Atresmedia Corporacion de Medios de Comunicacion SA

MAD:A3M

Earnings Call Transcript 2021-Q3

[Operator]

Welcome to Atresmedia 9 months 2021 Results Presentation. [Operator Instructions] [Audio Gap] There has been 7.5%. And if we talk about the small channels, what we call complementary channels, the all-in share have been 7.1%. So all in all, I see that talking about content and audience, it's been a very good year for this growth. About Digital, I think that we -- it's clear that we have consolidated our leadership among all the national, all the digital players. Our unit usage numbers has been EUR 27 million for the first 9 months. And if we talk of our SVOD platform, we have reached 418,000 subscribers by the end of September, which means that we have multiplied by 1.4 the figure we obtained in September 2020. So also a quite successful operation for us. About the financials. The total revenue of this period has reached EUR 665 million, 0.6% on a year-on-year basis. And talking about the Audio Visual the total net revenue has been EUR 624 million, with an increase of 15%. The market share of Atresmedia Television, has been 42%, which means a slight increase compared with the same period for 2020, which I think implies a very good performance if we take into consideration that this year has been the Olympics Games and the Euro Cup, both of them we didn't have in our grid. So it means that we have increased our market share despite all these sports events that were in the competitors' hands, not in ours. The total net advertising revenue of the Television has been EUR 500 million with an increase of 15.5% and Digital has been EUR 45 million, with an increase of 48.6%. So I think that both in Television and in Digital, we are doing a quite very good year. Talking a little bit about the content production and distribution division, the revenues has reached EUR 56 million, which means a slight decrease compared with 2020, that is, as you know, the difference in the schedules of production and distribution and giving them to the customers. So we expect that by the end of the year, this decrease will be offset. And in the other divisions, the revenues has grown by 20.3% to EUR 22 million. So I think that's good news in terms of revenues. About the Radio activities, the net advertising revenues has been EUR 48 million, which means an increase of 8.3%. In the case of the OpEx, the total OpEx for this period has been EUR 545 million, which is an increase of 7.4%. The EBITDA of the period has been EUR 120 million, which means an increase of 64.4% compared with the same period for 2020. And that means that the EBITDA margin has been 18%, which is slightly above the one we obtained in 2019 and the conversion has been 55% from revenues to EBITDA, which is slightly better than our guidance. So I think that's also very good news in terms of the EBITDA level. The net profit has been EUR 80 million versus the EUR 40 million we obtained in 2020, which means doubling it. And in the case of the net debt, the actual situation is the debt is only EUR 9 million -- sorry, EUR 11 million, which compares with the EUR 117 million we had at the end of December '20. Let's say that this is something due to some -- a different schedule of payment and by the end of the year, we expect to have net debt of something around EUR 100 million, and we include clear the payment of the dividend. So for just to know the situation. And what about the future? What do we foresee about the last part of the year? Well, October is being a flattish month. It is true that October 2020 was a very good month because of the, let's say, people was at home and it began to go out and there was the advertising had a very positive impact. And so in October 2021, it's flat compared with 2020. And we do think that this will be the trend also for November and December. So that's why we still stick to our guidance of market growing by 8%, 9% by the end of the year. By business units, we do think that TV, Radio and Digital will outperform the market that we have done in the previous months. So let's say, the same trend as the past. And talking about the content production and distribution, our activities here should be growing because, I mean, we are comparing with a very low level in the last quarter of 2020. Now talking about OpEx, I think that we will -- I mean, we stick to our guidance also about the total OpEx for the whole year and we will also stick to that. We will translate the every year in revenues and at least 50% at the EBITDA level. So that's what we can -- I can say for the rest of the year, which is I think it will be a very good year. But I don't think that the margin will be better than 8% to 9% by the end of that year. And that's all, so now we are open to your questions.

[Operator]

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

[Richard Eary]

First question is just on autos. Obviously, if you look at the numbers for the 9 months and relative to the 6 month, it seems there was quite a big headwind in the in the third quarter from the autos. Can you just sort of maybe pull that apart and just trying to highlight what happened in autos in the third quarter and what you're seeing around supply chain issues going into the fourth quarter and whether that's the reason why October is basically flattish and why being sort of somewhat maybe cautious around November and December? That's the first question.

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

You're right. In October, the autos has been -- I mean even disappeared, and we do expect the same thing for November and December as you know of the crisis of these semiconductors and all that, and they can provide the cars so they cannot sell any. And that's why I think that November and December will be the same as October, which is more or less be flat compared to October. On the positive side of this thing is that we are making the same figures without autos that are very important for us, both in terms of the market share and the price they, because I mean they are the value -- high-value other type of customers. But you're right. That's the question why we are not that optimistic that we can maintain the growth of the market by the end of the year.

[Richard Eary]

Can you just elaborate what autos was down in the third quarter? Was it just a main ...

