Entravision Communications Corp (EVC) 2012 Q4 法說會逐字稿

Good afternoon and welcome to the Entravision Communications fourth quarter and full year 2012 earnings conference call. All participants will be in listen-only mode.

(Operator Instructions)

After today's presentation there will be an opportunity to ask questions.

(Operator Instructions)

Please note this event is being recorded.

I would now like to turn the conference over to Mr. Walter Ulloa. Please go ahead.

Thank you, Amy.

Good afternoon, everyone, and welcome to Entravision's fourth quarter and year end 2012 earnings conference call. Joining me today 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 subject 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 results. This call is a 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 certain non-GAAP financial measures. The Company has provided are 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 in a Form 8-K.

Our fourth quarter results capped off an outstanding year for Entravision on all fronts. We generated a double-digit increase in our net revenues for both the fourth quarter and full year, as we benefited from a more than 100% gain in our political revenue as well as increased contributions from our core advertising business and retransmission consent revenue. At the same time we continue to demonstrate the improving operating leverage in our model as we grew our free cash flow substantially.

Our operating results were among the best in the broadcasting business in 2012 highlighting our focus on providing advertisers and marketers with a comprehensive multi media platform to reach Latino audiences and communities. The solid positioning of our television, radio, and digital assets to the nation's most densely populated markets, as well as Latino markets, as well as our ongoing efforts to expand our revenue streams and attract more ad dollars while carefully managing our costs are keys to our success.

Specifically, our consolidated fourth quarter revenue was just under $64 million up 28% over the fourth quarter of 2011. Our revenue for the full year was $223 million, up 15% over the previous year. We were able to convert a significant portion of this growth into gains in our EBITDA and free cash flow. Our focus on cost management resulted in an increase in EBITDA for the fourth quarter of 77% and a 39% increase in consolidated EBITDA for the full year.

We also generated $15.6 million in free cash flow in the quarter, up from $3.3 million in the fourth quarter of 2011. For the year, our free cash flow rose 218% to $34.8 million from $11 million last year. These gains have allowed us to strengthen our financial position considerably. We ended the year with a leverage ratio of 4.3 times a major decrease from 6.7 times in 2011.

As Chris will outline in a moment, we closed the year with $36 million in cash on our balance sheet, increasing our financial flexibility as we review strategies to decrease our overall debt levels, invest in our Business and maximize returns for our shareholders. I will review our outlook in a moment.

First, let me touch on the operating highlights of the fourth quarter. First, at our television division we increased total revenue during the fourth quarter by 33. Excluding retransmission fees, our television revenue grew 35%. Excluding retransmission and political revenue, core TV revenues increased 10% compared to the fourth quarter of last year.

Our core results were well ahead of the television broadcasting industry, where core revenues dropped 4% during the fourth quarter. In fact, these core revenues marked the fifth straight quarter in which our core television revenue categories have out paced the revenue growth of the television industry. This industry-leading core revenue growth by the Entravision Television Group points to a notable rebound in advertising dollars aimed at the Latino market and flowing into our Univision and UniMas affiliate group.

This strong performance in our core television business reflects an ongoing improvement across our markets and advertising categories. During the fourth quarter, local revenue was up 6% while national revenue finished up 69%. Excluding political billing, local television revenue grew 1% while national revenue increased 20% in the quarter.

Automotive has remained strong for our television unit. Auto was up 26.5% during the fourth quarter, which was the 11th consecutive quarter of double-digit automotive spending growth. This growth continues to be broad based with seven of our top eight auto brands demonstrating year-over-year growth. This balanced growth and momentum has continued during the first quarter. For the year double-digit percentage investment gains from all eight of our top eight auto brands. The automotive category in our Television business increased by 34% in 2012 over 2011.

Moving now other television advertising categories. During the fourth quarter we experienced double-digit growth in five of our top ten categories. Automotive, telecommunications, media product, and brand names, and of course political were the category drivers in fourth-quarter 2012. Our current pacing for our television business indicate this balanced performance across our advertising categories has continued during the first quarter. Through February, five of our top ten advertising categories are up over last year including automotive, retail, telecom, product brands and grocery stores.

Political spending for our television operations during the quarter was approximately $7.8 million compared to $300,000 during the fourth quarter of 2011 and $3.4 million in the fourth quarter of 2008, the last comparable presidential election cycle. Total political advertising for are our television business was $14 million in 2012 compared to $6.1 million in 2008. As we indicated earlier this year, we were able to more than double our political revenues in 2012 as compared to the 2008 presidential election. Total consolidated political revenue for the Company in 2012 was $16.6 million versus $8.1 million in 2008, the comparable presidential election cycle, a 105% increase in political revenue for Entravision over the 2008 presidential election.

We added 21 new advertisers who invested $10,000 or more in our Television business. New clients for our television division in the fourth quarter included Bank of America, First 5 California, JetBlue Airlines, PriceRight Supermarkets and Vonage.

Turning to our ratings performance, our Univision affiliates extended their ratings leadership position in the November 2012 sweeps. Among all adults, 18 to 34, regardless of language, seven of our Univision affiliates ranked number one or two sign-on to sign-off, adults 18 to 34. Additionally, six of our Univision affiliates are either number one or two among all adults 18 to 49, regardless of language. Six of our UniMas television stations are the number two ranked spanish-language television station in their markets in adults 18 to 34. Seven are ranked number two among adults 18 to 49.

