Entravision Communications Corp Q2 FY2022 Earnings Call

Greetings, and welcome to the Entravision Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. 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 Entravision's Second Quarter 2022 Earnings Conference Call. Joining me 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 Entravision's SEC filings for a list of risks and uncertainties that could impact actual results. This call is the property of Entravision Communications Corporation. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed 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 8-K. 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 Entravision's second quarter 2022 earnings call. Entravision's performance in the second quarter capped off a strong first half of 2022. Net revenue for the second quarter totaled $221.7 million, up 24% year-over-year. On a pro forma basis, revenue increased 16% over the prior-year period. The continued growth of our Digital segment combined with improvements in our core television and audio businesses drove the strength during the quarter. For the six months ended June 30 2022, revenue totaled $418.9 million, up 28% year-over-year. On a pro forma basis, revenue for the first six months of 2022 increased 20% over the prior-year period. Similar to the quarter, year-to-date revenue benefited from growth in our Digital segment, as well as improvements in our core television and audio businesses. Consolidated adjusted EBITDA totaled $22.5 million for the second quarter, up 26% year-over-year. What is so impressive about our second quarter EBITDA growth is that we had $5.4 million of non-returning revenue from the prior-year same period, and we still managed to grow EBITDA of 26% in the quarter. For the six months ended June 30 2022, consolidated adjusted EBITDA totaled $40.6 million, up 27% year-over-year. Even as our top line continues to grow, we have successfully maintained a lean cost structure, having right-sized our expenses over the last few years. Despite current macro conditions, we do not currently see a need to make any additional expense cuts. That said, expense management will continue to remain core to our operations as it undoubtedly drives our EBITDA free cash flow and ability to provide 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 $0.025 per share payable to shareholders on September 30 2022. During the quarter, we also continued buying back shares under our $20 million share repurchase program, bringing the total repurchase to date to approximately $11.3 million. With that as a background, let's take a further look at each of our three segments beginning with our largest, Digital. I'm very pleased to report that during the second quarter all of our Digital units delivered solid revenue growth while at the same time reporting positive operating margins. Digital segment revenue represented roughly 78% of consolidated revenue in the second quarter and totaled $174.4 million, up 34% year-over-year. Top achievements for the segment during the quarter included our strategic territorial expansion within Latin America, Southeast Asia and Sub Saharan Africa, as well as the success of our mobile performance business, led by Smadex. Entravision's Digital mission is to continue building a global digital marketing sales operation in emerging territories where a critical mass of connected consumers exist together with a large and growing advertising industry. Based on these criteria, we have expanded across multiple territories and continents both organically and through strategic tuck-in acquisitions. At present, Entravision's digital operations span 35 different countries and service over 7,000 clients. To deliver upon this mission, our digital operations provide two main offerings. The first is our commercial representation service for some of the world's leading social and technology platforms. In this business due to our phenomenal sales teams who provide staffing, onboarding and workflow services, we continue performing strongly. The second offering entails our mobile user acquisition solutions. That includes cutting-edge proprietary technology, unique performance services, and dynamic creative optimization workflows. These mobile solutions are offered in Latin America, Europe, Africa, and Southeast Asia as standalone services. With that as a background, let me provide some examples of these services in action. Starting in Latin America, Entravision's Cisneros Interactive delivered solid results, with the second quarter with revenue increasing 9% over the prior year, fueled by our commercial representation partnerships with Meta and Spotify. Turning to Meta in particular on July 1, Entravision Cisneros Interactive officially expanded its partnership with Meta in Honduras and El Salvador. This brings our Latin American partnership with Meta to 11 total countries. As part of this expanded partnership, Entravision Cisneros Interactive will provide strategic support, creative expertise and content development for Meta advertisers in the region. Entravision Cisneros Interactive has had great success in Latin America over the past five years, training more than 5,000 people, including agencies and advertisers to leverage the Meta platform for their advertising needs. Our geographic expansion into our 10th and 11th Latin American countries is evidence of our historical success and we are very excited to see our efforts on both go-to-market events already taking place throughout Honduras and El Salvador with setup and training happening at each of our local offices. In Southeast Asia, Entravision MediaDonuts also delivered very strong results with revenue improving for the second quarter 57% year-over-year on a pro forma basis. Entravision MediaDonuts revenue growth was largely driven by successful Twitter and TikTok along with strong mobile performance. Similar to our Digital units, Entravision MediaDonuts continues to expand its geographic reach, and during the second quarter broadened its operations into Bangladesh, Myanmar, Nepal, and Cambodia. Latin America, Asia and now Africa, Sub Saharan Africa is amongst our most recent expansion territories, and we have been very pleased with our performance in this region. For the second quarter, Entravision 365 Digital's revenue increased nearly five