Q3 2020 Hemisphere Media Group Inc Earnings Call

November 9, 2020

[music].

Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily till that time. Your line is probably going to be placed on hold thank you for your patience.

Once again, ladies and gentlemen. This is the operator today's conference is scheduled to begin momentarily until that time, the last really going to be placed on hold thank you for your patience.

[music].

Good day, ladies and gentlemen, and welcome to the Hemisphere Media Group incorporated third quarter 2020, <unk> financial results Conference call. My name is John and I'll be your operator today.

A replay of the call will be available beginning at approximately one o'clock.

PM Eastern time today Monday November nine 2020 by dialing 8774971 for three six or from outside of the United States by dialing 262.

5586 to 90 the conference I'd for the replay is 93656 there in that.

I will now turn the call over to Danielle Brian you may begin.

Thank you operator, and good morning, everyone I'd like to welcome everyone to today's conference call I'm, Danielle, Brian and I'm with Adam and financial cremation hemispheres outside Investor Relations firm.

Today's announcement and our comments may contain certain statements about hemisphere 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 of the management of hemisphere and are subject to uncertainty and changes in circumstance, which may cause actual results to differ materially from those expressed or implied in such forward looking statements.

In addition, these.

These statements are based on a number of assumptions that are subject to change.

Please refer to our company's most recent annual report on form 10-K, and our other public filings for a more complete discussion of forward looking statements and the 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 refer to adjusted EBITDA, which is a non-GAAP financial measure a.

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 Danielle and good morning, everyone I Hope you and your families a colleagues are staying healthy and safe.

We delivered outstanding results in the third quarter in the face of the pandemic overall, our net revenues increased by 4% driven by 27% growth in advertising revenue and our adjusted EBITDA grew by 6%.

Advertising growth significantly outpaced the advertising markets in both Puerto Rico, and the U.S. and is a direct result of our strong ratings grow viewership a compelling value proposition.

In Puerto Rico, we saw a solid rebound in consumer spending and business activity and to help your advertising environment with the overall TV AD market up 12% versus 2019, excluding political the advertiser recovery a potent Puerto Rico coincided with the resumption of economic activity and strong consumer spending fueled by the government stimulus.

Wow received the bulk of this higher spending increasing its share of the advertising market and driving its robust year over year growth.

Walk was able to achieve this growth as a result of its continued dominant ratings performance delivering the highest third quarter ratings in its history. The key advertiser demographics of adults 18 to 49 25 to 54 for the fourth consecutive quarter Wapas ratings were higher than Univision and Telemundo combined the first time this level of sustained.

Im going it has occurred since Nielsen commence ratings measurement in Puerto Rico.

With the rescheduling of Puerto Rico's gubernatorial primaries from June to August political spending was different from the second to the third quarter WAPA secured over 1 million a political spending in Q3 consistent with our original expectations.

In the fourth quarter, we are building on our third quarter momentum and our performance to date has been tremendous October represented the highest AD revenue month for Wawa in its history and help make it hemispheres all time highs month in AD revenues, even when excluding political revenue total was among the highest AD revenue month in our history.

I'm happy to announce that we have entered into a retransmission renewal agreement with the largest NBP d. in Puerto Rico effective as of January 2021.

<unk> will result in a substantial increase in our retransmission fees and reflects wapas market straight a unique value proposition.

Also worth noting that Puerto Rico cable subscribers, so a slight increase in Q3.

One final note on WAPA Wapas, President Javier might have let will resign at the end of the year.

Hobbyist wife, and children with Miami, and he has decided to relocate back to Florida to be able to spend more time with them. How did the great work of WAPA and we wish him. The best Fortunately, we have a terrific replaced with a hobby and Jorge Dogle Jorge has a long and very successful track record in Spanish TB, including executive Vice President in charge of the news and sports divisions that tell.

Window that has worked closely with Wapas news and production teams and the recent relaunch of our signature newscast.

Turning to our cable channels as I noted our second quarter earnings call. We began to see a strong rebound in AD sales in July which continued through the third quarter. Overall, we saw a meaningful AD sales growth in Q3, driven by strong viewership at all of our networks continued.

Continued ratings growth and differentiated and valuable audiences have been able to hire sell out and increased pricing even in a uniquely challenging environment.

Oh, I see only increased its ratings by 17% versus third quarter of 2019, its 15th consecutive quarter of year over year growth.

