Sinclair NASDAQ: SBGI reported higher second-quarter revenue and adjusted EBITDA as early political advertising demand, distribution revenue growth and expense discipline offset softer core advertising.
Total revenue for the second quarter was $840 million, up 7% from a year earlier, while adjusted EBITDA rose 45% to $149 million, President and Chief Executive Officer Chris Ripley said. Political advertising revenue reached $59 million, which was 9% above the comparable quarter in the 2022 midterm cycle.
Ripley said the company’s station footprint in competitive political markets, along with its broadcast, connected-TV, digital and podcast offerings, positioned Sinclair to benefit as election spending builds through the year. The company also repaid or retired about $320 million of debt during the quarter, with deleveraging remaining its top priority.
Political outlook rises as core advertising guidance resets
Sinclair raised its full-year political advertising revenue forecast to at least $375 million, from its previous outlook of at least $333 million. Chief Operating Officer and President of Local Media Rob Weisbord said Sinclair operates in all 10 states projected to receive the highest levels of political advertising spending, including states with competitive Senate, gubernatorial and House races.
“Political spending is always back-end loaded towards the weeks immediately preceding election day,” Weisbord said, adding that candidates, parties and issue advertisers have begun reserving inventory earlier in the cycle.
During the question-and-answer session, Ripley said the company’s platform is largely unchanged from four years ago and attributed the higher political outlook primarily to increased campaign fundraising. He said total fundraising in the current cycle could approach 2024 presidential-election levels.
At the same time, Sinclair reduced its outlook for core advertising revenue. Total company core advertising revenue is now expected to be between $1.22 billion and $1.28 billion, while Local Media core advertising is expected to range from $1.04 billion to $1.09 billion. The revision represents a $40 million reduction at the midpoint of the company’s previous ranges.
Executive Vice President and Chief Financial Officer Narinder Sahai said the updated view reflects expected political advertising crowd-out in the second half as well as current demand trends, without assuming improvement by year-end. Core advertising declined 3% in the second quarter. Sahai cited political inventory crowd-out, advertiser caution amid fuel and tariff volatility, and cost inflation affecting some advertiser budgets.
Weisbord said automotive advertising was flat year over year, while sports betting and legal categories helped drive quarterly results. Services and medical were among the weaker major advertising categories.
Adjusted EBITDA guidance increases
Despite the more cautious core advertising outlook, Sinclair raised its full-year adjusted EBITDA guidance. Total company adjusted EBITDA is now expected to be between $730 million and $760 million, while Local Media adjusted EBITDA is projected at $710 million to $740 million.
Sahai said the midpoint of adjusted EBITDA guidance increased by $25 million. The higher political outlook contributed to the increase, although it was partially offset by lower core advertising expectations and the transition of Sinclair’s St. Louis ABC affiliation at the end of August. Sahai said first-half outperformance and expense management accounted for the remaining improvement.
Sinclair maintained its total company revenue forecast of $3.4 billion to $3.54 billion and Local Media revenue guidance of $3 billion to $3.12 billion. Distribution revenue guidance also was unchanged, at $1.72 billion to $1.79 billion for the total company.
Second-quarter distribution revenue rose 2%, supported by moderating subscriber churn and partner-station buy-ins completed over the past year, Sahai said. Local Media revenue increased 8% to $731 million, and Local Media adjusted EBITDA climbed 51% to $149 million.
Sports and Tennis Channel results
Sinclair pointed to the FIFA World Cup on Fox as an example of broadcast television’s live-sports reach and advertising potential. Weisbord said 128.4 million Americans watched some part of the tournament across Fox, FS1 and FS2, while the final drew 66.4 million viewers, the largest U.S. audience for a non-Super Bowl sports event in more than 30 years.
The company sold World Cup campaigns across broadcast, streaming, digital, podcasts and live activations. Weisbord said Sinclair plans to build on that approach as college football and the NFL return in the third quarter.
Sinclair’s Tennis segment generated $70 million of revenue, compared with $68 million in the prior-year quarter. Advertising revenue increased 8%, aided by ratings growth and direct-to-consumer momentum, while distribution revenue rose 2%.
However, Tennis segment adjusted EBITDA declined to $8 million from $13 million a year earlier, reflecting higher programming and production costs, including investments in rights and the direct-to-consumer platform.
Debt reduction, regulatory outlook and M&A
At quarter-end, Sinclair had about $4.1 billion of total debt and $604 million of consolidated cash and cash equivalents, including $489 million at Ventures. Total liquidity, including undrawn revolver and accounts-receivable facility capacity, was approximately $1.4 billion.
In July, after the quarter ended, Sinclair repurchased and retired an additional $25 million face amount of its B7 term loan at a discount and repaid and terminated the remaining B3 term loan balance. Sahai said the company’s nearest material debt maturity, excluding its accounts-receivable facility, remains December 2029.
Ripley also discussed an anticipated Federal Communications Commission vote on removing the national television ownership cap. He said the company expected the action to reduce regulatory risk for larger broadcast transactions and could encourage potential counterparties to pursue deals. Sinclair intends to continue pursuing smaller market-by-market optimization opportunities, including swaps and station combinations, while increasing efforts around larger-scale consolidation, he said.
Separately, Ripley said Sinclair sees potential value in low-band spectrum and is evaluating possibilities including auctions, negotiated sales and leasing arrangements. He said broader deployment of ATSC 3.0 and a sunset of ATSC 1.0 would be important to creating additional spectrum capacity for programming and datacasting uses.
About Sinclair (NASDAQ:SBGI)
Sinclair Broadcast Group, Inc NASDAQ: SBGI is a media and entertainment company headquartered in Hunt Valley, Maryland. Founded in 1971 as a single UHF television station operator, Sinclair has grown through strategic acquisitions and organic expansion to become one of the largest owners of local television stations in the United States. Over its history, the company has pursued a diversified portfolio that includes both traditional broadcast assets and newer digital platforms.
At its core, Sinclair operates over 190 television stations affiliated with the major national broadcast networks, including ABC, CBS, NBC, Fox, The CW and MyNetworkTV.
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