Q1 2022 Entravision Communications Corp Earnings Call
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Now I'd like to turn the conference over to your host Kimberly <unk> of Investor Relations.
Please go ahead.
Thank you operator, good afternoon, everyone and welcome to Entravision first quarter 2022 earnings Conference call I Hope everyone is staying healthy and safe joining me on the call today are Walter Ulloa, Chairman and Chief Executive Officer, and Chris Young Chief Financial Officer.
Before we begin I 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.
Please refer to Entravision SEC filings for a list of risks and uncertainties that could impact actual results.
This call is the property of Entravision Communications Corporation.
Redistribution retransmission or rebroadcast of this call in any form without the expressed written et cetera. So that distribute ship Communications Corporation is strictly prohibited.
Also this call will include non-GAAP financial measures. The company has provided a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures in today's press release. The press release is available on the company's website and was filed with the SEC on form 8-K.
In addition, all pro forma figures, including revenue operating expenses and consolidated adjusted EBITDA noted throughout the prepared remarks include the contribution from media Donuts and $3 65 digital in the prior year period.
I will now turn the call over to Walter Ulloa, Chairman and Chief Executive Officer.
Thank you Kimberly and good afternoon, everyone. We appreciate you joining us for Entravision as first quarter 2022 earnings call.
Provision is off to a very strong start for the year demonstrated by all time first quarter record revenue EBITDA and free cash flow as we continued to generate organic growth as well as expand our strategic partnerships.
Net revenue for the first quarter totaled one $197 2 million up 32% year over year on a pro forma basis revenue increased 24% over the first quarter of 2021. The continued growth of our digital segment combined with improvements in our core television and audio businesses drove.
<unk>, our strong growth during the quarter.
Consolidated adjusted EBITDA totaled $18 1 million for the first quarter up 28% year over year on.
On a pro forma basis, adjusted EBITDA improved 17% compared to the prior year period.
What is so impressive about our first quarter EBITDA growth is that we had $5 2 million of non returning operating cash flow from the prior year same period, and we still managed to grow EBITDA, 17% on a pro forma basis and post a record $18 1 million a first quarter EBITDA for Entravision import.
As even as our top line continues to grow we maintain a lean cost structure, having significantly reduced our expenses, particularly in TV and audio over the past few years. Our continued focus on expense management has helped drive our EBITDA and free cash flow generation, along with our ability to provide solid returns to our shares.
Holders.
Speaking of shareholder returns I am pleased to announce that our board of directors has approved a cash dividend for the second quarter of 2022 of $2 five per share payable to shareholders. On June 32022, We also bought back approximately one 1 million shares during the first quarter under our new $20 million of share repurchase.
Program.
With that as a background, let's take a further look at each of our three segments beginning with our largest digital.
Over the past decade, we have transformed entravision into a digital first powerhouse we started this.
This journey 10 years ago with a plan to reach the newly connected consumer first in the U S and in Spanish speaking territories, and then everywhere around the globe today, we serve over 800 clients each month with operators across 35 countries and campaigns running on five continents, we use advanced technology and best in class compliance.
Calls to unlock Entravision is full potential as a leading global digital player.
Back in 2012, our annual digital revenue totaled less than $5 million fast forward to the first quarter of 2022, our digital revenue totaled $153 7 million or 78% of consolidated revenue of 51% compared to the prior year period.
This substantial digital revenue growth over the past decade is made possible by our diversified digital advertising and technology solutions, which include our global commercial digital partnerships and <unk>, our programmatic AD purchasing platform. In addition, we offer other marketing solutions to small and mid sized businesses across the globe.
These solutions include branding mobile performance digital marketing services, featuring our mobile video AD network and audio AD, our digital audio network or.
Our global commercial digital partnerships unit includes Entravision Cisneros interactive in Latin America.
Provision media Donuts in Southeast Asia, and Entravision 365 digital in Africa.
Entravision Cisneros interactive continues to execute large digital AD campaigns on Facebook and Spotify throughout Latin America.
Advertising and marketing spend patterns of Facebook in Latin America still lag behind the United States.
The platform is in a high growth mode.
Due to our unique sales operation platform commercial partnerships and client relationships intravenous as narrow as interactive revenue grew 27% in the first quarter as compared to the prior year.
Yeah.
During the first quarter Entravision Cisneros interactive further expanded its commercial partnerships to become the exclusive partner of Roku in Mexico through this partnership Entravision is connecting brands and marketers in Mexico, with Roku advertising solutions, enabling better customer targeting and measurement along with access to premium advertising.
