# Entravision Communications Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [Entravision Communications Corp](/companies/evc.md) (CIK 1109116)
- Form: 10-Q
- Filed: 2024-05-02
- Accepted by EDGAR: May 2, 2024, 16:10 ET
- Period: 2024-03-31
- Accession: 0000950170-24-052113
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1109116/000095017024052113/evc-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1109116/000095017024052113/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $277.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $203.2m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $26.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$55.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $4.6m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | −$7.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$51.7m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.55 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.55 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 89,518,058 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $33.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $2.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $4.5m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2024-03-31 | $128.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $380.0m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $805.0m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $274.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $591.6m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $195.8m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-31 | $3.4m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-31 | $173.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 37,564 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. For financial reporting purposes, we report in three segments based upon the type of advertising medium: digital, television and audio.

Our digital segment, whose operations are primarily located in Europe, Latin America, Asia, the United States and Africa, reaches a global market, with a focus on advertisers that wish to advertise on digital platforms owned and operated primarily by global media companies. We have commercial partnerships with Meta, ByteDance Ltd., or ByteDance, which owns the TikTok platform, X Corp., or X (formerly known as Twitter), Spotify AB, or Spotify, Snap Inc., or Snap, and Pinterest, Inc., or Pinterest. Additionally, marketers can use our Smadex programmatic ad purchasing platform to deliver targeted advertising to audiences around the globe.

Our digital operations are comprised of three business units:

- Entravision Global Partners, our digital commercial partnerships business;
- Smadex, our programmatic ad purchasing platform; and
- Adwake, our mobile growth solutions business.

On March 4, 2024, we received a communication from Meta that it intends to wind down its authorized sales partner, or ASP, program globally and end its relationship with all of its ASPs, including us, by July 1, 2024. We expect that the termination of this program will have a material effect on our digital operations and results of operations and that our consolidated and digital segment revenue and cash flow from operations will be materially and adversely affected in future periods. As a result, we have initiated a thorough review of our current digital strategy, operations and cost structure, which may include, among other things, the nature and extent to which we remain involved in this business and the timing thereof. The discussion regarding our digital operations throughout this report, including all references to our commercial relationship as an ASP with Meta, and the impact that the termination by Meta of the ASP program is expected have on our business, including our results of operations, consolidated and digital segment revenue and cash flow from operations, should be read in consideration of this development.

Our television and audio operations reach and engage U.S. Hispanics in the United States. We own and/or operate 49 primary television stations. Our television operations comprise the largest affiliate group of both the top-ranked Univision television network and TelevisaUnivision’s UniMás network, with TelevisaUnivision-affiliated stations in 15 of the nation’s top 50 U.S. Hispanic markets. We own and operate one of the largest groups of primarily Spanish-language radio stations in the United States. We own and operate 44 radio stations, consisting of 37 FM and 7 AM stations, in 14 U.S. markets. We own and/or operate media properties in 13 of the 20 highest-density U.S. Hispanic markets.

Our net revenue for the three-month period ended March 31, 2024 was $277.4 million. Of this amount, revenue generated by our digital segment accounted for approximately 86%, revenue generated by our television segment accounted for approximately 10%, and revenue generated by our audio segment accounted for approximately 4% of total revenue.

### Highlights

- On March 4, 2024, we received a communication from Meta that it intends to wind down its authorized sales partner, or ASP, program globally and end its relationship with all of its ASPs, including us, by July 1, 2024. We expect that the termination of this program will have a material effect on our digital operations and results of operations and that our consolidated and digital segment revenue and cash flow from operations will be materially and adversely affected in future periods. As a result, we have initiated a thorough review of our current digital strategy, operations and cost structure, which may include, among other things, the nature and extent to which we remain involved in this business and the timing thereof.
- We prepaid $10 million of our 2023 Credit Facility in March 2024.

### Relationship with TelevisaUnivision

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. 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 with multichannel video programming distributors, or MVPDs, for our Univision- and UniMás-affiliated television station signals. Revenue generated from retransmission consent agreements 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. The term of each of these current agreements expires on December 31, 2026 for all of our Univision and UniMás network affiliate stations. TelevisaUnivision also owns approximately 10% of our common stock on a fully-converted basis. For more information regarding these agreements and the stock that TelevisaUnivision owns, see Note 2 to Notes to Condensed Consolidated Financial Statements.

