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Edited Transcript of HMTV earnings conference call or presentation 2-Aug-19 2:00pm GMT

Q2 2019 Hemisphere Media Group Inc Earnings Call

Coral Gables Aug 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Hemisphere Media Group Inc earnings conference call or presentation Friday, August 2, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alan J. Sokol

Hemisphere Media Group, Inc. - CEO, President & Director

* Craig D. Fischer

Hemisphere Media Group, Inc. - CFO

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Conference Call Participants

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* Curry Michael Baker

Guggenheim Securities, LLC, Research Division - Analyst

* Kutgun Maral

RBC Capital Markets, LLC, Research Division - Associate VP

* Stephen Carll

* Danielle O'Brien

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to Hemisphere Media Group, Inc.'s Second Quarter 2019 Financial Results Conference Call. My name is Sidney, and I will be your operator today. A replay of the call will be available beginning at approximately 1 p.m. Eastern Time today, Friday, August 2, 2019, by dialing (855) 859-2056 or from outside of the United States by dialing (404) 537-3406. The conference ID for the replay is 4063557. I will now turn the call over to Ms. Danielle O'Brien.

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Danielle O'Brien, [2]

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Thank you, operator, and good morning, everyone. I'd like to welcome everyone to today's conference call. I'm Danielle O'Brien, and I'm with Edelman Financial Communications, Hemisphere's outside Investor Relations firm. Joining me on the call today is Alan Sokol, Hemisphere's Chief Executive Officer; and Craig Fischer, Hemisphere's Chief Financial Officer.

Today's announcement and our comments may contain certain statements about Hemisphere that are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations of the management of Hemisphere and are subject to uncertainty and changes in circumstance, which may cause actual results to differ materially from those expressed or implied in such forward-looking statements. In addition, these statements are based on a number of assumptions that are subject to change. Please refer to our company's most recent annual report on Form 10-K and other public filings for a more complete discussion of forward-looking statements and the risk factors applicable to our company. Forward-looking statements included herein are made as of the date hereof, and Hemisphere undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances.

During today's call, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we will refer to adjusted EBITDA, which is a non-GAAP financial measure. A reconciliation of GAAP to non-GAAP information is included in our earnings press release, which was issued earlier this morning. Management believes that this non-GAAP information is important to investors' understanding of our business.

I will now turn the call over to Alan.

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [3]

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Thank you, Danielle, and good morning, everyone. We continued our strong momentum into the second quarter, delivering growth across all of our key revenue streams and defined overall U.S. subscriber trends. We are proud to offer a highly differentiated content to fast-growing target audiences with untapped distribution and advertising opportunities. Unlike general market broadcasting cable networks, which are losing viewers and subscribers to major streaming services offering similar content, there are no streaming substitutes for the content we provide. Our channels have the top Spanish-language movies and the best serialized dramas from throughout the world as well as the large selection of and highest-quality exclusive content from Puerto Rico, Central America and the Dominican Republic. For the millions of Hispanic Americans seeking this content, our channels are the exclusive destination. Moreover, because we can pull the rights to the vast majority of our content across all media, we have the capacity to offer our content whenever and wherever our viewers prefer.

Turning to Puerto Rico. During the past few weeks, we have witnessed an unprecedented positive uprising, which has captured the attention of the world. The immediate results of the protest has been the resignation of Puerto Rico's governor. We are optimistic that the clear and unequivocal message sent by the public to elected officials will result in greater transparency and accountability and a heightened focus on economic growth. While it is likely that these events will result in additional federal oversight, which could potentially cause delays in federal funding, we do not expect the total amount of recovery proceeds to be affected.

Independent of the political upheaval, the economic metrics in Puerto Rico remained positive. The unemployment rate remained stable in June at 8.4% and is the lowest unemployment rate in at least 55 years. Auto sales in the first half of 2019 were up 4% over the comparable period of 2018. And net migration out of Puerto Rico was less than 2,000 persons in the first quarter of 2019, a significant decrease from pre-storm levels according to the most recently released passenger data from San Juan International Airport.

We are extremely proud with how these were performed by WAPA's world-class news organization in covering the political crisis. WAPA provided its audiences in both Puerto Rico and the U.S. with nonstop uninterrupted coverage, including as many as 13 consecutive hours of coverage in a single day. During these historic weeks, WAPA was an indispensable source for the latest news and insights garnering as much as a 90% audience share at times, an unprecedented achievement. At WAPA America, which simulcast all of WAPA's news programming, provided more extensive coverage of the crisis than any other network in the U.S. WAPA America's unmatched coverage was on display as the protest peaked during the week of July 15, when WAPA America was the highest rated U.S. Spanish-language cable network from 6:00 a.m. to 7:00 p.m. Monday to Sunday. On July 25, the date of the governor's resignation, WAPA America delivered its highest audience ever, peaking at nearly 300,000 households.

