HMTV - Earnings call transcript Q2 2019 | Hemisphere Media Group Inc

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Operator

Good day, ladies and gentlemen, and welcome to Hemisphere Media Group, Inc.'s Second Quarter 2019 Financial Results Conference Call. My name is Sydney, and I will be your operator today. A replay of the call will be available beginning at approximately 1 p.m. Eastern Time today, Friday, August 2, 2019, by dialing (855) 859-2056 or from outside of the United States by dialing (404) 537-3406. The conference ID for the replay is 4063557.

the to turn now will call Ms. over I O'Brien. Danielle

Danielle O'Brien

Hemisphere's morning, like call. to Thank Financial Danielle you, everyone I'd good and Communications, Edelman with conference operator, welcome firm. everyone. to and I'm Investor outside Relations O'Brien, I'm today's

call Chief Joining Hemisphere's Sokol, Hemisphere's Craig Officer. is Chief me today Alan Officer; Executive on and the Financial Fischer,

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

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

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

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

call the turn over will I Alan. to now

Alan Sokol

everyone. good and Danielle, morning, you, Thank

subscriber our all and overall defined revenue quarter, to have continue strong We streams second into the key trends. delivering across growth of momentum U.S.

to Unlike content for to market subscribers to proud differentiated we losing We streaming opportunities. content, there streaming cable untapped with are substitutes services the highly no distribution are viewers similar broadcasted networks, and and advertising major are offering fast-growing target which general content audiences provide. offer

as have selection throughout channels and movies America Puerto quality Spanish-language Republic. best highest dramas the Central large the the serialized from from and well of Rico, content Dominican and top Our as world the exclusive

the this vast across Moreover, of content, viewers the the seeking the we destination. rights are and majority we exclusive because whenever For the our have our all offer control our wherever Hispanic of our to capacity media, millions Americans channels prefer. content content to

Rico. Turning to Puerto

of During of immediate attention few the past The an popular we world. of has which the weeks, the witnessed has result have governor. unprecedented Puerto the Rico's the resignation protests uprising been captured

clear elected the by and a result message unequivocal public heightened greater that optimistic on and the are growth. to and in sent economic We transparency focus officials accountability will

While not these to total which events proceeds it oversight the federal XX Independent is lowest affected. of unemployment the in potentially be funding, at remained that in in expect economic stable least political federal result delays rate recovery the Puerto in is cause unemployment the we could will do June The positive. of rate X.X% upheaval, and metrics at years. Rico in remained amount likely additional

San recently of decrease sales the in first X,XXX net the quarter comparable data in according the most over International out XXXX, first migration XXXX passenger X% of of Puerto released than pre-storm Juan persons was period XXXX Auto a half less Airport. Rico the up to levels significant were of from and from

single nonstop the U.S. organization the day. in tireless news as with of WAPA of extremely WAPA’s proud work in including XX both political Puerto coverage, by Rico its audiences many performed coverage hours in and are crisis. uninterrupted as world-class provided We covering a consecutive

news America, news an in at indispensable WAPA more other XX% of we as times and achievement extensive the U.S. any audience for During crisis of than and WAPA's network source garnering latest unprecedented the these share the and coverage provided historic insights much the programming simulcast was weeks, all WAPA as

peaked Spanish of Sunday. to the PM, coverage from as on cable during the display X:XX highest week rated U.S. language was to July X:XX unmatched America network Monday XX, America's AM WAPA protest was when the WAPA

July bought Canal Guerreros, series, successes of in rating airing has XX, in resignation, on and new XXX,XXX programs ever format have date position. competition delivered On as as WAPA's Governor's reality and These In nearly further have the Uno successfully WAPA gate out WAPA of its households. America PM which flagship at entirely newscast new the been been peaking well new at the Colombia. daily audience solidify highest May, X:XX launched its leadership innovative a both

our to Turning U.S. cable networks.

