Entravision Communications Corporation Reports Third Quarter 2016 Results

SANTA MONICA, Calif., Nov. 3, 2016 /PRNewswire/ -- Entravision Communications Corporation (NYSE: EVC) today reported financial results for the three- and nine-month periods ended September 30, 2016.

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 10. Unaudited financial highlights are as follows:

 

	Three-Month Period												Nine-Month Period
	Ended September 30,												Ended September 30,
	2016				2015				% Change				2016				2015				% Change
Net revenue	$	65,281			$	69,261				(6)	%		$	188,223			$	188,702				(0)	%
Cost of revenue - digital media (1)		2,281				1,881				21	%			6,493				4,633				40	%
Operating expenses (2)		40,187				38,804				4	%			119,135				113,518				5	%
Corporate expenses (3)		5,728				5,535				3	%			16,625				15,578				7	%
Consolidated adjusted EBITDA (4)		17,841				23,878				(25)	%			48,623				57,542				(15)	%
Free cash flow (5)	$	11,928			$	17,793				(33)	%		$	30,285			$	36,150				(16)	%
Net income	$	5,415			$	9,293				(42)	%		$	13,402			$	19,818				(32)	%
Net income per share, basic	$	0.06			$	0.11				(45)	%		$	0.15			$	0.23				(35)	%
Net income per share, diluted	$	0.06			$	0.10				(40)	%		$	0.15			$	0.22				(32)	%
Weighted average common shares outstanding, basic		89,590,135				88,090,143								89,208,732				87,820,029
Weighted average common shares outstanding, diluted		91,489,975				90,423,333								91,188,958				90,202,389

(1)	Cost of revenue 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, selling, general and administrative expenses. Included in operating expenses are $0.1 million and $0.3 million of non-cash stock-based compensation for the three-month periods ended September 30, 2016 and 2015, respectively and $0.7 million and $1.0 million of non-cash stock-based compensation for the nine-month periods ended September 30, 2016 and 2015, respectively. Operating expenses do not include corporate expenses, depreciation and amortization, impairment charge, gain (loss) on sale of assets, gain (loss) on debt extinguishment and other income (loss).
(3)	Corporate expenses include $0.7 million and $0.6 million of non-cash stock-based compensation for the three-month periods ended September 30, 2016 and 2015, respectively and $1.9 million and $1.7 million of non-cash stock-based compensation for the nine-month periods ended September 30, 2016 and 2015, 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. Net interest expense is defined as interest expense, less non-cash interest expense relating to amortization of debt finance costs, and less interest income.

 

Commenting on the Company's earnings results, Walter F. Ulloa, Chairman and Chief Executive Officer, said, "During the third quarter, we faced challenging comparisons to last year's third quarter. We continued to grow our core television advertising revenue (excluding retransmission consent revenue and political advertising revenue), but these increases were offset by decreases primarily attributable to the loss of non-advertising revenue from a telecommunications operator. Additionally, we continued to grow our digital segment revenue and build our digital footprint through Pulpo Media, which provides us with an integrated platform to connect advertisers and marketers with Latino audiences. Looking ahead, we remain well positioned to build on our success in further attracting Latino audiences, expanding our advertiser base and monetizing our reach to the benefit of our shareholders."

Quarterly Cash Dividend

The Company announced today that its Board of Directors has approved a quarterly cash dividend to shareholders of $0.03125 per share of the Company's Class A, Class B and Class U common stock, in an aggregate amount of approximately $2.8 million. The quarterly dividend will be payable on December 30, 2016 to shareholders of record as of the close of business on December 14, 2016, and the common stock will trade ex-dividend on December 12, 2016. As previously announced, 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.

Financial Results

 

Three-Month Period Ended September 30, 2016 Compared to Three-Month Period Ended
September 30, 2015
(Unaudited)
	Three-Month Period
	Ended September 30,
	2016				2015				% Change
Net revenue	$	65,281			$	69,261				(6)	%
Cost of revenue - digital media (1)		2,281				1,881				21	%
Operating expenses (1)		40,187				38,804				4	%
Corporate expenses (1)		5,728				5,535				3	%
Depreciation and amortization		3,812				4,030				(5)	%
Operating income		13,273				19,011				(30)	%
Interest expense, net		(3,823)				(3,274)				17	%
Income before income taxes		9,450				15,737				(40)	%
Income tax expense		(4,035)				(6,444)				(37)	%
Net income	$	5,415			$	9,293				(42)	%

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

 

