Welcome to the Entravision Third Quarter 2016 Conference Call. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Walter Ulloa, CEO. Please go ahead, sir..

Thank you, Dan. Good afternoon everyone and welcome to Entravision's third quarter 2016 earnings conference call. Joining me today on the call is Chris Young, our Executive Vice President and Chief Financial Officer.

Before we begin, I must inform you that this conference call will contain forward-looking statements that are subjected to risks and uncertainties that could cause actual results to differ. Please refer to our SEC filings for a list of risks and uncertainties that could impact actual results.

This call is the property of Entravision Communications Corporation, any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Entravision Communications Corporation is strictly prohibited. Also, this call will include non-GAAP financial measures.

The Company has provided a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures in today's press release. The press release is available on the Company's website and was filed with the SEC on Form 8-K.

During the third quarter, we further expanded our total audience shares by continuing to execute our multi-platform strategy. Our results were impacted by a number of factors including tough comparisons at our audio business, as well as $5.5 million in non-advertising revenues in last year's comparable period.

Despite these comparisons, our core radio and TV stations remain well positioned and we're growing our collective digital audience, given the strength of our offerings and our mobile centric focus. Looking now at our financial results, revenues decreased 6% to $65.3 million.

The decline was due primarily to the non-advertising revenue that we generated in our television business during the third quarter of last year. Excluding the impact of those non-advertising revenues, our total revenues were down 1% compared to the third quarter of last year.

Consolidated adjusted EBITDA was $17.8 million in the third quarter, while free cash flow which we defined in our press release, was $11.9 million in the quarter.

Turning to our television segment operating results; television revenues were down 7% during the third quarter, again, mostly due to the impact of non-returning, non-advertising revenues in the prior year period. National advertising revenue was up 19%, while local advertising revenue was down 2%.

Retransmission revenues increased 4% during the third quarter. Excluding retransmission revenue, one-time only non-advertising revenue and including political revenue; television advertising revenues increased 7% compared to the third quarter of last year.

Total TV political revenue for the quarter was $1.8 million compared to $231,000 in the prior year and $4.4 million in the prior presidential election cycle, in the third quarter of 2012.

Year-to-date, through the end of the third quarter, our television division has booked $3.2 million in political revenue compared to $320,000 in the prior year and $6.3 million in 2012. Undoubtedly [indiscernible] election cycle and its candidates have had a negative impact on our political performance compared to our original expectations.

Excluding the impact of non-advertising revenue, retransmission revenues and political revenues, core television advertising revenues were up 2% with core national advertising revenue up 8% and core local TV revenue down 2%.

The automotive category continued to be a source of strength for the television division, despite difficult comps from third quarter 2015 cope with the auto in the prior year. Total automotive was up 10% over third quarter 2015, an increase of $1.3 million.

This growth was driven by significant increases in ad spending by Fiat, Honda, Toyota, General Motors and Nissan which are all up double-digits over the same quarter last year. We, once again, experienced growth across all three major auto dealers, with Tier 1 auto revenue up 42%, Tier 2 revenue up 9% and Tier 3 auto revenue up 4%.

Other key advertising categories positively impacting revenue included finance up 37%, media up 47% and healthcare up 10%. During the quarter, we added 51 new advertisers who spend more than $10,000 which total approximately $1.9 million in advertising revenue.

Notable new brands in the third quarter included; The National Republican Senatorial Committee, American Chemistry Council, Priorities U.S.A and the Dannon Company. Turning to our ratings performance, our Univision television affiliates built upon their market leadership in the July 2016 suite.

For adults 18 to 49, in our early local news, our Univision television stations finished ahead of their Telemundo competitors in 15 of 17 markets where we have head-to-head competition with the Telemundo affiliate.

In late local news, we finished ahead of Telemundo competitors among adults 18 to 49 in 12 markets plus one tie among the 17 markets where we have head-to-head competition.

During the full week, our Univision and UniMas television stations combined have a cumulative audience of 3 million Hispanics in our markets compared to Telemundo's 1.9 million Hispanics. We have 51% more viewers in Telemundo in our Univision and UniMas television footprint.

