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Auto improvement helps Univision drive 32% spike in Q3 ad revenue

While other media companies have encountered rough roads with automotive advertising sales, Univision Communications Inc. steered growth with the key category during the third quarter.

With chip shortages derailing the supply of new vehicles, Nexstar Media Group Inc., Sinclair Broadcast Group Inc., Fox Corp. and ViacomCBS Inc. are among the companies that discussed auto downturns and challenges on their recent round of earnings calls.

That was not the case at the U.S. Spanish-language media leader. CEO Wade Davis told analysts on Nov.4 that Univision did see some softness in Tier 3, the local dealerships. However, that was overcome by the strength of national Tier 1 brand-driven spending, which drove low to mid-single-digit sector growth.

Overall ad revenue of $442.7 million was up 32.5% from the pandemic-constrained 2020 third quarter and up 15.6% above $382.8 million in the comparable period in 2019.

Davis said on the company's Nov. 4 earnings call that the improved ad revenue results were achieved despite the overhang of the 2020-21 upfront selling season, which he called one of the worst in Univision's history.

During the upfront, content providers sell linear and digital schedules to media agencies and their clients ahead of the upcoming TV season. In scatter, sales are secured closer to a program's air date, often at significant premiums to the rates secured in the upfront.

Univision's ad revenue performance benefited from a 64% share of Spanish-language viewership, its top level since 2014, according to Davis. Moreover, with the erosion of general market linear audiences, Univision's total-market share jumped 25% to 6.9% share, the most in its history.

Looking ahead, Davis anticipates advertising momentum to continue if not accelerate, in certain areas, one of which will be the political arena. Univision, which installed a Washington, D.C.-based political ad sales operation for the 2020 presidential election cycle, saw category revenue treble from the 2016 election.

Davis said there is a "tidal wave of spending coming into the market." He expects aggressive political spending to wash up in Florida, Texas and Arizona, and in other states with contentious races that line up with the company's holdings.

As to the company's merger with Grupo Televisa SAB, its longtime key programming supplier that currently holds a 36% stake in Univision, Davis reported that all of the necessary regulatory approvals have been obtained in Mexico, but the company has not received any comments back from either the Federal Communications Commission or the U.S. Department of Justice.

"I'd characterize all of this as just kind of working its way through the ordinary course process, and we expect it to be closed early in Q1," said Davis.

Upon completion of the deal, which was originally targeted for a fourth-quarter close, Televisa will be the largest shareholder, with a 45% stake. ForgeLight LLC Davis' investment vehicle, and another private investment company, Searchlight Capital Partners LP, will hold 38%. The SoftBank Latin America Fund, The Raine Group, John Malone’s Liberty Media and Google LLC will own the remaining 17% of Televisa-Univision.

Last December, ForgeLight and SearchLight completed the transaction for 64% of Univision, with Televisa holding the aforementioned remaining 36% stake.

One of the prime assets coming from the Univision-Televisa union is a streaming service, slated to launch next year. The service plans to target the approximately 600 million Spanish-language speakers around the globe.

Third-quarter Univision revenues grew 20.3% year over year to $754.7 million, with the total 10.8% above the $681.4 million recorded in the comparable quarter in 2019.

Net income increased 8.4% to $33.5 million in the third quarter of 2020. Results in the recently completed quarter included a number of factors, including a $4.2 noncash impairment of program rights and $25.4 million in severance and related charges.