Vocento S A : C. Call Results 1Q21

CONFERENCE CALL

TRANSCRIPTION

13 MAY 2021

Investor Relations

Transcription of Conference Call on 1Q21 Results

LUIS ENRÍQUEZ

Good morning and welcome to Vocento's conference call on our 1Q21 results.

The main takeaway from this call could be that all our revenue lines are in line with the targets we set at the start of the year, for circulation revenues, subscriptions, digital and print advertising. We are in line in all these areas, and doing slightly better in cost controls, so EBITDA is slightly higher than the targets we set at the start of the year, which as you know was to return to the profit levels of 2019.

At advertising, although we are down 11% in the quarter, you should recall that two and half a months were pre-Covid, and note that we are also outperforming the market. Our digital advertising, excluding classifieds, rose by 8% and is now above 50% of group advertising revenues. This is significant, because in companies like ours, with a high weight for regional newspapers, print advertising still has an important absolute and relative value. For our group to reach the 50% mark is a clear indication for the future.

Turning to digital subscriptions, we saw growth of 16% to 75,000 digital subscribers, which is in line with our targets. This leads me to the following point, which is that when combined with the margin on circulation, the margin which we get from readers, i.e. circulation and digital subscriptions, was higher in 1Q21 than in 1Q20 and in 1Q19. It is about the same level as in 1Q 2015. The margin from our readers is very important for us. This makes us see that the target I set on the last call, which is that in 2024 the margin from readers should be unchanged from 2019, will sustain this part of our business.

Turning to events, since the end of lockdown in June last year we have made continuous progress. We have three major events in our catalogue. Women Now, a new supplement from Tesa called Turium, which is a platform and lobbying movement for high-quality tourism, and of course MadridFusión. One of the major differences this quarter at the EBITDA level compared with 2020 and 2019 is that MadridFusión has been rescheduled for June. The results are in line with the targets for events from pre- Covid, which shows how we have successfully reinvented this business. Hybrid events, with powerful registration tools, alongside the in-person element and international connections, are leading us towards the targets from our diversified businesses that we set at our Investor Day in March 2019.

Looking at our costs, we have already agreed with worker representatives in most of our businesses a salary reduction of c. 7% in 2021 and 2022, which will be seen from May. This will help us increase the savings we already achieving from, for example, news agencies and consultancies. The review of expenses we carried out in 2020 has helped us offset 71% of the fall in revenues and savings will continue into 2021 and 2022.

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. [phone] - [e-mail]

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Investor Relations

Transcription of Conference Call on 1Q21 Results

This has enabled us to generate EBITDA of 3 million euros, which as I said at the start is a little better than the forecast we made at the start of this year.

Looking at cash generation, as usual we have reported solid figures, with ordinary cashflow of 7.1 million euros. If we add the divestment of our 45% stake in Izen, cashflow has been much higher than our forecast, as this sale took place after our budget and forecasts for the year. So we are better than forecast in all areas.

Joaquín Valencia will now go into the financials in more detail and then we will answer any questions you may have.

JOAQUÍN VALENCIA

Many thanks Luis. I will look more closely at EBITDA, debt and cash generation.

For EBITDA, looking at each business line, regional performed very well, with a rise in EBITDA of 1 million euros, from 3.2 million to 4.2 million. The fall in advertising revenues was offset by the increased margin on circulation and digital subscriptions, and by control of commercial costs and personnel expenses. In March, advertising outside regional was positive, so down in the quarter but up in the month.

Looking at personnel expenses, Luis has already mentioned the salary reductions starting in May. The restructuring we carried out in December has impacted the regional newspapers from the start of the year. There will be an increased impact starting in May.

At ABC, the EBITDA performance was supported by a 3.9% rise in advertising in March, although it was down in the quarter. The fall in advertising was accompanied by a decline in printing for third parties because of the pandemic. These two negative effects were not offset entirely by the increase in the margin on circulation and digital subscriptions or by the decrease in fixed costs.