<unk>.
Then just after quarter end Entravision Cisneros interactive announced an exclusive partnership in Latin America with Enzo one of the world's most advanced in game advertising platforms. This partnership with Enzo allows entravision to be at the forefront of innovation when it comes to in game advertising <unk>.
Entravision media Doughnuts, and Entravision 365, digital also delivered very strong growth in the first quarter Entravision media Donuts in Southeast Asia grew its revenue on a pro forma basis to 80% in the first quarter versus the prior year same period 365. Digital also saw also saw a significant expansion of its top line following the launch of <unk>.
<unk> sales representation with Tic Toc in South Africa in the second half of last year 365 digital also exclusively represents <unk> in South Africa. Meanwhile, just yesterday, we also announced the expansion of Entravision 365 digital into Kenya, as we expand to new emerging markets.
It is clear that our global commercial digital partnership space is growing and importantly, we continue to work with leaders across the digital media and technology spaces that are early movers in the respective geographic regions.
I'd like to focus briefly on <unk>, our programmatic proprietary DSP AD Tech platform.
Since we acquired <unk> roughly five years ago. The units revenues have increased 10 times and for the first quarter of 2022, <unk> revenues improved 160% as compared to the prior year period.
<unk> highly competitive efficient and transparent offerings, including hyper targeted ads machine learning algorithms and multi dimensional custom reporting remained a go to for the gaming Fintech and mobile delivery industrial industries.
<unk> continues to set monthly revenue records and we are committed to bringing this offering to our existing client base across the globe.
Even with his exceptional performance as I highlighted last quarter. We believe the aesthetics is still in the very early stages of its growth potential.
Now, let's turn to our television segment, which comprised 16% of revenue for the first quarter TV revenue was $30 9 million in the first quarter down 14% compared to the prior year period, we anticipated our TV revenues to decline this year, primarily due to the loss of three Univision affiliations at the end of 2021, excluding those.
Three affiliate markets total TV revenue was up 1% year over year, excluding those three affiliate markets and $1 3 million in political spend in the first quarter of 2022 core TV advertising increased 4% national core advertising revenue decreased 2% in local core advertising revenue increased 8%.
Year over year.
In terms of advertising categories, the audio category and in particular, new car sales continue to face supply chain pressures, excluding the three Univision affiliations that we no longer operate auto AD revenues were down 70% in the first quarter year over year on a favorable note. We are seeing some improvements in auto ad spend.
As we begin the second quarter and believe that auto advertising will continue to slowly improve throughout the year as inventory supply returns to meet demand offsetting autos declines excluding the three Univision affiliate. So we no longer operate travel and leisure was up 141% compared to last year's Saint <unk>.
Telecom grocery retailer product brands also had strong growth in the first quarter compared to the prior year same period.
We're also looking forward to the return of political AD spend this year and continue to anticipate approximately $11 million of total political AD revenue in 2022, Entravision local TV markets are situated in the states, where political and messaging to Latino voters remains a top priority for both parties as well as special interest groups case in point in the first quarter are on our own.
And operated television stations, we booked approximately $1 3 million in political AD spending largely related to the primaries in Texas. In addition, with California, considering legalizing sports betting we anticipate a robust year for political ad spend.
Turning to our ratings performance, our Univision television affiliates built upon their market leadership in the February 2022 suites for adults 18 to 49 in early and late local news our Univision television stations finished ahead or tied with their Telemundo competitor in 12 of 14 markets, where we have head to head competition.
Additionally, our early local newscasts are ranked number one or two against English and Spanish competitors in eight markets. Our late local newscast ranked number one or two against English and Spanish competitors in 11 markets.
Finally, let's turn to our audio segment, which comprised the remaining 6% of first quarter revenue audio revenue totaled $12 6 million for the first quarter up 11% compared to the prior year period, primarily due to the <unk> to an increase in local revenue excluding political spend of $327000 in the first quarter of 2022 core audio revenue <unk>.
<unk>, 9% versus the first quarter of 2021 execution across our audio business remained best in class as we continue to manage our expenses in our local advertising business grew the audio segments cash flow generation during the first quarter improved 97% year over year.
Intravenously unique audio content attracts a vast and growing Latino audience in fact buyers of advertising space on a 46 radio properties.
