HMTV - Earnings call transcript Q1 2018 | Hemisphere Media Group Inc

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Operator

Good day, ladies and gentlemen, and welcome to the Hemisphere Media Group, Inc.'s First Quarter 2018 Financial Results Conference Call. My name is Bridget, and I will be your operator today. [Operator Instructions] A replay of the call will be available beginning at approximately 1 P.M. Eastern time on Friday, May 4, 2018 by dialing (855) 859-2056 or from outside the United States by dialing (404) 537-3406. The conference ID for the replay is 8877848. now call would to I Instructions] turn over the Ms. [Operator Bartsch. Erica

Erica Bartsch

operator, firm. Thank to everyone. I'd I'm today's good like morning, call. Company, outside you, Relations & Erica with and I'm to Sloane and Bartsch, Investor Hemisphere's conference welcome everyone

the Act XXXX. our is such current Alan differ to uncertainty the on may of statements. that certain forward-looking about comments are Reform of based Officer; which may These Chief on Sokol, in results Officer. Financial are to today Litigation Hemisphere's expectations Hemisphere materially Securities within statements Private the Hemisphere of from Fischer, contain subject U.S. and are Craig Chief call circumstance, actual management changes the those in of forward-looking expressed Today's me Hemisphere's the cause implied Executive Joining and announcement and meaning statements and or statements

that change. of most to addition, statements public of and are based company. on our discussion and a report our filings risk factors company's the number statements our a to other for to more are assumptions recent Form XX-K refer complete In forward-looking subject on annual applicable these Please

herein obligation reflect circumstances. hereof, the as made Hemisphere undertakes statements and no included of subsequent statements to Forward-looking such are publicly or update date to events

will of press information I now important over today. believes non-GAAP financial Management we in today's business. is the in refer non-GAAP adjusted reconciliation information earlier Alan. will call A principles, with to discussing earnings understanding that investors' a addition our accepted results to generally release, that which which of During accounting turn is issued call, was non-GAAP measure. accordance are to calculated included GAAP in EBITDA, to is to this our

Alan Sokol

and good morning, Thank you, everyone. Erica,

across see solidly. Puerto Rico rebuilding quarter, normalization first signs promising to businesses we had very in We that our begun continue while in and U.S. American make were in quarter, performed pockets we the Latin spoke When our positive advancing. Puerto Rico recovery of and strides to last

steps towards continue quarter. We to see first the throughout progress normalization important and meaningful

power were of XX% things year encouraged insurance the XX% of in the proceeds homes. the We today, with was in only beginning FEMA should Rican stand a As the economic improvement together has homes, restored in since funds of available the of growth. when major been increase power federal on This by also recovery island. flow drive emergency and expected meaningful funds Puerto

indicators of We are economic important already seeing some growth.

grew roughly car subject over XXXX. and quarter cement decade, up sales numerous sales Notwithstanding is grid these challenges for important of measures a XX% first the in of time first outages. fragile And The were still QX. in New the frequent electrical remain. to progress,

engaged Rico's Additionally, not Puerto delay which and are could the a austerity dispute the Board resolved Governor in of if implementation recovery. measures, Federal the impact adversely or over Oversight

compared So while have business TV continued QX, overall The fourth direct and Reflecting in QX decline see in each notable Maria. year-over-year into done. carry impressive, in these with is decline sequential WAPA's improved markedly the is and the XX% a during of of the 'XX. quarter, from a over continued to we improvement result was month trend Hurricane the positive this to down disruption work ad there QX be both XX% quarter. was ad progress market and to than TV market The still conditions, better were much

has being suppressed further addition, by ratings still advertisers. are published, In which spending Nielsen not

Nielsen the that expect will of before second end ratings We begin quarter. the publishing

was well online to of overall fees Nonetheless, to the fees numbers that come as subscribers Retransmission second also Given year-ago levels. retransmission these growth. WAPA's grew pay will show from the the half advertising retransmission continue below TV trends, over we and as positive significantly continue normalize pre-storm quarter remain lag the back year. revenue optimistic number fourth impressive of subscribers