During our prime time novela, Entravision television stations are either number one or two in five markets adults 18 to 34. In the early Univision network newscasts, 13 of our affiliates are number one or two, adults 18 to 34, regardless of language. 12 of our Univision affiliates are number one or two in early local news and 7 are number one or two in late local news, adults 18 to 34, again, regardless of language.

At our radio division, revenues increased 16% in the fourth quarter. Based on the recently released revenue data from the RAB, we out-paced the industry by 12 points. Local revenue increased 3% and national revenue grew 45% compared to the fourth quarter of 2011. National revenue grew significantly each month of the quarter. We experienced an increase of 56% in October of national business, November finished up 27% and we continue this positive trend in December with a 54% increase in national revenue for our radio group.

Among other drivers, we are benefiting from the continued build out of our radio network. Net political revenue in the fourth quarter was $1.6 million. Core revenues for our radio group increased 6% in the fourth quarter over last year when political revenue is excluded.

For the full year our radio division increased revenue 6% compared to 2011. According to the RAB, the radio industry finished with a 1% increase in total revenue for the year. We experienced a 28% increase in political revenue for 2012 compared to the 2008 presidential elections, with over $2.5 million booked compared to $2 million in political revenue in 2008. Excluding political revenue, our core net revenue grew 2% over 2011. According to the RAB, the radio industry core revenue, excluding political, was up 1%.

We recorded revenue growth in eight of our top ten categories in the fourth quarter. The auto category, which was our second largest category in the quarter, ended with a revenue increase of 8%. For the full year, the automotive category grew 25% in our radio group. In addition, the growth in automotive advertising, our top ad categories by spending for our radio group, during the fourth quarter were services, retail, telecommunications, health care, finance, and travel and leisure.

Services, our top category for the quarter, increased 5% led by increased spending from State Farm Insurance. Retail saw 9% increase, which was propelled by our top spending advertiser for the quarter, Walmart, and our third largest retail advertiser, Sears. Telecommunications increased 48% in the quarter with the increased spending by AT&T, Verizon and TracFone, a first time advertiser. Health care increased 4% and the finance category experienced an increase of 66% due to an increase in spending by JPMorgan Chase and Wells Fargo.

For the full year 2012 our top five advertising categories in our radio group were services, automotive, travel and leisure, retail and telecom. Top advertisers for Entravision Radio for the year were McDonald's, Anheuser-Busch, Walmart, State Farm Insurance, T-Mobile and AT&T Mobility. During the fourth quarter, we added 51 new radio advertisers who spent more than $10,000, which amounted to approximately $1.4 million in revenue. New advertisers included Kraft, Mars, Hershey's, and Interjet Airline and a number of political PACs, propositions and candidates.

As many of you are aware, Entravision entered into a syndicated radio program agreement with one of the hottest Mexican Regional recording artist, Jenni Rivera, who died tragically in a plane crash in Mexico on December 9. The last broadcast of Contacto Directo was for a memorial service broadcasted and webcasted live on December 19. Our content teams' in the process of replacing this show with another syndicated program that will be hosted by another well known Mexican Regional star.

We have also entered into two other syndicated radio programming agreements. One with Oswaldo Diaz, our very talented afternoon drive host of the Erazno y La Chokolata show, which airs on 34 stations nationally. We've also partnered with Sony Latin for a weekend Mexican Regional countdown show, La Supra Vente, the State Farm, which airs on 42 stations across the country.

In May 2011, Entravision launched its new radio network, which we have recently branded as Entravision Solutions network. Our Spanish-language radio network, in less than two years, has become the number one Spanish-language radio network in coverage and ratings. We currently reach 94% of all US Latinos between the ages of 18 to 49.

Our network revenue increased 136% in Q4 2012 compared to the 2011 comparable quarter. For the year our network revenue increased 166%. Over the past year, we've been able to increase our network affiliate base to 315 radio stations nationwide, an increase in affiliates to radio networks of 110% since the beginning of 2012. Top advertisers on the network in 2012 included Walmart, Sears, O'Reilly Auto Parts, AutoZone, Macy's, and Home Depot.

Entravision's Los Angeles radio cluster increased total revenue 16%, outperforming the market by 8 points for the quarter of 2012 according to Miller Kaplan. This revenue growth was driven by a combination of political revenue, as well as local and national advertising. National revenue posted strong year-over-year fourth quarter gains led by KLYY and KDLD, our two Mexican Regional formats.

National revenue increased 25% in the fourth quarter and that momentum is continuing as we move through the new year. The strategy that was implemented early on to identify growth accounts and the hard work of Entravision Solutions and our national sales managers continues to pay positive revenue dividends.

Local sales continue to post strong gains with an increase of 14%, which was spurred on by direct business and the dominance of KLYY as a direct response leader. Combined local and national digital revenue increased 56% year over year in our Los Angeles business by integrating key local event activation as well as by selling new products such as EntraLeads. EntraLeads is the first bi-lingual digital lead generation product that delivers to national and local advertisers, not just clicks or site visits, but customer calls, text, emails and store traffic.

