# Entravision Communications Corp: Form 10-Q for the period ended Jun 30, 2024

- Company: [Entravision Communications Corp](/companies/evc.md) (CIK 1109116)
- Form: 10-Q
- Filed: 2024-08-08
- Accepted by EDGAR: Aug 8, 2024, 16:10 ET
- Period: 2024-06-30
- Accession: 0000950170-24-093955
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1109116/000095017024093955/evc-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1109116/000095017024093955/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $82.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $160.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $24.4m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $47.1m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $14.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $28.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | −$3.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | −$11.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $4.1m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $8.6m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | −$10.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | −$14.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$31.7m | us-gaap:ProfitLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$80.6m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.35 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.90 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.35 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.90 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 90,721,280 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 89,669,397 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $51.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $4.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $9.0m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2024-06-30 | $85.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $204.6m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $569.6m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $67.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $349.2m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $186.8m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-06-30 | $220.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 42,361 characters.

### Overview

With the sale of our EGP business during the second quarter of 2024, as discussed in more detail under “Highlights and Recent Developments” below and in Note 8 to Notes to Condensed Consolidated Financial Statements, we identify ourselves as a media and advertising technology company.

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 advertising technology operations consist of:

- Smadex, our programmatic ad purchasing platform, that enables customers, primarily mobile app developers, to purchase advertising electronically and manage data-driven targeted advertising campaigns to audiences around the globe; and
- Adwake, our mobile growth solutions business, which provides managed services similar to Smadex, except our sales teams use third-party programmatic platforms.

For financial reporting purposes, we currently 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, 2024 was $82.7 million. Of this amount, revenue generated by our digital segment accounted for approximately 50%, revenue generated by our television segment accounted for approximately 34%, and revenue generated by our audio segment accounted for approximately 16% of total revenue. Prior to the sale of our EGP business during the second quarter of 2024, our digital segment accounted for the majority of our revenue. With the sale of our EGP business, we anticipate that net revenue will be significantly lower in future periods, at least for the foreseeable future, the percentage of revenue contributed by our remaining digital operations will be significantly lower in future periods and, correspondingly, the percentage of revenue contributed by our media operations will be significantly higher in future periods. As a result, cash flow from operations will be materially and adversely affected in future periods.

### Highlights and Recent Developments

As a result of the communication from Meta on March 4, 2024, that it intended to wind down its ASP program globally and end its relationship with all of its ASPs, including us, by July 1, 2024, we conducted a thorough review of our digital strategy, operations and cost structure, and during the second quarter of 2024 made the decision to dispose of the operations of EGP, our digital commercial partnerships business.

In furtherance of this decision, during the second quarter of 2024, we:

- sold our 51% equity interest in Adsmurai back to its founders, terminated loans we had made previously to them in the principal amount of €12.3 million and terminated certain other agreements involving Adsmurai, for total consideration of €15.0 million (approximately $16.2 million on the date of the closing), of which amount €10.0 was paid at closing and €5.0 million will be paid within six months following the closing;
- sold 100% of the issued and outstanding shares of stock of Jack of Digital back to its founder, for cash consideration of $0.1 million; and
- sold substantially all of the rest of our EGP business to IMS, for cash consideration of $16.4 million.

We used some of the net proceeds of these dispositions to satisfy a remaining contingent liability owed to the founders of MediaDonuts in the amount of $6.5 million and made a mandatory prepayment in the amount of $4.9 million under the terms of our 2023 Credit Facility. We made certain additional prepayments in the aggregate amount of $5.1 million during the second quarter of 2024 under the terms of our 2023 Credit Facility.

We believe that the disposition of our digital commercial partnerships business will allow us to enhance our strategic focus on our media business and our advertising technology business. We intend to continue to monitor our business operations and may make further adjustments if we believe that is appropriate, although we can provide no assurance that we will be successful in any such endeavors.