Sit artino growth rate is by 11% over 2019, and Central America David's ratings increased by an impressive 38% its ninth consecutive quarter of year over year growth.

WAPA America continued as a top five rated Spanish cable channel delivering large and loyal audiences with a national coverage of the Puerto Rico elections, and the COVID-19 crisis.

What are your subscriber numbers declined the third quarter, we have seen a sequential improvement in subscriber losses in the past two months, particularly as it relates to one of our largest distributors although too soon to know if this is a long term trend. We are encouraged by these results. In addition, we continue to be in discussions varies and B P. D. B M bbds that.

Washington, Spanish language package.

With the proliferation of numerous platforms. We believe it will we will be able to generate meaningful revenue from licensing our deep library of content.

As I previously noted we've already entered into partnerships with Amazon in Latin America and to be able to tell in the U.S. and Latin America. In addition, we now have agreements with Roku zummo, and the Spanish language platforms, canola and VIX, while negotiating with others.

Turning to Colombia, and our investment it cannot who know the market remains challenged by the pandemic. However, most restricted some business activity had been lifted and economic metrics are improving the advertising market has grown sequentially every month since may and we are optimistic that by year end spending will rebound to normalized levels.

[noise] cannot you know continues to outperform the overall TV market, while concurrently reducing cost offset the revenue declines.

Paccar continues to grow its subscriber base as the first and dominant as far offering dedicated to premium Spanish language movies and series.

Hi, currently at 825000 paying subscribers.

Certain upon ties productions were impacted by pandemic. However, production is largely resumed including the next two seasons upon ties blockbuster series as well over the last few hours a season two of their best family vacations Dark superstar linear derbez.

We're very excited about and confident in the growth of Empire.

In addition to anti F. We're exploring various direct to consumer opportunities leveraging our content ownership production capabilities unique understanding of the U.S. Hispanic and Latin American markets. The pandemic. It's also create a number been treating potential M&A opportunities, which are directly in our wheelhouse.

In closing we are extremely pleased with our performance under challenging conditions. We are proud of our market leadership and our ability to significantly outperform the overall AD market while closely managing our costs. Thank you everyone I'll now turn the call over to Craig.

Thank you Alan and good morning, everyone.

Revenues in the third quarter were 37.2 million, an increase of 4% as compared to net revenues of $35.8 million for the year ago period due to an increase in advertising revenue offset by decreases in affiliate revenue and other revenue.

Advertising revenue increased 27%, primarily due to the growth in advertising revenue across all of our networks as well as political revenue.

Excluding political total AD revenue was up 18% over the comparable period in 2019.

This increase compares very favorably to the 21% decline we experienced in the second quarter.

Affiliate revenue the third quarter decreased 9% due to decline in subscribers for our us cable networks and a decline in non US revenue as a result of subscriber and feed declines due in part to unfavorable foreign currency movements.

Other revenue decreased 47% driven by the timing of the licensing of content to third parties.

Yes.

Net revenues for the nine month career period were 104.3 million a decrease of 5% as compared to 110.1 million for the year ago period.

The decline was due to a 9% decrease in affiliate revenue and 2% decrease in advertising revenue offset in part by 23% increase in other revenue.

Affiliate revenue decreased due to the decline in U.S. cable network subscribers and a decline in non U.S. revenue.

Advertising revenue decreased due to the negative impact of the Puerto Rico earthquakes in January and then the COVID-19, pandemic, which more than offset the growth in advertising revenue during the third quarter.

Other revenue increased driven by the timing of the licensing of content to third parties.

Operating expenses in the third quarter were 23.8 billion, a decrease of 6% as compared to 25.3 million for the year ago period. This quarter. We operated at full production capacity and in fact produce more news programming due to extensive political coverage.

The decrease in operating expenses was primarily due to a decline in stock based compensation and reduced marketing and research offset impart by higher personnel expenses and an increase in the bad debt reserve.

The third quarter also benefited from a higher gain from the FCC spectrum repack of 1 million as compared to 200000 in the same period in 2019.

Operating expenses for the nine month period was 77.9 million, an increase of 5% as compared to 74.3 million for the year ago period. The increase was due to higher programming amortization as a result of increased content license to third parties and higher production expenses related to get US a daily reality show it was.

Which commenced production in May 2019.

The nine month period also reflected a smaller gain from the FCC spectrum repack and other as compared to the year ago period, as well as professional and advisory fees incurred in connection with pursuit of strategic transactions earlier this year. This.

