Sinclair reports first quarter 2021 financial results

Sinclair Broadcast Group, Inc., today reported financial results for the three months ended March 31, 2021.

First Quarter Highlights

• Consolidated total revenue decreased 6% to $1,511 million as compared to the first quarter of 2020.
• Consolidated operating income of $35 million, including $32 million of non-recurring costs for transaction and transition services, COVID, legal, and regulatory costs (Adjustments) decreased compared to operating income in the first quarter of 2020 of $327 million, which included $20 million of Adjustments. Excluding the Adjustments, operating income of $67 million decreased $280 million compared to the first quarter of 2020.
• Net loss attributable to the Company was $12 million versus net income of $123 million in the prior year period. Excluding the Adjustments, the Company had net income of $13 million.
• Consolidated Adjusted EBITDA, which excludes the Adjustments, of $182 million, decreased 35% versus the first quarter of 2020.

CEO Comment:
“Results for the quarter were much better than expected and reflect a strong recovery in the core advertising market, cost controls and timing of games played,” said Chris Ripley, Sinclair’s President & Chief Executive Officer. “We are optimistic that the rebound in advertising spending bodes well for the rest of the year, where we are lapping easy comparisons to the prior year, which was significantly impacted by the pandemic.”

Ripley continued, “At the end of the quarter, Sinclair entered a new era of sports viewing with the rebranding of our RSNs with the Bally Sports name. The roll-out went off without a hitch, thanks to the tireless efforts of our entire sports marketing team. The feedback has been very positive across all stakeholders, as the rebrand was a significant upgrade to the product’s graphics, and we are energized to be bringing local sports viewers the very best experience to root for their favorite hometown sports teams. With the recent launch of our new Bally Sports App, the stage is set to elevate sports viewing to a whole new level, allowing a more interactive and personalized experience.”

Ripley concluded, “We continue to focus on initiatives to create a more dynamic viewing experience across all our platforms, creating live interactive programming, building our gamification offerings, deploying NEXTGEN TV, and developing our direct to consumer platforms, to improve the consumer experience and engagement.”

Recent Company Developments:
Content and Distribution:

• In March, the Company rebranded its acquired regional sports networks (RSNs) under the Bally Sports name, ushering in a new era in the way people watch and interact with live sports.
• In April, the new Bally Sports app for authenticated users was launched, allowing viewers to watch the entire programming line-up of their local RSN, 24 hours a day, including live games, with a significantly greater amount of functionality and features compared to the app it replaced.
• In February, the Miami Marlins and the Company entered into a binding term sheet for a multi-year media rights agreement, beginning with the 2021 Major League Baseball season, for Bally Sports Florida to continue as the television home of the Marlins.
• In April, the Company signed a multi-year enterprise partnership agreement with Operative Media to enable Sinclair to consolidate all its sellable advertising assets across its platforms into a single ad sales system. The framework will enable Sinclair to offer its customers a simplified and optimized solution to buying from its extensive ad inventory across all platforms.
• In April, Sinclair agreed to an over-arching distribution deal with Samsung TV for much of Sinclair’s content to be accessible to Samsung TV viewers via apps. Sinclair content to be included includes free streaming platform STIRR, premium networks Tennis Channel (via TVE for authenticated subscribers) and Tennis Channel Plus (SVOD), as well as networks Comet TV and Charge!. Additional networks are expected to be available in the future, including the Bally Sports RSNs (via TVE for authenticated subscribers) and NewsOn.
• In March, fuboTV Inc. and Marquee Sports Network announced a carriage agreement to bring Chicago Cubs game coverage to the fuboTV platform.
• In April, the Company entered into a multi-year retransmission renewal with Cox for the carriage of Sinclair stations, Tennis Channel and Sinclair’s national networks on its platforms and extended carriage of the Bally Sports RSNs and YES Network.

Community:

• In April, the Company announced that for the third year in a row, a Sinclair station was the winner of a prestigious Investigative Reporters & Editors (IRE) award for its investigative reporting. The Company’s Portland, ME station, WGME (CBS), received the 2020 award for its excellent investigative coverage of a flaw in the Veterans Crisis Line, which it identified and helped spur legislative action to correct it.
• In April, Sinclair’s first television station, WBFF (Fox) in Baltimore MD, celebrated its 50th anniversary on the air.

Governance

• In April, the Company named Laurie R. Beyer to serve as its newest independent board member.

NEXTGEN Broadcasting (ATSC 3.0):

• As of April, the Company has launched NEXTGEN TV in 14 cities, including Columbus, OH, Syracuse, NY, and Buffalo, NY, which launched since year-end 2020.
• In April, CAST.ERA, a media technology joint venture between Sinclair and SK Telecom, announced it will launch a next generation broadcast solution this year that boosts television content quality utilizing SK Telecom’s 5G cloud and AI technology.