### 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- and Six-Month Periods Ended June 30, 2024 and 2023

The following table sets forth selected data from our operating results for the three- and six-month periods ended June 30, 2024 and 2023 (in thousands):

| Statements of Operations Data: | Three-Month Period Ended June 30,% 2024 | 2023 | Change | Six-Month Period Ended June 30,% 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net Revenue | $82,654 | $73,719 | 12% | $160,830 | $141,366 | 14% |
| Cost of revenue - digital | 24,424 | 19,649 | 24% | 47,082 | 36,516 | 29% |
| Direct operating expenses | 31,756 | 28,856 | 10% | 63,557 | 55,458 | 15% |
| Selling, general and administrative expenses | 14,363 | 12,610 | 14% | 28,697 | 25,417 | 13% |
| Corporate expenses | 10,811 | 12,042 | (10)% | 23,059 | 22,544 | 2% |
| Depreciation and amortization | 4,428 | 3,713 | 19% | 9,167 | 7,214 | 27% |
| Change in fair value of contingent consideration | 240 | 21 | 1043% | 20 | 721 | (97)% |
| Foreign currency (gain) loss | (24) | 792 | \* | 241 | 1,006 | (76)% |
|  | 85,998 | 77,683 | 11% | 171,823 | 148,876 | 15% |
| Operating income (loss) | (3,344) | (3,964) | (16)% | (10,993) | (7,510) | 46% |
| Interest expense | (4,118) | (4,195) | (2)% | (8,561) | (8,118) | 5% |
| Interest income | 577 | 720 | (20)% | 1,155 | 1,328 | (13)% |
| Dividend income | - | 14 | (100)% | 10 | 32 | (69)% |
| Realized gain (loss) on marketable securities | 4 | (29) | \* | (109) | (61) | 79% |
| Loss on debt extinguishment | (51) | - | \* | (91) | (1,556) | (94)% |
| Income before income (loss) taxes | (6,932) | (7,454) | (7)% | (18,589) | (15,885) | 17% |
| Income tax benefit (expense) | 10,664 | 1,628 | 555% | 14,811 | 2,043 | 625% |
| Net income (loss) from continuing operations | 3,732 | (5,826) | \* | (3,778) | (13,842) | \* |
| Net income (loss) from discontinued operations, net of tax | (35,412) | 3,837 | \* | (76,792) | 13,894 | \* |
| Net income (loss) attributable to common stockholders | $(31,680) | $(1,989) | 1493% | $(80,570) | $52 | \* |
| **Other Data:** |  |  |  |  |  |  |
| Capital expenditures | $1,723 | $5,783 |  | 3,793 | 13,689 |  |
| Net cash provided by operating activities |  |  |  | 51,071 | 47,091 |  |
| Net cash provided by (used in) investing activities |  |  |  | (26,937) | (12,103) |  |
| Net cash provided by (used in) financing activities |  |  |  | (44,726) | (46,092) |  |

29

### Consolidated Operations

*Net Revenue.* Net revenue increased to $82.7 million for the three-month period ended June 30, 2024 from $73.7 million for the three-month period ended June 30, 2023. This increase was primarily attributable to an increase of $10.8 million in advertising revenue from our digital segment, partially offset by decreases of $1.4 million and $0.5 million in advertising revenue from our television and audio segments, respectively.

Net revenue increased to $160.8 million for the six-month period ended June 30, 2024 from $141.4 million for the six-month period ended June 30, 2023. This increase was primarily attributable to an increase of $23.9 million in advertising revenue from our digital segment, partially offset by decreases of $3.1 million and $1.3 million in advertising revenue from our television and audio segments, respectively.

*Cost of revenue-Digital.* Cost of revenue in our digital segment increased to $24.4 million for the three-month period ended June 30, 2024 from $19.6 million for the three-month period ended June 30, 2023, primarily due to the increase in digital advertising revenue.

Cost of revenue in our digital segment increased to $47.1 million for the six-month period ended June 30, 2024 from $36.5 million for the six-month period ended June 30, 2023, primarily due to the increase in digital advertising revenue.

*Direct Operating Expenses.* Direct operating expenses increased to $31.8 million for the three-month period ended June 30, 2024, from $28.9 million for the three-month period ended June 30, 2023. This increase was primarily attributable to an increase of $1.4 million in direct operating expenses in our digital segment and $1.9 million in direct operating expenses in our television segment, partially offset by a decrease of $0.4 million in direct operating expenses in our audio segment.

Direct operating expenses increased to $63.6 million for the six-month period ended June 30, 2024, from $55.5 million for the six-month period ended June 30, 2023. This increase was primarily attributable to an increase of $3.6 million in direct operating expenses in our digital segment, $4.1 million in direct operating expenses in our television segment, and $0.4 million in direct operating expenses in our audio segment.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses increased to $14.4 million for the three-month period ended June 30, 2024 from $12.6 million for the three-month period ended June 30, 2023. This increase was primarily attributable to an increase of $1.5 million in selling, general and administrative expenses in our digital segment and $0.8 million in selling, general and administrative expenses in our television segment, partially offset by a decrease of $0.6 million in selling, general and administrative expenses in our audio segment.

