# Entravision Communications Corp: Form 10-Q for the period ended Jun 30, 2022

- Company: [Entravision Communications Corp](/companies/evc.md) (CIK 1109116)
- Form: 10-Q
- Filed: 2022-08-04
- Accepted by EDGAR: Aug 4, 2022, 16:21 ET
- Period: 2022-06-30
- Accession: 0000950170-22-014771
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1109116/000095017022014771/evc-20220630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1109116/000095017022014771/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-04-01 to 2022-06-30 | $221.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2022-01-01 to 2022-06-30 | $418.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-04-01 to 2022-06-30 | $145.0m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2022-01-01 to 2022-06-30 | $274.9m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2022-04-01 to 2022-06-30 | $17.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2022-01-01 to 2022-06-30 | $33.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-04-01 to 2022-06-30 | $13.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2022-01-01 to 2022-06-30 | $17.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-04-01 to 2022-06-30 | $2.3m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2022-01-01 to 2022-06-30 | $4.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-04-01 to 2022-06-30 | $3.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2022-01-01 to 2022-06-30 | $4.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-04-01 to 2022-06-30 | $8.5m | us-gaap:ProfitLoss |
| Net income | 6 months, 2022-01-01 to 2022-06-30 | $10.4m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2022-04-01 to 2022-06-30 | $0.10 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2022-01-01 to 2022-06-30 | $0.12 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-04-01 to 2022-06-30 | $0.10 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2022-01-01 to 2022-06-30 | $0.12 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-04-01 to 2022-06-30 | 86,985,817 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2022-01-01 to 2022-06-30 | 87,803,178 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2022-01-01 to 2022-06-30 | $62.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2022-01-01 to 2022-06-30 | $3.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2022-01-01 to 2022-06-30 | $4.3m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2022-01-01 to 2022-06-30 | $11.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2022-06-30 | $110.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-06-30 | $406.9m | us-gaap:AssetsCurrent |
| Total assets | at 2022-06-30 | $840.2m | us-gaap:Assets |
| Current liabilities | at 2022-06-30 | $240.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-06-30 | $584.9m | us-gaap:Liabilities |
| Long-term debt | at 2022-06-30 | $206.2m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-06-30 | $4.8m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-06-30 | $255.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 75,902 characters.

### Overview

We are a leading global advertising solutions, media and technology company. Our operations encompass integrated, end-to-end advertising solutions across multiple media, comprised of digital, television and audio properties. Our digital segment, whose operations are primarily located in Latin America, Europe, the United States, Asia and Africa, reaches a global market, with a focus on advertisers in emerging economies that wish to advertise on digital platforms owned and operated primarily by global media companies. Our television and audio operations reach and engage U.S. Hispanics in the United States. For financial reporting purposes, we report in three segments based upon the type of advertising medium: digital, television and audio. Our net revenue for the three-month period ended June 30, 2022 was $221.7 million. Of that amount, revenue attributed to our digital segment accounted for approximately 78%, revenue attributed to our television segment accounted for approximately 15% and revenue attributed to our audio segment accounted for approximately 7%. Our digital segment now accounts for the majority of our revenues and we expect this to continue in future periods.

We provide digital end-to-end advertising solutions that allow advertisers to reach online users worldwide. These solutions are comprised of four separate business units:

- our digital commercial partnerships business;
- Smadex, our programmatic ad purchasing platform;
- our branding and mobile performance solutions business; and
- our digital audio business.

Through our digital commercial partnerships business – the largest of our digital business units – we act as an intermediary between primarily global media companies and advertising customers or their ad agencies. The global media companies we represent include Meta Platforms, or Meta (formerly known as Facebook Inc.), Twitter, Inc., or Twitter, ByteDance Ltd., also known as TikTok, and Spotify AB, or Spotify, as well as other media companies, in more than 30 countries throughout the world. Our dedicated local sales teams sell advertising space on these and other media companies' digital platforms to our advertising customers or their ad agencies for the placement of ads directed to online users of a wide range of Internet-connected devices. We also provide some of our advertising customers billing, technological and other support, including strategic marketing and training, which we refer to as managed services. We market this business under our Entravision Cisneros Interactive, Entravision MediaDonuts, and Entravision 365 Digital brands, depending upon the geographic market we serve.

Smadex is our proprietary automated purchasing platform, on which advertisers can purchase ad inventory. This practice – the purchase and sale of advertising inventory electronically – is referred to in our industry as programmatic advertising. Smadex is also a “demand-side" platform, which allows advertisers to purchase space from online marketplaces on which media companies list their advertising inventory. Most advertisements acquired through Smadex are placed on mobile devices, but they may also be placed on computers and Internet-connected televisions. We also provide managed services to some of our advertising customers in connection with their use of our Smadex platform.

We also offer a branding and mobile performance solutions business, which provides managed services to advertisers looking to connect with consumers, primarily on mobile devices. Our digital audio business provides digital audio advertising solutions for advertisers in the Americas.

We have a diversified media portfolio that targets Hispanic audiences. We own and/or operate 49 primary television stations located primarily in California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Nevada, New Mexico, Texas and Washington, D.C. Our television operations comprise the largest affiliate group of both the top-ranked primary Univision television network of TelevisaUnivision Inc., or TelevisaUnivision, and TelevisaUnivision’s UniMás network. We own and operate 45 radio stations in 14 U.S. markets. Our radio stations consist of 37 FM and 8 AM stations located in Arizona, California, Colorado, Florida, Nevada, New Mexico and Texas. We also sell advertisements and syndicate radio programming to more than 100 markets across the United States.

In our digital segment, we generate revenue primarily from sales of advertising that are placed by our advertising customers or their ad agencies on the digital platforms of third-party media companies for which we act as commercial partner or placed directly with online digital marketplaces through our Smadex platform. In our television and audio segments, we generate revenue primarily from sales of national and local advertising time on television stations and radio stations, retransmission consent agreements that are entered into with MVPDs, and agreements associated with our television stations’ spectrum usage rights. Advertising rates are, in large part, based on each medium’s ability to attract audiences in demographic groups targeted by advertisers.

In our digital segment, we recognize advertising revenue when display or other digital advertisements record impressions on the websites and mobile and Internet-connected television apps of media companies on whose digital platforms the advertisements are placed or as the advertiser’s previously agreed-upon performance criteria are satisfied. In our television and audio segments, we recognize advertising revenue when commercials are broadcast. We do not obtain long-term commitments from our advertisers across any of our operations and, consequently, they may cancel, reduce or postpone orders without penalties. In our television and audio segments, we pay commissions to agencies for local and national advertising. For contracts we have entered into directly with agencies, we record net revenue from these agencies.

We refer to the revenue generated by agreements with MVPDs as retransmission consent revenue, which represents payments from MVPDs for access to our television station signals so that they may rebroadcast our signals and charge their subscribers for this programming. We recognize retransmission consent revenue earned as the television signal is delivered to an MVPD.

