SBGI - Earnings call transcript Q3 2019 | Sinclair Broadcast Group, Inc.

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Operator

Ladies and gentlemen, good day and thank you all for joining the Sinclair Broadcast Group Third Quarter 2019 Earnings Conference Call. All telephone lines are presently in a listen-only mode and instructions on how to submit a question will be shared after today's prepared remarks. [Operator Instructions]

And now for opening remarks and introduction I'm pleased to turn the floor over to your host, Senior Vice President and CFO, Lucy Rutishauser. Please go ahead.

Lucy Rutishauser

operator. you, Thank Senior call and the Chief today Chris President Rob are Officer Officer; Chief Participating Jeff and Steve with Marks, President Krolik, Weisbord, and Group; CEO; our Sports and President Executive Ripley, and of Revenue Net. on FOX Television me Vice Vice Operating President

Jo Billie begin our we will make forward-looking statement Before McIntire disclaimer.

Billie Jo McIntire

and result described been include Such in the Certain earnings of company's matters number filed forward-looking various uncertainties. operating in among results. included forth SEC factors. statements statements other most future have from quarter as subject regarding, results in could of discussed factors the reports on those second Actual as risks forward-looking a this the with in release. Such things, statements call the recent important set a and are may to differ future our

to undertakes www.sbgi.net. quarterly the this uses a being to website public. as no available company on The can made be our replay remain call statements. A release. next accessed available The of until which company and obligation earnings Regulation website will these available FD, its accordance information, with will be source our update key is forward-looking webcast company In at

website to the detail discussion non-GAAP GAAP the call of supplemental cash meant statements will measure in financial their under non-GAAP metrics measurements, in non-GAAP Included the as free on public valuation our to our measures. specifically but provided provided A to and GAAP be on of Investors, is the assist replace of BCF, These measures, company. financial measures not analysis reconciliation are our EBITDA, a are television financial flow leverage. and

the now walk will Ripley through operating Chris highlights. you

Chris Ripley

welcome FOX Sports earnings and our everyone the business. our since the call August morning, Network Regional closing of quarter first third Good to

the industry in live news of most We and local, two are now local desired genres. sports leaders content

cash Local as which revenue, broadcast focus ranges to now quarter beating our flow. spectacular the guidance we RSN, refer News on integrating and had our we on free segment a While EBITDA

to Lucy we're her, detail. walk would that about I opportunities media diversified in company today. is through to billion talk like over the turn $XX to operating you for results I those the before going But it

addition deepened With commitment nation, the path the to of Regional and embarked we years in Sports Networks, company the we the leading content, our becoming local five live, on have local premium ago. almost news sports a

revenue is In news our from content. now sports fact, over XX% and of generated

revenues distribution been cross ad In securing TV as addition with company the legalized the of of for has such On believe XX% the RSNs and MVPDs due new or the Tennis stations, as from distribution, opportunities, the represents the about programming which streams agreements of to regard, team versus are We AT&T stable contracts. associated revenue well derive we long-term Cox advertising, and now a more our promotional RSNs DirecTV, Marquee, Charter, revenues with this Mediacom. basis, nature production, Channel, busy and total as presents our betting. sports YES,

local look in and partners them to best delivering distribution our forward appreciate to content. their We class subscribers' and

an there any sense purchase protracted would have the as terms that of resolution. negotiations price timing approximate affiliate reduction the will of out to such acquisition, We DISH with to whether like continue fees whose RSNs carriage was we get part until RSN related Since July. for we of or with to million $XXX we've our better expired in done a RSNs, potentially contract removed can't have for from deal in the forecast of I point when discussions carriage DISH. them with late the predict we a DISH

been any broadcaster want other of side satellite RSNs. which those improvement the will adjustment of more subscribers should quarter. the to about do written we various churn repay where story, we is this reflect remind recent that our people reports subscriber subscriber report them made and we of company's I that only the which we been Much yet to do and by know the need migrated has to, has strength reporting we because expect to length expect begin don't of stations late blackouts the lag of receiving when Disney. the blackout, quarter on churn amount not Based fourth to

than core for And to story – year. quarter expecting better we're the third forma even positive advertising revenue Our be more quarter fourth growth pro expected. revenue a advertising was reflecting

