Q1 2022 Spanish Broadcasting System Inc Earnings Call
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.
Please note. This event is being recorded I would now like to turn the conference over to Brad Edwards. Please go ahead.
Thank you Andrea and good morning, everyone. Before we begin please recognize that certain statements on this conference call are not historical fact may be deemed therefore to be forward looking statements under the private Securities Litigation Reform Act of 1095.
In particular statements about future results expected to be obtained from the Companys current strategic initiatives are forward looking statements.
Many important factors may cause the company's actual results to differ materially from those discussed in any such forward looking statements Satish broadcasting system undertakes no obligation to publicly update or revise its forward looking statements.
Please also note we will be discussing non-GAAP financial measures. The company believes that operating income or loss before depreciation and amortization gain or loss on the disposal of assets recapitalization costs and other operating income or expense, excluding noncash stock based compensation or adjusted <unk>.
Is useful in evaluating its performance because it reflects a measure of performance for the company stations before considering costs and expenses related to capital structure and dispositions.
This information is not intended to be considered in isolation or as a substitute for operating income net income or loss cash flows from operating activities or any other measure used in determining the company's operating performance or liquidity that is calculated in accordance with U S. GAAP.
A reconciliation of the Companys U S. GAAP information to adjusted Oi BDA is provided in the tables attached to the company's 2022 first quarter earnings release, which is available on the Investor Relations section of the company's website at Www Dot Spanish broadcasting Dot com.
I'll now turn the conference over to Mr. Albert Rodriguez.
Good morning, ladies and gentlemen, welcome to the Sps 2022 earnings conference call on today, we will provide an overview of recent operating developments and review our financial results. Joining me today are Jose Molina, our Chief Financial Officer, and Richard Laura <unk>, Our General counsel.
Cool.
Our first quarter results are a strong start to the year and build on the momentum we've generated during 'twenty 'twenty. One our team is executing at a high level and the power of our audio network and digital.
And mobile assets.
Never been clearer.
Our performance in the first quarter was among the best in the industry and our radio business in particular had incredible solid results, we delivered radio revenue growth of 75%.
Adjusted Oi BDA growth.
151%.
And operating margins far superior to both our Spanish and English language peers no one in the radio industry, even came close to the performance of Spanish broadcasting.
Our compelling station formats unique digital and mobile content and deep connection with Latinos across all of the markets. We serve continues to drive strong financial performance and multi platform audience growth.
This past quarter, we closed on the acquisition of two audio stations in the Orlando Tampa area, which made us the largest Hispanic radio operator in the state of Florida.
We moved quickly to introduce a compelling ozols Spanish profitable format at both stations and the reaction from the listeners have been fantastic.
Our first quarter results are any indication 2022 is going to be another amazing year for Sps, our brand partners and the communities we serve.
Now, let's review our operations and we'll start with the <unk> radio networks for the first quarter Iot radio networks outpaced the marketplace by 27%.
Network was able to widen the gap and had strong categories in this period.
Such categories included retail plus 155% government, 148% pharmaceuticals, plus 72%.
<unk>, plus 94% and general services plus 24%.
<unk> continues its commitment to super serving Hispanics and asserted.
<unk> as the largest minority owned and certified Spanish language audio network in the nation.
Our competitive advantages include 95% reach of the U S. Hispanic audience with adults 18 to 49.
15 million weekly listeners across 100 markets nationwide.
And the top 50 U S. Hispanic markets.
One of the key highlights for ideas initiatives include <unk> morning show La Mex platform, Alex sensation, the Influencer network delivering campaign messages through our national platform, while penetrating local markets.
Press the center.
Where brands are aligned with Latin artist.
For the first quarter of the year, either radio networks was up 34%.
Miller Kaplan reported the market up by almost six 7%.
It could easily be the total market in terms of revenue growth.
Turning to our audio division, where we are number one in our top markets across the nation with unrelenting, what solid ratings performance and listener growth are rooted in hyper local super serving of the Hispanic community has driven our success we have content.
And personalities that listeners just absolutely love to listen to New York, We report again and again and again that we are the most potent audio Campbell and all of the five boroughs proof of the synergy and passion of Sps team.