This digital product connects businesses with Latino consumers at the precise moment they are searching and are motivated to purchase a product. The performance of this digital product is so terrific that we guarantee results to our advertisers. EntraLeads is also a great complement to our Radio business.

For the year our Los Angeles customers saw an 6% in total revenue, outpacing the market by 5 points. We continue to focus on intensive cold-call strategies, training our newest sales products and new business initiatives. EntraLeads provides our staff with an additional channel of distribution, which allows us to target existing and new advertisers for additional revenue growth. The revised management structure with Karl Meyer being promoted to Executive Vice President Western Region, promoting Matt Cardenas to Senior Vice President, Integrated Marketing Solutions for the cluster, and separating operations from sales has allowed both of these key executives along with their sales staff to concentrate 100% of their time on generating revenue for our Los Angeles cluster and the Entravision Western Region.

For the fall 2012 radio ratings, our radio stations continue to be ranked among the leaders in adults 18 to 34 against all competitors regardless of language. In the full week, Monday through Sunday, 6 A to 12 midnight, 19 of our radio stations are in the top ten in their markets regardless of language.

Let me turn briefly to our Digital business. We have continued to leverage our strong brands and sales force to deliver attractive integrated marketing solutions. Now our clients can connect with audiences across all key media and digital channels as we offer new attractive multi-platform advertising opportunities. We continue to make significant progress with our digital initiatives, which continues to grow fast and currently account for 2% of our total revenue and 3.5% of our local revenue.

Fourth quarter was a new record. Our best interactive revenue quarter ever. Our interactive revenues have grown year over year for 18 straight quarters, including a strong growth of 62% during the fourth quarter over the same period last year and an annual growth 42% during 2012 over 2011.

Our online video platform continues to generate increased viewing and consumer engagement. Video consumption across our digital network increased 63% during the fourth quarter. We published 9,000 local news stories online across our markets during the quarter and more than 35,000 over 2012. Our increased editorial content is resulting in increased views as well as driving strong 100% digital audience growth in 2012 over the previous year.

We now have more than 1 million monthly unique visitors to our websites. Our radio live streaming operations also showed solid performance. We now average monthly 600,000 unique streamers with an average session length of one hour. In the fourth quarter we streamed 3.6 million hours and a total of 15 million hours in 2012 of our radio content.

Our mobile presence continues to grow. Our Latino mobile communities have over 300,000 subscribers, a growth of 163% over 2011. Mobile revenues increased 166% during the fourth quarter and 187% over 2011, as usage trends remain at record levels.

During the fourth quarter we sent over 4 million text messages to our mobile audience and 11 million text messages during all of 2012. We are also driving increased engagement across social media as our radio and television station websites continue growing their Facebook and Twitter audiences. We finished the fourth quarter with more than 600,000 total followers on our social media channels, which is up 63% over the fourth quarter of 2011.

Turning to our pacings. As we look at the current quarter, we continue to see positive trends across our Business. We do not provide guidance, but we can tell you that our unaudited actual core revenue growth through February has our Television business at a plus 7% increase and our Radio business is pacing at plus 5%. Our consolidated pace through February is plus 6% revenue growth. Please note that this core pace excludes any retransmission revenue and political revenue, although we had practically no political revenue on the books through February of 2012. We are encouraged by our pacing through February.

Before turning the call over to Chris for the financial review, I want to reiterate that the advertising environment in our markets has clearly improved as our results demonstrate. Our radio pacings in the first quarter remain positive thus far and we are optimistic about the prospects for our core business in the year ahead. We believe the presidential election process demonstrated the power of the Latino population not only on Capitol Hill but also to the overall advertising industry.

Our audience continues to grow not only in total numbers and in proportion to the nation's population, but also in regard to influence. It is important to note that the Latinos increased their share of the national vote in the 2012 presidential election from 9% or 9.3 million to 10% or 12.3 million Latino voters, a 32% increase in the Latino voter turnout from 2008 to 2012. Entravision and Univision and community organizations like Mi Familia Vota contributed significantly to this record Latino voter turn out in November through voter registration and get-out-the-vote campaigns, voter education messaging, countdown to the elections, expansive news coverage, rides to the polls and special election programming.

Additionally, Latino vote demonstrated it was the X Factor in the four swing states where Entravision operates important powerful, media clusters including Colorado, Nevada, Florida and Virginia. The Latino voter turnout increased by an average of 2 percentage points in these key swing states from 2008 to 2012.

Advertisers of all sizes are increasingly recognizing that our audience can't be ignored. In order to grow market share, more and more brand and advertisers must address the Latino population. And our diversified platform represents an ideal conduit for reaching this important audience. We have never been in a better position to capitalize on this increased interest. Our broadcast properties remain market leaders in some of the largest and fastest growing Latino markets in the nation. In addition, we are making notable progress in building our digital assets and moving forward with our integrated 360 service approach under the Entravision brand.

Finally, we are benefiting from a diversifying stream of revenues including our revitalized core broadcast revenues, our growing and powerful radio network, and our complementary digital assets. While the presidential political cycle has passed we are now focused on attracting our share of advertising dollars tied to the Affordable Health Care Act.