### 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 2023 10-K.

### Recent Accounting Pronouncements

For further information on recently issued accounting pronouncements, see Note 2 to Notes to Condensed Consolidated Financial Statements.

### Three-Month Periods Ended March 31, 2024 and 2023

The following table sets forth selected data from our operating results for the three-month periods ended March 31, 2024 and 2023 (in thousands):

| Statements of Operations Data: | Three-Month Period Ended March 31,% 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Net Revenue | $277,445 | $239,006 | 16% |
| Cost of revenue - digital | 203,229 | 167,756 | 21% |
| Direct operating expenses | 35,572 | 29,862 | 19% |
| Selling, general and administrative expenses | 26,695 | 22,768 | 17% |
| Corporate expenses | 12,248 | 10,502 | 17% |
| Depreciation and amortization | 7,133 | 6,471 | 10% |
| Change in fair value of contingent consideration | (1,420) | (4,065) | (65)% |
| Impairment charge | 49,438 | - | \* |
| Foreign currency (gain) loss | 449 | (956) | \* |
|  | 333,344 | 232,338 | 43% |
| Operating income (loss) | (55,899) | 6,668 | \* |
| Interest expense | (4,559) | (4,028) | 13% |
| Interest income | 1,130 | 860 | 31% |
| Dividend income | 10 | 18 | (44)% |
| Realized gain (loss) on marketable securities | (113) | (32) | 253% |
| Loss on debt extinguishment | (40) | (1,556) | (97)% |
| Income before income (loss) taxes | (59,471) | 1,930 | \* |
| Income tax benefit (expense) | 7,802 | (231) | \* |
| Net income (loss) | (51,669) | 1,699 | \* |
| Net (income) loss attributable to redeemable noncontrolling interest | 2,779 | - | \* |
| Net (income) loss attributable to noncontrolling interest | - | 342 | (100)% |
| Net income (loss) attributable to common stockholders | $(48,890) | $2,041 | \* |
| **Other Data:** |  |  |  |
| Capital expenditures | $2,173 | $8,550 |  |
| Consolidated EBITDA (1) | 4,530 | 13,022 |  |
| Net cash provided by operating activities | 33,375 | 36,695 |  |
| Net cash provided by (used in) investing activities | 6,099 | (563) |  |
| Net cash provided by (used in) financing activities | (16,797) | (5,365) |  |

(1) Consolidated 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 EBITDA because that measure is defined in both the 2017 Credit Agreement and the 2023 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 EBITDA is a measure governing several critical aspects of our 2023 Credit Facility, and since our ability to borrow under our Revolving Credit Facility is subject to compliance with a consolidated EBITDA financial covenant, we believe that it is important to disclose consolidated EBITDA to our investors. Our 2023 Credit Facility contains a total net leverage ratio financial covenant. The total net leverage ratio, or the ratio of consolidated total debt (net of up to $50.0 million of unrestricted cash) to trailing-twelve-month consolidated EBITDA, affects both our ability to borrow from our Revolving Credit Facility and our applicable margin for the interest rate calculation. Under our 2023 Credit Agreement, our maximum total leverage ratio may not to exceed 3.25 to 1.00. In addition, our 2023 Credit Agreement contains interest coverage ratio financial covenant (calculated as set forth in the 2023 Credit Agreement), with a minimum permitted ratio of 3.00 to 1.00.

While many in the financial community and we consider consolidated 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). Consolidated EBITDA has certain limitations because it excludes and includes several important financial line items as noted above. Therefore, we consider both non-GAAP and GAAP measures when evaluating our business. Consolidated EBITDA is also used to make executive compensation decisions.

