Good day, everyone, and welcome to the Entravision Communications Corporation Second Quarter 2018 Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mr. Walter Ulloa. Please go ahead.

Thank you, Andrea. Good afternoon, everyone, and welcome to Entravision's second quarter 2018 earnings conference call. Joining me on the call today is Jeff Liberman, our President and COO; and Chris Young, our Executive Vice President and Chief Financial Officer. Before we begin, I must inform you that this conference call will contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ. Please refer to our SEC filings for a list of risks and uncertainties that could impact actual results. The call is the property of Entravision Communications Corporation. Any redistribution, retransmission or rebroadcast of this call in any form without expressed written consent of Entravision Communications Corporation is strictly prohibited. Also, this call will include non-GAAP financial measures. The company has provided a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures in today's press release. The press release is available on the company's website and was filed with the SEC on Form 8-K. Our second quarter results were in line with our expectations, with increased revenues overall, thanks to solid growth achieved by our digital segment, particularly, partially offset by decreased revenues at our television segment, while our radio segment revenue was flat over the prior period. As we communicated during our last earnings call, we continue to carefully manage our expenses to help offset the prevailing revenue headwinds across the broadcasting industry. During the quarter, we took approximately $8 million of annualized expenditures out of the business. These actions resulted in onetime severance charges of approximately $782,000, which are excluded from our calculation of EBITDA as defined in our credit agreement. We will continue to focus on additional cost reductions throughout the balance of the year as business conditions warrant, and we'll provide an update for…

Thank you, Walter, and good afternoon, everyone. As Walter has discussed, net revenue for the quarter was up 5% at $74.3 million compared to $70.5 million in the same quarter of last year. Operating expenses increased 4% to $43.8 million, and consolidated adjusted EBITDA was $14.9 million. Onetime severance costs relating to our workforce reduction efforts during the second quarter totaled $782,000, and they're excluded from our calculation of EBITDA during the quarter as per the terms of our 2017 credit agreement. For the quarter, revenues in our TV segment were down 3% to $36.5 million compared to $37.8 million in the same quarter of last year. The decrease in our TV segment revenue was primarily attributable to decreases in both local and national revenue, offset by an increase in retransmission revenue. We generated retrans revenue of $9.1 million for the three-month period ended June 30, 2018, compared to $7.5 million in the same quarter of last year. Radio net revenue for the quarter was flat compared to the prior year period at $17.2 million. National revenue was up 8%, while local revenue was down 3% compared to the prior year period. Digital net revenue for the quarter was up 32% to $20.6 million compared to $15.6 million in the same quarter of last year. The increase was primarily attributable to the strong performance of our Headway digital operations. For the quarter, cost of revenue in our digital media segment was up to $11.4 million compared to $8.8 million in the same quarter of last year. The increase was primarily attributable to increased cost of goods sold at Headway during the second quarter of 2018 related to the increase in revenue over the prior year period. Operating expenses increased 4% to $43.8 million for the three-month period ended June 30,…

[Operator Instructions]. And our first question comes from Michael Kupinski of NOBLE Capital Markets. Please go ahead.

Thank you for taking the questions. There are a number of TV stations on the market now. I was wondering if you can talk about your appetite for TV stations, whether Spanish or Network, in the current environment.

Michael, it's Walter. I mean, we will prefer if we were to buy television stations to buy Spanish language stations. But if only English language stations are available, then we would look at markets where we have high-density Hispanic populations. For example, we bought an NBC affiliate in Palm Springs, which is about a 50% Latino market in terms of population. If we could find English language affiliates along the U.S.-Mexican border, from San Diego all the way to McAllen, in those five broader markets that we operate in, that would be certainly, I think, a positive development. But unless it's a high-density Latino market with populations pushing 50%, it's probably not the right investment of our capital.

Got you. And what are the current NOLs at the company? And then if you can just give me a little color in terms of the taxes. Can you – particularly, as it relates to the spectrum auction proceeds. And in the event that the company doesn't make a like-kind acquisition, at what rate would you have taxes? And how much of the proceeds are going to be taxed, so to speak? And just a little color on where the tax situation would stand on that.

Sure, Michael. We've got about $360 million in NOLs on the books. We have, under the 1033 ruling, until the end of next year to redeploy the proceeds of the auction for like-kind exchange assets; in other words, to avoid having to burn through those NOLs. If in the events we were not able to burn through those NOLs, the tax rate that would apply would be 22%.

Got you. And you took a nice chunk of expenses out of TV. The $8 million in annualized cost savings, will that be spread evenly over the next few quarters? Or can you give us some thoughts about whether the second quarter is a good run rate? Do you expect further cost reduction efforts? Could you add a little color there?

Sure. That's an annualized number. You didn't see it in the second quarter, the full effect, because you had about $800,000 in severance charges that were offset against that. It did come out of EBITDA, but it's still in the expense. We make that adjustment with the EBITDA calculation. But for radio, on a run rate basis, per quarter, it should be about $1.1 million beginning in the third quarter. And for TV, it should run about $1.8 million.