Our FCC licenses grant us spectrum usage rights within each of the television markets in which we operate. These spectrum usage rights give us the authority to broadcast our stations’ over-the-air television signals to our viewers. We regard these rights as a valuable asset. With the proliferation of mobile devices and advances in technology that have freed up spectrum capacity, the monetization of our spectrum usage rights has become a significant source of revenue in recent years. We generate revenue from agreements associated with these television stations’ spectrum usage rights from a variety of sources, including but not limited to agreements with third parties to utilize spectrum for the broadcast of their multicast networks; charging fees to accommodate the operations of third parties, including moving channel positions or accepting interference with our broadcasting operations; and modifying and/or relinquishing spectrum usage rights while continuing to broadcast through channel sharing or other arrangements. Revenue generated by such agreements is recognized over the period of the lease or when we have relinquished all or a portion of our spectrum usage rights for a station or have relinquished our rights to operate a station on the existing channel free from interference. In addition, subject to certain restrictions contained in our 2017 Credit Agreement, we will consider strategic acquisitions of television stations to further this strategy from time to time, as well as additional monetization opportunities expected to arise as the television broadcast industry implements the standards contained in ATSC 3.0.

In our digital segment, our primary expense is cost of revenue which consists primarily of the costs of online media acquired from the media companies for which we act as commercial partner or purchased directly from online digital marketplaces through our Smadex platform, as well as third party server costs. Our primary expenses in our television and audio segments, and a secondary expense in our digital segment, is employee compensation, including commissions paid to our sales staff and amounts paid to our national sales representative firms, as well as expenses for general and administrative functions, promotion and selling, engineering, marketing, and local programming.

### Highlights

During the second quarter of 2022, our consolidated revenue increased to $221.7 million from $178.4 million in the prior year period, primarily due to an increase in advertising revenue in our digital and audio segments, partially offset by a decrease in advertising and retransmission consent revenue in our television segment.

Net revenue in our digital segment increased to $174.4 million for the three-month period ended June 30, 2022 from $130.2 million for the three-month period ended June 30, 2021. This increase of approximately $44.2 million, or 34%, in net revenue was primarily due to advertising revenue growth from our digital commercial partnerships business, and due to our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not contribute to net revenue in the comparable period ended June 30, 2021.

Net revenue in our television segment decreased to $32.4 million for the three-month period ended June 30, 2022 from $34.1 million for the three-month period ended June 30, 2021. This decrease of approximately $1.7 million, or 5%, in net revenue was primarily due to decreases in local and national advertising revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. The decrease was partially offset by increases in political advertising revenue and spectrum usage rights revenue.

Net revenue in our audio segment increased to $14.9 million for the three-month period ended June 30, 2022 from $14.1 million for the three-month period ended June 30, 2021. This increase of approximately $0.8 million, or 6%, in net revenue was primarily due to increases in local advertising revenue and political advertising revenue, partially offset by a decrease in national advertising revenue.

### The Impact of the COVID-19 Pandemic on our Business

*This section of this report should be read in conjunction with the rest of this item, “Forward-Looking Statements” and Notes to Consolidated Financial Statements appearing herein, for a more complete understanding of the impact of the COVID-19 pandemic on our business.*

The COVID-19 pandemic had minimal impact on our business during the quarter ended June 30, 2022. Subject to the extent and duration of possible resurgences of the pandemic from time to time and the continuing uncertain economic environment that has resulted, in part, from the pandemic, we anticipate that the pandemic will continue to have little effect on our business, from both an operational and financial perspective, in future periods. Nonetheless, we remain cautious due to the unpredictable nature of the pandemic and its effects. We also cannot give any assurance whether a resurgence or more prolonged impact of the pandemic in any location where our operations have employees or operate would not adversely affect our operations.

We have elected to defer the employer portion of the social security payroll tax (6.2%) as provided in the Coronavirus Aid, Relief and Economic Security Act of 2020, commonly known as the CARES Act. The deferral was effective from March 27, 2020 through December 31, 2020. The deferred amount is considered to be timely paid if 50% is paid by December 31, 2021 and the remainder is paid by December 31, 2022. During the year ended December 31, 2021, we paid 50% of the deferred amount.

Because of unprecedented uncertainties regarding the extent and duration of the pandemic and the continuing economic disruption that has resulted from the pandemic, our results of operations for the quarter ended June 30, 2022 may not be indicative of our results of operations for any future period. We do not know how soon the global, U.S. and local economies will fully recover to pre-pandemic levels, and they may do so at different rates. Any resurgence of the pandemic; reimposition of lockdown, shelter-in-place, stay-at-home and similar orders; prolongation of the continuing economic disruption that has resulted from the pandemic; or permanent changes in consumer behavior, could adversely affect our business, results of operations and financial condition in future periods during the course of the pandemic, or beyond.

We continue to closely monitor the situation across all fronts and will need to continue to remain flexible in order to respond to developments as and if they occur. However, we cannot give any assurance if, or the extent to which, we will be successful in any such efforts.

### Relationship with TelevisaUnivision

Substantially all of our television stations are Univision- or UniMás-affiliated television stations. Our network affiliation agreement with TelevisaUnivision provides certain of our owned stations the exclusive right to broadcast TelevisaUnivision’s primary Univision network and UniMás network programming in their respective markets. Under the network affiliation agreement, we retain 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 our exclusive third-party sales representative for the sale of certain national advertising on our Univision- and UniMás-affiliate television stations, and we pay certain sales representation fees to TelevisaUnivision relating to sales of all advertising for broadcast on our Univision- and UniMás-affiliate television stations. During the three-month periods ended June 30, 2022 and 2021, the amount we paid TelevisaUnivision in this capacity was $1.8 million and $2.0 million, respectively. During the six-month periods ended June 30, 2022 and 2021, the amount we paid TelevisaUnivision in this capacity was $3.3 million and $3.9 million, respectively.

We also generate revenue under a marketing and sales agreement with TelevisaUnivision, which give us the right to manage the marketing and sales operations of TelevisaUnivision-owned Univision affiliates in three markets – Albuquerque, Boston and Denver.

Under our proxy agreement with TelevisaUnivision, we grant TelevisaUnivision the right to negotiate the terms of retransmission consent agreements for our Univision- and UniMás-affiliated television station signals. Among other things, the proxy agreement provides terms relating to compensation to be paid to us by TelevisaUnivision with respect to retransmission consent agreements entered into with MVPDs. During the three-month periods ended June 30, 2022 and 2021, retransmission consent revenue accounted for approximately $9.0 million and $9.3 million, respectively, of which $6.2 million and $6.5 million, respectively, relate to the TelevisaUnivision proxy agreement. During the six-month periods ended June 30, 2022 and 2021, retransmission consent revenue accounted for approximately $18.2 million and $18.9 million, respectively, of which $12.5 million and $13.3 million, respectively, relate to the TelevisaUnivision proxy agreement. The term of the proxy agreement extends with respect to any MVPD for the length of the term of any retransmission consent agreement in effect before the expiration of the proxy agreement. The term of the proxy agreement extends with respect to any MVPD for the length of the term of any retransmission consent agreement in effect before the expiration of the proxy agreement.

TelevisaUnivision currently owns approximately 11% of our common stock on a fully-converted basis. Our 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 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 our issued and outstanding Class U common stock, so long as TelevisaUnivision holds a certain number of shares of Class U common stock, we may not, without the consent of TelevisaUnivision, merge, consolidate or enter into a business combination, dissolve or liquidate our company or dispose of any interest in any FCC license with respect to television stations which are affiliates of TelevisaUnivision, among other things.

### Critical Accounting Policies

For a description of our critical accounting policies, please refer to “Application of Critical Accounting Policies and Accounting Estimates” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2021 10-K.

### Recent Accounting Pronouncements

For further information on recently issued accounting pronouncements, see Note 2, “The Company and Significant Accounting Policies” in the accompanying Notes to Consolidated Financial Statements.

