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Sinclair Broadcast Group Inc (SBGI 2.72%)
Q3Â 2019 Earnings Call
Nov 6, 2019, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, good day and thank you all for joining the Sinclair Broadcast Group Third Quarter 2019 Earnings Conference Call. [Operator Instructions]
And now for opening remarks and introductions, I am pleased to turn the floor over to your host, Senior Vice President and CFO, Lucy Rutishauser. Please go ahead ma'am.
Lucy A. 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 Jeff Krolik, President of FOX Sports Net.
Before we begin, Billie-Jo McIntire will make our forward-looking statement disclaimer.
Billie-Jo McIntire -- Manager of Investor Relations
Certain matters discussed on this call may include forward-looking statements regarding among other things, future operating results. Such statements are subject to a number of risks and uncertainties, actual results in the future could differ from those described in the forward-looking statements as a result of various important factors, such factors have been set forth in the company's most recent reports as filed with the SEC and included in our third 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 BCF, 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 walk you through our operating highlights.
Christopher S. Ripley -- President and Chief Executive Officer
Good morning, everyone, and welcome to our third quarter earnings call, the first since our August closing of the FOX Regional Sports Network business. We are now industry leaders in local news and local sports, two of the most desired live content genres. While we focus on integrating the RSMs, our broadcast segment, which we now refer to as local news had a spectacular quarter, beating our guidance ranges on revenue, EBITDA and free cash flow.
Lucy is going to walk you through those results in detail. But before I turn it over to her, I would like to talk about the opportunities for the $16 billion diversified media company that we're operating today. With the addition of the regional sports networks, we have deepened our commitment to local content, becoming the leading premium live local sports and news company in the nation, a path we embarked on almost five years ago.
In fact, over 75% of our revenue is now generated from sports and news content. We believe the addition of the RSMs represents or presents advertising, production, programming and cross-promotional opportunities, as well as new revenue streams associated with legalized sports betting. On a total company basis, we now derive about 70% of our revenues from distribution, which are more stable versus ad revenues due to the long-term nature of the contracts.
In this regard our distribution team has been busy securing agreements for the TV stations, Tennis Channel, Marquee, YES and the RSNs with such MVPDs as AT&T Direct TV, Charter, Cox and Mediacom. We appreciate our distribution partners and look forward to delivering to them and their subscribers best-in-class local content. We continue to have discussions with DISH for the carriage of the RSNs, whose contracts expired in late July. Since we can't predict whether or when we will get a carriage deal done with them for the RSNs, we've removed DISH affiliate fees from our forecast, until we have a better sense of timing in terms of any such resolution.
I would like to point out that as part of the RSN acquisition, there was approximately $400 million purchase price reduction related to potentially protracted negotiations with DISH, based on the length of the blackout, we don't expect that we will need to repay any of the adjustment amount to Disney. Much has been written about subscriber churn of late, which has only been made worse by satellite companies recent blackouts of various broadcast or stations and the RSNs. I do want to remind people that because of the reporting lag, we do not yet know the other side of the churn story, which is where subscribers migrated to. We should begin receiving those reports this quarter and expect them to reflect subscriber churn improvement when we report our fourth quarter.
Our third quarter advertising revenue -- our core advertising revenue was better-than-expected and we're expecting pro forma fourth quarter to be up even more reflecting a positive growth story for the year. Looking ahead, data continues to point to 2020 as the biggest political ad spending year on record. Recent reports to reflect that more funds have been raised by both parties at this point in time that in both 2015 and 2017.
Our pro forma total free cash flow guidance for 2019 is expected to be $1,038 million to $1,065 million. Pro forma 2018-2019 free cash flow is expected to be approximately $14 per share. Excluding DISH for the rest of 2019 and all of 2020, our 2019-2020 free cash flow guidance is now $11.50 to $12.50 per share. We continue to evaluate our strong liquidity positions for both segments and our expected free cash flow generation with an eye to improving our overall cost of capital. With that in mind, we're contemplating redeeming a portion of the $1 billion of Diamond Sports Holdings preferred, which is callable at par for a 90-day window beginning later this month. The preferred has an L plus 50 cash dividend, which would increase our free cash flow, if we partially redeemed it with excess cash on hand.
Now let me turn it over to Lucy to discuss our financial performance.
