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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 SEPTEMBER 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 October 30, 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 NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS

 

 

 

 

 

Page

Number

 

 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1.

 

FINANCIAL STATEMENTS

 

4

 

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

 

4

 

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

 

5

 

 

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

 

6

 

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

 

7

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2023 AND SEPTEMBER 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

 

34

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

48

ITEM 4.

 

CONTROLS AND PROCEDURES

 

48

 

PART II. OTHER INFORMATION

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

 

50

ITEM 1A.

 

RISK FACTORS

 

50

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

 

50

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

 

50

ITEM 4.

 

MINE SAFETY DISCLOSURES

 

50

ITEM 5.

 

OTHER INFORMATION

 

50

ITEM 6.

 

EXHIBITS

 

51

 

 

 

 


 

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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

110,624

 

 

$

110,691

 

Marketable securities

 

 

18,063

 

 

 

44,528

 

Restricted cash

 

 

765

 

 

 

753

 

Trade receivables, (including related parties of $10,334 and $5,814) net of allowance for doubtful accounts of $7,346 and $6,572

 

 

211,175

 

 

 

224,713

 

Assets held for sale

 

 

1,223

 

 

 

-

 

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

 

 

43,404

 

 

 

27,238

 

Total current assets

 

 

385,254

 

 

 

407,923

 

Property and equipment, net of accumulated depreciation of $199,275 and $194,448

 

 

67,750

 

 

 

61,362

 

Intangible assets subject to amortization, net of accumulated amortization of $85,058 and $75,992 (including related parties of $3,017 and $3,714)

 

 

55,706

 

 

 

61,811

 

Intangible assets not subject to amortization

 

 

207,453

 

 

 

207,453

 

Goodwill

 

 

90,672

 

 

 

86,991

 

Deferred income taxes

 

 

2,591

 

 

 

2,591

 

Operating leases right of use asset

 

 

45,159

 

 

 

44,413

 

Other assets

 

 

21,550

 

 

 

8,297

 

Total assets

 

$

876,135

 

 

$

880,841

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Current maturities of long-term debt

 

$

8,643

 

 

$

5,256

 

Accounts payable and accrued expenses (including related parties of $1,222 and $1,215)

 

 

240,417

 

 

 

237,415

 

Operating lease liabilities

 

 

7,150

 

 

 

5,570

 

Total current liabilities

 

 

256,210

 

 

 

248,241

 

Long-term debt, less current maturities, net of unamortized debt issuance costs of $1,180 and $1,221

 

 

201,301

 

 

 

207,292

 

Long-term operating lease liabilities

 

 

46,849

 

 

 

42,151

 

Other long-term liabilities

 

 

17,294

 

 

 

30,198

 

Deferred income taxes

 

 

68,464

 

 

 

67,590

 

Total liabilities

 

 

590,118

 

 

 

595,472

 

Commitments and contingencies (note 6)

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

47,301

 

 

 

-

 

Stockholders' equity

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 260,000,000 shares authorized; shares issued and outstanding at September 30, 2023 78,644,012 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 September 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 September 30, 2023 and December 31, 2022 9,352,729

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

742,040

 

 

 

776,298

 

Accumulated deficit

 

 

(501,604

)

 

 

(504,375

)

Accumulated other comprehensive income (loss)

 

 

(1,729

)

 

 

(1,510

)

Total stockholders' equity

 

 

238,716

 

 

 

270,422

 

Noncontrolling interest

 

 

-

 

 

 

14,947

 

Total equity

 

 

238,716

 

 

 

285,369

 

Total liabilities and equity

 

$

876,135

 

 

$

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

 

 

Nine-Month Period

 

 

 

Ended September 30,

 

 

Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net Revenue

 

$

274,417

 

 

$

241,014

 

 

$

786,804

 

 

$

659,881

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue - digital

 

 

199,289

 

 

 

157,095

 

 

 

562,881

 

 

 

431,951

 

Direct operating expenses (including related parties of $1,523, $2,029, $4,487 and $5,357) (including non-cash stock-based compensation of $2,637, $981, $7,218 and $2,878)

 

 

31,855

 

 

 

30,086

 

 

 

94,782

 

 

 

87,505

 

Selling, general and administrative expenses

 

 

21,954

 

 

 

19,208

 

 

 

68,287

 

 

 

53,022

 

Corporate expenses (including non-cash stock-based compensation of $4,395, $1,805, $9,835 and $5,117)

 

 

13,292

 

 

 

9,525

 

 

 

35,836

 

 

 

26,769

 

Depreciation and amortization (including related parties of $232, $232, $696 and $695)

 

 

