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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 MARCH 31, 2024

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 April 29, 2024, there were 80,374,875 shares, $0.0001 par value per share, of the registrant’s Class A 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 QUARTERLY PERIOD ENDED MARCH 31, 2024

TABLE OF CONTENTS

 

 

 

 

 

Page

Number

 

 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1.

 

FINANCIAL STATEMENTS

 

4

 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF MARCH 31, 2024 AND DECEMBER 31, 2023

 

4

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2024 AND MARCH 31, 2023

 

5

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2024 AND MARCH 31, 2023

 

6

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2024 AND MARCH 31, 2023

 

7

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2024 AND MARCH 31, 2023

 

8

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

9

ITEM 2.

 

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

 

27

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

35

ITEM 4.

 

CONTROLS AND PROCEDURES

 

35

 

PART II. OTHER INFORMATION

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

 

37

ITEM 1A.

 

RISK FACTORS

 

37

ITEM 2.

 

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

 

37

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

 

37

ITEM 4.

 

MINE SAFETY DISCLOSURES

 

37

ITEM 5.

 

OTHER INFORMATION

 

37

ITEM 6.

 

EXHIBITS

 

38

 

 

 

 


 

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 and/or our ability to raise capital;
provisions of our debt instruments, including the agreement dated as of March 17, 2023, or the 2023 Credit Agreement, which governs our current credit facility, or 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;
the impact of changing preferences, if any, 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;
the impact of existing and possible additional legislative and/or regulatory action, as well as evolving industry standards applying to our business;
the ability to manage our growth effectively, including the ability to integrate successfully recently acquired businesses, particularly with respect to the global expansion of our digital operations;
the ability to hire and retain qualified personnel;
the ability 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 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 success of our emphasis on local news, including, but not limited to, the impact such effort may have in generating political advertising revenue;
our relationship with TelevisaUnivision, Inc., or TelevisaUnivision;
the extent to which we continue to generate revenue under retransmission consent agreements and spectrum usage rights;
our dependence upon a single global media company, Meta Platforms, Inc. (formerly known as Facebook Inc.), or Meta, for the majority of our revenue, which dependence we expect to continue until the termination of Meta's Authorized Sales Partners ("ASP") program on or before July 1, 2024;

2


 

the loss of our largest digital advertising segment commercial partner, which has created uncertainties and risks in our digital segment and our operations as a whole;
the risk of impairment of our assets, including but not limited to our digital assets;
uncertainties associated with a review of our operating strategy and cost structure, which review has been initiated;
the effectiveness with which we handle credit risk in our digital segment;
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; and
legal, political and other risks associated with our rapidly expanding operations located outside the United States.

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 11 of our Annual Report on Form 10-K for the year ended December 31, 2023 (our “2023 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)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

128,410

 

 

$

105,739

 

Marketable securities

 

 

4,335

 

 

 

13,172

 

Restricted cash

 

 

774

 

 

 

770

 

Trade receivables, (including related parties of $1,913 and $10,051) net of allowance for doubtful accounts of $6,916 and $5,719

 

 

206,065

 

 

 

235,837

 

Assets held for sale

 

 

301

 

 

 

301

 

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

 

 

40,095

 

 

 

30,036

 

Total current assets

 

 

379,980

 

 

 

385,855

 

Property and equipment, net of accumulated depreciation of $180,468 and $197,645

 

 

69,294

 

 

 

71,475

 

Intangible assets subject to amortization, net of accumulated amortization of $82,592 and $87,968 (including related parties of $2,553 and $2,785)

 

 

34,660

 

 

 

51,784

 

Intangible assets not subject to amortization

 

 

195,174

 

 

 

195,174

 

Goodwill

 

 

55,272

 

 

 

90,672

 

Deferred income taxes

 

 

5,175

 

 

 

4,991

 

Operating leases right of use asset

 

 

43,543

 

 

 

43,941

 

Other assets

 

 

21,892

 

 

 

22,054

 

Total assets

 

$

804,990

 

 

$

865,946

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Current maturities of long-term debt

 

$

3,360

 

 

$

9,969

 

Accounts payable and accrued expenses (including related parties of $1,064 and $1,071)

