SBSAA - Spanish Broadcasting System Inc. (SBSAA) Q4 2022 Earnings Conference Call Transcript

2023-05-07 06:15:21 ET

Spanish Broadcasting System, Inc. (SBSAA)

Q4 2022 Earnings Conference Call

May 3, 2023 11:00 AM ET

Company Participants

Brad Edwards - Investor Relations

Albert Rodriguez - President and Chief Operating Officer

Jose I. Molina - Chief Financial Officer

Presentation

Operator

Good day, and welcome to the Spanish Broadcasting Fourth Quarter and Full-Year 2022 Conference Call. All participants will be in a listen only mode. [Operator Instructions].

I would now like to turn the conference over to Mr. Brad Edwards, Investor Relations. Please go ahead, sir.

Brad Edwards

Thanks, Chuck, and good morning everyone. Before we begin, please recognize that certain statements on this conference call are not historical facts. They may be deemed therefore to be forward-looking statements under the Private Securities Litigation Reform Act of 1995.

In particular, statements about future results expected to be obtained from the Company's current strategic initiatives are forward-looking statements. Many important factors may cause the Company's actual results to differ materially from those discussed in any such forward-looking statements.

Spanish Broadcasting System undertakes no obligation to publicly update or revise its forward-looking statements. We also know that we would be discussing non-GAAP financial measures. The Company believes that operating income before depreciation and amortization gain on the disposal of assets, recapitalization costs and other operating income or expense, excluding non-cash stock based compensation, or adjusted OIBDA is useful in evaluating its performance because it reflects a measure of performance for the Company's stations before considering costs and expenses related to capital structure and dispositions.

This information is not intended to be considered in isolation or as a substitute for operating income, net income or loss, cash flows from operating activities or any other measure used in determining the Company's operating performance or liquidity that is calculated in accordance with U.S. GAAP. A reconciliation to the Company's U. S. GAAP information to adjusted OIBDA is provided in the tables attached to the Company's fourth quarter and full-year 20-22 earnings release which is available on the Investor Relations section of the Company's website at www.spanishbroadcasting.com.

I will now turn the conference over to Mr. Albert Rodriguez.

Albert Rodriguez

Good morning, ladies and gentlemen, Welcome to the SBS 2022 fourth quarter and full-year Earnings conference call. On today's call, we will provide an overview of recent operating developments and review our financial results. Joining me today are Jose Molina, our Chief Financial Officer, and Richard Lara, our General Counsel.

Our fourth quarter results finished another year of strong audio and consolidated revenue growth as well as key strategic accomplishments and investments we significantly expanded our aggregate audience in 2022 as well as redefined our multimedia platform to best position SBS for accelerated growth in 2023 and beyond.

On the audio side, we acquired two Florida stations; Orlando's 95.3 WPYO FM and Tampa's 97.1 WSUN FM, which continue to perform ahead of our expectations following the launch of El Zol so Spanish tropical format.

In the last 12 years, 2022 versus 2010 overall these markets have grown by double digit percentages even among the general population, yes, among the general population. As we previously forecasted, we are on track to be profitable within both of these stations in 2023.

Today, we operate the largest Hispanic audio platform in Florida and our station acquisitions built on our existing leadership in one of the nation's largest Hispanic markets. Among Hispanics, these markets have exploded Tampa plus 72%, Orlando plus 89%, Houston plus 42%. More than 1 in 5 people are Hispanic in Tampa, 21% more than 1 in 3 people are Hispanic in Orlando, 36% and more than 1 in 3 people are Hispanic in Houston, 36% in the recent Nielsen HDMA fall 2022 book, Houston ranked third surpassed fourth ranked Miami, [indiscernible] third DMA national ranked after Los Angeles ranked number one and New York, which is ranked number two.

In addition, we recently announced the acquisition of KROI, a FM audio broadcast station serving the Houston market KROI is a natural addition to our audio station footprint and is consistent with our strategy to broaden our connection with Latinos nationwide. We're excited to bring out content, talent and commitment to the Houston market as we look to deliver a compelling experience to listeners and unique advertising opportunities to connect brands with the rapidly expanding Latino population. Houston is also one of the nation's top audio revenue markets.

