Sinclair Broadcast Group(US:SBGI)2021-05-05 19:11Financial Data and Key Metrics Changes - The company's media revenues for Q1 2021 decreased by 5% compared to Q1 2020, primarily due to the absence of political revenue and the sale of three stations [40] - Adjusted EBITDA for the consolidated company declined to $182 million, down 22% from the previous year, but exceeded guidance [42][46] - The first quarter consolidated adjusted free cash flow was $9 million, approximately $117 million better than the low end of the guidance range [47] Business Line Data and Key Metrics Changes - Core advertising revenues, excluding the three sold stations, increased almost 1% year-over-year, better than expectations of a mid-single-digit decline [41] - Local sports media revenues declined by 5% compared to the first quarter of the previous year, impacted by lower distribution revenue and higher subscriber churn [43] - Local sports adjusted EBITDA for Q1 was $9 million, down from the prior year but beat guidance by over $60 million [45] Market Data and Key Metrics Changes - The advertising market showed improvement, with core ad revenues finishing flattish compared to the pro forma first quarter of 2020 and 2019 [10] - April 2021 saw a significant increase in advertising revenues, up over 70% compared to April 2020, and only low-single digits down from April 2019 [11] - The auto industry is facing supply constraints, which may impact advertising spending in upcoming quarters [12] Company Strategy and Development Direction - The company is focusing on direct-to-consumer opportunities for regional sports content, aiming to fill the void left by traditional distributors [22][24] - Sinclair is enhancing its programming through partnerships, such as with Bally's, to improve non-game programming and increase advertising yields [59] - The company is exploring monetization opportunities through ATSC 3.0 technology, which could unlock significant revenue potential [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the core advertising market, particularly in services and sports betting categories [12] - The company is cautiously optimistic about Q2 2021, expecting slightly down performance against 2019 benchmarks but positive trends in April and May [84] - Management highlighted the importance of viewer engagement and the potential for increased monetization through interactive programming and gamification [27] Other Important Information - The company announced the appointment of Laurie Beyer as its first female director, reflecting its commitment to diversity [21] - Sinclair's cash at the end of the quarter was $941 million, with total debt at $12.540 billion and net leverage at 6.4x [48][49] Q&A Session Summary Question: Can you provide insights on direct-to-consumer strategy and advertising yield improvements? - Management acknowledged a change in tone regarding direct-to-consumer opportunities, emphasizing the potential for increased engagement and monetization through digital platforms [58] - The partnership with Bally's is expected to enhance non-game programming and improve advertising yields without significant financial risk [59][60] Question: What is the status of negotiations with distributors and the impact on timing? - Management confirmed that they have direct-to-consumer rights for most teams and are in discussions to enhance those rights, with plans to launch in the first half of 2022 [65] Question: Can you discuss the implications of subscriber trends and the Cox renewal? - Management noted slight improvements in subscriber trends, with expectations of mid-single-digit declines for broadcast and high-single-digit declines for RSNs [87] Question: What are the expected cost savings from programming contract renewals? - Management indicated that they aim to variabilize costs in renewals, aligning interests with teams and potentially reducing fixed costs [75] Question: How does the company plan to utilize free cash flow moving forward? - Management stated that the focus remains on de-leveraging, increasing long-term value, and reinvesting in the company [70] Question: What feedback has been received regarding the new Bally Sports app? - Early feedback on the Bally Sports app has been positive, with significant engagement and plans for further monetization opportunities [100]