However, case continue year. the advertising, levels half increase seen normalize over we of have to second as with expect the subscriber and the with and

have we and Although, benefit published programming not feel very do in entertainment confident still of line-up. we the Nielsen our news ratings,

hurricanes the our hit social Based again new commentary We as confident the stature media, retransmission once prime of with affirmed received on in we and its negotiations U.S. in the the a hands. series movies in terrific that as reached news just undisputable leader a their novella aftermath, agreement. launched we impasse of Unfortunately, we consent DIRECTV we had the Puerto year, Rico this midnight, During on and have blockbuster time. Mother, regarding are WAPA market. and of our remainder pipeline for the a and feedback we have in Turkish

Puerto WAPA result, Rico in DIRECTV not to currently a is broadcast being customers. As

negotiations paying Rico, We programming. start Puerto DIRECTV which large do DIRECTV value short-lived. the TV news, for properly we that entertainment but distributor In has the from a WAPA and and extended extraordinary will value outpouring encourage the WAPA in few consent not programming. pay have tremendous the engaged since support of Hopefully, valued a another properly WAPA to DIRECTV is blackout new viewers. hours that now just agreement a will received line-up WAPA's WAPA be with and retransmission fair in signed blackout, market of this has Recently, with sports believe X's successfully of

to U.S. cable our now Turning channels.

our with We trends subscriber to defy organic overall growth. continue

the cord our continues overall market the to subscribers. to new uniqueness continues suffer channels cutting, quality and pay TV grow of While

our our accounts continues viewing by X measured last comScore, Hispanic a larger networks, to total channel in cable. Hispanic from to than audience is measured According we is growth that future the all of we bundle To Only packages. major audience aggregate for major on our grow. to comprise over during a programming platforms. cable we share of packages, time, X increased believe cable And only over-the-top are QX, channels Hispanic must-have of anticipate those package. XX% date, year. platform emerging Univision's and expect a Sling Hispanic Over we share that offering platforms also launch channel We the

driven growth increases Our solid has advertising. in audience

with ad advertising large number very a appeal in the ever sales Cinelatino have U.S., WAPA national the at XX% of QX to led its We its new Cinelatino by in demographic Nielsen, in growth the XX robust from affirming strong of a and movies. XX by bias highest achieved Cinelatino QX, quality and America. in key adult ratings its an line-up grew to advertisers. according blockbuster impressive quarter of

which WAPA digital XX continues America also as to third-party Pasiones syndicated other We its entertainment delivering Laguna well package a huge we news great have experienced growth our rated utilize platforms of adding and Films, value from grow just is in library for library, Cinelatino deliver our network robust and America to experienced and the year-over-year existing as X to can increasing its comScore acquired which PANTAYA top to audiences WAPA our will QX, platforms. networks in the its ratings and ratings comScore quarter programming. by highest growth. rated solid according ratings and history. XX% to strong also Hispanic according titles and

ratings as live resource At replicated important TV's driven history. sales Pasiones' coverage the are the American XXXX. been unparalleled, in fast ratings shown progress growth have nice is elections. and by in was advertising XX% Television national over extensive QX comScore. we growth ad growth, the U.S. critically of This revenue by Centroamerica to seeing in a Dominicana, according living rate up WAPA highest-rated Central Puerto on Turkish successfully series the the Pasiones. channel's aggressive Centroamerica novellas fueled Turkish and seen were them we great have for indispensable by hit, for have acquiring results ratings Elif, We is in in an in TV with Rico

Regarding our new to strategic well its investments, Canal grow and share. Uno continues perform audience

