Q1 2020 Earnings Call
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So and I will be or operator today, a replay of the goal would be available for getting a truck summit Li one PM Eastern time today Monday May 11, 2025 dialing eight five side it fivenine to 056, well from outside the United States by dialing.
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Thank you operator, and good morning, everyone I'd like to welcome everyone to today's conference call I'm actually Berlin, and I'm with Edelman financial Communications hemispheres outside Investor Relations firm.
Today's announcement and our comments may contain certain statements about how this year that are forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
These statements are based on the current expectations the management of Telesphere and are subject to uncertainties and changes in circumstance, which may cause actual results to differ materially from those expressed or implied in such forward looking statement.
In addition, these statements are based on a number of assumptions that are subject to change. Please refer to our companies. Most recent annual report on form 10-K, and our other public filings for a more complete discussion of forward looking statements under risk factors applicable to our company.
Forward looking statements included herein are made as of the date hereof and hemisphere undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances.
During today's call. In addition to discussing results that are calculated in accordance with generally accepted accounting principles, we will for refer to adjusted EBITDA, which is a non-GAAP financial measure.
A reconciliation of GAAP to non-GAAP information is included in our earnings press release, which was issued earlier. This morning management believes that this non-GAAP information is important to investors' understanding of our business I will now turn the call over to Alan.
Thank you Ashley and good morning, everyone I'm hopeful that you and your families in colleagues are healthy and well.
Since the onset of the global pandemic, we're prioritize protecting the health and safety ever employees working closely with our distribution in advertising partners identifying and implementing cost savings measures and critically providing our audiences with the most comprehensive continue with and relevant news and information.
The pandemic is unprecedented and its impact on the world population, the global economy public policy and our business operation.
We understand the implications of all this and as such our take no roll very seriously as a trusted newsource just as we have in the past during hurricanes or earthquakes and political crises.
Despite challenges presented we're well positioned whether it is difficult period.
Remain well capitalized with a strong balance sheet and ample liquidity.
Virtually all of our programming other than sports getting used to be produced an air giving us a significant advantage over other networks, which are unable to produce fresh programming.
Nonetheless, we're managing expense closely and cutting cost where we can.
We have reduced executive salaries across the company and furloughed certain employee.
In addition, we aggressively renegotiated programming contracts that suppliers and reduced capital expenditures. We may also have meaningful savings if sports and why did that touches mix universe, Puerto Rico or ultimately canceled.
Most importantly, we have a world class an innovative team was tremendous experience and a tested playbook for operating during times of crisis.
We're confident that we will navigate this period as we have others from a position of strain and emerge isn't even more dynamic and forward looking company.
Turning now to Puerto Rico, and WAPA, the governor in Puerto Rico implemented Curfews and stayed homeowners on March 15th the first state or kind of walk to do so.
Puerto Rico currently has approximately 2300 confirmed cases.
Per capita basis, Puerto Rico's fewer cases than any state other than Montana, Alaska and Hawaii.
The Governor began taking small steps to reopen Puerto Rico as it may 4th, but the island remains largely in lockdown mode.
Puerto Rico like other U.S. date is eligible to participate in the care that will be programs and as a result is projected to receive a 5 billion at federally funded.
Residents are also eligible from supplemental unemployment benefit of $600 per week.
We are extremely proud of and grateful to our team at WAPA Brits commitment to serving as the primary source at news and information for Puerto Ricans, what do we get on the island and in the U.S.
Not only continued to produce all of its newscast it's actually expanded the number of hours of news being produced.
That's provided Puerto Rican that vital that current information and reassurance for the most trusted journalists in Puerto Rico.
Wow, that's supposed to continue to produce nearly all of its talk and entertainment programming.
Looting socially distance version of a sit reality series get Adams.
In total WAPA is currently producing over 70 hours a week of news and entertainment programming, a testament to our commitment to serving Puerto Rico, an affirmation of Wapas unique and tremendous values a television network.
The results of these extraordinary efforts to speak for themselves in Q1 was broke all historical ratings record since the inception of Nielsen for viewing among both total person and the key advertising demographic of adults 18 to 49.
