Greetings, everyone, and welcome to the Entravision Third Quarter 2023 Earnings Conference Call. All participants are in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. As a reminder, today's conference call is being recorded. It is now my pleasure to introduce your host, Kimberly Orlando, Investor Relations.

Thank you, operator. Good afternoon, everyone, and welcome to Entravision's third quarter 2023 earnings conference call. Joining me today are Michael Christenson, Chief Executive Officer; Chris Young, Chief Financial Officer; and Jeffery Liberman, President and Chief Operating 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. In addition, all pro forma figures noted throughout the prepared remarks include the contributions of various acquisitions to the prior year period. The press release is available on the company's website and was filed with the SEC on Form 8-K. I will now turn the call over to Chris Young.

Thanks, Kim, and thank you all for joining us this afternoon. Jeff and I will cover our third quarter financial performance, and we will then turn it over to Mike to discuss Entravision's key focus areas and capital allocation priorities. Let's begin with an overview of our third quarter results. On a consolidated basis, we had a record quarter advertising revenue of $274.4 million, up 14% year-over-year, slightly below our previously disclosed pacings of plus 15%. Our digital segment revenue was $231.5 million for the quarter, up 23% year-over-year. The main drivers were our commercial partnerships business with revenue up 19%, our mobile growth solutions business, which saw revenue increase 19%, and various acquisitions, which did not contribute to revenue in the full comparable period. Both our programmatic and digital audio businesses were up modestly year-over-year. On a pro forma basis, digital revenues improved 18% compared to the prior year period. During the quarter, digital operating cash flow was approximately $10.3 million with a margin of approximately 4.5%. Next, I'd like to highlight two new partnerships we recently executed to further diversify our digital operations with Match and Pinterest. In September, Entravision was named the exclusive sales partner to Match Media, the group that powers ads for brands such as Tinder, OkCupid, and Match across Africa. Through our local team of experts on the ground in South Africa, we are able to more effectively assist customers to deploy their advertising investments more efficiently to drive sales growth. Subsequent to quarter end in October, we entered into an international sales partnership with Pinterest to offer advertisers outreach and campaign management in various countries where Pinterest has not been serving ads across Southeast Asia, Latin America, Africa, Europe, and the Middle East. We look forward to partnering with these marquee brands and continuing to grow our portfolio of digital solutions. I'll now turn the call over to Jeff to discuss our TV and audio business segments.

Thank you, Chris. Let me start with our television segment. Television revenue was $29.6 million in the quarter, down 17% compared to the prior year period, primarily due to declines in political revenue as we faced difficult comparisons versus last year's strong political revenue performance of $6.4 million. While we saw continued pressure on national advertising spending, our local TV business remains fairly resilient as our team has been doing a great job executing in a challenged environment. On a more granular basis, core television revenue increased 1%, local core revenue increased 7%, and national core revenue decreased 14% year-over-year. Retransmission revenue for the quarter was $8.9 million, which was flat year-over-year. Operating cash flow margin for our TV segment was 35% for the quarter. We saw growth in the auto category of 14% in the quarter compared to the same period last year. This growth was propelled by Tier 2 and Tier 3 spending. Unfortunately, this growth was offset by declines in media entertainment and retail. While softness on the national advertising front has persisted into October, we expect to see improvement in political spending in the fourth quarter. The Nevada primary election is on February 6, and the political window for this primary opens on December 24. Besides Nevada, there will be key elections in states like California, Arizona, Colorado, and Texas, which all have primaries in the first quarter of 2024. Now let's shift to audio. Audio revenue totaled approximately $13.4 million for the quarter and decreased 19% year-over-year. The decline in revenue was driven by lower national and local advertising revenue as compared to the third quarter of 2022, which included non-returning political advertising revenue of $1.5 million. On a core basis, excluding political, total revenue was down 11%, with local revenue down 11% and national revenue down 10%. Based on the current economic conditions, as I said earlier, we expect political spending to increase, which will help support our national sales efforts. I will now turn the call back to Chris to discuss the third quarter financials and fourth quarter pacings in further detail.

