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(

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-15997

 

ENTRAVISION COMMUNICATIONS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

95-4783236

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

2425 Olympic Boulevard, Suite 6000 West

Santa Monica, California 90404

(Address of principal executive offices) (Zip Code)

(310) 447-3870

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common stock

 

EVC

 

The New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No

 

As of July 31, 2023, there were 78,644,012 shares, $0.0001 par value per share, of the registrant’s Class A common stock outstanding, 0 shares, $0.0001 par value per share, of the registrant’s Class B common stock outstanding and 9,352,729 shares, $0.0001 par value per share, of the registrant’s Class U common stock outstanding.

 

 


 

ENTRAVISION COMMUNICATIONS CORPORATION

FORM 10-Q FOR THE THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2023

TABLE OF CONTENTS

 

 

 

 

 

Page

Number

 

 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1.

 

FINANCIAL STATEMENTS

 

4

 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF JUNE 30, 2023 AND DECEMBER 31, 2022

 

4

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 2023 AND JUNE 30, 2022

 

5

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 2023 AND JUNE 30, 2022

 

6

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 2023 AND JUNE 30, 2022

 

7

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2023 AND JUNE 30, 2022

 

9

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

10

ITEM 2.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

33

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

47

ITEM 4.

 

CONTROLS AND PROCEDURES

 

47

 

PART II. OTHER INFORMATION

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

 

49

ITEM 1A.

 

RISK FACTORS

 

49

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

49

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

 

49

ITEM 4.

 

MINE SAFETY DISCLOSURES

 

49

ITEM 5.

 

OTHER INFORMATION

 

49

ITEM 6.

 

EXHIBITS

 

50

 

 

 

 


 

Forward-Looking Statements

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect”, “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. Some of the key factors impacting these risks and uncertainties include, but are not limited to:

risks related to our substantial indebtedness or our ability to raise capital;
provisions of our debt instruments, including the agreement dated as of November 30, 2017, as amended and restated as of March 17, 2023 (the "2023 Credit Agreement"), which governs our current credit facility (the "2023 Credit Facility"), the terms of which restrict certain aspects of the operation of our business;
our continued compliance with all of our obligations under the 2023 Credit Agreement, including compliance with financial covenants and ratios thereunder;
rapid changes in the digital advertising industry;
the impact of changing preferences among audiences favoring newer forms of media, including digital and other forms of such media, over traditional media, including television and radio;
the ability to keep up with rapid technological and other changes, and compete effectively, in new forms of media, including digital media, and changes within digital media;
the impact of existing and possible additional legislative and/or regulatory action, in various jurisdictions around the world, with respect to the digital media and digital advertising industries;
the impact of possible legislative and/or regulatory action, in various jurisdictions around the world, with respect to artificial intelligence, or AI, and/or similar technologies, which we use and may use in our digital operations;
the impact of existing and possible additional legislative and/or regulatory action, as well as evolving industry standards and controls, on data privacy; the collection and use of personal identifying information; or PII; and other protections for online users of Internet-connected devices;
the ability to integrate successfully recently acquired businesses, primarily those in our digital segment, into our operations;
the ability of management to oversee the rapid global expansion of our digital operations;
the ability to hire and retain qualified personnel to manage the day-to-day operations of our digital properties throughout the world, as well as local management to establish and maintain internal financial and reporting systems that are of the type required of U.S. public companies;
cancellations or reductions of advertising due to the then current economic environment or otherwise;
changes in advertising rates due to the then-current economic environment or otherwise;
the impact of rigorous competition in Spanish-language and digital media and in the advertising industry generally;
the impact of changing preferences among U.S. Hispanic audiences for Spanish-language programming, especially among younger age groups;
the possible impact on our business as a result of changes in the way market share is measured by third parties;
our relationship with TelevisaUnivision, Inc., or TelevisaUnivision;

2


 

the extent to which we continue to generate revenue under retransmission consent agreements;
subject to restrictions contained in the 2023 Credit Agreement, the overall success of our acquisition strategy and the integration of any acquired assets or businesses with our existing operations;
industry-wide market factors and regulatory and other developments affecting our operations;
the ability to manage our growth effectively, including having adequate personnel and other resources for both operational and administrative functions;
general economic uncertainty, whether as a result of the COVID-19 pandemic or otherwise;
current and longer-term economic and other impacts of the COVID-19 pandemic on our operations, results of operations and financial condition, including without limitation our advertisers’ response to the pandemic and resulting economic disruptions caused as a result of the pandemic;
our dependence upon a single global media company for the majority of our revenue, which dependence we expect to continue;
the effect inflation may have on decision-making by our advertisers to place ads with or through us across our operating segments;
the effectiveness with which we handle credit risk in our digital segment insofar as we are required to pay the media companies for which we act as commercial partner for all inventory purchased regardless of whether we are able to collect on a transaction from the local advertiser or its ad agency;
the impact of a strengthening U.S. dollar on our overseas operations, including but not limited to our exposure between the time that we invoice in local currency and deposit the related collections into U.S. dollar-denominated accounts;
the impact of any potential future impairment of our assets;
risks related to changes in accounting interpretations;
consequences of, and uncertainties regarding, foreign currency exchange including fluctuations thereto from time to time;
legal, political and other risks associated with our rapidly expanding operations located outside the United States; and
the effect of changes in broadcast transmission standards by the Advanced Television Systems Committee's 3.0 standard (“ATSC 3.0”), as they are being adopted in the broadcast industry and as they may impact our ability to monetize our spectrum assets.