### Three- and Six-Month Periods Ended June 30, 2022 and 2021

The following table sets forth selected data from our operating results for the three- and six-month periods ended June 30, 2022 and 2021 (in thousands):

| Statements of Operations Data: | Three-Month Period Ended June 30,% 2022 | 2021 | Change | Six-Month Period Ended June 30,% 2022 | 2021 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net Revenue | $221,695 | $178,410 | 24% | $418,867 | $327,290 | 28% |
| Cost of revenue - digital | 144,965 | 109,030 | 33% | 274,856 | 193,786 | 42% |
| Direct operating expenses | 29,596 | 28,336 | 4% | 57,419 | 54,897 | 5% |
| Selling, general and administrative expenses | 17,775 | 13,106 | 36% | 33,814 | 26,959 | 25% |
| Corporate expenses | 8,520 | 7,345 | 16% | 17,244 | 14,503 | 19% |
| Depreciation and amortization | 6,263 | 5,074 | 23% | 12,658 | 10,258 | 23% |
| Change in fair value of contingent consideration | 976 | - | \* | 6,076 | - | \* |
| Impairment charge | - | 112 | (100)% | - | 1,438 | (100)% |
| Foreign currency (gain) loss | 993 | (309) | \* | 146 | 277 | (47)% |
| Other operating (gain) loss | (834) | (523) | 59% | (953) | (2,436) | (61)% |
|  | 208,254 | 162,171 | 28% | 401,260 | 299,682 | 34% |
| Operating income (loss) | 13,441 | 16,239 | (17)% | 17,607 | 27,608 | (36)% |
| Interest expense | (2,334) | (1,856) | 26% | (4,170) | (3,573) | 17% |
| Interest income | 722 | 83 | 770% | 1,128 | 223 | 406% |
| Dividend income | 11 | 2 | 450% | 14 | 4 | 250% |
| Income before income (loss) taxes | 11,840 | 14,468 | (18)% | 14,579 | 24,262 | (40)% |
| Income tax benefit (expense) | (3,373) | (3,992) | (16)% | (4,225) | (6,784) | (38)% |
| Net income (loss) | 8,467 | 10,476 | (19)% | 10,354 | 17,478 | (41)% |
| Net (income) loss attributable to redeemable noncontrolling interest | - | (2,612) | (100)% | - | (4,185) | (100)% |
| Net income (loss) attributable to common stockholders | $8,467 | $7,864 | 8% | $10,354 | $13,293 | (22)% |
| **Other Data:** |  |  |  |  |  |  |
| Capital expenditures | 1,891 | 1,115 |  | 3,408 | 2,628 |  |
| Consolidated adjusted EBITDA (1) |  |  |  | 40,594 | 31,982 |  |
| Net cash provided by operating activities |  |  |  | 62,906 | 44,385 |  |
| Net cash provided by (used in) investing activities |  |  |  | (77,278) | 14,964 |  |
| Net cash used in financing activities |  |  |  | (60,765) | (6,649) |  |

(1) 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 operating gain (loss), 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 the Federal Communications Commission, or FCC, spectrum incentive auction less related expenses, expenses associated with investments, EBITDA attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings. We use the term consolidated adjusted EBITDA because that measure is defined in our 2017

Credit Agreement 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), 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, EBITDA attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings.

Because consolidated adjusted EBITDA is a measure governing several critical aspects of our 2017 Credit Facility, we believe that it is important to disclose consolidated adjusted EBITDA to our investors. We may increase the aggregate principal amount outstanding by an additional amount equal to $100.0 million plus the amount that would result in our total net leverage ratio, or the ratio of consolidated total senior debt (net of up to $75.0 million of unrestricted cash) to trailing-twelve-month consolidated adjusted EBITDA, not exceeding 4.0. In addition, beginning December 31, 2018, at the end of every calendar year, in the event our total net leverage ratio is within certain ranges, we must make a debt prepayment equal to a certain percentage of our Excess Cash Flow, which is defined as consolidated adjusted EBITDA, less consolidated interest expense, less debt principal payments, less taxes paid, less other amounts set forth in the definition of Excess Cash Flow in the 2017 Credit Agreement. The total leverage ratio was as follows (in each case as of June 30): 2022, 1.4 to 1; 2021, 1.7 to 1.

While many in the financial community and we consider consolidated adjusted EBITDA to be important, it should be considered in addition to, but not as a substitute for or superior to, other measures of liquidity and financial performance prepared in accordance with accounting principles generally accepted in the United States of America, such as cash flows from operating activities, operating income (loss) and net income (loss). As consolidated adjusted EBITDA excludes non-cash gain (loss) on sale of assets, non-cash depreciation and amortization, non-cash impairment charge, non-cash stock-based compensation expense, 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, EBITDA attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings, consolidated adjusted EBITDA has certain limitations because it excludes and includes several important financial line items. Therefore, we consider both non-GAAP and GAAP measures when evaluating our business. Consolidated adjusted EBITDA is also used to make executive compensation decisions.

Consolidated adjusted EBITDA is a non-GAAP measure. The most directly comparable GAAP financial measure to consolidated adjusted EBITDA is cash flows from operating activities. A reconciliation of this non-GAAP measure to cash flows from operating activities follows (in thousands):

|  | Six-Month Period Ended June 30, 2022 | 2021 |
| --- | ---: | ---: |
| Consolidated adjusted EBITDA | $40,594 | $31,982 |
| EBITDA attributable to redeemable noncontrolling interest | - | 7,091 |
| Interest expense | (4,170) | (3,573) |
| Interest income | 1,128 | 223 |
| Dividend income | 14 | 4 |
| Income tax expense | (4,225) | (6,784) |
| Amortization of syndication contracts | (231) | (238) |
| Payments on syndication contracts | 234 | 239 |
| Non-cash stock-based compensation included in direct operating expenses | (1,897) | (650) |
| Non-cash stock-based compensation included in corporate expenses | (3,312) | (1,556) |
| Depreciation and amortization | (12,658) | (10,258) |
| Change in fair value of contingent consideration | (6,076) | - |
| Impairment charge | - | (1,438) |
| Other operating gain (loss) | 953 | 2,436 |
| Net (income) loss attributable to redeemable noncontrolling interest | - | (4,185) |
| Net income (loss) attributable to common stockholders | 10,354 | 13,293 |
| Depreciation and amortization | 12,658 | 10,258 |
| Impairment charge | - | 1,438 |
| Deferred income taxes | (3,213) | 3,699 |
| Non-cash interest | 711 | 298 |
| Amortization of syndication contracts | 231 | 238 |
| Payments on syndication contracts | (234) | (239) |
| Non-cash stock-based compensation | 5,209 | 2,206 |
| (Gain) loss on disposal of property and equipment | (638) | - |
| Change in fair value of contingent consideration | 6,076 | - |
| Net income (loss) attributable to redeemable noncontrolling interest | - | 4,185 |
| Changes in assets and liabilities: |  |  |
| (Increase) decrease in accounts receivable | 17,588 | 467 |
| (Increase) decrease in prepaid expenses and other assets | (1,252) | 2,909 |
| Increase (decrease) in accounts payable, accrued expenses and other liabilities | 15,416 | 5,633 |
| Cash flows from operating activities | $62,906 | $44,385 |

### Consolidated Operations

*Net Revenue.* Net revenue increased to $221.7 million for the three-month period ended June 30, 2022 from $178.4 million for the three-month period ended June 30, 2021, an increase of approximately $43.3 million, or 24%. Of the overall increase, approximately $44.2 million was attributable to our digital segment and was primarily due to advertising revenue growth from our digital commercial partnerships business, and due to our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not contribute to net revenue in the comparable period ended June 30, 2021. In addition, of the overall increase, approximately $0.8 million was attributable to our audio segment primarily due to increases in local advertising revenue and political advertising revenue, partially offset by a decrease in national advertising revenue. The overall increase was partially offset by a decrease of approximately $1.7 million attributable to our television segment, primarily due to decreases in local and national advertising revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. The decrease in our television segment revenue was partially offset by increases in political advertising revenue and spectrum usage rights revenue.