But the Liberty an astounding, 43% overall share among adults 18 to 49 higher than Telemundo and Univision combined.
And in Q2 to date WAPA has surpassed its Q1 viewing records and is well on its way to another historic ratings quarter.
What was dominant position as the leader in news and entertainment programming, Puerto Rico, It's worked out well it will continue to receive a very strong shared the advertising spend and it's more than ever a must have in any pay TV service in Puerto Rico.
Notwithstanding the dominant performance Wapas AD revenue declined by 10% in Q1.
They noted our last call, Puerto Ricos dropped by series a strong at damaging earthquakes in January which dampened the AD market as many advertisers cost or reduced their spending in January and February.
And the subsequent locked out of the island in mid March resulted in a further significant contraction of the market.
Oh this occurred against the backdrop of the island, making a steady recovery from the effect of Hurricane Maria.
While these events at both serious setbacks, we're optimistic that Puerto Rico, albeit a position to rebound once it is able to reopen.
Turning to our cable networks, we saw a terrific ready performance in Q1, a further across the board ratings growth in April.
It was driven channels WAPA America Centroamerica TV television dominicana have provided the audiences with comprehensive and exclusive round the clock news coverage from their home countries.
The value our U.S. cable networks was evident by the relatively modest declines in AD revenue April April as compared to the overall you what television industry.
WAPA America with over 200 hours per month of news produced in Puerto Rico saw robust, 29% increase audience in the first quarter of 2020 versus Q1 2019 in April WAPA America continued its ratings growth and a 32% ratings increase over April 2019.
Central America day, they had its sixth consecutive quarter of year over year audience growth with total day ratings, increasing an astounding 65% versus the first quarter of 29 team during April the channel that's more than doubled its audience delivery of April 2019.
This terrific performance reflects central America take that its position as the leader in news and information for the 6 million Central Americans living in the U.S.
By the honest total day ratings from 24% versus the first quarter of 2019, resulting in its 13th consecutive quarter of year over year audience growth as people are looking for unique and original entertainment content while at home.
April bought further volume increases and ratings outperformed April 2019 by 33%.
But you want us growth has been driven by its unique makes a compelling dramas from throughout the world, including Turkey, India and Brazil.
In the first quarter Cinelatino remain the second highest grade second ice Nielsen made a Spanish language cable network.
This strong performance continued into April with audiences, increasing 12% over April 2019.
So if you lose value proposition is further evidenced by video on demand performance video on demand usage nearly doubled in April versus 29 team.
Then on she does movie offering is well positioned for the remainder of 2020, well the strong pipeline a box office hits and critically acclaimed films.
Notwithstanding I tried to growth for both WAPA at our U.S. cable networks in Q1 and April our AD sales have been hurt by the pandemic.
In April our gross AD revenue, Puerto Rico, and the U.S. declined by 23% in comparison to April 2019, amazed pacing down 35% versus May 29 team.
It's very difficult to forecast the AD market going forward as advertising buying decisions are being made in a week to week basis and improvement is highly dependent on the reopening of commercial activity.
We made the decision not to renew our Nielsen contract personal Latino following the expiration on April Thirtyth later, the difficult advertising environment amplified by the pandemic.
Well, we have succeeded in freight attracting a number of major national advertisers Cinelatino savings from canceling Nielsen and related personnel and research costs will significantly outweigh any potential lost advertising revenues.
In the U.S., we continued to see a decline in subscribers in Q1. Obviously this is a concern for us going forward. The decline is primarily from two major distributors I.
I previously mentioned that one of these distributors began to experienced declines only after initiating a sign of process, which made it much more cumbersome to subscribe to this banning program package.
We've had numerous discussions with this distributor, but despite their assurances to date they have failed to alter their process.
Response to cope with 19, resulting in a relatively low number of cases today.
Over the pandemic, coupled with the dropping oil prices has resulted in economic distress and significant advertise a contraction.
The Colombian pesos also declined in value, we're hopeful that the country will recover quickly <unk> implemented significant cost cuts that will offset in large part any revenue declines.
Pad Thai has seen impressive growth and 2020.
