Good afternoon, and welcome to Entravision's First Quarter 2020 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Walter Ulloa Chairman and CEO. Please go ahead..

temporary reduction of our workforce by approximately 18%. Company-wide reduction of salaries for those still on the payroll ranging between 2.5% and 22.5% based on compensation levels.

The cancellation of our stock buyback program, the reduction of our dividend to shareholders by 50%; and lastly, the reduction or elimination of various expenses at our broadcast and digital units as well as corporate.

The combination of these cost reductions will result in a year-over-year fixed cost reduction in the second quarter of approximately $6.2 million across our television, audio and digital platforms as well as corporate expense.

Also, while we hope the world returns to work as soon and safely as possible, should it be necessary to maintain these cuts beyond the second quarter, the effective impact of doing so would result in an additional $14 million in fixed cost reduction over the third and fourth quarters versus the prior year period.In summary, our first quarter results were modestly improved from a cash flow perspective.

Right being negatively impacted by the COVID-19 pandemic. While there's no doubt, the second quarter will be extremely difficult to whether the pandemic, we have taken the necessary steps to ensure survival in these difficult times. I will now turn the call over to Christopher Young..

Thank you, Walter, and good afternoon, everyone. As Walter has discussed, net revenue for the quarter was down 1% to $64.2 million compared to $64.7 million in the same quarter of last year. Operating expenses decreased 6% to $40.3 million and consolidated adjusted EBITDA increased 20% to $9.7 million.

For our TV division, revenues in the first quarter increased 2% to 39.2 primarily due to approximately $5.3 million in political revenue for the quarter. Excluding political and $3.9 million in nonrecurring spectrum related revenue in the prior year period, core TV ad revenue was down 6% for the quarter.

Retransmission consent revenue for the quarter was $9.6 million and was up 9% over the prior year period.Radio net revenue for the quarter was down 2% to $11.7 million compared to $12 million in the same quarter of last year. Decrease in our radio segment was primarily due to decreases in both national and local advertising revenue.

Core radio revenues, excluding $1 million - approximately $1 million in political revenue in the first quarter were down 11%.

Digital net revenue for the quarter declined 8% to $13.3 million compared to $14.5 million in the same quarter of last year.The improvement was primarily due to declines at our international headway unit offset by a 13% increase in our U.S. digital unit.

Operating expenses decreased 6% to $40.3 million for the 3-month period ended March 30, 2020, from $42.7 million in the prior year period.

The decrease was primarily due to an 18% decrease in our audio expense, 11% decrease in our digital expense, slightly offset by a 5% increase at our TV division arising from an increase in commissionable revenue and severance costs.

Corporate expenses for the quarter were down 1% to $6.8 million compared to $6.9 million in the same quarter of last year. The decrease was primarily due to a decrease in audit-related fees in prior year, partially offset by an increase in legal fees. Consolidated adjusted EBITDA improved 20% to $9.7 million over the prior year.

Free cash flow, as defined in our press release, increased 304% to $5.2 million.During the quarter, due to the onset of the current economic crisis, we updated our internal forecast of future performance and determine the triggering events had occurred that required interim impairment assessments related to goodwill, SCC assets and fixed assets.

As a result of these assessments, we recognized a onetime noncash impairment charge totaling $39.8 million across all 3 of our business segments in Q1.As a result of the impairment, income tax expense was actually a benefit of $1.7 million for the quarter, while cash taxes paid was $145,000.

Earnings per share for the quarter were a negative $0.42 compared to $0.02 per share in the same last year. Excluding the onetime impairment charge, EPS was $0.02 per share. During the quarter, the company paid a cash dividend of $0.05 per share to shareholders of the company's Class A, B and U common stock.

The total amount of cash dispersed for the dividend was $4.2 million. The company announced today that due to the ongoing pandemic and the related economic uncertainties that have impacted our business.

Directors has decided to temporarily reduce the quarterly cash dividend by 50% to $0.025 per share to shareholders of the company's common stock payable on June 30, 2020.