X% full showing well, also we service shows in and believe of to with solid XX% growth X continues the there in are several movies. months, OTT plan Spanish find already joint share, front growth, now Spanish-language the and that We key is significant day validating drive ahead of and importance venture to we us, the of the parts. premium consumers Viewers pipeline a Lionsgate, new are in leading a OTT opportunity our believe certain only at growth. in further us. strong subscriber U.S., to hit is PANTAYA, have ratings After language PANTAYA we will well day perform continuing

the with with as Netflix. our well in a to platforms joining is in pay including well who acquiring the solid interest our sourcing largest will region, content Disney, organization Latin of distributor Snap broadcast such OTT has a leading distribution Ariel in America. to programming as Led the world-class independent be pleased of Hemisphere, of Global. Finally, Televisa TV ownership original owners networks. growing acquisition long-standing content I for and to Snap TV monetize am slate as network Tobi, provides OTT Fox, announce and and platforms XX% our Snap as Snap by as relationships

independent resources as confident leading content are expertise position of growth and we addition, In accelerate that distributor our will the throughout and Hispanic it Snap's world. a

we with a owner coproduction an established and production are a TV and in independent company, As film regarded joint part forming of Snap. this minority venture MarVista acquisition, highly Entertainment,

growing expansion utilize series meet high-quality be of content programming strategy fresh, and needs facilitating and our third-party MarVista, the We us the existing of expect to can providing movies to coproducing with content we original and networks and platforms with in platforms. emerging that our

over our attractive the and now I While other pipeline. our continue acquisition, acquisition optimistic we excited Snap we call pursue about are are will about to opportunities turn Craig. to

Craig Fischer

morning, good and Alan, you, Thank everyone.

the our trends I provide are to financials, into Before on we I seeing in want Rico. color some initial Puerto get

TV And noted, XXXX. quarter which typically XX% the quarter as declined was than the to the a in the XX%. first XXXX higher Rico actually the the of compared while fourth fourth advertising of compared improvement fourth market quarter, to first quarter quarter of Alan year-over-year quarter highest XXXX, by XXXX, is As ad of declined the as Puerto XX% dramatic

improvement will Importantly, with closely TV the of we tracks Rico. improvement over are number we of expect we the trends quarter. in with the This of power, Similarly, seen improvement island, Puerto sequential of that restoration on course also the in in subscribers pay seeing sequential power year. month-to-month the the restoration the have the and also continue during

begin and were subscriber as the fees realize we more rate we we the significant return trend that to subscribers While benefit increases this year-over-year, retransmission reverse online, secured. down to of continue anticipate have will

Turning during declined to million was of the Advertising net Net Maria, loss of three-month revenues compared quarter to which continued $X.X particularly decrease impact million. comparable XXXX. for the the was period our the in $XX in restored driven million Hurricane revenue power, period. the statement. as slowly of The income the by period in were widespread $XX.X revenues

on Dominicana XXXX. rate of carriage in termination Maria benefited due the the XXXX, Rico in as increases revenues, Hurricane savings WAPA Operating in implemented three-month period. programming decreased by in grew for in million Baseball million Television in This and Other Maria. $X $XXX,XXX television caused to by period the due on Subscriber three-month to company interruption and growth were X-month third-parties, the XXXX. September Additionally, partially the and from paid occur licensing decline of not subscribers. WAPA, costs the of expenses was to to XXXX. and production Classic in which $XX.X period to as AT&T following was in Puerto related did the World offset decrease retransmission are compared subscriptions the comparable the by primarily which million period in $XX.X This lower cost measures content Hurricane fees

refinancing fuel declined you was Maria-related of to in XXXX. February in in incremental period expenses decreases three-month the quarter EBITDA the Additionally, million by sequential sites. of the part fourth $XXX,XXX, our give Historically, Hurricane of been in This Adjusted of our first, compared business. million trends These fourth $XX.X the to loan compared our approximately $XX.X increase offset sense transaction has costs expenses and our quarter $X.X million were protect due incurred as in including strongest I as term lightest. XXXX of to all quarter transmitter to been and and security, sites to first has quarter the to the our the a of XXXX. the critical our for enhance should diesel report power since our power pleased signal, our sites. generators to and restored our am at maintain

We of $XXX.X debt cash. had Turning balance to million the million and $XXX.X sheet. in

that, was million our cash leverage insurance ratio were gross of and received by in was from and ratio leverage quarter $XXX,XXX the our the million This X.Xx. roughly the Capital expenditures prefunded Our $X.X of related. carriers. fourth was we approximately X.Xx, net in hurricane $X.X approximately in quarter,

incurred $XXX,XXX FCC also totaling expenditures related to the capital repack. We

this later be to this expect We reimbursed amount for year.

