Annual Report
2022
entravision.com
President, Editorial Televisa, a subsidiary of Televisa
Shareholder website: www.computershare.com/investor
OFFICERS
Christopher T. Young
Interim Chief Executive Officer
and Chief Financial Officer
Jeffery A. Liberman
President and Chief Operating O cer
Karl A. Meyer
Chief Revenue Officer
Juan Saldívar von Wuthenau
Chief Digital, Strategy and Accountability Officer
DIRECTORS
Paul Anton Zevnik
Interim Chair
Partner, Morgan, Lewis & Bockius LLP
Gilbert R. Vasquez, CPA
Managing Partner, Vasquez + Company LLP
Patricia Diaz Dennis
Senior Vice President & Assistant General Counsel,
AT&T (Ret.)
Juan Saldívar von Wuthenau
Chief Digital, Strategy and Accountability Officer
Martha Elena Diaz
Corporación ( Ret.)
Fehmi Zeko
Senior Partner, CDX Advisors
PRESS RELEASE INFORMATION
Press release and other information are available on the
Internet at our website at www.entravision.com.
Our press releases are also available through our
corporate office by calling (310) 447-3870.
ADDITIONAL INFORMATION
We file periodic reports with the Securities and
Exchange Commission that contain additional
information about the company.
You can obtain a copy of our annual report on Form 10-K
filed with the Securities and Exchange Commission free of
charge from our website, www.entravision.com, or at
https://investor.entravision.com/sec-filings/annual-re
ports-proxy-materials/default.aspx, or by writing to us at our
principal executive office at 2425 Olympic Blvd., Suite 6000
West, Santa Monica, California 90404, Attention: Secretary.
FORWARD-LOOKING STATEMENTS
In accordance with the safe harbor provisio ns of the
Private Securities Litigation Reform Act of 1995,
certain statements contained in this Annual Report
are forward-loo king in nature. Although we believe that
our expectations are based on reasonable assumptions
within the bounds of our knowledge and about our
business and operations, there can be no assurance that actual
results will not differ materially from expectations. We do not
intend to update these forward-looking statements.
COMMON STOCK
Stock Symbol: EVC
Listed: The New York Stock Exchange
TRANSFER AGENT
Computershare
150 Royall St Suite 100
Canton, MA 02021
Telephone Number: (800) 522-6645
TDD for Hearing Impaired: (877) 373-6374
Foreign Stockholders: (732) 563-7304
Shareholder correspondence should be mailed to:
Computershare
PO Box 43078
Providence, RI 02940
Computershare
150 Royall St Suite 100
Canton, MA 02021
Overnight correspondence should be sent to:
Shareholder online inquiries: https://www-
us.computershare.com/investor/Contact
CERTIFICATIONS
Christopher T. Young has provided certifications to the Securities
and Exchange Commission as required by Section 302 of the
Sarbanes-Oxley Act of 2002. These certifications are included
as Exhibits 31.1 and 31.2, respectively, to our Annual Report on
Form 10-K for the year ended December 31, 2022.
As required by The New York Stock Exchange (NYSE), on June 17,
2022, Walter F. Ulloa, our late Chief Executive Officer, submitted
his annual certification to the NYSE that stated he was not
aware of any violation by the company of the NYSE corporate
governance listin g standards.
ANNUAL MEETING OF STOCKHOLDERS
The meeting will be conducted as a virtual-only meeting.
There will be no physical location for the meeting.
Stockholders of record can access the meeting at
meetnow.global/M K9TQS6, plus the unique control
number issued to them.
(310) 447-3870
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
555 West 5th Street, Suite 2700
Los Angeles, CA 90013
(213) 688-0800
ANNUAL REPORT ON FORM 10-K
Thursday, June 8, 2023
Chris YoungInterim Chief Executive Officer and Chief Financial OfficerEntravision achieved record performance in 2022. We reached high-water marks in both revenue and adjusted EBITDA. We demonstrated significant growth in our digital segment, and record political ad sales bolstered strong results in our television and audio segments. This success would not have been possible without our incredible team. I thank our employees for their contributions to our phenomenal financial results.Walter UlloaWe continue to mourn our founder and Chief Executive Officer, Walter Ulloa, who passed away suddenly on New Year’s Eve. Walter was a trailblazer in the media industry and the Latino community. He built Entravision into a Spanish-language television and radio company, and then transformed that company into a global digital powerhouse. He was also a friend to all of us at Entravision. Walter’s clear vision for the company will continue to guide our growth strategy. As Interim Chief Executive Officer, I am grateful to Walter for his example, and for establishing a strong, experienced leadership team that will continue to execute on his vision.Continued Digital Expansion A core part of Walter’s growth strategy was to continue to expand our operations globally. In 2022, we strengthened our global partnerships with Meta, Twitter, TikTok and Spotify. We also opened offices led by digital marketing professionals in Honduras, El Salvador, Ghana, Iceland and Mongolia. As a result of our efforts, Entravision’s operations in Latin America, APAC and Africa saw revenue growth of 12%, 190% and 505%, respectively, year-over-year. Entravision now provides a full suite of digital advertising solutions to clients in 40 countries. Beyond our commercial digital partnerships, we also offer mobile user acquisition services worldwide. Smadex, our mobile-first programmatic advertising platform, had revenue growth of 102% in 2022. Our Smadex team has deep expertise in gaming, wellness, finance, and social marketing, leveraging machine learning algorithms to develop targeted ads on mobile devices. Smadex is the present and the future of user acquisition, targeting and brand awareness. We continue to invest in its growth and leadership.Digital is now our largest segment, comprising 78% of total revenue and approximately 51% of adjusted EBITDA for the year. With the global digital ad industry expected to grow 10% annually through 2026, there is no better time to further grow our digital operations.Strategic Capital Allocation & Pristine Balance Sheet While our business has transformed to meet the demands of our customer base, the one part of our operationsthat has remained consistent is our strong balance sheet. With over $155 million in cash and marketable securities at year end, along with a newly financed $275 million credit facility, we are well positioned to invest in organic growth and make strategic acquisitions, all while returning value to our shareholders. In fact, at the start of 2023, we doubled our dividend payment, returning it to pre-pandemic levels. We now have minimal net leverage – 0.5 times trailing twelve months EBITDA – and strong free cash flow conversion. Going forward, we will continue to thoughtfully leverage our capital, investing in our core business, while seeking out accretiveacquisitions that will further enhance our digital offerings. Positioned for SuccessWith a well-capitalized balance sheet, consistent free cash flow generation, and a talented leadership team, Entravision is ready to weather any economic cycle. Although we have experienced significant change over the past few years, our passion and drive to succeed remains steadfast. Walter instilled in us the importance of a strong work ethic and the belief that what we contribute matters – to our employees, our partners, our customers, the communities we serve, and our shareholders. We will continue to follow his lead.On behalf of the entire company and our Board of Directors, thank you for your continued support.Best regards, UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from
to
Commission File Number 1-15997
ENTRAVISION COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
are
Delaware
(State or other jurisdiction of
incorporation or organization)
95-4783236
(I.R.S. Employer
Identification No.)
2425 Olympic Boulevard, Suite 6000 West
Santa Monica, California 90404
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (310) 447-3870
Title of each class
Class A Common Stock
Securities registered pursuant to Section 12(b) of the Act:
Trading
Symbol(s)
EVC
Securities registered pursuant to Section 12(g) of the Act:
None
Name of each exchange on which registered
The New York Stock Exchange
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Smaller reporting company
☐ Accelerated filer
☐ Emerging growth company
☐
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2022 was approximately $310,382,246
(based upon the closing price for shares of the registrant’s Class A common stock as reported by The New York Stock Exchange for the last trading date prior
to that date).
As of March 13, 2023, there were 78,356,490 shares, $0.0001 par value per share, of the registrant’s Class A common stock outstanding, 0 shares, $0.0001
par value per share, of the registrant’s Class B common stock outstanding and 9,352,729 shares, $0.0001 par value per share, of the registrant’s Class U
common stock outstanding.
Portions of the registrant’s Proxy Statement for the 2023 Annual Meeting of Stockholders scheduled to be held on June 1, 2023 are incorporated by a
reference in Part III hereof.
ENTRAVISION COMMUNICATIONS CORPORATION
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022
TABLE OF CONTENTS
PART I
ITEM 1.
BUSINESS ......................................................................................................................................................................
ITEM 1A. RISK FACTORS.............................................................................................................................................................
ITEM 1B. UNRESOLVED STAFF COMMENTS..........................................................................................................................
ITEM 2.
PROPERTIES .................................................................................................................................................................
ITEM 3.
LEGAL PROCEEDINGS ...............................................................................................................................................
ITEM 4. MINE SAFETY DISCLOSURES...................................................................................................................................
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES ....................................................................................................................
ITEM 6.
RESERVED ....................................................................................................................................................................
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ................................................................................................................................................................
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...............................................
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...............................................................................
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE ................................................................................................................................................................
ITEM 9A. CONTROLS AND PROCEDURES ...............................................................................................................................
ITEM 9B. OTHER INFORMATION...............................................................................................................................................
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS..............................
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE........................................................
ITEM 11. EXECUTIVE COMPENSATION ..................................................................................................................................
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS ........................................................................................................................................
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ............
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES .................................................................................................
PART IV
Page
4
38
59
59
59
59
60
62
63
92
93
93
93
95
95
96
96
96
96
96
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES......................................................................................
97
ITEM 16. FORM 10-K SUMMARY...............................................................................................................................................
100
SIGNATURES ...................................................................................................................................................................................
101
POWER OF ATTORNEY..................................................................................................................................................................
101
2
FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of
1934, as amended, or the Exchange Act. All statements other than statements of historical fact are “forward-looking statements” for
purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial
items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed
new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any
statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,”
“expect”, “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the
date of this report. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do
not intend, and undertake no obligation, to update any forward-looking statement.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could
differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results
of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. Some of the key
factors impacting these risks and uncertainties include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
risks related to our substantial indebtedness or our ability to raise capital;
provisions of our debt instruments, including the agreement dated as of November 30, 2017, as amended as of April 30,
2019 and further amended as of June 4, 2021, or the 2017 Credit Agreement, which governs our current credit facility, or
the 2017 Credit Facility, the terms of which restrict certain aspects of the operation of our business;
our continued compliance with all of our obligations under the 2017 Credit Agreement;
rapid changes in the digital advertising industry;
the impact of changing preferences, if any, among audiences favoring newer forms of media, including digital and other
forms of such media, over traditional media, including television and radio;
the ability to keep up with rapid technological and other changes, and compete effectively, in new forms of media,
including digital media, and changes within digital media;
the impact of existing and possible additional legislative and/or regulatory action, in various jurisdictions around the
world, with respect to the digital media and digital advertising industries;
the impact of possible legislative and/or regulatory action, in various jurisdictions around the world, with respect to
artificial intelligence, or AI, and/or similar technologies, which we use in our digital operations;
the impact of existing and possible additional legislative and/or regulatory action, as well as evolving industry standards
and controls, on data privacy; the collection and use of personally identifying information; or PII; and other protections
for online users of Internet-connected devices;
the ability to integrate successfully recently acquired businesses, primarily those in our digital segment, into our
operations;
the ability of management to oversee the rapid global expansion of our digital operations;
the ability to hire and retain qualified personnel to manage the day-to-day operations of our digital properties throughout
the world, as well as local management to establish and maintain internal financial and reporting systems that are of the
type required of U.S. public companies;
cancellations or reductions of advertising due to the then current economic environment or otherwise;
changes in advertising rates due to the then-current economic environment or otherwise;
the impact of rigorous competition in Spanish-language media and in the advertising industry generally;
the impact of changing preferences, if any, among U.S. Hispanic audiences for Spanish-language programming, especially
among younger age groups;
the possible impact on our business as a result of changes in the way market share is measured by third parties;
our relationship with TelevisaUnivision, Inc., or TelevisaUnivision;
3
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the extent to which we continue to generate revenue under retransmission consent agreements;
subject to restrictions contained in the 2017 Credit Agreement, the overall success of our acquisition strategy and the
integration of any acquired assets or businesses with our existing operations;
industry-wide market factors and regulatory and other developments affecting our operations;
the ability to manage our growth effectively, including having adequate personnel and other resources for both operational
and administrative functions;
general economic uncertainty, whether as a result of the COVID-19 pandemic or otherwise;
current and longer-term economic and other impacts of the COVID-19 pandemic on our operations, results of operations
and financial condition, including without limitation our advertisers’ response to the pandemic and resulting economic
disruptions caused as a result of the pandemic;
our dependence upon a single global media company for the majority of our revenue, which dependence we expect to
continue;
the effectiveness with which we handle credit risk in our digital segment insofar as we are required to pay the media
companies for which we act as commercial partner for all inventory purchased regardless of whether we are able to collect
on a transaction from the local advertiser or its ad agency;
the impact of a strengthening U.S. dollar on our overseas operations, including but not limited to our exposure between
the time that we invoice in local currency and deposit the related collections into U.S. dollar-denominated accounts;
the impact of any potential future impairment of our assets;
risks related to changes in accounting interpretations;
consequences of, and uncertainties regarding, foreign currency exchange including fluctuations thereto from time to time;
legal, political and other risks associated with our rapidly expanding operations located outside the United States; and
the effect of changes in broadcast transmission standards by the Advanced Television Systems Committee's 3.0 standard
(“ATSC 3.0”), as they are being adopted in the broadcast industry and as they may impact our ability to monetize our
spectrum assets; and
For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any
forward-looking statement, please see “Risk Factors,” beginning at page 38 below.
ITEM 1.
BUSINESS
The discussion of the business of Entravision Communications Corporation and its wholly-owned subsidiaries, or Entravision
or the Company, is as of the date of filing this report, unless otherwise indicated.
Introduction
Overview
We are a leading global advertising solutions, media and technology company. Our operations encompass integrated, end-to-end
advertising solutions across multiple media, comprised of digital, television and audio properties. For financial reporting purposes, we
report in three segments based upon the type of advertising medium: digital, television and audio (formerly radio).
Our digital segment, whose operations are primarily located in Latin America, Europe, the United States, Asia and Africa,
reaches a global market, with a focus on advertisers in emerging economies that wish to advertise on digital platforms owned and
operated primarily by global media companies. Our television and audio operations reach and engage U.S. Hispanics in the United
States.
We provide digital end-to-end advertising solutions that allow advertisers to reach online users worldwide. These solutions are
comprised of four business units:
•
•
our digital commercial partnerships business;
Smadex, our programmatic ad purchasing platform;
4
•
•
our mobile growth solutions business; and
our digital audio business.
Through our digital commercial partnerships business – the largest of our digital business units – we act as an intermediary
between primarily global media companies and advertising customers or their ad agencies. The global media companies we represent
include Meta Platforms, or Meta (formerly known as Facebook Inc.), Twitter, Inc., or Twitter, ByteDance Ltd., or ByteDance, which
owns the TikTok platform, and Spotify AB, or Spotify, as well as other media companies, in 40 countries throughout the world. Our
dedicated local sales teams sell advertising space on these media companies' digital platforms to our advertising customers or their ad
agencies for the placement of ads directed to online users of a wide range of Internet-connected devices. We also provide some of
these customers billing, technological and other support services, including strategic marketing and training, which we refer to as
managed services.
Smadex is our programmatic ad purchasing platform, on which advertisers can purchase ad inventory. This practice – the
purchase and sale of advertising inventory electronically – is referred to in our industry as programmatic advertising. Smadex is also a
“demand-side platform”, which allows advertisers to purchase space from online marketplaces on which media companies list their
advertising inventory. Most advertisements acquired through Smadex are placed on mobile devices, but they may also be placed on
computers and Internet-connected televisions. We also provide managed services to some of our advertising customers in connection
with their use of our Smadex platform.
We also offer a mobile growth solutions business, which provides managed services to advertisers looking to connect with
consumers, primarily on mobile devices. This business allows us to manage programmatic media buys for our advertising customers
or their ad agencies through multiple ad purchasing platforms in real time across multiple channels.
Our digital audio business provides digital audio advertising solutions for advertisers in the Americas. Our advertising
customers and their ad agencies use these solutions to promote their brands on online audio streams, and provides them with tools to
target specific users by demographic and geographic categories.
We also have a diversified media portfolio that targets Hispanic audiences. We own and/or operate 49 primary television
stations located primarily in California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Nevada, New Mexico, Texas and
Washington, D.C. Our television operations comprise the largest affiliate group of both the top-ranked Univision television network
and TelevisaUnivision’s UniMás network, with television stations in 14 of the nation’s top 50 U.S. Hispanic markets. According to
TelevisaUnivision, which uses viewing data from Nielsen Holdings plc, or Nielsen, TelevisaUnivision’s primary Univision network is
among the most-watched broadcast television networks among U.S. Hispanics, and delivered multiple top rated programs during the
2022 calendar year. TelevisaUnivision is a key source of programming for our television broadcasting business and we consider it to
be a valuable strategic partner of ours. For a more complete discussion of our relationship with TelevisaUnivision, please see
“Television – Our Relationship with TelevisaUnivision” and “Television – Television Programming” below and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Overview”; and for a discussion of various risks related
to our relationship with TelevisaUnivision, please see “Risk Factors.”
Additionally, we own and operate one of the largest groups of primarily Spanish-language radio stations in the United States.
We own and operate 45 radio stations in 14 U.S. markets. Our radio stations consist of 37 FM and 8 AM stations located in Arizona,
California, Colorado, Florida, Nevada, New Mexico and Texas. We also sell advertisements and syndicate radio programming to more
than 100 markets across the United States.
Historically, through our television and audio segments, we focused primarily on the U.S. Hispanic market, and our television
and audio segments continue to focus on this core consumer. Additionally, with the growth of our digital segment, we now also focus
on advertisers attempting to reach online users throughout the world. We have relied historically on TelevisaUnivision as one of the
key strategic partners in our business and TelevisaUnivision remains our primary strategic relationship in our television segment. As
our digital segment has grown, we now also rely significantly on global and other media companies as strategic partners. We expect
that our digital operations will continue to grow and become an increasingly larger focus of our attention in terms of operational and
growth strategies, including our acquisition strategy; commercial and strategic partnerships, meeting customer expectations; and
contribution to our revenue and results of operations.
In our digital segment, we generate revenue primarily from sales of advertising that are placed by our advertising customers or
their ad agencies on the digital platforms of third-party media companies for which we act as commercial partner or placed directly
with online digital marketplaces through our Smadex platform. In our television segment, we generate revenue primarily from sales of
national and local advertising time on television stations, retransmission consent agreements that are entered into with multichannel
video programming distributors, or MVPDs, and agreements associated with our television stations’ spectrum usage rights. In our
5
audio segment, we generate revenue primarily from sales of national and local advertising time on radio stations. Advertising rates are,
in large part, based on each medium’s ability to attract audiences in demographic groups targeted by advertisers.
In our digital segment, we recognize advertising revenue when display or other digital advertisements record impressions on the
websites and mobile and Internet-connected television applications, or apps, of media companies on whose digital platforms the
advertisements are placed or as the advertiser’s previously agreed-upon performance criteria are satisfied. In our television and audio
segments, we recognize advertising revenue when commercials are broadcast. We do not obtain long-term commitments from our
advertisers across any of our operations and, consequently, they may cancel, reduce or postpone orders without penalties. In our
television and audio segments, we pay commissions to agencies for local and national advertising. For contracts we have entered into
directly with agencies, we record net revenue from these agencies.
In our television segment, we refer to the revenue generated by agreements with MVPDs as retransmission consent revenue,
which represents payments from MVPDs for access to our television station signals so that they may rebroadcast our signals and
charge their subscribers for this programming. We recognize retransmission consent revenue earned as the television signal is
delivered to an MVPD.
In our digital segment, net revenue generally increases in each fiscal quarter over the course of the year. Our television and
audio segments experience seasonal revenue fluctuations, which are common in our industry and are due primarily to variations in
advertising expenditures by both local and national advertisers. Our first fiscal quarter generally produces the lowest net revenue for
the year, and our second and third fiscal quarters generally produce the highest net revenue for the year. In addition, advertising
revenue is generally higher during presidential election years (2016, 2020, etc.), and, to a lesser degree, Congressional mid-term
election years (2018, 2022, etc.), resulting from increased political advertising in those years compared to other years. In addition,
revenue from political advertising can be affected by such factors as actual or perceived competitiveness of races in the markets we
serve, which we experienced in 2022, despite its being a Congressional mid-term election, resulting in record revenue from political
advertising for us. Advertising revenue in our audio segment is also generally higher during years when we broadcast the FIFA World
Cup on our radio stations (2018, 2022, etc.).
Our licenses from the Federal Communications Commission, or FCC, grant us spectrum usage rights within each of the
television markets in which we operate. These spectrum usage rights give us the authority to broadcast our stations’ over-the-air
television signals to our viewers. We regard these rights as a valuable asset. We generate revenue from agreements associated with
these television stations’ spectrum usage rights from a variety of sources, including but not limited to agreements with third parties to
utilize spectrum for the broadcast of their multicast networks; charging fees to accommodate the operations of third parties, including
moving channel positions or accepting interference with our broadcasting operations; and modifying and/or relinquishing spectrum
usage rights while continuing to broadcast through channel sharing or other arrangements. We recognize revenue generated by such
agreements is recognized over the period of the agreement or when we have relinquished all or a portion of our spectrum usage rights
for a station or have relinquished our rights to operate a station on the existing channel free from interference. In addition, subject to
certain restrictions contained in our 2017 Credit Agreement, we will consider strategic acquisitions of television stations to further this
strategy from time to time, as well as additional monetization opportunities expected to arise as the television broadcast industry
implements the standards contained in ATSC 3.0.
Our net revenue for the year ended December 31, 2022 was approximately $956.2 million. Of this amount, revenue generated
by our digital segment accounted for approximately 78%, revenue generated by our television segment accounted for approximately
15%, and revenue generated by our audio segment accounted for approximately 7% of total revenue. We anticipate that revenue
generated by our digital segment, both in absolute dollars and as a percentage of total revenue, will continue to grow in future periods.
In our digital segment, our primary expense is cost of revenue, which consists primarily of the costs of online media acquired
from the media companies for which we act as commercial partner or purchased directly from online digital marketplaces through our
Smadex platform, as well as third party server costs. Our primary expenses in our television and audio segments, and a secondary
expense in our digital segment, is employee compensation, including commissions paid to our sales staff and amounts paid to our
national sales representative firms, as well as expenses for general and administrative functions, promotion and selling, engineering,
marketing, and local programming.
Our principal executive offices are located at 2425 Olympic Boulevard, Suite 6000 West, Santa Monica, California 90404, and
our telephone number is (310) 447-3870. Our corporate website is www.entravision.com.
We were organized as a Delaware limited liability company in January 1996 to combine the operations of our predecessor
entities. On August 2, 2000, we completed a reorganization from a limited liability company to a Delaware corporation. On August 2,
2000, we also completed an initial public offering of our Class A common stock, which is listed on The New York Stock Exchange
under the trading symbol “EVC".
6
Business Strategy
Our digital strategy is to reach connected consumers, with a focus on those in emerging economies.
•
•
•
•
•
Significant and Growing Digital Advertising Industry. The global digital advertising business continues to grow year-
over-year at a rapid pace. According to eMarketer, global digital advertising spending was expected to reach an estimated
$567 billion in 2022 and grow to an estimated $836 billion by 2026. Moreover, the percentage of digital advertising
spending worldwide as a function of total advertising spending is expected to increase from 65 percent of total advertising
spending in 2022 to 73 percent of total advertising spending in 2026.
Global Internet Use Growth. Our digital segment targets advertising customers worldwide, with a focus on advertisers or
their ad agencies in emerging economies throughout the world, primarily in Latin America, Asia and Africa. Our focus on
emerging economies provides an opportunity to engage the growing population of Internet users in those areas. In Latin
America, Asia-Pacific (not including China) and the Middle East and Africa, three regions in which we have expanded,
digital ad spending is expected to increase from $94 billion in 2022 to $127 billion in 2025 – representing nearly 35%
growth.
Commercial Partnerships with Global Digital Media Companies. We have commercial partnership agreements, some of
which are exclusive, to act as commercial partner for primarily global media companies whose platforms provide our
advertising customers or their ad agencies a global reach to online users across a wide range of Internet-connected
devices. Meta, the commercial partner from which we derive most of our revenue, alone reported an estimated $114
billion in advertising revenue for 2022. That amount represents 20% of the estimated $567 billion in global digital
advertising spending in 2022. According to Kepios, of the six social media platforms that each claim one billion or more
monthly active users, three of the six platforms are owned by Meta (Facebook, WhatsApp and Instagram) and another is
owned by ByteDance, one of our other significant commercial partners (TikTok). Moreover, according to Sensor Tower,
Meta and ByteDance together are two out of the top three media companies worldwide in terms of downloads.
Capture Mobile Expansion. Our global digital advertising solutions also target the growing number of mobile device
users worldwide. According to eMarketer, there were an estimated 3.5 billion smartphone users worldwide in 2022, which
is expected to grow to an estimated 3.9 billion smartphone users by 2026. Global digital spend on mobile advertising was
expected to be an estimated $424 billion in 2022 and reach an estimated $634 billion in 2026, which is 76% of all digital
advertising in 2025. Additionally, according to SensorTower, global mobile app downloads are expected to increase from
148 billion in 2022 to 181 billion in 2026.
Embrace Advertising Technology. Our global digital end-to-end advertising solutions include our Smadex platform,
which enables advertising customers to electronically purchase advertising inventory from online marketplaces where
media companies list advertising inventory and directly manage data-driven advertising campaigns. This practice – the
purchase and sale of advertising inventory electronically – is referred to as programmatic advertising. Global spending on
programmatic advertising spending is expected to expand by $314 billion between 2021 and 2026, according to
Technavio, which is a year-over-year growth rate of nearly 16%.
For our television and audio segments, our strategy is to reach Hispanic audiences primarily in the United States and along or
near the United States/Mexico border. We own and/or operate media properties in 13 of the 20 highest-density U.S. Hispanic markets.
In addition, among the top 25 U.S. Hispanic markets, we own and/or operate media properties in 8 of the 15 fastest-growing markets.
We believe that targeting the U.S. Hispanic market will continue to translate into revenue growth in the future, including for the
following reasons:
•
•
•
U.S. Hispanic Population Growth. Our television and audio audience consists primarily of Hispanics, one of the fastest-
growing segments of the U.S. population and, by current U.S. Census Bureau estimates, now the largest minority group in
the United States. More than 62 million Hispanics live in the United States, accounting for approximately 19% of the total
U.S. population, according to the U.S. Census Bureau. The overall Hispanic population is growing at eight times the rate
of the non-Hispanic population and is expected to grow to 70 million, or approximately 20% of the total U.S. population,
by 2027. Approximately 57% of the estimated future growth in the U.S. population from 2020 to 2026 is expected to
come from the Hispanic community.
Spanish-Language Use. Approximately 77% of Hispanics age five and over in the United States speak some Spanish,
while approximately 64% of U.S. Hispanics age five and over are bilingual and 32% are Spanish dominant, according to
Geoscape, a business unit of Claritas LLC, or Geoscape.
Increasing U.S. Hispanic Buying Power. The U.S. Hispanic population was projected to account for total consumer
expenditures of about $1.2 trillion in 2022, according to Claritas. With an average expected household income of $84,000
in 2022, Hispanic household income is growing at a faster rate than non-Hispanic household income and is projected to
reach an aggregate of $1.9 trillion in 2027.
7
•
Attractive Profile of U.S. Hispanic Consumers. We believe that the demographic profile of the U.S. Hispanic audience
makes it attractive to advertisers. We also believe that the larger average size and younger median age of Hispanic
households (averaging 3.2 persons and 30.6 years of age as compared to the U.S. non-Hispanic averages of 2.4 persons
and 43.5 years of age) lead Hispanics to spend more per household in many categories of goods and services. Although
the average U.S. Hispanic household has less disposable income than the average non-Hispanic U.S. household, the
average U.S. Hispanic household spends 2% more per year than the average U.S. non-Hispanic household on food at
home,12% more on quick service restaurants, 30% more on children’s clothing, 46% more on footwear, 22% more on
soaps and detergents and 18% more on cellular phone services. We expect U.S. Hispanics to continue to account for a
disproportionate share of growth in spending nationwide in many important consumer categories as the U.S. Hispanic
population and its disposable income continue to grow.
•
Spanish-Language Advertising. According to Nielsen, over $11.1 billion of total advertising expenditures in the United
States were placed with Spanish-language media in 2022.
We seek to increase our revenue through the following strategies for our digital segment:
Target Strategic Acquisitions and Investments. We have grown our digital segment through the acquisition of several digital
advertising companies, as well as organically, over the last several years. We believe that these acquisitions, and their integration into
our operations, are key to the growth of our digital segment. We intend to continue to evaluate opportunities to acquire complementary
businesses that are consistent with our overall growth strategy, continuing to focus primarily on emerging economies. We believe that
our knowledge of, and experience with, the global digital advertising solutions business will enable us to identify potential
acquisitions of digital assets or businesses. However, we are currently subject to certain limitations on acquisitions under the terms of
the 2017 Credit Agreement. Please see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Liquidity and Capital Resources” below.
Strengthen and Grow Existing and New Media Company Relationships. Over the past two years, we have built commercial
partnerships with several of the world's largest media companies, and other media companies, all of which have a strong presence in
emerging economies. We believe that these relationships can be enhanced by continuing to provide best-in-class local service to these
media companies that wish to sell advertising space on their owned and operated digital platforms. In turn, we believe that the value-
added sales services, including managed services, we provide locally, backed by a sophisticated financial and accounting operation
managed from the United States, have the potential to lead to broader relationships with the global and other media companies for
which we currently act as commercial partner as well as new relationships with other media companies.
Develop Best-in-Class Advertising Technology. We continue to invest in our programmatic advertising technology, primarily
our Smadex programmatic ad purchasing platform. Smadex uses AI to give advertisers or their ad agencies a real-time bidding engine
that allows them to manage direct purchase of advertising on digital platforms owned and operated by global and other media
companies, in order to reach online users across a range of Internet-connected devices. As digital advertising continues to move more
to a programmatic model, which relies heavily on technology, we intend to make appropriate investments to keep up with
technological innovations and changes.
We seek to increase our revenue through the following strategies for our television and audio segments, as well as our digital
segment in the United States:
Develop Unique and Compelling Content and Strong Brands While Effectively Using the Brands of Our Network Affiliates. We
make investments in areas such as market research, data analysis and creative talent to license and create content for our television,
audio and U.S. digital properties.
Our television operations comprise the largest affiliate group of both TelevisaUnivision's top-ranked Univision primary
television network and TelevisaUnivision’s UniMás network. TelevisaUnivision reports that Univision continued its strong ratings
performance as the only major broadcast network to deliver ratings and audience growth for the 2021/2022 broadcast season. UniMás
is among the leading Spanish-language broadcast television networks. TelevisaUnivision makes its networks’ Spanish-language
programming available to our television stations 24 hours a day, seven days a week, including a prime time schedule on its primary
Univision network of substantially all first-run programming throughout the year. We believe that the breadth and diversity of
TelevisaUnivision’s programming, combined with our local news and community-oriented segments, provide us with an advantage
over other Spanish-language and English-language media in reaching U.S. Hispanic viewers. We design our local content in an effort
to meet the needs of our communities and brand each of our stations as the best source for relevant community information that
accurately reflects local interests and needs.
We format the programming of our audio networks and radio stations in an effort to capture a substantial share of the U.S.
Hispanic audience in each of our audio markets. We operate each of our three audio networks – La Tricolor, La Suavecita, and Fuego
– using a format designed to appeal to different listener tastes. In markets where competing stations already offer programming similar
8
to our network formats, or where we otherwise identify an available niche in the marketplace, we run alternative programming that we
believe appeals to local listeners.
Develop Local Content, Programming and Community Involvement. We believe that local content and service to the community
in each of our markets is an important part of building our brand identity and providing meaningful local service within those markets.
By combining our local news, local content and quality network programming, we believe that we have a significant competitive
advantage. We also believe that our active community involvement, including station remote broadcasting appearances at customer
events and concerts and tie-ins to major events, helps to build company and station awareness and identity as well as viewer and
listener loyalty. We also promote civic involvement and inform our listeners and viewers of significant developments affecting their
communities.
Distribute News and Other Content Across Our Television, Radio and Digital Properties. We develop our own Emmy® award-
winning news, entertainment and lifestyle content. We distribute this content across our television and radio stations and their related
digital properties, including four local news websites. In addition, through the Entravision Audio Network, we syndicate, distribute
and sell radio programs including “Erazno y La Chokolata”, “El Show de Piolin”, “The Shoboy Show” and“El Show de Alex ‘El
Genio’ Lucas” across a network of more than 300 radio stations, which includes our radio stations, as well as other radio stations that
we do not own or operate, in more than 100 markets throughout the United States. We also broadcast, on an exclusive basis, and
syndicate, National Football League, or NFL, games, including Sunday Night Football, Monday Night Football, and the NFL playoffs,
including the Super Bowl, in Spanish, on 15 radio stations. Through our partnership with Fútbol de Primera, we also broadcast on 15
radio stations a weekly soccer show, Mexican National Soccer team matches, and, in November and December 2022, the 2022 FIFA
World Cup.
Extend the Reach and Accessibility of Our Brands Through Our U.S.-Based Digital Platforms. In recent years, we have also
expanded the distribution of our content through our U.S.-based digital platforms, such as the content we offer on our owned-and-
operated websites and our El Boton mobile audio app. We believe that these platforms offer opportunities to further enhance the
relationships we have with our audiences by allowing them to engage and share our content in new ways, while providing us with new
distribution channels for one-to-one communication with them.
Continuing to Offer Advertisers an Integrated Platform of Services. We believe that our diversified media portfolio provides us
with a competitive advantage in targeting the Hispanic consumer. We offer advertisers the opportunity to reach potential customers
through an integrated platform of services that includes television, radio and U.S.-based digital properties. Currently, we operate some
combination of television and radio in 10 markets, which we sometimes refer to as combination markets, and, where possible, we also
combine our television and radio operations, which have the effect of creating certain cost savings. In all of our markets, we believe
that our digital properties complement our television and/or radio operations in an effort to create value-added advertising
opportunities for our advertisers.
Monetize our Spectrum Assets. In recent years, with the proliferation of mobile devices and advances in technology that have
freed up spectrum capacity, the monetization of our spectrum usage rights has become a significant source of revenue. We generate
revenue from agreements associated with these television stations’ spectrum usage rights from a variety of sources, including but not
limited to agreements with third parties to utilize spectrum for the broadcast of their multicast networks; charging fees to
accommodate the operations of third parties, including moving channel positions or accepting interference with broadcasting
operations; and modifying and/or relinquishing spectrum usage rights while continuing to broadcast through channel sharing or other
arrangements. With more advances in technology, and the implementation of ATSC 3.0, we intend to continue to generate revenue
from our spectrum assets.
Acquisition and Disposition Strategies
Historically, our acquisition strategy was focused on increasing our television and radio broadcasting presence in those markets
in which we already competed, as well as expanding our operations into U.S. Hispanic markets where we did not own properties. We
targeted fast-growing and high-density U.S. Hispanic markets. These included many markets in the southwestern United States,
including Texas, California and various other markets along or near the United States/Mexico border. However, in recent years, in
order to enhance our product portfolio in our digital segment, we have focused our strategy more on acquisitions of high-growth
digital advertising companies in new markets for us, primarily in emerging economies, in Asia and Africa, in addition to emerging
economies where we already had a presence, such as Latin America, as well as Europe.
We plan to continue to evaluate opportunities to make future acquisitions as opportunities present themselves, primarily
internationally, and particularly digital advertising companies. Additionally, we would consider acquiring spectrum assets with high
potential for future monetization, and additional media properties in markets that would enhance our overall offerings.
9
We are subject to certain limitations on acquisitions under the terms of the 2017 Credit Agreement. We cannot at this time
determine the effect that these limitations may have on our acquisition strategy or our overall business. Please see “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”.
We also periodically review our portfolio of media properties and, from time to time, have divested assets where we do not see
the opportunity to grow to scale or for other considerations. We are also subject to certain limitations on divestitures under the terms
of the 2017 Credit Agreement. We cannot at this time determine the effect that these limitations may have on our disposition strategy
or our overall business. Please see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Liquidity and Capital Resources”.
With a presence on five continents and personnel located in 40 countries, we provide integrated, end-to-end digital advertising
solutions that allow advertisers to reach online users worldwide, through operations that are located in Latin America, Europe, the
United States, Asia and Africa.
Digital
Our Solutions and Technology Platform
We have developed a suite of end-to-end digital advertising solutions, both organically and as a result of a series of acquisitions:
•
•
•
•
•
•
In 2017, we acquired a series of companies headquartered in Barcelona and Buenos Aires that now comprise our mobile
growth solutions business.
In 2018, we acquired the Smadex business, which owns a programmatic ad purchasing platform.
In 2020, we acquired 51 percent of Cisneros Interactive, a Miami-based business that has commercial partnerships with
global media companies, including Meta and Spotify, in Latin America. We acquired the remaining 49 percent of
Cisneros Interactive in October 2021. Cisneros Interactive also includes Audio.Ad, which is a digital audio business in
Latin America.
In July 2021, we acquired MediaDonuts, a Singapore-based business that has commercial partnerships with global media
companies, including ByteDance and Twitter, in Southeast Asia.
In November 2021, we acquired 365 Digital, a business in Cape Town that has an exclusive commercial partnership with
ByteDance in South Africa.
In August 2022, we made an investment in exchange for approximately 15 percent of the issued and outstanding shares of
stock of Jack of Digital, a digital marketing services company that serves as the exclusive advertising sales partner of
ByteDance in Pakistan.
We provide end-to-end digital advertising solutions that allow advertisers to reach online users worldwide. These solutions are
comprised of four business units:
•
•
•
•
our digital commercial partnerships business;
Smadex, our programmatic ad purchasing platform;
our mobile growth solutions business; and
our digital audio business.
10
Our digital advertising solutions allow advertisers to design their advertising campaigns with the specific characteristics on
which the advertising campaign is intended to focus, thereby reaching those online users that the advertiser identifies as high-quality
and valuable. These solutions include “awareness”, by which advertisers broadly reach users of certain specific demographics for a
particular advertising campaign; “acquisition”, by which advertisers directly attract new online customers in a more targeted way than
awareness; and “retargeting”, by which advertisers target online users who have previously shown interest in the advertiser’s products
or services but have not yet become a customer. This approach contrasts with advertising on traditional media, such as print, where an
advertising campaign reaches every person accessing that medium, regardless of their individual characteristics or which
characteristics are identified by the advertiser to be most valuable to it in the advertising campaign.
Digital Commercial Partnerships
Our largest digital business unit is our digital commercial partnerships business, in which we act as an intermediary between
primarily global media companies and advertising customers or their ad agencies. Through local sales teams that are dedicated to these
media companies, we have commercial partnerships in 30 countries worldwide. We have contractual relationships, some of which are
exclusive, with these media companies, to sell their digital advertising inventory on the digital platforms that they own and operate in
certain countries. We then sell this advertising inventory to our advertising customers or their ad agencies. We seek to identify and
enter into commercial partnership agreements with media companies that own and operate platforms featuring premium digital content
and having global audience reach, growth, composition and accessibility, across a wide range of Internet-connected devices, to
achieve the objectives of our advertising customers or their ad agencies.
Typically, when we have a contractual relationship with a media company to act as its commercial partner, in the course of
purchasing digital advertising a prospective advertiser would reach our dedicated local sales teams to purchase advertising inventory
on the digital platform owned and operated by that media company. The services we offer can be either self-service, which means the
customer drives the ad purchasing function using our dedicated sales team to process the purchase, or managed, which means our sales
team provides greater input in the design and implantation of an advertising campaign, for a more customized experience for the
advertiser.
Managed services include a range of related, additional business services, including:
•
•
•
Expertise in Advertising Solutions. Our dedicated sales teams have knowledge across all products, apps and services
offered by the digital platforms owned and operated by these media companies, so our advertising customers or their ad
agencies can learn how to best deploy advertising campaigns and effectively reach online users who are the targets of
advertising campaigns.
Local Support and Consulting. We provide local support, local billing and credit services, and consultation on the strategic
and optimization aspects of advertising campaigns.
Local Training. We provide access to programs and training provided by the platforms owned and operated by these
media companies, so our advertising customers or their ad agencies can gain advertising expertise specific to these
platforms and better design and execute their advertising campaigns.
In Latin America, where we have the largest footprint of our digital commercial partnerships business, we are Meta's only
authorized commercial partner, representing it in 11 countries. We also serve as Meta's only authorized commercial partner in Ghana,
Iceland and Mongolia. Additionally, we serve as Spotify's exclusive commercial partner in 16 Latin American countries, as well as
Thailand. For ByteDance, we serve as an exclusive commercial partner in South Africa, a non-exclusive commercial partner in six
countries in Asia, and an exclusive partner in Pakistan. We also serve Twitter as an exclusive commercial partner in three countries in
Southeast Asia.
Programmatic Ad Purchasing Platform
Our end-to-end digital advertising solutions include Smadex, our programmatic ad purchasing platform, which is also known in
our industry as a "demand-side” platform. This kind of platform enables our advertising customers or their ad agencies to purchase
advertising electronically and manage data-driven advertising campaigns via global online marketplaces where media companies
aggregate their advertising inventory. This practice – the purchase and sale of advertising inventory electronically – is referred to in
our industry as programmatic advertising. Programmatic advertising, in addition to being automated, is intended to enable more
precise audience targeting of online users in advertising campaigns because of the aggregation, analysis and use of data about the
online users who are the targets of the advertising campaigns. Most advertisements acquired through the Smadex platform are placed
on mobile devices, but may also be placed on computers and Internet-connected televisions. The services we offer can be either self-
service or managed services.
Smadex is headquartered in Barcelona, Spain and provides advertising solutions to customers in more than 120 countries. Our
Smadex platform utilizes proprietary technology on a cloud-based infrastructure, connecting our advertising customers or their ad
agencies and digital platforms owned and operated by media companies, primarily in the mobile space. The Smadex platform delivers
more than 13 billion advertisements per month to more than 600 million unique users per month.
Smadex emphasizes transparency in the delivery of advertising, offering our advertising customers granular data on their
purchased advertising via real-time reports accessed from the Smadex platform. For example, for every advertisement shown, Smadex
11
reports detailed information to the advertiser confirming the execution of the advertising campaign. We believe that this level of
transparency assists our customers in their advertising decision-making, as well as their confidence that the advertising campaign is
being executed to their requirements. In turn, we believe that this level of transparency, by providing verifiable data to our customers,
makes it less likely that fraud is taking place in the execution of an advertising campaign.
While the digital advertising business is rapidly changing and subject to a number of factors, including several that are beyond
our control, we believe that our programmatic digital ad purchasing business has the potential for future growth.
Mobile Growth Solutions
Our mobile growth solutions business provides our advertising customers or their ad agencies with opportunities to reach users
of mobile devices through managed services in 40 countries. Our sales teams have in-depth knowledge of the complex mobile app
marketing ecosystem, and work with our customers to design and execute mobile advertising marketing plans. These marketing plans
are tailored to our customers' needs, and enable our customers to reach their target audiences.
We manage programmatic media buys through multiple ad purchasing platforms in real time across multiple channels.
Customers choose to reach audiences primarily through two kinds of advertising: brand advertising and performance-based
advertising. Brand advertising is generally intended to establish a long-term, positive consumer attitude toward an advertiser or its
products or services, and such advertisers typically measure campaign effectiveness using metrics such as reach (how many
consumers within the advertiser’s target audience were exposed to the advertisement) and frequency (how many times the consumer
within the target audience was exposed to the advertisement). Performance-based advertising is generally intended to induce a specific
action, such as clicking on an advertisement, and direct response advertisers typically measure campaign effectiveness using metrics
related to consumer response to a particular advertisement. Our advertising customers can choose to pay media companies for
advertisements based on different payment models including CPM, which is cost per thousand impressions; CPC, which is cost per
each user click on an advertisement; or CPA, which is cost per acquisition, or each time someone acquires a product or service
through engagement with an advertisement. Our sales teams are also able to provide our customers with regular reporting and the
ability to further control their campaigns based on need.
Digital Audio
Our digital audio business provides our advertising customers or their ad agencies with opportunities to promote their brands on
audio streams in North America and South America. This business has two components: AudioEngage and Audio.Ad. AudioEngage
targets users in North America and South America, and aggregates advertising space on online streams of radio, music and audio
shows in English, Spanish and Portuguese. Audio.Ad, which we acquired as part of our acquisition of Cisneros Interactive, provides
digital audio advertising solutions for advertisers in Latin America, with tools allowing advertisers to target specific users by
demographic and geographic categories, thereby allowing them the ability to measure, track and understand their audience's
preferences.
Our Digital Customers
Our digital customers consist primarily of advertisers of all sizes or the ad agencies that represent them. For the year ended
December 31, 2022, we had over 5,600 advertising customers, including top advertisers in a diverse number of industries, including
healthcare, retail, e-commerce, financial technology, consumer packaged goods, gaming, delivery services, insurance, entertainment,
communications, lifestyle, and travel. We do not believe that our business is substantially dependent upon any individual advertiser or
industry.
In our digital commercial partnerships business, our customers include global and other media companies for which we act as
commercial partner. These customers include Meta, Twitter, ByteDance and Spotify. The loss of one or more of the global media
companies with which we have commercial partnership agreements may have an adverse impact on our digital business generally and
results of operations. See Item 1A, "Risk Factors".
Digital Sales
In our digital commercial partnerships business, we maintain a local, dedicated sales team for each of the global media
companies for which we act as commercial partner. For Smadex, our programmatic digital ad purchasing business, we maintain sales
and marketing teams located in Europe, the United States, Asia and Latin America. We also have sales and marketing teams for our
other digital business units.
Digital Advertising
We generate revenue in our digital segment by placing digital advertisements on the digital platforms of third-party media
companies, whether the advertisement is purchased through us as commercial partner for media companies or purchased through our
Smadex programmatic digital ad purchasing platform. Advertising customers or their ad agencies typically purchase advertising
through us for campaigns that are sold and, in some instances, managed by our direct sales teams, which we refer to as managed
12
campaigns. Managed campaigns provide advertisers with a higher degree of “white glove” customer service, with dedicated account
teams that provide more interaction and customization in the management of advertising campaigns.
We typically contract with advertising customers or their ad agencies through insertion orders, which set forth campaign
parameters such as size and duration of the campaign, type of advertising format and pricing. Our advertising customers or their ad
agencies submit advertising insertion orders to us and we fulfill those orders by selling them space on the digital platforms of the
media company for which we act as commercial partner, or directly through our Smadex programmatic digital ad purchasing platform.
In our digital commercial partnerships business, we are typically paid by advertisers on the basis of the number of viewer
impressions shown to online users in an advertising campaign, known as a cost-per-thousand basis. In our programmatic digital ad
purchasing business, we are typically paid both on a cost-per-thousand basis and a cost-per-action basis, which is measured by the
number of actions, such as app installations or purchases of goods or services, taken by the online users to whom an advertisement is
delivered. Typically, we collect an amount from our advertising customers or their ad agencies for the advertisement placement,
retaining a pre-negotiated portion for our services and remitting the difference to the media company on whose digital platform the
advertisement has been placed.
We believe that key benefits of our end-to-end digital advertising solutions include the following:
Sophisticated targeting. Our digital advertising solutions specifically identify and reach online users across a wide range of
Internet-connected devices.
We believe that one of the main strengths of our digital advertising solutions, including the platforms of media companies for
which we serve as commercial partner, is that these solutions can access and analyze large amounts of data in order to provide a
multidimensional view of individual consumer profiles on an anonymous basis. This process, referred to as “data analytics”, helps
advertisers understand the effectiveness of their advertising campaigns in reaching and engaging online users.
We believe that advertisers choose platforms because of the data analytics provided to them. In our programmatic digital ad
purchasing business, we directly aggregate and leverage data from the digital platforms of media companies on which ads are placed.
We have also developed a number of online user categories to which advertisers can target their advertisements. Online user
categories can be based on a variety of attributes, some of which include location, demographics, affluence, intent, gender and
personal interests. We identify these attributes based upon information we have gathered about users’ online activity on an anonymous
basis, a process known as interest-based or online behavioral advertising. Driven by AI, we analyze these data to build sophisticated
user profiles and audience groups that, in combination with our data analytics and real-time decision-making, optimization and
targeting capabilities, enable us to deliver highly targeted advertising campaigns for our advertising customers or their ad agencies, as
well as the data analytics to help them better understand the online users who advertisers have targeted in their advertising campaigns.
As we deliver more advertisements, we are able to collect additional information about these users and the effectiveness of particular
advertising campaigns, which in turn further enhances our targeting capabilities. We believe that this allows us to deliver better direct
and indirect results for our advertising customers or their ad agencies, including their assessment the overall effectiveness of their
advertising campaigns.
Choice of Inventory. We provide our advertising customers or their ad agencies with a wide variety of inventory where they can
place their ads. Through our digital commercial partnerships business, we offer access to platforms with a global reach, such as Meta,
Spotify, ByteDance and Twitter. We believe that these are premium platforms, desirable to advertisers because of their global reach,
number of users and quality interactive experience. For advertising customers or their ad agencies who prefer to target users across a
wide variety of media platforms of all sizes, our Smadex programmatic digital ad purchasing platform allows advertisers to access
online digital marketplaces where they can place their ads in a targeted manner. Our mobile growth solutions unit also provides our
advertising customers with opportunities to reach online users by placing their advertisements on a wide range of digital advertising
inventory.
Brand safety. We believe that our advertising customers or their ad agencies value placing advertisements on digital platforms
that are appropriate or desirable, and that their advertisements are also not being delivered with unrelated content that might be
considered objectionable to the advertiser, such as content that contains distasteful or obscene language, violence, gambling, adult
content or criminal activity. This is referred to in our industry as “brand safety”. In our digital commercial partnerships business, we
do not attempt to define objectionable material, or interact with media companies in any manner regarding issues of perceived
appropriateness, and, in fact we rely on the policies of these media companies and the technology of their digital platforms to address
such issues. Nonetheless, we believe that we work with media companies that have brand safety policies and practices of their own.
Moreover, our Smadex programmatic digital ad purchasing platform does have a process for promoting brand safety, having received
certifications from multiple industry trade bodies, including the Interactive Advertising Bureau, and integrating third-party brand
safety solutions into its technology.
Our Technology
We utilize technology in our business, primarily in connection with our Smadex programmatic digital ad purchasing platform.
Smadex’s technology includes a proprietary real-time bidding system, or RTB, which is a means by which advertising is bought and
sold programmatically. Successful programmatic advertising campaigns require technology that enables swift, precise and cost-
efficient decision-making by applying digital algorithms to large stores of data. Smadex employs software engineers who design
13
hundreds of algorithms for the Smadex RTB that rapidly process millions of data points from previous ad campaigns, together with
the ad campaign details that our advertising customers or their ad agencies enter into the Smadex user interface, to programmatically
acquire advertising inventory from online marketplaces where media companies list advertising inventory. The resulting analytics
allow our advertising customers or their ad agencies to bid on and acquire the advertising inventory that they value the most, pay less
for advertising inventory they value less and refrain from bidding on advertising inventory that does not fit their ad campaign
parameters.
Additionally, Smadex’s technology processes this programmatic buying almost instantaneously. When Smadex’s RTB receives
a bid request from an online advertising marketplace, it typically takes up to 100 milliseconds for the Smadex infrastructure to decide
on which advertisements to bid, how much to bid for those advertisements in order to optimize cost for the advertiser, and send the
advertisement for display on the online user’s device.
Smadex’s technology also provides our advertising customers or their ad agencies granular data via real-time reports accessed
from the Smadex platform, allowing them to anticipate future online user behavior based on current data and identify changes and
improvements in the advertiser’s digital advertising strategy. This campaign data is also fed back into the Smadex platform, and the
platform’s machine-learning capabilities use this newly inputted data to further improve the efficiency and accuracy of future
advertising campaigns.
Data Use
Our ability to optimize analysis of advertising campaigns and help our advertising customers or their ad agencies determine the
effectiveness of those advertising campaigns depends on our ability to successfully aggregate and leverage data, including data that we
collect from advertisers, platforms, technology companies and third parties, as well as data we access from our own operating history.
Using cookies and non-cookie-based software, we collect information about the interactions of online users with advertisers and
digital platforms owned and operated by media companies, including, for example, information about the placement of advertisements
and online users’ interactions with advertisers’ own websites or advertisements.
Our use of data, combined with our significant audience reach, access to a large volume of digital advertising inventory and
broad array of advertising formats, allows us to deliver solutions that we believe can help grow our advertising customers’ businesses.
Through data analytics, we also enable advertisers to gain insights into the performance of their advertising campaigns and manage
those campaigns with a view toward maximizing return on their advertising investment.
Key to our ability to aggregate such data is certain tracking software. Programmatic advertising companies use unique
identifiers, such as Identification for Advertisers, or IDFA, on iOS devices, Google Advertising Identification (GAID), on Android
devices, and cookies on web browsers, to track online user activity across the Internet and apps. It is this tracking ability that allows
advertisers to both send an online user who meets the parameters of an advertising campaign targeted advertisements and determine
how successful their advertising campaigns are.
This tracking ability could be restricted by a number of factors, including new developments in, or new interpretations of, laws,
regulations and industry standards, consumer choice, changes in technology, including changes in web browser technology, increased
visibility of consent or “do not track” software, “ad-blocking” software, and restrictions imposed by large technology companies and
platform providers, web browser developers or other software developers. Certain media companies have been promoting increased
user privacy as part of their product offerings and have created software that adversely impacts the availability of unique identifiers.
For example, Apple previously moved to limit the ability of companies to track certain user activities via its Safari browser. In early
2021, Apple first made available App Tracking Transparency as part of its iOS 14.5, which provides online users with a pop-up
window when they open an app that asks if the user wants the app to track their data. If a user chooses not to be tracked, which early
evidence suggests has been the typical user response, the IDFA identifier is not available and advertisers cannot use IDFA to track
users as they visit apps. This, in turn, can inhibit the ability of an advertiser to more effectively target online users for an advertising
campaign and/or determine the effectiveness of that advertising campaign.
While Apple has introduced a replacement for the technology that companies use to measure the performance of advertising
campaigns that Apple claims is more privacy friendly but still allows some advertiser tracking capability, some have said that this
replacement technology is less efficient than the prior technology. This is a dynamic and rapidly evolving area
.
Other mobile operating systems and browser providers have also announced, and in many cases have already introduced,
product changes to limit the ability of app developers to collect and use data to target and measure advertising. In addition to Apple’s
Safari, Mozilla’s Firefox and Microsoft’s Edge also block third-party cookies by default. Google has introduced new controls over
third-party cookies in its Chrome web browser and has announced plans to phase out support for third-party cookies in Chrome by
2024.
14
Some media companies, including Meta, have publicly stated that Apple’s changes have had an adverse impact on their
businesses. While our digital commercial partnerships business is currently mostly concentrated in South America, where iOS only
accounted for approximately 12% of the mobile operating systems used in South America as of December 2021, according to
StatCounter, the impact on our digital operations of Apple’s actions and its replacement for IDFA, as well as actions that other media
companies have taken and may take, is unknown at this time but has the potential to be significant. See “Risk Factors”.
The handling and protection of PII, is regulated in many jurisdictions where we operate, including but not limited to California,
Virginia, Colorado, Utah, Connecticut, Brazil and the European Union, or the E.U. We believe that we comply with US state laws,
Brazil’s General Data Protection Law, or LGPD, and the E.U.’s General Data Protection Regulation, or GDPR. See “Regulation of
Digital Media”.
Digital Competition
We believe that the principal competitive factors in the digital advertising business include effective targeting of online users,
multi-device advertising campaign delivery capability, proven and scalable technologies, online user reach, strong relationships with
advertisers, brand awareness and reputation, the ability to ensure brand safety and prevent fraud, the ability to aggregate and leverage
data to deliver more relevant information about advertising campaigns, use of data analytics to effectively measure performance and
the ability to adapt to rapidly changing technologies that both respond to, and influence, the expectations of our customers, whether
advertisers or global media companies. We believe that we compete favorably with respect to all of these factors and that we are well-
positioned to be a leading provider of end-to-end digital advertising solutions for our customers.
The digital advertising business is dynamic, rapidly changing and highly competitive, influenced by frequent technological
advances, trends in both the overall advertising and digital advertising markets, changing customer perceptions and expectations, and
governmental or regulatory oversight and action. Our digital commercial partnerships business competes with companies such as
Aleph Group, Inc., which also serves as a commercial partner to media companies worldwide, particularly in emerging economies in
Central Europe, Latin America, Asia and Africa, as well as the United States. Our digital commercial partnerships business also
competes with global media companies themselves, which sell advertising directly to advertisers, in addition to selling advertising
through representatives such as us. Moreover, as many advertisers seek automation and enhanced targeting of increasingly fragmented
audiences, they are moving a greater percentage of their advertising budgets to programmatic solutions. As a result, our digital
commercial partnerships business faces more competition from a variety of companies that have allocated resources to the automated
buying and selling of advertising inventory through traditional channels, like desktop computers, and new and developing channels,
including mobile.
Smadex competes with other demand-side platforms such as The Trade Desk, Inc., Criteo Corp., Liftoff, Inc. and Moloco, Inc.,
which also have a global presence selling advertisements through their ad purchasing platforms. We also compete at the product and
engineering level with global media companies themselves, including Meta and Google, as well as other media companies which sell
digital advertising inventory directly through their own ad purchasing platforms to advertisers. Our digital operations also compete for
advertising commitments with television broadcasters, cable television networks, radio broadcasters, print media and media platforms.
Many of our competitors in the digital advertising business have significantly larger financial resources and/or longer operating
histories than we have in this space.
Overview
Television
We own and/or operate TelevisaUnivision-affiliated television stations in 21 markets, including 14 of the top 50 Hispanic
markets in the United States. Our television operations comprise the largest affiliate group of both the top-ranked Univision primary
television network and TelevisaUnivision’s UniMás network. TelevisaUnivision’s primary Univision network is available in
approximately 64% of U.S. Hispanic television households. According to TelevisaUnivision, Univision continued its stellar ratings
performance as the only major broadcast network to deliver ratings and audience growth for the 2021/2022 broadcast season. UniMás
is among the leading Spanish-language broadcast television networks. We operate both Univision and UniMás affiliates in 17 of our
21 television markets. TelevisaUnivision’s networks make their Spanish-language programming available to our TelevisaUnivision-
affiliated stations 24 hours a day, seven days a week. TelevisaUnivision’s prime time schedule on its primary Univision network
consists of substantially all first-run programming throughout the year.
Our Relationship with TelevisaUnivision
Substantially all of our television stations are Univision- or UniMás-affiliated television stations. Our network affiliation
agreement with TelevisaUnivision provides certain of our owned stations the exclusive right to broadcast TelevisaUnivision’s primary
15
Univision network and UniMás network programming in their respective markets. Under the network affiliation agreement, we retain
the right to sell no less than four minutes per hour of the available advertising time on stations that broadcast Univision network
programming, and the right to sell approximately four and a half minutes per hour of the available advertising time on stations that
broadcast UniMás network programming, subject to adjustment from time to time by TelevisaUnivision.
Under the network affiliation agreement, TelevisaUnivision acts as our exclusive third-party sales representative for the sale of
certain national advertising on our Univision- and UniMás-affiliate television stations, and we pay certain sales representation fees to
TelevisaUnivision relating to sales of all advertising for broadcast on our Univision- and UniMás-affiliate television stations. During
the years ended December 31, 2022 and 2021, the amount we paid TelevisaUnivision in this capacity was $8.1 million and $8.4
million, respectively.
We also generate revenue under two marketing and sales agreements with TelevisaUnivision, which give us the right to manage
the marketing and sales operations of TelevisaUnivision-owned Univision affiliates in three markets – Albuquerque, Boston and
Denver.