XXXX that more to and parties point spending XXXX raised Recent time to have by been ad year political continues in at on XXXX. data point record. ahead, both this funds as the than biggest reflect Looking in reports both

Our $X.XX total guidance to XXXX, expected pro cash free for forma XXXX is flow to billion expected cash Pro be flow free billion. is $X.XX XXXX be $XX share. approximately per forma to

all is free and guidance XXXX, XXXX, flow the XXXX $XX.XX of share. for per DISH to now Excluding our cash of XXXX $XX.XX rest

continue both improving an to to generation our evaluate strong We liquidity for eye and cash cost expected overall our positions flow with free our capital. segments of

window an in cash increase on cash has partially portion billion redeemed if free of the beginning a contemplating mind, of we're $X XX Sports with flow callable would which later our The par we a dividend L this preferred, Diamond for that plus preferred With cash XX at hand. it is month. Holdings redeeming which day excess

Lucy discuss financial Now, performance. over to to let turn our me it

Lucy Rutishauser

Thank you, Chris.

XXX one correct plus Just the cash L so preferred dividend. is thing, to

Chris Ripley

Sorry.

Lucy Rutishauser

already we metric, not detail consensus to estimates over either some not, the But Street are contributed in our in an keep in reported So metric. quarter and third analysts this that go mind closed quarter financial consensus. results some comparable RSN guidance. each acquisition our into achieved as August, I late please mentioned, all quarter key unusable RSNs fourth about which Because in including resulted estimates the or has did before

financial received questions their bondholders also Diamond on statements. receive We've how from the to

have days XX we to indentures, provide the financials. in stated the As

bondholders access the via to the able putting which from will a secure be our be provide We link will we And website will URL. sbgi.net. them on website, public trustee the a also with

of media than the for partial the and revenues quarter result, or the to of Now XX% $X.XX million quarter increase a third include third of quarter results turning XXXX. RSNs. higher These XXX billion

million is RSNs were media high above guidance XX million the end revenues which XXX the Excluding of our range.

Included in of third are distribution revenues XXX the a over media increase million our quarter prior period. XXX% year revenues,

of year. for Excluding to to digit double on the which were grow range. we distribution the above RSNs expect X revenue is Based million, revenues end RSNs, current excluding guidance contract high the low continue expectations, million distribution our less this growth percents XXX

advertising pick be in mid in were political. an up single the with high to in digit fourth quarter, quarter starting fourth XX and million to percent. Political core is quarter to to company expectation revenues of the a up third expected we're XX see Total X million million

we $XX finish record. million year stated $XX to in XXXX our range. expect the biggest we XXXX year to political as the And For million previously on expect to be

in continue Our to posting revenue third digital overachieve growth. XX% over quarter businesses the

and political quarter X.XXX quarter billion fourth up revenues in revenues X.X XX% XXX total to media million year to distribution million million For of fees million to to approximately expecting XX compared XX we're as XX% versus company, This includes versus XXX billion assumes last XXXX. fourth company last to year. billion X.XXX total be

was compared are XXXX, X.X as billion part acquisition media operating expenses were revenue. of for programming primarily year, expenses and and which third the programming third to result the to X.X quarter RSN production defined the XX% and revenues SG&A from be media up year full to expected in media billion again, forma as higher costs. quarter Media of apolitical the in Pro million, XXX last quarter on the

Excluding to media lower our end million X G&A which range due expenses than the were the and is sales RSNs, low guidance million, XXX of better expense.

year, of increase billion expenses XXXX be company RSN full and expected are total due the and the compensation. the programming year-over-year to approximately to acquisition X.X year For for primarily expenses of billion. versus fees media is part media higher X.X The

expenses network cost our compared XXXX billion Pro on fees, of be as revenue to billion sports to programming higher to are X.X miscellaneous year media digital G&A. and forma and sales higher X expected growth in due full

XX $XXX loss and and change. litigation in overhead this note of reserve million, to that be estimate at million quarter and non-recurring XXX fees, litigation. Corporate the to that additional believed material reasonable remains exposure which regulatory related the potential to the includes reserve, legal a in the million I an time fluid, was subject transaction Tribune remains

