HMTV - Earnings call transcript Q1 2020 | Hemisphere Media Group Inc

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Operator

Good day ladies and gentlemen and welcome to Hemisphere Media Group Inc.

First Quarter 2020 Financial Results Conference Call. My name is Bella and I'll be your operator today.

A replay of the call will be available beginning approximately 1:00 PM Eastern Time today, Monday, May 11, 2020 by dialing (855) 859-2056 or from outside the United States by dialing (404) 537-3406. The conference ID for the replay is 4888365.

the to turn now will call Ms. over I

Firlan. Ashley

Ashley Firlan

Hemisphere's morning, like Act call. meaning announcement the the to Thank Financial Ashley you, about everyone and the the of I'd that at Securities U.S. Reform XXXX. on subject good of looking and Communications, Litigation are may Edelman contain cause with are changes current conference operator statements and our differ actual expectations welcome comments and results or firm. certain expressed within everyone. statements. such in management to implied are those and which forward These Hemisphere I'm of Investor forward statements may outside based uncertainty to Relations Firlan Private statements to Today's I'm from Hemisphere today's in materially circumstance looking

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

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

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

Alan Sokol

protecting and cost-saving identifying critically with the good and advertising working Since prioritized relevant safety most with hopeful and and everyone. pandemic providing and Ashley health and healthy implementing onset comprehensive, families of our audiences your you that and you, we closely and information. the distribution continuous of measures partners, our have well. colleagues the employees, global are am and the and I our news Thank morning

role on understand this pandemic the public political We the a source trusted crises. of seriously during very as news weather unprecedented world's the as we just all the to operations. have a policy its The as presented, are economy, challenges earthquakes implications our and and hurricanes, difficult such are business we well-positioned of period. is and Despite this in the global past and taking impact population,

with than liquidity. capitalized our sheet we significant where Virtually to us other programming ample over a programming. managing and be costs aired closely of we're Nonetheless, the balance and fresh We strong cutting and are expenses unable giving remain to advantage produce which all other well can. sports networks continues produced

company across We have certain furloughed and employees. the salaries reduced executive

team Rico In events our have meaningful capital and Universe reduced a playbook for tremendous Most Miss expenditures. tested world-class operating addition, Puerto We as live we and such innovative canceled. have experience aggressively times renegotiated have a also with of if suppliers sports programming savings are crisis. we contracts and importantly, may ultimately during with and

even We we a and are and as from position we period more will of as others this company. confident have emerge that strength forward-looking an navigate dynamic

steps and began orders the in remains fewer Puerto of relief than approximately The eligible are unemployment X and per as the but a eligible or for like Rico has other currently relief now is Puerto Rico's is so. Residents taking Puerto Rico of WAPA. Commonwealth largely to curfews as in participate capita U.S. Hawaii. to federal on state programs also Puerto in receive XX; states do Rico The Montana, mode. over billion Governor supplemental May $X confirmed week. reopen cases. result to Turning Puerto of first state Rico to other cases the to benefit per than stay-at-home funds. basis any the Puerto island implemented CARES On Alaska March and X,XXX small projected and lockdown Act governor a $XXX Rico

number to news Puerto Puerto Ricans a producing serving WAPA We produced. to and including of produce commitment proud to most the has WAPA newscasts to tremendous being over hit only has and Rico of WAPA television vital from actually is currently week a total, a all of the continued our produce its of hours with continued our is are Puerto of and to and as entertainment its all information of affirmation and serving and team not for has its reassurance of programming; as Rico. the information island testament it a XX and the expanded news trusted at reality programming talk provided socially of hours entertainment extremely In version U.S. Guerreros. current WAPA's WAPA the journalists in also network. grateful WAPA and commitment news source to primary on for series in distanced unique nearly value of Puerto Ricans and

since to key adults The astounding results an for is its XX viewers persons of these total advertising and ratings ratings and WAPA both efforts In another to way surpassed its overall viewing XX. the extraordinary demographic historical the QX has higher to Telemundo combined than and adults Univision themselves. WAPA share inception among XX% to-date on well QX of QX broke for all records among of XX speak quarter. delivered records historical WAPA Nielsen XX in and

Rico the that spend must-have as to advertising of ever in a ensures entertainment will more leader continue in it's receive TV the in Puerto service news Puerto than strong very pay and share in Rico. programming it and any position dominant a WAPA's

performance dominant declined ad its XX% by QX. withstanding revenue in Now WAPA's

