Sinclair Reports Second Quarter 2023 Financial Results

Sinclair, Inc. (Nasdaq: SBGI), the "Company" or "Sinclair," today reported financial results for the three and six months ended June 30, 2023.

Second Quarter Highlights:

• Met or exceeded key financial metrics
• Repurchased approximately $30 million of debt
• Completed holding company reorganization

CEO Comment:

"Sinclair is continuing to see a solid start to 2023, meeting or beating guidance on all key financial metrics," said Chris Ripley, Sinclair's President & Chief Executive Officer. "As we continue our evolution from a traditional broadcast company to a diversified content and data distributor, we have finalized the process of reorganizing our company structure to increase transactional flexibility and transparency around the value of assets being held in each business unit, Sinclair Broadcast Group and its subsidiaries (`SBG') and Sinclair Ventures and its subsidiaries (`Ventures'). SBG holds the pure-play local media assets, while Ventures holds the company's non-local media assets. Our end goal is to create an even more effective company, designed to use the breadth of our assets to identify and accelerate growth."

Recent Company Developments:

• In June, the Company completed the share exchange effectuating a reorganization in which Sinclair, Inc. became the publicly-traded parent of SBG.

Content and Distribution:

• Year-to-date, Sinclair's newsrooms have won a total of 223 journalism awards, including 23 RTDNA Regional Edward R. Murrow awards, three National Headliner awards, and two Investigative Reporters and Editors (IRE) awards. Sinclair’s “Project Baltimore” also won the Society of Professional Journalists National Sigma Delta Chi Award for Investigative Reporting.
• In July, the Company announced a distribution agreement with Hulu to add carriage of Tennis Channel, T2, Comet and CHARGE! to Hulu’s service offerings beginning January of 2024.
• In June, the Company reached an agreement with Smith Entertainment Group (SEG), parent company of the Utah Jazz, to make KJZZ “The Home of the Utah Jazz,” enabling fans within the Jazz’s local broadcast market to watch all non-nationally televised exclusive Jazz games on the over-the-air, local TV station.
• Tennis Channel, recorded a 20% year-over-year growth in total viewers in the second quarter of 2023, despite Wimbledon being pushed back a week this year into the third quarter. The growth rate outpaced all other English-language sports networks.

Community:

• In July, the Company announced a partnership with the National Diaper Bank Network to launch Sinclair Cares: Summer Diaper Drive, a nationwide campaign to create awareness, provide assistance, and build a community to reduce diaper need in the US.
• Also in July, the Company announced that it has awarded scholarships to 15 university students as a part of its annual Diversity Scholarship program. Having provided more than $315,000 in tuition assistance since 2013, the annual Sinclair Broadcast Group Diversity Scholarship aims to invest in the future of the local media industry and help students from diverse backgrounds, who reflect Sinclair’s audiences nationwide, complete their education and pursue careers in local media journalism, digital storytelling, and marketing.

Investment Portfolio:

• As of June 30, 2023, the Company estimated the fair market value of Ventures' investment portfolio, which includes investments in real estate, private equity, and venture capital funds, as well as direct investments in companies, at approximately $1.2 billion, or approximately $20 per share.
• During the second quarter, Ventures made investments of approximately $6 million in its portfolio of investments and received distributions, including exit payments, of approximately $5 million.

NextGen Broadcasting (ATSC 3.0):

• As of the end of July, the Company launched NextGen Broadcast in 41 markets, including recent launches in South Bend, IN and Reno, NV. To date, NextGen Broadcast is available in 69% of the TV households in Sinclair's licensed footprint.

Financial Results:

The results below reflect the deconsolidation of the Local Sports segment comprised of the regional sports networks (RSNs), which are owned and operated by Diamond Sports Group ("DSG") and its direct and indirect subsidiaries, from the Company's financial statements and accounted for under equity method of accounting, effective March 1, 2022. As such, the quarter-to-date and year-to-date 2023 consolidated financial results do not include any results of operations of the Local Sports segment, while the consolidated financial results for the comparable year-to-date 2022 period include two months results of operations of the Local Sports segment.