Under the current proxy agreement we have entered into with TelevisaUnivision, we grant TelevisaUnivision the right to
negotiate the terms of retransmission consent agreements for our Univision- and UniMás-affiliated television station signals. Among
other things, the proxy agreement provides terms relating to compensation to be paid to us by TelevisaUnivision with respect to
retransmission consent agreements entered into with MVPDs. During the years ended December 31, 2022, 2021 and 2020,
retransmission consent revenue accounted for approximately $36.0 million, $37.0 million and 36.8 million, respectively, of which
$24.9 million, $25.9 million and 26.8 million, respectively, relate to the TelevisaUnivision proxy agreement. The term of the proxy
agreement extends with respect to any MVPD for the length of the term of any retransmission consent agreement in effect before the
expiration of the proxy agreement.
On October 2, 2017, we entered into the current network affiliation agreement with TelevisaUnivision, which superseded and
replaced our prior network affiliation agreements with TelevisaUnivision. Additionally, on the same date, we entered into the current
proxy agreement and current marketing and sales agreements with TelevisaUnivision, each of which superseded and replaced the prior
comparable agreements with TelevisaUnivision. The term of each of these current agreements expires on December 31, 2026 for all
of our Univision and UniMás network affiliate stations, except that each current agreement expired on December 31, 2021 with
respect to our Univision and UniMás network affiliate stations in Orlando, Tampa and Washington, D.C.
TelevisaUnivision currently owns approximately 11% of our common stock on a fully-converted basis. Our Class U common
stock, all of which is held by TelevisaUnivision, has limited voting rights and does not include the right to elect directors. Each share
of Class U common stock is automatically convertible into one share of Class A common stock (subject to adjustment for stock splits,
dividends or combinations) in connection with any transfer of such shares of Class U common stock to a third party that is not an
affiliate of TelevisaUnivision. In addition, as the holder of all of our issued and outstanding Class U common stock, so long as
TelevisaUnivision holds a certain number of shares of Class U common stock, we may not, without the consent of TelevisaUnivision,
merge, consolidate or enter into a business combination, dissolve or liquidate our company or dispose of any interest in any FCC
license with respect to television stations which are affiliates of TelevisaUnivision, among other things.
Television Programming
TelevisaUnivision Primary Network Programming. TelevisaUnivision has publicly stated that it directs Univision's
programming primarily toward a young, family-oriented audience. It begins daily with Despierta America, a variety morning program,
Sunday through Friday. In the late afternoon and early evening, Univision offers an entertainment magazine, a news magazine and
national news, in addition to local news produced by our television stations. During prime time, Univision airs novelas, music specials
and award shows. Prime time is followed by late news. Overnight programming consists primarily of repeats of programming aired
previously on the network. Weekend daytime programming begins with children’s programming, and is generally followed by sports,
reality, comedy shows and movies.
Approximately eight to ten hours of programming per weekday, including a substantial portion of weekday prime time, are
currently programmed with novelas supplied primarily by TelevisaUnivision. Although novelas have been compared to daytime soap
operas on the English-language television networks, the differences are significant. Novelas, originally developed as serialized books,
have a beginning, middle and end, generally run five days per week and conclude three to five months after they begin. We believe
that novelas also have a much broader audience appeal than soap operas, delivering audiences that contain large numbers of women,
men and teenagers, unlike soap operas, whose audiences tend to be primarily women.
UniMás Network Programming. TelevisaUnivision has publicly stated that its other 24-hour general-interest Spanish-language
broadcast network, UniMás, is programmed to meet the diverse preferences of the multi-faceted U.S. Hispanic community. UniMás’s
16
programming includes sports (including boxing, soccer and a morning wrap-up at 6 a.m. similar to ESPN’s programming), movies
(including a mix of English-language movies translated into Spanish) and novelas not run on TelevisaUnivision’s primary Univision
network, as well as reruns of popular novelas broadcast on TelevisaUnivision’s primary Univision network.
Our Local Programming. We believe that our local news brands our stations in our television markets. We report our local news
to relate to, and inform, our audiences. According to Nielsen, our early local news is ranked first or second among competing local
newscasts regardless of language in its designated time slot in 11 of our television markets among adults 25-54 years of age, including
ties, and in nine markets among adults 18-49 and adults 18-34 years of age, including ties. We have made substantial investments in
people and equipment in order to provide our local communities with what we believe are quality newscasts. Our local newscasts have
won numerous awards, and we strive to support the community in each of our local markets. For example, in 2022, we partnered with
Children’s Miracle Network® Hospitals in a radio event to raise money for local children’s hospitals. Moreover, in several of our
markets, we believe that our local news is the only significant source of Spanish-language daily news for the Hispanic community.
Network Affiliation Agreements. Substantially all of our television stations are Univision- or UniMás-affiliated television
stations. Our TelevisaUnivision network affiliation agreement provides certain of our owned stations the exclusive right to broadcast
TelevisaUnivision’s primary Univision network and UniMás network programming in their respective markets. The
TelevisaUnivision network affiliation agreement expires in 2026, except that it expired on December 31, 2021 with respect to our
Univision and UniMás network affiliate stations in Orlando, Tampa and Washington, D.C. Under the TelevisaUnivision network
affiliation agreement, we retain the right to sell no less than four minutes per hour of the available advertising time on stations that
broadcast Univision network programming, and the right to sell approximately four and a half minutes per hour of the available
advertising time on stations that broadcast UniMás network programming, subject to adjustment from time to time by
TelevisaUnivision.
Our network affiliation agreements with Fox Broadcasting Company, or Fox, give us the right to broadcast Fox network
programming on KFXV-TV with simulcasts on KXFX-CD and KMBH-LD, each serving the Matamoros/Harlingen-Weslaco-
Brownsville-McAllen market, and KXOF-CD, serving the Laredo market. These agreements expire on December 31, 2025.
We also have agreements with Master Distribution Service, Inc., an affiliate of Fox, which give us the right to provide ten hours
per week of MyNetworkTV network programming on KXOF-CD and KPSE-LD. These agreements expire in September 2023 and
may be extended for successive one-year periods by mutual consent of the parties.
Our network affiliation agreement with The CW Network, LLC, or CW, gives us the right to broadcast CW network
programming through August 2026 on KCWT-CD and on the secondary program stream of KMBH-LD.
Our network affiliation agreement with NBCUniversal Media, LLC, or NBC, gives us the right to broadcast NBC network
programming on KMIR-TV, serving the Palm Springs market, through December 31, 2024.
Our network affiliation agreement with Grit Media, LLC, or Grit, gives us the right to broadcast Grit network programming on
WOTF-TV, serving the Orlando market, through December 31, 2024, and on the secondary program streams of KDCU-TV, serving
the Wichita market, KINT-TV, serving the El Paso market, KPSE-LD, serving the Palm Springs market, KETF-CD, serving the
Laredo market, and KREN-TV, serving the Reno market, through December 31, 2025.
Our network affiliation agreement with Multi Tele Ventas, S.A. de C.V., gives us the right to broadcast Milenio Televisión
network programming on XDTV-TV, serving the Tijuana/San Diego market, through December 31, 2023.
Our affiliation agreement with Universal Communications Network, Inc. dba New Tang Dynasty Television gives us the right to
broadcast New Tang Dynasty Television network programming on WJAL-TV, serving the Washington, D.C. market, through
September 30, 2026.
Our affiliation agreement with the Church of Scientology International gives us the right to broadcast Scientology Network
programming on WFTT-TV, serving the Tampa-St. Petersburg market, through December 31, 2024.
Our network affiliation agreement with Estrella Media, Inc. gives us the right to broadcast EstrellaTV network programming on
XHAS-TV, serving the Tijuana/San Diego market, through February 28, 2026.
Our network affiliation agreement with LATV Networks, LLC, or LATV, gives us the right to broadcast LATV network
programming on WMDO-CD, serving the Washington, D.C. market, and on the secondary program streams of many of our television
stations. Either party may terminate the affiliation with respect to a given station 30 months after the launch of such station. Under the
17
LATV network affiliation agreement, there are no fees paid for the carriage of programming, and we generally retain the right to sell
approximately five minutes per hour of available advertising time. Since July 2022, we own 15% of the stock of LATV. We believe
that LATV is majority owned and controlled by the family of Walter F. Ulloa, our late Chief Executive Officer, who died on
December 31, 2022.
We cannot guarantee that any of our current network affiliation agreements will be renewed beyond their respective expiration
dates under their current terms, under terms satisfactory to us, or at all. We do not believe that the termination of any of our network
affiliation agreements, other than the one with TelevisaUnivision, would have a material adverse effect on our business and results of
operations.
Marketing Agreements. Our marketing and sales agreements with TelevisaUnivision give us the right to manage the marketing
and sales operations of TelevisaUnivision-owned Univision affiliates through 2026 in Albuquerque, Boston and Denver. Our
marketing and sales agreements with TelevisaUnivision that gave us the right to manage the marketing and sales operations of
TelevisaUnivision-owned Univision affiliates in Orlando, Tampa and Washington, D.C. expired on December 31, 2021. We have also
entered into marketing and sales agreements with other parties in two of our other markets.
Long-Term Time Brokerage Agreements. We program each of XDTV-TV, serving the Tecate/San Diego market; XHAS-TV,
serving the Tijuana/San Diego market; and XHRIO-TV, serving the Matamoros/Harlingen-Weslaco-Brownsville-McAllen market,
under long-term time brokerage agreements. Under those agreements, in combination with certain of our Mexican affiliates and
subsidiaries, we provide the programming and related services available on these stations, but the station owners retain absolute
control of the content and other broadcast issues. These long-term time brokerage agreements expire in 2038, 2040 and 2045,
respectively, and each provides for automatic, perpetual 30-year renewals unless both parties consent to termination. Each of these
agreements provides for substantial financial penalties should the other party attempt to terminate prior to their respective expiration
dates without our consent, and they do not limit the availability of specific performance as a remedy for any such attempted early
termination. As a result of changes in regulations in Mexico, we were required to prepay the license fees for our Mexico broadcast
licenses for a period of 20 years. We elected not to make the required prepayment for station XHRIO-TV before the deadline to make
such prepayment. As a result, we stopped broadcasting on this station in January 2022.
Our Television Station Portfolio
The following table lists information concerning each of our owned and/or operated television stations in order of market rank
and its respective market:
Market
Orlando-Daytona Beach-Melbourne,
Florida
Harlingen-Weslaco-Brownsville-
McAllen, Texas
Tampa-St. Petersburg (Sarasota),
Florida
Washington, D.C.
Denver-Boulder, Colorado
San Diego, California
El Paso, Texas
Albuquerque-Santa Fe, New Mexico
Boston, Massachusetts
Market Rank
(by Hispanic
Households)
10
11
13
16
17
18
19
20
21
Total
Households
1,775,140
Hispanic
Households
385,130
%
Hispanic
Households
Call Letters
Principal
Programming
Stream
21.7% WOTF-TV
Grit
403,470
378,650
93.8% KNVO-TV
KTFV-CD (1)
KMBH-LD (1)
KXFX-CD (1)
KFXV-TV
KCWT-CD (1)
2,068,720
345,910
16.7% WFTT-TV
2,617,350
319,350
12.2% WMDO-CD (1)(4)
WJAL-TV (4)
1,792,540
295,320
16.5% KCEC-TV (2)
1,107,010
292,240
371,730
290,230
KTFD-TV
26.4% KBNT-CD (1)
KHAX-LD (1)
KDTF-LD (1)
78.1% KINT-TV
KTFN-TV
720,750
282,810
39.2% KLUZ-TV (2)
KTFQ-TV
2,596,190
251,070
9.7% WUNI-TV (2)
18
Univision
UniMás
Fox
Fox
Fox
CW
Scientology
Network
LATV
New Tang
Dynasty
Univision
UniMás
Univision
Univision
UniMás
Univision
UniMás
Univision
UniMás
Univision
Las Vegas, Nevada
Hartford-New Haven, Connecticut
Corpus Christi, Texas
Monterey-Salinas-Santa Cruz,
California
Yuma, Arizona-El Centro, California
Laredo, Texas
24
29
32
36
39
41
870,240
205,640
1,014,160
139,970
208,490
119,640
232,880
94,010
WUTF-TV
23.6% KINC-TV
KNTL-LD (1)
KELV-LD (1)
13.8% WUVN-TV (4)
WUTH-CD (1)(4)
57.4% KORO-TV
KCRP-CD (1)
40.4% KSMS-TV (4)
KDJT-CD (1)(4)
126,610
82,250
65.0% KVYE-TV
82,170
80,880
98.4% KLDO-TV
KAJB-TV (2)
KETF-CD (1)
KXOF-CD (1)
UniMás
Univision
Univision
UniMás
Univision
UniMás
Univision
UniMás
Univision
UniMás
Univision
UniMás
Univision
UniMás
Fox
Odessa-Midland, Texas
44
160,200
79,700
49.8% KUPB-TV
Univision
Market
Colorado Springs-Pueblo, Colorado
Santa Barbara-Santa Maria-San Luis
Obispo,
California
Market Rank
(by Hispanic
Households)
50
51
Total
Households
385,730
Hispanic
Households
70,690
241,200
69,850
Palm Springs, California
54
168,210
66,470
Lubbock, Texas
Wichita-Hutchinson, Kansas
Reno, Nevada
Springfield-Holyoke, Massachusetts
San Angelo, Texas
Tecate, Baja California, Mexico (San
Diego)
Tijuana, Baja California, Mexico (San
Diego)
Matamoros, Tamaulipas, Mexico
(Harlingen-
Weslaco-Brownsville-McAllen)
56
62
63
66
108
—
—
—
171,450
457,620
306,940
264,420
57,690
63,020
55,530
52,640
46,960
19,680
—
—
—
—
—
—
Source: Nielsen Media Research 2023 universe estimates.
%
Hispanic
Households
Call Letters
Principal
Programming
Stream
KGHB-CD (1)
18.3% KVSN-TV
29.0% KPMR-TV
K17GD-D (1)
K32LT-D (1)
KTSB-CD (1)
K10OG-D (1)
39.5% KVER-CD (1)
KVES-LD (1)
KEVC-CD (1)
KMIR-TV
KPSE-LD (1)
36.8% KBZO-LD (1)
12.1% KDCU-TV
17.1% KREN-TV
Univision
UniMás
Univision
Univision
Univision
UniMás
UniMás
Univision
Univision
UniMás
NBC
MyNetworkTV
Univision
Univision
Univision
UniMás
Univision
Univision
UniMás
— XHDTV-TV (3) Milenio
KRNS-CD (1)
17.8% WHTX-LD (1)
34.1% KEUS-LD (1)
KANG-LD (1)
— XHAS-TV (3)
EstrellaTV
— XHRIO-TV
(3)(5)
Silent
(1)
“CD” in call signs indicates that a station is operated as a Class A digital television service. Certain stations without this “CD”
designation are also Class A stations. “LD” in call signs indicates that a station is operated as a low-power digital television
service.
(2) We provide the sales and marketing function of this station under a marketing and sales arrangement.
19
(3) We hold a minority, limited voting interest (neutral investment) in the entity that directly or indirectly holds the broadcast
license for this station. Through that entity, we provide the programming and related services available on this station under a
time brokerage arrangement. The station retains control of the contents and other broadcast issues.
In a “channel sharing” arrangement, two broadcast television stations, each holding its own broadcast authorization, agree to
share the bandwidth of a single broadcast channel, with the two stations transmitting separate program streams on the same
channel, of various amounts of bandwidth, that they each originate.
These stations are currently not broadcasting any programming.
(4)
(5)
Digital Television Technology. As we continue to enhance digital television transmission technology for our television stations,
we are operating in an environment where we can decide the resolution and number of broadcast streams we provide in our over-the-
air transmissions. Depending upon how high a resolution level at which we elect to transmit our programming, we have the potential
to transmit over-the-air broadcast streams containing multiple program streams using the bandwidth authorized to each digital station.
The transmission of such multiple programming streams is often referred to as multicasting. We currently are multicasting network
programming streams, including LATV and other network programming streams, at most of our television stations, along with our
primary network program streams. We periodically evaluate these multicasting operations as well as the amount of bandwidth we
must allocate to our primary program streams and may consider either expanding or limiting our multicasting operations, or keeping
these multicasting operations substantially as at present, in the future.
We also continue to monitor developments in digital television technology. The ATSC sets the industry standards for the
technical operation of digital broadcast television stations. ATSC 3.0 is a major revision of the ATSC standards and comprises around
20 standards covering different aspects of the system. The industry standards are designed to offer support for newer technologies that
will allow enhanced video quality, datacasting capabilities, individualized advertising messages, and more robust mobile television
support. Television industry observers believe that the combination of these functionalities will enable television broadcasters to
engage successfully in new commercial endeavors, not previously available on broadcast television, such as targeted commercial
advertising. The FCC has set regulations allowing broadcast stations to offer, on a voluntary basis, ATSC 3.0 services (which the FCC
has called Next Gen TV). In doing so, full power broadcast television stations must offer ATSC 3.0 services alongside a standard
ATSC 1.0 digital signal and there will not be a mandatory transition period. We are considering how we will participate in the
adoption of ATSC 3.0 technology and we are monitoring how ATSC 3.0 is being adopted and accepted by viewers and advertisers.
Television Revenue
Approximately 71% of the revenue generated from our television operations in 2022 was derived from local and national
advertising revenue, approximately 25% from retransmission consent revenue, and approximately 4% from spectrum usage rights.
National Advertising. National advertising revenue generally represents revenue from advertising time sold to an advertiser or
its agency that is placed from outside a station’s market. We typically engage national sales representative firms to work with our
station sales managers and solicit national advertising sales, and we pay certain sales representation fees to these firms relating to
national advertising sales. Under our network affiliation agreement with TelevisaUnivision, TelevisaUnivision acts as our sales
representative for the sale of national advertising on our Univision and UniMás affiliate television stations, and advertisers which have
purchased during 2022 national advertising on these affiliate stations include Senate Majority PAC, Nissan Motor Co., Ltd., Charter
Communications, Inc., Toyota Motor Corporation, Citizens for Sanity, House Majority PAC, Cox Communications, Inc., Club for
Growth Action, Cano Health, Inc. and Majority Forward. Katz Communications, Inc., or Katz, acts as our national sales representative
for the sale of national advertising on KMIR-TV and KPSE-LD in the Palm Springs, California market and on our stations that
broadcast Fox and CW programming. In 2022, national advertising accounted for approximately 40% of our total television revenue.
Local Advertising. Local advertising revenue is generated predominantly from advertising time sold to an advertiser or its
agency that is placed from within a station’s market. Local advertising sales include sales to advertisers that are local businesses or
advertising agencies, and regional and national businesses or advertising agencies, which place orders from within a station’s market
or directly with a station’s local sales staff. We employ our own local sales force that is responsible for soliciting local advertising
sales directly from advertisers or their ad agencies. In 2022, local advertising accounted for approximately 31% of our total television
revenue.
Retransmission Consent Revenue. We generate retransmission consent revenue from retransmission consent agreements that are
entered into with MVPDs. This revenue represents payments from these entities for access to our television station signals so that they
may rebroadcast our signals on their services and charge their subscribers for this programming. In addition, we generally pay either a
per subscriber fee to or share certain of the retransmission consent revenue received from MVPDs with the network providing the
programming, which is known in the television industry as reverse network compensation.
20
Under our proxy agreement with TelevisaUnivision, we grant TelevisaUnivision the right to negotiate the terms of
retransmission consent agreements for our Univision- and UniMás-affiliated television station signals, which covers substantially all
of our retransmission consent revenue. Among other things, the proxy agreement provides terms relating to compensation to be paid to
us by TelevisaUnivision with respect to retransmission consent agreements entered into with MVPDs. The term of the proxy
agreement extends with respect to any MVPD for the length of the term of any retransmission consent agreement in effect before the
expiration of the proxy agreement. On October 2, 2017, we entered into the current proxy agreement with TelevisaUnivision, which
superseded and replaced the prior comparable agreement with TelevisaUnivision. The term of the current proxy agreement expired on
December 31, 2021 for our Univision and UniMás network affiliate stations in Orlando, Tampa and Washington, D.C, and will expire
on December 31, 2026 with respect to our Univision and UniMás network affiliate stations in Albuquerque, Boston and Denver. We
replaced the Univision and UniMás programming in the markets where the agreement has expired.
As a result of provisions in the Communications Act of 1934, as amended, or the Communications Act, we are not able to
negotiate retransmission consent agreements with other television stations located in the same television market. This provision
prevents us from negotiating with TelevisaUnivision in the television markets where we and TelevisaUnivision both own television
stations. We handle our negotiations directly with MVPDs in those markets where TelevisaUnivision and we are both station owners.
In 2022, retransmission consent revenue accounted for approximately 25% of our total television revenue.
Revenue from Spectrum Usage Rights. We generate revenue from agreements associated with our television stations’ spectrum
usage rights from a variety of sources, including but not limited to entering into agreements with third parties to utilize spectrum for
the broadcast of their multicast networks, charging fees to accommodate the operations of third parties, including moving channel
positions or accepting interference from our broadcasting operations and modifying and/or relinquishing spectrum usage rights while
continuing to broadcast through channel sharing or other arrangements. Revenue from such agreements is recognized over the period
of the programming agreements or when we have relinquished all or a portion of our spectrum usage rights for a station or have
relinquished our rights to operate a station on the existing channel free from interference. In 2022, revenue from spectrum usage rights
accounted for approximately 4% of our total television revenue.
Television Marketing/Audience Research
The relative advertising rates charged by competing stations within a market depend primarily on the following factors, among
others:
•
•
•
•
•
•
•
•
the station’s ratings (households or people viewing its programs as a percentage of total television households or people in
the viewing area);
audience share (households or people viewing its programs as a percentage of households or people actually watching
television at a specific time);
the demographic and other qualities of a program’s viewers (primarily age and gender);
the demand for available air time;
the time of day the advertising will run;
competitive conditions in the station’s market, including the availability of other advertising media;
changes in advertising choices and placements in different media, such as new media, compared to traditional media such
as television and radio; and
general economic conditions, including advertisers’ budgetary considerations.
Nielsen ratings provide advertisers with an industry-accepted measure of television viewing. Nielsen offers a ratings service
measuring all television audience viewing. In recent years, Nielsen has modified the methodology of its ratings service in an effort to
more accurately measure U.S. Hispanic viewing by using language spoken in the home as a control characteristic of its metered
market sample. Nielsen has also added weighting by language as part of its local metered market methodology in many of our metered
markets. Nielsen also continues to improve the methods by which it electronically measures television viewing, including using return
path data, which is information acquired from MVPDs, and has expanded its Local People Meter service to several of our markets. We
believe that these improvements will continue to result in more accurate ratings, allowing our advertisers to more precisely target our
viewers. We have made significant investments in experienced sales managers and account executives and have provided our sales
professionals with research tools to continue to attract major advertisers. There are other services that also measure television viewing
and we regularly consider whether to make use of them.
Television Competition
21
We face intense competition in the television broadcasting business. In each local television market, we compete for viewers
and revenue with other local television stations, which are typically the local affiliates of the five principal English-language television
networks, NBC, ABC, CBS, Fox and the CW Network. In certain markets, we also compete for Spanish-language viewers with the
local affiliates or owned and operated stations of Telemundo, the Spanish-language television network owned by Comcast
Corporation, as well as other Spanish-language networks. Telemundo is an industry leader in the production and distribution of high-
quality Spanish-Language content to U.S. Hispanics and audiences around the world. Telemundo’s multiple platforms include the
Telemundo Network, a Spanish-language television network featuring original productions, theatrical motion pictures, news and
sporting events. Several of the companies with which we compete have significantly greater resources and longer operating histories
than we do.
We also directly or indirectly compete for viewers and revenue with both English- and Spanish-language independent television
stations, other video media (including streaming, mobile and on demand), suppliers of cable television network programs, direct
broadcast satellite systems, newspapers, magazines, radio, apps for mobile media devices, and other forms of entertainment and
advertising. In certain markets we operate radio stations that indirectly compete for local and national advertising revenue with our
television stations. Additionally, advertisers allocate finite advertising budgets across different media. We believe that the advent of
new technologies and services, including digital advertising on digital platforms owned and operated by media companies, may result
in continued emphasis by certain advertisers on these new technologies and services as compared to legacy media, such as television
and radio.
We believe that our primary competitive advantages are the quality of the programming we receive through our affiliation with
TelevisaUnivision and the quality of our local news programming. According to Nielsen, TelevisaUnivision’s primary Univision
network is the most-watched Spanish-language network in the United States during prime time among U.S. Hispanics. Similarly, our
local news achieves strong audience ratings. Also, according to Nielsen, our early local news is ranked first or second among
competing local newscasts regardless of language in its designated time slot in 11 of our television markets among adults 25-54 years
of age, including ties, and in 9 markets among adults 18-49 and adults 18-34 years of age, including ties.
Audio
Overview
We own and operate 45 radio stations (37 FM and 8 AM), 40 of which are located in the top 50 Hispanic markets in the United
States, and we operate the Entravision Radio Network, through which we sell advertisements and provide syndicated radio
programming to more than 100 markets across the United States. According to Nielsen, our radio stations broadcast into markets with
a total population of approximately 19 million U.S. Hispanics, which is approximately 31% of the Hispanic population in the United
States. Our radio operations combine network and local programming with local time slots available for advertising, news, traffic,
weather, promotions and community events. This strategy allows us to provide quality programming with significantly lower costs of
operations than we could otherwise deliver solely with all locally produced programming.
Radio Programming
Radio Networks. Our networks allow advertisers with national product distribution to deliver a uniform advertising message to
the growing Hispanic market around the country in an efficient manner.
Although our networks have a broad geographic reach, technology allows our stations to offer the necessary local feel and to be
responsive to local customers and community needs. Designated time slots are used for local advertising, news, traffic, weather,
promotions and community events. The audience gets the benefit of a national radio sound along with local content. We have
established a new promotional unit to connect advertisers with consumers on social media platforms.
Radio Formats. Each of our three radio networks produce a music format that is simultaneously distributed via multiprotocol
label switching with a high definition quality sound to our stations. Each of these formats appeals to different listener preferences:
•
•
“La Suavecita” is a Mexican regional music format that targets primarily Hispanic women and adults 25-54 years of age,
which airs on 14 of our stations. The format features Spanish contemporary music and includes “El Genio” Alex Lucas
in the mornings; “El Show de Piolin”, a program hosted by Eddie "Piolín" Sotelo, with whom we have an affiliation
agreement, during midday hours; and “Jimena Aguilar” in afternoon drive.
“La Tricolor” airs on 11 of our stations and targets primarily Hispanic males 18-49 years of age. The format features
Mexican regional music and includes “La Bronca Manana” in the mornings, “Carla La Plebe” during midday hours and
“Erazno y La Chokolata”, a parody-based comedy program hosted by Oswaldo Diaz, with whom we have an affiliation
agreement, in the afternoon drive.
22
•
“Fuego” is a Latin urban hit station that targets primarily bilingual and bicultural Hispanic adults 18-34 years of age,
which airs on five of our stations and is syndicated in five other radio markets. The format features a music fusion from
today’s top trending global music movement, Latin Urban, and includes “The Shoboy Show” in the mornings.
We broadcast, on an exclusive basis, NFL games in Spanish, including Sunday Night Football, Monday Night Football, and the
NFL playoffs, including the Super Bowl, on 15 radio stations. Through our partnership with Fútbol de Primera, we also broadcast on
15 radio stations a weekly soccer show, Mexican National Soccer team matches, and, in November and December 2022, the 2022
FIFA World Cup.
Our radio networks are broadcast in 13 of the 14 radio markets that we serve. In addition, in markets where competing stations
already offer programming similar to our network formats, or where we otherwise identify an available niche in the marketplace, we
run alternative programming that we believe appeals to local listeners, including the following:
•
•
•
•
•
•
“José”, which airs in the Los Angeles market, targets primarily Hispanic adults 25-54 years of age, This personality-
driven format features a mix of Spanish-language adult contemporary and Mexican regional hits from the 1970s through
the present, and features “El Genio” Alex Lucas in the mornings; “El Show de Piolin” in daytime; and “Erazno y La
Chokolata” in the afternoon drive.
“Viva Cumbia y Mas”, which airs in the Los Angeles market, targets primarily Hispanic adults 25-49 years of age and
features top Cumbia and Grupero artists.
In the El Paso market, we program “The Fox”, an English-language format that features classic rock and pop hits from the
1960s through the 1980s and targets primarily adults 25-54 years of age;
In the McAllen market, we program two English-language formats, “Q94.5 All Rock”, a classic rock-oriented format that
targets primarily males 25-54 and 35-54 years of age, and “RGV 107.9”, a hit-based adult contemporary format that
targets primarily women 25-54 years of age;
In the Sacramento market, we program “Real Country”, an English-language format featuring country music from the
1980s through today and that targets primarily adults 25-54 years of age; and
In the Phoenix, El Paso, Lubbock, Denver and Albuquerque markets, we program “TUDN”, a Spanish-language sports
talk format that targets primarily Hispanic adults 18-54 years of age, that is provided to us by Univision Radio Inc., an
affiliate of TelevisaUnivision, pursuant to a network affiliation agreement.
Additionally, in November 2020, we launched “El Botón”, a website and app that allows consumers to stream our radio shows,
stations and podcasts directly on their mobile phones or other devices.
Our Radio Station Portfolio
The following table lists information concerning each of our owned and operated radio stations in order of market rank and its
respective market:
Market
Los Angeles-San Diego-Ventura,
California
Miami-Ft. Lauderdale-Hollywood,
Florida
Phoenix, Arizona
Harlingen-Weslaco-Brownsville-
McAllen,
Texas
Sacramento-Stockton-Modesto,
California
Market Rank
(by Hispanic
)
Households)
Station
Frequency
1
3
9
11
12
KLYY-FM
KDLD-FM
KDLE-FM
KSSC-FM
KSSD-FM
KSSE-FM
WLQY-AM
KLNZ-FM
KDVA-FM
KVVA-FM
KBMB-AM
KFRQ-FM
KKPS-FM
KNVO-FM
KVLY-FM
KRCX-FM
KHHM-FM
KNTY-FM
KXSE-FM
KMIX-FM
KTSE-FM
23
97.5
103.1
103.1
107.1
107.1
107.1
1320
103.5
106.9
107.1
710
94.5
99.5
101.1
107.9
99.9
101.9
103.5
104.3
100.9
97.1
MHz
MHz
MHz
MHz
MHz
MHz
kHz
MHz
MHz
MHz
kHz
MHz
MHz
MHz
MHz
MHz
MHz
MHz
MHz
MHz
MHz
Format
José (1)
Viva Cumbia y Mas (1)
Viva Cumbia y Mas (1)
La Suavecita
José (1)
José (1)
Time Brokered (2)
La Tricolor
La Suavecita (1)
La Suavecita (1)
TUDN
Q94.5 All Rock
Fuego
La Suavecita
RGV 107.9
La Tricolor
Fuego
Real Country
La Suavecita
La Tricolor
La Suavecita
KCVR-FM
98.9
MHz
Fuego
Denver-Boulder, Colorado
Aspen, Colorado
El Paso, Texas
Albuquerque-Santa Fe, New Mexico
Las Vegas, Nevada
Monterey-Salinas-Santa Cruz, California
Yuma, Arizona-El Centro, California
Palm Springs, California
Lubbock, Texas
Reno, Nevada
17
19
20
24
36
39
54
56
63
KJMN-FM
KXPK-FM
KMXA-AM
KPVW-FM
KOFX-FM
KINT-FM
KYSE-FM
KSVE-AM
KHRO-AM
KRZY-FM
KRZY-AM
KRRN-FM
KQRT-FM
KLOK-FM
KSES-FM
KMBX-AM
KSEH-FM
KMXX-FM
KLOB-FM
KPST-FM
KAIQ-FM
KBZO-AM
KRNV-FM
92.1
96.5
1090
107.1
92.3
93.9
94.7
1650
1150
105.9
1450
92.7
105.1
99.5
107.1
700
94.5
99.3
94.7
103.5
95.5
1460
102.1
MHz
MHz
kHz
MHz
MHz
MHz
MHz
kHz
kHz
MHz
kHz
MHz
MHz
MHz
MHz
kHz
MHz
MHz
MHz
MHz
MHz
kHz
MHz
La Suavecita
La Tricolor
TUDN
La Tricolor (1)
The Fox
La Suavecita (1)
La Tricolor
TUDN
La Suavecita (1)
La Suavecita
TUDN
Fuego
La Tricolor
La Tricolor
La Suavecita (1)
La Suavecita (1)
La Suavecita
La Tricolor
La Suavecita
Fuego
La Tricolor
TUDN
La Tricolor
Market rank source: Nielsen Media Research 2023 universe estimates.
Simulcast station.
(1)
(2) Operated pursuant to a time brokerage arrangement under which we grant to third parties the right to program the station.
Radio Advertising
Substantially all the revenue generated from our radio operations is derived from local and national advertising.
Local. Local advertising revenue is generated predominantly from advertising time sold to an advertiser or its ad agency that is
placed from within a station’s market. Local advertising sales include sales to advertisers that are local businesses or advertising
agencies, and regional and national businesses or advertising agencies, which place orders from within a station’s market or directly
with a station’s sales staff. We employ our own local sales force, in each of our markets, that is responsible for soliciting local
advertising sales directly from advertisers and their agencies. In 2022, local advertising revenue accounted for approximately 56% of
our total radio revenue.
National. National advertising revenue generally represents spot and network revenue from advertising time sold to an
advertiser or its agency that is placed from outside a station’s market. Since January 2020, Katz has acted as our national sales
representative to solicit national spot advertising sales on all of our radio stations, and we act as our own network sales representative.
In 2022, national advertising revenue accounted for approximately 44% of our total radio revenue.
Radio Marketing/Audience Research
We believe that radio is an efficient means for advertisers to reach targeted demographic groups. Advertising rates charged by
our radio stations are based primarily on the following factors, among others:
•
•
•
•
•
the particular station’s ratings (people listening to its programs as a percentage of total people in the listening area);
audience share (people listening to its programs as a percentage of people actually listening to radio at a specific time);
the demographic qualities of a program’s listeners (primarily age and gender);
the demand for available airtime;
the time of day that the advertising runs;
24
•
•
•
competitive conditions in the station’s market;
changes in advertising choices and placements in different media, such as new media, including digital media, compared
to traditional media, such as television and radio; and
general economic conditions, including advertisers’ budgetary considerations.
Nielsen Audio provides advertisers with the industry-accepted measure of listening audience classified by demographic segment
and time of day that the listeners spend on particular radio stations. Radio advertising rates generally are highest during the hours of
6:00 A.M. and 7:00 P.M. These hours are considered the peak times for radio audience listening.
Historically, advertising rates for Spanish-language radio stations have been lower than those for English-language stations with
similar audience levels. We believe that, over time, possibilities exist to narrow the disparities that have historically existed between
Spanish-language and English-language advertising rates as new and existing advertisers recognize the growing desirability of the
U.S. Hispanic population as an advertising target. For example, U.S. Hispanics spend more on food at home than the national average.
We also believe that having multiple stations in a market enables us to provide listeners with alternatives, to secure a higher overall
percentage of a market’s available advertising dollars, and to obtain greater percentages of individual customers’ advertising budgets.
Each station broadcasts an optimal number of advertisements each hour, depending upon its format, in order to maximize the
station’s revenue without jeopardizing its audience listenership. Our non-network stations have up to 14 minutes per hour for
commercial inventory and local content. Our network stations have up to one additional minute of commercial inventory per hour. The
pricing is based on a rate card and negotiations subject to the supply and demand for the inventory in each particular market and the
network.
Radio Competition
We face intense competition in the radio broadcasting business. The financial success of each of our radio stations and markets
depends in large part on our audience ratings, our ability to maintain and increase our market share of overall radio advertising
revenue and economic conditions of the local market and the United States as a whole. In addition, our advertising revenue depends
upon the desire of advertisers to reach our audience demographic. Each of our radio stations competes for audience share and
advertising revenue directly with both Spanish-language and English-language radio stations in its market, and with other media, such
as newspapers, broadcast, cable, satellite and streaming television, magazines, outdoor advertising, satellite-delivered radio services,
apps, podcasts and other forms of digital audio delivery, and direct mail advertising. In addition, in certain markets we operate
television stations that indirectly compete for local and national advertising revenue with our radio business. Our primary competitors
in our markets in Spanish-language radio are TelevisaUnivision, iHeartMedia Inc. (formerly Clear Channel Communications Inc.),
Audacy (formerly Entercom, Inc.) and Spanish Broadcasting System, Inc. These and many of the other companies with which we
compete are companies that have significantly greater resources and longer operating histories than we do.
Factors that are material to our competitive position include management experience, a station’s audience rank in its market,
signal strength and coverage, and audience demographics. If a competing station within a market converts to a format similar to that of
one of our stations, or if one of our competitors upgrades its stations, we could suffer a reduction in ratings and advertising revenue in
that market. The audience ratings and advertising revenue of our individual stations are subject to fluctuation and any adverse change
in certain of our key radio markets could have a material adverse effect on our operations.
The radio industry is subject to competition from new media technologies that are being developed or introduced, such as:
•
•
•
audio programming available on cable television systems, broadcast satellite-delivered audio services, over-the-top, or
OTT, services on Internet-connected televisions, Internet content providers, streaming audio available over mobile devices
via multiple platforms, including easy-to-use mobile apps, podcasts, smart speakers and other digital audio broadcast
formats and playback mechanisms;
satellite- and internet protocol network-delivered digital audio services—with both commercial-free and lower
commercial load channels—which have expanded their subscriber base and have introduced dedicated Spanish-language
channels and linear streams of over-the-air radio stations; and
In-Band On-Channel™ digital radio, which provides multi-channel, multi-format digital radio services in the same
bandwidth currently occupied by traditional high-definition FM radio services.
Advertisers allocate finite advertising budgets across different media. We believe that the advent of new technologies and
services may result in continued emphasis by certain advertisers on these new technologies and services as compared to legacy media,
such as radio. Accordingly, while we also believe that none of these new technologies and services can completely replace local
25
broadcast radio stations due to the element of localism that broadcast radio offers, the challenges we face in our radio operations from
new technologies and services will continue to require attention from management. Among other things, we intend to leverage
potential opportunities to adopt new technologies in our radio operations where appropriate, including digital streaming and
podcasting, such as “El Botón”. We cannot guarantee that such adoption of new technologies, if any, will adequately address the
challenges we face in our radio operations.
Seasonality
Our digital operations are not significantly subject to seasonality, although net revenue in our digital segment generally
increases in each fiscal quarter over the course of the year. Seasonal net revenue fluctuations are common in television and radio
broadcasting, and are due primarily to fluctuations in advertising expenditures by local and national advertisers. In our television and
audio segments, our first fiscal quarter generally produces the lowest net revenue for the year, and our second and third fiscal quarters
generally produce the highest net revenue for the year. In addition, advertising revenue across our segments is generally higher during
presidential election years (2016, 2020, etc.) and, to a lesser degree, Congressional mid-term election years (2022, 2026, etc.),
resulting from increased political advertising in those years compared to other years. In addition, revenue from political advertising
can be affected by such factors as actual or perceived competitiveness of races in the markets we serve, which we experienced in
2022, despite its being a Congressional mid-term election, resulting in record revenue from political advertising for us. Advertising
revenue in our audio segment is also generally higher during years when we broadcast the FIFA World Cup on our radio stations
(2018, 2022, etc.).
Intellectual Property
We believe that our ability to protect our intellectual property is an important factor in the success and continued growth of our
business. We protect our intellectual property through a combination of trade secrets law, copyrights, trademarks and contracts. We
have established business procedures designed to maintain the confidentiality and security of our proprietary information, including
the use of confidentiality agreements and assignment of inventions agreements with employees, independent contractors, consultants
and companies with which we conduct business. While we believe that such measures are generally effective, we cannot guarantee
that such measures will adequately protect our intellectual property from use, misuse or infringement by others.
In the course of our business, we use various trademarks, trade names and service marks, including our logos and FCC call
letters, in our advertising and promotions, as well as proprietary technology platforms and other technology. Some of our technology
relies upon third party licensed intellectual property. We do not hold or depend upon any material patent, government license,
franchise or concession, except for our broadcast licenses granted by the FCC.
We are continuing to evaluate the extent to which our proprietary intellectual property used in our digital operations may be
protectable beyond the measures discussed above. However, we cannot provide any assurance that any of such intellectual property is
protectable beyond the measures discussed above.
Regulation of Digital Advertising
Overview. We are subject to many U.S. federal and state laws and regulations, as well as laws and regulations of other
jurisdictions, applicable to businesses engaged in providing digital advertising services. The United States and certain foreign
governments have enacted, considered or are currently considering legislation or regulations that relate to digital advertising activities
and the use of consumer data in digital advertising, including, for example, the online collection and use of anonymous user data and
unique device identifiers, such as IP address or unique mobile device identifiers, geo-location data and other privacy and data
protection regulation. Some authorities have applied competition rules to regulate digital advertising practices which may result in
structural changes to advertising practices. Congress in the United States and legislatures in certain other countries have implemented
and are considering legislation that would structurally regulate digital advertising and the platforms that support such advertising,
potentially disrupting the current markets for digital advertising services.
In general, these laws limit the use to which we can use PII gathered in the course of providing these services, impose
substantial information security obligations, limit our ability to transfer data across national boundaries, provide consumers with the
right to know and access data relating to them and their households and limit the retention and use of that information. These laws and
regulations can affect our business to the extent that they restrict our business practices, increase our cost of compliance, impose
obligations to respond to and comply with requests to limit the processing and retention of consumers’ PII, or impose a greater risk of
liability for prohibited processing of PII and for data security incidents. These laws and regulations continue to evolve rapidly and
may substantially impact our ability to generate revenue from digital and other advertising and marketing services, and are likely to
impose additional compliance costs on our digital operations in addition to the compliance costs we currently incur.
Compliance with privacy, data protection and data security laws and regulations plays a significant role in our business. In the
United States, both federal and state laws regulate activities inherent to digital advertising, including the collection, use, sharing and
26
distribution of consumer data by us and by companies with which we do business in the course of providing digital advertising
solutions services. We also rely on the services of third parties in gathering, using and storing consumer data, and these parties’
compliance with applicable laws affects our own compliance status.
Because we interact with consumers outside the United States and provide services to advertisers who themselves interact with
those consumers, the laws of other jurisdictions may also apply to the types of services we provide and to the gathering, use, and
sharing of the PII of digital media users. In addition, because we and our affiliated entities provide digital advertising solutions
services to advertisers or their ad agencies, and other purchasers of advertising, in regions including Latin America, Europe, Africa
and Asia, our business is subject to the laws and regulations imposed by certain countries in those regions.
Privacy and data protection regulations have gained substantial publicity and attention in light of growing consumer
expectations both for enhanced services as well as privacy, especially in light of publicized data breach incidents and allegations of
undisclosed and uncontested use of consumers’ PII, and increasingly are the subject of regulatory attention and enforcement as well as
private litigation often taking the form of consumer class actions.
Regulation in the United States. Regulatory standards continue to evolve in ways that impose additional compliance costs and
risks on businesses, like ours, that possess, process and share consumer data. For example, several states have enacted laws which
affect the collection, use, retention, protection, disclosure, transfer and other processing of personal data, particularly in relation to
digital advertising services. These laws include the California Privacy Rights Act, or CPRA, which expands on the California
Consumer Privacy Act, or CCPA; the Colorado Privacy Act, or CPA; the Virginia Consumer Data Protection Act, or VCDPA; the
Connecticut Data Privacy Act, or CDPA; and the Utah Consumer Privacy Act, or UCPA. New laws like the foregoing provide
consumers with additional data privacy rights, including the right to opt out of the sharing of personal data for retargeting and certain
customized advertising purposes, which can limit the data available for use in Smadex or the global media companies who are our
commercial partners and to optimize our customers’ advertising impressions. New laws and regulations can further increase our
current cost of compliance, limit our ability to collect and process personal data, expose us to regulatory investigations and civil
actions, and cause us to change our business practices. Because these are new laws in the United States, they are also subject to
interpretation and evolving regulation, it is possible that these laws and related regulations may be interpreted and applied in a manner
that is inconsistent from one jurisdiction to another and may conflict with other laws and regulations to which we are subject or our
business practices. These laws and regulations may also impose obligations that are inconsistent with or interfere with our ability to
comply with other legal obligations.
Of particular importance is the enactment of the CCPA, which became effective on January 1, 2020. The CCPA imposes
restrictions on the use, sharing and security of PII and substantially expands the definition of covered PII to include geolocation
information and device location data, among other categories of information. The CCPA also provides rights and remedies to
individual consumers, including the right to object to certain marketing uses of their information and, in certain circumstances, the
right to require deletion of their PII and to opt out of the sale of their PII. California voters in November 2020 approved the CPRA,
which became effective on January 1, 2023 and substantially amends the CCPA and broadens the rights provided to consumers
covered by the CCPA. In particular, the CPRA added a “Do Not Share My Personal Information” right that empowers consumers to
require that covered businesses cease “sharing” the consumer’s PII for cross-context and cross-platform behavioral advertising. This
provision may directly impact our digital advertising revenue and impose substantial additional compliance costs on us.
The CPRA also grants consumers the right to limit the use, processing and retention of certain sensitive PII. Violations of the
statute may result in enforcement action by the State of California, including the imposition of substantial fines. The statute also grants
a private right of action to consumers. Final regulations are pending and could add additional compliance requirements to the statutory
scheme. It is likely that advertisers, advertising service providers and data providers will modify their practices in light of the CCPA
and CPRA in ways that may inhibit direct-to-consumer marketing and advertising with attendant revenue impacts. In addition,
because of our targeted digital advertising strategies, we will be required to implement procedures to implement and recognize these
rights and restrictions, imposing both operational costs and potential loss of revenues.
The CPA and VCDPA are both effective in 2023, while the CDPA and UCPA will both become effective in January 2024.
While substantially similar in scope to California’s CCPA/CPRA requirements, these other state laws provide consumers with specific
rights with regard to their PII and impose additional compliance obligations on businesses covered by these laws. Final regulations are
pending in these additional states and could add additional compliance requirements to these statutory schemes.
Other states are contemplating similar legislative and regulatory initiatives, some of which may impose additional or even
inconsistent regulatory obligations. There are comprehensive privacy laws proposed in approximately 12 additional states. In 2023 and
beyond, it is anticipated that these and possibly other states will continue to propose and adopt new data privacy laws similarly
regulating the use of PII for retargeting or cross-contextual advertising. The impact of these statutes likely will extend beyond the
specific markets as it may become increasingly impractical to maintain parallel compliance processes across our markets.
Additionally, state consumer protection laws and the enforcement of those laws by state attorneys general also impose
substantial compliance risks on our business. By way of further example, California’s Age-Appropriate Design Code Act, or
AADCA, also has been passed and will go into effect in 2024. The AADCA reaches consumers not covered by the Children's Online
27
Privacy Protection Act, or COPPA. The AADCA will impose additional obligations on online platforms which may affect the
advertising inventory and data available to us, impacting our business operations.
We are not presently able to determine the impact that any of these laws and regulations, within the United States or in other
countries where we operate, will have on our operations and results of operations.
Because there is no United States federal privacy legislation broadly applicable across business sectors, broadcast and online
advertising activities in the United States primarily have been subject to regulation and enforcement by the Federal Trade
Commission, or FTC, which principally relies on its enforcement authority under Section 5 of the Federal Trade Commission Act of
1914, as amended, or the FTC Act, to investigate and respond to allegedly unfair or deceptive acts and practices. Section 5 has been
the primary regulatory tool at the federal level used to respond to claims of deceptive or inadequate advertising as well as privacy
policies, inadequate data security practices, and the misuse of consumer data.
The FTC’s enforcement focus has included close attention to the mobile advertising industry. For example, in December 2012,
the FTC adopted amendments to rules under COPPA, which went into effect in July 2013. These amendments broaden the potential
applicability of COPPA compliance obligations to our activities and those of our customers when interacting with children. In
addition, the FTC’s testimonial and endorsement guidelines were updated in late 2009 and provide additional and expanded guidance
for advertising practices using endorsements, testimonials, and similar content. In addition to formal rules and guidelines, the FTC’s
active enforcement in the digital media industry creates evolving precedent for challenging digital advertising practices as deceptive or
unfair. With the appointment of new leadership at the FTC, including a new Chair, the FTC has announced its intention to more
aggressively enforce federal privacy laws, including Section 5, and has initiated proceedings designed to explore the possibility of
additional administrative rulemaking that could impose additional substantive privacy compliance obligations on covered businesses.
Unlike enforcement actions under Section 5, violations of such rules would result in administrative fines and other monetary liability.
The FTC has devoted particular attention to businesses within the digital media channel where the FTC has determined that
potentially abusive practices have occurred or are likely to occur. The FTC focuses its enforcement resources on the accuracy of
consumer disclosures, data security, data practices transparency, consumer tracking, and data aggregation. More recently, the FTC has
communicated its intention to focus on the use of data to disadvantage vulnerable or minority communities, and particular attention
has been paid to data brokers, processors, and aggregators of the type that may assist us in creating consumer profiles and in serving
advertisements, with particular inquiry into issues of bias attendant to machine learning and algorithmically based practices. In some
circumstances, the FTC has taken the position that advertisers may be liable for the acts of channel partners and has successfully
brought enforcement actions against parties based on the activities of their channel partners. This creates the possibility of
enforcement risk for acts other than our own.
The FTC also has employed its Section 5 authority to take action against digital advertising businesses with regard to their data
security practices and policies, even apart from its traditional enforcement of privacy regulations and standards. State attorneys
general also enforce consumer protection laws, some modeled after the FTC Act, in ways that affect the digital advertising industry. In
addition, many states mandate specific data security measures, and all U.S. states and the District of Columbia, as well as some
municipalities, enforce data breach notification laws that require notification to consumers and, in some instances, law enforcement, in
the event of a covered data security incident. There are private rights of action under some of these state laws, increasing the financial
risk attendant to data incidents.
Because we rely upon third parties to assist us in operating and managing digital advertising and marketing strategies, our
compliance obligations (and attendant risks) include the acts and omissions of those third parties. Federal enforcement and state
legislation is also increasingly applied to biometric, geolocation technologies and to sensitive PII that is used in behavioral advertising
and these developments may further impair data-driven digital advertising.
Regulation in Other Countries. In other global markets we serve, the regulation of consumer practices in digital advertising is
evolving. In Mexico, for example, the regulation of digital advertising largely relies on applying regulatory constraints on traditional
print advertising (such as prohibitions on pornographic or politically inflammatory speech) to digital advertising. Brazil has enacted
and enforces a privacy law of general application, the LGPD, substantially based on the GDPR of the E.U., that may restrict the use of
consumer data in connection with targeted and behavioral advertising. Certain jurisdictions in Asia, including India, are implementing
stringent consumer privacy laws similar to, but distinct from, existing international regulatory regimes like the GDPR.
The issue of privacy in the digital media industry continues to evolve. U.S. and foreign governments have enacted, have
considered, or are considering, legislation or regulations that could significantly restrict industry participants’ ability to collect, retain,
augment, analyze, use and share consumer data, such as by regulating the use of multi-source consumer profiling, machine learning,
personalized advertising delivery and, more generally, the level of consumer notice and consent required before a company can
employ “cookies” or other electronic tools to track online activities and by providing consumers with greater control over how their
information is used, maintained, sold and shared. Enforcement bodies are developing rules and enforcement standards applicable to
the collection, storage and use of geolocation data, biometric data, transparency of consumer data profile creation and management,
and consumer access to and control over their individual online profiles and the collection of consumer data through “Internet of
Things” technology. These evolving privacy and data security laws, particularly those of the United States, the E.U., Mexico and
28
Brazil, present a particular compliance obligation given our operations in those jurisdictions.
The E.U. and its member states traditionally regulated digital advertising practices pursuant to Directive 95/46/EC (commonly
known as the “Data Protection Directive”) and implementing national legislation. Effective as of May 1, 2018, the GDPR replaced the
Data Protection Directive. The GDPR reaches a greater range of data processing practices that occur outside the E.U. than was the
case under the Data Protection Directive, imposes substantially greater penalties for its violation, and imposes greater notice, consent
and data processing obligations than did the Data Protection Directive. Current and developing E.U. law, among other things, requires
advertisers to obtain specific types of explicit notice to and consent from individuals before using cookies or other technologies to
track individuals and their online behavior and deliver targeted advertisements, increases monetary penalties for non-compliance,
extends the extraterritorial reach of E.U. data protection laws, and grants consumers the rights in some circumstances to require that
their data no longer be stored or processed. It remains a possibility that additional legislation may be passed or regulations may be
enacted in the future. The GDPR increases monetary penalties for its breach that can equal 4% of an enterprise’s gross global
turnover.
The United Kingdom, or the U.K., has enacted children’s privacy legislation that will impose new and complex obligations on
businesses whose advertising and data collection practices reach minors under the age of 18. The law’s requirements are substantially
more extensive than under the United States’ COPPA framework. In addition, the withdrawal by the U.K. from the E.U., and the
current lack of a finalized permanent framework for data transfers between the E.U. and the U.K. following the withdrawal, including
the absence of a means of maintaining long-term free flows of information between the E.U. and the U.K., have created new
uncertainty as to the scope and content of U.K. privacy laws.
The regulation of cross-border data transfers is in a state of heightened uncertainty, with the E.U. judiciary having invalidated
the Privacy Shield regime, which was developed by the E.U. and the United States to allow the transfer of the personal data of
European nationals to the United States. While the E.U. and the United States have entered into negotiations aimed at creating a
replacement for the Privacy Shield, and a replacement has been proposed pending finalization of the European Commission’s
adequacy decision, and any such replacement process may also be challenged on the same grounds as was the Privacy Shield. The
invalidation of a principal means for legitimizing the transfer of the PII of E.U. nationals limits the ability to coordinate cross-border
digital advertising operations.
A new E.U.-U.S. Data Privacy Framework ("E.U.-U.S. DPF") has been proposed to allow cross-border data transfers, but this is
pending finalization of the European Commission’s draft adequacy decision on E.U.-U.S. transfers of personal data, which may not
happen until later in 2023. If and when adopted, the E.U.-U.S. DPF will require additional compliance measures, which can incur
addition costs and expose us to increased regulatory scrutiny, which may increase the cost and complexity of delivering our services.
In addition, actions by the Belgium Data Protection Authority have questioned Europe’s Interactive Advertising Bureau, or IAB,
user-facing framework (the Transparency and Control Framework, or “TCF”) that has been used to establish and manage compliance
for digital advertising under the GDPR and other E.U. and U.K. privacy laws including the ePrivacy Directive. IAB Europe will
implement changes to the TCF which may lead to significant changes in our business operations and will require effort to monitor the
impact of proposed changes, all of which may increase operating costs, or limit our ability to operate or expand our business.
Additional countries, including France and Germany, have issued additional guidance on cookie management, including disclosures
and consent requirements which may require us to change our current practices and impact the volume of personal data that can be
collected and used for our business purposes, including by our customers.
Other Regulations. We also participate in industry self-regulatory programs under which, in addition to other compliance
obligations, we provide consumers with notice about our use of cookies and our collection and use of data in connection with the
delivery of targeted advertising and allow them to opt out from the use of data we collect for the delivery of targeted advertising. The
rules and policies of the self-regulatory programs in which we participate are updated from time to time and may impose additional
costs or restrictions upon us in the future.
For example, the IAB and the IAB Tech Lab have updated their privacy protocols and have introduced a Multi-State Privacy
Agreement (“MSPA”) for advertising agencies, marketers, publishers and ad-tech companies. The MSPA seeks to provide a
framework and assist the digital advertising industry to comply with various, complex state privacy laws (in, for example, California,
Virginia, Utah, Colorado and Connecticut). These developments can create additional costs and complexity for us in engaging with
customers and digital commercial partners.
Additionally, in the United States and, increasingly, in other jurisdictions, consumers are provided private rights of action to file
civil lawsuits, including class action lawsuits, against companies that conduct business in the digital advertising industry, including
makers of devices that display digital media, providers of digital media, operating system providers, third party networks and
29
providers of Internet-connected devices and related services. Plaintiffs in these lawsuits have alleged a range of violations of federal,
state and common law, including computer trespass and violation of specific privacy laws. Recent appellate decisions have affirmed
the standing of consumers to initiate class and mass action litigation to remedy breaches of their privacy rights and injuries resulting
from data breaches. State attorneys general in most states have the authority to bring similar actions on behalf of their residents.
Any failure, or perceived failure, by us to comply with U.S. federal, state, or applicable international laws or regulations
pertaining to privacy or data protection, or other policies, self-regulatory requirements or legal obligations could result in proceedings
or actions against us by governmental entities or others, and also could result in reputational injury and/or monetary fines.
Regulation of Television and Radio Broadcasting
General. The FCC regulates television and radio broadcast stations pursuant to the Communications Act. Among other things,
the FCC:
•
•
•
•
determines the particular frequencies, locations and operating power of stations;
issues, renews, revokes and modifies station licenses;
regulates equipment used by stations; and
adopts and implements regulations and policies that directly or indirectly affect the ownership, changes in ownership,
control, operation and employment practices of stations.
A licensee’s failure to observe the requirements of the Communications Act or FCC rules and policies may result in the
imposition of various sanctions, including admonishment, fines, the grant of renewal terms of less than eight years, the grant of a
license renewal with conditions or, in the case of particularly egregious violations, the denial of a license renewal application, the
revocation of an FCC license or the denial of FCC consent to acquire additional broadcast properties.
Congress and the FCC have had under consideration or reconsideration, and may in the future consider and adopt, new laws,
regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and
profitability of our television and radio stations, result in the loss of audience share and advertising revenue for our television and
radio broadcast stations or affect our ability to acquire additional television and radio broadcast stations or finance such acquisitions.
Such matters may include:
•
•
•
•
•
•
•
•
•
•
•
•
changes to the license authorization process;
proposals to impose spectrum use or other fees on FCC licensees;
proposals to impose a performance tax on the music broadcast on commercial radio stations and the fees applicable to
digital transmission of music on the Internet;
proposals to change rules relating to political broadcasting including proposals to grant free airtime to candidates;
proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages;
proposals dealing with the broadcast of profane, indecent or obscene language and the consequences to a broadcaster for
permitting such speech;
technical and frequency allocation to broadcast services and usage matters;
modifications to the operating rules for digital television and radio broadcasting rules on both satellite and terrestrial
bases;
the implementation or modification of rules governing the carriage of local television signals by direct broadcast satellite,
or DBS, services and cable television systems and the manner in which such parties negotiate such carriage arrangements;
changes in local and national broadcast multiple ownership, foreign ownership, cross-ownership and ownership attribution
rules;
changes in the procedures whereby full-service broadcast stations are carried on MVPDs (cable television and direct-
broadcast satellite systems) either on a must-carry or retransmission consent basis and how compensation systems and
negotiating processes involving broadcasters and MVPDs might be modified;
proposals to modify the regulation of telephone and text messaging-based marketing;
30
•
•
changes in the operating rules and policies for AM and FM broadcasting; and
proposals to alter provisions of the tax laws affecting broadcast operations and acquisitions.
We cannot predict what changes, if any, might be adopted, nor can we predict what other matters might be considered in the
future, nor can we judge in advance what impact, if any, the implementation of any particular proposal or change might have on our
business.
FCC Licenses. Television and radio stations operate pursuant to licenses that are granted by the FCC for a term of eight years,
subject to renewal upon application to the FCC. During the periods when renewal applications are pending, petitions to deny license
renewal applications may be filed by interested parties, including members of the public. The FCC may hold hearings on renewal
applications if it is unable to determine that renewal of a license would serve the public interest, convenience and necessity, or if a
petition to deny raises a “substantial and material question of fact” as to whether the grant of the renewal applications would be
inconsistent with the public interest, convenience and necessity. However, the FCC is prohibited from considering competing
applications for a renewal applicant’s frequency, and is required to grant the renewal application if it finds:
•
•
•
that the station has served the public interest, convenience and necessity;
that there have been no serious violations by the licensee of the Communications Act or the rules and regulations of the
FCC; and
that there have been no other violations by the licensee of the Communications Act or the rules and regulations of the
FCC that, when taken together, would constitute a pattern of abuse.