During weekday prime time, Entravision's Univision and UniMas stations have a combined 51% share of all Spanish television viewing up from 50% for the same survey in 2015.

Also during weekday primetime, compared to all stations in total adults 18 to 49, our Univision stations had higher ratings than one of the big four networks in 11 markets and we had higher ratings on all four English language network competitors in six markets.

Just to point out, I would also like to give special recognition to our local Denver news team at KCEC-TV for winning six Emmy Awards for its Noticias Colorado programing for the National Academy of Television Arts and Sciences at the 2016 Heartland Chapter Emmy Awards.

KCEC-TV was the only Spanish language television station to win an Emmy for the chapter of this year. It is high quality programing like this that helps KCEC to be the number one Spanish language newscasts and the number two newscasts regardless of language in the Denver market among adults 18 to 49.

Turning to our audio division; during the third quarter, audio revenues declined 8% compared to last years as we cycle up against challenging comparisons as third quarter of last year when revenue grew 15%. Local revenues were down 12% while national revenue declined 2% in the quarter.

Taking a deeper look at our national audio revenues; national spot was down 16% while our national network business increased 34% to the third quarter of last year. We continue to see solid performance at our Entravision national audio network.

Network revenues were up 34% in the third quarter driven by notable brands including; Home Depot, O'Reilly Auto Parts, Uber, J. C. Penney, Macy's, DirecTV and Dodge Ram trucks.

Our audio network continues to benefit from our commitment to delivering the best content in Spanish language radio today between Erazno y la Chokolata, Alex El Genio Lucas and Eduardo Piolin Sotelo, content lineup we believe is unmatched in the industry we deliver not only through our owned and operated stations, but also with radio stations across the nation through our syndication platform.

It is important to note that all of these shows have a strong and growing online and social media presence, consistent with our multi-media platform strategy.

Our audio network sale success in 2016 continues to be a result of our ability to work with agencies and clients to create customized, syndicated partnerships where our radio personalities have become brand ambassadors for key advertisers. Last year, we only had two major national brand endorsement campaigns for the entire year.

Year-to-date this year, we're pleased to have over a dozen major national brand endorsement campaigns. These unique campaigns are audio focused through radio, mobile streaming, live events and on-site promotional extensions.

Total audio political revenue for the quarter was $268,000 compared to $80,000 in the prior year and $540,000 in the prior presidential cycle; in the third quarter of 2012. Year-to-date through the end of the third quarter, our audio division has booked $758,000 in political revenue compared to $253,000 in the prior year and $955,000 in 2012.

Top performing categories for our audio division in the quarter were; automotive which increased 3%, retail increased 7% and healthcare grew 8%.

Two categories that negatively impacted our audio revenue in the quarter were telecom which was down 40% in the quarter due to all four of the top national telecom operators significantly pulling back their ad spend with us in the quarter and alcohol beverages which was down by approximately 49% due to the absence of one large campaign that did not return this year.

El Show de Erazno y la Chokolata and Entravision's KYY in Los Angeles, the leading Latino market in United States is the number one afternoon drive-show regardless of language among men 18 to 49, 25 to 49 and 25 to 54 in the summer 2016 Nielsen Audio survey.

Additionally, with the station's additional signal coverage, KYY is the leading station regardless of language in Riverside-San Bernardino, the number 10 Hispanic metro measured by Nielsen in persons and men 18 to 49, 25 to 49 and 25 to 54 in Morning Drive with El Show El Genio Lucas and Afternoon Drive with El Show de Erazno y la Chokolata, as well as the full week as it has been for 15 consecutive quarters dating back to the winter of 2013.

Nationwide, on all stations regardless of language in the adult 18 to 49 demographic El de Erazno y la Chokolata is in the top 10 in six of the nine markets released for summer 2016 and El Genio Lucas in the top 10 in four of the eight markets where the show airs.

Across the 10 markets released by Nielsen Audio for summer 2016, six of Entravision's radio stations are among the top 10 stations regardless of language among adults 18 to 49. Now let's move over to our digital business.

We continue to generate strong growth in digital revenues which increased 15% during the third quarter and were up 31% through the first nine months of the year. Our digital revenues accounted for approximately 10% of our total advertising revenues in the third quarter.