times that of the prior year on a pro forma basis. In May, Entravision 365 Digital opened its operations in Kenya to serve local companies with advanced branding, performance and other creative needs. Sub Saharan Africa has over 500 million digitally connected consumers who are technologically savvy, making it a favorable region to further expand. Smadex, our mobile user acquisition programmatic ad tech platform headquartered in Barcelona, Spain, also performed very well during the second quarter, with revenue improving 162% year-over-year. Smadex's highly competitive offerings remain a go-to for the gaming, FinTech, and mobile delivery industries. In the second quarter, we continue to bring Smadex across the globe, with territory expansion into Asia and Europe. We also unveiled several ad-tech product performance enhancements, and debuted our new team of professionals solely dedicated to work on gaming apps and mobile performance. With many different digital brands now part of the Entravision family, we have taken the important step of unifying all of our marketing communications under a single umbrella. To manage this entire process on a global basis, we have appointed our very own Karina Cerda as Executive Vice President of Global Marketing. Karina will be an important part of our expansion efforts working closely with each of our global businesses on branding, messaging, sales and training. We are excited to take this step in our marketing and sales operations with Karina's promotion. Now let's turn to our Television segment, which comprises 15% of revenue for the second quarter. Television revenue was $32.4 million in the second quarter, down 5% compared to the prior year period. As noted last quarter, we anticipated our television revenue would decline this year, primarily due to the discontinuation of three Univision affiliates at the end of 2021. Excluding those three Univision affiliate markets, total television revenue was up 11% year-over-year, excluding those three Univision affiliate markets, and $2.8 million in political spend in the second quarter, core television advertising increased 1%. National core advertising revenue increased 1% and local core advertising revenue increased 1% year-over-year. The auto category continues to face pressures, excluding the three discontinued Univision affiliations, auto ad revenues were down 3% in the second quarter year-over-year. While we initially believed the auto category would recover in the second half of 2022, for a number of reasons, including high gas prices and continuous supply chain disruption impacting inventory, improvement in this key advertising category is unlikely to happen in the second half of 2022. Nevertheless, strong performance in other ad categories has nicely offset the decline in auto excluding the three discontinued Univision affiliates that ended in 2021. Travel and leisure, restaurants, retail, grocery, finance, and beverages had strong growth in the second quarter compared to the prior year. As a result of the current market conditions, national advertisements' order cycles have shortened considerably, reducing our overall sales visibility. Fortunately, local ads have been fairly resilient with consistent sales cycles. Turning to political, it was certainly an encouraging quarter from a political advertising perspective. We initially anticipated approximately $11 million in total political ad revenue in 2022. Following a strong second quarter in which we generated 3.4 million in political ad sales in our television and audio units, we now expect full-year political ad revenues for television and audio combined to be $17 million to $19 million. This impressive performance was primarily driven by the Nevada elections, the California online gambling initiatives, and the Texas primaries, all of which have recognized the importance of the Latino voting population. On a particular note in Texas, California, Nevada, we are seeing more political advertisers reserving television spots closer to Election Day. This is a purchasing behavior we have not experienced to this extent with past election cycles. With regards to a range performance during May 2022 for adults 18 to 49 in early local news, our Univision television stations finished ahead of their Telemundo competitors in 12 of 14 markets. In late local news, we finished ahead of Telemundo competitors among adults 18 to 49 in 11 of 14 markets plus one time. Additionally, our early and late local newscasts are ranked number one or two against English and Spanish competitors in nine markets, including ties. Lastly, to speak to our audio segment, which comprises the remaining 7% of second quarter revenue. Audio revenue totaled approximately $14.9 million for the second quarter, up 6% year-over-year, primarily due to an increase in local advertising revenue, excluding political spend of $620,000. In the second quarter of 2022, core audio revenue increased 2% versus the second quarter of 2021. The audio segment's cash flow generation was also strong and improved 8% in the second quarter, as compared to the prior year. With regards to advertising categories, travel and leisure, retail, restaurants, product brands, finance, beverages, and entertainment all delivered strong growth versus the prior year period. Similar to television, auto audio advertising continued to struggle during the second quarter, delivering a negative 5% performance year-over-year. Looking at our Audio segment ratings performance for the spring book. Among Spanish language radio stations, the Erazno y La Chokolata Show is ranked number one in PM drive in nine out of our 11 markets released for spring among Hispanic adults 25 to 54, including ties and in six markets among Hispanic adults 18 to 49. Across our 11 owned and operated radio stations, the Erazno y La Chokolata Show reached more than 469,000 Hispanics 25 to 54. On our Tricolor network, our midday programming ranked as a top choice among Latinos. During midday, La Plebe ranked as a top three Spanish language radio station in four of our six tricolored markets released for spring among Hispanic adults 18 to 49, including ties. Before speaking further, I will turn the call over to Chris Young our CFO to discuss our second quarter financial performance in further detail and to provide our third quarter pacings.