Net revenue decreased to $65.3 million for the three-month period ended September 30, 2016 from $69.3 million for the three-month period ended September 30, 2015, a decrease of $4.0 million. Of the overall decrease, approximately $3.0 million was attributed to our television segment and was primarily attributable to approximately $5.5 million of revenue associated with television station channel modifications made by the Company in order to accommodate the operations of a telecommunications operator included in the 2015 period, and which revenue did not recur in 2016, and a decrease in local advertising revenue. This decrease in the television segment was partially offset by an increase in national advertising revenue, an increase in political advertising revenue, which was not material in 2015, and an increase in retransmission consent revenue. Additionally we had a decrease of $1.7 million in the radio segment primarily attributable to a decrease in local advertising revenue, partially offset by an increase in political advertising revenue, which was not material in 2015. The overall decrease in net revenue was partially offset by an increase of $0.7 million that was attributed to our digital segment and was primarily attributable to increases in national and local revenue.

Cost of revenue increased to $2.3 million for the three-month period ended September 30, 2016 from $1.9 million for the three-month period ended September 30, 2015, an increase of $0.4 million, due to increased online media costs associated with the increase in net revenue of our digital segment.

Operating expenses increased to $40.2 million for the three-month period ended September 30, 2016 from $38.8 million for the three-month period ended September 30, 2015, an increase of $1.4 million. The increase was primarily attributable to expenses associated with the increase in advertising revenue and increases in salary expense and insurance expense. 

Corporate expenses increased to $5.7 million for the three-month period ended September 30, 2016 from $5.5 million for the three-month period ended September 30, 2015, an increase of $0.2 million. The increase was primarily attributable to increases in salary expense and non-cash stock-based compensation expense.

 

Nine-Month Period Ended September 30, 2016 Compared to Nine-Month Period Ended
September 30, 2015
(Unaudited)
	Nine-Month Period
	Ended September 30,
	2016				2015				% Change
Net revenue	$	188,223			$	188,702				(0)	%
Cost of revenue - digital media (1)		6,493				4,633				40	%
Operating expenses (1)		119,135				113,518				5	%
Corporate expenses (1)		16,625				15,578				7	%
Depreciation and amortization		11,724				11,950				(2)	%
Operating income		34,246				43,023				(20)	%
Interest expense, net		(11,423)				(9,738)				17	%
Income before income taxes		22,823				33,285				(31)	%
Income tax expense		(9,421)				(13,467)				(30)	%
Net income	$	13,402			$	19,818				(32)	%

 

Net revenue decreased to $188.2 million for the nine-month period ended September 30, 2016 from $188.7 million for the nine-month period ended September 30, 2015, a decrease of $0.5 million. Of the overall decrease, approximately $3.2 million was attributed to our television segment and was primarily attributable to approximately $10.5 million of revenue associated with television station channel modifications made by the Company in order to accommodate the operations of a telecommunications operator included in the 2015 period, and which revenue did not recur in 2016, and a decrease in local advertising revenue. This decrease in the television segment was partially offset by an increase in political advertising revenue, which was not material in 2015, an increase in national advertising revenue, and an increase in retransmission consent revenue. Additionally approximately $1.2 million of the overall decrease was attributed to our radio segment and was primarily attributable to a decrease in local advertising revenue, partially offset by an increase in political advertising revenue, which was not material in 2015. The overall decrease in net revenue was partially offset by an increase of approximately $3.9 million in our digital segment and was primarily attributable to increases in national and local revenue.

Cost of revenue increased to $6.5 million for the nine-month period ended September 30, 2016 from $4.6 million for the nine-month period ended September 30, 2015, an increase of $1.9 million, due to increased online media costs associated with the increase in net revenue of our digital segment.

Operating expenses increased to $119.1 million for the nine-month period ended September 30, 2016 from $113.5 million for the nine-month period ended September 30, 2015, an increase of $5.6 million. The increase was primarily attributable to expenses associated with the increase in advertising revenue and increases in salary expense and insurance expense. 

Corporate expenses increased to $16.6 million for the nine-month period ended September 30, 2016 from $15.6 million for the nine-month period ended September 30, 2015, an increase of $1.0 million. The increase was primarily attributable to increases in salary expense and non-cash stock-based compensation expense.