Got you. And then political in the second quarter piece nicely above the last cycle, I believe, albeit you get most of your political in the second half. Would you care to comment about how the third quarter is shaping up on political advertising and whether or not you have some thoughts about full year political advertising at this point?

Well, I think we told our investors and the markets, Michael, that we are looking to achieve the same amount of political revenue that we generated in 2014, which was about $9 million.

$9.3 million, that's right.

$9.3 million. And so we've kept that goal this year. Not sure about which way the wind was going to blow, but I'm pleased to announce that so far, through the first half of the year, we're at budget. We've got two big quarters of political coming up between the third and the fourth quarter, I mean, October, for sure. But we're on the right track, so we feel good about it.

Got you. That’s all we have to know.

Thank you.

Thank you.

Our next question comes from Gordon Hodge of Tracker Research. Please go ahead.

Yes. Good afternoon and thanks for taking my questions. Just had a question on the retrans of $9.1 million. I'm just wondering, is that a – was there any kind catch-ups or anything in there that wouldn't necessarily recur going forward? And then I was curious, also, I believe at the end of the quarter Dish and Univision got in a little spat, I guess. And I'm just wondering if that's impacting you on the refinance front in Q3.

Yes. So the retrans in the quarter did have some catch-up payments. But the way you should think about retrans forward, particularly given that we're getting some traction on the English language side with respect to the retrans growth, that run rate number quarter in, quarter out should be around $9.5 million in revenue. I would caution, though, not to factor that $9.5 million in the coming quarters simply because, to your point, we're dark on Dish across the country as Univision works through their negotiations. And that has a price tag of about $340,000 a month for us. We're already in two months of two of that issue of us being dark. So you should factor in at least what we're thinking is at least two months of that $340,000 coming out of that $9.5 million quarter run rate – quarterly run rate.

Okay. And the $9.5 million run rate you talked about, that's a gross number, not net, obviously, because NBC – you got to pay non-Hispanic networks something out of that, presumably, so it's not all margin, I understand that. But I'm curious, is that – does that reflect increases you've now negotiated in, say, Palm Springs, et cetera? Or is that – those are just natural increases and the renegotiation comes up later?

We're getting traction on some increases. You break out that $9.5 million. $7.5 million of that $9.5 million is Univision-related retrans, and then the balance, that's $2 million, is based on the English language stage. Now on the reverse comp side, you've got about $1 million – a little bit more than $1 million a quarter against that $2 million as far as the retrans is concerned in expense.

Great. Okay, cool. And then I'm just wondering, I know that one of the issues you've been grappling with is just the broader economy is having some challenges of late. And I'm just wondering if you're seeing any stabilization of those economies in terms of advertising or just general business, thinking of El Paso, McAllen, et cetera. And whether – or at least are you seeing any sign of that getting less worse?

Gordon, in spite of the recent, I'll call it, downturn, the impact of the retirement of our Telemundo affiliation in San Diego, our dominance along the U.S.-Mexican border continues, from McAllen all the way to San Diego. And last quarter, our TV stations along the border performed quite well despite the fact that there's a lot of controversy along the border, particularly in the McAllen area.

Okay. Good. And I guess, just finally, just on the buyback, glad to see you buying back some stock. How much is left of the authorization? I think it was $15 million. Can you state how much…

Yes, we've got almost the full $15 million that was announced in the last quarter. We were just burning through the remnants of our prior $15 million approval. So you virtually – you pretty much have all of the $15 million of the renewed approved amount as dry powder.

Okay, great. And then just last comment, I just – if I'm not mistaken, I think because of the World Cup, Univision's ratings really were a challenge, I think, in the second quarter, presumably for you guys as well. So process that you're able to outgrow the ratings declines, just anything to comment there. Is it news that's tolling up? Or is it just your sales guys just locally being able to deliver through the ratings? Or anything you can comment would be great.

Well, the news held up pretty well during the World Cup period. We did get the benefit, by the way. We've got a couple Fox stations. So we've got some benefit there. And then we also had World Cup on radio. So we got some benefit there as well. But I think, generally speaking, our local news really carried us through the difficult ratings period. Telemundo, to your point, did really well in the ratings, good for them. We just basically continue to focus on those operations which we have ultimate control over, which is our local news content. And we did pretty well, so we're pretty pleased.

I commented, Gordon, that in the recent survey where we compete with Telemundo, we – our adults 18 to 49, we were number one over Telemundo in 14 of the 17 markets. Now that was in May. But our news has always been a very strong product, and we didn't see any decline in advertising support for our news.

That’s great. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Walter Ulloa for any closing remarks.

Thank you, Andrea. And thank you, everyone, for participating on our second quarter earnings call. We look forward to talking to all of you in November when we will announce our third quarter earnings results. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.