Q1 2020 Wanda Sports Group Co Ltd Earnings Call
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Ladies and gentlemen, thank you first and buy and for joining one to sports groups first quarter 2020, <unk> earnings Conference call. At this time, all participants are willing to listen only mode. After managements prepared remarks.
That would be a question and answer session. Today's conference call is being recorded if you have any objections you may disconnect. At this time I would now like to turn the conference over to your host for today's conference call Me say desk, one head of Investor Relations at one does sports group.
Please go ahead.
Thank you.
Everyone thinks I'm trying to first quarter 20, Twond earnings call with US today, I hadn't seen Yang Chief Executive Officer off one of sports and Brown, our Chief Financial Officer, I play off the call will be available on our website. Later today. We have also posted a slide presentation on our website.
Hi, Brian would reveal during his remarks now let me quickly cover the safe Harbor today's discussion will contain forward looking statements. These forward looking statements involve inherent risks and uncertainties that could cause actual results could differ materially from those expressed or implied in the forward looking statements.
And consequently couldn't be affected by the uncertain and an unprecedented impact on corporate 19, I'm not business in operations and that really the impact on the on liquidity needs faulty that discussion on these risks and uncertainties. Please refer to our earnings release I never report on the form 20-F, one a year ended December 31st 29.
Team saw with SBC anyway, and as I look, though on sbcs website at that bid up you've got an easy thought you'll be I saw that other filings that we may from time to time with FCC any forward looking statements that we make on this call out based on assumptions as up to date and we did not undertake any obligation.
And to update these statements except as required.
The law. Please note that certain financial measures that we use on this call such as adjusted EBITDA I expressed on the non ibrance spaces. I first we saw some reconciliation off I pressed to long long Iris matches can be found on our earnings release with that I'll now turn the call, but I feel having Yang Ming please.
Proceed.
Well. Thank you you just answered thanks, everyone for joining us today.
I Hope you and your family this whole foods, Tennessee.
So you put it's cool I would like to first a review or first quarter performance.
Then I have some comments, our corporate 19 section impact.
The strategic initiatives.
So let me first start with the first quarter.
Given the pending closing off as Phil <unk>.
I don't know who would have treated the argument group for purposes or results for first quarter of consultant when kids are doing stuff, but hopefully.
And its historical results.
As discontinued operations.
Well first quarter, two fold ins wouldn't be or continuing operations.
Total revenue was 163.7 million euros.
Adjusted EPS.
Was 20.7 billion euros.
Despite the financial impact caused by the pandemic.
I want to making a few of our achievements and wings.
Demonstrating or resilient business model and long term contractual relationship.
Oh Spectator sports business benefited from a number of major international Winter Winter sports events.
You know, which would plays an important to rooms as well as expended the portfolio with new business wins.
To summarize.
In terms of hard for fog events, we delivered a cyber to fight the experiences, including if I am motor crops were jumping ship.
The MW international booked slated and a skeleton Federation word of championships.
I have some low were to championships.
Championships Hockey League finals for.
Men European and pull Federation through 2020.
And the 60 days for Hughes tournament.
So well this season throughout this events, we provided an extensive offerings and expertise your media marketing sponsorship or casting et cetera.
For major commercial contracts and extensional for long term partnerships, we signed a year agreement.
With International Flight couple alone Union point exclusive media and I'm, often white into 2013.
You know dishes.
German bonus slick football club.
So the main verified.
He has extensive its exclusive marketing agreements with us until 2031.
Five years ahead upticks my ration of the current agreed.
In terms of new business wins with brokered a successful commercial agreements between liquor one football club.
Olympic buildings.
And Amarins.
The official making sponsor.
We also launched <unk> cereal, a you sports competition for legal theoretically.
Who covance they told here in Columbus politically.
This success.
In the first quarter, a strong testament, a whole operational excellence and.
And our position as the preferred choice for be lung sports federations were to close friends and immediate localization.
Next I'd like come to or PBF is Christmas.
Well keep you up it's because it's continued to adopt leading technology.
And the leverage.
This above technology to drive more events production and other sports solutions.
For example, we were appointed by the French Tennis Federation as host Podcaster for French open from 2021 to 2023.
Do you envision Rx Gulf coast or dedicated digital Brent launched an upgraded content management system platform for Activision Blizzard.
Well as successfully piloted and the launch a new Fiveg basis. If you P 40 larger sports event, which greatly improved friends you stadium experience.
Turning to or less participation business, the first quarter, there's typically a low season.
Well that's participation sports events.
This year because of depends on it.
Only a couple of events were delivered with much less estimates.
As a patient.
