Q1 2020 Earnings Call
Televisions first quarter 2020 earnings conference call, all participants will be endless and only mode should you need assistance. Please signal content specialist or posting a star key followed by zero. After today's presentation. There will be an opportunity to ask questions ask a question you may pressed star than one on your Touchtone phone to withdraw your question.
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No. This event, it's being recorded Oh now like to turn the conference over to Walter who you're chairman and CEO. Please go ahead.
Thank you grant action and everyone and welcome to Entravisions first quarter to down then 20.
I hope everyone is staying healthy and safe in these difficult times.
The only call today is you have to leave them in our president Susilo and Chris Young our Chief Financial Officer.
We begin and must inform you that this conference call will contain forward looking statements that are subject to risk and uncertainties.
That could cause actual results to different please refer to I.C.C. five minutes from list a risks uncertainties.
Could impact actual resolved all as the property of Entravision Communications Corporation.
Redistribution retransmission a rebroadcast on this call the any form thought to express Redskins.
Also just call will include non gap financial measures.
Companies, providing a reconciliation of these non gap financial measures to their most directly comparable gap measures in today's press release.
Last release is available on the company's website and was filed with the S.C.C. on for me Okay.
Our first quarter results were affected by the Coven 19 pandemic tend to result in economic crisis late in the first quarter, which resulted in declines in our broadcast and digital segments.
Compared to the prior year. However, we did achieve growth in our televisions segment compared to the first quarter of 2019, as who benefited from a healthy political advertising firm.
Presidential primaries across the country.
Expect a significantly greater adverse impact and future periods, depending on the extent and duration of the economic turn down a rising from the pandemic.
Oh, we have undertaken to an extensive review of our business.
Initially align operations and reduce costs.
I'll walk you through the various actions we have to undertaken later on.
In beyond this extremely difficult business environment or balance sheet today continues to be solved with approximately 130 farmland in cash and marketable securities on the books versus a total debt of approximately 217 5 million.
Our financial performance revenues decrease one per cent of 64.2 maintenance quarter.
Holiday operating expenses were down 6%.
Oh, they adjusted <unk> was up 20% to 9.7 million compared to eight 1.8 million last year.
Free cash flow was up 340% to 5.2 million compared to 1.3 million.
Interesting to note that in early March we we're forecasting 70 per cent growth before the quarter largest percentage growth in a quarter in our his fortunately or revenue started to unravel across all our platforms. As we entered the second week of March and the beloved crisis accelerated.
Pretty into our televisions segment operating results television revenues in the first quarter.
Up 2%.
9.2 million compared to the prior year period, primarily due to 5.3 million and political advertising in the quarter slightly offset by the absence of approximately 3.9 million and nonrecurrent spectrum related revenue and depart period last year Asheville advertising revenue was up 34%, while local advertising revenue was down 1%.
On a core bases first quarter T.V. advertising revenue, excluding political was down 6% during the quarter.
National down, 9% and local down 3%.
Quarter be transmission revenues, <unk>, 9% 9.6 million.
Or did the same quarter last year.
It can look at some of our major add categories in the first quarter automotive our largest advertising category was down 12%.
Represented approximately 24% of our total television advertising revenue.
Impact of the covered 19 virus has been significant to the automotive sector.
Manufacturing [noise].
I haven't been closed or production significantly reduced many dealerships have looked to navigate to online traffic to substitute for foot traffic.
U.S. April auto sales are expected to be negative, 43% compared to April 2019, and the full your outlook has been revised to arrange of 12.7 million to 14 million auto units sold compared to 16.8 million in 2019.
Unlike the 2008 recession. This crisis has not yet led to lower prices, but special financing and record level incentives are being are expected to continue.
Services are second largest category was up 15% and the quarter.
Media was down 9% and health care was up 7%.
Turning to our ratings performance.
Division television affiliates built upon their marker leadership into February 2020 sleeps sweeps.
<unk> 18 to 49 <unk> early local news are Univision television stations finished ahead of their Telemundo competition in 12 of 17 17 markets, where we have.
Head competition.
Local news we finished ahead of Telemundo.
I tell him into competitors among adults 18 to 49.
And of the 17 markets, where we compete.
<unk> early local news casts are ranked number one or two against English and Spanish competitors and eight markets are late local newscasts ranks number one or two against English and Spanish competitors and seven markets.
