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 results for the full year 2022. As usual, we will go into the highlights of the period. It will be presented by Silvio Gonzalez, Executive Vice Chairman, and he will answer also all the questions you may have after in the Q&A session. So without further delay, we'll start with you.

Hello. Good morning. I mean, let's begin with a brief summary about 2022, which seems so far away. Well, I obviously say that, I mean it has been a tough year. Overall, our group has overcome all the difficulties that arise in 2022. Our most develop global markets, radio and digital has done well, has increased -- the advertising has increased by 8%, which means a very good results. But nevertheless, the TV ad market decreased by 5% during this year. So given the bad news at the same time. If we -- I think this has been an extraordinary year for this media. Our total audience has been 27.2% in terms of audience share, which means that we have been the leaders by far against our competitors and also prime time has had a very good restart with an audience share of 37.5%. Antena 3 has been the most used channel in 2022 with audience rate of 13.9 considering total individuals. And we have also less prime time with the audience share of 15.1. This means that we have been leaders for the second year in a row. Also, our second channel ATRESplayer has had a very good result, which means that it had a 6.1% share considering total individuals and 7.2% in commercial target. In both cases, we are well ahead of our main competitor quarter. And the audience of the complementary channels has been 7.2%, which means an increase of 41% compared with 2021. The good thing also is that which has been our commercial policy during the year. And we can tell that we have increased prices by 5% in overall comparison with the last year. And they have been driven by our audience leadership and also our excellent commercial position. So for 2022, our price increase has been 5%. I think we have always worked during the last years in the consolidation of our leadership opinion. And I think that it's clear that we are the clear leaders in unique users. We have had more than 26 million in 2022. And I think that our performance in subscription video demand, our ATRESplayer Premium has been very interesting. We have -- and we closed the year with the number of subscribers up to 430,000 subscribers. So I think we've had also very good figures in that field. A little bit about financials. I mean the total revenue for the group has been EUR 951 million, which means a slight decrease of 1.3% on a year-on-year comparison. And regarding audiovisual, the total net revenues has been EUR 884 million, which means a slight decrease also of 1.9% on a year-on-year comparison. Our market share in the television market has been 42.5%, which means that we have outperformed 2021 and it has led to our net advertising revenues to EUR 699 million, which means this decrease of 2.9%, which means we have outperformed the advertising market inaugural. On the digital field, the net advertising revenues have been EUR 75 million, mainly driven by the AVOD and Connected TV, and we have also outperformed the market for 3 points. Our content production and distribution division as we have the revenues has been EUR 71 million, a slight decrease of 10.3%. It's mainly due of the new policy that we are lower in content sales because we want to strengthen our SVOD platform. So let's see, this is not a commercial problem is that we are getting more focused on the SVOD because we want it to be a real original platform. And so that's why this decrease can be explained. In the other division, others revenues, we have -- the revenues has been EUR 40 million, which means an increase of 12.5% recovery, the levels we had previous to the pandemic disease. Talking about radio, radio has performed very well. Total revenues has been EUR 76 million, with an increase of 6.9%. which are more or less in line with the radio market. Talking about the OpEx for the whole year, there's been EUR 778 million, which was a slight decrease compared to 2021, 1.6%. And this has been mainly driven by savings in the programming costs. The EBITDA for the year has been EUR 173 million, which is a bit slightly better than the one we obtained in 2022. And that means that the EBITDA margin has been 18%. The net profit reached EUR 113 million. It's slightly worse than credit driven, but it's because of the change to the legal framework that the rate -- the minimum rent, which will be 15% and the average rate we had in the past was something like 13.8%. So that's because of the change of the law. The net debt at the end of the period was EUR 24 million, which is just 1 point. I mean, net debt against EBITDA, so very, very strong financial position. And in terms of dividends, we have maintained our policy of distribution nearly 80% of the net profit, which means that we will distribute EUR 95 million in '22, which means a dividend yield of 13% of our shareholders. So I think it's quite, quite good useful. And as we always do, I mean, we try to give you some hint of what we think about the future. Well, 2022 performed in a change way. I mean, January and February were 2 good months with an average growth of something like 5%. Then I mean things chipped after in the March and April. And so that's like by the end of the year, with a slight recovery in October and November was this in terms of television in this situation of 5% in the advertising market. What we do expect for the 2023? It's difficult to say. I mean, as you know, we always say that there is visibilities, it's very low visibility, so it's vital for us to know -- sorry, no. But we are now -- we have our budget with television market with a slight decrease in the vintage of 2% to 3%, that would step the full year. We expect to be able to better than that. We assume growth of something like 4% to 5% and we expect digital also to be in the same similar. In terms of audience, we think that our actual leadership position will be maintained. There is no any anything would envisage that would change that in the short term. So on this area, we do think that we will maintain leadership in the whole group in any channel. So I mean, there would not be any significant change there. We have also with this important, we expect TV consumption to decrease in the rates of 5% to 7%, which is what we are saying more in the beginning of the year in 2023. And we -- I think is that the important thing is that we have changed our commercial policy. After analyzing the whole environment, but we think has been something unfair in the sense that when a customer decides how to allocate their investment in the audiovisual world, let's say that, they could locate in television, in video and which however in video, we think that's the way to measure the different investments where different. Television was measure in terms of TRP, while all the digital investment was measured in terms of CPM. I mean we thought that there is no reason for that. The only way to compare with the efficiency of your investment is to make the comparison to the same investment. That's why we have move and now we are selling instead of starting on a gross rating points, measure our instrument to going to the CPM measure instrument. So we will begin that in the month of April. We have communicated the big policy to all the media agents and other customers. And on top of that, what we are doing is thinking that we have a real premium content, which is of use, and we are changing the way we are selling it. We are selling it more in the line of the Beta approach, which is with 2 rolls. And we think we are pacing at the price we should consider because it's a real premium tariff. With this policy, what we do think is that we could overcome the viewing time decrease and at the same time, it value to what is having because, I mean, we know television is by far the best. So we think we should be considered as the media you should need to pay more if you want to be with us. Well, it's a real test in terms of pricing policy. And -- but we do think that we have the strength in this very moment to go with it, and we do think we will succeed. Remember that we did a movement more or less the same when we put in practice the joint inventory bundle and we got to succeed with it. So I don't have any thought that we will go for that. And at the end, this strength of television is taking us, and we will put collection in the point we do think it should be. Regarding abatement in detail, we think these 2 sectors will be positive. Radio will be in the range of 4% to 5% increase. And digital will also think it will -- it will have a good performance in more even that this has in the radio. And now talking about OpEx, we -- our commitment is to maintain the net margins we have had in the past. So we are talking about the margin -- EBITDA margins of -- in sales of something in the range of 15%. So that's our challenge, and that's what we want to get. In terms of our financial position, I think that is pretty strong. We will -- we think we can finish the year with a net debt of something like EUR 50 million, considering that we have to pay the dividend for the company. And yes to end, we have the Board of Directors yesterday, and we have approved to pay a complementary dividend of EUR [ 0.22 ] per share, which means that for the whole year, we will pay something like EUR [ 0.18 ] per share. So -- and that's all -- thank you.