If as a result of an evidentiary hearing the FCC determines that the licensee has failed to meet the requirements for renewal and
that no mitigating factors justify the imposition of a lesser sanction, the FCC may deny a license renewal application. Historically,
FCC licenses have generally been renewed. We have no reason to believe that our licenses will not be renewed in the ordinary course,
although there can be no assurance to that effect. The non-renewal of one or more of our stations’ licenses could have a material
adverse effect on our business.
Ownership Matters. The Communications Act requires prior consent of the FCC for the assignment of a broadcast license or the
transfer of control of a corporation or other entity holding a license. In determining whether to approve an assignment of a television
or radio broadcast license or a transfer of control of a broadcast licensee, the FCC considers a number of factors pertaining to the
licensee including compliance with various rules limiting common ownership of media properties, the “character” of the licensee and
those persons holding “attributable” interests therein, and the Communications Act’s limitations on foreign ownership and compliance
with the FCC rules and regulations.
To obtain the FCC’s prior consent to assign or transfer a broadcast license, appropriate applications must be filed with the FCC.
If the application to assign or transfer the license involves a substantial change in ownership or control of the licensee, for example,
the transfer or acquisition of more than 50% of the voting equity, the application must be placed on public notice for a period of 30
days during which petitions to deny the application may be filed by interested parties, including members of the public. If an
assignment application does not involve new parties, or if a transfer of control application does not involve a “substantial” change in
ownership or control, it is a pro forma application, which is not subject to the public notice and 30-day petition to deny procedure. The
regular and pro forma applications are nevertheless subject to informal objections that may be filed any time until the FCC acts on the
application. If the FCC grants an assignment or transfer application, interested parties have 30 days from public notice of the grant to
seek reconsideration of that grant. The FCC has an additional ten days to set aside such grant on its own motion. When ruling on an
assignment or transfer application, the FCC is prohibited from considering whether the public interest might be served by an
assignment or transfer to any party other than the assignee or transferee specified in the application.
Under the Communications Act, a broadcast license may not, absent a public interest determination by the FCC, be granted to or
held by persons who are not U.S. citizens, by any corporation that has more than 20% of its capital stock owned or voted by non-U.S.
citizens or entities or their representatives, by foreign governments or their representatives or by non-U.S. corporations. Furthermore,
the Communications Act provides that no FCC broadcast license may be granted to or held by any corporation directly or indirectly
controlled by any other corporation of which more than 25% of its capital stock is owned of record or voted by non-U.S. citizens or
entities or their representatives, or foreign governments or their representatives or non-U.S. corporations. The FCC, recognizing its
authority to allow foreign ownership in excess of these safe harbor levels and to allow for greater foreign investment in domestic
broadcast media, has established new policies and practices allowing broadcast licensees to file petitions for declaratory ruling
requesting approval (i) of up to and including 100% aggregate foreign ownership by unnamed and future foreign investors in the
controlling U.S. parent of a broadcast licensee, (ii) for any named foreign investor who proposes to acquire less than 100% controlling
interest to increase the interest to 100% in the future, and (iii) for any non-controlling named foreign investor to increase its interest up
to 49.99% in the future. The new rules also establish that a broadcast licensee only needs to obtain specific approval for foreign
investors holding more than 5% interest, and in certain circumstances more than 10% interest, in the U.S. parent of the broadcast
licensee, or a controlling interest in the U.S. parent. The licenses for our stations could be revoked if our outstanding capital stock is
31
issued to or for the benefit of non-U.S. citizens in excess of these limitations or in violation of the procedures adopted by the FCC.
Our certificate of incorporation restricts the ownership and voting of our capital stock to enable us to comply with foreign ownership
limitations.
The FCC generally applies its other broadcast ownership limits to “cognizable” interests held by an individual, corporation or
other association or entity. In the case of a corporation holding broadcast licenses, the interests of officers, directors and those who,
directly or indirectly, have the right to vote 5% or more of the stock of a licensee corporation are generally deemed attributable
interests, as are positions as an officer or director of a corporate parent of a broadcast licensee.
Stock interests held by insurance companies, mutual funds, bank trust departments and certain other passive investors that hold
stock for investment purposes only become attributable with the ownership of 20% or more of the voting stock of the corporation
holding broadcast licenses.
A time brokerage agreement with another television or radio station in the same market creates an attributable interest in the
brokered television or radio station as well for purposes of the FCC’s local television or radio station ownership rules, if the agreement
affects more than 15% of the brokered television or radio station’s weekly broadcast hours. Likewise, a joint sales agreement (“JSA”)
involving radio stations creates a similar attributable interest for the broadcast station that is undertaking the sales function. As for
television stations, the FCC adopted and then eliminated the practice of attribution for television JSAs, in its quadrennial ownership
proceeding. The elimination of this practice was upheld by the U.S. Supreme Court in April 2021.
Debt instruments, non-voting stock, options and warrants for voting stock that have not yet been exercised, insulated limited
partnership interests where the limited partner is not “materially involved” in the media-related activities of the partnership and
minority voting stock interests in corporations where there is a single holder of more than 50% of the outstanding voting stock whose
vote is sufficient to affirmatively direct the affairs of the corporation generally do not subject their holders to attribution.
However, the FCC also applies a rule, known as the equity-debt-plus rule, which causes certain creditors or investors to be
attributable owners of a station, regardless of whether there is a single majority stockholder or other applicable exception to the FCC’s
attribution rules. Under this rule, a major programming supplier (any programming supplier that provides more than 15% of the
station’s weekly programming hours) or a same-market media entity will be an attributable owner of a station if the supplier or same-
market media entity holds debt or equity, or both, in the station that is greater than 33% of the value of the station’s total debt plus
equity. For purposes of the equity-debt-plus rule, equity includes all stock, whether voting or nonvoting, and equity held by insulated
limited partners in limited partnerships. Debt includes all liabilities, whether long-term or short-term.
Under the ownership rules currently in place, the FCC generally permits an owner to have only one television station per
Designated Market Area (DMA). The FCC’s rules regarding ownership permit an owner to operate two television stations assigned to
the same DMA so long as:
•
•
•
the television stations do not have overlapping broadcast signals;
at least one of the stations is not ranked top four in the DMA based upon audience share; or
two of the stations are ranked top four in the DMA based upon audience share but the FCC has determined, based on a
review of the facts and circumstances, that the combination would serve the public interest.
The FCC will consider waiving these ownership restrictions in certain cases involving failing or failed stations or stations which
are not yet built.
The number of radio stations an entity or individual may own in a radio market is as follows:
•
•
•
•
In a radio market with 45 or more commercial radio stations, a party may own, operate or control up to eight commercial
radio stations, not more than five of which are in the same service (AM or FM).
In a radio market with between 30 and 44 (inclusive) commercial radio stations, a party may own, operate or control up to
seven commercial radio stations, not more than four of which are in the same service (AM or FM).
In a radio market with between 15 and 29 (inclusive) commercial radio stations, a party may own, operate or control up to
six commercial radio stations, not more than four of which are in the same service (AM or FM).
In a radio market with 14 or fewer commercial radio stations, a party may own, operate or control up to five commercial
radio stations, not more than three of which are in the same service (AM or FM), except that a party may not own,
operate, or control more than 50% of the radio stations in such market.
Because of these multiple ownership rules, if one of our stockholders, officers or directors holds a “cognizable” interest in our
company, such stockholder, officer or director may violate the FCC’s rules if such person or entity also holds or acquires an
32
attributable interest in other television or radio stations in such markets, depending on their number and location. If an attributable
stockholder, officer or director of our company violates any of these ownership rules, we may be unable to obtain from the FCC one
or more authorizations needed to conduct our broadcast business and may be unable to obtain FCC consents for certain future
acquisitions.
In recent years, the FCC has eliminated certain of its media ownership limitations, including the newspaper/broadcast cross-
ownership rule, the radio-television cross-ownership rule, the so-called “eight voices” test that made it difficult to own more than one
station in a smaller market, and the ownership of two of the top four television stations in a DMA. New Quadrennial Reviews were
commenced in late 2018 and late 2022 and have not yet resulted in any definitive action on the FCC’s part.
The rule changes that have previously gone into effect amend the FCC’s methodology for defining a radio market for the
purpose of ownership caps. The FCC replaced its signal contour method of defining local radio markets in favor of a geographic
market assigned by Nielsen Audio, the private audience measurement service for radio broadcasters. For non-Nielsen Audio markets,
the FCC applies a “modified contour approach”. This modified approach excludes any radio station whose transmitter site is more
than 58 miles from the perimeter of the mutual overlap area.
With regard to the national television ownership limit, the FCC increased the national television ownership limit to 45% from
35%. Congress subsequently enacted legislation that reduced the nationwide cap to 39%. Accordingly, a company can now own
television stations collectively reaching up to a 39% share of U.S. television households. Limits on ownership of multiple local
television stations still apply, even if the 39% limit is not reached on a national level.
In establishing a national cap by statute, Congress did not make mention of the FCC’s UHF discount policy, whereby UHF
stations are deemed to serve only one-half of the population in their television markets. The FCC had abolished its UHF discount
policy, but grandfathered ownership interests in place at the time of the decision. However, that decision was reconsidered by the FCC
and the UHF discount policy was reinstated. The FCC has an open proceeding to determine whether and how to apply the UHF
discount policy as digital stations operating in the UHF mode do not face any operational problems in transmitting their signals to
their broadcast markets.
The FCC has previously decided that TelevisaUnivision’s television station interests are attributable to certain of our television
interests in determining the television interests we must count for local and national multiple ownership purposes. In addition, the
FCC, as previously noted, has commenced a rulemaking process to consider both the nationwide cap and the UHF discount. Should
the UHF discount be eliminated or the nationwide cap be interpreted to treat all stations on an equal basis, we may, in the absence of
retroactive applicability, which the FCC customarily does not apply, have to divest certain stations or be limited in our ability to
acquire certain additional television stations.
The Communications Act requires broadcasters to serve the “public interest.” The FCC has relaxed or eliminated many of the
more formalized procedures it developed to promote the broadcast of certain types of programming responsive to the needs of a
broadcast station’s community of license. Nevertheless, a broadcast licensee continues to be required to present programming in
response to community problems, needs and interests and to maintain certain records demonstrating its responsiveness. The FCC
considers complaints from the public about a broadcast station’s programming when it evaluates the licensee’s renewal application,
but complaints also may be filed and considered at any time. Stations also must follow various FCC rules that regulate, among other
things, political broadcasting, the broadcast of profane, obscene or indecent programming, sponsorship identification (including
foreign government program sponsorship identification), the broadcast of contests and lotteries and technical operations.
The FCC requires that licensees must not discriminate in hiring practices. It has adopted rules that require us to adhere to certain
outreach practices when hiring personnel for our stations and to keep records of our compliance with these requirements. The FCC’s
Equal Employment Opportunity, or EEO, rules set forth a three-pronged recruitment and outreach program for companies with five or
more full-time employees that requires the wide dissemination of information regarding full-time vacancies, notification to requesting
recruitment organizations of such vacancies, and a number of non-vacancy related outreach efforts such as job fairs and internships.
Stations are required to collect various information concerning vacancies, such as the number filled, recruitment sources used to fill
each vacancy, and the number of persons interviewed for each vacancy. While stations are not required to routinely submit
information to the FCC, stations must place an EEO report containing vacancy-related information and a description of outreach
efforts in their public file annually. Stations must submit the preceding two years of their annual EEO public file report as part of their
renewal applications. Stations also must place their EEO public file report on their Internet websites, if they have one. The FCC
periodically audits for compliance with its EEO rules. Failure to comply with the FCC’s EEO rules could result in sanctions or the
revocation of station licenses. The EEO rules do not materially affect our operations.
33
“Retransmission Consent” and “Must Carry” Rules. FCC regulations implementing the Cable Television Consumer Protection
and Competition Act of 1992, or the Cable Act, require each full-power television broadcaster to elect, at three-year intervals
beginning October 1, 1993, to either:
•
•
require carriage of its signal by cable systems in the station’s market, which is referred to as “must carry” rules; or
negotiate the terms on which such broadcast station would permit transmission of its signal by the cable systems within its
market, which is referred to as “retransmission consent.”
Currently and for the three-year period commencing on January 1, 2024, we intend to maintain our “retransmission consent”
elections with almost all of the MVPDs that carry our full-service television programming in our television markets. We have
arrangements or have entered into agreements with nearly all of our MVPDs as to the terms of the carriage of our television stations
and the compensation we will receive for granting such carriage rights, including through our national program supplier for Spanish-
language programming, TelevisaUnivision, for our Univision- and UniMás-affiliated television stations. We also have retransmission
consent arrangements for our stations that do not have Univision or UniMás affiliations. As previously discussed, television stations in
the same television market, even if not commonly-controlled, are not permitted to engage in joint negotiations for retransmission
consent. This rule prohibits us and TelevisaUnivision from negotiating retransmission consent jointly, or from coordinating such
negotiations, in those television markets where both companies own television stations.
The FCC has rules that govern the negotiation of retransmission consent agreements based on a policy decision to have those
agreements negotiated in good faith. The FCC has an open proceeding that could result in establishing new ground rules for such
negotiations, including prohibiting certain negotiating practices on the part of broadcasters. In recently enacted legislation, small
groups of cable systems were permitted to negotiate with large broadcast stations groups. We do not believe that this provision will
have a material impact on our retransmission consent revenues. We are not certain whether or in what other form such provisions
might be adopted and the impact of such changes on our negotiations and the economic results of such negotiations. Under the FCC’s
rules currently in effect, cable systems are only required to carry one signal from each local broadcast television station. As an element
of the retransmission consent negotiations described above, we arranged that our broadcast signal be available to our MVPD viewers,
no matter whether they obtain their cable service in analog or digital modes. Cable systems have transitioned to providing
substantially all their cable services in digital only and we expect that any remaining analog cable service operations will be
terminated by most cable operators and in most markets in the near future.
We continue to explore and develop, subject to our legal rights to do so, and the economic opportunities available to us, the
distribution of our programming in alternative modes, such as by delivery on the Internet through OTT services, by multicast delivery
services, and to individuals possessing wireless mobile reception devices.
Time Brokerage, Joint Sales Agreements and Shared Services Agreements. From time to time, we have entered into time
brokerage, joint sales and shared services agreements, generally in connection with pending station acquisitions, under which we are
given the right to broker time on stations owned by third parties, agree that other parties may broker time on our stations, we or other
parties sell broadcast time on a station, or share operating services with another broadcast station in the same market, as the case may
be. By using these agreements, we can provide programming and other services to a station proposed to be acquired before we receive
all applicable FCC and other governmental approvals, or receive such programming and other services where a third party is better
able to undertake programming and/or sales efforts for us.
FCC rules and policies generally permit time brokerage agreements if the station licensee retains ultimate responsibility for and
control of the applicable station. We cannot guarantee that we will be able to air all of our scheduled programming on a station with
which we have time brokerage agreements or that we will receive the anticipated revenue from the sale of advertising for such
programming.
Under a typical joint sales agreement, a station licensee obtains, for a fee, the right to sell substantially all of the commercial
advertising on a separately owned and licensed station in the same market. It also involves the provision by the selling party of certain
sales, accounting and services to the station whose advertising is being sold. Unlike a time brokerage agreement, the typical joint sales
agreement does not involve operating the station’s program format. The FCC has eliminated rules that make television joint sales
agreements attributable to the marketing station.
In a shared services agreement, one station provides services, generally of a non-programming nature, to another station in the
same market. This enables the recipient of the services to save on overhead costs.
As part of its increased scrutiny of television and radio station acquisitions, the Department of Justice, or DOJ, has stated
publicly that it believes that time brokerage agreements and joint sales agreements could violate the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or the HSRA, if such agreements take effect prior to the expiration of the waiting period
34
under the HSRA. Furthermore, the DOJ has noted that joint sales agreements may raise antitrust concerns under Section 1 of the
Sherman Antitrust Act and has challenged them in certain locations. The DOJ also has stated publicly that it has established certain
revenue and audience share concentration benchmarks with respect to television and radio station acquisitions, above which a
transaction may receive additional antitrust scrutiny. See Item 1A, “Risk Factors” below.
Digital Television Services. The FCC has implemented digital television service in the United States. Implementation of digital
television has improved the technical quality of television signals and provides broadcasters the flexibility to offer new services,
including high-definition television and broadband data transmission.
The FCC has required full-power and Class A television stations in the United States to operate in digital television since July
13, 2023. We timely completed the digital transition of all of our full-power and Class A television stations to the digital mode and
those of our low-power stations where we believed it was in our best interest to do so.
Equipment and other costs associated with the transition to digital television, including the relocation of stations from one
channel to another, have imposed some near-term financial costs on our television stations providing the services, some of which costs
we recouped through reimbursements from the FCC. The potential exists for new sources of revenue to be derived from use of the
digital spectrum, which we continue to explore as digital station operations evolve.
Digital Radio Services. The FCC has adopted standards for authorizing and implementing terrestrial digital audio broadcasting
technology, known as “In-Band On-Channel™” or HD Radio, for radio stations. Digital audio broadcasting’s advantages over
traditional analog broadcasting technology include improved sound quality and the ability to offer a greater variety of auxiliary
services. This technology permits FM and AM stations to transmit radio programming in both analog and digital formats, or in digital
only formats, using the bandwidth that the radio station is currently licensed to use. We have elected and commenced the process of
rolling out this technology on a gradual basis owing to the absence of receivers equipped to receive such signals and are considering
its merits as well as its costs. It is unclear what effect such technology will have on our business or the operations of our radio stations.
Radio Frequency Radiation. The FCC has adopted rules limiting human exposure to levels of radio frequency radiation. These
rules require applicants for renewal of broadcast licenses or modification of existing licenses to inform the FCC whether an
applicant’s broadcast facility would expose people to excessive radio frequency radiation. We currently believe that all of our stations
are in compliance with the FCC’s current rules regarding radio frequency radiation exposure.
Low-Power Radio Broadcast Service. The FCC has created a low-power FM radio service and has granted a limited number of
construction permits for such stations. Pursuant to legislation adopted in 2011, this service is being expanded and the opportunities for
FM translator stations reduced. The low-power FM service allows for the operation of low-power FM radio stations, with a maximum
power level of 100 watts. The 100-watt stations reach an area with a radius of approximately three and one-half miles. The low-power
FM stations are required to protect other existing FM stations, as currently required of full-powered FM stations.
The low-power FM service is exclusively non-commercial. To date, our stations have not suffered any technical interference
from such low-power FM stations’ signals. Due to current technical restrictions and the non-commercial ownership requirement for
low-power FM stations, we have not found that low-power FM service has caused any detrimental economic impact on our stations as
well. Federal legislation has resulted in the increase in the availability of the low-power FM service and the FCC has recently begun
granting new low-power FM authorizations.
35
Other Proceedings. The Satellite Home Viewer Improvement Act of 1999, or SHVIA, allows satellite carriers to deliver
broadcast programming to subscribers who are unable to obtain television network programming over the air from local television
stations. Congress in 1999 enacted legislation to amend the SHVIA to facilitate the ability of satellite carriers to provide subscribers
with programming from local television stations. Any satellite company that has chosen to provide local-into-local service must
provide subscribers with all of the local broadcast television signals that are assigned to the market and where television licensees ask
to be carried on the satellite system. We have taken advantage of this law to secure carriage of our full-power stations in those markets
where the satellite operators have implemented local-into-local service. SHVIA expired in 2004 and Congress adopted the Satellite
Home Viewer Extension and Reauthorization Act of 2004, or SHVERA. SHVERA extended the ability of satellite operators to
implement local-into-local service. SHVERA expired in late 2009, but was extended in May 2010 by the Satellite Television
Extension and Localism Act, or STELA. STELA provided a further five-year extension of the “carry one/carry all” rule earlier
adopted in SHVIA and SHVERA and was further renewed in late 2014 under the terms of the STELA Reauthorization Act of 2014, or
STELAR. STELAR expired in 2019 and was replaced by the Television Viewer Protection Act of 2019, or TVPA, which made the
satellite carriage provisions permanent and required satellite television operators to serve all television markets. To the extent we have
decided to secure our carriage on DBS through retransmission consent agreements, the statutory carriage provisions are no longer
relevant to us. The FCC has been undertaking a lengthy proceeding dealing with the revitalization of the AM band and the results may
affect the ability of certain of our AM radio stations to improve their signal carriage or may affect interference among stations. As of
the present, we have not experienced any negative impact on the operations of our AM stations.
Over the years, there have been legislative efforts in Congress to modify the tax laws to make advertising more expensive for
businesses. Advertising is currently treated as an ordinary and necessary business expense. Should businesses not be able to deduct
fully their advertising expenses in the year incurred, there could be a negative impact on advertising revenue for broadcasters. We
cannot determine the effect of any such change in tax laws would have on our business and results of operations.
White Spaces. The FCC has adopted rules allowing unlicensed users to operate within the broadcast spectrum in unoccupied
parts known as the “white spaces.” The intention of the rules is to make available unused spectrum for use in connection with wireless
functions related to connectivity between computers and related devices and the Internet. The FCC believes that the provisions it
adopted will protect broadcast services. Broadcast groups, on the other hand, believe that operation of unlicensed devices in the “white
spaces” has the potential for causing interference to broadcast reception. It is premature to judge the potential impact of what services,
if any, operate under the FCC’s rules on over-the-air broadcasting.
Performance Tax. While radio broadcasters have long paid license fees to composers for the musical works they have written,
radio broadcasters have never compensated musical artists for their recordings of these works. The rationale was that the radio
broadcasting industry provided artists, free of charge, with a promotional service for their performance.
As the entire music industry has changed, with revenues from the sale of CDs continuing to drop dramatically, both musical
artists and the recording companies have sought a change in how business is done. The recording companies, with the backing of
many artists, have asked Congress to require that broadcasters pay fees for the broadcast exploitation of musical works. Such
legislation received favorable committee action in Congress during 2009 and 2010, but no legislation was then enacted. Congress has
not taken any subsequent actions, but the issue remains under consideration. Were such legislation to be adopted, its impact would
depend on how any fees were structured.
Spectrum Policies/Incentive Auction. After studying national broadband needs, the FCC determined that more spectrum should
be made available for wireless broadband services based on the growing usage of wireless devices by consumers and businesses and
associated spectrum needs for telephony, data transmission, and entertainment purposes. In order to avert a spectrum crisis, the FCC
proposed to recover and reallocate to wireless broadband a total of 500 MHz of spectrum, of which the FCC expected up to 120 MHz
(amounting to 20 channels of 6MHz each) to come from spectrum currently allocated to over-the-air television broadcasting.
In order to achieve this spectrum reallocation, Congress enacted legislation and the FCC established a mechanism for
broadcasters to participate in a “voluntary incentive auction” in which interested station owners would offer the spectrum usage rights
of their stations in a “reverse auction”, providing spectrum usage rights for wireless operators to purchase in a simultaneous or future
“forward auction”. Through a series of rulemaking proceedings, the FCC established how stations would be valued, what percentage
of the auction payments would go to broadcasters, and what rights, if any, stations that relinquished spectrum usage rights or stations
agreeing to share spectrum usage rights would retain following the completion of the auction process. The incentive auction process
resulted in the FCC recovering from broadcasters 84 MHz, or the equivalent of 14 television channels of 6 MHz each. Following the
completion of the auction process in April 2017, the FCC provided for a repacking of the television band, commencing in late 2018
and extending until mid-2020, in order to deal with the reduction in spectrum available for over-the-air broadcast stations. This
repacking has had an impact on certain of our full-service and Class A stations which have been relocated across the spectrum band.
The FCC has used certain of the proceeds derived from the auction to reimburse broadcasters for certain costs associated with such
repacking. Where our stations are affected by the repacking, we have sought and received reimbursement from these funds to limit the
economic impact of repacking on us. We have completed the repacking of all of our repacked full-service and Class A stations in
compliance with the FCC’s schedule for undertaking the transition to post-auction channels.
36
In the reverse auction process, we returned the spectrum for four of our full-service and Class A stations and we received
proceeds of approximately $264 million in 2017. Under the terms of the incentive auction, stations that returned their spectrum were
entitled to engage subsequently in channel sharing arrangements. Under a channel sharing arrangement, a station that has returned
spectrum (known as a sharee) enters into an agreement, meeting certain requirements set by the FCC, with another station that has not
returned spectrum (known as the sharer), and the two parties then divide the authorized spectrum of the sharer enabling both to
continue to transmit programming but with smaller amounts of bandwidth. A reduction in bandwidth may reduce the ability of a
station in offering multicast programming and the revenue that can be derived from such service. In the case of two of our stations that
returned spectrum, they are engaged in channel sharing with other of our stations. In the case of the other two stations, we entered into
channel sharing agreements with third parties and expended certain of the incentive auction proceeds as consideration for the third
parties to serve as our hosts. In the case of our Washington, D.C. Class A station, we ended our channel sharing arrangement as of
December 31, 2021 and commenced a new channel-sharing agreement on December 29, 2022.
The reduction in available spectrum arising from the post-auction repacking process may also have a detrimental impact on low-
power stations (other than Class A stations), which are not protected owing to their secondary status.
Human Capital Management
As of December 31, 2022, we had approximately 1,262 employees in approximately 38 countries worldwide. Approximately
548 employees were employed in the United States and approximately 714 employees were employed in foreign countries.
We are a global company, and as a result we endeavor to have a diverse and inclusive workforce reflective of our international
footprint. While we do not employ specific human capital measures in our business, we are committed to the overall health, safety and
wellness of our employees globally. We offer our employees various health and wellness benefits that are tailored to the countries in
which they are located, which we believe provide a sense of security. We also offer career growth and development opportunities. For
example, we make available to our sales team, on a global basis, training to enhance their job-related skills.
We are committed to providing a work environment that is free of unlawful harassment, discrimination and retaliation. We have
a strict policy prohibiting sexual harassment, as well as harassment or discrimination based on race, gender and other specified
statuses and conditions. Unlawful harassment in any form, including verbal, physical and visual conduct, threats, demands and
retaliation, is prohibited. We have established hotline and anonymous complaint processes for any employee who believes that these
policies have been violated.
Our overall commitment to our employees has extended to the COVID-19 pandemic. During the height of the pandemic, we
implemented a work-from-home policy for our employees in several of the jurisdictions where we operate, which policy we believe
delivered a sense of safety. We adopted additional safety measures in several of our jurisdictions for our employees who do not work
from home, including our employees who provide essential services on-site. These measures included distancing and masking
requirements, where appropriate, and communications regarding our policies and procedures related to the pandemic. We have
regularly reviewed changing circumstances during the pandemic and have adjusted, and intend to further adjust, these measures, as
may be appropriate, from time to time.
37
ITEM 1A. RISK FACTORS
Summary
This summary is qualified in its entirety by the specific risk factors that follow this summary, as well as other risk factors contained
throughout this report and referred to herein.
Investors in our company should be aware of significant risk factors, including the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
If we fail to maintain and grow relationships with media companies and advertisers.
If we fail to respond to technological changes and market conditions in the digital advertising industry.
From competition with media companies and other digital advertising companies.
From consumer acceptance in the emerging economies in our digital operations are focused.
By accessing digital advertising inventory on a regular basis to grow our business.
Relying on commercial partnerships with a small number of large media companies for the majority of our digital segment
revenue.
Competing in the geographic markets in which we currently operate and may operate.
The success of our strategy to compete in primarily emerging economies, including consumer acceptance of our services
in those markets.
Challenges integrating any acquisitions that we undertake.
Because, in certain cases, we have guaranteed payment of net fees to the media companies for which we act as
commercial partner.
Risks to our IT infrastructure from breaches and other cybersecurity incidents.
Our ability to comply with rapidly changing laws in the United States and certain of the countries in which we operate in
the areas of protection of personal data, data privacy and similar consumer protections.
The increased costs of compliance with rapidly evolving legislation and regulations affecting our digital operations in the
United States, certain states and certain countries in which we operate, including protection of personal data, data privacy
and similar consumer protections.
Our need to collect data from various sources, which may be restricted by a number of factors, including restrictions
imposed by third party technology companies.
From exchange controls and other restrictions on the movement of capital.
From political instability and greater government control of society and local economies.
Difficulty enforcing our legal rights in some of the countries in which we operate.
Infrastructure and Internet connectivity in the countries in which we operate.
Establishing adequate management and financial controls.
The technology we use in our operations may not be fully protectable.
The highly competitive nature of the television and radio industries in which we operate are subject to changing
technologies, and we may not be able to compete successfully.
The impact of changes in the competitive landscape or technology on our ability to monetize our spectrum assets.
We do not have long-term commitments from our advertisers.
Cancellations or reductions of advertising.
Risks associated with the creditworthiness of our key advertisers.
Risks associated with the general trend of declining audiences in our televisions and audio segments.
Risks that retransmission consent agreements may be terminated or not extended.
38
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Retransmission consent revenue may not continue to grow at recent rates.
TelevisaUnivision’s ownership of our Class U common stock may make some transactions difficult or impossible to
complete without its consent.
If our network affiliation or other contractual relationships with broadcast networks, particularly TelevisaUnivision,
change in an adverse manner.
We may be subject to intellectual property rights claims by third parties.
Our substantial level of debt could limit our ability to grow and compete.
Our ability to generate cash needed to service our indebtedness and financial obligations.
If we cannot raise required capital, we may have to reduce or curtail certain operations.
Our advertising revenue can vary substantially from period to period.
The 2017 Credit Agreement contains various covenants that limit management’s discretion in the operation of our
business and could limit our ability to grow and compete.
The current economic environment and state of the capital markets, resulting from the COVID-19 pandemic or otherwise.
We may never realize the full value of our intangible assets.
Fluctuations in foreign exchange rates in our overseas operations.
Failure to maintain or renew our FCC broadcast licenses could cause a default under our 2017 Credit Facility and cause an
acceleration of our indebtedness.
Displacement of any of our low-power television stations (other than Class A stations).
New laws or regulations that eliminate or limit the scope of our MVPD carriage rights.
Compliance with rules to carry our signals on DBS services.
Possible changes in the FCC’s ownership rules could limit on our ability to acquire stations in certain markets.
Changes in rules regarding over-the-air spectrum.
We are subject to various anti-takeover provisions.
Terms of additional equity or convertible debt financing could contain terms that are superior to the rights of our existing
security holders.
Risks in Our Digital Operations
If we fail to maintain and grow our relationships with media companies, our business, results of operations and financial
condition could be adversely affected.
In our digital commercial partnerships business, we act as an intermediary between primarily global media companies and
advertisers in 40 countries. Our continued success depends, among other things, on our ability to maintain existing relationships with
these entities and develop new relationships with such entities.
We must maintain existing relationships with media companies and the digital platforms they own and operate, as well as
develop new relationships with such media companies. We currently have commercial agreements, many of which are exclusive, with
Meta, Spotify, ByteDance, Twitter and certain other owners of digital platforms. Some of these agreements provide that we are the
only authorized intermediary for advertisers to acquire digital advertising inventory for that platform in a specific geographic market.
The agreements we have entered into with these media companies provide, among other things, that we act as their representative and
sell their digital advertising inventory, and achieve certain minimum target sales during specified periods of time. These commercial
agreements typically have a six-month to one-year term and are subject to renewal upon expiration or are renewed automatically
except for prior notice of termination. The commercial terms under these agreements, including but not limited to the amount of
revenue we earn, are subject to renegotiation when they are renewed. Additionally, many of these agreements may be terminated upon
notice or upon our failure to sell a minimum amount of digital advertising inventory, at our partners’ discretion. Any such changes or
terminations could materially and adversely affect our revenues and results of operations, alter or result in the termination of our
relationship with such media company and/or result in our withdrawal from a given geographic market.
39
If we fail to maintain and grow our relationships with our advertising customers, our business, results of operations and financial
condition could be adversely affected.
Our advertising customers consist of businesses or their ad agencies that place advertisements for these businesses. The
agreements we typically enter into with our advertising customers or their ad agencies typically provides for a range of services,
including securing advertising insertions on a digital platform, and may provide for certain managed services. Since these agreements
typically do not require our advertising customers or their ad agencies to use our services exclusively, they may use other digital
advertising companies – our competitors – or place ads directly with those media companies that provide such option in target
markets. We must also provide our services in a way that satisfies our advertising customers or their ad agencies. Accordingly, we
cannot assure you that we will be able to maintain our existing relationships with our advertising customers or their ad agencies, or
develop new relationships with advertising customers or their ad agencies. They may also allocate advertising budgets towards digital
platforms with which we do not have commercial agreements. If we fail to retain or expand our existing advertiser base or increase the
amount of advertising purchases they make through us, our revenues and results of operations could be materially and adversely
affected.
Reduced advertising inventory or advertising channels, changes in the exclusivity of our commercial partnerships or attractiveness
of certain advertising channels, could have a material adverse effect on our business, results of operations and financial condition.
We act as an intermediary between primarily global media companies and advertising customers and/or their advertising
agencies. In several jurisdictions we serve as the exclusive authorized commercial partner for specific media companies in relation to
the sale of media inventory. The amount, quality, type and cost of advertising inventory available through our digital commercial
partnerships are subject to fluctuation. Any decrease in the availability of inventory through certain channels, whether due to a
decrease in inventory, a loss of our exclusive partner status or otherwise, could reduce the services we offer to our advertising
customers or their ad agencies and decrease the perceived value or effectiveness of those services.
Changes in the attractiveness of inventory offered by our digital commercial partners, due to events outside our control,
including changes in regulatory scrutiny, may affect our advertising customers’ desire to place advertising on certain channels and
therefore reduce demand for the inventory we sell. For example, increased regulation on advertising platforms by U.S. and foreign
regulators might affect the availability of inventory through Smadex or the global media companies who are our commercial partners,
or reduce the value of such inventory to our customers. We may not be able to predict changes in advertiser demand for the inventory
offered by any of our digital commercial partners. If we fail to maintain a diversified mix or consistent supply of quality inventory for
any reason, a possible decrease in the demand for our services could have a material adverse effect on our business, results of
operations and financial condition.
Economic volatility and market conditions beyond our control could adversely affect advertising spending by customers, lead to
loss of customers, digital commercial partners and reduction in advertising inventory, resulting in a material adverse effect on our
business, results of operations and financial condition.
Our business depends on the overall demand for advertising and on the economic health of our advertising customers or their ad
agencies that use our services. Economic downturns or unstable market conditions, in the United States or in the foreign jurisdictions
where we operate, have from time to time in the past caused, and may in the future again cause, advertisers to decrease advertising
budgets and thereby decreasing the amounts our customers spend on advertising, which could have a material adverse effect on our
business, results of operations and financial condition.
New and existing technologies and changes in third party platforms that modify the digital advertising marketplace and how
advertising is conducted online could have a material adverse effect on our business, results of operations and financial condition.
Our industry is subject to rapid and frequent changes in technology, including introduction of privacy-forward technologies
aimed at limiting or blocking digital advertising and customized or targeted advertising. This may include technologies such as global
privacy controls which reduce the ability to serve customized advertising as well as technology that blocks advertising altogether,
which may have the effect of adversely affecting our ability to direct advertising at specific audiences and demographics. Such actions
could reduce the value of our services, and have a material adverse effect on our business, results of operations and financial
condition.
Further unanticipated changes by third party platforms can impact our ability to use data to serve or customize advertising and
affect the performance of Smadex or the global media companies who are our commercial partners, resulting in a reduction of
advertising expenditures by our customers. The blocking or limiting third party cookies by Google, Apples and possibly others, on
which we rely to optimize the performance of our customers’ advertising and provide value to our customers, could have a material
adverse effect on our business, results of operations and financial condition.
40
New and enhanced technologies and methodologies for digital advertising are being developed, including alternatives for third
party cookies. As we develop and provide new products and services, they may be subject to different legal and regulatory challenges,
or may not be as effective as the current technology that is used, which could have a material adverse effect on our business, results of
operations and financial condition.
The digital advertising industry is evolving quickly and is highly competitive, and we may not remain competitive in the market.
The digital advertising industry experiences consistent changes in technology, evolving customer needs and demand, as well as
frequent entry and departures of competing companies, products and services in the market. The market share and offerings of certain
companies may change due to strategic alliances, mergers or acquisitions which could compromise the availability of advertising
inventory, the development of competing technology, products or services, and change the relationships we have with current or
potential customers and the primarily global media companies who are our partners. For example, our customers may acquire or
develop platforms that compete with our advertising services, which could lead to a loss of customers and potential loss of market
share. If we are unable to adapt to and compete with such changes, there could be a material adverse effect on our business, results of
operations and financial condition.
If we fail to respond to changes in the digital advertising industry, our business may become less competitive.
Our business depends not only on our ability to effectively service the existing media companies and advertisers or their ad
agencies, with which we have relationships, but to develop new solutions in order to meet the changing needs of media companies and
advertisers or their ad agencies. Digital platforms are quickly evolving, while both media companies and advertisers or their ad
agencies are learning more about the digital advertising industry. As advertisers further develop their own technological knowledge
that would allow them to navigate the digital advertising market themselves, and to the degree that digital platforms become more
directly accessible to advertisers, our role as an intermediary between media companies and advertisers could become less attractive,
resulting in a material adverse effect on our business, results of operations and financial condition.
Revenue in our digital segment depends significantly on our ability to adapt to rapidly changing technology, as well as customer
preferences and expectations as a result thereof.
Our industry is subject to rapid and frequent changes in technology, evolving customer needs and interests and the frequent
introduction by our competitors of new and enhanced services. We must constantly make investment decisions regarding services and
technology to meet customer demand and evolving industry standards. If new or existing competitors have more attractive services,
we may lose advertising customers or advertising customers may decrease their use of our services. New customer demands, superior
competitive services or new industry standards could require us to make unanticipated and costly changes to our digital platforms or
business model. If we fail to adapt to our rapidly changing industry or to evolving customer needs, demand for our services could
decrease and our business and results of operations may be materially and adversely affected.
We compete with media companies themselves, as well as with other digital advertising companies.
We compete both with other digital advertising companies and with large media companies themselves that sell their own
advertising inventory directly to advertisers or their ad agencies. The decision of such media companies to compete with us may be
unrelated to the results we achieve under the commercial agreements we have with such companies.
Furthermore, if we fail to respond to changes in the rapidly evolving digital advertising industry, our business model may
become less attractive to media companies. Although historically global media companies have been slow to open offices in emerging
economies, they may elect to do so in the future, which could materially and adversely affect our business and results of operations.
The digital advertising market is relatively new and depends on acceptance in the emerging economies in which we our digital
operations are primarily focused.
The digital advertising market is relatively new and may not sustain high levels of demand and market acceptance. While
display advertising, such as print advertising, has been used successfully for decades, digital advertising on mobile, social media and
other devices and platforms, is less well established. We depend, in part, on a broad level of acceptance and expansion of digital
advertising, especially in the emerging economies which are the focus of our digital operations. If demand for digital advertising does
not continue to grow or if digital advertising solutions do not achieve widespread acceptance in the markets where we compete, our
revenue and results of operations could be materially and adversely affected.
We must access digital advertising inventory on a regular basis to grow our business.
Our revenue derives from placing digital advertisements on third-party digital platforms. We do not own or operate these
platforms, or the advertising inventory, upon which advertisements are placed. The commercial agreements we enter into with media
companies for which we act as commercial partner do not include long-term obligations requiring them to make their inventory
41
available to us for sale to our advertising customers or their ad agencies. Moreover, many of these agreements may be terminated upon
notice or upon our failure to sell a minimum amount of digital advertising inventory, at our partners’ discretion. Even though digital
advertising inventory has tended to exceed the demand for digital advertising, leading to excess inventory available to advertisers, we
cannot guarantee that, if demand for digital advertising continues to grow, we will continue to have ready access to adequate levels of
digital advertising inventory to satisfy customer demand.
To date, we have relied, and currently expect to continue to rely, on commercial partnerships with a small number of large media
companies for the majority of our digital segment revenue.
We derive the majority of our digital segment revenues from a small number of global media companies for which we act as
commercial partner. For the years ended December 31, 2022 and 2021, revenue from the top five global media companies for which
we act as commercial partner accounted for 60% and 61% of our consolidated revenue, respectively. For the years ended December
31, 2022 and December 31, 2021, Meta alone accounted for 49% and 55% of our consolidated revenue, respectively.
We expect that we will continue to depend upon a relatively small number of global media companies for a majority of our
digital segment revenue for at least the foreseeable future. The loss of any relationship with one of our existing media company
customers, for any reason, could result in a loss of substantial revenue in the foreseeable future, and have a material adverse effect on
our business, results of operations and financial condition.
Competition in the geographic markets in which we currently operate and in the future may operate may increase, and existing or
new competitors could enter these markets.
Competition in the geographic markets in which we operate, in some of which where we have exclusive commercial agreements
as commercial partner, may increase in the future. Our primary competitors are other advertising representation companies and, to an
increasing degree, media companies themselves. Certain competitors may seek to gain market share by providing enhanced managed
services or offering discount pricing, in response to which we may be required to lower our own fees or may lose business to new
competitors. Such developments could materially and adversely affect our business and results of operations.
In certain cases, we have guaranteed payment of fees to the media companies for which we act as commercial partner, creating a
significant financial risk for us.
Some of the commercial agreements we have entered into with media companies for which we act as commercial partner
obligate us to guarantee fees to be paid to these media companies. This puts significant financial risk on us if we are unable to collect
fees in full from our advertising customers or their ad agencies.
For example, we allocate each of our advertisers a budget that they can use to purchase digital advertising inventory. We base
this budget on financial and credit information, including information provided by our advertisers. If an advertiser were to send us
inaccurate information, or if we were to fail to analyze the credit worthiness of any customer accurately, among other factors, we may
grant an advertiser more favorable credit or payment terms than may prove to be warranted, resulting in its difficulty in fulfilling its
financial obligations to us. We would nonetheless be obligated to pay the media company its fees from the advertising placement.
Our systems and IT infrastructure may be subject to security breaches and other cybersecurity incidents.
We rely on the accuracy, capacity and security of our IT systems, some of which are managed or hosted by third parties, and our
business operations may involve the transmission and/or storage of data, including in certain instances the PII of our employees and
contractual partners and online users. Maintaining the security of computers, computer networks and data storage resources is a
critical issue for us and our counterparties, as security breaches, including computer viruses and malware, denial of service actions,
misappropriation of data and similar events through the Internet (including via devices and apps connected to the Internet), and
through email attachments and persons with access to these information systems, could result in vulnerabilities and loss of and/or
unauthorized access to proprietary or confidential information, including but not limited to PII. We may face attempts by hackers,
cybercriminals or others with or without authorized access to our systems to misappropriate proprietary information, confidential
information, including but not limited to PII, and technology, interrupt our business and/or gain unauthorized access to confidential
information, including but not limited to PII. The reliability and security of our IT infrastructure and software, and our ability to
expand and update technologies in response to our changing needs, the changing needs of our customers and legislative and/or
regulatory requirements in the jurisdictions throughout the world where we operate, is critical to our business. To the extent that any
disruptions or security breaches result in a loss or damage to our data, it could cause harm to our reputation, potentially impair our
advertisers’ access to Smadex and could potentially cause operational delays and other detrimental impacts on our operations. In
addition, we could face enforcement actions by governments in the jurisdictions in which we operate, which could result in fines,
penalties and/or other liabilities, which may cause us to incur legal fees and costs and/or additional costs associated with responding to
a cyberattack.
42
Increased regulation regarding cybersecurity may increase our costs of compliance, including fines and penalties, as well as
costs of cybersecurity audits and associated repairs or updates to infrastructure, physical systems or data processing systems. Any of
these actions could have a material adverse effect on our business and results of operations. Although we maintain insurance coverage
to protect us against some of these risks, such coverage may be insufficient to cover all losses or types of claims that may arise in the
event we experience a cybersecurity incident, data breach or disruption, unauthorized access or failure of systems.
We are subject to new and rapidly evolving legislation and/or regulations in respect of protection of personal data and any failure
by us to comply with these regulations could result in loss of business and/or fines.
The handling and protection of personal information, including but not limited to PII, is regulated in many jurisdictions where
we operate, including but not limited to the CCPA in California, the LGPD in Brazil and the GDPR in the E.U. These privacy and
data-protection related laws and regulations are evolving rapidly, with new or modified laws and regulations proposed and
implemented frequently, and existing laws and regulations subject to new or different interpretations. In particular, the GDPR, which
became effective in 2018, poses increased compliance challenges both for companies operating within the E.U. and non-E.U.
companies that administer or process certain personal data of E.U. residents. The implementation of the GDPR prompted various other
countries to implement or update their own data protection laws and regulations.
Any failure by us to comply with applicable data protection laws and regulations in any of the jurisdiction where we do business
could subject us to significant penalties, negative publicity and reputational damage with our advertising customers or their ad
agencies, or the media companies for which we act as commercial partner, which in turn could have a material adverse effect on our
business, revenue and results of operations.
Our ability to generate revenue in our digital segment depends, in significant part, on our ability to collect data from various
sources, which may be restricted by a number of factors, including restrictions imposed by third party technology companies and
others.
Our ability to optimize the delivery of digital advertisements depends on our ability to successfully leverage data, including data
that we collect from advertisers, publishers and third parties, as well as our own operating history. Using cookies and non-cookie
based mechanisms, we collect information about the interactions of online users with advertisers and publishers’ digital properties,
including, for example, information about the placement of advertisements and users’ interactions with our customers’ websites or
advertisements. Our ability to successfully leverage such data depends, in significant part, on our continued ability to access and use
such data, which could be restricted by a number of factors, including new developments in, or new interpretations of, laws,
regulations and industry standards, consumer choice, changes in technology, including changes in web browser technology, increased
visibility of consent or “do not track” mechanisms or “ad-blocking” software, and restrictions imposed by large software companies
and platform providers, web browser developers or other software developers.
For example, mobile operating system and browser providers have announced product changes as well as future plans to limit
the ability of app developers to collect and use data to target and measure advertising. Currently, three major web browsers - Apple’s
Safari, Mozilla’s Firefox and Microsoft’s Edge – block third-party cookies by default. Google has introduced new controls over third-
party cookies in its Chrome web browser and has announced plans to phase out support for third-party cookies in Chrome by 2024. In
2021, Apple made certain changes to its products and data use policies in connection with the release of its iOS 14 operating system
that reduce the ability to target and measure advertising. These types of restrictions could reduce the budgets marketers are willing to
commit to us and other advertising platforms, and as a result could have a material adverse effect on our revenue and results of
operations.
Proposed legislation or regulations involving certain media companies with which we do business in our digital operations could
have an impact on our business.
From time to time, legislatures and regulatory agencies in the United States or other jurisdictions in which we operate, have
adopted or proposed legislation and regulations, including restrictions or outright bans, on the operations of certain global media
companies in such jurisdiction, including one global media company with which we act as a digital commercial partner outside the
United States. While we cannot at this time determine whether or how any such proposals would affect our digital operations, revenue
and results of operations, potentially the costs to monitor such developments in a large number of jurisdictions worldwide where we
currently operate and may operate, the costs to comply with any such legislation and regulations which may be adopted in any such
jurisdictions, and the costs to modify the way we currently do business to comply with any such legislation and regulations, could be
significant.
Our international operations subject us to significant costs and risks, which risks may increase if and as our overseas operations
continue to expand.
43
Our international digital operations subject us to many risks associated with supporting a rapidly growing business across many
cultures, customs, monetary, legal and regulatory systems, primarily in emerging economies. We currently have personnel in 40
countries on five continents, and the countries in which our personnel are located and in which we operate includes primarily
emerging economies. Such general risks include but are not limited to geopolitical concerns, local politics, governmental instability,
socioeconomic disparities, fiscal policies, high inflation and hyper-inflation, currency fluctuations, currency exchange controls,
restrictions on repatriating foreign-derived profits to the United States, local regulatory compliance, punitive tariffs, unstable local tax
policies, trade embargoes, import and export license requirements, trade restrictions, greater difficulty collecting accounts receivable,
unfamiliarity with local laws and regulations, differing legal standards in enforcing or defending our rights in courts or otherwise, the
possibility of less favorable intellectual property protection than is provided in the United States, changes in labor conditions,
difficulties in staffing and managing international operations, difficulties in finding personnel locally who are capable of complying
with the financial and reporting requirements of U.S. reporting companies, actions taken by foreign governments to respond to
localized public health emergencies, such as recent quarantines and travel restrictions related to the COVID-19 pandemic, and other
cultural differences. Foreign economies may differ favorably or unfavorably from the U.S. economy in growth of gross domestic
product, rate of inflation, market development, rate of savings, capital investment, resource self-sufficiency and balance of payments
positions, and in many other respects.
Some of the key specific risks to which we are subject as a result of our international operations in those markets where we
currently operate, and those markets where we may expand our operations in the future, include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
significant management, travel, infrastructure and legal compliance costs associated with having multiple international
operations;
potential difficulty in enforcing contracts, pursuing collections and asserting other legal rights due to different legal
systems compared to the United States;
regulatory and legal compliance, including with anti-bribery laws, import and export control laws, potential economic
sanctions and other regulatory limitations or obligations on our operations;
significant administrative costs and risks associated with compliance with local laws and regulations, including relating to
privacy and data security such as the GDPR in the E.U. and the LGPD in Brazil;
reduced protection for intellectual property rights in some countries;
compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and overlapping of
different tax regimes.
increased financial accounting and reporting burdens and complexities, including risks of maintaining internal controls
and procedures, which we have experienced in the past and might experience in the future;
concerns regarding unstable or changing politic and/or economic conditions in the countries in which we operate;
the impact of global and regional recessions and economic instability;
heightened risks of unfair or corrupt business practices and of improper or fraudulent sales arrangements;
reduced protection of free speech and potential restrictions on access to social media and the Internet;
difficulties in invoicing and collecting in foreign currencies and associated foreign currency exposure;
difficulties in repatriating or transferring funds from or converting currencies;
administrative difficulties, costs and expenses related to various local languages and cultural differences; and
varied labor and employment laws, including those relating to termination of employees.
As a result of the breadth of our rapidly growing international digital operations, we may incur significant operating expenses,
especially measured as a percentage of revenue generated in some of the markets in which we operate and may operate in the future.
Our failure to manage successfully our growth internationally could adversely affect our result of operations and financial condition.
Foreign exchange controls and other restrictions on the movement of capital out of certain jurisdictions or otherwise may
adversely affecting our ability to repatriate funds.
We keep cash and cash equivalents in certain jurisdictions that have foreign exchange controls, including Argentina, Brazil,
India, Nigeria, Pakistan and South Africa, which could result in restrictions on the movement of capital, including our ability to
repatriate funds to the United States. Certain other jurisdictions in which we currently or may in the future operate, also have or may
44
have foreign exchange controls or restrictions on the movement of capital, including restrictions on repatriation of funds. Generally
speaking, foreign exchange controls take different forms, but may include restrictions on the amount of funds that can be transferred
or dividends that can be paid upstream to us from such jurisdictions. For example, in certain jurisdictions, including Argentina, India
and South Africa, we must obtain regulatory approval prior to the repatriation of funds from these jurisdictions. We work to obtain
applicable approvals in the jurisdictions that impose these controls and restrictions, but we cannot provide any assurance that such
approvals will be obtained in a timely manner, or at all. These exchange control measures may also prevent or restrict the ability to
hold foreign currency in cash within the relevant jurisdiction. If we are unable to transfer such amounts from such jurisdictions when
and as needed, we will remain subject to foreign exchange risk relating to such retained funds denominated in local currencies, to the
extent we cannot convert such funds into other currencies (whether as a result of foreign exchange restrictions in such jurisdictions or
any restrictions on transferring funds out of such jurisdictions). This may subject us to significant foreign exchange risk, which could
have an adverse effect on our results of operations, liquidity and financial condition.
In addition, repatriations of funds from other jurisdictions may be subject to withholding, income and other taxes under the laws
of those jurisdictions. If our international locations are unable to repatriate funds and/or make other payments or transfers of funds to
us when needed, we may be unable to satisfy certain of our financial obligations, which could adversely affect our business, results of
operations and cash flow
.
Political instability and greater government control of society and local economies are not uncommon in many emerging
economies, including some of the markets in which we operate and may operate in the future.
We operate in 40 countries. The governments of some of the countries in which we operate, primarily emerging economies,
often exercise significant influence or control over such countries’ economies. In addition, due to a certain level of political instability,
changes in government, regimes or political philosophy as a result of democratic or non-democratic actions, may result in changes in
policy and regulations. These changes could be sudden and fundamental. Some of such actions and resulting changes may include,
among other things:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
blocking access to bank accounts;
growth or downturn of the economy of the countries in which we operate;
interest rates and monetary policies;
exchange rates and currency fluctuations;
restrictions on capital and funds expatriation;
exchange control policies and restrictions on remittances abroad and repatriation of funds;
inflation;
currency devaluations;
hyperinflation;
wage and price controls;
liquidity of the domestic capital and lending markets;
blocked access to, or freezes on, bank accounts;
bank failures without adequate bank deposit insurance protection;
modifications to laws and regulations, sometimes radical changes, according to political, social and economic interests;
fiscal policy, monetary policy and changes in tax laws or rates;
economic, political and social instability, including general strikes, mass demonstrations and civil strikes;
high levels of unemployment and underemployment;
labor and social security regulations;
public health crises, including but not limited to the ongoing COVID-19 pandemic;
limited infrastructure, including access to telecommunications and Internet services;
45
•
•
•
•
•
energy and water shortages and rationing;
commodity prices;
high levels of organized crime activity;
government intervention in the private sector, including through potential nationalization or expropriation of private
enterprises, and
other political, diplomatic, social and economic developments in or affecting the countries in which we operate.
We have no control over and cannot predict what measures or policies any governments may take in the future. However, any such
changes, or combination of changes, could have an adverse effect on our business, results of operations and financial condition.
We may be exposed to certain risks enforcing our legal rights generally in some of the countries in which we operate.
Unlike the United States, most of the countries in which we operate have a civil law system based on written statutes in which
judicial decisions have limited precedential value. While we believe that most or all the countries in which we operate have enacted
laws and regulations to deal with economic matters such as corporate organization and governance, foreign investment, intellectual
property, commerce, taxation and trade, our experience in interpreting and enforcing our rights under these laws and regulations is
limited, and our future ability to enforce commercial claims or to resolve commercial disputes in any of these countries is therefore
unpredictable. These matters may be subject to the exercise of considerable discretion by national, provincial or municipal
governments, agencies and/or courts, and forces and factors unrelated to the legal merits of a particular matter or dispute may
influence their determination.
Infrastructure and Internet connectivity in the countries in which we operate may impact our operations.
The emerging economies in which we operate, and in which we may operate in the future, may be prone to weakness in
infrastructure, including potential energy shortages and/or outages, inadequate or unreliable telecommunications, and lack of adequate
Internet connectivity and bandwidth. Any of these factors could adversely affect the success of an advertiser's advertising campaigns
or the perceived benefit to it placing, or continuing to place, digital advertisements in those markets.
The technology on which we rely may not be protectable, which could result in competition from others who may utilize the same,
or similar technology.
We rely on various technologies in our business, including but not limited to our Smadex ad purchasing platform, and the
aggregation and analysis of data collected about online users in our digital ad solutions operations. While much of this technology is
proprietary, we have not determined the extent to which this technology is protectable. To the extent that such technology is not
protectable, others could use the same, or similar, technology in competition with us. Such competition could have a material adverse
effect on our business, revenue and results of operations.
In the past we have experienced, and we may in the future experience, difficulty establishing adequate management and financial
controls in some of the countries in which we operate.
Certain of the countries in which we operate historically have been deficient in U.S.-style local management and concepts of
internal control over financial reporting, or ICFR, as well as in modern banking and other control systems. As our digital operations
have grown, we have experienced these problems and may experience them in new markets in which we may operate or with
companies we have recently acquired or may acquire in the future. We have had, and we may have, difficulty in hiring and retaining a
sufficient number of locally-qualified employees to work in such countries who are capable of satisfying all the obligations of a U.S.
public reporting company, including ICFR. As a result of these factors, we may experience difficulty in establishing adequate
management and financial controls (including ICFR), collecting financial data and preparing financial statements, books of account
and corporate records and instituting business practices in such countries in order to meet the requirements of U.S. GAAP and the
rules and regulations of the SEC as in effect from time to time that are applicable to reporting companies.
We may be unable to integrate any acquisitions that we undertake successfully, which could disrupt our business and adversely
affect our financial conditions and result in operations.
Subject to certain restrictions contained in the 2017 Credit Agreement, we plan to continue to evaluate opportunities to make
future acquisitions as opportunities present themselves, in a manner that is consistent with our overall acquisition strategy. We cannot
accurately predict the timing, size, and success of any currently planned or future acquisitions. We may be unable to identify suitable
acquisition candidates or to complete the acquisitions of candidates that we identify. Additionally, unforeseen expenses, delays and
46
competition frequently encountered in connection with pursuing acquisition targets could inhibit our growth and have an adverse
effect on our competitive position and results of operations.
We also may be unable to effectively complete an integration of acquired businesses with our own or achieve our desired
operating, growth, and performance goals for acquired businesses. The integration of acquired businesses involves numerous risks,
including:
•
•
•
•
•
•
•
•
•
•
•
•
the potential disruption of our core business;
the potential strain on our financial and managerial controls, reporting systems and procedures;
potential unknown liabilities associated with the acquired business;
costs relating to liabilities which we agree to assume;
unanticipated costs associated with the acquisition;
diversion of management’s attention from our core business;
problems assimilating the purchased operations or technologies;
risks associated with entering markets and businesses in which we have little or no prior experience;
failure of acquired businesses to achieve expected results;
adverse effects on existing business relationships;
the risk of impairment charges related to potential write-downs of acquired assets; and
the potential inability to create uniform standards, controls, procedures, policies, and information systems.
We cannot assure you that we would be successful in overcoming problems encountered in connection with any acquisitions,
and our inability to do so could have a material adverse effect on our competitive position and results of operations.
We may be subject to intellectual property rights claims by third parties, which may be extremely costly to defend, could require us
to pay significant damages and could limit our ability to use certain technologies.
Third parties may assert claims of infringement of intellectual property rights in proprietary technology against us for which we
may be liable. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs
defending against the claim and could distract our management from operating our business. Although third parties may offer a license
to their technology, the terms of any offered license may not be satisfactory to us and the failure to obtain a license or the costs
associated with any license could have a material adverse effect to our business, results of operations and financial condition. In
addition, some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us.
Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and
ultimately may not be successful. Furthermore, a successful claimant could secure a judgment or we may agree to a settlement that
prevents us from distributing certain products or performing certain services or that requires us to pay substantial damages, including
treble damages if we are found to have willfully infringed such claimant's patents or copyrights, royalties or other fees. Any of these
events could have a material adverse effect to our business, results of operations and financial condition.
Risks in our Television and Audio Operations
We operate in highly competitive industries subject to changing technologies, and we may not be able to compete successfully.
We operate in highly competitive industries. Our television stations and radio stations compete for audiences and advertising
with other television stations, radio stations and digital media platforms, as well as with other forms of media and content delivery.
Advances in technologies or alternative methods of content delivery, as well as changes in audience or advertiser expectations driven
by changes in these or other technologies and methods of content delivery across our segments, could have a negative effect on our
business. Examples of such advances in technologies include video-on-demand, satellite radio, video games, text messaging,
streaming video and downloaded content from mobile phones, tablets and other personal video and audio devices. For example,
streaming services and devices that allow users to view or listen to television or radio programs on a time-shifted, on-demand basis,
and technologies which enable users to fast-forward or skip advertisements altogether, such as DVRs and mobile devices, have caused
and are continuing to cause changes in consumer behavior that could affect the perceived attractiveness of our services to advertisers,
and could have a material adverse effect on our advertising revenue and results of operations.
