video ad markets into one. And so so again, hats off to the DOJ and make our team [ph] for doing that. And we'll just have to see what impact that may have.

All right. Thank you very much.

Operator

And next we'll move to Dan Kurnos of Benchmark Company. Please go ahead.

Dan Kurnos -- Benchmark Company -- Analyst

Great, thanks. Good morning. If I could just go back to the distribution upside. Obviously there's been a lot of noise in the marketplace around subs and I think Lucy you're one of the few that did call out kind of the linear decline.

Can you guys just give us an update if you think there is any change to kind of your net retrans outlook? And could you just remind us how much you do have coming up for renewal in terms of sub footprint in the back half of this year?

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Okay. So a couple of points. One is on a consolidated basis, we're seeing subs flattish, that's point number one that's important. Second point is we have reconfirmed our '19 growth for net retrans of low teen percent. Also reconfirming our '20 growth also low teen percent for next year as well.

So everything is looking very good and we have just a couple, where we're in the midst of charter which is very productive probably close to being done there. And then we have AT&T this summer and that's pretty much it for this year. We're done with all the networks. Those were all done coming into January this year.

Dan Kurnos -- Benchmark Company -- Analyst

Perfect. Super helpful. And then just it kind of got lost in the wash is a smaller piece and obviously you guys have made a slightly larger transaction. But just on Compulse, you know, I know you guys talked about it briefly in the prepared remarks. Certainly there's been some noise from the competitor in the space. You know, I don't know if there's opportunity for share gains. Kind of what kind of growth trajectory you're seeing or if there's incremental investment on that this year. And kind of how you think you know that can expand over the balance of the year, how that's contributing results?

Christopher Ripley -- President and Chief Executive Officer

So what I would state is in first quarter we were up against a major investment that was a one-time only investment due to a special circumstance and we expect the earnings to return to normalized growth that we've had as a trajectory over the last several years.

Marketing services was a major priority of the company and selling across all our screens. The definition of television is anything that has audio and video and we're really encouraged by the OTT space.

Steven Marks -- Executive Vice President and Chief Operating Officer

Yes. Specifically if you're referring to the other competitor being Tegna, but we think they've got a very interesting product. In Premion we have something that is fairly similar called CompulseOTT and it is a fastest-growing new product launch in our history and very complementary to our core spot sales activities and we expect that to continue to power our future growth into the future.

Dan Kurnos -- Benchmark Company -- Analyst

Chris, can I sneak one more in just on the tennis DTC? If there's any expense built in and just kind of how you're thinking about timing of all that since you mentioned it on the RSN call?

Christopher Ripley -- President and Chief Executive Officer

Sure. So tennis is scheduled to launch-it already has a significant direct-to-consumer and TV everywhere presence in the U.S. which we continue to build on. I think we have a charter added on the TV hour side later this year. And then next year we'll be launching internationally with the direct-to-consumer offering in international territory starting in Europe. And there are-there is some expense this year for that initiative with no revenues. So it's not a huge amount but it does impact 2019.

Dan Kurnos -- Benchmark Company -- Analyst

Perfect. Thanks for the color guys.

Operator

Our next question comes from Zach Silver with B. Riley FBR. Please go ahead.

Zach Silver -- B. Riley FBR -- Analyst

Okay great. Thanks for taking the question. I just wanted to first I guess ask what gives you confidence that you can grow core ad in the back half? And then along with that maybe elaborate on how the specialist versus generalist initiatives are going and the categories you've implemented them on? And what categories you can potentially implement them on for the remainder of the year?

Steven Marks -- Executive Vice President and Chief Operating Officer

Yeah, on the core side it's just a normal course of business of what we see. And on the first quarter call everything we said came to fruition. What we're seeing in second quarter we expected and is coming through and it's just the way we do our business. After the first four months and seeing where we're right after essentially six months down, we have a lot of confidence in our ability to bring the core on the plus side, just because of what we're seeing over the first six months. Everything that we suggested has come to fruition and that's the way we read the market right.