Thank you very much. We move into the Q&A session if there is any question, please.

[Operator Instructions] Our first question comes from the line of Enrique Yáguez Avilés from Bestinver Securities.

First of all, regarding the evolution of the advertising market. We would have to know in the first months of this year and stay delevered from plans to return to the market, taking to consideration the expectations of that sector for this year. Secondly, regarding the strategy of average per year, what do you expect from this year in terms of the potential evolution of subscriber and your pricing policy taking into consideration the competition? And finally, if you could give there evolution of net debt in the last quarter, which has been much better than clinically expected?

Well, the first question, which has been the evolution of the January and February. I mean they've had not very good performance. I mean, market has been down by 8%, but we do expect because, I mean, now we negotiated in March, and we think that for the whole quarter, the market will be down in the range of 6%. So January and February were 2 not very good months and March is recovering a little bit, so expect for the whole quarter that the market will be down by the range to 6%, 7%. The automotive sector was more active by the end of 2022. Now we are still a little bit quiet. We are not investing a lot. What -- there are 2 sectors in automotive and also finance that are not very active in the very beginning of the year. Once we talk to them, they see that they have -- they are going to invest because, I mean, they have a lot of different models that beginning to launch to the market and so far they are not in mood to invest and see what's going on for the future. About ATRESplayer Premium, well, as you know, it's a very active market with a lot of [indiscernible] the platform change their strategy in a very short time. I mean our path was to increase prices by midyear. And perhaps we are moving to 2 different tiers. Once it's what slide with the actual price, including advertising, and increase the price for those who don't want advertising in this [indiscernible]. We do expect by the end of the year to be something around 500,000 subscribers, which means that we increased nearly 100,000 subscribers for the year. We will release something like 12 new original fiction per year, which means you have a new fiction once a month. And well, I mean, our experience so far, stay is very, very good. The churn right is really low, it's around 8% and we have more than 90,000 subscribers which paid for the annual subscription. So I think it's quite a strong platform in terms of financials. Also, it's quite strong platforms in terms of -- which is the perception of the subscribers. And so as you know, for us, it's not just subscription platform. It's the way -- it's a window where we can manage how to exploit our content. That's the way we see television, AVOD and SVOD. It's not different platforms. I mean it's the way we face how to exploit our content in the different windows in order to make more money out of them in order to be more profitable. And the last question, I'll pass it to you Fernando Costi.

Well, last question is regarding the net debt evolution at the end of this year, the fourth quarter has been an improvement versus 9 months because basically the ratio of cash generation was higher due to a much better fourth quarter than the issues you said the market has improved in the fourth quarter being stronger. And so we are saying we got more cash down than expected, and that may move to the levels of this EUR 43 million, sorry, EUR 24 million at the end of the year. There was nothing special evolution on the market.

The next question comes from the line Fernando Cordero from Banco Santander.