Net revenue increased to $418.9 million for the six-month period ended June 30, 2022 from $327.3 million for the six-month period ended June 30, 2021, an increase of approximately $91.6 million, or 28%. Of the overall increase, approximately $96.4 million was attributable to our digital segment and was primarily due to advertising revenue growth from our digital commercial partnerships business, and due to our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not contribute to net revenue in the comparable period ended June 30, 2021. In addition, of the overall increase, approximately $2.1 million was attributable to our audio segment primarily due to increases in local advertising revenue and political advertising revenue, partially offset by a decrease in national advertising revenue. The overall increase was partially offset by a decrease of approximately $6.9 million attributable to our television segment, primarily due to decreases in local and national advertising revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. Additionally, the decrease in our television segment was attributed to a decrease in revenue from spectrum usage rights, partially offset by an increase political advertising revenue.

We believe that for the full year 2022, net revenue will increase primarily as a result of growth in our digital segment and operating MediaDonuts and 365 Digital for a full year in 2022 compared to 2021. In addition, we believe that for the full year 2022, net revenue will increase in part as a result of an increase in political advertising revenue compared to 2021. Political advertising revenue increased at an earlier time of year this year compared to previous mid-term election years, and we currently anticipate political advertising revenue will increase for the remainder of this fiscal year.

*Cost of revenue-Digital.* Cost of revenue in our digital segment increased to $145.0 million for the three-month period ended June 30, 2022 from $109.0 million for the three-month period ended June 30, 2021, an increase of $36.0 million, or 33%, primarily due to increased cost of revenue related to advertising revenue growth from our digital commercial partnerships business, and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur cost of revenue for us in the comparable period ended June 30, 2021. As a percentage of digital net revenue, cost of revenue decreased to 83% for the three-month period ended June 30, 2022 from 84% for the three-month period ended June 30, 2021.

Cost of revenue in our digital segment increased to $274.9 million for the six-month period ended June 30, 2022 from $193.8 million for the six-month period ended June 30, 2021, an increase of $81.1 million, or 42%, primarily due to increased cost of revenue related to advertising revenue growth from our digital commercial partnerships business, and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur cost of revenue for us in the comparable period ended June 30, 2021. As a percentage of digital net revenue, cost of revenue remained constant at 84% for each of the six-month periods ended June 30, 2022 and 2021.

*Direct Operating Expenses.* Direct operating expenses increased to $29.6 million for the three-month period ended June 30, 2022 from $28.3 million for the three-month period ended June 30 2021, an increase of $1.3 million, or 4%. Of the overall increase, approximately $1.6 million was attributable to our digital segment primarily due to an increase in expenses associated with the increase in digital advertising revenue and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur direct operating expenses for us in the comparable period ended June 30, 2021. In addition, of the overall increase, approximately $0.4 million was attributable to our audio segment primarily due to an increase in expenses associated with the increase in advertising revenue. The overall increase was partially offset by a decrease of approximately $0.7 million that was attributable to our television segment primarily due to a decrease in expenses associated with the decrease in local and national advertising revenue. As a percentage of net revenue, direct operating expenses decreased to 13% for the three-month period ended June 30, 2022 from 16% for the three-month period ended June 30, 2021, because the rate of increase in revenue exceeded the rate of increase in expenses.

Direct operating expenses increased to $57.4 million for the six-month period ended June 30, 2022 from $54.9 million for the six-month period ended June 30 2021, an increase of $2.5 million, or 5%. Of the overall increase, approximately $3.9 million was attributable to our digital segment primarily due to an increase in expenses associated with the increase in digital advertising revenue and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur direct operating expenses for us in the comparable period ended June 30, 2021. The overall increase was partially offset by a decrease of approximately $1.4 million that was attributable to our television segment primarily due to a decrease in expenses associated with the decrease in local and national advertising revenue. As a percentage of net revenue, direct operating expenses decreased to 14% for the six-month period ended June 30, 2022 from 17% for the six-month period ended June 30, 2021, because the rate of increase in revenue exceeded the rate of increase in expenses.

We believe that direct operating expenses will increase during 2022, primarily as a result of growth in our digital segment and operating MediaDonuts and 365 Digital for a full year in 2022 compared to less than a full year in 2021.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses increased to $17.8 million for the three-month period ended June 30, 2022 from $13.1 million for the three-month period ended June 30, 2021, an increase of $4.7 million, or 36%. Of the overall increase, approximately $3.6 million was attributable to our digital segment and was primarily due to increase in salary expense and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur selling, general and administrative expenses for us in the comparable period ended June 30, 2021. In addition, of the overall increase, approximately $0.9 million was attributable to our television segment primarily due to an increase in salaries and an increase in bad debt expense. Additionally, of the overall increase, approximately $0.1 million was attributable to our audio segment. As a percentage of net revenue, selling, general and administrative expenses increased to 8% for the three-month period ended June 30, 2022 from 7% for the three-month period ended June 30, 2021.

Selling, general and administrative expenses increased to $33.8 million for the six-month period ended June 30, 2022 from $27.0 million for the six-month period ended June 30, 2021, an increase of $6.8 million, or 25%. Of the overall increase, approximately $5.8 million was attributable to our digital segment and was primarily due to increase in salary expense and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur selling, general and administrative expenses for us in the comparable period ended June 30, 2021. In addition, of the overall increase, approximately $1.0 million was attributable to our television segment primarily due to an increase in salaries and an increase in bad debt expense. As a percentage of net revenue, selling, general and administrative expenses remained constant at 8% for each of the six-month periods ended June 30, 2022 and 2021.

We believe that selling, general and administrative expenses will increase during 2022, primarily as a result of growth in our digital segment and operating MediaDonuts and 365 Digital for a full year in 2022 compared to less than a full year in 2021.

*Corporate Expenses.* Corporate expenses increased to $8.5 million for the three-month period ended June 30, 2022 from $7.3 million for the three-month period ended June 30, 2021, an increase of $1.2 million or 16%. The increase was primarily due to increases in non-cash stock-based compensation and salaries. As a percentage of net revenue, corporate expenses remained constant at 4% for each of the three-month periods ended June 30, 2022 and 2021.

Corporate expenses increased to $17.2 million for the six-month period ended June 30, 2022 from $14.5 million for the six-month period ended June 30, 2021, an increase of $2.7 million or 19%. The increase was primarily due to increases in non-cash stock-based compensation and salaries. As a percentage of net revenue, corporate expenses remained constant at 4% for each of the six-month periods ended June 30, 2022 and 2021.

We believe that corporate expenses will increase during 2022 compared to 2021, primarily due to non-cash stock-based compensation expense.

*Depreciation and Amortization.* Depreciation and amortization increased to $6.3 million for the three-month period ended June 30, 2022 compared to $5.1 million for the three-month period ended June 30, 2021, an increase of $1.2 million. The increase was primarily attributable to amortization of the intangible assets from our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur depreciation and amortization expenses for us in the comparable period ended June 30, 2021.

