Entravision Communications Corporation

Greetings, and welcome to the EnterVision Communications Corporation third quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. Setting what you require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kimberly Esterkin of Investor Relations, Thank you. You may begin.

Thank you, Operator. Good afternoon, everyone, and welcome to Entrevision's third quarter 2020 earnings conference call. I hope everyone is staying healthy and safe. Joining me on the call today is 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 refer to Entrevision's SEC filings for a list of risks and uncertainties that could impact actual results. This call is the property of Entrevision Communications Corporation. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Entrevision 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 8K. I will now turn the call over to Walter Ulloa, Entrevision's Chief Executive Officer.

Thank you, Kimberly, and good afternoon, everyone. We appreciate you joining us today for Entrevision's third quarter 2020 earnings call. Entrevision had a strong third quarter with revenues improving sequentially across all three of our operating segments. Business picked up nicely in the quarter following the lows of the second quarter. We are excited about our prospects for the balance of the year as we head into 2021. Chris Young, our Chief Financial Officer, will speak further to our fourth quarter 2020 pacings later on today's call. Beginning with our top-line results, revenues for the quarter totaled $63 million, down 8% year-over-year, but up 40% sequentially. In line with our cost-cutting measures, consolidated operating expenses for Q3 2020 declined 21% year-over-year. Adjusted EBITDA increased significantly and totaled $16.4 million for the third quarter 2020, up 79%. compared to 9.1 million in the prior year. A key driver of revenue in the third quarter has been our television and radio political ad sales. Political advertising revenue for the third quarter totaled 6.3 million, while core revenues minus these political sales totaled 56.7 million. With the election now two days behind us, political advertising as of today have surpassed our prior record as we are expected to total in excess of 28 million for 2020, compared to our prior peak political revenues of $16.6 million in 2012. Investing in the Latino market has been a large focus of both political parties, particularly in Colorado, Nevada, and Florida, where Democrats and Republicans alike have recognized the importance of the Hispanic vote. In Arizona and Texas, Latino voter registrations grew by over 10% in this election cycle and now represent over 20% of the total electorates which bodes well for Andrew Rich's prospects in future national elections. With that as the background, let's speak about each of our three operating segments in further detail. Television, our largest segment, generated revenues of $37.8 million with the third quarter, up 4% compared to the prior year, and up 40% sequentially from the second quarter. Breaking this down further, TV advertising and multicast revenue was up 4% for the quarter, while re-transmission consent revenues were up 3% year over year. Excluding political spend, our core television revenues declined 10%, with TV political revenues totaling $4.9 million in the quarter versus a non-material amount of political revenue in the third quarter of 2019. National advertising revenues were up 37%, driven mainly by political spend, while local advertising revenues were down 14%, as a result of the continued impact of COVID-19. Turning to our top 10 TV ad categories, although six advertising categories did see year-over-year revenue declines, nine out of our top 10 categories experienced improvements sequentially. Another indication that our business is trending upwards following the lows in the second quarter. Services, our largest advertising category, was up 27% compared to the prior year. and represents 25% of our total TV advertising revenue. On a sequential basis, services improved 28%. Auto, our second largest ad category, declined 19% year over year, but improved 94% from Q2 2020. Healthcare, our fourth largest category, was up 27% over the prior year and also improved 12% sequentially. Grocery stores were also up 8% year-over-year and up over 114% sequentially. The remaining six categories were down for the prior year with the exception of political. Next, let's discuss our television ratings performance for the quarter. In all cases, I will be referring to performance among Hispanic adults ages 18 to 49, unless otherwise noted. Our Univision television affiliates built upon their market leadership in August. In early local news, our Univision television stations finished ahead or tied with our Telemundo competitor in 14 of 17 markets where we have head-to-head competition. These same newscasts rank first or second against English and Spanish competitors in eight markets. Similarly, in late local news, we also finished ahead of Telemundo competitors in 12 of 17 markets where we compete head-to-head. Our late local newscasts rank first or second against English and Spanish competitors in 10 markets. Our local news teams continue to provide the latest COVID-19 updates to our viewers. Across all of our local newscasts, we saw peak impressions during the month of April in line with the initial spread of the pandemic. This trend continued into the third quarter, with August impressions increasing in eight markets for early local news and 13 markets for late local news compared to last year. Looking at our weekly stats during a full week, Univision and Unimog television stations have a cumulative audience of 4 million people ages 2 plus in our markets combined, compared to Telemundo, whose combined audience of ages 2 plus totals 3.2 million people. Now let's turn to our audio operating segment, which generated revenue of $11.5 million in the third quarter. Audio revenues in the third quarter declined 22% compared to the third quarter of 2019. Local audio revenues declined 31% year over year, while national audio revenues were down just 4% year over year. largely bolstered by political ad sales. Despite these year-over-year declines, EnterVision's share of the Hispanic radio audience is resilient, and revenues in this