Sinclair Broadcasting meets Q4 goals, plans Tennis Channel DTC launch

Sinclair Broadcasting Group (SBGI) reported a steady performance in the fourth quarter of 2023, aligning with its guidance expectations and showcasing strong potential for future growth. The company met its Local Media segment’s expectations and saw the Tennis Channel exceed anticipated figures.

A significant highlight was the announcement of a planned direct-to-consumer offering for the Tennis Channel set to launch in 2024. Sinclair also underscored its financial strategies, including paying out $65 million in dividends and repurchasing $91 million of its debt.

The company’s optimism for the upcoming year was palpable, with expectations of record-breaking political advertising revenues and a positive outlook on the growth of its traditional Local Media business.

Key Takeaways

• Sinclair’s Local Media segment met guidance expectations, while Tennis Channel outperformed.
• $65 million in dividends were paid, and $91 million of debt was repurchased.
• Expectations of record political advertising revenues in 2024.
• Growth in Local Media driven by NextGen Broadcast and non-network content viewership.
• Settlement with Diamond Sports Group for $495 million, ensuring regional sports network stability.
• Distribution agreements signed with Verizon (NYSE:VZ) and NCTC; Fox affiliation extended.
• Mid-single-digit two-year CAGR expected for net retransmission revenues from 2023 to 2025.
• NextGen broadcast technology is now in half of Sinclair’s markets.
• Tennis Channel to launch a direct-to-consumer offering in 2024.

Company Outlook

• Anticipation of a record-breaking election year in 2024, fueled by strong political action committee (PAC) and super PAC fundraising trends.
• Expectation of robust growth in adjusted EBITDA and free cash flow throughout 2024.
• Confidence in the ability to negotiate favorable rates for network renewals.
• Focus on growing net retransmission revenues and maintaining leadership in core advertising growth.

Bearish Highlights

• Concerns addressed regarding a slowdown in core advertising at the beginning of the year.
• National advertising experienced a soft January but recovered throughout the quarter.

Bullish Highlights

• Local advertising remained steady, attributed to the company’s evolution into a full media company and focus on marketing solutions.
• Positive outlook for the regional sports network business, with confidence in the ability to secure favorable renewal rates.

Misses

• No specific misses were reported from the earnings call.

Q&A Highlights

• CEO Christopher Ripley explained the impact of significant sporting events on advertising trends.
• Robert Weisbord discussed the recovery of national advertising and the stability of local advertising.
• Details on the $50 million payment related to the Diamond settlement are to be clarified within the next 60 days.
• Target leverage remains unchanged, with a natural decline expected due to political and EBITDA strength.