Entravision Communications Corporation Reports Third Quarter 2018 Results

Three-Month Period

Nine-Month Period

Ended September 30,

Ended September 30,

2018

2017

% Change

2018

2017

% Change

Net revenue:

Revenue from advertising and retransmission consent

$

73,397

$

70,612

4

%

$

213,933

$

198,631

8

%

Revenue from spectrum usage rights

1,178

263,943

(100)

%

1,809

263,943

(99)

%

Total net revenue

74,575

334,555

(78)

%

215,742

462,574

(53)

%

Cost of revenue – television (spectrum usage rights) (1)

–

12,131

(100)

%

–

12,131

(100)

%

Cost of revenue – digital media (1)

13,240

9,910

34

%

35,249

20,424

73

%

Operating expenses (2)

44,092

43,044

2

%

132,209

123,281

7

%

Corporate expenses (3)

6,913

8,209

(16)

%

19,154

19,695

(3)

%

Consolidated adjusted EBITDA (4)

11,299

12,707

(11)

%

33,102

40,201

(18)

%

Free cash flow (5)

$

1,887

$

268,849

(99)

%

$

12,142

$

281,717

(96)

%

Net income (loss)

$

2,215

$

157,208

(99)

%

$

5,248

$

163,321

(97)

%

Net income (loss) per share, basic

$

0.02

$

1.74

(99)

%

$

0.06

$

1.81

(97)

%

Net income (loss) per share, diluted

$

0.02

$

1.71

(99)

%

$

0.06

$

1.78

(97)

%

Weighted average common shares outstanding, basic

88,852,342

90,517,492

89,371,750

90,370,679

Weighted average common shares outstanding, diluted

90,122,425

92,161,108

90,574,663

91,985,946

(1)

Cost of revenue – digital media consists primarily of the costs of online media acquired from third-party publishers. Media cost is classified as cost of revenue in the period in which

the corresponding revenue is recognized. Cost of revenue – television (spectrum usage rights) consists primarily of the carrying value of spectrum usage rights surrendered in the

FCC auction for broadcast spectrum.

(2)

Operating expenses include direct operating and selling, general and administrative expenses. Included in operating expenses are $0.2 million and $0.3 million of non-cash stock-based compensation for the three-month periods ended September 30, 2018 and 2017, respectively, and $0.4 million and $0.8 million of non-cash stock-based compensation for the nine-month periods ended September 30, 2018 and 2017, respectively. Operating expenses do not include corporate expenses, foreign currency (gain) loss, depreciation and amortization, impairment charge, gain (loss) on sale of assets, gain (loss) on debt extinguishment, other income (loss) and change in fair value of contingent consideration. 

(3)

Corporate expenses include $1.1 million and $0.8 million of non-cash stock-based compensation for the three-month periods ended September 30, 2018 and 2017, respectively, and $3.3 million and $2.3 million of non-cash stock-based compensation for the nine-month periods ended September 30, 2018 and 2017, respectively.

(4)

Consolidated adjusted EBITDA means net income (loss) plus gain (loss) on sale of assets, depreciation and amortization, non-cash impairment charge, non-cash stock-based compensation included in operating and corporate expenses, net interest expense, other income (loss), non-recurring cash expenses, gain (loss) on debt extinguishment, income tax (expense) benefit, equity in net income (loss) of nonconsolidated affiliate, non-cash losses, syndication programming amortization less syndication programming payments, revenue from FCC spectrum incentive auction less related expenses, expenses associated with investments, acquisitions and dispositions and certain pro-forma cost savings. We use the term consolidated adjusted EBITDA because that measure is defined in the agreement governing our current credit facility (“the 2017 Credit Facility”) and does not include gain (loss) on sale of assets, depreciation and amortization, non-cash impairment charge, non-cash stock-based compensation, net interest expense, other income (loss), non-recurring cash expenses, gain (loss) on debt extinguishment, income tax (expense) benefit, equity in net income (loss) of nonconsolidated affiliate, non-cash losses, syndication programming amortization less syndication programming payments, revenue from FCC spectrum incentive auction less related expenses, expenses associated with investments, acquisitions and dispositions and certain pro-forma cost savings.        

