• Total Distribution Revenue: In line with guidance range.
• Core Advertising Revenues: Grew 1% in the third quarter.
• Political Advertising Revenue: $138 million in the third quarter, an all-time high.
• Ventures Portfolio Cash: $334 million at quarter end, up $8 million from the previous quarter.
• Consolidated Media Revenues: $908 million, up 20% year-over-year.
• Adjusted EBITDA: $249 million, within guidance range, increased by 72% year-over-year.
• Tennis Channel Revenue: Distribution revenues up 4%, advertising revenues fell by 7%.
• Debt Maturity: Next meaningful maturity in September 2026.
• Cash Position: $536 million at quarter end.
• Fourth Quarter Guidance - Media Revenues: $992 million to $1 billion, up 21% to 22% year-over-year.
• Fourth Quarter Guidance - Adjusted EBITDA: $314 million to $325 million, up 74% to 81% year-over-year.
• Full Year Political Revenue: Approximately $406 million, up 16% over 2020.
• Full Year EBITDA Growth Rate: 53% to 55% year-over-year.

• Warning! GuruFocus has detected 8 Warning Signs with SBGI.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sinclair Inc (NASDAQ:SBGI) delivered solid third-quarter results, with core advertising revenues growing by 1% year-over-year, despite record political revenues.
• Political advertising revenues set records for the company during the third quarter, fourth quarter, and full year, showcasing the strength of Sinclair's operations.
• Distribution revenues were up 5% year-over-year, driven by renewal rate step-ups and new carriage agreements, reaffirming guidance of mid-single-digit CAGR for net retransmission revenues from 2023 through 2025.
• Sinclair's Ventures portfolio received $5 million in total distributions during the quarter, with cash levels increasing by $8 million from the end of the second quarter.
• The company launched new sports-related podcasts, which have been ranked among Apple's top 10 podcasts, indicating strong growth in their podcasting division.

Negative Points

• Late political ad cancellations, particularly from Nevada, impacted Sinclair's financial results, causing them to fall short of their revised political guidance.
• Core advertising revenues, although growing, came in modestly shy of the 2% to 4% revised guidance provided in mid-September.
• Tennis Channel's advertising revenues fell by 7% in the quarter, although this was partially offset by a $1.5 million net change in noncash audience deficiency units.
• The company faces regulatory challenges, including outdated broadcast rules and the need for modernization, which could impact future operations.
• Sinclair's leverage remains a concern, with first lien net leverage at 4.2x and total net leverage at 5.3x, indicating a need for deleveraging efforts.

Q & A Highlights

Q: Can you explain the decision to preannounce on political advertising and how it differed from 2022? Also, are Sinclair's stations more likely to be buyers or sellers with potential regulatory changes? A: Christopher Ripley, President & CEO, explained that the decision was based on historical trends pointing to higher Q4 numbers, which didn't materialize due to shifts in political ad spending. Regarding M&A, Sinclair is excited about potential regulatory changes and intends to participate in industry consolidation, whether as a buyer, seller, or merger partner.

Q: How are distribution revenues expected to trend following recent renewals, and what are the core advertising trends post-election? A: Christopher Ripley noted that Sinclair expects strong growth in distribution revenues into 2025, with 28% of subscribers still up for renewal. Robert Weisbord, COO & President of Local Media, highlighted that core advertising is trending better than historical levels, with sports content driving viewership and optimism for future growth.

Q: What gives Sinclair confidence in a more favorable regulatory environment, and what are the current subscriber trends? A: Christopher Ripley pointed out that previous deregulation efforts were upheld by the Supreme Court, and Sinclair is hopeful for further relief. Subscriber churn remains mid-single digits, but recent positive trends from major MVPDs like Charter and Comcast are encouraging.

Q: How will the launch of the Tennis Channel's direct-to-consumer product impact financials? A: Christopher Ripley stated that the launch will incur some expenses in Q4, but 2025 will be a build year. The product is expected to be an incremental contributor to Tennis Channel's results, offering enhanced viewing options for subscribers.

Q: How is Sinclair approaching its 2026 debt maturity, and what are the plans for capital and asset allocation? A: Christopher Ripley mentioned that Sinclair has several options to address upcoming maturities, focusing on the lowest cost of capital and flexibility for M&A. The company aims to reduce leverage and is open to strategic transactions that could drive further deleveraging.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.