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
Thank you, Chris. Just to correct one thing. So, the preferred is L plus 750 [Phonetic].
Christopher S. Ripley -- President and Chief Executive Officer
Sorry.
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
Cash dividend. So, as already mentioned we overachieved this quarter in all key financial metrics. But before I go into detail about each metric, please keep in mind that Street consensus estimates are not comparable to either our third quarter reported results or fourth quarter guidance. Because your RSN acquisition closed in late August, some analysts contributed estimates, including the RSN and some did not, which has resulted in an unusable consensus.
We have also received questions from the Diamond bondholders on how to receive their financial statements. As stated in the indentures, we have 75-days to provide the financials. We will be putting them on a secure website, which the bondholders will be able to access via a link from our public website sbgi.net. And we will also provide a trustee with the URL.
Now turning to the results. Media revenues for the third quarter were $1,070 million, an increase of 47% or $340 million higher than third quarter 2018. These results include a partial quarter of the RSNs. Excluding the RSNs media revenues were $719 million, which is $16 million above the high end of our guidance range.
Included in our third quarter media revenues are $679 million of distribution revenues, a 105% increase over the prior year period. Excluding the RSNs distribution revenues were $373 million, which is $7 million above the high end of our guidance range. Based on current contract expectations, we continue to expect net distribution revenue excluding the RSNs to grow low double-digit growth percents for this year.
Total company fourth quarter core advertising is expected to be up mid to high single-digit percent. Political revenues were $6 million in the third quarter and we are starting to see a pickup in the fourth quarter with an expectation of $15 million to $20 million in political. For the year, we expect 2019 to finish in the $26 million to $31 million range, and is previously stated, we expect 2020 to be our biggest political year on record.
Our digital businesses in the third quarter continue to overachieve posting over 30% revenue growth. For fourth quarter, we expect -- but we are expecting total company -- total company media revenues to be approximately $1,565 million to $1,587 million, up 84% to 87% as compared to fourth quarter of 2018. This assumes $15 million to $20 million of political revenues versus a $150 million last year, and includes $1.1 billion in distribution fees versus $334 million last year.
Pro forma, full-year media revenues are expected to be on the $6.5 billion, as compared to $6.7 billion in 2018. Again, which was a political year. Media operating expenses in the third quarter, defined as media programming and production and media SG&A expenses were $745 million, up 62% from third quarter last year primarily the result of the RSN acquisition for part of the quarter and higher programming costs.
Excluding the RSNs media expenses were $492 million, which is $8 million better than the low-end of our guidance range, due to lower G&A and sales expense. For the full-year, total company media expenses are expected to be approximately $2.8 billion versus 2018 media expenses of $1.8 billion. The year-over-year increase is due primarily to the RSN acquisition for part of the year, and higher programming fees and compensation.
Pro forma full-year media expenses are expected to be $4.3 billion, as compared to $4 billion in 2018, due to higher network in sports programming fees, higher cost of sales on our digital revenue growth and miscellaneous G&A. Corporate overhead in the quarter was $237 million, which includes $94 million in non-recurring transaction fees, legal and regulatory and an additional $120 million reserve believed to be at this time a reasonable estimate of the potential loss exposure related to the Tribune litigation. I note that litigation remains fluid and the reserve remains subject to material change.
Excluding these amounts and stock-based compensation corporate overhead was in line with prior guidance. For the year corporate overhead is expected to be $80 million, excluding $250 million in non-recurring transaction fees, legal, litigation and regulatory and $19 million in stock-based compensation.
Non-media EBITDA was approximately $13 million in the quarter, that's $11 million better than our prior guidance on timing of ONE Media expenses, which will occur next year and higher sales at our Antenna company. EBITDA in the third quarter including the $200 -- excluding the $214 million of non-recurring costs and $76 million of net programming cost was $374 million. Excluding the RSNs, we beat our EBITDA guidance by about $49 million.
Total company EBITDA and the fourth quarter adjusted for $6 million in non-recurring costs is expected to be approximately $434 million to $455 million. I do want to point out that the RSNs traditionally experience their lowest EBITDA in both the first and fourth quarters, due to advertising seasonality and contractual timing of the payment to the teams.