January, or of their the earthquakes dampened in ad in the Rico subsequent January many paused in And damaging struck As lockdown on contraction resulted significant was February. mid-March market noted call, the market. strong in a and in I which last of spending series the island reduced as a further and our Puerto by advertisers

against All steady a of the the backdrop Hurricane of occurred the Maria. island effects of making recovery from this

While to serious is will we're it these events to Rico position reopen. able optimistic that rebound Puerto once in be setbacks are both a

to cable our in networks. We Turning growth across-the-board saw performance ratings and terrific further QX ratings in April.

and Our in ad TV, April U.S. America value countries. the in channels per its increase round-the-clock their XX% news America in In XXXX over by saw home produced quarter cable audiences with as coverage the robust increase ratings America, month continued news our of networks of April overall versus Puerto their hours compared XX% and Rico had America to with provided WAPA was industry. driven Central Dominicana The revenue April television declines XXXX. WAPA for exclusive Television from U.S. in audience in news growth have evident modest XXXX. relatively comprehensive ratings first XXX QX WAPA the the

TV astounding had America versus Central XXXX. with year-over-year quarter XX% the its growth their sixth of increasing of quarter and audience first total ratings consecutive

as Americans leader of During channel performance April living America of resulting the the the Central entertainment first for and audience the U.S. million Central people its of looking XXXX. doubled content ratings XX% as delivery quarter X while position XXth day its original information reflects TV's in unique up versus Pasiones' are has delivery XXXX total news in audience and home. at quarter the in the April more consecutive were for terrific This than of growth year-over-year

from viewing dramas its increases XX%. the throughout brought unique compelling Turkey, and XXXX Pasiones further including April been driven April outperformed mix and Brazil. India of by ratings by growth has world,

highest strong is Nielsen its network. XX% over In cable the This evidenced into by second demand first audiences and demand XXXX. April rated usage films. proposition acclaimed pipeline for value the of with April offering April Cinelatino's in XXXX Video Spanish remainder remained is performance. with performance further on well quarter, on of continued strong video hits XXXX. box-office doubled Cinelatino the nearly critically language increasing movie positioned Cinelatino's versus a

XXXX. the cable as WAPA in buying and our made hurt growth April, ad improvement revenue forecast by of In gross terrific advertising Rico our is in commercial April the QX is versus XX% been pandemic. April, to and in our basis U.S. and Puerto XXXX, declined week-to-week the comparison U.S. May the highly our dependent difficult activity. a ad and by in sales very networks and have Notwithstanding May being on pacing market forward to going It's are reopening decisions ad XX% down on both

XXth Nielsen light in We for difficult made advertising April by the not of to its the expiration pandemic. renew the environment decision on following amplified Cinelatino our contract

potential number related lost have the revenues. personnel advertisers Nielsen will a significantly we major to from outweigh research costs and succeeded advertising of attracting to any and canceling [Cinelatino, While savings] national in

primarily The that of subscribers which in in package. us see the is from programming cumbersome U.S., the distributors. sign-up we concern forward. had Obviously, declines it a to subscribe continued initiating one Hispanic I distributors In is to made a experience two going mentioned previously much for process, a decline only to major after began to QX. more this these decline

We distributor. their date have had numerous assurances, have their to despite failed to discussions this with But they alter process.

increases, aggressive marketing nonetheless Hispanic us remains distributors Pricing confidence that to untapped the are tier. and show there to subscriber that are keys encouraged a continue giving certain significant We large growth. growing the

date. relatively president to measures cases in of a the in low Colombia, early implemented response In resulting strict to COVID-XX, number

in coupled peso economic pandemic, Colombian and drop in the the also resulted distress significant oil advertising in The has prices, has declined However, value. contraction. with

implemented the We in but large that recover will revenue are part Uno hopeful significant quickly, any will Canal declines. offset cuts country that cost

impressive seen has Pantaya in growth XXXX.

