Q4 2022 Entravision Communications Corp Earnings Call
Speaker 1: In F to.
Speaker 2: Good day and welcome to the EntraVision 4th Quarter and Full Year 2022 Earnings Conference Call.
Speaker 2: All participants will be in a listen-only mode.
Speaker 2: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Kimberly Estrekin in Investor Relations. Please go ahead. Thank you, Operator. Good afternoon, everyone, and welcome to Entervision's fourth quarter and full year 2022 earnings conference call.
Speaker 2: Joining me today are Chris Young, Interim Chief Executive Officer and Chief Financial Officer and Jeffrey Lieberman, President and Chief Operating Officer.
Speaker 2: Before we begin, I must inform you that this conference call will contain four looking statements that are subject to risks and uncertainties that could cause actual results to differ. Please refer to interventions SEC filing for a list of risks and uncertainties that could impact actual results.
Speaker 2: This call is the property of Entrovision Communications Corporation.
Speaker 2: Also, this call will include non-GAAP financial measures. The company has provided a reconciliation of these non-GAAP financial measures to the most comparable GAAP measures in today's press release. The press release is available on the company's website and was filed with the FCC on Form 8K. I will now turn the call over to Chris Young. Thank you, Kimberly, and good afternoon, everyone. We appreciate you joining us for Intervision's fourth quarter and full year 2022 earnings call.
Speaker 3: Before we begin, I want to note that it has been two months since the sudden and tragic passing of our founder and CEO Walter Ulloa. Walter's vision was to build a leading global advertising solutions media and technology company. In pursuing that vision, Intravision built a strong leadership team that has transformed our media portfolio, expanded our geographic resources and eighteen more our society at a time last, thanks to bottomless outer space technology, climb up the creation of sensor technologies, advances Ada's vision of trellis communication, increase the number of studies worldwide made at the safety and security level,
Speaker 3: Let's begin by discussing our full year results, which were very strong. Total revenue of $956.2 million for 2022 was up 26% year over year and represented a new company record. Digital, which comprised 78% of our total revenue, increased by 35% compared to 2021. Television and radio segment revenues, which made up the remaining 22% of consolidated revenue were down 1% and up 11% respectively year over year.
Speaker 3: Consolidated Adjusted EBITDA was also a record $103.1 million for the year, up 17% over last year.
Speaker 3: Free cash flow totaled $63.3 million for the year or a conversion rate of 61% of our consolidated adjusted EBITDA.
Speaker 3: For the year, earnings per share were 21 cents compared to 34 cents in 2021.
Speaker 3: With such stellar annual performance in February , our board of directors approved an increase in our dividend, doubling the dividend from 2 and a half cents per share to 5 cents per share. This increase returns the quarterly dividend payment to Pre pandemic levels.
Speaker 3: With that as a background on the year, I'll now turn the call over to Jeff Lieberman, Entrovision's President and Chief Operating Officer, to speak further on the fourth quarter. Jeff.
Speaker 3: Thank you, Chris. Like most of our management team, I've been part of Intervision for over two decades, working side by side with Walter. Walter and I worked together since Intervision became a publicly listed company on the New York Stock Exchange in August of 2000.
Speaker 3: Having known Walter for such a long time, I can say with certainty he would be proud of my financial results we are reporting today.
Speaker 3: Let's begin with our largest revenue segment, digital, which, similar to the full year, can price 78% of fourth quarter's revenue. Digital revenue was $230.1 million for the fourth quarter, improving 30% year-over-year. Directorial
Speaker 3: In the United States, our digital solution complements our existing television and audio offering with results-driven services for local clients. These services include digital audio, lead generation, OTT digital video solutions, and branded content production. Outside the U.S., Entrovision has achieved strong results based on our unique and extensive audience reach and superior technology. By partnering with premier digital platforms such as Meta, Spotify, TikTok, and Twitter,
Speaker 3: our solutions-based sales organization provides cutting-edge results for our clients in developing countries where these platforms have yet to have the reach they have established in the United States.