Well, we are Univision and when you must television stations combined heavy cumulative audience 4.1 million persons to plus compared to Telemundo 3.2 million.
Since two plus we have 25% more viewers and Telemundo.
Oh Division footprint.
Turning to our audio division audio revenues were down 2% during the first quarter.
Compared to the prior year local revenues were down 8% on national revenues were up 11%.
In.
Or radio revenues excluded approximately $1 million in political sales in the quarter or down 11% and the first quarter.
Entravision concluded our live audio coverage of the NFL with a broadcast of the Superbowl live from Miami, Florida. This was a fifth season of our relationship with the N.F.L. and our best performing season.
19, 2020 seasons saw an increase in audio revenue of 25% over our performance in the 2018 2900 season right.
N.F.L. Spanish rights extend through to the to the extent of the 2000 2021 season.
Services are largest <unk> advertising category for audio improved to spend with our audio platform by 18% over the prior year period and represented approximately 29% or total audio revenue increases services came from increase spending by several large law firms in the L.A. marketplace.
<unk> second largest had category for audio representing 17 present.
Oh audio revenue and went down 20 per cent into quarter <unk> last year.
Looking at at our audio Division ratings performance for Winter 2020, among Spanish language radio stations.
No electrical left the show is ranked number one in seven of our nine markets, including in Los Angeles release for the Winter book among the Hispanic adults 18 to 49, including ties Ross or nine owned and operated radio stations you Rasta electrical lots of show reached more than 619000, Hispanics 18 to 49.
<unk>, let's talk about our digital are Entravision digital business businesses earlier. This week, we announced to launch of Entravision digital which consolidates, our digital media consumer insights and marketing technology businesses under the Entravision brand as <unk>. Many of you know we have prudently build a portfolio digital assets over the past five year.
That was that possess digital reach it insights and creative and Programatic capabilities. This include spadix Programatic mobile first D.S.P.'s solution audio engage it audio advertising platform squalor ads and optimize video Mark advertising marketplace data expand and international data management platform.
And audience marketplace within consumer insights and R.U.S. Hispanic marketing solutions for S.M.B.
National advertisers.
Provision digital brings these businesses into a unified solutions offering that provides advertisers and agencies a single source to engage consumers globally.
Businesses have a successful track record record of connecting content and technology with targeted audiences and the performance and branding capabilities and just marketing technology platform will continue to be an exceptional component toward complement to our television radio digital media, serving the United States.
Market for the first <unk> quarter digital revenues were 13.3 million.
<unk>, a decrease 8% versus the same period last year. This decreases directly related to the current <unk> 19 pandemic.
Bright spot during the quarter for digital was our digital audio business, which improved its performance. During this crisis, we've been able to expand are offering through third party distribution in gain momentum with our unique content offering digital audio has proven to be a solid business unit for entravision over the past few quarters boasting a 15% increase in both margins and revenue.
Growth in the first quarter when compared to the same Puerto last year.
Oh <unk> demand side platforms fanatics. All also continues to show growth as we have seen increase in revenue of 41% from the from this product what compared to the same period last year.
Cobin crisis has also affected this business and we have had to prove pivot in terms of our client base. So we could serve clients had verticals left impacted by the pandemic.
Because of the flexibility offered by having our own technology, we're working hard and expanded our sales force in the United States to accelerate growth.
<unk> and that's in three months, we have <unk> and less than a month, we have strengthened or U.S. sales crew and it ended as it is already close three new campaigns and created dozens of new opportunities, we're expecting to see positive results from this business unit in the upcoming quarters as we continue to focus on <unk> mobile lap promotion value added services and Programatic.
In short while the digital divisions first quarter was affected by the Corona virus outbreak, we're excited about expanding our footprint in our local Marcus as well as a new prospects in technology advancements <unk> in the United States.
Turned to our outlook on the near term, it's important to remember that the majority of regions, where entravision. It operates I've been in locked down modes since the middle of March while our digits digital operations in Spain had been locked down since February on the positive side R.T.V. ratings are up significantly.
As the world's shelters in place to combat the virus. The negative side of course is I'm. Most ever advertisers are also under lockdown, causing a significant dislocation over advertising revenue.
Across all our advertising platforms.