We operate in states where there are significant number of uninsured Latinos and there will be considerable ad dollars spent on educating and informing the millions of Latinos who are eligible for health insurance through the Affordable Care Act. For example, in California there are 6.9 million residents eligible for health care insurance under the Affordable Care Act. Approximately 2.8 million of these individuals are Latinos and reside in Entravision media markets.

In addition, health care providers, drug companies and states will all need to advertise their products to the newly insured. We are a natural platform for delivering this information. This will be a long process and we expect to begin to see revenue service in this important new category in the second half of the year.

In addition, we are focused on improving resources aimed at attracting ad dollars from Mexico to our robust Spanish-language media assets along the US-Mexican border. Given our leading presence in the nation's border markets and our success in attracting television viewing and listening audiences in Mexico, we believe we have a terrific opportunity to help Mexican advertisers reach the more than 8 million Mexican citizens living along the US-Mexican border. The ongoing growth, the Latino population, improved ad environment, the diversification of our revenue resources and our progress in building an integrated platform are all drivers of our optimism going forward.

As we seek to grow our Business in the year ahead, we will remain focused on controlling our costs and supporting healthy free cash flow generation. We will continue to study strategic uses for our cash including further reducing our debt, investing in our business, returning cash to shareholders and seeking selective acquisition opportunities that strengthen our platform and expand our ability to attract ad dollars.

At this time I'll turn the call over to Chris Young for our review of our financial performance.

Thank you, Walter, and good afternoon, everyone.

As Walter has discussed net revenue was $63.8 million up 28%. Operating expenses increased 5% to $33.7 million, and consolidated adjusted EBITDA increased 77% to $25.3 million. Net revenue for the year was $223.3 million, up 15%. Operating expenses increased 4% to $130.1 million and consolidated adjusted EBITDA increased 39% to $76.9 million.

As we announced in our 8-K filing during the fourth quarter of 2012, we entered into a new credit facility consisting of a four-year $20 million term loan and a four-year $30 million revolving credit facility. The new credit facility replaces our $50 million revolving credit facility. Proceeds from the term loan facility and cash on hand were used to repurchase $40 million in the aggregate principal amount of the Company's 8.75% senior secured first lean notes due 2017 pursuant to the optional redemption provisions in the indenture governing the notes.

The redemption price for the redeemed notes was 103% of the principal amount, plus all accrued and unpaid interest. Approximately $324 million in principal amount of the notes remains outstanding. Also during the fourth quarter of 2012 we declared and paid a special cash dividend of $0.12 per share to shareholders of the Company's Class A, B, and Class U common stock. The total amount of cash disbursed for the special dividend was $10.3 million.

Net revenue for the quarter was up 28% to $63.8 million compared to $50 million in the same quarter of last year. Television net revenue was up 33% to $45.4 million for the quarter compared to $34.1 million in the same quarter of last year. Radio net revenue was up 16% to $18.4 million for the quarter compared to $15.8 million in the same quarter of last year.

The increase in our TV segment was primarily attributable to an increase in political revenue, core advertising revenue, and retransmission consent revenue. The increase in our radio segment was primarily attributable to an increase in both political and core advertising revenue. Excluding retransmission and political revenue, core TV advertising revenue was up 10% for the quarter versus the TV industry core revenue of minus 3.9% for the quarter. That's based on TVB.

This is the fifth consecutive quarter where our core TV revenue has significantly outperformed that of the television industry. Excluding political revenue, core radio advertising revenue was up 6% for the quarter. Net revenue for the year was up 15% to $223.3 million compared to $194.4 million in 2011. TV net revenue was up 19% to $156.8 million for the year compared to $131.5 million in 2011. Radio net revenue was up 6% to $66.4 million for the year compared to $62.9 million in 2011. The increase in our TV segment was primarily attributable to an increase in political revenue, core advertising revenue and retransmission revenue.

The increase in our radio segment was primarily attributable to an increase in both core and political revenue. Excluding retransmission and political revenue, core TV advertising revenue was up 8% for the year compared to the TV industry, which was up 1.5% for the year. Excluding political revenue, core radio advertising revenue was up 2% for the year. Retransmission consent revenue for the quarter was $5.1 million compared to $4.3 million in the same quarter of last year. Retransmission consent revenue for the year was $20.2 million compared to $17.1 million in 2011.

Operating expenses for the quarter were $33.7 million up 5%. Excluding non-cash compensation expense, operating expenses for the quarter were $33.4 million up 6%. The increase was primarily attributable to variable expenses relating to revenue and an increase in salary expense. Operating expenses for the year were $130.1 million, up 4%. Excluding non-cash comp expense, operating expenses for the year were $129.2 million up 4%. The increase was primarily attributable to variable expenses relating to revenue and an increase in salary expense.

Corporate expenses for the quarter were up 28% to $5.4 million compared to $4.3 million in the same quarter of last year. Excluding non-cash comp expense, corporate expenses for the quarter were $4.8 million, up 30%, compared to $3.7 million in the same quarter of last year. Excluding non-cash comp, the increase was primarily attributable to an increase in bonus expense, salary expense and interactive media related expenses.

