Q3 2019 Earnings Call

Automotive top 10 advertising categories that generated growth during the third quarter were services, which increased 3% travel and leisure increased 16% health care grew 3% and quick service restaurants were up 14% while increased spending from Jack in the box Pizza hut.

Del Taco and Mcdonalds.

Overall, we added 32, new advertisers, who spent more than $10000 during the third quarter, which totaled approximately $607000 and advertising revenue.

Notable new brands in the third quarter included now optics car care councils, Zwick, Chevy West Zone, and Floridian International Adjusters.

Turning to our ratings performance, our Univision television stations built upon their marketing leadership in July 2019.

Adults 18 to 49 and early local news our Univision television stations finished ahead of that Telemundo competitors in 14 of 17 markets, where we have head to head competition. Additionally, among adults 18 to 49, our early local newscasts are ranked number one or two against English and Spanish competitors and 10 markets are late local news are ranked number one or two again.

English and Spanish competitors in eight markets.

During a full week, our Univision andone must stations.

Find have come cumulative community of audience of 4 million persons two plus compare to Telemundo 3.2 million persons two plus we have 25% more viewers and Telemundo and our.

And our Univision television footprint.

During weekday prime time, when compared all comparing all stations, we had higher ratings and at least one of the big four networks and 10 markets. Among adults 18 to 49 and in 15 markets. Among adults 18 to 34.

The telecast for Univisions Premier who've been Twod Award show on July 18th was among the top 10 broadcast TV primetime programs for the night among adults 18 to 34, and 17 of our Univision and television markets regardless of language. Among other among adults 18 to 49 and 25 to 54. The show ranked among the top 10 in third.

Teen and 11 of our markets, respectively, regardless of language.

Turning to our audio division audio revenues were down 6% during the third quarter compared to the prior year local revenues were up 2% and national revenues were down 19% in the quarter.

Excluding political core radio revenues were down 5% in the third quarter.

There were two key areas that contributed to the decline.

In.

And our radio Division.

The first is Los Angeles, where we combined kilowatt why along with KFC and cases the to form.

A superstation, which based on Nielsen audio so simulcasts rules can can be combined into one set of call letters based on this change we saw a decline in national revenue with the change in format national agencies need to see results using six to nine months prior to purchase purchasing the station on a local bases, we have seen revenue improvement in each quarter of two.

2019, and positive pays starting in Q2 and continuing in Q3, we are pleased to announce endeavor Jose station continues to be a top ranking radio station in Los Angeles, a highly competitive market for the month of September ins and Hispanic adults 18 to 49 Kale why rank as a number two Spanish language radio station in the Metro.

During morning drive and the number one Spanish language radio station in afternoon Drive Jose also ranked as the number three Spanish language radio station in Prime among Hispanic adults 18 to 49 with this continued success, we expect to see improved results in the fourth quarter and 2020 with our Los Angeles Radio cluster. The other area that contributed to our national.

Sales decline was our radio network, our network nation wide ratings, which are released two times a year saw declines. These declines led to lower revenues for Q3, our affiliate stations along with our owned and operated faces haven't seen an increase in ratings that will be reflected in the spring release, we've delivered to the industry into the industry in late summer Besides the ratings increase.

We've also added a number of stations to our lineup that will help us strengthen the overall ratings of our audio network.

We recently presented our Entravision network audio portfolio at a series of high level meetings with the top national audio agencies in New York in advance of the 2020 network buying season, our presentation focused on our value proposition of unique coverage top syndicated personalities and our digital audio technology via audio engaged.

Services, our largest advertising category for audio was the only category saw an increase in spending in the third quarter improving by 5% over the prior year period. The increase in services came from increased spending by May 10 law firm freeway insurance specific gas and electric and Imogen I anticipate middle all other categories were down over.

Overall, our audio business added 28, new advertisers, who spent more than $10000 during the third quarter, which totaled approximately $541000 in advertising revenue notable new brands in the third quarter included core Sheedy law firm the JLL from DCH towed of Torrance and Bank of America.

Looking at our audio division ratings performance for summer 2019, among Spanish language radio stations Erosnow electrical other show is ranked number one and six of our six markets really source for summer.

Among Hispanics adults 18 to 49, including ties and number one in five markets among adult I spending adults 25 to 54 across our seven Ono stations Erosnow electrical out the show reached more than 563000, Hispanics 18 to 49.

Other Pope <unk> other high profile shows, including the venue Lucas and will show that appealing anchor our morning drive in mid day spots on US what was hit the network and on Jose in Los Angeles, and Riverside for Summer 2019, peeling ranked as a number one or two Spanish language midday show in five or six markets released among Hispanic adults 18 to 49.