 

 

263,484

 

 

 

254,802

 

Operating lease liabilities

 

 

7,518

 

 

 

7,282

 

Total current liabilities

 

 

274,362

 

 

 

272,053

 

Long-term debt, less current maturities, net of unamortized debt issuance costs of $1,012 and $1,116

 

 

195,762

 

 

 

199,552

 

Long-term operating lease liabilities

 

 

44,901

 

 

 

45,665

 

Other long-term liabilities

 

 

21,404

 

 

 

23,009

 

Deferred income taxes

 

 

55,186

 

 

 

59,381

 

Total liabilities

 

 

591,615

 

 

 

599,660

 

Commitments and contingencies (note 6)

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

39,840

 

 

 

43,758

 

Stockholders' equity

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 260,000,000 shares authorized; shares issued and outstanding at March 31, 2024 80,374,875 and December 31, 2023 80,150,506

 

 

8

 

 

 

8

 

Class U common stock, $0.0001 par value, 40,000,000 shares authorized; shares issued and outstanding at March 31, 2024 and December 31, 2023 9,352,729

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

743,339

 

 

 

743,246

 

Accumulated deficit

 

 

(568,702

)

 

 

(519,812

)

Accumulated other comprehensive income (loss)

 

 

(1,111

)

 

 

(915

)

Total stockholders' equity

 

 

173,535

 

 

 

222,528

 

Total liabilities, redeemable noncontrolling interest and equity

 

$

804,990

 

 

$

865,946

 

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

 

 

 

Ended March 31,

 

 

 

2024

 

 

2023

 

Net Revenue

 

$

277,445

 

 

$

239,006

 

Expenses:

 

 

 

 

 

 

Cost of revenue - digital

 

 

203,229

 

 

 

167,756

 

Direct operating expenses (including related parties of $1,400 and $1,421) (including non-cash stock-based compensation of $1,785 and $1,856)

 

 

35,572

 

 

 

29,862

 

Selling, general and administrative expenses

 

 

26,695

 

 

 

22,768

 

Corporate expenses (including non-cash stock-based compensation of $3,662 and $2,197)

 

 

12,248

 

 

 

10,502

 

Depreciation and amortization (including related parties of $232 and $232)

 

 

7,133

 

 

 

6,471

 

Change in fair value of contingent consideration

 

 

(1,420

)

 

 

(4,065

)

Impairment charge

 

 

49,438

 

 

 

-

 

Foreign currency (gain) loss

 

 

449

 

 

 

(956

)

Operating income (loss)

 

 

(55,899

)

 

 

6,668

 

Interest expense

 

 

(4,559

)

 

 

(4,028

)

Interest income

 

 

1,130

 

 

 

860

 

Dividend income

 

 

10

 

 

 

18

 

Realized gain (loss) on marketable securities

 

 

(113

)

 

 

(32

)

Gain (loss) on debt extinguishment

 

 

(40

)

 

 

(1,556

)

Income (loss) before income taxes

 

 

(59,471

)

 

 

1,930

 

Income tax benefit (expense)

 

 

7,802

 

 

 

(231

)

Net income (loss)

 

 

(51,669

)

 

 

1,699

 

Net (income) loss attributable to redeemable noncontrolling interest

 

 

2,779

 

 

 

-

 

Net (income) loss attributable to noncontrolling interest

 

 

-

 

 

 

342

 

Net income (loss) attributable to common stockholders

 

$

(48,890

)

 

$

2,041

 

Basic and diluted earnings per share:

 

 

 

 

 

 

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

 

$

(0.55

)

 

$

0.02

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.05

 

 

$

0.05

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic

 

 

89,518,058

 

 

 

87,623,887

 

Weighted average common shares outstanding, diluted

 

 

89,518,058

 

 

 

89,786,585

 

 

See Notes to Condensed Consolidated Financial Statements

5


 

ENTRAVISION COMMUNICATIONS CORPORATION

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

(In thousands)

 

 

 

Three-Month Period

 

 

 

Ended March 31,

 

 

 

2024

 

 

2023

 

Net income (loss)

 

$

(51,669

)

 

