Sinclair Expects Core Ad Gain This Quarter

Like other media companies, Sinclair Broadcast Group is seeing automotive advertising held back by supply chain issues. “While it’s difficult to ascertain when the inventory shortages will be alleviated, we are seeing continued strength in our largest category, services, coupled with significant growth for sports betting companies that have helped to mitigate the weakness in auto,” President-CEO Chris Ripley told analysts in Sinclair’s quarterly conference call this morning.

Providing an update on the recent cyberattack on the company’s computer systems, which impacted operations at its TV stations, Ripley said the investigation is ongoing. He noted that the company has insurance to cover business interruption from such an attack, but that the insurance may not cover the full amount of the shortfall. For now, though, that outcome is unknown.

Having reported a third quarter revenue decline of 0.3% for the entire company, EVP-CFO Lucy Rutishauser went over details for the two big segments: Broadcast (TV stations and “other” businesses); and Local Sports (the regional sports networks). Broadcast saw advertising revenue fall to $283 million from $344 million, owing to being an off year for federal elections, while distribution revenue rose to $372 million from $356 million.

“For broadcast and other, advertising revenues in the third quarter decreased 17% compared to the same period a year ago, and were down 2% versus 2019 pro forma. While the automotive category continued to be weak, strength in the services and sports betting categories helped to offset the auto weakness,” she told the analysts.

Looking ahead to the current quarter, Rutishauser provided this guidance to investors: “For our broadcast and other segment, fourth quarter guidance reflects the absence of political, which is the main driver for media revenues to be down approximately 11% to 13% to $861-$880 million versus the fourth quarter of last year. Compared to fourth quarter pro forma 2019, media revenues would be up 7% to 9%. Excluding the impact of political ad revenue, fourth quarter core advertising is expected to be up a low double-digit percent versus Q4 of last year and up by a low single-digit percent versus Q4 of 2019.”

Other than a question about network reverse-comp, the local TV business was ignored by analysts in the Q&A session as they focused on sports rights negotiations and troubling balance sheet issues for the regional sports networks.

Having been asked whether Sinclair might have an opportunity to push back against the broadcast networks because the NFL and other major sports are being streamed on the nets’ own services and are no longer exclusive to broadcast TV, Ripley replied that his focus is on net distribution revenues, not the margin split with the networks. “We see big up side on retrans still existing, given the relative strength of broadcast versus what’s happened at the cable channels over the last few years,” he said.