Eleven years ago, Sinclair Broadcast Group investors cheered as then President/CEO David Smith announced that the media company was reinstating its quarterly dividend after a two-year hiatus prompted by the economic downturn of the late 2000s.
Over the last six years, the dividend has increased, moving from $0.18 to $0.20 and to $0.25. That’s the quarterly dividend Sinclair is sticking with for its latest shareholder reward, as the television industry pacesetter on NEXTGEN TV released Q4 and full-year 2022 earnings that didn’t clearly beat analysts’ average estimates.
The five analysts polled by Yahoo! Finance were hardly in consensus as to where Sinclair would finish the year.
Meanwhile, the Sinclair leader of today told an analyst on today’s earnings call that the FCC should take action to phase out ATSC 1.0-powered television broadcasts by a firm date — a big declaration given the voluntary rollout of ATSC 3.0 and NEXTGEN TV presently underway in the U.S.
In Q4, total revenue declined to $960 million from $1.48 billion. However, total operating expenses were slashed from $1.31 billion to $707 million, resulting in operating income of $265 million, rising from $165 million.
Put it all together, and Sinclair President/CEO Chris Ripley expressed pleasure with the results. “We entered 2023 financially strong,” he said on the company’s earnings call. With the troubled Diamond Sports Group now operating independently of Sinclair, that helps with investments in technology and content, something Ripley believes will be key focus areas for Sinclair in the year ahead.
And, Sinclair will do so on Q4 2022 net income of $55 million ($0.79 per share), swinging from a net loss of $89 million (-$1.18) in Q4 2021.
Analysts polled by Yahoo! Finance resulted in a consensus net revenue of $981.98 million, with the low estimate at $966 million. Sinclair’s own Q4 2022 revenue range as shared with the release of its third quarter results was $966 million-$988 million. While that was a miss, the consensus Q4 ’22 EPS came in at $0.42. However, the high estimate was $1.85, while the low estimate was for a loss, coming in at -$0.37.
Given that extreme differential, some investors may have stuck with that high estimate by selling shares of SBGI, which trades on the Nasdaq GlobalSelect market. Just 20 minutes into Wednesday’s Opening Bell, Sinclair shares were down 6.7% to $17.70.
While that’s up from $14.53 on December 28, 2022, a low last seen in 2013 when negating the 2020 COVID-19 impact on Wall Street, economic uncertainty in the months ahead remains a key C-Suite concern with respect to how 2023 will play out for profits.
Looking further at Q4 2022, adjusted EBITDA grew to $309 million from $234 million — one likely reason why SBGI was up pre-market on Wednesday. Distribution revenue came in at $415 million on a consolidated basis, dipping from $1.05 billion on poor comps due to the Diamond Sports Group separation. Advertising revenue was up to $503 million, from $383 million, however — and that’s largely thanks to political ad revenue.
On a full-year 2022 basis, adjusted EBITDA decreased to $944 million from $1.3 million. With the separation of Diamond Sports Group, a look at total revenues for FY 2022 compared to FY 2021 requires a focus on this measure.
What’s the pacing for Q1 2023? On the call, Sinclair shared that January and February were down low-single digits, as the Super Bowl LVII telecast aired on FOX; Sinclair has fewer FOX affiliates than CBS affiliates, which some may find surprising given the conservative tone Sinclair local station newscasts have taken across the U.S.
Pacing for March is down slightly higher, but the month “has not broken yet,” Sinclair notes.
The strongest ad categories in Q1 2023 include Automotive, Legal and Entertainment, while Sports Betting is relatively flat now that Ohio and Maryland rollouts seen in Q4 2021 have cycled through. And, the Services category continues to see weakness due to insurance advertising declines. This has been tracked by RBR+TVBR through its Media Monitors Spot Ten TV and Spot Ten Cable coverage, which indeed has seen a pullback from some companies including GEICO and limited activity from Allstate.
CFO Lucy Rutishauser said media revenues will decrease 6%-9% in Q1, with core advertising to be flat to down mid-single digit percent. “Mild macroeconomic weakness” is driving the decrease, she said. Thus, Distribution revenue will be much higher than Advertising revenue.
The $0.25 quarterly dividend is payable March 17 to shareholders of record on March 3.
SUNSET CALL FOR ATSC 1.0
On the Sinclair Q4 2022 earnings call, President/CEO Chris Ripley just suggested a “sunset date” for ATSC 1.0 be put in place, speeding up the “voluntary transition” and putting pressure on TV set manufacturers to make NEXTGEN TV more affordable and accessible in the U.S. “The FCC needs to do its part in advancing ATSC 3.0 and giving the consumer access to the true benefits this technology presents,” Ripley said.
Sinclair Broadcast Group’s CBS affiliates are presently not available to FUBO TV subscribers, as Paramount Global handles the retransmission consent agreements for all CBS affiliates on the vMVPD. On the earnings call, Sinclair President/CEO Chris Ripley said the impact on the company is minor, given the small imprint FUBO TV has nationally, but called on Congress to take steps to resolve the continued impasses seen on an annual basis between MVPDs and broadcast television station owners.