<unk> Mega 97, nine FM is the number one audio station in the nation.
And with WP DFM $93, one or more we have the number one and number two station in New York City.
Genuine involvement and listener appreciation of the New York. Hispanic community has allowed us to build and Shakeel.
Beatable.
Listener relationship.
<unk> 97, nine in WP 18, $93, one or more.
The top stations in the market regardless of language.
Our online digital stream ratings indicate led WSJ Cuba.
<unk> is the fastest and number one most listened to station in New York in any language formats, and all of the top demographics, each quarter and year after year.
No one in New York City has the digital stream ratings Ws kick you has it does not exist no one is even close.
We continue to innovate in our opportunities for growth.
And the audience and revenues for example, we have launched a new initiative or program. The team has created new original and audio on demand content available on <unk> dot com our content.
Is far superior than any of our peers or competitors are content is at Hollywood quality <unk>.
And best moments of our top shows across the nation are now available on a mostly got dot com.
We are now turning to Los Angeles, we're excited to announce the launch of our modern not Haley our morning show on <unk> Mega 96.3, FM. This is no ordinary morning show. They are married coupled with over 18 years of success on day, one of launch arm their new home or streaming.
<unk> more than tripled in audience. The show is funding that is unexpected.
<unk> moments.
The listeners have spread the word amongst friends and family that are modern not hail you are now on Mega 96, three FM K, so well Los Angeles just months after returning to his home. These are 81 is now the number one Spanish rated afternoon show adult 18 to 34.
Or Monday through Friday on K <unk> Mega 96, three FM from three P. M to six P. M. <unk> La Raza is the number one Hispanic regional Mexican station.
And our morning show <unk> com.
That really is the number one morning show among all stations regardless of language his commitment to the community providing food wellness information and original fund Entertainment makes us the number one morning show among all Hispanics in the entire Los Angeles area.
Puerto Rico's ratings have absolutely exploded.
The station with the number one in just about every single demographic group WOD a loved 194 number 118 to 34 WMA Dream Mega $106 nine number 118 to 49 and WC empty is number one with men 25 to 54.
In Miami <unk> data 92.3 is that the top of the morning.
With audio and video journalist ask or answer and it remains number one overall weekly with adults 18 to 34.
WMC Jr. Zoe is gearing up for our upcoming Miami bass concert a highly anticipated of empire listeners that create excitement in the market.
W. RMA Rip Moe 95 is at the heart of the Cuban community and this is the home of the unique blend.
Sounds an artist exclusive to the station not heard anywhere else.
Written low 95 seven.
Only station that has established a powerful connection to listeners and clients in Miami with its continuous support of community efforts. Our overall station impressions continues to surpass the vast market.
According to Miller Kaplan.
First quarter marked our 21st back to back quarter of outperformance as we beat our competitors.
By over 300 basis points now.
<unk> Mega TV, where our national footprint remains more than 21 million homes via our cable and satellite broadcast partners.
One time content remains an area of focus and we are making progress driving audience growth among critical demographic groups, turning now to our live events Division SBS Entertainment also produced and delivered the first ever.
Three days sold out Kelly best concert in L. A.
On January 14th through January 16th.
<unk> Entertainment also launched the first ever Latin Festival commemorative NSP celebrating the 15th anniversary.
Of the <unk> brand.
<unk> Las Vegas, and the CMS umbrella under held in January also saw record breaking attendance and revenue outperforming all prior years.
Based on the momentum and performance of the Entertainment Division the company has focus.
Bus calendar of events in 2022 include Mexican regional format concerts and markets like Chicago, San Francisco and Los Angeles.
The Entertainment Division is also developing strategic partnership with co promoters in markets like Orlando, Puerto Rico to expand its existing heritage shows.
The Division currently has over 16 shows scheduled just this year alone, which is an increase of over 100%.
Now turning to our mobile and digital platforms and strategic initiatives over the last several years, we have had great success transforming SBS into the leading multi media. Hispanic media company period.
Today, we connect brands with more Hispanic than ever before and our aggregate audience continues to expand.
For our brand partners. There has never been a more important time to have a Latino focused marketing strategy and outreach program.