Corporate expenses for the year were up 15% to $18 million compared to $15.7 million in 2011. Excluding non-cash comp, corporate expenses for the year were $16.2 million up 13% compared to $14.4 million in 2011. Excluding non-cash comp, the increase was primarily attributable to an increase in bonus expense, salary expense and interactive media related expenses.

Broadcast cash flow margins for the television segment increased to 57% for the quarter compared to 46% in the same quarter of last year. Broadcast cash flow margins for the TV segment for the year increased to 51% for the year compared to 45% in 2011. Broadcast cash flow margins for the radio segment increased to 26% for the quarter compared to 16% in the same quarter of last year. Broadcast cash flow margins for the radio segment for the year increase to 21% compared to 18% in 2011.

Free cash flow as defined in our earnings release increased 376% to $15.6 million or $0.18 per share for the quarter compared to $3.3 million or $0.04 per share in the same quarter of last year. Cash interest expense for the quarter was $8 million. Free cash flow for the year increased 218% to $34.8 million, or $0.41 per share for the year. Cash interest expense for the year was $33 million. Cash CapEx for the quarter was $2.9 million. Cash capital expenditures for the year was $9.4 million.

Turning to our balance sheet. As of December 31, 2012 our total debt was $343.8 million and our trailing 12-month consolidated adjusted EBITDA was $76.9 million. Cash on the books was $36.1 million at December 31, 2012. Net of $10 million of unrestricted cash on the books, our total leverage as defined in our new resolving credit agreement, was 4.3 times as of December 31, 2012.

This concludes our formal remarks. Walter and I would be happy to take your questions. Amy, I'll turn it over to you.

Thank you.

(Operator Instructions)

James Dix, Wedbush Securities.

Hey, good afternoon, guys. Just a couple things. As you look forward to this year compared to 2012, what are you seeing in terms of the breadth of your category growth? Are you expecting your auto to continue to lead the way in terms of where you're going to be getting your growth from across both the TV and the radio platforms? Or do you think that's going to become a more balanced category growth as you look out over the course of the year? And then I had two follow-ups.

Well, hello, Jim -- James. As it relates to automotive, you know we had significant growth in 2012 both radio and television. What we're seeing, at least through February, is strong automotive growth. We don't expect automotive to be as strong as last year. But, it continues to grow here in the first quarter.

Okay. And are there any other categories, just on the flip side, which you are expecting to grow more than last year?

Well, I'll just say that, certainly, health care is a category we expect to see strong growth from in the second half of the year, but retail is doing pretty well. Services has always been an important category for us. Groceries is showing some strength. Telecom has bounced back, not the way we'd like it, but certainly it is showing some momentum. So overall, I think we're pretty pleased with what we're seeing in the first quarter.

Yes. And I think just to add to that, you had 8 out of our top 10 categories that showed broad-based growth during last year and I think the expectation is to see that continue into 2013.

Okay. Great. And then you mentioned, Walter, the health care and then in your opening remarks the Affordable Care Act. Just in terms of conceptualizing that, how much of that spending potentially is coming fairly directly from the government or government-sponsored initiatives? And then, how much of that do you expect to be just increased competition among providers, whether it's insurance or others in that sector? I'm just trying to get a sense as to where that potential money is being sourced from, that might be going to campaigns that would show up on your stations starting in the second half and then going beyond?

Well, let me just say, James, it's hard for us, at least at this point, to quantify what the opportunity looks like, but we believe it's big. We've already spent a lot of time on this not only in the fourth quarter of 2012, but in the first quarter of 2013. In fact, we have a team of people right now in Washington meeting with the key members of the Department of Health Services that is going to execute this plan. Not only do you have each state that will have to create a market for health insurance for those people that are eligible and that don't have health insurance, but -- and in a case where the state won't provide it, but at least up until now, it looks like most states are going to move forward. Florida was saying they weren't going to do it. As you know, that's an important market for us. But, the federal government has said if the state won't do it, we'll step in.

Now, I will tell you that in -- and I mentioned California in my remarks, but Texas is similar to the percentage of uninsured in that state. The numbers are big, but -- as they are in Colorado, in Nevada, in Florida. In every state we operate in there is a significant population of Latinos that are under insured or have no insurance. And so -- and they're eligible for insurance under the Affordable Care Act. So, you know, it is a large amount of money that's going to be spent to educate and inform the public in all the states in our country about the Affordable Care Act. And a number in the states we operate, there are significant Latino populations. That'll be significant number of Latino residents in these states who will be eligible to submit their application for health insurance.

In addition, you've got the health care companies themselves that are going to be advertising their services. I know of one at this time who is in discussions with two of our important markets and they'll probably begin advertising or messaging in the third quarter of this year, and the numbers that are being talked about are significant. That's just one or two markets that I'm referring to, but you've got the drug companies. They're going to be out there advertising, we believe. Any other provider of health care that deems it necessary to promote their products. So, we can't tell you what the number is in terms of what the opportunity looks like. We might be able to have a better -- we should have a better grip on it on our next call. We believe it's a big opportunity.