and strong our rated XX impressive a delivery across growth; its history. XX% quarter year-over-year over quarter growth momentum second consecutive and of highest of quarter trajectory, Pasiones We continued its delivering XXXX, giving audience growth of channels. in all our the increasing to continued channel by

now April, For the footprint Spectrum's national doubling Angeles and channel including York, of largest most fourth and Hispanic launched straight makes and the fully it's programming. compelling delivery. Univision's its widely its In distributors. our and Pasiones nearly two was unique Pasiones markets New This channel telco by distributed quarter, satellite cable, all beat major Pasiones in telenovelas cared across or Los primetime reflection

of rate to the continues ratings. Cinelatino language be coverage second cable Spanish in highest network

program highest was blockbuster, non-sports was XX adults the highlighted in No rated Our language entire the premiere by box-office QX the Manches Frida, day of cable for to Spanish which among XX. ratings performance

Sling the a quarter, with DISH affirming renewal during Additionally, network. our of reached Cinelatino and agreement multi-year value quality the and

Media Entertainment. to production ever excited acquired MarVista our first are launch previously venture joint our under announced Snap recently We between and

into and The a Spanish us the and venture see language joint company fee replicate. which premium series Snap, well intend This MarVista joint co-production media new production will exciting which a the series. the we Under to for major U.S. an as rights have secured to works agreement, we a is very template, the for U.S. and for Cinelatino. Pantaya agreement with entered venture

rating does cable not extraordinary its period. this highest and Spanish the of its in of weekday rated the in for by second early time coverage the July. WAPA channel our strong the America factor continued in America audience remains language quarter performance, over ratings bay fringe XXXX total protests the increasing WAPA X%

TV XXXX. strong quarter day to ratings Salvador El League, a supposed channel's was another quarter XX% the second total impressive rated which The highest of of growth, event over of increasing the by sporting history. ratings Centroamerica the was all quarter add match an in highlighted championship by Soccer the

in subscriber we DISH of other abated saw again Overall, the migrated as Although, to the to scribers spectrum trends, on dish QX Univision we the had Univision the defining with once industry and losses Pasiones blackout, we losses year. course subscriber over back distributors to due those continue from growth, to meaningful a U.S. quarter distribution.

experienced increase strong impressive to strategic up Canal total a in ratings XX% in Colombia Uno Turning including day with investments. the second over primetime. XXXX, and ratings XX% again growth quarter our of

that until this extremely are Colombian XXXX granted pleased additional Uno, week, at announced no has we we Canal extension As cost. concession XX-year the a legislature its license of

platform the best excluded its quarter. new movies premium impressive streaming the and premium We reinforced second series. will as continued destination we growth brand Pantaya subscription growth series, and for the recently accelerate believe Pantaya the in Our which original launched two

to remain to that our continue on we growth M&A be able will optimistic will we pursue and execute closing, such in opportunities successfully Finally, that accelerate opportunities.

the everyone. over, Craig. call Thank you turn now I'll

Craig Fischer

second the streams. XX% period. Net Alan, everyone. an the compared and good our XX% million across of revenues million, six of compared revenue revenues $XX.X year-ago increase $XX.X for of to $XX.X million quarter XX, year-ago XXXX, to the you, as as These net million for period. were were in Thank the Net for ended driven morning, were growth of $XX.X months June by an increase increases all revenues

including or $X.X comparable $X.X or in to respectively, million, the Affiliate XXXX, Pay and in and over periods for TV June April three XX, continued on These XX%, months Spectrum XXXX. revenue rate in were increases the launch restoration Puerto subscribers ended the Pasiones subscriber and six and of of increases Rico. XX%, due increased growth, million,

XX, six as in of XX%, XXXX, Puerto the or which and increase to in comparable XXXX. for quarter of three-month XXXX. compared revenue increased over of the $X.X the or the periods Miss second third was months three to produced ended due million, the primarily was of Universe June X%, The respectively, timing $X.X quarter XXXX, the period million, Advertising Rico, and

by which six-month we XXXX, was negatively The which period of to due increased over months from our acquired $X.X Maria. impacted and the both ended was also favorable in increase the licensing comparable in respectively, driven higher first in periods from revenue revenue by content XXXX quarter periods the for June Hurricane Other November and contribution Media, million comparison the six XXXX. with Snap XX, $X.X and three the XXXX, the million,