Looking at our digital platforms, we launched our pure play digital marketing department, DigIdea, Digital Marketing Solutions. The addition of DigIdea, Digital Marketing Solutions makes SBS a one stop shop for business for marketing needs. DigIdea allows advertisers across industries and of different sizes build complete marketing solutions to meet their target consumers at all stages of the purchase journey.

Lastly, earlier this year, we completed the sale of MegaTV to Voz Media for approximately $64 million. We will always be proud of the almost two decades of Emmy award winning achievements of MegaTV delivered. We are glad it will be operated by another dedicated Hispanic owner who will continue the station's commitment to serving the nation's Latino population, taken together, we have refined our multi-platform assets and taking steps to strengthen our connections with Latino nationwide as well as our ability to connect brands with the rapidly growing Latino population.

At SBS, we have always been committed to operating the best diverse minority owned Spanish language audio and digital entertainment platform in the nation, the targeted investments we are making will build on our market leadership and history of industry outperformance.

Now let's review our operations and we'll start with our AIRE Radio Networks.

For the fourth quarter of 2022 AIRE Radio Networks, outpaced the marketplace in all of the top broadcasters in America by 13%, Miller Kaplan reported network spot down by 9% while AIRE Radio Networks delivered an outstanding performance of 4%. The key categories of the period were telecommunications of 1300%, insurance by 1400%, home improvement by 113%, consumer packaged goods by 47%, government by 47%, AIRE Network made revenue history and achieved a record breaking level that had never been achieved before.

AIRE Radio Networks the largest minority owned Hispanic audio network delivering 42% of all Spanish language listeners across the country continues its commitment to super serving Hispanics, AIRE Radio Networks reached nearly a quarter 22% of all Hispanic consumers each month across more than 300 affiliates, NMSDC certified with presence in the top 50 U.S. Hispanic markets, some of the key highlights for AIRE’s initiatives included [De Rille Mourne] (ph) show, La Mezcla with Alex Sensation, the influencer network delivering campaign messaging through a national platform while penetrating local markets and Artistas360 where brands are aligned with Latin artists.

Now we look at our audio division, we are celebrating waiting success engagement and loyalty across New York, Los Angeles, Miami, Puerto Rico, Chicago, San Francisco, Tampa, and Orlando. With our relentless dedication and knowledge of the Hispanic market, not only have we achieved impressive ratings in all of our markets, but we have also experienced a significant growth in listener loyalty and engagement.

Our primary goal has always been to create unique engaged minutes and high quality content that resonates with our diverse Hispanic audience, our creativity and teamwork have made it possible for us to achieve this objective.

We are number one in New York with WSKQ FM Mega 97.9 number one in Los Angeles mornings KXOL, Mega 96.3 FM. Number one in Miami with WXDJ FM El Zol 106.7. Number one Orlando WPYO FM El Zol 95.3. Number one Puerto Rico WMEG FM Mega 106.9. Number one, San Francisco, KRZZ La Raza 93.3.

In New York, our programming and on air team continues to captivate the hearts and minds of one of the most demanding Hispanic audiences in the world, our ability to innovate and stay ahead of the curve has enabled us to become a staple in the daily lives of millions of New Yorkers and Hispanics across the nation.

WSKQ 97.9 is the number one station in New York and the number one most listened to online streaming station in the nation. SBS has three of the top 20 stations in America, regardless of language, adults 18 to 49.

In Los Angeles, our program has struck a chord with the vibrating and bustling Hispanic community as our morning show, Omar and Argelia on KXOL FM Mega 96.3 has now become one of the top rated morning shows in the city beating all of Spanish contemporary stations in the latest Nielsen March 2023 ratings book. Meanwhile, in Miami, we have tapped into the unique cultural blend, offering content that reflects its diverse and dynamic character. This has allowed us to establish a strong presence in the market.

As we continue to grow our listener base and expand our influence, we are creating a personal touch points with our Hispanic local community. This growing loyalty is a direct result of our consistent focus of delivering content that is relevant, exciting and tailored to the means of our Hispanic and diverse audience.