And we're also working, as you might expect, we have an important task force working on this within Entravision. We're also working with Univision and their teams. We're all working together to maximize the opportunity.

You have also got on top of that immigration reform, which is on the table, on the front pages of the news and that's working its way through the process, and that messaging could also benefit us down the road down the year.

Not only that. But if there is comprehensive immigration reform, then a lot of the people who are eligible for legal status will also be eligible for health care insurance. So, it's a -- there's a lot of interesting opportunities here that are moving forward. We continue to focus on these opportunities and we expect to have good news for our investors.

Great. And my last one. Just turning the attention to the balance sheet. Maybe for you, Chris. As you look forward for the rest of the year, what are your options in terms of potentially buying in additional debt or refinancing? Are there any windows that we should be thinking about as you look to address the balance sheet further in 2013?

Well, our bond indenture becomes fully callable on August 1. There is a way to go ahead into the market and call those bonds earlier. It becomes much more expensive, but it is possible. The high yield market, as most people who follow it know, is very active and the terms right now are very favorable. So we're looking at it very carefully. 8/1 would be a date we're looking at as far as a possible refinancing if not sooner. We're watching the market carefully and we'll keep everyone updated.

So you have an option to refinance earlier than that?

We could go out to the market earlier. There is a --

It just costs more.

Right. You just have to prepay the interest along with a slight premium. That's an option. It's expensive option, but the market is hot, both the term-loan B market and the high yield market. Univision had a successful re-fi about 1.5 weeks ago. Salem's out in the market this week. We're watching the Salem we're watching the market and we'll make our decisions very carefully in the near term on that front.

Okay. Great. Thanks very much, guys.

Michael Kupinski, Noble Financial.

Thank you. And congratulations, guys, on a great year, to you and your team. I thought the numbers were great. Just wanted to chat a little bit about the telecom category. Obviously, in 2011 it kind of fell off. It didn't really come back, I don't believe until -- we started to see some light in the third quarter, if I recall. It's nice to see that come back in the fourth quarter. I was just wondering, is that momentum in the telecom category continuing? If you can just paint that in relation as a category to where it was in terms of the peak for that category going back a few years?

Michael, we don't have the exact numbers from the past years. But we did see telecom as a category begin to drop significantly in 2010 and then it continued on to 2011 and most of 2012. We did see the category bounce back in the fourth quarter with telecom being up 36% in our television business and 48% in our radio business versus the fourth quarter of 2011. So, that is certainly good to see. It gives us at least the beliefs that we'll start to see this important category begin to improve. It's still early to determine just how well we're going to do this year with telecom.

And on the expenses in both the TV and radio were just a little tad higher than what I was looking for. And I guess, as you mentioned, there is a variable cost in there certainly because our revenues were a little bit better than I expected as well. So it goes to say that certainly you'd have some compensation, sales commissions and things like that that are going to be a factor in there. Were there anything else in the numbers like did you have an increase in the headcount? Any expenses related to some of your digital initiatives? Anything else in there that looking forward that we might need to adjust for our numbers?

Yes. Michael, there is, you know, an ongoing effort in the digital space to build out our group in that space. So, there is an expense drag on that front. We did announce also earlier, just a couple weeks back, the promotion of a new level of Management at the regional level, who will be focused on market clusters, multiple markets, I should say. Historically, what we've tried to do from the top down is manage every market individually. This is a way we see of giving more attention to the revenue generation of regions as opposed to just at the single-market level. You've got a new layer of Management in there that's going have a slight impact on expenses and I think that's up in part also what you saw in Q4. But, the bulk of the expense increase for the fourth quarter in both divisions was the ramp-up in revenue.

But, Michael, just to add to what Chris said, we did as he said, he pointed out, we did reorganize our businesses and then we created regions to better manage our businesses. In doing that we promoted a number of people. Gave them more responsibility. With that came new positions and even an increased compensation for the people that we promoted.

The goal with this new model is to separate operations from revenues so that our executives certainly at the highest level are spending 100% of their time focused on revenue. We're using this new structure to manage operations essentially through Corporate. Therefore, relieving what we formally referred to as our general managers, who are now Senior Vice Presidents of Integrated Marketing Solutions and getting their focus 100% on revenues. So, we will see expenses drift up a little bit. But by the same token, we saw revenues, grow substantially as well in the fourth quarter.

On a core basis.

Sure. That's true. And in terms -- I'm sorry.

I was just going to say that we believe our core growth in the fourth quarter was as good or better than any of our competitors, be it in Spanish or English.

Yes. No. That's for sure. And in terms of the headcount in the fourth quarter, what were the FTEs in the fourth quarter versus a year earlier? Do you have that?

Oh, you know, off the top of my head it's about 900. We're going to issue our K next week and that number will be in our K as of 12/31 though. I'll give you the page number if you want, once it's published.

Okay, thanks, Chris. Also on your digital initiatives, do you have a dedicated sales staff for that or is that just getting off the ground at this point, where you're really not focused on that, having a dedicated staff?

