Entravision Communications Corporation

Greetings, and welcome to the EntraVision Communications Corporation third quarter 2021 earnings conference call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kimberly Esterton of Investor Relations.

Thank you. You may begin. Thank you, operator. Good afternoon, everyone, and welcome to EntraVision's 2021 third quarter 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 of and Chris Young, Chief Financial Officer. Before we begin, I must inform you that this conference call will contain four booking 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 EntraVision 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, EntraVision's Chief Executive Officer.

Thank you, Kimberly, and good afternoon, everyone. We appreciate you joining us for EntraVision's third quarter 2021 earnings call. EntraVision's business continues to perform very strongly, and the third quarter was no exception. We are proud to see growth across all of our core businesses, with digital in particular our shining star. Digital has comfortably become the vast majority of our revenue, representing 73% of total revenue in the third quarter as we evolve our business to become a global digital media powerhouse. Speaking of evolving our digital business, just today we announced the acquisition of 365 Digital, a digital marketing solutions company headquartered in South Africa. We are very excited about this acquisition, which marks our third digital acquisition within the last 13 months. and I'll speak more about our digital growth and strategy later on the call. But first, let's begin with the consolidated results for the third quarter. Net revenue for the third quarter totaled $199 million, up 216% year-over-year. On a pro forma basis, including Cisneros Interactive and Media Donuts in our prior year results, revenue increased 60% over the third quarter of 2020. Growth during the quarter was largely driven by our digital business, as well as the continued sequential and year-over-year improvements of our core television and audio businesses. For the nine months ended September 30th, revenue totaled 526.3 million, up 205% compared to the same period in 2020. Similar to the quarter, year-to-date revenues benefited from the continued sequential and year-over-year improvements of all three business segments with digital leading the way. Adjusted EBITDA totaled 23.2 million for the third quarter, up 42% year-over-year. On a full form of basis, accounting for Cisneros Interactive and Media Donuts, adjusted EBITDA increased 17% year-over-year. We have been able to maintain many of the cost reductions put in place at the beginning of the pandemic, while at the same time improving top-line results to help drive our incredibly strong EBITDA growth. Now let's take a look at our segment performance. Digital revenue totaled $146.1 million for the third quarter, more than 10 times higher than the $13.7 million generated in the prior year period. Digital revenue represented 73% of total revenue for the company in the third quarter. Along with strong organic growth, the primary drivers of this improvement was our acquisition of a majority interest in Systemas Interactive in the fourth quarter of 2020, which became wholly owned during the third quarter of 2021, and our acquisition of Media Donuts at the beginning of the third quarter. On a pro forma basis, our digital revenue increased 95% compared to the prior year period. As I just noted, at the end of August, we officially acquired the remaining 49% interest in Cisneros Interactive and now own 100% of the company. Cisneros Interactive maintains sales partnerships with major technology platforms like Facebook, Spotify, and LinkedIn in Latin America. The business has been performing extremely well, and as a result, Entrevision has become a dominant digital player in Latin America. Our digital business now focuses on a combination of top-tier global audience and media representations, programmatic technology, and local digital solutions, such as El Boton, our digital audio app, which includes all of our radio broadcast shows, talents, and podcasts that streamed over 3.5 million downloads per month during the third quarter. Speaking of other digital solutions, additional growth drivers of digital revenue in the third quarter include Smatics, our global mobile programmatic user acquisition and performance business unit, headquartered in Barcelona, which grew its revenue 56% compared to the third quarter of 2020, and our U.S. local marketing solutions business, which was up 45% in Q3 2021 versus Q3 2020. Including our recent acquisition of Media Donuts, our digital segment now serves more than 1,400 clients each month in more than 30 countries, with campaigns running in over 120 countries. With the Media Donuts edition, we are now becoming a successful digital player in Southeast Asia, particularly with Twitter and TikTok. The integration of media donors is going well, and most of the heavy lifting to integrate their back office has been completed. Now let's turn to our television segment, which comprised roughly 18% of revenue for the third quarter. Television revenue was $36.5 million for Q3, down 4% compared to the prior year period, primarily due to a decrease in political revenue, partially offset by increases in local and national advertising revenues. Excluding $4.9 million in political spend in Q3 2020 related to the presidential election and $400,000 of political spend in Q3 2021 related to the California recall election, core television advertising increased 15%, with national advertising revenue increasing 5% and local advertising revenue up 25% year-over-year. When comparing Q3 2021 total television revenue with pre-COVID Q3 2019 results, TV revenue finished flat in Q3 2021 versus Q3 2019. The auto category, and in particular new car sales, continues to face supply chain pressures related to the international supply of electronic chips. While consumer demand for cars remains strong, the availability of new cars is being impacted by delays in production, and so television auto ad sales were down 9% in the third quarter as compared to the prior year period. Offsetting these declines, services were up 9% and healthcare was up 1% in Q3 compared to the last year's same period. Retail, restaurants, travel, and leisure all also grew in the quarter, assisted by overall improving macro conditions and the rollout of the vaccine. Turning to our ratings performance, our Univision television affiliates built upon their market leadership in September 2021. For adults 18 to 49 in early local news, our Univision television stations finished ahead of the Telemundo competition in 11 of 17 markets where we have head-to-head competition, plus three ties. In late local news, we finished ahead of Telemundo competitors among adults 18 to 49 in nine markets along the 17 markets where we have head-to-head competition, plus two ties. The Kolkakoff Gold Cup tournament rounded up the summer of soccer on our Univision and Unimas television stations. The final match between the United States and Mexico national teams delivered impressive ratings. The game ranked number one or number two for the time period among all local broadcast stations in 13 of our markets among adults 18 to 49 and adults 25 to 54, outperforming the NBC Summer Olympics. Finally, let's turn to our audio segment, which comprised the remaining 9% of our third quarter revenue. Audio revenue totaled $16.4 million for the third quarter, a sizable increase of 42% year-over-year. Local audio revenue increased 39% year-over-year, while national audio revenue was up 47% year-over-year. Excluding political spend of $1.2 million in Q3 2020 related to the presidential election and $600,000 of political spend in Q3 2021 related to the California recall election, Core radio revenue increased 54% versus the third quarter of 2020. When comparing Q3 2021 total audio revenue with pre-COVID Q3 2019 results, audio revenue grew 11% in Q3 2021 versus Q3 2019. Execution across our radio business could not be stronger.