Hemisphere Media Group, Inc.

Ladies and gentlemen, this is the operator. Your conference is scheduled to begin momentarily. Until that time, your lines will once again be placed on hold. Thank you for your patience. THE END THE END THE END THE END THE END THE END THE END Good morning, ladies and gentlemen, and welcome to the Hemisphere Media Group Incorporated's first quarter 2021 financial results conference call. My name is Jason, and I will be your operator today. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I will now turn the call over to Danielle O'Brien. Please go ahead.

Thank you, Operator, and good morning, everyone. I'd like to welcome everyone to today's conference call. I'm Danielle O'Brien, and I'm with Edelman Financial Communications, Hemisphere's outside investor relations firm. Today's announcement and our comments may contain certain statements about Hemisphere that are forward-looking statements within the meeting 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 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 reconciliation of GAAP to non-GAAP information is included in our earnings release, which was issued earlier this morning. Management believes that this non-GAAP information is important to investors' understanding of our business. I'll now turn the call over to Alan.

Thank you, Danielle, and good morning, everyone. We delivered yet another exceptional quarter of results, reflective of the differentiated nature of our business and our continued strong execution, further bolstered by the overall economic recovery. Following our industry-leading performance in the third and fourth quarters of 2020, our strong momentum continued into the first quarter of 2021. We grew net revenues by 16%, led by an outstanding quarter of advertising revenue growth of 35%. This top-line growth drove a 37% increase in adjusted EBITDA in the quarter. Beyond our exceptional results, last month we announced the acquisition of Pantaya, which we believe will accelerate the growth profile of our business. Since we formed Pantaya in partnership with Lionsgate, it has quickly become the go-to Spanish-language subscription streaming service, amassing approximately 900,000 subscribers, and we have just begun to scratch the surface of the addressable market. In three short years since its launch, it's become clear that Pantaya sits at the sweet spot of the large, fast-growing, and underserved U.S. Hispanic market. The metrics are incredibly compelling. There are 60 million Hispanics in the U.S. today, estimated to grow to 75 million by 2030. Of the 60 million, 39 million fall into our core target of bicultural and Spanish-dominant adults, a huge subscriber acquisition opportunity. And nearly 90% of these 39 million are already accessing at least one streaming service, demonstrating a strong appetite for streaming. Pantai has an unparalleled deep library of critically acclaimed original titles from Pantai's production on Pantaleon, as well as from world-class third-party content producers such as Televisa, Sony, and Lionsgate. While some of the large general market streaming platforms offer small samples of Spanish-language content, none of them come close to competing with the depth, quality, or popular appeal of Pantaya's offering. And as we have previously stated, we intend to meaningfully increase investment in content. We're very excited by our upcoming content pipeline, especially as production has broadly resumed. In two weeks, we will be releasing the second season of our hit reality series, Their Best Family Vacation, which was a massive success in its first season in 2019. This will be followed by a very strong release schedule for the second half of the year, including season two of Pantaya's most successful series to date, El Juego de las Llaves. While the business itself is incredibly exciting, there are many compelling opportunities created by the combination of Pantaya and Hemisphere. including the ability to leverage our content production capabilities, deep library, promotional platforms, and distributor relationships. We are already in negotiations with various connected TV platforms and virtual MVPDs about adding Fantaya. The goal is to attain 2.5 to 3 million subscribers by 2025, and we are confident we can achieve that objective. Turning to Puerto Rico, business trends and consumer activity continue to improve, building upon the momentum seen in the second half of 2020. as many of the COVID-related restrictions that were in place have been rescinded. Employment levels have improved. New auto sales are near historical highs. Cement sales are at their highest level since 2016, and hotel booking rates are above 2019 levels, which was a record year. The recent census reported Puerto Rico's population at 3.3 million, slightly higher than expected, and a strong indication that outward migration has abated. In April, the Biden administration announced the release of an additional $8 billion in Hurricane Maria funding that had been previously withheld. Puerto Rico saw tens of billions of hurricane recovery funds that have yet to be dispersed, which we expect will start flowing at a faster pace. We are more optimistic about Puerto Rico's economic future than we have been in many years. And with our leading market position, we are well positioned to benefit from an improved economy. We saw another outstanding quarter of revenue growth at WAPA. This period represented the highest first quarter in WAPA's history in both ad revenue and market share. As a result of improved economic conditions, the overall TV ad market grew an extraordinary 35% in the first quarter, and once again, WAPA outperformed the overall market. WAPA's retransmission fee revenue also increased substantially, as newer news became effective on January 1st. At the same time, subscriber levels have remained very stable in Puerto Rico. Turning to our U.S. cable channels, now with data in the challenging distribution environment, our performance was strong, and our channels continue to cement their leading positions in the marketplace. We delivered solid advertising revenue growth across our cable networks. Additionally, we executed a renewal of communications for all our cable channels, including expanded carriage for three of our networks, which will result in full national distribution of four of our five networks by July, another testament to the singular value of our channels. We are also currently in advanced discussions with a major virtual MVPD and are optimistic that we will secure distribution this year. We continue to see a contraction in U.S. subscriber levels in Q1, although at a more modest rate than the year-ago period. We are optimistic that we will be able to continue to mitigate organic subscriber declines with new virtual MVPD launches as they develop Spanish-language offerings and expanded carriage with existing distributors such as Cox. All of our cable networks continue to perform well and deliver strong viewings. Based on coverage ratings, all four of our measured channels are among the top 15 rated Spanish cable channels, with three of the four in the top 10 Monday to Friday. We are especially proud that Pasiones is the second highest rated cable channel Monday to Friday. Turning to Colombia and our medicine at Canal Uno, the market remains challenged by the pandemic, with a significant fourth wave of cases and low rates of vaccination to date. Nonetheless, Canal Uno had a solid first quarter with advertising revenue growth despite widespread lockdowns in January. We believe that there is a high level of pent-up advertising demand that will be realized once case levels decline. In closing, we have thrilled to have continued our strong momentum into 2021. We continue to drive robust, industry-leading growth in the face of challenging market conditions. With Pantaya, we immediately become the market leader in a high-growth Spanish-language subscription streaming space and have transformed the growth profile of our overall business. We are very excited about the future of Hemisphere. Thank you, everyone. I'll now turn the call over to Craig.