And Hispanic adults 25 to 54, including ties as show. They had you Lucas wasn't was number one among Spanish language stations in five of out of our six I'll hand, you markets. Among Hispanic adults 18 to 49 and Hispanic adults 25 to 54.

Now, let's move over to our digital business for third quarter digital revenues were 17.6 million, which represents a decrease of 20, 121% versus the same period last year.

The decrease is due mostly to the shift to performance market to programmatic as kind of customers are looking for more transparency and control with that trend in mind, we are developing our programmatic demand solutions Medix, which is currently generating 2.1 million on a monthly basis and has been evolving consistently over the last few quarters, we expect to continue to see.

Double digit growth for this unit other digital business units also experienced double digit growth during the third quarter led by our programmatic unit with an 85% increase versus last quarter, followed by our audio and video units with a 27% increase over last quarter.

Our overarching digital strategy comprises four key components number one bolster the double digit programmatic growth with strategic integrated products. Our demand side platform Spadix is front and center of our marketing solutions or we are also strengthening scale and inventory.

Through our reach.

Stabilizing our performance solutions with expansion to untapped markets number three put in we put in place a season experienced improved line to management overseeing our lab Tam and United States operations, while helping foster growth in key markets, such as Mexico, and U.S. National sales.

Number four we are focused on client return on investment and creating value while strengthening gross margins. Our digital division continuously focuses on increasing gross margins currently a 44% gross margin versus 38% in the same period last year.

We decided to merge all Entravision digital operations into one business unit in the third quarter, we believe that that synergies between these digital groups present significant opportunities for growth and innovation. We're confident that the combined know how of our digital specialists will help create a united front that will boost our performance in 2020.

As I mentioned before the merger of our digital units as a step forward to a more consistent and efficiently align product offering.

I'm excited to say that we are already seen great results in one of our business units digital audio we've been offering our streams and podcast under audio engage brand since the beginning of 2019 and the outcome has been very positive revenue increased 41% when compared to Q3 of 2018 led by a 60% growth and programmatic results.

So even more encouraging when looking at year to date figures with a 55% increase in revenue and a 100% growth in programmatic deals are podcast consumption has also grown significantly when compared to the third quarter of 2018, reaching 2.7 million downloads, which represents a 600% increase when compared to last year.

We heard the industry loud and clear when it comes a digital audio needs. That's why we are developing new audio solutions to keep fostering this growth will share more about this business unit and new projects in the quarters to can come.

And connecting with our communities is at the core of Entravisions purpose as a company as a result of our local efforts. We've we distributed over 3500 stories and videos to millions of Latinos, including a 185 million video views throughout our various digital touch points. This represents a 60, 676% growth versus the into.

Third quarter.

Versus the previous quarter, and 113% growth versus prior year.

We also delivered 9.6 million audio streams to our fans, which represents a 16% growth versus prior year. This increased engagement will help us boost our unique value proposition for both consumers and clients in 2020 now turning to our fourth quarter Pacings is important and remember that we generated approximately 8.7 million.

ICL revenue in the prior years fourth quarter that said, our total television revenue is pacing minus 19% excluding political our TV business currently pacing minus four in the fourth quarter. Our audio business is currently pacing minus 12% in the fourth quarter, excluding political or audio business pacing minus 7%.

Digital revenues are currently pacing plus 7% in the fourth quarter compared to the prior year period.

In summary, our third quarter results were.

Largely driven by continued softness in our digital and radio businesses, while our TV results were flat over the prior year period, we continue to work in executing our strategy to further build on our unique audience reach and targeting capabilities, while proactively managing arc our costs.

Starting in the third quarter, we made several important management changes in our broadcast and digital business units. As a result of these management changes we are seen steady improvement in our broadcast and digital units in the fourth quarter and we expect this improvement to in King continue to strengthen in 2020.

I'll now turn the call over to Chris Young to take us through the numbers, Chris. Thank you Walter and good afternoon, everyone. As Walters discussed net revenue for the quarter was down 8% to 68.8 million compared to 74.6 million.

In the same quarter last year.

Operating expenses decreased 2% to 43.3 million and consolidated adjusted EBITDA decreased 19% to 9.1 million.

For the quarter revenues in our TV segment were flat at 36.4 million during the third quarter last year, we generated 1.5 main and political which did not return the shortfall was offset from an additional 1.5 million in spectrum usage rights revenue, which totaled 2.7 million during the quarter.

Retransmission consent revenue for the quarter was 8.8 million and was up 4% over the prior year period.