to to compared million Operating of compensation expense. were $XX.X decrease $XX.X six-month to expenses the million, for expenses and in $XX.X period. for XXXX. stock-based and were were depreciation decrease $XX.X the as quarter Operating year-ago of million, the X%, of X%, million amortization a period lower These as decreases due compared comparable period a second for the

current in we prior which year Hurricane the incurred we in related occur periods expenses periods. Additionally, not the

of of following Miss Hurricane result reimbursements positive costs equipment income the included Maria, gain the expenses to in expenses Puerto FCC by the higher six-month Rico, gain back Universe relative XXXX as prior and a the in This produced which operating offset from year production lower but was in Operating as period well from was a period the out of related third repack reduced in when were the WAPA programming of spectrum spectrum purchases period result as in for a as FCC quarter. to EBITDA. required current partially the impact The $X.X million we repack. the is adjusted production at

$XX.X was for the comparable as to EBITDA $XX.X comparable the XX% million an period EBITDA on for the was as six-month $XX.X second compared to Adjusted compared million increase of an million, million, XX% for $XX.X increase period. Adjusted period. of the quarter

June million the to debt million and we as cash in $XXX had a of $XX.X XX, sheet, XXXX. balance Turning

Our X.Xx. gross leverage was and X.Xx ratio leverage net was approximately ratio approximately

repurchased an of of $XXX,XXX. approximately weighted average at approximately During price aggregate price purchase for common shares stock XX,XXX of a the quarter, we $XX.XX

equipment to quarter $XX anticipate to required Hurricane repack. most the share plan of the repurchase end, and by completed repurchases. in quarter, of was insurance by cover share spectrum to replace million Capital opportunistic repurchase share reimbursements for does FCC expenditures We will damaged authorized As CapEx million announced include proceeds million plan, The these that used be Maria our we and equipment XXXX. incur completed which $X.X additional the in expenditures. XX continue not we

strategic our ventures, MarVista. investments the the including Canal $X.X million joint $X.X Snap we XXX,XXX quarter, and venture million in funded during million with Uno, in into Pantaya, in joint into $X.X Turning production

channel and growth guidance with full-year which audiences to our unique create content long-term XXXX with growing affirming EBITDA positioned mid-team we avenues the provide are for are strategic of fast well We including multiple value. we believe shareholder coupled investments. percentage offerings our and growth our and to adjusted We

call questions. the open to now We'll your

Operator

the Instructions] line Guggenheim first question Curry [Operator of Baker comes Securities. Our from with

Your line open. is

Curry Baker

morning. guys. Good Thanks

color Puerto and there So environment advertising back with state I of you guess normalized whether or reached post-storm pretty us Rico, half maybe the as much starting year? in a to the give there we've the some can more not

Alan Sokol

as Hi. least as it like at Curry, is normalized. it’s Alan. the looks moment, for can Good advertising morning. we see Yes, think I far

basically look fairly I years. the quarter been line If in year. this was it it's think has two normalized second been where for at past advertising with past the year, we

the and a given result instability on market the think storm. good balance, I following given that's the out-migration the in

we advertising over pretty will funds opportunity We feel increase of are. about So things there's federal the good that and funds inflow with time. an that think insurance where

Curry Baker

us is sense improvement share also give share in sense your any Okay. have continue And to you a you and where as Puerto any to of sequential or see do Rico? where do there, kind you in can

Alan Sokol

grew quarter grew we quarter second last year first over second year, – we and quarter Yes, share this over year. this share

response X:XX have well feel schedule, very additions good p.m. great advertiser us. really those. response both we A daily Guerreros started for positive competition newscasts and our show, So that. very The our of flagship to to new off about reality the audience and

the year. the of So moving we about feel forward good balance for very things

Curry Baker

quarter U.S. Okay. you to tell just pockets us the And Are gear in that can also pressure on then to seeing you're cable in of relative fill? subscriber side. that talk most maybe the to you U.S. looking U.S. Spectrum. trends about – are there shifting I any obviously maybe subscription distribution know underlying the And the you guys Can launched the networks? Pasiones on you other still

Alan Sokol

Yes.