Excluding line guidance. those overhead amounts was corporate compensation, and stock with in based prior

in be million in XX overhead For million and XXX litigation transaction compensation. excluding XX the million regulatory year fees, non-recurring and stock legal, expected based is to corporate

at sales including Media in XX net antenna Non-media and excluding on EBITDA was million. million XXX, in will timing the third occur year higher next quarter, approximately than and quarter. the million the XX better EBITDA cost guidance company. prior our million ONE programming XXX XX That's was XXX which expenses, of million in cost the non-recurring in our

the our guidance we about by $XX RSNs million. Excluding EBITDA beat

on approximately to to lowest RSNs teams. want payments Total due first the the be XXX contractual I their point advertising expected in the million. EBITDA million X to to the EBITDA timing million fourth and that both cost of fourth adjusted is to quarters in quarter non-recurring company traditionally and do for XXX seasonality out the experience

from the of billion. a we XXXX is closing billion to Pro versus forma billion to due removing year months agreement be of primarily five assumed step to MVPD EBITDA between and in and RSNs by The EBITDA DISH is fees carriage political down reduced revenue lower at X.X X.X expected driven decrease X.X last full and XXXX. forma pro the the that

XX shares fee. per on adjusted income or the common of share weighted per $X.XX the loss quarter transaction when for non-recurring Diluted $X.XX in million average share was

XXX in by million XXX excluding quarter flow million. we free the non-recurring guidance cash prior end the flow expenses Excluding of the million RSNs million and free exceeding in the generated high with cash XXX XX of

XXX to approximately Total fourth XXX the the quarter and full million XXX to to XXX company in flow million free year. million is for expected be million cash

XXXX, approximately share. are the prior cash guide mentioned, per share, our XXXX flow increasing $XX share to per including expected $XX average Chris we As from forma free per pro of our RSNs

better XXXX XXXX, legacy the $XX.XX reflects of and pro that performance DISH free to financing And cash average be the business. primarily forma blackout on $XX.XX versus in to expected is Our by $XX. favorable XXXX part share expense offset on prior terms interest a flow lower guide per

Turning XX including capital third XX to the cash balance highlights, for flow repack. expenditures in million quarter the the sheet and million, were

the full the before CapEx repack and million. XX be million. XXXX XX for million be CapEx XXX XXXX And year is to including For is the expected RSNs total repack to to expected

quarters eight cash XX.X lien on September billion. a was end company a at holding the At half was through leverage four total was covenant indebtedness times times X.X debt leverage STGs X.X was total ratio and a of and billion on net XX, trailing net first quarter times. and Total basis. on X.X X.X a

remind on first net X.X total our Diamond's basis. X.X DISH target a division four of to near X.X indebtedness of threes the about times. blackout low and Diamond to everyone mid for was for low would for Sinclair times been of I on term quarters times times Diamond ratio high Absent times. do and have a want leverage to lien total the net four trailing leverage leverage four

like so to questions. with it open would to I And up that,

Operator

our Instructions] David's of with Thank question first line Herbert take we'll the Fargo. you. [Operator Wells And from

Davis Hebert

morning to ask the Diamond good the taking I questions. just wanted balance for Sports everyone. on Thanks sheet. Hi,

YES cash of should of transaction else option the on whether $X.X team believe With already it's put billion a closed. for anything we that Is hand, anything or nature? the adjust there I

Lucy Rutishauser

Yeah.

you Davis, is we XXXX. recall raise, – by which the in put So be there could early put a if

that's pre-fund $XXX amount, did almost million. we So that

is And and of so $XXX looking stock, that assume are cost that you preferred should is going again generate will we highest redeem million free capital, to the a so of cash flow which Chris our earmarked forward. as said, that evaluating then, portion

Davis Hebert

further preclude if from you going helpful. Okay, RSN, that redeem taking forward? part indeed that's do in preferred And you that M&A then some does of

Chris Ripley

doesn't. it no No,

we're. and We have to in today hand what's tackle ample the resources on marketplace

So very incremental synergies excited additional tuck-ins being for us. about and we're very generating

Davis Hebert

generated I at of build you cash free when the closed Sports with up? And at Diamond Sports look million, billion, flow you cash $XXX does cash balance to I Excellent. that $X.X that that think Diamond imply