47
In addition, further increases in the use of mobile devices which allow users to view or listen to content of their own choosing,
in their own time, while avoiding traditional commercial advertisements, could have a material adverse effect on our advertising
revenue and results of operations. Additionally, MVPDs, direct-to-home satellite operators, and other sources have implemented OTT
services (operated by MVPDs and others, including Dish Network, AT&T/DirecTV, YouTube and Sony) that allow them to transmit
targeted programming or limited bundles of broadcast and non-broadcast programming, that may or may not include our stations, over
the Internet to audiences, potentially leading to increased competition for viewers in our markets. New technologies and methods of
buying advertising present an additional competitive challenge, as competitors offer products and services such as the ability to
purchase advertising programmatically or bundled offline and online advertising, aimed at capturing advertising spend that previously
went to broadcasters.
Our inability, for technological, business or other reasons, to adapt to changes in program offerings and technology on a timely
and effective basis, exploit new sources of revenue from these changes, or to enhance, develop, introduce and deliver compelling
advertising solutions in response to changing market conditions and technologies or evolving expectations of advertisers may have a
material adverse effect on our business and results of operations.
Changes in the competitive landscape or technology may impact our ability to monetize our spectrum assets.
With the proliferation of mobile devices, new and expanding mechanisms for the distribution of video programming, and
advances in technology that have freed up spectrum capacity, the monetization of our spectrum usage rights has become an integral
part of our business in recent years. We rely on the demand to broadcast multicast networks and demand from telecommunications
operators to operate interference free in our markets in order to monetize our spectrum. There are no assurances that this demand will
continue in future periods. Additionally, program offerings and how they are made available as well as technology involving the
utilization of spectrum are evolving rapidly. If we are not able, for technological, business or other reasons, to adapt to these changes
in technology on a timely and effective basis, our ability to monetize our spectrum assets could be affected and have an adverse effect
on our results of operations.
We do not have long-term commitments from our advertisers, and we may not be able to retain or attract new advertisers or their
ad agencies.
Most of our advertising customers or their ad agencies do business with us by requesting that we place insertion orders for
advertising. Typically, these insertion orders may be cancelled by our customers or their ad agencies prior to the completion of the
campaign without penalty, subject to payment for advertisements that have already been delivered. Our success depends, in part, upon
our ability to secure repeat business from existing advertisers, while expanding the number of advertisers for which we provide
services. Because we do not have long-term agreements with advertisers, we cannot guarantee that our current advertisers will
continue to use our services, or that we will be able to replace advertisers who cease using our services with new advertising
customers. These events, were they to occur, would adversely affect our revenue and results of operations, especially if we are unable
to replace such advertising purchases. Many of our expenses are based, at least in part, on our expectations of future revenue and are
therefore relatively fixed once budgeted. Therefore, weakness in advertising sales would have a material adverse effect on our revenue
and results of operations.
We could be adversely affected by a competing radio station's format in a given market in which we operate.
If a competing radio station within a market converts to a format similar to that of one of our stations, or if one of our
competitors upgrades its stations, we could suffer a reduction in ratings and advertising revenue in that market.
Our business is exposed to risks associated with the creditworthiness of our key advertisers and other strategic business partners.
Periodic economic downturns may result in financial instability or other adverse effects for many of our advertisers and other
strategic business partners. Disruption of the credit markets, a prolonged recession and/or sluggish economic growth in future periods
could adversely affect our customers’ ability to access credit which supports the continuation and expansion of their businesses and
could result in advertising or broadcast cancellations or suspensions, payment delays or defaults by our customers.
We are a party to various retransmission consent agreements that may be terminated or not extended following their current
termination dates.
If our retransmission consent agreements are terminated or not extended following their current termination dates, our ability to
reach MVPD subscribers and, thereby, compete effectively, may be adversely affected, which could have a material adverse effect on
our business and results of operations.
Retransmission consent revenue may not continue to grow at recent rates and are subject to other factors.
While we expect the amount of revenues generated from our retransmission consent agreements to continue to grow in dollar
terms in the near-term and beyond, the rate of growth of such revenue may not continue at recent or current rates and may be
detrimentally affected by a variety of factors. The principal factor is the reduction in subscribers as existing subscribers elect to
48
terminate service, thereby reducing the subscriber base on which retransmission consent payments are determined. Other factors that
may have an adverse effect on such revenues are network program suppliers seeking reverse network compensation, the growing
concentration in the MVPD industry, and the resistance of MVPDs to continue to compensate broadcasters adequately for the
programming that they deliver. All of these factors may result in the amounts that MVPDs are willing or able to pay for our
programming being adversely affected.
We face declining audiences in our television and audio segments.
In general, our television and audio segments face declining audiences, which we believe is present across the broadcast
industry, competitive factors with the other major Spanish-language broadcasters, and changing demographics and preferences of
audiences in terms of the media they prefer to view, including streaming and social media. We anticipate that these changes in viewer
habits will persist and may accelerate for at least the foreseeable future and possibly permanently. Additionally, we have previously
noted a trend for advertising to move increasingly from traditional media, such as television, to new media, such as digital media, and
we expect this trend to continue. As a result of these trends, future revenue and results of operations in our television and audio
segments could be materially and adversely affected.
Fluctuations in audience ratings, and its effect on advertising rates and revenue, could have a material adverse effect on our
results of operations.
Audience ratings, and their effect on advertising rates and revenue of our individual stations, are subject to fluctuation.
Decreases in audience ratings, with potential resulting decreases in advertising rates and revenue, could have a material adverse effect
on our results of operations
TelevisaUnivision’s ownership of our Class U common stock may make some transactions difficult or impossible to complete
without TelevisaUnivision’s consent.
TelevisaUnivision is the holder of all of our issued and outstanding Class U common stock. Although the Class U common
stock has limited voting rights and does not include the right to elect directors, we may not, without the consent of TelevisaUnivision,
merge, consolidate or enter into a business combination, dissolve or liquidate or dispose of any interest in any FCC license with
respect to television stations which are affiliates of TelevisaUnivision, among other things. TelevisaUnivision’s ownership interest
may have the effect of delaying, deterring or preventing a change in control and may make some transactions more difficult or
impossible to complete without TelevisaUnivision’s support or due to TelevisaUnivision’s then-existing media interests in applicable
markets.
If our network affiliation and/or other contractual relationships with broadcast networks, including but not limited to
TelevisaUnivision, change in an adverse manner, it could negatively affect our television ratings, business, revenue, results of
operations and financial condition.
Our network affiliations and other contractual relationships with television networks, particularly TelevisaUnivision, are
essential to our business, revenue and the results of operations of our television stations. If our network affiliation and/or other
agreements or contractual relationship with a network, especially in the case of the TelevisaUnivision network, were terminated, in
whole or in part, or if a network, such as TelevisaUnivision, were to stop providing programming to us for any reason and we were
unable to obtain replacement programming of comparable quality, it could have a material adverse effect on our business, revenue,
results of operations and financial condition.
We regularly engage in discussions with our network partners regarding various matters relating to our contractual relationships.
If our network partners were to not continue to provide programming, marketing, available advertising time and other support to us on
the same basis as currently provided, or if our affiliation agreements or another contractual relationships with them were to otherwise
change in an adverse manner, it could have a material adverse effect on our business, revenue, results of operations and financial
condition.
Our television stations compete for audiences and advertising revenue primarily on the basis of programming content and
advertising rates. Audience ratings are a key factor in determining our television advertising rates and the revenue that we generate. If
our network partners’ programming success or ratings were to decline, it could lead to a reduction in our advertising rates and
advertising revenue on which our television business depends. Additionally, by aligning ourselves closely with TelevisaUnivision, we
might forego other opportunities that could diversify our television programming and avoid dependence on TelevisaUnivision’s
television networks.
We are subject to cybersecurity threats which could lead to business disruptions or data breaches that could damage our
reputation, harm our business, expose us to liability and materially adversely affect our results of operations.
We may be subject to disruptions, breaches or cyber-attacks of our secured networks and information technology systems
caused by illegal hacking, criminal fraud or impersonation, computer viruses, ransomware, acts of vandalism or terrorism or employee
error, and our security measures or those of any third party service providers we use may not detect or prevent such security breaches.
49
Malicious state actors have increased their cyberattacks not only on private and public entities but increasingly are using supply chain
attacks to broadly infiltrate numerous users of compromised systems. We may incur significant costs to investigate, eliminate,
remediate or alleviate cybersecurity breaches and vulnerabilities and to improve our information security capabilities, and our efforts
to protect against such breaches or vulnerabilities may not be successful. Any such compromise of our information security or the
third-party providers on which we rely could also result in the unauthorized publication of our confidential business or proprietary
information or the unauthorized release of customer or employee data, including but not limited to PII, or a violation of privacy or
other laws in the jurisdictions in which we operate. Such incidents could subject us to substantial governmental fines and civil liability
as well as potential litigation. Any of the foregoing could irreparably damage our reputation and business and/or expose us to material
monetary liability, which could have a material adverse effect on our business, results of operations and financial condition.
Financial Risks
Our substantial level of debt could limit our ability to grow and compete.
Our total indebtedness, net of unamortized debt issuance costs, was $212.5 million as of December 31, 2022. A significant
portion of our cash flow from operations is and will continue to be used to service our debt obligations, and our ability to obtain
additional financing is limited by the terms of the 2017 Credit Agreement. We may not have sufficient future cash flow to meet our
debt payments, or we may not be able to refinance any of our debt at maturity. We have pledged all of our domestic assets and our
existing and future domestic subsidiaries to our lenders as collateral. Our lenders could proceed against the collateral to repay
outstanding indebtedness if we are unable to meet our debt service obligations. If amounts outstanding under the 2017 Credit
Agreement were to be accelerated, our assets may not be sufficient to repay in full the obligation owed to such lender.
Our substantial indebtedness could have important consequences to our business, including without limitation:
•
•
•
preventing us, under the terms of the 2017 Credit Agreement, from obtaining additional financing to grow our business
and compete effectively;
limiting our ability, as a practical matter, to borrow additional amounts for working capital, capital expenditures,
acquisitions, debt service requirements, execution of our growth strategy or other purposes; and
placing us at a disadvantage compared to those of our competitors who have less debt or fewer restrictions under the terms
of the agreements governing their debt.
Historically, we have a history of net losses in some periods and net income in other periods. We have a significant accumulated
deficit. Were we to experience net losses again, our ability to comply with the 2017 Credit Agreement and continue to operate
our business as it is presently conducted, could be jeopardized.
We reported net income attributable to common stockholders of $18.1 million and had positive cash flow from operations of
$78.9 million for the year ended December 31, 2022. We reported net income attributable to common stockholders of $29.3 million
and had positive cash flow from operations of $65.3 million for the year ended December 31, 2021. Additionally, as of December 31,
2022, we had an accumulated deficit of $504.4 million. If we were to experience net losses and/or declining net revenue over a period
of time, there could be a material adverse effect on our liquidity and capital resources. In addition, if events or circumstances occur
such that we were not able to generate positive cash flow and operate our business as it is presently conducted, we may be required to
obtain additional equity or debt financing, refinance our existing debt, sell assets and/or curtail certain operations. There is no
assurance that any such transactions, if required, could be consummated on terms satisfactory to us or at all. Any default under our
2017 Credit Facility, or inability to renegotiate such agreements or obtain additional financing if needed, would have a material
adverse effect on our overall business and financial condition.
Our ability to generate the significant amount of cash needed to service our indebtedness and financial obligations and our
ability to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors beyond our
control. In addition, we may not be able to pay amounts due on our indebtedness.
As of December 31, 2022, we had outstanding total indebtedness, net of unamortized debt issuance costs, of $212.5 million. Our
ability to make payments on and refinance our indebtedness, including the amounts borrowed under our 2017 Credit Facility and other
financial obligations, and to fund our operations, depends on our ability to generate substantial operating cash flow. Our cash flow
generation will depend on our future performance, which is subject to many factors, including prevailing economic conditions and
financial, business and other factors, many of which are beyond our control.
Our business may not generate sufficient cash flow from operations and future borrowings may not be available to us under our
2017 Credit Facility or otherwise, in amounts sufficient to enable us to service our indebtedness, including the borrowings under our
50
2017 Credit Facility, or to fund our other liquidity needs. If events or circumstances occur such that we are not able to generate
positive cash flow and operate our business as it is presently conducted, we may be required to refinance our existing indebtedness,
sell assets, curtail certain operations and/or obtain additional equity or debt financing. There is no assurance that any such transactions,
if required, could be consummated on terms satisfactory to us or at all. Because of these and other factors beyond our control, we may
be unable to pay the principal, premium, if any, interest or other amounts on our indebtedness.
If we cannot raise required capital, we may have to reduce or curtail certain existing operations.
We require significant additional capital for general working capital and debt service needs. If our cash flow and existing
working capital are not sufficient to fund our general working capital and debt service requirements, we will have to raise additional
funds by selling equity, issuing debt, refinancing some or all of our existing debt, selling assets or subsidiaries and/or curtailing certain
operations. None of these alternatives for raising additional funds may be available, or available on terms satisfactory to us, in
amounts sufficient for us to meet our then requirements. In addition, our ability to raise additional funds and engage in acquisitions
and divestitures is limited by the terms of the 2017 Credit Agreement. Our failure to obtain any required new financing may, if
needed, could have a material adverse effect on our results of operations and financial condition.
Our advertising revenue can vary substantially from period to period based on many factors beyond our control, including but
not limited to those discussed herein. This volatility affects our operating results and may reduce our ability to repay
indebtedness or reduce the market value of our securities.
We rely on sales of advertising time for most of our revenues and, as a result, our operating results are sensitive to the amount of
advertising revenue we generate. If we generate less revenue, it may be more difficult for us to repay our indebtedness and the value
of our business may decline. Among other things, our ability to sell advertising time depends on:
•
•
•
•
•
•
•
•
the levels of advertising, which can fluctuate between and among industry groups and in general, based on industry and
general economic conditions;
for our television and audio segment, the health of the economy in the markets where our television and radio stations are
located and in the nation as a whole, and for our digital segment, the health of the economy in the markets where our
digital advertising customers, publishers and audiences are located, and globally as a whole;
the popularity of our programming on its own and as compared to that of our competition;
changes in the makeup of the population in the markets where our television and radio stations are located;
the activities of our competitors, including increased competition from other forms of advertising-based media, such as
other broadcast television stations, radio stations, MVPDs, Internet and broadband content providers, and publishers and
digital advertising technology companies serving the same markets;
changes in advertising choices and placements in different media, such as new media, compared to traditional media such
as television and radio;
revenue in our digital segment depends significantly on our ability to adapt to rapidly changing technology, as well as
consumer preferences and expectations as a result thereof; and
other factors that may be beyond our control, including without limitation legislative and/or regulatory action affecting
any of our operations.
The 2017 Credit Agreement contains various covenants that limit management’s discretion in the operation of our business and
could limit our ability to grow and compete.
Subject to certain exceptions, the 2017 Credit Agreement contains covenants that limit the ability of us and our restricted
subsidiaries to, among other things:
•
•
•
•
•
•
incur liens on our property or assets;
make certain investments;
incur additional indebtedness;
consummate any merger, dissolution, liquidation, consolidation or sale of substantially all our assets;
make certain acquisitions;
dispose of certain assets;
51
•
•
•
•
•
•
•
•
make certain restricted payments;
enter into substantially different lines of business;
enter into certain transactions with affiliates;
use loan proceeds to purchase or carry margin stock or for any other prohibited purpose;
change or amend the terms of our organizational documents or the organization documents of certain restricted
subsidiaries in a materially adverse way to the lenders, or change or amend the terms of certain indebtedness;
enter into sale and leaseback transactions;
make prepayments of any subordinated indebtedness, subject to certain conditions; and
change our fiscal year, or accounting policies or reporting practices.
Moreover, if we fail to comply with certain customary terms of default under the 2017 Credit Agreement, our lenders could:
•
•
elect to declare all amounts borrowed to be immediately due and payable, together with accrued and unpaid interest;
and/or
terminate their commitments, if any, to make further extensions of credit.
Any such action by our lenders would have a material adverse effect on our overall business and financial condition.
Uncertain or adverse economic conditions may have a material adverse effect on our industry, as well as our business, results of
operations and financial condition.
Uncertain or adverse economic conditions could have a material adverse effect on the fundamentals of our business, results of
operations and/or financial condition. These conditions could have a negative impact on our industry or the industry of those
customers who advertise on our stations, including, among others, the automotive, services, healthcare, retail, travel, restaurants, and
telecommunications industries, which provide a significant amount of our advertising revenue, or who purchase digital advertising
through us in our digital segment. There can be no assurance that we will not experience any material adverse effect on our business as
a result of current or future economic conditions or that the actions of the United States Government, Federal Reserve or other
governmental and regulatory bodies in the various jurisdictions in which we operate, for the purpose of stimulating the economy or
financial markets, will achieve their intended effect. Additionally, some of these actions may adversely affect financial institutions,
capital providers, advertisers or other consumers, or our results of operations, financial condition or the trading price of our securities.
Potential consequences of the foregoing include:
•
•
•
•
•
•
the financial condition of companies that advertise on our stations or who purchase digital advertising through us in our
digital segment, which companies may file for bankruptcy protection or face severe cash flow issues, resulting in a
significant decline in our advertising revenue;
our ability to borrow capital on terms and conditions that we find satisfactory, or at all, may be limited, which could limit
our ability to refinance our existing debt;
potential increased costs of borrowing capital if interest rates rise;
our ability to pursue permitted acquisitions or divestitures of television or radio assets may be limited, both as a result of
these factors and, with respect to acquisitions and dispositions, limitations contained in the 2017 Credit Agreement;
the possible further impairment of some or all of the value of our syndicated programming, goodwill and other intangible
assets, including our broadcast licenses; and
the possibility that our lenders under our 2017 Credit Facility could refuse to fund its commitment to us or could fail, and
we may not be able to replace the financing commitment of any such lender on satisfactory terms, or at all.
Actual or perceived difficulties in the global capital and credit markets have adversely affected, and uncertain or adverse
economic conditions may materially and adversely affect our business, as well as the industries of many of our customers.
Some of the markets and jurisdictions in which our advertisers operate, such as the services, telecommunications, automotive,
fast food and restaurants, and retail industries, are cyclical in nature, thus posing a risk to us which is beyond our control. A decline in
consumer and business confidence and spending, together with significant reductions in the availability and increases in the cost of
credit and volatility in the capital and credit markets, could adversely affect the business and economic environment in which we
52
operate, which in turn could affect the profitability of our business. Our business is significantly exposed to risks associated with the
creditworthiness of our key advertisers and other strategic business partners across our business segments. These conditions have
resulted, from time to time in the past in our television and audio segments, and could again result in any of our business segments, in
financial instability or other adverse effects at many of our advertisers and other strategic business partners. The consequences of such
adverse effects could include the delay or cancellation of customer advertising orders, cancellation of our programming and
termination of facilities that broadcast or re-broadcast our programming. The recurrence of any of these conditions may materially and
adversely affect our revenue, results of operations and financial condition. Any future disruption of the credit markets, increases in
interest rates and/or sluggish economic growth in future periods could adversely affect our customers’ access to or cost of credit,
which supports the continuation and expansion of their businesses, and could result in advertising cancellations or suspensions,
payment delays or defaults by our customers.
The current uncertain economic environment resulting from the COVID-19 pandemic and the continuing effects of the
pandemic, as well as general economic cycles, may have a material adverse effect on our industry, as well as our business,
results of operations and financial condition.
The COVID-19 pandemic caused a severe interruption in daily life and business throughout the United States and around the
world, causing concerns about the extent and duration of the resulting economic environment. The continuation or worsening of
current economic conditions could have a material adverse effect on the fundamentals of our business, results of operations and
financial condition. These conditions could also have a negative impact on our industry or the industry of those customers who
advertise on our stations, including, among others, the automotive, services, healthcare, retail, travel, restaurant and
telecommunications industries, which provide a significant amount of our advertising revenue, or who purchase digital advertising
through us in our digital segment. There can be no assurance that we will not experience any further material adverse effect on our
business as a result of the current economic environment, general economic cycles including recessions, or that the actions of the
United States Government, Federal Reserve or other U.S. or foreign governmental and regulatory bodies for the purpose of addressing
any resurgence of the pandemic, or stabilizing economies or financial markets, will achieve their intended effect.
Potential consequences of the foregoing include:
•
•
•
•
•
•
the financial condition of companies that advertise on our stations, which companies might file for bankruptcy protection
or face severe cash flow issues, resulting in a significant decline in our advertising revenue;
the financial condition of advertising customers or their ad agencies that purchase digital advertising through us in our
digital segment;
our ability to borrow capital on terms and conditions that we find acceptable, or at all, may be limited as a result of
liquidity restrictions at financial institutions and others, which could limit our ability to meet our expenses as they become
due;
the possible further impairment of some or all of the value of our tangible assets, goodwill and other intangible assets,
including our digital assets and broadcast licenses;
our ability to pursue permitted acquisitions or divestitures may be limited, both as a result of these factors and due to
restrictions contained in the 2017 Credit Agreement; and
the possibility that one or more of the lenders under our 2017 Credit Facility could refuse to fund its commitment to us or
could fail, and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.
The current uncertain economic environment resulting from the COVID-19 pandemic and the continuing effects of that
environment, as well as general economic cycles, and their impact on consumer and general business confidence, could
materially and adversely effect on us.
The COVID-19 pandemic created increasingly difficult operational and financial conditions for companies globally. If the
current and possible continuing conditions are similar to previous recessions and severe economic downturns, consumer confidence
could decline, and business and consumer spending could be curtailed, and could remain so, for an extended period. Consumer
purchases of advertising time are sensitive to these conditions and may decline in future periods where disposable income is adversely
affected or there is economic uncertainty, whether as a result of the COVID-19 pandemic or otherwise, including general economic
cycles such as recessions. The tightening of credit in financial markets also adversely affects the ability of our customers to obtain
financing for advertising purchases.
Adverse or uncertain general economic conditions may cause potential customers to cancel, defer or forgo the purchase of
advertising time. The consequences of such adverse or uncertain conditions could also include cancellation of our programming and
termination of facilities that broadcast or re-broadcast our programming. Moreover, insolvencies associated with the economic crisis
53
resulting from the pandemic, or general economic cycles including recessions, could adversely affect our business through the loss of
carriers and customers or by hampering our ability to sell advertising or generate retransmission consent revenue. Additionally,
reduced levels of staffing due to possible layoffs in such situations could also have a negative impact on our business by spreading our
personnel resources too thinly and not being able to cover all of our customer markets as effectively as in most economically robust
periods. The occurrence of any one or more of these conditions may materially and adversely affect our results of operations, cash
flow and financial condition.
Current uncertain economic conditions may affect our financial performance or our ability to forecast or budget for our
business with accuracy.
Our operations and performance depend significantly on U.S. and, increasingly, international, economic conditions and their
impact on purchases of advertising by our customers. As a result of the economic environment resulting from the COVID-19
pandemic and general economic cycles including recessions, general economic conditions may not improve, or even deteriorate
significantly, through future periods in 2023 and possibly beyond, depending upon the extent and duration of the pandemic and the
rate at which economies recover, and the duration and extent of any recession that may occur. As a result, economic conditions may
remain volatile and uncertain for the foreseeable future.
We believe that if this uncertainty continues in future periods, our customers may alter their purchasing activities in response to
then current economic conditions, and, among other things, our customers may change or scale back future purchases of advertising.
This uncertainty may also affect our ability to prepare accurate financial forecasts or meet specific forecasted results. It is currently
unclear as to what overall effect the current economic conditions and uncertainties will continue to have on the marketplace and our
future business. If we are unable to adequately respond to or forecast further changes in demand for advertising if current economic
conditions persist or deteriorate further, our business, results of operations and financial condition may be materially and adversely
affected.
We have a significant amount of goodwill and other intangible assets and we may never realize the full value of our intangible
assets.
Goodwill and intangible assets totaled $356.3 million and $344.8 million at December 31, 2022 and 2021, respectively,
primarily attributable to acquisitions in prior years. At the date of these acquisitions, the fair value of the acquired goodwill and
intangible assets equaled its book value.
Goodwill and indefinite life intangible assets are tested annually on October 1 for impairment, or more frequently if events or
changes in circumstances indicate that our assets might be impaired. Such circumstances may include, among other things, a
significant decrease in our operating performance, decrease in prevailing broadcast transaction multiples, deterioration in broadcasting
industry revenues, adverse market conditions, a significant decrease in our market capitalization, adverse changes in applicable laws
and regulations, including changes that restrict the activities of or affect the products or services sold by our businesses and a variety
of other factors. Appraisals of any of our reporting units or changes in estimates of our future cash flows could affect our impairment
analysis in future periods and cause us to record either an additional expense for impairment of assets previously determined to be
impaired or record an expense for impairment of other assets. Depending on future circumstances, we may never realize the full value
of our intangible assets. Any determination of impairment of our goodwill or other intangibles could have a material adverse effect on
our financial condition.
Changes in our accounting estimates and assumptions could negatively affect our financial position and operating results.
We prepare our financial statements in accordance with generally accepted accounting principles in the United States, or U.S.
GAAP. U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities, the
disclosure of contingent assets and liabilities, and our financial statements. We are also required to make certain judgments that affect
the reported amounts of revenue and expenses during each reporting period. We periodically evaluate our estimates and assumptions,
including those relating to the valuation of intangible assets, investments, income taxes, stock-based compensation, reserves, litigation
and contingencies. We base our estimates on historical experience and various assumptions that we believe to be reasonable at the
time we make those assumptions, based on specific circumstances. Actual results could differ materially from our estimated results.
Additionally, changes in accounting standards, assumptions or estimates may have a material adverse effect on our results of
operations, cash flows and financial condition.
We expect to experience fluctuations in foreign exchange rates in our overseas operations, which may increase if and as our
overseas operations expand.
Our digital segment engages in business operations involving a large number of currencies.
54
Our consolidated financial statements of our operations outside the United States are translated into U.S. Dollars at the average
exchange rates in each applicable period. To the extent that the U.S. Dollar strengthens against foreign currencies, the translation of
these foreign currencies denominated transactions will result in reduced revenue and operating expenses for our international
operations. Similarly, to the extent that the U.S. Dollar weakens against foreign currencies, the translation of these foreign currency
denominated transactions will result in increased revenue and operating expenses for our international operations. We are also exposed
to foreign exchange rate fluctuations as we convert the financial statements of our foreign operations into U.S. Dollars in
consolidation. In addition, we may have certain assets and liabilities that are denominated in currencies other than the relevant entity’s
functional currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a
transaction gain or loss. Moreover, some of the countries in which our digital segment operates, including Mexico, Argentina and
Brazil, have experienced significant and sometimes sudden devaluations of their currency over time, which could magnify these
fluctuations, should they happen again in the future.
Regulatory Risks
Legislation and regulation of the digital advertising businesses, including privacy and data protection regimes, could create
unexpected costs, subject us to enforcement actions for compliance failures, or cause us to change our business model.
U.S. and foreign governments have enacted, considered or are currently considering legislation or regulations that relate to
digital advertising activities and the use of consumer data in digital advertising. Such legislation or regulations could increase our cost
of doing business, and could reduce the demand for our digital advertising solutions, materially and adversely affecting our digital
operations and results of operations.
Several states have enacted laws which affect the collection, use, retention, protection, disclosure, transfer and other processing
of personal data, particularly in relation to digital advertising services, which can limit the data available for use in Smadex or the
global media companies who are our commercial partners and to optimize our customers’ advertising impressions. New laws and
regulations can further increase our current cost of compliance, limit our ability to collect and process personal data, expose us to
regulatory investigations and civil actions, and cause us to change our business practices. Because these are new laws in the United
States, they are also subject to interpretation and evolving regulation, it is possible that these laws and related regulations may be
interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other laws and
regulations to which we are subject or our business practices. These laws and regulations may also impose obligations that are
inconsistent with or interfere with our ability to comply with other legal obligations. Uncertainty and varying compliance efforts can
further increase our cost of compliance and add complexity to our operations, which may have a material adverse effect on our
business and results of operations.
Privacy legislation in other jurisdictions also continues to evolve. Such legislation will require additional compliance measures,
which can incur addition costs and expose us to increased regulatory scrutiny, which may increase the cost and complexity of
delivering our services. We may also be required to change our current practices regarding the volume of personal data that can be
collected and used for our business purposes, including by our customers. This could have a negative effect on the value and
efficiency of our services, resulting in a material adverse effect on our business and results of operations.
Our failure to comply with rapidly changing laws and regulations could subject us to enforcement action, fines and reputational
harm, resulting in a material adverse effect on our business, results of operations and financial condition.
Data protection and privacy-related laws and regulations are evolving rapidly and are expected to continue to do so both in the
United States and many other jurisdictions in which we operate and may operate in the future. Ever-increasing regulatory and public
scrutiny and escalating levels of enforcement and sanctions could result if we are unable to comply with numerous regulatory schemes
in all the jurisdictions in which we operate. Any failure, or perceived failure, by us to comply with U.S. federal, state, or international
laws and regulations, including laws and regulations governing privacy, data security or consumer protection, could result in
proceedings against us by governmental entities, consumers or others. Any such proceedings could force us to spend significant
amounts in defense of these proceedings, distract our management, result in fines or require us to pay significant monetary damages,
damage our reputation, materially and adversely affect the demand for our services, increase our costs of doing business or otherwise
cause us to change our business practices or limit or inhibit our ability to operate or expand our digital operations.
Measures we take to protect PII and other confidential information, as required by the laws and regulations to which we are
subject, may not be effective, and could expose us to significant liability.
While we take measures to protect the security of information, including PII, that we collect, use and disclose in the operation of
our business, such measures may not always be effective. Software bugs, malware, theft, misuse, defects, vulnerabilities in our
55
products and services, and security breaches expose us to a risk of loss or improper use and disclosure of such information, which
could result in litigation and other potential liability, including regulatory fines and penalties, as well as reputational harm.
Our reliance on third parties to perform certain functions could expose us to significant liability based on their actions or
inactions.
Because, at times, we rely on third parties to perform functions on our behalf, non-compliance by these third parties with laws
and regulations relating to the services they provide to us, as well as their failure to secure adequately the information that we entrust
to them, may subject us to additional legal exposure. The increased regulatory scrutiny of data practices has complicated the process
of engaging third party service providers and performing due diligence and supplier management processes, and limited some parties’
willingness to share, process or store data that supports consumer marketing and advertising, which could also have a material adverse
effect on our business and results of operations.
If we cannot renew our FCC broadcast licenses, our broadcast operations would be impaired, which could have a material and
adverse effect on our business, results of operations and financial condition.
Our television and radio businesses depend upon maintaining our broadcast licenses, which are issued by the FCC. The FCC has
the authority to renew licenses, not renew them, renew them only with significant qualifications, including renewals for less than a full
term, or revoke them. Beginning in September 2019 and continuing through December 2022, we (along with all other FCC radio and
television licensees) submitted applications to renew the FCC licenses of each of our radio and television stations. Although a
substantial majority of our radio station licenses and many of our television station licenses have been renewed for their full terms in
the ordinary course, we cannot guarantee that our future renewal applications will be approved, or that the renewals will not include
conditions or qualifications that could materially and adversely affect our operations. Failing to renew any of our stations’ main
licenses would prevent us from operating the affected stations, which could materially and adversely affect our business, results of
operations and financial condition. If we renew our licenses with substantial conditions or modifications (including renewing one or
more of our licenses for less than the standard term of eight years), it could have a material adverse effect on our business, results of
operations and financial condition.
Any failure to maintain our FCC broadcast licenses could cause a default under our 2017 Credit Facility and cause an
acceleration of our indebtedness.
Our 2017 Credit Facility requires us to maintain our FCC licenses. If the FCC were to revoke or place significant limitations on
any of our material licenses, our lender could declare us in default under the 2017 Credit Agreement. Among the consequences in the
event of a default thereunder could be a declaration by our lenders that all amounts outstanding under the 2017 Credit Facility are
immediately due and payable. If our indebtedness is accelerated, we may not have sufficient funds to pay the amounts owed.
Displacement of any of our low-power television stations (other than Class A stations) could cause our ratings and revenue for
any such station to decrease.
We own and operate a number of television stations in the FCC’s low-power television service. Our low-power television
stations operate with less power and coverage than our full-power stations. The FCC rules under which we operate provide that low-
power television stations (but not our Class A television stations) are treated as a secondary service. If any or all of our low-power
stations are found to cause interference to full-power stations or sufficient channels become unavailable to accommodate incumbent
broadcast television stations, owing to the relocation of full-power stations to fewer channels as part of the incentive auction repacking
process, we could be required to eliminate the interference, terminate service, or consider other options, including channel sharing
arrangements. In a few urban markets where we operate, including San Diego, there are a limited number of alternative channels to
which our low-power television stations can migrate. As a result of the elimination of part of the broadcast spectrum or otherwise, we
conducted a review of our low-power television stations that resulted in the return of certain of our licenses as we seek to optimize
our low-power station portfolio.
Because our full-power television stations rely on retransmission consent rights to obtain MVPD carriage, new laws or
regulations that eliminate or limit the scope of our MVPD carriage rights or affect how we negotiate our agreements, could
have a material adverse effect on our television operations.
We no longer rely on “must carry” rights to obtain the retransmission of our full-power television stations on MVPDs. New
laws or regulations could affect retransmission consent rights and the negotiating process between broadcasters and MVPDs and this
in turn may affect our negotiating strategies and the economic results we achieve in such negotiations. For instance, the inability of
non-common owners of television stations in a television market to negotiate with MVPDs has an impact on our negotiating
arrangements with TelevisaUnivision.
56
As we have come to the end of the term of our carriage agreement with TelevisaUnivision for certain of our markets, we have
had to confront retransmission consent agreements that are conditioned on the carriage of Univision or UniMás Network
programming. In the absence of such programming, our stations in affected markets have faced the loss of carriage on MVPDs until
the commencement of the next carriage election cycle, where we may choose to elect must carry treatment.
Our low-power television stations do not have MVPD “must carry” rights. Some of our low-power television stations are carried
on MVPDs as they provide broadcast programming the MVPDs desire or are part of the retransmission consent agreements to which
we are a party. Where MVPDs are not contractually required to carry our low-power stations, we face future uncertainty with respect
to the availability of MVPD carriage for our low-power television stations.
Carriage of our signals on DBS services is subject to DBS companies providing local broadcast signals in the television
markets we serve and our decision as to the terms upon which our signals will be carried.
SHVIA allowed DBS television companies, which are currently DirecTV and Dish Network, to transmit local broadcast
television station signals back to their subscribers in local markets. In exchange for this privilege, SHVIA required that in television
markets in which a DBS company elects to pick up and retransmit any local broadcast station signals, the DBS provider must also
offer to its subscribers signals from all other qualified local broadcast television stations in that market. Our broadcast television
stations in markets for which DBS operators have elected to carry local stations have previously obtained carriage under this “carry
one/carry all” rule.
SHVIA expired in 2004 and Congress adopted SHVERA, which expired in 2009, but was extended in May 2010 by STELA.
STELA and STELAR provide further five-year extensions. The TVPA has made these provisions permanent.
Changes in the FCC’s ownership rules could lead to increased market power for our competitors or could place limits on our
ability to acquire stations in certain markets.
As required by the Communications Act and as the regulator of over-the-air broadcasting, the FCC, both on a quadrennial basis
and in individual proceedings, continues to review its policies for the ownership of both radio and television stations. To date, only a
reduction in the nationwide television cap, to 39% of the viewing public, has been the subject of federal legislation. The impact of
changes in the FCC’s rules as to how many stations a party may own, operate and/or control, and how these are counted, depends on
whether the FCC expands its ownership limits, as it has done in the past, or adopts new limits on ownership, as it has also done as in
the case of time brokerage and joint sales agreements. In the case of the former, expanding ownership limits could result in our
competitors’ ability to increase their ownership presence in the markets in which we operate. In the case of the latter, as has been
discussed herein in connection with the UHF discount and attribution of joint sales agreements, we may be unable to acquire stations
in markets where additional station ownership would enable us to achieve operating efficiencies or grow our broadcasting business.
The 2014 Quadrennial Review, the one most recently completed, resulted in the adoption of changes to the FCC’s ownership rules that
we had deemed favorable to us.
We rely on over-the-air spectrum which is being altered in connection in the incentive auction context, the results of which may
affect the broadcasting services in general and our operations in particular.
Our television business operates through over-the-air transmission of broadcast signals. These transmissions are authorized
under licenses issued to our stations by the FCC. The current electromagnetic spectrum is finite and certain parts of the spectrum are
better than others owing to the ability of electromagnetic signals to penetrate buildings. This is the portion of the spectrum where
broadcast stations operate.
With the advent of mobile wireless communications and its use not only for voice but for broadband distribution, the need for
spectrum has grown. The FCC has sought to increase the amount of spectrum available for use by wireless broadband services at the
expense of over-the-air broadcast services. Available sources of such spectrum are limited and the spectrum allotted for television
broadcasting has been identified as spectrum that the FCC seeks to recover in part and make available for wireless broadband use. In
2017, the FCC conducted an incentive auction involving relinquishing and repurposing broadcast spectrum usage rights that have been
auctioned off for what is expected to be wireless service use. While existing broadcasters that did not relinquish spectrum usage rights
as part of the incentive auction are entitled to have their service protected, the future of broadcasting with a smaller and repacked
broadcast band is now a reality. In this regard, it cannot be certain how the FCC’s efforts to secure additional spectrum for mobile
wireless communications and the incentive auction, including the results of our participation in the incentive auction process and
repacking processes that accompanied the redistribution of reduced broadcast spectrum, will affect television broadcasting in general
and our operations in particular. There are significant political, legal and technical issues to overcome and be considered by us as the
changes in spectrum operation and usage occur.
57
We must comply with the Foreign Corrupt Practices Act.
We are required to comply with the United States Foreign Corrupt Practices Act, or the FCPA, which prohibits U.S. companies
from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.
Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in certain countries, including
some of the countries in which we operate. If our competitors engage in these practices, they may receive preferential treatment, ,
giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new
business, which would put us at a disadvantage. Although we inform our own personnel that such practices are illegal, we cannot
assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our
employees or other agents are found to have engaged in such practices, we could suffer severe penalties under the FCPA, with respect
to which there is robust enforcement in the United States.
Investor Risks
Stockholders who desire to change control of our company may be prevented from doing so by provisions of our certificate of
incorporation and the 2017 Credit Agreement. In addition, other agreements contain provisions that could discourage a
takeover.
The provisions of our Class U common stock, contained in our Second Amended and Restated Certificate of Incorporation, or
our certificate of incorporation, could make it more difficult for a third party to acquire us, even if doing so would benefit our
stockholders. The provisions of our certificate of incorporation could diminish the opportunities for a stockholder to participate in
tender offers. In addition, under our certificate of incorporation, our board of directors may issue preferred stock on terms that could
have the effect of delaying or preventing a change in control of our company. The issuance of preferred stock could also negatively
affect the voting power of holders of our common stock. The provisions of our certificate of incorporation may have the effect of
discouraging or preventing an acquisition or sale of our business.
In addition, the 2017 Credit Agreement contains limitations on our ability to enter into a change of control transaction. Under
the 2017 Credit Agreement, the occurrence of a change of control would constitute an event of default permitting acceleration of our
outstanding indebtedness.
The terms of any additional equity or convertible debt financing could contain terms that are superior to the rights of our
existing security holders.
Depending upon our future results of operations, and our ability to further reduce costs as necessary and comply with our
financing agreements, we may require additional equity or debt financing. If future funds are raised through issuance of stock or
convertible debt, these securities could have rights, privileges and preference senior to those of our Class A common stock. The sale of
additional equity securities or the issuance of securities convertible into or exchangeable for Class A common stock or other of our
equity securities could also result in dilution to our current stockholders. There can be no assurance that additional financing, if
required, will be available on terms satisfactory to us or at all.
Available Information
We make available free of charge on our corporate website, www.entravision.com, the following reports, and amendments to
those reports, filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the SEC:
•
•
•
our annual report on Form 10-K;
our quarterly reports on Form 10-Q; and
our current reports on Form 8-K.
The information on our website is not, and shall not be deemed to be, a part of this report or incorporated by reference into this
or any other filing we make with the SEC.
58
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Our corporate headquarters are located in Santa Monica, California. We lease approximately 16,000 square feet of space in the
building housing our corporate headquarters under a lease that was most recently amended as of June 7, 2022. The lease, as amended,
provides that we will relocate and expand our corporate headquarters within the same building to a space consisting of approximately
38,000 square feet, at which point the term of the lease will be extended until January 31, 2034. We moved into temporary premises in
December 2022 pending the build-out of the permanent premises and expect to complete our relocation into the permanent premises
during the first half of 2023.
We also lease approximately 41,000 square feet of space in the building housing our radio network headquarters in Los Angeles,
California, under a lease that we terminated as of September 30, 2022. In respect of this termination, we paid a termination fee of
approximately $0.4 million as of September 30, 2022. We will continue to lease this space on a month-to-month basis and intend on
relocating all of our personnel into our new, permanent premises in Santa Monica
.
The types of properties required to support each of our television stations, radio stations and digital operations typically include
offices, broadcasting studios and antenna towers where broadcasting transmitters and antenna equipment are located. The majority of
our office, studio and tower facilities are leased pursuant to long-term leases. We also own the buildings and/or land used for office,
studio and tower facilities at certain of our television and/or radio properties. We own substantially all of the equipment used in our
television and radio broadcasting business. We believe that all of our facilities and equipment are adequate to conduct our present
operations. We also lease certain facilities and broadcast equipment in the operation of our business. See Note 8 to Notes to
Consolidated Financial Statements.
ITEM 3.
LEGAL PROCEEDINGS
We currently and from time to time are involved in litigation incidental to the conduct of our business, but we are not currently a
party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us or our
business.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
59
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Class A common stock has been listed and traded on The New York Stock Exchange since August 2, 2000 under the
symbol “EVC.”
As of March 13, 2023, there were approximately 97 holders of record of our Class A common stock. We believe that the
number of beneficial owners of our Class A common stock substantially exceeds this number.
Performance Graph
The following graph, which was produced by S&P Global Market Intelligence, depicts our performance for the period from
December 31, 2017 through December 31, 2022, as measured by total stockholder return calculated on a dividend reinvestment basis,
on our Class A common stock, compared with the total return of the S&P 500 Index, the S&P Broadcasting & Cable TV Index and the
Dow Jones U.S. Media Index. This graph assumes $100 was invested in each of our Class A Common Stock, the S&P 500 Index, the
S&P Broadcasting & Cable TV Index and the Dow Jones U.S. Media Index, as of the market close on December 31, 2017. Starting in
our Annual Report on Form 10-K for the year ended December 31, 2021, we added the Dow Jones U.S. Media Index, which was not
included in the years prior to 2021, to reflect that we are a U.S.-based media company that has diversified our operations beyond
60
broadcasting to include our digital operations. Upon request, we will furnish to stockholders a list of the component companies of such
indices.
We caution that the stock price performance shown in the graph below should not be considered indicative of potential future
stock price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Entravision Communications Corporation, the S&P 500 Index, the S&P Broadcasting Index,
and the Dow Jones U.S. Media Index
Index
Entravision Communications Corporation
S&P 500 Index
S&P Broadcasting Index
Dow Jones U.S. Media Index
12/31/17
100.00
100.00
100.00
100.00
12/31/18
42.71
95.62
87.90
95.84
Period Ending
12/31/19
41.03
125.72
95.70
126.17
12/31/20
46.04
148.85
83.44
154.57
12/31/21
115.59
191.58
79.36
144.79
12/31/22
83.42
156.88
55.54
86.82
61
Dividend Policy
We currently pay a dividend on our Class A common stock. Our future dividend policy, including the amount of any dividend,
will depend on factors considered relevant in the discretion of the Board of Directors, which may include, among other things, our
earnings, capital requirements and overall financial condition. In addition, the 2017 Credit Agreement places certain restrictions on
our ability to pay dividends on any class of our common stock.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information regarding outstanding options and shares reserved for future issuance under our
equity compensation plans as of December 31, 2022:
Number of Securities
to be Issued upon
Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of
Securities
Remaining
Available
for Future Issuance
Under Equity
Compensation Plans
(excluding
Securities
Reflected in the
First Column)
260,000
$
2.48(2)
6,240,838
Plan Category
Equity compensation plans approved by
security holders:
Incentive Stock Plans (1)
(1) Represents information with respect to both our 2000 Omnibus Equity Incentive Plan and our 2004 Equity Incentive Plan. No
options, warrants or rights have been issued other than pursuant to these plans.
(2) Weighted average exercise price of outstanding options; excludes restricted stock units.
Issuer Purchases of Equity Securities
On March 1, 2022, our Board of Directors approved a share repurchase program of up to $20 million of our common stock.
Under this share repurchase program, we are authorized to purchase shares from time to time through open market purchases or
negotiated purchases, subject to market conditions and other factors. On the same date, the Board terminated our previous share
repurchase program of up to $45 million of our common stock.
As of December 31, 2022, we have repurchased a total of 1.8 million shares of our Class A common stock under the new share
repurchase program for an aggregate purchase price of $11.3 million, or an average price per share of $6.43. All such repurchased
shares were retired as of December 31, 2022.
ITEM 6.
RESERVED
62
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of our consolidated results of operations and cash flows for the years ended December 31, 2022, 2021
and 2020 and consolidated financial condition as of December 31, 2022 and 2021 should be read in conjunction with our consolidated
financial statements and the related notes included elsewhere in this annual report on Form 10-K.
The discussion and analysis of our financial condition and results of operations for 2022 compared to 2021 appears below. As
permitted by SEC rules, we have omitted the discussion and analysis of our financial condition and results of operations for 2021
compared to 2020. See Item 7, “Management’s Discussions and Analysis of Financial Condition and Results of Operations”, in our
Annual Report on Form 10-K for the year ended December 31, 2021, for this discussion.
OVERVIEW
We are a leading global advertising solutions, media and technology company. Our operations encompass integrated, end-to-end
advertising solutions across multiple media, comprised of digital, television and audio properties. Our digital segment, whose
operations are primarily located in Latin America, Europe, the United States, Asia and Africa, reaches a global market, with a focus on
advertisers in emerging economies that wish to advertise on digital platforms owned and operated primarily by global media
companies. Our television and audio operations reach and engage U.S. Hispanics in the United States. For financial reporting
purposes, we report in three segments based upon the type of advertising medium: digital, television and audio (formerly radio). Our
net revenue for the year ended December 31, 2022 was $956.2 million. Of that amount, revenue attributed to our digital segment
accounted for approximately 78%, revenue attributed to our television segment accounted for approximately 15%, and revenue
attributed to our audio (formerly radio) segment accounted for approximately 7%.
We provide digital end-to-end advertising solutions that allow advertisers to reach online users worldwide. These solutions are
comprised of four business units:
•
•
•
•
our digital commercial partnerships business;
Smadex, our programmatic ad purchasing platform;
our mobile growth solutions business; and
our digital audio business.
Through our digital commercial partnerships business – the largest of our digital business units – we act as an intermediary
between primarily global media companies and advertising customers or their ad agencies. The global media companies we represent
include Meta (formerly known as Facebook Inc.), Twitter, ByteDance, which owns the TikTok platform, and Spotify, as well as other
media companies, in 30 countries throughout the world. Our dedicated local sales teams sell advertising space on these media
companies' digital platforms to our advertising customers or their ad agencies for the placement of ads directed to online users of a
wide range of Internet-connected devices. We also provide some of our advertising customers billing, technological and other support,
including strategic marketing and training, which we refer to as managed services.
Smadex is our programmatic ad purchasing platform, on which advertisers can purchase ad inventory. This practice – the
purchase and sale of advertising inventory electronically – is referred to in our industry as programmatic advertising. Smadex is also a
“demand-side" platform, which allows advertisers to purchase space from online marketplaces on which media companies list their
advertising inventory. Most advertisements acquired through Smadex are placed on mobile devices, but they may also be placed on
computers and Internet-connected televisions. We also provide managed services to some of our advertising customers in connection
with their use of our Smadex platform.
We also offer a mobile growth solutions business, which provides managed services to advertisers looking to connect with
consumers, primarily on mobile devices. This business allows us to manage programmatic media buys for our advertising customers
or their ad agencies through multiple ad purchasing platforms in real time across multiple channels.
Our digital audio business provides digital audio advertising solutions for advertisers in the Americas. Our advertising
customers and their ad agencies use these solutions to promote their brands on online audio streams, and provides them with tools to
target specific users by demographic and geographic categories.
We have a diversified media portfolio that targets Hispanic audiences. We own and/or operate 49 primary television stations
located primarily in California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Nevada, New Mexico, Texas and Washington,
D.C. Our television operations comprise the largest affiliate group of both the top-ranked primary Univision television network of
63
TelevisaUnivision Inc., or TelevisaUnivision, and TelevisaUnivision’s UniMás network. We own and operate 45 radio stations in 14
U.S. markets. Our radio stations consist of 37 FM and 8 AM stations located in Arizona, California, Colorado, Florida, Nevada, New
Mexico and Texas. We also sell advertisements and syndicate radio programming to more than 100 markets across the United States.
In our digital segment, we generate revenue primarily from sales of advertising that are placed by our advertising customers or
their ad agencies on the digital platforms of third-party media companies for which we act as commercial partner or placed directly
with online digital marketplaces through our Smadex platform. In our television and audio segments, we generate revenue primarily
from sales of national and local advertising time on television stations and radio stations, retransmission consent agreements that are
entered into with MVPDs and agreements associated with our television stations’ spectrum usage rights. Advertising rates are, in large
part, based on each medium’s ability to attract audiences in demographic groups targeted by advertisers. In our digital segment, we
recognize advertising revenue when display or other digital advertisements record impressions on the websites and mobile and
Internet-connected television apps of media companies on whose digital platforms the advertisements are placed or as the advertiser’s
previously agreed-upon performance criteria are satisfied. In our television and audio segments, we recognize advertising revenue
when commercials are broadcast. We do not obtain long-term commitments from our advertisers across any of our operations and,
consequently, they may cancel, reduce or postpone orders without penalties. In our television and audio segments, we pay
commissions to agencies for local and national advertising. For contracts we have entered into directly with agencies, we record net
revenue from these agencies.
We refer to the revenue generated by agreements with MVPDs as retransmission consent revenue, which represents payments
from MVPDs for access to our television station signals so that they may rebroadcast our signals and charge their subscribers for this
programming. We recognize retransmission consent revenue earned as the television signal is delivered to an MVPD.
Our FCC licenses grant us spectrum usage rights within each of the television markets in which we operate. These spectrum
usage rights give us the authority to broadcast our stations’ over-the-air television signals to our viewers. We regard these rights as a
valuable asset. With the proliferation of mobile devices and advances in technology that have freed up spectrum capacity, the
monetization of our spectrum usage rights has become a significant source of revenue in recent years. We generate revenue from
agreements associated with these television stations’ spectrum usage rights from a variety of sources, including but not limited to
agreements with third parties to utilize spectrum for the broadcast of their multicast networks; charging fees to accommodate the
operations of third parties, including moving channel positions or accepting interference with our broadcasting operations; and
modifying and/or relinquishing spectrum usage rights while continuing to broadcast through channel sharing or other arrangements.
Revenue generated by such agreements is recognized over the agreement of the lease or when we have relinquished all or a portion of
our spectrum usage rights for a station or have relinquished our rights to operate a station on the existing channel free from
interference. In addition, subject to certain restrictions contained in our 2017 Credit Agreement, we will consider strategic
acquisitions of television stations to further this strategy from time to time, as well as additional monetization opportunities expected
to arise as the television broadcast industry implements the standards contained in ATSC 3.0.
In our digital segment, our primary expense is cost of revenue which consists primarily of the costs of online media acquired
from the media companies for which we act as commercial partner or purchased directly from online digital marketplaces through our
Smadex platform, as well as third party server costs. Our primary expenses in our television and audio segments, and a secondary
expense in our digital segment, is employee compensation, including commissions paid to our sales staff and amounts paid to our
national sales representative firms, as well as expenses for general and administrative functions, promotion and selling, engineering,
marketing, and local programming.
Highlights
During 2022, our consolidated revenue increased to $956.2 million from $760.2 million in the prior year, primarily due to an
increase in advertising revenue in our digital segment, an increase in political advertising revenue in our television and radio
segments, and an increase in local advertising revenue in our audio segment. Revenue from political advertising represented a
company record for any election cycle, including prior presidential cycles. These increases were partially offset by decreases in local
and national advertising revenue, retransmission consent revenue and spectrum usage rights revenue in our television segment, and a
decrease in national advertising revenue in our radio segment.
Net revenue for our digital segment increased to $747.1 million in 2022, from $555.3 million in 2021. This increase of
approximately $191.8 million was primarily due to advertising revenue growth from our digital commercial partnerships business. In
addition, the increase was due to revenue generated by the companies we acquired or in which we made investments, as more fully
described below.
As part of the expansion of our digital segment we engaged in several transactions during the years ended December 31, 2022
and 2021:
64
•
•
•
•
•
On July 1, 2021 we acquired 100% of the issued and outstanding shares of stock of MediaDonuts, a digital advertising
solutions company in Southeast Asia.;
On September 1, 2021 we acquired the remaining 49% of the issued and outstanding shares of Cisneros Interactive stock,
as of which date we own 100% of the issued and outstanding shares of stock of Cisneros Interactive;
On November 1, 2021 we acquired 100% of the issued and outstanding shares of stock of 365 Digital, a digital advertising
solutions company headquartered in South Africa;
On August 3, 2022 we made an investment in exchange for approximately 15% of the issued and outstanding shares of
stock of Jack of Digital, a digital marketing services company that serves as the exclusive advertising sales partner of
ByteDance in Pakistan; and
On August 5, 2022 we made a loan to an entity affiliated with owners of a majority interest in Adsmurai, a company
engaged in the sale and marketing of digital advertising, which loan is convertible into a majority of the issued and
outstanding shares of Adsmurai stock;
Each of these acquisitions and investments began to contribute to our financial results in our digital segment in the quarter
beginning with the date of the respective investment or acquisition.
Net revenue for our television segment decreased to $144.7 million in 2022, from $146.8 million in 2021. This decrease of
approximately $2.1 million was primarily due to a decreases in local and national advertising revenue, a decrease in spectrum usage
rights revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our
Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. The decrease
was partially offset by an increase in political advertising revenue. We generated a total of $36.0 million in retransmission consent
revenue for the year ended December 31, 2022 compared to $37.0 million for the year ended December 31, 2021. We generated a total
of $6.0 million in spectrum usage rights revenue for the year ended December 31, 2022 compared to $6.2 million for the year ended
December 31, 2021.
Net revenue for our audio segment increased to $64.4 million in 2022, from $58.0 million in 2021. This increase of
approximately $6.4 million was primarily due to increases in political advertising revenue and local advertising revenue, partially
offset by a decrease in national advertising revenue.
The Impact of the COVID-19 Pandemic on our Business
This section of this report should be read in conjunction with the rest of this item, “Forward-Looking Statements” and Notes to
Consolidated Financial Statements appearing herein, for a more complete understanding of the impact of the COVID-19 pandemic on
our business.
The COVID-19 pandemic did not have a material effect on our business, from both an operational and financial perspective,
during the year ended December 31, 2022. Subject to the extent and duration of possible resurgences of the pandemic from time to
time and the continuing uncertain economic environment that has resulted, in part, from the pandemic, we anticipate that the pandemic
will continue to have little or no material effect on our business, from both an operational and financial perspective, in future periods.
Nonetheless, we cannot give any assurance whether a resurgence or more prolonged impact of the pandemic in any location where our
operations have employees or where we operate would not adversely affect our operations and/or results of operations.
We have elected to defer the employer portion of the social security payroll tax (6.2%) as provided in the Coronavirus Aid,
Relief and Economic Security Act of 2020, commonly known as the CARES Act. The deferral was effective from March 27, 2020
through December 31, 2020. The deferred amount is considered to be timely paid if 50% is paid by December 31, 2021 and the
remainder is paid by December 31, 2022. During the year ended December 31, 2021, we paid 50% of the deferred amount and paid
the remainder of the deferred amount on or before December 31, 2022.
Relationship with TelevisaUnivision
Substantially all of our television stations are Univision- or UniMás-affiliated television stations. Our network affiliation
agreement with TelevisaUnivision provides certain of our owned stations the exclusive right to broadcast TelevisaUnivision’s primary
Univision network and UniMás network programming in their respective markets. Under the network affiliation agreement, we retain
the right to sell no less than four minutes per hour of the available advertising time on stations that broadcast Univision network
programming, and the right to sell approximately four and a half minutes per hour of the available advertising time on stations that
broadcast UniMás network programming, subject to adjustment from time to time by TelevisaUnivision.
65
Under the network affiliation agreement, TelevisaUnivision acts as our exclusive third-party sales representative for the sale of
certain national advertising on our Univision- and UniMás-affiliate television stations, and we pay certain sales representation fees to
TelevisaUnivision relating to sales of all advertising for broadcast on our Univision- and UniMás-affiliate television stations.
We also generate revenue under two marketing and sales agreements with TelevisaUnivision, which give us the right to manage
the marketing and sales operations of TelevisaUnivision-owned Univision affiliates in three markets – Albuquerque, Boston and
Denver.
Under our proxy agreement with TelevisaUnivision, we grant TelevisaUnivision the right to negotiate the terms of
retransmission consent agreements for our Univision- and UniMás-affiliated television station signals. Among other things, the proxy
agreement provides terms relating to compensation to be paid to us by TelevisaUnivision with respect to retransmission consent
agreements entered into with MVPDs. During the years ended December 31, 2022, 2021 and 2020, retransmission consent revenue
accounted for approximately $36.0 million, $37.0 million and $36.8 million, respectively, of which $24.9 million, $25.9 million and
$26.8 million, respectively, relate to the TelevisaUnivision proxy agreement. The term of the proxy agreement extends with respect to
any MVPD for the length of the term of any retransmission consent agreement in effect before the expiration of the proxy agreement.
On October 2, 2017, we entered into the current affiliation agreement with TelevisaUnivision, which superseded and replaced
our prior affiliation agreements with TelevisaUnivision. Additionally, on the same date, we entered into the current proxy agreement
and current marketing and sales agreements with TelevisaUnivision, each of which superseded and replaced the prior comparable
agreements with TelevisaUnivision. The term of each of these current agreements expires on December 31, 2026 for all of our
Univision and UniMás network affiliate stations, except that each current agreement expired on December 31, 2021 with respect to
our Univision and UniMás network affiliate stations in Orlando, Tampa and Washington, D.C.
Univision currently owns approximately 11% of our common stock on a fully-converted basis. Our Class U common stock, all
of which is held by TelevisaUnivision, has limited voting rights and does not include the right to elect directors. Each share of Class U
common stock is automatically convertible into one share of Class A common stock (subject to adjustment for stock splits, dividends
or combinations) in connection with any transfer of such shares of Class U common stock to a third party that is not an affiliate of
TelevisaUnivision. In addition, as the holder of all of our issued and outstanding Class U common stock, so long as TelevisaUnivision
holds a certain number of shares of Class U common stock, we may not, without the consent of TelevisaUnivision, merge, consolidate
or enter into a business combination, dissolve or liquidate our company or dispose of any interest in any FCC license with respect to
television stations which are affiliates of TelevisaUnivision, among other things.
Acquisitions and Dispositions
Cisneros Interactive
On October 13, 2020, we acquired from certain individuals (collectively, the “Cisneros Sellers”), 51% of the issued and
outstanding shares of stock of a digital advertising solutions company that, together with its subsidiaries, does business under the
name Cisneros Interactive. The acquisition, funded from cash on hand, included a purchase price of approximately $29.9 million in
cash. We concluded that the remaining 49% of the issued and outstanding shares of Cisneros Interactive stock was considered to be a
noncontrolling interest.