secondly on yet. that in very YouTube focused vMVPDs, with primarily filling, number even And some mentioned some and we've we Spanish think the launched I them television have not Dominicana. that language past of still packages of then include of a we are holes Hulu, now the

forward. an On us opportunity going channels not all fully for of that's are So Sling, carried. our

So that's another for opportunity us.

growth the which view us carriers days vMVPD television vis-a-vis really most is as where we traditional situation, is upside a So opportunity Dominicana. well as good of these as for the the

And forward. I of see space, in think past three We Hispanic we of with disruption respect going the DISH's situation continue to the optimistic and quarters positive we space, our trends trends about have because those are did Univision. to

We are hopeful situation seeing that reversing. has that finally itself start resolved we're DISH and that will stabilized and

the for of we results last the a – delay, numbers out that they effect don't next months. see numbers – we DISH's the them are pretty seen only hopefully with fully but we couple – think were seeing haven't start not on quarter, encouraged good came I DISH's we'll by fully since fully just we two-month we over

Curry Baker

Okay. conversations is guys on a too still the And just you color? or any in or virtual earlier little you Are there provide additional up just vMVPDs. following maybe it active can

Alan Sokol

in in there. conversations conversations. they but packages, all all of have DISH And and opportunities we launching always immediately planning active do on to with Yes, them so. Sling Hispanic we're Not are plans about are

Curry Baker

time? Okay. there that? And then color at you additional provide anything any maybe is still Subscribers – Or too any this on it soon? Pantaya, is like can are or there

Alan Sokol

But you the what have value We I subscriber I really I data, I it. is Yes. put know need think, because that's we're by to can some apologize trends. know encouraged released specific around that say Lionsgate what and very that

product rates are our And and outlook. course have which seeing very we to marketing We subscriber continue balance which positive year, positive of accelerate long-term ahead our We're even of think further. the the and Pantaya, a churn decline, amazing to into we really is programming response plans. that some response and new will growth of coming vis-a-vis

Curry Baker

positive? the Concession helpful. that of That's as the maybe you is the incremental Colombia, did XX-year And don't you on think I License Okay. this horizon. mentioned before expect on then of or something in had an extension sort guys this

Alan Sokol

incremental It it. expect positive. not We is did an

it to renewable another XX getting lobbied is investment. expect and about renewal we now and we Our return XX quickly. for were getting great clear XX-year license, it great which it years years, our in for feel having We would this a hard receive this we to not on successful a path

Curry Baker

Got Okay. it.

basically you've it's a it's and XX-year another years So or got path renewable like XX – for XX think that. and like something I

you. got Okay,

Alan Sokol

XX.

Craig Fischer

still… We're Yes.

Curry Baker

then that went anything on equity just quarters quarter, about four to forward? And more just or discern guess up I Was trending one of this there They unusual been have on and down. the ticked thinking quarter whereas the anything that line there losses. going past kind question this

Craig Fischer

that particularly Cinelatino's universal for investment programming. deal had we was It about, was the in made the in that had there Canal in reflected since some talked quarters prior Uno, of and at Alan programming done

that of the the programming. just timing that was So recording of

Curry Baker

take let's place or think – say there guess that's me. guys it I the I tricky but then looking always know and how it's maybe to M&A sort can this Is pipeline's more is see, indulge one whether maybe the going I maybe if And not, front? Thanks. on you'll a that anything anything largely year? one, Okay. qualitatively just of you

Alan Sokol

Okay.

can't You done But get encouraged year. we a into And to a optimistic specifics about our just this like hopeful broken get and and obviously, are this. sound record. pipeline I on deal

happened. again, it set chance and reasonable that But we hasn't thought I think there's before it I a that and will. before

we're the So good about that done. we in feel its' stages opportunities opportunities various us. several fastballs that and for But we are feel it's middle on down not done, until

Curry Baker

Thanks. Okay.

it that's think I I for guys. Thanks me. appreciate it.

Alan Sokol

Thank you.