Chris Ripley

$XXX was price generation. drove rest is is that; of two adjustment free this that Well, approximately that the cash purchase referenced there one I million and flow components

Davis Hebert

that it being anticipate gave over. Do Sports Diamond it in see turn to and a you Okay. And XX your last lag – before within low question leverage? think, times should I four a et targets, I anything terms changed mid bit forecast, leverage getting Has leverage blacked and with your to but was you subscriber months, the at Lucy out declines, little of, target cetera? DISH is we of that

Chris Ripley

way leverage the we So which view said, equivalent about should create on to elevated time. look, issue relevance top XX for a that period But DISH, combined. it will the entertainment a leverage we for issue viewership come think time, as with DISH deal a either temporary as depending their industry what you Diamond will DISH. think in with be We temporary RSNs know happens but over programs really, some reduced for for growing it's a with don't is From perspective me. the the I is at the of what and or will going, that DISH we happen

piece that's key growing and going the to of interest of exasperated over moves the greater So only Sports content. through a it's with sparks Betting country be and bundle, engagement time and really the our even for as

Davis Hebert

for questions. Thanks great. taking the Okay,

Operator

And of is line open. from hear Wolfe your next ahead, Marci Please we'll Research. line go the at Ryvicker

Marci Ryvicker

is a X.X you the number? assume I to forma pro new I you're at discussed guide, in and versus that lower November carriage anticipated 'XX have step Lucy XXXX, with closing. EBITDA that no couple down been arrive the X.X mentioned old of first there about X.X that talking the Thanks. one, the that of at down step was new the has questions;

Lucy Rutishauser

closing. contracted, that assume it XX CF negotiated we That's by they're correct, Marci, the that's was

Marci Ryvicker

mentioned TV And you that advertising then include the that perfect. when high RSNs? only up to or in single-digits, stations mid being core is does QX Okay,

Lucy Rutishauser

So of that advertising but includes XX% remember RSN for their new RSNs, about business the really is business. only

of the performance. seeing scheme broadcast So company really whole what by on the there the driven you're is

Marci Ryvicker

contributing for the high-end? the to And 'XX, meaning $X,XXX the range, $X,XXX. updated to gets versus the they are flow then is you cash to guide what for Okay. free 'XX, What low-end

Lucy Rutishauser

just we're mean I it's budgets. because our XXXX a right really still Well, now, Marci, finalizing range

You're And so always as there have as a used because to it's we really of you advertising in just we – well. right? a on do, have visibility range don't putting lot a us out with normally range, coming

Chris Ripley

– know you And

Lucy Rutishauser

– then mean, I okay.

Chris Ripley

is Yes, harder things a but political like for historically be drive think the range. year XXXX, to massive of predict, to going which obviously it's we some

Marci Ryvicker

for sheet the clarification include the question, normal current And then the just range. one raise? so Okay, last QX does balance from $XXX million

Chris Ripley

Yeah.

Lucy Rutishauser

Yeah.

Marci Ryvicker

you Great, so much. thank

Lucy Rutishauser

Thanks.

Operator

Deutsche. Next, we'll go Please sir. at hear Aaron is your from open, ahead, line Watts

Aaron Watts

as environment, Hi, XXXX heading you of one about of momentum One have everyone. be Thanks of how any like it for having some might Can me helpful the indications kind on. the if that? drivers sounds some seeing quick early, you on the end on the of, start into year. core ad that'd well? you're And talk

Chris Ripley

strength of our driving Yeah, attorneys, the seeing we're pharmaceuticals, insurance business.

on and our new XXX are focus pool. as introducing selling and So, has we're categories new solutions solutions solidified the driving that

Aaron Watts

category? the color Any auto around

Chris Ripley

we to and QX. results in down Auto single-digits see expect low category for was same quarter third the

Aaron Watts

have changed around Is few curious; in at for other what them has And the agreement is purely they hang-up the you reaching got one very able recently, Any agreements it or unique and or Chris, some past something I color more with the just large optimism I'm with new price to it been with asking weeks? guess over your DISH? give an players can distribution space you reach DISH. on Okay, recently. different?