Depreciation and amortization increased to $12.7 million for the six-month period ended June 30, 2022 compared to $10.3 million for the six-month period ended June 30, 2021, an increase of $2.4 million. The increase was primarily attributable to amortization of the intangible assets from our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur depreciation and amortization expenses for us in the comparable period ended June 30, 2021.

*Foreign currency (gain) loss.* Historically, our revenues have primarily been denominated in U.S. dollars, and the majority of our current revenues continue to be, and are expected to remain, denominated in U.S. dollars. However, we have operations in countries other than the United States, primarily related to our digital business, and as a result, a portion of our revenues is denominated in currencies other than the U.S. dollar, primarily the Mexican peso, Argentine peso, certain other Latin American currencies and various other currencies. As a result, we have operating expense, attributable to foreign currency, that is primarily related to the operations related to our digital business. We had a foreign currency loss of $1.0 million for the three-month period ended June 30, 2022 compared to a foreign currency gain of $0.3 million for the three-month period ended June 30, 2021. We had a foreign currency loss of $0.1 million for the six-month period ended June 30, 2022 compared to a foreign currency loss of $0.3 million for the six-month period ended June 30, 2021. Foreign currency gains and losses are primarily due to currency fluctuations that affected our digital segment operations located outside the United States.

*Other operating gain.* Other operating gain increased to $0.8 million for the three-month period ended June 30, 2022 from $0.5 million for the three-month period ended June 30, 2021, primarily due to gains on assets held for sale, partially offset by a decrease in gains in connection with the required relocation of certain television stations to a different channel as part of the broadcast television repack following the FCC auction for broadcast spectrum that concluded in 2017.

Other operating gain decreased to $1.0 million for the six-month period ended June 30, 2022 from $2.4 million for the six-month period ended June 30, 2021, primarily due to a decrease in gains in connection with the required relocation of certain television stations to a different channel as part of the broadcast television repack following the FCC auction for broadcast spectrum that concluded in 2017, partially offset by gains on assets held for sale.

*Impairment.* During the three-and six month periods ended June 30, 2021 we recorded impairment charges of $0.1 million and $1.4 million, respectively, related to assets held for sale.

*Change in fair value of contingent consideration.* As a result of change in fair value of contingent consideration related to our various acquisitions, we recognized an expense of $1.0 million and $6.1 million for the three- and six-month periods ended June 30, 2022, respectively.

*Operating Income (Loss).* As a result of the above factors, operating income was $13.4 million for the three-month period ended June 30, 2022, compared to operating income of $16.2 million for the three-month period ended June 30, 2021.

As a result of the above factors, operating income was $17.6 million for the six-month period ended June 30, 2022, compared to operating income of $27.6 million for the six-month period ended June 30, 2021.

*Interest Expense, net.* Interest expense, net decreased to $1.6 million for the three-month period ended June 30, 2022 from $1.8 million for the three-month period ended June 30, 2021. This decrease was primarily due to interest income on our available for sale securities, partially offset by an increase in interest expense due to a higher interest rate on our debt.

Interest expense, net decreased to $3.0 million for the six-month period ended June 30, 2022 from $3.4 million for the six-month period ended June 30, 2021. This decrease was primarily due to interest income on our available for sale securities, partially offset by an increase in interest expense due to a higher interest rate on our debt.

*Income Tax Benefit (Expense).* Income tax expense for the six-month period ended June 30, 2022 was $4.2 million, or 29% of our pre-tax income. Income tax expense for the six-month period ended June 30, 2021 was $6.8 million, or 28% of our pre-tax income. The effective tax rate for the six-month period ended June 30, 2022 was different from our statutory rate due to foreign and state taxes, a valuation allowance on deferred tax assets in our Spanish, Paraguay, Argentina and Mexico digital entities, changes in the fair value of the contingent consideration liability, and non-taxable non-territorial income

Our management periodically evaluates the realizability of the deferred tax assets and, if it is determined that it is more likely than not that the deferred tax assets are realizable, adjusts the valuation allowance accordingly. Valuation allowances are established and maintained for deferred tax assets on a “more likely than not” threshold. The process of evaluating the need to maintain a valuation allowance for deferred tax assets and the amount maintained in any such allowance is highly subjective and is based on many factors, several of which are subject to significant judgment calls.

Based on our analysis, we determined that it was more likely than not that our deferred tax assets would be realized for all jurisdictions with the exception of our digital operations located in Spain, Paraguay, Argentina and Mexico. As a result of recurring losses from our digital operations in Spain, Paraguay, Argentina and Mexico, management has determined that it is more likely than not that deferred tax assets of approximately $2.2 million at June 30, 2022 will not be realized and therefore we have established a valuation allowance on those assets.

We intend to reinvest permanently our unremitted earnings in our foreign subsidiaries, and accordingly have not provided deferred tax liabilities on those earnings. We have not yet determined an estimate of the total amount of unremitted earnings.

### Segment Operations

### Digital

*Net Revenue.* Net revenue in our digital segment increased to $174.4 million for the three-month period ended June 30, 2022 from $130.2 million for the three-month period ended June 30, 2021. This increase of approximately $44.2 million in net revenue was primarily due to advertising revenue growth from our digital commercial partnerships business, and due to our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not contribute to net revenue in the comparable period ended June 30, 2021.

Net revenue in our digital segment increased to $328.1 million for the six-month period ended June 30, 2022 from $231.7 million for the six-month period ended June 30, 2021. This increase of approximately $96.4 million in net revenue was primarily due to advertising revenue growth from our digital commercial partnerships business, and due to our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not contribute to net revenue in the comparable period ended June 30, 2021

*Cost of revenue*. Cost of revenue in our digital segment increased to $145.0 million for the three-month period ended June 30, 2022 from $109.0 million for the three-month period ended June 30, 2021, an increase of $36.0 million, primarily due to increased cost of revenue related to advertising revenue growth from our digital commercial partnerships business, and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur cost of revenue for us in the comparable period ended June 30, 2021. As a percentage of digital net revenue, cost of revenue decreased to 83% for the three-month period ended June 30, 2022 from 84% for the three-month period ended June 30, 2021.

Cost of revenue in our digital segment increased to $274.9 million for the six-month period ended June 30, 2022 from $193.8 million for the six-month period ended June 30, 2021, an increase of $81.1 million, primarily due to increased cost of revenue related to advertising revenue growth from our digital commercial partnerships business, and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur cost of revenue for us in the comparable period ended June 30, 2021. As a percentage of digital net revenue, cost of revenue remained constant at 84% for each of the six-month periods ended June 30, 2022 and 2021.

We have previously noted a trend in our digital operations globally whereby revenue is shifting more to programmatic revenue. As a result, advertisers are demanding more efficiency and lower cost from intermediaries like us. In response to this trend, we are offering programmatic alternatives to advertisers, which is putting pressure on margins. Among our programmatic solutions is our Smadex ad purchasing platform. Additionally, we experienced lower margins related to revenue generated from the primarily global media companies for which we act as commercial partner as a result of relative negotiating strength and industry trends generally. We expect these trends will continue in future periods, likely further resulting in a higher volume, lower margin business in our digital segment. The digital advertising industry remains dynamic and is continuing to undergo rapid changes in technology and competition. We expect this trend to continue and possibly accelerate. We must continue to remain vigilant to meet these dynamic and rapid changes including the need to further adjust our business strategies accordingly. No assurances can be given that such strategies will be successful.