April XXXX. first the April Spanish new in series of a of five Pantaya in to broke more all Pantaya and for Pantaya streams viewed the series including premium movies has subscribers. March in previous and compared as viewed wide two paying including Pantaya margin, in records has a quarantine. increase sufficient on XX% As a viewing viewing pipeline of times April, produced today, XXXX. on launched than XXX,XXX balance streams by series

the In am value grateful to crisis. all our of serve shining closing, information, that services and on-air audiences. of of to that work continued I and a stability reassurance source again am once in midst has are our proud to as talent our I the

advantage valuations. financial Looking weather well our solid positioned ahead, grow attractive position and take M&A will emerge that potentially to opportunities with we and with stronger are confident us to storm, this helping organically of to we

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

Craig Fischer

Thank you, good Alan, morning, everyone. and

to maintenance the We covenants. costs and million Let's start ended cash important is the It any maturities reducing on impact actions possible, in pandemic. where carefully no conserve to with we are managing of $XX note our of million time. the with capital had are the we We expenditures, profile stock quarter cash, of March financial we near-term debt To near-term are some back not XX. our we taking mitigate do at that of buying have and $XXX.X not this and as have hand.

We also made or staff at furlough, including our XX% have to the levels. across for the reduce salaries reduced difficult shifts organization, terminate executive decision the Board and over of and

hiring We frozen have salary also activities increases. presently and

defer Additionally, XXXX to back In other and we are we cut CARES payments spending payroll taking on to until agreements the and of renegotiating the of Act, seeking have deferral are end advantage and programming XXXX. discretionary regards taxes of the concessions.

also We be options to us. may exploring are other available that

Capital totaled quarter. the in expenditures $XXX,XXX

the have certain our for plans into capital year reprioritized We XXXX. deferred and projects capital have

to the spend nearly equipment XXXX. related expect XXXX, expected repack, spectrum to be to in the with of capital for $X which by the XXXX be to be and for our in expect million we FCC approximately spend reimbursed We half

production The programing. costs largest our news, related and of to are portion

more Our near us a at operating and and nearly news for on programming. full news full of Accordingly, production this information viewers ever has WAPA are entertainment capacity, than time. producing more actually been relying slate during

have and Additionally, our interruptions cable of networks supply not to the entertainment content. any had news

the impacted of or in the moving Rico and were some February. on revenue revenue to then declined X% was to pick We January quarter $X.X advertising and the on $XX.X earthquake of decrease decrease up was in the again of in million $XX.X due million, to the for due to revenues net Now that our Advertising the The detail a declines year-ago million results. was on Puerto period. quarter decline revenue. revenues market TV would first as in ad first compared ad pandemic. by market affiliate Net more impact March, XX%. the anticipated The but

declines as our on cable networks a decline for revenue million movements. and XXXX period the result across a or in our the and $X.X quarter negative unfavorable of X% Affiliate the in Dish impact blackout XXXX, comparable WAPA until America of to subscribers over a subscriber of January late foreign and fee cable networks, the revenues due decreased in decrease Latin U.S. American at currency

expenses, fees even debt, advisory in a taking $XXX,XXX increase of incurred decline the million non-operating into transactions collection risk to of connection of the spectrum expenses non-operating in for strategic after the The Operating the an as due repack. items, were account included received flat with quarter increased of $X equipment year-over-year bad result of timing given a excluding reserve pandemic. the reimbursements and for and $X.X our of professional required pursuit million of from purchases due FCC in

Adjusted first to decrease comparable a $XX.X the EBITDA million, period. for XX% quarter compared in the was $XX.X million as of

investments. Turning to strategic

million ventures, Pantaya. During our million into quarter, we into Uno the into including joint $X.X Canal $X.X funded and $X.X million

Uno the Canal to quarter, we of advantage elected pre-funded the the During exchange and quarter. second favorable take through rate

onset the economic to related going $X.X concern current in of we recognized charge during investment the resulting non-cash totaling quarter Additionally, to impairment million risks, REMEZCLA. the a and due crisis our the one-time

providing bit revenue term in ahead, the expect second For pandemic. and advertising XXXX, more near be to our we to in on of detail purposes continue to approximately quarter of the total [XX%] which a challenged represented year due revenue,

gross is May declined April down XX%. pacing and advertising XX% noted, Alan As revenue

from With half the expected. though than revenue the be we of Puerto to to back the it of will year, quarter, primaries the the the postponement quarter political gubernatorial Rico anticipate second softer shift third originally to

and Miss also Key like sports Major special League Puerto impacted. and programing Rico may Baseball Universe be events

the cushion profitability. help on To be will these reductions. will cost some continue this revenue and also therefore have associated costs and we us declines, offset to impact While of implement reduced revenue, impact

information In issues demonstrating closing, rose best immune We've XXXX crisis us. while are our the to hit quickly caused needed been growth. when natural ensuring recently a been resilience strength occasion, and in business certainly to our brought the has and Hurricane they we most disaster We viewers and not up in the this had rebounded hard the faced that by before, and generational we in Maria. has news to pandemic, the

we are company. We a stronger and from confident will once will that emerge this again pandemic do it

We'll call to now your the open questions.

