Entravision Communications Corp (EVC) 2022 Q2 法說會逐字稿

Greetings, and welcome to the Entravision Second Quarter 2022 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Kimberly Esterkin of Investor Relations. Thank you. You may begin.

Thank you, operator. Good afternoon, everyone, and welcome to Entravision's second quarter 2022 earnings conference call. Joining me today are Walter Ulloa, Chairman and Chief Executive Officer; and Chris Young, 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 Entravision's SEC filings for a list of risks and uncertainties that could impact actual results. This call is the property of Entravision Communications Corporation.

Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Entravision Communications Corporation is strictly prohibited. Also, this call will include non-GAAP financial measures. The company has provided a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures in today's press release. The press release is available on the company's website and was filed with the SEC on Form 8-K. In addition, all pro forma figures, including revenue, operating expenses and consolidated adjusted EBITDA noted throughout the prepared remarks include the contributions of MediaDonuts and 365 Digital in the prior year period.

I will now turn the call over to Walter Ulloa, Chairman and Chief Executive Officer.

Thank you, Kimberly, and good afternoon, everyone. We appreciate you joining us for Entravision's second quarter 2022 earnings call. Entravision's performance in the second quarter capped off a strong first half of 2022. Net revenue for the second quarter totaled $221.7 million, up 24% year-over-year. On a pro forma basis, revenue increased 16% over the prior year period. The continued growth of our digital segment, combined with improvements in our core television and audio businesses drove the strength during the quarter. For the 6 months ended June 30, 2022, revenue totaled $418.9 million, up 28% year-over-year.

On a pro forma basis, revenue for the first 6 months of 2022 increased 20% over the prior year period. Similar to the quarter, year-to-date revenue benefited from growth in our digital segment, as well as improvements in our core television and audio businesses. Consolidated adjusted EBITDA totaled $22.5 million for the second quarter, up 26% year-over-year. What is so impressive about our second quarter EBITDA growth is that we had $5.4 million of non-returning revenue from the prior year same period, and we still managed to grow EBITDA 26% in the quarter. For the 6 months ended June 30, 2022, consolidated adjusted EBITDA totaled $40.6 million, up 27% year-over-year. Even as our top line continues to grow, we have successfully maintained a lean cost structure, having rightsized our expenses over the last few years.

Despite current macro conditions, we do not currently see a need to make any additional expense cuts. That said, expense management will continue to remain core to our operations as it undoubtedly drives our EBITDA, free cash flow and ability to provide returns to our shareholders. Speaking of shareholder returns, I am pleased to announce that our Board of Directors has approved a cash dividend for the second quarter of 2022 of $0.025 per share payable to shareholders on September 30, 2022.

During the quarter, we also continued buying back shares under our $20 million share repurchase program, bringing the total repurchase to date to approximately $11.3 million. With that as a background, let's take a further look at each of our 3 segments, beginning with our largest digital. I'm very pleased to report that during the second quarter, all of our digital units delivered solid revenue growth, while at the same time reporting positive operating margins. Digital segment revenue represented roughly 78% of consolidated revenue for the second quarter and totaled $174.4 million, up 34% year-over-year.

Top achievements for the segment during the quarter included our strategic territorial expansion within Latin America, Southeast Asia and Sub-Saharan Africa, as well as the success of our mobile performance business led by Smadex. Entravision's digital mission is to continue building a global digital marketing sales operation in emerging territories, where a critical mass of connect consumers exist together with a large and growing advertising industry. Based on these criteria, we have expanded across multiple territories and continents, both organically and through strategic tuck-in acquisitions.

At present, Entravision's digital operations span 35 different countries and service over 7,000 clients. To deliver upon this mission, our digital operations provide 2 main offerings. The first is our commercial representation service for some of the world's leading social and technology platforms. In this business due to our phenomenal sales teams who provide staffing, onboarding and workflow services, we continue performing strongly.

The second offering entails our mobile user acquisition solutions that includes cutting-edge proprietary technology, unique performance services and dynamic creative optimization workflows. These mobile solutions are offered in Latin America, Europe, Africa and Southeast Asia as stand-alone services. With that as a background, let me provide some examples of these services in action. Starting [with] Latin America, Entravision Cisneros Interactive delivered solid results for the second quarter with revenue increasing 9% over the prior year, fueled by our commercial representation partnerships with Meta and Spotify.

