Entravision Communications Corporation Reports First Quarter 2018 Results

Three-Month Period

Ended March 31,

2018

2017

% Change

Net revenue

$

66,838

$

57,510

16

%

Cost of revenue - digital media (1)

10,625

1,752

506

%

Operating expenses (2)

44,327

38,292

16

%

Corporate expenses (3)

5,975

5,867

2

%

Consolidated adjusted EBITDA (4)

6,937

12,570

(45)

%

Free cash flow (5)

$

1,590

$

7,265

(78)

%

Net income (loss)

$

(1,808)

$

2,618

*

Net income per share, basic and diluted

$

(0.02)

$

0.03

*

Weighted average common shares

 outstanding, basic

90,319,092

90,236,476

Weighted average common shares

 outstanding, diluted

90,319,092

91,760,531

(1)

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

(2)

Operating expenses include direct operating and selling, general and administrative expenses. Included in operating expenses are $0.2 million of non-cash stock-based compensation for each of the three-month periods ended March 31, 2018 and 2017. Operating expenses do not include corporate expenses, foreign currency (gain) loss, depreciation and amortization, impairment charge, gain (loss) on sale of assets, gain (loss) on debt extinguishment, other income (loss) and change in fair value of contingent consideration.

(3)

Corporate expenses include $1.0 million and $0.8 million of non-cash stock-based compensation for the three-month periods ended March 31, 2018 and 2017, respectively.

(4)

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

(5)

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

Three-Month Period Ended March 31, 2018 Compared to Three-Month Period Ended

March 31, 2017

(Unaudited)

Three-Month Period

Ended March 31,

2018

2017

% Change

Net revenue

$

66,838

$

57,510

16

%

Cost of revenue - digital media (1)

10,625

1,752

506

%

Operating expenses (1)

44,327

38,292

16

%

Corporate expenses (1)

5,975

5,867

2

%

Depreciation and amortization

3,939

3,546

11

%

Change in fair value of contingent consideration

2,100

-

*

Foreign currency (gain) loss

213

-

*

Operating income (loss)

(341)

8,053

*

Interest expense, net

(2,485)

(3,536)

(30)

%

Dividend income

128

-

*

Other income (loss)

22

-

*

Income (loss) before income taxes

(2,676)

4,517

*

Income tax benefit (expense)

930

(1,899)

*

Net income (loss) before equity in net income

 (loss) of nonconsolidated affiliates

(1,746)

2,618

*

Equity in net income (loss) of

 nonconsolidated affiliates, net of tax

(62)

-

*

Net income (loss)

$

(1,808)

$

2,618

*

(1)

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

Three-Month Period

Ended March 31,

2018

2017

% Change

Net Revenue

Television

$

34,491

$

37,710

(9)

%

Radio

14,103

15,719

(10)

%

Digital

18,244

4,081

347

%

Total

$

66,838

$

57,510

16

%

Cost of Revenue - digital media (1)

Digital

$

10,625

$

1,752

506

%

Operating Expenses (1)

Television

21,522

20,205

7

%

Radio

15,280

15,721

(3)

%

Digital

7,525

2,366

218

%

Total

$

44,327

$

38,292

16

%

Corporate Expenses (1)

$

5,975

$

5,867

2

%

Consolidated adjusted EBITDA (1)

$

6,937

$

12,570

(45)

%

(1)

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

Entravision Communications Corporation

Consolidated Balance Sheets

(In thousands; unaudited)

March 31,

December 31,

2018

2017

ASSETS

Current assets

Cash and cash equivalents

$

89,224

$

39,560

Marketable securities

157,752

-

Restricted cash

769

222,294

Trade receivables, net of allowance for doubtful accounts

73,728

84,348

Prepaid expenses and other current assets

9,732

6,260

Total current assets

331,205

352,462

Property and equipment, net

60,075

60,337

Intangible assets subject to amortization, net

25,306

26,758

Intangible assets not subject to amortization

254,506

251,163

Goodwill

70,557

70,557

Other assets

4,253

4,690

Total assets

$

745,902

$

765,967

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Current maturities of long-term debt

$

3,000

$

3,000

Accounts payable and accrued expenses

46,397

57,563

Deferred revenue

1,535

1,959

Total current liabilities

50,932

62,522

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

291,863

292,489

Other long-term liabilities

23,420

21,447

Deferred income taxes

39,289

40,639

Total liabilities

405,504

417,097

Stockholders' equity

Class A common stock

7

7

Class B common stock

2

2

Class U common stock

1

1

Additional paid-in capital

882,935

888,650

Accumulated deficit

(541,538)

(539,730)

Accumulated other comprehensive income (loss)

(1,009)

(60)

Total stockholders' equity

340,398

348,870

Total liabilities and stockholders' equity

$

745,902

$

765,967

Entravision Communications Corporation

Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

Three-Month Period

Ended March 31,

2018

2017

Net revenue

$

66,838

$

57,510

Expenses:

Cost of revenue - digital media

10,625

1,752

Direct operating expenses

31,033

27,092

Selling, general and administrative expenses

13,294

11,200

Corporate expenses

5,975

5,867

Depreciation and amortization

3,939

3,546

Change in fair value of contingent consideration

2,100

-

Foreign currency (gain) loss

213

-

67,179

49,457

Operating income (loss)

(341)

8,053

Interest expense

(3,398)

(3,645)

Interest income

913

109

Dividend income

128

-

Other income (loss)

22

-

Income (loss) before income taxes

(2,676)

4,517

Income tax benefit (expense)

930

(1,899)

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

(1,746)

2,618

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

(62)

-

Net income (loss)

$

(1,808)

$

2,618

Basic and diluted earnings per share:

Net income (loss) per share, basic and diluted

$

$

0.03

Cash dividends declared per common share

$

0.05

$

0.03

Weighted average common shares outstanding, basic

90,319,092

90,236,476

Weighted average common shares outstanding, diluted

90,319,092

91,760,531

Entravision Communications Corporation

Consolidated Statements of Cash Flows

(In thousands; unaudited)

Three-Month Period

Ended March 31,

2018

2017

Cash flows from operating activities:

Net income (loss)

$

(1,808)

$

2,618

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

Depreciation and amortization

3,939

3,546

Deferred income taxes

(1,014)

1,473

Amortization of debt issue costs

124

183

Amortization of syndication contracts

176

109

Payments on syndication contracts

(186)

(113)

Equity in net (income) loss of nonconsolidated affiliate

62

-

Non-cash stock-based compensation

1,249

975

Changes in assets and liabilities:

(Increase) decrease in accounts receivable

11,043

10,979

(Increase) decrease in prepaid expenses and other assets

(3,981)

(891)

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

(5,977)

(5,963)

Net cash provided by operating activities

3,627

12,916

Cash flows from investing activities:

Purchases of property and equipment

(3,030)

(1,526)

Purchases of intangible assets

(3,153)

-

Purchases of marketable securities

(159,403)

-

Purchases of investments

-

(250)

Deposits on acquisition

-

(230)

Net cash provided by (used in) investing activities

(165,586)

(2,006)

Cash flows from financing activities:

Proceeds from stock option exercises

-

311

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

(2,227)

-

Payments on long-term debt

(750)

(938)

Dividends paid

(4,518)

(2,821)

Repurchase of Class A common stock

(2,402)

-

Net cash used in financing activities

(9,897)

(3,448)

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

(5)

-

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

(171,861)

7,462

Cash, cash equivalents and restricted cash:

Beginning

261,854

61,520

Ending

$

89,993

$

68,982

Entravision Communications Corporation

Reconciliation of Consolidated Adjusted EBITDA to Cash Flows From Operating Activities

(In thousands; unaudited)

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

Three-Month Period

Ended March 31,

2018

2017

Consolidated adjusted EBITDA (1)

$

6,937

$

12,570

Interest expense

(3,398)

(3,645)

Interest income

913

109

Dividend income

128

-

Income tax expense

930

(1,899)

Equity in net loss of nonconsolidated affiliates

(62)

-

Amortization of syndication contracts

(176)

(109)

Payments on syndication contracts

186

113

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

(216)

(223)

Non-cash stock-based compensation included in corporate expenses

(1,033)

(752)

Depreciation and amortization

(3,939)

(3,546)

Change in fair value of contingent consideration

(2,100)

-

Other income (loss)

22

-

Net income (loss)

(1,808)

2,618

Depreciation and amortization

3,939

3,546

Deferred income taxes

(1,014)

1,473

Amortization of debt issue costs

124

183

Amortization of syndication contracts

176

109

Payments on syndication contracts

(186)

(113)

Equity in net (income) loss of nonconsolidated affiliate

62

-

Non-cash stock-based compensation

1,249

975

Changes in assets and liabilities:

(Increase) decrease in accounts receivable

11,043

10,979

(Increase) decrease in prepaid expenses and other assets

(3,981)

(891)

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

(5,977)

(5,963)

Cash flows from operating activities

3,627

12,916

(1)

Consolidated adjusted EBITDA is defined on page 1.

Entravision Communications Corporation

Reconciliation of Free Cash Flow to Cash Flows From Operating Activities

(In thousands; unaudited)

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

Three-Month Period

Ended March 31,

2018

2017

Consolidated adjusted EBITDA (1)

$

6,937

$

12,570

Net interest expense (1)

(2,361)

(3,353)

Dividend income

128

-

Cash paid for income taxes

(84)

(426)

Capital expenditures (2)

(3,030)

(1,526)

Free cash flow (1)

1,590

7,265

Capital expenditures (2)

3,030

1,526

Other income (loss)

22

-

Change in fair value of contingent consideration

(2,100)

-

Changes in assets and liabilities:

(Increase) decrease in accounts receivable

11,043

10,979

(Increase) decrease in prepaid expenses and other assets

(3,981)

(891)

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

(5,977)

(5,963)

Cash Flows From Operating Activities

$

3,627

$

12,916

(1)

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

(2)

Capital expenditures are not part of the consolidated statement of operations.