Dino population is growing rapidly inside cultural influence and tremendous purchasing power.
<unk> has the multimedia assets the reach in over four decades of experience and commitment to the Latino community across the U S. As such we can deliver compelling and integrated advertising opportunities like <unk>.
Cross all over major media platforms and offer access to coveted demographic groups as I stated our aggregate audience.
<unk> the Roe.
As of March 30th our total audience was up 22% compared to Q1.
For years, our La Musica platform reaches $1 8 million people, who combine for over 19 million screaming hours per month use.
Usage and adoption of <unk> continues to accelerate as it offers a truly unique mobile and digital experience, including original daily video content short form programming millions of songs and a personalized experience.
Overall, we have placed strategic emphasis on identifying new digital revenue streams as well as increasing our CPM on existing digital offerings.
During the first quarter, our streaming audience surpassed $1 7 million per month. This audience delivered 52 million listening hours and over $46 million total sessions in the quarter.
Given Hispanics heavily heavily over indexed on mobile phone ownership and usage mobile remains the primary driver of our mobile digital traffic and accounted for approximately 95% of our total digital traffic in the quarter.
In the first quarter I must take a had a record of 500 million audio AD impressions. In addition to the $140 million display impressions and $90 million video pre roll impressions, a key driver of growth in streaming hours and sessions has been the expansion of our la Musica user base as well.
Increasing consumption of our podcast in platelets products with an average time spent listening of over 45 minutes at the most popular categories. We have added over 20, new shows in Q1 to a podcast offerings and we expect a tremendous growth on this category for the rest of 2000.
'twenty two.
In summary, the first quarter marked a strong start to 2022, we delivered a strong financial performance and we have sustained momentum.
<unk> generated during 2021.
Our audio business will be further strengthened by the addition of its store Orlando and Tampa stations, and we continue to meaningfully grow our aggregate multi platform audience. In addition, our digital and mobile engagement metrics continue to grow and we are connecting leading national.
Brands with highly engaged Latino consumers in more ways than ever.
We had a strong 2021 and entered this year with significant momentum across our business. Our first quarter results demonstrate our ability to build on that momentum and deliver industry leading growth.
We could not be more excited about the year ahead. These are exciting times for SBS and we see a number of opportunities to drive accelerated growth and deepen our connection with Latinos across the communities.
We serve.
This marks the fourth consecutive quarter of Sps generating revenue at much higher levels than we were at the pandemic.
Thanks for your time and your attention now let me turn the call over to Jose Molina for the financial overview.
Andre.
Thank you Albert now turning to our first quarter results.
Our consolidated revenues totaled $40 4 million compared to $24 6 million for the same prior year period, resulting in an increase of $15 8 million or 64%.
Our radio revenues totaled $38 million, increasing $16 3 million or 75%.
This growth was primarily due to increases in special event revenue and local network and digital sales.
Additionally, our radio revenues exceeded the same pre pandemic period in 2019 by $4 million or 12%, which marks the fourth consecutive quarter that radio revenues are about 2019 levels.
Our television revenues totaled $2 4 million a decrease of approximately 500000.
Our 18% due to lower national barter and local sales.
Our consolidated adjusted EBITDA, a non-GAAP measure totaled $6 7 million compared to $1 4 million for the same prior year period, representing an increase of $5 3 million.
Our radio adjusted EBITDA increased $7 1 million, primarily due to the increase in revenues of $16 3 million, partially offset by an increase in operating expenses of $9 2 million.
Our radio station operating expenses increased mainly due to special event expenses compensation and benefits local commissions advertising and promotions travel and entertainment expenses music license fees and butter barter expense, partially offset by decreases in the allowance for doubtful accounts and professional.
Fees.
Also and again for the fourth consecutive quarter, our radio adjusted <unk> exceeded the same pre pandemic period in 2019.
Our TV adjusted <unk> decreased approximately $400000 due to the decrease.
And revenues.
Corporate expenses increased $1 3 million, primarily due to increases in compensation and benefits travel.
Travel and entertainment and outside services operating income totaled $5 8 million compared to a loss of 800000 for the same prior year period, representing an increase of $6 6 million.