Selling, general and administrative expenses increased to $28.7 million for the six-month period ended June 30, 2024 from $25.4 million for the six-month period ended June 30, 2023. This increase was primarily attributable to an increase of $3.0 million in selling, general and administrative expenses in our digital segment and $1.5 million in selling, general and administrative expenses in our television segment, partially offset by a decrease of $1.2 million in selling, general and administrative expenses in our audio segment.

*Corporate Expenses.* Corporate expenses decreased to $10.8 million for the three-month period ended June 30, 2024 from $12.0 million for the three-month period ended June 30, 2023. This decrease was primarily due to a decrease of $1.9 million in professional services expense, and a decrease of $0.5 million in non-cash stock-based compensation, partially offset by an increase of $1.1 million in severance expense.

Corporate expenses increased to $23.1 million for the six-month period ended June 30, 2024 from $22.5 million for the six-month period ended June 30, 2023. This increase was primarily due to an increase of $1.1 million in severance expense, an increase of $1.0 million in non-cash stock-based compensation, and an increase of $0.7 million in salaries, partially offset by a decrease of $2.2 million in professional services expense.

Depreciation and amortization increased to $4.4 million for the three-month period ended June 30, 2024 compared to $3.7 million for the three-month period ended June 30, 2023. Of this increase, $0.3 million was attributable to the acquisition of BCNMonetize, which did not fully contribute to our financial results in the comparable prior period, and $0.4 million was attributable to depreciation expense related to our new corporate headquarters.

Depreciation and amortization increased to $9.2 million for the six-month period ended June 30, 2024 compared to $7.2 million for the six-month period ended June 30, 2023. Of this increase, $1.0 million was attributable to the acquisition of BCNMonetize, which did not fully contribute to our financial results in the comparable prior period, and $0.9 million was attributable to depreciation expense related to our new corporate headquarters.

*Change in fair value of contingent consideration.* As a result of the change in fair value of the contingent consideration related to the acquisition of BCNMonetize, we recognized an expense of $0.2 million and a de minimis amount for the three-month periods ended June 30, 2024 and 2023, respectively.

As a result of the change in fair value of the contingent consideration, we recognized a de minimis amount related to the acquisition of BCNMonetize for the six-month period ended June 30, 2024, and we recognized an expense of $0.7 million related to a previous acquisition for the six-month period ended June 30, 2023.

*Foreign currency (gain) loss.* We had a de minimis amount of foreign currency gain for the three-month period ended June 30, 2024 compared to a foreign currency loss of $0.8 million for the three-month period ended June 30, 2023. Foreign currency gains and losses are primarily due to currency fluctuations that affect our digital segment operations located outside the United States.

We had a foreign currency loss of $0.2 million for the six-month period ended June 30, 2024 compared to a foreign currency loss of $1.0 million for the six-month period ended June 30, 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 remained constant at $3.5 million for each of the three-month periods ended June 30, 2024 and 2023.

Interest expense, net increased to $7.4 million for the six-month period ended June 30, 2024 from $6.8 million for the six-month period ended June 30, 2023. This increase was primarily due to a higher interest rate on our debt and a lower interest income.

*Gain (loss) on debt extinguishment.* We recorded a loss on debt extinguishment of $0.1 million for the three-month period ended June 30, 2024 due to a prepayment of $10.0 million of our 2023 Credit Facility.

We recorded a loss on debt extinguishment of $0.1 million for the six-month period ended June 30, 2024 due to prepayments totaling $20.0 million of our 2023 Credit Facility. We recorded a loss on debt extinguishment of $1.6 million for the six-month period ended June 30, 2023 due to the refinancing of our previous credit facility with our 2023 Credit Facility.

*Realized gain (loss) on marketable securities.* For each of the three-month periods ended June 30, 2024 and 2023 we recorded a de minimis amount of realized gain and loss, respectively, related to our available for sale securities.

For each of the six-month periods ended June 30, 2024 and 2023 we recorded $0.1 million of realized loss, related to our available for sale securities.

*Income Tax Expense or Benefit.* Income tax benefit for the three-month period ended June 30, 2024 was $10.7 million. The effective tax rate for the three-month period ended June 30, 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 benefit for the three-month period ended June 30, 2023 was $1.6 million. The effective tax rate for the three-month period ended June 30, 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.