(5)

Free cash flow is defined as consolidated adjusted EBITDA less cash paid for income taxes, net interest expense, capital expenditures, and non-recurring cash expenses plus dividend income and revenue from FCC spectrum incentive auction less related cash expenses. Net interest expense is defined as interest expense, less non-cash interest expense relating to amortization of debt finance costs, and less interest income.

Financial Results

Three-Month Period Ended September 30, 2018 Compared to Three-Month Period Ended September 30, 2017

(Unaudited)

Three-Month Period

Ended September 30,

2018

2017

% Change

Net revenue:

Revenue from advertising and retransmission consent

$

73,397

$

70,612

4

%

Revenue from spectrum usage rights

1,178

263,943

(100)

%

Total net revenue

74,575

334,555

(78)

%

Cost of revenue – television (spectrum usage rights) (1)

–

12,131

(100)

%

Cost of revenue – digital media (1)

13,240

9,910

34

%

Operating expenses (1)

44,092

43,044

2

%

Corporate expenses (1)

6,913

8,209

(16)

%

Depreciation and amortization

4,094

4,337

(6)

%

Change in fair value of contingent consideration

(114)

–

*

Foreign currency (gain) loss

335

(58)

*

Operating income (loss)

6,015

256,982

(98)

%

Interest expense, net

(3,062)

(3,500)

(13)

%

Dividend income

457

–

*

Other income (loss)

327

–

*

Income (loss) before income taxes

3,737

253,482

(99)

%

Income tax benefit (expense)

(1,443)

(96,167)

(98)

%

Net income (loss) before equity in net income (loss) of nonconsolidated affiliates

2,294

157,315

(99)

%

Equity in net income (loss) of nonconsolidated affiliates, net of tax

(79)

(107)

(26)

%

Net income (loss)

$

2,215

$

157,208

(99)

%

(1)      Cost of revenue, operating expenses and corporate expenses are defined on page 1.

Nine-Month Period Ended September 30, 2018 Compared to Nine-Month Period Ended September 30, 2017

(Unaudited)

Nine-Month Period

Ended September 30,

2018

2017

% Change

Net revenue:

Revenue from advertising and retransmission consent

$

213,933

$

198,631

8

%

Revenue from spectrum usage rights

1,809

263,943

(99)

%

Total net revenue

215,742

462,574

(53)

%

Cost of revenue – television (spectrum usage rights) (1)

–

12,131

(100)

%

Cost of revenue – digital media (1)

35,249

20,424

73

%

Operating expenses (1)

132,209

123,281

7

%

Corporate expenses (1)

19,154

19,695

(3)

%

Depreciation and amortization

12,052

12,460

(3)

%

Change in fair value of contingent consideration

1,073

–

*

Foreign currency (gain) loss

531

293

81

%

Operating income (loss)

15,474

274,290

(94)

%

Interest expense, net

(8,509)

(10,609)

(20)

%

Dividend income

1,002

–

*

Other income (loss)

622

–

*

Income (loss) before income taxes

8,589

263,681

(97)

%

Income tax benefit (expense)

(3,164)

(100,185)

(97)

%

Net income (loss) before equity in net income (loss) of nonconsolidated affiliates

5,425

163,496

(97)

%

Equity in net income (loss) of nonconsolidated affiliates, net of tax

(177)

(175)

1

%

Net income (loss)

$

5,248

$

163,321

(97)

%

(1)      Cost of revenue, operating expenses and corporate expenses are defined on page 1.