Our consistent digital performance is driven by what we believe is a truly unique platform that combines strong online and mobile audience shares and data with engaging premium content and our Pulpo network reach. Programmatic continues to be a key area of growth.

This growth is based on our ability to incorporate our Latino consumer data in combination with premium inventory direct private deals and high viewability metrics. Our roster of digital advertising partners continues to grow.

During the third quarter, our digital teams worked with major brands including Audi, Bimbo Bakeries, Sprint, Microsoft, L'Oreal and the Food and Drug Administration, among others.

We, once again, generated solid broad-based growth across key advertising categories including; telecom up 62%, auto up 26% and travel and leisure up 65% over the same quarter of last year. One key reason for this strong advertising sales performance is our digital reach. Today, we delivered the largest U.S. Latino reach to advertisers.

Our industry-leading audience share is driven in part by the Pulpo audience platform which targets Latino's across all devices and platforms, while leveraging big data programmatic targeting and yield optimization tools.

We build on this tremendous value proposition with our engaging mobile-centric digital content and offerings coupled with expanding social media presence. We continue to track our digital audiences connecting primarily with our content through mobile devices. Mobile remains an essential component of our digital strategy and platform offerings. U.S.

Latinos, particularly Latino millennials, continue to over-index in both mobile usage and mobile content consumption. Not surprising, mobile is our fastest growing revenue stream and has reached 29% of our total digital revenues. comScore continues to rank Pulpo as the Number one digital platform for reaching Latinos in the United States.

Latest comScore numbers point out that our mobile audience shares continue to grow, especially among bilingual millennial. comScore data shows we connect with 12.2 million unique Spanish dominant Latinos and 27 million unique bicultural Latinos through mobile via our Pulpo network.

It is important to note that our digital audiences cross all acculturation levels, all key demographics including Spanish dominant, bicultural and English dominant Latinos. We reach all corners of the total Latino market nation-wide with our digital and traditional media assets.

Turning to our station websites which has delivered a record-setting 4.1 million unique visitors in August, we continue to focus on providing a robust digital content offering for our audiences. During the third quarter, we published over 10,000 local new stories which produced over 25 million page views across our station's website.

We also created over 4,500 videos that generated over 20 million plays across Entravision's platforms which included our websites and social media sites. We also streamed over 6 million hours of audio entertainment during the third quarter to an average of over 730,000 monthly unique listeners.

We continue to expand our followers and presences on major social media channels. Our cumulative social media engagement level surpassed 8 million followers across key networks, including Facebook, YouTube, Twitter and Instagram.

Overall, mobile remains a key area of focus for our digital team as we look to further strengthen our offerings and capabilities. This includes developing the apps and mobile first websites for our industry leading personalities such as Erazno y la Chokolata, Alex El Genio Lucas, El Show De Piolin.

We announced and demonstrated our integrated and branded digital video capabilities, virtual reality and augmented reality at our September 29 Entravision Audio Network Upfront in New York. This included the launch of El Garaje De Erazno, an animated webisode series around one of the main personalities of the Erazno y la Chokolata Show.

These webisodes debuted on October 24 exclusively on the Erazno y la Chokolata mobile app and will also be available on the show's website and our television station's websites later this month. We believe the Erazno webisodes create tremendous branding opportunities for advertisers. We're very pleased with the evolution of our digital businesses.

We will continue to invest and expand our capabilities. We're increasingly focused on mobile first digital content, the best advertising and marketing technology, the best data assets to target and deliver increased content value from our Latino audiences and increased return on the advertising investments for our national and local clients.

Turning now to our pacings for the fourth quarter; television revenues are currently pacing up in low to mid-teens due to higher political revenues. Excluding political, television revenues are pacing down low-single digits.

Our audio advertising revenue is currently pacing up in the high-single-digits in the fourth quarter, due primarily to the impact of political revenues. Excluding political, audio revenues are pacing up low-single digits. Digital revenues are currently pacing up in the mid-single-digits, as we begin cycling against tough comparisons for that business.

In summary, we continue to execute our multi-platform strategy and grow our total audience shares. While our audio business is cycling against tough comparisons, we remain well positioned, given our leading content line-up as well as our strong position in key Latino markets across United States.