Turning to Meta in particular, on July 1, Entravision Cisneros Interactive officially expanded its partnership with Meta and Honduras and El Salvador. This brings our Latin American partnership with Meta to 11 total countries. As part of this expanded partnership, Entravision Cisneros Interactive will provide strategic support, creative expertise and content development for Meta advertisers in the region. Entravision Cisneros Interactive has had great success in Latin America over the past 5 years, training more than 5,000 people, including agencies and advertisers to leverage the Meta platform for their advertising needs.

Our geographic expansion into our 10th and 11th Latin American countries is evidence of our historical success, and we are very excited to see our efforts on both. Go-to-market events are already taking place throughout Honduras and El Salvador with setup and training happening at each of our local offices. In Southeast Asia, Entravision's MediaDonuts also delivered very strong results with revenue improving for the second quarter, 57% year-over-year on a pro forma basis. Entravision's MediaDonuts revenue growth was largely driven by success with Twitter and TikTok, along with strong mobile performance.

Similar to our digital units, Entravision MediaDonuts continues to expand its geographic reach and during the second quarter, broadened its operations into Bangladesh, Myanmar, Nepal and Cambodia, Latin America, Asia and now Africa. Sub-Saharan Africa is amongst our most recent expansion territories, and we have been very pleased with our performance in this region. For the second quarter, Entravision 365 Digital's revenue increased nearly 5x net of the prior year on a pro forma basis. In May, Entravision 365 Digital opened its operations in Kenya to serve local companies with advanced branding, performance and other creative needs.

Sub-Saharan Africa has over 500 million digitally connected consumers who are technologically savvy, making it a favorable region to further expand. Smadex, our mobile user acquisition programmatic ad tech platform headquartered in Barcelona, Spain also performed very well during the second quarter, with revenue improving 162% year-over-year. Smadex' highly competitive offerings remain a go-to for the gaming, fintech and mobile delivery industries. In the second quarter, we continued to bring Smadex across the globe with territory expansion into Asia and Europe. We also unveiled several ad tech product performance enhancements and debuted our new team of professionals solely dedicated to work on gaming apps and mobile performance.

With many different digital brands now part of the Entravision family, we have taken the important step of unifying all of our marketing communications under a single umbrella. To manage this entire process on a global basis, we have appointed our very own Karina Cerda as Executive Vice President of Global Marketing. Karina will be an important part of our expansion effort, working closely with each of our global businesses on branding, messaging, sales and training. We are excited to take this step in our marketing and sales operation with Karina's promotion.

Now let's turn to our television segment, which comprise [15%] of revenue for the second quarter. Television revenue was $32.4 million in the second quarter, down 5% compared to the prior year period. As noted last quarter, we anticipated our television revenue would decline this year, primarily to the discontinuation of 3 Univision affiliates at the end of 2021. Excluding those 3 Univision affiliate markets, total television revenue was up 11% year-over-year. Excluding those 3 Univision affiliate markets and $2.8 million in political spend in the second quarter, core television advertising increased 1%. National core advertising revenue increased 1% and local core advertising revenue increased 1% year-over-year.

The auto category continues to face pressures. Excluding the 3 discontinued Univision affiliations, auto ad revenues were down 3% in the second quarter year-over-year. While we initially believe the auto category would recover in the second half of 2022, but for a number of reasons, including high gas prices and continuous supply chain disruption impacting inventory, improvement in this key advertising category is unlikely to happen in the second half of 2022. Nevertheless, strong performance in other ad categories has nicely offset the decline in auto. Excluding the 3 discontinued Univision affiliates that ended in 2021, travel and leisure, restaurants, retail, grocery, finance and beverages had strong growth in the second quarter compared to the prior year. As a result of the current market conditions, national advertisement order cycles have shortened considerably reducing our overall sales visibility. Fortunately, local ads have been fairly resilient with consistent sales cycles.