As we move forward, we celebrate these accomplishments and remember that our success is built on the foundation of pushing the boundaries and creativity and innovation as we strive to maintain our position as a leading source of entertainment and information for our family of listeners.

WPYO FM El Nuevo Zol 95.3 continues to dominate the Orlando and Central Florida market. Our morning show El Despelote with Rocky the Kid is again the number one Hispanic morning show in the entire Orlando market.

KLAX La Raza 97.9 is a number one regional Mexican station with El Chikilin middays 10 to 3. El Chikilin is also on our San Francisco station and across our AIRE Radio Network. KRZZ is the number one Hispanic station in San Francisco. In Puerto Rico, we have a station with the number one in every demographic group with adults 18 to 34 WMEG La Mega 106.9 is number one with 9.3 share in WODA FM La Nueva 94.7 is a number two with a 8.7 share and with adults 18 to 49 WMEG Mega is number one.

Turning now to our live events division. SBS closed a multi-year agreement with Oak View Group, the largest developer of sports and live entertainment venues in the world to produce SBS heritage shows such as Mega Bash, Mega Mezcla and many other shows in its venues in New York, Austin, Palm Springs and many other cities. SBS Entertainment also secured a strategic partnership with touring partner to co-produce the [Indiscernible] in Orlando this year. But the vision continues to see great demand for it shows as a comprehensive show schedule is into place for 2024.

Now turning to our mobile and digital platforms and strategic initiatives. Over the last several years, we've had great success transforming SBS into a leading multimedia Hispanic media company. Today, we connect brands with much more than Hispanics have ever seen before and our aggregate audience continues to expand.

For our brand partners, there has never been a more important time to have a Latino focused marketing strategy and outreach program. The Latino population is growing rapidly in size, cultural influence and purchasing power. SBS has the multimedia assets to reach in over four decades of experience and commitment to the Latino community across the U.S. As such, we can deliver compelling and integrated advertising opportunities that cross all major media platforms and offer access to coveted demographic groups.

As I stated, our aggregate audience continues to grow. As of December 31, our total audience was up 108% compared to Q4 of the prior year. December 22, we had a record of 3.3 million unique listeners for a live audio compared to 1.7 million in 2021. Programmatic revenue grew by 157%. The total division revenue grew by 22%, year-over-year, LaMusica platform reaches over 3.7 million people across all of our devices who combine for over 25 million streaming hours per month, usage and adoption of LaMusica continues to accelerate as it offers a truly unique mobile and digital experience including original daily video content, short form programming, millions of songs and a personalized experience. Overall, we have placed strategic emphasis on identifying new digital revenue streams as well as increasing our CPMs on existing digital offerings.

We have launched an in house agency to allow us to sell additional digital products. Our clients need SEO, SCM, OTT ads and more, we are also in the process of launching a brand new podcast division that will add dozens of new unique podcasts unrelated to our existing audio based podcasts. We have high expectations for both of those new initiatives.

During the fourth quarter, our total streaming audience surpassed 3.6 million unique listeners per month. This audience delivered 37 million listening hours and over 78 million total sessions in the quarter, given Hispanics's heavily over index on mobile phone ownership and usage, mobile remains the primary driver of our mobile digital traffic and accounted for approximately 95% of our total digital traffic in the quarter. A key driver of our growth in streaming hours and sessions has been the expansion of our LaMusica user base as well as increasing consumption of our podcast and playlist products with an average time spent listening of over 45 minutes in the most popular categories.

In summary, 2022 was a year of many accomplishments and we are just getting started, our audio footprint has been significantly strengthened by our acquisitions in Florida and in Texas. Our aggregate audience significantly grew this past year and our digital platforms and marketing solutions are continuing to gain momentum. We've never been in a stronger positioned to connect with Latinos nationwide and rapidly expanding Latino population. We see a number of compelling growth opportunities in 2023 are focused on building on our success to-date.

Thanks for your time and attention. Now let me turn the call over to Jose Molina for the financial overview. Jose?

Jose I. Molina

Thank you, Albert. Before we turn to our results, I would like to again mention that our results continue to reflect the investments that we have made in our business, beginning with our startup stations in Orlando and Tampa, our digital personnel and infrastructure and our programming content.