As it today Pattaya 750000 paying subscribers.
Aperam, you'll note pad Thai broke all previous viewing records by a wide margin, including a 52% increase in streams viewed as compared to March and more than five times a stream student April 2019.
Pentile launched two new premium series in April, including the first series in Spanish produced in quarantine.
Anti AD that sufficient pipeline of movies and theories for the balance of 2020.
Enclosing I'm proud of the value of our services are once again shining in the midst of a crisis.
Grateful to all our on our talents that asking me to work and serve as a source of information stability and reassurance to our audiences.
Looking ahead without us our financial position, helping as to whether this storm. We are confident that we will emerge stronger and what position to grow organically at the potentially take advantage and many opportunities with attract evaluations.
Thank you, everyone and I'll turn the call overcrowded.
Thank you around and good morning, everyone.
Let's start with our near term financial profile and some of the actions we are taken to mitigate the impact of event pandemic.
We ended the quarter with 95 million up cash on hand to conserve cash we're reducing costs were possible carefully managing our capital expenditures and we were not buying back stuck at this time.
We had 206.4 million and as of March 31 is important to know that we have known near term maturities and did not have any maintenance covenants.
We made it difficult decision to furlough terminate or reduce ships for over 10% of our staff and I've also reduced salaries across the organization, including at the executive and board levels.
We have also presently frozen hiring activities and salary increases.
Additionally, we have cut back on discretionary spending on our negotiated renegotiating programming agreements to defer payments and seeking other concessions.
In regards to the cares that we are taking advantage of the different payroll taxes until the end of 2021 and 2022 were also exploring other options that may be available to us.
Capital expenditures total of 300000 in the quarter, we have reprioritize or capital plans for the year and a differed certain capital projects into 2021.
We expect our capital spend to be approximately 5 million and 2020 with nearly half of the spend expected to be for equipment related to the spectrum repack for which we expect to be reimbursed by the F.C.C. in 2020 and 2021.
The largest portion of our costs are related to news production and programming.
Our viewers are relying on us more than ever for news and information during this time.
Accordingly, WAPA has been operating it near full production capacity actually producing more news and in nearly full slate of entertainment programming.
Additionally, aren't cable networks have not had any interruptions to the supply of news and entertainment content.
Now moving on to some more detail on our first quarter results.
Net revenues in the first quarter was 32.4 million a decrease of 8% as compared to net revenues of 35.1 million for the year ago period.
Decreases due to declines in advertising revenue and affiliate revenue.
Advertising revenue declined 1.3 million or 10% decline was do the impact of the earthquakes on the Puerto Rico TV AD market in January and February we anticipated that the AD market would pick up again in March but was then impacted by the pandemic.
Affiliate revenue for the quarter decreased 1.5 million or 7% over the comparable period in 2019 due to a declining subscribers across our U.S. cable networks the negative impact of the blackout of Wap America on dish until late January 2020, and a decrease in revenues that are Latin American cable networks as a result.
Subscriber and feed declines and unfavorable foreign currency movements.
Operating expenses, excluding not operating items were flat year over year, even after taking into account an increase of 500000 in reserve for bad debt given the increased risk of collection do the pandemic.
The quarter included not operating expenses of 3 million in professional advisers fees incurred in connection with our pursuit of strategic transactions and in decline of 1.5 million due to the timing of reimbursements received from the F.C.C. for equipment purchase required as a result of the spectrum repack.
Adjusted even done the first quarter was 11.5 million decrease of 23% as compared to 14.9 million for the comfortable period.
Turning to strategic investments during the quarter, we funded 6.4 million into our joint ventures, including 4.8 million into <unk>, you know at 1.5 million <unk>.
During the quarter, we elected to take advantage of the favorable exchange rate and Prefunded come out with you know through the second quarter.
<unk> during the quarter due to the onset of the current economic crisis, and the resulting going concern rest we recognize a one time non cash impairment charge totaling 5.5 million related to our investment in <unk>.
For purposes of riding a bit more detail in the second quarter and you're ahead, we expect advertising revenue, which represented approximately 40% of our total revenue in 2019 to continue to be challenged the near term do the pandemic.