Three Months Ended June 30, 2023 Consolidated Financial Results:

• Total revenues decreased 8% to $768 million versus $837 million in the prior year period. Media revenues also decreased 8% to $761 million versus $831 million in the prior year period.
• Total advertising revenues of $309 million decreased 16% versus $366 million in the prior year period. Core advertising revenues, which exclude political revenues, were down 3% in the second quarter to $303 million versus $312 million in the prior year period.
• Distribution revenues of $418 million decreased versus $430 million in the prior year period.
• Operating loss of $3 million, including non-recurring transaction and transition services, implementation, COVID, legal, and regulatory costs ("Adjustments") of $24 million, declined versus an operating income of $107 million in the prior year period, which included Adjustments of $13 million. Operating income, when excluding the Adjustments, was $21 million compared to an operating income, excluding the Adjustments, of $120 million in the prior year period.
• Net loss attributable to the Company was $89 million versus net loss of $11 million in the prior year period. Excluding Adjustments, the Company had net loss of $70 million.
• Adjusted EBITDA decreased 42% to $107 million from $183 million in the prior year period.
• Diluted loss per common share was $1.38 as compared to diluted loss per common share of $0.17 in the prior year period. On a diluted share basis, the impact of Adjustments was $(0.29), and the impact of Adjustments in the prior year period was $(0.14).

Six Months Ended June 30, 2023 Consolidated Financial Results:

• Total revenues decreased 27% to $1,541 million versus $2,125 million in the prior year period. Media revenues decreased 27% to $1,527 million versus $2,106 million in the prior year period. Excluding DSG, total revenues decreased 8% from $1,669 million in the prior year period and media revenues decreased 7% from $1,650 million in the prior year period.
• Total advertising revenues of $618 million decreased 16% versus $737 million in the prior year period. Excluding DSG, total advertising revenues decreased 11% from $693 million in the prior year period. Core advertising revenues, which excludes political revenues, of $609 million were down 9% versus $666 million in the prior year period. Excluding DSG, core advertising revenues decreased 2% from $622 million in the prior year period.
• Distribution revenues of $844 million decreased versus $1,303 million in the prior year period. Excluding DSG, distribution revenues decreased 3% from $870 million in the prior year period.
• Operating income of $18 million, including $30 million of Adjustments, declined versus operating income of $3,573 million in the prior year period, which included Adjustments of $19 million and a $3,357 million gain on asset dispositions relating to deconsolidating DSG's net liability ("Gain on Deconsolidation"). Operating income, when excluding the Adjustments and Gain on Deconsolidation, was $48 million compared to operating income of $235 million in the prior year period. Excluding DSG, operating income excluding the Adjustments and Gain on Deconsolidation decreased 81% from $237 million in the prior year period.
• Net income attributable to the Company was $96 million versus net income of $2,576 million in the prior year period. Excluding Adjustments, the Company had net income of $120 million. Net loss from DSG in the prior year period was $94 million.
• Adjusted EBITDA decreased 48% to $227 million from $437 million in the prior year period. Adjusted EBITDA from DSG in the first two months of 2022 was $54 million.
• Diluted earnings per common share was $1.43 as compared to diluted earnings per common share of $36.00 in the prior year period. On a diluted-per-share basis, the impact of Adjustments was $(0.36) and the impact of Adjustments and the Gain on Deconsolidation in the prior year period was $35.68.

Segment financial information is included in the following tables for the periods presented. The Local Media segment consists primarily of broadcast television stations, which the Company owns, operates or to which the Company provides services, and includes multicast networks and original content. The Local Media segment assets are owned and operated by SBG. The Tennis segment consists primarily of Tennis Channel, a cable network which includes coverage of many of tennis' top tournaments and original professional sport and tennis lifestyle shows; the Tennis Channel International streaming service; Tennis Channel Plus streaming service; T2 FAST, a 24-hours a day free ad-supported streaming television channel; and Tennis.com. Other includes non-broadcast digital and internet solutions, technical services, and other non-media investments. The assets of the Tennis segment and Other are owned and operated by Ventures. The highlights below include the divestiture of Ring of Honor (May 3, 2022) and Stadium (May 2, 2023).