In May, WAPA launched its entirely new and innovative 4:00 p.m. flagship newscast as well as its new daily reality competition, Guerreros, a format which has been successfully airing on Canal Uno in Colombia. These new programs have been both -- have both generating successes out of the gate and have further solidified WAPA's leadership position.

Turning to our U.S. cable networks, we continued our strong momentum and saw growth across all our channels. Pasiones continued its impressive growth trajectory delivering its 10th consecutive quarter of year-over-year growth, increasing audience delivery by 39% over second quarter of 2018, and giving the channel the highest rated quarter in history. For the fourth straight quarter, Pasiones beat Univision's telenovelas channel in prime time nearly doubling its delivery. In April, Pasiones was fully launched across Spectrum's national footprint, including Los Angeles and New York, the 2 largest Hispanic markets, and is now carried by all major cable, satellite and telco distributors. This makes Pasiones our most widely distributed channel, a reflection of its unique and compelling programming.

Cinelatino continues to be the second-highest rated Spanish language cable network in coverage ratings. Our ratings performance in Q2 was highlighted by the premier of box-office blockbuster, No Manches Frida, which was the highest rated Spanish language nonsports cable program for the entire day among adults 18 to 49. Additionally, during the quarter, Cinelatino reached a multi-year renewal agreement with DISH and Sling, affirming the quality and value of our network.

We are excited to launch our first production ever under our previously announced joint venture between recently acquired Snap Media and Mar Vista Entertainment. The joint venture has entered into a co-production agreement with a major U.S. media company for an exciting and premium Spanish-language series. Under the agreement, the Snap, Mar Vista joint venture will receive a production fee and we have secured U.S. rights to the series for Pantaya and Cinelatino. This is a template, which works very well for us and which we intend to replicate.

WAPA America continued its strong ratings performance, increasing its total day audience by 5% over the second quarter of 2018 and this does not factor in the extraordinary ratings to our coverage of the protests in July. WAPA America remains the highest-rated Spanish-language cable channel in the weekday early fringe period.

Centroamerica TV also posted another quarter of strong ratings growth, increasing total day ratings by an impressive 47% over the second quarter of 2018. The quarter was highlighted by the championship match of the El Salvador soccer league, which was the highest rated sporting event in the channel's history.

Although we continue to see subscriber losses from DISH in Q2 due to the Univision blackout, those losses abated over the course of the quarter with Univision back on the air.

Overall, we once again saw a meaningful U.S. subscriber growth defining industry trends as DISH subscribers migrated to other distributors and we had a Spectrum to Pasiones distribution.

Turning to our strategic investment. Canal Uno in Colombia, again, experienced strong and impressive ratings growth with total day ratings up 33% over the second quarter of 2018, including a 42% increase in prime time. As we announced this week, we are extremely pleased that the Colombian legislature has granted Canal Uno a 10-year extension of its concession license until 2037 at no additional cost.

Our subscriptions streaming platform, Pantaya, continued its impressive growth in the second quarter. We recently launched 2 new premium series, which we believe will accelerate growth and reinforce the Pantaya brand as the exclusive destination for the best movies and original premium series.

Finally, in closing, we continue to pursue M&A opportunities that will accelerate our growth and remain optimistic that we will be able to successfully execute on such opportunities.

Thank you, everyone. I'll now turn the call over to Craig.

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Craig D. Fischer, Hemisphere Media Group, Inc. - CFO [4]

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Thank you, Alan, and good morning, everyone. Net revenues in the second quarter were $39.1 million, an increase of 13% as compared to net revenues of $34.8 million for the year ago period. Net revenues for the 6 months ended June 30, 2019 were $74.3 million, an increase of 16% as compared to $63.8 million for the year ago period. These increases were driven by growth across all of our revenue streams.

Affiliate revenue for the 3 and 6 months ended June 30, 2019, increased $2 million or 10% and $4.9 million or 13%, respectively, over the comparable periods in 2018. These increases were due to rate increases and subscriber growth, including the launch of Pasiones on Spectrum in April and continued restoration of pay TV subscribers in Puerto Rico.

