Entravision Communications Corporation

Greetings. Welcome to EntraVision Communications Corporation Fourth Quarter and Full Year 2021 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kimberly Estrikin of Investor Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon, everyone, and welcome to EntraVision's Fourth Quarter and Full Year 2021 Earnings Conference Call. I hope everyone is staying healthy and safe. Joining me on the call today are 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. In addition, all pro forma figures, including revenue, operating expenses, and consolidated adjusted EBITDA, noted throughout the prepared remarks, include contributions of EntraVision, Cisneros Interactive, Media Donuts, and 365 Digital in the prior year period. I will now turn the call over to Walter Ulloa, Chairman and Chief Executive Officer.

Thank you, Kimberly, and good afternoon, everyone. We appreciate you joining us for Entrevision's fourth quarter and full year 2021 earnings call. 2021 was a transformational year for Entrevision. Through organic growth, strategic partnerships, and acquisitions, we continued to develop our business beyond traditional television and radio broadcasting. We have become a leading global media marketing services and technology company. serving technology and media platforms and advertising clients around the world. We have a talented, experienced, and energetic team of professionals in over 30 countries with the expertise and resources to continue to grow Entrevision's business into the future. I'm also pleased to announce that our board of directors has approved a new share repurchase program of up to $20 million of our common stock. The board also approved a cash dividend for the first quarter of 2022 of two and a half cents per share payable to shareholders on March 31st, 2022. Now let's review Entrevision's consolidated results for the fourth quarter 2021. Net revenue for the fourth quarter totaled $233.9 million, up 36% year over year. On a pro forma basis, revenue increased 21% over the fourth quarter of 2020. Growth during the fourth quarter was largely driven by our digital segment, as well as from improvements in our core television and audio businesses. Consolidated adjusted EBITDA totaled $32.9 million for the fourth quarter, up 1% year-over-year. Excluding $12.8 million in net political and related cash flow in the fourth quarter of 2020, adjusted EBITDA increased 65% year-over-year in the fourth quarter of 2021. Moving beyond the quarter, our full year results were even more impressive. For the year, consolidated net revenue reached an all-time record and totaled $760.2 million, up 121% over 2020. Free cash flow also reached an all-time record and totaled $78.7 million, up 83% over 2020. Consolidated adjusted EBITDA totaled $88 million in 2021, an increase of 46% over the prior year period. Importantly, even as our top line continued to grow, we maintained a lean cost structure. As Chris Young will discuss in his remarks, we have retained many of the cost reductions we put in place at the beginning of the pandemic. Our continued focus on expense management has helped drive our incredible EBITDA and free cash flow. Now let's take a look at our segment performance, starting with digital, which is our largest segment and comprise 76% of our total revenue in the fourth quarter. For the quarter, digital revenue totaled approximately $177.5 million, up 69% compared to the prior year period. On a pro forma basis, digital revenue increased 40% compared to the fourth quarter 2020. For the full year 2021, digital revenue totaled $555.3 million, up 288% over 2020. Our digital segments growth during the fourth quarter and the year was driven by the excellent performance of Enter Business Cisneros Interactive and Smatics, our global mobile programmatic and DSP user acquisition business. Also contributing to our growth were our more recent acquisitions of Media Donuts serving the Southeast Asia market and 365 Digital, a leading marketing services and commercial digital partnership business based in South Africa. As I mentioned earlier, Entrevision is now a global digital enterprise. Our digital segment serves over 1,800 clients each month across 30 countries with campaigns running in more than 120 countries spanning five continents. Our Entrevision Cisneros Interactive Digital Commercial Partnership business has a unique capability to execute very large digital ad campaigns on Facebook and Spotify throughout Latin America. Compared to the United States, Latin America is still in the early stages of digital advertising and marketing growth, but showing impressive industry growth and potential. Due to its unique market position and the demand for local digital ad solutions, Entrevision's Cisneros Interactive revenue grew 95% in 2021 as compared to the prior year. As I noted, we are also seeing strong performance by our Entrevision Media Donuts and Entrevision 365 digital business units. With Media Donuts, Entrevision provides services across eight countries in Southeast Asia, and with 365 Digital, we serve the broader South