Q2 2020 Entravision Communications Corp Earnings Call
Good afternoon, and welcome to the Entravision second quarter 2020 earnings Conference call.
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This time I'd like turn the conference call over to Lottery Loa, Chairman and CEO. Sir. Please go ahead.
Thank you Jamie good afternoon, everyone and welcome to Entravision second quarter 2020 earnings Conference call.
I hope everyone is still staying healthy and safe and he is difficult times.
Joining me on the call today, it's Chris Young our Chief Financial Officer before we begin to must inform you that this conference call will contain forward looking statements that are subject to risks and uncertainties that could cause actual results to differ.
Please refer to <unk> SEC filings for a list of risks and uncertainties that could impact actual results. It's called it the property of Entravision Communications Corporation any redistribution retransmission a reward rebroadcast of this call any in any form without the expressed written consent of Entravision Communications Corporation is strictly prohibited also this.
Called include non-GAAP financial measures.
Nobody has provided a reconciliation of these non-GAAP financial measures to them to their most comparable GAAP measures in today's press release. The press release is available on the company's website that was filed with the FCC on form 8-K.
Our second quarter results were affected by the cobot 19, pandemic and the resulting resulting economic crisis, which caused revenue declines across all of our business segments compared to the prior year period.
It's.
<unk> paid they continued adverse economic environment due to the bad debt for the balance of 2020.
Accordingly, we continue to manage our cost structure and the most efficient manner in order to align our operations most effectively with the challenges we are presently facing I'll walk you through the various expense saving steps we have undertaken later in my remarks.
Going beyond the difficult business environment, our balance sheet. The date continues to be among the strongest in the industry, but approximately $138 million in cash at Markel marketable securities on the books versus the total debt of approximately 216.8 million at the end of the second quarter. Our total net leverage was 2.6 times.
Turning to our financial performance.
Revenues decreased 35% to 45.1 billion in the second quarter consolidated operating expenses were down 24% and consolidated adjusted EBITDA was down 86% to 1.7 million compared to 12.6 million last year net income was 2.3 million compared to a loss of 16 point.
3 million in the same period last year.
Turning briefly to our television segment operating result television revenues in the second quarter were down 29% to 27 million compared to the prior year period due to the pandemic national television advertising revenue was down 25% well local advertising revenue was down 43% total television advertising and multicast revenue was.
Down, 39%, well retransmission consent revenue.
Was up 3%.
Looking into our top 10 AD categories for television in the second quarter services, our largest advertising category.
It was minus 6% or television segment and represented approximately 32% work total television advertising revenue auto our second largest category was down 57% in the quarter and represented 20% of our television ad spend.
On a better note health care, our fourth largest category in the quarter was actually up 36% over the prior year and represented approximately 12%.
Television AD spend we also saw 6% increase in the financial category over the prior year. All other top 10 categories were says significantly were down significantly in the quarter with exception of political which represented 1.2 million in television revenue versus 36000 in the prior year period.
Turning to our ways performance, our Univision television affiliates built upon their market leadership in May 2020.
For adults 18 to 49 and early and late local news our Univision television stations finished ahead or tied with the Telemundo competitor in 12 of 17 markets, where we haven't had the had competition.
Well adults 18 to 49 or early and late late local newscasts are ranked number one or two against English and Spanish language competitors in eight markets, including ties.
That's what we were we were also pleased to announce that our Denver news operations 131 that means across 10 different categories, including being awarded an Emmy for best eating newscast regardless of language.
Congratulations to our Colorado news team that by one Carlos with you others.
Well this.
Impressive record breaking a record breaking number of Emmys by single Entravision markets during a four week or Univision and when he must stations combined have a cumulative audience of 4 million persons two plus compared to tell him with a 3.2 million persons two plus we have 25% more viewers and Telemundo in our footprint.
[noise] during weekday primetime when compared to all television stations in total we had higher ratings at least one of the big four networks and 10 markets. Among adults 18 to 49 and adults 25 to 54 and in Mark and 14 markets. Among adults 18 to 34.
Turning to our audio division audio revenues were down 53% during the second quarter compared to the party or local revenues were down 52%, well Nashville revenues were down 54% in the quarter.
In the 12 markets that we subscribe to Miller Kaplan market data, we outperformed the market by seven points in total spot revenue combined.
Turning briefly to our audio advertising categories surface is our largest advertising category for audio declined by 20% over the prior year period and represented approximately 42% about total audio revenue <unk> well auto our second largest category <unk> second largest AD category for audio was down 69% in the quarter compared to last year.
Okay and represented 12% of our audio revenue all other top 10 10 categories were down significantly in the quarter with exception of political which represented a $620000 in the quarter.
Sorry your period.
