Atresmedia Corporación de Medios de Comunicación, S.A. (A3M) Earnings Call Transcript & Summary

Hi, good afternoon. Welcome to this conference call in which we are presenting the full year 2021 results. My name is David Gomez, Head of Investor Relations. And as usual, I would like to welcome to this conference call to Silvio González, CEO; and Antonio Manso, CFO. We will go into the highlights of the period, and we will move on to the Q&A question after that. Without further delay, I will hand over to Silvio.

Good morning to you all. Thank you for being with us to serve this movement with us. We also which I will give some highlights about the full year 2021. Begin with, I think it's being [indiscernible] whatever decade you should analyzed. The advertising market, both for television and radio performed well. Television grew by 8% and radio by 11% year-on-year, and the digital ad market increased by 14%. So I mean, all the 3 markets performed quite well. But also if we analyze the audience market, I think, this year has been a very, very good year for Atresmedia. Atresmedia as a group, we have delivered a total audience of 27.3%, which means that we improved one point the figures we got in 2020. And this means that we let the prime time slot in total individuals with an audience share of 28.2%. Also, Antena 3 -- channel Antena3 reached 13.8%, which means an increase of 2 points compared with the previous year in total individuals, and we led the prime time with a figure of EUR 15.5 million. we're also the most viewed channel in Spain in the last quarter of 2021. That's for Antena 3. But if we go to laSexta, also excellent results. laSexta obtained a sale of 6.4% in total individuals, which means an increase of 1.1 point versus the main competitor with Cuatro. And if we analyze the commercial target, the result was 7.5%. So a very good results for Stars well. And the cumulative audience of all the what we call complementary channels has been 7.1%. That's about, let's say, the convention of the world. We talk about detail. We consolidated our leadership among all the national artificial players in terms of unique users. The average of the year has been 27.4 million users daily. And in the case of our SVOD platform, ATRESPlayer premium, we've finished the year with a number of 427,000 subscribers, which I think is we have, by far, the best OTT platform, Spanish OTT platform. So that's the overall view. We go to the financials. Total revenue has been EUR 963 million, which means an increase of 11.2% on a year-on-year basis. Talking noted about the audiovisual part of the business. The total net revenues has been EUR 901 million, which means an increase of 11.5%, also, of course, on a year-on-year basis. The market share for Atresmedia has been 41.7%, which means an increase of 16% better than the previous year, which means that we outperformed the market. And also, these have an in consideration that Eurocup 2020 was there by our principal main competitor. So it means that even with this event, we were able to over perform. So of course, we maintain the highest power ratio of the market. The net advertising revenues for the period has been EUR 720 million, with an increase of 9% compared to 2020. The digital net arbitration revenue has been EUR 67 million, an increase of 30.9%. And this has been driven mainly because of the over performance in all our digital assets, I mean the AVOD, [ Smartclip, HbbTV ] and also by the inclusion in the perimeter of influencer marketing company, H2H that we acquired in summer 2020. In the case of the content production and distribution division, the revenues has been EUR 79 million with an increase of 5.3% and the main driver has been the OT platform, ATRESplayer Premium, and also the recovery, let's say, that about the cinema production. Although cinema is still far from what it was before the COVID-19. In the rest of the group, the revenues grew by 66.3%, up to EUR 35 million, which means that we are returning slowly to and to the activities, the normal activity levels previous to the pandemic that has affected all of us. About radio, the net advertising revenues has been EUR 71 million, which is an increase of 8.3%. OpEx -- Total OpEx for the group EUR 791 million, which means a small decrease compared with 2020, if we include a severance payment scheme. And on a pro forma basis, the increase has been 4.7%. The EBITDA has been EUR 172 million, which is an increase of 132%, which means an EBITDA margins of 18% very much in line with the one we obtained in 2019. So very good -- I think it's excellent results, if we -- if you analyze that we are still very far from 2019 in terms of revenues of the advertising market. The net profit has been EUR 118 million, 5x better than 2020 and at the same level for those we obtained in 2019. The net debt level -- the net debt -- the total net debt has been EUR 13 million, which we compare with the EUR 117 million that we got at the end of December '20, which is the lowest level since 2005. News, I mean, we had, as you know, a Board of Directors yesterday and we will propose the assembly meeting, a complementary dividend to be paid in June 2022, which -- EUR 0.24 per share, which means that if you add up with when we prepaid by the first days of December, which means that the yield of the company will be 12% if we you took the price that we got yesterday. And with this means that we will stick to the, let's say, the policy we have always had, which is pay 80% of profit obtained by the group. I think these are the main highlights of the figures that we obtained in 2021. So as lapping I think has been very, very good year. And even that, as you know, the advertising market. Also, we ended with 80% of the -- I mean, the growth. In the beginning of the year was quite tough. And we have not obtained yet the levels of 2019, I think, which are one of the rare European market, which is still far below 2019. Well, let's talk about 2022. Although, I mean, the new -- I mean, the news that we are involved now, which is, say, the war between Russia and Ukraine could affect everything, and we cannot now envisage which will be the effect in terms of cost inflation and whatever. But I mean, let's take it out a part because I cannot even imagine what could happen. But if things were as it were before that, before this event, we expect 2022 a year that should go well our activities. We do think that the television market should grow, let's say, mid-single digit between 4% to 6%. That's what we foresee for television in 2022. We do think that radio and detail would -- will perform better, which means high single digit. We do think that it should grow between 2%, 8% and 10%. So that's for television and radio and digital. On the continent production area, it will be flattish on a year-on-year basis, and that is because there will be three of the areas that will grow, which is cinema, the ATRESplayer Premium platform, our OTT, and international channels. But we do think that all related with sale of content will be slightly down because we are -- we will try not to sell our product to the other OTT platforms, but still keep them for our platform for ATRESplayer Premium. So that's what we say all in all, will be flat because of that. Looking at OpEx, we do think that the cost level will be very much in line with 2021, except all those costs that are linked to revenues. So as you know, all the -- what we paid to the media buyers, all the things that are related to the revenues, the variable costs, they will increase at the same pace of revenues, but the rest of the cost will be flat. Of course, I mean, columns, it would depend on what's going on with crane and all if it's -- all the cost goes up, there could be an effect. But I mean, without that, I think that the cost will be flat. I think if we could maintain the commitment we gave at the end of the year that every revenue on top will mean at least 50% of the EBITDA level. So we will stick to that. And on the net issue, I do think that by the end of the year, we will finish with debt, which would be in the range of EUR 50 million to EUR 60 million, assuming, of course, the payment of the dividend as usual. So I think a quick view of what's going on in 2021, what we foresee for 2022. And so we are now open to your comments. Thank you.

