Entravision Communications Corporation Reports Third Quarter 2019 Results

SANTA MONICA, Calif., Nov. 7, 2019 /PRNewswire/ -- Entravision Communications Corporation (NYSE: EVC) today reported financial results for the three- and nine-month periods ended September 30, 2019.

Historical results, which are attached, are in thousands of U.S. dollars (except share and per share data). This press release contains certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each of these non-GAAP financial measures, and a table reconciling each of these non-GAAP financial measures to its most directly comparable GAAP financial measure is included beginning on page 12. Unaudited financial highlights are as follows:

Commenting on the Company's earnings results, Walter F. Ulloa, Chairman and Chief Executive Officer, said, "Our third quarter results were impacted by declines in our radio and digital segments compared to the prior year. However, our television segment did remain constant due to increases in revenue from spectrum usage rights and retransmission consent revenue. We continue to maintain a solid balance sheet and return capital to our shareholders through our share repurchase program and dividend. Looking ahead, we remain well positioned to build on our success in further attracting Latino and other audiences worldwide, as we execute our multiplatform strategy to the benefit of our shareholders."

Quarterly Cash Dividend

The Company announced today that its Board of Directors approved a quarterly cash dividend to shareholders of $0.05 per share on the Company's Class A, Class B and Class U common stock, in an aggregate amount of approximately $4.3 million. The quarterly dividend will be payable on December 31, 2019 to shareholders of record as of the close of business on December 16, 2019, and the common stock will trade ex-dividend on December 13, 2019. The Company currently anticipates that future cash dividends will be paid on a quarterly basis; however, any decision to pay future cash dividends will be subject to approval by the Board.

Goodwill and Intangible Assets Impairment

The Company recorded an impairment charge of $5.3 million related to goodwill as a result of an appraisal recently conducted on its digital reporting unit. Due to lower than anticipated performance of its digital reporting unit, and updated internal forecasts of future performance of its digital reporting unit, the Company determined that triggering events had occurred during the third quarter of 2019 that required interim impairment assessment for its digital reporting unit. This impairment charge is in addition to an impairment charge on its digital reporting unit incurred in the second quarter of 2019.

The Company also recorded an impairment charge of $3.5 million related to indefinite life intangible assets as a result of an appraisal recently conducted on one of its television broadcast licenses. During the third quarter, as a result of changes in regulations in Mexico, the Company was required to prepay the license fees for its Mexico broadcast licenses for a period of 20 years. The Company elected not to make the required prepayment for station XHRIO-TV serving the Matamoros/Harlingen-Weslaco-Brownsville-McAllen market before the deadline to make such prepayment. As a result, the Company currently expects to stop broadcasting on this station at the end of the current license term, which expires on December 31, 2021.  As such, the Company determined that triggering events had occurred during the third quarter of 2019 that required an interim impairment assessment for this broadcast license.

Net revenue decreased to $68.8 million for the three-month period ended September 30, 2019 from $74.6 million for the three-month period ended September 30, 2018, a decrease of $5.8 million. Of the overall decrease, approximately $4.8 million was attributable to our digital segment and was primarily due to declines in both international and domestic revenue.  This decline in digital revenue is being driven by a trend whereby revenue is shifting more to automated self-service platforms, referred to in our industry as programmatic revenue. Additionally, approximately $1.0 million of the overall decrease was attributable to our radio segment and was primarily due to a decrease in national advertising revenue, as a result in part of ratings declines and changing demographic preferences of audiences, as well as the absence of revenue from the 2018 FIFA World Cup revenue in 2019 compared to 2018 and a decrease in political advertising revenue, which has not been material in 2019. Revenue in our television segment remained constant with increases in revenue from spectrum usage rights and retransmission consent revenue, partially offset by a decrease in local advertising revenue, as a result in part of ratings declines and changing demographic preferences of audiences. Additionally, there is a trend for advertising to move increasingly from traditional media, such as television, to new media, such as digital media. The increases in revenue from spectrum usage rights and retransmission consent revenue were also partially offset by a decrease in political advertising revenue, which has not been material in 2019.

Cost of revenue in our digital segment decreased to $9.9 million for the three-month period ended September 30, 2019 from $13.2 million for the three-month period ended September 30, 2018, a decrease of $3.3 million, primarily due to a decrease in expenses associated with the decrease in revenue in our digital segment and a strategic shift in our digital business designed to focus on generating revenue with lower associated costs to produce higher margins.

Operating expenses decreased to $43.3 million for the three-month period ended September 30, 2019 from $44.1 million for the three-month period ended September 30, 2018, a decrease of $0.8 million. The decrease was primarily due to the decrease in expenses associated with the decrease in revenue and a decrease in salary expense, partially offset by an increase in severance expense in our radio segment and an increase in fees due to networks related to retransmission consent agreements in our television segment.

Corporate expenses decreased to $6.8 million for the three-month period ended September 30, 2019 from $6.9 million for the three-month period ended September 30, 2018, a decrease of $0.1 million. The decrease was primarily due to a decrease in non-cash stock-based compensation.

Impairment charge related to goodwill in our digital reporting unit was $5.3 million for the three-month period ended September 30, 2019. Impairment charge related to indefinite life intangible assets in our television reporting unit was $3.5 million for the three-month period ended September 30, 2019. These write-downs were made pursuant to Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other, which requires that goodwill and certain intangible assets be tested for impairment at least annually, or more frequently if events or changes in circumstances indicate the assets might be impaired. We also recorded an impairment charge of $0.2 million to reflect the fair market value of our assets held for sale.