Radio net revenue for the quarter was down 6% to 14.8 million compared to 15.8 million in the same quarter of last year.

The decrease in our radio segment was primarily due to decrease in national advertising revenue related from World Cup slightly offset by an increase in local revenue.

Digital revenue for the quarter was down 21% to 17.6 million compared to 22.4 million in the same quarter last year. The decrease was primarily due to a growing trend of digital advertising moving over to programmatic platforms in recent months, both domestically and more recently in international markets.

Operating expenses decreased 2% to $43.3 million from 44.1 million in the prior year period.

The decrease was primarily due to a 4% decrease in our radio division and an 11% decrease at our digital division of rising from certain expense control measures. The company undertook in April of last year, partially offset by a 3% increase in operating expenses that are TV division arising primarily from an increase in fees due to networks related to retransmission consent degree.

Hints at Art English language TV stations.

Corporate expenses for the quarter were down 2% to 6.8 million compared to 6.9 million in the same quarter last year. The decrease was primarily due to a decrease in noncash stock based compensation.

Income tax expense was 5.9 million for the quarter, while cash taxes actually paid was $440000.

Earnings per share for the quarter were a negative 14 cents compared to two cents per share in same quarter of last year. This was primarily due to an impairment charge related to our digital goodwill excluding the impact of this onetime noncash charge EPS was two cents per share.

Net cash interest expense was 2.5 main for the quarter compared to 2.8 million in the same quarter last year cash capital expenditures for the quarter were 7.2 million compared to 6.6 million in the prior year period.

Excluding capital expenditure is expected to be reimbursed by the FCC, we anticipate that our capital expenditures will be approximately $17.5 million during the full year 2019.

Turning to our balance sheet as of September Thirtyth 2019, or total debt was 244 million in our trailing 12 month consolidated adjusted EBITDA was 50.7 million cash and marketable securities on the books was 156.9 million as of September 30.

[noise] net of 75 million of unrestricted cash notebooks or total leverage as defined in our 2017. The credit agreement was 3.3 times as of September Thirtyth.

Net of cash and marketable securities. Our total net leverage was 1.72 times. This concludes our formal remarks, Walter Jeff and I will now take your questions Jamie will turn it over to you prefer the Q.

Ladies and gentlemen at this time will begin the question and answer session.

Ask your question you May Press Star, then one or your Touchtone phones. If you are using a speaker phone we ask the please pick up or handset before passing the keys to ensure the best sound quality.

All your questions you May press star into once again that is starting in one to ask your question.

At this time, we'll pause momentarily to assemble the roster.

And our first question today comes from Michael Kupinski from Noble capital markets. Please go ahead with your question.

Thank you and thanks for taking the questions.

First of all in terms of the TV pacings for the fourth quarter I was wondering if you could give us a little bit more color on what you're seeing in core, particularly auto course, which is a big category for you. If you can just give us some thoughts on the categories.

Hi, Michael I'm auto for fourth quarter is pacing at a minus seven.

There has been some softness primarily arising from the the strike activity that recently got settled but that has had a negative impact on our fourth quarter business right now autos or minus seven.

Gotcha, and then in terms of.

What are your expectation for political in the fourth quarter because.

The thought is that there might you might get a little political in the fourth quarter, especially with the early our primary boats in California, and so forth. It was wondering if you can just give us some thoughts on political.

Well the political real political event for us in the fourth quarter is actually first quarter, it's going to be the California primaries and that's.

So because you had got such a big part of the constituency mailing their ballots in during the start advertising early and we still feel that December will be a pretty hot month for us as far the the California primaries are concerned. So we don't really have much per se on the books as we sit here today, but we do expect that the that amount could be much.

Cereal, who also have a primary or early on in Nevada that also could a yield some pretty interesting results and we're already starting to see that money trickle in as we speak.

Gotcha and at least.

Or at least your thoughts at least for now with the TV pacing down 19, you're not factoring in much political him to that guidance I suppose.

Yeah, that's just the pace and we've got no real political factored into that minus 19, Thats correct, Yeah, and we haven't okay. Michael we have not Oh, we're not forecasting any political dollars in Q4 as well, but we are seeing signs of political activity in in a you know in some of the states, where we operate certainly enough.

Data.

We'll be in early primary, California has moved up to March now, Texas as well in March so even though we don't have any oh, we don't have any significant revenue on the books, yet and political we <unk>, we expect to see some activity in December .

But again nothing forecasted.

Gotcha, and I know Walter you had in the past indicated that you'd like to see digital as a significant portion of the company in your recent stumble on the digital Ariad has that changed her mind about the prospect of investments in this area. What are your thoughts in terms of the growth of the business are you optimistic that you can turn that's it.