Turning to political. It was certainly an encouraging quarter from a political advertising perspective. What we had initially anticipated approximately $11 million in total political ad revenue in 2022, following a strong second quarter in which we generated $3.4 million in political ad sales in our television and audio units, we now expect full year political ad revenues for television and audio combined to be $17 million to $19 million. This impressive performance was primarily driven by the Nevada elections, the California online gambling initiatives and the Texas primaries, all of which have recognized the importance of the Latino voting population.

On a particular note, in Texas, California, Nevada, we are seeing more political advertisers reserving television spots closer to Election Day. This is a purchasing behavior we have not experienced to this extent with past election cycles. With regards to our ratings performance during May 2022 for adults 18 to 49 in early local news, our Univision television stations finished ahead of their Telemundo competitors in 12 of 14 markets. In late local news, we finished ahead of Telemundo competitors among adults 18 to 49 in 11 of 14 markets plus 1 tie. Additionally, our early and late local newscasts are ranked #1 or #2 against English and Spanish competitors in 9 markets, including ties.

Lastly let's speak to our audio segment, which comprise the remaining 7% of second quarter revenue. Audio revenue totaled approximately $14.9 million for the second quarter, up 6% year-over-year, primarily due to an increase in local advertising revenue. Excluding political spend of [$628,000] in the second quarter of 2022, core audio revenue increased 2% versus the second quarter of 2021. The audio segment's cash flow generation was also strong and improved 8% in the second quarter as compared to the prior year. With regards to advertising categories, travel and leisure, retail, restaurants, product brands, finance, beverages and entertainment, all delivered strong growth versus the prior year period.

Similar to television, auto audio advertising continued to struggle during the second quarter, delivering a negative 5% performance year-over-year. Looking at our audio segment ratings performance for the Spring book, among Spanish language radio stations, the Erazno y La Chokolata Show is ranked #1 in PM drive in 9 out of our 11 markets released for Spring among Hispanic adults 25 to 54, including ties, and in 6 markets among Hispanic adults, 18 to 49. Across our 11 owned and operated radio stations, the Erazno y La Chokolata Show reached more than 469,000 Hispanics 25 to 54. On our Tricolor Network, our mid-day programming ranked as a top choice among Latinos. During mid-day, La Plebe ranked as a top 3 Spanish language radio station in 4 of our 6 Tricolor markets released for spring among Hispanic adults 18 to 49, including ties.

Before speaking further, I will turn the call over to Chris Young, our CFO, to discuss our second quarter financial performance in further detail and to provide our third quarter pacings. Chris?

Thanks, Walter, and good afternoon, everyone. As Walter discussed, revenue for Q2 2022 totaled $221.7 million, an increase of 24% from the second quarter of 2021. For our digital segment, revenue totaled $174.4 million in the second quarter, up 34% year-over-year and up 22% on a pro forma basis as compared to Q2 of 2021. For our TV segment, total revenue was $32.4 million in the second quarter, down 5% year-over-year. Excluding political, core advertising revenue was down 20% year-over-year. However, excluding the revenue impact from the 3 discontinued Univision affiliates, total revenue increased 11% year-over-year.

Retransmission revenue for the quarter totaled $9 million, which was down 3% year-over-year, mainly due to the loss of the 3 Univision affiliates. Lastly, for our audio segment, revenue totaled $14.9 million in the quarter, up 6% from the prior year. Excluding political, core audio revenue was up 2% over Q2 of last year. Operating expenses in the second quarter of 2022 totaled $47.4 million, up 14% from $41.4 million in the prior year period. Excluding operating expenses related to our MediaDonuts and 365 Digital acquisitions, operating expenses were up 9%, primarily due to our revenue growth and increases in salaries. Corporate expenses increased by 16% to total $8.5 million for the quarter compared to $7.3 million in the same quarter of last year.

The primary drivers of corporate expense increases were increases in non-cash stock-based compensation expenses and salary expenses. During the second quarter, we repurchased approximately 600,000 shares under our $20 million share repurchase program, bringing our total repurchases to date to 1.8 million shares or a total of $11.3 million. Consolidated adjusted EBITDA totaled $22.5 million for the second quarter, up 26% from the $17.8 million in the prior year period. Free cash flow, as defined in our earnings release, was up 15% to $14.3 million in the quarter or a conversion rate of 64% of adjusted EBITDA compared to $12.4 million in the second quarter of the prior year.