Speaker 3: All of our digital companies experience growth. SmatX, our programmatic ad platform, once again performed well during the quarter, with revenue improving 29% year-over-year as we grew our business across multiple verticals, most notably gaming apps.
Speaker 3: known formally as Media Donuts, saw revenue improve 72% year over year. Revenue growth was largely driven by success with Twitter and TikTok, along with the strong performance of our mobile user acquisition operation, now servicing 11 countries in Southeast Asia. Turning to Africa, Intravision Africa, known formally as 365 Digital, achieved a 92% increase in revenue for the fourth quarter compared to the prior year, driven by our TikTok relationship.
Speaker 3: Beyond enhancing our digital product offerings, we continue to broaden our sales leadership. In December , Spadix welcomed Phil Gautier as our Chief Revenue Officer.
Speaker 3: Phil is the former head of mobile for Twitter in Europe , the Middle East, and Africa. He will continue to accelerate Smatics' global revenue growth by leading our sales team around the world.
Speaker 3: Let's now turn to the television segment, which comprised 15% of revenue for the fourth quarter. Television revenue was $45.8 million in Q4, up 14% compared to the prior year's period, benefiting from strong political advertising revenue, excluding the three discontinued Univision affiliates.
Speaker 3: watching DC, Tampa, and Orlando, total television revenue was up 38% year over year.
Speaker 3: Excluding these three affiliate markets and the incremental political revenue, core television revenue decreased 9%, national core revenue decreased 21%, and local core revenue increased 3% year-over-year.
Speaker 3: Retransmission revenue for the quarter totaled $8.9 million, which was down 1% year-over-year, mainly due to the discontinued Univision affiliates.
Speaker 3: Operating cash flow margin for our television division was 50% for the quarter.
Speaker 3: Political revenue totaled $19.1 million in the fourth quarter, bringing our total political revenue to a record $32.1 million for the year. Out of this total, television generated $14.8 million of political revenue in Q4 and $25.2 million for the year.
Speaker 3: Lastly, our audio segment comprised the remaining 7% of fourth quarter consolidated revenue.
Speaker 3: Audio revenue totaled approximately $20.4 million for the fourth quarter, an increase of 26% year-over-year, again largely driven by political ad revenue.
Speaker 3: Excluding incremental political revenue of $4.2 million in the fourth quarter of 2022, Core audio revenue increased 2% versus the fourth quarter of 2021. Even more impressive was our audio operating cash flow margin, which was a record 43% in the quarter.
Speaker 3: I want to thank our entire team around the world for a strong fourth quarter in year, and we'll now turn the call back to Chris to discuss the quarterly financials and first quarter pacing in further detail.
Speaker 3: Thanks, Jeff revenue for Q4 2022 total 296.3M an increase of 27% from the 4th quarter of 2021.
Speaker 4: As Jeff just mentioned in the segment breakouts for our digital segment revenue totaled 230.1 million in the fourth quarter up 30% year-over-year and up 20% on a pro forma basis as compared to Q4 of 2021. For our TV segment total revenue was 45.8 million in the fourth quarter up 14% year-over-year.
Speaker 4: from $48.1 million in the prior year period, primarily due to our variable expenses related to revenue growth and increases in salaries. Corporate expenses increased by 101% to $22.6 million for the quarter, compared to $11.2 million in the same quarter of last year.
Speaker 4: The primary driver was severance expense incurred upon the passing of our late chief executive officer, increases in non-cash stock based compensation and an increase in salaries.
Speaker 4: Consolidated adjusted EBITDA totaled 36.5 main for the fourth quarter, up 11% from 32.9 main in the prior year period.
Speaker 4: Free cash flow as defined in our earnings release was $19.3 million compared to $30.9 million in the prior year quarter or a conversion rate of 53% of adjusted EBITDA. Net income attributable to common stockholders was a negative $1.6 million compared to $3.9 million recorded in the prior year period.