So our first quarter performance for audio segment sets the stage for a strong for 2022 and I want to thank our entire team for their incredible effort and performance before I speak further I would turn the call over to Chris Young are CFO to discuss our first quarter performance in further detail and to provide our second quarter of 2022 facing Chris.
Thanks, Walter and good afternoon, everyone is Walter discussed revenue for Q1, 2022 totaled $197.2 million, an increase of 32% from the first quarter of 2021 for.
For our digital segment revenue totaled $153.7 million in the first quarter up 51% year over year and up 38% on a pro forma basis as compared to Q1 of last year.
For our T V segments total revenue was $39 million in the first quarter down 14% year over year, excluding political poor advertising revenue was down 20% year over year. However, excluding the revenue impact from the three discontinued Univision affiliate at the end of 2021 total revenue increased 1% year over.
A year.
Retransmission revenue for the quarter totaled $9.2 million, which was down 5% year over year also due to the loss of the three discontinued Univision affiliate.
Lastly for audio segment revenue totaled 12.6 million in the first quarter up 11% from the prior year, excluding political core audio revenue was up 9% over Q1 of last year.
Operating expenses in the first quarter of 2022 totaled $43.9 million up 9% from $44 million in the prior year period X.
Excluding operating expenses related to our immediate doughnuts and 365 digital acquisition operating expenses were up 3%.
Corporate expenses increased by 22% of total eight 7 million for the quarter compared to $7.2 million in the same quarter of last year. The primary drivers of corporate expense increases were increases a non-cash stock based compensation expenses salaries and audit fees.
Consolidated adjusted EBITDA totaled 18.1 million for the first quarter up 28% from $14.2 million in the prior year period.
Free cash flow as defined in our earnings release was $14 $3 million and a quarter or a conversion rate of 79% of adjusted EBITDA compared to $13 million in the first quarter of the prior year.
The looted earnings per share for the first quarter of 2022 were two cents compared to six cents per share in the same period last year.
Excluding a non-cash charge of $5.1 million relating to a change in fair value of contingent consideration earnings for the first quarter of 2022 were eight cents per share.
Cash pay for income taxes was $1.2 million for the first quarter net cash interest expense was $1.2 million for the first quarter compared to $1.4 million in the same quarter of last year.
Cash capital expenditures for Q1 totaled 1.5 million, we expect cash capex. The total roughly 12 mean for the full year.
Turning to our balance sheet, which remains rock solid as illustrated by a recent that ratings upgrade by standard and Poor's cash and marketable securities as of March 31st 2022 totaled 211.6 million.
Total that was $211 $8 million net of 75 million of cash and marketable securities on the books are total leverage as defined in our credit agreement with 1.5 times as of the end of the first quarter.
A total cash and marketable securities are total net leverage with zero point zero times.
Turning to our pacings for the second quarter of 2022 as of today revenue from our digital segment is pacing plus 34% over the prior year factoring in media Donuts and 365 digital revenue generated in Q2 of 2021, our digital segment on a pro forma basis is pacing and plus 23%.
Our T V segment is pacing minus 10% over the prior year period with Court T V advertising, excluding political book, thus far in the quarter pacing at an minus 14%.
As we noted last quarter, we do expect our T V revenue to decline in 2022 from the loss of the three of art Univision affiliates.
That said, we more than make up for any T V revenue decline with our digital segment performance.
Excluding the impact of our three lost T V affiliates T V is facing a plus 1%.
Lastly, our audio segment is pacing plus three per cent over the prior year period with core audio excluding political pacing at a plus 2%.
All in our total revenue compared to last year is pacing at a plus 23% on a pro forma basis or total revenue is currently pacing at a plus 15% over last year with that I'll turn the call back over to Walter Walter.
Thanks, Chris <unk>.
Last year marked 2050 year as a company at that time, if you look at a map of our operations that you'd see on television and radio stations planted across the United States. Today, We are global advertising solutions of media and technology company with operations spread across five continents in 35 countries.
It is apparent from both our first quarter performance in second quarter patients that Entravision business remains on an upward track. We are excited about the enormous opportunities in front of us as we continue to invest in the future of digital just last week, we announced that we entered into a definitive agreement to make a strategic investment and Jack of digital which has an exclusive commercial partnership with Tictoc.
And Pakistan.
Subject to regulatory approval and other closing conditions, we anticipate that the investment will be completed during the second quarter of 2022 with this investment and Jack of digital we expand our global commercial partnership reach into South Asia, a region, which comprises 22 per cent of the world's population.