$

1,699

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

Change in foreign currency translation

 

 

(295

)

 

 

16

 

Change in fair value of marketable securities

 

 

99

 

 

 

126

 

Total other comprehensive income (loss)

 

 

(196

)

 

 

142

 

Comprehensive income (loss)

 

 

(51,865

)

 

 

1,841

 

Comprehensive (income) loss attributable to redeemable noncontrolling interests

 

 

2,779

 

 

 

-

 

Comprehensive (income) loss attributable to noncontrolling interests

 

 

-

 

 

 

342

 

Comprehensive income (loss) attributable to common stockholders

 

$

(49,086

)

 

$

2,183

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional
Paid-in

 

Accumulated

 

Other
Comprehensive

 

Noncontrolling

 

 

 

 

 

Class A

 

Class U

 

Class A

 

Class U

 

Capital

 

Deficit

 

Income (Loss)

 

Interest

 

Total

 

Balance, December 31, 2023

 

 

80,150,506

 

 

9,352,729

 

$

8

 

$

1

 

$

743,246

 

$

(519,812

)

$

(915

)

$

-

 

$

222,528

 

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

 

 

224,369

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(490

)

 

-

 

 

-

 

 

-

 

 

(490

)

Stock-based compensation expense

 

 

-

 

 

-

 

 

-

 

 

-

 

 

5,447

 

 

-

 

 

-

 

 

-

 

 

5,447

 

Dividends paid

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(4,476

)

 

-

 

 

-

 

 

-

 

 

(4,476

)

Dividends equivalents payable

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(388

)

 

-

 

 

-

 

 

-

 

 

(388

)

Change in fair value of marketable securities

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

15

 

 

-

 

 

15

 

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

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

84

 

 

-

 

 

84

 

Foreign currency translation gain (loss)

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(295

)

 

-

 

 

(295

)

Net income (loss) attributable to common stockholders

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(48,890

)

 

-

 

 

-

 

 

(48,890

)

Balance, March 31, 2024

 

 

80,374,875

 

 

9,352,729

 

 

8

 

 

1

 

 

743,339

 

 

(568,702

)

 

(1,111

)

 

-

 

 

173,535

 

 

 

 

 

 

Number of Common Shares

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional
Paid-in

 

Accumulated

 

Other
Comprehensive

 

Noncontrolling

 

 

 

 

 

Class A

 

Class U

 

Class A

 

Class 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

 

 

See Notes to Condensed Consolidated Financial Statements

 


 

ENTRAVISION COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 

 

Three-Month Period

 

 

Ended March 31,

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

$

(51,669

)

 

$

1,699

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

7,133

 

 

 

6,471

 

Impairment charge

 

49,438

 

 

 

-

 

Deferred income taxes

 

(4,224

)

 

 

(205

)

Non-cash interest

 

92

 

 

 

133

 

Amortization of syndication contracts

 

113

 

 

 

120

 

Payments on syndication contracts

 

(115

)

 

 

(120

)

Non-cash stock-based compensation

 

5,447

 

 

 

4,053

 

(Gain) loss on marketable securities

 

113

 

 

 

32

 

(Gain) loss on disposal of property and equipment

 

97

 

 

 

68

 

(Gain) loss on debt extinguishment

 

40

 

 

 

1,556

 

Change in fair value of contingent consideration

 

(1,420

)

 

 

(4,065

)

Changes in assets and liabilities:

 

 

 

 

 

(Increase) decrease in accounts receivable

 

29,473

 

 

 

33,157

 

(Increase) decrease in prepaid expenses and other current assets, operating leases right of use asset and other assets

 

(7,150

)

 

 

948

 

Increase (decrease) in accounts payable, accrued expenses and other liabilities

 

6,007

 

 

 

(7,152

)

Net cash provided by operating activities

 

33,375

 

 

 

36,695

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(2,743

)

 

 

(6,750

)

Purchases of marketable securities

 

-

 

 

 

(9,397

)

Proceeds from sale of marketable securities

 

8,842

 

 

 

15,704

 

Purchases of investments

 

-

 

 

 

(120

)

Net cash provided by (used in) investing activities

 

6,099

 

