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, 2020

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 August 3, 2020, there were 59,905,386 shares, $0.0001 par value per share, of the registrant’s Class A common stock outstanding, 14,927,613 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, 2020

TABLE OF CONTENTS

		Page Number
	PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	4
	CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF JUNE 30, 2020 AND DECEMBER 31, 2019	4
	CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND JUNE 30, 2019	5
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND JUNE 30, 2019	6
	CONSOLIDATED STATEMENTS OF STOCKHOLDERS’  EQUITY (UNAUDITED) FOR THE THREE-AND SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND JUNE 30, 2019	7
	CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND JUNE 30, 2019	9
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	10
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45
ITEM 4.	CONTROLS AND PROCEDURES	45
	PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	47
ITEM 1A.	RISK FACTORS	47
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	47
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	47
ITEM 4.	MINE SAFETY DISCLOSURES	47
ITEM 5.	OTHER INFORMATION	47
ITEM 6.	EXHIBITS	48

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”, “hope” 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 as of April 30, 2019, or the 2017 Credit Agreement, which governs our current credit facility, or the 2017 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 2017 Credit Agreement;

• cancellations or reductions of advertising due to the then current economic environment or otherwise;

• advertising rates remaining constant or decreasing;

• rapid changes in digital advertising;

• the impact of rigorous competition in Spanish-language media and in the advertising industry generally;

• the impact of changing preferences, if any, among U.S. Hispanic audiences for Spanish-language programming, especially among younger age groups;  

• the impact of changing preferences, if any, among audiences favoring newer forms of media over traditional media, such as 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 possible impact on our business as a result of changes in the way market share is measured by third parties;

• our relationship with Univision Communications Inc., or Univision;

• the extent to which we continue to generate revenue under retransmission consent agreements;

• subject to restrictions contained in the 2017 Credit Agreement, the overall success of our acquisition strategy and the integration of any acquired assets with our existing operations;

• our ability to implement effective internal controls to address the material weakness identified in this report;

• industry-wide market factors and regulatory and other developments affecting our operations;

2

• 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 by lockdown, shelter-in-place, stay-at-home or similar orders instituted as a result of the pandemic;

• 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 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 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 31 of our Annual Report on Form 10-K for the year ended December 31, 2019 and beginning on page 42 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.  

3

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENTRAVISION COMMUNICATIONS CORPORATION

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data)

	June 30,			December 31,
	2020			2019
ASSETS
Current assets
Cash and cash equivalents	$	69,270			33,123
Marketable securities		65,098			91,662
Restricted cash		735			734
Trade receivables, (including related parties of $6,548 and $4,251) net of allowance for doubtful accounts of $3,683 and $2,890		51,706			71,406
Assets held for sale		3,099			950
Prepaid expenses and other current assets (including related parties of $274 and $274)		16,586			11,557
Total current assets		206,494			209,432
Property and equipment, net of accumulated depreciation of $188,749 and $188,579		74,810			79,642
Intangible assets subject to amortization, net of accumulated amortization of $101,713 and $99,819 (including related parties of $6,484 and $7,098)		9,752			16,772
Intangible assets not subject to amortization		216,853			252,544
Goodwill		45,711			46,511
Operating leases right of use asset		35,126			43,837
Other assets		7,428			7,462
Total assets	$	596,174		$	656,200
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	3,000		$	3,000
Accounts payable and accrued expenses (including related parties of $1,918 and $2,147)		48,572			53,931
Operating lease liabilities		7,830			9,056
Total current liabilities		59,402			65,987
Long-term debt, less current maturities, net of unamortized debt issuance costs of $2,014 and $2,226		211,736			213,024
Long-term operating lease liabilities		32,784			41,387
Other long-term liabilities		3,385			3,371
Deferred income taxes		38,607			44,259
Total liabilities		345,914			368,028
Commitments and contingencies (note 6)
Stockholders' equity
Class A common stock, $0.0001 par value, 260,000,000 shares authorized; shares issued and outstanding 2020 59,905,386 and 2019 60,074,698		6			6
Class B common stock, $0.0001 par value, 40,000,000 shares authorized; shares issued and outstanding 2020 and 2019 14,927,613		2			2
Class U common stock, $0.0001 par value, 40,000,000 shares authorized; shares issued and outstanding 2020 and 2019 9,352,729		1			1
Additional paid-in capital		830,900			836,170
Accumulated deficit		(581,130	)		(547,876	)
Accumulated other comprehensive income (loss)		481			(131	)
Total stockholders' equity		250,260			288,172
Total liabilities and stockholders' equity	$	596,174		$	656,200