In have what additional terms previously no we we of insurance provided. proceeds, beyond updates

strategic we in towards the During quarter, $XX.X funded million investments ventures. our

is was the to business first While we not XXXX certainly still questions. necessary call guidance. to positive, quarter Rico your speed, the trend that, Rico and lack With has and provide the the situation Puerto let's visibility in open the improved economy the in full still Puerto our in at

Operator

first Canada. Cahall [Operator Steven comes Instructions] Royal of line question of from Our from Bank the

open. Your line is

Steven Cahall

to Thanks, ad Maybe good market. morning. the start off on

You of Puerto mentioned in will bit the of a more Rico the look to back you of Perhaps getting normalized and year. at run back view looks the like maybe rate in just a what migration what market a have like. overall half

second will step due So a do the of the Or to year of do there in to from down historical of half you migration? sort it expect think you sort be run be a rates?

Alan Sokol

Good Steve. morning,

starting year. a it's I tell. think new little too will half a to the of do I we get the normal, soon think in second

the population. the which The on there's economy, of jobs, migration have estimate point, overall will in of the a of certain into ad the and has we effect number, the environment market. date time, insurance positive the and Of Rico amount status coming that will government that of growth outward think of the which will the in we the X% out eventually at of and that's best that, come percentage again, the market. size depends been jobs Our XXX,XXX migrating about proceeds Puerto and is At hard back. which ultimate the impact this of around to and, same however, number to market, the island, the stimulate people stimulate proceeds tell

of tell for the second but pre-storm should to the shakes be close the out it the hard all think we half numbers little normalization a year, to what new look it's So like. how

Steven Cahall

point, to just tell? too an on funding, And you. this you or we're outlook while do Got Puerto Rico political have soon on at

Craig Fischer

will revenue There's X The really year political it current - is be years, cycle expected so there XXXX no in every for the Puerto Rico.

Steven Cahall

day, just any work on DIRECTV, two negotiation? can revenue I of you the through you. on us guidance as there terms what lost is blackout Got per in And the mean, give results you

Alan Sokol

to us. - with to of NBC can't negotiate liberty misguided and think that information, Americans CBS, a We them We It's We of specifics at we talk deprive did do it to was bad from Deportes. depriving and from ABC, give - it that depriving with equivalent don't that continue in about think Ricans Puerto not specific the was negotiation the they Ricans our the out DIRECTV. we're not decision WAPA and for of U.S. programs WAPA programming Fox Puerto combined. of

DIRECTV, think a So it we're get we it's - promptly. we it's a disastrous hopeful resolved by and move will that

Steven Cahall

U.S. then you. has know this on first, maybe us many able how to you that just Got let point? are at platform And the side, on subs PANTAYA,

Alan Sokol

make and but we're grow a platform subs, in it the going U.S. now, of it's now, of to to the we're the the PANTAYA, numbers discussing to we're invest think validating SVOD not to pleased and up to are really and of of the - As specific growth. it continue very results We with concept major

Steven Cahall

is snap for financial well, there we us any just give And disclosure there? can the as there - then And related you in out earn as there any Snap, year? about think on modeling is

Craig Fischer

be of Yes, the EBITDA X $X EBITDA. yet is some That has a said, price cash business modeling, business, it We're over think done will you because historically turns is future a of and approximately it little of about subject fixed the not paying to and as million stock. the performance. for mix

Steven Cahall

one And very for That's me. helpful. then last

had of strong going season market. in you the in what a like I It you QX advertising do of to sounds you quarter last really hold in into think domestically. sort heading upfront were back year, terms in

approach year? to expectations and your this are upfront season the what So

Alan Sokol

going we it. and think very to be we're I I feel really think good about aggressive,

additional a get I for I agencies successfully Cinelatino. think last to big much new number once think break And broke It easier it of we year, launch us. I going point last hard year took was that But to sort advertising-driven to us of tipping a while It's accounts. you on think and break a accounts, becomes very accounts. those momentum networks.