Although the group continued host some races, and a sporting events in Europe, and North America in the first quarter two children 20.
<unk> April older remaining mess participation sports events have been canceled opus food.
We are confident if and when sports events can resume.
You or ability to organize successful large scale events.
In key Joker, forgets globally, and trucking diverse athletes and spectators.
Compliance with regulations and protocols for public health and safety relating to Cobiz 19 concerns.
For China business.
Unfortunately, almost all sports events were cancelled local schools across the country in the first quarter as a result of the pandemic disruption.
We only organized a couple of events.
Reverted for charity wholesale Saar purposes.
The purchase medical protective gears for workers on the front line.
As well as you restoring my role and unique find people onto a disaster crisis.
As China begins to return to normal and a restrictions all being lifted.
We look forward to capturing the second different opportunities by bringing and expanding premium sports events.
Now let me provide some updates on the current environment.
You got a threat to the qubic 19th disruption.
Or paramount's priority once the safety and it will be a for athletes employees fence vegetal partners and Congress.
Or you need it adoption of remote work in political and I know or strict compliance to health and safety protocols 40 employees, who are gradually resuming to work on site.
Food are you sure there will be or employees around the world.
Internally.
We are very fortunate that our workforce.
Or you pull yourself technically seven.
Hi, these celebrities and the support is off to China, as well as competitive activity, serving or partners and the clients.
Externally, we've continued to deepen our engagement with partners and declines as we assist each other in navigating the unprecedented disruption.
Our expertise.
The weight of creativity and commitment.
Great. Please recognize the value that by or partners and clients onto the changing environment.
For example.
Where the tour de force.
And he was likely rigs was cold.
We proactively supported the successful lunch often the very first the digital Prusak anyway series named digital Sweet spot.
As saying Oh lying alternative.
We think just a few weeks of intensive collaboration with various organizers.
This premier event attracted Y media coverage and the considerable populates interest.
Our next priority is the planning postponed the events for assumption.
That's right time, what's different about this.
We continue to work closely with governments partners like holders sponsors and event organizers to assess the impact of crude 19 on timing and the kratos for future United's as well as to manage the financial impact across the metallurgy.
For our spectator business that come into football. We are pleased to see the return of children fungus Liga Oh May 16, which has been placed young schools to doors.
This is the first <unk> European study to resume opt in March looked up.
Meanwhile, semi finals and final of yes people kill rescheduled for June and July of this year.
The Syria is also expected to restart in June.
We are looking forward to other leaks and the club's gradually resume as well.
Our winter sports season was set to be completed in may with possible impact from the endemic which is starting to emerge in mid March including the cancellation of 2020 I. So people were to championship in Switzerland, and 2020, Werent Mezz hurting jumping ship <unk>.
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Summer sports could be the most uncertain as majority events or cancelled or put school to later this year.
Furthermore, for our TPS business.
Yeah anticipation of the uncertainties at full swing spoke event and the games will most likely precede the new future without spectators.
We are developing additional digital and Florida forecast solutions to offer to and prepared partners for the expected demand for new forms of life and digital sports consumption.
You know the coupon 19 issues, although we continue to focus on or long term strategy in building, a leading global sporting events Mediamath and flexible we are developing a few near to midterm initiatives to enable us to emerge from the pandemic even stronger.
First.
We are active discussion to prolong covered the partnership agreements.
Provider service offerings aligns with the current environment.
And winning new contracts has rights holders move forward, there's a long term planning for their sports events.
These are all valued long term partners.
And we expect to collaborate effectively ruins resolving any potential issues.
Second.
And we foresee great opportunity being shaping or industry by embracing new technology and trends.
From direct to consumer activation to virtual advertising and immersive viewing experiences.
We plan to accelerate the pursue all that leverage a wider range of content and digital initiatives to enable organizers protestors sponsors as well as consumers, we more actively engaged with the increased efficiency.
She has the expansion of virtual sports he supports tournament.
In the production virtual training mobile social media account management.
Combination of home and life fitness expect exercises.
Cross collaboration with other intimate entertainment segments, such as music et cetera.
Finally.
We believe we will we have and will continue to be very focused our cost containment.
And liquidity protection.
In order to minimize the overall impact our business fundamentals, which Brian will discuss further.
In summary.
One of the short term and challenging.
These complex challenges will escalate the demand for higher order of strategic advisory creativity dependable execution from rights holders organizes sponsors or to customers and Britain's.
As they become more cautious and collective.
As we see the sport sector gradually we open up to the Cobiz 19 religion Lockdowns.
We believe we're prepared to activity third or partners and the clients I'll give myself different buckets.