Advertising revenue for the 3 and 6 months ended June 30, 2019, increased $900,000 or 6% and $4.2 million or 17%, respectively, over the comparable periods in 2018. The increase in the 3-month period was due primarily to the timing of Miss Universe Puerto Rico, which was produced in the second quarter of 2019 as compared to the third quarter of 2018. The increase in the 6-month period was also due to the favorable comparison with the first quarter of 2018, which was negatively impacted by Hurricane Maria.

Other revenue for the 3 and 6 months ended June 30, 2019, increased $1.4 million and $1.3 million, respectively, over the comparable periods in 2018. Both periods were driven by higher revenue from the licensing of our content and the contribution from Snap Media, which we acquired in November 2018.

Operating expenses in the second quarter were $25.1 million, a decrease of 5% as compared to $26.5 million for the year ago period. Operating expenses for the 6-month period were $49 million, a decrease of 3% as compared to $50.7 million for the comparable period of 2018. These decreases were due to lower stock-based compensation and depreciation and amortization expense. Additionally, we incurred hurricane-related expenses in the prior year periods, which we do not incur in the current periods.

Operating expenses in the 6-month period were lower as a result of a $1.5 million gain in the current period related to reimbursements from the FCC for equipment purchases required as a result of the spectrum repack. This positive impact was partially offset by higher programming and production expenses relative to the prior year period when we reduced cost at WAPA following Hurricane Maria as well as the production of Miss Universe Puerto Rico, which in 2018 was produced in the third quarter. The gain from the FCC spectrum repack is included in operating income, but backed out of adjusted EBITDA.

Adjusted EBITDA in the second quarter was $17.5 million, an increase of 18% as compared to $14.8 million for the comparable period. Adjusted EBITDA for the 6-month period was $32.4 million, an increase of 27% as compared to $25.4 million for the comparable period.

Turning to the balance sheet. We had $208 million in debt and $79.5 million of cash as of June 30, 2019. Our gross leverage ratio was approximately 3.1x, and net leverage ratio was approximately 1.9x.

During the quarter, we repurchased approximately 10,000 shares of common stock at a weighted average price of $12.90 from an aggregate purchase price of approximately $135,000. As of quarter end, we completed our $25 million share repurchase plan, which was announced in 2017. The completed share repurchase plan does not include the additional $25 million authorized to be used for opportunistic share repurchases.

Capital expenditures were $1.4 million in the quarter. We continued to incur CapEx to replace equipment damage by Hurricane Maria, and equivalent required by the spectrum repack. We anticipate that insurance proceeds and FCC reimbursements will cover most of these expenditures.

Turning to strategic investments. During the quarter, we funded $8.1 million into our joint ventures, including $6.3 million in Canal Uno, $1.6 million in Pantaya and $200,000 in the Snap production joint venture with Mar Vista. We are affirming our full year 2019 guidance of mid-teen percentage growth and adjusted EBITDA, with multiple avenues for growth, including the unique and differentiated content and channel offerings, which we provide to our fast-growing audiences, coupled with our strategic investments, we believe, we are well positioned to create long-term shareholder

value.

We'll now open the call to your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Curry Baker with Guggenheim Securities.

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Curry Michael Baker, Guggenheim Securities, LLC, Research Division - Analyst [2]

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So I guess starting with Puerto Rico. Can you maybe give us some more color as to advertising environment there and whether or not we pretty much reached a normalized state there, post-storm in the back half of the year?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [3]

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Curry, it's Alan. Yes, I think, at least as far as we can see for the moment, it looks like advertising is normalized. I think advertising has been basically normalized for the past year. If we look at second quarter this year, it was fairly in line with where it's been the past 2 years. I think on balance, that's a good result given the instability in the market and given the out-migration following the storm. So we feel pretty good about where things are. We think that there's an opportunity that advertising will increase with the inflow of federal funds and insurance funds over time.

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Curry Michael Baker, Guggenheim Securities, LLC, Research Division - Analyst [4]

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Okay. And also there, do you have any sense as to where -- or can you give us any sense where share is, and do you continue to see kind of sequential improvement in your share in Puerto Rico?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [5]

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Yes. We grew share -- second quarter this year, we grew share over second quarter last year and our first quarter this year. So we feel very good about that. The new additions to our schedule, the 4:00 p.m. flagship newscast and our daily competition reality show, Guerreros, has started off really well for us. Great audience response and very positive advertisers response to both of those. So we feel very good about things moving forward to the balance of the year.