Speaker 4: that impacted net income in the fourth quarter and 27.7 million that impacted the full year. These charges included the following. An increase in fair value contingent consideration of 7.4 million for the quarter and 14.2 million for the full year, resulting from the outperformance of our various digital platforms compared to original expectations.
Speaker 4: $4.6 million in non-cash charges related to the acceleration of Mr. Ulloa's unfested RSUs upon his death.
Speaker 4: $4.3 million in cash severance charges also primarily relating to Mr. Ulloa's passing.
Speaker 4: 1.6 million in non-cash impairment charges relating to our broadcasting assets.
Speaker 4: And finally foreign currency losses of approximately $900,000 in the quarter and $3 million for the full year.
Speaker 4: Excluding these one-time charges, adjusted EPS was 19 cents in the fourth quarter and 52 cents for the full year. Cash paid for income taxes was 5.5 million for the fourth quarter compared to 0.6 million in the same quarter of last year. For the year, cash paid for income taxes totaled 16.9 million in 2022 compared to 4.1 million paid in 2020.
Speaker 4: in 2021. Turning to our balance sheet, cash and marketable securities as of December 31, 2022, totaled $155.2 million. Total debt was $213 million. Our total leverage as defined in our credit agreement was 1.3 times as of the end of fourth quarter. Net of total cash and marketable securities racial disparity
Speaker 4: Our total net leverage was 0.5 times.
Speaker 4: Turning to our pacing for the 1st quarter of 2023. As of today, revenue from our digital segment is currently pacing at a plus 21% over the prior year.
Speaker 4: Our TV segment is pacing a minus 3% over the prior year period with core TV revenue excluding political booked thus far in the quarter pacing at a plus 2% Lastly our audio segment is pacing a minus 3% over prior the prior year period with core audio revenue excluding political pacing at a minus 1%
Speaker 4: All in our total revenue compared to last year is pacing at a plus 16 percent
Speaker 4: As we look ahead to the remainder of 2023, despite the prevailing choppy macroeconomic conditions, Entrovision remains well positioned for another year of growth as we continue to expand our operations globally. With the benefit of a solid balance sheet, strong cash flow generation, and a talented management team,
Speaker 4: You can expect us to continue to seek out opportunities that will further enhance the digital offerings we provide to our growing global customer base. Beyond acquisitions or strategic investments, you should also expect to see continued growth from our digital platform. Our strengthening relationship and overall business model with META in particular continues to be validated through the recently announced launch of operations for this platform in Hanoi.
Speaker 4: I want to take a moment to thank all of our stakeholders, including our employees, our board, and our shareholders, for your support during this difficult time. A significant part of Walter's legacy was his installment of highly talented leaders across all of Intravision's business platforms, and through their leadership, we will continue to succeed.
Speaker 2: With that we'll open up the call to questions. Operator? We will now begin the question and answer session. To ask a question you may press star and 1 on your touch tone phone.
Speaker 2: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker 2: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Speaker 5: At this time we will pause momentarily to assemble our raster.
Speaker 4: The first question today comes from Michael Kupinski from Noble Capital Market. Please go ahead. Thank you for taking my question and first of all my condolences to the Intravision family and also congratulations on a great quarter.
Speaker 4: earn-outs that may be coming up for some of the past acquisitions? There are earn-outs that are coming up as far as payments are concerned. We'll have about a 30 million dollar payment in April and in addition to that there will be something in the low single digits as far as the payment is concerned also in April and then that's it for the year.
Speaker 4: Gotcha. And then can you talk a little bit about the M&A environment? I know that you have been making acquisitions. Can you talk a little bit about that? Yeah, it's been busy on that front. I mean we've got a pipeline that's pretty robust and we continue to work through it and again you're not talking transformative you're talking about smaller deals that will be complementary to our existing digital portfolio.