We remain confident a fourq distinct.
Well, we're supposed to the global expertise and a broad capability to continue to the ultimate part of your choice.
So now I pass to Brian.
Thank you for me.
Hello, everyone I with an eye tools the game by echoing means a salad sentiment that hope off you I know your family stay safe and a healthy.
Before I start to first quarter discussion I would like to make suite comments.
Firstly, that's a we previously mentioned that the nature of our business has to some psychology, depending on the timing of awareness event.
Including even two years I criticality.
These are generally resolved, even some volatility of our financials, which we experienced taking the first quarter of Twentytwenty you know teaching to the partial impact from Cowen My team during the quarter.
Second.
We have I know well continue to adapt and enhance our balance sheet and their liquidity position by working closely with our management team valued upon us blenders and the rights owners around the world to full appropriately to respond pizza to the crises.
Finally, we expect at the closing of the I romance fail to occur or buy and but the second quarter even.
According to see with accounting rules, we have adopted the our reporting to exclude the Ireland based nita under treated that.
That's a habit for sale and the discontinued operations.
I don't know massive resolves the on the operating data also have been excluded them from the.
Comparing Q4 first a quota couldn't keep my team to be south on the operating week data as well.
Yes, the otherwise indicated the financial statement lie items, I know I, if I have to financial matters.
Please santida are continuing operation bases.
Now for the first quarter Financial review you only follow my remarks.
In the earnings conference call presentation on our website.
Okay. Before you can open that back I know turn to slide number six.
You might say for the first quarter of Twentytwenty.
Our total revenue was the Wahabi, it's 63.7 meeting euro.
The decline of 26% year over year, what's many due to into a you band cyclicality.
Excluding the impact of reimbursement revenues.
Total revenue was a 163.1 meta euro warm I don't know AIDS that data reimbursement revenues.
Usually look at the lowest to you in the first quarter of a year due to their technology.
Anyhow, despite the Rapidio decline.
Our cross coffee was a 57.8 million euro which increased by 8% annually.
With the same thing overall gross margin improved from 24% to 65%.
Our adjusted EBITDA was 20.7 euro.
The net loss for first quarter country trend he was the 4.3 million euro.
Many attribute a boat to increase the finance costs under personnel expenses.
Now I will provide detailed review of our three sacraments.
Let's start from Spectator sports on slide number not.
[noise] Spectator sports.
Revenue was a 100.
Well 139.8 million Euro a decrease of 28% year over year.
Mainly due to the events equity collar he fat driven by the exercise of the fees scheme water Championships.
Partially offset by the current state of the man he AFE that's it European Hempel.
Yeah, Jeff for you don't Twentytwenty.
Thesis scheme water Championship is Oh PPI annual event that took place in the first quarter of last year, but I'm not thinking twentytwenty.
If I revenue decline, our spec paid us both gross profit increased 8% year over year.
We soggy gross margin of 34 per se.
The increase.
Primarily refracs a favorable sports events had anda, mainly due to the man you after euro twentytwenty.
On the MFS of wrapping you'll keep action relating to Jim football business in 29 team.
Let's turn to slide number 11.
For the P.S. at the segment.
It's a segment Easter Collegially continue to Fannie fee from the expansion of our digital business that we should revenue of 422.9 meta euro he first quarter Twentytwenty.
You increase the offer 6% year over year.
He asked us to revenue excluding reimbursement revenue was 22.3 meta euro.
Gross coffee was a PEMCO to me the euro which increased the night, but that anybody.
Representing a gross margin of 45%.
Okay reflect does continue the maki attractive needs of our innovative a D. P. S S solutions.
Lastly for our mass participate patient segment on slide number 13.
In first quarter Trytwenty, our mass participation rapidio decreased significantly due to the decrease in total number of gross pay the athletes.
I will resolve all for the coven 19 condemning.
Although waste steel manager that to somehow completed two events in the first quarter this year.
So the number of events, it's a consistent a waste of corresponding period in Tennessee Nike.
As a result gross profit you also decreased.
Although the market participation margin percentage improved the too.
14%.
The gross margin increase.
He's.
Primarily driven by higher margin Mark participating event due to the quarter.
Let's move to slide number 15 on cash on the Capex.
That's all from March 31st Attendee 20, we had a strong liquidity position with cash on the cash equivalents offer 164.7 meta euro from continuing operations.
Our first quarter Capex.
From continuing operation was a 3 million euro.
Similar to the corresponding quarter, you intend to 19.
As part of our cost saving initiatives even.
Even responses to the cobot 19, and damage we are talking our annual Capex intend to 20 to be lower than last year.