Thanks, Jeff. Let's begin by reviewing our expenses. Cost of revenue in the quarter totaled $199.3 million, up 27% from $157.1 million in the prior year period and was driven by the increase in our digital segment revenue. On a pro forma basis, factoring in recent acquisitions that did not contribute to cost of revenue in the prior year period, cost of revenue increased 23%. Operating expenses in the quarter totaled $53.8 million, up 9% from $49.3 million in the prior year period. This increase was driven by various factors, including higher noncash stock-based compensation due to the timing of the annual RSU grant being in Q1 of this year compared to Q4 in the prior year, increased expenses associated with higher digital advertising revenue, increased salary expenses, and the result of various acquisitions in 2023 that did not fully contribute to our financial results in our digital segment in the prior year period. On a pro forma basis, cash operating expenses increased 4% compared to the prior year period. Corporate expenses increased by 40% to total $13.3 million for the quarter compared to $9.5 million in the same quarter of last year, which is mainly a result of the timing of the annual RSU grant I just mentioned as well as an RSU grant to our CEO and increases in professional service fees. Consolidated adjusted EBITDA totaled $14.2 million for the quarter, down 45% from $26 million in the prior year period. The decline was primarily driven by non-returning political revenue at our broadcasting business and sales mix. Free cash flow, as defined in our earnings release, was $4 million in the quarter or a conversion rate of 28% of consolidated adjusted EBITDA compared to $15.4 million in the same quarter of the prior year. Net cash interest expense was $2.8 million for the quarter compared to $1.9 million in the same quarter of last year. Cash capital expenditures for Q3 totaled $5 million. We expect cash CapEx to total roughly $17.5 million for the full year. Cash paid for income taxes was $2.3 million for the quarter compared to $4 million paid last year. Diluted earnings per share for the third quarter 2023 were $0.03 compared to $0.11 in the same quarter last year. Our Board of Directors also approved a quarterly $0.05 dividend. Turning to our balance sheet. Cash and marketable securities as of September 30, 2023, totaled $128.7 million. Total debt was $211.1 million. Our total leverage as defined in our credit agreement was 2.1 times as of the end of the third quarter. Net of total cash and marketable securities, our total net leverage was 1.1 times. As we turn to our current pacings for the fourth quarter 2023, it's important to note that we booked approximately $19.1 million in political revenue in the fourth quarter of last year that will not return this year. $14.8 million of that was on TV and $4.2 million of that was on radio with a balance of approximately $100,000 being booked on digital. As of today, revenue from our digital segment is pacing plus 15% over the prior year. Factoring in acquisitions, our digital segment on a pro forma basis is pacing plus 13%. Our TV segment is pacing minus 32% over the prior year period, with core TV advertising, excluding political booked in the prior year, pacing at a plus 1%. Lastly, our audio segment is pacing at a minus 30% over the prior year period, with core audio, again, excluding political, both in the prior year quarter, pacing at a minus 11%. All in, our total revenue compared to last year is pacing at a plus 4%. On a pro forma basis, our total revenue is pacing currently at a plus 5%. I will now turn the call over to Mike for concluding remarks.

Thanks, Chris. As you've heard from Chris and Jeff, we're working hard to finish 2023 with good momentum, and we're in the process of building our plans for 2024. 2024 will be a very important year for Entravision. Our priorities for the year will be, first, to maximize our political revenue. We have a large audience; nearly one in five of the 62 million Latinos in the U.S. are in our TV and radio broadcast markets. This is a critical audience for the 2024 elections—Congress, the Senate, and presidential. We cover five of the 20 closest states in the 2020 presidential race. Second, we're investing to increase our local news capacity, adding morning news in all of our markets and weekend news in San Diego, Las Vegas, and Denver. Third, we'll be very focused on improving the operating performances of our three digital businesses: Entravision digital services, Smadex, and Entravision mobile growth solutions. For our capital allocation plans for 2024, our most important allocation is our dividend. We are committed to the dividend. Then after covering the dividend, the balance will be reinvested in our businesses. We are making investments in adding AI and machine learning capabilities to our technology businesses, particularly Smadex, applying those capabilities to how we manage and analyze all of our businesses. Again, 2024 will be an important year for Entravision. However, I think it's important to remind everyone that all of our businesses are correlated with global ad spending, and this will likely be a challenging year from an economic and geopolitical perspective. With that, we want to thank you for joining us today and for your support of Entravision. And now we'll open up the call to take your questions.

Our first question today comes from Michael Kupinski from NOBLE Capital Markets. Please go ahead with your question.

A couple of questions. Political advertising, I noticed some presidential political advertising already being spent in Florida, which is kind of unusual at this time of the year. But can you talk a little bit about political in the fourth quarter? I know that you gave guidance in terms of your pacing is down 30% or so. But how much of that is political? And then can you give us your thoughts about the level of political in 2024?

So Michael, we're expecting somewhere between $300,000 and $400,000 of political in the fourth quarter. As I said in my remarks earlier, we do have some very key states that are coming up with primaries in the first quarter of next year, especially in Nevada, which is a very contested race. And that political window actually opens up on Christmas Eve this year. So we're expecting to see a ramp up of our spend probably right after the Thanksgiving break as we move forward into the primary election in the state of Nevada.

And Michael, since we gave up pace only as of today, that's obviously not 100% factored in. We are running some presidential campaign campaigns now, but that pace is not reflective of stuff that might break late in the quarter.