Operator

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

line Your open. is now

Curry Baker

the question. the both what if could Good Hey. wondering about little was seeing advertising more markets, morning, Puerto a guys. Rico the for Thanks I talk you're bit and you U.S. in

television we look from Again, you That's stabilization a pacing noted talk into what about April. May hearing from any sequentially at have would limited, visibility all I that you're you additional know than can mid-May obviously late You May? great. advertising. just was worse other we've as get there be into been a seeing bit any and is in others contrary but color

Alan Sokol

Sure.

we're are erosion May seeing We seeing market Puerto actually of in April. versus -- advertising in Rico

Puerto them April, to has lockdown Rico since into advertisers. XXth largely is into state it to some They March remember that that back fatigue think think advertise U.S. any continue in I by the went of pandemic I the during due to lockdown. economy for before reopen. have I and waiting pulled been

a a the earnest been long will and there relatively by time. May. number it's of expectation there, there said, is end cases to is begin So of low that economy in reopen an the That

So we be rough the businesses think waiting That's once reopens. we're for. the really may things but will are May start that hopeful economy what flipping month, a

is a PM in a than Puerto sense, now, you state X give U.S. Just curfew earlier to Rico right which has the any

the the So that there. illnesses also and -- will has that affecting -- I that number -- while adversely of taken that commerce. time, very it's the Governor measures And at same hopefully strict has minimize think

seeing we're pretty speaking. U.S., results relatively the solid In

they than networks and what Puerto cable declines are much broadcast than announced. is in are modest other and Rico to modest date May April. have And fairly Our with more steady

Curry Baker

you subscribers. Got Rico? insight at then, maybe How you. I directional the then on have do subscribers impact do talked from And Puerto just and you in That's in is? networks helpful. about also the also the COVID-XX, cable think maybe the U.S. And the any U.S. declines Thanks. on here know you temporary both turning into this

Alan Sokol

have question two-month first, payments second your of don't remittances COVID-XX. we our insight on answer are the into To and a Remember, yet typically. real impact delay

days see XX numbers don't so for until generally we actually after happen. or So they

the So we specific cable themselves, set numbers. have distributors I'm actual insight have And what sorry question any your beyond was? don't into other

Curry Baker

this returning Just in are? the the point U.S., to at you some saw temporary year? the subscriber quarter. during see a declines there you path do these How you Do think growth

Alan Sokol

at -- while couple is largest we're among larger nice among I we're other same seeing it's of distributors. think what the time a we're schizophrenic the really growth distributors, seeing the bit of weakness couple seeing little strong some a because

So I marketing it [continuing two or to sort One look aggressively the you prices. those continuing you price] appropriately, TV at increased differences pay other abandoned and just to there, while their is think and at businesses market is the between have abandoned if of sort set look sets. set of

I that So bifurcation we're the that's seeing. think

the realize to on are the on I the or available offered the market extent and relative content to that Hispanic singular, guys and Hispanic is is VODS AVOD. underpenetrated these and TV of so not pay still really the market unique focused any form on overall think here smart that that

think even grow still to tremendous it's linear though there's that I opportunity television. That business conventional

be should to and opportunity market it, and want given tremendous growth think priced still size. We're increase size for the its is runway is we under-penetration are to market, severe numbers meaningful is runway this there the relative the it out of huge marketed that audience product there there and that that growth of in our And that and it. viewership a nowhere which find else signifies viewership. real the for tremendous, it's there here the is think I in properly to there for mean grow. that seeing I is hungry growth

Curry Baker

color. Great. appreciate Thanks for the the guys. I questions

Operator

Cahall from Your Wells the next Steven Fargo. of comes question with line

now Your open. line is

Steve Cahall

Hey network guys. what side. morning. Craig's follow-up about advertising seeing questions. talk cable little Good U.S. on on you're Thanks. Maybe you Maybe just a first, bit can a the

in that's board mostly of expect verticals direct would this? there different is think or are it you I across and like as sort response weak Or Are time the there you strength from in pockets a advertisers like have? acting pretty of advertisers major there?