Well some regions globally have begun to the process of gradually returning to do the workplace given the uncertainty of both the timing and the economy opening backup and the length of the recovery, we have extremely low visibility on our future operations.
They are <unk> are television advertising business is pacing minus 36% or radio business of taking in mind is 50 per cent and our digital is pacing minus 30, 33% for the second quarter.
They can several difficult steps to whether this helps and economic crisis. They include the following <unk>.
Temper reduction ever workforce for approximately 18%.
Company wide reduction of salaries for those still on the payroll ranging between 2.5% and 22.25% based on compensation compensation levels. The cancellation of our stock buyback program the reduction of our dividend to shareholders by 50% and lastly, the reduction or elimination of various expenses at our broadcast in digital.
Units as well as corporate.
Oh and one of these cost reductions will result, a year over year fixed cost reduction in the second quarter of approximately 6.2 million across her <unk> television audio and digital platforms as well as corporate expense also while we hope the world returns to work as soon as <unk> and safety as possible.
It'd be necessary to maintain discuss beyond the second quarter. The effective impact of doing so would result. In addition in an additional 14 million and fixed cost reduction over the third and fourth quarters versus prior year period.
Summary, our first quarter results were modestly improved from a casco perspective.
Might be negatively impacted by the covert 19 pandemic Oh, there's no doubt the second quarter will be extremely difficult.
But to whether the pandemic, we've taken it necessary steps to ensure our survival and these typical times oh, not trying to call over to Chris <unk>.
<unk>.
Thank you all turn good afternoon, everyone as Walters as discussed net revenue for the quarter was down 1% the 64.2 million.
64.7 million in the same quarter of last year.
Operating expenses decrease 6% to 40.3 million.
Adjusted D., but increase 20% than 9.7 [noise].
For a T.V. division <unk> revenues in the first quarter increase to present a 39.2.
Primarily due to approximate 5.3 million and political revenue for the quarter.
Excluding political and 3.9 million in non recurring spectrum related revenue in the prior year period.
T.V. AD revenue was down 6% per quarter.
Retransmission consent revenue for the court it was 9.6 million and was about 9% over the prior your period.
Radio net revenue for the quarter was down 2% to 11.7 million <unk>, Oh mean in the same quarter last year.
Decrease in our radio segment was primarily due to decreases in both national and local advertising revenue.
Or radio revenues, excluding 1 million approximate 1 million and political revenue in the first quarter were down 11%.
Digital net revenue for the quarter declined 8% to 13.3 million compared to 14.5 million in the same court of last year.
<unk> was primarily due to declines at our international heavily unit offset by 13% increase at R.U.S. Digital unit.
Operating expenses decrease 6% to 40.3 million for the three month period ended March 30, 2020 from 42.7 million in the prior your period.
Secrease was primarily due to 18% decrease in our audio expense.
11% decrease in our digital expense slightly offset by a 5% increase at or T.V. division arising from an increase in Commissionable revenue.
And severance costs.
Corporate expenses for the quarter down 1% to 6.8 million compared to 6.9 billion in the same quarter of last year.
The decrease primarily due to decrease in audit related fees in prior year, partially offset by an increase in legal fees.
Consolidated adjusted D., but I improve 20% to 9.7 million over per year.
Cash flow is to find in our press release increased 304% to 5.2 million.
During the quarter due to the onset of the current economic crisis, we updated our internal forecast of future performance and determine the triggering events that occurred they're required interim impairment assessments related to goodwill F.C.C. assets and fixed assets.
<unk> assessments, we recognize that at one time noncash impairment charge totaling 39.8 million across all three of our business.
Segments in Q1.
As a result of the impairment income tax expense was actually a benefit of 1.7 million for the quarter well cash taxes paid was 145000.
Earnings per share for the for the quarter were negative 42 cents compared to two cents per share in the same quarter of last year. Excluding the one time impairment charge U.P.S. was two cents per share.
[noise] during the quarter, but company paid cash dividend to five cents per share to shareholders of the company's class A.B.N.U. common stock the total amount of cash dispersed for the dividend was 4.2 million.
Company announced today that due to the ongoing pandemic and the related economic uncertainties that have impacted our business.
Rector since decided to temporarily reduced a quarter to be cash stupid and by 50% to two and a half cents per share to shareholders with the company's common stock payable on June 30th 2020.