Pro forma full-year EBITDA is expected to be between $2.1 billion and $2.2 billion versus 2018 pro forma EBITDA of $2.6 billion. The decrease is driven primarily by the reduced political revenue and lower carriage fees of the RSNs due to a step down in an MVPD agreement that we assumed at closing and removing DISH from the last five months of 2019.
Diluted loss per share of 93 million weighted average common shares was $0.64 in the quarter, where a $1.15 of income per share when adjusted for the non-recurring transaction fees. Excluding the $214 million in non-recurring expenses, we generated $203 million of free cash flow in the quarter and excluding the RSNs free cash flow was $125 million exceeding the high end of prior guidance by $43 million. Total company free cash flow in the fourth quarter is expected to be approximately $177 million to $203 million and $578 million to $603 million for the full-year.
As Chris mentioned, we are increasing our average 2018-2019 pro forma expected free cash flow per share, including the RSNs to approximately $14 per share from our prior guide of $12 per share. Our 2019-2020 average pro forma free cash flow is expected to be $11.50 to $12.50 per share versus a prior guide of $13, and that primarily reflects the DISH blackout offset in part by lower interest expense on favorable financing terms and better 2019 performance on the legacy business.
Turning to the balance sheet and cash flow highlights. Capital expenditures in the third quarter were $35 million, including $16 million for the repack. For the full-year 2019 total capex before the repack and including the RSNs is expected to be $95 million to $100 million, and for 2019 repack capex is expected to be $67 million. At September 30th, total debt was $12.5 billion and cash was $1.4 billion.
Total net leverage through the holding company at quarter end was 4.8 times. STG's first lien indebtedness ratio on a trailing eight quarters was 2.7 times on a covenant of 4.5 times and 4.6 times on a total net leverage basis. Diamond's first lien indebtedness ratio on a trailing four quarters was 3.7 times and 4.9 times on a total net leverage basis. Absent the DISH blackout, total net leverage for Diamond would have been about 4.7 times.
I do want to remind everyone of our near-term target leverage for the Sinclair division of high 3s to low 4 times, and for Diamond of low to mid 4 times.
And so with that, I would like to open it up to questions.
Operator
Thank you. [Operator Instructions] And we'll take our first question from the line of Davis Hebert with Wells Fargo.
Davis Hebert -- Analyst
Hi, good morning everyone, thanks for taking the questions. I just wanted to ask on the Diamond Sports balance sheet. With the $1.1 billion of cash on hand, I believe the YES transaction already closed. Is there anything else we should adjust for whether it's a team put option or anything of that nature?
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
Yes, so Davis, if you recall we -- there is a put by the raise, which could be put early in 2020. So we did pre-fund that amount, that's almost $400 million. And so you should assume that $400 million that is earmarked and then, as Chris said, we are evaluating looking to redeem a portion of the preferred stock, which is again our highest cost of capital, so that will generate free cash flow going forward.
Davis Hebert -- Analyst
Okay, that's helpful. And then if you do indeed redeem some of that preferred, does that preclude you from taking part in further RSN, M&A going forward?
Christopher S. Ripley -- President and Chief Executive Officer
No, no it doesn't. We have ample resources on hand to tackle what's in the marketplace today and we're. So we're very excited about additional tuck-ins being very incremental and generating synergies for us.
Davis Hebert -- Analyst
Excellent. And when I look at the cash at Diamond Sports of $1.1 billion, I think you closed with $800 million, does that imply that you generated free cash flow Diamond Sports to build that cash balance up?
Christopher S. Ripley -- President and Chief Executive Officer
Well, there is two components that drove that; one, was this purchase price adjustment that I referenced of approximately $400 million and the rest is free cash flow generation.
Davis Hebert -- Analyst
Okay. And last question before I turn it over. Has anything changed in terms of, Lucy you gave your leverage targets. But with the DISH being blacked out and subscriber declines, etc. Do you anticipate your leverage forecast, I think, it was low to mid 4 times at this -- at Diamond Sports within 18 months, is that -- do we -- should we see a little bit of a lag and getting to that target leverage?
Christopher S. Ripley -- President and Chief Executive Officer
So look, I think the way you should think about leverage is that depending on what happens with DISH, which as we said, we don't know what will happen with DISH. We view it as a temporary issue either we come to a deal with DISH or their relevance in the industry will be reduced over time. But that will create elevated leverage at Diamond for some period of time, but really it's a temporary issue and DISH for going, the RSNs is the equivalent for me. From a viewership perspective for growing the top 10 entertainment programs combined. So it's a -- it's really for growing a key piece of the of the bundle, and that's only going to be exasperated over time as Sports Betting moves through the country and sparks even greater interest and engagement with our content.
