Entravision Communications Corporation

Greetings and welcome to the EntraVision Communications Corporation fourth quarter and full year 2020 earnings conference call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kimberly Estricant of Congressional Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon, everyone, and welcome to EntraVision's fourth quarter and full year 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 EnterVision'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 contain 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 FCC on Form 8-K. I will now turn the call over to Walter Ulloa, InterVision's Chief Executive Officer. Walter Ulloa, InterVision's Chief Executive Officer Thank you, Kimberly, and good afternoon, everyone.

We appreciate you joining us today for InterVision's fourth quarter and 2020 earnings call. InterVision had a very strong fourth quarter. As a result, we are well positioned for growth in the first quarter and full year 2021. Beginning with the top line, revenues for the quarter totaled $171.7 million, up 142% year-over-year and 173% sequentially. On a pro forma basis, including Cisneros Interactive, revenues improved 51% over the fourth quarter of 2019. Our digital segment performed well due in large part to our acquisition of Cisneros Interactive. While I will speak to the digital segment in further detail shortly, we are particularly pleased with our performance of Cisneros Interactive led by Victor Kong. Cisneros Interactive continues to be additive to our cash flow and EBITDA, and we have the utmost confidence that they will successfully execute their business plan in 2021. As highlighted last quarter, political ad sales were also a strong driver of our fourth quarter revenues. In total, political advertising revenue for the fourth quarter of $14.2 million, surpassing our prior record set in the fourth quarter of 2012. Excluding political ad sales and including Cisnero Interactive on a full form of basis, revenue increased by 39% in the quarter. Adjusted EBITDA totaled $32.6 million for the fourth quarter of 2020, an increase of 195% compared to $11.1 million in the prior year period. On a pro forma basis, EBITDA increased 159% in 2020 versus 2019. Moving beyond the fourth quarter and turning to the full year results, for 2020, revenues totaled $344 million, up 26% over 2019. Adjusted EBITDA totaled $60.4 million for full year 2020, as compared to 41.2 million in 2019, or a 47% EBITDA growth in 2020 versus 2019. 2020 was a very challenging year, but thanks to the strength of our business model, our proactive and conservative cost-cutting measures, and the dedication of all our employees, our business continued to improve each quarter from the lows of the second quarter in 2020. We enter 2021 primed for growth. With the onset of COVID-19, we made a number of expense cuts in anticipation of a prolonged economic impact from the virus. Fortunately, due in part to these proactive reductions in our SG&A, our business continued to grow quarter over quarter. As a result, we were able to reinstate certain expenses back in the business, namely employee salaries. I could not be prouder of the team we have assembled at Entrevision. Their commitment to both our clients and our company this past year never wavered. I was pleased to be able to reinstate our well-deserved employee salaries to the pre-COVID-19 levels. Even though salary expenses have been reinstated, the rest of our expense cuts remain in place, and we will continue to operate as a leaner, more efficient business with strong free cash flow generation. As Chris Young, our CFO, will discuss shortly, in Q4, we more than doubled our prior record of free cash flow set in the second quarter of 2006. This strong cash flow generation should help offset some of the revenue loss from the lack of political ad sales in the first quarter of 2021. With that as a background, let's turn to our three operating segments in further detail. Our television division generated revenues of $50.5 million for the quarter, up 37% compared to the prior year and up 34% sequentially. Breaking this down further, television advertising and multicast revenue was up 48% over the prior year fourth quarter, while retransmission consent revenues were up 1% year-over-year. Excluding political spend, our core television revenues increased by 10%, with television political revenues totaling $11.1 million in the quarter versus the non-material amount of political revenue in the fourth quarter of 2019. Excluding political revenue, national advertising revenues were up 20%, driven mainly by Tier 2 automotive and health care. while local advertising revenues, excluding political, were up 2%, driven by legal services and health care. On a full-year basis, television revenues totaled $154.5 million, up 3% year-over-year. Excluding political ad sales, core television revenues for 2020 were $131.9 million, a decrease of 12% over full-year 2019. Turning to our top 10 television ad categories. Although several advertising categories did see year-over-year revenue declines, many experienced improvements sequentially. Another indication that our business continues on an upward trend, auto, our largest television ad category, increased 3% year-over-year, but improved 28% from Q3 2020. Services, our second largest advertising category, was up 17% compared to the prior year period. Healthcare, our third largest category, was up 26% over the prior year and also improved 102% sequentially. Media was up 22% year-over-year and up 26% sequentially. Retail, while still down 21% year-over-year, posted a strong gain sequentially of 60%. Next, let's discuss our television ratings performance for the quarter. In all cases, I will be referring to the performance among Hispanic adults ages 