on our about think as rate strong positive other at and mind and a is lot our networks, non-Nielsen channel well, strong think America, it audience to very feel going deliveries growth And realized to watch and of and the I particularly service during to for a really result continued we as programming, WAPA right have I networks we found just WAPA and wonderful after America what national, people the after a think So - that. think time. continue storms, outlook over in it or Cinelatino we're of growth I

Steven Cahall

I one just sorry, forgot. And

going on any World have that drive events to you Just that the Is League could that WAPA a you normal there that's a this sort upcoming Like tough marquee close? programming? had that anything like a sort more I long of quarter for ago. would Little quickly continue that process? are not on to daytime is more Series just a of it's Or there negotiation, where know little distributor DIRECTV really to big through negotiation be

Alan Sokol

a WAPA XX% think network animal time. a sense I at is the Well, rating day different that of prime than traditional we're in sort every in U.S.

Super a So every us. for day prime time Bowl is

So of Because is to competition day, game U.S. drive or lot decision-making. or we're turners one gotten this on Rico Turkish literally, we've whole already. event novella, just hook our know launched that XX% reliant That watching one one air. we every of said, and not Puerto we a

for start going which event. Deportes basketball exclusivity as it's viewers the who League the got we have think it. right and league, gear got Puerto huge And well, Major which - WAPA high Baseball complaints a watch local is cannot DIRECTV we've season's and the be of in on those difficult that now. We've from also on to it's very with I to deal Rican

Operator

next of Our from the Guggenheim comes Curry question Baker with line Securities.

line open. now is Your

Curry Baker

this I WAPA Hey, provider a Rico? has following to allowed guess thanks, just go first guys. on DIRECTV. Is time in Puerto up the dark

Alan Sokol

the being first the you deserve distributors we channel happen. hopefully, that they the have frankly, should feel We're and, our deprived our forward. is valuing programming have the your to that But we of viewers not product the it appropriately last. than And for no value your don't are when and that not something wanted It - it's have and choice U.S., in programming. sometimes, we we we pressing It's are happy of be that really it, different in WAPA, we paid case a unique it. that's just to be any way

Curry Baker

Correct.

So I is which there really role also? down just in of rights on coming a are think price, more other in it to disagreement the play may considerations, U.S. or or a negotiation

Alan Sokol

pricing issue. a it's No,

Curry Baker

Okay. And roughly subscribers is can of DIRECTV Puerto in you what share remind Rico? us

Alan Sokol

think distributor to they I at subscriber But we're have the talk about largest not market. in been don't liberty specific their the historically, numbers.

Curry Baker

Okay. for know us in Southeastern I in be U.S. guess increased distribution networks? its next some pockets March, markets. added Cinelatino may in Can where of I for on other Cox cable fill your you

Alan Sokol

Pasiones DIRECTV AT&T. with Sure. not then and Those before. not both for And has And that less legacy in a the on are systems Time us. term, Television that pockets a material And solution we'll on. specific for that there in tick-up hold somewhat we're smaller, holds, are near that significant and and and our or primary Dish Dominicana Charter now be is we're discussed have distributed will the this we've and optimistic systems. Warner

Curry Baker

your can share Okay. And strong? business are goals remainder for of share seems And in among receptivity Colombia still it the Uno, gains. Canal year? like good that what advertisers you're Is maybe for the you the on getting

Alan Sokol

that a a very I like I and we advertising with because go once Not advertising market, upfront slam and on manner. bought follow. I that in the to to ratings - lag year-end, share advertising share advance a most I mean, is but is think from an to competitive dunk, stretch, we're achievable. Sure. to think share, advertising think There track to that. that's for will get double-digit get I is by any in a double-digit And by would zero we think it in

of that advertisers shown it proposition, market. show-me that think sort And and a is thing. have strong the differentiated, it's in third we interest a So it's to great of I the we value competitor support are that there's a in advertisers growth,

Operator

turn Thank closing questions. for the you. back Alan Sokol showing to I'm not any over further call now remarks. I'll

Alan Sokol

and you, a Thank further. Nothing everybody, weekend. have good

Operator

this the gentlemen, and does Ladies program. conclude

You may now disconnect.

Hemisphere Media (HMTV) 6 May 182018 Q1 Earnings call transcript