In connection with the acquisition, we also entered into a Put and Call Option Agreement (the “Cisneros Put and Call
Agreement”). Subject to the terms of the Cisneros Put and Call Agreement, if certain minimum EBITDA targets are met, the Sellers
had the right (the “Cisneros Put Option”), between March 15, 2024 and June 13, 2024, to cause us to purchase all (but not less than
all) the remaining 49% of the issued and outstanding shares of Cisneros Interactive stock at a purchase price to be based on a pre-
determined multiple of six times Cisneros Interactive’s 12-month EBITDA in the preceding calendar year. The Cisneros Sellers also
had the right to exercise the Cisneros Put Option upon the occurrence of certain events, between March 2022 and April 2024.
Additionally, subject to the terms of the Cisneros Put and Call Agreement, we had the right (the “Cisneros Call Option”), in
calendar year 2024, to purchase all (but not less than all) the remaining 49% of the issued and outstanding shares of Cisneros
Interactive stock at a purchase price to be based on a pre-determined multiple of six times of Cisneros Interactive’s 12-month
EBITDA in calendar year 2023.
Applicable accounting guidance requires an equity instrument that is redeemable for cash or other assets to be classified outside
of permanent equity if it is redeemable (a) at a fixed or determinable price on a fixed or determinable date, (b) at the option of the
holder, or (c) upon the occurrence of an event that is not solely within the control of the issuer.
As a result of the Cisneros Put Option and Call Option redemption features, and because the redemption was not solely within
our control, the noncontrolling interest was considered redeemable, and was classified in temporary equity within our Consolidated
66
Balance Sheets initially at its acquisition date fair value. The noncontrolling interest was adjusted each reporting period for income (or
loss) attributable to the noncontrolling interest as well as any applicable distributions made. Since the noncontrolling interest was not
then redeemable under the terms of the Cisneros Put and Call Agreement and it was not probable that it would become redeemable,
we were not required to adjust the amount presented in temporary equity to its redemption value in prior periods. The fair value of the
redeemable noncontrolling interest which includes the Cisneros Put and Call Agreement recognized on the acquisition date was $30.8
million.
The following is a summary of the final purchase price allocation (in millions):
Cash
Accounts receivable
Other assets
Intangible assets subject to amortization
Goodwill
Current liabilities
Deferred tax
Redeemable noncontrolling interest
$
8.7
50.5
8.3
41.7
10.5
(48.1)
(10.9)
(30.8)
Intangible assets subject to amortization acquired includes:
67
Intangible Asset
Publisher relationships
Advertiser relationships
Trade name
Non-Compete agreements
Estimated
Fair Value
(in millions)
Weighted
average
life (in years)
$
34.4
5.2
1.7
0.4
10.0
4.0
2.5
4.0
The fair value of the assets acquired included trade receivables of $50.5 million. The gross amount due under contract was $54.0
million, of which $3.5 million was expected to be uncollectable. Subsequent to the initial purchase price allocation, and during the
measurement period, we increased other assets and deferred tax by $2.1 million and $0.3 million, respectively, and decreased goodwill
by $1.8 million, to reflect final tax amounts.
The goodwill, which is not expected to be deductible for tax purposes, is assigned to our digital segment and is attributable to
Cisneros Interactive’s workforce and synergies from combining Cisneros Interactive’s operations with our operations.
On September 1, 2021, we acquired the remaining 49% of the issued and outstanding shares of Cisneros Interactive stock, and
as of that date we own 100% of the issued and outstanding shares of stock of Cisneros Interactive. As consideration for the acquisition
of the remaining 49% of the issued and outstanding shares of Cisneros Interactive Stock, we agreed to pay the Cisneros Sellers
contingent earn-out payments, based on a predetermined multiple of six times Cisneros Interactive’s 12-month EBITDA targets in
calendar years 2021, 2022 and 2023, each divided by three, and an additional payment equal to $10,000,000, less an amount (up to
$10,000,000) equal to 49 percent of any amounts paid by Cisneros Interactive for future acquisitions. The fair value of the contingent
consideration recognized on the acquisition date was $84.4 million, which was estimated by applying the real options approach. Key
assumptions include risk-neutral expected growth rates based on our management’s assessments of expected growth in EBITDA,
adjusted by appropriate factors capturing their correlation with the market and volatility, discounted at a cost of debt rate ranging from
6.5% to 7.2% over the three-year period. These are significant inputs that are not observable in the market, which ASC 820-10-35
refers to as Level 3 inputs. We recognize any future changes in fair value of the contingent liability in earnings.
As part of our acquisition of the remaining 49% of the issued and outstanding shares of Cisneros Interactive stock, the Cisneros
Put and Call Agreement was terminated effective September 1, 2021. Applicable accounting guidance requires changes in our
ownership interest while we retain controlling financial interest in our subsidiary to be accounted for as an equity transaction.
Therefore, no gain or loss was recognized in relation to the acquisition of the remaining 49% of the issued and outstanding shares of
stock of Cisneros Interactive. As of the acquisition date, the carrying amount of the noncontrolling interest was adjusted to reflect the
change in our ownership interest, and the difference between the fair value of the contingent consideration and the amount by which
the noncontrolling interest was recognized as a decrease to paid-in capital in the Consolidated Balance Sheets and the Statements of
Stockholders' Equity.
Effective December 31, 2021, we agreed to pay certain of the Cisneros Sellers who are individual persons an accelerated earn-
out in the aggregate amount of $14.7 million based on the EBITDA for calendar year 2021, which was paid in January 2022.
As of December 31, 2021 the contingent liability was adjusted to its current fair value of $97.1 million, of which $44.6 million
is a current liability and $52.5 million is a noncurrent liability. The change in the fair value of the contingent liability of $12.7 million
expense is reflected in the Consolidated Statements of Operations.
In April 2022, we paid all the Cisneros Sellers an earn-out in the aggregate amount of $28.9 million based on the final EBITDA
for calendar year 2021. Additionally, effective September 13, 2022, the Company agreed to pay Sorin Properties, S.L., one of the
Cisneros Sellers, an accelerated earn-out of $21.7 million based on EBITDA for the four prior fiscal quarters, which amount was paid
in September 2022.
As of December 31, 2022 the contingent liability was adjusted to its current fair value of $41.4 million, of which $30.0 million
is a current liability and $11.4 million is a noncurrent liability. The change in the fair value of the contingent liability of $9.6 million
expense is reflected in the Consolidated Statements of Operations..
The table below presents the reconciliation of changes in redeemable noncontrolling interests (in thousands):
68
Beginning balance
Initial fair value of redeemable noncontrolling interests
Net income (loss) attributable to redeemable noncontrolling interest
Acquisition of redeemable noncontrolling interest
Ending balance
Years Ended December 31,
2021
2020
$
$
33,285
-
5,938
(39,223)
-
$
$
-
30,762
2,523
-
33,285
During the year ended December 31, 2021 Cisneros Interactive generated net revenue and net income of $453.9 million and
$12.1 million, respectively. During the year ended December 31, 2020, since the acquisition date, Cisneros Interactive generated net
revenue and net income of $89.2 million and $5.1 million, respectively.
The following unaudited pro forma information has been prepared to give effect to our wholly-owned acquisition of Cisneros
Interactive as if the acquisition had occurred on January 1, 2020. This pro forma information was adjusted to exclude acquisition fees
and costs of $0.9 million for the year ended December 31, 2020, which were expensed in connection with the acquisition. This pro
forma information does not purport to represent what our actual results of operations would have been had this acquisition occurred on
such date, nor does it purport to predict the results of operations for any future periods.
In thousands, except share and per share data
Pro Forma:
Total revenue
Net income (loss) attributable to common stockholders
Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic and diluted
Weighted average common shares outstanding, basic and diluted
Year Ended
December 31,
2020
$
$
$
488,137
(86)
(0.00)
84,231,212
MediaDonuts
On July 1, 2021, we acquired 100% of the issued and outstanding shares of stock of MediaDonuts, a digital advertising solutions
company in Southeast Asia. The acquisition, funded from cash on hand, includes a purchase price of approximately $15.1 million in
cash, which amount was adjusted at closing to approximately $17.1 million due to customary purchase price adjustments for cash,
indebtedness and estimated working capital. Subsequently, the purchase price was adjusted downward by approximately $1.2 million,
based on actual working capital acquired. Additionally, the transaction includes up to $7.4 million in contingent earn-out payments
based upon the achievement of certain EBITDA targets in calendar years 2021 and 2022, and an additional earn-out based upon the
achievement of certain year-over-year EBITDA growth targets in calendar years 2023 and 2024, calculated as a pre-determined
multiple of EBITDA for each of those years. The total purchase price for the acquisition, including the fair value of the contingent
consideration, was $36.2 million.
The following is a summary of the final purchase price allocation (in millions):
Cash
Accounts receivable
Other assets
Intangible assets subject to amortization
Goodwill
Current liabilities
Deferred tax
Debt
$
4.3
9.9
1.8
22.8
13.2
(10.1)
(4.0)
(1.7)
69
Intangible assets subject to amortization acquired includes:
Intangible Asset
Publisher relationships
Advertiser relationships
Trade name
Non-Compete agreements
Estimated
Fair Value
(in millions)
Weighted
average
life (in years)
$
16.9
3.7
2.0
0.2
10.0
4.0
5.0
4.0
As noted above, the acquisition of MediaDonuts includes a contingent consideration arrangement that requires additional
consideration to be paid by us to the selling stockholders of MediaDonuts, based on a pre-determined multiple of MediaDonuts' 12-
month EBITDA targets in calendar years 2021 through 2024. The fair value of the contingent consideration recognized on the
acquisition date of $20.3 million was estimated by applying the real options approach. Key assumptions include risk-neutral expected
growth rates based on management’s assessments of expected growth in EBITDA, adjusted by appropriate factors capturing their
correlation with the market and volatility, discounted at a cost of debt rate ranging from 5.8% to 6.7% over the three year period.
These are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs.
As of December 31, 2021 the contingent liability was adjusted to its current fair value of $15.8 million, all of which is a
noncurrent liability. The change in the fair value of the contingent liability for the year ended December 31, 2021 of $4.5 million
income is reflected in the Consolidated Statements of Operations.
As of December 31, 2022 the contingent liability was adjusted to its current fair value of $22.2 million, of which $6.5 million is
a current liability and $15.7 million is a noncurrent liability. The change in the fair value of the contingent liability for the year ended
December 31, 2022 of $6.4 million expense is reflected in the Consolidated Statements of Operations.
The fair value of the assets acquired included trade receivables of $9.9 million. The gross amount due under contract was $10.2
million, of which $0.3 million was expected to be uncollectable.
During the year ended December 31, 2021 MediaDonuts generated net revenue and net income of $30.9 million and $5.6
million, respectively.
The goodwill, which is not expected to be deductible for tax purposes, is assigned to our digital segment and is attributable to
MediaDonuts' workforce and expected synergies from combining MediaDonuts' operations with our operations.
The following unaudited pro forma information has been prepared to give effect to our acquisition of MediaDonuts as if the
acquisition had occurred on January 1, 2020. This pro forma information was adjusted to exclude acquisition fees and costs of $0.7
million for the year ended December 31, 2021, which were expensed in connection with the acquisition. This pro forma information
does not purport to represent what our actual results of operations would have been had this acquisition occurred on such date, nor
does it purport to predict the results of operations for any future periods.
In thousands, except share and per share data
Pro Forma:
Total revenue
Net income (loss) attributable to common stockholders
Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic
Net income (loss) per share, attributable to common stockholders, diluted
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
365 Digital
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$
$
$
$
781,835
32,997
0.39
0.38
$
$
$
$
372,519
(522)
(0.01)
(0.01)
85,301,603
87,910,603
84,231,212
84,231,212
On November 1, 2021, we acquired 100% of the issued and outstanding shares of stock of 365 Digital, a digital advertising
solutions company headquartered in South Africa. The acquisition, funded from cash on hand, includes a purchase price of
approximately $1.8 million in cash, which amount was adjusted at closing to approximately $1.9 million due to customary purchase
price adjustments for cash, indebtedness and estimated working capital. Subsequently, the purchase price was adjusted to $3.5 million
based on a predetermined multiple of EBITDA for the trailing twelve month period ended March 31, 2022. Additionally, the
transaction includes contingent earn-out payments based upon the achievement of certain EBITDA targets in calendar years 2022,
70
2023 and 2024, calculated as a pre-determined multiple of EBITDA for each of those years. The total purchase price for the
acquisition, including the fair value of the contingent consideration, was $5.5 million.
The following is a summary of the final purchase price allocation (in millions):
Cash
Accounts receivable
Intangible assets subject to amortization
Goodwill
Current liabilities
Deferred tax
$
0.5
1.1
2.2
3.7
(1.4)
(0.6)
Intangible assets subject to amortization acquired includes:
Intangible Asset
Publisher relationships
Advertiser relationships
Trade name
Non-Compete agreements
Estimated
Fair Value
(in millions)
Weighted
average
life (in years)
$
1.7
0.2
0.2
0.1
9.0
4.0
5.0
4.0
As noted above, the acquisition of 365 Digital includes a contingent consideration arrangement that requires additional
consideration to be paid by us to the selling stockholders of 365 Digital, based on a pre-determined multiple of 365 Digital's 12-month
EBITDA targets in calendar years 2022 through 2024. The fair value of the contingent consideration recognized on the acquisition
date of $2.0 million was estimated by applying the real options approach. Key assumptions include risk-neutral expected growth rates
based on management’s assessments of expected growth in EBITDA, adjusted by appropriate factors capturing their correlation with
the market and volatility, discounted at a cost of debt rate ranging from 7.6% to 8.3% over the three year period. These are significant
inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs.
As of December 31, 2021 the contingent liability has been reflected in the Consolidated Balance Sheet as noncurrent liabilities
of $2.0 million and has not changed materially between the acquisition date and December 31, 2021.
As of December 31, 2022 the contingent liability was adjusted to its current fair value of $0.2 million, all of which is a
noncurrent liability. The change in the fair value of the contingent liability for the year ended December 31, 2022 of $1.8 million
income is reflected in the Consolidated Statements of Operations.
The fair value of the assets acquired included trade receivables of $1.1 million. The gross amount due under contract was $1.1
million, of which a de minimis amount was expected to be uncollectable.
During the year ended December 31, 2021 365 Digital generated net revenue and net income of $1.9 million and $0.1 million,
respectively.
The goodwill, which is not expected to be deductible for tax purposes, is assigned to our digital segment and is attributable to
365 Digital's workforce and expected synergies from combining 365 Digital's operations with our operations.
The following unaudited pro forma information has been prepared to give effect to our acquisition of 365 Digital as if the
acquisition had occurred on January 1, 2020. This pro forma information was adjusted to exclude acquisition fees and costs of $0.2
million for the year ended December 31, 2021, which were expensed in connection with the acquisition. This pro forma information
does not purport to represent what our actual results of operations would have been had this acquisition occurred on such date, nor
does it purport to predict the results of operations for any future periods.
71
In thousands, except share and per share data
Pro Forma:
Total revenue
Net income (loss) attributable to common stockholders
Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic
Net income (loss) per share, attributable to common stockholders, diluted
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$
$
$
$
762,300
30,642
0.36
0.35
$
$
$
$
344,965
(3,747)
(0.04)
(0.04)
85,301,603
87,910,603
84,231,212
84,231,212
Variable Interest Entities
Adsmurai
On August 5, 2022, we made a loan in the principal amount of €12,535,000 (approximately $12.8 million as of that date) to an
entity affiliated with owners of a majority interest in Adsmurai, S.L. (“Adsmurai”), a company engaged in the sale and marketing of
digital advertising. The loan has a two-year term, bears interest at a rate of 5% annually, and can be converted into 51% of the issued
and outstanding shares of stock of Adsmurai at our sole discretion. If we elect not to convert the loan, the borrower has the option to
repay the loan at maturity either in cash or with 51% of the issued and outstanding shares of stock of Adsmurai.
We have determined for accounting purposes that (i) Adsmurai is a VIE because the equity investors at risk, as a group, lack the
characteristics of a controlling financial interest; and (ii) we are the primary beneficiary because the conversion right gives us the
power to direct the activities of the entity that most significantly impact the entity’s economic performance. See Note 2 to Notes to
Consolidated Financial Statements for more details.
We have determined that Adsmurai is a business and has accounted for its consolidation under the provisions of ASC 805,
“Business Combinations”, and included Adsmurai's results of operations since the date of the loan in our Consolidated Statements of
Operations. We are in the process of completing the purchase price allocation for Adsmurai. The following is a summary of the
preliminary purchase price allocation (in millions):
Cash
Accounts receivable
Other assets
Fixed assets
Intangible assets subject to amortization
Goodwill
Current liabilities
Deferred tax
Debt
Noncontrolling interest
Convertible loan
$
7.4
12.2
0.7
2.8
8.2
13.0
(14.4)
(2.0)
(2.8)
(12.3)
(12.8)
Intangible assets subject to amortization acquired includes:
Intangible Asset
Advertiser relationships
Existing technology
Trade name
Estimated
Fair Value
(in millions)
Weighted
average
life (in years)
$
4.7
2.4
1.1
7.0
5.0
5.0
72
The fair value of the trade receivables is $12.2 million. The gross amount due under contract is $12.3 million, of which $0.1
million is expected to be uncollectable.
The goodwill, which is not expected to be deductible for tax purposes, is assigned to the Company’s digital segment and is
attributable to Adsmurai’s workforce and synergies from combining Adsmurai’s operations with those of ours.
Subsequent to the consolidation through December 31, 2022, we consolidated Adsmurai's revenues of $31.7 million, and net
income of $2.0 million.
The following unaudited pro forma information has been prepared to give effect to our consolidation of Adsmurai as if the
transaction had occurred on January 1, 2021. This pro forma information was adjusted to exclude acquisition fees and costs of $0.6
million for the year ended December 31, 2022, which were expensed in connection with the transaction. This pro forma information
does not purport to represent what our actual results of operations would have been had this transaction occurred on such date, nor
does it purport to predict the results of operations for any future periods.
In thousands, except share and per share data
Pro Forma:
Total revenue
Net income (loss) attributable to common stockholders
Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic
Net income (loss) per share, attributable to common stockholders, diluted
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
Jack of Digital
Year Ended
December 31,
2022
2021
$
$
$
$
984,566
19,283
0.23
0.22
$
$
$
$
801,436
29,696
0.35
0.34
85,391,163
87,769,762
85,301,603
87,910,603
On August 3, 2022, we made an investment of $0.1 million in cash in exchange for approximately 15% of the issued and
outstanding stock of Jack of Digital, a digital marketing services company that serves as the exclusive advertising sales partner of
ByteDance in Pakistan.
We have determined for accounting purposes that (i) Jack of Digital is a VIE because the equity investors at risk, as a group,
lack the characteristics of a controlling financial interest; and (ii) we are the primary beneficiary because we have the power to direct
the activities of the entity that most significantly impact the entity’s economic performance. See Note 2 to Notes to Consolidated
Financial Statements for more details.
Subsequent to the consolidation through December 31, 2022, we consolidated Jack of Digital's revenues of $1.7 million, and de
minimis net income.
The following unaudited pro forma information has been prepared to give effect to our consolidation of Jack of Digital as if the
transaction had occurred on January 1, 2021. This pro forma information was adjusted to exclude acquisition fees and costs of $0.3
million for the year ended December 31, 2022, which were expensed in connection with the transaction. This pro forma information
73
does not purport to represent what our actual results of operations would have been had this transaction occurred on such date, nor
does it purport to predict the results of operations for any future periods:
In thousands, except share and per share data
Pro Forma:
Total revenue
Net income (loss) attributable to common stockholders
Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic
Net income (loss) per share, attributable to common stockholders, diluted
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
Year Ended
December 31,
2022
2021
$
$
$
$
959,693
18,602
0.22
0.21
$
$
$
$
761,130
29,285
0.34
0.33
85,391,163
87,769,762
85,301,603
87,910,603
The table below presents the reconciliation of changes in noncontrolling interests (in thousands):
Beginning balance
Initial fair value of noncontrolling interests
Net income (loss) attributable to noncontrolling interest
Ending balance
Year Ended December 31,
2022
$
$
-
12,897
2,050
14,947
74
RESULTS OF OPERATIONS
Separate financial data for each of the Company’s operating segments is provided below. Segment operating profit (loss) is
defined as operating profit (loss) before corporate expenses, change in fair value of contingent consideration, impairment charge, other
operating (gain) loss, and foreign currency (gain) loss. The Company evaluates the performance of its operating segments based on the
following (in thousands):
Years Ended December 31,
2022
2021
2020
% Change
2022 to 2021
% Change
2021 to 2020
Net Revenue
Digital
Television
Audio
Consolidated
Cost of revenue - digital
Direct operating expenses
Digital
Television
Audio
Consolidated
Selling, general and administrative expenses
Digital
Television
Audio
Consolidated
Depreciation and amortization
Digital
Television
Audio
Consolidated
Segment operating profit (loss)
Digital
Television
Audio
Consolidated
Corporate expenses
Change in fair value of contingent consideration
Impairment charge
Foreign currency (gain) loss
Other operating (gain) loss
Operating income (loss)
Net income (loss) attributable to common
stockholders
Consolidated adjusted EBITDA (1)
Capital expenditures
Television
Digital
Audio
Consolidated
Total assets
Television
Digital
Audio
Consolidated
$
$
$
$
$
$
$
$
747,103
144,730
64,376
956,209
623,916
32,518
61,301
28,792
122,611
41,612
20,657
12,896
75,165
12,148
11,126
2,423
25,697
36,909
51,646
20,265
108,820
49,404
14,210
1,600
2,972
382
40,252
18,119
103,090
5,887
6,186
561
12,634
363,904
408,027
108,910
880,841
$
$
$
$
$
$
$
$
555,338
146,839
58,015
760,192
466,517
25,481
63,016
27,952
116,449
26,123
18,381
12,081
56,585
8,377
12,477
1,566
22,420
28,840
52,965
16,416
98,221
32,993
8,224
3,023
508
(6,998)
60,471
29,292
88,033
2,833
2,073
705
5,611
433,303
309,347
108,692
851,342
$
$
$
$
$
$
$
$
143,309
154,456
46,261
344,026
106,928
15,227
61,145
28,537
104,909
15,404
19,748
13,252
48,404
2,561
12,918
1,803
17,282
3,189
60,645
2,669
66,503
27,807
—
40,035
(1,052)
(6,895)
6,608
(3,910)
60,419
7,184
1,659
641
9,484
425,899
196,020
125,426
747,345
35%
(1)%
11%
26%
34%
28%
(3)%
3%
5%
59%
12%
7%
33%
45%
(11)%
55%
15%
28%
(2)%
23%
11%
50%
73%
(47)%
485%
*
(33)%
(38)%
17%
288%
(5)%
25%
121%
336%
67%
3%
(2)%
11%
70%
(7)%
(9)%
17%
227%
(3)%
(13)%
30%
804%
(13)%
515%
48%
19%
*
(92)%
*
1%
815%
*
46%
* Percentage not meaningful.
(1) 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 operating gain (loss), gain (loss) on debt extinguishment, income tax (expense) benefit, equity in net income (loss) of
75
nonconsolidated affiliate, non-cash losses, syndication programming amortization less syndication programming payments,
revenue from the Federal Communications Commission, or FCC, spectrum incentive auction less related expenses, expenses
associated with investments, EBITDA attributable to noncontrolling and to redeemable noncontrolling interest, acquisitions and
dispositions and certain pro-forma cost savings. We use the term consolidated adjusted EBITDA because that measure is
defined in our 2017 Credit Agreement 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, EBITDA attributable to noncontrolling and to redeemable
noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings
Since consolidated adjusted EBITDA is a measure governing several critical aspects of our 2017 Credit Facility, we believe that
it is important to disclose consolidated adjusted EBITDA to our investors. We may increase the aggregate principal amount
outstanding by an additional amount equal to $100.0 million plus the amount that would result in our total net leverage ratio, or the
ratio of consolidated total senior debt (net of up to $75.0 million of unrestricted cash) to trailing-twelve-month consolidated adjusted
EBITDA, not exceeding 4.0. In addition, beginning December 31, 2018, at the end of every calendar year, in the event our total net
leverage ratio is within certain ranges, we must make a debt prepayment equal to a certain percentage of our Excess Cash Flow, which
is defined as consolidated adjusted EBITDA, less consolidated interest expense, less debt principal payments, less taxes paid, less
other amounts set forth in the definition of Excess Cash Flow in the 2017 Credit Agreement. The total leverage ratio was as follows
(in each case as of December 31): 2022, 1.3 to 1; 2021, 1.6 to 1.
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 (loss) and net income (loss). 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), non-recurring cash expenses, 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, EBITDA
attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings, consolidated
adjusted EBITDA has certain limitations because it excludes and includes several important financial line items. Therefore, we
consider both non-GAAP and U.S. GAAP measures when evaluating our business. Consolidated adjusted EBITDA is also used to
make executive compensation decisions.
76
Consolidated adjusted EBITDA is a non-GAAP measure. The most directly comparable U.S. GAAP financial measure to
consolidated adjusted EBITDA is cash flows from operating activities. A reconciliation of this non-GAAP measure to cash flows from
operating activities follows (in thousands):
2022
Years Ended December 31,
2021
2020
Consolidated adjusted EBITDA (1)
EBITDA attributable to redeemable noncontrolling interest
EBITDA attributable to noncontrolling interest
Interest expense
Interest income
Realized gain (loss) on marketable securities
Income tax (expense) benefit
Amortization of syndication contracts
Payments on syndication contracts
Non-cash stock-based compensation included in direct operating expenses
Non-cash stock-based compensation included in corporate expenses
Depreciation and amortization
Change in fair value of contingent consideration
Other operating gain (loss)
Impairment charge
Non-recurring severance charge
Dividend income
Net (income) loss attributable to redeemable noncontrolling interest
Net (income) loss attributable to noncontrolling interest
Net income (loss) attributable to common stockholders
Depreciation and amortization
Deferred income taxes
Amortization of debt issue costs
Amortization of syndication contracts
Payments on syndication contracts
Non-cash stock-based compensation
(Gain) loss on disposal of property and equipment
Realized (gain) loss on marketable securities
Net income (loss) attributable to redeemable noncontrolling interest
Net income (loss) attributable to noncontrolling interest
Impairment charge
Change in fair value of contingent consideration
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
(Increase) decrease in prepaid expenses and other current assets, operating
leases right of use asset and other assets
Increase (decrease) in accounts payable, accrued expenses and other liabilities
Cash flows from operating activities
(footnotes on preceding page)
$
$
103,090
—
3,399
(10,876)
2,864
(532)
(11,559)
(468)
470
(5,694)
(14,340)
(25,697)
(14,210)
(382)
(1,600)
(4,316)
20
—
(2,050)
18,119
25,697
(3,708)
1,314
468
(470)
20,034
(636)
532
—
2,050
1,600
14,210
(9,687)
2,017
7,377
78,917
$
$
88,033
9,127
—
(7,020)
245
-
(18,679)
(475)
473
(3,234)
(6,361)
(22,420)
(8,224)
6,998
(3,023)
(423)
213
(5,938)
—
29,292
22,420
14,554
604
475
(473)
9,595
(4,629)
—
5,938
—
3,023
8,224
(49,109)
6,782
18,557
65,253
$
$
60,419
3,436
—
(8,265)
1,748
-
(1,506)
(504)
458
(1,247)
(3,878)
(17,282)
—
6,895
(40,035)
(1,654)
28
(2,523)
—
(3,910)
17,282
(6,225)
649
504
(458)
5,125
(731)
—
2,523
—
40,035
—
(20,100)
11,526
17,229
63,449
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Consolidated Operations
Net Revenue. Net revenue increased to $956.2 million for the year ended December 31, 2022 from $760.2 million for the year
ended December 31, 2021, an increase of approximately $196.0 million. Of the overall increase, approximately $191.8 million was
attributable to our digital segment and was primarily due to advertising revenue growth from our digital commercial partnerships
business. In addition, the increase in net revenue in our digital segment was due to our acquisitions and investments, as more fully
described under “Highlights” above. In addition, of the overall increase, approximately $6.4 million was attributable to our audio
segment primarily due to increases in political advertising revenue and local advertising revenue, partially offset by a decrease in
national advertising revenue. The overall increase was partially offset by a decrease of approximately $2.1 million attributable to our
television segment, primarily due decreases in local and national advertising revenue, a decrease in spectrum usage rights revenue, and
a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our Univision and UniMás
77
network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. The decrease in our television
segment revenue was partially offset by an increase in political advertising revenue.
We believe that for the full year 2023, net revenue will increase, primarily as a result of growth in our digital segment and
operating Adsmurai for a full year in 2023 compared to approximately five months in 2022.
Cost of revenue-Digital. Cost of revenue in our digital segment increased to $623.9 million for the year ended December 31,
2022 from $466.5 million for the year ended December 31, 2021, an increase of $157.4 million, primarily due to increased cost of
revenue related to advertising revenue growth from our digital commercial partnerships business, and due to our acquisitions and
investments, as more fully described under “Highlights” above.
Direct Operating Expenses. Direct operating expenses increased to $122.6 million for the year ended December 31, 2022 from
$116.4 million for the year ended December 31, 2021, an increase of approximately $6.2 million. Of the overall increase,
approximately $7.0 million was attributable to our digital segment primarily due to an increase in expenses associated with the
increase in digital advertising revenue. In addition, the increase in direct operating expenses in our digital segment was due to our
acquisitions and investments, as more fully described under “Highlights” above, and due to an increase in non-cash stock-based
compensation. In addition, of the overall increase, approximately $0.8 million was attributable to our audio segment, primarily due to
an increase in expenses associated with the increase in local advertising revenue. The overall increase was partially offset by a
decrease of approximately $1.7 million that was attributable to our television segment and was primarily due to a decrease in expenses
associated with the decrease in local and national advertising revenue, partially offset by an increase in non-cash stock-based
compensation. As a percentage of net revenue, direct operating expenses decreased to 13% for the year ended December 31, 2022
from 15% for the year ended December 31, 2021, because the rate of increase in revenue exceeded the rate of increase in expenses.
We believe that direct operating expenses will increase during 2023, primarily as a result of growth in our digital segment and
operating Adsmurai for a full year in 2023 compared to approximately five months in 2022.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $75.2 million for the
year ended December 31, 2022 from $56.6 million for the year ended December 31, 2021, an increase of approximately $18.6 million.
Of the overall increase, approximately $15.5 million was attributable to our digital segment and was primarily due to increase in salary
expense. In addition, the increase in selling, general and administrative expenses in our digital segment was due to our acquisitions
and investments, as more fully described under “Highlights” above. In addition, of the overall increase, approximately $2.3 million
was attributable to our television segment, primarily due to an increase in rent expense and an increase in bad debt expense.
Additionally, of the overall increase, approximately $0.8 million was attributable to our audio segment, primarily due to an increase in
rent expense. As a percentage of net revenue, selling, general and administrative expenses increased to 8% for the year ended
December 31, 2022 from 7% for the year ended December 31, 2021, because the rate of increase in expenses exceeded the rate of
increase in revenue.
We believe that selling, general and administrative expenses will increase during 2023, primarily as a result of growth in our
digital segment and operating Adsmurai for a full year in 2023 compared to approximately five months in 2022.
Corporate Expenses. Corporate expenses increased to $49.4 million for the year ended December 31, 2022 from $33.0 million
for the year ended December 31, 2021, an increase of $16.4 million. The increase was primarily due to $8.1 million of severance
expense incurred upon the passing of our late Chief Executive Officer, and due to increases in non-cash stock-based compensation and
an increase in salaries. As a percentage of net revenue, corporate expenses increased to 5% for the year ended December 31, 2022
from 4% for the year ended December 31, 2021.
We believe that corporate expenses will increase during 2023 compared to 2022, without taking into consideration the expense
incurred in 2022 upon the passing of our late Chief Executive Officer.
Depreciation and Amortization. Depreciation and amortization increased to $25.7 million for the year ended December 31, 2022
from $22.4 million for the year ended December 31, 2021, an increase of $3.3 million. The increase was primarily attributable to
amortization of the intangible assets from our acquisitions and investments, as more fully described under “Highlights” above.
Change in fair value of contingent consideration. As a result of the change in fair value of the contingent consideration related
to our acquisitions of Cisneros Interactive, Media Donuts and 365 Digital, we recognized expense of $14.2 million for the year ended
December 31, 2022. As a result of the change in fair value of the contingent consideration related to our acquisitions of Cisneros
Interactive and Media Donuts, we recognized expense of $8.2 million for the year ended December 31, 2021.
Foreign currency loss. Historically, our 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, we have operations in countries
other than the United States, primarily related to our digital business, and as a result, a portion of our revenues is denominated in
78
currencies other than the U.S. dollar, primarily the Mexican peso, Argentine peso, Uruguayan Pesos, Euros, certain other Latin
American currencies and various Asian and African currencies. As a result, we have operating expense, attributable to foreign
currency, that is primarily related to the operations related to our digital business. Foreign currency loss was $3.0 million and $0.5
million for the years ended December 31, 2022 and 2021, respectively. Foreign currency gains and losses are primarily due to
currency fluctuations that affected our digital segment operations located outside the United States. In our digital operations outside
the United States, we typically pay our global media partners in U.S. dollars but bill certain of our customers in their local currency.
Therefore, during times of a strengthening U.S. dollar relative to other currencies, we may incur a loss based on the difference in value
between what we pay in U.S dollars and what we ultimately receive in a local currency, when expres5sed in U.S. dollars.
Other operating (gain) loss. We had other operating loss of $0.4 million for the year ended December 31, 2022 compared to
other operating gain of $7.0 million for the year ended December 31, 2021. This change of $7.4 million was primarily due to gains on
assets held for sale in the prior year period, and a decrease in gains in connection with the required relocation of certain television
stations to a different channel as part of the broadcast television repack following the FCC auction for broadcast spectrum that
concluded in 2017.
Impairment. We incurred an impairment charge related to certain FCC licenses in our television and audio segments totaling
$1.6 million for the year ended December 31, 2022.
We incurred an impairment charge related to indefinite life intangible assets totaling $1.3 million due to a termination of an
agreement with a media company for which we act as commercial partner in our digital segment, and impairment charges related to
assets held for sale of $1.7 million for the year ended December 31, 2021. These write-downs were made pursuant to 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.
Operating Income (Loss). As a result of the above factors, operating income was $40.3 million for the year ended December 31,
2022, compared to operating income of $60.5 million for the year ended December 31, 2021.
Interest Expense, net. Interest expense, net increased to $8.0 million for the year ended December 31, 2022 from $6.8 million
for the year ended December 31, 2021, an increase of $1.2 million. This increase was primarily due to a higher interest rate on our
debt, partially offset by interest income on our available for sale securities. We anticipate that interest expense will continue to
increase in future periods as long as interest rates increase, since our borrowings under the 2017 Credit Facility bear interest at a
variable rate.
Realized gain (loss) on marketable securities. Realized loss on marketable securities for the year ended December 31, 2022 was
$0.5 million, related to our available for sale securities.
Dividend Income. We had de minimis dividend income for the year ended December 31, 2022. Dividend Income was $0.2
million for the year ended December 31, 2021 due to a dividend received on a cost method investment.
Income Tax Expense or Benefit. Income tax expense for the year ended December 31, 2022 was $11.6 million. The effective tax
rate for the year ended December 31, 2022 was different from our statutory rate due to foreign and state taxes, changes in valuation
allowances on deferred tax assets , non deductible executive compensation, changes in the fair value of the contingent consideration
liability, and non-taxable non-territorial income. Income tax expense for the year ended December 31, 2021 was $18.7 million. The
effective tax rate for the year ended December 31, 2021 was different from our statutory rate due to foreign and state taxes, a valuation
allowance on deferred tax assets in our Spain, Paraguay and Mexico digital entities, changes in the fair value of the contingent
consideration liability, and non-taxable non-territorial income.
Our management periodically evaluates the realizability of the deferred tax assets and, if it is determined that it is more likely
than not that the deferred tax assets are, or are not, realizable, adjusts the valuation allowance accordingly. Valuation allowances are
established and maintained for deferred tax assets on a “more likely than not” threshold. The process of evaluating the need to
maintain a valuation allowance for deferred tax assets and the amount maintained in any such allowance is highly subjective and is
based on many factors, several of which are subject to significant judgment calls.
Based on our analysis, we determined that it was more likely than not that our deferred tax assets would be realized for all
jurisdictions with the exception of certain of our digital operations and certain U.S. Foreign Tax Credit carryovers. As a result of
historical losses from our digital operations in Spain, Israel, Uruguay, Panama, Mexico, Argentina, Thailand and Ghana and certain
U.S. Foreign Tax Credit carryovers, management has determined that it is more likely than not that deferred tax assets of
approximately $4.9 million at December 31, 2022 will not be realized and therefore we have established a valuation allowance in that
amount on those assets.
79
Segment Operations
Digital
Net Revenue. Net revenue in our digital segment increased to $747.1 million for the year ended December 31, 2022 from
$555.3 million for the year ended December 31, 2021, an increase of $191.8 million. The increase was primarily due to advertising
revenue growth from our digital commercial partnerships business. In addition, the increase in net revenue in our digital segment was
due to our acquisitions and investments, as more fully described under “Highlights” above.
Cost of revenue. Cost of revenue in our digital segment increased to $623.9 million for the year ended December 31, 2022 from
$466.5 million for the year ended December 31, 2021, an increase of $157.4 million, primarily due to increased cost of revenue related
to advertising revenue growth from our digital commercial partnerships business, and due to our acquisitions and investments, as more
fully described under “Highlights” above. As a percentage of digital net revenue, cost of revenue remained constant at 84% for each of
the years ended December 31, 2022 and 2021.
We have previously noted a trend in our digital operations globally whereby revenue is shifting more to programmatic revenue.
As a result, advertisers are demanding more efficiency and lower cost from intermediaries like us. In response to this trend, we are
offering programmatic alternatives to advertisers, which is putting pressure on margins. Among our programmatic solutions is our
Smadex ad purchasing platform. Additionally, we experienced lower margins related to revenue generated from the primarily global
media companies for which we act as commercial partner, as a result of relative negotiating strength and industry trends generally. We
expect these trends will continue in future periods, likely further resulting in a higher volume, lower margin business in our digital
segment. The digital advertising industry remains dynamic and is continuing to undergo rapid changes in technology and competition.
We expect this trend to continue and possibly accelerate. We must continue to remain vigilant to meet these dynamic and rapid
changes including the need to further adjust our business strategies accordingly. No assurances can be given that such strategies will
be successful.
Direct operating expenses. Direct operating expenses in our digital segment increased to $32.5 million for the year ended
December 31, 2022 from $25.5 million for the year ended December 31, 2021, an increase of $7.0 million. The increase was primarily
due to an increase in expenses associated with the increase in digital advertising revenue. In addition, the increase in direct operating
expenses in our digital segment was due to our acquisitions and investments, as more fully described under “Highlights” above, and
due to an increase in non-cash stock-based compensation.
Selling, general and administrative expenses. Selling, general and administrative expenses in our digital segment increased to
$41.6 million for the year ended December 31, 2022 from $26.1 million for the year ended December 31, 2021, an increase of $15.5
million. The increase was primarily due to increase in salary expense. In addition, the increase in selling, general and administrative
expenses in our digital segment was due to our acquisitions and investments, as more fully described under “Highlights” above.
Television
Net Revenue. Net revenue in our television segment decreased to $144.7 million in 2022, from $146.8 million in 2021. This
decrease of approximately $2.1 million was primarily due to decreases in local and national advertising revenue, a decrease in
spectrum usage rights revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the
expiration of our Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31,
2021. The decrease in our television segment revenue was partially offset by an increase in political advertising revenue. We
generated a total of $36.0 million in retransmission consent revenue for the year ended December 31, 2022 compared to $37.0 million
for the year ended December 31, 2021. We generated a total of $6.0 million in spectrum usage rights revenue for the year ended
December 31, 2022 compared to $6.2 million for the year ended December 31, 2021.
In general, our television segment faces declining audiences, which we believe is present across the industry, competitive factors
with the other major Spanish-language broadcasters, and changing demographics and preferences of audiences in terms of the media
they prefer to view, including streaming and social media. We anticipate that these changes in viewer habits will persist and may
accelerate for at least for the foreseeable future and possibly permanently. Additionally, we have previously noted a trend for
advertising to move increasingly from traditional media, such as television, to new media, such as digital media, and we expect this
trend to continue.
Direct Operating Expenses. Direct operating expenses in our television segment decreased to $61.3 million for the year ended
December 31, 2022 from $63.0 million for the year ended December 31, 2021, a decrease of approximately $1.7 million. The decrease
was primarily due to a decrease in expenses associated with the decrease in local and national advertising revenue, partially offset by
an increase in non-cash stock-based compensation.
Selling, General and Administrative Expenses. Selling, general and administrative expenses in our television segment increased
80
to $20.7 million for the year ended December 31, 2022 from $18.4 million for the year ended December 31, 2021, an increase of
approximately $2.3 million. The increase was primarily due to an increase in rent expense and an increase in bad debt expense.
Audio
Net Revenue. Net revenue in our audio segment increased to $64.4 million in 2022, from $58.0 million in 2021. This increase of
approximately $6.4 million was primarily due to increases in political advertising revenue and local advertising revenue, partially
offset by a decrease in national advertising revenue.
Notwithstanding the foregoing, in general, our audio segment faces declining audiences, which we believe is present across the
industry, competitive factors with other major Spanish-language broadcasters, and changing demographics and preferences of
listening audiences, including podcasts and other streaming services. We anticipate that these changes in listener habits will persist
and may accelerate at least for at least for the foreseeable future and possibly permanently. Additionally, notwithstanding the increases
in local advertising revenue, we have previously noted a trend for advertising to move increasingly from traditional media, such as
radio, to new media, such as digital media, and we expect this trend to continue.
Direct Operating Expenses. Direct operating expenses in our audio segment increased to $28.8 million for the year ended
December 31, 2022 from $28.0 million for the year ended December 31, 2021, an increase of approximately $0.8 million. The
increase was primarily due to an increase in expenses associated with the increase in local advertising revenue.
Selling, General and Administrative Expenses. Selling, general and administrative expenses in our audio segment increased to
$12.9 million for the year ended December 31, 2022 from $12.1 million for the year ended December 31, 2021, an increase of
approximately $0.8 million. The increase was primarily due to an increase in rent expense.
Liquidity and Capital Resources
While we have a history of operating losses in some periods and operating income in other periods, we also have a history of
generating significant positive cash flows from our operations. We had net income attributable to common stockholders of $18.1
million and $29.3 million for the years ended December 31, 2022 and 2021, respectively, and a net loss attributable to common
stockholders of $3.9 million for the year ended December 31, 2020. We had positive cash flow from operations of $78.9 million,
$65.3 million and $63.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. For at least the next twelve
months, we expect to fund our working capital requirements, capital expenditures and payments of principal and interest on
outstanding indebtedness, with cash on hand and cash flows from operations.
We currently believe that our cash position is capable of meeting our operating and capital expenses and debt service
requirements for at least the next twelve months from the issuance of this annual report. We believe that our position is strengthened
by cash and cash equivalents on hand, in the amount of $110.7 million, and available for sale marketable securities in the additional
amount of $44.5 million, as of December 31, 2022.
Our liquidity is not materially impacted by the amounts held in accounts outside the United States. The majority of our cash and
cash equivalents is held outside the United States, primarily in Uruguay, Spain, Ecuador and Singapore, none of which countries have
foreign currency controls. We hold smaller amounts in certain countries that do have foreign currency controls, including South Africa
and Argentina, which could impact our ability to freely repatriate such funds from those countries to the United States.
2017 Credit Facility
On November 30, 2017 (the “Closing Date”), we entered into our 2017 Credit Facility pursuant to the 2017 Credit Agreement.
The 2017 Credit Facility consists of a $300.0 million senior secured Term Loan B Facility (the “Term Loan B Facility”), which was
drawn in full on the Closing Date. In addition, the 2017 Credit Facility provides that we may increase the aggregate principal amount
of the 2017 Credit Facility by up to an additional $100.0 million plus the amount that would result in our first lien net leverage ratio
(as such term is used in the 2017 Credit Agreement) not exceeding 4.0 to 1.0, subject to us satisfying certain conditions.
Borrowings under the Term Loan B Facility were used on the Closing Date (a) to repay in full all of our and our subsidiaries’
then outstanding obligations under the previous 2013 credit agreement, or 2013 Credit Agreement, and to terminate the 2013 Credit
Agreement, (b) to pay fees and expenses in connection with the 2017 Credit Facility, and (c) for general corporate purposes.
The 2017 Credit Facility is guaranteed on a senior secured basis by certain of our existing and future wholly-owned domestic
subsidiaries, and is secured on a first priority basis by our and those subsidiaries’ assets.
Our borrowings under the 2017 Credit Facility bear interest on the outstanding principal amount thereof from the date when
made at a rate per annum equal to either: (i) the Eurodollar Rate (as defined in the 2017 Credit Agreement) plus 2.75%; or (ii) the
81
Base Rate (as defined in the 2017 Credit Agreement) plus 1.75%. As of December 31, 2022, the interest rate on our Term Loan B was
7.13%. The Term Loan B Facility expires on November 30, 2024 (the “Maturity Date”).
The amounts outstanding under the 2017 Credit Facility may be prepaid at our option without premium or penalty, provided that
certain limitations are observed, and subject to customary breakage fees in connection with the prepayment of a LIBOR rate loan. The
principal amount of the Term Loan B Facility shall be paid in installments on the dates and in the respective amounts set forth in the
2017 Credit Agreement, with the final balance due on the Maturity Date
Subject to certain exceptions, the 2017 Credit Facility contains covenants that limit the ability of us and our restricted
subsidiaries to, among other things:
• incur liens on our property or assets;
• make certain investments;
• incur additional indebtedness;
• consummate any merger, dissolution, liquidation, consolidation or sale of substantially all assets;
• dispose of certain assets;
• make certain restricted payments;
• make certain acquisitions;
• enter into substantially different lines of business;
• enter into certain transactions with affiliates;
• use loan proceeds to purchase or carry margin stock or for any other prohibited purpose;
• change or amend the terms of our organizational documents or the organization documents of certain restricted subsidiaries
in a materially adverse way to the lenders, or change or amend the terms of certain indebtedness;
• enter into sale and leaseback transactions;
• make prepayments of any subordinated indebtedness, subject to certain conditions; and
• change our fiscal year, or accounting policies or reporting practices.
The 2017 Credit Facility also provides for certain customary events of default, including the following:
• default for three (3) business days in the payment of interest on borrowings under the 2017 Credit Facility when due;
• default in payment when due of the principal amount of borrowings under the 2017 Credit Facility;
• failure by us or any subsidiary to comply with the negative covenants and certain other covenants relating to maintaining the
legal existence of the Company and certain of its restricted subsidiaries and compliance with anti-corruption laws;
• failure by us or any subsidiary to comply with any of the other agreements in the 2017 Credit Agreement and related loan
documents that continues for thirty (30) days (or ten (10) days in the case of failure to comply with covenants related to
inspection rights of the administrative agent and lenders and permitted uses of proceeds from borrowings under the 2017
Credit Facility) after our officers first become aware of such failure or first receive written notice of such failure from any
lender;
• default in the payment of other indebtedness if the amount of such indebtedness aggregates to $15.0 million or more, or
failure to comply with the terms of any agreements related to such indebtedness if the holder or holders of such indebtedness
can cause such indebtedness to be declared due and payable;
• certain events of bankruptcy or insolvency with respect to us or any significant subsidiary;
• final judgment is entered against us or any restricted subsidiary in an aggregate amount over $15.0 million, and either
enforcement proceedings are commenced by any creditor or there is a period of thirty (30) consecutive days during which the
judgment remains unpaid and no stay is in effect;
• any material provision of any agreement or instrument governing the 2017 Credit Facility ceases to be in full force and
effect; and
• any revocation, termination, substantial and adverse modification, or refusal by final order to renew, any media license, or
the requirement (by final non-appealable order) to sell a television or radio station, where any such event or failure is
reasonably expected to have a material adverse effect.
82
The Term Loan B Facility does not contain any financial covenants. In connection with our entering into the 2017 Credit
Agreement, we and our restricted subsidiaries also entered into a Security Agreement, pursuant to which we and all of the companies
existing in future wholly-owned domestic subsidiaries each granted a first priority security interest in the collateral securing the 2017
Credit Facility for the benefit of the lenders under the 2017 Credit Facility.
We did not make prepayments in 2022 and 2021.
On April 30, 2019, we entered into an amendment to the 2017 Credit Agreement, which became effective on May 1, 2019.
The 2017 Credit Agreement contains a covenant that we deliver our financial statements and certain other information for each
fiscal year within 90 days after the end of each fiscal year.
On June 4, 2021, we entered into the Second Amendment (the "Amendment") to the 2017 Credit Agreement, by and among the
Company, Bank of America, N.A., as Administrative Agent, and the other financial institutions party thereto as Lenders (collectively,
the “Lenders”). The Amendment amends the 2017 Credit Agreement, primarily to permit additional investments in restricted
subsidiaries that are not loan parties, and make certain changes to the definition of “Consolidated Net Income” for the purpose of
calculating EBITDA as defined by the 2017 Credit Agreement. Pursuant to the Amendment, we agreed to pay to the Lenders
consenting to the Amendment a fee equal to 0.375% of the aggregate principal amount of the outstanding loans held by such Lenders
under the 2017 Credit Agreement as of June 4, 2021. This fee totaled approximately $0.6 million and will be amortized as interest
expense over the remaining term of the Term Loan B.
The carrying amount of the Term Loan B Facility as of December 31, 2022 was $208.1 million, net of $1.2 million of
unamortized debt issuance costs and original issue discount. The estimated fair value of the Term Loan B Facility as of December 31,
2022 was $204.0 million. The estimated fair value is based on quoted prices in markets where trading occurs infrequently.
Share Repurchase Program
On March 1, 2022, our Board of Directors approved a share repurchase program of up to $20 million of our common stock.
Under this share repurchase program, we are authorized to purchase shares from time to time through open market purchases or
negotiated purchases, subject to market conditions and other factors. On the same date, the Board terminated our previous share
repurchase program of up to $45 million of our common stock.
As of December 31, 2022, we have repurchased a total of 1.8 million shares of our Class A common stock under the new share
repurchase program for an aggregate purchase price of $11.3 million, or an average price per share of $6.43. All such repurchased
shares were retired as of December 31, 2022.
Consolidated Adjusted EBITDA
Consolidated adjusted EBITDA (as defined below) increased to $103.1 million for the year ended December 31, 2022 from
$88.0 million for the year ended December 31, 2021, an increase of $15.1 million, or 17%. As a percentage of net revenue,
consolidated adjusted EBITDA decreased to 11% for the year ended December 31, 2022, from 12% for the year ended December 31,
2021.
83
Consolidated adjusted EBITDA, as defined in our 2017 Credit Agreement, 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), non-recurring cash expenses, 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, EBITDA attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost
savings. We use the term consolidated adjusted EBITDA because that measure is defined in our 2017 Credit Agreement 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), non-recurring cash expenses, 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, EBITDA attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost
savings.
Since consolidated adjusted EBITDA is a measure governing several critical aspects of our 2017 Credit Facility, we believe that
it is important to disclose consolidated adjusted EBITDA to our investors. We may increase the aggregate principal amount
outstanding by an additional amount equal to $100.0 million plus the amount that would result in our total net leverage ratio, or the
ratio of consolidated total senior debt (net of up to $75.0 million of unrestricted cash) to trailing-twelve-month consolidated adjusted
EBITDA, not exceeding 4.0. In addition, beginning December 31, 2018, at the end of every calendar year, in the event our total net
leverage ratio is within certain ranges, we must make a debt prepayment equal to a certain percentage of our Excess Cash Flow, which
is defined as consolidated adjusted EBITDA, less consolidated interest expense, less debt principal payments, less taxes paid, less
other amounts set forth in the definition of Excess Cash Flow in the 2017 Credit Agreement. The total leverage ratio was as follows
(in each case as of December 31): 2022, 1.3 to 1; 2021, 1.6 to 1.
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 (loss) and net income (loss). 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), non-recurring cash expenses, 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, EBITDA
attributable to redeemable noncontrolling interest, acquisitions and dispositions and certain pro-forma cost savings, consolidated
adjusted EBITDA has certain limitations because it excludes and includes several important financial line items. Therefore, we
consider both non-GAAP and U.S. GAAP measures when evaluating our business. Consolidated adjusted EBITDA is also used to
make executive compensation decisions.
Consolidated adjusted EBITDA is a non-GAAP measure. For a reconciliation of consolidated adjusted EBITDA to cash flows
from operating activities, its most directly comparable U.S. GAAP financial measure, please see page 71.
Cash Flow
Net cash flow provided by operating activities was $78.9 million for the year ended December 31, 2022 compared to net cash
flow provided by operating activities of $65.3 million for the year ended December 31, 2021. We had net income of $20.2 million for
the year ended December 31, 2022, which included non-cash items such as deferred income taxes of $3.7 million, depreciation and
amortization expense of $25.7 million, non-cash stock-based compensation expense of $20.0 million, and impairment charge of $1.6
million. We had net income of $35.2 million for the year ended December 31, 2021, which included non-cash items such as deferred
income taxes of $14.6 million, depreciation and amortization expense of $22.4 million, non-cash stock-based compensation expense
of $9.6 million, and impairment charge of $3.0 million. We expect to have positive cash flow from operating activities for the 2023
year.
Net cash flow used in investing activities was $60.5 million for the year ended December 31, 2022, compared to net cash flow
provided by investing activities of $17.3 million for the year ended December 31, 2021. During the year ended December 31, 2022,
we spent $106.4 million on purchases of marketable securities, spent $11.5 million in net capital expenditures, spent $5.2 million on
investments in VIEs, net of cash consolidated, received $59.8 million from the sale of marketable securities, and received $2.7 million
from the sale of property and equipment and intangibles. During the year ended December 31, 2021, we had proceeds of $27.8 million
from the maturity of marketable securities and proceeds of $10.4 million from the sale of property and equipment and intangibles, and
we spent $14.3 million on the acquisitions of MediaDonuts and 365 Digital, net of cash acquired, $5.8 million on net capital
expenditures, and $0.8 million on the purchase of an investment. We anticipate that our capital expenditures will be approximately
$19.5 million during the full year 2023. Of this amount, we expect that approximately $3.9 million will be reimbursed in connection
with a new office lease (see Note 20 to Notes to Consolidated Financial Statements). The amount of our anticipated capital
84
expenditures may change based on future changes in business plans and our financial condition and general economic conditions. We
expect to fund capital expenditures with cash on hand and net cash flow from operations.
Net cash flow used in financing activities was $92.8 million for the year ended December 31, 2022, compared to net cash flow
used in financing activities of $16.6 million for the year ended December 31, 2021. During the year ended December 31, 2022, we
made payments of contingent consideration of $65.3 million, dividend payments of $8.5 million, debt payments of $3.3 million,
payments for taxes related to shares withheld for share-based compensation plans of $4.5 million, spent $11.3 million for the
repurchase of Class A common stock, and received $0.2 million related to the issuance of common stock upon the exercise of stock
options. During the year ended December 31, 2021, we made dividend payments of $8.5 million, principal debt repayments of $3.0
million, payments for financing costs of $0.6 million, and spent $4.7 million for taxes related to shares withheld for share-based
compensation plans.
On February 3, 2023, we announced that our Board of Directors approved a quarterly cash dividend to shareholders of $0.05 per
share of the Company's Class A and Class U common stock, payable on March 31, 2023. This is double our previous quarterly
dividend of $0.025 that was paid quarterly in 2022 and restores the dividend to its pre-pandemic level.
Credit Risk
We have credit risk in our digital segment insofar as we are required to pay the media companies for which we act as
commercial partner for all inventory purchased regardless of whether we are able to collect on a transaction from the local advertiser
or its ad agency. We believe that we manage this credit risk effectively, in part by analyzing the creditworthiness of these customers;
however, we can give no assurance that this will continue to be the case in future periods.
Additionally, we are dependent upon one single global media company for the majority of our consolidated revenue, which
amounted to approximately 49% and 55% of our consolidated revenue for the years ended December 31, 2022 and 2021, respectively.
We expect that dependence will continue. The loss of all or a substantial part of that revenue would have a significant impact on our
liquidity and cash flow.
Commitments and Contractual Obligations
Our material contractual obligations at December 31, 2022 which are not reflected as liabilities in the Consolidated Balance
Sheets include media research and ratings providers, to provide television and radio audience measurement services, of approximately
$7.4 million, and other amounts consist primarily of obligations for software licenses utilized by our sales team of approximately $3.9
million.
We have also entered into employment agreements with certain of our key employees, including Christopher T. Young, Jeffery
A. Liberman, Karl Meyer, and Juan Saldivar, and we had an employment agreement with our late Chief Executive Officer, Walter F.
Ulloa.
Other than the foregoing commitments, legal contingencies incurred in the normal course of business and employment contracts
for key employees, we do not have any off-balance sheet financing arrangements or liabilities. We do not have any majority-owned
subsidiaries or any interests in or relationships with any variable-interest entities that are not included in our consolidated financial
statements.
Application of Critical Accounting Policies and Accounting Estimates
Critical accounting policies are defined as those that are the most important to the accurate portrayal of our financial condition
and results of operations. Critical accounting policies require management’s subjective judgment and may produce materially different
results under different assumptions and conditions. We have discussed the development and selection of these critical accounting
policies with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed and approved our related
disclosure in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Goodwill
We believe that the accounting estimates related to the fair value of our reporting units and indefinite life intangible assets and
our estimates of the useful lives of our long-lived assets are “critical accounting estimates” because: (1) goodwill and other intangible
assets are our most significant assets, and (2) the impact that recognizing an impairment would have on the assets reported on our
balance sheet, as well as on our results of operations, could be material. Accordingly, the assumptions about future cash flows on the
assets under evaluation are critical
85
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets
acquired in each business combination. We test our goodwill and other indefinite-lived intangible assets for impairment annually on
October 1, or more frequently if certain events or certain changes in circumstances indicate they may be impaired. In assessing the
recoverability of goodwill and indefinite life intangible assets, we must make a series of assumptions about such things as the
estimated future cash flows and other factors to determine the fair value of these assets.
In testing the goodwill of our reporting units for impairment, we first determine, based on a qualitative assessment, whether it is
more likely than not that the fair value of each of our reporting units is less than their respective carrying amounts. We have
determined that each of our operating segments is a reporting unit.
If it is deemed more likely than not that the fair value of a reporting unit is less than the carrying value based on this initial
assessment, the next step is a quantitative comparison of the fair value of the reporting unit to its carrying amount. If a reporting unit’s
estimated fair value is equal to or greater than that reporting unit’s carrying value, no impairment of goodwill exists and the testing is
complete. If the reporting unit’s carrying amount is greater than the estimated fair value, then an impairment loss is recorded for the
amount of the difference.
As of our annual goodwill testing date, October 1, 2022, we had $46.2 million of goodwill in our digital reporting unit. We did
not reach a definitive conclusion on the digital reporting unit based on a qualitative assessment alone so we performed a quantitative
test and compared the fair value of the digital reporting unit to its carrying amount. The fair value of our digital reporting unit
exceeded its carrying value by 65%, resulting in no impairment charge. As discussed in Note 6 to Notes to Consolidated Financial
Statements, the calculation of the fair value of the digital reporting unit requires estimates of the discount rate and the long term
projected growth rate. If that discount rate were to increase by 1%, the fair value of the digital reporting unit would decrease by 4%.
If the long term projected growth rate were to decrease by 0.5%, the fair value of the digital reporting unit would decrease by 1%.
As of our annual goodwill testing date, October 1, 2022, we had $40.5 million of goodwill in our television reporting unit. We
did not reach a definitive conclusion on the television reporting unit based on a qualitative assessment alone so we performed a
quantitative test and compared the fair value of the television reporting unit to its carrying amount. The fair value of our television
reporting unit exceeded its carrying value by 28%, resulting in no impairment charge. As discussed in Note 6 to Notes to Consolidated
Financial Statements, the calculation of the fair value of the television reporting unit requires estimates of the discount rate and the
long term projected growth rate. If that discount rate were to increase by 0.5%, the fair value of the television reporting unit would
decrease by 3%. If the long term projected growth rate were to decrease by 0.5%, the fair value of the television reporting unit would
decrease by 2%.