7,356

 

 

 

6,554

 

 

 

20,336

 

 

 

19,212

 

Change in fair value of contingent consideration

 

 

(5,997

)

 

 

734

 

 

 

(8,939

)

 

 

6,810

 

Impairment charge

 

 

989

 

 

 

-

 

 

 

989

 

 

 

-

 

Foreign currency (gain) loss

 

 

548

 

 

 

1,966

 

 

 

289

 

 

 

2,112

 

Other operating (gain) loss

 

 

-

 

 

 

(58

)

 

 

-

 

 

 

(1,011

)

Operating income (loss)

 

 

5,131

 

 

 

15,904

 

 

 

12,343

 

 

 

33,511

 

Interest expense

 

 

(4,454

)

 

 

(3,055

)

 

 

(12,788

)

 

 

(7,225

)

Interest income

 

 

1,558

 

 

 

788

 

 

 

3,455

 

 

 

1,916

 

Dividend income

 

 

-

 

 

 

6

 

 

 

32

 

 

 

20

 

Realized gain (loss) on marketable securities

 

 

(33

)

 

 

(473

)

 

 

(94

)

 

 

(473

)

Gain (loss) on debt extinguishment

 

 

-

 

 

 

-

 

 

 

(1,556

)

 

 

-

 

Income (loss) before income taxes

 

 

2,202

 

 

 

13,170

 

 

 

1,392

 

 

 

27,749

 

Income tax benefit (expense)

 

 

530

 

 

 

(4,080

)

 

 

1,038

 

 

 

(8,305

)

Net income (loss)

 

 

2,732

 

 

 

9,090

 

 

 

2,430

 

 

 

19,444

 

Net (income) loss attributable to redeemable noncontrolling interest

 

 

(13

)

 

 

-

 

 

 

(1

)

 

 

-

 

Net (income) loss attributable to noncontrolling interest

 

 

-

 

 

 

303

 

 

 

342

 

 

 

303

 

Net income (loss) attributable to common stockholders

 

$

2,719

 

 

$

9,393

 

 

$

2,771

 

 

$

19,747

 

Basic and diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.03

 

 

$

0.11

 

 

$

0.03

 

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.05

 

 

$

0.03

 

 

$

0.15

 

 

$

0.08

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic

 

 

87,995,567

 

 

 

84,945,873

 

 

 

87,803,770

 

 

 

85,469,675

 

Weighted average common shares outstanding, diluted

 

 

89,888,721

 

 

 

87,417,501

 

 

 

89,835,363

 

 

 

87,671,726

 

 

See Notes to Condensed Consolidated Financial Statements

5


 

ENTRAVISION COMMUNICATIONS CORPORATION

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

(In thousands)

 

 

 

Three-Month Period

 

 

Nine-Month Period

 

 

 

Ended September 30,

 

 

Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income (loss)

 

$

2,732

 

 

$

9,090

 

 

$

2,430

 

 

$

19,444

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation

 

 

(408

)

 

 

(23

)

 

 

(463

)

 

 

(66

)

Change in fair value of marketable securities

 

 

17

 

 

 

551

 

 

 

244

 

 

 

(982

)

Total other comprehensive income (loss)

 

 

(391

)

 

 

528

 

 

 

(219

)

 

 

(1,048

)

Comprehensive income (loss)

 

 

2,341

 

 

 

9,618

 

 

 

2,211

 

 

 

18,396

 

Comprehensive (income) loss attributable to redeemable noncontrolling interests

 

 

(13

)

 

 

-

 

 

 

(1

)

 

 

-

 

Comprehensive (income) loss attributable to noncontrolling interests

 

 

-

 

 

 

303

 

 

 

342

 

 

 

303

 

Comprehensive income (loss) attributable to common stockholders

 

$

2,328

 

 

$

9,921

 

 

$

2,552

 

 

$

18,699

 

 

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

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

103

 

 

-

 

 

103

 

OCI release due to realized gain (loss) on marketable securities

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

23

 

 

-

 

 

23

 

Foreign currency translation gain (loss)

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

16

 

 

-

 

 

16

 

Net income (loss) attributable to common stockholders

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

2,041

 

 

-

 

 

(342

)

 

1,699

 

Balance, March 31, 2023

 

 

78,356,490

 

 

-

 

 

9,352,729

 

 

-

 

 

8

 

 

-

 

 

1

 

 

776,198

 

 

(502,334

)

 

(1,368

)

 

14,059

 

 

286,564

 

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

 

 

260,527

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

241

 

 

-

 

 

-

 

 

-

 

 

241

 

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

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(15

)

 

-

 

 

-