The total amount of cash to be disperse for this quarterly dividend will be approximately 2.1 million.
Didn't tends to revisit this temporary dividend reduction next quarter as we continue to review economic conditions.
Also during the quarter, we repurchased approximate 259000 shares at an average price of $2.02 per share given the uncertainties around the current economic crisis. The company has ceased all buying back activity for the foreseeable future.
Ashley interest expense was 1.9 million for a quarter compared to 2.3 million tons last year.
Dash capital expenditures for the quarter were 2.7 million compared to 6.1 main in the prior your period.
We anticipate that are capital expenditures will be between six and 7 million.
Turning to our balance sheet as of March 30th 2020, or total debt was 217.5 million.
Trailing 12 month consolidated adjusted EBITDA was 42.8 million.
Fashion marketable securities on the books was 128 million as of three.
That have 75 million of unrestricted cash on the books are total leverage as defined in our 2017 credit agreement was 3.3 times as of 330 2020.
Set of cash total cash and marketable securities. Our total net that leverage was 2.1 times.
This concludes our former were marks <unk> Walter Night will now take your questions Grant all ended over to you.
Mm.
We will now be getting the question answer session sounds. Good question you my across star than one on your touched down so I got another star than one.
If you're using speaker phone, it's pick up your hands that before pressing the key.
Your question. Please press start them to have this problem no paused momentarily to assemble our roster.
Oh first question comes from my goal.
Yeah, well capital markets. Please go.
[noise], we're taking the question so in terms of the costs cut that you've done for the second quarter is that in addition to the cost cuts that you done or began I guess in the third import porters up last year. So this would be incremental.
Oh, Okay and the.
Oh.
Okay, I'm, sorry, and it <unk> what are the metrics that you are going to use in terms of trying to determine whether or not to keep those cog in place where the third and fourth quarter is what are their triggers that you meet back off on some of those Cox cuts.
I think revenue.
Revenue.
So just be in general that revenues would increase then you can start <unk> cost okay.
And in in terms of the digital business, Okay talk about what was involved in.
Doing the consolidation what are the costs savings associated with that we've been what does it mean for your digital strategy going forward. I mean can you just kinda expand upon the reasons why you went through the consolidation what that means or your strategy in it sounds like you're trying to still develop your strategy to.
Expanding the you out for the U.S. footprint. So was just want to if you can just have a little bit more color there.
Well.
Reason for the for the consolidation of the digital business was just to get day.
<unk> organized approach to our or.
Marketing of those businesses.
But a gay who recently named is.
T or or national digital business.
<unk>.
One of the people with within the organization with the the most experience in.
Take the role that he has but we've also consolidated R.U.S. business under the Entravision digital brand, but.
They it was our firm's was to have a a robust multi platform service.
You know existing small and mid sized businesses in the U.S. and compliments, our branding services offered by our television and radio.
Taylor performance based digital products and so we're able to.
Bye bye.
I'll say integrating our our better integrating our digital U.S. digital assets with our broadcast houses were able to provide better solutions marketing solutions for our clients and then our international business.
It can steps as I as I pointed out to accelerate the growth of that business that in the U.S. with it.
Attics products. So it's just the way of bringing everything under one umbrella and to create a more efficient platform for all of our digital business units.
Intermission U.S. for instance, your intuition digital U.S. does that have the pool sweeter products at this point or is that something they're going to be layering and as you go.
It has the full speed of products.
Okay Alright.
The latest consolidation that we just made.
Gotcha, and then auto obviously, a big category for you said, it's 24% I know that at one point. It was it 29, almost 30% of your business can you talk about that category, whether you believe it will come back what what are you hearing from your dealerships and so forth. If you could just kind of give us a flavor or what.
What you're starting to see comedies are starting to open up a little bit here.
Oh, it's.
No. We haven't we haven't don't have the feedback right now that we'd like to have you know it set as as I pointed out and we're just starting to see a Texas and.
Florida in Colorado opening up there's also.
Yes steps being taken to open up California here this week and some some capacity but.
A motive is.
<unk> to really estimate.
Think it's going to going to end up I I gave you. Some information that we that we were able to source about how the revised forecast for for for a auto unit sales in the U.S. is.
About 12 to 13 million as as compared to almost 17 million in 2000 and.
Right there there's been a major adjustment in in.
