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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, 2022

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 31, 2022, there were 61,465,531 shares, $0.0001 par value per share, of the registrant’s Class A common stock outstanding, 14,127,613 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 NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

 

 

 

 

 

Page

Number

 

 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1.

 

FINANCIAL STATEMENTS

 

4

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

 

4

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021

 

5

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021

 

6

 

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021

 

7

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021

 

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

 

49

ITEM 4.

 

CONTROLS AND PROCEDURES

 

49

 

 

PART II. OTHER INFORMATION

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

 

50

ITEM 1A.

 

RISK FACTORS

 

50

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

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”, “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 and June 4, 2021, 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;
rapid changes in the digital advertising industry;
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 newer forms of media, including digital media, and changes within digital media;
the ability of management to oversee the rapid global expansion of our digital operations;
the ability to integrate successfully recently acquired businesses, primarily those in the digital segment, into our 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 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 as a result of various factors;
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 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;
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;
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;

2


 

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 effect inflation may have on decision-making by our advertisers to place ads with or through us across our operating segments;
our dependence upon a single global media company for the majority of our revenue, which dependence we expect to continue;
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 37 of our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 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,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

121,589

 

 

$

185,094

 

Marketable securities

 

 

43,212

 

 

 

-

 

Restricted cash

 

 

751

 

 

 

749

 

Trade receivables, (including related parties of $3,750 and $8,162) net of allowance for doubtful accounts of $6,593 and $6,398

 

 

194,291

 

 

 

201,747

 

Assets held for sale

 

 

-

 

 

 

1,963

 

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

 

 

42,517

 

 

 

18,925

 

Total current assets

 

 

402,360

 

 

 

408,478

 

Property and equipment, net of accumulated depreciation of $190,516 and $183,930

 

 

61,649

 

 

 

62,498

 

Intangible assets subject to amortization, net of accumulated amortization of $112,569 and $104,687 (including related parties of $3,945 and $4,642)

 

 

64,704

 

 

 

64,034

 

Intangible assets not subject to amortization

 

 

209,053

 

 

 

209,053

 

Goodwill

 

 

86,715

 

 

 

71,708

 

Deferred income taxes

 

 

1,462

 

 

 

1,462

 

Operating leases right of use asset

 

 

42,027

 

 

 

25,582

 

Other assets

 

 

8,487

 

 

 

8,527

 

Total assets

 

$

876,457

 

 

$

851,342

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Current maturities of long-term debt

 

$

5,060

 

 

$

4,903

 

Accounts payable and accrued expenses (including related parties of $1,500 and $1,920)

 

 

240,994

 

 

 

212,655

 

Operating lease liabilities

 

 

5,406

 

 

 

7,304

 

Total current liabilities

 

 

251,460

 

 

 

224,862

 

Long-term debt, less current maturities, net of unamortized debt issuance costs of $1,377 and $1,851

 

 

207,817

 

 

 

207,416

 

Long-term operating lease liabilities

 

 

39,363

 

 

 

20,988

 

Other long-term liabilities

 

 

29,283

 

 

 

72,930

 

Deferred income taxes

 

 

70,064

 

 

 

68,220

 

Total liabilities

 

 

597,987

 

 

 

594,416

 

Commitments and contingencies (note 6)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 260,000,000 shares authorized; shares issued and outstanding 2022 61,465,531 and 2021 63,116,896

 

 

6

 

 

 

6

 

Class B common stock, $0.0001 par value, 40,000,000 shares authorized; shares issued and outstanding 2022 and 2021 14,127,613

 

 

2

 

 

 

2

 

Class U common stock, $0.0001 par value, 40,000,000 shares authorized; shares issued and outstanding 2022 and 2021 9,352,729

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

770,639

 

 

 

780,388

 

Accumulated deficit

 

 

(502,747

)

 

 

(522,494

)

Accumulated other comprehensive income (loss)

 

 

(2,025

)

 

 

(977

)

Total stockholders' equity

 

 

265,876

 

 

 

256,926

 

Noncontrolling interest

 

 

12,594

 

 

 

-

 

Total equity

 

 

278,470

 

 

 

256,926

 

Total liabilities and equity

 

$

876,457

 

 

$

851,342

 

See Notes to Condensed Consolidated Financial Statements

4


 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net Revenue

 

$

241,014

 

 

$

199,008

 

 

$

659,881

 

 

$

526,298

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue - digital

 

 

157,095

 

 

 

124,332

 

 

 

431,951

 

 

 

318,118

 

Direct operating expenses (including related parties of $2,029, $2,121, $5,357 and $6,010) (including non-cash stock-based compensation of $981, $321, $2,878 and $971)

 

 

30,086

 

 

 

28,583

 

 

 

87,505

 

 

 

83,480

 

Selling, general and administrative expenses

 

 

