Spanish Broadcasting System, Inc. (SBSAA) Earnings Call Transcript & Summary

Good day, and welcome to the Spanish Broadcasting's First Quarter 2025 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Mike Smargiassi with Investor Relations. Please go ahead, sir.

Thank you, and good day, everyone. Before we begin, please recognize that certain statements on this conference call are not historical fact. They may be deemed, therefore, to be forward-looking statements under the Private Securities Litigation Reform Act of 1995. In particular, statements about future results expected to be obtained from the company's current strategic initiatives are forward-looking statements. Many important factors may cause the company's actual results to differ materially from those discussed in any such forward-looking statements. Spanish Broadcasting System undertakes no obligation to publicly update, or revise, its forward-looking statements. Please also note that we will be discussing non-GAAP financial measures. The company believes that operating income before depreciation and amortization, loss on the disposal of assets, impairment charges and other operating expenses, excluding noncash stock-based compensation, or adjusted OIBDA, is useful in evaluating its performance, because it reflects the measure of performance for the company's stations, before considering costs and expenses related to capital structure and dispositions. This information is not attended to be considered in isolation or as a substitution for operating income, net income or loss, cash flows from operating activities, or any other measure used in determining the company's operating performance, or liquidity, that is calculated in accordance with U.S. GAAP. I will now turn the conference call over to Mr. Raul Alarcon.