 

 

(563

)

Cash flows from financing activities:

 

 

 

 

 

Proceeds from stock option exercises

 

-

 

 

 

313

 

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

 

(27

)

 

 

(80

)

Payments on debt

 

(10,275

)

 

 

(211,748

)

Dividends paid

 

(4,476

)

 

 

(4,932

)

Distributions to noncontrolling interest

 

(1,078

)

 

 

-

 

Payment of contingent consideration

 

(900

)

 

 

-

 

Principal payments under finance lease obligation

 

(41

)

 

 

(38

)

Proceeds from borrowings on debt

 

-

 

 

 

212,405

 

Payments for debt issuance costs

 

-

 

 

 

(1,285

)

Net cash provided by (used in) financing activities

 

(16,797

)

 

 

(5,365

)

Effect of exchange rates on cash, cash equivalents and restricted cash

 

(2

)

 

 

1

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

22,675

 

 

 

30,768

 

Cash, cash equivalents and restricted cash:

 

 

 

 

 

Beginning

 

106,509

 

 

 

111,444

 

Ending

$

129,184

 

 

$

142,212

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash payments for:

 

 

 

 

 

Interest

$

4,467

 

 

$

3,895

 

Income taxes

$

1,291

 

 

$

72

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

Capital expenditures financed through accounts payable, accrued expenses and other liabilities

$

1,416

 

 

$

3,910

 

Dividends equivalents payable

$

1,049

 

 

$

-

 

See Notes to Condensed Consolidated Financial Statements

 


 

ENTRAVISION COMMUNICATIONS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

Presentation

The condensed consolidated financial statements included herein have been prepared by Entravision Communications Corporation (the “Company”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to such rules and regulations. These condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s 2023 Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 10-K"). The unaudited information contained herein has been prepared on the same basis as the Company’s audited consolidated financial statements and, in the opinion of the Company’s management, includes all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the information for the periods presented. The interim results presented herein are not necessarily indicative of the results of operations that may be expected for the full fiscal year ending December 31, 2024 or any other future period.

2. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

The Company is a global advertising solutions, media and technology company. The Company's operations encompass integrated, end-to-end advertising solutions across multiple media, comprised of digital, television and audio properties. The Company's management has determined that the Company operates in three reportable segments as of March 31, 2024, based upon the type of advertising medium: digital, television and audio.

The Company's digital segment, whose operations are primarily located in Europe, Latin America, Asia, the United States and Africa, reaches a global market, with a focus on advertisers that wish to advertise on digital platforms owned and operated primarily by global media companies. The digital segment is comprised of three business units: Entravision Global Partners, the Company's digital commercial partnerships business; Smadex, the Company's programmatic ad purchasing platform; and Adwake, the Company's mobile growth solutions business. The Company's television and audio operations reach and engage U.S. Hispanics in the United States. The Company owns and/or operates 49 primary television stations and 44 radio stations (37 FM and 7 AM).

Restricted Cash

As of March 31, 2024 and December 31, 2023, the Company’s balance sheet includes $0.8 million in restricted cash, which was deposited into a separate account as collateral for the Company’s letters of credit.

The Company's cash and cash equivalents and restricted cash, as presented in the Condensed Consolidated Statements of Cash Flows, was as follows (in thousands):

 

As of March 31,

 

 

2024

 

 

2023

 

Cash and cash equivalents

$

128,410

 

 

$

141,455

 

Restricted cash

 

774

 

 

 

757

 

Total as presented in the Condensed Consolidated Statements of Cash Flows

$

129,184

 

 

$

142,212

 

Related Party

Substantially all of the Company’s television stations are Univision- or UniMás-affiliated television stations. The network affiliation agreement with TelevisaUnivision provides certain of the Company’s owned stations the exclusive right to broadcast TelvisaUnivision’s primary Univision network and UniMás network programming in their respective markets. Under the network affiliation agreement, the Company retains the right to sell no less than four minutes per hour of the available advertising time on stations that broadcast Univision network programming, and the right to sell approximately four and a half minutes per hour of the available advertising time on stations that broadcast UniMás network programming, subject to adjustment from time to time by TelevisaUnivision.