Forecasting by the auto industry and <unk>.
<unk>.
Challenges that we're all gonna face, but you know anything Chris well, they're going to come back can offer a ton of incentives when the world. Finally opens up they they've got a ton of inventory they'd have to start on loading.
And those incentives are going to be record breaking if they're going to need to advertise and message those incentives. So we expect ought to come back fairly robustly when it does come back. The question is so then that that actually happens, but we're pretty confident that when it does come back it'll be.
Strong why I also think that because of the of the.
I make.
Change and.
Attitudes and probably younger demographics and millennials, who.
Hadn't and or the or I'd entered the vehicle Mark.
I'm sure <unk> rideshare programs and public transportation.
And that makes gonna change that and we're going to see more young younger downloads looking to buy vehicles.
Gotcha and did do you have any obviously political was very strong for you in the first quarter any thoughts and how that shakes out as your trend toward the third the stronger third port borders and and are you seeing political exactly or can you just talk a little bit about your thoughts on political.
Well you know we had a just a huge political.
Certainly very please.
Turned out.
Important data point about the.
Core business.
Advertising categories were also performing quite well in our second quarter advertising categories. We're we're looking.
Sorry, you know.
Yeah, It looks us was very positive.
As far as as far as political is <unk> second quarter, and we we review our numbers constantly and what we're seeing it probably will look to be a budget for the quarter.
<unk>, we had forecast that it'd be above budget, but then.
You'll fairly confident that will be a budget for.
Now as far as cues three and four it's still too early to tell you know we have.
You can imagine a you know Q3 is.
Our budget then cue.
Two Q1.
And then Q. force pretty pretty.
Be large budget. So we'll see we still think you know one of the things I just read this week and you probably read too is that this announcement by by.
Biden campaign that they're going to spend $55 million in.
Five key states to mobilize the Latino more or less if you know voter and you know of the five states I think I believe we're in for those states with strong media assets, including addict, Colorado.
Florida and Texas.
Anyway, but we're we're well positioned to take advantage of of that.
Oh of that you know.
Rather impressive purchased by the finding campaign or investment into Latino Cat and then.
They'll believe that.
I wanted to to.
When the Whitehouse, you're going to need to.
Lives Latino vote in the important to swing states.
Hi.
Gotcha and you have a large cast position. It appears that there are a lot of distress companies out there that make a trip to got cabinet. What is the ultimate may environment like right now art people like talk anymore. They just waiting to see how things shake out and and if you are looking at.
Yeah. Yeah. That's it is there is there a preference for you in terms of radio T.V. or digital at this point.
Well I I don't think there's any we haven't been privy to any conversations on the Yemeni front, I think everyone still and kind of a lingering state of what do we do now you know as far as as Pandemics concern.
Minutes don't start to get tripped up until you start reporting Q2 numbers and you're going to be.
In late summer before that happens and then Oh conversations with lenders about what to do about those covenant breaks you know start and.
In early summer, perhaps so we're we're not kind of we're not in that.
Realm, where those conversation started yeah, but that's that we're we're sitting here and we're watching and we'll wait and see what shakes out but to your point we we.
Do have cash cushion and <unk> wait and see how things turn out as far as platform priorities are concerned.
Digital continues to interest us T.V. I think would also be opportunistic should it be kind of an mark it took an opportunity.
And then I guess third on that run would be a would be radio.
Yeah actually I just one last question is how to keep the item I assume that there were some unusual items in the D.N.A. depreciation amortization annoy, which was like 4.5 million that number is that a good number going forward or or Where's, there's something in that number.
That was really related to the repack assets depreciating. So it's slightly accelerated number but that'll that'll smooth itself out that's gotcha now the repack was the came after the.
The F.C.C. auction and you had to go out and buy equipment on that front and that's why there was.
Spike.
Okay perfect. That's all I have thank you appreciate it.
Michael.
I guess, if you'd like the question. It is star than one stars on one to ask a question.
Oh this time I'm showing no questions on that question cute. So this will conclude our question and answer Sasha.
Like the turn the call comes back over to Walter Yeah, Alright closing remarks.
Thank you grant and thank you every once worked for participating on on base call. We look forward to reporting our second quarter earnings results on a circle in early August.
Hey, Thank you.
They called Huh.
Oh.
That's true.
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