Spanish-language media giant Univision Communications, which late last year sold a majority stake to an investor group led by former Viacom CFO Wade Davis and recently agreed to a merger with Mexican TV giant Televisa, reported higher first-quarter core advertising sales and earnings Friday.
“Our quarterly results demonstrate that Univision’s transformation is continuing to gain momentum,” Davis argued. “Univision’s underlying business is optimizing as evidenced by the strong growth in advertising revenue” and other trends. The transformation he referenced has focused on remaking Univision from a U.S. broadcast giant to the global streaming leader in Spanish-language content.
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On Friday’s earnings conference call, Davis emphasized, for example, that only about 10 percent of the nearly 600 million Spanish speakers around the globe, the largest group outside of China, have so far had access to one or more streaming services. He said that the Televisa deal, which will strengthen the firm’s position in pursuit of this goal, was on track to close in the fourth quarter.
Univision posted a first-quarter profit of $66.0 million, compared with a year-ago profit of $11.7 million. Adjusted operating income before depreciation and amortization (OIBDA), another profitability metric, was nearly unchanged at $252.1 million.
The company had recently forecast a 4 percent quarterly revenue drop due to pay TV subscriber losses. Revenue for the latest period did indeed fall 4 percent to $633.7 million, with Univision’s media networks unit recording a 3 percent revenue drop, but media networks ad revenue rising 7 percent, or 11 percent when focusing on core trends, which exclude 2020 election spending. Media networks unit subscriber fee revenue fell 6 percent.
The increase in networks core advertising was “due to higher ad revenue driven by new brand activations, growth in low volume accounts and improvements in the auto, healthcare and beverage sectors, which are recovering from the negative impacts of COVID-19,” the firm said. “Political and advocacy revenue was $11.6 million in 2021 compared to $20.9 million in the same prior period.”
Univision’s total core advertising revenue increased 7 percent in the quarter, “led by double-digit growth from national advertising.”
Lower costs helped the bottom line in the first quarter. “Cost structure efficiencies” reached in 2020 reduced first-quarter costs and “increased operating leverage,” the company highlighted.
Televisa and Univision are set to combine into a new company to be called Televisa-Univision, the two announced in mid-April, with Univision set to pay about $4.8 billion for Televisa’s content assets. Davis will hold the same title at the combined company, with Televisa co-CEO Alfonso de Angoitia serving as executive chairman of the board. Televisa will own the largest part in the new entity, holding a 45 percent stake.
The deal would create the largest Spanish-language media company in the world with bases in the two biggest Spanish-speaking markets: Mexico and the United States. Televisa is a production powerhouse, making some 86,000 hours of content in 2020. Both companies also hold big sports rights packages.
Davis has said one key goal is to build a global streaming giant for Spanish-language content.
The deal is expected to close later this year, pending regulatory approval in both the U.S. and Mexico and Televisa shareholder approval. The boards of the two companies have already signed off on the transaction.
“This quarter we took a number of important actions to drive our strategy forward including, most notably, the announcement of our historic combination with Televisa’s content and media assets,” Davis said Friday. “We also successfully launched PrendeTV, our free ad-supported streaming platform, which is now the leading Spanish-language entertainment app on Google, Apple and Roku platforms in just slightly more than a month since its launch. Finally, we’ve demonstrated incredible success with our audience.”
On the earnings call, he expressed optimism for the upfront advertising market. “We totally changed the trajectory of our ad business” with new leadership, a different market approach and a focus on such things as optimizing mix, Davis said. In addition to that basic execution improvements, Univision will also bring new products, such as PrendeTV, to marketers. The streamer, for example, is seeing more than an hour of daily usage from users, which means there is “very significant capacity” for advertisers, he said.