Christopher Ripley -- President and Chief Executive Officer

I'll just add to that, that in the back half of the year we do have the advantage of not having political write out that you had last year, it tends to be natural tailwind for quarter.

David Amy -- Vice Chairman

And I'll speak to specialist versus generalist. We're in our early stages but it appears to be sitting very well in the categories that we've focused on we are seeing positive results year-over-year and we expect to expand into other verticals and specialties by hiring core experts from those industries.

Zach Silver -- B. Riley FBR -- Analyst

Got it. Very helpful. And then just one on STIRR, I think that this is an all ad based product. Now I'm wondering how you're thinking about the subscription revenue opportunity and maybe if there's any way that this fits in either the brand or the technology with the RSN acquisition? Thanks.

Christopher Ripley -- President and Chief Executive Officer

Sure. So STIRR is very much in start-up mode right now, doing great in terms of awareness and downloads. We're very pleased with their progress so far, well ahead of expectations. So it's really trying to build a user base first and foremost right now and we think free is the best way to do that.

The technology does provide the ability to add paywalls and premium content for upselling to subscription-based programming and that's something that won't likely be turned on in the near-term since we're trying to build a user base, but it's absolutely on the product plan.

And in terms of how this fits within our broader sports footprint we see specifically from the RSNs programming, non-game programming being used on STIRR since it is a multichannel offering and also on an authenticated basis we very well might populate games as well, but that's to be determined.

Steven Marks -- Executive Vice President and Chief Operating Officer

And one other thing so I'd like to add is with hat one, the different trades STIRR has been mentioned as one of the top 10 AVOD OTT apps and the likes of Pluto and Zoom [ph] so just recently launched shows the time energy and effort put together by our products and programming team to come out of the gate with a strong asset.

Zach Silver -- B. Riley FBR -- Analyst

Great. Thank you very much.

Steven Marks -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

And our next question comes from Kyle Evans with Stephens. Please go ahead.

Kyle Evans -- Stephens -- Analyst

Hi, thanks. Congratulations David. Lucy I wanted to start with maybe a question on your flattish sub commentary. I just want to make certain that that's just for core TV stations and it's not, that you're not including new tennis houses or any of the smaller stations there?

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

That's correct.

Kyle Evans -- Stephens -- Analyst

Great. Steve, I'd like to ask you to dig down a little bit in the autos. Is that strength that you're seeing there in 2Q and for the balance of the year is that local dealership level, higher tiers? And maybe some comments on which mix are driving that?

Steven Marks -- Executive Vice President and Chief Operating Officer

Actually the three biggest categories of where we derive revenue from on auto are up the second quarter, the domestic dealership is up, domestic manufacturer is up and the foreign dealer which is the largest of the two others that I just mentioned is just slightly down, not even 1% down, it's less than 1% . So the three biggest categories we have are propelling our efforts right now and that gives us a really reasonable year [ph] We're turning the corner on this category, delivering what we said we were going to deliver.

Kyle Evans -- Stephens -- Analyst

Anything specific that you're seeing at the local dealership level you could comment on?

David Amy -- Vice Chairman

I think that we've had a large emphasis on dealing directly with the rooftops, where many are focused having local agencies. We are focused on dealing at the dealer levels. So that's where we're seeing our success directly at solving the needs of the rooftops individually.

Kyle Evans -- Stephens -- Analyst

Great. Last one, I know STIRR has been start-up mode and it's still small. Could you talk a little bit about the content expansion strategy there? And then I know it's available on the web and across all the major streaming platforms. Are you seeing any particular one of those drive hours in these early days? Thank you.

Christopher Ripley -- President and Chief Executive Officer

Sure. So there's a plan to add well over 100 channels to STIRR and we have-a lot of those deals are in the queue making their way down the pipeline. One of the technological choke points is ingestion of content, which we're working hard to solve to get more more channels up and running. So right now we're we're focused on adding quality and also quantity and we're making progress there. I think we're already up to around 40 channels.