This was partially offset by cost savings measures implemented in response to the COVID-19, pandemic, including reduced personnel expenses as well as marketing and research costs.

Adjusted EBITDA for the third quarter was $16.7 million, an increase of 6% as compared to $15.7 million for the year ago period turn.

Turning to the balance sheet as of September Thirtyth, we had 205 million in debt and 118 million of cash. This represents an increase in cash of nearly 26 million since the start of the year.

Our gross leverage ratio improved to 3.4 times and net leverage ratio improved to 1.5 times.

Capital expenditures of $1.4 million in the quarter, bringing year to date Capex for 2 million as compared to 4.9 million in the same period of 2019. The decrease was due to the deferral of certain capital projects, which were moved to the back end of 2020 and into 2021.

Turning to strategic investments, we invested $1.1 million in Canada, we know during the third quarter, bringing our total year to date investment to 7.5 million down from the 27.4 million in the nine month period of 2019 the decrease.

Was primarily due to improved operating results that can only window.

We are proud of our third quarter performance, which underscores our strong execution in October we set a company record for monthly advertising revenue and this positive momentum has us optimistic as we head into the remainder of the year and into 2021, we'll now open the call to your questions.

[noise] [noise] at this time I would like to remind everyone that he would like to ask a question press far one.

[music].

We have a question coming from the line of Steven Cahall from Wells Fargo.

Thanks, maybe just to start off on advertising. So it sounds like a lot of strength in the quarter I think you probably outperformed a lot of the media market in the U.S. and so you know if you could just kinda talk on a core basis. How does it seem like Q4 is pacing are you up both in Puerto Rico and on the U.S. cable knutsen and what.

Do you think is driving a lot of that positive momentum because while we've seen a lot of sequential improvement in your peers I don't think I've talked to anybody else who's actually up on a year on year basis right now.

Hi, Steve I think.

That you know.

Our results point to summarize the unique.

Leadership that we have and then dean and unique quality of our assets.

We are seeing strong core growth in Puerto Rico in fourth quarter as I mentioned October was the best advertising revenue month in our history.

That performance has continued into November to date and you know we have really good visibility on November four for both Puerto Rico and the U.S. So we feel very confident in in both markets US we've had strong growth in third quarter and that momentum has continued into the fourth quarter. So we feel very positive about fourth quarter and.

Expect to see similar kinds of growth to what we saw in the third quarter, if not potentially better.

Great and then on the sub decline front I mean, you talked a little bit about maybe what could be driving the improvement and the potential for VM ppds are still be ahead, but I mean, it was a pretty big improvement over your sub decline level. In Q3 are there any new deals and there are changes the way your networks are distributed.

That's all organic we yeah as I've mentioned in past calls.

There are just too there's large distributors, you and and I really haven't heard other.

Other media companies talk about this in terms of breaking it down by distributor, but there are two distributors that have really adversely impacted our results and with one of the distributors. We've seen a significant improvement in their numbers and a significant decline in the velocity of their losses and thats largely accountable for ARPU.

Results you know art.

At school without our discussions with that distributor they've expressed optimism that that trend will continue. So hopefully they are they are correct in that and that will continue to see better a better results and lower velocity of losses, if not a a turnaround over the next few months.

And you mentioned the VNB PD is I mean, we think of that's almost 10 million subs, now and who you to ban and sling or the big ones.

Can you at least comment as to whether or not you're in conversation with like at least the major ones. There are all three of those.

Yeah, we're in conversations with the major ones and I think you know honestly it is a.

Eat inexplicably all that none of them have launched Spanish language packages, particularly given the take up of Hispanics to digital platforms.

And and I think they will recognize that it's just a matter of prioritization, but we have put been putting you to see that significant pressure on the major ones to launch Spanish language packages and they have indicated that they are you know they are there any intention and inclination to do so it's just a question of getting it done.

Great and then lastly, I'm just wondering whether its canal you know or anything else in the investment portfolio do you have a lot of cash commitment for 2021 or do you expect that to be like flat to down year on year. Thanks.

We don't have commitments per se, but the ongoing.

Ah future capital requirements, we think we'll be at similar levels.

To where we were this year, which is obviously down considerably from last year, and we are still expecting sequential improvement. It a lot of it depends upon how the market recovers from the pandemic.

Great. Thank you.

Again to ask a question press star one now.