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

|  | Three-Month Period Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Consolidated EBITDA | $4,530 | $13,022 |
| EBITDA attributable to redeemable noncontrolling interest | 167 | — |
| EBITDA attributable to noncontrolling interest | — | 230 |
| Interest expense | (4,559) | (4,028) |
| Interest income | 1,130 | 860 |
| Dividend income | 10 | 18 |
| Realized gain (loss) on marketable securities | (113) | (32) |
| Income tax expense | 7,802 | (231) |
| Amortization of syndication contracts | (113) | (120) |
| Payments on syndication contracts | 115 | 120 |
| Non-cash stock-based compensation included in direct operating expenses | (1,785) | (1,856) |
| Non-cash stock-based compensation included in corporate expenses | (3,662) | (2,197) |
| Depreciation and amortization | (7,133) | (6,471) |
| Change in fair value of contingent consideration | 1,420 | 4,065 |
| Impairment charge | (49,438) | — |
| Non-recurring cash severance charge | — | (125) |
| Gain (loss) on debt extinguishment | (40) | (1,556) |
| Net (income) loss attributable to redeemable noncontrolling interest | 2,779 | — |
| Net (income) loss attributable to noncontrolling interest | — | 342 |
| Net income (loss) attributable to common stockholders | (48,890) | 2,041 |
| Depreciation and amortization | 7,133 | 6,471 |
| Impairment charge | 49,438 | — |
| Deferred income taxes | (4,224) | (205) |
| Non-cash interest | 92 | 133 |
| Amortization of syndication contracts | 113 | 120 |
| Payments on syndication contracts | (115) | (120) |
| Non-cash stock-based compensation | 5,447 | 4,053 |
| Realized (gain) loss on marketable securities | 113 | 32 |
| (Gain) loss on debt extinguishment | 40 | 1,556 |
| (Gain) loss on disposal of property and equipment | 97 | 68 |
| Change in fair value of contingent consideration | (1,420) | (4,065) |
| Net income (loss) attributable to redeemable noncontrolling interest | (2,779) | — |
| Net income (loss) attributable to noncontrolling interest | — | (342) |
| Changes in assets and liabilities: |  |  |
| (Increase) decrease in accounts receivable | 29,473 | 33,157 |
| (Increase) decrease in prepaid expenses and other current assets, operating leases right of use asset and other assets | (7,150) | 948 |
| Increase (decrease) in accounts payable, accrued expenses and other liabilities | 6,007 | (7,152) |
| Cash flows from operating activities | $33,375 | $36,695 |

### Consolidated Operations

*Net Revenue.* Net revenue increased to $277.4 million for the three-month period ended March 31, 2024 from $239.0 million for the three-month period ended March 31, 2023. This increase was primarily attributable to increases in advertising revenue from our digital business units in our digital segment, and political advertising revenue in our television and audio segments, partially offset by decreases in national advertising revenue, spectrum usage rights revenue and retransmission consent revenue in our television segment, and decreases in local and national advertising revenue in our audio segment.

*Cost of revenue-Digital.* Cost of revenue in our digital segment increased to $203.2 million for the three-month period ended March 31, 2024 from $167.8 million for the three-month period ended March 31, 2023, primarily due to the increase in digital advertising revenue.

*Direct Operating Expenses.* Direct operating expenses increased to $35.6 million for the three-month period ended March 31, 2024 from $29.9 million for the three-month period ended March 31, 2023. This increase was primarily attributable to an increase in expenses associated with the increase in advertising revenue, and an increase in salaries.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses increased to $26.7 million for the three-month period ended March 31, 2024 from $22.8 million for the three-month period ended March 31, 2023. This increase was primarily attributable to our digital segment, primarily due to an increase in salaries, partially offset by a decrease in rent expense.

*Corporate Expenses.* Corporate expenses increased to $12.2 million for the three-month period ended March 31, 2024 from $10.5 million for the three-month period ended March 31, 2023. This increase was primarily due to an increase in non-cash stock-based compensation and an increase in salaries, partially offset by a decrease in audit fees.

Depreciation and amortization increased to $7.1 million for the three-month period ended March 31, 2024 compared to $6.5 million for the three-month period ended March 31, 2023. This increase was primarily attributable to the acquisition of BCNMonetize, which did not contribute to our financial results in the comparable prior period.