Under the network affiliation agreement, TelevisaUnivision acts as the Company’s exclusive third-party sales representative for the sale of certain national advertising on the Univision- and UniMás-affiliate television stations, and the Company pays certain sales representation fees to TelevisaUnivision relating to sales of all advertising for broadcast on its Univision- and UniMás-affiliate television stations.

 


 

During each of the three-month periods ended March 31, 2024 and 2023, the amount the Company paid TelevisaUnivision in this capacity was $1.4 million. These amounts were included in Direct Operating Expenses in the Company's Condensed Consolidated Statements of Operations.

The Company also generates revenue under two marketing and sales agreements with TelevisaUnivision, which give it the right to manage the marketing and sales operations of TelevisaUnivision-owned Univision affiliates in three markets – Albuquerque, Boston and Denver.

On October 2, 2017, the Company entered into the current affiliation agreement which superseded and replaced its prior affiliation agreements with TelevisaUnivision. Additionally, on the same date, the Company entered into a proxy agreement and marketing and sales agreement with TelevisaUnivision, each of which superseded and replaced the prior comparable agreements with TelevisaUnivision. The term of each of these current agreements expires on December 31, 2026 for all of the Company’s Univision and UniMás network affiliate stations, except that each current agreement expired on December 31, 2021 with respect to the Company’s Univision and UniMás network affiliate stations in Orlando, Tampa and Washington, D.C.

Under the Company’s current proxy agreement with TelevisaUnivision, the Company grants TelevisaUnivision the right to negotiate the terms of retransmission consent agreements for its Univision- and UniMás-affiliated television station signals. Among other things, the proxy agreement provides terms relating to compensation to be paid to the Company by TelevisaUnivision with respect to retransmission consent agreements entered into with multichannel video programming distributors, (“MVPDs”). As of March 31, 2024, the amount due to the Company from TelevisaUnivision was $1.9 million related to the agreements for the carriage of its Univision and UniMás-affiliated television station signals. During the three-month periods ended March 31, 2024 and 2023, retransmission consent revenue accounted for $9.2 million and $9.6 million, respectively, of which $6.4 million and $6.6 million, respectively, relate to the TelevisaUnivision proxy agreement.

TelevisaUnivision currently owns approximately 10% of the Company’s common stock on a fully-converted basis. The Company’s Class U common stock, all of which is held by TelevisaUnivision, has limited voting rights and does not include the right to elect directors. Each share of Class U common stock is automatically convertible into one share of the Company’s Class A common stock (subject to adjustment for stock splits, dividends or combinations) in connection with any transfer of such shares of Class U common stock to a third party that is not an affiliate of TelevisaUnivision. In addition, as the holder of all of the Company’s issued and outstanding Class U common stock, so long as TelevisaUnivision holds a certain number of shares of Class U common stock, the Company may not, without the consent of TelevisaUnivision, merge, consolidate or enter into a business combination, dissolve or liquidate the Company or dispose of any interest in any FCC license with respect to television stations which are affiliates of TelevisaUnivision, among other things.

Stock-Based Compensation

The Company measures all stock-based awards using a fair value method and recognizes the related stock-based compensation expense in the condensed consolidated financial statements over the requisite service period. As stock-based compensation expense recognized in the Company’s condensed consolidated financial statements is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.

Restricted Stock Units

Stock-based compensation expense related to restricted stock units ("RSUs") is based on the fair value of the Company’s stock price on the date of grant and is amortized over the vesting period, generally between 1 to 4 years.

The following is a summary of non-vested restricted stock units granted (in thousands, except grant date fair value data):

 

 

Three-Month Period

 

 

 

Ended March 31,

 

 

 

2024

 

 

2023

 

Restricted stock units granted

 

 

2,431

 

 

 

3,614

 

Weighted average fair value

 

$

4.38

 

 

$

6.63

 

 

Stock-based compensation expense related to RSUs was $4.9 million and $4.1 million for the three-month periods ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, there was $21.9 million of total unrecognized compensation expense related to grants of RSUs that is expected to be recognized over a weighted-average period of 1.9 years.