For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see the section entitled “Risk Factors,” beginning on page 38 of our Annual Report on Form 10-K for the year ended December 31, 2022 (our “2022 10-K”).

 

3


 

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENTRAVISION COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

99,580

 

 

$

110,691

 

Marketable securities

 

 

26,881

 

 

 

44,528

 

Restricted cash

 

 

761

 

 

 

753

 

Trade receivables, (including related parties of $10,693 and $5,814) net of allowance for doubtful accounts of $8,038 and $6,572

 

 

210,008

 

 

 

224,713

 

Assets held for sale

 

 

301

 

 

 

-

 

Prepaid expenses and other current assets (including related parties of $274 and $274)

 

 

36,655

 

 

 

27,238

 

Total current assets

 

 

374,186

 

 

 

407,923

 

Property and equipment, net of accumulated depreciation of $195,759 and $194,448

 

 

68,654

 

 

 

61,362

 

Intangible assets subject to amortization, net of accumulated amortization of $81,875 and $75,992 (including related parties of $3,249 and $3,714)

 

 

60,089

 

 

 

61,811

 

Intangible assets not subject to amortization

 

 

207,453

 

 

 

207,453

 

Goodwill

 

 

90,706

 

 

 

86,991

 

Deferred income taxes

 

 

2,591

 

 

 

2,591

 

Operating leases right of use asset

 

 

45,204

 

 

 

44,413

 

Other assets

 

 

16,273

 

 

 

8,297

 

Total assets

 

$

865,156

 

 

$

880,841

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Current maturities of long-term debt

 

$

6,799

 

 

$

5,256

 

Accounts payable and accrued expenses (including related parties of $1,134 and $1,215)

 

 

236,276

 

 

 

237,415

 

Operating lease liabilities

 

 

6,397

 

 

 

5,570

 

Total current liabilities

 

 

249,472

 

 

 

248,241

 

Long-term debt, less current maturities, net of unamortized debt issuance costs of $1,243 and $1,221

 

 

204,574

 

 

 

207,292

 

Long-term operating lease liabilities

 

 

46,863

 

 

 

42,151

 

Other long-term liabilities

 

 

14,538

 

 

 

30,198

 

Deferred income taxes

 

 

68,502

 

 

 

67,590

 

Total liabilities

 

 

583,949

 

 

 

595,472

 

Commitments and contingencies (note 6)

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

47,288

 

 

 

-

 

Stockholders' equity

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 260,000,000 shares authorized; shares issued and outstanding at June 30, 2023 78,617,017 and December 31, 2022 78,172,827

 

 

8

 

 

 

8

 

Class B common stock, $0.0001 par value, 40,000,000 shares authorized; shares issued and outstanding at June 30, 2023 and December 31, 2022 0

 

 

-

 

 

 

-

 

Class U common stock, $0.0001 par value, 40,000,000 shares authorized; shares issued and outstanding at June 30, 2023 and December 31, 2022 9,352,729

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

739,571

 

 

 

776,298

 

Accumulated deficit

 

 

(504,323

)

 

 

(504,375

)

Accumulated other comprehensive income (loss)

 

 

(1,338

)

 

 

(1,510

)

Total stockholders' equity

 

 

233,919

 

 

 

270,422

 

Noncontrolling interest

 

 

-

 

 

 

14,947

 

Total equity

 

 

233,919

 

 

 

285,369

 

Total liabilities and equity

 

$

865,156

 

 

$

880,841

 

See Notes to Condensed Consolidated Financial Statements

 


 

ENTRAVISION COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

Three-Month Period

 

 

Six-Month Period

 

 

 

Ended June 30,

 

 

Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net Revenue

 

$

273,381

 

 

$

221,695

 

 

$

512,387

 

 

$

418,867

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue - digital

 

 

195,836

 

 

 

144,965

 

 

 

363,592

 

 

 

274,856

 

Direct operating expenses (including related parties of $1,543, $1,752, $2,964 and $3,328) (including non-cash stock-based compensation of $2,725, $939, $4,581 and $1,897)

 

 

33,065

 

 

 

29,596

 

 

 

62,927

 

 

 

57,419

 

Selling, general and administrative expenses

 

 

23,565

 

 

 

17,775

 

 

 

46,333

 

 

 

33,814

 

Corporate expenses (including non-cash stock-based compensation of $3,243, $1,697, $5,440 and $3,312)

 

 

12,042

 

 

 

8,520

 

 

 

22,544

 

 

 

17,244

 

Depreciation and amortization (including related parties of $232, $232, $464 and $463)

 

 

6,509

 

