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Sinclair Reports First Quarter 2021 Financial Results

Wednesday May 5, 2021. 03:01 PM , from Digital Pro Sound
BALTIMORE–(BUSINESS WIRE)–Sinclair Broadcast Group, Inc. (Nasdaq: SBGI), the “Company” or “Sinclair,” 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.

Three months ended March 31, 2021

Broadcast

 

Local Sports

 

Corporate,
Other &
Elimination

 

Consolidated

($ in millions)

 

 

 

Revenue Highlights:

 

 

 

 

 

 

 

Distribution revenue

$

361

 

 

$

698

 

(a)

$

50

 

 

$

1,109

 

Advertising revenue

267

 

 

65

 

 

39

 

 

371

 

Other media revenue

37

 

(b)

5

 

 

(25)

 

(b)

17

 

Media revenues

$

665

 

 

$

768

 

 

$

64

 

 

$

1,497

 

Non-media revenue



 

 



 

 

14

 

 

14

 

Total revenues

$

665

 

 

$

768

 

 

$

78

 

 

$

1,511

 

 

 

 

 

 

 

 

 

Expense Highlights:

 

 

 

 

 

 

 

Media programming & production expenses and media selling, general and administrative expenses

$

478

 

 

$

722

 

(b)

$

36

 

(b)

$

1,236

 

Sports rights amortization included in media production expenses



 

 

552

 

 



 

 

552

 

Non-media expenses



 

 



 

 

17

 

 

17

 

Corporate general and administrative expenses

55

 

 

3

 

 

3

 

 

61

 

 

 

 

 

 

 

 

 

Other Highlights:

 

 

 

 

 

 

 

Sports rights payments



 

 

607

 

(a)



 

 

607

 

Program contract payments

22

 

 



 

 

3

 

 

25

 

Capital expenditures(c)

6

 

 

7

 

 

3

 

 

16

 

Interest expense (net) (d)

1

 

 

100

 

 

41

 

 

142

 

Adjusted EBITDA(e)

 

 

 

 

 

 

182

 

(a)

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.

(b)

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.

(c)

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.

(d)

Interest expense excludes deferred financing costs, original issue discount amortization, and other non-cash interest expense, and is net of interest income.

(e)

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.

Three months ended March 31, 2020

Broadcast

 

Local Sports

 

Corporate,
Other &
Elimination

 

Consolidated

($ in millions)

 

 

 

Revenue Highlights:

 

 

 

 

 

 

 

Distribution revenue

$

355

 

 

$

752

 

 

$

49

 

 

$

1,156

 

Advertising revenue

310

 

 

55

 

 

35

 

 

400

 

Other media revenue

36

 

(a)

5

 

 

(23)

 

(a)

18

 

Media revenues

$

701

 

 

$

812

 

 

$

61

 

 

$

1,574

 

Non-media revenue



 

 



 

 

35

 

 

35

 

Total revenues

$

701

 

 

$

812

 

 

$

96

 

 

$

1,609

 

 

 

 

 

 

 

 

 

Expense Highlights:

 

 

 

 

 

 

 

Media programming & production expenses and media selling, general and administrative expenses

$

456

 

 

$

535

 

(a)

$

47

 

(a)

$

1,038

 

Sports rights amortization included in Media production expenses



 

 

391

 

 



 

 

391

 

Non-media expenses



 

 



 

 

30

 

 

30

 

Corporate general and administrative expenses

44

 

 

2

 

 

3

 

 

49

 

 

 

 

 

 

 

 

 

Other Highlights:

 

 

 

 

 

 

 

Sports rights payments



 

 

612

 

 



 

 

612

 

Program contract payments

23

 

 



 

 



 

 

23

 

Capital expenditures(b)

21

 

 

4

 

 



 

 

25

 

Interest expense (net)(c)

1

 

 

111

 

 

52

 

 

164

 

Adjusted EBITDA(d)

 

 

 

 

 

 

281

 

(a)

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.

(b)

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.

(c)

Interest expense excludes deferred financing costs, original issue discount amortization, and other non-cash interest expense, and is net of interest income.

(d)

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.

Notes:

Certain reclassifications have been made to prior years’ financial information to conform to the presentation in the current year.

Outlook:

The Company currently expects to achieve the following results for the three months ending June 30, 2021 and the twelve months ending December 31, 2021.