Performance Stock Units

In connection with the hiring of the Company's CEO in July 2023, the Company has granted the CEO Performance Stock Units ("PSUs"), which are subject to both time-based vesting conditions and market-based conditions. Both the service and market conditions must be satisfied for the PSUs to vest. The PSUs consist of five equal tranches (each, a "Performance Tranche"), based on achievement of a share price condition if the Company achieves share price targets of $5.75, $7.25, $9.00, $11.20, and $13.75,

10


 

respectively, over 30 consecutive trading days during a performance period commencing on July 1, 2023 and ending on July 1, 2028. The fair value of each of the Performance Tranches was $0.8 million, $0.7 million, $0.7 million, $0.6 million, and $0.5 million, respectively, and have a grant date fair value per share of restricted stock of $3.98, $3.64, $3.31, $2.93, and $2.58, respectively. To the extent that any of the performance-based requirements are met, the Company's CEO must also provide continued service to the Company through at least July 1, 2024 to receive any shares of common stock underlying the PSUs and through July 1, 2028 to receive all of the shares of common stock underlying the PSUs that have satisfied the applicable market-based requirement. The maximum number of shares that can be earned under this PSU grant is 1,000,000 shares, with 20% of the total award allocated to each Performance Tranche. Between 0% and 100% of each Performance Tranche of the PSUs will vest on each of the tranche dates.

Additionally, in connection with the annual grant in January 2024, the Company has granted PSUs to certain employees, which are subject to both time-based vesting conditions and market-based conditions. Both the service and market conditions must be satisfied for the PSUs to vest. The PSUs consist of four equal tranches (each, a "Performance Tranche"), based on achievement of a share price condition if the Company achieves share price targets of $4.83, $5.65, $7.15, and $8.90, respectively, over 30 consecutive trading days during a performance period commencing on January 25, 2024 and ending on January 25, 2029. The fair value of each of the Performance Tranches was $0.6 million, $0.6 million, $0.5 million, and $0.5 million, respectively, and have a grant date fair value per share of restricted stock of $4.16, $3.98, $3.66, and $3.32, respectively. To the extent that any of the performance-based requirements are met, the grantees must also provide continued service to the Company through at least January 25, 2025 to receive any shares of common stock underlying the PSUs and through January 25, 2029 to receive all of the shares of common stock underlying the PSUs that have satisfied the applicable market-based requirement. The maximum number of shares that can be earned under this PSU grant is 600,000 shares, with 25% of the total award allocated to each Performance Tranche. Between 0% and 100% of each Performance Tranche of the PSUs will vest on each of the tranche dates.

The Company recognizes compensation expense related to the PSUs using the accelerated attribution method over the requisite service period. Stock-based compensation expense for PSUs is based on a performance measurement of 100%. The compensation expense will not be reversed even if the performance metrics are not met.

Stock-based compensation expense related to PSUs was $0.5 million for the three-month period ended March 31, 2024. There was no stock-based compensation expense related to PSUs for the three-month period ended March 31, 2023.

As of March 31, 2024, there was $4.1 million of total unrecognized compensation expense related to grants of PSUs that is expected to be recognized over a weighted-average period of 2.5 years.

The grant date fair value for each PSU was estimated using a Monte-Carlo simulation model that incorporates option-pricing inputs covering the period from the grant date through the end of the performance period. The unobservable significant inputs to the valuation model at the time of award issuance were as follows:

 

 

 

2024 PSUs

 

 

2023 PSUs

 

Stock price at issuance

 

$

4.38

 

 

$

4.39

 

Expected volatility

 

 

57.0

%

 

 

58.0

%

Risk-free interest rate

 

 

4.01

%

 

 

4.13

%

Expected term

 

 

5.0

 

 

 

5.0

 

Expected dividend yield

 

 

0

%

 

 

0

%

During the three-month period ended March 31, 2024, the Company had the following non-vested PSUs activity (in thousands, except grant date fair value data):

 

 

 

Number of PSUs

 

 

Weighted-Average Grant Date Fair Value

 

Nonvested balance at December 31, 2023

 

 

1,000

 

 

$

3.29

 

Granted

 

 

600

 

 

 

3.78

 