As of our annual goodwill testing date, October 1, 2022, we had no goodwill in our radio reporting unit.
When a quantitative analysis is performed, the estimated fair value of goodwill is determined by using a combination of a
market approach and an income approach. The market approach estimates fair value by applying sales, earnings and cash flow
multiples to each reporting unit’s operating performance. The multiples are derived from comparable publicly-traded companies with
similar operating and investment characteristics to our reporting units. The market approach requires us to make a series of
assumptions, such as selecting comparable companies and comparable transactions and transaction premiums. The current economic
conditions have led to a decrease in the number of comparable transactions, which makes the market approach of comparable
transactions and transaction premiums more difficult to estimate than in previous years.
The income approach estimates fair value based on our estimated future cash flows of each reporting unit, discounted by an
estimated weighted-average cost of capital that reflects current market conditions, which reflect the overall level of inherent risk of
that reporting unit. The income approach also requires us to make a series of assumptions, such as discount rates, revenue projections,
profit margin projections and terminal value multiples. We estimated our discount rates on a blended rate of return considering both
debt and equity for comparable publicly-traded companies in the television, radio and digital media industries. These comparable
publicly-traded companies have similar size, operating characteristics and/or financial profiles to us. We also estimated the terminal
value multiple based on comparable publicly-traded companies in the television, radio and digital media industries. We estimated our
revenue projections and profit margin projections based on internal forecasts about future performance.
86
Uncertain economic conditions, fiscal policy and other factors beyond our control potentially could have an adverse effect on
the capital markets, which would affect the discount rate assumptions, terminal value estimates, transaction premiums and comparable
transactions. Such uncertain economic conditions could also have an adverse effect on the fundamentals of our business and results of
operations, which would affect our internal forecasts about future performance and terminal value estimates. Furthermore, such
uncertain economic conditions could have a negative impact on the advertising industry in general or the industries of those customers
who advertise on our stations, including, among others, the automotive, financial and other services, telecommunications, travel and
restaurant industries, which in the aggregate provide a significant amount of our historical and projected advertising revenue. The
activities of our competitors, such as other broadcast television stations and radio stations, could have an adverse effect on our internal
forecasts about future performance and terminal value estimates. Changes in technology or our audience preferences, including
increased competition from other forms of advertising-based mediums, such as Internet, social media and broadband content providers
serving the same markets, could have an adverse effect on our internal forecasts about future performance, terminal value estimates
and transaction premiums. Finally, the risk factors that we identify from time to time in our SEC reports could have an adverse effect
on our internal forecasts about future performance, terminal value estimates and transaction premiums.
There can be no assurance that our estimates and assumptions made for the purpose of our goodwill impairment testing will
prove to be accurate predictions of the future. If our assumptions regarding internal forecasts of future performance of our business as
a whole or of our units are not achieved, if market conditions change and affect the discount rate, or if there are lower comparable
transactions and transaction premiums, we may be required to record additional goodwill impairment charges in future periods. It is
not possible at this time to determine if any such future change in our assumptions would have an adverse impact on our valuation
models and result in impairment, or if it does, whether such impairment charge would be material.
Indefinite Life Intangible Assets
We believe that our broadcast licenses are indefinite life intangible assets. An intangible asset is determined to have an
indefinite useful life when there are no legal, regulatory, contractual, competitive, economic or any other significant factors that may
limit the period over which the asset is expected to contribute directly or indirectly to future cash flows. The evaluation of impairment
for indefinite life intangible assets is performed by a comparison of the asset’s carrying value to the asset’s fair value. When the
carrying value exceeds fair value, an impairment charge is recorded for the amount of the difference. The unit of accounting used to
test broadcast licenses represents all licenses owned and operated within an individual market cluster, because such licenses are used
together, are complementary to each other and are representative of the best use of those assets. Our individual market clusters consist
of cities or nearby cities. We test our broadcasting licenses for impairment based on certain assumptions about these market clusters.
The estimated fair value of indefinite life intangible assets is determined by using an income approach. The income approach
estimates fair value based on the estimated future cash flows of each market cluster that a hypothetical buyer would expect to
generate, discounted by an estimated weighted-average cost of capital that reflects current market conditions, which reflect the overall
level of inherent risk. The income approach requires us to make a series of assumptions, such as discount rates, revenue projections,
profit margin projections and terminal value multiples. We estimate the discount rates on a blended rate of return considering both
debt and equity for comparable publicly-traded companies in the television, radio and digital media industries. These comparable
publicly-traded companies have similar size, operating characteristics and/or financial profiles to us. We also estimated the terminal
value multiple based on comparable publicly-traded companies in the television, radio and digital media industries. We estimated the
revenue projections and profit margin projections based on various market clusters signal coverage of the markets and industry
information for an average station within a given market. The information for each market cluster includes such things as estimated
market share, estimated capital start-up costs, population, household income, retail sales and other expenditures that would influence
advertising expenditures. Alternatively, some stations under evaluation have had limited relevant cash flow history due to planned or
actual conversion of format or upgrade of station signal. The assumptions we make about cash flows after conversion are based on the
performance of similar stations in similar markets and potential proceeds from the sale of the assets.
The carrying value of one television FCC license exceeded its fair value. As a result, we incurred an impairment charge in the
amount of $0.9 million. The fair values of our television FCC licenses for each of the remaining market clusters exceeded the carrying
values in amounts ranging from 49% to over 1,000%.
The carrying value of four radio FCC license exceeded their fair value. As a result, we incurred an impairment charge in the
amount of $0.7 million. The fair values of our radio FCC licenses for each of the remaining market clusters exceeded the carrying
values in amounts ranging from 12% to over 70%.
87
Uncertain economic conditions, fiscal policy and other factors beyond our control potentially could have an adverse effect on
the capital markets, which would affect the discount rate assumptions, terminal value estimates, transaction premiums and comparable
transactions. Such uncertain economic conditions could also have an adverse effect on the fundamentals of our business and results of
operations, which would affect our internal forecasts about future performance and terminal value estimates. Furthermore, such
uncertain economic conditions could have a negative impact on the advertising industry in general or the industries of those customers
who advertise on our stations, including, among others, the automotive, financial and other services, telecommunications, travel and
restaurant industries, which in the aggregate provide a significant amount of our historical and projected advertising revenue. The
activities of our competitors, such as other broadcast television stations and radio stations, could have an adverse effect on our internal
forecasts about future performance and terminal value estimates. Changes in technology or our audience preferences, including
increased competition from other forms of advertising-based mediums, such as Internet, social media and broadband content providers
serving the same markets, could have an adverse effect on our internal forecasts about future performance, terminal value estimates
and transaction premiums. Finally, the risk factors that we identify from time to time in our SEC reports could have an adverse effect
on our internal forecasts about future performance, terminal value estimates and transaction premiums.
There can be no assurance that our estimates and assumptions made for the purposes of our impairment testing will prove to be
accurate predictions of the future. If our assumptions regarding internal forecasts of future performance of our business as a whole or
of our units are not achieved, if market conditions change and affect the discount rate, or if there are lower comparable transactions
and transaction premiums, we may be required to record additional impairment charges in future periods. It is not possible at this time
to determine if any such future change in our assumptions would have an adverse impact on our valuation models and result in
impairment, or if it does, whether such impairment charge would be material.
Long-Lived Assets, Including Intangibles Subject to Amortization
Depreciation and amortization of our long-lived assets is provided using the straight-line method over their estimated useful
lives. Changes in circumstances, such as the passage of new laws or changes in regulations, technological advances, changes to our
business model or changes in our capital strategy could result in the actual useful lives differing from initial estimates. In those cases
where we determine that the useful life of a long-lived asset should be revised, we will depreciate the net book value in excess of the
estimated residual value over its revised remaining useful life. Factors such as changes in the planned use of equipment, customer
attrition, contractual amendments or mandated regulatory requirements could result in shortened useful lives.
Long-lived assets and asset groups are evaluated for impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. The estimated future cash flows are based upon, among other things,
assumptions about expected future operating performance and may differ from actual cash flows. Long-lived assets evaluated for
impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash
flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows (excluding interest) is less than the
carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is
made.
Deferred Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary
differences and deferred liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when it is determined to be more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
In evaluating our ability to realize net deferred tax assets, we consider all reasonably available evidence including our past
operating results, tax strategies and forecasts of future taxable income. In considering these factors, we make certain assumptions and
judgments that are based on the plans and estimates used to manage our business.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the
financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being
realized upon settlement. We recognize interest and penalties related to uncertain tax positions in income tax expense.
88
Revenue Recognition
Revenue related to our digital segment is recognized when display or other digital advertisements record impressions on the
websites and mobile and Internet-connected television apps of media companies on whose digital platforms the advertisements are
placed or as the advertiser’s previously agreed-upon performance criteria are satisfied. In our arrangements with media companies for
which we act as commercial partner, we have concluded that we are the principal in the transaction and therefore recognize revenue on
a gross basis, because (i) we are responsible for fulfillment of the contract, including customer support, resolving customer
complaints, and accepting responsibility for the quality or suitability of the product or service; (ii) we have pricing discretion over the
transaction; and (iii) we carry inventory risk and we are required to pay the media companies for which we act as commercial partner
for all inventory purchased regardless of whether we are able to collect on a transaction. Cash payments received prior to services
rendered result in deferred revenue, which is then recognized as revenue when the advertising time or space is actually provided.
Revenue related to the sale of advertising in our television and audio segments is recognized at the time of broadcast. Revenue
for contracts with advertising agencies is recorded at an amount that is net of the commission retained by the agency. Revenue from
contracts directly with advertisers is recorded as gross revenue and the related commission or national representation fee is recorded in
operating expense.
We generate revenue from retransmission consent agreements that are entered into with MVPDs. We refer to such revenue as
retransmission consent revenue, which represents payments from MVPDs for access to our television station signals so that they may
rebroadcast our signals and charge their subscribers for this programming. We recognize retransmission consent revenue earned as the
television signal is delivered to the MVPD.
We also generate revenue from agreements associated with our television stations’ spectrum usage rights from a variety of
sources, including but not limited to entering into agreements with third parties to utilize excess spectrum for the broadcast of their
multicast networks, charging fees to accommodate the operations of third parties, including moving channel positions or accepting
interference with broadcasting operations, and modifying and/or relinquishing spectrum usage rights while continuing to broadcast
through channel sharing or other arrangements. Revenue from such agreements is recognized over the period of the agreement or
when we have relinquished all or a portion of our spectrum usage rights for a station or have relinquished our rights to operate a
station on the existing channel free from interference.
Allowance for Doubtful Accounts
Our accounts receivable consist of a homogeneous pool of relatively small dollar amounts from a large number of customers.
We evaluate the collectability of our trade accounts receivable based on a number of factors. When we are aware of a specific
customer’s inability to meet its financial obligations to us, a specific reserve for bad debts is estimated and recorded which reduces the
recognized receivable to the estimated amount we believe will ultimately be collected. In addition to specific customer identification
of potential bad debts, bad debt charges are recorded based on our recent past loss history and an overall assessment of past due trade
accounts receivable amounts outstanding.
Business Combinations
We apply the acquisition method of accounting for business combinations in accordance with U.S. GAAP and use estimates and
judgments to allocate the purchase price paid for acquisitions to the fair value of the assets, including identifiable intangible assets and
liabilities acquired. Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to,
revenue projections, gross margin projections, customer attrition rates, royalty rates, discount rates and terminal growth rate
assumptions. We use established valuation techniques and may engage reputable valuation specialists to assist with the valuations.
Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and
unpredictable and, as a result, actual results may differ from estimates. Fair values are subject to refinement for up to one year after the
closing date of an acquisition, as information relative to closing date fair values becomes available. Upon the conclusion of the
measurement period, any subsequent adjustments are recorded to earnings.
Variable Interest Entities
In accordance with the provisions of the Financial Accounting Standards Board (FASB) or ASC 810, “Consolidation,” we
evaluate entities for which control is achieved through means other than voting rights to determine if we are the primary beneficiary of
a VIE. An entity is a VIE if it has any of the following characteristics: (1) the entity has insufficient equity to permit it to finance its
activities without additional subordinated financial support; (2) equity holders, as a group, lack the characteristics of a controlling
financial interest; or (3) the entity is structured with non-substantive voting rights. The primary beneficiary of a VIE is generally the
entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b)
the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. We consolidate our
investment in a VIE when we determine that we are the primary beneficiary of such entity.
89
In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but
not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities;
and the significance of the our investment and other means of participation in the VIE’s expected profits/losses. Significant judgments
related to these determinations include estimates about the current and future fair values and performance of assets held by these VIEs
and general market conditions.
We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements
that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest
held by the primary beneficiary. We perform this analysis on an ongoing basis.
Contingent Consideration
If business combinations or variable interest entities provide for contingent consideration, we record the contingent
consideration at fair value at the acquisition date. We adjust the contingent consideration liability at the end of each reporting period
based on fair value inputs representing changes in forecasted revenue of the acquired entities and the probability of an adjustment to
the purchase price. Key assumptions include risk-neutral expected growth rates based on management’s assessments of expected
growth in EBITDA, adjusted by appropriate factors capturing their correlation with the market and volatility, discounted at a cost of
debt rate. Changes in the fair value of the contingent consideration after the acquisition date are included in earnings if the contingent
consideration is recorded as a liability.
Additional Information
For additional information on our significant accounting policies, please see Note 2 to Notes to Consolidated Financial
Statements.
Recently Issued Accounting Pronouncements
For further information on recently issued accounting pronouncements, see Note 2 to Notes to Consolidated Financial
Statements.
Sensitivity of Critical Accounting Estimates
We have critical accounting estimates that are sensitive to change. The most significant of those sensitive estimates relates to the
impairment of intangible assets. Goodwill and indefinite life intangible assets are not amortized but instead are tested annually on
October 1 for impairment, or more frequently if events or changes in circumstances indicate that the assets might be impaired. In
assessing the recoverability of goodwill and indefinite life intangible assets, we must make assumptions about the estimated future
cash flows and other factors to determine the fair value of these assets.
90
Digital
We conducted our annual review of our digital reporting unit as part of our goodwill testing and determined that the fair value of
our digital reporting unit exceeded the carrying value. The fair value of the digital reporting unit was primarily determined by using a
combination of a market approach and an income approach. The revenue projections and profit margin projections in the models are
based on the historical performance of the business and projected trends in the digital industry and Hispanic market. Based on the
assumptions and estimates described above, as of our annual goodwill testing date, October 1, 2022, the fair value of our digital
reporting unit exceeded its carrying value by 65%, resulting in no impairment charge. As discussed in Note 6 to Notes to Consolidated
Financial Statements, the calculation of the fair value of the digital reporting unit requires estimates of the discount rate and the long
term projected growth rate. If that discount rate were to increase by 1%, the fair value of the digital reporting unit would decrease by
4%. If the long term projected growth rate were to decrease by 0.5%, the fair value of the digital reporting unit would decrease by
1%.
Television
In calculating the estimated fair value of our television FCC licenses, we used models that rely on various assumptions, such as
future cash flows, discount rates and multiples. The estimates of future cash flows assume that the television segment revenues will
increase significantly faster than the increase in the television expenses, and therefore the television assets will also increase in value.
If any of the estimates of future cash flows, discount rates, multiples or assumptions were to change in any future valuation, it could
affect our impairment analysis and cause us to record an additional expense for impairment.
We conducted a review of our television indefinite life intangible assets by using an income approach. The income approach
estimates fair value based on the estimated future cash flows of each market cluster that a hypothetical buyer would expect to
generate, discounted by an estimated weighted-average cost of capital that reflects current market conditions, which reflect the overall
level of inherent risk. The income approach requires us to make a series of assumptions, such as discount rates, revenue projections,
profit margin projections and terminal value multiples. We estimate the discount rates on a blended rate of return considering both
debt and equity for comparable publicly-traded companies in the television, radio and digital media industries. These comparable
publicly-traded companies have similar size, operating characteristics and/or financial profiles to us. We also estimated the terminal
value multiple based on comparable publicly-traded companies in the television, radio and digital media industries. We estimated the
revenue projections and profit margin projections based on various market clusters signal coverage of the markets and industry
information for an average station within a given market. The information for each market cluster includes such things as estimated
market share, estimated capital start-up costs, population, household income, retail sales and other expenditures that would influence
advertising expenditures. We noted that the carrying value of one television FCC license exceeded its value. As a result, we incurred
an impairment charge in the amount of $0.9 million. The fair values of our television FCC licenses for each of the remaining market
clusters exceeded the carrying values in amounts ranging from 49% to over 1,000%.
We conducted our annual review of our television reporting unit as part of our goodwill testing and determined that the fair
value of our television reporting unit exceeded the carrying value. The fair value of the television reporting unit was primarily
determined by using a combination of a market approach and an income approach. The revenue projections and profit margin
projections in the models are based on the historical performance of the business and projected trends in the television industry and
Hispanic market. Based on the assumptions and estimates described above, as of our annual goodwill testing date, October 1, 2022,
the television reporting unit’s fair value exceeded its carrying value by 28%, resulting in no impairment charge. As discussed in Note
6 to Notes to Consolidated Financial Statements, the calculation of the fair value of the television reporting unit requires estimates of
the discount rate and the long term projected growth rate. If that discount rate were to increase by 0.5%, the fair value of the
television reporting unit would decrease by 3%. If the long term projected growth rate were to decrease by 0.5%, the fair value of the
television reporting unit would decrease by 2%.
Radio
In calculating the estimated fair value of our radio FCC licenses, we used models that rely on various assumptions, such as
future cash flows, discount rates and multiples. The estimates of future cash flows assume that the audio segment revenues will
increase significantly faster than the increase in the radio expenses, and therefore the radio assets will also increase in value. If any of
the estimates of future cash flows, discount rates, multiples or assumptions were to change in any future valuation, it could affect our
impairment analysis and cause us to record an additional expense for impairment.
91
We conducted a review of our radio indefinite life intangible assets by using an income approach. The income approach
estimates fair value based on the estimated future cash flows of each market cluster that a hypothetical buyer would expect to
generate, discounted by an estimated weighted-average cost of capital that reflects current market conditions, which reflect the overall
level of inherent risk. The income approach requires us to make a series of assumptions, such as discount rates, revenue projections,
profit margin projections and terminal value multiples. We estimate the discount rates on a blended rate of return considering both
debt and equity for comparable publicly-traded companies in the television, radio and digital media industries. These comparable
publicly-traded companies have similar size, operating characteristics and/or financial profiles to us. We also estimated the terminal
value multiple based on comparable publicly-traded companies in the television, radio and digital media industries. We estimated the
revenue projections and profit margin projections based on various market clusters signal coverage of the markets and industry
information for an average station within a given market. The information for each market cluster includes such things as estimated
market share, estimated capital start-up costs, population, household income, retail sales and other expenditures that would influence
advertising expenditures. We noted that the carrying value of four radio FCC license exceeded their fair value. As a result, we incurred
an impairment charge in the amount of $0.7 million. The fair values of our radio FCC licenses for each of the remaining market
clusters exceeded the carrying values in amounts ranging from 12% to over 70%.
We did not have any goodwill in our radio reporting unit at December 31, 2022.
Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for each of our fiscal years in the three-year
period ended December 31, 2022. However, based on recent inflation trends, the economy in Argentina has been classified as highly
inflationary. As a result, we applied the guidance in ASC 830, “Foreign Currency Matters”, by remeasuring non-monetary assets and
liabilities at historical exchange rates and monetary-assets and liabilities using current exchange rates. There can be no assurance that
future inflation would not have an adverse impact on our operating results and financial condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General
Market risk represents the potential loss that may impact our financial position, results of operations or cash flows due to
adverse changes in the financial markets. We are exposed to market risk from changes in the base rates on our Term Loan B.
Interest Rates
As of December 31, 2022, we had $209.3 million of variable rate bank debt outstanding under our 2017 Credit Facility. The
debt bears interest at Eurodollar plus a margin of 2.75%.
Because our debt is subject to interest at a variable rate, our earnings will be affected in future periods by changes in interest
rates. If the Eurodollar were to increase by 100 basis points, or one percentage point, from its December 31, 2022 level, our annual
interest expense would increase and cash flow from operations would decrease by approximately $2.1 million based on the
outstanding balance of our term loan as of December 31, 2022.
Foreign Currency
We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S.
dollar. Historically, our 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, we have operations in countries other than the United States,
primarily related to our digital business, and as a result we expect an increasing portion of our future revenues to be denominated in
currencies other than the U.S. dollar, primarily the Mexican peso, Argentine peso, certain other Latin American currencies and various
Asian currencies. The effect of an immediate and hypothetical 10% adverse change in foreign exchange rates on foreign-denominated
accounts receivable at December 31, 2022 would not be material to our overall financial condition or consolidated results of
operations. Our operating expenses are primarily denominated in U.S. Dollars. In addition, certain of our operating expenses are
denominated in the currencies of the countries in which our operations are located, such as Spain, Latin American countries and other
countries. Increases and decreases in our foreign-denominated revenue from movements in foreign exchange rates are partially offset
by the corresponding decreases or increases in our foreign-denominated operating expenses.
Based on recent inflation trends, the economy in Argentina has been classified as highly inflationary. As a result, we applied the
guidance in ASC 830 by remeasuring non-monetary assets and liabilities at historical exchange rates and monetary-assets and
liabilities using current exchange rates. See Note 2 to Notes to Consolidated Financial Statements.
92
We maintain certain cash and cash equivalents in Argentina and South Africa, which countries have foreign exchange controls
that could impact our ability to freely repatriate such funds from those countries to the United States.
As our international operations continue to grow, our risks associated with fluctuation in currency rates will become greater, and
we will continue to reassess our approach to managing this risk. In addition, currency fluctuations or a weakening U.S. dollar can
increase the amount of operating expense of our international operations, which are primarily related to our digital business. To date,
we have not entered into any foreign currency hedging contracts, since exchange rate fluctuations historically have not had a material
impact on our operating results and cash flows.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages F-1 through F-49.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that the information relating to our Company, including our
consolidated subsidiaries, required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive
officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure. We conducted an
evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial
officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report. Based on
this evaluation, our chief executive officer and chief financial officer concluded that, as of the evaluation date, our disclosure controls
and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including
our chief executive officer and chief financial officer, we conducted an evaluation of the design and operating effectiveness of our
internal controls over financial reporting based on the framework in “Internal Control—Integrated Framework (2013)” issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and
directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on the financial statements.
Our independent registered public accounting firm, Deloitte & Touche LLP, has independently assessed the effectiveness of our
internal control over financial reporting and its report is included in response to "Item 8. Financial Statements and Supplementary
Data", appearing beginning at page F-2 of this report.
93
Inherent Limitations on Effectiveness of Controls
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the
control system’s objectives will be met. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect all control issues or misstatements. Accordingly, our controls and procedures are designed to provide reasonable, not absolute,
assurance that the objectives of our control system are met. Projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become adequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Changes in Internal Control
There have been no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2022
that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
94
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
95
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of
Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of
Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of
Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of
Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of
Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022.
96
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report:
1. Financial Statements
The consolidated financial statements contained herein are as listed on the “Index to Consolidated Financial Statements” on
page F-1 of this report.
2. Financial Statement Schedule
The consolidated financial statement schedule contained herein is as listed on the “Index to Consolidated Financial Statements”
on page F-1 of this report. All other schedules have been omitted because they are not applicable, not required, or the information is
included in the consolidated financial statements or notes thereto.
3. Exhibits
See Exhibit Index.
(b) Exhibits:
The following exhibits are attached hereto and incorporated herein by reference.
Exhibit
Number
Exhibit Description
3.1(2)
Second Amended and Restated Certificate of Incorporation
3.2(20)
Fifth Amended and Restated Bylaws, as adopted on March 26, 2020
4.1*
Description of the Registrant's Securities
10.1(3)†
2000 Omnibus Equity Incentive Plan
10.2(21)
Amended and Restated Voting Agreement by and among Walter F. Ulloa, Paul A. Zevnik and the other parties thereto
10.3(18)†
Employment Agreement effective as of January 1, 2020 by and between the registrant and Walter F. Ulloa
10.4(33)† Amendment to Executive Employment Agreement effective as of March 1, 2023 by and between the registrant and
Jeffery A. Liberman
10.5(19)†
Executive Employment Agreement effective as of March 1, 2020 by and between the registrant and Jeffery A. Liberman
10.6(25)†
Executive Employment Agreement effective as of January 1, 2022 between the registrant and Christopher T. Young
10.7(34)†
Executive Employment Agreement effective as of May 1, 2022 between the registrant and Karl Meyer
10.8(17)†
Executive Employment Agreement effective as of May 13, 2019 between the registrant and Karl Meyer
10.9(24)†
Executive Employment Agreement effective as of November 5, 2020 between the registrant and Juan Saldívar
10.10*†
Form of Indemnification Agreement for officers and directors of the registrant
10.11(3)
Form of Investors Rights Agreement by and among the registrant and certain of its stockholders
10.12(1)
10.13(1)
10.14(3)
Amendment to Investor Rights Agreement dated as of September 9, 2005 by and between Entravision Communications
Corporation and Univision Communications Inc.
Letter Agreement regarding registration rights of Univision dated as of September 9, 2005 by and between Entravision
Communications Corporation and Univision Communications Inc.
Office Lease dated August 19, 1999 by and between Water Garden Company L.L.C. and Entravision Communications
Company, L.L.C.
97
10.15(6)
10.16(5)
First Amendment to Lease and Agreement Re: Sixth Floor Additional Space dated as of March 15, 2001 by and
between Water Garden Company L.L.C., Entravision Communications Company, L.L.C. and the registrant
Second Amendment to Lease dated as of October 5, 2005 by and between Water Garden Company L.L.C. and the
registrant
10.17(10)
Third Amendment to Lease effective as of January 31, 2011 by and between Water Garden Company L.L.C. and the
registrant
10.18(23)
Fourth Amendment to Lease effective as of January 14, 2021 by and between Water Garden Company L.L.C. and the
registrant
10.19(25)
Fifth Amendment to Lease, effective as of February 16, 2022 by and between Water Garden Company L.L.C. and the
registrant
10.20*
10.21(14)
Sixth Amendment to Lease, effective as of June 7, 2022 by and between Water Garden Company L.L.C. and the
registrant
Station Affiliation Agreement, dated as of October 2, 2017, by and between Entravision Communications Corporation,
The Univision Network Limited Partnership and UniMás Network
10.22(7) Master Network Affiliation Agreement, dated as of August 14, 2002, by and between Entravision Communications
Corporation and Univision Network Limited Partnership
10.23(11) Amendment, effective as of October 1, 2011, to Master Network Affiliation Agreement, dated as of August 14, 2002, by
and between Entravision Communications Corporation and Univision Network Limited Partnership
10.24(7) Master Network Affiliation Agreement, dated as of March 17, 2004, by and between Entravision Communications
Corporation and TeleFutura
10.25(11) Amendment, effective as of October 1, 2011, to Master Network Affiliation Agreement, dated as of March 17, 2004, by
and between Entravision Communications Corporation and TeleFutura
10.26(2)†
2004 Equity Incentive Plan
10.27(8)†
First Amendment, dated as of May 1, 2006, to 2004 Equity Incentive Plan
10.28(9)†
Second Amendment, dated as of July 13, 2006, to 2004 Equity Incentive Plan
10.29(12)† Third Amendment, dated as of April 23, 2014, to 2004 Equity Incentive Plan
10.30(13)† Fourth Amendment, dated as of May 21, 2014, to 2004 Equity Incentive Plan
10.31(26)† Fifth Amendment, effective as of April 27, 2021, to 2004 Equity Incentive Plan
10.32(27)† Sixth Amendment, effective as of May 27, 2021, to 2004 Equity Incentive Plan
10.33(4)†
Form of Stock Option Award under the 2004 Equity Incentive Plan
10.34*†
Form of Restricted Stock Unit Award under the 2004 Equity Incentive Plan (directors)
10.35*†
Form of Restricted Stock Unit Award under the 2004 Equity Incentive Plan (employees)
10.36*†
Non-Employee Director Compensation Policy
10.37(15) Credit Agreement, dated as of November 30, 2017, by and among Entravision Communications Corporation, as the
Borrower, Bank of America, N.A., as Administrative Agent, RBC Capital Markets, as Syndication Agent, Wells Fargo
Bank, National Association, as Documentation Agent, and the other financial institutions party thereto as Lenders
10.38(15)
Security Agreement, dated as of November 30, 2017, by and among Entravision Communications Corporation, each
other guarantor from time to time party thereto and Bank of America, N.A., as Administrative Agent
10.39(16)
First Amendment and Limited Waiver, dated as of April 30, 2019, by and among Entravision Communications
Corporation, as the Borrower, Bank of America, N.A., as Administrative Agent, and the other financial institutions party
thereto as Lenders
10.40(28)
Second Amendment, dated as of June 4, 2021, to Credit Agreement, dated November 30, 2017 and amended as of April
30, 2019, by and among by and among the Company, Bank of America, N.A., as Administrative Agent, and the other
financial institutions party thereto as Lenders
98
10.41(22)
Share Purchase Agreement effective as of October 13, 2020 by and among Entravision Digital Holdings, LLC and the
selling shareholders named therein
10.42(22)
Put and Call Option Agreement effective as of October 13, 2020 by and among Entravision Digital Holdings, LLC,
Entravision Communications Corporation and the selling shareholders named therein
10.43(29)
Share Purchase Agreement dated as of August 25, 2021 by and among Entravision Digital Holdings, LLC, Entravision
Communications Corporation, Redmas Ventures, S.L., and the selling shareholders named therein
10.44(30)
Amendment No. 1 to Share Purchase Agreement executed on January 4, 2022 by and among Entravision Digital
Holdings, LLC, Entravision Communications Corporation, Redmas Ventures, S.L., and the selling shareholders named
therein
10.45(35)
Letter Agreement Re: Accelerated Payments executed on September 13, 2022 by and among Entravision Digital
Holdings, LLC, Sorin Properties, S.L., and Entravision Communications Corporation (as guarantor)
10.46(31)
Securities Purchase Agreement effective as of June 4, 2021 by and among Entravision Digital Holdings, LLC,
Entravision Communications Corporation, MediaDonuts Pte. Ltd. and the selling shareholders named therein
10.47(32)
Earn-Out Agreement effective as of July 1, 2021 by and among Entravision Digital Holdings, LLC, Entravision
Communications Corporation, and the selling shareholders named therein
21.1*
23.1*
23.2*
24.1*
31.1*
31.2*
32*
Subsidiaries of the registrant
Consent of Deloitte & Touche LLP
Consent of BDO USA, LLP
Power of Attorney (included after signatures hereto)
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13a-
14 and 15d-14 under the Securities Exchange Act of 1934
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13a-
14 and 15d-14 under the Securities Exchange Act of 1934
Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL
tags are embedded within the Inline XBRL document.
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase
104
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained
in Exhibits 101)
* Filed herewith.
† Management contract or compensatory plan, contract or arrangement.
(1)
Incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed with the
SEC on November 9, 2005.
Incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, filed with the SEC on
August 9, 2004.
Incorporated by reference from our Registration Statement on Form S-1, No. 333-35336, filed with the SEC on April 21, 2000,
as amended by Amendment No. 1 thereto, filed with the SEC on June 14, 2000, Amendment No. 2 thereto, filed with the SEC
on July 10, 2000, Amendment No. 3 thereto, filed with the SEC on July 11, 2000 and Amendment No. 4 thereto, filed with the
SEC on July 26, 2000.
Incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2004, filed with the SEC on
March 15, 2005.
(2)
(3)
(4)
99
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)
Incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on
March 16, 2006.
Incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2000, filed with the SEC on
March 28, 2001.
Incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, filed with the SEC on
May 10, 2004.
Incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, filed with the SEC on
May 10, 2006.
Incorporated by reference from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, filed with the
SEC on November 9, 2006.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on March 25, 2011.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on January 5, 2012.
Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the SEC on May 9, 2014.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on May 30, 2014.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on October 5, 2017.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on December 1, 2017.
Incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on
May 7, 2019.
Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the SEC on August 8, 2019.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on December 30, 2019.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on March 13, 2020.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on March 27, 2020.
Incorporated by reference from Schedule 13D of Walter F. Ulloa and Paul A. Zevnik, filed with the SEC on May 15, 2020.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on October 15, 2020.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on January 26, 2021.
Incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on
April 12, 2021.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on February 18, 2022.
Incorporation by reference from our Registration Statement on Form S-8, No. 333-258366, filed with the SEC on August 2,
2021.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on June 1, 2021.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on June 7, 2021.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on August 31, 2021.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on January 7, 2022.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on June 9, 2021.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on July 6, 2021.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on March 3, 2023.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on June 10, 2022.
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on September 16, 2022.
(c) Financial Statement Schedules:
Not applicable.
ITEM 16.
FORM 10-K SUMMARY
None.
100
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
ENTRAVISION COMMUNICATIONS CORPORATION
By:
/s/ CHRISTOPHER T. YOUNG
CHRISTOPHER T. YOUNG
Interim Chief Executive Officer
and Chief Financial Officer and Treasurer
Date: March 16, 2023
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints,
jointly and severally, Christopher T. Young and Mark A. Boelke, and each of them, as his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ CHRISTOPHER T. YOUNG
Christopher T. Young
/s/ PAUL A. ZEVNIK
Paul A. Zevnik
/s/ GILBERT R. VASQUEZ
Gilbert R. Vasquez
/s/ PATRICIA DIAZ DENNIS
Patricia Diaz Dennis
Title
Interim Chief Executive Officer, and Treasurer and Chief Financial
Officer (principal executive officer, principal financial officer and
principal accounting officer)
Director and Interim Chair
Director
Director
/s/ JUAN SALDIVAR VON WUTHENAU
Juan Saldivar von Wuthenau
Director
/s/ MARTHA ELENA DIAZ
Martha Elena Diaz
/s/ FEHMI ZEKO
Fehmi Zeko
Director
Director
Date
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
March 16, 2023
101
[THIS PAGE INTENTIONALLY LEFT BLANK]
ENTRAVISION COMMUNICATIONS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID#34)..............................................................................
Report of Independent Registered Public Accounting Firm (BDO USA, LLP; Los Angeles, California; PCAOB ID#243).......
Consolidated Balance Sheets – December 31, 2022 and 2021 ......................................................................................................
Consolidated Statements of Operations – Years ended December 31, 2022, 2021 and 2020 .......................................................
Consolidated Statements of Comprehensive Income (loss) – Years ended December 31, 2020, 2021 and 2020.........................
Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2022, 2021 and 2020.......................................
Consolidated Statements of Cash Flows – Years ended December 31, 2022, 2021 and 2020......................................................
Notes to Consolidated Financial Statements..................................................................................................................................
Schedule II – Consolidated Valuation and Qualifying Accounts ..................................................................................................
Page
F-2
F-4
F-8
F-9
F-10
F-11
F-12
F-13
F-49
F-1
Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of Entravision Communications Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheet of Entravision Communications Corporation and subsidiaries (the
"Company") as of December 31, 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’
equity and cash flows, for the year ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15
(collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as
of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company
as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity
accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control —
Integrated Framework (2013) issued by COSO.
Basis for Opinion
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial
statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud,
and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on
a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
F-2
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Contingent Consideration Liability – Cisneros and MediaDonuts — Refer to Notes 3 and 11 to the consolidated financial
statements
Critical Audit Matter Description
The Company’s contingent consideration liability is primarily related to the acquisition of the remaining 49% of the issued and
outstanding shares of stock of Cisneros Interactive and the acquisition of MediaDonuts. These past business combinations include
contingent consideration arrangements that require additional consideration to be paid by the Company to the sellers based on a pre-
determined multiple of the acquired businesses’ 12-month EBITDA targets in specified calendar years. The contingent consideration
arrangements are accounted for as a liability and are recorded at fair value each period end, with the change in fair value recognized in
the consolidated statements of operations during the period.
As of December 31, 2022, the liability for Cisneros and Media Donuts was $63.6 million, which resulted in a change in fair value
recognized in the consolidated statements of operations of $16.0 million during the year. The Company used the real options approach
to estimate the fair value of the contingent consideration liability at December 31, 2022.
We identified management’s determination of the fair value of the contingent consideration as a critical audit matter due to the significant
judgments made by management to estimate the fair value of the contingent liability, and in consideration of the complexity inherent in
applying the real option approach. The significant inputs used in establishing the fair value include the revenue growth rates, cost of
debt rates, and volatility rates. These are significant inputs that are not observable in the market and represent significant judgements
made by management. Auditing the revenue growth rates, cost of debt rates and volatility rates were especially challenging and required
a high degree of auditor judgement, including the involvement of our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to testing management’s assumptions of the expected amount of future revenues, cost of debt rates and
volatility rates, and the acceptability of the results of management’s application of the real option approach used to estimate the fair
value of the contingent liability included the following, among others:
• We tested the effectiveness of management's controls over the valuation of the contingent liability, including management's
controls over the estimates of the amount of expected future revenues, cost of debt rates and volatility rates.
• We evaluated the reasonableness of management's forecasts of future revenues by performing inquiries of appropriate
individuals outside of the accounting organization, comparing the projections to historical results, third-party industry forecasts,
and internal communications to management and board of directors.
• We evaluated management's ability to estimate future revenues by comparing actual revenues to estimates assumed in the
valuation models.
With the assistance of our fair value specialists, we::
•
•
•
Evaluated the results of management’s real option approach.
Evaluated the reasonableness of management’s selected volatility rates by assessing the peer group public companies used in
the selection of the volatility rates and developed a range of independent estimates and compared those estimates to the volatility
rates selected by management.
Evaluated the reasonableness of the cost of debt rates selected, including developing a range of independent estimates and
comparing those to the cost of debt rates selected by management.
/s/ Deloitte & Touche LLP
Los Angeles, California
March 16, 2023
We have served as the Company's auditor since 2022
F-3
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Entravision Communications Corporation
Santa Monica, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Entravision Communications Corporation (the “Company”) as of
December 31, 2021, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash
flows for each of the two years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in
the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its
operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Goodwill Impairment Assessment – Digital Reporting Unit
As described in Notes 2 and 6 to the Company’s consolidated financial statements, the Company’s total goodwill carrying value at
December 31, 2021 was $71.7 million, of which $31.2 million was allocated to the digital reporting unit. The Company performs an
impairment analysis of goodwill annually, or more frequently if certain events or certain changes in circumstances indicate impairment
may exist. There were no triggering events identified by the Company during the year ended December 31, 2021. The Company uses a
combination of the market approach and an income approach to estimate the fair value of the reporting units.
We identified the Company’s goodwill impairment assessment for the digital reporting unit as a critical audit matter. The Company’s
goodwill and related impairment assessment processes include the following: (i) development of revenue projections and profit margin
projections, (ii) determination of inputs and assumptions used to determine the weighted average cost of capital, and (iii) performance
of a market capitalization reconciliation which includes estimation of control premiums. There is significant judgment and estimation
by management when estimating the fair value of the reporting unit, which in turn led to a high degree of auditor judgment, subjectivity
and the use of specialized skill and knowledge in performing procedures and evaluating audit evidence relating to the factors considered
in management’s estimate.
F-4
The primary procedures we performed to address this critical audit matter included:
• Assessing the reasonableness of the Company’s projections and related assumptions by comparing them to the Company’s
historical performance, industry conditions and outlooks, market data and evidence obtained in other areas of the audit.
•
Testing the accuracy of the underlying data used by management in the estimate of the fair value of the digital reporting unit.
• Utilizing personnel with specialized knowledge and skill in valuation to assist in assessing the reasonableness of the Company’s
valuation, including: (i) the inputs and assumptions used in the determination of the weighted average cost of capital, and (ii)
assessing the reasonableness of the control premium used in the market capitalization reconciliation.
Impairment Assessment of FCC Licenses
As described in Notes 2 and 6 to the Company’s consolidated financial statements, the Company’s total FCC license carrying value at
December 31, 2021 was $209.1 million. The Company tests the FCC licenses for impairment annually, or more frequently if certain
events or changes in circumstances indicate they may be impaired. There were no triggering events identified by the Company during
the year ended December 31, 2021. The evaluation of impairment is performed by comparing the asset’s carrying value to the asset’s
fair value, which the Company determined based on an income approach. This method requires management to make estimates and
assumptions such as discount rates, revenue projections, profit margin projections, terminal value multiples, estimated market share,
and estimated capital start-up costs.
We identified the impairment assessments of the Company’s FCC licenses as a critical audit matter. Management applies significant
judgments in (i) the development of revenue and profit margin projections and estimated market share, and (ii) the determination of
inputs and assumptions used to determine the weighted average cost of capital. Auditing these elements involved especially challenging
and subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of
specialized skill or knowledge needed.
The primary procedures we performed to address this critical audit matter included:
•
•
Evaluating the reasonableness of estimated market share assumptions used by management for a selection of FCC licenses by
comparing the market share for a selection of stations to industry data in relation to the FCC license market size and competition
within the market.
Testing the reasonableness of assumptions for a selection of FCC licenses used by management, including revenue projections
and profit margin projections, by performing analytical procedures based on considerations of each FCC license’s designated
market area and rank.
• Utilizing personnel with specialized knowledge and skill in valuation to assist in assessing the reasonableness of the Company’s
valuation, including (i) the reasonableness of the market data used by management and the reasonableness of the estimated
market share used in a selection of FCC licenses, and (ii) the inputs and assumptions used in the determination of the weighted
average cost of capital.
Impairment Assessment of Long-Lived Assets
As described in Notes 2, 6 and 7 to the Company’s consolidated financial statements, the Company’s total intangible assets subject to
amortization and property plant and equipment (collectively, “long-lived assets”) at December 31, 2021 were $64 million and $62.5
million, respectively. The Company reviews long-lived assets for impairment annually, or more often if circumstances indicate that the
carrying amount of those assets may not be recoverable. The Company evaluates the recoverability of assets to be held and used in a
two-step process by first comparing the carrying amount of the asset to the undiscounted future net cash flows the asset is expected to
generate. If the Company determines that an asset is impaired in step one, an impairment loss is recognized equal to the excess of the
asset’s carrying amount over its fair value.
We identified the assessment of long-lived assets for impairment as a critical audit matter due to the significant estimation required to
determine (i) the undiscounted future net cash flows for assets with indicators of potential impairment and (ii) the fair value of assets
that fail the first step. In particular, management applies significant judgments in the development of revenue and profit margin
projections, and discount rates where a discounted cash flow model is used to determine fair value. Auditing these elements involved
especially challenging auditor judgment due to the nature and extent of audit effort required to address these subjective estimates,
including the extent of specialized skill or knowledge needed.
The primary procedures we performed to address this critical audit matter included:
F-5
•
Evaluating the reasonableness of the significant assumptions by assessing the historical accuracy of management’s estimates,
comparing revenue and profit margin projections used by management to current industry and economic trends and evaluating
whether changes to the Company’s business and other relevant factors would affect those assumptions.
• Utilizing personnel with specialized knowledge and skill in valuation to assist in assessing the reasonableness of the Company’s
valuation, including the inputs and assumptions used in the determination of the discount rates.
Acquisition of MediaDonuts
As described in Note 3 to the Company’s consolidated financial statements, the Company acquired MediaDonuts PTE Ltd for a purchase
price of approximately $36.2 million. As a result of the acquisition, management was required to determine estimated fair values of the
assets acquired, including certain identifiable intangible assets, and liabilities assumed.
We identified the determination of fair values of the identifiable intangible assets as a critical audit matter. Management applied
significant judgment in determining the unobservable inputs including revenue projections, gross margin projections, discount rates,
and customer attrition rates assumptions in determining the fair values of the identifiable intangible assets. Auditing these elements
involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including
the extent of specialized skill or knowledge needed.
The primary procedures we performed to address this critical audit matter included:
• Assessing the reasonableness of the revenue projections and gross margin projections through: (i) evaluating historical
performance of the target entity, and (ii) assessing financial projections against industry metrics and peer-group companies.
• Assessing the reasonableness of the customer attrition rates used in the purchase price allocation by (i) comparing to historical
customer attrition rates of the target entity, and (ii) evaluating the terms of sales partnership agreements.
• Utilizing personnel with specialized knowledge and skill in valuation to assist in: (i) assessing the reasonableness of the
discount rate and terminal value growth rate incorporated into the various valuation models, and (ii) performing independent
estimates to evaluate the potential effect of changes in the significant assumptions.
Contingent Consideration- Cisneros and MediaDonuts
As described in Note 3 and 11 to the Company’s consolidated financial statements, the Company’s contingent consideration is primarily
related to the acquisition of the remaining 49% of the issued and outstanding shares of stock of Cisneros Interactive, and the acquisition
of MediaDonuts, and was estimated by applying the real options approach using level 3 inputs. The fair value of the contingent
consideration as of December 31, 2021 is approximately $114.9 million.
We identified the valuation of the contingent consideration as a critical audit matter due to the significant judgment required by
management in determining the forecasted results of the Company during the earn-out period and volatility and discount rate
assumptions used in the valuation. Auditing the fair value of the contingent consideration involved especially challenging and subjective
auditor judgment due to the nature and extent of audit effort required to address these estimates, including the extent of specialized skill
or knowledge needed.
The primary procedures we performed to address this critical audit matter included:
• Assessing the reasonableness of the forecasted results of Cisneros and MediaDonuts through: (i) evaluating historical
performance of the target entities, and (ii) assessing financial projections against industry metrics and peer-group companies.
• Utilizing personnel with specialized knowledge and skill in valuation to assist in: (i) assessing the reasonableness of the
volatility and discount rate assumptions incorporated into the various valuation models, and (ii) performing independent
estimates to evaluate the potential effect of changes in the significant assumptions.
Accounting for Income Taxes
As described in Notes 2 and 12 to the consolidated financial statements, the Company is subject to federal, state and foreign income
taxes. For the year ended December 31, 2021 the total provision for income taxes was $18.7 million and the net deferred income tax
liability as of December 31, 2021 was $66.7 million.
We identified certain aspects of accounting for income taxes as a critical audit matter. Specifically, the Company’s income tax process
includes complexity related to (i) income tax provision of a material foreign tax jurisdiction and (ii) assessing the tax impacts of the
acquisition of MediaDonuts. Auditing these elements was especially challenging due to the nature and extent of audit effort required to
address these matters, including the need for specialized knowledge and skill in assessing these elements.
F-6
The primary procedures we performed to address this critical audit matter included:
•
Testing mathematical accuracy of the income tax provision related to the foreign tax jurisdiction by re-performing or
independently calculating significant portions of the tax provision and reviewing relevant source documents. Agreeing material
portions of the income tax provision to the trial balances, relevant source documents and applicable enacted foreign
jurisdictional tax rates.
• Utilizing personnel with specialized knowledge and skill in domestic and international tax to assist in (i) evaluating
management’s application of domestic and foreign tax laws and (ii) evaluating the calculation of the deferred tax attributes
associated with the acquisition of MediaDonuts by reviewing relevant source documents supporting deferred tax assets and
liabilities and re-performing or independently calculating portions of the tax provision.
/s/ BDO USA, LLP
We served as the Company’s auditor from 2018 to 2022.
Los Angeles, California
March 16, 2022
F-7
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2022 and 2021
(In thousands, except share and per share data)
Current assets
ASSETS
Cash and cash equivalents
Marketable securities
Restricted cash
Trade receivables (including related parties of $5,814 and $8,162), net of allowance for doubtful
accounts of $6,572 and $6,398
Assets held for sale
Prepaid expenses and other current assets (including related parties of $274 and $274)
Total current assets
Property and equipment, net of accumulated depreciation of $194,448 and $183,930
Intangible assets subject to amortization, net of accumulated amortization of $75,992 and $104,687
(including related parties of $3,714 and $4,642)
Intangible assets not subject to amortization
Goodwill
Deferred income taxes
Operating leases right of use asset
Other assets
Total assets
Current liabilities
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt
Accounts payable and accrued expenses (including related parties of $1,215 and $1,920)
Operating lease liabilities
Total current liabilities
Long-term debt, less current maturities, net of unamortized debt issuance costs of $1,221 and $1,851
Long-term operating lease liabilities
Other long-term liabilities
Deferred income taxes
Total liabilities
Commitments and contingencies (note 13)
Stockholders' equity
Class A common stock, $0.0001 par value, 260,000,000 shares authorized; shares issued and
outstanding 2022 78,172,827 and 2021 63,116,896
Class B common stock, $0.0001 par value, 40,000,000 shares authorized; shares issued and
outstanding 2022 0 and 2021 14,127,613
Class U common stock, $0.0001 par value, 40,000,000 shares authorized; shares issued and
outstanding 2022 and 2021 9,352,729
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income (loss)
Total stockholders' equity
Noncontrolling interest
Total equity
Total liabilities and equity
December 31,
2022
December 31,
2021
$
$
$
$
$
$
$
110,691
44,528
753
224,713
—
27,238
407,923
61,362
61,811
207,453
86,991
2,591
44,413
8,297
880,841
5,256
237,415
5,570
248,241
207,292
42,151
30,198
67,590
595,472
185,094
—
749
201,747
1,963
18,925
408,478
62,498
64,034
209,053
71,708
1,462
25,582
8,527
851,342
4,903
212,655
7,304
224,862
207,416
20,988
72,930
68,220
594,416
8
—
6
2
1
776,298
(504,375)
(1,510)
270,422
14,947
285,369
880,841
$
1
780,388
(522,494)
(977)
256,926
-
256,926
851,342
See Notes to Consolidated Financial Statements
F-8
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2022, 2021 and 2020
(In thousands, except share and per share data)
Net revenue
Expenses:
Cost of revenue - digital
Direct operating expenses (including related parties of $8,095, $8,412,
and $9,063) (including non-cash stock-based compensation of $5,694,
$3,234, and $1,247)
Selling, general and administrative expenses
Corporate expenses (including non-cash stock-based compensation of
$14,340, $6,361, and $3,878)
Depreciation and amortization (includes direct operating of $17,352,
$14,916, and $12,506; selling, general and administrative of $8,113,
$7,013, and $4,065; and corporate of $232, $491 and $711) (including
related parties of $928, $1,228, and $1,228)
Change in fair value of contingent consideration
Impairment charge
Foreign currency (gain) loss
Other operating (gain) loss
Operating income (loss)
Interest expense
Interest income
Dividend income
Realized gain (loss) on marketable securities
Income (loss) before income taxes
Income tax (expense) benefit
Net income (loss)
Net (income) loss attributable to redeemable noncontrolling interest
Net (income) loss attributable to noncontrolling interest
Net income (loss) attributable to common stockholders
$
Basic and diluted earnings per share:
Net income (loss) per share attributable to common stockholders, basic
$
Net income (loss) per share attributable to common stockholders, diluted $
Cash dividends declared per common share, basic and diluted
$
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
2022
2021
2020
$
956,209
$
760,192
$
344,026
623,916
466,517
106,928
122,611
75,165
49,404
25,697
14,210
1,600
2,972
382
915,957
40,252
(10,876)
2,864
20
(532)
31,728
(11,559)
20,169
—
(2,050)
18,119
0.21
0.21
0.10
85,391,163
87,769,762
$
$
$
$
116,449
56,585
32,993
22,420
8,224
3,023
508
(6,998)
699,721
60,471
(7,020)
245
213
—
53,909
(18,679)
35,230
(5,938)
—
29,292
0.34
0.33
0.10
85,301,603
87,910,603
$
$
$
$
104,909
48,404
27,807
17,282
—
40,035
(1,052)
(6,895)
337,418
6,608
(8,265)
1,748
28
—
119
(1,506)
(1,387)
(2,523)
—
(3,910)
(0.05)
(0.05)
0.13
84,231,212
84,231,212
See Notes to Consolidated Financial Statements
F-9
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years ended December 31, 2022, 2021 and 2020
(In thousands)
Net income (loss)
Other comprehensive income (loss), net of tax:
Change in foreign currency translation
Change in fair value of marketable securities
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive (income) loss attributable to redeemable noncontrolling
interests
Comprehensive (income) loss attributable to noncontrolling interests
Comprehensive income (loss) attributable to common stockholders
$
2022
2021
2020
$
20,169
$
35,230
$
(1,387)
(45)
(488)
(533)
19,636
—
(2,050)
17,586
$
184
(105)
79
35,309
(5,938)
—
29,371
$
(922)
(3)
(925)
(2,312)
(2,523)
—
(4,835)
See Notes to Consolidated Financial Statements
F-10
N
O
I
T
A
R
O
P
R
O
C
S
N
O
I
T
A
C
I
N
U
M
M
O
C
N
O
I
S
I
V
A
R
T
N
E
Y
T
I
U
Q
E
’
S
R
E
D
L
O
H
K
C
O
T
S
F
O
S
T
N
E
M
E
T
A
T
S
D
E
T
A
D
I
L
O
S
N
O
C
0
2
0
2
d
n
a
1
2
0
2
,
2
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
s
r
a
e
Y
)
a
t
a
d
e
r
a
h
s
t
p
e
c
x
e
,
s
d
n
a
s
u
o
h
t
n
I
(
k
c
o
t
S
n
o
m
m
o
C
s
e
r
a
h
S
n
o
m
m
o
C
f
o
r
e
b
m
u
N
2
7
1
,
8
8
2
$
-
$
)
1
3
1
(
$
)
6
7
8
,
7
4
5
(
$
0
7
1
,
6
3
8
$
1
$
2
$
6
$
l
a
t
o
T
g
n
i
l
l
o
r
t
n
o
c
n
o
N
t
s
e
r
e
t
n
I
e
v
i
s
n
e
h
e
r
p
m
o
C
)
s
s
o
L
(
e
m
o
c
n
I
d
e
t
a
l
u
m
u
c
c
A
t
i
c
i
f
e
D
d
e
t
a
l
u
m
u
c
c
A
r
e
h
t
O
l
a
n
o
i
t
i
d
d
A
n
i
-
d
i
a
P
l
a
t
i
p
a
C
s
s
a
l
C
U
s
s
a
l
C
B
s
s
a
l
C
A
y
r
u
s
a
e
r
T
k
c
o
t
S
—
)
6
2
4
,
1
(
5
2
1
,
5
)
5
2
5
(
)
3
(
)
2
2
9
(
)
0
1
9
,
3
(
)
1
3
5
,
0
1
(
0
8
9
,
5
7
2
6
1
4
)
9
2
7
,
4
(
5
9
5
,
9
—
)
5
0
1
(
4
8
1
)
1
3
5
,
8
(
)
6
7
1
,
5
4
(
2
9
2
,
9
2
6
2
9
,
6
5
2
9
1
2
)
4
2
5
,
4
(
4
3
0
,
0
2
—
—
)
5
4
(
)
9
9
8
(
)
9
3
5
,
8
(
)
0
8
2
,
1
1
(
1
1
4
7
9
8
,
2
1
9
6
1
,
0
2
9
6
3
,
5
8
2
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0
5
0
,
2
7
9
8
,
2
1
7
4
9
,
4
1
—
—
—
—
—
)
3
(
)
2
2
9
(
—
)
6
5
0
,
1
(
—
—
—
—
—
)
5
0
1
(
4
8
1
—
—
)
7
7
9
(
—
—
—
—
—
—
—
)
5
4
(
)
9
9
8
(
—
—
1
1
4
—
—
—
—
—
—
—
)
0
1
9
,
3
(
)
6
8
7
,
1
5
5
(
—
—
—
—
—
—
—
—
2
9
2
,
9
2
)
4
9
4
,
2
2
5
(
—
—
—
—
—
—
—
—
—
—
—
9
1
1
,
8
1
—
)
6
2
4
,
1
(
5
2
1
,
5
)
5
2
5
(
)
1
3
5
,
0
1
(
—
—
—
3
1
8
,
8
2
8
6
1
4
)
9
2
7
,
4
(
5
9
5
,
9
—
)
1
3
5
,
8
(
—
—
—
)
6
7
1
,
5
4
(
8
8
3
,
0
8
7
9
1
2
)
4
2
5
,
4
(
4
3
0
,
0
2
—
—
)
9
3
5
,
8
(
)
0
8
2
,
1
1
(
—
—
—
—
—
$
)
0
1
5
,
1
(
$
)
5
7
3
,
4
0
5
(
$
8
9
2
,
6
7
7
$
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
—
—
2
—
—
—
)
2
(
—
—
—
—
—
—
—
—
-
$
—
—
—
—
—
—
—
—
6
—
—
—
—
—
—
—
—
—
6
—
—
—
2
—
—
—
—
—
—
—
—
8
$
—
—
—
0
0
5
,
9
5
2
)
0
0
5
,
9
5
2
(
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
—
—
—
—
—
—
—
1
0
0
,
3
5
7
,
1
)
1
0
0
,
3
5
7
,
1
(
9
2
7
,
2
5
3
,
9
U
s
s
a
l
C
3
1
6
,
7
2
9
,
4
1
B
s
s
a
l
C
8
9
6
,
4
7
0
,
0
6
A
s
s
a
l
C
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7
0
2
,
4
4
9
)
0
0
5
,
9
5
2
(
9
2
7
,
2
5
3
,
9
3
1
6
,
7
2
9
,
4
1
5
0
4
,
9
5
7
,
0
6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0
0
0
,
1
5
1
—
1
9
4
,
6
0
4
,
1
)
0
0
0
,
0
0
8
(
0
0
0
,
0
0
8
9
2
7
,
2
5
3
,
9
3
1
6
,
7
2
1
,
4
1
6
9
8
,
6
1
1
,
3
6
—
—
—
—
—
—
—
—
—
—
—
—
9
2
7
,
2
5
3
,
9
—
—
—
—
—
—
—
—
—
—
—
—
)
3
1
6
,
7
2
1
,
4
1
(
—
—
—
—
—
—
—
0
0
0
,
6
6
—
9
1
3
,
5
1
6
,
2
)
1
0
0
,
3
5
7
,
1
(
3
1
6
,
7
2
1
,
4
1
-
e
r
a
h
s
r
o
f
d
l
e
h
h
t
i
w
s
e
r
a
h
s
o
t
d
e
t
a
l
e
r
s
t
n
e
m
y
a
p
x
a
T
0
2
0
2
,
1
y
r
a
u
n
a
J
,
e
c
n
a
l
a
B
k
c
o
t
s
n
o
m
m
o
c
A
s
s
a
l
C
f
o
e
s
a
h
c
r
u
p
e
R
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
k
c
o
t
s
y
r
u
s
a
e
r
t
f
o
t
n
e
m
e
r
i
t
e
R
s
n
a
l
p
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
d
i
a
p
s
d
n
e
d
i
v
i
D
s
r
e
d
l
o
h
k
c
o
t
s
n
o
m
m
o
c
o
t
e
l
b
a
t
u
b
i
r
t
t
a
)
s
s
o
l
(
e
m
o
c
n
i
t
e
N
s
e
i
t
i
r
u
c
e
s
e
l
b
a
t
e
k
r
a
m
f
o
e
u
l
a
v
r
i
a
f
n
i
e
g
n
a
h
C
)
s
s
o
l
(
n
i
a
g
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
k
c
o
t
s
f
o
e
s
i
c
r
e
x
e
n
o
p
u
k
c
o
t
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
s
t
i
n
u
k
c
o
t
s
d
e
t
c
i
r
t
s
e
r
f
o
s
d
r
a
w
a
r
o
s
n
o
i
t
p
o
-
e
r
a
h
s
r
o
f
d
l
e
h
h
t
i
w
s
e
r
a
h
s
o
t
d
e
t
a
l
e
r
s
t
n
e
m
y
a
p
x
a
T
0
2
0
2
,
1
3
r
e
b
m
e
c
e
D
,
e
c
n
a
l
a
B
A
s
s
a
l
C
r
o
f
d
e
g
n
a
h
c
x
e
k
c
o
t
s
n
o
m
m
o
c
B
s
s
a
l
C
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
s
n
a
l
p
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
k
c
o
t
s
n
o
m
m
o
c
d
i
a
p
s
d
n
e
d
i
v
i
D
s
r
e
d
l
o
h
k
c
o
t
s
n
o
m
m
o
c
o
t
e
l
b
a
t
u
b
i
r
t
t
a
)
s
s
o
l
(
e
m
o
c
n
i
t
e
N
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
e
l
b
a
m
e
e
d
e
r
f
o
n
o
i
t
i
s
i
u
q
c
A
s
e
i
t
i
r
u
c
e
s
e
l
b
a
t
e
k
r
a
m
f
o
e
u
l
a
v
r
i
a
f
n
i
e
g
n
a
h
C
)
s
s
o
l
(
n
i
a
g
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
k
c
o
t
s
f
o
e
s
i
c
r
e
x
e
n
o
p
u
k
c
o
t
s
n
o
m
m
o
c
f
o
e
c
n
a
u
s
s
I
s
t
i
n
u
k
c
o
t
s
d
e
t
c
i
r
t
s
e
r
f
o
s
d
r
a
w
a
r
o
s
n
o
i
t
p
o
-
e
r
a
h
s
r
o
f
d
l
e
h
h
t
i
w
s
e
r
a
h
s
o
t
d
e
t
a
l
e
r
s
t
n
e
m
y
a
p
x
a
T
1
2
0
2
,
1
3
r
e
b
m
e
c
e
D
,
e
c
n
a
l
a
B
A
s
s
a
l
C
r
o
f
d
e
g
n
a
h
c
x
e
k
c
o
t
s
n
o
m
m
o
c
B
s
s
a
l
C
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
s
n
a
l
p
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
k
c
o
t
s
n
o
m
m
o
c
A
s
s
a
l
C
f
o
e
s
a
h
c
r
u
p
e
R
k
c
o
t
s
y
r
u
s
a
e
r
t
f
o
t
n
e
m
e
r
i
t
e
R
d
i
a
p
s
d
n
e
d
i
v
i
D
k
c
o
t
s
n
o
m
m
o
c
e
l
b
a
t
e
k
r
a
m
n
o
)
s
s
o
l
(
n
i
a
g
d
e
z
i
l
a
e
r
o
t
e
u
d
e
s
a
e
l
e
r
I
C
O
s
e
i
t
i
r
u
c
e
s
e
l
b
a
t
e
k
r
a
m
f
o
e
u
l
a
v
r
i
a
f
n
i
e
g
n
a
h
C
)
s
s
o
l
(
n
i
a
g
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
s
e
i
t
i
r
u
c
e
s
s
r
e
d
l
o
h
k
c
o
t
s
n
o
m
m
o
c
o
t
e
l
b
a
t
u
b
i
r
t
t
a
)
s
s
o
l
(
e
m
o
c
n
i
t
e
N
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
f
o
n
o
i
t
i
s
i
u
q
c
A
7
2
8
,
2
7
1
,
8
7
2
2
0
2
,
1
3
r
e
b
m
e
c
e
D
,
e
c
n
a
l
a
B
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
d
e
t
a
d
i
l
o
s
n
o
C
o
t
s
e
t
o
N
e
e
S
1
1
-
F
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2022, 2021 and 2020
(In thousands)
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income to net cash provided by operating activities:
2022
2021
2020
$
20,169
$
35,230
$
Depreciation and amortization
Impairment charge
Deferred income taxes
Non-cash interest
Amortization of syndication contracts
Payments on syndication contracts
Non-cash stock-based compensation
(Gain) loss on marketable securities
(Gain) loss on disposal of property and equipment
Change in fair value of contingent consideration
Changes in assets and liabilities:
(Increase) decrease in trade receivables, net
(Increase) decrease in prepaid expenses and other current assets, operating leases right
of use asset and other assets
Increase (decrease) in accounts payable, accrued expenses and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from sale of property and equipment and intangibles
Purchases of property and equipment
Purchases of intangibles
Purchase of businesses, net of cash acquired
Investment in variable interest entities, net of cash consolidated
Purchases of marketable securities
Proceeds from marketable securities
Purchases of investments
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from stock option exercises
Tax payments related to shares withheld for share-based compensation plans
Payments on long-term debt
Dividends paid
Repurchase of Class A common stock
Payment of contingent consideration
Principal payments under finance lease obligation
Payments of capitalized debt offering and issuance costs
Net cash used in financing activities
Effect of exchange rates on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash:
Beginning
Ending
Supplemental disclosures of cash flow information:
Cash payments for:
Interest
Income taxes
Supplemental disclosures of non-cash investing and financing activities:
Capital expenditures financed through accounts payable, accrued expenses and other
liabilities
Contingent consideration liability related to acquisitions and purchase of noncontrolling
interest
$
$
$
$
$
25,697
1,600
(3,708)
1,314
468
(470)
20,034
532
(636)
14,210
(9,687)
2,017
7,377
78,917
2,708
(11,468)
—
—
(5,164)
(106,382)
59,814
—
(60,492)
219
(4,524)
(3,252)
(8,539)
(11,280)
(65,340)
(105)
—
(92,821)
(3)
(74,399)
185,843
111,444
9,562
16,921
2,109
$
$
$
$
(49,109)
(20,100)
22,420
3,023
14,554
604
475
(473)
9,595
——
(4,629)
8,224
6,782
18,557
65,253
10,348
(5,819)
—
(14,260)
—
——
27,800
(800)
17,269
416
(4,729)
(3,000)
(8,531)
—
——
(126)
(604)
(16,574)
(16)
65,932
119,911
185,843
6,412
4,125
942
(1,387)
17,282
40,035
(6,225)
649
504
(458)
5,125
—
(731)
—
11,526
17,229
63,449
5,089
(9,060)
(158)
(21,261)
—
—
63,480
—
38,090
—
(1,426)
(3,000)
(10,531)
(525)
—
—
—
(15,482)
(3)
86,054
33,857
119,911
7,616
7,731
1,155
—
$
$
$
$
$
— $
106,700
See Notes to Consolidated Financial Statements
F-12
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Nature of Business
Entravision Communications Corporation (together with its subsidiaries, hereinafter referred to collectively as the "Company")
is a global advertising solutions, media and technology company. The Company's operations encompass integrated, end-to-end
advertising solutions across multiple media, comprised of digital, television and audio properties. The Company's digital segment,
whose operations are located in Latin America, Europe, the United States, Asia and Africa, reaches a global market, with a focus on
advertisers in emerging economies that wish to advertise on digital platforms owned and operated primarily by global media
companies. The Company's television and audio operations reach and engage U.S. Hispanics in the United States. The Company's
management has determined that the Company operates in three reportable segments as of December 31, 2022, based upon the type of
advertising medium: digital, television and audio (formerly radio).