We also continue to expand our audience shares across all television and digital businesses. Finally, I like to comment on political. Overall, like others in the industry, our political revenues in the third quarter were significantly less than we had organically anticipated.

In short, we're disappointed with how political investment evolved for Entravision and Latino electorate during this election cycle. Year-to-date through the third quarter, our total political revenue across all platforms of $4 million is down 46% from the $7.4 million in political revenue generated thus far in the 2012 presidential cycle.

With less than one week left to go before Election Day, we currently expect total 2016 political revenue to be approximately $10.2 million compared to $16.7 million generated in the 2012 election cycle.

While both parties know the value of the Latino electorate; in our opinion, neither campaign candidate nor party initiative has been able to develop or implement a complete strategy to tap the Latino voter. This cycle does not reflect the critical importance of this voting segment and what could be done to better engage the Latino voters.

The Latino vote will continue to have a profound effect on the outcome of our presidential elections now and in the future. At this time, I'll turn the call over to Chris Young, our Chief Financial Officer for a review of our financial information..

Thank you, Walter and good afternoon everyone. As Walter has discussed, net revenue for the quarter was down 6% at $65.3 million compared to $69.3 million in the same quarter last year. Operating expenses increased 4% to $40.2 million and consolidated adjusted EBITDA was $17.8 million.

During the third quarter of 2016, the Company paid a cash dividend of $0.03125 per share to shareholders of the Company's Class A, Class B and Class U common stock. The total amount of the cash disbursed with the dividend was $2.8 million.

The Company also announced today that the Board of Directors has declared a quarterly cash dividend of $0.03125 per share to shareholders of the Company's common stock, payable on December 30, 2016. The total amount of cash to be dispersed for this quarterly dividend will be approximately $2.8 million.

As previously announced, we currently anticipate making cash dividends on a quarterly basis in future periods. For the quarter, TV net revenue was down 7% to $40.4 million compared to $43.4 million in the same quarter of last year.

The decrease in our TV segment was primarily attributable to approximately $5.5 million of revenue associated with television station channel modifications made by the Company in order to accommodate operations of a telecommunications operator, included in the 2015 period which revenue did not recur in 2016; and a decrease in local advertising revenue.

This decrease was partially offset by an increase in national advertising revenue; an increase in political advertising revenue which was not material in 2015; and an increase in retransmission consent revenue. Retransmission consent revenues for the quarter was $7.4 million compared to $7.1 million in the same quarter of last year.

Excluding the third quarter 2015 revenue associated with the channel modification and political revenue, TV net revenue increased 2% compared to the same quarter of last year. Audio revenue for the quarter was down 8% to $19.2 million compared to $20.9 million in the same quarter of last year.

Political revenue for the quarter was $0.3 million compared to $0.1 million in the same quarter of last year. The decrease in our audio segment was primarily attributable to a decrease in local advertising revenue partially offset by an increase in political advertising revenue which was not material in 2015.

Digital net revenue for the quarter was up 15% to $5.7 million compared to $5 million in the same quarter of last year. The increase in our digital segment was primarily attributable to increases in national and local advertising revenue. Operating expenses for the quarter were $40.2 million, up 4%.

TV operating expenses excluding non-cash compensation expense were up 3% at $21.0 million. Audio operating expenses excluding non-cash comp were up 4% at $16.5 million. Digital operating expenses excluding non-cash comp were up 10% to $2.6 million.

Corporate expenses for the quarter were up 3% to $5.7 million compared to $5.5 million in the same quarter of last year. Excluding non-cash comp expense, corporate expenses for the quarter were $5.1 million versus $4.9 million in the same quarter of last year, an increase of 3%.

Excluding non-cash compensation expense, the increase in corporate expenses was primarily attributable to an increase in salary expense. Income tax expense was $4.0 million for the quarter, while cash taxes paid was $0.1 million.

Given the elimination of our full valuation allowance in the fourth quarter of 2013, future income tax expense will run at approximately 40% of pre-tax income, although most of this expense will continue to be non-cash given our NOL offsets.