Segment Results

The following represents selected unaudited segment information:

Three-Month Period

Nine-Month Period

Ended September 30,

Ended September 30,

2018

2017

% Change

2018

2017

% Change

Net Revenue

Revenue from advertising and retransmission consent

Television

$

35,183

$

36,547

(4)

%

$

105,574

$

112,021

(6)

%

Radio

15,783

16,934

(7)

%

47,126

49,816

(5)

%

Digital

22,431

17,131

31

%

61,233

36,794

66

%

Total

73,397

70,612

4

%

213,933

198,631

8

%

Revenue from spectrum usage rights

1,178

263,943

(100)

%

1,809

263,943

(99)

%

Total net revenue

74,575

334,555

(78)

%

215,742

462,574

(53)

%

Cost of Revenue (1)

Television

$

–

$

12,131

(100)

%

$

–

$

12,131

(100)

%

Digital

13,240

9,910

34

%

35,249

20,424

73

%

Total

$

13,240

$

22,041

(40)

%

$

35,249

$

32,555

8

%

Operating Expenses (1)

Television

20,462

20,161

1

%

62,573

60,516

3

%

Radio

14,676

15,953

(8)

%

45,393

47,294

(4)

%

Digital

8,954

6,930

29

%

24,243

15,471

57

%

Total

$

44,092

$

43,044

2

%

$

132,209

$

123,281

7

%

Corporate Expenses (1)

$

6,913

$

8,209

(16)

%

$

19,154

$

19,695

(3)

%

Consolidated adjusted EBITDA (1)

$

11,299

$

12,707

(11)

%

$

33,102

$

40,201

(18)

%

(1)          Cost of revenue, operating expenses, corporate expenses, and consolidated adjusted EBITDA are defined on page 1.

Entravision Communications Corporation

Consolidated Balance Sheets

(In thousands; unaudited)

September 30,

December 31,

2018

2017

ASSETS

Current assets

Cash and cash equivalents

$

101,789

$

39,560

Marketable securities

132,410

–

Restricted cash

769

222,294

Trade receivables, net of allowance for doubtful accounts

78,092

84,348

Assets held for sale

1,179

–

Prepaid expenses and other current assets

13,217

6,260

Total current assets

327,456

352,462

Property and equipment, net

63,204

60,337

Intangible assets subject to amortization, net

24,196

26,758

Intangible assets not subject to amortization

254,506

251,163

Goodwill

74,149

70,557

Other assets

5,087

4,690

Total assets

$

748,598

$

765,967

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current maturities of long-term debt

$

3,000

$

3,000

Accounts payable and accrued expenses

52,795

57,563

Deferred revenue

4,351

1,959

Total current liabilities

60,146

62,522

Long-term debt, less current maturities, net of unamortized debt issuance costs

290,614

292,489

Other long-term liabilities

19,237

21,447

Deferred income taxes

43,172

40,639

Total liabilities

413,169

417,097

Stockholders’ equity

Class A common stock

6

7

Class B common stock

2

2

Class U common stock

1

1

Additional paid-in capital

871,321

888,650

Accumulated deficit

(534,482)

(539,730)

Accumulated other comprehensive income (loss)

(1,419)

(60)

Total stockholders’ equity

335,429

348,870

Total liabilities and stockholders’ equity

$

748,598

$

765,967

Entravision Communications Corporation

Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

Three-Month Period

Nine-Month Period

Ended September 30,

Ended September 30,

2018

2017

2018

2017

Net revenue:

Revenue from advertising and retransmission consent

$

73,397

$

70,612

$

213,933

$

198,631

Revenue from spectrum usage rights

1,178

263,943

1,809

263,943

Total net revenue

74,575

334,555

215,742

462,574

Expenses:

Cost of revenue – television (spectrum usage rights)

–

12,131

–

12,131

Cost of revenue – digital

13,240

9,910

35,249

20,424

Direct operating expenses

31,694

30,231

93,844

87,238

Selling, general and administrative expenses

12,398

12,813

38,365

36,043

Corporate expenses

6,913

8,209

19,154

19,695

Depreciation and amortization

4,094

4,337

12,052

12,460

Change in fair value of contingent consideration

(114)

–

1,073

–

Foreign currency (gain) loss

335

(58)

531

293

68,560

77,573

200,268

188,284

Operating income (loss)

6,015

256,982

15,474

274,290

Interest expense

(3,995)

(3,756)

(11,394)

(11,084)

Interest income

933

256

2,885

475

Dividend income

457

–

1,002

–

Other income (loss)