*Change in fair value of contingent consideration.* As a result of the change in fair value of the contingent consideration related to our various acquisitions, we recognized income of $1.4 million and $4.1 million for the three-month periods ended March 31, 2024 and 2023, respectively.

*Impairment.* We incurred a goodwill impairment charge of $35.4 million and intangible assets subject to amortization impairment of $14.0 million for the three-month period ended March 31, 2024, in our digital segment, related to the impending termination by Meta of its ASP program. See Note 2 to Notes to Condensed Consolidated Financial Statements.

*Foreign currency (gain) loss.* We had a foreign currency loss of $0.4 million for the three-month period ended March 31, 2024 compared to a foreign currency gain of $1.0 million for the three-month period ended March 31, 2023. Foreign currency gains and losses are primarily due to currency fluctuations that affect our digital segment operations located outside the United States.

*Interest Expense, net.* Interest expense, net increased to $3.4 million for the three-month period ended March 31, 2024 from $3.2 million for the three-month period ended March 31, 2023. This increase was primarily due to a higher interest rate on our debt, partially offset by higher interest income.

*Gain (loss) on debt extinguishment.* We recorded a de minimis loss on debt extinguishment for the three-month period ended March 31, 2024 due to prepayment of $10.0 million of our 2023 Credit Facility. We recorded a loss on debt extinguishment of $1.6 million for the three-month period ended March 31, 2023 due to the refinancing of our previous credit facility with our 2023 Credit Facility.

*Realized gain (loss) on marketable securities.* For the three-month period ended March 31, 2024 we recorded $0.1 million of realized loss, related to our available for sale securities. For the three-month period ended March 31, 2023 we recorded a de minimis amount of realized loss, related to our available for sale securities.

*Income Tax Expense or Benefit.* Income tax benefit for the three-month period ended March 31, 2024 was $7.8 million. The effective tax rate for the three-month period ended March 31, 2024 was different from our statutory rate due to foreign and state taxes, changes in valuation allowances on deferred tax assets, non deductible executive compensation, changes in the fair value of the contingent consideration liability, goodwill impairment, and non-taxable non-territorial income. Income tax expense for the three-month period ended March 31, 2023 was $0.2 million, or 12% of our pre-tax income. The effective tax rate for the three-month period ended March 31, 2023 was different from our statutory rate due to foreign and state taxes, changes in valuation allowances on deferred tax assets, non deductible executive compensation, 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, or are not, 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 certain of our digital operations and certain U.S. Foreign Tax Credit carryovers. As a result of historical losses from our digital operations primarily in Spain, Uruguay, Mexico and Argentina and certain U.S. Foreign Tax Credit carryovers, management has determined that it is more likely than not that deferred tax assets of $6.3 million at March 31, 2024 will not be realized and therefore we have established a valuation allowance in that amount on those assets.

The Organization for Economic Co-operation and Development (“OECD”) Pillar 2 guidelines address the increasing digitalization of the global economy, re-allocating taxing rights among countries. The OECD, many other member states and various other governments have adopted, or are in the process of adopting, Pillar 2 which calls for a global minimum tax of 15% to be effective for tax years beginning in 2024. The OECD guidelines published to date include transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax. The Company is monitoring developments and evaluating the impacts these new rules will have on its tax rate, including eligibility to qualify for these safe harbor rules.

### Segment Operations

### Digital

*Net Revenue.* Net revenue in our digital segment increased to $237.5 million for the three-month period ended March 31, 2024 from $196.5 million for the three-month period ended March 31, 2023. The increase was primarily due to increases in advertising revenue from our various digital business units, and due to the acquisition of BCNMonetize, which did not contribute to our financial results in our digital segment in the comparable prior period.

*Cost of revenue*. Cost of revenue in our digital segment increased to $203.2 million for the three-month period ended March 31, 2024 from $167.8 million for the three-month period ended March 31, 2023, primarily due to the increase in advertising revenue.

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 have been offering our programmatic purchasing platform, Smadex, to advertisers. We are also experiencing lower margins related to revenue generated from our Entravision Global Partners business, 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 more pronounced lower margin business in our digital segment. For example, beginning in the second half of 2023, we have begun receiving a lower rate of payment on our sales made on behalf of Meta, resulting in further lower margins. The digital advertising industry remains dynamic and is continuing to undergo rapid changes in technology, customer expectation 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.