Thank you, Mike. Good morning, ladies and gentlemen, and thank you for joining me for the SBS First Quarter 2025 Earnings Call. During the quarter, we continued to make substantial progress in executing on our strategic plan while simultaneously significantly reducing our operating expenses. During Q1, we also successfully launched what is now the #1 Spanish station in Houston, continue to invigorate and strengthen our premier radio brands and on-air talent procurement, and implemented important growth initiatives at LaMusica, the digital music and entertainment ecosystem that houses the massive amount of audiovisual content the company produces on a daily basis. More on that in a moment. In line with our industry, our top line results were impacted by a series of destabilizing marketplace uncertainties that resulted in an advertiser pull back during the first few months of the year. We were also affected by the wildfires that decimated sectors of Los Angeles County, causing a slowdown in overall economic activity in that market and forcing the rescheduling and cancellation of two of our signature first quarter concerts. However, these unavoidable setbacks were significantly offset by our continued focus on reducing operating costs and corporate expenses, which yielded an additional $3.2 million in savings in the quarter, as compared to Q1 of 2024. We expect these savings to continue throughout 2025 at a rate of approximately $2.5 million per quarter, without affecting our core infrastructure as evidenced by our operating results. We are focused on extending our operating momentum in 2025 by continuing to invest in our leading brands and expanding their distribution. We believe these initiatives, combined with our emphasis on cost reduction, will strengthen our ability to deliver revenue growth and improved cash flows as we aggregate audience shares, and impressions, and capture a greater proportion of ad dollars. Now starting with radio, I'm happy to report that SBS is #1 in the key demos across the top Hispanic markets of New York, Miami, Los Angeles, San Francisco and our amazing start-up in Houston. SBS stations dominate the important morning drive day-part among both 18 to 34, and 25 to 54-year-old listeners. The most valued demographic for advertisers seeking brand growth and loyalty. These results reaffirm the strength of our content strategy, local talent fandom and digital amplification. In New York City, WSKQ was the #1 station among Hispanics of all ages in morning drive and is remarkably the most listened to station in any language among 25- to 54-year-old New Yorkers. Sister station WPAT follows right behind in second place with Hispanic morning listeners ages 18 to 34. New York City continues to lead the country with unmatched morning dominance and strong full week performance. In Miami, our WRMA station is # 1 among 18- to 34-year-olds all week long, and WXDJ is #1 among 25 to 54-year-olds in the market. Miami is firing on both ends of the demo spectrum and securing its leadership with stations appealing to younger as well as more adult listeners. In Los Angeles, SBS again splits the market with a strong generational reach for [ WKXOL ] in the 18 to 34 and KLAX in the 25 to 54 demos. And in the Bay Area, our KRZZ FM is #1 in all three key demos, 18 to 34, 18 to 49 and 25 to 54. Our Houston launch earlier this year was a master class in strategic execution. From the creation of the brand and its music mix, to securing the iconic Raul Brindis to host mornings while integrating our radio, digital and video platforms to better capture the market's Hispanic listeners and the results are in. After only 5 months on the air, KROI is the undisputed Hispanic leader in the market, dominating Houston's Hispanic morning listeners and the #2 station in the morning in any language. In the Houston Metro, the fourth largest in the nation, displacing established competitors that have operated in that market for decades. Most impressively, KROI has achieved profitability in only its third month of full-on operations. To give you an overall impression of the impact of a hit show and a hit radio station in a major Hispanic market, consider the following. Not only does a top ranking in a major market automatically make you a must-buy in terms of local radio budgets. But through the stations affiliation with our own AIRE Radio Network, it can now be positioned as an audience aggregator for the purpose of securing network budgets and multi-market national syndication monies. In fact, the Brindis show started its syndication run last week in a number of Texas markets, including Dallas, San Antonio, Austin and McAllen, as well as Indianapolis. In addition, through LaMusica's digital streaming, the surplus impressions generated by KROI will also improve the revenues for the company's ancillary digital businesses. In fact, KROI is very well positioned to become a leader among the nation's top 18 to 49 streaming stations, right up there with our own WSKQ flagship in New York City, the most streamed station in the nation. The same revenue enhancements hold true for the debut morning show on our WSUN-FM in Tampa, hosted by Cristy Balderrama and Nandy Davila, The Nandy & Cristy morning show previously ranked as the #1 Hispanic radio program in the greater Tampa Bay area during the last decade. Nandy & Cristy's unmatched charisma and ability to connect with their listeners has earned them the devotion of countless Hispanic fans throughout the Tampa Bay metro. They are joining SBS further confirms our company's ability to attract and promote the best talent in the industry with identical growth prospects for our network revenues, our syndication monies and our digital streaming monetization on LaMusica. We are in a historic ratings moment and the strategy behind it has been years in the making. We have spearheaded the installation of cameras and automated studio systems across key markets, powering our LaMusica streaming expansion and YouTube growth, which is now separately generating significant revenue for the company and growing. This is more than rating success. It's the result of a multi-platform content ecosystem that is increasing brand visibility and engagement across every consumer touch point. These efforts continue to position SBS as a next-generation media leader for U.S. Hispanics, a testament to the cultural precision, emotional relevance and digital adaptability of our programming. Turning to digital. Our streaming audio business is healthy with a market-leading CPM and almost 3 million unique users consuming our content on a monthly basis and registering an impressive 20% increase in Q1 revenue. Furthermore, our digital division has launched several new initiatives, which will increase sellable inventory and programmatic revenue. Some of these initiatives include aggregating content formats on LaMusica from other domestic and international radio groups, including the multimedia network from Mexico, and others, in order to offer consumers an easy way to find and consume their preferred content. Through our announced partnership with Roku, the leading connected TV streaming platform in the U.S., we will expand distribution of our LaMusica brand affording millions of Roku users in the U.S. and Mexico access to the new LaMusica TV, including a 24/7 slate of exclusive content, including the live streaming of SBS's top rank radio shows, popular hosts and iconic personalities. Ultimately, LaMusica TV will also premiere SBS's live concerts, including major events such as Calibash, MiamiBash and Mega Mezcla venue performances, as well as its unplugged artist showcases. No doubt, the launch of LaMusica TV marks an important acceleration in LaMusica's brand evolution as a significantly larger audience will now be able to enjoy our exclusive content offerings. Looking ahead, our multistation portfolio, combined with our digital LaMusica platform, our AIRE Network syndication affiliation service, and our live events business represents a unique opportunity for advertisers seeking to target the nations $3.6 trillion Hispanic market, including their most coveted younger consumers. We are committed to strategically investing in our growth while continuing to drive efficiencies across our operations to the benefit of all our stakeholders. Finally, I'd like to conclude today with a brief note on the company's monetization plans for its non-core television assets. As part of a comprehensive deleveraging plan previously delineated, the company announced that it had entered into an asset purchase agreement for the sale of its television stations in Puerto Rico. The company expects the transaction to close upon FCC approval in Q3, or Q4, of this year, and that the proceeds will be used in the refinancing of its bonds prior to net maturity in March of 2026. Additionally, the company is confident that it will sell its remaining television assets as well as its ancillary real estate in the near future. And with that, I'd like to thank all of you for joining us this morning. Your continued support is greatly appreciated by all of us at SBS. For those of you that would like to contact us directly with any further questions or comments, please e-mail us at [email protected]. Thank you all, and have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.