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

Hello. Hi, good afternoon, everyone. Thank you. Thank you very much for attending this conference call in which we are presenting the first half of the year 2024. The call will be hosted by Fernando Costi, CFO of Atresmedia; and by myself, David Gomez, Deputy Financial Director and Head of Investor Relations. As usual, we will be summarizing the main highlights of the period and then we will move on, on the Q&A session. So without further delay, we start with the highlights. So please, Fernando, the floor is yours.

Thanks, David. Let me start by saying that the first half of 2024 has been remarkable for Atresmedia. All the markets in which Atresmedia operates presented positive figures. TV advertising market, including both conventional and digital revenues increased by around 5% to 6%, with a similar trend in radio. Atresmedia audience shares have been very positive. In TV, Atresmedia led the semester 5 in a row, with a total audience of 27.1%, 1.6 points more than Mediaset Espana, despite the fact that Atresmedia operates 1 channel less. Also leading the prime time slot in total individuals are 26.6% versus 24.9% of Mediaset Espana. Antena 3 was the most viewed channel in Spain in first half 2024, with an audience rate of 13.0% in total individuals. It also led the prime time with a rating of 13.5%. For its part, La Sexta obtained 6.4% share in total individuals and 7.4% in commercial target. In both cases, well ahead from its main competitor, Cuatro. The accumulated audience of our 4 complementary channels stood at 7.7%. In digital, Atresmedia consolidated its leadership among the national and regional players in terms of unique users, with an average of 26.1 million in the first half of 2024, ranking 6th in the top 10 most visited sites. On our video on-demand platform, Atresplayer, 22 million video hours were consumed by the end of June, 23% more than the same period last year. Additionally, our SVOD offer Atresplayer Premium reached near 625,000 subscribers by the end of the semester. Total revenue reached EUR 523 million, which is 10.6% increase year-on-year. Regarding audiovisual, total net revenues stood at EUR 487.1 million, plus 10.9% up compared with the first half of 2023. Atresmedia's net advertising revenue in audiovisual content, TV mass digital -- plus digital, sorry, was EUR 412.6 million, which represent an increase of 9.5%, a sound growth year-on-year due to our strong audiences, our commercial policy, and our market positioning in AVOD, connected TV and other digital activities. The content production and distribution division reached EUR 49 million, plus 17.4% based on higher box office takings and robust increase in SVOD subscribers and a sound increase in sale of contents to third-parties. In others division, revenues grew by 22.7%, up to EUR 26 million, reflecting a dynamic level of activity, especially in events and thanks to the incorporation of new activities to the perimeter, such as the Waynabox. About our radio activities, total net advertising revenue was EUR 41 million, increasing 6.5% better than the trend of the total radio market that we estimate at 5% increase for the first half of the year. Total OpEx stood at EUR 421 million, which represents an increase at 9.6%. EBITDA reached EUR 102 million, which represents 15.3% higher than first half 2023, which implies a 19.5% EBITDA margin. Net profit reached EUR 69 million, which is 15.5% compared to the first half 2023. Our net cash position was positive at EUR 64 million by the end of June after the distribution of EUR 54 million as complementary dividend on 2023. Regarding our view for the coming months, these numbers that I have just presented, clearly set a positive outlook for the whole of 2024. As mentioned, the first half of the year has clearly been much more positive than initially expected. Even though geopolitical uncertainties are still a reality, the macroeconomic environment has remained risk-resilient with GDP and private consumption indicators revised upwards. As a result, the advertising market showed one of the strongest performances in last year. First quarter of 2024 was especially impressive with high-single-digit growth rates in most of the businesses. The growth pace was lower in the second quarter but still sounded positive. In terms of advertising trends for the full year, we expect mid-single-digit growth in TV and radio, measured in both cases as the sum of conventional and digital advertising. Prices and volumes are bought up in year-on-year basis. In that context, Atresmedia robust position as market leader will lead to another year of outperforming our peers and resulting in an increase in the advertising revenue. This best-in-class audience rankings and an innovative marketing policy is clearly paying off since. As per the figures released today, our top line in advertising grows much faster than the market. In addition to that, our non-related to advertising activities, content production and distribution and others are also performing well, contributing to an increase of the total revenue by more than 10% in this first half. Based on this, Atresmedia reiterates its objective to exceed the 1 billion revenue threshold by the end of the year and maintaining operating margins similar to recent years. The company is committed to cost control as well as maintaining and reinforcing the quality and attractiveness of the content offering in the new activities such as AVOD/SVOD and the third-party distribution business. Following our diversification strategy, we are focused on increasing income and total consumption rates of our content, whichever the distribution platform. In conclusion, we keep a positive stance on the coming months and feel confident to achieve the objectives for 2024. From a financial point of view, our net cash position continues to improve and the new forecasts are EUR 60 million to EUR 80 million by the end of the year. Our dividend policy remains the same with a payout of 80% and 2 dividend cash. Final dividend on 2023 paid in June and an interim dividend on 2024 to be informed and approved by the end of the year. We finish here with the highlights of the period and we are now glad to answer any questions you may have. Thanks.

