Q4 2006 Spanish Broadcasting System Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Ladies and gentlemen, welcome to the Spanish Broadcasting fourth quarter and full year 2006 teleconference call. Hosting the call today from Spanish Broadcasting is Raul Alarcon Jr., Chairman, President and Chief Executive Officer. (OPERATOR INSTRUCTIONS) At this time all participants are on a listen-only mode. We will be conducting a question-and-answer session later in the conference. (OPERATOR INSTRUCTIONS). This conference is being recorded today. At this time I would like to turn the conference over to Mr. Alarcon. Please go ahead, sir.

RAUL ALARCON, CHAIRMAN, PRESIDENT, CEO, SPANISH BROADCASTING SYSTEM: Good afternoon, ladies and gentlemen, and welcome to our 2006 fourth quarter conference call. Joining me on today's call are Joseph Garcia, our Chief Financial Officer; Marko Radlovic, our Chief Operating Officer; Pio Ferro, our National Program Director; and Cynthia Hudson-Fernandez, our Chief Creative Officer. As usual, let me start by commenting that today's conference call may contain forward-looking statements that are subject to risks and uncertainties that could cause the actual results to differ. Please refer to our most recent prospectus for a list of those factors that could impact actual results.

This afternoon I am going to provide a brief review of our strategic and operating developments since our last call, and Joe will then review our fourth quarter financial results in more detail, and comment on first quarter 2007 expectations, and then we will take your questions. Starting with our fourth quarter results, net revenues were $44.4 million as compared to $46.9 million, a decrease of 5% over fourth quarter 2005 with radio net revenues decreasing 9% year-over-year for the quarter?

Our television operation MEGA TV continued its revenue expansion, posting $1.7 million for the quarter. While we are obviously not satisfied with our fourth quarter results, I do want to emphasize that the decrease were almost solely concentrated in one area, national radio sales, and that we are already vigorously addressing the issue in lockstep with our national rep firm, InterRep and our own national sales managers. To a lesser extent our results were affected by unbalanced comps versus 2005 as the company limited its participation in certain concerts and events in fourth quarter 2006.

As you will hear more in-depth in a moment, all other relevant metrics, including audience ratings, local radio sales and TV revenues were up in the quarter. And, of course, the U.S. Hispanic market, the foundation underlying all of the company's strategic initiatives, continues its unabated expansion in terms of absolute audience, economic growth via purchasing power and cultural and political influence. And as always, SBS will continue to be a leader in the Hispanic media among the millions of people we serve in our major market, still the largest and most successful Hispanic owned media entity in the U.S.

Once again, SBS lays claim to the number one Spanish radio station in America, as well as the number one tropical and the number one Herbin station in the world and the number two regional Mexican Spanish AC and Spanish oldies formatted stations in the nation. All in all, SBS owns and operates four out of the top six ranked stations in the country according to Arbitron. Furthermore, our entry into television has proven our ability to generate award-winning proprietary content and paved the way for revenues that will soon approximate $1 million per month at MEGA TV.

And our interactive division continues to generate impressive page views statistics and dramatic user growth. Hispanics are embracing the power of digital media along with everyone else, and we built a dynamic online offering that is attracting a large and youthful audience base. These are the next generation of Hispanic consumers in this country and through the depth and quality of our content and popularity of our diversified media brands we are setting the foundation for our company's future.

The proof of that lies squarely in the audience share traction we are gaining across our platform of media properties. Today we offer advertisers some of the most attractive demographics in all of media -- young, Hispanic Americans with growing influence and improving financial standing in the country's largest media markets. This is a powerful growth platform with tremendous long-term potential. Our mission is of course to better monetize our audiences and continue to close the Hispanic media revenue gap.

Companywide we are making considerable progress in educating the advertising community on the benefits of our platform. For example, in the fourth quarter and into 2007 we have picked up Wal-Mart, Delta, Apple iTunes, Dunkin Donuts, NBC TV, MetLife and Starbucks, not including 19 other first-time advertisers on television. Now I would like to turn to some of the recent operating highlights across our base of businesses in radio; we achieved important share gains across key demos in our markets in the four Arbitron book shows that SBS has strengthened its overall ratings position in the Hispanic radio industry.

In New York our ratings position increased substantially during the full book, at WSKQ our ratings in the 12 plus demo increased 16% over the full 2005 period. For the 25 to 54 demo ratings increased 11%. The station remains the most listened to Spanish language station in the country. The growth at BAT is even more impressive. For 12 plus ratings increased 30% over fall 2005, and the station jumped to third most listened to station in the New York market regardless of language or format. In the 25 to 54 demo WPAT jumped 26% over fall 2005, the station is now the third most listened to Spanish language station in the country.

As an update let me confirm that our WSKQ morning show cohosts have been replaced by two new talented SBS recruits that have joined the other eight cast members in what appears to be a seamless transition for our Vasilon ensemble. If revenue is any indication I can tell you that our first quarter pacings are up double-digits at WSKQ, and that is a good indication that advertisers have …