We expect the investment to continue in the near term after which we should see revenue growth and our margins and profitability normalize. We believe that we are making the necessary and right investments to drive accelerated long term growth while also sustaining and building on the power of our brands as market leadership position.

It is also important to note that in the comparable prior year period, our radio, television and corporate expenses were impacted by $4.7 million of employee retention credits that were used directly to offset compensation and benefit expense.

Now turning to our fourth quarter results. Our consolidated revenues totaled $48.9 million compared to $46 million for the same prior year period resulting in an increase of approximately $2.9 million or 6%. Our radio revenues totaled $45.3 million increasing $3.2 million or 8%. The growth was primarily due to increases in special event revenues and national sales.

Our radio revenues totaled $3.5 million decreasing 9% primarily due to local sales. Our consolidated adjusted OIBDA, a non-GAAP measure totaled $11.3 million decreasing $7.3 million or 39%. Excluding the effects of the employee retention credit received in the prior year period, which reduced compensation and benefits, consolidated adjusted OIBDA totaled $11.3 million compared to $13.9 million in the prior period, resulting in a decrease of $2.6 million or 18%. Our consolidated adjusted OIBDA decreased $8.1 million or 34% primarily due to the increases in operating expenses of $11.3 million partially offset by the growth in revenues.

Radio station operating expenses increased mainly due to increases in compensation and benefits, special event expenses and advertising and promotion. Our television adjusted OIBDA decreased by approximately 900,000 dollars due to lower revenues and an increase of operating expenses related to compensation and benefits.

Corporate expenses decreased $1.7 million or 29% primarily due to lower compensation and benefits. Operating income totaled $10.8 million compared to $17.7 million for the same prior year period representing a decrease of 39%. Capital expenditures during the fourth quarter were approximately $1.3 million. As of yesterday we had cash on hand of approximately $9.7 million which includes the $3.8 million deposit related to the Voz TV transaction. In addition, we have the undrawn $15 million revolver fully available if needed.

As noted, on February 9, 2023, we agreed to sell substantially all of our television assets and certain real estate assets in the U.S. and Puerto Rico. These assets comprise of our television operations known as MegaTV. And include our television FCC licenses, programming content, equipment, leases and various contracts used in the operations of MegaTV, and our two buildings in Miami, Florida and Puerto Rico where the television studios are located.

The total sales price amount to $64 million of which $57 million are for the assets purchased and $7 million is for a prepaid advertising buy to promote their newly acquired television business during the next four years following the close.

The sale is expected to receive FCC approval and close late second quarter or early third quarter of 2023. We are not expecting any delays. At close, Voz will pay $62 million plus or minus any adjustments and net of their $3.8 million nonrefundable deposit. The remaining $2 million related to the prepaid advertising buy will be paid within one year of the close.

Also on April 3, 2023, we opportunistically and strategically entered into an agreement to acquire an FM radio station in Houston, which is in the nation's third largest Hispanic DMA. We agreed to purchase the FCC license and certain assets and leases used in the operations of KROI FM for $7.5 million. At close, which we expect to occur sometime in the third quarter of 2023 we will pay the remaining balance plus or minus any adjustments and net of our escrow deposit of $375,000.

Looking forward to the fiscal year 2023, we expect capital expenditures to be in the range of $3 million to $4 million and cash taxes to be in the range of $4.5 million to $7 million excluding any additional taxes paid on the Voz TV transaction.

This will conclude our formal remarks. And with that, I would like to turn the call over to Brad for any questions. Brad?

Brad Edwards

Thanks, Jose. So we have a number of questions to get through today. The first area of questions that we received were just a little bit more detail in the fourth quarter. So, Albert and Jose, could you talk in a little bit more detail about what the drivers were of fourth quarter revenue performance as well as expenses?

Albert Rodriguez

Look, national, it was up 21% and I'll give you some color on the categories. Category's telecom is performing particularly well. Consumer packaged goods. Retail is performing well and it gives us a good outlook for what we're going to see in the future, pharmaceutical is doing well. And we're optimistic about that. Digital is up double digit, special event is up as well. And Jose, you want to talk a little bit about barter?