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Curry Michael Baker, Guggenheim Securities, LLC, Research Division - Analyst [6]

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Okay. And then maybe shifting gear to the U.S. subscription side. Can you just fill us in -- and I know you launched in the quarter Pasiones on Spectrum. Are there any other pockets of distribution in the U.S. that you're still looking to fill? And can you maybe also talk about the underlying subscriber trends that you guys are seeing relative to obviously, the pressure on most U.S. cable networks?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [7]

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Yes. I think we've mentioned in the past that we saw a number of holes that we are very focused on filling, primarily Televisión Dominicana. And then secondly, with some of the vMVPDs, most -- some of them now like Hulu, YouTube have not even launched Spanish-language packages yet, so that's an opportunity for us going forward. On Sling, not all of our channels are fully carried so that's another opportunity for us. So we view the vMVPD situation which is where the -- where most of the growth is these days, as a really good upside opportunity for us as well as the traditional carriers vis-à-vis Televisión Dominicana. And I think with respect to our space, the Hispanic space, we continue to see positive trends and we are optimistic about those trends going forward. We did have disruption in the past 3 quarters because of DISH's situation with Univision. We are finally seeing that, that situation has stabilized and resolved itself. And we're hopeful that DISH will start reversing. I think we were encouraged by DISH's numbers that they just came out with -- we only see numbers on a 2-month delay, we are not fully -- we don't fully -- we haven't fully seen the effects of DISH's pretty good results over the last quarter. But hopefully, we'll start seeing them over the next couple of months.

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Curry Michael Baker, Guggenheim Securities, LLC, Research Division - Analyst [8]

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Okay. And may be just following up on the virtual MVPDs. Are you guys in active conversations there, or is it still just a little too earlier, or can you provide any additional color?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [9]

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Yes. We are in active conversations. Not all of them are immediately planning on launching Hispanic package, but they all have plans to do so. And we're always in conversations with DISH's playing about opportunities there.

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Curry Michael Baker, Guggenheim Securities, LLC, Research Division - Analyst [10]

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Okay. And then maybe on Pantaya. Are there any -- is there any additional color you can provide at this time, subscribers or anything like that, or is it still too soon?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [11]

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Yes. We know Lionsgate have released specific scrubber data, and I apologize that, because I know that's really what you need to put some value around it. But I think, what I can say is that we're very encouraged by the trends. We're ahead of our plan. We're seeing very positive subscriber response and responses on marketing and new programming. And churn rates continue to decline, which, of course, is really positive vis-à-vis our long-term outlook. And we have some amazing product coming into Pantaya, the balance of the year, which we think will accelerate our growth even further.

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Curry Michael Baker, Guggenheim Securities, LLC, Research Division - Analyst [12]

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Okay. That's helpful. And then maybe on the 10-year extension of the concession license in Colombia. Did you guys expect this or is this an incremental positive? I don't think you'd mentioned that before as sort of something on the horizon.

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [13]

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It is an incremental positive. We did not expect it. Our license, which is 10 years renewable for another 10 years, we were not expecting to receive this renewal this quickly. We lobbied for it hard and we're successful in getting it. And we feel great about it having a -- now having a clear 20-year path to getting a great return on our investment.

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Curry Michael Baker, Guggenheim Securities, LLC, Research Division - Analyst [14]

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Okay. Got you. So basically, you've got a 20-year path and then it's renewable for another 20 years and like I think '37 or something. Okay.

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [15]

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Correct. Yes. '37. We'll still be on LIN then.

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Curry Michael Baker, Guggenheim Securities, LLC, Research Division - Analyst [16]

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And then I guess, one more question just on the equity losses. They ticked up this quarter, whereas the past 4 quarters have been trending down. Was there anything unusual that went on this quarter, or anything to kind of discern there and just thinking about that line going forward?

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Craig D. Fischer, Hemisphere Media Group, Inc. - CFO [17]

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It was reflected of some of the investment in programming at Canal Uno that was made, particularly Alan had talked in priors quarters about Sin Senos and the Universal deal that we've done there for programming. So that was just the timing of the recording of that programming as we did.

