Q4 2019 Earnings Call

Now I'm turning to our financial performance revenues decreased 14% to 70.8 million in the fourth quarter Consolidated operating expenses were down 1% and Consolidated adjusted was 11.1 million compared to twenty point nine million last year or in 2019 for the year 2018 excuse for the year total revenues decreased by 8% to 273.6 million compared to two hundred ninety-seven point eight million in the prior-year Consolidated operating expenses for the year. We're down to 2% off solid just decreased 24% to 41.2 million turning to our television segment television revenues in the fourth quarter were down 19% to 36.9 million month compared to the prior-year. Primarily due to the absence of approximately seven billion dollars and non-recurring political Revenue in the fourth quarter 2018 midterm election cycle.

National advertising Revenue was down.

39% while local Revenue was down 6% on a core basis fourth-quarter television advertising Revenue, excluding political was down 7% during the quarter with Nashville and down 11% and local down 4% fourth-quarter retransmission revenues were up 1% to 8.8 million during the quarter compared to the prior-year. While multicast Revenue was up 16% of 1.4 million compared to the prior-year period during the fourth quarter both AT&T and Charter to reach has Mission consent agreements will fight a lot more finalized for our Univision Spanish language television box, and we negotiated new long-term retransmission agreements for English language affiliates with Frontier and Charter Spectrum for the year television revenues declined by 2% in 2019 compared to 2018 249.7 million due primarily to the absence of 9.8 million and political partially offset by approximately 7.9 million and one time Spectrum usage rights Revenue recorded wage.

2019 total

New transmission revenue for the improved by 1% to 35.5 million in 2019 while total Spectrum usage rights usage rights Revenue which includes a non-recurring contract law of approximately 7.9 million was thirteen Point 1 million for the year. Total television. Advertising revenues were down 12% in 2019 to 101.2 million month National was down 19% while local advertising was down 6% on a core basis 2019 television advertising revenue for the year, excluding political was down 4% with Nash down 3% and local down 5% in the fourth quarter Automotive. Our largest advertising category was down 7% for a television segment and represents a representative approx 30% of our national television advertising Revenue in the quarter services are second largest category was flat in the quarter while grocery stores and Telecom were up 6% and 195% respectively. Yep.

Oh, we added 33 new advertisers.

Spent more than $10,000 during the fourth quarter, which total approximately $918,000 in advertising Revenue during the quarter our local news teams continue to shine by winning an additional 1199 in our Rio Grande Valley operation and two in El Paso bringing the total number of Emmys for introvision news in 2019, 2:55 returning to our ratings performance are Univision television box built upon their Market leadership in two thousand in November 2019 for adults 18-49 an early local news our Univision television stations finished ahead of their Telemundo competitor in thirteen of seventeen thousand it's where we have head-to-head competition plus two ties during a full week our universe and we must television stations combined have a cumulative audience of 4.1 million persons two plus bath in our markets compared to telemundo's 3.3 million persons two plus on a weekly basis. We have twenty-four percent more viewers than the than Telemundo in our footprint.

Telecast for univision's Latin Grammy awards show on November 14th was among the top ten broadcast TV Prime Time programs for the night among adults 18-49 in 15 markets regardless of language among adults, 18-34 and 25 to 54 the show ranked among the top ten in fourteen markets again, regardless of language turning over to our audio division audio revenues wage seventy 17% during the fourth quarter compared to the prior-year local revenues were down 9% while National revenues were down 29% in the quarter quarter radio revenues, excluding approximately 1.6 in political in the same quarter. We're down 9% in the fourth quarter for the year audio revenues were down 14% in 2019, 255 million compared to sixty three point nine million in the prior local revenues were down 5% while National revenues were down 27% over the prior year. Kaur radio revenue for the year, excluding approximately 200.1 million in political. Yep.

1.9 million in World Cup

Avenue in 2018 was down 9% in 2019.

