Sinclair Broadcast Group(SBGI) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company ended the quarter with a cash balance of $623 million, leading to a total liquidity of almost $1.3 billion at quarter end [2] - Adjusted EBITDA for the second quarter is expected to be between $84 million and $104 million, down from $184 million pro forma last year, primarily due to lower revenue and higher programming fees [4] - Total debt at the end of the first quarter was $4.3 billion, with a first-lien indebtedness ratio of 3.5x and total net leverage of 4.4x [131] Business Line Data and Key Metrics Changes - Media revenues for the quarter were $766 million, achieving the high end of guidance, with core advertising meeting expectations and political and distribution revenues surpassing guidance [128] - Adjusted EBITDA decreased by 40% compared to the first quarter of last year, attributed to lower media revenues and higher corporate and media expenses [153] - The Tennis Channel saw a 33% increase in total subscribers year-over-year, with over 3.5 million hours streamed in the quarter [119] Market Data and Key Metrics Changes - The advertising environment is showing low single-digit percent increases in the automotive category, while there is softness in the insurance category [145] - Local advertising is outperforming national advertising, with strength in categories such as auto and legal [27] - The company expects media revenues to decline in the second quarter compared to the previous year due to the absence of political spending and continued subscriber churn [132] Company Strategy and Development Direction - The company is reorganizing under a holding company structure to improve transparency and flexibility for transactions, separating broadcasting assets from non-broadcasting assets [107][109] - There is a strategic focus on reallocating capital towards non-broadcast holdings, particularly in NextGen technologies and international opportunities [92] - The company is investing approximately $75 million in infrastructure this year, including cloud migration and NextGen technologies [157] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the core broadcasting business while acknowledging regulatory uncertainties affecting capital allocation [92] - The company anticipates a record-breaking political spending year in 2024, following strong political spending in Q1 [117] - There is ongoing uncertainty regarding macroeconomic conditions that could impact consumer behavior and advertising revenue [134] Other Important Information - The company has initiated a Sinclair Cares initiative to promote mental health awareness and community support [99] - The Tennis Channel is set to become a dedicated network for the French Open, airing over 2,000 hours of coverage [121] - The company is launching a white-label Tennis Channel shop to create a merchandising revenue stream [121] Q&A Session All Questions and Answers Question: Can you provide more details on the investments in ventures and the accounts receivable facility? - Management indicated that additional information about the holding company would be limited due to ongoing share exchange offerings, but more detailed disclosures are expected post-reorganization [9][10] Question: How is the ad environment trending in Q2? - Management noted that local advertising is outperforming national, with positive results in specific categories, while monitoring macroeconomic headwinds [27] Question: What is the expected impact of the Diamond bankruptcy on financial liabilities? - Management refrained from speculating on the Diamond bankruptcy's impact, stating that they would provide updates as more information becomes available [13] Question: How will the company balance stock buybacks against debt repayment? - Management acknowledged the undervaluation of debt and indicated that leverage targets remain in the high 3s to low 4s, with expectations to improve by the end of 2024 [81]