 

Segment Results
The following represents selected unaudited segment information
	Three-Month Period												Nine-Month Period
	Ended September 30,												Ended September 30,
		2016				2015			% Change					2016				2015			% Change
Net Revenue
Television	$	40,363			$	43,393				(7)	%		$	116,143			$	119,292				(3)	%
Radio		19,169				20,855				(8)	%			55,605				56,785				(2)	%
Digital		5,749				5,013				15	%			16,475				12,625				30	%
Total	$	65,281			$	69,261				(6)	%		$	188,223			$	188,702				(0)	%
Cost of Revenue - digital media (1)
Digital	$	2,281			$	1,881				21	%		$	6,493			$	4,633				40	%
Operating Expenses (1)
Television		21,151				20,445				3	%			62,299				59,928				4	%
Radio		16,422				15,865				4	%			48,486				45,997				5	%
Digital		2,614				2,494				5	%			8,350				7,593				10	%
Total	$	40,187			$	38,804				4	%		$	119,135			$	113,518				5	%
Corporate Expenses (1)	$	5,728			$	5,535				3	%		$	16,625			$	15,578				7	%
Consolidated adjusted EBITDA (1)	$	17,841			$	23,878				(25)	%		$	48,623			$	57,542				(15)	%

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

 

Entravision Communications Corporation will hold a conference call to discuss its 2016 third quarter results on November 3, 2016 at 5 p.m. Eastern Time. To access the conference call, please dial 412-858-4600 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 media company that reaches and engages U.S. Latinos across acculturation levels and media channels, as well as consumers in Mexico. The Company's comprehensive portfolio incorporates integrated media and marketing solutions comprised of acclaimed television, radio, digital properties, events, and data analytics services. Entravision has 54 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. According to comScore Media Metrix®, Entravision's digital operating group, Pulpo, is the #1-ranked online advertising platform in Hispanic reach, and Pulpo's comprehensive media offering, data, and consumer insights lead the industry. 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.

(Financial Table Follows)

 

Entravision Communications Corporation
Consolidated Balance Sheets
(In thousands; unaudited)
	September 30,				December 31,
	2016				2015
ASSETS
Current assets
Cash and cash equivalents	$	70,320			$	47,924
Trade receivables, net of allowance for doubtful accounts		62,317				66,399
Prepaid expenses and other current assets		6,602				5,705
Total current assets		139,239				120,028
Property and equipment, net		55,719				57,874
Intangible assets subject to amortization, net		14,005				16,656
Intangible assets not subject to amortization		220,701				220,701
Goodwill		50,081				50,081
Deferred income taxes		49,000				57,929
Other assets		2,314				1,693
Total assets	$	531,059			$	524,962
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	3,750			$	3,750
Accounts payable and accrued expenses		28,440				29,787
Total current liabilities		32,190				33,537
Long-term debt, less current maturities, net of unamortized debt issuance costs		307,296				309,587
Other long-term liabilities		14,687				14,565
Total liabilities		354,173				357,689
Stockholders' equity
Class A common stock		6				6
Class B common stock		2				2
Class U common stock		1				1
Additional paid-in capital		906,375				910,228
Accumulated deficit		(725,450)				(738,849)
Accumulated other comprehensive income (loss)		(4,048)				(4,115)
Total stockholders' equity		176,886				167,273
Total liabilities and stockholders' equity	$	531,059			$	524,962

 

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,
	2016				2015				2016				2015
Net revenue	$	65,281			$	69,261			$	188,223			$	188,702
Expenses:
Cost of revenue - digital media		2,281				1,881				6,493				4,633
Direct operating expenses		28,238				27,624				84,341				81,353
Selling, general and administrative expenses		11,949				11,180				34,794				32,165
Corporate expenses		5,728				5,535				16,625				15,578
Depreciation and amortization		3,812				4,030				11,724				11,950
		52,008				50,250				153,977				145,679
Operating income		13,273				19,011				34,246				43,023
Interest expense		(3,894)				(3,286)				(11,619)				(9,769)
Interest income		71				12				196				31
Income before income taxes		9,450				15,737				22,823				33,285
Income tax expense		(4,035)				(6,444)				(9,421)				(13,467)
Net income	$	5,415			$	9,293			$	13,402			$	19,818
Basic and diluted earnings per share:
Net income per share, basic	$	0.06			$	0.11			$	0.15			$	0.23
Net income per share, diluted	$	0.06			$	0.10			$	0.15			$	0.22
Cash dividends declared per common share	$	0.03			$	0.03			$	0.09			$	0.08
Weighted average common shares outstanding, basic		89,590,135				88,090,143				89,208,732				87,820,029
Weighted average common shares outstanding, diluted		91,489,975				90,423,333				91,188,958				90,202,389

