Sinclair Broadcast Group(SBGI) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The deconsolidation of Diamond resulted in a non-cash gain of approximately $3.4 billion, primarily due to Diamond's net liability position at the time of deconsolidation [14] - Adjusted EBITDA for the quarter grew 14% over the first quarter of last year, exceeding guidance [49] - Earnings per share for the quarter, excluding Diamond and other adjustments, was $1.23 per share [49] - Adjusted free cash flow was $176 million for the quarter, growing by $48 million year-over-year [49] - Total debt at the end of the first quarter was $4.4 billion, with a first-lien indebtedness ratio of 2.9 times [51] Business Line Data and Key Metrics Changes - Media revenues for the quarter were up 9% year-over-year, driven by higher distribution and political ad revenues [46] - Distribution revenues increased by 7% compared to last year, primarily due to favorable revenue from virtual distributors [47] - Core advertising increased by 3% in the first quarter compared to the same period last year [47] - Total advertising revenues increased by 7% over last year [47] Market Data and Key Metrics Changes - Political advertising is tracking above expectations, with a record mid-term election spend anticipated for 2022 [37] - The company expects total advertising revenue to be up in the high-single-digit to low-teen percent range for the second quarter compared to the previous year [54] Company Strategy and Development Direction - The company is focused on monetizing its investment portfolio, which has generated an approximate 24% average rate of return since 2014 [21] - Sinclair is committed to increasing transparency around its assets like Tennis Channel, NewsOn, and Compulse360, which are expected to carry meaningful upside [24] - The company is exploring new revenue streams through NextGen technology, including data delivery as a service [31] Management's Comments on Operating Environment and Future Outlook - Management is monitoring inflation and its potential impact on advertiser spending but has not seen significant softening yet [57] - The company expects to exceed core revenue levels from 2018 and 2019, despite some crowd-out effects from political advertising [62] - Management remains optimistic about the advertising environment and believes that those who continue to advertise during economic downturns emerge stronger [100] Other Important Information - The company launched a battery recycling pilot and reduced printed paper accounts by approximately 90% as part of its ESG initiatives [28][29] - The company has resumed its stock buyback program, repurchasing nearly 1.5 million shares since February [52] Q&A Session Summary Question: What is the pacing for core advertising in the second quarter? - Management is currently monitoring inflation but has not seen results of softening yet, and core guidance is expected to exceed revenues from 2018 and 2019 [57] Question: Can you update on net retransmission fees after the Charter renewal? - The overall net retrans guide for this year will still be low single digits, despite exceeding expectations on the Charter renewal [58] Question: What is the strength of advertising categories? - Reliance on auto advertising has been mitigated by strength in service, retail, and food categories, which remain strong [69] Question: Will free cash flow guidance be provided for the year? - Management is considering providing future ranges for free cash flow, which was previously offered pre-pandemic [80] Question: How does the deconsolidation impact share repurchase capacity? - The deconsolidation is an accounting change that does not affect the company's fundamentals, and there is a strong appetite for share repurchases [96]