Univision Quarterly Earnings Drop on Lower Revenue, Higher Expenses

Courtesy of Univision Communications
Univision Communications CEO Vincent Sadusky

The Spanish-language media giant, led by CEO Vincent Sadusky, discussed its current sales process after reporting its latest financials.

Spanish-language media giant Univision Communications, which recently put itself up for sale, on Wednesday reported lower second-quarter earnings amid lower revenue and higher operating expenses. 

Univision, led by CEO Vincent Sadusky, during a morning analyst call discussed the current sales process for the company as rival media players were urged to be quick to kick the tires of the Hispanic media giant. "You've got to give this thing a good hard look. This is the last opportunity for this asset to trade," Sadusky insisted.

He recalled Telemundo being sold to NBC in 2001 and since remaining in the NBCUniversal fold. "Univision is independent and it will trade one time. And if you don't execute on that opportunity, I believe the opportunity is lost forever," Sadusky argued.

He was also asked whether the sales process was prompted by an approach from a possible buyer. "It really was triggered by the progress we've made in transforming and refocusing Univision and the recognition of the importance and the real growth opportunity in Hispanic media," Sadusky answered as he touted the purchasing power of the Hispanic consumer as an appeal for advertisers.

"It was a matter of really changing our strategic focus and getting our company in a position where we are attractive," Sadusky added.

During the latest financial quarter, Univision reported second-quarter earnings from continuing operations of $92.0 million, compared with a year-ago profit of $121.3 million, down 24 percent. Quarterly adjusted operating income before depreciation and amortization (OIBDA), another profitability metric, dropped 14 percent to $265.7 million.

Quarterly revenue declined 4 percent to $701.7 million, with core revenue down 3.5 percent to $694.5 million, including a 1.1 percent drop in media networks unit core advertising revenue. Total networks unit advertising revenue fell 2 percent to $347.2 million "due to declines in television advertising revenue, partially offset by higher digital advertising revenue." Media networks unit non-advertising revenue, including carriage fees and content licensing, declined 6.2 percent to $292.8 million in the latest period. 

Subscriber fee revenue in the quarter reached $263.3 million, down from $279.6 million in the year-ago period. Univision this year had a carriage dispute with Dish Network, which it settled late in the first quarter.

Sadusky told analysts Univision would continue to see subscriber fee evenue declines away from its newly-signed deal with Dish, in line with the rest of the pay TV industry. "We're behaving as the ecosystem behaves," he said.

Quarterly direct operating expenses rose 9 percent to $273.7 million. Expenses related to programming, excluding variable program license fees, increased 31 percent to $40.0 million in the second quarter, "primarily due to increases in sports programming costs of $45.8 million," driven by Gold Cup and UEFA soccer rights, and higher news programming costs, partially offset by a decrease in entertainment programming costs. Operating expenses related to variable program license fees and other operating expenses fell in the second quarter. 

Besides recent stepped-up investments in programming and ad sales to draw Hispanic audiences and marketers, Sadusky pointed to "mid single-digit" growth in ad revenue after the recently completed 2019/2020 upfront sales cycle, combined with even stronger growth on the digital advertising front. 

"We made really good progress and you'll start to see those results really soon," Sadusky told analysts looking to know when Univision's current turnaround efforts will pay dividends.

Univision last year cut jobs, scrapped plans for an initial public offering and replaced its CFO. The firm then announced that private equity firm Great Hill Partners will buy Univision's digital media group Gizmodo Media Group and The Onion for an undisclosed sum.

In July, it said it would entertain offers from potential buyers, saying that the U.S. Hispanic audience "represents one of the very few certain growth opportunities in today's media." The firm engaged Morgan Stanley, Moelis & Co. and LionTree as financial advisers as its board of directors reviews a sale and other "strategic options for the company."

Univision has been privately owned for more than a decade and investors, like Saban Capital Group, Madison Dearborn Partners and Providence Equity Partners, have been seeking at least a partial exit that formerly might have come via an initial public offering.

Aug. 14, 9:00 a.m.: Updated with comments by Univision executives made during an analyst call.