Next question is coming from the line of Curry Baker from Guggenheim.

Hey, good morning, guys. Thanks for the questions can.

Can you maybe give us some insight where are you guys route for political in the fourth quarter.

Yeah.

We are we had a we had a good fourth quarter and political I would say.

Modestly exceeded.

Our expectations a lot of Pac money came into Puerto Rico, and we you know secured a significant share of all that money.

Is there a I think you said you came in about $1 million for the third quarter is there a number you can kind of put around that if we can get credit it'll be higher in the fourth quarter or the third quarter was more around the primaries.

The the beach.

Page during elections here in November.

Which is sort of tracks, where we were in 2016, you would have seen an increase.

A higher level of political spend in Q4, and we expect this year to be slightly up over 16, and I think we guided we guided at the beginning of the year to 3 million before all the pandemic everything we got at the $3 million or expectation on political.

For us and a and you know weve somewhat exceeded that okay. No that's helpful.

On Penn tire.

Can you maybe talk more about kind of you know the.

The addressable market. There I think you said you're at 825000 paid subs already.

Where do you think that business can maybe go over the next couple of years and is there anything you can say just in terms of.

Where they are in terms of profitability.

In terms of the growth opportunity, we think it's significant we think that you know.

The market opportunities multiples of where it is today.

You know we're not we're not in Pattaya you know for an 800000 sub business, we think that the given given that there are 17 million. Hispanic homes in the U.S. given that this is a unique service given that this is the first of its kind in the U.S. and as it and you know at NNN is really has no.

Bibles in its space, we think there is a tremendous opportunity.

For continued growth there and we haven't given specifics on on financial performance, but the appetite is getting close to breakeven okay.

Okay.

[noise] [noise] and this kind of just in line with with the last part of that question.

You reported loss from equity method investments dramatically improved this quarter.

It is there any one time items in there or is this kind of a.

New improve run rate just reflecting better.

Better financial operations, some from the various investments.

Yes, Yeah Kerry its its.

Really two factors one is certainly the improved operating results that can help you know, which we expected as we continue to grow our market share the market and this is despite the negative impact of the pandemic. There is a little bit of impact from as you referred to sort of one time items in the sense of foreign currency movements that can.

Attributed to the loss last quarter that flipped to a gain this quarter. So it's a combination of those two okay.

Okay. That's helpful and then and then lastly, the.

The balance sheet seems to be in a good.

Good position.

What's the priority in terms of cash.

Cash in and are you guys seeing opportunities in terms of M&A.

M&A and the market that you can take advantage of.

Yeah. We are we think the pandemic has given rise to opportunities that were not there before you see companies that have assets that are not core to their business that they now are open to selling we're disposing up because the because the reprioritization of their businesses and financial pressures. So.

So we are seeing some intriguing and interesting opportunities that are that we hadn't seen before and didn't are actively pursuing those.

Okay. Thanks.

Thanks, guys I appreciate it.

And then if you would like to ask a question. Please press Star then the number one.

We have no further questions. He may continue presenters.

Thank you that will be all for today appreciate in everybody stay well and and talk soon.

This concludes today's conference call. Thank you all for participating you may now disconnect.

[music].

Oh.

[music].

Good day, ladies and gentlemen, and welcome to the Hemisphere Media Group incorporated third quarter 2020 financial results Conference call. My name is John and I'll be your operator today.

A replay of the call will be available beginning at approximately one.

PM Eastern time today Monday November 920, 20 by dialing 8774971 for three six or from outside of the United States by dialing and she was 62.

Fivefive eight six to 90 the conference I'd for the replay is 93656, there or not.

I will now turn the call over to Danielle O'brien you may begin.

Thank you operator, and good morning, everyone I'd like to welcome everyone to today's conference call I'm, Danielle, Brian and I'm with element financial presentation atmospheres outside Investor Relations firm.

In addition, these.

These statements are based on a number of assumptions that are subject to change. Please refer to our company's most recent annual report on form 10-K, and our other public filings for a more complete discussion of forward looking statements and the 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.

A reconciliation of GAAP to non-GAAP information is included in our earnings press release, which was issued earlier. This morning, not exempt 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 Danielle and good morning, everyone I Hope you and your families and colleagues are staying healthy and safe we.

Our advertising growth significantly outpaced the advertising markets in both Puerto Rico, and the U.S. and is a direct result of our strong ratings growing viewership a compelling value proposition input.