327

–

622

–

Income (loss) before income taxes

3,737

253,482

8,589

263,681

Income tax benefit (expense)

(1,443)

(96,167)

(3,164)

(100,185)

Income (loss) before equity in net income (loss) of nonconsolidated affiliate

2,294

157,315

5,425

163,496

Equity in net income (loss) of nonconsolidated affiliate, net of tax

(79)

(107)

(177)

(175)

Net income (loss)

$

2,215

$

157,208

$

5,248

$

163,321

Basic and diluted earnings per share:

Net income per share, basic

$

0.02

$

1.74

$

0.06

$

1.81

Net income per share, diluted

$

0.02

$

1.71

$

0.06

$

1.78

Cash dividends declared per common share

$

0.05

$

0.05

$

0.15

$

0.11

Weighted average common shares outstanding, basic

88,852,342

90,517,492

89,371,750

90,370,679

Weighted average common shares outstanding, diluted

90,122,425

92,161,108

90,574,663

91,985,946

Entravision Communications Corporation

Consolidated Statements of Cash Flows

(In thousands; unaudited)

Three-Month Period

Nine-Month Period

Ended September 30,

Ended September 30,

2018

2017

2018

2017

Cash flows from operating activities:

Net income (loss)

$

2,215

$

157,208

$

5,248

$

163,321

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

Depreciation and amortization

4,094

4,337

12,052

12,460

Cost of revenue – television (spectrum usage rights)

–

12,131

–

12,131

Deferred income taxes

913

96,086

1,942

99,514

Non-cash interest expense

290

226

828

595

Amortization of syndication contracts

174

93

526

311

Payments on syndication contracts

(156)

(85)

(516)

(300)

Equity in net (income) loss of nonconsolidated affiliate

79

107

177

175

Non-cash stock-based compensation

1,286

1,089

3,711

3,149

Changes in assets and liabilities:

(Increase) decrease in accounts receivable

(592)

(791)

8,578

12,790

(Increase) decrease in prepaid expenses and other assets

(663)

(383)

(7,210)

(1,830)

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

(2,059)

130

(2,839)

(8,862)

Net cash provided by (used in) operating activities

5,581

270,148

22,497

293,454

Cash flows from investing activities:

Proceeds from sale of property and equipment and intangible assets

–

–

33

–

Purchases of property and equipment

(6,567)

(2,343)

(12,277)

(9,639)

Purchases of intangible assets

–

(32,588)

(3,153)

(32,588)

Purchases of businesses, net of cash acquired

41

–

(3,522)

(7,489)

Purchases of marketable securities

–

–

(159,403)

–

Proceeds from marketable securities

–

–

25,000

–

Purchases of investments

(935)

–

(970)

(2,200)

Deposits on acquisitions

–

(1,050)

–

(1,240)

Net cash provided by (used in) investing activities

(7,461)

(35,981)

(154,292)

(53,156)

Cash flows from financing activities:

Proceeds from stock option exercises

(29)

(515)

77

11

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

–

–

(2,239)

–

Payments on long-term debt

(750)

(938)

(2,250)

(2,813)

Dividends paid

(4,443)

(4,532)

(13,403)

(10,179)

Repurchase of Class A common stock

–

(1,778)

(7,660)

(1,778)

Payment of contingent consideration

–

–

(2,015)

–

Net cash provided by (used in) financing activities

(5,222)

(7,763)

(27,490)

(14,759)

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

(1)

35

(11)

17

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

(7,103)

226,439

(159,296)

225,556

Cash, cash equivalents and restricted cash:

Beginning

109,661

60,637

261,854

61,520

Ending

$

102,558

$

287,076

$

102,558

$

287,076

Entravision Communications Corporation

Reconciliation of Consolidated Adjusted EBITDA to Cash Flows From Operating Activities

(In thousands; unaudited)

The most directly comparable GAAP financial measure is operating cash flow. A reconciliation of this non-GAAP measure to cash flows from operating activities for each of the periods presented is as follows:

Three-Month Period

Nine-Month Period

Ended September 30,

Ended September 30,

2018

2017

2018

2017

Consolidated adjusted EBITDA (1)

$

11,299

$

12,707

$

33,102

$

40,201

Net revenue – FCC spectrum incentive auction

–

263,943

–

263,943

Expenses – FCC spectrum incentive auction

–

(14,234)

–

(14,234)

Interest expense

(3,995)

(3,756)

(11,394)

(11,084)

Interest income

933

256

2,885

475

Dividend income

457

–

1,002

–

Income tax benefit (expense)

(1,443)

(96,167)

(3,164)

(100,185)

Equity in net loss of nonconsolidated affiliates

(79)

(107)

(177)

(175)

Amortization of syndication contracts

(174)

(93)

(526)

(311)

Payments on syndication contracts

156

85

516

300

Non-cash stock-based compensation included in direct operating expenses

(156)

(276)

(448)

(806)

Non-cash stock-based compensation included in corporate expenses

(1,130)

(813)

(3,263)

(2,343)

Depreciation and amortization

(4,094)

(4,337)

(12,052)

(12,460)

Change in fair value of contingent consideration

114

–

(1,073)

–

Non-recurring cash severance charge

–

–

(782)

–

Other income (loss)

327

–

622

–

Net income (loss)

2,215

157,208

5,248

163,321

Depreciation and amortization

4,094

4,337

12,052

12,460

Cost of revenue – television (spectrum usage rights)

–

12,131

–

12,131

Deferred income taxes

913

96,086

1,942

99,514

Non-cash interest expense

290

226

828

595

Amortization of syndication contracts

174

93

526

311

Payments on syndication contracts

(156)

(85)

(516)

(300)

Equity in net (income) loss of nonconsolidated affiliate

79

107

177

175

Non-cash stock-based compensation

1,286

1,089

3,711

3,149

Changes in assets and liabilities:

(Increase) decrease in accounts receivable

(592)

(791)

8,578

12,790

(Increase) decrease in prepaid expenses and other assets

(663)

(383)

(7,210)

(1,830)

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

(2,059)

130

(2,839)

(8,862)

Cash flows from operating activities

5,581

270,148

22,497

293,454

(1)      Consolidated adjusted EBITDA is defined on page 1.

Entravision Communications Corporation

Reconciliation of Free Cash Flow to Cash Flows From Operating Activities

(In thousands; unaudited)

The most directly comparable GAAP financial measure is operating cash flow. A reconciliation of this non-GAAP measure to cash flows from operating activities for each of the periods presented is as follows:

Three-Month Period

Nine-Month Period

Ended September 30,

Ended September 30,

2018

2017

2018

2017

Consolidated adjusted EBITDA (1)

$

11,299

$

12,707

$

33,102

$

40,201

Net interest expense (1)

(2,772)

(3,273)

(7,681)

(10,014)

Dividend income

457

–

1,002

–

Cash paid for income taxes

(530)

(82)

(1,222)

(671)

Capital expenditures (2)

(6,567)

(2,343)

(12,277)

(9,639)

Non-recurring cash severance charge

–

–

(782)

–

Net revenue – FCC spectrum incentive auction

–

263,943

–

263,943

Expenses – FCC spectrum incentive auction

–

(2,103)

–

(2,103)

Free cash flow (1)

1,887

268,849

12,142

281,717

Capital expenditures (2)

6,567

2,343

12,277

9,639

Other income (loss)

327

–

622

–

Change in fair value of contingent consideration

114

–

(1,073)

–

Changes in assets and liabilities:

(Increase) decrease in accounts receivable

(592)

(791)

8,578

12,790

(Increase) decrease in prepaid expenses and other assets

(663)

(383)

(7,210)

(1,830)

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

(2,059)

130

(2,839)

(8,862)

Cash Flows From Operating Activities

$

5,581

$

270,148

$

22,497

$

293,454

(1)     Consolidated adjusted EBITDA, net interest expense, and free cash flow are defined on page 1.

(2)     Capital expenditures are not part of the consolidated statement of operations.