In December tenth revision entered into a new two-year affiliation agreement with Oswald Adidas for his hit show and show the irrational electrical aati to be carried in 15 and Asian markets. Also and tradition has extended its programming and advertising representation agreement with Eddie Piolin Sotelo and is hit midday program and show de Piolin Killian's contract extension will run through December 2020 and is broadcast in 13 of our markets Viva debuted on in Los Angeles on December 16th. 2019 is the only 24-hour Cumbia station in the market and and the response is exciting Latin music dance format has been outstanding individuals live coverage of the NFL expanded in Q4 to include both a Sunday night and Monday Night Football games. All Paul speaks all postseason games the Pro Bowl and culminated with an exciting Super Bowl 54 live from Miami, Florida in February tenth revision are at a total of birth.

seven games this 2019

Doesn't season NFL rights extend through 2020-21 season including the Super Bowl 55 live from Tampa, Florida on February 7th 2021 in December. We took it into an agreement with cats media to represent all of our radio properties on a national basis starting this past January. We expect this change in strategy to result in a significant decrease in expanse in our audio built in 2020. It is also our opinion that cats have better visibility into the national radio business and this will lead to better National Audio Revenue audio Revenue performance in the club to come we will continue to operate our Network radio sales organization. We saw an improvement in Q4 which performed 11 points better than Q through he also saw a year-over-year increase of 4% of audience in Primetime 6 a.m. To 7 p.m. Monday through Friday and adults eighteen to thirty-four. We are well-positioned for improved performance in 2024 our network audio business in early.

2019 we combined KY.

FM FM in Los Angeles to create a super station under the successful Jose format. We are pleased to report that our Hostess station is steadily built this audience closing the year with great results for fall 2019 a spanish-language radio stations in the Los Angeles metro klyy ranked number two in AM Drive number one and p.m. Drive and number three during Monday through Friday 6 a.m. To 7 P Primetime listing our wage among spanning adults 18-49 services are largest advertising category for audio improved to spend with our audio platform by 12% over the prior-year. The increase in Services came from increased spending eighteen Law Firm intercose Insurance, the jlf firm and California Department of Public Health. The media category was up 20% due to an increase spending by Cox Communications all other categories down including Auto which was down 22%

Looking at our audio division ratings performance for fall 2019 among Spanish language radio stations in afternoon Drive electrical at the show is ranked. Number one. In fact about 15 markets including Los Angeles in adults eighteen to Forty Nine and number one in eleven markets among Hispanic adults 25-54 across r1500 stations the electrical Arthur's reach more than 760,000 Hispanics 18 to 49 in the in the 18 18 to 49 in the fall survey.

Now, let's move over to her over to provision digits.

For the fourth quarter digital revenues increased by 1% to twenty million dollars compared to nineteen point eight million in the prior year. Our operating cash flow from our digital unit increased to one point six million in the quarter month for the year digital revenues declined by 15% over 2018 68.9 million during the past earnings calls. I have addressed the changes in the digital industry particularly the trans concerning programmatic birth, which now represents the primary method of buying digital media in the United States with the advanced advanced Advent of these new ad Tech Trends and programmatic buying it's clear that advertising on Thursday is going to continue to evolve at a rapid place and semantics are proprietary platform is entrance to superb technology to compete in this Marketplace cymatics is transparent Mobile Media platforms connects to International mobile ad exchanges and offers real-time bidding for ad space cymatics can easily plug and play with any new external Partners in the platform has been working with agencies. Yep.

Rhett clients across the globe

Advertising now accounts for almost 75% of all us digital ad spending somatic is a state-of-the-art DSP technology that provides a advertisers unique tools to achieve their goals. These goals can be aligned with the three pillars of Excellence performance transparency and Roi the cymatics DSP excels and all three criteria for performance campaigns Hispanics DSP provides best-in-class features to help clients with performance campaigns, like mobile app promotion platform also measurable measurable results from post app installs store visits and sales.

Transparency on the other hand is what drives every product decision asthmatics. We give our clients full visibility over more than 5 million ads that run every month advertisers and agencies have access to state-of-the-art interface where they can see a detailed account of ads for Matt's mobile devices phone models types of connections and much more the system also details all optimization criteria in Iraq and how algorithms are optimizing the client's budget. Roi is an is of utmost importance to keep our clients and track to reach their goals are algorithms are able to achieve campaign key performance indicators more accurately a full-scale. Thanks to our data science teams when it comes to delivering Roi the semantics tsp is one of the strongest tools in the industry the Spanish DSP was built with one idea in mind to deliver a value for clients that's with our platform different from the rest. The technology is a hundred percent cost-per-action optimize which allows clients to measure and adjust your strategy to get the desired results faster on top of that we have added, Mass.