Davis Hebert -- Analyst
Okay, great. Thanks for taking the questions.
Operator
And next we'll hear from the line of Marci Ryvicker at Wolfe Research. Please go ahead, your line is open.
Marci Ryvicker -- Analyst
Thanks. I have a couple of questions; the first one, Lucy with the new pro forma EBITDA guide, the 2.1 and 2.2 versus the 2018, 2.6 you mentioned lower carriage that was anticipated at closing. I assume you're talking about the old step down that has been discussed in November of '18 that there is no new step down to arrive at that number?
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
That's correct, Marci, that's the contracted, it was negotiated by 21 CF that we assume they're closing.
Marci Ryvicker -- Analyst
Okay, perfect. And then when you mentioned the core advertising in Q4 being up mid to high single-digits, is that TV stations only or does that include RSNs?
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
So that includes new RSNs, but remember for the RSN business advertising is really only about 10% of their business. So on the scheme of the whole company what you're really seeing there is driven by the broadcast performance.
Marci Ryvicker -- Analyst
Okay. And then for the updated free cash flow guide for '19-'20, they are $1,150 to $1,250. What is contributing to the range, meaning what gets you to the low-end versus the high-end?
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
Well, I mean right now, it's really just a range Marci, because you know, we're still in our -- finalizing our 2020 budgets. And so it's really just putting a range in there as we normally do, right? You're used to us always coming out with a range, because you have -- we don't have a lot of visibility on advertising as well.
Christopher S. Ripley -- President and Chief Executive Officer
And you know --
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
I mean, then -- OK.
Christopher S. Ripley -- President and Chief Executive Officer
Yes, things like political for 2020, which historically is harder to predict, but we think it's going to be a massive year obviously drive some of the range.
Marci Ryvicker -- Analyst
Okay, so just normal range. And then one last clarification question. Does the current balance sheet from Q3 include the $400 million for the raise?
Christopher S. Ripley -- President and Chief Executive Officer
Yes.
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
Yes.
Marci Ryvicker -- Analyst
Great, thank you so much.
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
Thanks.
Operator
Next we'll hear from Aaron Watts at Deutsche. Please go ahead, your line is open, sir.
Aaron Watts -- Analyst
Hi, everyone. Thanks for having me on. One quick one on the core ad environment, it sounds like you're seeing some momentum heading into the end of the year. Can you talk about some of the drivers of that? And if you have any early, kind of, indications on how 2020 might start that'd be helpful as well?
Christopher S. Ripley -- President and Chief Executive Officer
Yes, we're seeing the strength of pharmaceuticals, attorneys, insurance driving our business. So, as we're introducing new categories and new solutions that are driving and our focus on selling 360 solutions has solidified the pool.
Aaron Watts -- Analyst
Any color around the auto category?
Christopher S. Ripley -- President and Chief Executive Officer
Auto category for third quarter was down low single-digits and we expect to see the same results in Q4.
Aaron Watts -- Analyst
Okay. Got it. And Chris, one more on DISH. I'm just curious, you have been able to reach new distribution agreements with some other large players in the space recently, very recently. Any color you can give around what the hang-up is with DISH? Is it purely price or they asking for something unique or different? And I guess has your optimism at reaching an agreement with them changed over the past few weeks?
Christopher S. Ripley -- President and Chief Executive Officer
I really can't get into the specifics on the negotiation, just for a myriad of reasons we don't talk about that level of specifics. And I would say that, I'm still in the same place that have always been our value proposition is very strong as I mentioned, the viewing is for these are sense -- are greater than the top 10 entertainment programs combined, and oftentimes are the top program in prime time. So it's just a matter of making sure that DISH recognizes the true value of the RSNs.
Aaron Watts -- Analyst
Okay, and if I could just one last big picture question for you, Chris. With several well publicized and heavily promoted streaming services starting up this month, as well as next year a couple more getting added to the mix. Be curious to hear your thoughts on what impact that could have on your business overall, whether it's from an audience rating standpoint or more pressure on cord cutting, anything you can give us on your thoughts would be helpful? Thanks.
