Entravision Communications Corp Q4 FY2025 Earnings Call

Good afternoon, everyone, and welcome to Entravision's Fourth Quarter and Full Year 2025 Earnings Call. I'm Roy Nir, Vice President of Financial Reporting and Investor Relations. Joining me today to discuss our results are Michael Christenson, our Chief Executive Officer; and Mark Boelke, our Chief Financial Officer and Chief Operating Officer. Before we begin, I would like to inform you that this 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. The press release is available on the company's Investor Relations page and was filed with the SEC on Form 8-K. Additional information may also be found on our annual report on Form 10-K, which was also filed today. Our call today is using Zoom. If you'd like to ask a question, please use the Q&A function on the screen, during the call, indicate your name and company, and submit your question in writing. We will try to answer any questions that relate to the topics contained in today's call during the Q&A session. I will now turn the call over to Michael Christenson.

Thank you, Roy, and thanks to everyone joining the call today. We appreciate your interest and support. As mentioned in our press release, Entravision's consolidated revenue grew by 26% to $134 million in the fourth quarter of 2025 compared to the same period in 2024. We reported an operating loss of $21 million in the fourth quarter of 2025, reduced from a loss of $49 million in the fourth quarter of 2024. This loss included a $26 million noncash impairment charge, which means we would have seen an operating profit if we had excluded this adjustment. However, we acknowledge that we still have work to do to enhance our operating performance and profitability, particularly in our Media business. We divide our results into two segments: Media and Advertising Technology & Services, or ATS. In our Media segment, revenue fell by 32% in the fourth quarter of 2025 compared to the same quarter in 2024, primarily due to reduced political revenue. Without the political revenue, our results showed a 4% increase in local advertising revenue and a 5% decrease in national advertising revenue. While our local operations experienced a 3% decline in monthly active advertisers, this was countered by an 8% increase in revenue per active advertiser. Regarding operating expenses, we made significant investments in our media business throughout 2025, such as enhancing our local sales teams and increasing our capacity for digital sales. This led to an annualized increase of about $8 million in operating expenses for our Media segment, although we funded these investments partly by improving efficiency and reducing costs in non-revenue-generating areas. Consequently, total operating expenses in our Media segment were actually 6% lower in the fourth quarter of 2025 compared to the fourth quarter of 2024. Due to lower revenue without political contributions, we incurred an operating loss of $428,000 in the fourth quarter of 2025, in contrast to an operating profit of $18.5 million in the fourth quarter of 2024. For our Media segment, we are currently working on two initiatives to generate additional revenue. First, we launched a new network called Altavision in October last year, which is broadcast on our multicast capacity across all markets, with shared revenue from local news programming and content provided by Grupo Multimedios of Monterrey, Mexico. The stations began broadcasting in October, and we started test marketing with local advertisers earlier this year. Secondly, we launched new programming on our full power Orlando television station, WOTF-TV, on January 1, 2026, in partnership with Hemisphere Media. This collaboration aims to serve the growing Puerto Rican, Caribbean, Central, and South American Spanish-speaking communities in Central Florida, which includes over 500,000 Puerto Ricans in the Orlando area, presenting a promising revenue opportunity. Moving on to our Advertising Technology & Services segment, ATS revenue more than doubled in the fourth quarter of 2025 compared to the same period in 2024, driven by a larger customer base and increased spending per customer. We continued to invest in our ATS segment to boost revenue and operating profits, focusing on enhancing our technology and expanding our sales and customer operations teams. Infrastructure costs also rose as we scaled our revenue. Although these costs are growing at the same rate as our revenue, we anticipate achieving incremental operating leverage, allowing costs to rise more slowly than revenue over time. Our investments, which significantly raised direct operating expenses and selling, general, and administrative expenses, amounted to $6.5 million more in the fourth quarter of 2025 compared to the fourth quarter of 2024, which translates to $26 million higher on an annualized basis. The operating profit for ATS was $12 million in the fourth quarter of 2025, compared to $2 million in the same quarter of 2024. Recently, we announced the acquisition of the technology and product IP of Playback Rewards, a loyalty platform. This acquisition accelerates our entry into the rewards market, which complements the reward platform we've been developing for the past year. To summarize, in Media, we're enhancing our local sales capacity and expanding our digital sales operations, while in ATS, we're adding more engineers to improve our technology and boost our sales capacity. We believe these investments will strengthen our company. Now, I will turn it over to Mark for more details on our financial results for the fourth quarter of 2025 and the full year.