In Puerto Rico, we saw a solid rebound in consumer spending and business activity and to help your advertising environment with the overall TV AD market up 12% versus 2019, excluding political the advertiser recovery of quota, Puerto Rico coincided with the resumption of economic activity and strong consumer spending fueled by the government stimulus.

Well I foresee the bulk of this higher spending increasing its share of the advertising market and driving its role but year over year growth.

I was able to achieve this growth as a result of its continued dominant ratings performance delivering the highest third quarter ratings in its history in the key advertiser demographics of adults 18 to 49 25 to 54, but.

For the fourth consecutive quarter Wapas ratings were higher than Univision and Telemundo combined the first time. This level of sustained dominance has occurred since Nielsen commence ratings measurement in Puerto Rico.

With the rescheduling of Puerto Rico's gubernatorial primaries from June to August political spending with different from the second to the third quarter WAPA secured over 1 million a political spending in Q3 consistent with our original expectation.

In the fourth quarter, we are building on our third quarter momentum and our performance to date has been tremendous October represented the highest AD revenue month for a while in its history and help make it hemispheres all time highs month, an ad revenues.

Even when excluding political revenue total was among the highest AD revenue month in our history.

I'm happy to announce that we have entered into a retransmission renewal agreement with the largest MPPD in Puerto Rico effective as of January 2021. This renewal or will result in a substantial increase in our retransmission fees and reflects wapas market strength and unique value proposition. It's.

Also worth noting that Puerto Rico cable subscribers, so a slight increase in Q3.

One final note on WAPA Wapas precedent hobby I'm going to let will resign at the end of the year hobbyist wife, and children that Miami and he has decided to relocate back to Florida to be able to spend more time with them.

Great work at WAPA, and we wish him the best.

Currently we have a terrific replacement for Javier and Jorge Dogle or has a long and very successful track record in Spanish TV, including executive Vice President in charge of the news and sports Division that Telemundo and has worked closely with Wapas news and production teams and the recent relaunch at our signature newscast.

Turning to our cable channels as I noted on our second quarter earnings call. We began to see a strong rebound in AD sales in July which continued into the third quarter. Overall, we saw a meaningful AD sales growth in Q3, driven by strong viewership at all of our networks have continued ratings growth and differentiated and valuable audiences.

Have any of the higher sell out and increased pricing even in a uniquely challenging environment.

Pat you want to increase its ratings by 17% versus third quarter of 2019, its 15th consecutive quarter of year over year growth.

Cinelatino gross ratings by 11% over 2019, and Central America David's ratings increased by an impressive 38% its ninth consecutive quarter of year over year growth.

WAPA America continued as a top five rated Spanish cable channel delivering large and loyal audiences with its unmatched coverage of the Puerto Rico elections, and the COVID-19 crisis.

Spanish language package.

With the proliferation of numerous platforms. We believe it will we will be able to generate meaningful revenue from licensing our deep library of content.

As I previously noted we've already entered into partnerships with Amazon in Latin America and to be and Pluto in the U.S. and Latin America. In addition, we now have agreements with Roku zummo, and the Spanish language platforms, canola and mix, while negotiating with others.

Turning to Colombia, and our investment it cannot who know the market remains challenged by the pandemic. However, most restrictions on business activity have been lifted and economic metrics are improving the advertising market has grown sequentially every month since may and we're optimistic that by year end spending will rebound to normalized levels.

Can I ask you know continues to outperform the overall TV market, while concurrently reducing costs to offset the revenue declines.

Hi continues to grow its subscriber base as the first and dominant spot offering dedicated to premium Spanish language movies as series.

Currently at 825000 paying subscribers.

Certain upon type reductions were impacted by the pandemic. However production has largely Brazil, including the next two seasons upon ties blockbuster series as weather than last year as a season two of their best family vacations, starting superstar any other vas.

We are very excited about and confident in the growth of Empire.

In addition to fantastic, we're exploring various direct to consumer opportunities leveraging our content ownership production capabilities unique understanding of the U.S. Hispanic and Latin American markets. The pandemic. It's also create a number been treating potential M&A opportunities, which are directly in our wheelhouse.

Thank you everyone I'll now turn the call over to Craig.

Thank you Alan and good morning, everyone.

Net revenues in the third quarter were $37.2 million, an increase of 4% as compared to net revenues of $35.8 million for the year ago period due to an increase in advertising revenue offset by decreases in affiliate revenue and other revenue.