African market. We've been able to leverage the local teams of these business units to generate global synergies to help advertisers reach audiences and consumers in these markets. In addition to our digital commercial partnership businesses, programmatic digital services have also helped drive our growth. Smatics, our proprietary DSP business based in Barcelona, Spain, has been a cornerstone of our programmatic digital services since 2018. There are few companies in the world that offer demand-side platform services like Smatics. Smatics has developed a highly competitive offering, in part due to a favorable competitive landscape and the efficiency, transparency, and performance of the platform. Smatics has demonstrated strength in the gaming, fintech, and mobile delivery industries, to mention a few, and we continue to strengthen our staff with expertise in these categories. With a strong understanding of the mobile gaming market, Smatics has been setting new monthly revenue records. Smatics revenue increased 120% in the fourth quarter of 2021 compared to the prior year. Even with this record performance, we are at the very beginning of our expansion in mobile gaming, and the growth opportunity ahead of us is tremendous. Mobile users grew at a compounded rate of 25% since 2019, with gaming representing 40% of that growth. Along with gaming, fintech and delivery have also become top focus areas for SMATICS and EnterVision. Now let's turn to our television segment, which comprised 17% of revenue for the fourth quarter. Television revenue was $40.2 million in the fourth quarter, down 20% compared to the prior year period, primarily due to a decrease in political ad revenue. Excluding $11.1 million in political ad spend in the fourth quarter 2020 and $400,000 of political spend in the fourth quarter 2021, core television advertising increased 2%. National advertising revenue increased 4%, and local advertising revenue declined 1% year over year. When comparing the fourth quarter 2021 total television revenue with pre-COVID fourth quarter 2019 results, television improved 9%. For the full year, television revenue was down 5%. Excluding political revenue, however, television finished up 11% compared to 2020. In terms of advertising categories, the auto category, and in particular new car sales, continued to face supply chain pressures. While auto ad sales were down 30% in the fourth quarter year over year, many of our clients have recently indicated to us that they anticipate some improvement in auto spending in the second half of 2022. Offsetting auto declines, services were up 8% and travel and leisure were up 92% compared to last year's same period. Media, grocery, restaurants, and product brands also grew in the fourth quarter from the previous year. We're also looking forward to the return of political ad spend this year. EntreVision's local television markets are situated in states where political messaging to Latino voters continues to be a top priority for both parties, as well as special interest groups. In addition, with California considering legalizing sports betting, it could be a very robust year for political ad spend. One last comment about our television segment. As we previously discussed, on December 31, 2021, we ended our Univision affiliations in the D.C., Orlando, and Tampa markets. We anticipate some impact to the television segment's top line and operating cash flow as a result of the loss of these affiliations. However, the growth of our digital segment, along with the anticipated strength in political advertising spend this year, is expected to more than offset this loss in revenue and operating cash flow in 2022. Finally, let's turn to our audio segment, which comprises the remaining 7% of fourth quarter revenue. Audio revenue totaled $16.1 million for the fourth quarter, consistent with the year-ago period. Excluding political spend of $3 million in the fourth quarter of 2020 and $200,000 of political spend in the fourth quarter of 2021, core audio revenue increased 20% versus the fourth quarter of 2020. When comparing the fourth quarter of 2021 with the pre-COVID fourth quarter of 2019 results, audio grew 16%. On a full year basis, audio revenue improved 25% when compared to 2020. National advertising revenue increased 28%, while local advertising revenue was up 24% year over year. Execution across our audio business was strong. The segment's cash flow generation during the fourth quarter alone exceeded that of the full year 2019. Gross margin of the audio segment was also a record and totaled 36% in the fourth quarter. Services, retail, travel, and leisure, restaurants, product brands, telecom, and media all delivered strong double-digit growth for our audio division in the fourth quarter of 2021 versus the prior year period. In short, I could not be prouder of Edger Vision's performance in 2021, and we believe that we have created significant momentum for 2022. Before I speak further, I will turn the call over to Chris Young, our CFO, to further discuss our fourth quarter of 2021, as well as provide our first quarter 2022 pacings. Chris?