*Direct operating expenses*. Direct operating expenses in our digital segment increased to $7.8 million for the three-month period ended June 30, 2022 from $6.2 million for the three-month period ended June 30, 2021, an increase of $1.6 million. The increase was primarily due to an increase in expenses associated with the increase in digital advertising revenue and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur direct operating expenses for us in the comparable period ended June 30, 2021.

Direct operating expenses in our digital segment increased to $15.0 million for the six-month period ended June 30, 2022 from $11.1 million for the six-month period ended June 30, 2021, an increase of $3.9 million. The increase was primarily due to an increase in expenses associated with the increase in digital advertising revenue and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur direct operating expenses for us in the comparable period ended June 30, 2021.

*Selling, general and administrative expenses*. Selling, general and administrative expenses in our digital segment increased to $9.4 million for the three-month period ended June 30, 2022 from $5.8 million for the three-month period ended June 30, 2021, an increase of $3.6 million. The increase was primarily due to an increase in salary expense and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur selling, general and administrative expenses for us in the comparable period ended June 30, 2021.

*Selling, general and administrative expenses*. Selling, general and administrative expenses in our digital segment increased to $17.5 million for the six-month period ended June 30, 2022 from $11.7 million for the six-month period ended June 30, 2021, an increase of $5.8 million. The increase was primarily due to an increase in salary expense and our acquisitions of MediaDonuts and 365 Digital during the third and fourth quarters of 2021, respectively, both of which did not incur selling, general and administrative expenses for us in the comparable period ended June 30, 2021.

### Television

*Net Revenue.* Net revenue in our television segment decreased to $32.4 million for the three-month period ended June 30, 2022 from $34.1 million for the three-month period ended June 30, 2021. This decrease of approximately $1.7 million in net revenue was primarily due to decreases in local and national advertising revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. We expect retransmission consent revenue from these three markets will continue to decline over the next two years, at which point it will be eliminated. The decrease was partially offset by increases in political advertising revenue and spectrum usage rights revenue. Political advertising revenue increased at an earlier time of year this year compared to previous mid-term election years, and we currently anticipate political advertising revenue will increase for the remainder of this fiscal year.

Net revenue in our television segment decreased to $63.2 million for the six-month period ended June 30, 2022 from $70.1 million for the six-month period ended June 30, 2021. This decrease of approximately $6.9 million in net revenue was primarily due to decreases in local and national advertising revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. We expect retransmission consent revenue from these three markets will continue to decline over the next two years, at which point it will be eliminated. Additionally, the decrease in our television segment was attributed to a decrease in revenue from spectrum usage rights, partially offset by an increase political advertising revenue. Political advertising revenue increased at an earlier time of year this year compared to previous mid-term election years, and we currently anticipate political advertising revenue will increase for the remainder of this fiscal year.

In general, our television segment faces declining audiences, which we believe is present across the industry, competitive factors with the other major Spanish-language broadcaster, and changing demographics and preferences of audiences. Additionally, we have previously noted a trend for advertising to move increasingly from traditional media, such as television, to new media, such as digital media, and we expect this trend to continue.

*Direct Operating Expenses.* Direct operating expenses in our television segment decreased to $14.5 million for the three-month period ended June 30, 2022 from $15.2 million for the three-month period ended June 30, 2021, a decrease of approximately $0.7 million. The decrease was primarily due to a decrease in expenses associated with the decrease in local and national advertising revenue.

Direct operating expenses in our television segment decreased to $28.8 million for the six-month period ended June 30, 2022 from $30.2 million for the six-month period ended June 30, 2021, a decrease of approximately $1.4 million. The decrease was primarily due to a decrease in expenses associated with the decrease in local and national advertising revenue.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses in our television segment increased to $5.2 million for the three-month period ended June 30, 2022 from $4.3 million for the three-month period ended June 30, 2021, an increase of approximately $0.9 million. The increase was primarily due to an increase in salaries and an increase in bad debt expense.

Selling, general and administrative expenses in our television segment increased to $10.2 million for the six-month period ended June 30, 2022 from $9.2 million for the six-month period ended June 30, 2021, an increase of approximately $1.0 million. The increase was primarily due to an increase in salaries and an increase in bad debt expense.

### Audio

*Net Revenue*. Net revenue in our audio segment increased to $14.9 million for the three-month period ended June 30, 2022 from $14.1 million for the three-month period ended June 30, 2021. This increase of approximately $0.8 million in net revenue was primarily due to increases in local advertising revenue and political advertising revenue, partially offset by a decrease in national advertising revenue. Political advertising revenue increased at an earlier time of year this year compared to previous mid-term election years, and we currently anticipate political advertising revenue will increase for the remainder of this fiscal year.

Net revenue in our audio segment increased to $27.5 million for the six-month period ended June 30, 2022 from $25.4 million for the six-month period ended June 30, 2021. This increase of approximately $2.1 million in net revenue was primarily due to increases in local advertising revenue and political advertising revenue, partially offset by a decrease in national advertising revenue. Political advertising revenue increased at an earlier time of year this year compared to previous mid-term election years, and we currently anticipate political advertising revenue will increase for the remainder of this fiscal year.

Notwithstanding the foregoing, in general, our audio segment faces declining audiences, which we believe is present across the industry, competitive factors with other major Spanish-language broadcasters, and changing demographics and preferences of audiences. Additionally, notwithstanding the increases in local advertising revenue, we have previously noted a trend for advertising to move increasingly from traditional media, such as radio, to new media, such as digital media, and we expect this trend to continue.

*Direct Operating Expenses.* Direct operating expenses in our audio segment increased to $7.3 million for the three-month period ended June 30, 2022 from $6.9 million for the three-month period ended June 30, 2021, an increase of $0.4 million. The increase was primarily due to an increase in expenses associated with the increase in advertising revenue.

Direct operating expenses in our audio segment increased to $13.7 million for the six-month period ended June 30, 2022 from $13.6 million for the six-month period ended June 30, 2021, an increase of $0.1 million.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses in our audio segment increased to $3.1 million for the six-month period ended June 30, 2022 from $3.0 million for the six-month period ended June 30, 2021, an increase of $0.1 million.

Selling, general and administrative expenses in our audio segment increased to $6.1 million for the six-month period ended June 30, 2022 from $6.0 million for the six-month period ended June 30, 2021, an increase of $0.1 million.

### Liquidity and Capital Resources

While we have a history of operating losses in some periods and operating income in other periods, we also have a history of generating significant positive cash flows from our operations. We had net income attributable to common stockholders of $29.3 million for the year ended December 31, 2021, and net losses attributable to common stockholders of $3.9 million and $19.7 million for the years ended December 31, 2020 and 2019, respectively. We had positive cash flow from operations of $65.3 million, $63.4 million and $31.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. We had positive cash flow from operations of $62.9 million for the six-month period ended June 30, 2022. For at least the next twelve months, we expect to fund our working capital requirements, capital expenditures and payments of principal and interest on outstanding indebtedness, with cash on hand and cash flows from operations.

We currently believe that our cash position is capable of meeting our operating and capital expenses and debt service requirements for at least the next twelve months from the issuance of this report. We believe that our position is strengthened by cash and cash equivalents on hand, in the amount of $110.0 million, and available for sale marketable securities in the additional amount of $74.3 million, as of June 30, 2022. Our liquidity is not materially impacted by the amounts held in accounts outside the United States.