18 to 49, unless otherwise noted. Our Univision television affiliates built upon their market leadership in November 2020. For adults 18 to 49 in early local news, our Univision television stations finished ahead of or tied their Telemundo competitor in 11 of 17 markets where we have head-to-head competition. In late local news, we finished ahead of or tied Telemundo competitors in 10 markets along the 17 markets where we have head-to-head competition. Additionally, our early local news ranked number one or two against English TV and Spanish language television competitors in nine markets. And we built up audience levels from the 15-minute lead-in in eight markets. Our late local newscasts ranked number one or two against English and Spanish language television competitors in six markets. Our local news teams reported the latest on the COVID-19 pandemic and an unprecedented election year. During the full week, our Univision and Unimas television stations combined have a cumulative audience of 3.8 million persons two plus in our markets combined. compared to Telemundo's 3.1 million persons 2+. We have 22% more viewers than Telemundo in our television footprint. During weekday primetime, when comparing to all stations in total, we had a higher rating than at least one of the big four networks in nine markets among adults 18 to 49 and 10 markets among adults 18 to 34. Telecast for Univision's Latin Grammy Awards show on November 19th was among the top 10 broadcast television primetime programs for the night, among adults 18 to 49 and adults 25 to 54 in 13 markets. Among adults 18 to 34, the show ranked among the top 10 in 15 markets. Our sales teams did a remarkable job selling the Latin Grammys, setting a revenue record for this signature TV special with revenues up 25% over 2019. Now let's turn to our audio operating segment. Audio revenues for the fourth quarter totaled $16.2 million. an increase of 17% over the prior year period and up 41% sequentially. Local audio revenues decreased 3% over the prior year fourth quarter, while national revenues were up 51% over prior year, largely bolstered by political ad sales. Excluding political spend, core radio revenues declined 5% versus the prior year fourth quarter, with political revenues totaling $3 million in the quarter versus a non-material amount of political revenue in the fourth quarter of 2019. Excluding political span, national advertising revenues were up 8% driven by the service category, while local advertising revenues were down 11% in our audio unit as a result of the continued impact of the COVID-19 pandemic. On a full year basis, audio revenues totaled $46.3 million, down 16% year-over-year. Excluding political ad sales, core audio revenues for 2020 were down 26% over full year 2019. The 12 markets where we subscribed to Miller Kaplan data, we outperformed the market by 34.6 points in total revenue combined. We outperformed the total market in 11 out of the 12 markets where we subscribed to Miller Kaplan. Turning to radio advertising categories, services, our largest category, representing 26% of our total audio revenue, improved 31% over the prior year fourth quarter period. Legal services, including those related to immigration as well as government messaging, regarding COVID-19 safety, continued to represent a large portion of the services ad in this past quarter. Auto, our second largest advertising category, declined 28% for the fourth quarter as compared to the fourth quarter of 19, but was up 49% sequentially. Auto repair advertising was up a healthy 34% year-over-year, as was grocery store advertising, which improved 3% over the prior year period. We also saw increases in the product brand and paid programming categories. The remaining top 10 advertising categories were all down year over year in the fourth quarter, with the exception of political ads, where revenues totaled $3 million in the fourth quarter compared to an immaterial amount in the prior year period. On a particular note, during the quarter, we announced the launch of our new streaming destination, El Boton. Listeners can now stream their favorite Entrevision radio shows and stations directly on their mobile phones or desktops. We are positioning El Boton as a hub to direct our audiences across different genres while also aggregating content to provide our listeners a seamless search and discovery experience. The addition of digitally streaming content to our radio offering fits with Entrevision's overall positioning as an omni-channel audio solutions expert. The firm deployment of our podcast offering, mobile app presence, and first-party data subscription services are also part of Entrevision's vision. On this front, it is important to note that our recent investment in the digital space includes the acquisition of a controlling stake of AudioAd, the strongest audio network and digital audio publisher platform in Latin America. This investment enhances our proprietary AudioAd network, AudioEngage, currently serving the U.S. Latino market. In addition, with the Super Bowl just a month ago, Entrevision has now completed its fifth season as the NFL's exclusive nationwide Spanish-language radio broadcaster. The NFL has been an exceptional partner, and we look forward to continuing to share their programming with our radio listenership. Looking at our audio division ratings performance for fall 2020, among the Spanish-language radio stations, the Erasmo Electrocolata Show is ranked number one in nine out of 14 markets, including Los Angeles, released for fall among Hispanic adults 18 to 49, including Thais, and number one in 11 markets, including Los Angeles, among Hispanic adults 25 to 54. Across our 14 O&O radio stations, the Erasmo y la Chocolata show reached more than 608,000 Hispanics, 18 to 