Around and and really start to see a lot of traction and in terms of.

Having a lot of cash there what are your thoughts in terms of where you might seek.

M&A opportunities.

Okay, you know we continue to be.

Positive and bullish about our digital businesses.

We have had some some missteps this year and but the but I believe strongly that we corrected I'm you know we made that whatever corrections, we had to make including management changes I'm certainly I'm pleased with the pace for Q4, I think we have a much better reporting.

Throughout our digital platform as it relates to you know weekly information monthly information.

The people that we have running our different units are particularly our sales operation. So I continue to be to believe that were on the right check as it relates to digital as you know as well as I or better you know I'm most of the here of the new AD dollars are all going into digital.

So that's where the growth is and that's where we expect to to continue our focus.

Developing products, which are which are our call say special or particular to the to the Latino market is something that we also continue to work on I'm using our expertise in in technology around digital and transferring that expertise to to the U.S. via the Latino market is something that I said that over that I'm continuing to to talk to our team.

About every day on as it relates to M&A activity I mean.

You know.

We we I would say, we probably look at it a M&A opportunities you know with that with an eye on television and digital.

Maybe first and then you know we look at radio opportunities a you know second or third I mean I'm.

Certainly a univision television opportunities would be something that we're interested in beyond that I don't see us moving into you know general market I'm, not sitting out and certainly not the way or because of the fact that.

You know general market is continuing to consolidate their already you know two or three major consolidator. So.

And then digital we're always looking at digital products, we've got two or three we're looking at right now we want to make sure that they.

They are not only a cultural fit but a strategic fit and I'm certainly much more I'll call. It Oh. So we are so much more assertive about looking at digital digital products now than we have our digital business unit well organized.

And I, probably have a question you talked a little bit about the ratings. So the stations I was wondering the ratings for Univision network overall has that stabilized and are you seeing at least some stabilization of the rating slide for the did not work itself.

Yeah. We are we're starting to see a improvement in in Univision rate in ratings I mean, we look at the you know certainly network, but we pay more attention to our to our markets and we're seeing improvement in our markets in terms of the ratings performance. So that's a that gives us. Some you know confidence that Univision is is on the right track here we knew.

With that they would where they bounce back they always have they been the leader in the Spanish language programming for 50 years, So and you know occasionally they've had some some setbacks, but but we believe there for Dave or regained their focus you know they're doing something interesting there, they're there [noise] retooling old classic Nobel loves it.

Were huge hugely popular you know 2030 years ago, and their updating them and making them a shorter or in terms of the chapters and a more more.

I'll call it more in touch with today's audience, we've seen increases and just <expletive> mentioned a few we've seen increases in there in 'em Univision primetime ratings and in San Diego, Washington, D.C., Tampa, Denver in Las Vegas, and this increased rating in the 10 P.M. time slot certainly has had a positive.

Packed Arnold on our local loop local late news offering.

And I'm sorry, do you have one more question you indicated earlier that in earlier calls that you were some of your markets were being affected by especially your border markets being affected by the economies and and maybe some of the immigration issues that you were that that we were seeing I'm out of Washington are there.

Those markets stabilize that started to come back or are they still software.

No. They they've they've come back you know I say their led led by a by a San Diego a in particular is had a.

You know a great Oh performance in the past few quarters and even earlier El Centro is doing well El Paso is is performing well as a it despite the tragedy of Oh.

That occurred there in in the summer [noise], but it is bounce back and is on track. We've got an excellent manager there and you know Paso, so that certainly.

So perform overall performance of the of the <unk> of our media cluster, we have seen some softness in macallan with our television and radio business, but we were doing some things to strengthen that in and.

Providing more support to the management team down there and obviously given that more attention. We do want to turn that market around it's very important market for us. It's one of our largest media markets. So.

So we certainly want to.

Make sure that is performing it at the at the highest level.

Okay. Thanks, that's all I have okay. Thank you thanks Michael.

Once again, if he would like to ask a question. Please press star and then one so it's all your questions you May press star into.

And ladies and gentlemen at this time and not showing additional questions I'd like to turn the conference call back over to management for closing remarks.

So thank you Jamie and thank you. Thank you everyone for participating in our third quarter earnings.

Call a we look forward to speak into all of you in the new year and report our fourth quarter results. It for 2019.

And as well as our as our pacings for for Q1 of 2020.

And you also are your results total total 2019 results.

Well thank you.

Boxing.

Ladies and gentlemen that does conclude today's conference call would do thank you for joining.

You may now disconnect your lines.