Yes. And Biden— as Chris has mentioned, Biden is already spending in the Nevada marketplace with us.

And I know that you have several developments in your digital business. But can you talk a little bit about the margins? I know that you've indicated in the past that improving digital margins was a priority for the company. I was wondering if you could talk a little bit about the progress on that front? And where do you anticipate margins to be?

Sure. We did—cash flow margin for digital was 4.5% in the third quarter. That's down from 4.7%. In the second quarter, we are gunning to get north of 5% in the fourth quarter. Right now, the way the revenue is coming in, we feel pretty comfortable with that number. And then obviously, we're still going through budgets here for 2024. So that's going to be a work in progress. But obviously, the goal is to continue to ramp that higher.

And then I know that when we talked a little bit about Facebook and some of the changes that you had there, that you indicated that there might be some additional markets that Facebook might give you. And I was just wondering if you kind of finished those discussions and others, and if you have, if you can kind of give us some thoughts about what markets that you're likely to get from Facebook and then also the market opportunity from those markets?

Yes. Nothing to announce as of right now, it's still a work in progress, and we'll keep the market updated as that continues.

And then on the broadcast side, the auto being a real key component to some of what's driving some of the core advertising. Is that the largest? Can you just kind of give us a flavor of what you're seeing outside of the political and TV—what's driving the core revenue?

So auto was up 14% for the quarter. It's back to our largest segment. Even with the strike, what we noticed in this foreign auto—auto manufacturers are stepping in to take market share as a way to capitalize on the weakness of the U.S. auto side with the strike. They're looking to capitalize on a unique situation. That's really what drove auto in the quarter, 14% for TV.

Also, that was Tier 2 and Tier 3, right? So that's the dealer associations and also the local car dealerships in our marketplaces. And you did ask from a category standpoint besides being positive in auto, we also did see the services category go up a little bit in health care also.

And then there's a lot—last question, I promise. There's a lot of distressed broadcasters out there that are obviously not in the financial position like you are. Is there any thoughts in terms of M&A at this point? Or is the concentration still going to be on the digital? Or would you take a look at the broadcasting side?

2024 is going to be about focusing on our own internal businesses. The work to expand and cover the political opportunity we think is going to take a lot of time and attention and money. Then we want to improve the operating performance of the digital portfolio that we have today. So that's what we're focused on for 2024. We'll get through 2024 and then figure out where we go from there.

Our next question comes from James Dix from Industry Capital Research. Please go ahead with your question.

Just looking at the top line for the moment, I mean, looking across your three segments, how is demand in the quarter versus your expectations? And then how is that looking in the fourth quarter versus your expectations? I'm just curious as to where you're seeing the variances versus what you thought and what might be driving that?

Yes. Well, the sales rep business, James, was up 19% in the quarter. We were pretty pleased with that. That's really being driven by Latin America. And so far, that's come down a little bit so far in the quarter, looking more at a low-teens pace for fourth. So that's come down a little bit. Otherwise, you've got mobile growth and branding were both up double digits. That's generally in the 10% range. So then you've got our brand-new unit Adsmurai, which was up close to 40%. So that should give you some color behind the digital moving parts.

And then I think in the past, you've spoken about focus on organic growth initiatives as distinct from M&A and things like that. My understanding was that was primarily on the digital side. Any color you can offer on what types of initiatives you're thinking about and timing and things like that.

So in our— as we said, pretty much all of our energy right now is on political. It is a very big piece of our business in 2024. We're also expanding our news capacity. So we're adding news in several of our markets morning and weekend. So that's important. And then again, as I said earlier, focusing on improving the performance of our three core digital businesses.

And then just speaking of political, this might be for you, Chris. When you look at the core—like for last year, for example, should we be assuming that all of that was incremental and how you're calculating it? It almost seems to me like you were making maybe some assumptions that it wasn't all political, and that's how we should be thinking about the base for calculating core growth now.

I'd go with core growth but the political being 100% incremental.

So we should pull all of last year's out in coming up with the base for assessing the pacings?

I think that's right. Yes.

And then like for next year, I mean, obviously, potentially much bigger year. Any thoughts as to how we should be thinking about or how you're thinking about the incrementality of that when gauging the return on the investments you're going to be making to get more political?

Well, certainly, we're going to have some markets that are going to have crazy political, and the expectation is that core is going to be down as a result because you just can't jam that much political in such a short amount of time. But again, it's just easier to think about this as being 100% incremental.

Yes. In the midterm election, we did a really good job managing our core versus political too, and we're all focused on doing the same thing in the upcoming election.

And then I guess, finally, just internationally, just—since you're global, just trying to get some sense as to like what countries and regions have been outliers to you either positively or negatively in terms of your growth?