49, in the fall 2020 survey. High-profile shows, Eugenio Lucas y El Sheldon Piolín anchor our morning drive and midday spots on La Suave Sita Network and on Jose in Los Angeles and Riverside. For fall 2020, Piolín ranked as the number one or two Spanish-language midday show, including Los Angeles, in 10 out of our 13 markets released among Hispanic adults 18 to 49, including ties. It will show that Henio Lucas was number one or two among Spanish-language radio stations in eight out of our 11 El Henio markets, among Hispanic adults 18 to 49 and Hispanic adults 25 to 54. In IntraVision's audio markets, Hispanic list is recovering at a faster rate than the total market average. Fall 2020, Hispanic adults 18 to 49 weekly reach was at 95% of 2019 levels. while fall 2020 reach for total adults 18 to 49 was at 91% of 2019 levels. Now moving on to digital. Our third and final operating segment is digital. Digital revenues totaled $105 million for the fourth quarter of 2020, a substantial increase of 424% as compared to the prior year period. Sequentially, digital revenues improved 669%. On a pro forma basis for Cisneros Interactive, digital revenue increased 67 percent compared to the prior year period. On a quarterly basis, digital revenues surpassed that of our television segment. On a full year basis, digital revenues totaled 143.3 million, an increase of 108 percent compared to 2019. Throughout the past year, we made a number of strategic moves aimed at furthering EnterVision's digital segment by building a portfolio of exceptional digital service offerings with creative and programmatic capabilities that meet our clients' needs around the globe. First in May, we brought our digital capabilities together through the launch of Entrevision Interactive, which provides advertisers and agencies a single source to engage consumers globally. Then in October, we announced our strategic majority investment in Cisneros Interactive. Through our majority investment in Cisneros Interactive, we represent the strongest global audience in ad tech platforms such as Facebook, Spotify, and LinkedIn across Latin America. Last but not least, in November we announced the appointment of Juan Saldivar as our new Chief Digital Strategy and Accountability Officer. Juan has over two decades of experience in media, marketing, technology, venture capital, and e-commerce industries. As a result of working for Bertelsmann in Germany, Spain, and Mexico, and as Executive Director of Televisa Digital Interactive for seven years. Juan has been a member of our board since 2014. and he and his team were instrumental in the acquisition of Cisneros Interactive and its integration into Entrevision. Prior to Juan's appointment, we did not have a single leader running all of our digital business units. With Juan, a fluent Spanish speaker at the helm of our U.S. and global digital businesses, we expect to be able to grow our solutions, technology, and talent pool that serve today more than 4,000 clients in 21 countries. Entrevision believes it is critical to understand, participate, and build technology to serve the programmatic advertising space. On this front, Smatics, our Barcelona-based machine learning DSP platform with proprietary technology, has continued to grow and serve the most demanding clients in the gaming, mobile performance, and app space by matching the strongest transparency, contextual, demographic features, and performance standards. Due to the impact of COVID-19, digital platform usage has increasingly increased all over the world, and specifically in Latin America, where it has accelerated Internet adoption and penetration. Digital video is also a core pillar within our digital and interactive strategy. Our video network continues to expand and close exclusive connections with Tier 1 publishers. In 2021, EnterVision will continue exploring the most prominent growth markets around the globe as it deploys its digital services and considers strategic and complementary investments and acquisitions. Overall, while 2020 was a challenging year, our business reemerged in the fourth quarter exceeding our expectations and demonstrating the strength of Entrevision's business model. One last thing I would like to comment on before handing it over to Chris is our political performance in 2020. As we discussed earlier, 2020 was a record for Entrevision in terms of political revenue. We generated over $28 million in political revenue in 2020, which was an incredible 65% increase over our prior year record of $17 million in 2012. According to a recently published UCLA Latino study of the 2020 presidential election turnout, approximately 16.6 million Latinos cast votes in the 2020 election. This represents a 31% increase and nearly doubled the nationwide growth of 16% in ballots cast between 2016 and 2020. Latino voters supported Joe Biden by a margin across the country consistent with margins that Obama won in both 2008 and 2012. That said, without the Latino vote, President Biden probably would not have been able to win Arizona, Nevada, and New Mexico. We expected the outcome of the Latino vote in 2020 to be strong, but it went beyond our estimates. I believe that going forward, the Latino voter is only going to become more important, and you're going to see much more investment in the Latino vote, particularly in the markets where we operate, California, Nevada, Arizona, New Mexico, Colorado, Texas, and certainly Florida, Virginia, and Massachusetts. So I'm very bullish about the future and the continuing important role Latinos will play in U.S. politics. Now, before I speak to our areas of focus for the new calendar year, I will now turn the call over to Chris Young, our CFO, to speak further about our fourth quarter 2020 performance and first quarter 21 pacings. Chris?