Net income attributable to common stockholders was up 8% to $8.5 million compared to $7.9 million recorded in the prior year period. Diluted earnings per share for the second quarter of 2022 were $0.10 compared to $0.09 per share in the same period of last year. Excluding a non-cash charge of approximately $1 million relating to a change in fair value of contingent consideration, earnings for the second quarter of 2022 were $0.11 per share. Cash paid for income taxes was $6.2 million for the second quarter compared to $3.3 million in the same quarter of last year.

The increase was primarily due to our making 2 quarters worth of tax payments during the quarter as opposed to just 1 in the prior year. Net interest expense was $1.6 million for the quarter, down 9% from $1.8 million in the same quarter of last year. Net cash interest expense was $1.2 million for the second quarter, down 27% compared to $1.6 million in the same quarter of last year. Cash capital expenditures for Q2 totaled $1.7 million. We remain on track for roughly $12.5 million in full year cash capital expenditures.

Turning to our balance sheet. Cash and marketable securities as of June 30, 2022, totaled $184.2 million. Total debt was $210.8 million. Net of $75 million of cash and marketable securities on the books, our total leverage, as defined in our credit agreement was 1.4x as of the end of the second quarter. Net of total cash and marketable securities, our total net leverage was 0.3x.

Turning to our pacings for the third quarter of 2022. As of today, revenue from our digital segment is pacing plus 24% over the prior year. Our TV segment is pacing minus 4% over the prior year period, with core TV advertising, excluding political booked thus far in the quarter, pacing at minus 14%. As Walter noted, we expect our TV revenue to decline in 2022 from the discontinuation in 2021 of 3 of our Univision affiliates. That said, we more than make up for any TV revenue decline with our digital segment performance. Excluding the impact of our 3 discontinued Univision affiliates, TV is pacing plus 6%. Lastly, our audio segment is pacing plus 4% over the prior year period, with core audio excluding political pacing at a plus 1%. All in, our total revenue compared to last year is pacing at a plus [17%].

With this, I will turn it back over to you, Walter.

Thanks, Chris. As I previously highlighted, we are very pleased to see continued growth across all our digital platforms. In just the past 2 years alone, our digital segment revenue has grown by over 13x. As I mentioned on our last call, we made a strategic investment in Jack of Digital, which has an exclusive commercial partnership with TikTok in Pakistan. Jack of Digital taps into a market of over 100 million connected consumers and is part of a vibrant emerging economy with strong advertising spend. These elements fit ideally with the core aspects of our digital mission that I spoke about earlier.

Not only are we entering into representation partnerships with new social and technology platforms and new territories, but we are also cross-leveraging organically our current partnerships from one region to another. For example, we expanded our partnership with the in-gaming advertising platform, Anzu, which we now represent through Entravision 365 Digital in South Africa, Entravision MediaDonuts in Southeast Asia and Entravision Cisneros Interactive in Latin America.

Another example is our recent exclusive partnership between Entravision Cisneros Interactive and Televisa Univision. Entravision Cisneros Interactive has been appointed as exclusive advertising sales partner for ViX, the over-the-top platform of Televisa Univision in 10 Latin American markets. Given our solid balance sheet, we remain active and continue to look for opportunities to invest or acquire companies that will further enhance the digital services we provide to our growing global customer base.

As we look to the second half of 2022, we believe that political advertising spend will also be a key driver of revenue growth. While we expected strong political growth in 2022, the amount spent by the political industry in the first 2 quarters, still months away from the midterm elections was a very pleasant surprise. This increase in political ad spend provides further evidence that both political parties understand the importance of Latino voters to local and national elections.