Three Months Ended March 31, 2021 Consolidated Financial Results:

• Total revenues decreased 6% to $1,511 million versus $1,609 million in the prior year period. Media revenues decreased 5% to $1,497 million versus $1,574 million in the same period a year ago.
• Total advertising revenues of $371 million decreased 7% versus $400 million in the prior year period, due to the absence of political revenues, as 2021 is a non-political year. Core advertising revenues, which excludes political revenues, in the first quarter of $367 million were up 3% versus $358 million in the first quarter of 2020, benefiting from more local sports games taking place in the quarter compared to the same period a year ago.
• Distribution revenues were $1,109 million versus $1,156 million in the same period a year ago, with the decrease driven by certain distributors that dropped carriage of the RSNs, as well as higher subscriber churn in the Pay TV industry in the quarter compared to the same period a year ago.
• Operating income of $35 million, included Adjustments of $32 million versus operating income of $327 million in the prior year period, which included $20 million of Adjustments. Operating income when excluding the Adjustments decreased to $67 million from $347 million for the same prior-year period.
• Net loss attributable to the Company was $12 million versus net income of $123 million in the prior year period. Excluding Adjustments, the Company had net income of $13 million. Adjusted EBITDA, which excludes Adjustments, decreased 35% to $182 million from $281 million in the prior year period.
• Diluted loss per common share was $(0.16) as compared to diluted earnings per common share of $1.35 in the prior year period. The impact of Adjustments in the three months ending March 31, 2021, on a diluted per-share basis, was $(0.34) and the impact of Adjustments in the three months ending March 31, 2020 was $(0.18).

Consolidated and Segment Highlights
The below highlights include the launch of Marquee Sports Network (February 22, 2020), the divestiture of the non-license assets in Harlingen, TX (January 27, 2020), the divestiture of WDKY in Lexington, KY (September 17, 2020), the divestiture of WDKA and KBSI in the Cape Girardeau MO/Paducah KY market (February 1, 2021), and the acquisition of ZypMedia (February 5, 2021).

Segment financial information is included in the following tables for the periods presented. The Broadcast segment consists primarily of broadcast television stations, which the Company owns, operates or to which the Company provides services. The Local Sports segment consists primarily of the RSNs. The Other segment includes corporate, original networks and content, including Tennis Channel, non-broadcast digital and internet solutions, technical services, and other non-media investments.

• Local Sports distribution revenue includes $19 million for the reversal of previously accrued rebates to distributors tied to minimum game guarantees. Sports rights payments includes approximately $67 million of lower payments to and rebates from teams for sports rights overpayments tied to minimum game guarantees.
• For the quarter ended March 31, 2021, Broadcast includes $27 million of revenue for services provided by the Broadcast segment to the Local Sports and Other segments, the Local Sports segment includes $26 million of selling, general, and administrative expenses for services provided by the Broadcast segment to the Local Sports segment, and the Other segment includes $1 million of selling, general, and administrative expenses for services provided by the Broadcast segment to the Other segment. Such amounts are eliminated in consolidation.
• Capital expenditures exclude $4 million of repack capital expenditures expected to be reimbursed in the future from the TV Broadcaster Relocation Fund administered by the FCC.
• Interest expense excludes deferred financing costs, original issue discount amortization, and other non-cash interest expense, and is net of interest income.
• Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization, and non-recurring transaction and transition service, COVID, legal, litigation and regulatory costs, as well as certain non-cash items such as stock-based compensation expense and sports rights amortization; less sports rights payments and program contract payments. Refer to the reconciliation on the last page of this press release and the Company’s website.

• For the quarter ended March 31, 2020, Broadcast includes $24 million of revenue for services provided by the Broadcast segment to the Local Sports and Other segments, the Local Sports segment includes $23 million of selling, general, and administrative expenses for services provided by the Broadcast segment to the Local Sports segment, and the Other segment includes $1 million of selling, general, and administrative expenses for services provided by the Broadcast segment to the Other segment. Such amounts are eliminated in consolidation.
• Capital expenditures exclude $21 million of repack capital expenditures expected to be reimbursed in the future from the TV Broadcaster Relocation Fund administered by the FCC.
• Interest expense excludes deferred financing costs, original issue discount amortization, and other non-cash interest expense, and is net of interest income.
• Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization, and non-recurring transaction, legal, litigation and regulatory costs, as well as certain non-cash items such as stock-based compensation expense and sports rights amortization; less sports rights payments and programming payments. Refer to the reconciliation on the last page of this press release and the Company’s website.

Consolidated Balance Sheet and Cash Flow Highlights:

• Total Company debt as of March 31, 2021 was $12,540 million, which includes Diamond Sports Group LLC (DSG) debt of $8,121 million.

• Cash and cash equivalents for the Company as of March 31, 2021 was $941 million, which includes $415 million held at DSG.

• As of March 31, 2021, 51.1 million Class A common shares and 24.2 million Class B common shares were outstanding, for a total of 75.3 million common shares.

• In April, the Company’s wholly-owned subsidiary, Sinclair Television Group, Inc. (STG), entered into a new term loan in an aggregate amount of $740 million, the proceeds of which were used to refinance a portion of STG’s existing 2024 term loan B-1 tranche. The new term loan matures on April 1, 2028.

• In March, the Company paid a $0.20 per share quarterly cash dividend to its shareholders.

• Routine capital expenditures in the first quarter of 2021 were $16 million with another $4 million related to the spectrum repack.

• The Local Sports segment’s media production expense included $552 million of sports rights amortization, while sports rights payments in the quarter were $607 million. Business Wire