Speaker 4: If you want to chat about Cisneros, we see deceleration in the rate of revenue growth there. Can you give us an update on what is going on with Facebook, Latin America, and I know it sounds like you are adding additional markets there. Can you give us a flavor of what the
Speaker 4: and you needed some color and what you learned. I mean it's still in growth mode, right? So the Cis Narrows, Lat-10, Q3 did plus 10, Q4 they did a plus seven. We're looking to do a little better than plus seven in that pace that we gave out for Q1. So it's still a relatively stable region of the world for Facebook. And of course we've got the new markets that we're also.
Speaker 6: percent growth.
Speaker 4: Sorry, I didn't mean to talk over you. The new markets aren't really contributing to the growth. You know, if you took that plus 21 And factored in if you took the plus 16 pace that we talked about factored in the acquisitions, you know, on a pro forma basis that looks more like a plus 11. But it's clearly, you know, we've got a minus 3 on the broadcast side. We've got a plus 21 ish.
Speaker 4: at this point.
Speaker 6: Gotcha. And then my next question was about national. If you can just kind of give us a flavor of national versus local in your core TV and audio as well.
Speaker 4: Yeah, for TV local is a plus one, but national is minus 18 and from all the channel checks that we've been doing We're hearing the same numbers coming out of other folks in the space. So Look, if you look at our top three Categories for broadcast you got auto which is facing at a plus 10 q1 Services minus 3 and health care plus 22 and then everything else is kind of a mixed bag So but but but clearly look this is a government-sponsored
Speaker 4: Radio is a little bit higher than usual because we are in the process of moving the radio folks here to corporate So that drove it and then TV with the plus five you've got variable expenses associated with the revenue growth Well, you've got variable expenses on both sides associated with the revenue growth in to any thoughts about
Speaker 6: how we should look at that in terms of the run rate and going into the first quarter.
Yeah, that'll be a function of the revenue, right? We don't like to generally guide on expense, but you know there will be Radio will look a little higher than usual because of that because of that move that we're doing TV will be a bit more subdued and the digital just purely a function of the revenue growth So digitally you should expect to see double-digit growth on the expense from
The recent dividend increase is interesting. I just may be wondering if you could talk about capital allocation priorities for 2023.
Yeah, the dividend increase was just getting it back to pre-COVID levels. I think what we're going to do going forward is allocate capital towards M&A. That's kind of where it needs to be. Dividend is kind of where it needs to be as well. So the, and we'll observe and monitor the debt accordingly with our operations.
But we've got plenty of cash, we're going to generate plenty of free cash, and we're going to work to applying that to continued M&A opportunities. Okay, got it. Thank you. Thanks, Edward. As a reminder, if you would like to ask a question, please press star and one to enter the question.
With regard to the M&A landscape, could you talk about your focus with regard to M&A? Is it new markets? Is it...
the M&A landscape, could you talk about your focus with regard to M&A? Is it new markets? Well, we just started our talk yesterday and it took some time.
more focused internationally. Could you just talk about the landscape and what opportunities that you are seeing presenting themselves at this point?
Sure, digital, international, complementary to our existing digital footprint. Not necessarily thinking geography by geography in this day and age technology such that it could be in a different geography but it's complementary to our existing infrastructure. But that's our focus. We've got a lot of smart folks out of our Barcelona office who are helping us out with some opportunities.
Anything in particular that might be on the table for divestiture here in the next 12 to 18 months.
No, it's steady as she goes as far as our asset base. Nothing that we're looking to sell.
And then just turning to the advertising side, I mean obviously political will be down significantly from first.
after this year certainly and maybe even to the third quarter but obviously a big big election year next year do you see political coming back are you starting to get some you know it
interest in terms of political ads for the back half of the year at this point already? Yeah David we are already starting to see some small buys that are coming through right now. We had a really robust political year last year and we are anticipating that the presidential election year is going to be as good if not better than what we delivered last year as we go forward.
Thank you. This concludes our question and answer session. I would like to turn the conference back over to Chris Young for any closing remarks.
Thanks again for joining us today. We look forward to sharing our progress with you on our Q1 earnings call in May. Betsy, with that, we'll sign off. Thank you all for your time. Appreciate it.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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