Looking at our audio Division Radians performance for spring 2020 kilowatt why in both Los Angeles and Riverside continues to perform an extremely high level among Spanish language stations in the June ratings, and Hispanics 25 to 54.
In Los Angeles, we are ranked number two and morning drive what they had your Lukas program. This is followed by a number one rank in bed days with fueling continued to be ranked number one with your Boston, We took a lot to show in the afternoon drive time slots. This program is also ranked number two regardless of language in Los Angeles.
Afternoon dry.
In Riverside, rather they like it took a lot the appealing and we'll hand Youre all ranked number one Spanish language audio shows in their respective dayparts among spending adults 18 to 49 and 25 to 54 for spring 2020.
The Erosnow electrical lots of shows ranked number one in 10 of our 14 markets for at least for spring. Among Hispanic adults 18 to 49 and number one or two and 12 markets. Among Hispanic adults 25 to 54.
Luckily Supan via the latest addition to articulate that work lineup gained traction in spring 2020, and Keith Panic markets like markets like Denver, Phoenix, and Sacramento to show ranked as a number one Spanish morning show among Hispanic adults 18 to 49 and 25 to 54.
For spring 2020 appealing ranked as the number one or two Spanish language midday show in eight of our 11 markets released among Hispanic adults 18 to 49 and 25 to 54 and show the Haniel Lucas was number one or two a morning show among Spanish radio stations in eight of our nine El Nino markets. Among Hispanic adults 18.
He not in 25 to 25 to 54, we're excited about the incredible talent, we have assembled and our audio division, particularly in Los Angeles and number one audio market in the United States working for me personally to convert our recent strong ratings in Los Angeles to stronger revenue.
Oh, that's over to our Entravision digital businesses.
Earlier this year, we announced the launch of Entravision digital which consolidated or digital media consumer insights on marketing technology businesses under the Entravision brand over the past several years, we have worked to build a portfolio of digital assets opposing digital reach did insights and create even programmatic capabilities. This includes fanatics of programmatic mobile.
First DSP solution audio and gauge a digital audio advertising platforms, Colorado and optimize video advertising marketplace.
Did expand that international data management platform.
Audience, the marketplace with consumer insights and our U.S. Hispanic marketing solutions for small and medium sized businesses targeting Latino consumers.
Entravision digital brings senior businesses into a unified solutions offering the provides advertisers and agencies.
Single source to engage consumers globally. These businesses, having such a successful track record of connecting content and technology with targeted audiences and the performance in brand the capabilities of this marketing technology platform will continue to be an exceptional complement to our television radio and digital media assets, serving the U.S. Hispanic markets.
The second quarter digital revenues were 11.4 million, which represents a decrease of 32% versus the same period last year. The degree so directly related to the current corporate 19 pandemic one bright spot during the quarter for digital was our demand side platform spadix, which continued to show growth.
6% globally over prior year.
Despite the difficult operating environment for branding surfaces.
Snacks, we have three main divisions branding that works with agencies in focuses on brand awareness value added services and performance. The performance mechanism insights fanatics provides services to gaming Fintech and Ed Tech App developers.
It continues to produce strong growth in the U.S. with a 57% growth rate registered.
In Q2 versus the prior year period, we remain optimistic regarding our prospects for spadix in the United States heavy continued deploying our plan to win market share in the up economy.
As we can continue to focus.
Our programmatic products on cutting edge transparency and performance.
Got it successfully passed their review process, but the I.E. be goal standard and was awarded the brand safety certification this prestigious British certification process.
In it.
Okay.
This prestigious certification process was created by the H E b to encourage.
Best practices, including the reduction that flawed and digital advertising.
Oh, I'm sorry, new version of it video ads coolers to focus on in gain advertising, capturing the great momentum of gaming for of the gaming vertical I.
I understand what kind of stuff in short while the digital division second quarter was affected by the Corona virus outbreak looking beyond April which was the low point of the quarter in both May and June we saw progressively improving revenue sequentially, which gives us confidence about our prospects for the second half of the or we're also excited about expanding our footprint now in our local markets tapping into new category.
Right. So that's one of the new prospects and technology advancements that by spadix.
As we turned out to our outlook for the near term it's important to note that many of the regions were Entravision operates.
Recently in counter to search of the Corona virus cases, including Florida, Texas, Arizona in California.
Overall operations have shown solid improvement to date in Q3 revenue versus Q2, despite the uncertainty of the current economic environment.
As of today, our television advertising business is the fact is pacing minus 8% our radio business is pacing minus 34% and our digital businesses are pacing minus 18% versus the third quarter of 2019 I left as a footnote. We currently have more revenue on our books today than.
Our second quarter finish.
As we previously mentioned over the past five months, we've taken multiple difficult steps to ensure we weathered this identity crisis.