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

You mean why autos were down?

[Richard Eary]

No, not why, just the magnitude of the decline?

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

It's more or less 30%.

[Richard Eary]

Okay. Okay. And is that what we're seeing in October as well?

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

Yes. Yes. Well, I mean, the impact of the weakness of the automobile market is pressing on October, November and December, October and November mainly because I mean, these are the 2 months where Autos has been statistically very important in our -- in the market. And now they have disappeared.

[Richard Eary]

Okay. And just 2 other questions. One is just on the content side. Obviously, you said you expect growth in the fourth quarter given an easy comp. But what should we be thinking in terms of actually physical numbers in terms of the full year numbers for the other revenue, including the content side?

[Antonio Carlos Manso Marcos, Chief Financial Officer]

Yes, Richard. In the side of content production and distribution, there are -- in the fourth quarter, we are expecting that the -- there are certain impact in Q4 because it's more this year is more along the year, all the different deliveries of the products, not like last year in which just -- there was just 1 product in the third quarter. So it will be -- it will be more, I would say, spread all along the year. Enough to get to a similar levels of revenues, as you saw in the last year for the whole year, meaning we are catching up to say better. We are catching up in the fourth quarter in the area of contemplation distribution, to get to the same levels of -- in absolute levels in that area by the end of the year, okay?

[Richard Eary]

Okay. That's clear. And then maybe just the last question. If I look at ATRESplayer, obviously up year-on-year when you look at September versus September last year, but it was actually down basically on the June number. Is there any reason for that? Is that a churn or is it a seasonality issue? And how should we think about that?

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

Well, there are 2 reasons. One, I mean we have increased prices to the whole subscriber base in July and that has a certain impact. And it's also very much related with the content. We have not been pressing on content on this month, and we will do that by November. We are releasing cargo, which is also, I think, a type of fiction that will work very well because he is very much in the line of [indiscernible]. So we are not concerned about that figure because I think we are doing quite well, and we could recover the trend in the future and very much -- but the impact has been very much 2 effects, 1 of the increase of price; and 2, that the content we have had has not been the best because, I mean, we do think that at this moment, we are not that important. From November on, we will push a little bit on the content, and we do think that will work in the terms of increasing the subscriber base.

[Richard Eary]

Maybe just 1 last question, if I may. It's just on the share from associates. Obviously, it's been quite a good year so far. How do we think about things in the fourth quarter? Is there any other basically things that we should be aware about in terms of media for equity deals that could influence those numbers in the fourth quarter?

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

Well, we don't think there is nothing significant. So I mean, in terms of media for equity, we have done all we plan for the year, we're just selling [ my modem ], selling [ BB ] and so we don't expect to do any more deal in the last quarter and also in other in other revenues, we will be more or less as we expected. So no news on that side.

[Operator]

[Operator Instructions] Your next question comes from Fernando Cordero from Banco Santander.

[Fernando Cordero Barreira, Equity Analyst]

Just 1 question from my side. I would like to discuss a little bit on the radio business. We have seen radio in an underperforming during the third quarter. I can understand that the sports content is quite relevant for the radio business and particularly in the third quarter where Euro Cup was partially present. But I would like to understand what could be the potential measure or if there's concern on the radio market share going forward? Should we expect any kind of revamp of the business here?

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

Yes. Well, about radio, it's performing a little bit worse than television because, I mean, it's -- the gap between 2021 and 2019 is bigger than the television has. But I do think it's doing quite well. In our case, we are a little bit below our competitors in comparing 2021 with 2020. But if you make the comparison with both years 2021 and 2019, I mean we are more or less at the same level. We are down by 21% versus 2019. PRISA something like down by 17% versus 2019, and [ co-pay ] at 21%, the case that we did much better in 2020, much better than them. And we outperformed the market by far. So we are now getting to the same levels we had previously to the COVID disease. At the same time, in the radio business, we are something like a work in progress because I mean we haven't changed all the sports area. And we need to see how that, is it working. As you know, radio searching tools are different from television. We do have the figures quarter after quarter. And also, it's a long-term type of trend. So we need to give time to this sport proposal in the case of sports. At the same time, as you know, we have the bad news that our anchor woman in our afternoon magazine, which is [indiscernible] had a disease, and so it is not in the -- she is not heading the program since more than 6 months. We do expect her to recover soon. And I do think that by the end of the year, we will be again. So I do think that, that will have a positive impact in the audience. And talking about the musical format, there's also big change because I think we changed the oncoming of the morning show there, which was Cardenas with a new program, heading by 2 people, male and female. And so we are now in a changing process. But I do think that the result is anyway good in the radio.

[David Gómez Baquero, Director of Investor Relations]

Thank you, Fernando. We move to the next question, please.

[Operator]

The next question comes from Fernando Abril from Alantra. Mr. Fernando, you have the floor. Thank you.