As you have seen with each of our digital acquisitions, thus far all of which have been accretive entravision provides the infrastructure entrepreneurial digital first companies. So that their teams can focus their local expertise on crafting solutions and growing their business, while entravision expanse and enhances its digital offerings and capabilities.
As Chris noted earlier, we have a very solid balance sheet that provides us the ability to make additional investments based on cash on hand, but can also take on additional leverage down the line should a larger acquisition opportunity arise with the transformation of our business and overall go to market strategy. We continue to believe that our value proposition for both our investors and advertising class.
I've never been stronger we position ourselves to partner with some of the largest most innovative digital companies today, and we look forward to sharing our success along the way.
That concludes our prepared remarks I want to thank you again for your continued support of Entravision Christian I would like to open the call to your questions operator.
Thank you very much.
At this time, we will be conducting a question and answer session.
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One moment, please while you were thoughtful questions.
We have a first question from the lineup Michael.
Michael Kamensky with the capital markets. Please go ahead.
Thank you thanks for taking the questions good afternoon.
Congratulations I mean, just spectacular numbers.
Guys are just kicking it right now a couple of questions I have your first of all just add a line item here can you talk a little bit about direct operating expenses that number came in lower than I was looking for and I was just wondering if you can just kind of give us some thoughts I know that you know some of the states and stuff might be factored in there, but can you kind of it was there any.
Thing special on that order that I should look for.
Michael Hey.
Television was down 4% all in radio was down 4% all in digital was up consistent with where the revenue growth. So there wasn't anything extraordinary in particular about the quarter.
As far as expenses were concerned.
Gotcha and then.
Just in general you know we're hearing that.
National advertising is a little softer and you know maybe maybe because of concerns there was inflation and let you know people were talking recession, and so forth, but could you just is there any variance in terms of what you were saying I know, it's very difficult to break out national out of some television radio but are you seeing any bearing some other key categories and.
Things like that that might be viewed as national advertising versus local.
Will auto is obviously choppy for reasons that we've talked about before the call I don't think there's anything clearly the local businesses strong the national business is a little choppy.
But.
That's probably going to persist for a couple more quarters.
But but yeah generally speaking the local side of the business is stronger than the national side.
And certainly your your digital business that are just going growing so rapidly I mean with the.
What how would you anticipate that that business would react if we do see a slowdown maybe a global slowdown what what are your thoughts in general about how your digital business could perform in that environment.
Well I think the digital businesses prime for growth regardless.
We're not in Russia, we're not in the Ukraine, we're in an area, particularly in Latin America that is instill high growth mode.
Facebook talked about their numbers and their first quarter call. They did 23% in Latin America, and the middle East and we outpaced that as far as our own Latin American growth was concerned for Facebook. So.
We think we are in great shape, regardless, and we're going to have to see how things play out on the macro scale.
Plus obviously.
Michael has a unique place in the world and high growth countries that we operate in so we're also very pleased with the growth.
And with media Donuts, they grew 80% pro forma versus a Q1 2021.
So obviously you guys are building a big cash position with this lots of free cash flow.
What is the allocation of cash at this point what do we.
Are there M&A opportunities that you're looking at certainly I'm looking at the stock in the aftermarket here 514 or five O. One it's just incredibly <unk>.
Scratch my head why the stock is so cheap but did you have any thoughts in terms of maybe increasingly share repurchase <unk>. Just did a is doing a Dutch auction I mean, what are your thoughts about do a more aggressive on the stock repurchases here.
Well, we don't necessarily disagree with you we have a share buyback program in place. We are actively working on the M&A front to put the cash to work that we do have.
We'll revisit the dividend policy in the buyback policy at the next board meeting.
And we will keep everybody posted.
Okay, well, that's all I have congratulations great quarter.
Thank you Michael I appreciate it.
Thank you.
We have a next question from the lineup James Dick's with industry Capital Research. Please go ahead.
Hey, good afternoon, guys just wants to drill down a little bit on what Michael was asking about on the digital side are you seeing is there any particular regions I mean now that you're in over 30 countries, where you would call out either you know some positive or negative variances versus what you were expecting in terms of the growth.
Mmm any regions that are operating differently than we had anticipated.
Yeah on the on the top blindsided anybody who's really either outperforming or maybe even lagging a little bit versus what you expected across your geographies.
Smacks platform is really beginning to shine they increased revenue almost two times over prior year and what we're doing is we're getting that product.