Advertising revenue increased 27%, primarily due to the growth in advertising revenue across all of our networks as well as political revenue.

Excluding political total AD revenue was up 18% over the comparable period in 2019.

This increase compares very favorably to the 21% decline we experienced in the second quarter.

Affiliate revenue in the third quarter decreased 9% due to declining subscriber to our our us cable networks and a decline in non US revenue as a result, the subscriber and feed declines due in part to unfavorable foreign currency movements.

Other revenue decreased 47% driven by the timing of the licensing of content to third parties.

Net revenues for the nine month period period were $104.3 million, a decrease of 5% as compared to $110.1 million for the year ago period.

Decline was due to a 9% decrease in affiliate revenue and 2% decrease in advertising revenue offset in part by a 23% increase in other revenue.

Affiliate revenue decreased due to the decline in us cable network subscribers and a decline in non us revenue.

Other revenue increased driven by the timing of the licensing of content to third parties.

Operating expenses in the third quarter were $23.8 billion, a decrease of 6% as compared to $25.3 million for the year ago period. This.

This quarter, we operated at full production capacity and in fact produce more news programming due to extensive political coverage. The decrease in operating expenses was primarily due to a decline in stock based compensation and reduced marketing and research offset impart by higher personnel expenses and an increase in the bad debt reserve.

The third quarter also benefited from a higher gain from the FCC spectrum repack of 1 million as compared to 200000 in the same period in 2019.

[music].

Operating expenses for the nine month period was $77.9 million, an increase of 5% as compared to $74.3 million for the year ago period. The increase was due to higher programming amortization as a result of increased content license to third parties and higher production expenses related to get US a daily reality show at WAPA, which commence production.

Auction in May 2019.

This was partially offset by cost savings measures implemented in response to the COVID-19, pandemic, including reduced personnel expenses as well as marketing and research costs.

Adjusted EBITDA for the third quarter was $16.7 million, an increase of 6% as compared to $15.7 million for the year ago period.

Thanks to the balance sheet as of September Thirtyth, we had $205 million in debt and $118 million of cash. This represents an increase in cash of nearly 26 million since the start of the year.

Our gross leverage ratio improved to 3.4 times and net leverage ratio improved to 1.5 times.

Capital expenditures were $1.4 million in the quarter, bringing year to date Capex of 2 million as compared to $4.9 million in the same period of 2019. The decrease was due to the deferral of certain capital projects, which were moved to the back end of 2020 and into 2021.

Turning to strategic investments, we invested $1.1 million and canals during the third quarter, bringing our total year to date investment to $7.5 million down from the 27.4 million in the nine month period of 2019.

The decrease was primarily due to improved operating results the canal window.

[music].

At this time I would like to remind everyone. If you would like to ask a question press far one.

Yes.

We have a question coming from the line of Steven Hall from Wells Fargo.

Thanks, maybe just to start off on advertising. So it sounds like a lot of strength in the quarter I think you probably outperformed a lot of the media market in the us and so if you could just kinda talk on a core basis, how does that seem like Q4 is pacing are you out both in Puerto Rico and on the U.S. cable Knutsen and.

Hi, Steve I think.

Our results point to sort out the unique.

Leadership that we have and then in unique quality of our assets. We are seeing strong core growth in Puerto Rico in fourth quarter as I mentioned in October was the best advertising revenue month in our history.

That performance has continued into November to date.

And we have really good visibility on November four for both Puerto Rico and the U.S. So we feel very confident in in both markets US we've had strong growth in third quarter and that momentum has continued into the fourth quarter. So we feel very positive about fourth quarter and expect to see similar kinds of growth to what we saw in the third quarter.

Not potentially better.

Great and then on the sub decline front I mean, you talked a little bit about maybe what could be driving the improvement and the potential for VLP beauties is still be ahead, but I mean, it was a pretty big improvement over your sub decline level. In Q3 are there any new deals in there are changes the way your networks are distributed.

That's all organic.

As I've mentioned in past calls.

There are two of the large distributors.

And I really haven't heard other.

Other media companies talk about that in terms of breaking it down by distributor, but there are two a distributor is that have really adversely impacted our results.

And with one of the distributors, we've seen a significant improvement in their numbers and a significant decline in the velocity of their losses and thats largely accountable for our improved results.

No.

Our discussions with our discussions at that distributor they've expressed optimism that that trend will continue. So hopefully they are they are correct in that and that will continue to see better.