Christopher S. Ripley -- President and Chief Executive Officer
Well, you know, their streaming more is -- are in a different -- are in a very interesting dynamic in our industry there the reason we have pivoted toward are focused on local sports and local news. We think the relevance of general entertainment will continue to be diminished, because of the streaming wars and all these new entrants. So, the value of sports and news will increase over time as the value of any one entertainment program continues to be diminished by oversupply. And so we think that's a positive trend in terms of where we pivoted with over 75% of our revenue now coming from sports and news it's really that being quite weighed heavily toward sports. So that, as well as sports betting, which I mentioned just to remind you a few facts on that, you've got people who view sports regularly 38% indicate they watch more if they could bet on it and of those who don't watch regularly 25% say they would watch more if they get bet on it.
So we're set up to have a huge increase in engagement around our sports properties and where the ones that actually provide the tonnage, the over 5,000 games a year that we produce. So we're the primary beneficiary of that increased engagement, and we see the value of those sports properties going up over time on a relative basis -- especially on a relative basis given what's going on in general entertainment.
Aaron Watts -- Analyst
Okay, great. Thank you.
Operator
[Operator Instructions] We'll hear next from Steven Cahall at Wells Fargo. Please go ahead, your line is open.
Steven Cahall -- Analyst
Yes. Thank you very much. Maybe just first another question on DISH, when I look at that change in the $1 per share of free cash flow in your '19-'20 guidance. I'm backing into around 5 million subscribers on DISH to the RSNs, and I think that's only about half of their total sub footprint. So I'm just wondering if that all sounds in the ballpark. And if that is part of the challenge that their RSN, you know, your RSNs don't cover all of their subscribers? And then maybe separately on the political side of things, I think you've talked about maybe starting to drive some political ad revenue into the RSNs in 2020. So I know you haven't had a lot of time with them, but where are you kind of on that path? And do you think that you could see some meaningful political revenue on those networks next year?
Christopher S. Ripley -- President and Chief Executive Officer
Sure. So you're broadly in the right ballpark, if you will for DISH to less than 10% of our subscriber base, on the RSNs and they weren't fully penetrated there, they were partially penetrated, which is pretty standard for most MVPDs, we don't -- we are not in the full basic package on the RSNs for most MVPDs. And then on the -- on political, we've started to connect the dots with RSN and folks with our broadcast folks, who are in the flow in a big way on the political spending. So it's hard to quantify for you, but since we are in the flow on a significant amount of ad dollars coming in from political next year. We believe we will be able to substantially increase the amount of ad dollars that go to the RSNs especially in hot markets where we give additional highly rated inventory.
And then what also is going to be a big tailwind for the RSNs from an advertising perspective and we're starting to see it hit certain markets here, where sports betting has been legalized is that we've -- just we've taken significant orders and in some markets at significant premiums, where sports betting has turned on, because the RSNs are one of the ideal places for them to start advertising. So some of those orders you're seeing that hit the New York market, if you're paying attention to what's going on with MSG, it's benefiting. Yes, and we're -- and there is other markets in the RSN portfolio where those orders are starting to hit, and they're not just -- they are at a pretty healthy premiums to what we normally sell at. So that's going to be a nice tailwind into next year.
Steven Cahall -- Analyst
Maybe some quick follow-ups on those. Could you give us any sense of what the percentage of overlap is of states that have legalized sports betting, where you have networks? And then what do we think about as just like long-term rights cost growth that your new sports segment as we try to put all this together under the new helpful reporting structure? Thanks.
Christopher S. Ripley -- President and Chief Executive Officer
So, right now there is just a handful of our sense that have what a core market overlaps with those that are -- have gone legal and are actually up and running operationally. So as more states turn on that's going to be a much, much bigger impact. But right now, there is literally, I think, I can count them on one hand, how many have core market overlaps that above states that are operational not just legalized, but also operational. And in terms of the expense growth, we are in, sort of, we expect on the low side and mid single-digits for expense or growth going forward on the RSNs.
Steven Cahall -- Analyst
Thank you.
Operator
[Operator Instructions] We'll hear next from the line of Zach Silver with B. Riley FBR.