Chris Ripley

strong than top that, on have can't would in mentioned, the I the of I'm talk we same are programs just I oftentimes the entertainment level sense really that are place and always for proposition specifics. – myriad that for very specifics And about the don't of still time. a program get combined, value greater prime is I reasons into the negotiation, viewing the XX are in these been as top our is say

it's making of DISH value just matter of RSNs. sure the the So true a recognizes that

Aaron Watts

well your you, can that cutting, With Chris. on year rating give thoughts Okay, could well as Be thoughts would your just up Thanks. more your have question month, mix. impact it's publicized the for to I promoted an or on curious getting as what and on more overall, this helpful? us pressure to added heavily be whether audience couple last could hear big streaming a and services several cord next picture if starting standpoint from you on business anything one

Chris Ripley

sports have streaming entrants. the will their Well, are – more local our all pivoted focused and to interesting on – in news. and there dynamic relevance is these streaming be local of are general reason a new are entertainment in diminished, we a because We different the of wars think continue the very in industry toward

So, sports of time and be as entertainment one the will increase oversupply. over by diminished the to news any continues value of value program

And in we over that where and toward coming we weighed so terms XX% of sports. with being quite pivoted of our really sports now trend positive that's think revenue a heavily it's from news

So well remind sports that, bet more view if indicate mentioned few it they could they and more to XX% bet got it. those people don't that, you you've on facts would as which say watch if XX% just a regularly I on watch betting, who of sports regularly on watch they get they who as

So X,XXX around our where a ones properties and that games in the actually the up provide have a increase we're huge that set over sports year the we engagement to tonnage, produce.

and beneficiary relative – on the general in over primary entertainment. increased of we that the a on a on see up what's especially sports those relative going So time basis going engagement, given value of we're properties basis

Aaron Watts

great. Okay, you. Thank

Operator

Instructions] from is Please Cahall ahead, Wells go hear next Steven Fargo. at [Operator open. line We'll your

Steven Cahall

at another on subscribers into I'm free I around cash think your only the first just half change question you in in look $X 'XX million total five footprint. of the DISH, flow per I DISH Thank of their backing to sub much. 'XX, RSNs, and guidance. on about that's Maybe Yeah. that share very when

So ballpark. sounds on you've about is starting the And that RSNs RSNs if in that the some their don't challenge of ad XXXX. cover to I'm just maybe that I revenue then in the all political the subscribers? maybe talked of political all separately of And their wondering things, RSN think – drive if part your side into

that lot you you And So those I meaningful a some where time had path? see next haven't think do you but networks are with on could them, you year? know revenue political kind of on of that

Chris Ripley

Sure.

in if will of we DISH base, than for standard don't So subscriber less the not there, you're RSNs big and the ballpark, on folks, RSNs – with flow for the are MVPDs, we – partially right most the you in the full basic to And the the fully they are in were folks to the spending. on on penetrated is MVPDs. with broadly they pretty way dots penetrated, which XX% in package our weren't we've and most connect political, a political then RSN our on started for who on broadcast

we for it's year. next a RSNs of coming but hot especially significant substantially in in are flow inventory. ad go since rated believe political where of the amount dollars We highly that from ad hard able amount increase to to the to quantify the we you, additional So in will dollars on give markets be we

certain we're advertising. then from some where perspective sports RSNs to be and hit also premiums, orders significant it taken starting we've an significant ideal of the see going has markets them just for is And for on, a places where because been is markets here, – legalized what one and the start turned tailwind at betting we've has are advertising betting sports in the big that to to RSNs

a hit MSG, you're portfolio RSN and going So the we're other you're attention we York just not those is to are what's in hit, and sell of benefiting. New to normally orders – those what if paying with it's pretty there healthy market, and on that they premiums – Yes, orders markets some seeing are where starting at to at. they're the

nice be to tailwind next a that's into going year. So

Steven Cahall

like percentage sports Maybe of of you And under your then betting, what new try sense on states new where what you this just the think do that helpful together rights to follow-ups networks? about we all overlap those, growth as us is of have have legalized long-term that some the put Thanks. could as quick sports we give reporting any cost structure? segment

Chris Ripley

of overlaps So, operationally. those market are right gone what legal – up is and now that handful sense our and that a are running core have there just with have actually a

a expense So But much, that think, growth states in, the single-digits the market one as are many just on going have more are impact. And states expect core on right much sort that also in them I there I for hand, the we side now, turn RSNs. overlaps on of how that's expense can going be bigger count literally, operational is not and we growth, on above legalized, operational. but of, or forward terms low to mid

Steven Cahall

Thank you.