Thanks, Walter. And good afternoon, everyone. As Walter discussed, revenue for Q2 2022 totaled $221.7 million, an increase of 24% from the second quarter of 2021. For our digital segment revenue totaled $174.4 million in the second quarter of 34% year over year and up 22% on a pro forma basis as compared to Q2 of 2021. For our TV segment, total revenue was $32.4 million in the second quarter, down 5% year-over-year, excluding political core advertising revenue was down 20% year-over-year. However, excluding the revenue impact from the three discontinued Univision affiliates, total revenue increased 11% year-over-year. Retransmission revenue for the quarter totaled $9 million, which was down 3% year-over-year, mainly due to the loss of three Univision affiliates. Lastly, for our audio segment, revenue totaled $14.9 million in the quarter, up 6% from the prior year, excluding political core audio revenue was up 2% over Q2 of last year. Operating expenses in the second quarter of 2022 totaled $47.4 million, up 14% from $41.4 million in the prior year period. Excluding operating expenses related to our Media Donuts and 365 Digital acquisitions, operating expenses were up 9% primarily due to our revenue growth and increases in corporate expenses, which increased by 16% to totaled $8.5 million for the quarter compared to $7.3 million in the same quarter of last year. The primary drivers of corporate expense increases were increases in non-cash stock-based compensation expenses and salary expenses. During the second quarter, we repurchased approximately 600,000 shares under our $20 million share repurchase program, bringing our total repurchases to date to 1.8 million shares or a total of $11.3 million. Consolidated adjusted EBITDA totaled $22.5 million for the second quarter, up 26% from the $17.8 million in the prior year period. Free cash flow as defined in our earnings release was up 15% to $14.3 million in the quarter or a conversion rate of 64% of adjusted EBITDA compared to $12.4 million in the second quarter of the prior year. Net income attributable to common stockholders was up 8% to $8.5 million compared to $7.9 million recorded in the prior year period. Diluted earnings per share for the second quarter of 2022 were $0.10 compared to $0.09 per share in the same period of last year. Excluding a non-cash charge of approximately $1 million relating to a change in fair value of contingent consideration, earnings for the second quarter of 2022 were $0.11 per share. Cash paid for income taxes was $6.2 million for the second quarter compared to $3.3 million in the same quarter of last year. The increase was primarily due to our making two quarters worth of tax payments during the quarter as opposed to just one in the prior year. Net interest expense was $1.6 million for the quarter, down 9% from $1.8 million in the same quarter of last year. Net cash interest expense was $1.2 million for the second quarter, down 27% compared to $1.6 million in the same quarter of last year. Cash capital expenditures for Q2 totaled $1.7 million. We remain on track for roughly $12.5 million in full-year cash capital expenditures. Turning to our balance sheet, cash and marketable securities as of June 30, 2022, totaled $184.2 million. Total debt was $210.8 million, net of $75 million of cash and marketable securities on the books. Our total leverage, as defined in our credit agreement was 1.4x as of the end of the second quarter. Net of total cash and marketable securities, our total net leverage was 0.3x. Turning to our pacings for the third quarter of 2022. As of today, revenue from our digital segments is pacing plus 24% over the prior year. Our TV segment is pacing minus 4% over the prior year period with core TV advertising, excluding political book thus far in the quarter pacing at minus 14%. As Walter noted, we expect our TV revenue to decline in 2022 from the discontinuation in 2021 of three of our Univision affiliates. That said, we more than make up for any TV revenue decline with our digital segment performance. Excluding the impact of our three discontinued Univision affiliates, TV is pacing plus 6%. Lastly, our audio segment is pacing plus 4% over the prior year period with core audio excluding political pacing at plus 1%. All in our total revenue compared to last year is pacing at a plus 70%. With this, I will turn it back over to you, Walter.