What we've done is, we've gone from having a dedicated staff initially, as we introduced these new digital products, to an integrated staff as we start the year. So we started to integrate better, actually, in the fourth quarter, all of the products that we're offering to our advertisers across our entire platform. We're pleased to see what -- the results. I talked about EntraLeads. I think that's going quite nicely. The Los Angeles team has embraced that product and is just doing -- creating wonderful growth using it's radio platform and integrating EntraLeads with it. And, across the country we are promoting this product. Again, it's an integrated effort.

In terms of your corporate expenses, just a little bit of a jump there. Was anything in there like a true up in terms of bonuses and accruals and things like that? Or, if you can just give us some thought about how we should look at that number going forward in terms of our run rate?

The bulk of that number, Michael, was bonus accrual for the quarter. That bonus accrual was about $850,000. Then the management reorg that we referenced before was about $0.5 million. That's by and far the bulk of that corporate expense increase. Looking forward to next year, that corporate expense will be flat to down low single digits as far as your models are concerned.

Perfect. That's all I have. Thanks, guys.

I just want to add that in 2011 our bonuses were relatively low. Of course, this year we had a very strong year. We felt it was important to reward the people that work so hard to create our success.

Yes. Well done. Thank you.

(Operator Instructions)

Aaron Syverston, Sidoti.

Appreciate the extensive color you provided on the today. I apologize if this was already asked. Do you have a number of what your political numbers were in 2010 and then what you expect to see in 2014 after the record year you just had?

2010 political for TV was $5.1 million. For radio it was $1.9 million. All-in it was about $7.1 million. That's net.

We don't have -- yes, $7.1 million was the number for 2010, consolidated. We haven't, again, sat down to put the numbers to what our goals might be in 2014. I think it's safe to say, here on this call, that we're going to be looking at least plus 20% in 2014.

Sure.

Great. And then --

And that's -- that number is being driven by the great success we had in 2012 and the increase in awareness around the power of the Latino vote.

Sure. Was there -- from one, between Obama and Romney, what party seemed to -- you get the majority of the revenue from?

Well, what we can tell you is that the Obama campaign out spent the Romney campaign. What was, I think, the more important data is that the Obama campaign started in the second quarter and ran all the way through the election. They were laying in their message in every week. Whereas the Romney campaign didn't start really until late third quarter. Of course, they were very heavy in the fourth. But different strategies. Of course, we know how it turned out.

Sure. One more question from me. On the pretty significant increases in free cash flow, just looking ahead on what your primary uses of cash will be, whether it's still going to be a focus on delevering? Or are there some other options that could be a possibility?

I think our first priority is we'd like to reinvest that free cash flow in our Business. And if there are acquisition opportunities that are accretive to our current position we'll take a hard look at those. We've always been pretty determined to get leverage below 5 times. We're there now. We're in an odd year, which means that there will be some leakage with respect to that leverage, possibly, as we try to overcome the political that we saw last year. The first priority of that free cash flow is to reinvest in the business, then we'll continue to look at debt reduction possibilities and then shareholder friendly activities.

To Chris' point, we want to invest in our growing core business and, of course, create new growth drivers. We invest in our growing core business by increasing the training of our revenue executives and sales teams as well as bringing stronger executives into our Company.

All right. Great, guys. That's it for me. Thanks.

John Kornreich, JK Media.

I have a few just real quickies. I think they will be. Walter or Chris, should we plug in maybe a $1 million for political this year?

You know, John, that's fine. You know, we're still trying to get our arms around the number. If you want to plug in $1 million, we're okay with that.

We're in February and it's going to be a long year on the political front. So, we honestly don't know, but that's probably a good place to start.

Okay. Chris, what you say the cash was at the end of the year?

Cash was $36 million and change.

And the leverage number you gave of 4.3 is using gross debt, right?

No, using $10 million of our debt, so our new credit facility allows us to take $10 million and net it against the gross to get that 4.3%. Otherwise, it's 4.5% on a gross basis.

Okay, so using $10 million against the gross?

That's right. Used to be, we could net $20 million. Now we can only net $10 million.

Okay. When you report your $6.1 million of taxes on the income statement in the press release, that's all non cash, right?

Non cash, that's right. That's just the non-cash expense.

What's the --?

(multiple speakers) -- it's NOL. So, we won't be cash payer.

What is the NOL?

The NOLs are about $290 million at the federal level.

I won't ask that question again.

Okay.

The retrends of $20.2 million, you know the next presumed bump will be 2015. So with the next 2013, '14, I would think and maybe up $1 million in each one?

Retrends next year -- or this year should be about $21 million.

Okay, and then next year could be $20 million --?

Yes, I'm not going to go next year. But, we'll say $21 million --

Okay. But '14 is still part of the five-year agreement?

Yes, it is.

Okay. I you was going to ask you about overhead, you did that. At-the-call price on the bonds is $100 million?

The call price is $106.5 million in August.

Right. Okay. Any soccer money this year to speak of?

Yes. We've got two tournaments, Copa de Oro and (spoken in Spanish). One is in June and one is in July.

I thought there was something going on right this quarter.

Well, we have our Mexican soccer league, the Primera Liga or Liga Primera, that we run games. Plus, the national team, the Mexican national team, we're broadcasting those games as well. Qualifying games.

I thought there's something very big going on because ESPN is playing it up very big. Messy versus Renaldo?

