Mega TV Dip Can’t Ding SBS In Q4


Spanish Broadcasting System (SBS) late Monday finally issued its fourth-quarter 2018 and full-year results — just as financial leaders across broadcast media begin to assess their company’s respective first-quarter 2019 performance.

How did SBS do? Consolidated revenue rose 9%. But, the Mega TV segment saw a year-over-year slump. Operating income was flat, while net income inched up slightly when removing the company’s income tax benefit seen in Q4 2017 from the mix.

“Our television segment net revenue decreased $1.7 million, or 29%, primarily from a reduction in subscriber based revenue, partially offset by increases in local and national sales,” the Miami-based company explained.

With TV net revenue coming in at $4.03 million, dropping from $5.7 million, SBS turned to its high cash-flow radio stations to fuel the quarterly growth. The stations didn’t disappoint. Radio net revenue surged 16% to $35.6 million, from $30.68 million, helping push consolidated net revenue up to $39.65 million, from $36.38 million.

Consolidated adjusted OIBDA increased by 25% to $17.38 million.

While overall net income was down, this is in large part due a $31.1 Q4 2017 income tax benefit.

Net income minus this benefit was $4.06 million, up from $3.88 million.

Operating income was $14.32 million, from $14.44 million.

For the full-year, operating income moved to $51.59 million, from $40.53 million.

Even though Mega TV was soft in Q4, Chairman/CEO Raúl Alarcón Jr. was highly pleased with the company’s results.

“Our fourth quarter and full year 2018 performance represent one of the best operating results in our 35-year history and the true power of our multi-media strategy and leading radio, television, digital and experiential assets,” Alarcón said. “Our multi-year effort to transform our company from a traditional broadcaster into an integrated multi-media company is clearly evident in our financial results.”

What about SBS’s outstanding 12.5% Senior Secured Notes due 2017, which SBS has not repaid since they became due on April 17, 2017? Alarcón says the company continues to evaluate all options available to refinance the Notes.

“While we assess how to best achieve a successful refinancing of the Notes, we have continued to pay monthly interest on the Notes, payments that a group of investors purporting to own our 10 3/4% Series B Cumulative Exchangeable Redeemable Preferred Stock have challenged through the institution of litigation in the Delaware Court of Chancery,” he says. “The complaint filed by these investors revealed a purported foreign ownership of our Series B preferred stock, which we are actively addressing, including before the FCC in order to protect our broadcast licenses.  Our refinancing efforts have been made more difficult and complex by the Series B preferred stock litigation and foreign ownership issue.”

SBS will provide more information about each of these items in its Annual Report.

That didn’t stop Alarcón from being quite vocal on the matter.

“We have worked and continue to work with our advisors regarding a consensual recapitalization or restructuring of our balance sheet, including through the issuance of new debt or equity to raise the necessary funds to repay the Notes,” he adds. “We believe that the delay in refinancing the Notes has adversely affected us, in that we have been paying substantially more in interest expense on our outstanding Notes than would be the case if we refinanced them in the current market based on the feedback we have received from several financial institutions and potential sources of capital; there is a cloud on title regarding who validly owns our Series B preferred stock, which has created uncertainty as to who owns these shares, and the parties with whom the company could potentially negotiate a consensual restructuring.”

Further, Alarcón believes SBS’s reputation has been negatively affected despite its “diligent efforts to resolve the situation.”

He says, “The negativity and complexity surrounding our situation has been an unfortunate distraction from our otherwise successful and healthy operating business.”