Moving to the general EBITDA of the group, we can see an improvement of 0.7% in the press business, where falls in circulation and advertising were offset by cost decreases, increases in margins on subscription and digital and various cost savings. The audiovisual EBITDA was flat, showing the resilience of this business. At Gastronomy, as Luis explained, there was a temporary effect because of the rescheduling of Madrid Fusión from 1Q to 2Q, with a fall in EBITDA of 1.3 million. We expect to recover this in 2Q. Revenues attributable to MadridFusión or Gastronomy are about 2.7 million euros. There was a 4.1 fall in other revenues, entirely because of the delay to this event. Meanwhile, Classifieds and Others were affected by lockdown measures but we expect a solid recovery in the rest of the year.

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. [phone] - [e-mail]

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Investor Relations

Transcription of Conference Call on 1Q21 Results

All of this has resulted in positive cash flow of 7.1 million euros, a clear improvement on 2020 as Luis said, when it was just above 4 million. The increase in debt ex IFRS16 is about 2 to 3 million euros, so very little. This is mainly the result of one-off items, such as the compensation payments made this quarter for the December restructuring, which was all paid in 1Q. We also had some capex linked to the buildings in Madrid and Bilbao. These are new, large buildings which can hold events, so they will generate revenues for the group.

As Luis said, in April we sold 45% of Izen for a cash entry of c. 10 million euros, taking our debt ex IFRS16 to c. 38 million euros in April, so even more comfortable than we were in March.

Looking now at the P&L, there are not many extraordinary items and a clear increase in EBITDA from 0.9 to 3. We offset 81% of the fall in revenues with costs. We wrote down goodwill by 0.5 million as usual in our film distribution catalogue, which we always compare to a coal mine where we are extracting coal and reducing the value of the mine. There is also a tax effect, of -0.9 in 1Q vs. zero in 1Q20, because of our two tax groups. Last year the Basque group had less profit because of compensation payments and this year it had higher profits and hence higher taxes, with a reversal of the deferred tax asset for the other group. Apart from that, it is a straightforward P&L which shows a significant improvement from 1Q20.

And now we will open the call to your questions.

Q&A SESSION

ENRIQUE YAGÜEZ - BESTINVER SECURITIES

Hello and thanks for taking my questions. The first is about the guidance for the year. You said it was in line with 2019, so around 42 million. Based on the cost performance in 1Q, which was better than expected, and the new cost savings planned, does this improve your guidance for the full year? That is my first question.

The second is about the advertising market in the second quarter. Some Spanish media companies have given a bullish outlook, what is your outlook, what are you seeing?

My third question is about digital subscribers. Do you still have the target of 100,000?

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. [phone] - [e-mail]

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Investor Relations

Transcription of Conference Call on 1Q21 Results

Finally, a question about Classifieds. You said that you are seeing weakness in automotive. Based on the rebound in April and May and the increase in car sales in other markets, have you seen an increase in activity on your portals in these months? Thanks.

L.E.: Thanks for your questions Enrique. We have decided to maintain the guidance we gave you. All the cost measures we are applying from May were included in our outlook at the start of the year. It is true that we were a bit better in costs in the quarter, but this does not change our target of maintaining EBITDA from 2019 this year. So our guidance is unchanged.

About advertising in the second quarter, I can tell you that in April we are doing about 30% better than in April last year, in the middle of the pandemic. We will have to see what happens after that, but to April we have been seeing exactly what we expected for advertising revenues for month to month, with minimal variations. Remember that for this quarter we expected to recover 50% of what was lost in 2020 from 2019, so advertising at the halfway level between the two years, and I think that is what we are seeing.

Of course we are keeping our target of 100,000 subscribers. We are in line with our targets for capturing subscribers and maintaining net subscriptions.

In Classifieds we will see a recovery when the automotive market recovers. We will recover alongside the market. We are working hard to maintain client numbers and critical mass and to keep our position in the market. We just need to wait for the market to restart. When that happens, our classified advertising business will recover to pre-Covid levels.

E.Y.: Perfect, many thanks.

IÑIGO EGUSQUIZA - KEPLER

Hello Luis, Joaquín and Javier, thanks for the presentation. I have three questions.

The first is a follow-up to what Enrique asked about the advertising market. You said that in April you are growing by 30%. In May so far, are you seeing a recovery, as the television companies are saying? And also, what happened in March? Slide 3 shows that in March the market was better than in January and February, while Vocento was little bit worse. That is my first question.

My second question is about cash flow. Could Joaquín explain exactly where it has come from, as a lot of the cashflow generation is due to working capital?

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. [phone] - [e-mail]

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