In fact, a study by the Pew Center found that in battleground states in the 2020 election as a share of eligible voters, Latino voters grew more than any other racial or ethnic group. We believe this bodes well for our television and audio segments in the back half of this year as political parties rev up their ad spending to the mid-term elections. While macro conditions, including inflation and recessionary concerns may pose some challenges to the broader markets as we progress through 2022 with a strong balance sheet, streamlined expense structure and a team of some of the best professionals in our industry, Entravision is well positioned for continued success. I want to extend my gratitude to our Entravision teams around the world for their continuous efforts and performance, and I want to thank our shareholders for your support.

That concludes our prepared remarks. Chris and I would like to open up the call for your questions. Operator?

(Operator Instructions) We have our first question from the line of Michael Kupinski with NOBLE Capital Markets.

Congratulations on a strong quarter. I have a couple of questions. I know that you recently expanded your footprint in Latin America. I was just wondering, have you now expanded what I would consider the low-hanging fruit? What are the opportunities still left in Latin America? What countries do you still think you might be able to expand into, if you can just give us a sense of the opportunity to grow outside of the regions that you currently have?

Michael, it's Walter. Yes, we did expand in our Meta partnership in 2 new territories in Latin America. As far as what else might be available to us, so that's something that Meta has to decide. We work very closely with them. We try to -- we do the best we can to represent their platform in all of our Latin American markets. And like I said, we certainly try to mirror their professionalism and give the platform the best representation possible. Beyond that, we're in contact with them regularly. And we're always looking for new opportunities in other parts of the world to represent Meta.

I know that, a lot of investors focus on the U.S. economy and how that's affecting advertising. It's particularly national advertising. I was just wondering if given that you are in such strong growth markets, in such a strong growth industry in digital and a lot of these other countries. Are you seeing any weakness coming from any particular regions around the globe? What we are seeing in the United States and what's [happening?]

Well, I think the -- this inflationary condition in the United States is worldwide. And that certainly has -- it dampens people's ability to consume more or spend more. So certainly, I think the issues that we're facing here in the United States with a slowdown in consumer spending is prevalent throughout the world.

Got you. Is there any particular region that you're noticing that weaknesses, that -- or I guess are softening of the growth that you're seeing in digital?

No, not at this time. I mean, we monitor all of our markets, our territories as closely as we can, and trying to get a good sense of where the markets headed. But right now, we're not seeing any call it any weakness, but we'll continue to monitor it. I think the economic situation, not only in the U.S., but in the world is something that will continue to change and be more volatile than we would like.

And then my last question, obviously, you have a pristine balance sheet, lots of cash, which is in a great position to be in, especially if we are heading into recession, there are a lot of media companies out there that are very levered. It look like at this point, are you seeing anything that's now crossing your desk that may have (technical difficulty) go when the economy was looking pretty strong? Just kind of like looking at the pipeline of opportunities. And then if you can just talk a little bit about where you're seeing the opportunities, are they in the digital space? Are they in other areas that you might consider?

Well, I think you were dropping off a little bit of Michael, so we're having trouble hearing all of your question. But we spend a lot of time analyzing the opportunities in the digital space. That's something that's kind of a constant that runs through the company. We continue to look at opportunities in all parts of the world, particularly those opportunities that complement our current infrastructure that we've put in place.

Got you. At this point, you wouldn't be looking at media, like traditional media, like television or radio, or other things in that -- of that nature?

Well, it has to be something really compelling. I mean, once in a while, things come across our desks here on the traditional media side, and we look at it closely and we evaluate it and see if it can contribute to our growth. And if it can't, and if we don't we move on. But that's the same way. That's the same approach we use with our digital, any digital opportunities as well, how well will it fit into the current strategy of the company with regards to our digital assets? What's the culture like of the new company that we might be looking at? And most importantly, what are the prospects for growth?

We have next question from the line of James Dix with Industry Capital Research.

Couple questions. I think -- and correct me if I'm wrong over the past quarter, you had a couple conference presentations, where I think the message was that you were still comfortable with the business outlook that you had going into the year. Now that you've reported your second quarter results, would you speak to that again? I mean, do you still feel basically the similar level of comfort with your business outlook that you had going into the year?

We do, James. We like what we see so far in the current quarter. And then fourth quarter, obviously is still a long ways out. But we're still tracking to what we had budgeted as far as the end of last year.