See Notes to Consolidated Financial Statements

4

ENTRAVISION COMMUNICATIONS CORPORATION

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,
	2020			2019			2020			2019
Net Revenue	$	45,116		$	69,241		$	109,365		$	133,921
Expenses:
Cost of revenue - digital media		6,447			8,859			13,794			16,501
Direct operating expenses (including related parties of $1,386, $2,007, $3,605 and $3,969) (including non-cash stock-based compensation of $104, $116, $235 and $250)		22,140			29,655			48,819			58,585
Selling, general and administrative expenses		10,897			13,545			24,488			27,359
Corporate expenses (including non-cash stock-based compensation of $699, $719, $1,357 and $1,385)		5,384			6,501			12,224			13,395
Depreciation and amortization (includes direct operating of $2,800, $2,968, $5,931 and $5,462; selling, general and administrative of $891, $1,176, $2,099 and $2,445; and corporate of $182, $162, $355 and $315) (including related parties of $307, $307, $614 and $615)		3,873			4,306			8,385			8,222
Change in fair value contingent consideration		-			(2,735	)		-			(2,376	)
Impairment charge		-			22,368			39,835			22,368
Foreign currency (gain) loss		(155	)		(82	)		1,353			50
Other operating (gain) loss		(2,030	)		(1,597	)		(2,866	)		(3,593	)
Operating income (loss)		(1,440	)		(11,579	)		(36,667	)		(6,590	)
Interest expense		(2,024	)		(3,554	)		(4,704	)		(7,044	)
Interest income		539			857			1,162			1,776
Dividend income		-			251			24			506
Income (loss) before income taxes		(2,925	)		(14,025	)		(40,185	)		(11,352	)
Income tax benefit (expense)		5,263			(2,252	)		6,931			(3,345	)
Income (loss) before equity in net income (loss) of nonconsolidated affiliate		2,338			(16,277	)		(33,254	)		(14,697	)
Equity in net income (loss) of nonconsolidated affiliate, net of tax		-			(2	)		-			(158	)
Net income (loss)	$	2,338		$	(16,279	)	$	(33,254	)	$	(14,855	)
Basic and diluted earnings per share:
Net income (loss) per share, basic and diluted	$	0.03		$	(0.19	)	$	(0.39	)	$	(0.17	)
Cash dividends declared per common share	$	0.03		$	0.05		$	0.08		$	0.10
Weighted average common shares outstanding, basic		84,123,530			85,359,998			84,220,649			85,728,820
Weighted average common shares outstanding, diluted		84,669,250			85,359,998			84,220,649			85,728,820

See Notes to Consolidated Financial Statements

5

ENTRAVISION COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In thousands)

	Three-Month Period					Six-Month Period
	Ended June 30,					Ended June 30,
	2020		2019			2020			2019
Net income (loss)	$	2,338	$	(16,279	)	$	(33,254	)	$	(14,855	)
Other comprehensive income (loss), net of tax:
Change in foreign currency translation		467		(318	)		301			(288	)
Change in fair value of available for sale securities		534		523			311			1,286
Total other comprehensive income (loss)		1,001		205			612			998
Comprehensive income  (loss)	$	3,339	$	(16,074	)	$	(32,642	)	$	(13,857	)

See Notes to Consolidated Financial Statements

6

ENTRAVISION COMMUNICATIONS CORPORATION

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
	Class A			Class B		Class U		Stock			A		B		U		Capital			Deficit			Income (Loss)			Total
Balance, December 31, 2019		60,074,698			14,927,613		9,352,729		-			6		2		1		836,170			(547,876	)		(131	)		288,172
Stock-based compensation expense		-			-		-		-			-		-		-		789			-			-			789
Repurchase of Class A common stock		(259,500	)		-		-		259,500			-		-		-		(525	)		-			-			(525	)
Retirement of treasury stock		-			-		-		(259,500	)		-		-		-		-			-			-			-
Dividends paid		-			-		-		-			-		-		-		(4,218	)		-			-			(4,218	)
Change in fair value of marketable securities		-			-		-		-			-		-		-		-			-			(223	)		(223	)
Foreign currency translation gain (loss)		-			-		-		-			-		-		-		-			-			(166	)		(166	)
Net income (loss) for the three-month period-ended March 31, 2020		-			-		-		-			-		-		-		-			(35,592	)		-			(35,592	)
Balance, March 31, 2020		59,815,198			14,927,613		9,352,729		-			6		2		1		832,216			(583,468	)		(520	)		248,237
Issuance of common stock upon exercise of stock options  or awards of restricted stock units		90,188			-		-		-			-		-		-		(15	)		-			-			(15	)
Stock-based compensation expense		-			-		-		-			-		-		-		803			-			-			803
Dividends paid		-			-		-		-			-		-		-		(2,104	)		-			-			(2,104	)
Change in fair value of marketable securities		-			-		-		-			-		-		-		-			-			534			534
Foreign currency translation gain (loss)		-			-		-		-			-		-		-		-			-			467			467
Net income (loss) for the three-month period-ended June 30, 2020		-			-		-		-			-		-		-		-			2,338			-			2,338
Balance, June 30, 2020		59,905,386			14,927,613		9,352,729		-			6		2		1		830,900			(581,130	)		481			250,260

See Notes to Consolidated Financial Statements

	Number of Common Shares								Common Stock												Accumulated
							Treasury		Class		Class		Class		Additional Paid-in			Accumulated			Other Comprehensive
	Class A		Class B		Class U		Stock		A		B		U		Capital			Deficit			Income (Loss)			Total
Balance, December 31, 2018		63,210,531		14,927,613		9,352,729		-		6		2		1		862,299			(528,164	)		(1,412	)		332,732
Tax payments related to shares withheld for share-based  compensation plans		25,059		-		-		-		-		-		-		(42	)		-			-			(42	)
Stock-based compensation expense		-		-		-		-		-		-