Operator

Stephen you. from Carll Fargo. next question of Wells comes our Thank And the with line

Your is open. line

Stephen Carll

impact mentioned Thanks. from subs about sequentially Maybe you they down first I the I to And away little. WAPA year-on-year. were know America fade Alan, starting a think DISH down and were

should at the trend? just going there what's we into America anything is read sub on So WAPA

Alan Sokol

of No, continued primarily as of the the a DISH, distributors that's and I with which quarter. of have said, it's as seems that of baited subs function various loss just a to DISH combination what's happening on end

that that continue optimistic improve. going that we're So forward will to

Stephen Carll

just some on some and Great. been then selling there's that looking of DirecTV their Rico, Puerto back there. AT&T And at headlines maybe assets

So been some with broadcasters I'd still be how And DirecTV that, you Nexstar. on if has the U.S. that the curious of have might in here you affect market. just to any comment related CBS think and off like the

you rates, any more starting you side? if So I any retrans see wondering on renewals here there's gotten you've Puerto if to maybe upcoming tension and think comment the about we're up was crop Rico could like domestic around

Alan Sokol

your repeat all if to trying them. missed just them, I'm questions, remember of but I

Stephen Carll

Yes.

Sorry about that.

Alan Sokol

worries. No

AT&T DirecTV So our in heard if marketing knowledge, Puerto not about on do, television possible an their have the or Rico, frankly, But issue wireless on we To their of it's sales us. they business. for they're not business.

entered have we unfortunately day, of end year, And into to got with we renewal dark we tail But them us that renewal wanted. required a for know, we go with the them that. you so As the six last at weeks. what on some

we I the leverage and way both deal our we got market So done. that resolve our in think showed

that to have think protest. we look past the you events mean, the I there. weeks risk the few And to set afford distributors on a I they at market to take the WAPA message with to that of cannot the not

the generated yet. any distributor XX% up about think There's can get audience. way share having as no us as we much So the of

Rico. We're ABC is, in NBC, we're CBS as strong CBS, and Puerto not combined – Fox

our negotiations and rates. retransmission to easy. leverage our Obviously, drive continue growth our are position ability about good there, very our to these feel and we in never So down

drive a way share there. in confident even our down can continue we're and – more but share to mind of we pressure, broadcasters can much pricing that because of growth than U.S. there's And share significant audience our

was? question other Your

Stephen Carll

No.

it you've then I content then original just the true will sort be You think with the of first all. And that on covered Cinelatino you content with Pantaya. that's and some created MarVista, announced both distributing of and

you maybe in years develop what expand a looks if could few original you a and content plan more on, multi-year that like time? just a lot maybe have So to

Alan Sokol

Yes.

in we the you big for Latin motivation get of into part was snap more us in doing As business our American a this recall, bigger started to may a do production this is way with through venture And for established original way. and deal that and to a company cost independent production have great quality produces really institutionalized joint programming MarVista a effective way. a MarVista. high that

producing experienced have Latin as they And America well.

formed I our based it's this can't have co-production. launched studio down team we Mexico a U.S. that we with, launched that We co-produces are first and in it but studio with. we've quickly major a have disclose

that series It's started great, take episode rights. premium a we on. production will XX Latin They America,

TV We far producer and fee U.S., receive Pay as as have we on nice it. rights a

us strategically. and So it's forward, financially both for a good going really model

Stephen Carll

Great. it's the grow out, but the give adjusted EBITDA, you just EBITDA in And I tough a to Craig. I to quarter. know to in quarterly Adjusted each for want the guidance, half? of last leave should you're quarters back Craig. expect one we not then going to didn't comp fourth in

Craig Fischer

Look, into not to Yes. quarterly going we're guidance. get

the We in talked to benefited first We – like Rico. earlier quarter, prior this guidance. which certain timing the events, it from will about we're storm. certain the that year year's Universe comparison by was and We've affirming guide Puerto Miss productions impacted for full-year

content. timing shifting of of licensing also our the of from have We recognition the

you takes be from puts will and to it are vary within quarter quarters, So probably that identifying.

growth of on in to obviously, we're year. we're second quarters. going But the comment So the within the half expecting not