Income tax benefit for the six-month period ended June 30, 2024 was $14.8 million. The effective tax rate for the six-month period ended June 30, 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 benefit for the six-month period ended June 30, 2023 was $2.0 million. The effective tax rate for the six-month period ended June 30, 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, certain U.S. Foreign Tax Credit carryovers and capital losses due to sale of subsidiaries management has determined that it is more likely than not that deferred tax assets of $31.3 million at June 30, 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 $41.1 million for the three-month period ended June 30, 2024 from $30.2 million for the three-month period ended June 30, 2023. The increase was primarily due to increases in advertising revenue from Smadex.

Net revenue in our digital segment increased to $79.3 million for the six-month period ended June 30, 2024 from $55.4 million for the six-month period ended June 30, 2023. The increase was primarily due to increases in advertising revenue from Smadex.

*Cost of revenue*. Cost of revenue in our digital segment increased to $24.4 million for the three-month period ended June 30, 2024 from $19.6 million for the three-month period ended June 30, 2023, primarily due to the increase in advertising revenue.

Cost of revenue in our digital segment increased to $47.1 million for the six-month period ended June 30, 2024 from $36.5 million for the six-month period ended June 30, 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. 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.

*Direct operating expenses*. Direct operating expenses in our digital segment increased to $7.4 million for the three-month period ended June 30, 2024 from $6.1 million for the three-month period ended June 30, 2023, primarily due to an increase in cloud infrastructure expenses associated with the increase in digital advertising revenue.

Direct operating expenses in our digital segment increased to $14.4 million for the six-month period ended June 30, 2024 from $10.8 million for the six-month period ended June 30, 2023, primarily due to an increase of $2.6 million in cloud infrastructure expenses and an increase of $1.0 million in salaries associated with the increase in digital advertising revenue.

*Selling, general and administrative expenses*. Selling, general and administrative expenses in our digital segment increased to $5.4 million for the three-month period ended June 30, 2024, from $3.8 million for the three-month period ended June 30, 2023, primarily due to an increase in salaries.

Selling, general and administrative expenses in our digital segment increased to $10.3 million for the six-month period ended June 30, 2024, from $7.4 million for the six-month period ended June 30, 2023, primarily due to an increase in salaries.

### Television

*Net Revenue.* Net revenue in our television segment decreased to $28.6 million for the three-month period ended June 30, 2024 from $29.9 million for the three-month period ended June 30, 2023. This decrease was primarily due to a decrease of $1.5 million in advertising revenue, a decrease of $0.5 million in spectrum usage rights revenue and a decrease of $0.5 million in retransmission consent revenue, partially offset by an increase of $1.2 million in political advertising revenue.

Net revenue in our television segment decreased to $57.1 million for the six-month period ended June 30, 2024 from $60.3 million for the six-month period ended June 30, 2023. This decrease was primarily due to a decrease of $2.8 million in advertising revenue, a decrease of $0.8 million in spectrum usage rights revenue and a decrease of $1.0 million in retransmission consent revenue, partially offset by an increase of $1.4 million 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 $17.0 million for the three-month period ended June 30, 2024 from $15.0 million for the three-month period ended June 30, 2023, primarily due to an increase in salaries, primarily associated with the expansion of our news programming in anticipation of this year's election cycle.

Direct operating expenses in our television segment increased to $33.9 million for the six-month period ended June 30, 2024 from $29.8 million for the six-month period ended June 30, 2023, primarily due to an increase of $3.6 million in salaries, primarily associated with the expansion of our news programming in anticipation of this year's election cycle, and $0.2 million in programming fees.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses in our television segment increased to $5.7 million for the three-month period ended June 30, 2024 from $4.8 million for the three-month period ended June 30, 2023, primarily due to an increase in salaries and other employee benefits.

Selling, general and administrative expenses in our television segment decreased to $11.7 million for the six-month period ended June 30, 2024 from $10.2 million for the three-month period ended June 30, 2023, primarily due to an increase in salaries and other employee benefits.

### Audio

*Net Revenue*. Net revenue in our audio segment decreased to $13.0 million for the three-month period ended June 30, 2024 from $13.5 million for the three-month period ended June 30, 2023. This decrease was primarily due to a decrease of $0.8 million in advertising revenue, partially offset by an increase of $0.3 million in political advertising revenue.