And then in terms of usage, it is available on all the streaming boxes. It is a TV product. You know, you can get it on your mobile phone, but the vast majority of the usage is on televisions, mainly through streaming boxes with Roku being the biggest contributor in terms of usage.

David Amy -- Vice Chairman

And the Interesting stat is that it's like television and television programming to date, not biog that's driving the viewership.

Christopher Ripley -- President and Chief Executive Officer

Yes. That's of other thing that we really like about the strategy is, is that it's not just a peer on-demand service. It has streaming, traditional lean back experience which linear, as well as VOD which a lot of platforms you know just have VOD and we think that's a shortcoming.

Kyle Evans -- Stephens -- Analyst

Thank you so much.

Operator

And our next question comes from Aaron Watts from Deutsche Bank. Please go ahead.

Aaron Watts -- Deutsche Bank -- Analyst

Hi, everyone. Thanks for having me on. Let me start by saying congratulations to Dave on your retirement and all you've achieved at Sinclair. On a personal level, will say that I've enjoyed working with you over these many years. So congratulations.

Let me start by saying congratulations to Dave on your retirement and all you achieved on Sinclair. On a personal level I enjoyed working with you these many years. Congratulations.

David Amy -- Vice Chairman

Thanks Aaron. I always enjoyed the September Deutsche Bank Bonn conference. So I'll miss that quite a bit.

Aaron Watts -- Deutsche Bank -- Analyst

Yes. We will miss you out there. One quick follow-up question on auto. Embedded in your belief that core can grow for the full year. Do you see auto as a category for the full year being up?

David Amy -- Vice Chairman

Yes. Low-single digits we see it being up. And we spent the last couple of years really focusing in on the auto category. And again it's starting to seed and we're seeing the fruits of our investments.

Aaron Watts -- Deutsche Bank -- Analyst

Okay. Got it. And I guess secondly maybe for Lucy. You've been operating recently at what I-from what I can remember low leverage levels in recent memory. With the RSM transaction, we're going to see that leverage pop back up. Any preliminary thoughts looking ahead on where deleveraging falls is a priority for you and kind of a target maybe to think about over the 12 day 18 months after the transaction closes?

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Yes. So we-in our Monday call we talked about the step-up in the leverage is and the goal will absolutely be to delever all the credits stacks in the company. So over the 12 to 18 months I would say we're looking to get that SBG side back to the high-threes, low fours . The RSN side into the mid-four times But longer term as a diversified media company our goal will be to ultimately get to an investment grade company through the parent Co.

Aaron Watts -- Deutsche Bank -- Analyst

Okay, great. Thank you very much.

Operator

And next we'll take a question from David Joyce of Evercore. Please go ahead.

David Joyce -- Evercore -- Analyst

Thank you. A couple of questions. First on the distribution side. How should we think about a step-ups escalators retiering any other exchanges of value there? And then secondly on the ATSC 3.0 rollouts given that that's progressing well. Do you have any learnings or any thoughts about when revenue might start being generated there? Thank you.

Christopher Ripley -- President and Chief Executive Officer

So on distribution our contracts generally have escalators every year of anywhere from 5% to 10%. And then when we renew we tend to have a bigger, bigger step-ups there upon renewal. And most of our reverse contracts are fixed fees that again also have escalators.

And one of the reasons we can't, but the specific terms of our contracts are subject to confidentiality agreement,s so we can't disclose specifics. So that's why we like to focus the Street on our net retrans guidance which gives you the-essentially what's left over for the bottom line which in 2019 is in the double digits, as well for 2020 as Lucy mentioned earlier.

On the ATSC 3.0, we're learning quite a bit. The focus right now is on testing out the single network in terms of the actual RF capabilities, the reception capabilities, you know, in Dallas specifically by adding these three FFN sites we dramatically enhance the quality of reception through the entirety of the DNA to the level of quality that you'd expect from a wireless carrier saturating the signal throughout DNA.