Gail Gathering the high

Best quality Publishers supporting all programmatic trading models available including cost-per-click cost-per-action cost per view and many more are semantics platform has grown steadily since our acquisition generation approximately six billion dollars in Revenue in 2017 11 million dollars in 2018 and $22 in 2019. Furthermore is expanding roster of sophisticated customers such as an American Express American Airlines Samsung Audi and BMW Europe.

Causes us to be excited and confident about rolling out the Statics mobile more proactively in the United States in 2020. In addition to strong Revenue. 8019 cymatics is recognized by the industry and its peers into including the IAB gold standard, which is a prestigious certificate certification process created to reduce a Draught improve the digital advertising experience increased brand safety cymatics is mobile-first DSP was also added to the global top 20 traffic index in 2019 by kochava and was recognized specifically for its excellent high-value wage position and long-term retention scoring in a and traffic quality and ranking number two in the Contra index in the traffic quality category these recognitions follow on the heels of the Statics DSP wage being selected by analytics Insight magazine as one of the top machine learning companies in 2018 and reflect the efforts of the schematics and Headway teams were built a leading Global first DSP with constant Focus wage.

Improvement and innovation

In short while 2019 was a year of transition for a digital division. We are excited about our prospects for our digital division then by semantics in 2020 with the streamlined cost structure and A Renewed focus on driving both new growth and profitability. We look forward to reporting significant progress in our digital unit in the quarters to come turning out to our pacing is important to remember that we generated approximately 3.9 a non-recurring spectrum usage rights in the prior Year's first quarter with that said our total TV revenues pacing plus plus 6% all in for the first, excluding the three point nine point nine million in non-recurring Spectrum rights revenue from the prior year. Our television business is currently pacing plus 21% in the first quarter bath and political Revenue in the current year and non-recurring Spectrum Revenue in the prior-year. Our court TV. Advertising is pacing minus 1% Our audio business is currently pacing plus 4% in the first quarter excluding Thursday.

This is pacing minus 5% looking beyond the revenue Pace. It is important to note that as part of our 2020.

Budget process we have removed approximately eight million dollars in annual costs from our audio business which should significantly enhance the cash flow profile for audio division in 2020 digital offer. You are currently pacing plus 3% in the first quarter compared to the prior-year.

In summary. Our fourth-quarter results were larger largely driven by continued softness in our television and Audry units partially due to non-recurring non-returning political revenue on our digital offer results were greatly improved over the prior year. We continue to work on executing our strategy to further build our unique audience reach and targeting capabilities while proactively managing our costs Edge execute our multi-platform strategy and strategically invested are content and distribution assets. We remain committed to maximizing our performance and enhancing our cash flows to the benefit of our shareholders. Thanks in part to talk to a strong political pacing in in the first quarter. We're off to a good start in 2020 and we remain highly enthusiastic about the 2020 political year. Our media assets are well positioned across Key System States including California, Florida, Colorado, Nevada, New Mexico and Virginia at a time when the Latino population continues to grow a number and most importantly and influence we continue to anticipate wage.

impressive political Revenue increases

Versus 2016 and look forward to reporting those results during 2020. Well now turn the call over to Chris to go over the numbers. Thank you Walter and good afternoon. Everyone Walter is discuss revenue for the quarter was down 14% at 17.8 million compared to last year operating expenses decreased 1% of 44.2 million Consolidated adjusted ebitda decreased 47% to 11.1 million for the year. Net revenue was down 8% to 273.6 million compared to two hundred ninety-seven point eight million. We generated in 2018 operating expenses decreased 2% 173.4 million and Consolidated adjusted ebitda decreased 24% to 41.2 million.

For our TV division revenues in the fourth quarter declined 19% to thirty six point nine million primarily due to the absence of approximately 7 million and political Revenue in the prior-year. Which did not return excluding political Court T ad Revenue was down 7% for the quarter retransmission-consent revenue for the quarter was 8.7 million and was up 1% over the prior year. Radio network was down 17% to 13.9 million compared to sixteen point eight million in the same quarter of last year the decrease in a radio segment was primarily due to decreases in both national and local advertising t or radio Revenue excluding approximately 1.6 million in political Revenue in the same quarter of last year was down 9% in the fourth quarter digital net revenue for the quarter ended up 1% to twenty million compared to nineteen point eight million in the same quarter of last year. The Improvement was primarily due to growth achieved by our core programmatic Platforms cymatics in our International markets operating expenses. Dikhao.

