Entravision Communications Corporation Reports Third Quarter 2017 Results

Three-Month Period

Nine-Month Period

Ended September 30,

Ended September 30,

2017

2016

%
Change

2017

2016

%
Change

Net revenue

Revenue from advertising and retransmission consent

$

70,612

$

65,281

8%

$

198,631

$

188,223

6%

Revenue from spectrum usage rights

263,943

-

*

263,943

-

*

Total Net Revenue

334,555

65,281

412%

462,574

188,223

146%

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

12,131

-

*

12,131

-

*

Cost of revenue - digital media (1)

9,910

2,281

334%

20,424

6,493

215%

Operating expenses (2)

43,044

40,187

7%

123,281

119,135

3%

Corporate expenses (3)

8,209

5,728

43%

19,695

16,625

18%

Foreign currency (gain) loss

(58)

-

*

293

-

*

Consolidated adjusted EBITDA (4)

262,416

17,841

1371%

289,910

48,623

496%

Free cash flow (5)

$

268,849

$

11,928

2154%

$

281,717

$

30,285

830%

Net income

$

157,208

$

5,415

2803%

$

163,321

$

13,402

1119%

Net income per share, basic

$

1.74

$

0.06

2800%

$

1.81

$

0.15

1107%

Net income per share, diluted

$

1.71

$

0.06

2750%

$

1.78

$

0.15

1087%

Weighted average common shares outstanding, basic

90,517,492

89,590,135

90,370,679

89,208,732

Weighted average common shares outstanding, diluted

92,161,108

91,489,975

91,985,946

91,188,958

(1)      Cost of revenue – digital media consists primarily of the costs of online media acquired from third-party publishers. Media cost is classified as cost of revenue in the period in which the corresponding revenue is recognized. Cost of revenue – television (spectrum usage rights) consists primarily of the carrying value of spectrum usage rights surrendered in the FCC auction for broadcast spectrum.

(2)      Operating expenses include direct operating and selling, general and administrative expenses. Included in operating expenses are $0.3 million and $0.1 million of non-cash stock-based compensation for three-month periods ended September 30, 2017 and 2016, respectively, and $0.8 million and $0.7 million of non-cash stock-based compensation for the nine-month periods ended September 30, 2017 and 2016, respectively. Operating expenses do not include corporate expenses, foreign currency (gain) loss, depreciation and amortization, impairment charge, gain (loss) on sale of assets, gain (loss) on debt extinguishment and other income (loss).

(3)      Corporate expenses include $0.8 million and $0.7 million of non-cash stock-based compensation for the three-month periods ended September 30, 2017 and 2016, respectively, and $2.3 million and $1.9 million of non-cash stock-based compensation for the nine-month periods ended September 30, 2017 and 2016, 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 and syndication programming amortization less syndication programming payments. We use the term consolidated adjusted EBITDA because that measure is defined in our 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 and syndication programming amortization and does include syndication programming payments. While many in the financial community and we consider consolidated adjusted EBITDA to be important, it should be considered in addition to, but not as a substitute for or superior to, other measures of liquidity and financial performance prepared in accordance with accounting principles generally accepted in the United States of America, such as cash flows from operating activities, operating income and net income. As consolidated adjusted EBITDA excludes non-cash gain (loss) on sale of assets, non-cash depreciation and amortization, non-cash impairment charge, non-cash stock-based compensation expense, net interest expense, other income (loss), gain (loss) on debt extinguishment, income tax (expense) benefit, equity in net income (loss) of nonconsolidated affiliate, non-cash losses and syndication programming amortization and includes syndication programming payments, consolidated adjusted EBITDA has certain limitations because it excludes and includes several important non-cash financial line items. Therefore, we consider both non-GAAP and GAAP measures when evaluating our business. Consolidated adjusted EBITDA is also used to make executive compensation decisions.

