Hemisphere Media (HMTV) Reports Q3 Revs of $32.2M, Notes Puerto Rico Impact

Hemisphere Media (NASDAQ: HMTV) reported Q3 revenue for the quarter came in at $32.2 million versus the consensus estimate of $35.05 million.

President and Chief Executive Officer of Hemisphere, Alan Sokol, said, “The situation in Puerto Rico following two devastating hurricanes in September – Irma and Maria – had a significant impact on our business. Immediately following Hurricane Maria, our first priority was to ensure the safety and well-being of our employees. Thankfully, no one was injured, but some families lost their homes and unfortunately their lives continue to be in disarray. We are continuing to work closely with them to provide support and assistance.

We previously announced that Hurricane Maria inflicted only limited damage to our studios and offices, and that one of our three transmission towers was significantly damaged. Upon further inspection, the damage to this transmission tower was beyond repair, while our other two towers incurred only minimal damage. We are still estimating the replacement cost of the damaged tower, but we do expect insurance will cover most of the cost, subject to deductibles and other costs. We also anticipate that a portion of our lost income will be mitigated through business interruption insurance, although it will not offset the full extent of the income loss. There can be no assurances of the timing and amount of the proceeds we may recover under our insurance policies.

Notwithstanding the extraordinarily challenging situation, WAPA-TV has provided uninterrupted news coverage of Hurricane Maria and its aftermath. Our news team worked tirelessly and under near impossible circumstances – a testament to their courage and tenacity.

While our business in Puerto Rico was performing well through August, following the hurricanes, there was a steep decline in advertising revenue in Puerto Rico, which continues through today. We also expect that there will be a significant decrease in retransmission revenue in Puerto Rico for the fourth quarter. Generally, for both advertising and retransmission revenues in Puerto Rico, we do not expect significant improvement until power is more widely restored. Power was restored to WAPA’s headquarters on October 31st, prior to which we had been using generators, and officially, electric power generation on the island is over 40% of normal production. We are managing our expenses in Puerto Rico as much as possible to mitigate the impact of revenue losses.

All of our WAPA news coverage has been simulcast on WAPA America, providing Puerto Ricans and other interested viewers living in the U.S. with the only continuous coverage of this crisis. Importantly, at the request of several of our distributors, in response to consumer demand, we were pleased to allow MVPDs to expand carriage of WAPA America to all of their subscribers. From September 21st through the end of October, WAPA America was the top-rated Hispanic cable channel in the U.S., according to Comscore, a reflection of WAPA America’s leading role in providing news and information to all viewers interested in Puerto Rico.

In addition, following Hurricane Maria, two major operators expanded their carriage of Television Dominicana to their basic packages, underscoring the importance of the channel to the fourth largest Hispanic community in the U.S. That said, while these operators are recognizing Television Dominicana’s critical role in the large Dominican-American community, the decision in September by AT&T to remove the channel from AT&T U-verse and DIRECTV shows a disregard for this valuable and important consumer group. We believe this decision was ill-advised and are hopeful that we can come to an appropriate resolution. During September, we experienced a loss of subscriber fees in connection with this dispute, and anticipate this will be the case in the fourth quarter as well.

While returning WAPA to full pre-storm performance is our main focus, this has not slowed our work on future growth initiatives and M&A activity. Regarding our newest strategic initiatives, we formally launched the new Canal 1 in Colombia on August 14th and implemented a full rebrand of the network. Less than three months into the initiative, we are already seeing very strong and positive reaction, which has translated into a 6% share of the audience in Colombia, approximately 3 times the viewing share prior to our re-launch. In addition in October, marketing efforts commenced for PANTAYA, our OTT movie platform that we own in partnership with Lionsgate, with very strong early returns. PANTAYA is already ranked among the highest-grossing entertainment apps on iOS and Android.

Over the long-term, we remain very optimistic about our business prospects. I believe in the resilience of Puerto Rico and more specifically, our ability to withstand the impact from these events, given our standing as the leading source of news, information and entertainment to Puerto Ricans both on and off the island. And we continue to aggressively build and grow our valuable set of assets that are attracting an increasing number of subscribers and advertisers, and are on the cutting edge of Hispanic content consumption.”

For earnings history and earnings-related data on Hemisphere Media (HMTV) click here.

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