Many thanks. We move on to the Q&A session, please. If you have any questions, just go ahead.

[Operator Instructions] And our first question comes from the line of Fernando Cordero from Banco Santander.

Two questions. The first question is related with the working capital performance during the first half. And I'm just willing to understand if there has been any peculiarity or if it is just driven by the fact that during the month of June we see which are not so intense at market, the positive contribution of the working capital is coming from this market trend and -- sorry, to be a market trend. And the second question is regarding precisely on what is your views on the beginning of the third quarter of the year. We have seen a material, let's say, different performance between the second quarter and the first quarter of this year. And just willing to understand also what are your views on the beginning of this third quarter is to that seasonality is impacting. But just to understand if the third quarter is somewhat similar to the second.

Okay, Fernando, thank you very much. Let me answer the question regarding working capital for the semester. There is nothing special in this first half. Basically the market was strong, as you know, in the first half, in terms of revenues. So we had a good performance in terms of catching all the sales. There's always some better performance. In the case of the inventories, we were consuming more than we're producing and there was some just by -- business as usual, some payments that were finally were moved to the month of July. But in general terms, these are the main drivers of the reason why the working capital was so good in the semester. But nothing special, apart of the business operation as usual, okay? And regarding the second question, first views on this start of the third quarter, basically just July, because we don't have any visibility in August so far. July is performing well in the case of the radio, with an increase of something like mid-single-digit growth. And not so good in the case of the television plus digital because it's just moving to a slightly negative. But in general terms, which corresponds to or I would say refers to our top line in terms of revenues regarding -- or coming from advertising, both the effect of radio and Television and digital, everything which is advertising will be practically flattish. Okay?

Okay. Very clear. Just as a follow-up, more than a follow-up, an additional question. We have seen in recent weeks some comments or some news reports about potential new channel to be awarded, a new DTT channel to be awarded in the Spanish market. Just to understand whether the company just has received the same insights and what are your views regarding the potential and newcomers on the market?

Yes. As you know, these are only rumors so far. And we are attending the potential rules for the new channel. And in any case, we don't think that there is a problem. There are more than 25 channels today and we are used to compete. We don't think there is a problem of lack of competition. And in the moment the government decide to launch this new channel, we will analyze the terms and we will decide if presenting our offer. It's not an important issue for us so far.

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

Our next question comes from the line of Alvaro Bernal from Alantra Equities.

Just to follow-up on the last question regarding the channel and more pointing towards increased competition from Mediaset and public channels and the announced new programs or during prime time, just how do you see the competitive landscape in H2? Do you expect more margin deterioration as we have seen this quarter?

Well, we don't think so. I mean, we feel confident with our programming grid. It has been proven to be competitive enough to lead every day of the week at any slot, has been the case for the last quarters and seasons. So we are not concerned on that point. I mean, we will be, obviously, a leader of the market. We will be competing for any inch, for any percentage point of audience at any level. So we have the financial strength to do that. We have the sole position that gives us the current audience ratings. So we don't feel concerned or threatened. I mean, at that point we don't feel any -- we don't expect any erosion in the current position we have as a leader, both in audience and in market share.

And a follow-up as well just to clarify. You mentioned in July the TV ad market is falling -- is slightly negative, correct?

Well, we measure both because that we are just measuring not just television from our side or digital from the other, because we are selling both together as a hybrid offer. TV plus digital is moving towards flat to slightly negative year-on-year in the month of July, okay.

[Operator Instructions] And the next question comes from the line of Jose Antonio Suarez Roig from CaixaBank.

I have 2 of them, if I may. First of all, I would like to know if you could provide a little bit more visibility. We know you're trying to diversify in the media program. You have a relevant stake in FEVER that could be valid at a relevant valuation. If you could provide more visibility on what are you expecting to do with this stake, if we can see some movement this year. This will be the first question. And the second question would be related also in terms of capital allocation. If we could see some share buyback in the year with the strong cash position you're generating? Or how should we expect these proceeds here, you're getting this strong position, how should we see the capital employed go forward?

From media for equity and specifically FEVER, all news are positive and the company is performing outstandingly and according with the stage of growth and above its business plan. And we expect -- we don't expect any transaction or any specific deal, but we are very happy with FEVER, so -- from FEVER and we continue supervising this investment in a positive way.

Okay. And regarding the second question, capital allocation, well, as has been the case now, I mean, we are not -- the cash position we have is very positive, but we want to consider that along the year. And as Fernando has mentioned before, we had to approve an interim dividend by the end of the year. So part of the cash will be dedicated to that. And there is no -- any other consideration regarding this capital allocation. You refer to share buybacks, but it's not under consideration or has not been at the moment and we don't expect any change in that, okay.

[Operator Instructions] There are no further questions at this time. I will now hand back to David Gomez Baquero. Your line is open. Thank you.

Okay. Thank you very much. There are no more questions, but if you have any, just please contact the Investor Relations department. We finish here the conference call and wish you all a very happy holiday break. Thank you very much. Bye-bye.

Thank you.