(5)      Free cash flow is defined as consolidated adjusted EBITDA less cash paid for income taxes, net interest expense, and capital expenditures plus non-cash cost of revenue – spectrum usage rights. 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 September 30, 2017 Compared to Three-Month Period Ended

September 30, 2016

(Unaudited)

Three-Month Period

Ended September 30,

2017

2016

% Change

Net revenue

Revenue from advertising and retransmission consent

$

70,612

$

65,281

8

%

Revenue from spectrum usage rights

263,943

-

*

Total Net Revenue

334,555

65,281

412

%

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

12,131

-

*

Cost of revenue - digital media (1)

9,910

2,281

334

%

Operating expenses (1)

43,044

40,187

7

%

Corporate expenses (1)

8,209

5,728

43

%

Depreciation and amortization

4,337

3,812

14

%

Foreign currency (gain) loss

(58)

-

*

Operating income

256,982

13,273

1836

%

Interest expense, net

(3,500)

(3,823)

(8)

%

Income before income taxes

253,482

9,450

2582

%

Income tax expense

(96,167)

(4,035)

2283

%

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

157,315

5,415

2805

%

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

(107)

-

*

Net income

$

157,208

$

5,415

2803

%

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

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

September 30, 2016

(Unaudited)

Nine-Month Period

Ended September 30,

2017

2016

% Change

Net revenue

Revenue from advertising and retransmission consent

$

198,631

$

188,223

6

%

Revenue from spectrum usage rights

263,943

-

*

Total Net Revenue

462,574

188,223

146

%

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

12,131

-

*

Cost of revenue - digital media (1)

20,424

6,493

215

%

Operating expenses (1)

123,281

119,135

3

%

Corporate expenses (1)

19,695

16,625

18

%

Depreciation and amortization

12,460

11,724

6

%

Foreign currency (gain) loss

293

-

*

Operating income

274,290

34,246

701

%

Interest expense, net

(10,609)

(11,423)

(7)

%

Income before income taxes

263,681

22,823

1055

%

Income tax expense

(100,185)

(9,421)

963

%

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

163,496

13,402

1120

%

Equity in net loss of nonconsolidated affiliates, net of tax

(175)

-

*

Net income

$

163,321

$

13,402

1119

%

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

Three-Month Period

Nine-Month Period

Ended September 30,

Ended September 30,

2017

2016

% Change

2017

2016

% Change

Net Revenue

Revenue from advertising and retransmission consent

Television

$

36,547

$

40,363

(9)

%

$

112,021

$

116,143

(4)

%

Radio

16,934

19,169

(12)

%

49,816

$

55,605

(10)

%

Digital

17,131

5,749

198

%

36,794

$

16,475

123

%

Total

$

70,612

$

65,281

8

%

$

198,631

$

188,223

6

%

Revenue from spectrum usage rights

$

263,943

$

-

*

$

263,943

$

-

*

Total Net Revenue

$

334,555

$

65,281

412

%

$

462,574

$

188,223

146

%

Cost of Revenue (1)

Television

12,131

-

*

12,131

$

-

*

Digital

9,910

2,281

334

%

20,424

$

6,493

215

%

Total

$

22,041

$

2,281

866

%

$

32,555

$

6,493

401

%

Operating Expenses (1)

Television

20,161

21,151

(5)

%

60,516

$

62,299

(3)

%

Radio

15,953

16,422

(3)

%

47,294

$

48,486

(2)

%

Digital

6,930

2,614

165

%

15,471

$

8,350

85

%

Total

$

43,044

$

40,187

7

%

$

123,281

$

119,135

3

%

Corporate Expenses (1)

$

8,209

$

5,728

43

%

$

19,695

$

16,625

18

%

Foreign currency (gain) loss

$

(58)

$

-

*

$

293

$

-

*

Consolidated adjusted EBITDA (1)

$

262,416

$

17,841

1371

%

$

289,910

$

48,623

496

%

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

Entravision Communications Corporation

Consolidated Balance Sheets

(In thousands; unaudited)

September 30,

December 31,

2017

2016

ASSETS

Current assets

Cash and cash equivalents

$

55,980

$

61,520

Restricted cash

231,096

-

Trade receivables, net of allowance for doubtful accounts

72,651

65,072

Prepaid expenses and other current assets

6,583

4,870

Total current assets

366,310

131,462

Property and equipment, net

56,606

55,368

Intangible assets subject to amortization, net

25,691

13,120

Intangible assets not subject to amortization

241,298

220,701

Goodwill

69,042

50,081

Deferred income taxes

-

44,677

Other assets

5,474

2,512

Total assets

$

764,421

$

517,921

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Current maturities of long-term debt

$

3,750

$

3,750

Accounts payable and accrued expenses

49,117

30,810

Total current liabilities

52,867

34,560

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

283,998

286,697

Other long-term liabilities

26,083

13,208

Deferred income taxes

59,720

-

Total liabilities

422,668

334,465

Stockholders' equity

Class A common stock

7

7

Class B common stock

2

2

Class U common stock

1

1

Additional paid-in capital

896,070

904,867

Accumulated deficit

(552,702)