Alan Sokol

in certain categories toes well extremely products, are We're seen market looking during to Nice Spanish-language into are And on their certain growth. household We've home of products, types direct a good talk for wellness seeing Steve. products we've Hi, this and very result, are people to response response. performing as direct some advertisers well you. general seen dip performing time. also as

have centers been it's that's this gone side With pricing response some a -- well. some is with language available, and there. and for down had forward-Looking move versus their But categories I Obviously, during about as smart on call broadcast advertisers pandemic hiatus stable traction balance, being of because more are staffing and we've inventory resilient the time are during heard pretty or call on that their business there the seen on that's of have cable affected been and also And time. part. what on relative And soft to and English seen the issues we've think this and being there certain direct networks. centers and

Steve Cahall

your counterparties sports seasons sports Puerto, And paying what a still on as and any little discussions are about those with in payments rights you are may influx. those look WAPA thanks. you are bit Okay, first having like then

Curry Baker

specific require have that to some to these clauses to confidentiality some we but clauses provided. subject majeure on be into content cases, Look, agreements Yes. force details, get in of or

and historically with cases, And partners past been we expect forward. have payments. in been making those continue great had all partners us our going in not to we So that the

pretty So on right we're now, obligations. we are -- well our we feel protected

Steve Cahall

bit. be comments, cash of a Great. give And think might for year? then, in this be that's little your maybe but in looking JVs And what to an missed you area investing you'll you I an the manage this expense I'm guessing outlook you that did

Curry Baker

evaluate in didn't exchange quarter. the into future. guidance. the the I took in $X.X we get to know through which quarter obligation did first further favorable we advantage the in the did Pantaya, specific give plans Canal rate The earlier fund mention million. quarter we'll here you our we I Uno, did as quarter, about in was of Yes, and next and On is, pre-funded what we guidance fulfilled

So the Uno in is first that's was of be QX, but you and terms year similar period of in half at -- number we to the a cash. funding of of got on time expect the to it half than second look the longer Canal higher funding terms in to

Steve Cahall

Yes.

kind share of you just crises] And What you're helpful. in hurricane dealt that years. maybe puts of then, did of learn whether the with I you mean kind feel question, like position few going very than to have the I Rico a now. a big public maybe Okay, picture you're last through the with of situation little mean, have fiscal or companies over from, what guys more better deal you a was you [fair it in Puerto lot

Alan Sokol

learned I think helped. be mean I Well, think how that's agile. really that I to we've

playbook a unfortunate that that crises we've confront. have to we've from developed past had these We

to we staff. manage So our how know

these with staff crises. to dealing used Our is

and is has and layoffs staff furloughs cutbacks happened having before. used because Our it short-term having their to pay, in

produce teams a is they and know how to know there crisis how step crisis. when to Our up production in

times. our clients So sales be creative very teams, not strategies and price react know in programs the coming And this up to and win-win sales is flexible this. be situations with rodeo first and in these agencies sales first in not how to doing it's with with create difficult their importantly, time, and and

Steve Cahall

a maybe last M&A. one on then, just And

having is market. potential You of mentioned the in I a imagine there distress lot opportunities. some maybe

the the here a come balance So might some have not and and bit the opportunities gas little than that started? sheet before are crisis prices find you able together or to push use better

Alan Sokol

the I and will think arise over that surface few opportunities months. next those

come up. a that be when number of I necessarily to those for are and of advantage come distressed. capitalized in take position companies going And think to not they interesting well that are there's really that think a we're up great opportunities I opportunities

I although going so our forward. the priority And at business at -- our priorities really our moment, working declines think it's is and yes, this and that not way mitigating -- our managing best revenue

over few time attractive months, opportunities the I think over some next will strategic think I we and appealing really valuations. seeing that at interesting start potentially

Steve Cahall

Great. Thank you.

Operator

I callers participating And showing may thank and this you in no time. concludes more am Everyone for further questions at conference. This day. gentlemen today's for you a all Ladies wonderful disconnect. the have program. And

Hemisphere Media (HMTV) 12 May 202020 Q1 Earnings call transcript