Sinclair Broadcast Group(US:SBGI)2019-11-06 21:45Financial Data and Key Metrics Changes - Media revenues for Q3 2019 were $1.70 billion, an increase of 47% or $340 million compared to Q3 2018, including a partial quarter of the RSNs [24] - Distribution revenues were $679 million, a 105% increase year-over-year; excluding RSNs, distribution revenues were $373 million, exceeding guidance by $7 million [25] - Total company free cash flow for Q4 is expected to be approximately $177 million to $203 million, with full-year free cash flow guidance of $578 million to $603 million [37][38] - Diluted loss per share was $0.64, or $1.15 of income per share when adjusted for non-recurring transaction fees [36] Business Line Data and Key Metrics Changes - Core advertising revenue in Q3 was better than expected, with pro forma Q4 expected to be up mid to high single digits [15][26] - Digital businesses posted over 30% revenue growth in Q3, with total media revenues for Q4 expected to be approximately $1.565 billion to $1.587 billion, up 84% to 87% compared to Q4 2018 [27] - Media operating expenses in Q3 were $745 million, up 62% from the previous year, primarily due to the RSN acquisition and higher programming costs [28] Market Data and Key Metrics Changes - The company now derives about 70% of its revenues from distribution, which is more stable compared to advertising revenues [12] - Political revenues were $6 million in Q3, with expectations of $15 million to $20 million in Q4, and a total of $26 million to $31 million for the year [26] Company Strategy and Development Direction - The company aims to deepen its commitment to local content, becoming a leading provider of premium live local sports and news [11] - The addition of RSNs is expected to create new revenue streams associated with legalized sports betting [12] - The company is contemplating redeeming a portion of the $1 billion of Diamond Sports Holdings preferred stock to improve free cash flow [17] Management's Comments on Operating Environment and Future Outlook - Management noted that 2020 is expected to be the biggest political ad spending year on record, with strong fundraising by both parties [15] - The company views the DISH blackout as a temporary issue, with expectations of subscriber churn improvement in future reports [14] - Management expressed optimism about the strength of the core advertising environment, driven by pharmaceuticals, attorneys, and insurance sectors [61] Other Important Information - Corporate overhead in Q3 was $237 million, including $94 million in non-recurring transaction fees and a $120 million reserve related to litigation [31] - Total debt at the end of Q3 was $12.5 billion, with cash of $1.4 billion, resulting in a total net leverage of 4.8 times [40] Q&A Session Summary Question: Adjustments to Diamond Sports balance sheet - Management confirmed a $400 million earmarked for a put option related to the YES transaction and discussed evaluating the redemption of preferred stock to generate free cash flow [44] Question: Impact of redeeming preferred stock on future M&A - Management stated that redeeming preferred stock does not preclude participation in further RSN M&A opportunities [46] Question: Drivers of core advertising momentum - Management identified pharmaceuticals, attorneys, and insurance as key drivers of advertising momentum heading into the end of the year [61] Question: Status of negotiations with DISH - Management refrained from specifics but emphasized the strong value proposition of RSNs and the importance of reaching an agreement with DISH [64] Question: Political ad revenue potential in RSNs - Management indicated that they are starting to connect political ad revenue with RSNs and expect substantial increases in ad dollars, especially in hot markets [71] Question: Long-term rights cost growth for the new sports segment - Management expects low to mid single-digit growth for expenses related to RSNs [74]