These steps include a reduction of our workforce by approximately 18% a companywide reduction of salaries for those still on the payroll the cancellation of our stock buyback program the reduction of our dividend to shareholders by 50% the two and half Centsper share initiated last quarter and lastly, the elimination and reduction of various expenses about.
The operating a corporate level.
We expect these cost reductions to result in a year over year fixed and variable expense.
Auction of approximately $11 million in the third quarter Clos or television.
Hardy when digital platforms.
Well its corporate compared to the prior year period [noise].
Also as economy struggles to contend with the <unk> pandemic.
Should it be necessary to maintain these cuts beyond Q3, the effective impact of doing so would result in additional $10 million to $11 million in fixed and variable cost reductions in Q4, depending how revenue performs in the quarter.
In summary, the second quarter is one of the most challenging a difficult quarters at our company's history, well, we also foresee a difficult third quarter, that's just pandemic indoors.
We are encouraged by the positive signs were seen with our revenue base in Q3, and Furthermore, believed that the decisions we made regarding our cost restructuring efforts where necessary to ensure financial progress in these difficult times.
Well now turn the call over to Chris to go through a financial revenue.
Thank you Walter and good afternoon, everyone as Walter as discussed net revenue for the quarter was down 35% to 45.1 million compared to 69.2 million in the same quarter last year.
Operating expenses decreased 24% to 33 million and consolidated adjusted EBITDA.
Great, 86% to 1.7 million.
For a TV division revenues in the second quarter decreased 29% to 27 million political revenue totaled 1.3 million in retransmission consent revenue.
Total 9.4 million, representing an increase of 3%.
Radio net revenue for the quarter was down 53% to 6.8 million compared to 14.4 million in the same quarter last year. The decrease in a radio segment was primarily due to decreases in both national and local advertising revenue.
Digital net revenue for the quarter declined 32% to 11.4 million compared to 16.8 million in the same quarter last year.
Yes, you're gonna expenses decreased 20% to 10.99 for three month period ended June Thirtyth 2020, 13.5 main in the prior year period.
Direct operating expenses decreased 25% to 22.1 million compared to 29.7 million in the prior period.
Decrease on both line items was primarily due to our ongoing cost cutting cost to bring our operations in line with a difficult economic environment.
Corporate expenses for the quarter were down 17% to 5.4 million compared to 6.5 million in the prior year.
Tax expense was actually a benefit of 5.3 million for the quarter, while cash taxes paid was 322000.
Earnings per share for the quarter were a positive three cents compared to a loss of 19 cents per share in the same quarter last year.
The cash interest expense was 1.3 million for the quarter compared to 2.5 main at the same quarter last year.
Cash capital expenditures for the quarter 3 million compared to 7.99 in the prior year period.
We anticipate that our capital expenditures will be approximately 7.5 million for the full year 2020.
Turning to our balance sheet as of June 30, 2020, or total debt was 216.8 million.
Our trailing 12 month consolidated adjusted EBITDA was 32 million.
Cash and marketable securities on the books.
134.4 million as of June Thirtyth 2020.
Yeah, So 75 million of unrestricted cash of books or total leverage as defined in our 2017 credit agreement was 4.43 times as of June Thirtyth.
Total cash and marketable securities or total net leverage was 2.5 times. This concludes our formal remarks, Walter and I will now be happy to take your questions, Jamie I'll hand, it over to you.
[laughter].
Ladies and gentlemen at this time will begin the question answer session.
Josh Good question, you May press Star and then one using it touched on telephone.
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Once again that is start and then one to ask your question.
Our first question today comes from Michael Kupinski from Noble capital markets. Please go ahead with your question.
Thank you and thanks for taking the questions.
First of all congratulations on managing through a very difficult environment and they actually over achieving my cash flow expectation and they actually showing positive cash flow I know that must have been a real struggled and a lot of sacrifices there.
So my question is.
As we kind of looking to Q3 Q3, your pacing numbers are actually a little bit better than what I was expecting pretty much across the board <unk> in your Q3 TV pacing number how much are you anticipating or maybe your political in that in that number and then also maybe for radio as well.
For HM for that for television.
I believe the pace that we that I gave you was minus minus 8%.
But core would be minus 14% for.
For the quarter ticking up okay pick it up a little <unk>, Yeah, Yeah, and then there was saying for radio because actually radio in the second quarter actually had better.
Medical I mean, it was a few hundred thousand dollars, but it was a little bit better than what I was expecting.
Yeah are you seeing radio kinda with political in there as well.
We are wish it were seen certainly a ready with political not as much political certainly as a as our television business.
What Chris do you have the active information well I've got a total radio pacing at a minus 33% and I've got core radio with July's.
Instead of 33% and I've got core radio with I think it's not money that's correct my 30%, Okay. A couple of yeah. Okay.