Capital expenditures during the first quarter were approximately $710000 as of yesterday, we had cash on hand of approximately $8 million.
In addition, we have an undrawn $50 million revolver fully available if needed.
On April 29th.
We closed on the acquisition of our two new FM radio station in Orlando and Tampa for a purchase price of $12 $5 million, we use cash on hand to fund these acquisitions.
This will conclude my formal remarks, and with that I would like to turn the call over to the operator for any questions operator.
We will now begin the question and answer session.
Ask a question you May press Star then one on your telephone keypad.
If you are using a speaker phone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two at.
At this time, we will pause momentarily to assemble our roster.
Okay.
And our first question will come from Tim Daggett of RBC. Please go ahead.
Hey, guys. Thanks for taking the questions good morning.
Hi, Good morning could you talk about the trends that youre seeing in the second quarter on both the radio and the television side I guess, we're halfway through the quarter kind.
Kind of what Youre seeing now.
I can tell you that national is up mid to high single digits.
Network is exploding network isn't.
The high thirties forties.
We're seeing the highest gain.
In the company's history and network.
Local is going to be up a few points.
And.
We're doing a concert this month.
<unk> solid.
Solid projections on that here in New York.
We are very high.
Estimates for sponsorships.
So we're feeling really good.
Yeah.
Okay.
Great and then looking at the outlook for 'twenty, two I know, we've talked before about the path to getting over $50 million of EBITDA does that still seem reasonable given the first quarter and kind of the outlook in the second quarter. Do you think we can hit our surpassed $50 million of EBITDA number in fiscal 'twenty two.
That's certainly the target.
We were very optimistic about this year.
There's going to be a lot of political money.
Coming in and Spanish broadcasting because of the technology and the reach of the content that we have we will be in pretty much every single swing state in the nation with respect to political advertising. So very very excited about that our programmatic revenue.
He has absolutely gone through the roof and continues to grow with.
Certain deals that we've done so we're very optimistic about 2022.
Great and then we think about the M&A environment. What are you seeing out there in the market in terms of multiples you know assets for sale I know you made the two recent purchases what are you seeing in terms of your more potential opportunities to buy some stations in the market.
Look after the company's successful.
After the company's successful refinance.
We are very well positioned to grow our platform because of our content and because of the 2020 census was shown.
The Hispanic group in terms of being the biggest continuum.
The biggest minority but grew faster than every single other group so theres Hispanics across the nation, if theres stations, what makes sense for us and the number is right. That's something we're very open to we are 100% in the growth mode.
Because of the audience that we serve.
And technology, we are with our technology.
Broadcaster for radio is the best compared to where like a silicon Valley technologically advanced audio and video company.
And the reason for that is because we have the number one station in America, which is in New York matter and at the same time, let's.
What is the number one station, which is more than we are.
On the broadcasting side.
And on the streaming side.
So we are uniquely qualified because of the technology. The team the programs that we have we feel we are best in class in audio and screening period.
Awesome, and then maybe like longer term.
The business is executing at a very high level it looks like the longer term plan for Spanish So maybe three to five years out where do you see yourselves do you see as the potential sale to somebody else.
Getting bigger through acquisitions, maybe selling your TV business.
Where do you see yourselves.
Three to five years out and that's it for me thanks for taking the questions.
Thank you Luke.
That's more of a question for the chairman, but in terms of executing the chairman's vision. The chairman's vision right now is growing Hispanic.
And the platform that we have so we are total growth mode.
In my mind.
In my opinion I don't see it.
Uh huh.
So right now he is.
Vision is 100% with respect to the Hispanic market has boomed and grown.
He is going to continue to focus on growing our footprint footprint because our content is so relevant.
So we're in 100% growth mode.
Okay, great. Thank you guys.
Thank you Tim.
The next question comes from Matt Swope of Baird. Please go ahead.
Good morning, guys good morning.
Just follow up on the TV part of that last question from Tim.
This is a business that just has felt sub scale for a long time is not probably producing the kinds of numbers you want but what is the plan with TV would you be opening to sell that or would you actually wouldn't be looking to acquire to sort of.
Improve the scale there how do you look at that.
Look right now we're investing in our content, we're up for a big political.
Susan.