Thanks, Chris. As I previously highlighted, we are very pleased to see continued growth across all our Digital platforms. In just the past two years alone, our Digital segment revenue has grown by over 13 times. As I mentioned on the last call, we made a strategic investment in Jack of Digital, which has an exclusive commercial partnership with TikTok in Pakistan. Jack of Digital taps into a market of over 100 million connected consumers. And as part of a vibrant emerging economy with strong advertising spend, these elements fit ideally with the core aspects of our Digital mission that I spoke about earlier. Not only are we entering into representation partnerships with new social and technology platforms and new territories, but we're also cross-leveraging organically our current partnerships from one region to another. For example, we expanded our partnership with the in-gaming advertising platform Anzu, which we now represent through Entravision 365 Digital in South Africa, Entravision MediaDonuts in Southeast Asia, and Entravision Cisneros Interactive in Latin America. Another example is our recent exclusive partnership between Entravision Cisneros Interactive and Televisa Univision. Entravision Cisneros Interactive has been appointed as the exclusive advertising sales partner for VIX, the over-the-top platform of Televisa Univision in 10 Latin American markets. Given our solid balance sheet, we remain active and continue to look for opportunities to invest or acquire companies that will further enhance the digital services we provide to our growing global customer base. As we look to the second half of 2022, we believe that political advertising spend will also be a key driver of revenue growth. While we expected strong political growth in 2022, the amount spent by the political industry in the first two quarters, still months away from the midterm elections was a very pleasant surprise. This increase in political ad spend provides further evidence that both political parties understand the importance of Latino voters to local and national elections. In fact, a study by the Pew Center firm that in battleground states in the 2020 election, as a share of eligible voters, Latino voters grew more than any other racial or ethnic group. We believe this bodes well for our television and audio segments in the back half of this year, as political parties rev up their ad spending to the midterm elections. While macro conditions including inflation and recessionary concerns may pose some challenges to the broader markets as we progress through 2022, with a strong balance sheet, streamlined expense structure, and a team of some of the best professionals in our industry, Entravision is well positioned for continued success. I want to extend my gratitude to our Entravision teams around the world for their continuous efforts and performance. And I want to thank our shareholders for your support. That concludes our prepared remarks. Chris and I would like to open up the call for your questions, operator?

Thank you very much, sir. At this time, we will be conducting a question-and-answer session. We have our first question from the line of Michael Kupinski with Noble Capital Markets. Please go ahead.

Thank you. Good afternoon, everyone. Congratulations on a strong quarter. I have a couple of questions. I know that you recently expanded your footprint in Latin America. I was just wondering, have you now expanded what I would consider the low-hanging fruit? What are the opportunities still left in Latin America? What countries do you still think you might be able to expand into, if you can just give us a sense of the opportunity to grow outside of the regions that you currently have?

Yes, we have expanded our Meta partnership into two new territories in Latin America. As for other opportunities, that is something Meta will need to determine. We collaborate closely with them to represent their platform effectively across our Latin American markets. We strive to reflect their professionalism and provide the best representation possible. Additionally, we maintain regular communication with them and are continuously seeking new opportunities in other regions to represent Meta.

I know that a lot of investors focus on the U.S. economy and how that's affecting advertising, particularly national advertising. I was just wondering if given that you are in such strong growth markets, and such a strong growth industry in digital and a lot of these other countries, are you seeing any weakness coming from any particular regions around the globe, similar to what we are seeing in the United States?

Well, I think this inflationary condition in the United States is worldwide. And that certainly dampens people's ability to consume more, spend more. So certainly, I think the issues that we're facing here in the United States with a slowdown in consumer spending is prevalent throughout the world.

Got you. Is there any particular region that you're noticing weaknesses in or a softening of the growth that you're seeing in digital?