1% of 44.2 million

Three month period ended December 31st from forty four point six million in the prior year. The decrease was primarily due to a 9% decrease in our digital expense slightly offset by 3% wage increase at our radio division arising from an increase in Severance costs corporate expenses for the quarter up 2% to 7.9 million compared to seven point seven million in the same quarter of last month. The increase was primarily due to an increase in legal expense partially offset by a decrease in non-cash stock-based compensation expense.

Income tax expense was actually a benefit of 1.1 million for the quarter. What cash taxes paid was $523,000 or earnings per share for the quarter were $0.09 compared to eight cents per share with the same quarter last year that cash interest expense was 2.2 million for the quarter compared to three million in the same quarter of last year cash Capital expenditures for the quarter were four point 1 million compared to four point seven months same quarter last year Capital expenditures for the year 25.3 million vs. 17 million and 2018 is unusually high capex and 2019 is attributable to three primary factor wage. First of of approximately 10.3 million second reimbursable capex of approximately 6.7 million related to the FCC repack and third capex relating of a one-off project involving the centralization and optimization of our TV operations, which total 8.2 million during 2019. We anticipate that our capex will go back to a normalized level of between wage.

And 9 million for the full year.

Turning to our balance sheet as of 12:31 2019. Our total debt was 218 million and our trailing-twelve-month Consolidated adjusted ebitda was 41.2 million cash and marketable securities on the book was 124.89 as of twelve Thirty One nineteen seventy-five million of unrestricted cash. The books are total leverage as defined in our 2017 credit agreement was 3.5 times as of twelve Thirty One nineteen now the cash and marketable securities. Our total net leverage was 2.27 times. This concludes our formal remarks Walter Jeff and I will now be happy to take your questions. I lie will send it back over to you.

We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys to assuage your question. You can press * then two and our first question today comes from Michael Koontz key with Noble Capital markets.

Thank you for taking the question first. Did you do about a million dollars in television political in the fourth quarter? Is that the right number? No, no, no political was about two hundred thousand dead. But okay, perfect. Okay, and can you talk about the amount of political that was booked so far in the first quarter?

We have a approximately 4.6 billion of political on the books for q1 for television and about $790,000.00 dollars which we also include as part of our political number and for radio, we've got about $638,000 booked for q1 and political and about $364,000 in census wage, which has I also included and just remind me. I miss this. You said that the World Cup contributed what one point nine million million 1003 is about 1.9 million in in in Revenue write a 20 and then 2018-2018. Right? And then in terms of the ratings and radio have have they kind of stabilized in a couple of positive books at this point or what. What are you seeing and where are you seeing the most impact from on your radio side?

Well, the the the yeah, the ratings have is certainly a stabilized. I mean, we're we're we're the market that we pay the most attention to just because of its size is Los Angeles and we've seen tremendous tremendous. Yeah plus is tremendous Improvement in in Los Angeles. We we you know, we Consolidated off our signals in Los Angeles over one format Jose that's proven to be a very, you know, a very good decision our talent continues to format that, you know at the highest level which is our Prime top or afternoon Drive show wage in Los Angeles and and other other 15 markets or 14 markets.

Is you know number one?

And I think it's number one in in ten of the of the other of the remaining markets. So we're really pleased with the with the progress of that show is making and then continues to make and then our our annual Lucas, which is our morning show among Spanish language radio shows is number two in in practically every month in in when we compare it with the other spanish-language radio stations in the market and then Piolin which is our midday show is number 4 Dead Again Spanish language radio stations in Los Angeles. And again, you know, the peeling show is I think in ten of our markets that's number one and it's and it's time. Thursday. We're we're pleased about the a lot of the of the improvements. We made it we made in programming in 2019. As I said earlier. We we taken about eight million dollars out of birth.

cost structure for the unit and we

That's going to be certainly that's going to contribute greatly to increase increase cash flow in the business. Plus we also as part of that wage reduction in in in expense. We we adjusted our strategy around our or our national sales effort and we've engaged with them and and they will be there managing all of our our national radio sales effort. Not only do we believe it's not know not only will this result in in a sales, you know, sales and expense savings, but also more importantly we believe that we're going to see increased Revenue in our radio business or audio business over the next 4 quarters Michael. Thanks for the offer mentioned that on a court case basis for the core core performance basis. We did improve each quarter of the of the year as our ratings did wage.

Gained some strength, you know, you had a legal issue with one of your stations.

I think it was performance royalties. Can you get an update on that?

