After a corporate reorganization involving its regional sports networks, Sinclair Broadcast Group is on solid footing, even in the face of a potential recession, the company’s CEO told shareholders Thursday.
Sinclair will benefit from cutting-edge broadcast technology and expects record political ads, executives said. And they believe the company’s share price is significantly undervalued.
The Hunt Valley-based broadcaster held its annual meeting in person with attendance restrictions, citing continued safety concerns from the COVID-19 pandemic.
Here are some key takeaways:
Diamond Sports Group refinancing will enable live sports streaming
The company, through a corporate reorganization, has completed refinancing the debt of Diamond Sports Group, holder of local sports networks that Sinclair purchased for $10.6 billion in 2019. Diamond has been removed from Sinclair’s financial statements.
The company took the step after having to write off $4.2 billion of the value of the sports networks in the third quarter of 2020 after the pandemic decimated live sports programming. The restructuring will allow for the launch and ramp up of direct-to-consumer streaming of live sports, CEO Chris Ripley said Thursday. Diamond is negotiating for streaming rights to the teams it televises.
“Our commitment to the business and belief in its future remains,” Ripley said.
”Next Gen” TV is on its way
Industry groups expect the new Next Generation broadcast signal to reach more than 75% of U.S. households by the end of the year, “setting the stage for the monetization of the technology in years ahead,” Ripley said.
Industrywide testing is underway on expected benefits such as enhanced video and audio, precision GPS and targeted advertising. Sinclair has launched a “commercial datacasting” pilot, a program to provide targeted advertising and additional content to electric vehicle charging stations.
“We believe this pilot just scratches the surface of datacasting capabilities for Next Gen, as the technology can communicate with millions of endpoints without the signal strength or latency concerns ... of Wi-Fi signals,” Ripley said.
Tennis Channel is expanding
The Sinclair-owned Tennis Channel continues to expand both geographically and content-wise, Ripley said. And a new ad-supported channel, T2, has been added for free on Samsung’s streaming platform and on Samsung smart TVs and mobile devices.
Viewing through digital means has been growing for the sports channel, now in eight countries with more planned in the years ahead, Ripley said.
Sinclair’s core TV business is strong, thanks in part to anticipated political ads
The current year is shaping up to be a record midterm political advertising year, Ripley said.
“TV continues to be the medium of choice for political advertising, as it’s widely believed to be the most effective at reaching voters,” he said. “The strength in political is expected to ensure the success of ad revenues for the year, even if a slowdown due to inflation and recession fears does materialize.”
Sinclair’s share price is undervalued, the company believes
“We continue to believe our share price is significantly undervalued, and so have been proactive over the past six months repurchasing our shares,” Ripley said.
Since the beginning of 2019, Sinclair has repurchased almost 30 million shares, or about a third of total shares outstanding, he said.
Shares of Sinclair, which were trading down 20 cents at $22.65 each Thursday afternoon, soared to all-time high of $60.48 each in May 2019 on news of Sinclair’s purchase of the former Fox regional sports networks.
The sports networks struggled, however, because of the pandemic and cord-cutting, Ripley said.
But with the networks’ streaming plans and recent refinancing, Ripley said, “we think it has a bright future.”