Operator

We'll from next Riley B. Instructions] the Silver hear with [Operator FBR. line of Zach

Zach Silver

RSNs the from Okay, altitude, with channels? wondering would I your the bit, other besides the done RSN, MVPDs, wanted think dropped just the have at one factor DISH? you they you of I were how is taking guys of on and next they the follow-up thank deal to DISH a of with broadcast question. I that And negotiations to really round XXXX in and have for couple DISH just great, any I'm a end for didn't that, reasons a broadcast the programming just of guess

Chris Ripley

Sure.

is a better point as I to market think the relates coming negotiations a programming to always that's it relevant MVPDs. with more with position very

to then So extent deal be not will we there factor a that's relevant very by be by to have the going then. DISH something with done a that

Zach Silver

thank Great, very you much.

Operator

Company. Benchmark hear Dan with We'll from Instructions] Kurnos [Operator next The

Dan Kurnos

just that? bit you maybe just of all AVOD do there. programming on with announced all of you Ring you guess of the had on RSN, then And the it's just onto the – adding with sort or DTC smaller, of on of you that RSNs, of adding other Can it's are us that I you you Chris, update guys could programming about where programming a timing initiatives Honor then Thanks. just sort lot adding about were whether talking talked the know, don't lot SVOD to getting streaming. adjacency, M&A deeper a you're on if in are with there want little of the out more your deeper STIRR building There's now I you maybe Thanks. properties lot on but lot but into specifically and if from of an focused thoughts kind you a RSN. a more space sort kind get just perspective? or a really that it's a more out and of

Chris Ripley

So our we're on And ownership sorry sort Stadium, which less today. or multicast RSNs at channel than what's there post-cable about on that in increase sports of upgraded expensive to of to it network, supply cheaper our a sports. price will is – price, one content focuses the really

starting and from synergies acquisition, we synergies post upgrade today we is there the of plus to achieving announced will we lower we'll spoke content expect the which the mark from on So of start the what from of the our one-year the be an about. at be the When powered will cost. a $XXX outside and about pre some Stadium, gain by RSNs, at million be

North some investigating other and for coming will news in news we markets we're model think for that and experimentation every hold RSNs. the future to But is bigger of local local create dominant you excited the especially opportunities. picture, you sports do in generate will may be local local market will, the sports, Stadium is revenue to package of if from Star find additional local we'll we and strategies, provider local us the local it with whatever the We're the like local the savings country. if looks about a news business the in that offering cost be backdrop, sports will local poised And of news. bundle, to and can we're where combination particularly And to the also programming marketplace

of Temple the sports, local the that the exist content which only have ecosystem. you is If really exclusive in

free we're longer-term of things in doing that they right vision. thinking headed supplying now where growing we're so role heavily And a terms it's funnel nicely, That's local our it's on right will ad the our top attention is into as and ad-supported we're offerings add STIRR channels, offerings. that about all the it's of and top subscription-based that. current can weighs which quickly, be and on subscription-based bundle positioned in the play turning thinking into now on adding to supported, we now that that be that offering, STIRR of STIRR its what offering, the would free our ramping

Dan Kurnos

for color the thanks Great, it. Chris. Appreciate

Chris Ripley

Thank you.

Lucy Rutishauser

operator? so Okay,

Operator

Q&A And any closing for this to does our to over it additional for today. I'd you Rutishauser back turn remarks. Ms. conclude or like session

Lucy Rutishauser

you, Thank operator.

any So again, we us our joining has And much first if forward Thank usual, day please questions, company. call, diversified appreciate everyone - us this feel on you. free different this going anyone as morning, media to give a call.

Operator

your earnings do thank we today's participation. you conclude does for release all this gentlemen, and and Ladies

disconnect that rest of enjoy day. and we hope your you may lines your You now the

Sinclair Broadcast (SBGI) 6 Nov 192019 Q3 Earnings call transcript