I have 2 questions. The first question is like, I assume that -- and also, we have seen our cash flow of [indiscernible] and cash inflow from disposal of that is on from the [indiscernible]. Just understanding what is going to be acted the group going forward on the content as you expand the operation earnings with strengthen? Second question is related to the new commercial strategy that is very relevant to take into Europe in the sense. You have already guided for the responding period market from between 2% and 3% for the full year. What do you expect to obtain versus the market performance to your new commercial policy?

First of all, media when we began this is positive, which was something like 5, 6 years ago, was to get advantage of the inventory we have in the company. And we maintain the same thing is what we try to do is if we save inventory cannot sell to the, let's say, bigger advertising. We can get the money out that this media investment. We will go for the same strategy for the future. In the case of [indiscernible], it was different because I mean when we advised fiber at the first time, we thought that there were some angles that converted with our business. This was something related with the events with advertising. And so that's why we put some cash into the company. But I mean it has set goals and to be said, a big company that, well, we have changed and now it's always is a financial position. It's doing quite well. We are quite happy to live with the company, but we follow our policy that if we can, let's say, recover the money we have invested in the company. We do it in very first moment we do, we can and let's see what with the company. That's why we have sold this 4 million shares, which means that we have reduced our stake there less than 1 point and we have obtained a profit of EUR 9 million because of the investment. So our policy remains as it was, and fiber is a special case that we should be analyzed in a different way. But the commercial policy, I mean, the good news about the actual situation and pricing policies that before we have launched this new policy. Prices has been acting this quarter by roughly 12%, 13%, so that's a good news. I mean we are now really given television the value then it should happen in the past. It's very important for us that our competitor test understood that the only way to really manage the after situation is increasing prices. So that's good news. The actual new policy, we do think that we could increase prices even more than that, and that's why we are doing that. We do think our product is more valuable. It's worth more than we are getting from the other -- from the advertisers, and that's what we do think it will work. It's difficult to now to foresee the visits, which would be the effect. But what we do expect is that we need to welcome the view in time, the decreasing viewing time and also we do need to move any from the digital world to television world. That's why we do want to compare with the same drivers, CPM and we do think that the main result will be that summary that is allocated in the detailed video will come to our role to the television world.

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

Just a follow-up on the market. So you said that the market was down by 6% to 7% more or less you expect to be in Q1, but expected to be 2% to 3% in the full year. So you are guiding for almost flattish market April onwards I guess, based on your commercial position and also, you were back to 7% in construction fall in here. So you roughly speaking, what you are targeting with these new commercial policies to raise prices by high single digit? Is this correct? And then second question is with regard to your net debt. So you are almost going into net cash. I don't know if you are thinking of extra dividends or acquisitions growing any of your businesses growing inorganically as well in this year or nothing new on this front?

I mean your first question, yes, it is -- I mean, we do expect increased prices in the high single digit. We are already doing that because, I mean, in this two first months and what have been marked is that we will exit by more than 10%. So we are in the right path, and we are getting that. So it doesn't look it will be very difficult to get that. And I still think that with the new commercial policy, we'll be needing any share of our [indiscernible] and to get into really get that [indiscernible]. About the evolution of the market, 2022, I mean, in the first month where we were with the certain effects of the Ukrainian war in the department. So at this point it's very difficult to compare now year against the year because of the different situations that we have lived in the past. What we do see is that, in 2022, January and February were 2 good months because, I mean, the overall growth of this month is something like 4% to 5%. And in this year, we have had a worse performance because, I mean, the decrease is something like 7% to 8%. But now, I mean, we are just in the beginning of the March, and we have now -- we do see how is evolution of the market, and we do expect March to be much better, but it will be a negative 5% something that 3% to 4%, and at the same time, March is a bigger market. So on the overall, the performance for the first quarter, we expect to be in the range of 6% negative. That's what we see. And we used to expect that for the rest of the year, but in the case of any growth, you should consider [indiscernible]. It's not also, as you know, if we take, I mean, it's like you have a week less in the month, more or less the effect of histories a week. But from April 1, we do expect that the market give recoveries maybe and get that and by the end of the year, we'll expect the market to be negative in the range of 2%, 3%. That's what we do think. I mean, when we build the budget in the part of October and November, we need a top down and also from the bottom to the top, we talked with the media finance, we talked with the media advertisers. So because of this conversation, we do -- that's what we felt at that moment that the market will perform like that. I mean, it's very early in the year to change that position. That's why we see that although the beginning of the year has been positive, we do expect that it will recover. So that by the end of the year, it will be slightly negative. About the cash. Well, we are -- as we do but, we are rising everything and in order to see if it makes sense to make investment in whatever things that we do think that it will make the company bigger and better, mainly better and so there's not any plans now in this moment. And in terms of dividends, there's no plan also to increase the dividends in this [indiscernible]. Let's see what's going on and perhaps really, the cash situation changes that much of it is expected to be, perhaps there could be a open amount. But at this very moment, there is no any strategy or any idea, neither to buy companies or invest more to increase the policy.

There are no further questions at this time. I will now hand back to David Gómez Baquero.

Okay. Thank you. We are here on the call. Thank you very much for your attendance. And if you have any other questions, please just refer to Investor Relations department if you have any queries. Thank you very much. Bye.