The total amount of cash to be disbursed for this quarterly dividend will be approximately $2.0 million.Board intends to revisit this temporary dividend reduction next quarter as we continue to review economic conditions. Also during the quarter, we repurchased approximately 259,000 shares at an average price of $2.02 per share.

Given uncertainties around the current economic crisis, the company has ceased all buyback activity for the foreseeable future. Cash interest expense was $1.9 million for the quarter compared to $2.3 million in the same quarter last year. Cash capital expenditures for the quarter were $2.7 million compared to $6.1 million in the prior year period.

We anticipate that our capital expenditures will be between $6 million and $7 million.Turning to our balance sheet. As of March 30, 2020, our total debt was $217.5 million, and our trailing 12-month consolidated adjusted EBITDA was $42.8 million. Cash and marketable securities on the books was $128 million as of 3/30/2020.

Net of $75 million of unrestricted cash on the books, our total leverage as defined in our 2017 credit agreement was 3.3x as of 3/30/2020. Net of cash, total cash and marketable securities, our total net-net leverage was 2.1x. This concludes our formal remarks. Walter and I will now take your questions. Grant I'll hand it over to you..

[Operator Instructions]. Our first question comes from Michael Kupinski with Noble Capital Markets..

So in terms of the cost cuts that you've done for the second quarter, is that in addition to the cost cuts that you've done or began, I guess, in the third and fourth quarters of last year? So this would be incremental or is that in total? Okay. And the - okay. I'm sorry.

And what are the metrics that you are going to use in terms of trying to determine whether or not to keep those costs in place for the third and fourth quarters? What are the triggers that you may back off on some of those cost cuts?.

I think revenue as revenue..

So just be in general, that revenues would increase, then you can start layering back the cost, okay? And then in terms of the digital business, can you talk about what was involved in doing the consolidation of what are the cost savings associated with that move? And what does it mean for your digital strategy going forward? I mean, can you just kind of expand upon the reasons why you went through the consolidation and what that means for your strategy? And it sounds like you're trying to still develop your strategy to expand in the U.S.

and the U.S. footprint. So I was just wondering if you can just add a little bit more color there..

Well, the reason for the consolidation of the digital business was just to get an organized approach to our marketing of those businesses. But again we recently named as [indiscernible] our national digital business. Certainly, one of the people within the organization with the most experience and [indiscernible] take the role that he has.

But we've also consolidated our U.S. business under the Entravision digital brand. But it was - our purpose was to have a robust multiplatform service, servicing our existing small and midsized businesses in the U.S. and complements our branding services by our television and radio tailor performance-based digital products.

And so we're able to - by I'll say, integrating our better integrating our digital - U.S. digital assets, our broadcast assets. We're able to provide better solutions, marketing solutions for our clients. And then our international business, taking steps, as I pointed out, to accelerate the growth of that business in the U.S. with the Smadex product.

So it's just a way of bringing everything under 1 umbrella and to create a more efficient platform for all of our digital business units..

And Entravision U.S., for instance, your Entravision digital U.S., does that have the full suite of products at this point? Or is that something that you're going to be layering in as you go?.

It has the full suite of products, just latest consolidation that we just made..

Got you. And then auto, obviously, a big category for you. You said it's 24%. I know that at 1 point, it was 29%, almost 30% of your business.

Can you talk about that category, and whether you believe it will come back? What are you hearing from your dealerships and so forth, if you could just kind of give us a flavor of what you're starting to see as the economies are starting to open a little bit here?.

Well, it's - we haven't - don't have the feedback right now that we'd like to have. It's - as I pointed out, we're just starting to see Texas and Florida and Colorado opening up. There's also steps being taken to open up California here this week and some capacity. But motive is difficult to really estimate. I think it's going to end up.