No, not at this time. I mean, we monitor all of our markets and our territories as closely as we can, and trying to get a good sense of where the market is headed. But right now, we're not seeing any call it any weakness, but we'll continue to monitor it. I think the economic situation, not only in the U.S., but in the world is something that will continue to change and be more volatile than we would like.

And then my last question, obviously, you have a pristine balance sheet, lots of cash, which is in a great position to be in, especially if we are heading into recession, there are a lot of media companies out there that are very levered. At this point, are you seeing anything that's now crossing your desk that may have in the past when the economy was looking pretty strong? Just kind of like looking at the pipeline of opportunities and if you can just talk a little bit about where you're seeing the opportunities? Are they in the digital space? Are they in other areas that you might consider?

Well, I think you were dropping off a little bit on the microphone; it was having trouble hearing your question, but we spend a lot of time analyzing the opportunities in the Digital space. That's something that's kind of a constant that runs through the company. We continue to look at opportunities in all parts of the world, particularly those opportunities that complement our current infrastructure that we've put in place.

Got you. At this point, you wouldn't be looking at media, like traditional media, like television or radio or other things of that nature?

Well, it has to be something really compelling. I mean, once in a while, things come across our desks here on the traditional media side, and we look at it closely and evaluate it and see if it can contribute to our growth. And if it can't, then we move on. But that's the same approach we use for any digital opportunities as well: how well will it fit into the current strategy of the company with regards to our digital assets? What's the culture like of the new company that we might be looking at, and most importantly, what are the prospects for growth?

Got you. All right. That's all I have. Thank you.

Thank you. We have the next question from the line of James Dix with Industry Capital Research. Please go ahead.

Hey, gentlemen, a couple of questions. I think and correct me if I'm wrong, over the past quarter, you had a couple of conference presentations where I think the message was that you were still comfortable with the business outlook that you had going into the year. Now that you've reported your second quarter results, would you speak to that again? I mean, do you still feel basically the similar level of comfort with your business outlook that you had going into the year?

We do, James. We like what we see so far in the current quarter. And then fourth quarter, obviously, is still a long ways out, but we're still tracking to what we had budgeted as far as the end of last year.

Okay. And would you've announced since then a few territorial expansions, which you've talked about earlier in the call, would results from there be incremental to that?

Would they be incremental? No, probably not. That's kind of potentially could serve as an offset if there is any perceived weakness with the core operations. So we're sticking with that number and not really adding anything incremental from those two new territories.

Okay, got it.

And I will add, James, just to what Chris had. It takes a while to develop these countries; it doesn't happen overnight. So it'll be at least a six-month to two-year process before we start to see some real returns on all of our work.

Your digital revenue was slightly below my expectations for the quarter. I know you mentioned some headwinds previously. Are there any specific challenges for digital that you encountered in the second quarter?

Any headwinds? No, I mean, we still like what we're seeing; maybe the Meta business, the growth has subsided a little bit, and we are comping against tougher numbers deeper into the year last year, so that directionally is something that we're tracking, but no, otherwise. We like what we're seeing.

Okay, great. And then one housekeeping thing as far as television; I think at the end of your pacing discussion, you talked about pacing up 6%, excluding the three affiliate changes you had at the end of last year. I just want to be clear, is that a pacing for core advertising or all revenue?

That includes political.

Okay, but is that an advertising-only number? Or is that a total revenue number?

Yes, it's an advertising-only number, including political, but not including trends, yes.

Okay. Great. And then the pace of the buyback was a little bit slower in the second quarter than the first. Anything, any particular reason for that, or was that just kind of the brakes of the windows and things like that?

Well, we're watching the market carefully. We had a 10b5-1 in place with specific buying criteria. Many oftentimes that criteria would never hit; we'll look at tweaking that when the windows open and seeing if we can make more progress on that front.

Okay. And then the last one for me is, are you seeing or do you think that this digital business is seeing any impact from the strong U.S. dollar in various markets? I know you've indicated in the past, I think most of your media representation contracts are denominated in dollars. But I still wonder about some of the advertisers just locally there. Whether they're feeling any pressure from the strong dollar and whether that's flowing through it all to your partners and therefore to you, or do you think that's really a non-issue?

I think it's a non-issue. We're monitoring the situation closely. It's difficult to determine if that's actually occurring, but at this moment, I feel confident in saying that we continue to appreciate what we observe.

Okay, great. Thanks very much.

Thank you.

