Earnings Call Transcript - EVC Q1 2021

Operator, Operator

Welcome to the Entravision Communications Corporation First Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. It is now my pleasure to introduce your host, Kimberly Esterkin from Investor Relations. Please go ahead.

Kimberly Esterkin, Investor Relations

Thank you, Operator. Good afternoon, everyone, and welcome to Entravision's 2021 first quarter earnings conference call. I hope everyone is staying healthy and safe. Joining me on the call today is Walter Ulloa, Chairman and Chief Executive Officer; and Chris Young, Chief Financial Officer.

Walter Ulloa, Chairman and CEO

Thank you, Kimberly, and good afternoon, everyone. We appreciate you joining us for Entravision's first quarter 2021 earnings call. Entravision posted strong results for the first quarter with net revenue of $148.9 million, up 132% year-over-year. On a pro forma basis including Cisneros Interactive revenue in our prior year results, revenue increased 43% over the first quarter of 2020. Growth during the quarter was driven by our core broadcasting businesses excluding political, along with the continued strong performance of our digital segment. We are pleased to see our underlying businesses continue on an upward course since the pandemic-driven lows in 2020. I'd like to thank all of our employees for an excellent first quarter as we continue to navigate the pandemic. Each of our businesses is now firmly on the path to recovery. Our first quarter results give us confidence and an optimistic outlook for the balance of 2021. Adjusted EBITDA totaled $14.2 million for the quarter, which is up 47% from the prior year period. On a pro forma basis, accounting for Cisneros Interactive, adjusted EBITDA increased a solid 35% year-over-year. From an expense management perspective, we continue to operate as a much more efficient business. Our lean cost structure is helping propel our company forward as macroeconomic conditions continue to improve. Chris Young, our CFO, will speak further about our first quarter expenses later in today's call. Now let's take a look at our segment performance for the quarter. Our television division generated $36.1 million for the first quarter, down 8% compared to the prior year, primarily due to the lack of non-returning political revenue compared to the first quarter last year, excluding $5.3 million of non-returning television political spend in the first quarter of 2020. Core television advertising increased by 3%.

Christopher Young, CFO

(Not provided in the raw transcript; continuation of Walter's speech)

Walter Ulloa, Chairman and CEO

Thanks, Chris. As I mentioned at the beginning of my prepared remarks, we are very pleased with our results for the first quarter with our core broadcasting businesses performing well, along with our digital segments that continue to see exceptional growth.

Michael Kupinski, Analyst

Thank you, and congratulations on an amazing quarter. You did a much better job in digital than I expected. I was wondering how did your legacy digital businesses perform in the quarter? And then if you could just give us a flavor of Cisneros and how did it perform better than you expected? And maybe give us a flavor of what's driving maybe their growth outside of you adding the business to your digital business. I'm just trying to understand how core is growing and what's driving that growth at this point?

Walter Ulloa, Chairman and CEO

Well, thank you, Michael. So I'll start with this sales question first. It did perform much better than expected. I think the budget was plus 40% versus the first quarter last year, and we wound up finishing over 100% growth in the first quarter with that business. It's just a combination of our team, our sales teams executing better and providing better solutions to our advertisers in Latin America. Yes, the popularity and performance of Facebook, Spotify, and LinkedIn—primarily Facebook—drove this. As for the rest of our digital businesses, we have three digital businesses. I started off by giving you some color on our Cisneros international sales rep business, but we also have a U.S. digital business, which includes providing digital advertising solutions to advertisers, mostly SMBs, who primarily want to reach Latino consumers in the more than 29 markets we operate across the U.S. This team works alongside our broadcast sales team as well. Another core part of our U.S. digital business is our audio programmatic business where we are connected to major audio buying platforms, including Cats, Adways, and Triton. We also offer our own audio inventory to these major audio platforms and our audio exchange network. Together, these two businesses make up the core of what we call our U.S. digital unit, which was up 39% compared to the first quarter of last year. The third leg of the stool is our Entravision International, which is another essential part of our digital sector. Our core product in this unit is Smadex, our programmatic mobile-first DSP. Its core mission is to provide marketers with app downloads, primarily in gaming, Fintech, and entertainment categories. This business operates internationally with around 68% of the sales generated internationally and about 32% coming from the U.S. in the first quarter. Smadex grew its revenue 21% over the prior year period. So that gives you a summary of our digital business as a whole.

Michael Kupinski, Analyst

Do you start to see political advertising related to the California recall? Can you give us your thoughts on political advertising for this year?

Walter Ulloa, Chairman and CEO

Well, I'll just give you my thoughts, and then Chris, I'm sure, will have some other thoughts. We all believe here that in order for Newsom to continue as governor of California, he has to have a big turnout by the Latino voter electorate. So I think it's all going to depend on the Latino voter in California, in terms of who wins the election. I believe that Newsom certainly has the advantage. He's well familiar with the Latino community, having appointed Alex Padilla to the U.S. Senate, which was a major appointment. I know that the Latino community was very pleased with that decision. What the number might be, we don't know. We've kind of thrown numbers around as to what it might look like at somewhere between $2 million to $4 million of additional revenue, primarily in the fourth quarter. Chris?

Christopher Young, CFO

I agree. I think $2 million to $4 million is probably the right number, at least as we stand here today.

Michael Kupinski, Analyst

I was wondering if you could just talk a little bit about the soccer tournament and what the revenue impact might be in the upcoming quarters as well?

Walter Ulloa, Chairman and CEO

So we've got three tournaments coming up. It's going to be a lot of soccer, both on TV and radio. You've got the Euro Cup, Copa America, and the Gold Cup. The number to think about those incrementally, as far as revenue is concerned, is probably an additional $2 million to $3 million, primarily falling in Q2, but some will bleed into Q3. Again, this will be across both TV and radio.

Michael Kupinski, Analyst

All right. Thank you very much.

Walter Ulloa, Chairman and CEO

Thank you, Michael.

Operator, Operator

I'm showing no further questions. This concludes our question and answer session. I would like to turn the conference back over to Walter Ulloa for any closing remarks.

Walter Ulloa, Chairman and CEO

Thank you, Sarah. Thank you again, everyone for joining us today and for your support. We are optimistic about the future of Entravision and look forward to sharing our progress with you on our second quarter earnings call in August. Thank you.

Operator, Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.