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how it has and will continue to impact its advertisers, distributors, and professional sports leagues. The Company is currently unable to predict the extent of the impact that the COVID-19 pandemic will have on its financial condition, results of operations and cash flows in future periods due to numerous uncertainties. For additional discussion of how the COVID-19 pandemic has impacted the Company’s business, please see the section titled The Impact of COVID-19 on our Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which will be updated in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

For the three months ending June 30, 2021 ($ in millions)

Broadcast

 

Local Sports

 

Corporate and
Other and
Elimination

 

Consolidated

Revenue Highlights:

 

 

 

 

 

 

 

Core advertising revenue

 

 

 

 

 

 

$470 to 497

Political revenue

 

 

 

 

 

 

4 to 5

Advertising revenue

$270 to 286

 

$155 to 167

 

$49

 

$474 to 502

Distribution revenue

358 to 360

 

659 to 661

 

50

 

1,067 to 1,071

Other media revenue

46

(a)

7 to 9

 

(25)

(a)

28 to 30

Media revenues

674 to 692

 

821 to 836

 

74

 

1,569 to 1,602

Non-media revenue



 



 

14

 

14

Total revenues

$674 to 692

 

$821 to 836

 

$87

 

$1,582 to 1,616

 

 

 

 

 

 

 

 

Expense Highlights:

 

 

 

 



 

 

Media programming & production expenses and media selling, general and administrative expenses

$474 to 478

 

$1,084 to 1,085

(a)

$70

(a)

$1,629 to 1,633

Sports rights amortization included in media production expenses



 

844

(b)



 

844

Non-media expenses



 



 

19

 

19

Corporate overhead

 

 

2

 

 

 

35

Stock-based compensation and non-recurring costs for transaction, legal, litigation and regulatory fees included in corporate and media expenses above

 

 

22

 

 

 

41

Depreciation, intangible & programming amortization

 

 

79

 

 

 

170

 

 

 

 

 

 

 

 

Other Highlights:

 

 

 

 

 

 

 

Sports rights payments



 

$409

(b)



 

$409

Program contract payments

 

 

 

 

 

 

27

Interest expense (net)(c)

 

 

101

 

 

 

144

Income tax benefit

 

 

 

 

 

 

Approximately 16% effective tax rate

Net cash tax refunds

 

 

 

 

 

 

Approximately $33 million

Payments to noncontrolling interest holders, including preferred dividend(d)

 

 

11

 

 

 

12

Total capital expenditures, including repack

 

 

10

 

 

 

38

Repack capital expenditures

 

 

 

 

 

 

6

Adjusted EBITDA(e)

 

 

$192 to 206

 

 

 

$349 to 378

Note: Certain amounts may not summarize to totals due to rounding differences.

(a)

The Broadcast segment includes $27 million of revenue for services provided by the Broadcast segment to the Local Sports and Other segments and the Local Sports segment includes $27 million of selling, general, and administrative expenses for services provided by the Broadcast segment to the Local Sports segment. Such amounts are eliminated in the Consolidated column.

(b)

Includes approximately $42 million of lower payments to and rebates from teams for sports rights overpayments tied to minimum game guarantees carried over from 2020.

(c)

Interest expense excludes deferred financing costs, original issue discount amortization, and other non-cash interest expense, and is net of interest income.

(d)

Preferred dividend is expected to be paid in-kind in the quarter ending June 30, 2021.

(e)

Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization, plus impairment loss 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 programming payments. Refer to the reconciliation on the last page of this release and the Company’s website.

For the twelve months ending December 31, 2021 ($ in millions)

Broadcast

 

Local Sports

 

Corporate and
Other
and Elimination

 

Consolidated

Revenue Highlights:

 

 

 

 

 

 

 

Media revenues

$3,066 to 3,249

(a)

Non-media revenue

 

 

 

 

70

 

70

 

 

 

 

 

 

 

 

Expense Highlights:

 

 

 

 

 

 

 

Media programming & production expenses and media selling, general and administrative expenses

$1,915 to 1,924

 

$3,127 to 3,132

(b)

$241 to 243

(b)

$5,283 to 5,299

Sports rights amortization included in media production expenses



2,357

(c)



2,357

Non-media expenses



 



 

81

 

81

Corporate overhead

 

 

9

 

 

 

160

Stock-based compensation and non-recurring costs for transaction, legal, litigation and regulatory fees included in corporate and media expenses above

 

 

58

 

 

 

159

Depreciation, intangible & programming amortization

 

 

320

 

 

 

686

 

 

 

 

 

 

 

 

Other Highlights:

 

 

 

 

 

 

 

Sports rights payments



 

1,887

(c)



 

1,887

Program contract payments

 

 

 

 

 

 

103

Interest expense (net)(d)
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