Vocento S A : C. Call Results 9M21

CONFERENCE CALL

TRANSCRIPT

12 NOVEMBER 2021

Investor Relations

Conference Call Transcript 9M21

LUIS ENRÍQUEZ

Hello and thank you for attending Vocento's conference call on our 9M21 results. I will start the presentation by going over some of the targets that we set at the beginning of the year. Meeting these targets will not only depend on what happens in 2021 but also probably on what happens in the coming years, as we discussed during the Investor Day this year.

Firstly, advertising. In advertising in the first nine months of the year, compared with 2019, we have seen 18% growth in digital advertising excluding Classifieds, which faced some unique circumstances in 2021 especially in the automotive sector. Digital advertising now represents over 51% of our advertising revenues. This is significant, because unlike nationwide businesses, print advertising is still important in the regional market. So this figure is not just the result of the decrease in the denominator, in print advertising, but is also because of an increase in digital revenues, to stand at over 51% of the total.

Another of the targets we set for the year was to maintain the level of revenues from readers. Digital subscriptions are performing completely in line with our outlook for the year. The margin coming from readers is increasing, if we include the margin on circulation revenues. There has been an improvement of 2.7 million euros compared with 2019. This is one of the main focus areas of our group. We have not seen a decrease here, despite the fall in sales and in circulation, thanks to cost savings, cover price increases and above all thanks to the increase in the number of digital subscribers without reducing the margin on revenues from digital readers.

One further target is to return to the EBITDA level of 2019. Although the summer was weak for advertising, as we said it would be on our last call, or at least not as good as the first half, we are on course to meet this target. We continue to move towards the margins of 2019. We are not as confident as were in the first half, because of the global supply crunch and stock problems in technological equipment and in the automotive sector, but nevertheless we continue to expect to repeat or exceed the margin of 2019.

Moving to cash generation, this continues to be one of the strong points of our company. We generated around 20 million euros of ordinary cash flow in 9M21, and we continue to execute on our targets. We have divested the buildings in San Sebastián and we will carry out financially attractive real estate deals across our portfolio of buildings. We have also divested Veralia, which was a non-core asset for us. As a result, we are investing in our future, in Premium Leads, a business focused on generating profiles and leads, which is totally complementary with our advertising business and with digital, user profiles, and of course with data. We will continue to act in this line, divesting our non-core assets, reducing our debt, and opening up possibilities for investing in new assets which make strategic sense, such as corporate

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. +34 902 404 073 - ir@vocento.com

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Investor Relations

Conference Call Transcript 9M21

actions in our sector, which we are ready for, or investments in complementary assets such as Premium Leads. The scale of these transactions can be as ambitious as we like, thanks to the cash position of our group.

I am sure you will have questions about this. I will be happy to talk about the month of October, the outlook for the last quarter and other issues, but for now I will leave you with Joaquín Valencia, who will share with you some more financial details, and then we will open the call to your questions.

JOAQUÍN VALENCIA

Thanks Luis. Before looking at the financials, I will share some further information with you, above all about digital subscriptions, which is something you always have questions about.

The first thing to note is that we are on course to meet our target, set at the beginning of the year, of having 100,000 or more digital subscribers. We are at 95,000, so we are fully in line with our target.

Secondly, there are always questions about whether the growth in the quarter was high or low. It is important to realise that we are prioritising profitability over volume. We are renewing subscriptions that were made during promotions and are now moving to higher prices, so this may be a reason why the number of subscribers in the quarter is lower, but come with a higher margin.

You should also note that more than half of the digital subscribers are on quarterly or annual subscriptions, which makes it a very healthy portfolio of subscribers.

Moving to the performance of advertising and EBITDA, we can see a clear quarterly improvement. We make comparisons with 2019, which we think is more sensible than with 2020. We can see the trends that we discussed at the start of the year. There is an improvement in the margin on readers, compared with 2020 and with 2019, which is contributing to our overall profitability. You can also see that the rate of decrease in advertising is slowing down, from Q1 to Q3.

This is also reflected at the EBITDA level from quarter to quarter. In Q3, the presentation shows that reported EBITDA in 9M21 is still negative compared with 9M19. This is the result of a very specific issue, which is that we are continuing to account for the bonus as if it had to be paid at the end of the year. This is a sign of our confidence in the strength of our plan and that we will execute this plan. In 2020 at this stage of the year we had reversed the provision. If we adjust for this effect, reported EBITDA would be +0.6 instead of -0.3 million, so well above the EBITDA of Q3 in 2019.