We believe for these provide to US we saw solid cash position in current environment.
I would also note that the we have always been wherever it does depend on approved the human capital management.
So immediately after the outbreak of pets pandemic, we implemented a virus Costa Rica doctrine match across our organization in order to preserve our financial position on the to minimize the overall impact to our business.
Now turning to slide number 16 liquidity.
As a homi mentioned earlier attacking the quickly it's also a vital focus for us.
Aside upfront cash on hand, we are expecting to received net proceeds about a 345 million to 360 stream meta euros cash from the idle myself.
This will further optimize the our capital structure.
Strengthened our balance sheet and provide us with greater financial flexibility to navigate a mine and the to emerge a stronger from Cobra Nitin disruption.
I will always the Arrow Metro section. We are you comps. So we are in consideration to apply the policies to strengthen our balance sheet.
To use support General Corporation Club House, all subject to shareholder approval return capital to our shareholders.
We will further review with the board once the transaction is completed.
Let me conclude on slide 17 under 18.
Even the significant the uncertainties relating to the scope of Juba Asian, and the impact of their coven 19, we are not able to provide a twentytwenty guidance, but at this point.
We will reconsider providing guidance, whilst the embodiments stabilized.
Having said that I do realize the difficulty. So you can call Jackson, you, especially given the current environment. So I would like to share with you on slide number seven key.
That we expected it to use a part of our policies from the sale of for the Ironman group to repay some of our debt.
As a result, we expect our total indebtedness to.
Two larger new reduced to two.
470 screen, neither euro from 931 needed.
And our social the net increases.
Expand piece.
In fact, either to be reduced debt by more than 40 per se comparable comparative to 2019.
Also I understand that there are some crashed answer regarding our partner agreement you, especially when sporting events in the near future maybe protiviti. The we saw the spectators onsite.
I would like to emphasize that a majority of our contracts are related to media under sponsorship right.
We will still be able to generate a marketing media on the all protection revenue from thesis we opened the events.
Looking ahead it is still unclear.
For the full.
Matching to the of the Coven 19 impact on the Tenting Penske Financial result, I know, we will continue to close ammonia type of situation.
Despite the uncertainties the strength of our balance sheet and the liquidity indicate that a we remain well positioned to financially and emotionally to fully support our partners when they restock.
This concludes our prepared remarks.
Operator, we would like now to open the call for questions.
Thank you.
Thank you so much ladies and gentlemen, we will now begin to question and answer session. I saw a reminder, if he wished asked a question you will need to pass star and one on your telephone and wait for you need to be a news if you wish to cancel your request to these past the hash key again it started in one.
If you wish to ask a question.
And our first question comes from the line up high income from Deutsche Bank, Brian. Your line is now open.
Thank you hi.
So two questions first I appreciate the limited visibility with respect to spectator sports events being held but I was wondering if you could frame the revenue scenarios at a high level based on what you see now as reasonable worse case and best case scenarios.
And then the second question unrelated to that is with the liquidity in balance sheet strength that you'll have following the iron man sale. It seems like you'll be in a strong position to take advantage of acquisition situations, where you know small maybe private companies are in financial distress and available to the acquired a discounted valuations.
Wondering if you're seeing any scenarios out there like that them that you think might represent attractive opportunities for you. Thank you.
Okay.
Hi, Brian This is I mean, maybe I ask Brian too.
Your comment on his first.
First question about revenue scenario now I'm going to cover the.
You know the any new acquisition opportunity, possibly good opportunity now there.
Right, Yes, Brian effects, you actually be frankly, it's hard to you, especially for spectator, it's harder to gave a range or even a range. It all guidance.
Even at a high level or for that for the revenue because of the situation they environment.
It's still uncertain.
We we can see ace move into positive now like to Jam football what's the openness.
The Eataly football.
CVR a.
So we'll be open the soon.
Also for spam football et cetera.
But to steel.
Oh.
We don't know how to.
Huh.
A range or jewelry Asian school, a will be lost team.
So cool Coleman 19.
So we just can't see pool for the entire organization, we mobilized to our people.
The team to get Iraqi whenever the.
Eventual schools can be resumed.
And the we will be the first want to catch up the opportunities.
It's Brian if I could ask maybe just a follow up on that and you know thanks for you I know it's a hard question asked but can you talk about maybe what you're seeing on the sponsorship side.
You know because I think that you know obviously a lot of companies or.
Going back on marketing spending and I was wondering if you're seeing that at all with your sponsors or you know so when sports resumed should we still assume that maybe there's some discounting sponsorship side.
Ah Onez sponsorship, we can see food the due to the impact of the covert 19.