Better results and lower velocity of losses, if not a turnaround over the next few months.

And you mentioned the VNB PD is I mean, we think of that's almost 10 million subs, now and who you to ban and sling or the big ones.

Hi can you at least comment as to whether or not you are in conversation with like at least the major ones are all three of those yes.

Yes, we're in conversations with the major ones that I think honestly it is a.

He inexplicably all that none of them have launched Spanish language packages, particularly given the take up of Hispanics to digital platforms.

And and I think they will recognize that it's just a matter of a prioritization, but we have put been putting significant pressure on the major ones to launch Spanish language packages and they have indicated that there are there any intention and inclination to do so it's just a question of getting it done.

Great and then lastly.

Just wondering whether it's an hour or anything else in the investment portfolio do you have a lot of cash commitment for 2021 or do you expect that to be like flat to down year on year. Thanks.

Don't have commitments per se, but the ongoing.

Future capital requirements.

We think we'll be at similar levels.

To where we were this year, which is obviously down considerably from last year, and we are still expecting sequential improvement.

There's a lot of it depends on how the market recovers from the pandemic.

Great. Thank you.

I'm going to ask a question for star one.

Next question is coming from the line of Curry Baker from Guggenheim.

Hey, good morning, guys. Thanks for the questions.

Can you maybe give us some insight where you guys are at for political in the fourth quarter.

Yes.

We are we had a we had a good fourth quarter and political I would say.

Modestly exceeded.

Our expectations are a lot of Pac money came into Puerto Rico, and we secured a significant share of all that money.

Is there I think you said you came in about $1 million for the third quarter is there a number you can kind of put around that.

Okay. It will be higher in the fourth quarter, the third quarter was more on the primaries.

The.

The general elections here in November.

Which is sort of tracks, where we were in 2016, you would have seen an increase.

A higher level of political spend in Q4, and we expect this year to be slightly up over 16, and I think we guided we guided at the beginning of the 3 million to four all the pandemic everything we got at the $3 million expectation on political.

For us and and we somewhat exceeded that okay. No that's helpful.

On Penn tire.

Can you maybe talk more about kind of.

The addressable market. There I think you said you're at 825000 paid subs already.

Where do you think that business can maybe over the next couple of years and is there anything you can say just in terms of.

Where they are in terms of profitability.

In terms of the growth opportunity, we think it's significant we think that.

The market opportunities multiples of where it is today.

And we're not we're not in Pattaya for an 800000 sub business, we think that given given that there are 17 million. Hispanic homes in the U.S. given that this is a unique service given that this is the.

The first of its kind in the U.S. and as it then.

And it's really has no.

Rivals.

In its space, we think theres a tremendous opportunity for us.

Continued growth there.

And we haven't given specifics.

On.

On financial performance, but that appetite is getting close to breakeven.

Okay.

Thanks.

And this is kind of just in line with with the last part of that question.

You reported loss on equity method investments dramatically improved this quarter.

It is there any one time items in there or is this kind of.

New improve run rate just reflecting.

Better financial operations from the various investments.

Yes, yes, sorry.

Really two factors one is certainly the improved operating results that can help you know.

Which we expected.

Expected as we continue to grow our market share of the market and this is despite the negative impact of the pandemic. There is a little bit of impact from as you referred to sort of one time items in the sense of foreign currency movements that.

Contributing to the loss last quarter that flipped to again this quarter. So it's a combination of those two.

That's helpful and then lastly.

The balance sheet seems to be.

Good position.

What's the priority in terms of cash.

Cash in and are you guys seeing opportunities in terms of.

M&A and the market that you can take advantage of yes.

Yes, we are we think the pandemic has given rise to opportunities that were not there before you see companies that have assets that are not core to their business that they now are open to selling and disposing up because the because the reprioritization of their businesses and financial pressures. So so.

So we are seeing some intriguing and interesting opportunities that that we hadn't seen before and didn't are actively pursuing those.

Okay.

Thanks, guys I appreciate it.

Again, if you would like to ask a question. Please press Star then the number one.

We have no further questions you may continue presenters.

Thank you that will be offered today.

I appreciate it and everybody stay well and.

And talk soon.

This concludes today's conference call. Thank you all for participating you may now disconnect.

Q3 2020 Hemisphere Media Group Inc Earnings Call

Request a DemoDemo

HMTV

Hemisphere Media Group

Earnings