Atresmedia Corporacion de Medios de Comunicacion SA

MAD:A3M

Earnings Call Transcript 2021-Q1

[David Gómez Baquero, Director of Investor Relations]

Hi. Good afternoon, everyone. Thanks for attending this conference call. We are presenting the first quarter 2021 results. My name is David Gomez, Head of Investor Relations. I'm pleased to introduce the speakers to this conference call: Silvio Gonzalez, CEO; and Fernando Costi, the new Chief Financial Officer. As usual, Silvio Gonzalez will go through the main highlights of the period. And after that, we will enter into the Q&A section for all of your questions that you can ask. Thank you very much. Silvio, the floor is yours.

[Silvio Jose Gonzalez Moreno, CEO, MD & Executive Director]

Thank you. Good morning. Thank you for attending this conference call. Well, let's begin with the highlights of the quarter. But let's say that I think this first quarter is very much like what has happened in 2020. I mean in Spain, there's been lockups in the several cities and [Foreign Language]. There has been mobility restrictions. So we cannot at all say that we are leaving anything normal, is everything back to normal. So I think this various market has been very much affected because all of these consequences of the COVID-19. Because of that, the advertising market results, as you know, is our main source of revenues has been negative by 10% in this first quarter compared with the same quarter of 2020. Talking about the relevant markets where we operate. Television advertising market has decreased by 14%. The radio advertising market has decreased by 12%. And the only one who has performed better is the detail advertising market, which -- I mean, it depends of the source you take. But in our case, there has been some increase in the high single digits. So let's say that our power markets has performed more or less as the total advertising market. On the other side, I'm talking about the audience, I think that the performance of Atresmedia has been very positive. Our audience as a group has been 27.9%, which means an increase of 1.7 points. And we have been the leaders of the market despite that we have 1 less channel that would -- that our most direct competitor. In the case of Antena 3, the audience share has been 14.1%, which means an increase of 2.4 points, which is the best quarter since 2014. In the case of laSexta, we obtained a 6.9% share, which means a difference with 1.8 points versus our principal competitor opposite, Cuatro. And the accumulated audience for the other channels, the 4 complementary channels has been 7%. So I think on the side of the audience, this quarter has been excellent. In talking about digital, we have consolidated our leadership among the audiovisual competitors because, I mean, as ComScore say, we have 28 million unique users, which means that we are, by far, the best with our peers in the audiovisual sector. And talking about our SVOD operation, Atresplayer Premium. We are about 425,000 subscribers by the end of March, which means that we've multiplied by 1.8 the figures we obtained in March 2020. And I'm talking about financials now. Total revenues have reached EUR 204 million, which means a decrease of 8.7% compared with 2020. And regarding the audiovisual operations, total net revenue has been EUR 193 million, which means a decrease of 8.4% year-on-year. The Atresmedia Television market share has been 42.5% according to all the research we already have. The net advertising revenues for television has been EUR 157 million, which means a decrease of 12.9%. But on the other hand, we have outperformed the television market, which has been a decrease of 13.6%. So we have been really one point on top of the evolution of the market. Talking about digital. The net advertising revenue has been EUR 13 million, which is an increase of 37.1%. And this has been a very impressive increase due also to the inclusion of the perimeter of H2H, which is the infomercial marketing company that we acquired in September 2020. The content production and distribution division has reached EUR 15 million, which means an increase of 3.7%. And in the rest of the divisions, the revenues have grown by 24%, up to EUR 8 million. In the case of the revenue of the radio -- excuse me, the net advertising revenue has been EUR 14 million, which means a decrease of nearly 13%, very much in line with the decrease of the market. Total OpEx for the group has been EUR 169 million, which means cost reductions of 9.7%. And that means that the EBITDA for this quarter has been EUR 35 million, which is very much the same EBITDA we had in the first quarter of 2020, and we should also consider that the first quarter, the 2 first month, January and February, were not affected by the pandemia of the COVID-19. The net profit for the quarter has been EUR 20 million. Our financial position is excellent. The net debt is EUR 97 million, which is -- which compare with the net debt we had at the end of December, which was EUR 117 million. And so this means that we adjust [ 1.9 ] net debt on EBITDA, which is, I think, one of the best finance position we have had ever. And the operation cash flow has reached EUR 33 million, which is very much in line with the EBITDA we have. So it's nearly 1 conversion of 100%. And so that's the past, that's the figure. And well, let's give you some guidance, some hints about how do we see the future. When -- at the beginning of the year, the performance of January and February were very disappointing. And we really thought that we were concerned about which will be the performance of the year due to the how January and February has performed. But I think that March was quite a shift. But I think that the performance of April is really something that fills us up with optimism. In April, we are about to close the month. And so far, the market has performed very good. The increase is 150% compared with the -- when we had in 2020. And also May, although it's always soon, and as you know, visibility is always difficult, we do think that market will -- May will be positive, too. So far, at the very beginning of the month, we see that the increase will be at least 100%. And if May performs as April, which has been a month coming from low to high, we do expect March -- May also to be very positive. So now, although everything is moving and it's all steady and you could not say what's going on in the future because, I mean, we are not in a normal situation. I mean all the activity, all the economic activity, I think, is still very weak. We are positive in the sense that we do believe that by the end of the year, we will have -- we will stick to our guidance, which is 7% to 8% -- 7% to 9% because I think that's something very reasonable to achieve due to the actual circumstances and the performance of April and what we expect May to be. So I think we have recovered the optimism on in the sector. I think that things are going better, and they are going better and to stay. So let's hope this is something that will go to -- that's -- it's going to happen. If we analyze all the operations linked to the advertising activities, we think that we will be very much in line with the market trend. So we expect to grow the same at the market. Talking a little bit about content, production and distribution, all our activities in content sales, international PTV channels and SVOD, revenue will keep growing soundly on a year-on-year basis. So we are pretty confident that we will obtain our goals in this item. And talking about OpEx, I think that we have proved to be much more flexible than anyone could expect in an industry, which is the audiovisual industry, the television industry, that the relation between cost fixed and variables is very high. I think that we proved to be very flexible. And so what we do think that -- first of all, that we have reduced costs significantly without affecting our competitive position in terms of audience, which is something remarkable. And that we do think that -- well, we will also be very flexible and with the performance of the advertising market. What we do think now is that in terms of OpEx, is that every increase in revenues will mean that 50% of that will go to the EBITDA -- to the EBITDA of the company. So that's what we say last time, and then that's -- we'll stick to that. And -- well, I think that that's all for today. Let me remind you that -- well, I think that we can tell that there has been a significant shift in the performance of the advertising market. And we hope that it is here to stay. And so now we do feel quite optimistic about our guidance we gave of the performance of the market and for the year. Thank you.