Jose I. Molina

Sure, barter was down about 20%. Just we're trying to focus on cash sales. In addition, I think there was a question on political sales for the fourth quarter, which totaled consolidated $2.6 million, radio was $2 million and television was about $600,000 and for the full-year political gross sales totaled $4.5 million, $3.2 million of that was in radio and $1.3 million was in television.

Just to talk through the expense and let me just walk you through the expenses in the fourth quarter. Expenses increased a total of about $11.3 million of which $6 million was related to the lack of an employee retention credit and an increase in compensation and benefits. $2.3 million was related to special events, $1.1 million was related to advertising promotions and contesting and then $1 million was related to various other expenses. Another way to kind of reconcile these expenses, expenses increased $11.1 million, $4.4 million of those expenses were related to Orlando and Tampa expenses, $5.3 million was related to the lack of employee retention credit and the increase of compensation and benefits and $1.6 million was related to special event expenses.

Brad Edwards

Thanks, Jose. So investors also asked about an update on the Orlando and Tampa stations. So Albert, could you give an update on maybe not just ratings performance, but how the stations you feel are performing as a whole? And what the expectations are over the longer term? And then maybe for Jose, could you discuss how the stations are trending in terms of revenue and EBITDA?

Albert Rodriguez

Sure. Look, that's a great question. I'm glad you asked the question on Orlando and Tampa with respect to performance. I want to talk about the Orlando station, we took over the station basically in early May, late April, early May. And within the first 90 days the station we had to basically we flipped the format of the station and we took the station to number one basically in the first 90 to 120 days. The station right now in Orlando 18 to 49 is basically the number one station in the market.

And in terms of the ratings performance and all of the key demos, 18 to 34, 18 to 49, it fluctuates anywhere from a 6 to 7 share. The morning show does anywhere from a 10 to 11 share, it depends on the book month to month. When you look at the Miller Kaplan performance, the Miller Kaplan performance when you look at the historicals, the historicals, you look at the prior the history and the history was in the high 20s of what the station typically performed.

In terms of the station rank that the station now is in the top five total market range. So we're really proud of the stations revenue performance rank. Tampa, the station is performing rapid as well, not as rapid as Orlando has. The station is in the teens in terms of the ratings performance. So the station is probably in the three share and the ratings performance is growing double digits basically week after week. So we're seeing a progression with the ratings performance and with the revenue performance as well. So we're happy with the direction that it's going as well. So we're really happy in terms of both Tampa and Orlando and the direction.

And if you've seen my formal comments at the beginning of today's call. I mentioned in our earlier earnings calls maybe a few months ago that in 2023, the state -- both stations would be breaking even and we are on track to do that. So we will make money in 2023 online. Jose, do you want to give color on Tampa and Orlando?

Jose I. Molina

Yes, Albert. Orlando and Tampa combined had net revenues $2.9 million in the fourth quarter and $4.5 million for the full fiscal year of 2022. Adjusted OIBDA loss totaled approximately $1.5 million in the fourth quarter and $3.1 million for the full fiscal year of 2022. It's important to note that our fourth quarter results and full year results included significant promotional expenditures mostly one time in nature.

As Albert mentioned, we expect that Orlando and Tampa will be breakeven and have positive adjusted OIBDA for 2023. For example, in the first quarter Orlando has reached breakeven and Tampa is close as well.

Brad Edwards

Great. Thanks, Jose. So another topic was the pending divestiture of MegaTV. So Albert, could you talk about the strategic rationale behind the sale? And then we got questions as well, Jose around the tax implications and expected use of proceeds from the sale?

Albert Rodriguez

Look, I can now be prouder of the history almost two decades of Emmy award winning awards of MegaTV and the great work that our video division has done and the great teamwork. Our audio division does great work and we have three of the top 20 audio stations in America. And because our audio division continues to grow our content offerings we believe that that's a direction that the resources of our Company should be focusing on and that's the direction that we're going to go.

And we're going to continue to partner with our – with this group of Voz media and they're going to continue to grow the video platform and we'll be partnering with them and we're excited for them.

