Entravision(US:EVC)2024-05-02 20:10PART I. FINANCIAL INFORMATION Financial Statements Q1 2024 saw a $51.7 million net loss due to a $49.4 million impairment charge from Meta ASP program termination, despite $277.4 million revenue Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2024 ($ in thousands) | December 31, 2023 ($ in thousands) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | 128,410 | 105,739 | ▲ | | Goodwill | 55,272 | 90,672 | ▼ | | Total assets | 804,990 | 865,946 | ▼ | | Total liabilities | 591,615 | 599,660 | ▼ | | Total stockholders' equity | 173,535 | 222,528 | ▼ | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Q1 2024 ($ in thousands) | Q1 2023 ($ in thousands) | Change | | :--- | :--- | :--- | :--- | | Net Revenue | 277,445 | 239,006 | ▲ 16% | | Operating income (loss) | (55,899) | 6,668 | ▼ | | Impairment charge | 49,438 | - | N/A | | Net income (loss) | (51,669) | 1,699 | ▼ | | Net income (loss) attributable to common stockholders | (48,890) | 2,041 | ▼ | | Net income (loss) per share, basic and diluted | (0.55) | 0.02 | ▼ | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Q1 2024 ($ in thousands) | Q1 2023 ($ in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 33,375 | 36,695 | | Net cash provided by (used in) investing activities | 6,099 | (563) | | Net cash provided by (used in) financing activities | (16,797) | (5,365) | - On March 4, 2024, Meta announced its intention to wind down its Authorized Sales Partners (ASP) program by July 1, 2024, triggering an interim impairment test as Meta represented approximately 53% of the company's consolidated revenue in Q1 202449 - As a result of the Meta ASP program termination, the company recorded a goodwill impairment charge of $35.4 million and an intangible assets impairment charge of $14.0 million in the digital segment during Q1 20245255 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported 16% revenue growth to $277.4 million, but the Meta ASP program termination led to a $49.4 million impairment charge and a $55.9 million operating loss - The company received communication from Meta on March 4, 2024, about its intent to wind down the ASP program globally by July 1, 2024, which management expects to have a material adverse effect on future revenue and cash flow, prompting a review of its digital strategy and cost structure153159 Segment Revenue - Q1 2024 vs Q1 2023 | Segment | Q1 2024 Net Revenue ($ in thousands) | Q1 2023 Net Revenue ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Digital | 237,491 | 196,482 | 21% | | Television | 28,549 | 30,312 | (6)% | | Audio | 11,405 | 12,212 | (7)% | | Total | 277,445 | 239,006 | 16% | Segment Operating Profit (Loss) - Q1 2024 vs Q1 2023 | Segment | Q1 2024 Operating Profit ($ in thousands) | Q1 2023 Operating Profit ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Digital | 2,339 | 3,556 | (34)% | | Television | 2,655 | 7,555 | (65)% | | Audio | (178) | 1,038 | * | | Total | 4,816 | 12,149 | (60)% | - The company prepaid $10.0 million of its 2023 Credit Facility in March 2024, applying $8.75 million to the Term A Facility and $1.25 million to the Revolving Credit Facility159207 - Management believes its current cash position of $128.4 million, plus $4.3 million in marketable securities, is sufficient to meet operating expenses and debt service for at least the next twelve months, despite the expected negative impact from the Meta ASP program termination203204 Quantitative and Qualitative Disclosures About Market Risk The company faces market risk from $197.8 million variable-rate debt and growing foreign currency exposure, with a 100 basis point SOFR increase raising annual interest expense by $2.0 million - As of March 31, 2024, the company had $197.8 million of variable-rate bank debt, where a hypothetical 1% (100 basis points) increase in the SOFR would increase annual interest expense by approximately $2.0 million217218 - The company has growing foreign currency risks from its digital operations in Latin America, Asia, and other regions, with revenue and expenses denominated in various foreign currencies, but has not used hedging contracts to date219223 Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that as of the end of the quarter, the company's disclosure controls and procedures were effective224 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting227 PART II. OTHER INFORMATION Legal Proceedings Management believes any liability from ongoing legal proceedings will not materially adversely affect the company's financial position, results, or cash flows - In the opinion of management, any liability from outstanding claims and legal proceedings will not materially adversely affect the company's financial position, results of operations, or cash flows229 Risk Factors New risk factors include credit risk from Meta ASP termination and the potential need for additional financing, with no guarantee of availability - The company faces credit risk related to the potential uncollectibility of accounts receivable from advertisers after the termination of its ASP relationship with Meta, which is set to occur by July 1, 2024230 - The company may need to seek additional equity or debt financing if its liquidity becomes insufficient to fund business activities, particularly as a result of the Meta ASP program termination, with no guarantee that such capital will be available on favorable terms, or at all231 Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company made no Class A common stock repurchases in Q1 2024, having cumulatively repurchased 1.8 million shares for $11.3 million under its program - No shares of Class A common stock were repurchased during the three-month periods ended March 31, 2024, and 2023233 - As of March 31, 2024, the company has repurchased a total of 1.8 million shares for an aggregate price of $11.3 million under its current share repurchase program233 Defaults Upon Senior Securities No defaults upon senior securities were reported Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers informed the company of the adoption or termination of any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the quarter236 Exhibits This section lists exhibits filed, including CEO and CFO certifications and Inline XBRL data files