Yes, I've got—Latin America was up in the third quarter, 18%. Asia was up 24%. Europe was up 19%. Africa was down close to 30%. And then in the U.S., on the digital side, it was up 1%. And then we also did some business in the Middle East as well, and that was up from four times, but that's our Jack of Digital business in Pakistan.

And are you seeing much change in terms of the mix of the growth across those geographies as you look toward the end of the year? Or should we be looking for something similar?

Yes. I think as you look into Q4, I think all of those regions have come down a little bit Q4 versus Q3 in general. So maybe you take it down a couple of points. But clearly, particularly with Meta, Meta in LatAm, something to the tune of, I think, LatAm and they break out LatAm, Africa, and the Middle East, they were plus 30% for the quarter. We did a plus 18%. So it's still the growth versus they did a plus 7 or 8 in the U.S. So it's still—in our markets, Facebook, Meta is still the growth engine in these regions, and we expect that to continue.

Our next question comes from Mike Albanese from EF Hutton. Please go ahead with your question.

Just a couple of quick ones. I want to dive back in, I guess, to the kind of sector level. You mentioned that auto, services, and I think health care have all been showing good trends. I mean, on the flip side of that, is there anything standing out or any copies of weakness that you're seeing or maybe even just kind of give us a sense of the variation between what you're seeing at the top level, which I guess is maybe auto and sectors that are underperforming?

Yes, some sectors are not performing as well as we would like. This primarily includes travel and leisure, retail, and restaurants. Many of these issues are related to the current economic conditions.

And then just to dive back into 2024 priorities, more specifically capital allocation, reinvesting to drive organic growth. You mentioned expanding news capacity. You mentioned AI. Maybe you could talk—just give us a sense of how you intend to use AI or maybe just add a little bit more color into that? And then in terms of just CapEx needs in 2024, historically high this past year as expected, right? I mean, kind of are you expecting that to really be the same in the next year or come back down more towards historical levels, I guess?

Yes. CapEx, I'll cover—CapEx will be more normalized next year in the $11 million to $12 million range, down from where it is this year because of the move that we did here in Los Angeles. And then the AI question, I think...

Yes. Really, in all of our digital businesses, AI and machine learning are now a critical part of the capabilities of the products that we deliver to advertisers. So we have to invest to be competitive in all of those businesses or even to establish some competitive differentiation. So that's across the board, having committed to making that investment. What we're also doing is saying, can it apply to other areas of our business, can we operate the company more efficiently or smarter using those capabilities? Like every company, this is now a critical area of investment, and we need to keep up.

Yes. I guess just regarding internally with operational efficiencies. Is this something you're just—you're kind of looking into if you identified ways, I guess, where you believe you can implement AI technology and find efficiencies and improvements?

We are implementing and improving in our tech businesses. So in Smadex and our mobile growth solutions. That work has been underway for probably more than a year at this point, and we've definitely put more behind it in the last quarter, and it will be an important area of investment for us again in 2024. The application of that to broader Entravision, including how we manage our broadcast businesses, that's just— that's a new effort. That will be something that we do in 2024. Again, if we're going to have this capability, we're going to use it in as many places as we can.

And then, Mike, just— you’ve been here for a few months, and I really had a chance to kind of dive under the hood. I know it's a fluid process, but just I guess very broadly, any major learnings or surprises as you got a chance to dive in here that you think is worth sharing?

It's a great company with a lot of opportunity. I'm more excited now after finishing my quarter and getting to know the people and the businesses, and I'm very optimistic about what we can accomplish in 2024. So any time you go into a new situation, there are pluses and minuses. In my case, the pluses have definitely outweighed the minuses, and I'm excited about the opportunity.

And our next question comes from Chris Sakai from Singular Research. Please go ahead with your question.

Yes, I'm in for Dave Marsh. Can you talk about— for political ad spending, which of the three segments would perform the best?

Yes. TV by far and away. And I've said this publicly, we've got an internal budget of about $40 million for political next year. It's a budget. We'll see how we do vis-a-vis budget. But TV should be good for about $30 million of that, radio should be good for the other $10 million. And maybe we'll do a couple of hundred grams digital, but it's really a TV-driven process.

Okay, great. And then can you talk about any potential acquisitions that you're seeing out there?

Not in 2024. 2024 is going to be about organic growth and improving our operations.

Can you talk about your digital revenue and it slowed. So can you talk about why? And what should we be expecting there over the next couple of quarters?

Well, we've been very acquisitive over the past several years. And to my point, we're right now just working on harmonizing those acquisitions and driving up margins. But really, the growth has come from the acquisitions that we've been active with for the past four or five years. Plain and simple.

And ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Michael Christenson for any closing remarks.

Just want to thank you all for joining us today and for your support of Entravision. We look forward to sharing further details on our progress with you on our fourth quarter earnings call, which will be in March. So thank you.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.