Sinclair Broadcast Group(SBGI) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Media revenues for Q2 2019 were $721 million, a 4% increase or $24 million higher than Q2 2018, exceeding the low end of guidance [14] - Distribution revenue was $367 million, a 15% increase over the prior year [14] - Political revenues in Q2 were $3 million, down from $28 million in the same quarter last year [15] - Media operating expenses were $500 million, up 11% from the previous year, primarily due to higher reverse retrans fees and growth initiative costs [15] - Adjusted EBITDA for Q2 was $193 million, $11 million higher than the high end of prior guidance [17] - Free cash flow for Q2 was $97 million, exceeding the high end of prior guidance by $27 million [19] Business Line Data and Key Metrics Changes - Core advertising was up low single-digits in Q2, with automotive advertising slightly up [34] - Digital business revenues grew 30% in Q2 compared to the same period last year [36] Market Data and Key Metrics Changes - The pay TV universe saw a very slight decline in subscribers during Q2 [64] - The company expects media revenues for Q3 to be approximately $695 million to $703 million, down 4% to 5% compared to Q3 2018 [37] Company Strategy and Development Direction - The company is working towards the acquisition of RSNs and has successfully closed bond financing for this purpose [9][27] - The company aims to achieve investment-grade leverage in the long term, aligning equity value with diversified media companies [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving net retrans growth in the low teens for 2019 and 2020 [15][60] - The company anticipates 2020 to be the biggest political year on record, with campaigns raising more money than in previous presidential elections [35] Other Important Information - The company has a total debt of $3.788 billion and cash of approximately $929 million as of June 30 [25] - The company has raised significant financing for the RSN acquisition, including $3.050 billion of secured notes and $1.825 billion of unsecured notes [27][28] Q&A Session Summary Question: Why is there no step-up in distribution revenues from Q2 to Q3? - Management explained that AT&T's contract is only partially included in Q2 numbers and that other stations are currently dark [44][45] Question: What is the outlook for core advertising? - Management expects core advertising to be flat to up in Q3, with a positive outlook for the full year [34][57] Question: How are underlying subscribers trending? - There was a very slight decline in the pay TV universe, with growth in virtual subscriptions offsetting declines from satellite providers [64][65] Question: What is the status of the RSN acquisition? - Management stated that there is no financial impact from the current DISH blackout as the company does not own the RSNs yet [102] Question: What are the implications of the STELAR renewal? - Management indicated that the STELAR renewal is not problematic for the industry and should be allowed to expire [105]