Our historical 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, our operating expenses are generally denominated in the currencies of the countries in which our operations are located, and we have operations in countries other than the U.S., primarily related to our Headway business. As a result, we have operating expense, attributable to foreign currency loss, that is primarily related to the operations related to our Headway business. We had foreign currency loss of $0.9 million for the three-month period ended September 30, 2019 compared to a foreign currency loss of $0.3 million for the three-month period ended September 30, 2018. Foreign currency loss was primarily due to currency fluctuations that affected our digital segment operations located outside the United States, primarily related to our Headway business.

Net revenue decreased to $202.7 million for the nine-month period ended September 30, 2019 from $215.7 million for the nine-month period ended September 30, 2018, a decrease of $13.0 million. Of the overall decrease, approximately $12.3 million was attributable to our digital segment and was primarily due to declines in both international and domestic revenue.  This decline in digital revenue is being driven by a trend whereby revenue is shifting more to programmatic revenue. Additionally, approximately $6.0 million of the overall decrease was attributable to our radio segment and was primarily due to decreases in local and national advertising revenue, as a result in part of ratings declines and changing demographic preferences of audiences as well as the absence of revenue from the 2018 FIFA World Cup revenue in 2019 compared to 2018 and a decrease in political advertising revenue, which has not been material in 2019. The overall decrease in revenue was partially offset by an increase in our television segment of approximately $5.3 million and was primarily due to increases in revenue from spectrum usage rights and retransmission consent revenue, partially offset by a decrease in local advertising revenue, as a result in part of ratings declines and changing demographic preferences of audiences and a trend for advertising to move increasingly from traditional media, such as television, to new media, such as digital media. The increase in revenue in our television segment was also partially offset by a decrease in political advertising revenue, which has not been material in 2019.

Cost of revenue in our digital segment decreased to $26.4 million for the nine-month period ended September 30, 2019 from $35.2 million for the nine-month period ended September 30, 2018, a decrease of $8.8 million, primarily due to a decrease in expenses associated with the decrease in revenue in our digital segment and a strategic shift in our digital business designed to focus on generating revenue with lower associated costs to produce higher margins.

Operating expenses decreased to $129.2 million for the nine-month period ended September 30, 2019 from $132.2 million for the nine-month period ended September 30, 2018, a decrease of $3.0 million. The decrease was primarily due to the decrease in expenses associated with the decrease in revenue and a decrease in salary expense, partially offset by an increase in severance expense in our digital and radio segments and an increase in fees due to networks related to retransmission consent agreements in our television segment.

Corporate expenses increased to $20.2 million for the nine-month period ended September 30, 2019 from $19.2 million for the nine-month period ended September 30, 2018, an increase of $1.0 million. The increase was primarily due to an increase in audit fees that we incurred in connection with the audit of our 2018 financial statements, partially offset by a decrease in non-cash stock-based compensation. 

Impairment charge related to goodwill in our digital reporting unit was $27.7 million for the nine-month period ended September 30, 2019. Impairment charge related to indefinite life intangible assets in our television reporting unit was $3.5 million for the nine-month period ended September 30, 2019. These write-downs were made pursuant to Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other, which requires that goodwill and certain intangible assets be tested for impairment at least annually, or more frequently if events or changes in circumstances indicate the assets might be impaired. We also recorded an impairment charge of $0.2 million to reflect the fair market value of our assets held for sale.

Our historical 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, our operating expenses are generally denominated in the currencies of the countries in which our operations are located, and we have operations in countries other than the U.S., primarily related to our Headway business. As a result, we have operating expense, attributable to foreign currency loss, that is primarily related to the operations related to our Headway business. We had foreign currency loss of $1.0 million for the nine-month period ended September 30, 2019 compared to a foreign currency loss of $0.5 million for the nine-month period ended September 30, 2018. Foreign currency loss was primarily due to currency fluctuations that affected our digital segment operations located outside the United States, primarily related to our Headway business.

Entravision Communications Corporation will hold a conference call to discuss its 2019 third quarter results on November 7, 2019 at 5 p.m. Eastern Time. To access the conference call, please dial 412-317-5440 ten minutes prior to the start time. The call will be webcast live and archived for replay on the investor relations portion of the Company's web site located at www.entravision.com.

Entravision Communications Corporation is a leading global media company that, through its television and radio segments, reaches and engages U.S. Hispanics across acculturation levels and media channels. Additionally, our digital segment, whose operations are located primarily in Spain, Mexico, and Argentina and other countries in Latin America, reaches a global market. The Company's expansive portfolio encompasses integrated marketing and media solutions, comprised of television, radio, and digital properties and data analytics services. Entravision has 55 primary television stations and is the largest affiliate group of both the Univision and UniMás television networks. Entravision also owns and operates 49 primarily Spanish-language radio stations featuring nationally recognized talent, as well as the Entravision Audio Network and Entravision Solutions, a coast-to-coast national spot and network sales and marketing organization representing Entravision's owned and operated, as well as its affiliate partner, radio stations. Entravision's Pulpo digital advertising unit is the #1-ranked online advertising platform in Hispanic reach according to comScore Media Metrix®, and Entravision's digital group also includes Headway, a leading provider of mobile, programmatic, data and performance digital marketing solutions primarily in the United States, Mexico and other markets in Latin America. Entravision shares of Class A Common Stock are traded on The New York Stock Exchange under the symbol: EVC.

This press release contains certain forward-looking statements. These forward-looking statements, which are included in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, may involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this press release. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that actual results will not differ materially from these expectations, and the Company disclaims any duty to update any forward-looking statements made by the Company. From time to time, these risks, uncertainties and other factors are discussed in the Company's filings with the Securities and Exchange Commission.

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