Distributed globally sales front, and that's really exciting other than that regionally just looking across the board. We had stellar performances from basically all of our digital platforms and I wouldn't necessarily call once beyond <unk> Nacional just outperformed our expectations okay excellent.
Convert our global commercial digital partnership as it sounds everywhere.
And America, Southeast Asia, and South Africa, as Chris pointed out that <unk> had a tremendous quarter.
We were expecting even that growth to continue into Q2 and beyond and are you guys digital business had a great quarter.
Gaming and Fintech in particular are two vertical that have really taken off across the board with us and that's exciting to see and I don't I don't see that realistically changing materially.
Even with the turbulent macroeconomic environment that we're in.
And that you mentioned you you've been rolling out smacks to more and more clients any any sense as to.
Roughly how how much more of your client basis. You know you have to really be pitched hard with smacks to to understand what its potential is.
Like it's just another half of your client base or yeah or more than half and we think.
We think the potential for Spanish is tremendous.
We are now marketing the product and and the southeast.
The Southeast Asia region.
We're looking at opening an office in Japan, we're doing well the United States.
Well in Europe , So I think the the potential for increased revenue in that kind of growth were seamless maddux is.
It's very very strong.
Okay, Great and then I'm just on the M&A front.
Any sense as to how long it's gonna take I mean is it kind of another six months or you know before you'd be able to decide I'm pulling the trigger on some of these I'm. Just curious you know given the macro and everything.
It's the pace the cadence of the deals kind of slowed down or sped up.
Well, we spent a lot of time on M&A.
James and.
Looking for companies a stick in the digital.
You know digital business.
That are they have the right valuation.
And the right strategic fit and so.
Well you know we're looking at the number of companies right now.
See how.
It turns out.
Okay.
And then just following up on the share repurchases I mean, how.
How should we think about the maximum scale of repurchases that you'd consider I mean is it.
You know daily volume limitations in the stock or I mean, just relative to the <unk> you know, but the cash on your balance sheet that it doesn't seem like catching your balance sheet would really be much of a limitation. So I'm just trying to understand a little bit about how you. How you look at the rest of the authorization being applied.
Think we want to get into the details of how we're going about it we've got a little less than half of that 20 million that basket.
Buyback basket approved.
Used so we will continue to be active on that front and.
We'll see how that goes.
Okay, you say a little less so you you did around 7 million correct in the quarter.
And then we did some and cute too so we.
So far.
Got it in and out of the 20.
Okay.
And then on the the non-cash charge I guess that relate to the <unk> Ah the contingent consideration for some of your details.
Anything in particular, we should be looking at like what what that related to while.
While the digital businesses are outperforming so we schiavo. The sellers is on the back end of that payment and so as the business outperforms the amount that we potentially kudos them on the back and also increases so you've got to run that through the P&L.
Below the line.
Okay. So that wasn't just related to one particular deal it was kind of a <unk> more than that's right yes.
The two of yeah, Okay, and then just laughs for me anything we should be thinking about in terms of the income statement impact from your your deal for Jakob digital or is it still a little early to say just give it hasn't closed yet.
It's still early yeah okay.
Okay, great. Thanks, very much thanks to our next James.
Thank you we have a next question from the line up Lisa Springer with Cingular Research. Please go ahead.
Good afternoon.
Mmm.
My question concerns your partnership with Andrew in Latin America could you comment on the opportunities and what kind of birth rate you seen in the in game the advertising market versus more traditional digital advertising like Facebook and tick tock.
Well, we just launched that business or that I should say that partnership here recently, so it's still early but.
And just one of the Premier.
Game manufacturers or producers in the world and so we think that the potential for Upticking Latin America for that businesses.
It's pretty pretty strong and so we have great hopes about it as we rolled into the second half of the of the year and into 2023.
Okay and regarding the jack-up digital investment are they strictly in Pakistan or did they already have reached into surrounding countries as well.
No it's strictly Pakistan, but there is an ambition internally to expand into other countries as that business develops.
Okay. Thank you.
Thank you.
Thank you ladies.
Ladies and gentlemen, you have reached the end of the question and answer session and I'd like to turn to call back to Walter <unk>.
Chairman and CEO for closing remarks over to yourself.
Thank you.
Again, everyone for joining us today and for your support and we look forward to sharing a progress with you on our second quarter earnings call in early August .
Have a good rest of the day.
Thank you very much ladies and gentlemen this.
Today's conference.
Connect your lines at this time, thank you for your participation.
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