 

 

6,263

 

 

 

12,980

 

 

 

12,658

 

Change in fair value of contingent consideration

 

 

1,123

 

 

 

976

 

 

 

(2,942

)

 

 

6,076

 

Foreign currency (gain) loss

 

 

697

 

 

 

993

 

 

 

(259

)

 

 

146

 

Other operating (gain) loss

 

 

-

 

 

 

(834

)

 

 

-

 

 

 

(953

)

Operating income (loss)

 

 

544

 

 

 

13,441

 

 

 

7,212

 

 

 

17,607

 

Interest expense

 

 

(4,306

)

 

 

(2,334

)

 

 

(8,334

)

 

 

(4,170

)

Interest income

 

 

1,037

 

 

 

722

 

 

 

1,897

 

 

 

1,128

 

Dividend income

 

 

14

 

 

 

11

 

 

 

32

 

 

 

14

 

Realized gain (loss) on marketable securities

 

 

(29

)

 

 

-

 

 

 

(61

)

 

 

-

 

Gain (loss) on debt extinguishment

 

 

-

 

 

 

-

 

 

 

(1,556

)

 

 

-

 

Income (loss) before income taxes

 

 

(2,740

)

 

 

11,840

 

 

 

(810

)

 

 

14,579

 

Income tax benefit (expense)

 

 

739

 

 

 

(3,373

)

 

 

508

 

 

 

(4,225

)

Net income (loss)

 

 

(2,001

)

 

 

8,467

 

 

 

(302

)

 

 

10,354

 

Net (income) loss attributable to redeemable noncontrolling interest

 

 

12

 

 

 

-

 

 

 

12

 

 

 

-

 

Net (income) loss attributable to noncontrolling interest

 

 

-

 

 

 

-

 

 

 

342

 

 

 

-

 

Net income (loss) attributable to common stockholders

 

$

(1,989

)

 

$

8,467

 

 

$

52

 

 

$

10,354

 

Basic and diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common stockholders, basic and diluted

 

$

(0.02

)

 

$

0.10

 

 

$

0.00

 

 

$

0.12

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.05

 

 

$

0.03

 

 

$

0.10

 

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic

 

 

87,787,772

 

 

 

84,959,130

 

 

 

87,706,282

 

 

 

85,735,916

 

Weighted average common shares outstanding, diluted

 

 

87,787,772

 

 

 

86,985,817

 

 

 

89,807,095

 

 

 

87,803,178

 

 

See Notes to Condensed Consolidated Financial Statements

5


 

ENTRAVISION COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In thousands)

 

 

 

Three-Month Period

 

 

Six-Month Period

 

 

 

Ended June 30,

 

 

Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income (loss)

 

$

(2,001

)

 

$

8,467

 

 

$

(302

)

 

$

10,354

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation

 

 

(71

)

 

 

(43

)

 

 

(55

)

 

 

(43

)

Change in fair value of marketable securities

 

 

101

 

 

 

(1,250

)

 

 

227

 

 

 

(1,533

)

Total other comprehensive income (loss)

 

 

30

 

 

 

(1,293

)

 

 

172

 

 

 

(1,576

)

Comprehensive income (loss)

 

 

(1,971

)

 

 

7,174

 

 

 

(130

)

 

 

8,778

 

Comprehensive (income) loss attributable to redeemable noncontrolling interests

 

 

12

 

 

 

-

 

 

 

12

 

 

 

-

 

Comprehensive (income) loss attributable to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

342

 

 

 

-

 

Comprehensive income (loss) attributable to common stockholders

 

$

(1,959

)

 

$

7,174

 

 

$

224

 

 

$

8,778

 

 

See Notes to Condensed Consolidated Financial Statements

 

 

6


 

ENTRAVISION COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share data)

 

 

 

Number of Common Shares

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury

 

Class

 

Class

 

Class

 

Additional
Paid-in

 

Accumulated

 

Other
Comprehensive

 

Noncontrolling

 

 

 

 

 

Class A

 

Class B

 

Class U

 

Stock

 

A

 

B

 

U

 

Capital

 

Deficit

 

Income (Loss)

 

Interest

 

Total

 

Balance, December 31, 2022

 

 

78,172,827

 

 

-

 

 

9,352,729

 

 

-

 

$

8

 

$

-

 

$

1

 

$

776,298

 

$

(504,375

)

$

(1,510

)

$

14,947

 

$

285,369

 

Issuance of common stock upon exercise of stock options or awards of restricted stock units

 

 

164,474

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

313

 

 

-

 

 

-

 

 

-

 

 

313

 

Tax payments related to shares withheld for share-based compensation plans

 

 

19,189

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(80

)

 

-

 

 

-

 

 

-

 

 

(80

)

Stock-based compensation expense

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

4,053

 

 

-

 

 

-

 

 

-

 

 

4,053

 

Dividends paid

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(4,386

)

 

-

 

 

-

 

 

-

 

 

(4,386

)

Distributions to noncontrolling interest

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(546

)

 

(546

)

Change in fair value of marketable securities

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-