Entravision Communications Corporation

Greetings and welcome to EnterVision First Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. Now I'd like to turn the conference over to your host, Kimberly Asterkin of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to EntraVision's first quarter 2022 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 gap 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 the contributions from MediaDonuts 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 first quarter 2022 earnings call. Entrevision is off to a very strong start for the year, demonstrated by all-time first quarter record revenue, EBITDA, and free cash flow, as we continue to generate organic growth as well as expand our strategic partnerships. Net revenue for the first quarter totaled $197.2 million, up 32% year-over-year. On a pro forma basis, revenue increased 24% over the first quarter of 2021. The continued growth of our digital segment combined with improvements in our core television and audio businesses drove our strong growth during the quarter. Consolidated adjusted EBITDA totaled $18.1 million for the first quarter, up 28% year-over-year. On a pro forma basis, adjusted EBITDA improved 17% compared to the prior year period. What is so impressive about our first quarter EBITDA growth is that we had $5.2 million of non-returning operating cash flow from the prior year same period, and we still managed to grow EBITDA 17% on a pro forma basis, and post a record $18.1 million of first quarter EBITDA for IntraVision. Importantly, even as our top line continues to grow, we maintain a lean cost structure, having significantly reduced our expenses, particularly in television and audio, over the past few years. Our continued focus on expense management has helped drive our EBITDA and free cash flow generation, along with our ability to provide solid returns to our shareholders. Speaking of shareholder returns, I am pleased to announce that our Board of Directors has approved a cash dividend for the second quarter of 2022 of 2.5 cents per share, payable to shareholders on June 30, 2022. We also bought back approximately 1.1 million shares during the first quarter under our new $20 million share repurchase program. With that as a background, let's take a further look at each of our three segments, beginning with our largest digital segment. Over the past decade, we have transformed Entrevision into a digital-first powerhouse. We started this journey 10 years ago with a plan to reach the newly connected consumer, first in the U.S. and in Spanish-speaking territories, and then everywhere around the globe. Today, we serve over 1,800 clients each month with operations across 35 countries and campaigns running on five continents. We use advanced technology and best-in-class compliance protocols to unlock Entrevision's full potential as a leading global digital player. Back in 2012, our annual digital revenue totaled less than $5 million. Fast forward to the first quarter of 2022, our digital revenue totaled 153.7 million or 78% of consolidated revenue of 51% compared to the prior year period. This substantial digital revenue growth over the past decade is made possible by our diversified digital advertising and technology solutions which include our global commercial digital partnerships and Smatics, a programmatic ad purchasing platform. In addition, we offer other marketing solutions to small and mid-sized businesses across the globe. These solutions include branding and mobile performance digital marketing services, featuring our mobile video ad network and audio ad, our digital audio network. Our global commercial digital partnerships unit includes EnterVision Cisneros Interactive in Latin America, Entrevision Media Donuts in Southeast Asia, and Entrevision 365 Digital in Africa. Entrevision Cisneros Interactive continues to execute large digital ad campaigns on Facebook and Spotify throughout Latin America. Advertising and marketing spend patterns of Facebook in Latin America still lag behind the United States, so the platform is in a high-growth mode. Due to its unique sales operation, platform commercial partnerships, and client relationships, EnterVision Cisneros Interactive revenue grew 27% in the first quarter as compared to the prior year. During the first quarter, EnterVision Cisneros Interactive further expanded its commercial partnerships to become the exclusive partner of Roku in Mexico. Through this partnership, EnterVision is connecting brands and marketers in Mexico with Roku's advertising solutions, enabling better customer targeting and measurement along with access to premium advertising inventory. Then, just after quarter end, Entrevision Cisneros Interactive announced an exclusive partnership in Latin America with Anzu, one of the world's most advanced in-game advertising platforms. This partnership with Anzu allows Entrevision to be at the forefront of innovation when it comes to in-game advertising. Entrevision Media Donuts and Entrevision 365 Digital also delivered very strong growth in the first quarter. Entrevision Media Donuts in Southeast Asia grew its revenue on a pro forma basis 80% in the first quarter versus the prior year's same period. 