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. +34 902 404 073 - ir@vocento.com

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Investor Relations

Conference Call Transcript 9M21

Moving now to Classifieds, we can see that the business is performing in line with the strategy discussed at our Investor Day. In other words, there is a gradual transition from a listing business to more of a transactional business. Premium Leads makes perfect sense here and it will support the Classifieds area. There are also other initiatives underway, such as marketplaces for training, for consumer services and so on. These marketplaces that we are adding to our portfolio are a direct consequence of the acquisition of Premium Leads.

The performance of the automotive and real estate Classified advertising businesses closely reflects events in the automotive sector. If we compare Real Estate in 2021 with 2019, we are in line in terms of revenues and better at the EBITDA level. That shows the impact of conditions in the automotive market, which as Luis said is suffering from a well publicised supply crunch at car manufacturers. We are continuing to add new services at Sumauto and at Pisos. At Sumauto we are rolling out a C2B service for individuals to sell their vehicles to dealers, and also new rental services, in line with what we said at the Investor Day about enriching the Classifieds product offering.

The impact of all this on reported EBITDA has been an increase from 20.4 million to 21.7 million euros, with a contribution of 2.5 million from the press business and 0.4 million euros from new businesses. The performance at the press has been driven by the margin on readers we have already discussed, and by cost savings including savings in personnel expenses, with no compensation payments this year in contrast to previous years. The new businesses, especially Agencies and Gastronomy, should report an incremental contribution to EBITDA in Q4. The decrease in EBITDA at the corporate centre from 2019 to 2021 is mainly the result of the provision for the bonus that I mentioned earlier. On the extra page which shows the performance at the comparable EBITDA level, which we have not published this year as we are using reported EBITDA, you can clearly see these effects.

In terms of cash generation, as Luis mentioned cash and debt have been two very significant achievements of this period. We generated ordinary cash flows of 20.2 million euros, compared with 17.1 million euros in Q3 of 2019. We also had a very positive performance of working capital, of 8.1 million euros. Our average period for being paid has improved significantly and we have also reduced inventories. In 2019, for example, the impact on working capital was half the level of this year.

Looking at the one-offs, these were all disclosed in the first half and include the acquisition of Premium Leads and the payment of VAT following the receipt of payment for the building of El Diario Vasco during this quarter.

I think it is worth mentioning that based on the ordinary cash flow of the last 12 months we have a cash flow yield of 20%. Using Free Cash Flow, including financial expenses and even compensation payments as if they were perpetual, it would be 16%. So we have a cash flow yield of 16 to 20%, which is very high for a listed company.

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. +34 902 404 073 - ir@vocento.com

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Investor Relations

Conference Call Transcript 9M21

I would like to highlight a couple of points about the P&L. There is goodwill of 1.5 million euros as usual in the film distribution business Veralia Distribución. There is also a capital loss on the sale of Izen in the first half, plus effects linked to the sale of the building of El Diario Vasco, including capital gains, minority interest (which is why there is such a big increase in this line), and a higher tax payment because of the capital gains on the Diario Vasco sale.

As we have highlighted in the presentation, cost cuts have offset 84% of the fall in revenues, which is in line with previous period.

And at the bottom line, we have reported a profit of just over 3 million euros, compared with losses of 3.6 million euros in 2019 at this stage of the year, which I think is a reasonable performance.

And with that we will now open the call to your questions.

Q&A SESSION

ENRIQUE YAGÜEZ - BESTINVER SECURITIES

Hello and thanks for the presentation. I have three questions.

First, and related to the increasing inflationary pressures that we are seeing, could you quantify the sort of increases you are experiencing, in paper costs, and how much this represents of your total opex? Related to this, and to your focus on maintaining circulation margins, do you see any need to raise cover prices next year, and if yes, what sort of increase and do you think the competition will follow you?

Secondly, about the advertising market, can you say how much the automotive sector represents in your advertising mix, and what sort of performance you are seeing in Q4 and what do you expect for next year?

And finally, a question about capital. With this inflationary environment and with such uncertainty about advertising, is it possible to return to making dividend payments, or instead do you think at these uncertain times it is more conservative and sensible to preserve a strong balance sheet ahead of potential M&A movements?

Many thanks.

L.E.: Thanks Enrique. In answer to your first question, we are seeing this mainly in paper. It is not only the inflationary trend. It is also problems in maritime transport, fleets, even raw materials. Of course, for 2022 this will result in an increase in paper costs that was

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. +34 902 404 073 - ir@vocento.com

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