It's just one game. That's the Barcelona, probably.

Okay. So nothing really meaningful this year?

Well, the Copa de Oro is a big tournament. (Spoken in Spanish) are important tournaments. Nothing like World Cup, which we'll have next year.

Okay. You touted the great year that LA had, yet the entire radio division, excluding political, was up 2% for the year. That would almost suggest that ex LA radio didn't have a very good year?

Well, I would answer that by saying we had a slow start in radio and we started to really turn it on in the second half. And by that I mean our core business. I think the results in fourth quarter suggest that we're on the right track with that business and based upon what I said about first quarter and 5% core revenue growth through February, I don't think there are too many radio companies with that kind of number.

Okay. I think you said in the fourth quarter, local core was up 1% and national was up some humongous number.

I think I said to you the local core was up 1% and national core was up 20%.

Right.

For television.

For TV, right.

And consolidated was up 10% core.

But, the local of 1% I would think suffered from inventory displacement from the political?

That's a pretty good assumption, yes. I mean, we did -- I think we did just a tremendous job overall of managing the inventory given the fact that we grew our political by over 100%. And it was crunch time between August and November. But I think we did terrific work there in managing the inventory and local may have -- probably was squeezed by political and national.

And remember we're not --

When I look at your first quarter pacings numbers of TV up 7%, I mean, is it the same kind of thing? Zero local and 15% national?

Actually, it's -- it's funny you bring that up. It's actually local is what's stronger, much stronger than national.

It's flipped.

It's flipped.

Okay.

Which I'm a little -- we're a little surprised to see, but we'll take the growth.

Okay. And, finally, I think I noted in an SEC filing that Walter and Chris together bought close to 400,000 shares. Was that due to the expiration of options?

No, those were options that just vested. That were granted. So it's all -- it's not us being active in the market buying shares. It's just part of --

I see. I misread that. Okay. And one -- two suggestions for the future. One, especially at year-end reporting, you should have a balance sheet on here, on the press release. And two, on pages 3 and 5 you basically have the 3-month numbers and the 12-month numbers. Now, when it comes to page 4, segment breakdown, you don't. And it would be helpful so that we don't have to, 20 minutes before the phone call, have to dig into our numbers. It would be helpful to have the three-month numbers for the segments, which you have revenue and expense, and the 12-month.

Okay. John, we'll take that under advisement.

John, you always give us good advice. We listen very carefully.

It's just a matter of saving us time. You have the numbers anyway.

Yes, right. We will look at that. We want to make it easier for people to read our press release.

Absolutely.

Chris, you are going to be DB and Walter is not, right?

We will both be there.

we'll both be there, John. Are you going to be there?

I will definitely be there.

I look forward to seeing you.

We'll keep the microphone away from you. (laughter)

He only gets three minutes.

That's it.

David Hebert, Wells Fargo.

Hi everyone. Thanks for taking the question. Most of mine have been answered. I was going to ask about the balance sheet and taking out those notes, but I think you have that pretty well covered. I guess the only follow-up I might have would be are you partial to bank debt only or bonds? I mean, how do you balance like covenants versus not having covenants? I just wanted to get your thoughts there?

Less covenants from our perspective is always more flexibility. That's kind of our focal point, right now. Term loan B market seems to have that optionality in hand. So we're looking at it. Again it's going to be a function of what the market has to offer. So.

Okay. Fair enough. And then on M&A you mentioned you guys are interested in acquiring additional assets. Where would English-language TV stations fall under that umbrella because we've seen -- or we've seen and heard that a lot of stations are on the block right now. Wanted to know your appetite for that kind of acquisition?

Well, from time to time a number -- I mean, a lot of information comes through our doors in terms of potential acquisition opportunities. We're very careful at what we look at. It has to be accretive. It has to be assets that are complementary to our existing clusters. As for English-language assets, we do operate a few in some of our markets, particularly our border markets. We have two Fox affiliates, one in McAllen and one in Laredo. I think what's important to note about those two assets and those two markets is that they are 90% Latino. Doesn't matter what language you are speaking in there, you're speaking to the Latino community. It would have to be that kind of an asset. English-language asset that fits one of our high density Latino markets. And of course it has to fit the financial criteria, more importantly.

Okay. Fair enough. And the retrans agreements, Univision currently negotiates that on behalf of Entravision, correct?

Correct.

And that agreement, I believe, expires next year. Is that something you guys are looking to extend or just kind of cross that bridge next year?

Oh, I think we'll cross that bridge when we get there. Univision did renew three agreements in 2012. I believe it was Verizon, AT&T, and DISH. I believe one of those agreements runs beyond our proxy agreement with Univision. That agreement will be honored, certainly. But look it, we believe it makes sense to continue to work with Univision. They're a great partner of ours and we'll certainly address the proxy extension at the appropriate time.

Great. Thank you very much.

This concludes our question-and-answer session. I'd like to turn the conference back over to Management for any closing remarks.

Thank you, Amy. And thank you, everyone, for participating on our fourth-quarter and 2012 full-year call. We look forward to providing you with our first-quarter results in May. And again I want to thank all of you for joining us on our fourth-quarter and 2012 investor conference call. Good-bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.