Vested

 

 

-

 

 

 

-

 

Forfeited or cancelled

 

 

-

 

 

 

-

 

Nonvested balance at March 31, 2024

 

 

1,600

 

 

 

3.47

 

Income (Loss) Per Share

The following table illustrates the reconciliation of the basic and diluted income (loss) per share (in thousands, except share and per share data):

11


 

 

 

Three-Month Period

 

 

 

Ended March 31,

 

 

 

2024

 

 

2023

 

Basic earnings per share:

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

Net income (loss) attributable to common stockholders

 

$

(48,890

)

 

$

2,041

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

89,518,058

 

 

 

87,623,887

 

 

 

 

 

 

 

 

Per share:

 

 

 

 

 

 

Net income (loss) per share attributable to common stockholders

 

$

(0.55

)

 

$

0.02

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

Net income (loss) attributable to common stockholders

 

$

(48,890

)

 

$

2,041

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

89,518,058

 

 

 

87,623,887

 

Dilutive securities:

 

 

 

 

 

 

Stock options and restricted stock units

 

 

-

 

 

 

2,162,698

 

Diluted shares outstanding

 

 

89,518,058

 

 

 

89,786,585

 

 

 

 

 

 

 

 

Per share:

 

 

 

 

 

 

Net income (loss) per share attributable to common stockholders

 

$

(0.55

)

 

$

0.02

 

For the three-month period ended March 31, 2024, all dilutive securities have been excluded as their inclusion would have had an antidilutive effect on loss per share. The number of securities whose conversion would result in an incremental number of shares that would be included in determining the weighted average shares outstanding for diluted earnings per share if their effect was not antidilutive was 1,235,452 equivalent shares of dilutive securities for the three-month period ended March 31, 2024.

For the three-month period ended March 31, 2023, a total of 1,870,073 shares of dilutive securities were not included in the computation of diluted income per share because the exercise prices of the dilutive securities were greater than the average market price of the common shares.

Impairment

The Company has identified each of its three operating segments to be separate reporting units: digital, television, and audio. The carrying values of the reporting units are determined by allocating all applicable assets (including goodwill) and liabilities based upon the unit in which the assets are employed and to which the liabilities relate, considering the methodologies utilized to determine the fair value of the reporting units.

Goodwill and indefinite life intangibles are not amortized but are tested annually for impairment, or more frequently, if events or changes in circumstances indicate that the assets might be impaired. The annual testing date is October 1.

As of the most recent annual goodwill testing date, October 1, 2023, there was $50.1 million of goodwill in the digital reporting unit. Based on the assumptions and estimates discussed in the Company's 2023 10-K, the fair value of the digital reporting unit exceeded its carrying value by 28%, resulting in no impairment charge for the year ended December 31, 2023.

On March 4, 2024, the Company received a communication from Meta that it intends to wind down its Authorized Sales Partners ("ASP") program globally and end its relationship with all of its ASPs, including the Company, by July 1, 2024. For the fiscal year ended December 31, 2023 ASP revenue from Meta represented approximately 53% of the Company's consolidated revenue, and 63% of the Company's digital segment revenue. For the three-month periods ended March 31, 2024 and 2023, ASP revenue from Meta represented approximately 53% and 51%, respectively, of the Company's consolidated revenue, and 62% and 62% of the Company's digital segment revenue, respectively. The Company expects a significant loss of future revenue due to the termination of the ASP by Meta. As a result, the Company updated its internal forecasts of future performance and determined that a triggering event had occurred during the first quarter of 2024 that required interim impairment tests.

As a result, the Company conducted a review of certain of its long-lived assets using a two-step approach. In the first step, the carrying value of the asset group is compared to the projected undiscounted cash flows to determine recoverability. If the asset carrying value is not recoverable, then the fair value of the asset group is determined in the second step using an income approach. The income approach requires the Company to make a series of assumptions, such as discount rates, revenue projections, profit margin projections and useful lives.

12


 

Based on the assumptions and estimates described above, the carrying values of long-lived assets in the digital reporting unit exceeded their fair values. As a result, the Company performed the second step analysis, resulting in intangibles subject to amortization impairment charge of $