 

Entravision Communications Corporation
Consolidated Statements of Cash Flows
(In thousands; unaudited)
	Three-Month Period								Nine-Month Period
	Ended September 30,								Ended September 30,
	2016				2015				2016				2015
Cash flows from operating activities:
Net income	$	5,415			$	9,293			$	13,402			$	19,818
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,812				4,030				11,724				11,950
Deferred income taxes		3,965				6,394				8,887				12,764
Amortization of debt issue costs		195				202				579				595
Amortization of syndication contracts		99				91				289				262
Payments on syndication contracts		(87)				(131)				(270)				(377)
Non-cash stock-based compensation		744				877				2,634				2,684
(Increase) decrease in accounts receivable		221				(8,573)				5,804				2,845
(Increase) decrease in prepaid expenses and other assets		(569)				(795)				(952)				(1,078)
Increase (decrease) in accounts payable, accrued expenses and other liabilities		684				1,625				(3,192)				(2,579)
Net cash provided by operating activities		14,479				13,013				38,905				46,884
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 investments		(250)				-				(250)				-
Purchases of property and equipment and intangibles		(2,215)				(2,963)				(6,960)				(11,546)
Net cash provided by (used in) investing activities		27,535				(2,963)				(7,210)				(11,546)
Cash flows from financing activities:
Proceeds from stock option exercises		615				233				1,885				1,814
Payments on long-term debt		(938)				(938)				(2,813)				(2,813)
Dividends paid		(2,802)				(2,203)				(8,371)				(6,591)
Payment of contingent consideration		-				-				-				(1,000)
Net cash used in financing activities		(3,125)				(2,908)				(9,299)				(8,590)
Net increase in cash and cash equivalents		38,889				7,142				22,396				26,748
Cash and cash equivalents:
Beginning		31,431				50,866				47,924				31,260
Ending	$	70,320			$	58,008			$	70,320			$	58,008

 

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								Nine-Month Period
	Ended September 30,								Ended September 30,
		2016				2015				2016				2015
Consolidated adjusted EBITDA (1)	$	17,841			$	23,878			$	48,623			$	57,542
Interest expense		(3,894)				(3,286)				(11,619)				(9,769)
Interest income		71				12				196				31
Income tax expense		(4,035)				(6,444)				(9,421)				(13,467)
Amortization of syndication contracts		(99)				(91)				(289)				(262)
Payments on syndication contracts		87				131				270				377
Non-cash stock-based compensation included in direct operating    expenses		(79)				(274)				(700)				(980)
Non-cash stock-based compensation included in corporate expenses		(665)				(603)				(1,934)				(1,704)
Depreciation and amortization		(3,812)				(4,030)				(11,724)				(11,950)
Net income		5,415				9,293				13,402				19,818
Depreciation and amortization		3,812				4,030				11,724				11,950
Deferred income taxes		3,965				6,394				8,887				12,764
Amortization of debt issue costs		195				202				579				595
Amortization of syndication contracts		99				91				289				262
Payments on syndication contracts		(87)				(131)				(270)				(377)
Non-cash stock-based compensation		744				877				2,634				2,684
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		221				(8,573)				5,804				2,845
(Increase) decrease in prepaid expenses and other assets		(569)				(795)				(952)				(1,078)
Increase (decrease) in accounts payable, accrued expenses and other liabilities		684				1,625				(3,192)				(2,579)
Cash flows from operating activities	$	14,479			$	13,013			$	38,905			$	46,884

(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								Nine-Month Period
	Ended September 30,								Ended September 30,
		2016				2015				2016				2015
Consolidated adjusted EBITDA (1)	$	17,841			$	23,878			$	48,623			$	57,542
Net interest expense (1)		(3,628)				(3,072)				(10,844)				(9,143)
Cash paid for income taxes		(70)				(50)				(534)				(703)
Capital expenditures (2)		(2,215)				(2,963)				(6,960)				(11,546)
Free cash flow (1)		11,928				17,793				30,285				36,150
Capital expenditures (2)		2,215				2,963				6,960				11,546
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		221				(8,573)				5,804				2,845
(Increase) decrease in prepaid expenses and other assets		(569)				(795)				(952)				(1,078)
Increase (decrease) in accounts payable, accrued expenses and other liabilities		684				1,625				(3,192)				(2,579)
Cash Flows From Operating Activities	$	14,479			$	13,013			$	38,905			$	46,884

(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.

 

 

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SOURCE Entravision Communications Corporation

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