We're going to be announcing something very big.
On television.
I'm just going to be good in terms of content and we hope to monetize on it we're also gonna be releasing.
Releasing our app on TV now.
All the.
The TV broadcast market has been challenging obviously with.
With linear TV video and where the screaming division as longhorn so but.
Hmm.
If something were to if there will be an opportunity for someone.
To look at the TV outside obviously, it would have to make sense for us but for right now we're focused.
On growing our content in an investing on our content and making sure we're ready for this.
Very busy political season and.
Right. After the mid terms, we're going to go full force with the presidential election cycle. That's what we're hearing from both sides of the party. So we've been making sure that we invest in the right news to make sure.
Our content resonates with the upcoming political seasons, both of them, which are back to back very very soon so.
Got you. Thank you that's helpful and then maybe one for Jose on the capital structure.
You guys have you guys had a nice job with cash or up to up to close to $20 million at the end of the quarter. We've got this really Tim.
Tumultuous market right now is there any opportunity to buy your bonds back at a discount or to delever via debt reduction in any other way.
Look we look at the market and we're open to suggestions and we look at these things, but at the moment right now where we're looking to invest into the business to delever by growing EBITDA.
That's our current current strategy right now, but look I mean, if opportunity presents itself absolutely we'll look at it.
Got it great. Thanks, guys.
Thank you.
The next question comes from Matthew Sam Schaefer of Meso row. Please go ahead.
Good morning, Matthew.
Good morning.
I wanted to go back to the the political topic did you guys generate any political revenue this quarter.
We've generated regenerate some advocacy.
But the big political is going to be starting very soon so.
So it will be kind of a stop.
And after labor day.
Where.
That's where the big buys come but were very very very active right now.
On negotiating deals with both sides both parties.
Okay, and you still think Youre on track for there was a $12 million to $15 million dollar number that.
I was thrown out on our previous call.
Look thats, what our target is.
Okay.
And being that we're gonna be in so many of the swing states because of our audio platform.
We're going to get by them pretty much every single State, Georgia, Pennsylvania, Rhode Island.
Michigan.
Arizona, New Mexico, Nevada, and a lot of local races.
Other states are impulse, Florida, we have a very strong hold on Florida now.
Uniquely positions.
Obviously as being the largest Hispanic audio broadcaster.
So.
Okay.
You guys have.
<unk> performance for 2019, a few times and I guess I am curious with.
That kind of political revenue.
Had $51 million in EBITDA in 2019.
I understood that that to be generally higher margin revenue and I guess I'm curious why it is that.
Pardon me why does it should I expect to <unk> to.
To clear the 2019 number by.
By more with that with the political revenue and tobacco.
Look we should be in 2019.
There was not as much.
There was not that much political revenue, we got some but not a lot.
Month after month and this is the fourth consecutive quarter level of bidding to two.
2019 revenue numbers.
So we feel really we feel really good in terms of.
We've had a spectacular start in 2022.
There has been no other radio broadcaster, but even.
Close to the revenue growth, let Spanish broadcasting good and I'm talking about total market none of the hall.
The larger.
Radio broadcasters came even close in terms of revenue growth in August .
EBITDA growth basically the same.
Right, but I guess the revenue was going to be a big over 2019, but EBITDA is going to be roughly flat to 2019, that's what it sounded like.
Possibly but the target is obviously to get a little bit above that 2019 number.
Let's see look the what what probably held back the broadcast industry, it's been a little bit of the noise of the war. So some of the brand partners.
We're a little reluctant.
Two to grow better than that.
Estimates.
But hopefully moving forward.
That will all paths.
Okay.
One more question from me and then I'll stop.
The SG&A line, obviously moved up a lot this quarter and.
Jose listed along there were a lot of reasons why it's up I guess is this the new level I should we should expect kind of $20 million in a quarter or were there. Some things this quarter that were unusually high that'll come down going forward.
We've made certain obviously, we've just we've just launched two stations that we've made investments.
But Jose did you want to give a little color on that sure.
Sure sure Yeah. So so we had a very intense first quarter from an event standpoint. So in that number there is about $6 3 million of event expenses.
Those are variable so the core.
Or is that we do have events. There is a lot of expense running through that line item.