The Company's digital segment provides digital end-to-end advertising solutions that allow advertisers to reach online users
worldwide. These solutions are comprised of four business units:
•
•
•
•
the Company's digital commercial partnerships business;
Smadex, the Company's programmatic ad purchasing platform;
the Company's mobile growth solutions business; and
the Company's digital audio business.
Through the Company's digital commercial partnerships business – the largest of its digital business units – the Company acts as
an intermediary between primarily global media companies and advertising customers or their ad agencies. The global media
companies represented by the Company include Meta Platforms, or Meta (formerly known as Facebook Inc.), Twitter, Inc., or Twitter,
ByteDance Ltd., or ByteDance, which owns the TikTok platform, and Spotify AB, or Spotify, as well as other media companies, in 30
countries throughout the world. The Company's dedicated local sales teams sell advertising space on these media companies' digital
platforms to its advertising customers or their ad agencies for the placement of ads directed to online users of a wide range of Internet-
connected devices. The Company also provides some of its advertising customers billing, technological and other support, including
strategic marketing and training, which it refers to as managed services.
Smadex is the Company's programmatic ad purchasing platform, on which advertisers can purchase ad inventory. This practice
– the purchase and sale of advertising inventory electronically – is referred to in the Company's industry as programmatic advertising.
Smadex is also a “demand-side" platform, which allows advertisers to purchase space from online marketplaces on which media
companies list their advertising inventory. Most advertisements acquired through Smadex are placed on mobile devices, but they may
also be placed on computers and Internet-connected televisions. The Company also provides managed services to some of its
advertising customers in connection with their use of its Smadex platform.
The Company also offers a mobile growth solutions business, which provides managed services to advertisers looking to
connect with consumers, primarily on mobile devices. This business allows the Company to manage programmatic media buys for its
advertising customers or their ad agencies through multiple ad purchasing platforms in real time across multiple channels.
The Company's digital audio business provides digital audio advertising solutions for advertisers in the Americas. The
Company's advertising customers and their ad agencies use these solutions to promote their brands on online audio streams, and
provides them with tools to target specific users by demographic and geographic categories.
The Company also has a diversified media portfolio that targets Hispanic audiences. The Company owns and/or operates 49
primary television stations located primarily in California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Nevada, New
Mexico, Texas and Washington, D.C. The Company’s television operations comprise the largest affiliate group of both the top-ranked
primary Univision television network of TelevisaUnivision Inc. (“TelevisaUnivision”) and TelevisaUnivision’s UniMás network. The
Company owns and operates 45 radio stations in 14 U.S. markets. Its radio stations consist of 37 FM and 8 AM stations located in
Arizona, California, Colorado, Florida, Nevada, New Mexico and Texas. The Company also sells advertisements and syndicates radio
programming to more than 100 markets across the United States.
F-13
The Impact of the COVID-19 Pandemic on the Company’s Business
The COVID-19 pandemic did not have a material effect on the Company's business, from both an operational and financial
perspective, during the year ended December 31, 2022. Subject to the extent and duration of possible resurgences of the pandemic
from time to time and the continuing uncertain economic environment that has resulted, in part, from the pandemic, the Company
anticipates that the pandemic will continue to have little or no material effect on its business, from both an operational and financial
perspective, in future periods. Nonetheless, the Company cannot give any assurance whether a resurgence or more prolonged impact
of the pandemic in any location where its operations have employees or operates would not adversely affect its operations and/or
results of operations.
The Company elected to defer the employer portion of the social security payroll tax (6.2%) as provided in the Coronavirus Aid,
Relief and Economic Security Act of 2020, commonly known as the CARES Act. The deferral was effective from March 27, 2020
through December 31, 2020. The deferred amount is considered to be timely paid if 50% is paid by December 31, 2021 and the
remainder is paid by December 31, 2022. During the year ended December 31, 2021, the Company paid 50% of the deferred amount
and paid the remainder of the deferred amount on or before December 31, 2022.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation and Presentation
The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and
its variable interest entities (each, a "VIE"). All significant intercompany accounts and transactions have been eliminated in
consolidation. Certain amounts in the Company’s prior period consolidated financial statements and notes to the financial statements
have been reclassified to conform to current period presentation.
Variable Interest Entities
In accordance with the provisions of the Financial Accounting Standards Board (FASB) or ASC 810, “Consolidation,” the
Company evaluates entities for which control is achieved through means other than voting rights to determine if the Company is the
primary beneficiary of a VIE. An entity is a VIE if it has any of the following characteristics: (1) the entity has insufficient equity to
permit it to finance its activities without additional subordinated financial support; (2) equity holders, as a group, lack the
characteristics of a controlling financial interest; or (3) the entity is structured with non-substantive voting rights. The primary
beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the
VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant
to the VIE. The Company consolidates its investment in a VIE when it determines that the Company is the primary beneficiary of such
entity.
In determining whether it is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors,
including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls
such activities; and the significance of the Company’s investment and other means of participation in the VIE’s expected
profits/losses. Significant judgments related to these determinations include estimates about the current and future fair values and
performance of assets held by these VIEs and general market conditions.
The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual
arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion
of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis.
Based on the foregoing, the Company has determined that Adsmurai, S.L. (“Adsmurai”) and Jack of Digital Holdings, Inc.
("Jack of Digital") are both VIEs, the Company is the primary beneficiary, and therefore accounted for the consolidation under the
provisions of ASC 805, “Business Combinations”. See Note 4 for more details.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
The Company’s operations are affected by numerous factors, including changes in audience acceptance (i.e. ratings), priorities
of advertisers, new laws and governmental regulations, and policies and technological advances. The Company cannot predict if any
of these factors might have a significant impact on the television, radio, or digital advertising industries in the future, nor can it predict
what impact, if any, the occurrence of these or other events might have on the Company’s operations and cash flows. Significant
estimates and assumptions made by management are used for, but not limited to, the allowance for doubtful accounts, stock-based
compensation, the estimated useful lives of long-lived and intangible assets, the recoverability of such assets by their estimated future
undiscounted cash flows, the fair value of reporting units and indefinite life intangible assets, fair value of contingent consideration,
disclosure of the fair value of debt, deferred income taxes and the purchase price allocations used in the Company’s acquisitions.
F-14
Cash and Cash Equivalents
The Company considers all short-term, highly liquid debt instruments purchased with original maturities of three months or less
to be cash equivalents. Cash and cash equivalents consist of funds held in general checking accounts, money market accounts and
commercial paper. Cash and cash equivalents are stated at cost plus accrued interest, which approximates fair value. The Company
had $89.7 million and $53.7 million in cash and cash equivalents held outside the United States as of December 31, 2022 and 2021,
respectively.
Restricted Cash
As of December 31, 2022 and 2021, the Company’s balance sheet includes $0.8 million and 0.7 million, respectively, in
restricted cash as temporary collateral for the Company’s letters of credit.
The Company's cash and cash equivalents and restricted cash, as presented in the Consolidated Statements of Cash Flows, was
as follows (in thousands):
Cash and cash equivalents
Restricted cash
Total as presented in the Consolidated Statements of Cash Flows
Investments
2022
Years Ended December 31,
2021
110,691
753
111,444
$
$
185,094
749
185,843
$
$
$
$
2020
119,162
749
119,911
The Company’s available for sale debt securities totaled $44.5 million as of December 31, 2022, and were comprised of
corporate bonds and notes, which were recorded at their fair market value within “Marketable securities” in the consolidated balance
sheet (see Note 11). The majority of the carrying value of the corporate bonds and notes held by the Company are investment grade.
Long-lived Assets, Other Assets and Intangibles Subject to Amortization
Property and equipment are recorded at cost. Depreciation and amortization are provided using the straight-line method over
their estimated useful lives (see Note 7). The Company periodically evaluates assets to be held and used and long-lived assets held for
sale when events and circumstances warrant such review.
Syndication contracts are recorded at cost within “Other assets” in the consolidated balance sheets. Syndication amortization is
provided using the straight-line method over their estimated useful lives.
Intangible assets subject to amortization are amortized on a straight-line method over their estimated useful lives (see Note 6).
Deferred debt issuance costs are amortized over the life of the related indebtedness using the effective interest method.
Changes in circumstances, such as the passage of new laws or changes in regulations, technological advances or changes to the
Company’s business strategy, could result in the actual useful lives differing from initial estimates. Factors such as changes in the
planned use of equipment, customer attrition, contractual amendments or mandated regulatory requirements could result in shortened
useful lives. In those cases where the Company determines that the useful life of a long-lived asset should be revised, the Company
will amortize or depreciate the net book value in excess of the estimated residual value over its revised remaining useful life.
Long-lived assets and asset groups are evaluated for impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. The estimated future cash flows are based upon, among other things,
assumptions about expected future operating performance, and may differ from actual cash flows. Long-lived assets evaluated for
impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash
flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows (excluding interest) is less than the
carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is
made.
F-15
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets
acquired in each business combination. The Company tests its goodwill and other indefinite-lived intangible assets for impairment
annually on October 1, or more frequently if certain events or certain changes in circumstances indicate they may be impaired. In
assessing the recoverability of goodwill and indefinite life intangible assets, the Company must make a series of assumptions about
such things as the estimated future cash flows and other factors to determine the fair value of these assets.
In testing the goodwill of its reporting units for impairment, the Company first determines, based on a qualitative assessment,
whether it is more likely than not that the fair value of each of its reporting units is less than their respective carrying amounts. The
Company has determined that each of its operating segments is a reporting unit.
If it is deemed more likely than not that the fair value of a reporting unit is less than the carrying value based on this initial
assessment, the next step is a quantitative comparison of the fair value of the reporting unit to its carrying amount. If a reporting unit’s
estimated fair value is equal to or greater than that reporting unit’s carrying value, no impairment of goodwill exists and the testing is
complete. If the reporting unit’s carrying amount is greater than the estimated fair value, then an impairment loss is recorded for the
amount of the difference.
When a quantitative analysis is performed, the estimated fair value of goodwill is determined by using a combination of a
market approach and an income approach. The market approach estimates fair value by applying sales, earnings and cash flow
multiples to each reporting unit’s operating performance. The multiples are derived from comparable publicly-traded companies with
similar operating and investment characteristics to the Company’s reporting units. The market approach requires the Company to
make a series of assumptions, such as selecting comparable companies and comparable transactions and transaction premiums. In
recent years, there has been a decrease in the number of comparable transactions, which makes the market approach of comparable
transactions and transaction premiums more difficult to estimate than in previous years.
The income approach estimates fair value based on the Company’s estimated future cash flows of each reporting unit,
discounted by an estimated weighted-average cost of capital that reflects current market conditions, which reflect the overall level of
inherent risk of that reporting unit. The income approach also requires the Company to make a series of assumptions, such as discount
rates, revenue projections, profit margin projections and terminal value multiples. The Company estimated discount rates on a blended
rate of return considering both debt and equity for comparable publicly-traded companies in the television, radio and digital media
industries. These comparable publicly-traded companies have similar size, operating characteristics and/or financial profiles to the
Company. The Company also estimated the terminal value multiple based on comparable publicly-traded companies. The Company
estimated revenue projections and profit margin projections based on internal forecasts about future performance.
Indefinite Life Intangible Assets
The Company believes that its broadcast licenses are indefinite life intangible assets. An intangible asset is determined to have
an indefinite useful life when there are no legal, regulatory, contractual, competitive, economic or any other significant factors that
may limit the period over which the asset is expected to contribute directly or indirectly to future cash flows. The evaluation of
impairment for indefinite life intangible assets is performed by a comparison of the asset’s carrying value to the asset’s fair value.
When the carrying value exceeds fair value, an impairment charge is recorded for the amount of the difference. The unit of accounting
used to test broadcast licenses represents all licenses owned and operated within an individual market cluster, because such licenses
are used together, are complementary to each other and are representative of the best use of those assets. The Company’s individual
market clusters consist of cities or nearby cities. The Company tests its broadcasting licenses for impairment based on certain
assumptions about these market clusters.
The estimated fair value of indefinite life intangible assets is determined by using an income approach. The income approach
estimates fair value based on the estimated future cash flows of each market cluster that a hypothetical buyer would expect to
generate, discounted by an estimated weighted-average cost of capital that reflects current market conditions, which reflect the overall
level of inherent risk. The income approach requires the Company to make a series of assumptions, such as discount rates, revenue
projections, profit margin projections and terminal value multiples. The Company estimates the discount rates on a blended rate of
return considering both debt and equity for comparable publicly-traded companies. These comparable publicly-traded companies have
similar size, operating characteristics and/or financial profiles to the Company. The Company also estimated the terminal value
multiple based on comparable publicly-traded companies in the television, radio and digital media industries. The Company estimated
the revenue projections and profit margin projections based on various market clusters signal coverage of the markets and industry
information for an average station within a given market. The information for each market cluster includes such things as estimated
market share, estimated capital start-up costs, population, household income, retail sales and other expenditures that would influence
advertising expenditures. Alternatively, some stations under evaluation have had limited relevant cash flow history due to planned or
actual conversion of format or upgrade of station signal. The assumptions the Company makes about cash flows after conversion are
based on the performance of similar stations in similar markets and potential proceeds from the sale of the assets.
F-16
Concentrations of Credit Risk and Trade Receivables
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash
equivalents and trade accounts receivable. The Company from time to time may have bank deposits in excess of the Federal Deposit
Insurance Corporation ("FDIC") insurance limits. As of December 31, 2022, the majority of all deposits are maintained in two
financial institutions. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant
credit risk on cash and cash equivalents.
The Company’s credit risk is spread across a large number of customers in the United States, Latin America, Asia and various
other countries, therefore spreading the trade receivable credit risk. The Company routinely assesses the financial strength of its
customers and, as a consequence, believes that it is managing its trade receivable credit risk effectively. Trade receivables are carried
at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly
basis. An allowance for doubtful accounts is provided for known and anticipated credit losses, as determined by management in the
course of regularly evaluating individual customer receivables. This evaluation takes into consideration of a customer’s financial
condition and credit history, as well as current economic conditions. Trade receivables are written off when deemed uncollectible.
Recoveries of trade receivables previously written off are recorded when received. No interest is charged on customer accounts.
Aggregate receivables from the largest five advertisers represented 2% and 3% of total trade receivables as of December 31,
2022 and 2021, respectively. No single advertiser represents more than 5% of the total trade receivables.
Revenue from the largest advertiser represented 14% and 13% of total revenue for the years ended December 31, 2022 and
2021, respectively. This advertiser pays on a frequent basis and management does not believe this concentration of credit represents a
significant risk to the Company. No other advertiser represented more than 5% of the total revenue.
Estimated losses for bad debts are provided for in the consolidated financial statements through a charge to expense that
aggregated $3.4 million, $3.5 million and $2.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. The net
charge off of bad debts aggregated $3.3 million, $0.9 million and $1.5 million for the years ended December 31, 2022, 2021 and 2020,
respectively.
Dependence on Global Media Companies
The Company is dependent on the continued commercial agreements with, as well as the financial and business strength of, the
global media companies for which the Company acts as a commercial partner in the digital segment, as well as the companies from
which it obtains programming in the television and audio segments. The Company could be at risk should any of these entities fail to
perform their respective obligations to the Company or terminate their relationship with the Company. This in turn could materially
adversely affect the Company’s business, results of operations and financial condition.
Revenue related to a single media company for which the Company acts as a commercial partner represented 49% and 55% of
the Company's total revenue for the years ended December 31, 2022 and 2021, respectively. The Company expects that dependence
will continue.
Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it
is practicable to estimate that value:
The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of those instruments.
As of December 31, 2022 and 2021, the fair value of the Company’s Term Loan B Facility was approximately $204.0 million
and $209.1 million, respectively, based on quoted prices in markets where trading occurs infrequently.
The Company’s available for sale debt securities are valued using quoted prices for similar attributes in active markets. Since
these investments are classified as available for sale, they are recorded at their fair market value within “Marketable securities” in the
consolidated balance sheets and their unrealized gains or losses are included in “Accumulated other comprehensive income (loss)”.
The carrying values of receivables, payables and accrued expenses approximate fair value due to the short maturity of these
instruments.
Off-Balance Sheet Financings and Liabilities
Other than legal contingencies incurred in the normal course of business and employment contracts for key employees (see
Notes 13 and 18), the Company does not have any off-balance sheet financing arrangements or liabilities. The Company does not have
F-17
any majority-owned subsidiaries or any interests in, or relationships with, any material variable-interest entities that are not included in
the consolidated financial statements.
Income Taxes
Deferred income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when it is determined to be more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
In evaluating the Company’s ability to realize net deferred tax assets, the Company considers all reasonably available evidence
including past operating results, tax strategies and forecasts of future taxable income. In considering these factors, the Company
makes certain assumptions and judgments that are based on the plans and estimates used to manage the business.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the
financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being
realized upon settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
Value Added Taxes
Value added taxes collected from customers and remitted to governmental authorities are accounted for on a net basis, and are
therefore excluded from revenues.
Advertising Costs
Amounts incurred for advertising costs with third parties are expensed as incurred. Advertising expense totaled approximately
$0.1 million for each of the years ended December 31, 2022, 2021 and 2020.
Legal Costs
Amounts incurred for legal costs that pertain to loss contingencies are expensed as incurred.
Repairs and Maintenance
All costs associated with repairs and maintenance are expensed as incurred.
Business Combinations
The Company applies the acquisition method of accounting for business combinations in accordance with U.S. GAAP and uses
estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets, including identifiable
intangible assets and liabilities acquired. Such estimates may be based on significant unobservable inputs and assumptions such as, but
not limited to, revenue projections, gross margin projections, customer attrition rates, royalty rates, discount rates and terminal growth
rate assumptions. The Company uses established valuation techniques and may engage reputable valuation specialists to assist with
the valuations. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently
uncertain and unpredictable and, as a result, actual results may differ from estimates. Fair values are subject to refinement for up to
one year after the closing date of an acquisition, as information relative to closing date fair values becomes available. Upon the
conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Contingent Consideration
If business combinations or variable interest entities provide for contingent consideration, the Company records the contingent
consideration at fair value at the acquisition date. The Company adjusts the contingent consideration liability at the end of each
reporting period based on fair value inputs representing changes in forecasted revenue of the acquired entities and the probability of an
adjustment to the purchase price. Key assumptions include risk-neutral expected growth rates based on the Company's assessments of
expected growth in EBITDA, adjusted by appropriate factors capturing their correlation with the market and volatility, discounted at a
F-18
cost of debt rate. Changes in the fair value of the contingent consideration after the acquisition date are included in earnings if the
contingent consideration is recorded as a liability.
Revenue Recognition
Revenue related to the Company's digital segment is recognized when display or other digital advertisements record impressions
on the websites and mobile and Internet-connected television apps of media companies on whose digital platforms the advertisements
are placed or as the advertiser’s previously agreed-upon performance criteria are satisfied. In the Company’s arrangements with media
companies for which it acts as commercial partner, the Company has concluded that it is the principal in the transaction and therefore
recognizes revenue on a gross basis, because (i) the Company is responsible for fulfillment of the contract, including customer
support, resolving customer complaints, and accepting responsibility for the quality or suitability of the product or service; (ii) the
Company has pricing discretion over the transaction; and (iii) the Company carries inventory risk and is required to pay the media
companies for which it acts as commercial partner for all inventory purchased regardless of whether the Company is able to collect on
a transaction. Cash payments received prior to services rendered result in deferred revenue, which is then recognized as revenue when
the advertising time or space is actually provided.
Revenue related to the sale of advertising in the television and audio segments is recognized at the time of broadcast. Revenue
for contracts with advertising agencies is recorded at an amount that is net of the commission retained by the agency. Revenue from
contracts directly with the advertisers is recorded as gross revenue and the related commission or national representation fee is
recorded in operating expense.
The Company generates revenue from retransmission consent agreements that are entered into with MVPDs. The Company
refers to such revenue as retransmission consent revenue, which represents payments from MVPDs for access to the Company's
television station signals so that they may rebroadcast the Company's signals and charge their subscribers for this programming. The
Company recognizes retransmission consent revenue earned as the television signal is delivered to the MVPD.
The Company also generates revenue from agreements associated with its television stations’ spectrum usage rights from a
variety of sources, including but not limited to entering into agreements with third parties to utilize excess spectrum for the broadcast
of their multicast networks, charging fees to accommodate the operations of third parties, including moving channel positions or
accepting interference with broadcasting operations, and modifying and/or relinquishing spectrum usage rights while continuing to
broadcast through channel sharing or other arrangements. Revenue from such agreements is recognized over the period of the
agreement or when the Company has relinquished all or a portion of its spectrum usage rights for a station or has relinquished its
rights to operate a station on the existing channel free from interference.
Trade Transactions
The Company exchanges broadcast time for certain merchandise and services. Trade revenue is recognized when commercials
air at the fair value of the goods or services received or the fair value of time aired, whichever is more readily determinable. Trade
expense is recorded when the goods or services are used or received. Trade revenue was approximately $0.4 million, $0.4 million and
$0.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. Trade costs were approximately $0.4 million, $0.4
million and $0.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Cost of Revenue
Cost of revenue related to the Company’s digital segment consists primarily of the costs of online media acquired from third-
party media companies.
Direct operating expenses
Direct operating expenses consist primarily of salaries and commissions of sales staff, amounts paid to national representation
firms, production and programming expenses, fees for ratings services, and engineering costs.
Corporate expenses
Corporate expenses consist primarily of salaries related to corporate officers and back office functions, third party legal and
accounting services, and fees incurred as a result of being a publicly traded company.
F-19
Stock-Based Compensation
The Company recognizes stock-based compensation according to the provisions of ASC 718, “Stock Compensation”, which
requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors
including employee stock options, restricted stock awards, and restricted stock units based on estimated fair values.
The Company granted restricted stock units during each of the years ended December 31, 2022, 2021 and 2020. The estimated
fair value of the restricted stock units granted is based on the Company's share price on the grant date.
The Company did not grant any stock options during the years ended December 31, 2022, 2021 and 2020.
Earnings Per Share
The following table illustrates the reconciliation of the basic and diluted per share computations (in thousands, except share and
per share data):
Basic earnings per share:
Numerator:
Year Ended
December 31,
2022
Year Ended
December 31,
2021
Year Ended
December 31,
2020
Net income (loss) attributable to common stockholders
Denominator:
Weighted average common shares outstanding, basic
Per share:
Net income (loss) per share attributable to common stockholders
Diluted earnings per share:
Numerator:
Net income (loss) attributable to common stockholders
$
$
$
18,119
$
29,292
$
(3,910)
85,391,163
85,301,603
84,231,212
0.21
18,119
$
$
0.34
29,292
$
$
(0.05)
(3,910)
Denominator:
Weighted average common shares outstanding
Dilutive securities:
Stock options
Restricted stock units
Diluted shares outstanding
Per share:
85,391,163
85,301,603
84,231,212
146,699
2,231,900
87,769,762
298,743
2,310,257
87,910,603
-
-
84,231,212
Net income (loss) per share attributable to common stockholders
$
0.21
$
0.33
$
(0.05)
Basic earnings per share is computed as net income divided by the weighted average number of shares outstanding for the
period. Diluted earnings per share reflects the potential dilution, if any, that could occur from shares issuable through stock options
and restricted stock awards.
For the year ended December 31, 2022, a total of 623,152 shares of dilutive securities were not included in the computation of
diluted income per share because the exercise prices of the dilutive securities were greater than the average market price of the
common shares.
For the year ended December 31, 2021, a total of 465,993 shares of dilutive securities were not included in the computation of
diluted income per share because the exercise prices of the dilutive securities were greater than the average market price of the
common shares.
For the year ended December 31, 2020, all dilutive securities have been excluded as their inclusion would have had an
antidilutive effect on loss per share. The number of securities whose conversion would result in an incremental number of shares that
would be included in determining the weighted average shares outstanding for diluted earnings per share if their effect was not
antidilutive was 892,720.
F-20
Comprehensive Income (loss)
For the year ended December 31, 2022 the Company had other comprehensive loss, net of tax, of $0.5 million. For the year
ended December 31, 2021 the Company had other comprehensive income, net of tax, of $0.1 million. For the year ended December
31, 2020 the Company had other comprehensive loss, net of tax, of $0.9 million.
Recently Issued Accounting Pronouncements
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers. ASU 2021-08 requires the recognition and measurement of contract assets and
contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers.
Considerations to determine the amount of contract assets and contract liabilities to record at the acquisition date include the terms of
the acquired contract, such as timing of payment, identification of each performance obligation in the contract and allocation of the
contract transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception.
ASU 2021-08 is effective for the Company beginning in the first quarter of 2023. ASU 2021-08 should be applied prospectively for
acquisitions occurring on or after the effective date of the amendments. Early adoption of the proposed amendments would be
permitted, including adoption in an interim period. The Company is currently assessing the impact this standard will have on the
Company’s consolidated financial statements.
Newly Adopted Accounting Standards
There were no new accounting standards that were adopted during the year ended December 31, 2022.
3. ACQUISITIONS
All business acquisitions have been accounted for as purchase business combinations with the operations of the businesses
included subsequent to their acquisition dates. The allocation of the respective purchase prices is generally based upon independent
appraisals and or management’s estimates of the discounted future cash flows to be generated from the media properties for intangible
assets, and replacement cost for tangible assets. Deferred income taxes are provided for temporary differences based upon
management’s best estimate of the tax basis of acquired assets and liabilities that will ultimately be accepted by the applicable taxing
authority.
For business combinations where noncontrolling interests remain after the acquisition, assets (including goodwill) and liabilities
of the acquired business are recorded at the full fair value and the portion of the acquisition date fair value attributable to
noncontrolling interests is recorded as a separate line item within the equity section or, as applicable to redeemable noncontrolling
interests, between the liabilities and equity sections of the Company’s consolidated balance sheets. Policies related to redeemable
noncontrolling interest involve judgment and complexity, specifically on the classification of the noncontrolling interest in the
Company’s consolidated balance sheet. Further, there is significant judgment in determining whether an equity instrument is currently
redeemable or not currently redeemable but probable that the equity instrument will become redeemable. Additionally, there are also
significant estimates made in the valuation of the redeemable noncontrolling interest.
Cisneros Interactive
On October 13, 2020, the Company acquired from certain individuals (collectively, the “Cisneros Sellers”), 51% of the issued
and outstanding shares of stock of a digital advertising solutions company that, together with its subsidiaries, does business under the
name Cisneros Interactive (“Cisneros Interactive”). The acquisition, funded from cash on hand, included a purchase price of
approximately $29.9 million in cash. The Company concluded that the remaining 49% of the issued and outstanding shares of
Cisneros Interactive stock was considered to be a noncontrolling interest.
In connection with the acquisition, the Company also entered into a Put and Call Option Agreement (the “Cisneros Put and Call
Agreement”). Subject to the terms of the Cisneros Put and Call Agreement, if certain minimum EBITDA targets are met, the Sellers
had the right (the “Cisneros Put Option”), between March 15, 2024 and June 13, 2024, to cause the Company to purchase all (but not
less than all) the remaining 49% of the issued and outstanding shares of Cisneros Interactive stock at a purchase price to be based on a
pre-determined multiple of six times Cisneros Interactive’s 12-month EBITDA in the preceding calendar year. The Cisneros Sellers
also had the right to exercise the Cisneros Put Option upon the occurrence of certain events, between March 2022 and April 2024.
Additionally, subject to the terms of the Cisneros Put and Call Agreement, the Company had the right (the “Cisneros Call
Option”), in calendar year 2024, to purchase all (but not less than all) the remaining 49% of the issued and outstanding shares of
Cisneros Interactive stock at a purchase price to be based on a pre-determined multiple of six times of Cisneros Interactive’s 12-month
EBITDA in calendar year 2023.
F-21
Applicable accounting guidance requires an equity instrument that is redeemable for cash or other assets to be classified outside
of permanent equity if it is redeemable (a) at a fixed or determinable price on a fixed or determinable date, (b) at the option of the
holder, or (c) upon the occurrence of an event that is not solely within the control of the issuer.
As a result of the Cisneros Put Option and Call Option redemption features, and because the redemption was not solely within
the control of the Company, the noncontrolling interest was considered redeemable, and was classified in temporary equity within the
Company’s Consolidated Balance Sheets initially at its acquisition date fair value. The noncontrolling interest was adjusted each
reporting period for income (or loss) attributable to the noncontrolling interest as well as any applicable distributions made. Since the
noncontrolling interest was not then redeemable under the terms of the Cisneros Put and Call Agreement and it was not probable that
it would become redeemable, the Company was not required to adjust the amount presented in temporary equity to its redemption
value in prior periods. The fair value of the redeemable noncontrolling interest which includes the Cisneros Put and Call Agreement
recognized on the acquisition date was $30.8 million.
The following is a summary of the final purchase price allocation (in millions):
Cash
Accounts receivable
Other assets
Intangible assets subject to amortization
Goodwill
Current liabilities
Deferred tax
Redeemable noncontrolling interest
$
8.7
50.5
8.3
41.7
10.5
(48.1)
(10.9)
(30.8)
Intangible assets subject to amortization acquired includes:
Intangible Asset
Publisher relationships
Advertiser relationships
Trade name
Non-Compete agreements
Estimated
Fair Value
(in millions)
Weighted
average
life (in years)
$
34.4
5.2
1.7
0.4
10.0
4.0
2.5
4.0
The fair value of the assets acquired included trade receivables of $50.5 million. The gross amount due under contract was $54.0
million, of which $3.5 million was expected to be uncollectable. Subsequent to the initial purchase price allocation, and during the
measurement period, the Company increased other assets and deferred tax by $2.1 million and $0.3 million, respectively, and
decreased goodwill by $1.8 million, to reflect final tax amounts.
The goodwill, which is not expected to be deductible for tax purposes, is assigned to the Company’s digital segment and is
attributable to Cisneros Interactive’s workforce and synergies from combining Cisneros Interactive’s operations with the Company's
operations.
On September 1, 2021, the Company acquired the remaining 49% of the issued and outstanding shares of Cisneros Interactive
stock, and as of that date owns 100% of the issued and outstanding shares of Cisneros Interactive stock. As consideration for the
acquisition of the remaining 49% of the issued and outstanding shares of Cisneros Interactive stock, the Company agreed to pay the
Cisneros Sellers contingent earn-out payments, based on a predetermined multiple of six times Cisneros Interactive’s 12-month
EBITDA targets in calendar years 2021, 2022 and 2023, each divided by three, and an additional payment equal to $10,000,000, less
an amount (up to $10,000,000) equal to 49% of any amounts paid by Cisneros Interactive for future acquisitions. The fair value of the
contingent consideration recognized on the acquisition date was $84.4 million, which was estimated by applying the real options
approach. Key assumptions include risk-neutral expected growth rates based on management’s assessments of expected growth in
EBITDA, adjusted by appropriate factors capturing their correlation with the market and volatility, discounted at a cost of debt rate
ranging from 6.5% to 7.2% over the three-year period. These are significant inputs that are not observable in the market, which ASC
820-10-35 refers to as Level 3 inputs. The Company recognizes any future changes in fair value of the contingent liability in earnings.
As part of the Company’s acquisition of the remaining 49% of the issued and outstanding shares of Cisneros Interactive stock,
the Cisneros Put and Call Agreement was terminated effective September 1, 2021. Applicable accounting guidance requires changes
in the Company's ownership interest while the Company retains its controlling financial interest in its subsidiary to be accounted for as
F-22
an equity transaction. Therefore, no gain or loss was recognized in relation to the acquisition of the remaining 49% of the issued and
outstanding shares of stock of Cisneros Interactive. As of the acquisition date, the carrying amount of the noncontrolling interest was
adjusted to reflect the change in the Company's ownership interest, and the difference between the fair value of the contingent
consideration and the amount by which the noncontrolling interest was recognized as a decrease to paid-in capital in the Consolidated
Balance Sheets and the Statements of Stockholders' Equity.
Effective December 31, 2021, the Company agreed to pay certain of the Cisneros Sellers who are individual persons an
accelerated earn-out in the aggregate amount of $14.7 million based on the EBITDA for calendar year 2021, which was paid in
January 2022.
As of December 31, 2021 the contingent liability was adjusted to its current fair value of $97.1 million, of which $44.6 million
is a current liability and $52.5 million is a noncurrent liability. The change in the fair value of the contingent liability of $12.7 million
expense is reflected in the Consolidated Statements of Operations.
In April 2022, we paid all the Cisneros Sellers an earn-out in the aggregate amount of $28.9 million based on the final EBITDA
for calendar year 2021. Additionally, effective September 13, 2022, the Company agreed to pay Sorin Properties, S.L., one of the
Cisneros Sellers, an accelerated earn-out of $21.7 million based on EBITDA for the four prior fiscal quarters, which amount was paid
in September 2022.
As of December 31, 2022 the contingent liability was adjusted to its current fair value of $41.4 million, of which $30.0 million
is a current liability and $11.4 million is a noncurrent liability. The change in the fair value of the contingent liability of $9.6 million
expense is reflected in the Consolidated Statements of Operations.
The table below presents the reconciliation of changes in redeemable noncontrolling interests (in thousands):
Beginning balance
Initial fair value of redeemable noncontrolling interests
Net income (loss) attributable to redeemable noncontrolling interest
Acquisition of redeemable noncontrolling interest
Ending balance
Years Ended December 31,
2021
2020
$
$
33,285
-
5,938
(39,223)
-
$
$
-
30,762
2,523
-
33,285
During the year ended December 31, 2021 Cisneros Interactive generated net revenue and net income of $453.9 million and
$12.1 million, respectively. During the year ended December 31, 2020, since the acquisition date, Cisneros Interactive generated net
revenue and net income of $89.2 million and $5.1 million, respectively
The following unaudited pro forma information has been prepared to give effect to the Company’s wholly-owned acquisition of
Cisneros Interactive as if the acquisition had occurred on January 1, 2020. This pro forma information was adjusted to exclude
acquisition fees and costs of $0.9 million for the year ended December 31, 2020, which were expensed in connection with the
acquisition. This pro forma information does not purport to represent what the actual results of operations of the Company would have
been had this acquisition occurred on such date, nor does it purport to predict the results of operations for any future periods.
In thousands, except share and per share data
Pro Forma:
Total revenue
Net income (loss) attributable to common stockholders
Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic and diluted
Weighted average common shares outstanding, basic and diluted
MediaDonuts
Year Ended
December 31,
2020
$
$
$
488,137
(86)
(0.00)
84,231,212
On July 1, 2021, the Company acquired 100% of the issued and outstanding shares of stock of MediaDonuts, a digital
advertising solutions company in Southeast Asia. The acquisition, funded from the Company’s cash on hand, includes a purchase
F-23
price of approximately $15.1 million in cash, which amount was adjusted at closing to approximately $17.1 million due to customary
purchase price adjustments for cash, indebtedness and estimated working capital. Subsequently, the purchase price was adjusted
downward by approximately $1.2 million, based on actual working capital acquired. Additionally, the transaction includes up to $7.4
million in contingent earn-out payments based upon the achievement of certain EBITDA targets in calendar years 2021 and 2022, and
an additional earn-out based upon the achievement of certain year-over-year EBITDA growth targets in calendar years 2023 and 2024,
calculated as a pre-determined multiple of EBITDA for each of those years. The total purchase price for the acquisition, including the
fair value of the contingent consideration, was $36.2 million.
The following is a summary of the final purchase price allocation (in millions):
Cash
Accounts receivable
Other assets
Intangible assets subject to amortization
Goodwill
Current liabilities
Deferred tax
Debt
$
4.3
9.9
1.8
22.8
13.2
(10.1)
(4.0)
(1.7)
Intangible assets subject to amortization acquired includes:
Intangible Asset
Publisher relationships
Advertiser relationships
Trade name
Non-Compete agreements
Estimated
Fair Value
(in millions)
Weighted
average
life (in years)
$
16.9
3.7
2.0
0.2
10.0
4.0
5.0
4.0
As noted above, the acquisition of MediaDonuts includes a contingent consideration arrangement that requires additional
consideration to be paid by the Company to the selling stockholders of MediaDonuts, based on a pre-determined multiple of
MediaDonuts' 12-month EBITDA targets in calendar years 2021 through 2024. The fair value of the contingent consideration
recognized on the acquisition date of $20.3 million was estimated by applying the real options approach. Key assumptions include
risk-neutral expected growth rates based on management’s assessments of expected growth in EBITDA, adjusted by appropriate
factors capturing their correlation with the market and volatility, discounted at a cost of debt rate ranging from 5.8% to 6.7% over the
three year period. These are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs.
As of December 31, 2021 the contingent liability was adjusted to its current fair value of $15.8 million, all of which is a
noncurrent liability. The change in the fair value of the contingent liability for the year ended December 31, 2021 of $4.5 million
income is reflected in the Consolidated Statements of Operations.
As of December 31, 2022 the contingent liability was adjusted to its current fair value of $22.2 million, of which $6.5 million is
a current liability and $15.7 million is a noncurrent liability. The change in the fair value of the contingent liability for the year ended
December 31, 2022 of $6.4 million expense is reflected in the Consolidated Statements of Operations.
The fair value of the assets acquired included trade receivables of $9.9 million. The gross amount due under contract was $10.2
million, of which $0.3 million was expected to be uncollectable.
During the year ended December 31, 2021 MediaDonuts generated net revenue and net income of $30.9 million and $5.6
million, respectively.
The goodwill, which is not expected to be deductible for tax purposes, is assigned to the Company’s digital segment and is
attributable to MediaDonuts' workforce and expected synergies from combining MediaDonuts' operations with the Company's
operations.
F-24
The following unaudited pro forma information has been prepared to give effect to the Company’s acquisition of MediaDonuts
as if the acquisition had occurred on January 1, 2020. This pro forma information was adjusted to exclude acquisition fees and costs of
$0.7 million for the year ended December 31, 2021, which were expensed in connection with the acquisition. This pro forma
information does not purport to represent what the actual results of operations of the Company would have been had this acquisition
occurred on such date, nor does it purport to predict the results of operations for any future periods.
In thousands, except share and per share data
Pro Forma:
Total revenue
Net income (loss) attributable to common stockholders
Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic
Net income (loss) per share, attributable to common stockholders, diluted
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$
$
$
$
781,835
32,997
0.39
0.38
$
$
$
$
372,519
(522)
(0.01)
(0.01)
85,301,603
87,910,603
84,231,212
84,231,212
365 Digital
On November 1, 2021, the Company acquired 100% of the issued and outstanding shares of stock of 365 Digital, a digital
advertising solutions company headquartered in South Africa. The acquisition, funded from the Company’s cash on hand, included an
initial purchase price of approximately $1.9 million in cash, which included customary purchase price adjustments for cash,
indebtedness and estimated working capital. Subsequently, the purchase price was adjusted to $3.5 million based on a predetermined
multiple of EBITDA for the trailing twelve month period ended March 31, 2022. Additionally, the transaction includes contingent
earn-out payments based upon the achievement of certain EBITDA targets in calendar years 2022, 2023 and 2024, calculated as a pre-
determined multiple of EBITDA for each of those years. The total purchase price for the acquisition, including the fair value of the
contingent consideration, was $5.5 million.
The following is a summary of the final purchase price allocation (in millions):
Cash
Accounts receivable
Intangible assets subject to amortization
Goodwill
Current liabilities
Deferred tax
$
0.5
1.1
2.2
3.7
(1.4)
(0.6)
Intangible assets subject to amortization acquired includes:
Intangible Asset
Publisher relationships
Advertiser relationships
Trade name
Non-Compete agreements
Estimated
Fair Value
(in millions)
Weighted
average
life (in years)
$
1.7
0.2
0.2
0.1
9.0
4.0
5.0
4.0
As noted above, the acquisition of 365 Digital includes a contingent consideration arrangement that requires additional
consideration to be paid by the Company to the selling stockholders of 365 Digital, based on a pre-determined multiple of 365
Digital's 12-month EBITDA targets in calendar years 2022 through 2024. The fair value of the contingent consideration recognized on
the acquisition date of $2.0 million was estimated by applying the real options approach. Key assumptions include risk-neutral
expected growth rates based on management’s assessments of expected growth in EBITDA, adjusted by appropriate factors capturing
F-25
their correlation with the market and volatility, discounted at a cost of debt rate ranging from 7.6% to 8.3% over the three-year period.
These are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs.
As of December 31, 2021 the contingent liability has been reflected in the Consolidated Balance Sheet as noncurrent liabilities
of $2.0 million and has not changed materially between the acquisition date and December 31, 2021.
As of December 31, 2022 the contingent liability was adjusted to its current fair value of $0.2 million, all of which is a
noncurrent liability. The change in the fair value of the contingent liability for the year ended December 31, 2022 of $1.8 million
income is reflected in the Consolidated Statements of Operations.
The fair value of the assets acquired includes trade receivables of $1.1 million. The gross amount due under contract is $1.1
million, of which a de minimis amount is expected to be uncollectable.
During the year ended December 31, 2021 365 Digital generated net revenue and net income of $1.9 million and $0.1 million,
respectively.
The goodwill, which is not expected to be deductible for tax purposes, is assigned to the Company’s digital segment and is
attributable to 365 Digital's workforce and expected synergies from combining 365 Digital's operations with the Company's
operations.
The following unaudited pro forma information has been prepared to give effect to the Company’s acquisition of 365 Digital as
if the acquisition had occurred on January 1, 2020. This pro forma information was adjusted to exclude acquisition fees and costs of
$0.2 million for the year ended December 31, 2021, which were expensed in connection with the acquisition. This pro forma
information does not purport to represent what the actual results of operations of the Company would have been had this acquisition
occurred on such date, nor does it purport to predict the results of operations for any future periods.
In thousands, except share and per share data
Pro Forma:
Total revenue
Net income (loss) attributable to common stockholders
Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic
Net income (loss) per share, attributable to common stockholders, diluted
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$
$
$
$
762,300
30,642
0.36
0.35
$
$
$
$
344,965
(3,747)
(0.04)
(0.04)
85,301,603
87,910,603
84,231,212
84,231,212
4. VARIABLE INTEREST ENTITIES
Adsmurai
On August 5, 2022, the Company made a loan in the principal amount of €12,535,000 (approximately $12.8 million as of that
date) to an entity affiliated with owners of a majority interest in Adsmurai, S.L. (“Adsmurai”), a company engaged in the sale and
marketing of digital advertising. The loan has a two-year term, bears interest at a rate of 5% annually, and can be converted into 51%
of the issued and outstanding shares of stock of Adsmurai at the Company’s sole discretion. If the Company elects not to convert the
loan, the borrower has the option to repay the loan at maturity either in cash or with 51% of the issued and outstanding shares of stock
of Adsmurai.
The Company has determined for accounting purposes that (i) Adsmurai is a VIE because the equity investors at risk, as a
group, lack the characteristics of a controlling financial interest; and (ii) the Company is the primary beneficiary because the
conversion right gives it the power to direct the activities of the entity that most significantly impact the entity’s economic
performance. See Note 2 for more details.
The Company has determined that Adsmurai is a business and has accounted for its consolidation under the provisions of ASC
805, “Business Combinations”, and included Adsmurai's results of operations since the date of the loan in the Company's
F-26
Consolidated Statements of Operations. The Company is in the process of completing the purchase price allocation for Adsmurai. The
following is a summary of the preliminary purchase price allocation (in millions):
Cash
Accounts receivable
Other assets
Fixed assets
Intangible assets subject to amortization
Goodwill
Current liabilities
Deferred tax
Debt
Noncontrolling interest
Convertible loan
$
7.4
12.2
0.7
2.8
8.2
13.0
(14.4)
(2.0)
(2.8)
(12.3)
(12.8)
Intangible assets subject to amortization acquired includes:
Intangible Asset
Advertiser relationships
Existing technology
Trade name
Estimated
Fair Value
(in millions)
Weighted
average
life (in years)
$
4.7
2.4
1.1
7.0
5.0
5.0
The fair value of the trade receivables is $12.2 million. The gross amount due under contract is $12.3 million, of which $0.1
million is expected to be uncollectable.
The goodwill, which is not expected to be deductible for tax purposes, is assigned to the Company’s digital segment and is
attributable to Adsmurai’s workforce and synergies from combining Adsmurai’s operations with those of the Company.
Subsequent to the consolidation through December 31, 2022, the Company consolidated Adsmurai's revenues of $31.7 million,
and net income of $2.0 million.
The following unaudited pro forma information has been prepared to give effect to the Company’s consolidation of Adsmurai as
if the transaction had occurred on January 1, 2021. This pro forma information was adjusted to exclude acquisition fees and costs of
$0.6 million for the year ended December 31, 2022, which were expensed in connection with the transaction. This pro forma
information does not purport to represent what the actual results of operations of the Company would have been had this transaction
occurred on such date, nor does it purport to predict the results of operations for any future periods.
In thousands, except share and per share data
Pro Forma:
Total revenue
Net income (loss) attributable to common stockholders
Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic
Net income (loss) per share, attributable to common stockholders, diluted
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
Jack of Digital
Year Ended
December 31,
2022
2021
$
$
$
$
984,566
19,283
0.23
0.22
$
$
$
$
801,436
29,696
0.35
0.34
85,391,163
87,769,762
85,301,603
87,910,603
F-27
On August 3, 2022, the Company made an investment of $0.1 million in exchange for approximately 15% of the issued and
outstanding stock of Jack of Digital, a digital marketing services company that serves as the exclusive advertising sales partner of
ByteDance in Pakistan.
The Company has determined for accounting purposes that (i) Jack of Digital is a VIE because the equity investors at risk, as a
group, lack the characteristics of a controlling financial interest; and (ii) the Company is the primary beneficiary because it has the
power to direct the activities of the entity that most significantly impact the entity’s economic performance. See Note 2 for more
details.
Subsequent to the consolidation through December 31, 2022, the Company consolidated Jack of Digital's revenues of $1.7
million, and de minimis net income.
following unaudited pro forma information has been prepared to give effect to the Company’s consolidation of Jack of Digital
as if the transaction had occurred on January 1, 2021. This pro forma information was adjusted to exclude acquisition fees and costs of
$0.3 million for the year ended December 31, 2022, which were expensed in connection with the transaction. This pro forma
information does not purport to represent what the actual results of operations of the Company would have been had this transaction
occurred on such date, nor does it purport to predict the results of operations for any future periods.
In thousands, except share and per share data
Pro Forma:
Total revenue
Net income (loss) attributable to common stockholders
Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic
Net income (loss) per share, attributable to common stockholders, diluted
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
Year Ended
December 31,
2022
2021
$
$
$
$
959,693
18,602
0.22
0.21
$
$
$
$
761,130
29,285
0.34
0.33
85,391,163
87,769,762
85,301,603
87,910,603
The table below presents the reconciliation of changes in noncontrolling interests (in thousands):
Beginning balance
Initial fair value of noncontrolling interests
Net income (loss) attributable to noncontrolling interest
Ending balance
5. REVENUES
Year Ended December 31,
2022
$
$
-
12,897
2,050
14,947
Revenues are recognized when control of the promised services is transferred to the Company’s customers, in an amount equal
to the consideration the Company expects to be entitled to in exchange for those services.
Digital Advertising. Revenue from digital advertising is earned primarily from sales of advertising that are placed by the
Company's advertising customers or their ad agencies on the digital platforms of third-party media companies for which the Company
acts as commercial partner or placed directly with online digital marketplaces through the Company's Smadex programmatic ad
purchasing platform. Revenue in the digital segment is recognized when display or other digital advertisements record impressions on
the websites and mobile and Internet-connected television apps of media companies on whose digital platforms the advertisements are
placed or as the advertiser’s previously agreed-upon performance criteria are satisfied.
Broadcast Advertising. Revenue related to the sale of advertising in the television and audio segments is recognized at the time
of broadcast. Broadcast advertising rates are fixed based on each medium’s ability to attract audiences in demographic groups targeted
by advertisers and rates can vary based on the time of day and ratings of the programming airing in that day part.
Broadcast and digital advertising revenue is recognized over time in a series as a single performance obligation as the ad,
impression or performance advertising is delivered per the insertion order. The Company applies the practical expedient to recognize
revenue for each distinct advertising service delivered at the amount the Company has the right to invoice, which corresponds directly
to the value a customer has received relative to the Company’s performance. Contracts with customers are short term in nature and
billing occurs on a monthly basis with payment due in 30 days. Value added taxes collected concurrently with advertising revenue
F-28
producing activities are excluded from revenue. Cash payments received prior to services being rendered result in deferred revenue,
which is then recognized as revenue when the advertising time or space is actually provided.
Retransmission Consent. The Company generates revenue from retransmission consent agreements that are entered into with
MVPDs. The Company grants the MVPDs access to its television station signals so that they may rebroadcast the signals and charge
their subscribers for this programming. Payments are received on a monthly basis based on the number of monthly subscribers.
Retransmission consent revenues are considered licenses of functional intellectual property and are recognized over time
utilizing the sale-based or usage-based royalty exception. The Company’s performance obligation is to provide the licensee access to
the Company's intellectual property. MVPD subscribers receive and consume the content monthly as the television signal is delivered.
Spectrum Usage Rights. The Company generates revenue from agreements associated with its television stations’ spectrum
usage rights from a variety of sources, including but not limited to agreements with third parties to utilize excess spectrum for the
broadcast of their multicast networks; charging fees to accommodate the operations of third parties, including moving channel
positions or accepting interference with broadcasting operations; and modifying and/or relinquishing spectrum usage rights while
continuing to broadcast through channel sharing or other arrangements.
Revenue generated by spectrum usage rights agreements are recognized in accordance with the contractual fees over the term of
the agreement or when the Company has relinquished all or a portion of its spectrum usage rights for a station or have relinquished its
rights to operate a station on the existing channel free from interference.
Other Revenue. The Company generates other revenues that are related to its broadcast operations, which primarily consist of
representation fees earned by the Company’s radio national representation firm, talent fees for the Company’s on air personalities,
ticket and concession sales for radio events, rent from tenants of the Company’s owned facilities, barter revenue, and revenue
generated under joint sales agreements.
In the case of representation fees noted above, the Company does not control the distinct service, that being the commercial
advertisement, prior to delivery and therefore recognizes revenue on a net basis. Similarly for joint service agreements, the Company
does not own or control the station providing the airtime, and is not the principal in the arrangement, and therefore recognizes revenue
on a net basis. In the case of talent fees, the on air personality is an employee of the Company and therefore the Company controls the
service provided and recognizes revenue gross with an expense for fees paid to the employee.
Practical Expedients and Exemptions
The Company does not disclose the value of unsatisfied performance obligations when (i) contracts have an original expected
length of one year or less, which applies to essentially all of the Company's advertising contracts, and (ii) variable consideration is a
sales-based or usage-based royalty promised in exchange for a license of intellectual property, which applies to retransmission consent
revenue.
The Company applies the practical expedient to expense contract acquisition costs, such as sales commissions generated either
by internal direct sales employees or through third party advertising agency intermediaries, when incurred because the amortization
period is one year or less. These costs are recorded within direct operating expenses.
Disaggregated Revenue
The following table presents our revenues disaggregated by major source (in thousands):
Digital advertising
Broadcast advertising
Spectrum usage rights
Retransmission consent
Other
Total revenue
Years Ended December 31,
2021
555,338 $
154,297
6,195
37,041
7,321
760,192 $
2022
747,103 $
161,713
6,036
36,022
5,335
956,209 $
2020
143,309
152,677
5,429
36,766
5,845
344,026
$
$
F-29
Contracts are entered into directly with customers or through an advertising agency that represents the customer. Sales of
advertising to customers or agencies within a station’s designated market area (“DMA”) are referred to as local revenue, whereas sales
from outside the DMA are referred to as national revenue. The following table further disaggregates the Company’s broadcast
advertising revenue by sales channel (in thousands):
Local direct
Local agency
National agency
Total revenue
Years Ended December 31,
2021
2022
22,931 $
54,094
84,688
161,713 $
23,070 $
59,865
71,362
154,297 $
2020
21,334
48,702
82,641
152,677
$
$
The following table further disaggregates the Company’s revenue by geographical region, based on the location of the sales
office (in thousands):
U.S.
Latin America
Asia
Rest of the World
Total revenue
Deferred Revenues
Years Ended December 31,
2021
235,876 $
466,638
30,898
26,780
760,192 $
2022
247,371 $
518,100
91,274
99,464
956,209 $
2020
220,574
123,267
-
185
344,026
$
$
The Company records deferred revenues within Accounts payable and accrued expenses in the Consolidated Balance Sheets,
when cash payments are received or due in advance of its performance, including amounts which are refundable. The change in the
deferred revenue balance for the year ended December 31, 2022 is primarily driven by cash payments received or due in advance of
satisfying the Company’s performance obligations, offset by revenues recognized that were included in the deferred revenue balance
as of December 31, 2021.
The Company’s payment terms vary by the type and location of customer and the products or services offered. The term
between invoicing and when payment is due is typically 30 days. For certain individual customers and customer types, the Company
generally requires payment before the services are delivered to the customer.
(in thousands)
Deferred revenue
December 31,
2021
$
5,942
Increase
Decrease *
December 31,
2022
7,175
(5,942) $
7,175
* The amount disclosed in the decrease column reflects revenue that has been recorded during the year ended December 31, 2022.
(in thousands)
Deferred revenue
December 31,
2020
$
3,127
Increase
Decrease *
December 31,
2021
5,942
(3,127) $
5,942
* The amount disclosed in the decrease column reflects revenue that has been recorded during the year ended December 31, 2021.