Thank you, Mike. I will begin by discussing the performance of our two reporting segments: Media and Advertising Technology & Services. In the Media segment, fourth quarter revenue was $45.8 million, a decrease of 32% compared to the fourth quarter of 2024. For the full year 2025, revenue reached $176.7 million, down 20% from the previous year. As we mentioned in earlier calls, our Media business experienced a slow start in 2025, partly due to advertiser uncertainty stemming from a new administration and federal immigration enforcement actions. Additionally, 2024 saw significant political advertising that was absent in 2025. However, we have observed improvements in revenue as the quarters progressed, especially in local ad sales, and we are gaining momentum in executing our revenue strategies. One of our objectives is to optimize our organizational structure and support service expenses to align them with revenue, aiming for profitability in each segment as well as at a consolidated level. Looking at total operating expenses for our Media business, which includes both direct operating expenses and selling, general, and administrative expenses, we saw a decrease of $2.5 million in the fourth quarter compared to the same period last year, a reduction of 6%. Operating expenses remained unchanged for the entire year of 2025 compared to 2024. Starting in the third quarter of 2025, we have implemented changes as part of an ongoing organizational design strategy meant to facilitate revenue growth and reduce expenses in the Media segment. Key parts of this plan involved a workforce reduction of about 5% in the third and fourth quarters, mostly affecting back-office roles, and the closure of several leased facilities, transitioning affected employees to remote work. We anticipate these adjustments will lower media operating expenses by about $5 million annually, and we recorded restructuring costs of $2.8 million in the third and fourth quarters for these moves. In the fourth quarter of 2025, the Media segment incurred an operating loss of $0.4 million, in contrast to an operating profit of $18.5 million in the same quarter last year. This decline was largely due to the absence of political advertising revenue that we saw in the fourth quarter of 2024. We are continuously reviewing the organizational structure of our Media business to deliver appealing content, drive sales, streamline operations, and optimize costs. The operating loss in the Media segment showed considerable improvement from the third to the fourth quarter of 2025. Now, moving on to our Ad Tech & Services segment, fourth quarter revenue was $88.6 million, which is a remarkable increase of 123% compared to the fourth quarter of 2024, and represents a sequential growth of 16% from the third to the fourth quarter of 2025. For the full year 2025, revenue totaled $270.9 million, reflecting a 90% year-over-year increase compared to 2024. As the year progressed, we experienced growth in both the number of monthly active accounts and revenue per active account. As previously mentioned, we have successfully implemented strategies in the ATS business throughout 2025, including enhancing our sales team and geographic coverage, as well as bolstering our AI capabilities and technology platform. ATS total operating expenses rose by 48% in the fourth quarter of 2025 compared to the same period last year, an increase of $6.5 million. For the full year, these expenses increased by 54% compared to 2024. The rise in ATS expenses predominantly resulted from increased revenue, including higher cloud computing service costs due to processing more transactions and utilizing enhanced AI functionalities within our ad tech platform. There was also a rise in sales commissions and performance compensation linked to revenue growth and other achieved performance metrics. In recent quarters, we have added more sales, engineering, and ad operations staff to foster ATS growth and enter new geographic markets. The ATS segment reported an operating profit of $12.3 million in the fourth quarter of 2025, denoting a 464% increase from the previous year and a 26% sequential increase from the third quarter. The operating profit for the full year 2025 was $33.8 million, an increase of 317% from 2024. Our aim for the ATS segment is to consistently grow revenue while achieving positive operating leverage, with revenue growth surpassing expense growth both in percentage and total dollar amounts. Combining our two operating segments, consolidated revenue for the fourth quarter of 2025 was $134.4 million, up 26% from the previous year. Full year 2025 revenue totaled $447.6 million, up 23% from 2024. Together, the two segments produced a consolidated operating profit of $11.9 million in the fourth quarter and $27.6 million for the full year, which reflects a decline of 43% and 41% respectively compared to prior periods. This decline primarily stemmed from reduced operating profit in the Media segment, notably due to the absence of political revenue in 2025, although this was partially mitigated by increased operating profit in the ATS segment. We reported a consolidated operating loss of $20.7 million in the fourth quarter of 2025, improving from a loss of $48.6 million in the same quarter last year. This operating loss included a noncash impairment charge of $26 million related to specific FCC licenses. Without factoring in this noncash charge, we would have achieved an operating profit exceeding $5 million for the fourth quarter of 2025. For the full year 2025, we recorded an operating loss of $83.4 million compared to a loss of $52 million in 2024, mainly attributed to lease abandonment losses associated with our corporate headquarters and restructuring costs primarily related to our Media segment. Once again, our goal is to achieve profitability for each segment and generate a consolidated operating profit. There is still work to do, especially within the Media segment, and we are committed to increasing revenue and reducing operating expenses throughout 2026 and beyond. Concerning corporate expenses, we have made significant progress in trimming these costs over the past few years. Corporate expenses for the fourth quarter of 2025 were $6.5 million, representing a 13% decrease from the same quarter last year, approximately $1 million less. This reduction was primarily due to lowered expenses in rent and professional services. For the full year 2025, we reduced corporate expenses by $10.5 million compared to the previous year, a 28% year-over-year reduction. Looking back another year, corporate expenses in 2025 were nearly half of those incurred in 2023. Entravision's balance sheet remains robust, with over $63 million in cash and marketable securities at the end of the year. We take pride in our strong financial position, which we believe differentiates us in the industry. In 2025, we made total debt repayments of $20 million, decreasing our credit facility indebtedness to around $168 million by year-end. As previously reported, we amended our credit facility in the third quarter, a strategic measure to expedite debt reduction and enhance financial stability and flexibility within our credit agreement. Additionally, we distributed $4.6 million in dividends to shareholders in the fourth quarter, equating to $0.05 per share, and a total of $18 million for the full year, or $0.20 per share. For the first quarter of 2026, our Board of Directors has approved a dividend of $0.05 per share, payable on March 31 to stockholders recorded as of March 17, totaling approximately $4.6 million. Our cash allocation strategy focuses firstly on reducing debt and maintaining low leverage, and secondly on returning capital to our shareholders primarily through dividends. We assess capital allocation over a two-year horizon to consider the cyclical nature of political advertising that occurs every other year. During the past two years, 2024 and 2025, we generated around $85 million in net cash from operating activities. Over this two-year span, we utilized approximately $76 million of that cash to reduce debt and distribute dividends to shareholders, with $40 million directed towards debt reduction and $36 million towards dividends. Since 2025 was not a political year, we did not experience substantial political revenue, but we have now entered another political advertising election year in 2026. We appreciate your participation in today’s call and encourage our investors to reach out through the Investor Relations section on our corporate website, entravision.com, where you can access a transcript of this call, the press release with our fourth quarter and full year financial results, and our annual report filed with the SEC on Form 10-K. Now, Mike and I would like to welcome questions from the investment community. Roy, I’ll hand it back to you.