Well, the the the, you know, it's a matter of this being litigated and

That's all I'll say. It's been it's in litigation and but regardless of it's it's it's it's non-material. Yeah, but regardless of the outcome, we're not we're not expecting any scenario the material to our operations and you have insurance for that basically is what I think right. That's correct. Okay, and then just in terms of wage, um, the recent ownership changes that Univision, can you give us any thoughts about that how that might impact you at all?

Well, you know just like a brief comment, maybe Grace or other comments to make but you know, it's too early. We don't know much about them about the new leadership a little certainly learn more as time goes on and probably meet with them. But look at I think it's it's probably a positive step in the right direction here for Univision wage depend on them for for their programming. And so anything that that will improve we believe any step that will improve that that programming delivery think is is good so more to come.

Y'all get back.

The cube or let others ask questions. Thank you. Thanks, Michael.

Again, if you have a question, please press * then 1 our next question comes from Gordon Hodge with tracker research. Good afternoon. I just had a quick question just to clarify the 8 million of expense to come out of the audio cost structure was that actually realized last year or is that I I assume that's more of a run-rate given given the changes with cats or shifting two cats is that oh no majority of that eight million dollars of cost reduction is a result of programming contracts that we've negotiated or renegotiated. Oh great. Okay. Do you realize realize then? Yeah. Yeah. Oh, okay, excellent. And so just thinking about the the shift to cats. So the way that would work is you'll pay them a commission. Basically, that's right and dead.

and it in the mean in in and then have you

I presume there would be you know, your national sales force would essentially either be reallocated somewhere else or disappears that that's correct. Yeah, I got it home. Okay, so they're so more more expense probably coming out going full. Well that that million that I referred to in in expense expense reduction is dead is includes the includes that okay, you guys have some of that in there, right? Okay, perfect. Got it. That's what I just wanted to clarify and then took anyway, um, you know, it sounds encouraging the the pacing sound it certainly sounded encouraging even even you know down one with TV on a core base is still sounded pretty good down there in that number much of an increase on the retran side. It wasn't significant. You know, it's just advertising just add bath.

Okay, and then just as as you're bored.

Gets together and thinks about the dividend which I know you approved for March and then thinks about Buybacks in other ways to to play capital in what has become a very uncertain time. I'm just wondering what whether you you know, sort of what are the Dynamics that you think about in in terms of, you know, having cash as sort of a safety, you know cushion if things if you know all hell breaks loose or or vice versa are you cuz you have plenty of cash or or you know, just sort of how do you think about the balance things? And how much do you have left on the buyback that that you could execute if you wanted I'll just comment briefly on the on the dividends. I don't remember paying, you know as it is and we certainly feel yeah. It's a great job that's for sure actually field and you know, just to kind of add to your comment about you know, how we see the future. We we're we're confident wage.

The Year, we're off to a really good start.

First quarter, we've made a number of changes throughout 2019 not only in our Media Group or broadcast business but also on our digital business and we continue to fine-tune our management team. We just in the process of of of adding New Management talent and in in McAllen, Texas, which is one of our most important Tino markets, so we're certainly pleased with what we've done them done a lot of work by many people in terms of getting that operation to operate it. It's at its Optimum capability. So again, you know pleased with the dog all the work we've done it was certainly difficult but we're through it and we'll continue to fine-tune but the first quarter looks looks very strong and then of course, so, we'll see what happens as we go through the years, right and just to reiterate we we do have a stock buyback program in place. And what we're trying to do is take a balanced approach between returning Capital to shareholders and just

paying down debt and then

Scoping out the landscape for opportunistic, you know, well opportunities as they may arise so we're not going full bore into any direction just because you want to be around the side of caution a little bit. Yeah. That's a good point by Chris. You know, we're going to continue to be take a balanced approach to to you know, how we how we work through the future here in a position to be in stock buyback Etc stock buyback refresh. My memory is it's there was a there was an authorization. Are we through that? Authors? Are we still have a ways to go yet? We still have a ways to go at a plan in place and Will refresh that the windows opens up next week and refresh that next week and we'll keep running.

Great. Thank you. Thank you Gordon.

This concludes our question-and-answer session. I would like to turn the conference back over to Walter for any closing remarks. Thank you. I lie. We look forward to reporting our first quarter earnings results in the early may think all of you for participating in our fourth quarter and 2019 earnings conference call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.