As Alan noted April growth advertising revenue declined 23% and May is pacing down 35%.
With the postponement other Puerto Rico gubernatorial primary is from the second quarter to the third quarter, we anticipate political revenue to shift to the back half of the year, there will be softer than originally expected.
Keys sports programming and special events like Major League baseball and Miss Universe, Puerto Rico May also be impacted well. This will impact revenue associated costs will also be reduced and therefore cushion the impact on profitability.
To help us offset some of these revenue declines we have and continued to implement cost reductions.
In closing, while our business certainly has not been immune to the issues caused by the pandemic, we're demonstrating resilience and strength and this crisis has brought up the best enough.
We've been hit harder before most recently in 2017, when we face a generational natural disaster in Hurricane Maria.
We wrote to the occasion ensured that our viewers had the news and information they needed and rebounded quickly to gross.
We are confident W., we'll do it once again it will emerge from this pandemic astronomer company well now up in the call to your question.
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Hey, good morning, guys. Thanks for the question also where if you could talk a little bit more about what you're seeing and the advertising markets, both Puerto Rico and the U.S.
You, obviously noted that that may was pacing sequentially worse than April that's a bit contrary were from what we've been hearing from from others and.
In television advertising.
You know I know Visibilities limited, but can can you talk about any stabilization. It all you're you're you're seeing as we get the mid mid May and you you have a look into late may.
Again, just any other additional color there would be great.
Sure.
We're seeing in Puerto Rico horse, we're actually seeing a erosion advertise marking it may versus April I think that it is largely due to fatigue by advertisers they continued to advertise.
Into the pandemic during April and I think that some of them have pulled back waiting for the economy to reopen I remember, Puerto Rico, it's been a locked down since Marcia paint before any U.S. state went into locked down. So it's been a long time that said you know this a relatively low low number of cases, there and there's an expectation.
That the economy will begin to reopen in in in earnest.
Idea that may so we didn't may maybe a month or a hopeful that things will start flipping once the economy reopens, that's really what.
What the differences are waiting for just to give you a says Puerto Rico has eight seven P.M. a curfew right now which is in earlier that any stayed in the U.S. So the government has taken very strict measures there and I think that you know why hopefully that has that will minimize the odd the number of illnesses and deaths at the same time.
Also adversely affecting commerce in the U.S., we're seeing pretty solid results relatively speaking are the clients are much more modest than they are in Puerto Rico and modest than what other cable and broadcast networks hammers have have have announced and a and may today.
Is fairly steady with April.
Gotcha thinks that it's helpful. And then maybe just turning on the subscribers and then you talked about declines.
The 19 remember <unk>, our our payments and remains is on a two month delay typically so we generally don't see numbers for 60 days or so until after they actually happened. So you know beyond what the cable distributors have said themselves. We don't have any specific insight into.
New into actual numbers.
And I'm sorry, you are the question was.
Oh, just just in the U.S. the subscriber decline just all during the quarter <unk>. So where do you think these are do you see a path. So you know returning the growth there at some point.
I think it's you know you what we're seeing is.
It's a little bit to get to Frank because we're seeing some really nice strong growth among among couple of the largest distributor while at the same time, we're seeing weakness mine a couple of the other or distributors. So I think if you look at it there you know you <unk> you look at the differences between those two set.
Once said is continuing to market aggressively you into price appropriately while the other status sort of abandoned just sort of abandoned marketing their pay T.B. businesses and have increased prices.
So I think that that's the by application, we're seeing I think to the extent that these guys.
I mean.
The increase in viewership.
Numbers are tremendous which.
Signifies that these there is really a real and meaningful audience out there that wants this product that is hungry for it is nowhere else defined it and and we take that it properly marketed and price that there still is huge runway for growth here and there should be runway for growth given the size of the market growth as a market.
The severe under penetration.
Relative to the size.
Great. Thanks for the color appreciate the questions guys.
Your next question comes from the line.
Wells Fargo's your line is now.
Thanks.
Hey, guys good morning.