Net revenue in our audio segment decreased to $24.4 million for the six-month period ended June 30, 2024 from $25.8 million for the six-month period ended June 30, 2023. This decrease was primarily due to a decrease of $1.9 million in advertising revenue, partially offset by an increase of $0.5 million 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 decreased to $7.4 million for the three-month period ended June 30, 2024 from $7.8 million for the three-month period ended June 30, 2023, primarily due to a decrease of $0.7 million in expenses associated with the decrease in advertising revenue, partially offset by an increase of $0.2 million in ratings services expense.

Direct operating expenses in our audio segment increased to $15.3 million for the six-month period ended June 30, 2024 from $14.9 million for the six-month period ended June 30, 2023, primarily due to an increase of $0.4 million in salaries expense and $0.4 million in ratings services expense, partially offset by a decrease of $0.5 million in expenses associated with the decrease in advertising revenue.

*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 June 30, 2024 from $4.0 million for the three-month period ended June 30, 2023, primarily due to a decrease in rent expense.

Selling, general and administrative expenses in our audio segment decreased to $6.7 million for the six-month period ended June 30, 2024 from $7.9 million for the six-month period ended June 30, 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 $51.1 million for the six-month period ended June 30, 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 $85.1 million, and available for sale marketable securities in the additional amount of $3.2 million, as of June 30, 2024. Our liquidity is not materially affected by the amounts held in accounts outside the United States.

On March 4, 2024, we received a communication from Meta that it intended 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. As a result, we conducted a thorough review of our digital strategy, operations and cost structure, and during the second quarter of 2024 made the decision to dispose of the operations of EGP, our digital commercial partnerships business, which was completed during the second quarter of 2024.

We expect that the disposition of our EGP business, the largest business unit of our digital segment, will have a material effect on our results of operations in that total revenue from our digital segment is expected to be significantly lower than it was prior to the disposition of our EGP business. Additionally, cash flow from operations will be materially and adversely affected in future periods, which could also adversely affect our liquidity. To the extent that our then current liquidity is insufficient to fund our business activities or if we do not remain in compliance with our financial covenants under the 2023 Credit Agreement, whether as a direct or indirect result of the disposition of our EGP business 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.

### 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.

In June 2024, we made an additional prepayment of $10.0 million, of which $4.9 million was a mandatory prepayment as a result of the EGP disposition. The prepayment was applied to the quarterly principal payments in 2025 under the Term A Facility.

### Consolidated EBITDA

Consolidated EBITDA is a non-GAAP measure. The most directly comparable GAAP financial measure to consolidated EBITDA is net income (loss) attributable to common stockholders.

We use the term “consolidated EBITDA” because that term is defined in our 2023 Credit Agreement. Under the terms of our 2023 Credit Agreement, consolidated EBITDA is a measure that governs several critical aspects of our 2023 Credit Facility, including, among other things, financial covenants with which we must comply and financial ratios which we must maintain in order to borrow funds needed for the operation of our business and with respect to the interest rates that we pay on our 2023 Credit Facility. For example, our 2023 Credit Agreement 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 exceed 3.25 to 1.00. In addition, our 2023 Credit Agreement contains an 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.

Therefore, we believe that it is important to disclose consolidated EBITDA to our investors to understand our compliance with these, and certain other, terms of our 2023 Credit Agreement. 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 financial performance and liquidity prepared in accordance with accounting principles generally accepted in the United States of America, such as operating income (loss), net income (loss) and cash flows from operating activities. 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.

A reconciliation of this non-GAAP measure to its most directly comparable GAAP financial measure follows (in thousands):

|  | Six-Month Period Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net income (loss) attributable to common stockholders | $(80,570) | $52 |
| Net income (loss) attributable to redeemable noncontrolling interest - discontinued operations | (2,779) | (12) |
| Net income (loss) attributable to noncontrolling interest - discontinued operations | — | (342) |
| Interest expense | 8,561 | 8,118 |
| Interest expense - discontinued operations | 219 | 216 |
| Interest income | (1,155) | (1,328) |
| Interest income - discontinued operations | (731) | (569) |
| Dividend income | (10) | (32) |
| Realized gain (loss) on marketable securities | 109 | 61 |
| (Gain) loss on debt extinguishment | 91 | 1,556 |
| Income tax expense | (14,811) | (2,043) |
| Income tax expense - discontinued operations | (645) | 1,535 |
| Amortization of syndication contracts | 227 | 240 |
| Payments on syndication contracts | (229) | (241) |
| Non-cash stock-based compensation | 8,734 | 10,021 |
| Depreciation and amortization | 9,167 | 7,214 |
| Depreciation and amortization - discontinued operations | 3,958 | 5,766 |
| Change in fair value of contingent consideration | 20 | 721 |
| Change in fair value of contingent consideration - discontinued operations | (12,568) | (3,663) |
| Impairment charge - discontinued operations | 49,438 | — |
| Non-recurring cash severance and restructuring charge | 3,127 | 612 |
| Other operating (gain) loss - discontinued operations | 45,014 | — |
| EBITDA attributable to redeemable noncontrolling interest - discontinued operations | (167) | (417) |
| EBITDA attributable to noncontrolling interest - discontinued operations | — | (230) |
| Consolidated EBITDA (1) | $15,000 | $27,235 |