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Curry Michael Baker, Guggenheim Securities, LLC, Research Division - Analyst [18]

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Okay. And then let's see, I think that's largely it. I guess, maybe one more, if you'll indulge me. Is there anything that you guys can say on the M&A front? I know it's always a tricky one. But just sort of may be qualitatively, how the pipeline's looking and whether or not, anything's maybe going to take place this year?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [19]

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Okay. You sound like a broken record. And obviously, I can't get into specifics on this. But we are encouraged and optimistic about our pipeline and hopeful to get a deal done this year. I think there's a reasonable chance that we will. But again, I thought that -- thought it before and said it before and it hasn't happened. So until its done, it's not done. But we feel good about several opportunities that we're in various stages on and opportunities that we feel are path flows down the middle for us.

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Operator [20]

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And our next question comes from the line of Stephen Carll with Wells Fargo.

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Stephen Carll, [21]

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Maybe first, I think WAPA America subs were down sequentially and they were down year-on-year. And Alan, I know, you mentioned about the impact from DISH starting to fade away a little. So is there just anything we should read into what's going on at the WAPA America sub trends?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [22]

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No. That's just a combination of what's happening with various distributors and it's primarily a function of DISH and continued loss of subs on DISH which, as I said, seems to have abated as of the end of the quarter. So we're optimistic that going forward, that will continue to improve.

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Stephen Carll, [23]

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Great. And then just back on Puerto Rico, there's a -- there's some headlines that AT&T and DIRECTV may be looking at selling some of their assets there. So I'd be curious if you have any comment on just how you think that might affect the market? And related to that, DIRECTV has been still off with some of the broadcasters here in the U.S. like CBS and Nexstar. So I was wondering if you could comment about any upcoming renewals you've got in Puerto Rico and if you just think there's any more tension around retrans rates like maybe we're starting to see crop up here on the domestic side?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [24]

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I'll try to remember all of your questions. But if I missed, just repeat them.

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Stephen Carll, [25]

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Yes. Sorry about that.

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [26]

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No worries. So on DIRECTV or on AT&T in Puerto Rico, we've heard about the possible sale of their wireless business. To our knowledge, they're not marketing their television business. But if they do, frankly, it's not an issue for us. We -- as you know, we entered into a -- renewal with them last year, so we have some tail on that. And that renewal unfortunately, required us to go dark with them for 6 weeks, but at the end of the day, we got what we wanted. So I think we showed both our resolve and our market leverage in the way we got that deal done. And I think we sent the message to the market that the distributors that they cannot afford to take a risk not to have WAPA on there. I mean, you look at events of the past few weeks with the protest, we generated as much as a 90% share of the audience. There's no way any distributor can think about having us off the air. We're not -- as strong CBS is, we're CBS, NBC Fox and ABC combined in Puerto Rico. So we feel very good about our leverage and our position down there and our ability to continue to drive growth in our retransmission rates. Obviously, these negotiations are never easy and there's pricing pressure but we're confident that we can continue to drive growth even in a much more significant way than U.S. broadcasters can because of our share -- our mind share and our share of audience down there. I'm sorry, your other question was?

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Stephen Carll, [27]

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No. You covered it all. And then just on the content you announced with Mar Vista, I think that some of the first sort of true original content that you've both created and will then be distributing with Cinelatino and Pantaya. So could you maybe just expand on, if you have a multi-year plan to develop a lot more original content and maybe what that looks like in a few years time?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [28]

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Yes. As you might recall, a big part of our motivation for doing this Snap deal was for us to get into the original production business in a bigger way, in Latin America in a more institutionalized way. And we have started to do that through this joint venture with Mar Vista. Mar Vista is a great, established, independent production company that produces high quality programming in a really cost-effective way. And they have experience producing Latin America as well. We have formed a team down based in Mexico, and we have quickly launched our first coproduction. I can't disclose the studio that we've launched it with, but a major U.S. studio that we are -- co-producers with. It's a great 10-episode premium series that we start production on. They will take Latin America rights. We have U.S. as far as pay TV rights and we receive a nice producer fee on it. So it's a really good model for us going forward, both financially and strategically.

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Stephen Carll, [29]

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Great. And then just last one for Craig, I didn't want to leave you out, Craig. Adjusted EBITDA, it's a tough comp in the fourth quarter. I know you're not going to give quarterly guidance, but should we expect adjusted EBITDA to grow in each of the quarters in the back half?

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Craig D. Fischer, Hemisphere Media Group, Inc. - CFO [30]

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Yes. Look, we're not going to get into quarterly guidance. We've guided for the full year. We're affirming that guidance. We benefited earlier this year from the comparison to far years, first quarter, which was impacted by the storm. We talked about certain timing of certain events and productions like Miss Universe in Puerto Rico. We also have the shifting from the timing of recognition of licensing of our content. So it will be -- vary from within quarters to quarters, it's got some puts and takes that you probably are right in identifying. So we're not going to comment on within the quarters. But obviously, we're expecting growth in the second half of the year.