Can you just give us your thoughts about political I guess, where the balance of the year. What your Amit you know I I understand that there's been some presidential money being booked but it seems like it's in specific markets was wondering if you can just give us your thoughts about.
The balance of the year in terms of political.
Well, we had a huge first quarter political will surpass right our budgets.
Our Q2 political was about $1.2 million and was a.
Slightly under what are what we what we budgeted.
Q3, we've got to certainly have a much larger numbers in Q2 to achieve but we feel pretty good about it right. Now of course Q4 will be there would be the biggest quarter of the year for for political but we feel pretty good where we feel like we're going to read it certainly achieve our budgets for the year.
So far we're.
On track to do that so.
When we go.
And in terms of be cost cutting you indicated that you can.
Reduce cost fixed and variable cost in Q4, and you know it indicated what your thoughts were about Q3.
What would be.
That's fair trigger in terms of.
For further action in terms of cost cutting I mean Ari.
Just trying to understand in terms of modeling what how we should look at the pace of revenues versus your expenses.
Sure just trying to understand how you determine to pull back and throttle on the expenses. Even further if you need to that sort of thing or whether or not we could see some variable costs kind of moved back yet what what's gonna be the trigger there.
As you pointed out Michael we know we we made some pretty severe cuts in in Q2 and those cuts a fall let us into Q3, you know it is.
Revenue will will determine you know how we manage our expenses going Ah, yes, as we move through the rest of the year.
HM.
I mean, I think that's it's the best information I can give you Chris you have any common yeah I don't think it's the right call to draw a line in the same thing if we get this terrestrial variable expenses will start to creep and we're operating at a bare bones level right now.
In the environment starts feeling better and we start feeling more confident about a about everything is one will start to factor in you know some incremental expense with the revenue return.
I will point out Michaels, even though we've made these cuts and they've been you know severe and certainly deep I feel that we're operating efficiently and ER and were.
Addressing all the needs of our of our clients and customers and so I think our people are operating at the highest levels. We've ever operated as a company. So I'm certainly pleased to see that.
I think your last question is on your part you were positive cash flow in the second quarter.
Yes, you're right that you cancel your stock repurchase program are given the fact that your cash flow positive cute greens actually pacing better than expected.
Where do your thoughts in terms of capital allocation and that that's sort of thing.
Well the stock buyback program has been canceled.
We were active earlier in a year, but that has since been.
Canceled we didn't cut the dividend.
Right now we're in cash conservation mode. Michael So you know we should you know with de Minimis Capex. This year, we're not a big taxpayer.
We should be able to generate some significant.
Cash flow conversion.
As far as whatever incremental EBITDA, we're able to generate so that's what we're focused on right now and in this difficult environment and.
No I think our cash balance for the moment is.
You know is a safety nets that we're just trying to protect.
Thank you end up be well everyone.
Thank you Michael to Michael.
Once again, if you would like to ask your question. Please press star and one so withdraw your question as you May Press Star ensue.
Our next question comes from Aaron Watts from Deutsche Bank. Please go ahead with your question.
Walter Chris Thanks for having me on thank you.
So you're in a unique position, where you have a prevents over both TV and radio stations and I'm just kidding.
So obviously radio was hit harder than TV is.
People are stuck at home and maybe not in their cars.
As you look ahead kinda to what you're seeing in the third quarter. It seems as though obviously TV is pacing stronger them radio even stripping out political.
What's your expectation as traffic patterns returned to more normal.
What you'll see him and radio advertising and do you expect radio to close the gap with what you're seeing on the television side.
In the months ahead.
Well, we certainly expect it radio to improve I mean, a if you can tell from or the information we've.
We shared with every wanted to it the pace for radios improved or certainly in three isn't proved in third quarter versus versus the second quarter. We believed that the you know that improvement will continue through the quarter local is is.
Has rebounded better than the national in a in a radio business, but national is now starting to come alive Oh, the rep that we work with the started to show some some positive a you know.
Positive information that they pass to us and so.
We feel pretty confident we moved through the rest of the quarter that radio will continue to improve and television is as you pointed out as you know leases is faring better than radio and it did in the second quarter and.
Television is being is being fueled by both local and national.
I'll close to radio, which was mostly driven by local right now, but national starting to come alive in radio.
Okay, great. Thank you very much extra thank you.
And ladies and gentlemen, what that will conclude today's question and answer session I'd like to turn the conference call back over to management for any closing remarks.
Thank you Jamie and thank everyone for participating in our second quarter, a Investor Conference call. We look forward to sharing with you all the view our third quarter results in early November have a great day be safe and thank you.
Ladies and gentlemen went that will conclude today's conference call. We do thank you for joining you may now disconnect your lines.
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