Sinclair Broadcast Braces For Weaker Economy

Sinclair Broadcast Group reported sharp drops in revenue and profit for the first quarter that reflect the Hunt Valley-based company’s move to deconsolidate its struggling regional sports networks.

The broadcaster said it is bracing for a weaker economy that is expected to dampen its financial results this year, reports The Baltimore Sun.

Shares of Sinclair plunged 9% Wednesday to $16.97 each.

Sinclair President and CEO Chris Ripley said in the earnings announcement Wednesday that the company has seen a “solid start” to the fiscal year, meeting or beating guidance on key metrics.

“Nonetheless, we remain cautious for the full year on expectations for a weaker economy,” Ripley said. “As we continue our evolution from a traditional broadcast company to a diversified content and data distributor, we have begun the process of reorganizing our company structure.”

Chris Ripley

Sinclair, which is the nation’s largest owner of local television stations, said a month ago that it plans to reorganize its business and drop “Broadcast Group” from its name to become Sinclair Inc. A newly created holding company called Sinclair would become the publicly traded parent of Sinclair Broadcast and its subsidiaries, which include Diamond Sports Group, which owns regional sports networks and airs games for 14 MLB teams. Diamond Sports filed for bankruptcy protection in March, burdened by more than $8 billion in debt.

A newly created Sinclair Ventures subsidiary will hold non-broadcast assets, including Tennis Channel, Compulse, a digital advertising platform, real estate and venture capital.

“While we’re optimistic about the future prospects of our core broadcasting business and its continued transformation through investments in niche programming, cloud and NextGen broadcast, continued regulatory uncertainty is causing us to think differently about the allocation of capital,” Ripley said during a call with analysts Wednesday. “We intend to allocate more capital to growing, non-broadcast holdings.”

On Wednesday, the company reported income of $185 million, or $2.64 per share, compared with nearly $2.6 billion, or $35.84 per share, in the prior year period when it recorded a large gain related to deconsolidating Diamond Sports Group from its results in March 2022. Excluding adjustments for nonrecurring costs, the company reported net income of $189 million, or $2.71 per share.

Sinclair said revenue decreased 40% to $773 million in the three months ended March 31, compared with $1.3 billion in the first quarter of 2022, which includes two months of revenue from Diamond Sports Group. Excluding Diamond, revenues fell 7%.

Advertising sales fell 17% to $309 million, or a decrease of 6% removing Diamond from the results. Revenue that comes from distributing its networks and content was cut in half, to $426 million compared with $873 million with the Diamond networks included in the year-ago period.