[Fernando Abril-Martorell]

First question is related to the market. So I don't know if you can share with us your thoughts on what to expect for the market in 2022? I know it's -- it might be a bit too early, but considering that Q1 this year was very weak, but it is expected mid-single GDP growth, the outdoor business should come at some point, I guess, next year. I don't know if you can comment a bit on what we expect for the next year.

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

Sorry, we are muted now. Yes. As you say, I think it's a little bit soon. We are just in the middle of the budget process, and we need to review all the, all the different items. I mean just in general, what I see is that there is room enough in order to catch up 2019. So that's good news. It's also good news that the auto sector is disappeared in the last quarter. And well, we don't -- we think that it will come back by mid -- by June next year. So first part of the year, I think that the automobile sector will be also out of the market. Also, they devote the most part of the budget in the last part of the year. So that's a good thing to think that the market will have a certain growth. But I mean, we need to review everything. So it's too soon to say which is our view on the market for the future. But I mean, all in all, I think that, of course, it will be positive. I mean the point is which is the positive that we think. If it's low single digit or high single digit, I mean it's too soon to say anything now.

[Fernando Abril-Martorell]

May I have another question?

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

Sure, sure, go ahead.

[Fernando Abril-Martorell]

Okay. Second question is last 1 is on the shareholder remuneration. So you are considering an interim dividend before year-end. Are you considering anything else? I mean an extra dividend considering the low debt levels or any buyback at all?

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

Well, now, we are just in the process of recovering the dividend policy, which is, as you know, have to payments by December and by April, more or less, and we still need the approval of the Board. But I mean, I think that we will go back to the old policy of giving up to at least up to 80% of the net profit in dividend. I mean all -- we are not in any movement other than that. So we are not expecting -- we are not -- have not studied anything of extra dividend or a buyback of shares of the company. So just in terms of going back to the old policy of giving the shareholders up to 80% of the net profit for the -- as a total dividend.

[David Gómez Baquero, Director of Investor Relations]

Thank you, Fernando. We move in to the question, please.

[Operator]

We have another question from Fernando Cordero from Banco Santander.

[Fernando Cordero Barreira, Equity Analyst]

Thanks for taking a follow up question. In particular in the capital allocation. Since I would like to understand what are the views regarding the potential investments on organic growth going forward? And particularly, we just -- end should we expect any kind of increase of vesication? If you are going to -- or if you are still looking for deals or for businesses that have been complemented like the case of H2H -- In the case of previous M&A that you have that in recent years. Just to understand a little bit how is your thoughts on capital allocation, particularly in growth?

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

Well, we are always searching the market in order to see whether there is something that could be interesting for us. As you know, we have just made a deal creating a company called Sonora, which will be in the podcast business. We'll be streaming subscription type of business and it will be launched by the first quarter of 2022. So this is our main goal. We are focused on that and see whether this could be a good business for us, and very much related with this because I mean it is all everything related with audiovisual. And we are always reviewing what things can we do. But I mean, this is our focus now, which is this subscription audio platform called Sonora. And let's see how it works and let's focus on that for the moment.

[David Gómez Baquero, Director of Investor Relations]

Thank you, Fernando. Do you have more question Fernando.

[Fernando Cordero Barreira, Equity Analyst]

No, no, no.

[Operator]

[Operator Instructions] The next question comes from German Garcia from JB Capital.

[Germán García Bou, Managing Director]

I just want to know if you can elaborate about your views on the free cash flow generation during the next quarter? We've seen a very significant improvement in the third quarter helped by a series of factors. If you could elaborate, please, on the following quarter? And if you could confirm what you initially mentioned at the beginning of the call, or reaching a net debt of close to EUR 100 million by year-end?

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

Well, yes, I mean, yes, for you to know that we have -- we are expecting to pay dividends, and we are expecting also to pay some payables that had been delayed so that by the end of the year, we'll be more or less by EUR 100 million on the total net debt. We expect the working capital flat because I mean we have made lower investments and also in terms of inventory, we have consume more than produce for the third quarter. Yes. And so that's why that's more or less the evolution of the cash flow of the company.

[Antonio Carlos Manso Marcos, Chief Financial Officer]

Yes. To refresh Herman, the main point is regarding the dividend, as Silvio said, then there are also tax payments that for calendar issues who were not done in the third quarter. And then will the movements of the payables that Silvio also refer that probably will take place in the fourth quarter. and the normal movements of the working capital in this period it takes receivables from a very low level of activity from summer. All in all we will made our net debt move into the levels of 100 as Silvio said.

[Operator]

Ladies and gentlemen, there are no further questions. Dear speakers back to you.

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

Yes. Well, there are no more questions. So, if you have any other just refer to the Investor Relations department. In any case, I wish you all a very good afternoon and next time. Thank you. Bye-bye.