365 Digital also saw a significant expansion of its top line following the launch of its exclusive sales representation with TikTok in South Africa in the second half of last year. 365 Digital also exclusively represents Ansu in South Africa. Meanwhile, just yesterday, we also announced the expansion of Entrevision 365 Digital into Kenya as we expand to new emerging markets. It is clear that our global commercial digital partnerships base is growing. And importantly, we continue to work with leaders across the digital media and technology spaces that are early movers in their respective geographic regions. I'd like to focus briefly on Smatics, our programmatic proprietary DSP ad tech platform. Since we acquired Smatics roughly five years ago, the unit's revenues have increased 10 times And for the first quarter of 2022, Smatic's revenues improved 160% as compared to the prior year period. Smatic's highly competitive, efficient, and transparent offerings, including hyper-targeted ads, machine learning algorithms, and multidimensional custom reporting, remain a go-to for the gaming, fintech, and mobile delivery industries. Smatic continues to set monthly revenue records. and we are committed to bringing this offering to our existing client base across the globe. Even with its exceptional performance, as I highlighted last quarter, we believe that Spadix is still in the very early stages of its growth potential. Now let's turn to our television segment, which comprised 16% of revenue for the first quarter. Television revenue was $30.9 million in the first quarter, down 14% compared to the prior year period. We anticipated our television revenue to decline this year, primarily due to the loss of three Univision affiliations at the end of 2021. Excluding those three affiliate markets, total television revenue was up 1% year-over-year. Excluding those three affiliate markets and $1.3 million in political spend in the first quarter of 2022, core television advertising increased 4%. National core advertising revenue decreased 2%, and local core advertising revenue increased 8% year-over-year. In terms of advertising categories, the audio category and in particular new car sales continue to face supply chain pressures. Excluding the three Univision affiliations that we no longer operate, auto ad revenues were down 70% in the first quarter year over year. On a favorable note, we are seeing some improvements in auto ad spend as we begin the second quarter and believe that auto advertising will continue to slowly improve throughout the year as inventory supply returns to meet demand. Offsetting auto declines, excluding the three Univision affiliates that we no longer operate. Travel and leisure was up 141% compared to last year's same period. Telecom, grocery, retail, and product brands also had strong growth in the first quarter compared to the prior year's same period. We're also looking forward to the return of political ad spend this year and continue to anticipate approximately $11 million in total political ad revenue in 2022. Entrevision's local television markets are situated in the states where political messaging to Latino voters remains a top priority for both parties, as well as special interest groups. Case in point, in the first quarter on our owned and operated television stations, we booked approximately $1.3 million in political ad spend, largely related to the primaries in Texas. In addition, with California considering legalizing sports betting, we anticipate a robust year for political ad spend. Turning to our ratings performance, our Univision television affiliates built upon their market leadership in the February 2022 sweeps. For adults 18 to 49 and early and late local news, our Univision television stations finished ahead or tied with their Telemundo competitor in 12 of 14 markets where we have head-to-head competition. Additionally, our early local newscasts are ranked number one or two against English and Spanish competitors in eight markets. Our late local newscasts ranked number one or two against English and Spanish competitors in 11 markets. Finally, let's turn to our audio segment, which comprised the remaining 6% of first quarter revenue. Audio revenue totaled $12.6 million for the first quarter, up 11% compared to the prior year period, primarily due to an increase in local revenue. Excluding political spend of $327,000 in the first quarter of 2022, core audio revenue increased 9% versus the first quarter of 2021. Execution across our audio business remained best-in-class. As we continued to manage our expenses and our local advertising business grew, the audio segment's cash flow generation during the first quarter improved 97% year-over-year. EnterVision's unique audio content attracts a vast and growing Latino audience. In fact, buyers of advertising space on our 46 radio properties and partner radio stations can reach nearly 95% of the US Latino listenership in a single ad placement. With regards to advertising spend during the first quarter, services, retail, travel and leisure, restaurants, product brands, healthcare, and finance all delivered strong growth for our audio segment in the first quarter 2022 versus the prior year period. Auto advertising, though softer than the prior year, is trending better in the second quarter in our audio unit. We continue to outperform the market in a number of our key territories, such as Phoenix, Los Angeles, Las Vegas, and McAllen, in total spot revenue, according to Miller Kaplan. Looking at our audio segment ratings performance for the winter book among Hispanic language radio stations, the Erasmo y la Chocolata show is ranked number one in afternoon drive in six out of our six PPM markets released for winter among Hispanic adults 18 to 49 and Hispanic adults 25 to 54, including Thais. Across our six O&O radio stations, the Erasmo y la Chocolata show reached more than 425,000 Hispanics 18 to 49. On our tricolored network, our midday programming ranked as a top choice among Hispanics. During midday, La Plebe ranked as a number three Spanish language radio station in three out of our three tricolored markets, released for winner among Hispanic adults 18 to 49, including Thais. Overall, our first quarter performance for our audio segment sets the stage for a strong 2022. And I want to thank our entire team for their incredible effort and performance. Before I speak further, I will turn the call over to Chris Young, our CFO, to discuss our first quarter performance in further detail and to provide our second quarter 2022 pacing. Chris?