[David Gómez Baquero, Director of Investor Relations]

Thank you very much. We move in to the Q&A session, please.

[Operator]

[Operator Instructions] The first question comes from Fernando Cordero from Banco Santander.

[Fernando Cordero Barreira, Equity Analyst]

And just before it, just to confirm, Silvio. You said that April is 150%, 1-5-0, up year-on-year.

[Silvio Jose Gonzalez Moreno, CEO, MD & Executive Director]

Fernando, you're right. I just said that the growth in April has been 150% compared with April 2020.

[Fernando Cordero Barreira, Equity Analyst]

Okay. Perfect. So at the end 2021 is close to April 2019. And my question is related with shareholder remuneration. Considering 2 facts. First in your comfortable balance sheet and also the optimism to which you are looking to the year 2021, at which extent is likely to see resuming shareholder remuneration? Or also following recent movements on the whole sector at European level, if you foresee any kind of investment in order to use the cash generation during the year 2021.

[Silvio Jose Gonzalez Moreno, CEO, MD & Executive Director]

At this point, what I can tell you is that we will recover the dividend policy we have. So we will pay at least 80% of the net profit to our shareholders. So we don't see any investment that could reduce or change the policy we have had all these years. And the only year we suspended it was because of the COVID-19 and difficult situation we all have passed. From now on, we will recover the policy we have had since 2003, which were the time we were listed.

[Operator]

[Operator Instructions] The next question comes from Richard Eary from UBS.

[Richard Eary]

I hope you can hear me. Just 3 questions actually from my side. First of all, obviously, you've said that April is up 150%. Have we got any early visibility of May because I presume that May last year was actually weaker than April and whether you can confirm that? And maybe if you could give us the numbers through the second quarter, what April, May and June were down last year, so we can try and get a sense of those comps. The second side is that you talked about, obviously, perhaps more flexibility on OpEx, which is obviously what was delivered in the first quarter. Is there any sort of guidance that you could give us for the full year? I know that you said you've got target guidance of 7% to 9% on [indiscernible]. So could you give us basically a guidance range on costs based on those targets, that would be helpful. And then thirdly, obviously, you're confident hitting the goals on the content side and delivery, but I may have missed out whether you actually gave anything numbers or guidance around that. So that will be helpful as well.