(718,444)

Accumulated other comprehensive income (loss)

(1,625)

(2,977)

Total stockholders' equity

341,753

183,456

Total liabilities and stockholders' equity

$

764,421

$

517,921

Entravision Communications Corporation

Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

Three-Month Period

Nine-Month Period

Ended September 30,

Ended September 30,

2017

2016

2017

2016

Net revenue

Revenue from advertising and retransmission consent

$

70,612

$

65,281

$

198,631

$

188,223

Revenue from spectrum usage rights

263,943

-

263,943

-

Total Net Revenue

334,555

65,281

462,574

188,223

Expenses:

Cost of revenue - television (spectrum usage rights)

12,131

-

12,131

-

Cost of revenue - digital media

9,910

2,281

20,424

6,493

Direct operating expenses

30,231

28,238

87,238

84,341

Selling, general and administrative expenses

12,813

11,949

36,043

34,794

Corporate expenses

8,209

5,728

19,695

16,625

Depreciation and amortization

4,337

3,812

12,460

11,724

Foreign currency (gain) loss

(58)

-

293

-

77,573

52,008

188,284

153,977

Operating income

256,982

13,273

274,290

34,246

Interest expense

(3,756)

(3,894)

(11,084)

(11,619)

Interest income

256

71

475

196

Income before income taxes

253,482

9,450

263,681

22,823

Income tax expense

(96,167)

(4,035)

(100,185)

(9,421)

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

157,315

5,415

163,496

13,402

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

(107)

-

(175)

-

Net income

$

157,208

$

5,415

$

163,321

$

13,402

Basic and diluted earnings per share:

Net income per share, basic

$

1.74

$

0.06

$

1.81

$

0.15

Net income per share, diluted

$

1.71

$

0.06

$

1.78

$

0.15

Cash dividends declared per common share

$

0.05

$

0.03

$

0.11

$

0.09

Weighted average common shares outstanding, basic

90,517,492

89,590,135

90,370,679

89,208,732

Weighted average common shares outstanding, diluted

92,161,108

91,489,975

91,985,946

91,188,958

Entravision Communications Corporation

Consolidated Statements of Cash Flows

(In thousands; unaudited)

Three-Month Period

Nine-Month Period

Ended September 30,

Ended September 30,

2017

2016

2017

2016

Cash flows from operating activities:

Net income

157,208

$

5,415

163,321

$

13,402

Adjustments to reconcile net income to net cash provided by
  operating activities:

Depreciation and amortization

4,337

3,812

12,460

11,724

Cost of revenue - television (spectrum usage rights)

12,131

-

12,131

-

Deferred income taxes

96,086

3,965

99,514

8,887

Amortization of debt issue costs

226

195

595

579

Amortization of syndication contracts

93

99

311

289

Payments on syndication contracts

(85)

(87)

(300)

(270)

Equity in net income (loss) of nonconsolidated affiliate

107

-

175

-

Non-cash stock-based compensation

1,089

744

3,149

2,634

Changes in assets and liabilities:

(Increase) decrease in accounts receivable

(791)

221

12,790

5,804

(Increase) decrease in prepaid expenses and other assets

(383)

(569)

(1,830)

(952)

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

130

684

(8,862)

(3,192)

Net cash provided by operating activities

270,148

14,479

293,454

38,905

Cash flows from investing activities:

Purchases of short-term investments

-

-

-

(30,000)

Proceeds from maturity of short term investments

-

30,000

-

30,000

Purchases of property and equipment

(2,343)

(2,215)

(9,639)

(6,960)

Purchases of intangible assets

(32,588)

-

(32,588)

-

Purchases of investments

-

(250)

(2,200)

(250)

Deposits on acquisitions

(1,050)

-

(1,240)

-

Purchase of a business, net of cash acquired

-

-

(7,489)

-

Net cash provided by (used in) investing activities

(35,981)

27,535

(53,156)

(7,210)

Cash flows from financing activities:

Net proceeds from stock option exercises

(515)

615

11

1,885

Payments on long-term debt

(938)

(938)

(2,813)

(2,813)

Dividends paid

(4,532)

(2,802)

(10,179)

(8,371)

Repurchase of Class A common stock

(1,778)

-

(1,778)