Jose I. Molina

And to add some more color to the results and the use of proceeds and tax implications. Let me just add that SBS's management team is really focusing on separating the television segment within our consolidated operations and to provide a smooth transition of these operations to Voz media. As mentioned in the remarks, we expect to close this deal late second quarter, early third quarter and we're not expecting any delays. It's important to note that there is no -- it's not contingent on financing. As we reported in 2023, our television segment will be classified as discontinued operations and current and prior year's periods going forward will be reflected as such.

For simplicity purposes, for modeling purposes, you can assume that most of the television revenue and expenses will be eliminated and any increases in operating expenses will be netted out by some offsetting decreases on operating expenses. Clearly, the transaction is delivering. And as a very, very, very preliminary estimate, the gross net asset proceeds of $57 million should net proceeds in the low $40 million range after transaction costs and taxes are considered. As to the use of the net asset proceeds per our indenture. These proceeds can be reinvested within 365 days of receipt to do mainly the following, prepayment of notes at par, acquisition of properties, fund, capital expenditures, acquire other assets in a similar business or replace sold assets. And if the proceeds have not been reinvested in 365 days, we must make an offer to purchase the notes at par with the asset sale proceeds in excess of $10 million.

As mentioned earlier, we are primarily focused on the smooth transition and closing of the transaction with Voz. We continue to analyze and consider the best use of these asset proceeds after we close and are open to consider all available options.

Brad Edwards

All right. Thanks, Albert and Jose. So we also got -- we also received some questions around the Houston state. So looking across the questions we received, I think most of the focus is on the rationale for the station as well as what the plans might be, regard to station format or rebranding the station. So those are probably best for you, Albert. And then for Jose, can you talk about how the acquisition, the Houston acquisition is going to be financed and what the timeline to profitability for the station looks like?

Albert Rodriguez

Look, I'm glad you brought that up. That's in excellent question. I'm really happy you brought up Houston. We've been working with Nielsen and their research team and their demographers. And we've been looking at how in the last 10 or 12 years the market of Houston has changed so much and that's a market that if you're serving the Hispanic market, it can be overlooked. Look I made it in my formal remarks at the very beginning how the Houston market has changed so much.

And if you look at the Hispanic DMA, 20 years ago and if you looked at it 10 years ago and you look at it now, Houston surpassed like so many of the Hispanic markets and now it even surpassed Miami. And it's right next to right in line with right after LA and New York and its ranked number three in America. So how could you like not look at Houston.

So Houston is a very, very important market in America. And when the opportunity came up, it's if you're serving the Hispanic market and we serve it very seriously, we had to seriously consider when the opportunity came up. We thought that we had to act on it. And we've got a very good price for an incredible signal there. And we're going to do really well with it. And we do really well with every single station that we have. And look at the stations that we have right now, we have three of the top 20 ranked stations in America. Look at some of the top broadcasters. Look at, in particular, some of the broadcasters that have let's say thousand without mentioning our peers, but some of the broadcasters that have maybe 600 or 1000 broadcasters in America without mentioning their names. And they don't even have two or three of the top 20. We only have 22 stations in America and we have three of the top 20. Some would have 1000 stations don't even have three in the top 20. We're the second ranked in the top 20.

So we know what we're doing. We put up our content team against anyone that does content in America and we have the number one station in America. And we have the number seven and the number 19 station in America. So we happen to know what we do in terms of producing content and we deliver so. We're going to deliver big in Houston as we did in 90 days in Orlando and we're making money this year in Tampa and Orlando, no one does what we do. Jose?

Jose I. Molina

Sure. Yes, to build on Albert's points, very opportunistic and strategic acquisition. The Houston acquisition will be funded by the asset sale proceeds that we will receive from the Voz TV transaction. The closing of the Houston acquisition is scheduled right after the close of Voz television transaction.

As Albert mentioned, look, this acquisition gives us an important footprint in Texas and allows us to unpack all of our offerings in Houston and in Texas, including our highly rated programming content streaming assets, AIRE Radio Network, our new SBS Global Podcasting division. Our DigIdea, digital agency offerings, SBS Entertainment and Events and more. Also, it's important to note that Texas or Houston rather should be a large political market for 2024 and beyond.