6. GOODWILL AND OTHER INTANGIBLE ASSETS
The carrying amount of goodwill for each of the Company’s operating segments for the years ended December 31, 2022 and
2021 is as follows (in thousands):
Digital
Television
Audio
Consolidated
December 31,
2020
$
$
17,494
40,549
—
58,043
Purchase
Price
Adjustments
$
(1,822) $
—
—
(1,822) $
Acquisitions
15,487
—
—
15,487
$
December 31,
2021
$
$
31,159
40,549
—
71,708
Purchase
Price
Adjustments
1,907
$
—
—
1,907
$
Additions
From
VIEs
December 31,
2022
$
$
13,376
—
—
13,376
$
$
46,442
40,549
—
86,991
F-30
The composition of the Company’s acquired intangible assets and the associated accumulated amortization as of December 31,
2022 and 2021 is as follows (in thousands):
2022
2021
Weighted
average
remaining
life in years
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Intangible assets subject to
amortization:
Television network affiliation
agreements
Customer base
Pre-sold advertising contracts
and other
Total assets subject to
amortization:
Intangible assets not subject to
amortization:
FCC licenses and spectrum
usage rights
Total intangible assets
5
7
5
$
60,043
68,276
$
54,755
17,378
$
5,288
50,898
$
60,043
74,512
$
53,668
20,557
$
6,375
53,955
9,484
3,859
5,625
34,166
30,462
3,704
$ 137,803
$
75,992
$
61,811
$ 168,721
$
104,687
$
64,034
207,453
$ 269,264
209,053
$ 273,087
The aggregate amount of amortization expense for the years ended December 31, 2022, 2021 and 2020 was approximately
$10.7 million, $8.9 million and $4.0 million, respectively. Estimated amortization expense for the next five years and thereafter is as
follows (in thousands):
Estimated Amortization Expense
2023
2024
2025
2026
2027
Thereafter
Total
Amount
11,014
10,841
9,791
8,705
5,820
15,640
61,811
$
$
Impairment
The Company has identified each of its three operating segments to be separate reporting units: digital, television, and audio
(formerly radio). The carrying values of the reporting units are determined by allocating all applicable assets (including goodwill) and
liabilities based upon the unit in which the assets are employed and to which the liabilities relate, considering the methodologies
utilized to determine the fair value of the reporting units.
Goodwill and indefinite life intangibles are not amortized but are tested annually for impairment, or more frequently, if events
or changes in circumstances indicate that the assets might be impaired. The annual testing date is October 1.
The Company conducted its annual review of the fair value of the digital reporting unit. As of the annual goodwill testing date,
October 1, 2022, there was $46.2 million of goodwill in the digital reporting unit. Based on the assumptions and estimates in Note 2,
the fair value of the digital reporting unit exceeded its carrying value by 65%, resulting in no impairment charge. The calculation of
the fair value of the digital reporting unit requires estimates of the discount rate and the long term projected growth rate. If that
discount rate were to increase by 1%, the fair value of the digital reporting unit would decrease by 4%. If the long term projected
growth rate were to decrease by 0.5%, the fair value of the digital reporting unit would decrease by 1%.
During the year ended December 31, 2021, the Company concluded that the digital reporting unit fair value exceeded its
carrying value, resulting in no impairment charge.
During the year ended December 31, 2020, the Company concluded that the digital reporting unit carrying value exceeded its
fair value, resulting in a goodwill impairment charge of $0.8 million.
The Company also conducted its annual review of the fair value of the television reporting unit. As of the annual goodwill
testing date, October 1, 2022, there was $40.5 million of goodwill in the television reporting unit. Based on the assumptions and
F-31
estimates in Note 2, the television reporting unit fair value exceeded its carrying value by 28%, resulting in no impairment charge in
2022. The calculation of the fair value of the reporting unit requires estimates of the discount rate and the long term projected growth
rate. If that discount rate were to increase by 0.5%, the fair value of the television reporting unit would decrease by 3%. If the long
term projected growth rate were to decrease by 0.5%, the fair value of the television reporting unit would decrease by 2%.
During the years ended December 31, 2021 and 2020, the Company concluded that the television reporting unit fair value
exceeded its carrying value, resulting in no impairment charge.
The Company did not have any goodwill in its audio reporting unit at December 31, 2022 and 2021.
The Company also conducted a review of the fair value of the television and radio FCC licenses in 2022 and 2021. The
estimated fair value of indefinite life intangible assets is determined by an income approach. The income approach estimates fair value
based on the estimated future cash flows of each market cluster that a hypothetical buyer would expect to generate, discounted by an
estimated weighted-average cost of capital that reflects current market conditions, which reflect the level of inherent risk. The income
approach requires the Company to make a series of assumptions, such as discount rates, revenue projections, profit margin projections
and terminal value multiples. The Company estimates the discount rates on a blended rate of return considering both debt and equity
for comparable publicly-traded companies. These comparable publicly-traded companies have similar size, operating characteristics
and/or financial profiles to the Company. The Company also estimated the terminal value multiple based on comparable publicly-
traded companies. The Company estimated the revenue projections and profit margin projections based on various market clusters
signal coverage of the markets and industry information for an average station within a given market. The information for each market
cluster includes such things as estimated market share, estimated capital start-up costs, population, household income, retail sales and
other expenditures that would influence advertising expenditures. Alternatively, some stations under evaluation have had limited
relevant cash flow history due to planned or actual conversion of format or upgrade of station signal. The assumptions the Company
makes about cash flows after conversion are based on the performance of similar stations in similar markets and potential proceeds
from the sale of the assets.
For the year ended December 31, 2022, the Company recorded impairment charges of FCC licenses in its television and audio
reporting units in the amount of $0.9 million and $0.7 million, respectively.
For the year ended December 31, 2021, the Company recorded impairment charges of FCC licenses in its audio reporting unit in
the amount of $0.1 million.
For the year ended December 31, 2020, the Company recorded impairment charges of FCC licenses in its television and audio
reporting units in the amount of $23.5 million and $9.0 million, respectively.
For the year ended December 31, 2021, the Company recorded an impairment charge related to Intangibles subject to
amortization of $1.3 million in its digital reporting unit to reflect the termination effective in June 2022 of an agreement with a media
company for which we act as commercial partner. In addition, during the year ended December 31, 2021, the Company recorded an
impairment charge related to Intangibles subject to amortization of $0.3 million and $1.3 million in its television and audio reporting
units, respectively, to reflect the fair market value of assets held for sale.
For the year ended December 31, 2020, the Company recorded impairment charges related to Intangibles subject to amortization
of $5.3 million, and property and equipment of $1.5 million.
F-32
7. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2022 and 2021 consists of (in millions):
Buildings
Construction in progress
Transmission, studio and other broadcast equipment
Office and computer equipment
Transportation equipment
Leasehold improvements and land improvements
Less accumulated depreciation
Land
Estimated useful
life (years)
40
—
5-15
3-7
5
Lesser of lease
life or useful life
$
$
2022
18.6
5.2
152.7
44.8
4.5
22.0
247.8
194.4
53.4
8.0
61.4
$
$
2021
18.6
1.2
158.4
33.6
5.4
21.2
238.4
183.9
54.5
8.0
62.5
Depreciation expense was $14.9 million, $13.5 million, and $13.3 million for the years ended December 31, 2022, 2021 and
2020, respectively.
As part of the FCC auction for broadcast spectrum that concluded in 2017, the FCC has reassigned some stations to new post-
auction channels and will reimburse station owners for the cost of the relocation. The Company received notification from the FCC
that 17 of its stations have been assigned to new channels with an estimated reimbursable cost of approximately $16.0 million. The
Company recorded gains on involuntary conversion associated with the repack process of $0.2 million, $2.6 million and $5.9 million
in 2022, 2021 and 2020, respectively, which are presented as other operating gain in the Consolidated Statements of Operations.
8. LEASES
The Company’s leases are considered operating leases and primarily consist of real estate such as office space, broadcasting
towers, land and land easements. A Right of Use (“ROU”) asset and lease liability is recognized as of the lease commencement date
based on the present value of the future minimum lease payments over the lease term. As the implicit rate for operating leases is not
readily determinable, the future minimum lease payments were discounted using an incremental borrowing rate. Due to the
Company’s centralized treasury function, the Company applied a portfolio approach to discount its domestic lease obligations using its
secured publicly traded U.S. dollar denominated debt instruments interpolating the duration of the debt to the remaining lease term.
The incremental borrowing rate for international leases is the interest rate that the Company would have to pay to borrow on a
collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
The operating leases are reflected within the consolidated balance sheet as Operating leases right of use asset with the related
liability presented as Operating lease liabilities and Long-term operating lease liabilities. Lease expense is recognized on a straight-
line basis over the lease term.
Generally, lease terms include options to renew or extend the lease. Unless the renewal option is considered reasonably certain,
the exercise of any such options have been excluded from the calculation of lease liabilities. In addition, as permitted within the
guidance, ROU assets and lease liabilities are not recorded for leases within an initial term of one year or less. The Company’s
existing leases have remaining terms of less than one year up to 28 years. Certain of the Company’s lease agreements include rental
payments based on changes in the consumer price index (“CPI”). Lease liabilities are not remeasured as a result of changes in the CPI;
instead, changes in the CPI are treated as variable lease payments and recognized in the period in which the related obligation was
incurred. Lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Certain real estate leases include additional costs such as common area maintenance (non-lease component), as well as property
insurance and property taxes. These costs were excluded from future minimum lease payments as they are variable payments. As such,
these costs were not part of the calculation of ROU assets and lease liabilities associated with operating leases upon transition.
The Company’s corporate headquarters are located in Santa Monica, California. The Company leases approximately 16,000
square feet of space in the building housing its corporate headquarters under a lease that was most recently amended as of June 7,
2022. The lease, as amended, provides that the Company will relocate and expand its corporate headquarters within the same building
to a space consisting of approximately 38,000 square feet, at which point the term of the lease will be extended until January 31, 2034.
F-33
The Company moved into temporary premises in December 2022 pending the build-out of the permanent premises and expects to
complete its relocation into the permanent premises during the first half of 2023.
The Company also leases approximately 41,000 square feet of space in the building housing its radio network headquarters in
Los Angeles, California. In 2021, the Company amended the lease to cease in September 2022 and paid a termination fee of
approximately $0.4 million in 2022. The Company will continue to lease this space on a month-to-month basis and intends on
relocating all of its personnel into its new, permanent premises in Santa Monica.
The types of properties required to support each of the Company’s television and radio stations typically include offices,
broadcasting studios and antenna towers where broadcasting transmitters and antenna equipment are located. The majority of the
Company’s office, studio and tower facilities are leased pursuant to non-cancelable long-term leases. The Company also owns the
buildings and/or land used for office, studio and tower facilities at certain of its television and/or radio properties. The Company owns
substantially all of the equipment used in its television and radio broadcasting business.
The following table summarizes the expected future payments related to lease liabilities as of December 31, 2022:
(in thousands)
2023
2024
2025
2026
2027
2027 and thereafter
Total minimum payments
Less amounts representing interest
Less amounts representing tenant improvement allowance
Present value of minimum lease payments
Less current operating lease liabilities
Long-term operating lease liabilities
$
$
$
7,801
8,917
8,537
7,036
5,327
32,301
69,919
-18,289
(3,909)
47,721
(5,570)
42,151
The weighted average remaining lease term and the weighted average discount rate used to calculate the Company’s lease
liabilities as of December 31, 2022 were 8.8 years and 6.2%, respectively. The weighted average remaining lease term and the
weighted average discount rate used to calculate the Company’s lease liabilities as of December 31, 2021 were 9.8 years and 6.3%,
respectively.
The following table summarizes lease payments and supplemental non-cash disclosures:
(in thousands)
Cash paid for amounts included in lease liabilities:
Years Ended December 31,
2021
2020
2022
Operating cash flows from operating leases
Non-cash additions to operating lease assets
$ 9,680 $ 10,265 $ 12,049
$ 31,125 $ 6,950 $ 2,593
The following table summarizes the components of lease expense:
(in thousands)
Operating lease cost
Variable lease cost
Short-term lease cost
Total lease cost
Years Ended December 31,
2021
2020
2022
$
9,203 $
1,143
2,705
9,891
672
848
$ 13,051 $ 11,478 $ 11,411
8,299 $
1,469
1,710
For the year ended December 31, 2022, lease cost of $6.0 million, $6.2 million and $0.9 million, were recorded to direct
operating expenses, selling, general and administrative expenses and corporate expenses, respectively. For the year ended December
31, 2021, lease cost of $6.1 million, $4.8 million and $0.6 million, were recorded to direct operating expenses, selling, general and
administrative expenses and corporate expenses, respectively. For the year ended December 31, 2020, lease cost of $5.9 million, $4.7
million and $0.8 million, were recorded to direct operating expenses, selling, general and administrative expenses and corporate
expenses, respectively.
F-34
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses as of December 31, 2022 and 2021 consist of (in millions):
Accounts payable
Accrued payroll and compensated absences
Accrued bonuses
Professional fees
Deferred revenue
Accrued national representation fees
Income taxes payable
Other taxes payable
Amounts due under joint sales agreements
Accrued property taxes
Accrued capital expenditures
Accrued media costs – digital
Accrued contingent consideration
Other
2022
2021
75.2 $
15.6
9.3
0.2
7.2
1.7
7.2
11.3
0.5
2.0
2.1
62.1
36.5
6.5
237.4 $
58.8
12.3
5.8
0.3
5.9
1.7
6.5
8.8
1.0
1.7
0.9
50.0
44.6
14.4
212.7
$
$
10. LONG TERM DEBT
Long-term debt as of December 31, 2022 and 2021 is summarized as follows (in millions):
Term Loan B Facility
Other long term debt
Less current maturities
Less unamortized debt issuance costs
$
$
2022
2021
209.3
4.5
5.3
208.5
1.2
207.3
$
$
212.3
-
3.0
209.3
1.9
207.4
The scheduled maturities of long-term debt as of December 31, 2022 are as follows (in millions):
Year
2023
2024
2025
2026
2027
Thereafter
Amount
5.3
207.4
1.1
-
-
-
213.8
$
$
2017 Credit Facility
On November 30, 2017 (the “Closing Date”), the Company entered into its 2017 Credit Facility pursuant to the 2017 Credit
Agreement. The 2017 Credit Facility consists of a $300.0 million senior secured Term Loan B Facility (the “Term Loan B Facility”),
which was drawn in full on the Closing Date. In addition, the 2017 Credit Facility provides that the Company may increase the
aggregate principal amount of the 2017 Credit Facility by up to an additional $100.0 million plus the amount that would result in its
first lien net leverage ratio (as such term is used in the 2017 Credit Agreement) not exceeding 4.0 to 1.0, subject to the Company
satisfying certain conditions.
Borrowings under the Term Loan B Facility were used on the Closing Date (a) to repay in full all of the Company’s and its
subsidiaries’ outstanding obligations under the Company’s previous credit facility and to terminate the credit agreement relating
thereto, (b) to pay fees and expenses in connection with the 2017 Credit Facility, and (c) for general corporate purposes.
F-35
The 2017 Credit Facility is guaranteed on a senior secured basis by certain of the Company’s existing and future wholly-owned
domestic subsidiaries, and is secured on a first priority basis by the Company’s and those subsidiaries’ assets.
The Company’s borrowings under the 2017 Credit Facility bear interest on the outstanding principal amount thereof from the
date when made at a rate per annum equal to either: (i) the Eurodollar Rate (as defined in the 2017 Credit Agreement) plus 2.75%; or
(ii) the Base Rate (as defined in the 2017 Credit Agreement) plus 1.75%. As of December 31, 2022, the interest rate on the Company's
Term Loan B was 7.13%. The Term Loan B Facility expires on November 30, 2024 (the “Maturity Date”).
The amounts outstanding under the 2017 Credit Facility may be prepaid at the Company’s option without premium or penalty,
provided that certain limitations are observed, and subject to customary breakage fees in connection with the prepayment of a LIBOR
rate loan. The principal amount of the Term Loan B Facility shall be paid in installments on the dates and in the respective amounts
set forth in the 2017 Credit Agreement, with the final balance due on the Maturity Date.
Subject to certain exceptions, the 2017 Credit Facility contains covenants that limit the ability of the Company and its restricted
subsidiaries to, among other things:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
liens on the Company’s property or assets;
make certain investments;
incur additional indebtedness;
consummate any merger, dissolution, liquidation, consolidation or sale of substantially all assets;
dispose of certain assets;
make certain restricted payments;
make certain acquisitions;
enter into substantially different lines of business;
enter into certain transactions with affiliates;
use loan proceeds to purchase or carry margin stock or for any other prohibited purpose;
change or amend the terms of the Company’s organizational documents or the organization documents of certain
restricted subsidiaries in a materially adverse way to the lenders, or change or amend the terms of certain indebtedness;
enter into sale and leaseback transactions;
make prepayments of any subordinated indebtedness, subject to certain conditions; and
change the Company’s fiscal year, or accounting policies or reporting practices.
The 2017 Credit Facility also provides for certain customary events of default, including the following:
•
•
•
•
•
•
default for three (3) business days in the payment of interest on borrowings under the 2017 Credit Facility when due;
default in payment when due of the principal amount of borrowings under the 2017 Credit Facility;
failure by the Company or any subsidiary to comply with the negative covenants and certain other covenants relating to
maintaining the legal existence of the Company and certain of its restricted subsidiaries and compliance with anti-
corruption laws;
failure by the Company or any subsidiary to comply with any of the other agreements in the 2017 Credit Agreement and
related loan documents that continues for thirty (30) days (or ten (10) days in the case of failure to comply with covenants
related to inspection rights of the administrative agent and lenders and permitted uses of proceeds from borrowings under
the 2017 Credit Facility) after the Company’s officers first become aware of such failure or first receive written notice of
such failure from any lender;
default in the payment of other indebtedness if the amount of such indebtedness aggregates to $15.0 million or more, or
failure to comply with the terms of any agreements related to such indebtedness if the holder or holders of such
indebtedness can cause such indebtedness to be declared due and payable;
certain events of bankruptcy or insolvency with respect to the Company or any significant subsidiary;
F-36
•
•
•
final judgment is entered against the Company or any restricted subsidiary in an aggregate amount over $15.0 million, and
either enforcement proceedings are commenced by any creditor or there is a period of 30 consecutive days during which
the judgment remains unpaid and no stay is in effect;
any material provision of any agreement or instrument governing the 2017 Credit Facility ceases to be in full force and
effect; and
any revocation, termination, substantial and adverse modification, or refusal by final order to renew, any media license, or
the requirement (by final non-appealable order) to sell a television or radio station, where any such event or failure is
reasonably expected to have a material adverse effect.
The Term Loan B Facility does not contain any financial covenants. In connection with the Company entering into the 2017
Credit Agreement, the Company and its restricted subsidiaries also entered into a Security Agreement, pursuant to which the Company
and all of the companies existing in future wholly-owned domestic subsidiaries each granted a first priority security interest in the
collateral securing the 2017 Credit Facility for the benefit of the lenders under the 2017 Credit Facility.
The Company did not make prepayments in 2022 and 2021.
The 2017 Credit Agreement contains a covenant that the Company deliver its financial statements and certain other information
for each fiscal year within 90 days after the end of each fiscal year.
On June 4, 2021, the Company entered into the Second Amendment (the "Amendment") to the 2017 Credit Agreement, by and
among the Company, Bank of America, N.A., as Administrative Agent, and the other financial institutions party thereto as Lenders
(collectively, the “Lenders”). The Amendment amends the 2017 Credit Agreement, primarily to permit additional investments in
restricted subsidiaries that are not loan parties, and make certain changes to the definition of “Consolidated Net Income” for the
purpose of calculating EBITDA as defined by the 2017 Credit Agreement. Pursuant to the Amendment, the Company agreed to pay to
the Lenders consenting to the Amendment a fee equal to 0.375% of the aggregate principal amount of the outstanding loans held by
such Lenders under the 2017 Credit Agreement as of June 4, 2021. This fee totaled approximately $0.6 million and will be amortized
as interest expense over the remaining term of the Term Loan B.
The carrying amount of the Term Loan B Facility as of December 31, 2022 was $208.1 million, net of $1.2 million of
unamortized debt issuance costs and original issue discount. The estimated fair value of the Term Loan B Facility as of December 31,
2022 was approximately $204.0 million. The estimated fair value is based on quoted prices in markets where trading occurs
infrequently.
As of December 31, 2022, the Company believes that it is in compliance with all material covenants in the 2017 Credit
Agreement.
11. FAIR VALUE MEASUREMENTS
ASC 820, “Fair Value Measurements and Disclosures”, defines and establishes a framework for measuring fair value and
expands disclosures about fair value measurements. In accordance with ASC 820, the Company has categorized its financial assets
and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below.
Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active
market that the company has the ability to access at the measurement date.
Level 2 – Assets and liabilities whose values are based on quoted prices for similar attributes in active markets; quoted prices in
markets where trading occurs infrequently; and inputs other than quoted prices that are observable, either directly or indirectly, for
substantially the full term of the asset or liability.
Level 3 – Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both
unobservable and significant to the overall fair value measurement.
If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on
the lowest level input that is significant to the fair value measurement of the instrument.
F-37
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring and
nonrecurring basis in the consolidated balance sheets (in millions):
Recurring fair value measurements
Assets:
Money market account
Corporate bonds and notes
Liabilities:
Contingent consideration
Nonrecurring fair value measurements:
FCC licenses
$
$
$
$
Total Fair
Value
and Carrying
Value on
Balance Sheet
December 31, 2022
Fair Value Measurement Category
Level 1
Level 2
Level 3
Total Gains
(Losses)
$
1.4
1.4
44.5
$
$
— $
$
44.5
—
63.8
$
24.5
—
—
— $
63.8
— $
24.5 $
(1.6)
December 31, 2021
Total Fair
Value
and Carrying
Value on
Balance Sheet
Recurring fair value measurements
Assets:
Money market account
Liabilities:
Contingent consideration
Nonrecurring fair value measurements:
FCC licenses
$
$
$
Fair Value Measurement Category
Level 1
Level 2
Level 3
Total Gains
(Losses)
88.3
$
88.3
$
— $
—
114.9
$
0.7
—
—
— $
114.9
— $
0.7 $
(0.1)
The Company held investments in a money market fund, corporate bonds and notes. The majority of the carrying value of the
corporate bonds and asset-backed securities held by the Company are investment grade.
The Company’s money market account is comprised of cash and cash equivalents.
The Company’s available for sale debt securities are comprised of corporate bonds and notes. These securities are valued using
quoted prices for similar attributes in active markets (Level 2). Since these investments are classified as available for sale, they are
recorded at their fair market value within Cash and cash equivalents and Marketable securities in the Consolidated Balance Sheets and
their unrealized gains or losses are included in other comprehensive income. Realized gains and losses from the sale of available for
sale securities are included in the Statements of Operations and were determined on a specific identification basis.
As of December 31, 2022, the following table summarizes the amortized cost and the unrealized (gains) losses of the available
for sale securities (in thousands):
Due within a year
Due after one year
Total
Corporate Bonds and Notes
Amortized Cost
Unrealized gains
(losses)
$
$
20,802
24,560
45,362
$
$
(122)
(712)
(834)
F-38
The Company’s available for sale debt securities are considered for credit losses under the guidance of Accounting Standards
Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326). As of December 31, 2022 and December 31, 2021, the
Company determined that a credit loss allowance is not required.
Included in interest income for the years ended December 31, 2022, 2021 and 2020 was interest income related to the
Company’s available for sale securities of $2.1 million, 0.2 million and $1.7 million, respectively.
The fair value of the contingent consideration is related to the acquisitions of:
•
•
•
the remaining 49% of the issued and outstanding shares of stock of a digital advertising solutions company that, together
with its subsidiaries, does business under the name Cisneros Interactive;
100% of the issued and outstanding shares of stock of a digital advertising solutions company in Southeast Asia that,
together with its subsidiaries, does business under the name MediaDonuts ; and
100% of the issued and outstanding shares of stock of a digital advertising solutions company headquartered in South
Africa, that, together with its subsidiaries, does business under the name 365 Digital.
The fair value of the contingent consideration was estimated by applying the real options approach using level 3 inputs as
further discussed in Note 3. The following table presents the changes in the contingent consideration (in millions):
Beginning balance
Additions from acquisitions
Payments to sellers
(Gain) loss recognized in earnings
Ending balance
12. INCOME TAXES
Years Ended December 31,
2022
2021
114.9
$
(65.3)
14.2
63.8
$
-
106.7
-
8.2
114.9
$
$
The components of income (loss) before provision for income taxes for the years ended December 31, 2022, 2021 and 2020 (in
millions):
Domestic
Foreign
Income (loss) before provision for income taxes
2022
2021
2020
$
$
14.2
17.5
31.7
$
$
35.9
18.0
53.9
$
$
2.0
(1.9)
0.1
The provision (benefit) for income taxes from continuing operations for the years ended December 31, 2022, 2021 and 2020 (in
millions):
Current
Federal
State
Foreign
Deferred
Federal
State
Foreign
Total provision for taxes
2022
2021
2020
$
$
$
$
8.6 $
1.4
5.3
15.3 $
(1.6) $
0.2
(2.3)
(3.7)
11.6 $
1.8 $
1.9
7.4
11.1 $
9.6 $
0.4
(2.4)
7.6
18.7 $
1.2
(1.2)
1.5
1.5
0.8
(1.0)
0.2
-
1.5
F-39
The income tax provision (benefit) differs from the amount of income tax determined by applying the Company’s federal
corporate income tax rate of 21% to pre-tax income for the years ended December 31, 2022, 2021 and 2020 due to the following (in
millions):
Computed “expected” tax provision (benefit)
Change in income tax resulting from:
State taxes, net of federal benefit
Change in fair value of earnout
Non-deductible executive compensation
Non-deductible expenses
Foreign GILTI income
Foreign Permanent Differences including U.S. GAAP to
Statutory Differences
Foreign Non-Territorial Income
Foreign rate differential
State tax impact of previously deferred gain from FCC
auction for broadcast spectrum
Transaction costs
Change in valuation allowance
Change in tax rate
Stock compensation
Change in unrecognized tax benefits
Impairment
Other
2022
2021
2020
$
6.7 $
11.3 $
1.2
3.3
2.1
0.5
1.6
(1.6)
(4.5)
0.7
-
0.1
2.9
(0.4)
0.5
(2.3)
-
0.8
11.6 $
1.9
2.7
1.2
0.2
4.1
2.8
(6.9)
-
-
0.2
0.2
(0.1)
(0.8)
(0.3)
-
2.2
18.7 $
$
-
0.7
-
0.4
0.2
0.1
-
-
-
(2.5)
0.1
1.7
0.5
0.2
0.1
0.2
(0.2)
1.5
The components of the deferred tax assets and liabilities at December 31, 2022 and 2021 consist of the following (in millions):
Deferred tax assets:
Accrued expenses
Accounts receivable
Net operating loss carryforward
Stock-based compensation
Credits
Lease obligations
Other comprehensive income
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Intangible assets
Property and equipment
Lease assets
Other
Total deferred tax liabilities
Net deferred tax liabilities
2022
1.3 $
2.6
6.4
2.1
-
11.7
0.3
0.7
25.1
(4.9)
20.2 $
(69.5) $
(3.7)
(10.8)
(1.2)
(85.2)
(65.0) $
2021
1.9
1.5
4.8
1.4
-
7.2
0.4
1.1
18.3
(1.9)
16.4
(70.3)
(5.9)
(6.4)
(0.5)
(83.1)
(66.7)
$
$
$
$
As of December 31, 2022, the Company has certain U.S. state and foreign net operating loss carryforwards of approximately
$33.1 million, and $15.7 million, respectively, available to offset future taxable income. The state net operating loss carryforwards
will expire during the years 2028 through 2038, to the extent they are not utilized. The foreign net operating loss carryforwards will
expire during the years 2026 through 2037 in various jurisdictions, In various other jurisdiction, net operating loss carryforwards do
not expire.
Utilization of the Company’s state net operating loss may be subject to substantial annual limitation due to the ownership
change limitations provided by the Internal Revenue Code (the "Code") or similar state provisions. Such an annual limitation could
F-40
result in the expiration of the net operating loss carryforwards before utilization. As of December 31, 2022, the Company believes that
utilization of its state net operating losses are not limited under any ownership change limitations provided under the Code or under
similar state statutes.
Due to the enactment of Tax Cuts and Jobs Act (“the Tax Act”) in December 2017, the Company is subject to a tax on global
intangible low-taxed income (“GILTI”). GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign
corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to
recognize deferred taxes for temporary differences including outside basis differences expected to reverse as GILTI. The Company
has elected to account for GILTI as a period cost, and therefore has included GILTI expense in its effective tax rate calculation for the
period.
The Company periodically evaluates the realizability of the deferred tax assets and, if it is determined that it is more likely than
not that the deferred tax assets are realizable, adjusts the valuation allowance accordingly. Valuation allowances are established and
maintained for deferred tax assets on a “more likely than not” threshold. The process of evaluating the need to maintain a valuation
allowance for deferred tax assets is highly subjective and requires significant judgment. The Company has considered the following
possible sources of taxable income when assessing the realization of the deferred tax assets: (1) future reversals of existing taxable
temporary differences; (2) taxable income in prior carryback years; (3) future taxable income exclusive of reversing temporary
differences and carryforwards; and (4) tax planning strategies. Based on the Company’s analysis and a review of all positive and
negative evidence such as historical operations, future projections of taxable income and tax planning strategies that are prudent and
feasible, the Company determined that it was more likely than not that its deferred tax assets would be realized for all jurisdictions
with the exception of the Company’s digital operations located in Spain, Israel, Uruguay , Panama, Mexico, Argentina, Thailand and
Ghana. As a result of recurring losses from the digital operations in Spain, Israel, Uruguay, Panama, Mexico, Argentina, Thailand and
Ghana, the Company has determined that it is more likely than not that deferred tax assets of approximately $4.4 million at December
31, 2022 will not be realized and therefore the Company has established a valuation allowance on those assets. In addition, the
Company has determined that it is more likely than not its foreign tax credits carryovers of $0.5 million generated for 2022 and
previous years will not be utilized and accordingly has recorded a valuation allowance of $0.5 million on them.
The Company addresses uncertainty in tax positions according to the provisions of ASC 740, “Income Taxes”, which clarifies
the accounting for income taxes by establishing the minimum recognition threshold and a measurement attribute for tax positions
taken or expected to be taken in a tax return in order to be recognized in the financial statements.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions):
Balance at December 31, 2020
Lapse of statute
Interest accrued
Increase in balances related to prior year tax positions
Balance at December 31, 2021
Decrease in balances related to prior year tax positions
Interest accrued
Increase in balances related to prior year tax positions
Balance at December 31, 2022
$
$
$
Amount
4.3
(3.6)
0.1
2.4
3.2
(2.1)
0.6
1.2
2.9
As of December 31, 2022, the Company had $2.9 million of gross unrecognized tax benefits for uncertain tax positions, of
which $2.1 million would affect the effective tax rate if recognized.
As of December 31, 2022, the Company does not anticipate that the amount of unrecognized tax benefits to decrease within the
next 12 months.
The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. As of
December 31, 2022, the Company had $0.5 million of accrued interest and penalties related to uncertain tax positions.
The Company is subject to taxation in the United States, various states and various foreign jurisdictions. The tax years 2019 to
2021 and 2018 to 2021 remain open to examination by federal and state taxing jurisdictions, respectively. For foreign jurisdictions, the
tax years 2009 to 2021 may remain open to examination by certain foreign jurisdictions.
F-41
The Company intends to indefinitely reinvest its unremitted earnings in its foreign subsidiaries except for our Uruguay
subsidiary Tirkel S.A., and accordingly has provided a deferred tax liability of $0.6 million on those earnings. The Company has not
determined at this time an estimate of total amount of other entities unremitted earnings, as it is not practical at this time.
13. COMMITMENTS AND CONTINGENCIES
The Company has non-cancelable agreements with certain media research and ratings providers, expiring at various dates
through December 2026, to provide television and radio audience measurement services. Pursuant to these agreements, as of
December 31, 2022, the Company is obligated to pay these providers a total of approximately $7.4 million. In addition, as of
December 31, 2022, the Company has commitments consist primarily of obligations for software licenses utilized by the Company's
sales team of approximately $3.9 million. The 2023 and 2024 annual commitments total approximately $8.1 million and $2.1 million,
respectively. The annual commitments beyond 2024 total approximately $1.2 million.
14. STOCKHOLDERS’ EQUITY
The Company’s Second Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") authorizes both
common and preferred stock.
Common Stock
The Company’s common stock has three classes, identified as Class A common stock, Class B common stock and Class U
common stock. The Class A common stock and Class B common stock have similar rights and privileges, except that the Class B
common stock is entitled to ten votes per share as compared to one vote per share for the Class A common stock. Each share of Class
B common stock is convertible at the holder’s option into one fully paid and non-assessable share of Class A common stock and is
required to be converted into one share of Class A common stock upon the occurrence of certain events as defined in the Certificate of
Incorporation.
The requirement for the mandatory conversion of all outstanding shares of Class B common stock to be converted into shares of
Class A common stock was met upon the passing of the Company's late Chief Executive Officer, Walter F. Ulloa, in 2022. No shares
of Class B common stock are currently outstanding and no new shares of Class B common stock are expected to be issued in the
future.
The Class U common stock, all of which is held by TelevisaUnivision, has limited voting rights and does not include the right to
elect directors. Each share of Class U common stock is automatically convertible into one share of the Company’s Class A common
stock (subject to adjustment for stock splits, dividends or combinations) in connection with any transfer of such shares of Class U
common stock to a third party that is not an affiliate of TelevisaUnivision. In addition, as the holder of all of the Company’s issued
and outstanding Class U common stock, so long as TelevisaUnivision holds a certain number of shares of Class U common stock, the
Company may not, without the consent of TelevisaUnivision, merge, consolidate or enter into a business combination, dissolve or
liquidate the Company or dispose of any interest in any Federal Communications Commission, or FCC, license with respect to
television stations which are affiliates of TelevisaUnivision, among other things. Class U Common stock is entitled to dividends as
and when declared on common stock.
During the year ended December 31, 2022, the Company paid cash dividends totaling $0.10 per share, or $8.5 million in the
aggregate, on all shares of Class A, Class B and Class U common stock. During the year ended December 31, 2021, the Company paid
cash dividends totaling $0.10 per share, or $8.5 million in the aggregate, on all shares of Class A, Class B and Class U common stock.
During the year ended December 31, 2020, the Company paid cash dividends totaling $0.13 per share, or $10.5 million in the
aggregate, on all shares of Class A, Class B, and Class U common stock.
Preferred Stock
As of December 31, 2022 and 2021, there were no shares of any series of preferred stock issued and outstanding.
Treasury Stock
On March 1, 2022, the Company's Board of Directors approved a share repurchase of up to $20 million of the Company's
common stock. Under this share repurchase program, the Company is authorized to purchase shares of its common stock from time to
time through open market purchases or negotiated purchases, subject to market conditions and other factors. On the same date, the
Board terminated the Company's previous share repurchase program of up to $45 million of the Company's common stock.
F-42
During the year ended December 31, 2022, the Company has repurchased a total of 1.8 million shares of its Class A common
stock under the new share repurchase program for an aggregate purchase price of $11.3 million, or an average price per share of $6.43.
The Company did not repurchase any shares during the year ended December 31, 2021. The Company repurchased 0.3 million shares
of Class A common stock at an average price of $2.02, for an aggregate purchase price per share of approximately $0.5 million, during
the year ended December 31, 2020. All repurchased shares were retired as of December 31, 2022.
Treasury stock is included as a deduction from equity in the Stockholders’ Equity section of the consolidated balance sheets.
Shares repurchased pursuant to the Company’s share repurchase program are retired during the same calendar year.
15. EQUITY INCENTIVE PLANS
In May 2004, the Company adopted its 2004 Equity Incentive Plan (“2004 Plan”), which replaced its 2000 Omnibus Equity
Incentive Plan (“2000 Plan”). The 2000 Plan had allowed for the award of up to 11,500,000 shares of Class A common stock. The
2004 Plan, as originally adopted, allowed for the award of up to 10,000,000 shares of Class A common stock, plus any grants
remaining available at its adoption date under the 2000 Plan. Awards under the 2004 Plan may be in the form of incentive stock
options, nonqualified stock options, stock appreciation rights, restricted stock or restricted stock units. The 2004 Plan is administered
by a committee appointed by the Board. This committee determines the type, number, vesting requirements and other features and
conditions of such awards. Generally, stock options granted from the 2000 Plan have a contractual term of ten years from the date of
the grant and vest over four or five years and stock options granted from the 2004 Plan have a contractual term of ten years from the
date of the grant and vest over four years.
The 2004 Plan was amended by the Compensation Committee effective July 13, 2006 to (i) eliminate automatic option grants
for non-employee directors, making any grants to such directors discretionary by the Compensation Committee and (ii) eliminate the
three-year minimum vesting period for performance-based restricted stock and restricted stock units, making the vesting period for
such grants discretionary by the Compensation Committee.
The 2004 Plan was further amended by the Board of Directors on April 28, 2014, and approved by the stockholders at the 2014
annual meeting of stockholders on May 29, 2014, to extend the term of the 2004 Plan until May 29, 2024.
The 2004 Plan was further amended by the Board of Directors effective April 29, 2021, and approved by the stockholders at the
2021 annual meeting of stockholders on May 27, 2021, to increase the number of shares of Class A common stock issuable under the
2004 Plan by 8,000,000 shares, for a total of 18,000,000 shares issuable thereunder.
The Company has issued stock options and restricted stock units to various employees and non-employee directors of the
Company in addition to non-employee service providers under both the 2004 Plan and the 2000 Plan. As of December 31, 2022, there
were approximately 6.2 million securities remaining available for future issuance under equity compensation plans.
Stock Options
The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. Stock-based
compensation expense related to stock options is based on the fair value on the date of grant and is amortized over the vesting period,
generally between 1 to 4 years. Expected volatilities are based on historical volatility of the Company’s stock. The Company uses
historical data to estimate option exercise and employee termination within the valuation model. The expected term of stock options
granted is based on historical contractual life and the vesting data of the stock options. The risk-free rate for periods within the
contractual life of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant.
There were no stock options granted during the years ended December 31, 2022, 2021, and 2020.
F-43
The following is a summary of stock option activity: (in thousands, except exercise price data and contractual life data):
Options
Outstanding at December 31, 2019
Exercised
Forfeited or cancelled
Outstanding at December 31, 2020
Exercised
Forfeited or cancelled
Outstanding at December 31, 2021
Exercised
Forfeited or cancelled
Outstanding at December 31, 2022
Vested and Exercisable at December 31, 2022
Number of
Shares
944
(10)
(50)
884
(533)
-
351
(91)
-
260
260
Weighted-
Average
Exercise Price
2.20
$
1.92
2.87
2.17
2.09
-
2.28
1.71
-
2.48
2.48
Weighted-
Average
Remaining
Contractual
Life (Years)
$
0.19
0.19
Aggregate
Intrinsic
Value
627
11
722
1,559
1,577
381
605
605
There was no stock-based compensation expense related to the Company’s employee stock options for the years ended
December 31, 2022, 2021 and 2020.
Restricted Stock and Restricted Stock Units
The following is a summary of non-vested restricted stock and restricted stock units activity: (in thousands, except grant date
fair value data):
Nonvested balance at December 31, 2019
Granted
Vested
Forfeited or cancelled
Nonvested balance at December 31, 2020
Granted
Vested
Forfeited or cancelled
Nonvested balance at December 31, 2021
Granted
Vested
Forfeited or cancelled
Nonvested balance at December 31, 2022
Number of
Shares
Weighted-
Average Grant
Date Fair Value
3.64
2.96
3.63
3.15
3.12
6.49
4.35
3.03
5.00
5.43
5.10
5.35
5.26
2,256 $
2,623
(1,427)
(81)
3,371
3,200
(1,926)
(115)
4,530
3,555
(3,491)
(151)
4,443
Stock-based compensation expense related to grants of restricted stock and restricted stock units was $20.0 million, $9.6 million
and $5.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.
As of December 31, 2022, there was approximately $13.0 million of total unrecognized compensation expense related to grants
of restricted stock and restricted stock units that is expected to be recognized over a weighted-average period of 1.8 years.
The fair value of shares vested related to grants of restricted stock and restricted stock units was $18.1 million, $8.7 million, and
$5.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company’s restricted stock units are net settled by withholding shares of the Company’s common stock to cover minimum
statutory incomes taxes and remitting the remaining shares of the Company’s common stock to an individual’s brokerage account.
Authorized shares of the Company’s common stock are used to settle restricted stock units.
F-44
16. RELATED-PARTY TRANSACTIONS
Substantially all of the Company’s television stations are Univision- or UniMás-affiliated television stations. The network
affiliation agreement with TelevisaUnivision provides certain of the Company’s owned stations the exclusive right to broadcast
TelvisaUnivision’s primary Univision network and UniMás network programming in their respective markets. Under the network
affiliation agreement, the Company retains the right to sell no less than four minutes per hour of the available advertising time on
stations that broadcast Univision network programming, and the right to sell approximately four and a half minutes per hour of the
available advertising time on stations that broadcast UniMás network programming, subject to adjustment from time to time by
TelevisaUnivision.
Under the network affiliation agreement, TelevisaUnivision acts as the Company’s exclusive third-party sales representative for
the sale of certain national advertising on the Univision- and UniMás-affiliate television stations, and the Company pays certain sales
representation fees to TelevisaUnivision relating to sales of all advertising for broadcast on its Univision- and UniMás-affiliate
television stations.
The Company also generates revenue under two marketing and sales agreements with TelevisaUnivision, which give it the right
to manage the marketing and sales operations of TelevisaUnivision-owned Univision affiliates in three markets – Albuquerque,
Boston and Denver.
At December 31, 2022, TelevisaUnivision owns approximately 11% of the Company’s common stock on a fully-converted
basis.
The Company’s Class U common stock, all of which is held by TelevisaUnivision, has limited voting rights and does not
include the right to elect directors. Each share of Class U common stock is automatically convertible into one share of the Company’s
Class A common stock (subject to adjustment for stock splits, dividends or combinations) in connection with any transfer of such
shares of Class U common stock to a third party that is not an affiliate of TelevisaUnivision. In addition, as the holder of all of the
Company’s issued and outstanding Class U common stock, so long as TelevisaUnivision holds a certain number of shares of Class U
common stock, the Company may not, without the consent of TelevisaUnivision, merge, consolidate or enter into a business
combination, dissolve or liquidate the Company or dispose of any interest in any FCC license with respect to television stations which
are affiliates of TelevisaUnivision, among other things.
On October 2, 2017, the Company entered into the current affiliation agreement which superseded and replaced its prior
affiliation agreements with TelevisaUnivision. Additionally, on the same date, the Company entered into a proxy agreement and
marketing and sales agreement with TelevisaUnivision, each of which superseded and replaced the prior comparable agreements with
TelevisaUnivision. The term of each of these current agreements expires on December 31, 2026 for all of the Company’s Univision
and UniMás network affiliate stations, except that each current agreement expired on December 31, 2021 with respect to the
Company’s Univision and UniMás network affiliate stations in Orlando, Tampa and Washington, D.C. Among other things, the proxy
agreement provides terms relating to compensation to be paid to the Company by TelevisaUnivision with respect to retransmission
consent agreements entered into with MVPDs. During the years ended December 31, 2022, 2021 and 2020, retransmission consent
revenue accounted for approximately $36.0 million, $37.0 million and $36.8 million, respectively, of which $24.9 million, $25.9
million and $26.8 million, respectively, relate to the TelevisaUnivision proxy agreement. The term of the proxy agreement extends
with respect to any MVPD for the length of the term of any retransmission consent agreement in effect before the expiration of the
proxy agreement.
The following tables reflect the related-party balances with TelevisaUnivision and other related parties (in thousands):
Trade receivables
Other current assets
Intangible assets subject to amortization, net (2)
Accounts payable
Univision
Other
Total
2022
$ 5,814
—
3,714
1,097
2021
$ 8,162
—
4,642
1,802
$
2022
2021
2022
— $
274
—
118
— $ 5,814
274
3,714
1,215
274
—
118
2021
$ 8,162
274
4,642
1,920
Direct operating expenses (1)
Amortization
(1) Consists of national representation fees paid to TelevisaUnivision.
F-45
2022
Univision
2021
$
8,095 $
928
8,412 $
1,228
2020
9,063
1,228
(2) Consists of intangible rights originally acquired from TelevisaUnivision.
In addition, the Company also had accounts receivable from third parties in connection with a joint sales agreement between the
Company and TelevisaUnivision. As of December 31, 2022 and 2021 these balances totaled $0.5 million and $3.8 million,
respectively.
In May 2007, the Company entered into an affiliation agreement with LATV Networks, LLC (“LATV”). Pursuant to the
affiliation agreement, the Company will broadcast programming provided to the Company by LATV on one of the digital multicast
channels of certain of the Company’s television stations. Under the affiliation agreement, there are no fees paid for the carriage of
programming, and the Company generally retains the right to sell approximately five minutes per hour of available advertising time.
Since July 2022, the Company owns 15% of the stock of LATV. The Company believes that LATV is majority owned and controlled
by the family of Walter F. Ulloa, the Company's late Chief Executive Officer, who died on December 31, 2022.
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) includes foreign currency translation adjustments from those subsidiaries not
using the U.S. dollar as their functional currency, the cumulative gains and losses of derivative instruments that qualify as cash flow
hedges, and the cumulative unrealized gains and losses of marketable securities. The following table provides a roll forward of
accumulated other comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020 (in thousands):
Foreign Currency
Translation
Marketable
Securities
Total
Accumulated other comprehensive income (loss) as of January 1, 2020
Other comprehensive income (loss)
Income tax (expense) benefit
Other comprehensive income (loss), net of tax
Accumulated other comprehensive income (loss) as of December 31, 2020
Other comprehensive income (loss)
Income tax (expense) benefit
Other comprehensive income (loss), net of tax
Accumulated other comprehensive income (loss) as of December 31, 2021
Other comprehensive income (loss)
Income tax (expense) benefit
Amounts reclassified from AOCI
Income tax (expense) benefit
Other comprehensive income (loss), net of tax
Accumulated other comprehensive income (loss) as of December 31, 2022
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(562) $
(922) $
— $
(922) $
(1,484) $
184
$
— $
184
$
(1,300) $
(45) $
— $
— $
— $
(45) $
(1,345) $
431
$
(25) $
$
22
(3) $
428
$
(113) $
$
8
(105) $
323
$
(1,353) $
454
$
$
532
(121) $
(488) $
(165) $
(131)
(947)
22
(925)
(1,056)
71
8
79
(977)
(1,398)
454
532
(121)
(533)
(1,510)
18. LITIGATION
The Company is subject to various outstanding claims and other legal proceedings that may arise in the ordinary course of
business. In the opinion of management, any liability of the Company that may arise out of or with respect to these matters will not
materially adversely affect the financial position, results of operations or cash flows of the Company.
19. SEGMENT DATA
The Company’s management has determined that the Company operates in three reportable segments as of December 31, 2022,
based upon the type of advertising medium, which segments are digital, television and audio (formerly radio). The Company’s
segments results reflect information presented on the same basis that is used for internal management reporting and it is also how the
chief operating decision maker evaluates the business.
Digital
The Company's digital segment, whose operations are located in Latin America, Europe, the United States, Asia and Africa,
reaches a global market, with a focus on advertisers in emerging economies that wish to advertise on digital platforms owned and
operated primarily by global media companies.
The Company provides digital end-to-end advertising solutions that allow advertisers to reach online users worldwide. These
solutions are comprised of four business units:
F-46
•
•
•
•
the Company's digital commercial partnerships business;
Smadex, the Company's programmatic ad purchasing platform;
the Company's mobile growth solutions business; and
the Company's digital audio business.
Through the Company's digital commercial partnerships business – the largest of its digital business units – the Company acts as
an intermediary between primarily global media companies and advertising customers or their ad agencies. The global media
companies represented by the Company include Meta (formerly known as Facebook Inc.), Spotify, ByteDance and Twitter, as well as
other media companies, in more than 30 countries throughout the world. The Company's dedicated local sales teams sell advertising
space on these and other media companies' digital platforms to its advertising customers or their ad agencies for the placement of ads
directed to online users of a wide range of Internet-connected devices. The Company also provides some of its advertising customers
billing, technological and other support, including strategic marketing and training, which it refers to as managed services.
Smadex is the Company's programmatic ad purchasing platform, on which advertisers can purchase ad inventory. This practice
– the purchase and sale of advertising inventory electronically – is referred to in the Company's industry as programmatic advertising.
Smadex is also a “demand-side" platform, which allows advertisers to purchase space from online marketplaces on which media
companies list their advertising inventory. Most advertisements acquired through Smadex are placed on mobile devices, but they may
also be placed on computers and other Internet-connected devices. The Company also provides managed services to some of its
advertising customers in connection with their use of its Smadex platform.
The Company also offers a mobile growth solutions business, which provides managed services to advertisers looking to
connect with consumers, primarily on mobile devices. This business allows the Company to manage programmatic media buys for its
advertising customers or their ad agencies through multiple ad purchasing platforms in real time across multiple channels.
The Company's digital audio business provides digital audio advertising solutions for advertisers in the Americas. The
Company's advertising customers and their ad agencies use these solutions to promote their brands on online audio streams, and
provides them with tools to target specific users by demographic and geographic categories.
Television
The Company's television operations reach and engage U.S. Hispanics in the United States. The Company owns and/or operates
49 primary television stations located primarily in California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Nevada, New
Mexico, Texas and Washington, D.C. The Company generates revenue from advertising, retransmission consent agreements and the
monetization of spectrum usage rights in these markets.
Audio
The Company's audio operations reach and engage U.S. Hispanics in the United States. The Company owns and operates 45
radio stations (37 FM and 8 AM) located primarily in Arizona, California, Colorado, Florida, Nevada, New Mexico and Texas.
Segment operating profit (loss) is defined as operating profit (loss) before corporate expenses, change in fair value of contingent
consideration, impairment charge, other operating (gain) loss, and foreign currency (gain) loss. The Company generated 74%, 69%
and 36% and of its revenue outside the United States during the years ended December 31, 2022, 2021 and 2020, respectively (see
Note 5).
F-47
The accounting policies applied to determine the segment information are generally the same as those described in the summary
of significant accounting policies (see Note 2). The Company evaluates the performance of its operating segments based on separate
financial data for each operating segment as provided below (in thousands):
Years Ended December 31,
2022
2021
% Change
2022 to 2021
2020
% Change
2021 to 2020
Net Revenue
Digital
Television
Audio
Consolidated
Cost of revenue - digital
Direct operating expenses
Digital
Television
Audio
Consolidated
Selling, general and administrative expenses
Digital
Television
Audio
Consolidated
Depreciation and amortization
Digital
Television
Audio
Consolidated
Segment operating profit (loss)
Digital
Television
Audio
Consolidated
Corporate expenses
Change in fair value of contingent consideration
Impairment charge
Foreign currency (gain) loss
Other operating (gain) loss
Operating income (loss)
Capital expenditures
Digital
Television
Audio
Consolidated
Total assets
Digital
Television
Audio
Consolidated
$ 747,103 $ 555,338 $ 143,309
154,456
46,261
344,026
106,928
144,730
64,376
956,209
623,916
146,839
58,015
760,192
466,517
32,518
61,301
28,792
122,611
41,612
20,657
12,896
75,165
12,148
11,126
2,423
25,697
25,481
63,016
27,952
116,449
26,123
18,381
12,081
56,585
8,377
12,477
1,566
22,420
36,909
51,646
20,265
108,820
49,404
14,210
1,600
2,972
382
40,252 $
28,840
52,965
16,416
98,221
32,993
8,224
3,023
508
(6,998)
60,471 $
15,227
61,145
28,537
104,909
15,404
19,748
13,252
48,404
2,561
12,918
1,803
17,282
3,189
60,645
2,669
66,503
27,807
—
40,035
(1,052)
(6,895)
6,608
6,186 $
5,887
561
12,634 $
2,073 $
2,833
705
5,611 $
1,659
7,184
641
9,484
$
$
$
35%
(1)%
11%
26%
34%
28%
(3)%
3%
5%
59%
12%
7%
33%
45%
(11)%
55%
15%
28%
(2)%
23%
11%
50%
73%
(47)%
485%
*
(33)%
288%
(5)%
25%
121%
336%
67%
3%
(2)%
11%
70%
(7)%
(9)%
17%
227%
(3)%
(13)%
30%
804%
(13)%
515%
48%
19%
*
(92)%
*
1%
815%
$ 408,027 $ 309,347 $ 196,020
425,899
125,426
$ 880,841 $ 851,342 $ 747,345
363,904
108,910
433,303
108,692
F-48
ENTRAVISION COMMUNICATIONS CORPORATION
SCHEDULE II – CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Description
Allowance for doubtful accounts
Year ended December 31, 2022
Year ended December 31, 2021
Year ended December 31, 2020
Balance at
Beginning of
Period
Charged /
(Credited) to
Expense
Other
Adjustments
(1)
Deductions
Balance at
End of Period
$
$
$
6,398
3,790
2,890
$
$
$
3,436
3,469
2,452
$
$
$
$
81
67
$
(59) $
(3,343) $
(928) $
(1,493) $
6,572
6,398
3,790
(1) Other adjustments represent recoveries and increases in the allowance for doubtful accounts.
F-49
OFFICERS
Christopher T. Young
Interim Chief Executive Officer
and Chief Financial Officer
Jeffery A. Liberman
President and Chief Operating O cer
Karl A. Meyer
Chief Revenue Officer
Juan Saldívar von Wuthenau
Chief Digital, Strategy and Accountability Officer
DIRECTORS
Paul Anton Zevnik
Interim Chair
Partner, Morgan, Lewis & Bockius LLP
Gilbert R. Vasquez, CPA
Managing Partner, Vasquez + Company LLP
Patricia Diaz Dennis
Senior Vice President & Assistant General Counsel,
AT&T (Ret.)
Juan Saldívar von Wuthenau
Chief Digital, Strategy and Accountability Officer
Martha Elena Diaz
President, Editorial Televisa, a subsidiary of Televisa
Corporación ( Ret.)
Fehmi Zeko
Senior Partner, CDX Advisors
PRESS RELEASE INFORMATION
Press release and other information are available on the
Internet at our website at www.entravision.com.
Our press releases are also available through our
corporate office by calling (310) 447-3870.
ADDITIONAL INFORMATION
We file periodic reports with the Securities and
Exchange Commission that contain additional
information about the company.
ANNUAL REPORT ON FORM 10-K
You can obtain a copy of our annual report on Form 10-K
filed with the Securities and Exchange Commission free of
charge from our website, www.entravision.com, or at
https://investor.entravision.com/sec-filings/annual-re
ports-proxy-materials/default.aspx, or by writing to us at our
principal executive office at 2425 Olympic Blvd., Suite 6000
West, Santa Monica, California 90404, Attention: Secretary.
FORWARD-LOOKING STATEMENTS
In accordance with the safe harbor provisio ns of the
Private Securities Litigation Reform Act of 1995,
certain statements contained in this Annual Report
are forward-loo king in nature. Although we believe that
our expectations are based on reasonable assumptions
within the bounds of our knowledge and about our
business and operations, there can be no assurance that actual
results will not differ materially from expectations. We do not
intend to update these forward-looking statements.
COMMON STOCK
Stock Symbol: EVC
Listed: The New York Stock Exchange
TRANSFER AGENT
Computershare
150 Royall St Suite 100
Canton, MA 02021
Telephone Number: (800) 522-6645
TDD for Hearing Impaired: (877) 373-6374
Foreign Stockholders: (732) 563-7304
Shareholder correspondence should be mailed to:
Computershare
PO Box 43078
Providence, RI 02940
Overnight correspondence should be sent to:
Computershare
150 Royall St Suite 100
Canton, MA 02021
Shareholder website: www.computershare.com/investor
Shareholder online inquiries: https://www-
us.computershare.com/investor/Contact
CERTIFICATIONS
Christopher T. Young has provided certifications to the Securities
and Exchange Commission as required by Section 302 of the
Sarbanes-Oxley Act of 2002. These certifications are included
as Exhibits 31.1 and 31.2, respectively, to our Annual Report on
Form 10-K for the year ended December 31, 2022.
As required by The New York Stock Exchange (NYSE), on June 17,
2022, Walter F. Ulloa, our late Chief Executive Officer, submitted
his annual certification to the NYSE that stated he was not
aware of any violation by the company of the NYSE corporate
governance listin g standards.
ANNUAL MEETING OF STOCKHOLDERS
Thursday, June 8, 2023
The meeting will be conducted as a virtual-only meeting.
There will be no physical location for the meeting.
Stockholders of record can access the meeting at
meetnow.global/M K9TQS6, plus the unique control
number issued to them.
(310) 447-3870
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
555 West 5th Street, Suite 2700
Los Angeles, CA 90013
(213) 688-0800
Chris YoungInterim Chief Executive Officer and Chief Financial OfficerEntravision achieved record performance in 2022. We reached high-water marks in both revenue and adjusted EBITDA. We demonstrated significant growth in our digital segment, and record political ad sales bolstered strong results in our television and audio segments. This success would not have been possible without our incredible team. I thank our employees for their contributions to our phenomenal financial results.Walter UlloaWe continue to mourn our founder and Chief Executive Officer, Walter Ulloa, who passed away suddenly on New Year’s Eve. Walter was a trailblazer in the media industry and the Latino community. He built Entravision into a Spanish-language television and radio company, and then transformed that company into a global digital powerhouse. He was also a friend to all of us at Entravision. Walter’s clear vision for the company will continue to guide our growth strategy. As Interim Chief Executive Officer, I am grateful to Walter for his example, and for establishing a strong, experienced leadership team that will continue to execute on his vision.Continued Digital Expansion A core part of Walter’s growth strategy was to continue to expand our operations globally. In 2022, we strengthened our global partnerships with Meta, Twitter, TikTok and Spotify. We also opened offices led by digital marketing professionals in Honduras, El Salvador, Ghana, Iceland and Mongolia. As a result of our efforts, Entravision’s operations in Latin America, APAC and Africa saw revenue growth of 12%, 190% and 505%, respectively, year-over-year. Entravision now provides a full suite of digital advertising solutions to clients in 40 countries. Beyond our commercial digital partnerships, we also offer mobile user acquisition services worldwide. Smadex, our mobile-first programmatic advertising platform, had revenue growth of 102% in 2022. Our Smadex team has deep expertise in gaming, wellness, finance, and social marketing, leveraging machine learning algorithms to develop targeted ads on mobile devices. Smadex is the present and the future of user acquisition, targeting and brand awareness. We continue to invest in its growth and leadership.Digital is now our largest segment, comprising 78% of total revenue and approximately 51% of adjusted EBITDA for the year. With the global digital ad industry expected to grow 10% annually through 2026, there is no better time to further grow our digital operations.Strategic Capital Allocation & Pristine Balance Sheet While our business has transformed to meet the demands of our customer base, the one part of our operationsthat has remained consistent is our strong balance sheet. With over $155 million in cash and marketable securities at year end, along with a newly financed $275 million credit facility, we are well positioned to invest in organic growth and make strategic acquisitions, all while returning value to our shareholders. In fact, at the start of 2023, we doubled our dividend payment, returning it to pre-pandemic levels. We now have minimal net leverage – 0.5 times trailing twelve months EBITDA – and strong free cash flow conversion. Going forward, we will continue to thoughtfully leverage our capital, investing in our core business, while seeking out accretiveacquisitions that will further enhance our digital offerings. Positioned for SuccessWith a well-capitalized balance sheet, consistent free cash flow generation, and a talented leadership team, Entravision is ready to weather any economic cycle. Although we have experienced significant change over the past few years, our passion and drive to succeed remains steadfast. Walter instilled in us the importance of a strong work ethic and the belief that what we contribute matters – to our employees, our partners, our customers, the communities we serve, and our shareholders. We will continue to follow his lead.On behalf of the entire company and our Board of Directors, thank you for your continued support.Best regards, Annual Report
2022
entravision.com