Okay.
As for guidance with Astro guidance from and then this is radio so I'll give you some guidance or radio radio of the operating expenses probably quarter over quarter stripping out events is going to be low to mid <unk>.
Low to mid twenties.
Each quarter various clearly.
Based on revenues.
Okay.
And on the TV side Youre looking at about $33 5 million of operating expenses quarter over quarter.
Yes.
Yes.
And Thats all in operating expenses by the way.
Okay.
Okay. Thank you thank.
Thank you.
The next question comes from Craig <unk> of Longfellow. Please go ahead.
Good morning, guys. Thanks. Good morning, Thanks for the time shifting gears a little bit.
Thinking about your equity for a moment and trying to.
Add some value to the equity holders given how just how illiquid its trading and I think it's literally $16000 worth a day on average over the last three or four months.
You mean, you don't think that the equity market cap is currently reflection a reflection of the proper value of the business would you consider spending a small amount of money supporting or cleaning up the.
The equity.
$100000, a month type number could greatly improve the trading.
The trading performance of the stock because that's something you'd consider or are considering.
Okay.
Jose you want to take that one sure sure look we will take our everything will take everything into consideration, but as we said right now we're looking to really grow the business from a footprint standpoint from a content standpoint from a digital standpoint, we believe that there is a huge opportunity to Hispanic space now.
That we must capitalize so that's our real initiative for 2022 and going forward, but yes, absolutely if something makes sense and and and and we have the capital to use that we'll consider it.
Okay.
The difference between the equity and the bond is obviously to move the needle on interest savings you have to spend a lot more capital on the bonds, but.
I don't know if theres any benefit to your vision or the next three to five years of having a stock price more effective of.
The economic value of the company from a perception standpoint, but.
I do think a small amount of capital dedicated to the equity or we buy shares.
Might make a lot of sense or something to think about anyway. Thanks for the time guys.
Thanks, and thanks for the feedback.
The next question comes from Derek <unk> of Fancy capital. Please go ahead.
Yes concise capital.
I'm a bondholder.
And good morning.
Good morning.
I wanted to know.
Mr. Andrew are in growth mode.
But your leverage is still fairly high and you're planning on de levering through growth in EBITDA. Good I'm just.
Throwing out some caution here, if youre going to consider an acquisition, which was alluded to earlier as a possibility.
You wouldn't want to lever the company to do such that maybe you would use your stock.
In a transaction. So I wanted your comments on that and then secondly, I don't believe Theres a transcript available for the earnings calls, but that would be helpful. If there if there is not.
Lynn.
Hello, Jose did you want to take that one.
Sure, Yes, Derrick so look.
From an acquisition standpoint, clearly we'd have to make a prudent investment.
We're not going to go out and lever up the company, we truly understand that our leverage is high.
Totally understand that so so again.
We were cautiously optimistic with with growing the company clearly.
But we will.
First of all the bonds are somewhat restricted right.
So there is a lot of things here now as to issuing equity.
To fund an acquisition those are those are options that we have.
Okay.
And then the transcript.
Yes.
We'll get the transcript and put it online.
Yes that would be great I think thats very helpful.
Thank you Derek.
Thank you.
The next question comes from Ben Broad <unk> of <unk>. Please go ahead.
Good morning, Dave.
Good morning, Ben Browder with already on how are you guys.
Good. Thanks, Hello, then great.
Hi, guys just a quick question on the Cox radio.
Two station acquisition do you guys give any color just kind of think pro forma multiple did you guys give any color in terms of where you expect those stations to do from a revenue and EBITDA standpoint. Thank you.
Yes, right now, we're not really much giving any guidance on these two stations, but we do believe that there'll be cash flow positive.
Rather shortly we are utilizing a lot of the synergies within the company but in.
In the beginning will have investments but.
In the near term, we believe it will be cash flow positive.
Yeah, I'd agree with that.
Okay. Thank you that's additional call it having the call I appreciate it.
Thank you thank.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
I wanted to take this opportunity and thank everyone, who participated in todays earnings call.
For Q1, and I look forward to discussing our second quarter results with everyone. So I have a great day and thanks for participating thank you.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.