I gave you some information that we were able to source about how the revised forecast for auto unit sales in the U.S.

is about $12 million to $13 million as compared to almost $17 million in 2019 right there, there's been a major adjustment in forecasting by the auto industry in terms of [indiscernible] challenges that we're all going to face but anything, Chris?.

Well, they're going to come back and offer a ton of incentives when the world finally opens up. They've got a ton of inventory. They have to start unloading. And those incentives are going to be record breaking, and they're going to need to advertise and message those incentives. So we expect auto to come back fairly robustly, when it does come back.

The question is when that actually happens but we're pretty confident that when it does come back, it will be a strong way..

I also think that because of the systemic change in attitudes. Some of the younger demographics and millennials who hadn't entered the - not entered the vehicle market [indiscernible] ride share programs and public transportation. The pandemic is going to change that, and we're going to see more younger demos looking to buy vehicles..

Got you. And then do you have any - obviously, political was very strong for you in the first quarter.

Any thoughts on how that shakes out as you trend toward the stronger third and fourth quarters, and are you seeing political in the second quarter? Can you just talk a little bit about your thoughts on political?.

Well, we had a - just a huge political - certainly, we're very pleased [indiscernible] turned out, other important data point about the - our core business advertising categories. We're also performing quite well. In our second quarter advertising categories, we're looking very - the outlook was very positive.

As far as political is concerned in the second quarter, we review our numbers constantly. And what we're seeing is probably, we look to be at budget for the quarter. Expecting to be - we had forecasted to be above budget, but then everything feel fairly confident will be a budget for quarter. Now for Q3 and 4, it's still too early to tell.

We have - you can imagine, Q3 is higher budget than Q2 then Q1. And then Q4 is pretty large budget. So we'll see.We still think one of the things I just read this week, and you probably read too, is this announcement by biding campaign that they're going to spend $55 million in 5 key states to mobilize the Latino voter.

And of the five states, I think - I believe we're in 4 of those states with strong media assets, including ADA, Colorado, Florida and Texas. Anyway, but we're well positioned to take advantage of that rather impressive purchase by the binding campaign or investment in the Latino.

And I still believe that in order to win the White House, you're going to need to buys Latino vote in the important to swing states..

Got you. And you have a large cash position, and it appears that there are a lot of distressed companies out there that may trip some covenants.

What is the M&A environment like right now? Are people like talking? Or are they just waiting to see how things shake out? And if you are looking at assets, is there a preference for you in terms of radio, TV or digital at this point?.

Well, I don't think there's any - we haven't been [indiscernible] to any conversations on the M&A front.

I think everyone is still in kind of a lingering state of what do we do now as far as this pandemic is concerned, covenants don't start to get tripped up until you start reporting Q2 numbers, and you're going to be in late summer before that happens.

And then conversations with lenders about what to do about the covenant brakes starting in early summer, perhaps. So we're not kind of - we're not in that realm where those conversations start to be had. But that said, we're sitting here and we're watching, and we'll wait and see what shakes out.

But to your point, we do have a cash cushion, and we'll wait and see how things turn out. As far as platform priorities are concerned, I think digital continues to interest us. TV would also be opportunistic. Should it be kind of an end market tuck-in opportunity? And then, I guess, third, on the run would be radio..

And just 1 last question and a housekeeping item. I assume that there were some unusual items in the D&A, depreciation and amortization line, which was like $4.5 million.

Is that number - is that a good number going forward? Or was there something in that number?.

That was related to the repack assets depreciating. So it's slightly accelerated number, but that will smooth itself out..

Got you..

Now the repack was came after the FCC auction and had to go and buy equipment on that front, and that's why that was a temporary spike..

[Operator Instructions]. At this time, I'm showing no questions in the question queue. So this will conclude our question-and-answer session. I'd like to turn the conference back over to Walter Ulloa for any closing remarks..

Thank you, Grant, and thank you, everyone, for participating on today's call. We look forward to reporting our second quarter earnings results on an investor call in early August. Stay Safe. Thank you..