Thank you, Silvio. We'll move into the Q&A session, please.

[Operator Instructions] The first question comes from Juan Pena from GVC Gaesco.

Only one question about costs. you explained that in 2022, you expect 50% of increase of EBITDA based on the increase of revenues. But in 2021, this performance has been quite impressive because the increase of cost has been lower than your [ this year's ] guidance of 50% of the revenues. Do you have seen some extraordinary things in 2021 that had to have to this increase in EBITDA? Or what do you see in 2021 that you don't see in 2022 to maintain this good trend seen in 2021? .

2021 was an impressive year and I like to be conservative. I mean there's -- I mean I don't see that things could be changed. So let me be conservative in this case. As you know, I don't want to promise. I want to achieve. So that's our aim. That's what we always say.

Thank you, Juan. Move to next question, please.

The next question comes from Fernando Abril from Alantra.

I have three, please. First is on the TV market. how does the year start according to your estimates in January and February? And what do you expect throughout the year? I think you've mentioned that you expect 4% to 6% growth and then high single-digit growth in the other businesses, that been in radio and digital. And then second question is with regard to OpEx. So how could Ukraine affect costs? I mean, I would understand that it would affect that market, but I don't know why there's cost inflation with regard to this? So any clarification would also be very grateful. And then last question is with regard to the OTT. I don't know if you have any target with regards to your pricing and subscribers by year-end?