As mentioned, we will reformat the station and have standard startup costs that are required when reformatting a station. These costs can range based on market, competition and synergies. At this time, we are not going to provide any estimates on the start of cost for Houston. We do believe that Houston station can reach breakeven within year or two of its operations and the projected EBITDA after the startup stage should be in the range of $1 million to $4 million.

Brad Edwards

Thank you. So moving on to the last couple of questions we have here. One is on cost structure. So Jose, can you share your thoughts on current expense levels and where there might be opportunities to reduce costs and drive OIBDA?

Jose I. Molina

Sure. Look, like I mentioned in my formal remarks, we continue to invest in our business with the acquisition of Orlando and Tampa, our digital personnel and infrastructure launching DigIdea, launching SBS Global Podcast and continuing to improve our programming offerings with the New Morning Show in Los Angeles, which is doing great.

Albert Rodriguez

Okay. We took a heritage so from our competitors across the street, it was the number one Hispanic show for about 17 years, husband and wife and it took a year and it was the number one show in for about 15 years and it took a year. And now it's the number one show in Hispanic with a 6 share and our competitor’s morning show tanked. And it took a year and we had to make an investment and we're doing incredibly well.

And not only is it doing incredibly well to our -- I don't want to say surprise, but KXOL, Mega which was not in the top 20 in LA ranked in America, it drove the station to number that morning show helped drive our overall station to number seven most listened to station in America.

So our investments, yes, we're making investments, but we expect that our investments are going to give a return on investments it takes time. It takes time. So we've made the right strategic investments and we will get our return on investment.

Jose I. Molina

So just to add on that, we believe that these investments will continue.

Albert Rodriguez

And that show is Omar and Argelia and it came from the competitors. And we are generating incredible amounts of revenue on it and we're doing incredibly well and it's everywhere, every advertiser on LA, it's right now, it's on their radar and Omar and Argelia is a must buy with a 6.0 share and the ratings are off the charts on there.

Jose I. Molina

And to continue on the question, so we expect these investments will continue in the near term. And then look, the revenues will catch up and our margins and profitability will normalize soon, right, it's just going to take some time.

As Albert mentioned, we think that we're doing the right -- the necessary and right investments.

Albert Rodriguez

The marketplace has shown it. The marketplace has shown it. It's confirming it.

Jose I. Molina

As to expenses and opportunities to reduce costs, there's always areas where we can reduce expenses. We just have been choosing to really launch these initiatives given where the market is, given where demand is for our content. So right now we're prudently investing clearly with an eye on expenses, but there's always room to reduce expenses and we are proven and known as very good expense cutters when the time is needed.

Brad Edwards

And then for Albert, we also had interest in first quarter pacing’s and overall just how the business is trending so far in 2023?

Albert Rodriguez

Look, national and network is up high double digits and look when we talk to our industry peers, to the broadcasters, our broadcasters in specific are saying our national pacing for Q1, they make reference to SBS that our national pacing is an anomaly. We are the highest and I'm talking about when you categorize the top 15 broadcasters in the nation, SBS in Q1 is the highest radio broadcaster probably in the pacing and the actual, we finished in the mid to low 20% for national.

The only one that probably came close to SBS and national pacing was in the low single digit, probably 5% to 6%. Everyone else, the industry probably finished minus 10% to 15%, our network finished double digits. Our local was low single digits down. Special revenue was down double digits because we had -- our event was down because we had last nights in some of the events that we were going to do got changed to other quarters. Our digital was high. It was up double digits. Jose, do you want to add any color to that?

Jose I. Molina

No.

Albert Rodriguez

Okay. Do you have any other questions, Brad?

Brad Edwards

No, that was it.

Albert Rodriguez

I want to thank everyone who participated in our fourth quarter 2022 and our year end conference call, earnings call today and I look forward to discussing our Q1 2023 which is we're going to have it very soon. And if you have any questions at least submit your questions and we'll be very excited to answer them.

Thank you very much and hope to hear from you soon. Thank you.

Question-and-Answer Session

Q -

Operator

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

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Spanish Broadcasting System, Inc. (SBSAA) Q4 2022 Earnings Conference Call Transcript