Maybe first just a follow up increased advertising questions. Maybe you can talk a little bit about what you're seeing on the U.S. cable network side I think that's most the direct response advertiser.
Are there instead of acting as you would expect in a time like this or their pockets of strength in there or is it pretty weak across the board like from verticals or or different major advertisers you have.
Hi, Steve let's talk to you.
We're seeing in certain categories are performing very well in direct response as people are home and looking for certain types of product household product wellness products are performing extremely well on direct response and as a result, we've seen good growth Weve also seen some general Mark.
That advertisers dip their toe goes into Spanish language during this time.
Pricing being down an inventory being more available.
Think thats been a smart and forward looking move on their part and we've seen some traction. There. Obviously there are certain categories that are you know that are that are soft or have gone on hiatus. During this time and also there is.
To be somewhat some of the direct response advertisers have had issues with call centers and staff and call centers. During this time, because the pandemic and thats affected their business as well, but on balance it's been pretty stable and resilient.
Relative to.
Relative to what we've.
Scene and heard about art versus in the broadcast and.
And and cable side for English language networks.
Okay. Thanks, and then.
On Whopper in Puerto Rico are you still pay for sports rights and having any discussions with years sports Counterparties about what those payments may look like as the isn't there a little bit influx.
Yes.
So that the company reality on some of these agreements to get into specific details.
But in some cases, we have force majeure clauses or clauses that require content to be provided so.
In those cases, we have not been making payments.
And all our partners historically have been great partners with us in the past.
Yeah.
We expect that to continue going forward. So right now were we feel we're pretty well protected on on our obligations.
Great and then maybe I missed this in the comments, but did you give an outlook do you think you'll be investing in your JV. This year and I'm guessing that's an area, which expense that you might be looking to manage a little bit.
Yeah, we didn't get into specific guidance I did mention what we did in the quarter, which was about 6.4 million.
The guidance I did give is.
Hi, as you know we fulfilled our obligation here in the first quarter and we'll evaluate plans to fund further in the future on can now we know we took advantage of the favorable exchange rates earlier in the quarter.
And pre funded.
Through next quarter so.
So that's that's to the number is higher than it was in Q4, but look at in terms of funding a longer period of time.
And we expect the second half the year on common abuse similar to the first half.
In terms of on the couch.
Yes.
Okay very helpful.
And then I mean, maybe just.
A big picture question I mean, you guys is dealt with more you're kind of fair share crises than a lot of public companies have over the last few years, what did you kind of learn from whether it was the hurricane their fiscal situation, Puerto Rico that you feel like puts you in a little better positioned to maybe deal with what you're going through now.
Well I think we've learned how to be actual Matt I think the that's really helped we have a playbook that we've developed.
From these unfortunate past crises that we've had the can front. So we know how to manage our staff. Our staff is used to dealing with these prices our staff it used to having having short term furloughs and lay offs and having cutbacks in there did their pay because it has happened before our production teams know how to.
Reducing crisis and they know how to step up when there is a crisis. So this is not the first time, that's not the first rodeo in doing this and our sales teams.
Very importantly know how to know how to react and price and be flexible and be created in coming up with sales strategies and sales programs with clients and with agencies to create win win situations in the difficult times.
And then maybe just the last one.
M&A, you mentioned, maybe having some potential opportunity that I imagine there's a lot of distress in the market. So are you able to use the balance sheet and put the gas little bit here and and find opportunities that might not have come together or better prices. Then yes, I can start I think that those opportunities will will arise and.
Surface over the next few months.
I think there's going to be in number of interesting opportunities that come up a companies that are not necessarily well capitalized and that our distressed and I think we're really great position to take advantage of the our of those opportunities when they come up.
And and so yes, I think that that although pit at this moment, it's not our priorities our priorities really managing managing our business and mitigating the revenue declined and and working at the best way going forward.
I think that overtime over the next few months I think we will start seeing some really interesting it potentially appealing.
Strategic opportunities that add at attractive valuations.
Great. Thank you.
And then showing no further questions for more collision at this time, ladies and gentlemen, thank you for participating on today's conference. Please.
Yes, the program and you may all disconnect.
I would have a wonderful day.
Yeah.
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