On March 4, 2024, we received a communication from Meta that it intends to wind down its authorized sales partner, or ASP, program globally and end its relationship with all of its ASPs, including us, by July 1, 2024. We expect that the termination of Meta’s ASP program will have a material effect on our digital operations and results of operations and that our consolidated and digital segment revenue and cash flow from operations will be materially and adversely affected in future periods. As a result, we have initiated a thorough review of our current digital strategy, operations and cost structure, which may include, among other things, the nature and extent to which we remain involved in this business and the timing thereof.

*Direct operating expenses*. Direct operating expenses in our digital segment increased to $10.7 million for the three-month period ended March 31, 2024 from $8.0 million for the three-month period ended March 31, 2023, primarily due to an increase in expenses associated with the increase in digital advertising revenue.

*Selling, general and administrative expenses*. Selling, general and administrative expenses in our digital segment increased to $17.3 million for the three-month period ended March 31, 2024, from $13.5 million for the three-month period ended March 31, 2023, primarily due to an increase in salary expense.

### Television

*Net Revenue.* Net revenue in our television segment decreased to $28.5 million in the three-month period ended March 31, 2024, from $30.3 million in the three-month period ended March 31, 2023, primarily due to decreases in national advertising revenue, spectrum usage rights revenue and retransmission consent revenue, partially offset by an increase in political advertising revenue.

In general, our television segment faces declining audiences, which we believe is present across the industry, competitive factors with the other major Spanish-language broadcasters, and changing demographics and preferences of audiences, particularly younger audiences, in terms of the media they prefer to view, including streaming and social media. We anticipate that these changes in viewer habits will persist at least for the foreseeable future and possibly permanently. 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 will also continue.

*Direct Operating Expenses.* Direct operating expenses in our television segment increased to $16.9 million for the three-month period ended March 31, 2024 from $14.8 million for the three-month period ended March 31, 2023, primarily due to an increase in salaries as a result of expanding our local news operations.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses in our television segment increased to $6.0 million for the three-month period ended March 31, 2024 from $5.3 million for the three-month period ended March 31, 2023, primarily due to an increase in salaries.

### Audio

*Net Revenue*. Net revenue in our audio segment decreased to $11.4 million in the three-month period ended March 31, 2024, from $12.2 million in the three-month period ended March 31, 2023, primarily due to decreases in local and national advertising revenue, partially offset by an increase in political advertising revenue.

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 listening audiences, particularly younger audiences, including podcasts and other streaming services. We anticipate that these changes in listener habits will persist at least for at least for the foreseeable future and possibly permanently. Additionally, 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 will also continue. While we believe that none of these new technologies and services can completely replace local broadcast radio stations due to the element of localism that broadcast radio offers, the challenges we face in our radio operations from new technologies and services will continue to require attention from management.

*Direct Operating Expenses.* Direct operating expenses in our audio segment increased to $7.9 million for the three-month period ended March 31, 2024 from $7.1 million for the three-month period ended March 31, 2023, primarily due to increases in salaries.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses in our audio segment decreased to $3.3 million for the three-month period ended March 31, 2024 from $3.9 million for the three-month period ended March 31, 2023, primarily due to a decrease in rent expense.

### 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 loss attributable to common stockholders of $15.4 million for the year ended December 31, 2023, and net income attributable to common stockholders of $18.1 million and $29.3 million for the years ended December 31, 2022 and 2021, respectively. We had positive cash flow from operations of $75.2 million, $78.9 million and $65.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. We had positive cash flow from operations of $33.4 million for the three-month period ended March 31, 2024. 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 $128.4 million, and available for sale marketable securities in the additional amount of $4.3 million, as of March 31, 2024.