Stephen Carll

you. Thank

Operator

comes following Kutgun our question And you. Maral. Thank from

is open. Your line

Kutgun Maral

over backing to Pasiones Dominicana again for X.X% a unique year. about America. Good relaunch friends taking about last out just nets, on Latin Even morning. I getting the there X% sub in Thanks in wanted it growth TV spectrum question. your your cable the subscribers is because ask Univision story, and U.S., on such is the

still Pay traditional TV of You're outperforming rest market. the the

from the discussions – seen distributors your that to wanted growth accelerate discussions out tenor you year. just continued that there balance have with just has those mentioned So growth? I coming of that you changed for and not on the growth thoughts sub that, yet? have of the renewals dish had Are any coming or get And the the those might affiliate

Alan Sokol

ecosystem we that different is continues good just our than peers contract, of our the growth the general see mentioned Kutgun, remain optimistic, think and whenever as We steady systems to even on of continue that – and Hi, morning. step market the paradigm earlier. to launch a growth have I better We we see one we as function. step is then function the as organic

is through still we've opportunities to launches. resolve that that this forward business new We this and good numbers, into very over good with about very committed and But going believe have and had business. situation or now for feel we discussions positive they some feel the noise situation Hispanic feel and that their about

good. very that's So

the this In it looked use several meantime, growth think of and drive have at Hispanic really business. with have discussions to take opportunity their distributors. as try it an always advantage and other in to to We're distributors I situation significant seen

are staggered channels their dates. of expiration in Our terms

vMVPD on. us with services that expand fully distributed those always potentially were the offer distributors renewals that have distribution, So particularly not to opportunities

a And that think that a the not them is and partnerships strong feel as as as channels, they priced positive like the offensive the again, given center center generally they're profit the loss strength distributed distributor. with fact of way in to for them. we're like with given cost We have center not view a I our us necessarily and or distributors for

Kutgun Maral

about talk Okay. ones to you three Great. quick And extent on that Pantaya it. could the just

in the to its has added continues any subs, Roku, and platforms? impact thinking seen plans added at since other be in about there be it to service onto AVOD you what are on expanding to all an as it getting earlier to subs, and First scale year it then are

perhaps more streaming consumer broadly SVOD we've raised seen lastly, their And services direct a and lot of prices. to just

that maintaining of could your flow extent perhaps sub it the are you point retail price that talk on as seeing about costs to again, the growth the content inflation pricing? thoughts into to continue the you're what the opposed So through some

Alan Sokol

the the continue SVOD over there's or AVOD will those that discussions, to no AVOD plans it's are content, a time like focus to Netflix out a to convert ones is is On we've this. positive we and only business not looking Obviously Hulu really that's and and have an some their language there really that very AVOD or good have Spanish shallow had but evaluate business offering of current their something add and offering.

corner we and proof market strong And market so feel in seen demand this early like And niche. and it's we a have the a and far of innings the on product. a for great concept we've great

with the and we're So Roku continue more to have of discussions addition them marketing a are and us. going that We has the great we They definitely in together to the forward. positioned been in doing result about market that and feel noticed well. doing about some grow positive for as way Roku pickup opportunity more The seen as business.

a number platform. SVOD of about on including, are other services launching vMVPDs launched, discussions getting also We're platforms in SVOD platforms, of a additional that their number with

question? that your then feel Is forward. was opportunity what final we going final that's So that big a pricing? And that

Kutgun Maral

Yes.

Alan Sokol

for some honestly much studies, our we're that subscribers pay price showed it with that good price that be the We've We done more willing were to didn't this seen comfortable service. the now. in mark. will get good We receptivity. the prospective We've selling

prices. So the we we're reduced opportunity up take yearly the in think forward stages. and XXX which price seen raise there's sticking But great for a with Boston going initial plan, we now to has

Kutgun Maral

you Thank great. much. Okay, so

Operator

time. turn the remarks. call for showing like to I to I'm at And now no you. further Sokol this Thank back closing questions Alan Mr. would

Alan Sokol

All right. a No have morning. further and you great thank joining this remarks. for Everybody weekend

Operator

for disconnect. in does Ladies you conference. have Everyone and program all you the day. conclude participating today's wonderful a This may and gentlemen, thank

Hemisphere Media (HMTV) 2 Aug 192019 Q2 Earnings call transcript