Thank you, Mark. The first question is about the outlook for political revenue in 2026. Mike, would you like to address that?

Yes. Today marks 243 days until election day 2026, and as we've seen in the news, primaries are currently taking place nationwide. I believe we are well positioned for a robust political spending climate in 2026. As mentioned in previous calls, we think the Latino vote will be essential to the results of the congressional elections in our six Southwestern states. The Cook Political Report highlights the 35 closest races among the 435 congressional contests, and we're fortunate to have 11 of those races in our markets. Additionally, the significant Texas U.S. Senate race is gaining considerable media attention. We also have governor races in California, Colorado, Nevada, New Mexico, and Texas, putting us in a strong position. As we've stated before, the Latino vote is vital for these elections. Research indicates that Latinos are the most persuadable group within the electorate, and we have an effective way to engage that audience. To clarify our message, we emphasize to everyone that winning the Latino vote is crucial for election success. If you aim to win over this demographic, increasing your budget for Spanish language media should be a priority. We remain very optimistic about our positioning for 2026.

Thank you, Mike. We received another question related to the status of renewing the affiliation agreement with TU. Can you provide an update on that?

Sure. Not much to update since our last call, what we said last time, and it's still the case today. The affiliation agreement with TelevisaUnivision runs through December 31, '26. We've been partners for 3 decades, and our plan is to renew this agreement. So we expect to renew this agreement. But that's all I can say at this point.

Thank you, Mike. Please hold as we review additional questions. Thank you, everyone, for joining us today. Mike, I'll turn it back to you for closing remarks.

At this point, we'll say thanks, Roy, and thank you again to all of you who are joining our call today. We look forward to speaking with you again when we report our 2026 first quarter results. Thank you very much.