[Silvio Jose Gonzalez Moreno, CEO, MD & Executive Director]

About the first question, we envisage that May at least will grow by 100%. At this moment in our research from a top-down level and down to top level, talking about with advertisers and with the media buyers, we can -- we see now that at least May will increase by 100% compared with 2020. And if May perform as April, there should be some increase on that first view of what's going to happen. On the second, well, we have made an important effort in cost, try to adapt to the revenues of the company. But I cannot give you an exit amount because, I mean, we need to see what's going on with our competitor. As you know, in June and July, they have their European cap. So we need to see what's going on, and we have to adopt our grid and make some, let's say, an effort in content in order to not to lose a step and try to be ahead in terms of audience share. So what I -- what I have said is -- and you can -- I think you can make [indiscernible] with that is that, well, if you have the results of 2020, every euro on top that we got that year will be 50% down to the EBITDA level. And on the content side, well, we have something which makes comp difficult, which is that Buendia, which is the company we created with Telefonica as a joint venture by the very first moment of this year. And so Antena 3 studios disappears. So the point is that it is difficult to make the comp because of a new company. What I can tell you is that the new company is doing well. I think we have more than 40 programs and products in the pipeline. And so it's doing well, but it's difficult to compare with the results we obtained in Atresmedia Studios. So let's say that, I think that when Buendia is doing quite well, and at least, we'll be more or less at the same level it was in 2020 for us. Thank you.

[Richard Eary]

Can I ask a follow-up question, please?

[David Gómez Baquero, Director of Investor Relations]

Yes, of course.

[Richard Eary]

So if we look at last year, the second quarter TV advertising number was down 48%. And so in actual euro numbers, it was down EUR 104 million, which was essentially nearly 90% of the full year drop, which was EUR 121 million. So if April is up 150% and made up 100%, I'm assuming that we pretty much recovered all the EUR 100 million that was lost last year. So that would imply that the market would be up significantly more than the 7% to 9% that you were indicating for the full year. I mean sorry, am I missing something in terms of the June number? Or are you just being conservative around the 7% to 9%?

[David Gómez Baquero, Director of Investor Relations]

Yes. Richard, this is David. Yes, you are right. I mean, I was expecting. I mean the -- remember that last year, April was down by 62%. May was something like minus 60% and June was also negative, was minus 27%. So in total, second quarter last year, the market in television decreased by 50%, okay? Clearly, when you have such a growth, as Silvio has mentioned 150% in April and 100% in May, we are catching up a lot of the decline in the first quarter. And when you make the calculation, which is generally to May, for example, which is the math we have visibility so far, we will be talking, obviously, about our increase in the market of low double digits. That is clear. Probably at the end of the month of -- at the end of September will be also even higher than that. But this stood at the same time, in the second half of the year last year, the market decreased by 3% -- 3%, 4%. We are not expecting same increases, obviously, in the second half of the year. So this growth that we will see at the end of the semester will be declining, will be declining because the comparison so far, it seems the comparison difficult. We don't have visibility in that period. This is why we are sticking on the guidance of 7% to 8%, okay?

[Richard Eary]

Can you just say that the April numbers again, April was down 62. May was...

[David Gómez Baquero, Director of Investor Relations]

62, 6-2 down.

[Richard Eary]

6-2.

[David Gómez Baquero, Director of Investor Relations]

Yes.

[Richard Eary]

May was down...

[David Gómez Baquero, Director of Investor Relations]

60, 6-0.

[Richard Eary]

And May was down 24, was it, 22?

[David Gómez Baquero, Director of Investor Relations]

No, in June. June was down 27.

[Richard Eary]

June was down 27. Okay. That's super helpful.

[Operator]

The next question comes from Fernando Abril from Alantra.

[Fernando Abril-Martorell]

Just a clarification on the first on the savings that you expect for the year. So you've mentioned that you expect 50% of the revenue increase to go down to EBITDA. And are you including the personnel savings from the restructuring plan? And then second question is on the SVOD business. I've seen that you rose prices EUR 1 for both new and existing clients. My question is how has been churned after this raising prices on your existing subscriber base?

[Silvio Jose Gonzalez Moreno, CEO, MD & Executive Director]

About the first question. I mean the extra costs should be included in the total cost because as you remember, during the first quarter last year and during the pandemia, we had exceptional savings because of the repeating of programs, and we need a lot of things that were exceptional, and we cannot do that anymore. So you should take the total cost base of 2020, included everything. About the SVOD, well, the thing is that the price increase is doing quite well. We -- our churn rate is single -- high single digit, which is very much in line -- a little bit below which is the trend of other sector. And so we are having positive subscribers every day. So it's doing quite well. We are satisfied with the effects of the increasing prices policy. And so I think that operation is doing very, very, very good.

[Fernando Abril-Martorell]

Okay. So just a follow-up on the last question. So do you expect then subscriber growth in Q2?

[Silvio Jose Gonzalez Moreno, CEO, MD & Executive Director]

Well, we do expect that because I think we are -- now we are launching some new programs, which we expect that it will be very, very successful, which is the drag queen program and also Los Hombres de Paco. So yes, we do expect some growth in the second quarter.

[Operator]

Thank you. Ladies and gentlemen, there are no further questions. I will now give back the floor to our speakers. Thank you.

[David Gómez Baquero, Director of Investor Relations]

Okay. Thank you very much. Thanks for your attendance again. As you know, if you have any further questions, please contact the IR department. Thank you much, all. Bye.