On March 4, 2024, we received a communication from Meta that it intends to wind down its authorized sales partner, or ASP, program globally and end its relationship with all of its ASPs, including us, by July 1, 2024. We expect that the termination of Meta’s ASP program will have a material effect on our digital operations and results of operations and that our consolidated and digital segment revenue and cash flow from operations will be materially and adversely affected in future periods. As a result, we have initiated a thorough review of our current digital strategy, operations and cost structure, which may include, among other things, the nature and extent to which we remain involved in this business and the timing thereof. To the extent that our then current liquidity is insufficient to fund business activities or if we do not remain in compliance with our financial covenants under the 2023 Credit Agreement, whether as a result of the termination of the Meta ASP program or otherwise, we may be required to seek additional equity or debt financing in the future to satisfy capital requirements. There is no guarantee that any such capital would be available to us on favorable terms, or at all. The failure to obtain any required capital could have a material adverse effect on our operations and financial condition.

Our liquidity is not materially affected by the amounts held in accounts outside the United States. The majority of our cash and cash equivalents is held outside the United States, primarily in Uruguay, Spain and Singapore, none of which countries have foreign currency controls. We hold smaller amounts of cash in certain countries that do have foreign currency controls, including Argentina, Brazil, India and Pakistan, which could impact our ability to freely repatriate such funds from those countries to the United States

### Credit Facility

On March 17, 2023, we entered into the 2023 Credit Facility, pursuant to the 2023 Credit Agreement, by and among us, Bank of America, N.A., as Administrative Agent, and the other financial institutions party thereto as Lenders (collectively, the “Lenders” and individually each a “Lender”). The 2023 Credit Agreement amended, restated and replaced in its entirety our previous credit agreement (the "2017 Credit Agreement"). For detailed information regarding certain terms of our 2023 Credit Agreement and Credit Facility, see Note 2 to Notes to Condensed Consolidated Financial Statements.

In March 2024, we made a prepayment of $10.0 million, of which $8.75 million was applied to the upcoming quarterly principal payments in 2024 under the Term A Facility, and $1.25 million was applied to the Revolving Credit Facility.

### Consolidated EBITDA

Consolidated EBITDA decreased to $4.5 million for the three-month period ended March 31, 2024 compared to $13.0 million for the three-month period ended March 31, 2023. As a percentage of net revenue, consolidated EBITDA decreased to 2% for the three-month period ended March 31, 2024 from 5% for the three-month period ended March 31, 2023.

Consolidated EBITDA, which is defined in the 2023 Credit Agreement, is a non-GAAP measure. For a reconciliation of consolidated EBITDA to cash flows from operating activities, its most directly comparable GAAP financial measure, please see page 30.

### Cash Flow

Net cash flow provided by operating activities was $33.4 million for the three-month period ended March 31, 2024, compared to net cash flow provided by operating activities of $36.7 million for the three-month period ended March 31, 2023. We had net loss of $51.7 million for the three-month period ended March 31, 2024, which included non-cash items such as deferred income taxes of $4.2 million, depreciation and amortization expense of $7.1 million, non-cash stock-based compensation expense of $5.4 million, change in fair value of contingent consideration of $1.4 million, and impairment charge of $49.4 million. We had net income of $1.7 million for the three-month period ended March 31, 2023, which included non-cash items such as deferred income taxes of $0.2 million, depreciation and amortization expense of $6.5 million, change in fair value of contingent consideration of $4.1 million, non-cash stock-based compensation of $4.1 million, and loss on debt extinguishment of $1.6 million. We expect to have positive cash flow from operating activities for the 2024 year.

Net cash flow provided by investing activities was $6.1 million for the three-month period ended March 31, 2024, compared to net cash flow used in investing activities of $0.6 million for the three-month period ended March 31, 2023. During the three-month period ended March 31, 2024, we spent $2.7 million in net capital expenditures, and received $8.8 million from the sale of marketable securities. During the three-month period ended March 31, 2023, we spent $9.4 million on purchases of marketable securities, spent $6.8 million in net capital expenditures, and received $15.7 million from the sale of marketable securities. We anticipate that our capital expenditures will be approximately $6.0 million during the full year 2024. 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 $16.8 million for the three-month period ended March 31, 2024, compared to net cash flow used in financing activities of $5.4 million for the three-month period ended March 31, 2023. During the three-month period ended March 31, 2024, we made debt payments of $10.3 million, dividend payments of $4.5 million, distributions to noncontrolling interest of $1.1 million, and payments of contingent consideration of $0.9 million. During the three-month period ended March 31, 2023, we made debt payments of $211.7 million, dividend payments of $4.9 million, payments of $1.3 million of debt issuance costs, payments for taxes related to shares withheld for share-based compensation plans of $0.1 million, and received $212.4 million proceeds from borrowings on debt and $0.3 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. 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. Nonetheless, we face some credit risk in connection with the termination by Meta of its ASP program, which will occur on or before July 1, 2024. Whenever that actually occurs, we will have accounts receivable from certain advertisers who used our services while we were still an ASP of Meta, but with whom we will not have ongoing business after we cease being an ASP of Meta. We are in the process of assessing the nature and extent of this risk but we cannot quantify any such risk at this time.