And so most of the testing right now is on actually the physical characteristics of that RF signal and reception. And out of the work that we're just taking off at SK Telecom with our joint venture is being finalized and launched. As we speak there will be more coming out of that venture in terms of the product, the consumer facing, iterations of 3.0 which will undoubtedly be an app-based experience, that will include much more in a way programming choice and VOD assets and targeted advertising, premium subscriber based content, synchronization, low latency for sporting events, integrated interactive features like stats and social media commentary. And so that is all being worked on not just by us but others in the industry and one of our-I think our horse in the race there is our joint venture with SK.

David Joyce -- Evercore -- Analyst

Great. Thank you.

Operator

And our next question comes from Davis Hebert with Wells Fargo. Please go ahead.

David Hebert -- Wells Fargo Securities -- Analyst

Good morning everyone and congratulations to Dave, hope you enjoy retired life. Just one couple of quick questions for Lucy. The $700 million of new debt at Sinclair Television Group do you anticipate that being secured or unsecured?

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

That would be incremental Term Loan B.

David Hebert -- Wells Fargo Securities -- Analyst

Incremental Term Loan B. Okay. Thank you. And then in terms of your comment on the investment-grade intention or aspiration. Is there any sort of leverage target you are trying to imply there for the parent level?

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Not quite at this time. Just directionally we want you to know how we think about the company longer term and what we're focused on.

David Hebert -- Wells Fargo Securities -- Analyst

Okay. That's helpful. And then in the non-GAAP reconciliation for the RSN detail, I think there was a $42 million adjustment to the Sinclair Television EBITDA. Is that the management fee that is going to be paid from the RSN?

David Amy -- Vice Chairman

Yes. That's right.

David Hebert -- Wells Fargo Securities -- Analyst

Okay. Thank you for that clarification. And then last one more big picture. I think you're about a year into the maybe a little bit more into your new Nielsen relationship. And I'm just curious how you think that's gone so far? How you think, if you think they're more effective in capturing dealership on local broadcast TV? And then a follow-on to that is how you think they're positioned for viewership measurement on the RSN side of things? Thank you.

Christopher Ripley -- President and Chief Executive Officer

So look Nielsen is is still a widely used currency, you k now, increasingly Comscore is become more and more accepted. And as things move into the targeted world the need for a panel based currency is less and less. And we-they are a service that for the right price we're happy to keep, but it is not something that is essential to our business. And that's probably the same answer for the RSN as well.

David Hebert -- Wells Fargo Securities -- Analyst

Okay. Thank you so much.

Christopher Ripley -- President and Chief Executive Officer

Thank you.

Rob Weisbord -- Senior Vice President and Chief Revenue Officer

Thank you.

Operator

And that does conclude our Q&A session for today. I'll turn the call back over to Lucy for any closing remarks.

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Thank you operator. So this has been an exciting week for us with the announcement of the RSN which has been transforming the acquisition for us, as well as a very good first quarter results and outlook for 2019. IIf you have any questions feel free to give us a call. Thank you.

Operator

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. And have a great day.

Duration: 49 minutes

Call participants:

Lucy Rutishauser -- Senior Vice President and Chief Financial Officer

Billie-Jo McIntire -- Senior Manager, Investor Relations

Christopher Ripley -- President and Chief Executive Officer

David Amy -- Vice Chairman

Steven Marks -- Executive Vice President and Chief Operating Officer

Marci Ryvicker -- Wolfe Research -- Analyst

Alexia Quadrani -- JPMorgan -- Analyst

Dan Kurnos -- Benchmark Company -- Analyst

Zach Silver -- B. Riley FBR -- Analyst

Kyle Evans -- Stephens -- Analyst

Aaron Watts -- Deutsche Bank -- Analyst

David Joyce -- Evercore -- Analyst

David Hebert -- Wells Fargo Securities -- Analyst

Rob Weisbord -- Senior Vice President and Chief Revenue Officer

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