Spanish Broadcasting System, Inc. (SBSAA) Q3 FY2025 Earnings Call Transcript & Summary

Good day, and welcome to the Spanish Broadcasting's Third 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. 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 intended 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 over to Mr. Raul Alarcon.

Thank you, Mike. Good morning, ladies and gentlemen, and thank you for joining me for SBS' Third Quarter 2025 Earnings Call. Since our last call, we continue to make notable progress in implementing a range of initiatives aimed at strengthening and diversifying our revenue sources and evolving our national platform at scale while simultaneously reducing our operating costs. This has been a multiyear concerted plan that is delivering tangible results and positioning our organization for success over the longer term. Despite a very challenging environment across our industry, which has impacted revenues this year, we believe the strategic steps we are taking are, in fact, bearing fruit while putting us in a stronger position to deliver returns as the overall market environment improves. Looking at our momentum this year, our progress is reflected in our sequential quarterly improvements from Q1 2025 in net revenue, which was up 5%, station operating income up 35% and adjusted OIBDA up 61%. Underlining our plan and our outlook through our multi-platform ecosystem, we provide our advertisers with exceptional reach into the $4 trillion U.S. Hispanic market, the fifth largest economy in the world. Our audience loyalty has been consistently strong this year, once again representing among the largest aggregated Hispanic audiences in the nation, providing advertisers and brand partners with an exceptional multi-platform ecosystem to promote their brands. And this massive audience reach has only grown in the past year through our expansion efforts and organic growth, which is driven by our industry-leading talent and highly relevant and popular content. At the core of our success, our stations continue to deliver exceptional audience shares in the nation's largest markets. Nielsen's latest audience metrics confirm our leadership position in Latino media, including the #1 Hispanic radio station in the world, WSKQ-FM in New York City, the national leadership position in total Hispanic listeners with the largest average quarter hour audience 12 years of age and older, 4 of the top 6 over-the-air Hispanic stations in the country and the top 3 Hispanic streaming stations in the nation, a strong validation of the company's multi-platform strategy as evidenced by the continued growth of our newest outlet, KROI in Houston, the most successful start-up ever in Spanish radio. Early results from the LaMusica aggregator platform, YouTube and live stream ad integrations underscore the strength and scalability of our digital transformation. Monthly active uniques have grown 13.4% year-over-year, and we are upgrading our proprietary content manager system to support additional station streams and expanded content offerings from third-party programming partners. Sequential audience growth registered 14% in Q3 across both audio and live video. Fast channel integrations continue to broaden LaMusica's reach, including a 43% sequential increase in new Q3 users through the company's Roku partnership, which was launched last summer. And digital revenue was up 17% over Q2 and 29% over Q3 2024. We now feature nearly 70 daily hours of live video content consisting of our popular entertainment shows and iconic personalities, all accessible via multiple streaming platforms and at minimal incremental cost. On top of these initiatives, we have also delivered strong results in our Live Events division this year, drawing a total of 70,000 fans and generating more than $10 million in ticket and sponsorship revenues across a series of SBS branded concerts. As we execute on our growth plan and build on these revenue-generating initiatives, we've also continued to diligently reduce our operating expenses as reflected in the 12% decrease during the third quarter and 11% decrease year-to-date. We are likewise predicting a similar reduction of approximately $10 million in operating costs in 2026 as we continue to properly adjust to industry and market factors. These operating efficiency efforts have been bolstered by our focus on strategically investing in our digital transition as we are now operating a larger and more powerful portfolio of brands across a more efficient and increasingly digital infrastructure. We believe this strategy and our revenue expansion and platform diversification plan, combined with our continued emphasis on cost reduction, will strengthen our ability to deliver revenue growth as well as enhanced cash flows as the market improves. And lastly, in support of the comprehensive deleveraging plan previously delineated, we remain committed to divesting our remaining television assets as well as ancillary real estate in the very near future. And with that, I'd like to thank all of you for joining us this morning. Your continued support is very much 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.

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