(1) Consolidated EBITDA is presented in accordance with the definition provided in our 2023 Credit Facility.

### Cash Flow

Net cash flow provided by operating activities was $51.1 million for the six-month period ended June 30, 2024, compared to $47.1 million for the three-month period ended June 30, 2023. The increase in cash flow from operating activities was primarily due to net changes in our working capital of $29.9 million for the six-months periods ended June 30, 2024 compared to $25.7 million for the six-months periods ended June 30, 2023. The net changes in working were primarily due to the timing of cash payments to publishers in the EGP business and timing of collections in the EGP business. The increase in cash flow provided by operating activities was partially offset by a decrease in net income after adjusting for non-cash items. Significant non-cash items in the six-month period ended June 30, 2024 included the loss on sale related to the EGP business of $45.0 million, impairment charges of $49.4 million, depreciation and amortization expense of $13.1 million, non-cash stock based compensation of $8.7 million, and income related to the change in fair value of contingent consideration of $12.5 million. Significant non-cash items in the six-month period ended June 30, 2023 included depreciation and amortization expense of $13.0 million, non-cash stock based compensation of $10.0 million, and income related to the change in fair value of contingent consideration of $2.9 million. We expect to have positive cash flow from operating activities for the 2024 year.

Net cash flow used in investing activities was $26.9 million for the six-month period ended June 30, 2024, compared to $12.1 million for the six-month period ended June 30, 2023. The increase in cash flow used in investing activities was primarily due to net cash divested in the sale of the EGP business of $43.0 million for the six-month period ended June 30, 2024 compared to $6.9 million spent on the purchase of businesses for the six-month period ended June 30, 2023, and a reduction in proceeds from the sale of marketable securities to $10.0 million for the six-month period ended June 30, 2024 compared to $28.1 million for the six-month period ended June 30, 2023. The increase in cash flow used in operating activities was partially offset by a reduction in capital expenditures to $4.7 million for the six-month period ended June 30, 2024 compared to $14.9 million for the six-month period ended June 30, 2023 as a result of the build out of our corporate headquarters in the prior year period, no spend on purchases of marketable securities for the six-month period ended June 30, 2024 compared to $10.2 million for the six-month period ended June 30, 2023, and proceeds from a loan receivable associated with the sale of the EGP business of $10.7 million for the six-month period ended June 30, 2024 compared to the issuance of a loan receivable of $8.1 million for the six-month period ended June 30, 2023. We anticipate that our capital expenditures will be approximately $7.0 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 $44.7 million for the six-month period ended June 30, 2024, compared to $46.1 million for the six-month period ended June 30, 2023. The decrease in cash flow used in financing activities was primarily due to payments of contingent consideration of $14.3 million for the six-month period ended June 30, 2024 compared to $31.7 million for the six-month period ended June 30, 2023, distributions to noncontrolling interest of $1.1 million for the six-month period ended June 30, 2024 compared to $3.4 million for the six-month period ended June 30, 2023, and payments of $1.8 million of debt issuance costs for the six-month period ended June 30, 2023 as a result of the refinancing of our credit facility. The decrease in cash flow used in financing activities was partially offset by $20.0 million of debt prepayments during the six-month period ended June 30, 2024.

## Market risk

As filed, 3,120 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 June 30, 2024, we had $187.8 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 June 30, 2024 level, our annual interest expense would increase and cash flow from operations would decrease by $1.9 million based on the outstanding balance of our term loan as of June 30, 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 continuing digital operations, and expect a portion of our future revenues will be denominated in currencies other than the U.S. dollar. The effect of an immediate and hypothetical 10% adverse change in foreign exchange rates on foreign-denominated accounts receivable at June 30, 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, primarily Spain. 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.

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 continuing digital operations. 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

Filed Aug 8, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-093955. Last ingested by Listed: Nov 5, 2026, 17:39 ET. No prices; not investment advice.