Other Categories Filling Auto Gap For Sinclair

The recovery continued to be strong for the “broadcast and other” segment of Sinclair Broadcast Group in the second quarter, with EVP-CFO Lucy Rutishauser telling Wall Street analysts Wednesday morning that media revenues were up 18% to $789 million vs. the same quarter of 2020, “due primarily to stronger ad revenues as last year’s second quarter was significantly impacted by the pandemic.” Compared to the second quarter of 2019, she added, revenues increased 9% (adjusted for stations sold), driven primarily by higher distribution revenues.

Core advertising for the segment rose 51% compared to a year ago “and were down just over 1% from 2019 pro forma,” she noted. “While the automotive category was a primary driver of the decline versus the second quarter of 2019, solid growth in our largest category, services, as well as strength in the sports betting and pharmaceutical categories offset much of the decrease,” Rutishauser added.

Broadcast President Rob Weisbord provided more color on the auto category during the Q&A period with analysts. “Versus 2019 second quarter was low-teens down. We have a strategy of working with the Tier 3 auto dealers to promote services, used cars, as well as drilling into what available inventories they have. And we’re segmenting where the buyers are for omni-channel solutions that we provide for the dealers. It’s obviously been in the news with the semiconductor chip shortage that dealers are having a tough time getting vehicles, but that means that their grosses are at an all-time high. So, we’re working through it,” he said.

“Again, as a reminder, our service category is our largest category. It’s been led by financial, insurance. And the new category that broke, and we’ve been asked about for a couple of years, is sports betting, where we’re three times up versus ’20, when we first started seeing the money. So we’re in a healthy position from a core advertising position,” Weisbord added.

“Turing to our third quarter and full year guidance, for our broadcast and other segment our guidance reflects third quarter media revenue down approximately one to three percent to $792 million to $806 million versus third quarter of last year. This is driven primarily by the absence of political revenues in a non-election year. If you compare to pro forma third quarter of 2019, media revenues would be up 9% to 11%. Excluding the impact of political ad revenue, third quarter core advertising is expected to be up approximately high-teens percent versus third quarter of last year and flat to up low-single-digit percents versus third quarter of 2019,” CFO Rutishauser told the analysts.

President-CEO Chris Ripley used the call to complain that Wall Street is significantly undervaluing Sinclair’s stock. He went through the company’s non-core assets and said they are equal to the current stock price. Those included Bally’s warrants and options; underlying spectrum value; tax benefits on the books from the regional sports networks acquisition; and the values of various investments in other businesses. Add in the core businesses of broadcast stations, the RSNs, Tennis Channel and digital assets, he said, and the company is worth well over double its current stock price.

Ripley is also bullish on a direct-to-consumer app for the RSN sports programming, targeted for launch in the first half of 2022. He said the company already has clearance from the MVPD distributors of the Bally’s RSNs, while negotiations continue with some of the sports teams and leagues. Stay tuned for details on pricing and the actual rollout.