Okay. And would -- you've announced since then a few territorial expansions, which you've talked about earlier in the call. Would results from there be incremental to that?

Would there be incremental? No, probably not. That kind of potentially could serve as an offset if there is any perceived weakness with the core operations. So we're sticking with that number and not really adding anything incremental from those 2 new territories.

Okay, got it.

Also I will add, James, just to what Chris said. It takes a while to develop these countries, it doesn't happen overnight. So it'll be at least a 6 month to one year process before we start to see some real returns on all of our work.

Okay. And then your digital revenue, I would say maybe a little -- was a little bit below what I was expecting in the quarter. There, I know previously, you had mentioned a few headwinds, you might have been seeing. Are there any headwinds that you would call out for digital that you saw in the second quarter?

Any headwinds? No, I mean, we still like what we're seeing, maybe the Meta business has -- the growth has subsided a little bit, we are comping against tougher numbers deeper into the year, last year, so that directionally is something that we're tracking. But no, otherwise, we would like what we're seeing.

Okay, great. And then one housekeeping thing as far as television, I think at the end of your pacing discussion, you talked about pacing up 6%, excluding the 3 affiliate changes you had at the end of last year. I just want to be clear, is that a pacing for core advertising or all revenue?

That includes political.

Okay. But is that an advertising only number? Or is that a total revenue number?

Yes, it's an advertising only number, but including political, but not including trends, yes.

Okay, great. And then the pace of the buyback was a little bit slower in the second quarter than the first. Anything, any particular reason for that or was that just kind of the brakes of the windows and things like that?

Well, you know what, we're watching the market carefully. We had 10b5-1 in place with specific buying criteria. Many -- oftentimes that criteria would never hit, we'll look at tweaking that when the windows open and seeing if we can make more progress on that front.

Okay. And then the last one for me is, are you seeing or do you think that this digital business is seeing any impact from the strong U.S. dollar in various markets? I know you've indicated in the past, I think most of your media representation contracts are denominated in dollars. But I still wonder about some of the advertisers just locally there. Whether they're feeling any pressure from the strong dollar and whether that's flowing through it all to your partners, and therefore to you or do you think that's really a non-issue?

I think it's a non-issue. Look, it's something really we're watching. But we -- it's tough to say whether that's really happening or not. But right now, I think it's safe to say, we continue to like what we say.

We have next question from line of Lisa Springer with Singular Research.

Robert Maltbie filling in for Lisa Springer. Couple of questions. Firstly, in light of the headwinds experience during the internet and digital, notably Facebook, or better as we now call them Snapchat, Roku recently. How have you been able to navigate those extreme headwinds? And what are strategies you may deploy to address the near future versus that? And secondly, is there a consideration or a thought about untethering the lower growth assets, namely radio television from the higher growth digital assets and businesses, possibly in the form of a, I don't know, tracker or a spin off?

So it's Howard, right?

Robert.

Robert, thank you for your question. There is no discussion here internally to divest or spin off any of our broadcast assets. We as you may know, we've been certainly executing those assets for a great period of time, but we still see growth in the Latino market, it's one of the most, call it dynamic segments of our population. You can see what's happening in political. We're seeing more political dollars than ever, in our history. A lot of that's due to the growth of the Latino voter electorate, which are more -- what's both parties now are continuing to invest more in. So now that's not in the plans.

As far as our digital business, we continue to provide, looking to provide a better service to our not only the platform's that we partner with, but also our advertisers. And that means more training for our sales professionals, more training for our advertising and agencies and clients. Better data, we're working right now on a product where we're going to provide to our advertisers and agencies that will give them a lot more data on their campaigns. We're certainly going to look -- work, use that data to help them better execute their campaigns. And in the end, we think this will result in more sales for them. So that'll be a benefit to us as well, blocking and tackling. Hello?

Sir, do you have any further questions, Robert?

No further questions.

We have a next question from the line of Edward Reilly with EF Hutton.

I think I heard that core TV pacings were down 14%. I was just wondering if you could maybe break that down between the national or the local level for me?

Yes, the national and local are both pacing down 9%. And then you've got political reversing all of that.