### 2017 Credit Facility

On November 30, 2017 (the “Closing Date”), we entered into our 2017 Credit Facility pursuant to the 2017 Credit Agreement. The 2017 Credit Facility consists of a $300.0 million senior secured Term Loan B Facility (the “Term Loan B Facility”), which was drawn in full on the Closing Date. In addition, the 2017 Credit Facility provides that we may increase the aggregate principal amount of the 2017 Credit Facility by up to an additional $100.0 million plus the amount that would result in our first lien net leverage ratio (as such term is used in the 2017 Credit Agreement) not exceeding 4.0 to 1.0, subject to us satisfying certain conditions.

Borrowings under the Term Loan B Facility were used on the Closing Date (a) to repay in full all of our and our subsidiaries’ then outstanding obligations under the previous 2013 credit agreement, or 2013 Credit Agreement, and to terminate the 2013 Credit Agreement, (b) to pay fees and expenses in connection with the 2017 Credit Facility, and (c) for general corporate purposes.

The 2017 Credit Facility is guaranteed on a senior secured basis by certain of our existing and future wholly-owned domestic subsidiaries, and is secured on a first priority basis by our and those subsidiaries’ assets.

Our borrowings under the 2017 Credit Facility bear interest on the outstanding principal amount thereof from the date when made at a rate per annum equal to either: (i) the Eurodollar Rate (as defined in the 2017 Credit Agreement) plus 2.75%; or (ii) the Base Rate (as defined in the 2017 Credit Agreement) plus 1.75%. As of June 30, 2022, the interest rate on our Term Loan B was 3.81%. The Term Loan B Facility expires on November 30, 2024 (the “Maturity Date”).

Subject to certain exceptions, the 2017 Credit Facility contains covenants that limit the ability of us and our restricted subsidiaries to, among other things:

- incur liens on our property or assets;
- make certain investments;
- incur additional indebtedness;
- consummate any merger, dissolution, liquidation, consolidation or sale of substantially all assets;
- dispose of certain assets;
- make certain restricted payments;
- make certain acquisitions;
- enter into substantially different lines of business;
- enter into certain transactions with affiliates;
- use loan proceeds to purchase or carry margin stock or for any other prohibited purpose;
- change or amend the terms of our organizational documents or the organization documents of certain restricted subsidiaries in a materially adverse way to the lenders, or change or amend the terms of certain indebtedness;
- enter into sale and leaseback transactions;
- make prepayments of any subordinated indebtedness, subject to certain conditions; and
- change our fiscal year, or accounting policies or reporting practices.

The 2017 Credit Facility also provides for certain customary events of default, including the following:

- default for three (3) business days in the payment of interest on borrowings under the 2017 Credit Facility when due;
- default in payment when due of the principal amount of borrowings under the 2017 Credit Facility;
- failure by us or any subsidiary to comply with the negative covenants and certain other covenants relating to maintaining the legal existence of the Company and certain of its restricted subsidiaries and compliance with anti-corruption laws;
- failure by us or any subsidiary to comply with any of the other agreements in the 2017 Credit Agreement and related loan documents that continues for thirty (30) days (or ten (10) days in the case of failure to comply with covenants related to inspection rights of the administrative agent and lenders and permitted uses of proceeds from borrowings under the 2017 Credit Facility) after our officers first become aware of such failure or first receive written notice of such failure from any lender;
- default in the payment of other indebtedness if the amount of such indebtedness aggregates to $15.0 million or more, or failure to comply with the terms of any agreements related to such indebtedness if the holder or holders of such indebtedness can cause such indebtedness to be declared due and payable;
- certain events of bankruptcy or insolvency with respect to us or any significant subsidiary;
- final judgment is entered against us or any restricted subsidiary in an aggregate amount over $15.0 million, and either enforcement proceedings are commenced by any creditor or there is a period of thirty (30) consecutive days during which the judgment remains unpaid and no stay is in effect;
- any material provision of any agreement or instrument governing the 2017 Credit Facility ceases to be in full force and effect; and
- any revocation, termination, substantial and adverse modification, or refusal by final order to renew, any media license, or the requirement (by final non-appealable order) to sell a television or radio station, where any such event or failure is reasonably expected to have a material adverse effect.

The Term Loan B Facility does not contain any financial covenants. In connection with our entering into the 2017 Credit Agreement, we and our restricted subsidiaries also entered into a Security Agreement, pursuant to which we and all of the companies existing in future wholly-owned domestic subsidiaries each granted a first priority security interest in the collateral securing the 2017 Credit Facility for the benefit of the lenders under the 2017 Credit Facility.

On June 4, 2021, we entered into the Second Amendment (the "Amendment") to the 2017 Credit Agreement, by and among the Company, Bank of America, N.A., as Administrative Agent, and the other financial institutions party thereto as Lenders (collectively, the “Lenders”). The Amendment amends the 2017 Credit Agreement, primarily to permit additional investments in restricted subsidiaries that are not loan parties, and make certain changes to the definition of “Consolidated Net Income” for the purpose of calculating EBITDA as defined by the 2017 Credit Agreement. Pursuant to the Amendment, we agreed to pay to the Lenders consenting to the Amendment a fee equal to 0.375% of the aggregate principal amount of the outstanding loans held by such Lenders under the 2017 Credit Agreement as of June 4, 2021. This fee totaled approximately $0.6 million and it is amortized as interest expense over the remaining term of the Term Loan.

The carrying amount of the Term Loan B Facility as of June 30, 2022 was $209.2 million, net of $1.5 million of unamortized debt issuance costs and original issue discount. The estimated fair value of the Term Loan B Facility as of June 30, 2022 was $204.4 million. The estimated fair value is based on quoted prices in markets where trading occurs infrequently.

### Share Repurchase Program

On March 1, 2022, our Board of Directors approved a share repurchase program of up to $20 million of our common stock. Under this share repurchase program, we are authorized to purchase shares from time to time through open market purchases or negotiated purchases, subject to market conditions and other factors. On the same date, the Board terminated our previous share repurchase program of up to $45 million of our common stock.

In the three-month period ended June 30, 2022, we repurchased 0.6 million shares of our Class A common stock under the new share repurchase program for an aggregate purchase price of $4.1 million, or an average price per share of $6.48. As of June 30, 2022, we have repurchased a total of 1.8 million shares of our Class A common stock under the new share repurchase program for an aggregate purchase price of $11.3 million, or an average price per share of $6.43. All such repurchased shares were retired as of June 30, 2022.

### Consolidated Adjusted EBITDA

Consolidated adjusted EBITDA (as defined below) increased to $40.6 million for the six-month period ended June 30, 2022 compared to $32.0 million for the six-month period ended June 30, 2021. As a percentage of net revenue, consolidated adjusted EBITDA remained constant at 10% for each of the six-month periods ended June 30, 2022 and 2021.

Consolidated adjusted EBITDA, as defined in our 2017 Credit Agreement, 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, EBITDA attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings. We use the term consolidated adjusted EBITDA because that measure is defined in our 2017 Credit Agreement 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, EBITDA attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings.