Thank you. We have the next question from line of Lisa Springer with Singular Research. Please go ahead.

Hello gentlemen, Robert Maltbie filling in for Lisa Springer. A couple of questions. Firstly, in light of the headwinds experienced during the internet, notably Facebook, or better as we now call them Snapchat, Roku recently. How have you been able to navigate those extreme headwinds, and what are strategies you may deploy to address the near future versus that? And secondly, is there a consideration or a thought about untethering the lower growth assets, namely radio or television from the higher growth digital assets and businesses, possibly in the form of a tracker or a spin-off? Thank you.

So it's Robert, right?

Robert.

Robert, thank you for your question. There's no discussion here internally to divest or spin-off any of our broadcast assets. We, as you may know, have been certainly executing those assets for a great period of time, but we still see growth in the Latino market; it's one of the most dynamic segments of our population. You can see what's happening in political. We're seeing more political dollars than ever, in our history. A lot of that has to do with the growth of the Latino voter electorate, which both parties now are continuing to invest more in. So now that's not in the plans. As far as our digital business, we continue to provide, looking to provide a better service to our not only the platforms that we partner with, but also our advertisers. And that means more training for our sales professionals, more training for our advertising and agencies and clients. Better data, we're working right now on a product where we're going to provide to our advertisers and agencies that will give them a lot more data on their campaigns. We're certainly going to look to use that data to help them better execute their campaigns. In the end, we think this will result in more sales for them, so that'll be a benefit to us as well.

Thank you very much. No further questions.

Thank you.

Thank you. We have the next question from the line of Edward Reilly with EF Hutton. Please go ahead.

Hey guys, thank you for taking my question. I think I heard that core TV pacings were down 14%. I was just wondering if you could maybe break that down between the national or a local level for me?

Yes, the national and local are both pacing down 9%. And then you've got political reversing all of that.

Okay, got you. And congrats on the close of the Jacket Digital acquisition. Wondering how material the effects of the acquisition will be on the financials going forward.

Yes, it'll be negligible this year. It's a small acquisition, not material. But we do expect high growth out of that operation over time. We're excited about it. But no need to change your models at this point.

Okay. All right. Great. Thank you, guys.

Thank you. You're welcome.

Thank you. We have the next question from the line of Howard Rosencrans with Value Advisory. Please go ahead.

Hi, Chris. Hi, Walter. Good to be back on your calls.

Thank you. Good to have you back.

Good to hear your voice.

Thank you. I just wanted to get first clarification on that pacings number. You said it was minus 14%. But that includes the affiliates you lost in TV, right?

That is correct.

That's correct.

Okay, so I believe you said pro forma is plus 6%. And that includes political, and I guess political is probably crowding out core, so we shouldn't. So we probably shouldn't get into a deeper breakdown on that. Is that fair?

That's fair. Yes. Inventory is getting grounded.

So my question is about the global markets you compete in, particularly Latin America, which is your largest market. I'm aware that you have a partnership with Meta, but I'm unclear on how your presence with Meta compares to TikTok. Are those platforms losing market share in the same way? It seems like, based on your pro forma growth, you haven't been affected by this yet. Is the situation different in those global markets?

Well, I think a couple of things, one, we focus on emerging territories with a strong connected consumer base. And so our markets that we operate in are maybe not as mature as the bigger markets that the platforms that we're all aware of operate: Meta, Google, etc. But that might be part of it that there's still more growth left in our markets. But certainly, we're all fighting for the ad pie. So it's fierce.

Do you expect continued quarter-to-quarter growth to drive your EBITDA higher, considering your margin in digital is approximately 7%? I doubt there will be margin compression in the near future, so can we assume that this will lead to a meaningful increase in EBITDA quarter-to-quarter?

Yes. Digital margins were 7.3%. Q2 we expect that to continue to ramp up. Q4 is the peak quarter for digital. So and sequentially, yes, revenue is expected here internally to continue to improve quarter-by-quarter for the balance of the year.

Gentlemen, thank you very much, and glad I'm back. Thank you.

Thanks, Howard. Welcome back.

Glad you're back too, Howard. Thank you for your questions. Thank you everyone for joining us today on our second quarter call. We look forward to sharing our progress with you in the third quarter when we have our call in November, where we will announce our third quarter earnings.

Thank you very much, sir. Ladies and gentlemen, this concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.