operating sector are moving in the right direction. On a sequential basis, audio revenues improved 70% from the second quarter. Further, in the 12 markets that we subscribed to Miller Kaplan data, we outperformed the market by 13.9 points in total revenue combined. Turning to radio advertising categories, services are largest category, representing 36% of our total audio revenue improved 26% over the prior year period and 54% sequentially. Legal services, including those related to immigration as well as government messaging regarding COVID-19 safety, represented a large portion of the services ads this past quarter. We also saw increases in the political ad and paid programming categories. Auto, our second largest advertising category, declined 49% for the quarter as compared to the third quarter of 2019, but was up 77% sequentially. Seventy percent of radio listeners listen out of home amongst Hispanic adults ages 12 plus. With less people commuting to work on a daily basis, listenership is down as an industry. Nevertheless, we saw a 71% sequential improvement on average for every single one of our top ten categories in audio for the third quarter. Remaining eight top ten advertising categories were all down year-over-year, with the exception of political ads, where revenues totaled $1.2 million in the quarter compared to an immaterial amount in the prior year. Our audio division rating is held strong for summer 2020. The Eurasia Electrocolata Show ranked number one in six of our nine markets, including Los Angeles, among Hispanic adults ages 18 to 49, and number one in seven markets, including Los Angeles, amongst Hispanic adults 18. ages 25 to 54. Across our nine O&O stations, the Arraso y la Turculata show reached more than 519,000 average weekly listeners in the Hispanic adults 18 to 49. On our tricolor network, our morning and midday programming were both top choices among Hispanic radio listeners. In the morning, El Flaco y Supandia continued to see success in markets such as Denver, Phoenix, and Sacramento. and ranked as the number one Spanish morning drive show in these markets amongst Hispanic adults 25 to 54, including Thais. High-profile shows, Eugenio Lucas, El Show de Piolín, Anchor on Morning Drive, and Midday Spots on Las Papasita Network, and on Jose in Los Angeles and Riverside. For summer 2020, Piolín ranked as the number one second Spanish language midday show in four of our NARN markets, including Los Angeles, among Hispanic adults 18 to 49, and Hispanic adults 25 to 54, including TIS. Eugenio Lucas ranked first or second among Spanish language programs in five of our eight annual markets among Hispanic adults 18 to 49, and in seven markets among Hispanic adults 25 to 54, including TIS. Our third and final operating segment is digital. We continue to build a portfolio of exceptional digital assets with creative and programmatic capabilities that meet our clients' needs. Earlier this year, we brought our digital capabilities together under a unified umbrella of solutions through the launch of EnterVision Digital, which provides advertisers and agencies a single source to reach consumers globally. Then, just post-quarter end, we announced a strategic majority investment in Cisneros Interactive, a digital advertising company serving over 2,000 brands and agencies each month across the U.S. and Latin America. This investment aligns with our mission to expand and enhance our digital advertising capabilities and service offerings, while positioning our combined platforms to be one of the largest premier digital advertising companies serving the U.S. and Latin American Hispanic market today. There's a lot more I'd like to discuss on this investment. It's important to enter into this long-term growth strategy. But before getting into those details, let's review our digital performance for the third quarter. Digital revenues totaled $13.7 million from the third quarter of 2020, a decrease of 22% versus the same period last year, due largely to the impact of COVID-19. Sequentially, digital revenues improved 20%. The use of mobile apps has surged this year. Mobile commerce and gaming have seen an unprecedented acceleration in their adoption by consumers. That's why we were proud of the work done by our product engineering and data science teams, who continue to improve our competitive solutions, Smatics becomes one of the leading performance-oriented programmatic platforms for app brand marketers, registering a growth rate of 9% during the third quarter. Also, we are happy to announce that Smatics has been shortlisted by industry publication Digiday as one of the best buy-side advertising platforms. Following an increased demand for gaming audiences, we launched Scroller Ads Play, an in-game advertising solution that allows brand advertisers to reach mobile gamers with non-intrusive ads during gameplay. Since its inception, we've onboarded 100 advertisers from diverse categories, such as automotive, financial, consumer product goods, and online streaming. We've received exceptional feedback from a delivery and performance perspective, with 90% of clients increasing spending after starting their advertising campaigns. Our digital video division increased revenue 84% versus Q2 2020, Also, as the world is moving into a more transparent and data-safe solution, DataXpand, our data marketplace and data services unit, has launched DataXpand Persona, its cookie-less data solution. As the use of third-party cookies for user identification is slowly being replaced by new technologies, DataXpand Persona is a state-of-the-art solution for data-driven marketers to target quality users and prospects with digital advertising. IntraVision is building a portfolio of digital assets that possess digital reach, data insights, and creative and programmatic capabilities. Overall, our strong third quarter results demonstrated the resiliency of our media assets, even in the most difficult of market conditions. We are very pleased to see sequential growth across the board, growth that is preparing each of our operating segments to return to their pre-COVID-19 levels as the economy bounces back. To speak further about this, This sequential growth, our third quarter performance, and our fourth quarter outlook, I'll now turn the call over to Chris Young, our Chief Financial Officer.