Zach Silver -- Analyst
Okay, great, thank you for taking the question. I wanted to follow-up on DISH a bit, and just I guess altitude, they were dropped from a couple of MVPDs, and I think that, one of the reasons is that they didn't really have any other programming besides the RSN, you guys have just done a deal with DISH at the end of 2018 for the broadcast channels? And I'm just wondering how the RSNs would factor in to your next round of broadcast negotiations with DISH?
Christopher S. Ripley -- President and Chief Executive Officer
Sure. I think that's a very relevant point coming to market with more programming is always a better position as it relates to negotiations with the MVPDs. So that's going to be something that to the extent we have not done a deal with DISH by then there will be a very relevant factor by then.
Zach Silver -- Analyst
Great, thank you very much.
Operator
[Operator Instructions] We'll hear next from Dan Kurnos with The Benchmark Company.
Dan Kurnos -- Analyst
Thanks. Chris, I guess then just on sort of adding programming you guys announced Ring of Honor onto the RSN, you had talked about adding other programming there. Can you just maybe update us on where you are with sort of all the initiatives that you were talking about that you could do with the RSNs, whether it's DTC or adding programming timing of all of that? And then just on -- it's a lot smaller, but you're kind of getting a little bit deeper into the AVOD space and now specifically SVOD streaming. There's a lot of properties out there and you are lot more focused on the RSN. I don't know, if you want to get a lot deeper in with STIRR or if it's really more just an adjacency, but just kind of your thoughts on sort of building that out from a maybe a more M&A perspective? Thanks.
Christopher S. Ripley -- President and Chief Executive Officer
So we have -- we're about to increase our ownership in Stadium, which is one of our multicast sports channel or sort of post-cable network, that focuses on sports. And it really will supply upgraded content to the RSNs at a cheaper price -- sorry less expensive price, than what's on there today. So starting at about the one-year mark from our acquisition, we expect to start achieving some of the synergies we spoke about. When we announced the RSNs, the $100 million plus of synergies will be powered by content from Stadium, which will be an upgrade from what is on there today outside of the gain the pre and the post.
And we'll be at a lower cost, we're also investigating other programming strategies, especially in local markets where we can find local news and local sports, to create additional revenue opportunities. But the backdrop, if you will looks like it will be coming from Stadium and that will generate cost savings for the RSNs. And we're particularly excited about some of the experimentation we'll do with the combination of local sports and local news we think bigger picture, that is the North Star for us, you know, whatever the future business model may hold is offering a package to local bundle, if you will to the marketplace of local sports and local news. And we're poised to be the dominant local news provider in every market in the country. If you have the Temple of local sports, which is really the only exclusive content that exist in the ecosystem.
And so that weighs heavily into our thinking about where we're headed in terms of supplying that local bundle and things that we're doing on STIRR they all play a role in that longer-term vision. STIRR right now is ad supported, it's growing quickly, it's adding channels, right now it's positioned as our free offering, free ad-supported offering, which will be the top of the funnel into subscription-based offerings. That's the current thinking on STIRR and it's ramping nicely, and now we're turning our attention to what would be the subscription-based offerings that we can add on top of that.
Dan Kurnos -- Analyst
Great, thanks for the color Chris. Appreciate it.
Christopher S. Ripley -- President and Chief Executive Officer
Thank you.
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
Okay, so operator?
Operator
And this does concluded our Q&A session for today. I'd like to turn it back over to you Ms. Rutishauser for any additional or closing remarks.
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
Thank you, operator. So again, we appreciate everyone joining us on this call, this morning, our first day going forward much different -- diversified media company. And as usual, if anyone has any questions, please feel free to give us a call. Thank you.
Operator
[Operator Closing Remarks]
Questions and Answers:
Duration: 39 minutes
Call participants:
Lucy A. Rutishauser -- Senior Vice President and Chief Financial Officer
Billie-Jo McIntire -- Manager of Investor Relations
Christopher S. Ripley -- President and Chief Executive Officer
Davis Hebert -- Wells Fargo -- Analyst
Marci Ryvicker -- Wolfe Research -- Analyst
Aaron Watts -- Deutsche Bank -- Analyst
Steven Cahall -- Wells Fargo -- Analyst
Zach Silver -- B. Riley FBR -- Analyst
Dan Kurnos -- The Benchmark Company -- Analyst