Okay, got you. And congrats on the close of the Jack of Digital acquisition. Wondering how material the effects of the acquisition will be on the financials going forward.

Yes, it'll be negligible this year. It's a small acquisition, not material. But we do expect high growth out of that operation over time. We're excited about it. But no need to re -- or just to change your models at this point.

We have next question from the line of Howard Rosencrans with Value Advisory.

Good to be back on your calls.

Good to have you back.

Good to hear your voice.

I just wanted to get first clarification on that pacings number. You said it was minus 14%. But that includes the affiliates you lost in TV, right?

That is correct.

That's correct.

Okay. So I believe you said pro forma is plus 6%. And that includes political, and I guess political is probably crowding out core, so we shouldn't. So we probably shouldn't get into a deeper breakdown on that. Is that fair?

That's fair. Yes. Inventory is getting grounded.

Okay. So my question is regarding digital. So you said so, if I have it correctly. So in the second quarter digital was up 34%. And pro forma, it was up 22%. Is that right?

Yes, I believe that's right. Are you looking for prior year numbers to reconcile the front.

No, not looking to reconcile, that was up -- so as up '22 pro forma. So then you said that Q3, the pacing is plus 24%. So just -- can you give us a ballpark of sort of what that's running pro forma in digital?

Yes, that is basically -- that is -- but it's not quite pro forma. But the only acquisition that has yet to be tucked in at that point last year was 365 Digital. And that's a very small deal, Howard. So that percentage won't likely change on a pro forma basis.

Okay. So that's certainly encouraging, particularly that. And then I'm going to go back to the tail of what I think was the singular question. If you addressed it, I apologize. So basically, social media is having a tough goal. Now in part, I believe it reflects that one social media vehicle is eating the pie of another social media vehicle. But that's just my general perception. Maybe there is just an industry-wide slowing in social media? I'm asking for your color in general on that. But -- so with the slowing -- or is there a share change? Is it just -- is the social media spend just getting spread out more? And how do you -- or is it just a slowdown in social maybe a better aspect first?

Well, I think it's a combination of factors. I mean, if you look at the reports that have come out recently from the big tech platforms here, it's a combination of a competition, certainly. And just -- I think, just overall, the economic condition that they're looking at is changing quarter-to-quarter. So I think those are the 2 biggest factors, the macro competition.

So it's -- okay, so it's both factors. So then my question to you is, on a global basis, specifically in the markets you're competing in, I guess it's, foremost, it's the biggest market -- if I'm not mistaken, far and away the biggest market is Latin America. And I know you have representation with Meta, I don't really know what your representation is Meta, vis-a-vis TikTok. But are those mediums losing share? Like they are in, again is it that there is this TikTok taking from Meta is -- are you seeing the same sort of conditions there? So you would see, because based on your pro forma growth, it doesn't seem like you're being impacted as of yet. So, is it not the same in those global markets?

Well, I think a couple of things. One, we focus on emerging territories with a strong connected consumer base. And so our markets that we operate in are maybe not as mature as the bigger markets that the platforms that we're all aware of operating the Meta, Google, et cetera. But -- so that might be part of it. And that there's still more growth left in our markets. But certainly, we're all fighting for the ad pie. So it's fierce.

Okay. And do you expect, I don't know if it's seasonality or it's just continued Q-to-Q growth to -- I would assume to continue to drive your EBITDA on a quarter-to-quarter basis higher, because I assume your margin in -- your margin, I figured was about 7% in digital. So I assume there is really going to be, I doubt there is margin compression on the near horizon. So I -- is it fair to say that, that should drive up -- there should be some nice flow through and drive up the EBITDA Q-to-Q meaningfully?

Yes. Digital margins were 7.3%, Q2, we expect that to continue to ramp up. Q4 is the peak quarter for digital. So -- and sequentially yes, revenue is expected here internally to continue to improve quarter-by-quarter for the balance of the year.

Glad you're back too, Howard. So thank you again, everyone for joining us today on our second quarter call. We look forward to sharing our progress with all of you in the third quarter when we -- on our third quarter call in November, when we'll announce our third quarter earnings. Operator?

Thank you very much, sir. Ladies and gentlemen, this concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.