19,208

 

 

 

14,530

 

 

 

53,022

 

 

 

41,489

 

Corporate expenses (including non-cash stock-based compensation of $1,805, $773, $5,117 and $2,329)

 

 

9,525

 

 

 

7,253

 

 

 

26,769

 

 

 

21,756

 

Depreciation and amortization (includes direct operating of $4,300, $2,591, $12,937 and $10,220; selling, general and administrative of $2,205, $3,214, $6,091 and $5,538; and corporate of $49, $96, $184 and $401) (including related parties of $232, $306, $695 and $921)

 

 

6,554

 

 

 

5,901

 

 

 

19,212

 

 

 

16,159

 

Change in fair value of contingent consideration

 

 

734

 

 

 

-

 

 

 

6,810

 

 

 

-

 

Impairment charge

 

 

-

 

 

 

166

 

 

 

-

 

 

 

1,604

 

Foreign currency (gain) loss

 

 

1,966

 

 

 

177

 

 

 

2,112

 

 

 

454

 

Other operating (gain) loss

 

 

(58

)

 

 

(2,431

)

 

 

(1,011

)

 

 

(4,867

)

Operating income (loss)

 

 

15,904

 

 

 

20,497

 

 

 

33,511

 

 

 

48,105

 

Interest expense

 

 

(3,055

)

 

 

(1,714

)

 

 

(7,225

)

 

 

(5,287

)

Interest income

 

 

788

 

 

 

12

 

 

 

1,916

 

 

 

235

 

Dividend income

 

 

6

 

 

 

207

 

 

 

20

 

 

 

211

 

Realized gain (loss) on marketable securities

 

 

(473

)

 

 

-

 

 

 

(473

)

 

 

-

 

Income (loss) before income taxes

 

 

13,170

 

 

 

19,002

 

 

 

27,749

 

 

 

43,264

 

Income tax benefit (expense)

 

 

(4,080

)

 

 

(5,118

)

 

 

(8,305

)

 

 

(11,902

)

Net income (loss)

 

 

9,090

 

 

 

13,884

 

 

 

19,444

 

 

 

31,362

 

Net (income) loss attributable to redeemable noncontrolling interest

 

 

-

 

 

 

(1,753

)

 

 

-

 

 

 

(5,938

)

Net (income) loss attributable to noncontrolling interest

 

 

303

 

 

 

-

 

 

 

303

 

 

 

-

 

Net income (loss) attributable to common stockholders

 

$

9,393

 

 

$

12,131

 

 

$

19,747

 

 

$

25,424

 

Basic and diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.11

 

 

$

0.14

 

 

$

0.23

 

 

$

0.30

 

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

 

$

0.11

 

 

$

0.14

 

 

$

0.23

 

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.03

 

 

$

0.03

 

 

$

0.08

 

 

$

0.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic

 

 

84,945,873

 

 

 

85,390,333

 

 

 

85,469,675

 

 

 

85,207,992

 

Weighted average common shares outstanding, diluted

 

 

87,417,501

 

 

 

88,315,732

 

 

 

87,671,726

 

 

 

87,694,395

 

 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

9,090

 

 

$

13,884

 

 

$

19,444

 

 

$

31,362

 

Net (income) loss attributable to redeemable noncontrolling interest

 

 

-

 

 

 

(1,753

)

 

 

-

 

 

 

(5,938

)

Net (income) loss attributable to noncontrolling interest

 

 

303

 

 

 

-

 

 

 

303

 

 

 

-

 

Net income (loss) attributable to common stockholders

 

 

9,393

 

 

 

12,131

 

 

 

19,747

 

 

 

25,424

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation

 

 

(23

)

 

 

230

 

 

 

(66

)

 

 

366

 

Change in fair value of marketable securities

 

 

551

 

 

 

(5

)

 

 

(982

)

 

 

(113

)

Total other comprehensive income (loss)

 

 

528

 

 

 

225

 

 

 

(1,048

)

 

 

253

 

Comprehensive income (loss)

 

 

9,618

 

 

 

14,109

 

 

 

18,396

 

 

 

31,615

 

Comprehensive (income) loss attributable to redeemable noncontrolling interests

 

 

-

 

 

 

(1,753

)

 

 

-

 

 

 

(5,938

)

Comprehensive (income) loss attributable to noncontrolling interests

 

 

303

 

 

 

-

 

 

 

303

 

 

 

-

 

Comprehensive income (loss) attributable to common stockholders

 

$

9,921

 

 

$

12,356

 

 

$

18,699

 

 

$

25,677

 

 

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, 2021

 

 

63,116,896

 

 

14,127,613

 

 

9,352,729

 

 

-

 

$

6

 

$

2

 

$

1

 

$

780,388

 

$

(522,494

)

$

(977

)

$

-

 

$

256,926

 

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