Some impact on the entire sponsorship.
Okay.
The good thing for Us Asia because.
Especially for him from under also are like we have fun.
Also sponsorship relationship of for all the.
Many years.
So.
Oh.
Probably you you will see.
Some showed him.
Sponsor.
Sponsorship.
We'll be.
We'll be some some some impact by the overall, we are confident that a dose of sponsorship east, especially useful for those.
A lot of 'em relationship or partners Oh.
Well the will be remained the same.
Yeah, maybe just I just want to ask something I think I think you're right I think there is.
We'll be some kind of impact on that you sponsorship, particularly the company Lucky spending as part of results of the coffee 19 impact. So we will I think we've already to monitor that we need to watch out what but if we think there will be impact Ah I think as Brian said it out most of our support it really show long term.
Most of our right out the contract on long term.
So I think and also most importantly, the event would help.
Quite a premium.
And international Hulick nature. So we should be we believe we are more well positioned competitively to.
To capture more picker pushing off this partnership servers.
But I think I'd hate to some extent you will be impacted and into 2020, it could actually maybe some of the residual impact they happen to though to 20 as well.
And also the.
We have to highlight that you know we are diversified portfolios where.
Media rights revenue, we have sponsorship so yeah digital and all the so part of it's only one three of our revenue.
So so there are diversified nature of business. It also helps us to mitigate through this difficult time.
So regarding your second question on the well with improved liquidity, we see any.
Activity, it's out there in the market I think yes.
But we watch this out very carefully and really make sure that a limited opportunities fits into our strategy [noise].
Fits into a portfolio and be those opportunities are really it happens very cost effective a very good return or we do look at them. We do see some ice endex events caught you know these.
Come out we've made it might be attractive, but but we also on other hand Wilson.
Well, if you're talking very carefully.
Okay. Thank you thanks to the appreciate it.
Thank you so much.
Your next question comes from the line of it.
Jason Bazinet some cities Jason Your line is now open.
Oh, thanks, so much I just I just had a question on.
Spectator sports it I think that if you break that down in any given contract you might have media rights production rights marketing and hospitality and my question is.
If an event.
Occurs but there are no participants there.
Is it just the hospitality sort of revenue that disappears or is there.
As it spill over into marketing as well.
As the media and production sort of impact that sort of the right way to think about it.
Yeah, So I think pickup in nature of or media rights, you know the marketing sponsorship or like.
Even without spectator, we believe there's few demand for media even increased demand for media rights.
For the casting okay and exposure for the marketing Brent So so that revenue will resume we think.
Oh, that's gotten it depending on how quickly the eventual would be resumed so timing right next to it.
The.
You know ticketing hospitality as your rushes pointed out should be impacted.
But I think good thing is not ticketing and you know the.
You know the hospitality is is actually very small portion.
Of our portfolio in their life. So we.
We will be impacted but will not be big youre doing work is over purposes rugged.
Great. Thank you.
Thank you so much.
And last question comes from the line of Allentown from <unk> capital Alan I mean, they're asking question.
Hi, Thanks for taking my question I Hope you guys are doing well.
The question is regarding the sale of Iron Man was wondering what what are the so you said the timing is the second quarter are there any hurdles remaining to have that deal sold its or any change in the price.
And then once the Iron Man is sold do you have some sort of target leverage ratio how should we think about how much cash you want to keep at the company versus how much you might want to return to shareholders. Thank you.
Hi, Alan.
Yes.
So I forgot from what's the first question they have other timing or timing, Ireland and shortly Philadelphia. So you know we don't see any hurdles. We are both parties are actively prepare for the closing.
The only thing you know we're waiting is <unk> government a clearance of the antitrust Fivek, which do you have one country.
We got old therefore countries a week of street clearance, there's one country, which were still waiting pool and we expect to get the clear is anytime from now till the end of June couldn't be early July.
And they become an approval slowed a little bit into Europe countries because of the pandemic.
Ah so so and the team are all working.
Preparing the necessary in a documents to for the closing so we're working as we plan.
For the top leverage right, yeah, I can cover that.
Actually you you may refer to slide number 717.
And that shows up pretty full HMA.
Pose a sale.
Repaid or crabby.
Suisse facility about 200, and a median.
Our total DAC, a will be reduced to 470 suite.
And our gross leverage you will be a run the sweet times.
I mean pro forma wholesale under the Nat laboratory.
We'll be around.
A 1.4 to one pools.
Six huh.
And that be.
Three times and 1.4 to 1.6 times, a projected 2020 times EBITDA adjusted EBITDA So correct.
Yes, correct.
Okay. Thank you so much.
Thank you.
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