Earnings per share for the quarter was $0.06 per share compared to $0.11 per share in the same quarter of last year. Free cash flow, as defined in our earnings release, decreased 33% to $11.9 million for the quarter compared to $17.8 million for the same quarter of last year.

Cash interest expense for the quarter was $3.6 million compared to $3.1 million in the same quarter of last year due to interest related to our swap agreements. Cash capital expenditures for the quarter were $2.2 million. Capital expenditures for 2016 are expected to be approximately $10.5 million.

Turning to our balance sheet, as of September 30, 2016, our total debt was $313.7 million and our trailing 12-month consolidated adjusted EBITDA was $67.4 million. Cash on the books were $70.3 million as of September 30, 2016.

Net of $20 million of unrestricted cash in the books, our total leverage as defined in our 2013 credit agreement was 4.4 times as of September 30. This concludes our formal remarks. Walter and I will now be happy to take your questions. Dan, we'll send it back over to you..

[Operator Instructions]. Our first question comes from Michael Kupinski of Noble Financial. Please go ahead..

I just have a quick couple here. Regarding the retransmission revenue, I know that that number is growing nicely for you guys, but a number of broadcasters are now indicating that they have $2 per subscriber is in sight and then in the next few years they even have $3 per subscriber in sight.

And I was just wondering, in terms of your negotiations with Univision, where does the Company stand on the prospect of maybe getting more retransmission revenue from the negotiations with the Univision..

Well, I guess the one thing that we'll comment to that question is that we continue to negotiate with Univision our proxy agreement with respect to retransmission revenue. So obviously the tension points are everyone wants more money out of this process, so we're working hard to achieve that.

But we really can't comment at this time on what the outlook is for retrans..

Okay.

And right now what does auto account for total television advertising?.

Auto for the quarter was 32% of our total television advertising revenue..

And in light of how important the category is, how is it pacing in the fourth quarter?.

The pace for auto is actually doing -- it continues to do well. It's pacing in the mid-single digits to the positive in fourth quarter.

Auto is one category that we realize and we see it slowing down for the English language folks and albeit for us as well, it's starting to slow down a little bit at this stage in the year compared to the beginning of the year.

But what you have to keep in mind, our place in the automotive segment, our number one product that we advertised for is by far the pickup truck. And if you look at sales as far as autos are concerned, truck sales were up 9% whereas cars are down 9%.

And if you factor in the point that who's buying new autos, Latinos are purchasing -- the number of Latinos purchasing new cars is up 4% whereas non-Latinos purchasing new cars is actually down 2% to 3%.

So from our perspective, it makes sense that this category will continue to be one of strength going into next year, even though you're seeing probably the opposite happened with our English language competitors..

And just to add to what Chris said, Michael, most of our Entravision media assets are located in high-growth and emerging markets and these are crucial to the automotive companies seeking to tap into new audiences to increase their share of auto spend.

So that's certainly -- that point plus an improving economy, low gas prices, low interest rates, a number of new model launches, we think will continue to drive growth for us in the fourth quarter and into 2017 in the auto category..

And I realize that the television expenses were up a little bit. There is some variable expenses and they're related to compensation and so forth.

You guys spending a little bit in terms of adding news and so forth to take advantage of political season, is that why the trend line looks a little bit higher in television?.

Yes, that's right Michael.

I mean, we've mentioned on the last quarter call that we had been gearing up for big political year and part of that was gearing up with our new staff and the year didn't turn out, at least, so far the way we had originally planned it and that's one of the reasons why the expenses on TV were probably 1 point or 1.5 point higher than what you would normally see..

Yes and the final question. You have a sizable cash position.

Can you talk about your plans for you use of cash at this point?.

Well, we're sitting on, call it, a ton of cash flow and cash on the books and you know what, at the end of the year, the Board will sit down and make a decision with respect to potential debt repayment. And then, there continues to be here internally, some M&A work that we're working on, but we're not ready to discuss at this time..

[Operator Instructions]. And ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks..

Thank you Dan and thank you everyone for participating on our call. We look to speaking to our investors in the first quarter of 2017, when we will release our fourth quarter of 2016 results as well as full year. Thank you..

And ladies and gentlemen, the conference is now concluded. Thank you for attending today's presentation. You may now disconnect..