Yes. About the first one, I think we -- I mean, the beginning of the year has been good for us. But both year -- both the months January, February, as an overall, we have grew by something nearly 4%. And in the case of radio, I mean, we have grown by 15%. And in the case of digital, it will be something like 3% for both months, January and February. So that's why we -- I think that the market is not being that good, but we have overperformed the market. And we expect that from now on, the market will recover. And so that's why we say that by the end of the year, the market will be 4% to 6%. Of course, I mean all of this should be accompanied by the price increase that we are now in the -- that we always go for that for the price increase. We are now in the -- we are negotiating price increase by 4% to 6% with all our customers. So that's it. In terms of OpEx, well, I don't know. I don't know which would be the effect on on gas and petrol and all that. And this affects all the other sectors, and we are affected by this cascade of price increase. So far, if nothing happens, there should not be no increase in the OpEx of the company. About the OTT, I mean I will not disclose you which is our price policy, of course. Our target is to be very -- something like between 800,000 subscribers by the end of 2025. That's our goal for the OTT platform. So I think the trend is good. We are confident about what's going on. I think the grid is good. The offer is good, and we will go on, increasing the prices of the platform. But I mean, that's something that we will manage as we see, which is the evolution of the market all the new platforms.

Yes, may I have a follow-up, please?

Yes, sure, Fernando.

Just so with your OTT, can you remind us what is the economics? I mean, with the results you have had in '21, how has been EBITDA if you've made breakeven and with your '25 targets, doubling the subscriber base?

We -- I mean, it was -- the EBITDA was positive by the end of the year, but it was due to the price increase we did in mid-June and it was expected to be done by the end of the year. So that's one of the the reason that this year has been EBITDA positive. We will invest more money in terms of content. And so we do think that by the end of 2021, I mean, the effect will be flat -- 2022. The fact we will be flat. So we are trying to build a platform. So we are not very much concerned of the today results. Also, of course, we look at them what we want to build the future. And by the end of the plan, which begins in 2025, with these 800,000 subscribers, it will be extremely profitable. and we will have a platform that could be, of course, the local hero of the spans market, which is our aim, which is our goal.

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

My question. I would like to review a little bit the moving parts in order to understand your EPS market outlook in that sense. You are guiding or you are trying to implement a price increase between 4% and 6%. If you are also guiding to a similar level of market growth, I would understand that in terms of volumes, you are expecting flattish performance. which, at the end of the day would be the result of an increased audience year-on-year, offsetting the lower TV consumption. And in that sense, just to check with you if this is the underlying scenario within your outlook?

I mean what we see is that the [indiscernible] level will be very much like we have uptake this year. And the way we can grow is by increasing prices. And that's what we are looking for. And that's why the negotiations we do with our customers is what we do. And so we -- that's what we think that would happen this year. Price increase policy in the range to 6% to 8%, which is what we're now looking for and what we have obtained in January and February.

[Operator Instructions] The next question comes from Fernando Abril from Alantra.

Sorry, there are no further questions. I have only one more, please. So with regards that you expect by the end of the year, which is pretty low even with the dividend payments, are you targeting any other capital allocation that meaning M&A, I mean, growing inorganically digital business or buybacks?

I cannot give you any color about that. Of course, we are always looking to any opportunity we could see if it goes good for the company, and it means that we grow in the right sense and have a profit about that. We analyze everything, but I mean, I cannot give any color about what will be the next step we will go in the future.

The next question comes from Enrique Yáguez from Bestinver Securities.

Just two quick questions. The first one was regarding the net debt. [indiscernible] to increase your net debt [indiscernible] [indiscernible]. When do you expect a decrease [indiscernible] for the working capital [indiscernible] And secondly, we have [indiscernible] last year, [indiscernible], and this year [indiscernible] that we will have [indiscernible] could you explain [indiscernible] what are [indiscernible].

The sound was really, really bad. We understood the first one, thinking relating to the net debt and the reasons why the net debt was so low. Just -- please confirm that this was the question, please? Enrique?

He got disconnected.

Okay. Well, I will answer Enrique directly.

[Operator Instructions] There are no more questions. Dear speakers, the floor is yours.

Okay. Thank you very much, everyone. If you have any further questions, please contact the Investor Relation [indiscernible] Bye.