EARNINGS CALL

Sinclair Reports Ad Trends Better Than Expected

“Core broadcast and other advertising revenues were above our expectations for the quarter, as November improved to down low-single-digits percentages and December was relatively flat,” Sinclair President-CEO Chris Ripley told Wall Street analysts in the company’s quarterly conference call. He said that core improvement was likely due to pent-up demand after the record-breaking political season.

While Sinclair Broadcast Group reported this morning that overall revenues were down 7% in the fourth quarter, the decline was all on the regional sports networks (RSN) side. The local television stations, fueled by record political advertising, saw total revenues rise to $896 million from $751 million a year earlier. Within that, ad revenues rose to $503 million from $364 million and retrans moved up to $355 million from $347 million.

“Core broadcast and other advertising revenues were above our expectations for the quarter, as November improved to down low-single-digits percentages and December was relatively flat,” Sinclair President-CEO Chris Ripley told Wall Street analysts in the company’s quarterly conference call. He said that core improvement was likely due to pent-up demand after the record-breaking political season.

“For the first quarter, we’re expecting broadcast and other core advertising to be down mid-single-digit percentages, with COVID cases still high, new strains of the virus spreading throughout the country and vaccinations just rolling out,” Ripley said.

Later in the call, Broadcast President Rob Weisbord provided some details when an analyst asked what is driving core growth.

“For the [fourth] quarter, automotive, quarter-over-quarter, was up 38.5%, so we’re very encouraged that the supply chain is fixed. That spend will continue to see upward increases. And services was up 47% quarter-over-quarter. And we’re bullish on this ad revenue business. We established the Sinclair Sports Group, and that will unlock value across the RSNs, broadcast and the Tennis Channel as well. We’re working on several deals that will be unique to what we’ve done in the past,” Weisbord told the analysts.

“Once COVID seems to stabilize, we see advertisers returning to the pre-pandemic levels and coming out of first quarter, with the vaccinations, even though there’s uncertainty, we’re very confident that we will exceed the budget on first quarter numbers from an ad perspective — so all that leads to very good optimism,” he added.

BRAND CONNECTIONS

“Also, the sports fantasy gaming category will see a breakout year for expenditures as well,” said Weisbord.

“We were very pleasantly surprised by the strength of core advertising in Q4, given all of the political we were absorbing,” Ripley added.

Sinclair has gone in heavily for fantasy sports and actual sports betting, where legal. It will soon implement its partnership deal to rebrand the RSNs with the Bally’s name and promote the Bally’s brand across all of its platforms. As part of the company’s sports “gamification” efforts, Ripley says it will soon release a new app that will encourage viewers to “actively participate in the sports viewing experience,” with interactive elements such as free-to-play contests, rewards and interaction with other fans. “The idea is to make watching sports similar to playing a video game,” he said.

Also planned for 2021 is a new unified advertising platform to help advertisers take advantage of Sinclair’s reach into 70% of U.S. TV households. That will provide access to inventory across Sinclair’s entire portfolio of 186 TV stations, 21 RSNs, Tennis Channel, the STIRR digital platform, Stadium and NewsON.

Getting down to the nitty gritty, EVP-CFO Lucy Rutishauser told Wall Street that first quarter revenues for the broadcast and other segment should have revenues in a range of $730 million to $745 million. That’s down approximately 4%-6% from the year-ago level of $774 million, pro forma for recent station sales in three markets.

“The decrease is the result of a full quarter of the pandemic versus really just two weeks last year, as well as this year being a non-presidential election year,” Rutishauser noted.


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