Since consolidated adjusted EBITDA is a measure governing several critical aspects of our 2017 Credit Facility, we believe that it is important to disclose consolidated adjusted EBITDA to our investors. We may increase the aggregate principal amount outstanding by an additional amount equal to $100.0 million plus the amount that would result in our total net leverage ratio, or the ratio of consolidated total senior debt (net of up to $75.0 million of unrestricted cash) to trailing-twelve-month consolidated adjusted EBITDA, not exceeding 4.0. In addition, beginning December 31, 2018, at the end of every calendar year, in the event our total net leverage ratio is within certain ranges, we must make a debt prepayment equal to a certain percentage of our Excess Cash Flow, which is defined as consolidated adjusted EBITDA, less consolidated interest expense, less debt principal payments, less taxes paid, less other amounts set forth in the definition of Excess Cash Flow in the 2017 Credit Agreement. The total leverage ratio was as follows (in each case as of June 30): 2022, 1.4 to 1; 2021, 1.7 to 1.

While many in the financial community and we consider consolidated adjusted EBITDA to be important, it should be considered in addition to, but not as a substitute for or superior to, other measures of liquidity and financial performance prepared in accordance with accounting principles generally accepted in the United States of America, such as cash flows from operating activities, operating income (loss) and net income (loss). As consolidated adjusted EBITDA excludes non-cash gain (loss) on sale of assets, non-cash depreciation and amortization, non-cash impairment charge, non-cash stock-based compensation expense, 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, EBITDA attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings, consolidated adjusted EBITDA has certain limitations because it excludes and includes several important financial line items. Therefore, we consider both non-GAAP and GAAP measures when evaluating our business. Consolidated adjusted EBITDA is also used to make executive compensation decisions.

Consolidated adjusted EBITDA is a non-GAAP measure. For a reconciliation of consolidated adjusted EBITDA to cash flows from operating activities, its most directly comparable GAAP financial measure, please see page 35.

### Cash Flow

Net cash flow provided by operating activities was $62.9 million for the six-month period ended June 30, 2022 compared to net cash flow provided by operating activities of $44.4 million for the six-month period ended June 30, 2021. We had net income of $10.4 million for the six-month period ended June 30, 2022, which included non-cash items such as deferred income taxes of $3.2 million, depreciation and amortization expense of $12.7 million, change in fair value of contingent consideration of $6.1 million, non-cash stock-based compensation of $5.2 million, and gain on disposal of property and equipment of $0.6 million. We had net income of $17.5 million for the six-month period ended June 30, 2021, which included non-cash items such as deferred income taxes of $3.7 million, depreciation and amortization expense of $10.3 million, non-cash stock-based compensation of $2.2 million, and impairment loss of $1.4 million. We expect to have positive cash flow from operating activities for the 2022 year.

Net cash flow used in investing activities was $77.3 million for the six-month period ended June 30, 2022, compared to net cash flow provided by investing activities of $15.0 million for the six-month period ended June 30, 2021. During the six-month period ended June 30, 2022, we spent $87.2 million on purchases of marketable securities, spent $3.2 million in net capital expenditures, received $10.5 million from sale of marketable securities, and received $2.7 million from sale of property and equipment and intangibles. During the six-month period ended June 30, 2021, we had proceeds of $17.8 million from the maturity of marketable securities and spent $2.8 million in net capital expenditures. We anticipate that our capital expenditures will be approximately $16.4 million during the full year 2022. Of this amount, we expect that approximately $3.6 million will be reimbursed in connection with our new office lease. The amount of our anticipated capital expenditures may change based on future changes in business plans and our financial condition and general economic conditions. We expect to fund capital expenditures with cash on hand and net cash flow from operations.

Net cash flow used in financing activities was $60.8 million for the six-month period ended June 30, 2022, compared to net cash flow used in financing activities of $6.6 million for the six-month period ended June 30, 2021. During the six-month period ended June 30, 2022, we made payments of contingent consideration of $43.6 million, dividend payments of $4.3, debt payments of $1.5 million, payments for taxes related to shares withheld for share-based compensation plans of $0.3 million, spent $11.3 million for the repurchase of Class A common stock, and received $0.2 million related to the issuance of common stock upon the exercise of stock options. During the six-month period ended June 30, 2021, we made dividend payments of $4.3 million, principal debt repayments of $1.5 million, payments for financing costs of $0.6 million, payments for taxes related to shares withheld for share-based compensation plans of $0.5 million, and received $0.2 million related to the issuance of common stock upon the exercise of stock options.

### Credit Risk

We have 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. We believe that we manage this credit risk effectively, in part by analyzing the creditworthiness of these customers; however, we can give no assurance that this will continue to be the case in future periods.

Additionally, we are dependent upon one single global media company for the majority of our consolidated revenue, which amounted to approximately 52% our consolidated revenue for each of the three- and six-month periods ended June 30, 2022, and we expect that dependence will continue. The loss of all or a substantial part of that revenue could have a significant impact on our liquidity and cash flow.

## Market risk

As filed, 3,287 characters.

### General

Market risk represents the potential loss that may impact our financial position, results of operations or cash flows due to adverse changes in the financial markets. We are exposed to market risk from changes in the base rates on our Term Loan B.

### Interest Rates

As of June 30, 2022, we had $210.8 million of variable rate bank debt outstanding under our 2017 Credit Facility. The debt bears interest at the three-month Eurodollar rate plus a margin of 2.75%.

Because our debt is subject to interest at a variable rate, our earnings will be affected in future periods by changes in interest rates. If the Eurodollar were to increase by a hypothetical 100 basis points, or one percentage point, from its June 30, 2022 level, our annual interest expense would increase and cash flow from operations would decrease by approximately $2.1 million based on the outstanding balance of our term loan as of June 30, 2022.

### Foreign Currency

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar. Historically, our revenues have primarily been denominated in U.S. dollars, and the majority of our current revenues continue to be, and are expected to remain, denominated in U.S. dollars. However, we have operations in countries other than the United States, primarily related to our digital business, and as a result we expect an increasing portion of our future revenues to be denominated in currencies other than the U.S. dollar, primarily the Mexican peso, Argentine peso, certain other Latin American currencies and various other currencies. The effect of an immediate and hypothetical 10% adverse change in foreign exchange rates on foreign-denominated accounts receivable at June 30, 2022 would not be material to our overall financial condition or consolidated results of operations. Our operating expenses are primarily denominated in U.S. Dollars. In addition, certain of our operating expenses are denominated in the currencies of the countries in which our operations are located, such as Spain, Latin American countries and other countries. Increases and decreases in our foreign-denominated revenue from movements in foreign exchange rates are partially offset by the corresponding decreases or increases in our foreign-denominated operating expenses.

Based on recent inflation trends, the economy in Argentina has been classified as highly inflationary. As a result, we applied the guidance in ASC 830 by remeasuring non-monetary assets and liabilities at historical exchange rates and monetary-assets and liabilities using current exchange rates (see Note 2 to Notes to Consolidated Financial Statements).

As our international operations continue to grow, our risks associated with fluctuation in currency rates will become greater, and we will continue to reassess our approach to managing this risk. In addition, currency fluctuations or a weakening U.S. dollar can increase the amount of operating expense of our international operations, which are primarily related to our digital business. To date, we have not entered into any foreign currency hedging contracts, since exchange rate fluctuations historically have not had a material impact on our operating results and cash flows.

## Controls and procedures

As filed, 2,014 characters.

We conducted an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of the evaluation date, our disclosure controls and procedures were effective.

Our disclosure controls and procedures are designed to ensure that the information relating to our company, including our consolidated subsidiaries, required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

There have not been any changes in our internal control over financial reporting during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### PART II.

### OTHER INFORMATION

Filed Aug 4, 2022.
Source: SEC EDGAR, the filing index for accession 0000950170-22-014771. Last ingested by Listed: Nov 5, 2026, 17:39 ET. No prices; not investment advice.