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Operator [31]

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And our following question comes from Kutgun Maral.

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Kutgun Maral, RBC Capital Markets, LLC, Research Division - Associate VP [32]

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I wanted to ask, again, about your subscriber trends just because it is such a unique story. Your cable nets, the sub growth there it is about 2.5% in the U.S., 4% in Latin America. Even backing out Pasiones getting on Spectrum and TV Dominicana's launch -- relaunch on U-verse last year, you're still outperforming the rest of the traditional pay TV market. So I just wanted to get your thoughts on continued growth for the balance of the year. Are there any renewals coming up that might accelerate that growth? And has the tenor of the affiliate discussions changed with those distributors -- the distributors that you mentioned that have seen sub growth coming from DISH and -- or have you not had those discussions just yet?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [33]

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Kutgun, we remain optimistic. We think our paradigm is just different and better than that of our channel market peers, at the -- even if the ecosystem continues to contract, we continue to see steady organic growth. That is a step function, which we see step function growth whenever we have a launch on one of the systems. And as I mentioned earlier, we still have the opportunities from new launches. But the DISH situation threw some noise into the numbers. We believe that, that situation is now resolved and over. And feel good about -- we've had very good discussions with DISH, and they feel very positive going forward about their Hispanic business and feel committed to that business. So that's very good. In the meantime, several other distributors have seen really significant growth and I think have looked at the DISH situation to try to take advantage of it and use this as an opportunity to drive their Hispanic business. We're always in discussions with distributors. Our channels are staggered in terms of their expiration dates. So those renewals always offer us opportunities to potentially expand distribution, particularly with distributors that have vMVPD services that we're not fully distributed on. And again, given the strength of our channels, given the fact that they're priced in a way that I think is not offensive to the distributor, we feel like we're -- we generally have positive partnerships with the distributors, and they view us as a strong profit center for them and not necessarily as a cost center or loss center for them.

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Kutgun Maral, RBC Capital Markets, LLC, Research Division - Associate VP [34]

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Okay. Great. And 3 just quick ones on Pantaya to the extend that you could talk about it. First, as it continues to scale in subs, are you at all thinking expanding it to be an AVOD service? And then on its subs, what impact has it seen since getting added on to Roku earlier in the year, and are there any plans to be added to other platforms? And just lastly, we've seen a lot SVOD and perhaps more broadly direct-to-consumer streaming services raise their prices. So to the extent that you could talk about it again, what are your thoughts on maintaining the price point to continue the sub-growth as opposed to perhaps flow through some of the content cost inflation that you're seeing into the retail pricing?

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [35]

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On AVOD, we've had those discussions. That's something we will continue to evaluate over time, there's no current plans to add an AVOD or convert to AVOD. And the SVOD business is looking really good and positive. We're the only ones out there that have a business like this. Obviously, Netflix and Hulu have some Spanish-language content, but their offering is very shallow and it's not really a focus of their offering. And we feel that we have a corner on the market, and it's a great market and a great niche. And we've seen in the early innings so far strong proof-of-concept and demand for this product. So we feel great about the way we're positioned in the market and the opportunity going forward. The Roku addition has been positive for us. We've definitely seen some pick up as a result of Roku. And our discussions with them about doing more marketing and doing more together to continue to grow that business, they have noticed it as well. We're also in discussions with a number of other platforms about getting launched, including a number of additional MVPDs that are launching SVOD platforms, SVOD services on their platform, so we feel that, that's a big opportunity going forward. And then final was on pricing?

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Kutgun Maral, RBC Capital Markets, LLC, Research Division - Associate VP [36]

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Yes.

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [37]

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Is that your final question? We're comfortable with the price that we're starting at now. We think it's a good price in the market. We've seen good receptivity. We've done some studies, honestly that show that the -- that our prospective subscribers will be willing to pay much more for this service. So we think there's opportunity going forward to raise prices. But for now, we're sticking with the $5.99 price, and we've also introduced a yearly plan, which we have seen great pick up in the initial stages.

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Operator [38]

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And I'm showing no further questions at this time. I would now like to turn the call back to Mr. Alan Sokol for closing remarks.

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Alan J. Sokol, Hemisphere Media Group, Inc. - CEO, President & Director [39]

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No further remarks. Everybody, have a great weekend, and thank you for joining this morning.

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Operator [40]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.