Additionally, we have been dependent upon one single global media company, Meta, for the majority of our consolidated revenue, which amounted to approximately 53% and 51% of our consolidated revenue for the three-month periods ended March 31, 2024 and 2023, respectively. On March 4, 2024, we received a communication from Meta that it intends to wind down its ASP program globally and end its relationship with all of its ASPs, including us, by July 1, 2024. The loss of all or a substantial part of this revenue will have a significant adverse effect on our cash flow and liquidity.

## Market risk

As filed, 4,088 characters.

### General

Market risk represents the potential loss that may affect our financial position, results of operations and/or cash flows due to adverse changes in the financial markets. We are also exposed to market risk from changes in the base rates on our 2023 Credit Facility.

### Interest Rates

As of March 31, 2024, we had $197.8 million of variable rate bank debt outstanding under our 2023 Credit Facility. Our borrowings bear interest on the outstanding principal amount thereof from the date when made at a rate per annum equal to either: (i) the Term SOFR (as defined in the 2023 Credit Agreement) plus a margin between 2.50% and 3.00%, depending on the Total Net Leverage Ratio (as defined in the 2023 Credit Agreement) or (ii) the Base Rate (as defined in the 2023 Credit Agreement) plus a margin between 1.50% and 2.00%, depending on the Total Net Leverage Ratio. In addition, the unused portion of the Revolving Credit Facility is subject to a rate per annum between 0.30% and 0.40%, depending on the Total Net Leverage Ratio.

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 SOFR were to increase by a hypothetical 100 basis points, or one percentage point, from its March 31, 2024 level, our annual interest expense would increase and cash flow from operations would decrease by $2.0 million based on the outstanding balance of our term loan as of March 31, 2024.

### 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 Asian currencies. The effect of an immediate and hypothetical 10% adverse change in foreign exchange rates on foreign-denominated accounts receivable at March 31, 2024 would not be material to our consolidated results of operations or overall financial condition.

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 inflation data, 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 Condensed Consolidated Financial Statements).

We maintain certain cash and cash equivalents in certain countries, including Argentina, Brazil, India and Pakistan, which has foreign exchange controls that could impact our ability to freely repatriate such funds to the United States.

To the extent that 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 effect 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

## Risk factors

As filed, 1,254 characters.

*We face credit risk in connection with the termination of our business with Meta.*

We face certain credit risk in connection with the termination of Meta’s ASP program, which will occur on or before July 1, 2024. Whenever that actually occurs, we will have accounts receivable from certain advertisers who used our services while we were still an ASP of Meta, but with whom we will not have ongoing business after we cease being an ASP of Meta. There is risk, which we cannot quantify at this time, that certain such receivables may be uncollectible.

*We may need to raise capital if our current liquidity is insufficient to fund business activities.*

To the extent that our then current liquidity is insufficient to fund business activities or if we do not remain in compliance with our financial covenants under the 2023 Credit Agreement, whether as a result of the termination of the Meta ASP program or otherwise, we may be required to seek additional equity or debt financing in the future to satisfy capital requirements. There is no guarantee that any such capital would be available to us on favorable terms, or at all. The failure to obtain any required capital could have a material adverse effect on our operations and financial condition.

Filed May 2, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-052113. Last ingested by Listed: Oct 26, 2026, 17:01 ET. No prices; not investment advice.