Good afternoon, and welcome to the Entravision Second Quarter 2019 Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Walter Ulloa, CEO. Please go ahead, sir.

Thank you, Nancy. Good afternoon, everyone, and welcome to Entravision's Second Quarter 2019 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.This call is a property of Entravision Communications Corporation. Any redistribution, retransmission or rebroadcast of this call in any form without the 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 at our TV division being offset by a decrease in revenues at both our digital and radio segments.Looking beyond the general business environment, our balance sheet continues to be solid with approximately $166 million in cash and marketable securities on the books versus a total debt of $245 million. During the quarter, we were also active in buying back our stock with approximately 439,000 shares repurchased at an average price of $2.95 per share. We also continue to return capital to our shareholders through our quarterly dividend. We are very proud of our local TV news teams in Denver, San Diego and Washington, D.C. In these 3 markets, we have won a total of 44 Emmys. We'll update you on the next call…

Thank you, Walter, and good afternoon, everyone. As Walter has discussed, net revenue for the quarter was down 7% at $69.2 million compared to $74.3 million in the same quarter of last year. Operating expenses decreased 1% to $43.2 million, and consolidated adjusted EBITDA decreased 15% to $12.6 million. For the quarter, revenues in our TV segment were up 4% to $38.1 million compared to $36.5 million in the same quarter of last year. The increase in our TV segment revenue was primarily attributable to revenue generated from spectrum usage rights, which totaled $4 million during the second quarter, arising primarily from non-advertising revenue related to a service agreement with a local telecom operator and spectrum leasing initiatives, and an increase in national advertising revenue, partially offset by decreases in local advertising revenue and political revenue.Retransmission consent revenue for the quarter was $9.1 million and was flat over the prior year period. Radio net revenue for the quarter was down 17% to $14.4 million compared to $17.2 million in the same quarter of last year. The decrease in our radio segment was primarily due to decreases in local and national advertising revenue as well as the absence of World Cup revenue achieved in the prior year period.Digital net revenue for the quarter was down 18% to $16.8 million compared to $20.6 million in the same quarter of last year. The decrease was primarily due to a growing trend of digital advertising moving over to programmatic platforms in recent months, both domestically and more recently in international markets. Operating expenses decreased 1% to $43.2 million for the 3-month period ended June 30, 2019, from $43.8 million for the prior 3-month period. The decrease was primarily attributable to a 10% decrease in our radio division expenses arising from certain expense control measures…

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

First, I was wondering in the digital media segment, if you can break down for me where you're seeing the most trouble? Is it Headway? Is it Pulpo? And since you did take an impairment charge and anticipate that you're looking for a slower growth in that business, I was wondering if you can -- obviously, you're going to be cycling against your strategy over the course of the next year, but kind of looking forward, if you can give us your thoughts on whether or not this division can begin to grow based on the current environment that you're seeing? Or is it that you have to maybe make a few acquisitions to kind of bolster the current business to have a more broader product suite to offer advertisers.

So Michael, it's Walter. To answer the first question, the -- of our 2 digital, call it, units, Headway saw the biggest decline, and that was just attributable to the changes that I spoke about in my remarks about more advertisers moving to programmatic away from our Mobrain traditional product. In addition to that, we did -- looking at the business in totality and dusting it -- and taking steps to return to growth. We're on a better track in the third quarter -- expenses. As I said, we're also putting increased focus on Smadex, which is our machine learning, artificial intelligence programmatic product. That seems to be coming along nicely. So I believe that for Headway, in particular, the second half will be better than the first half.We are more prudent about the business that we take in terms of campaigns that we involve ourselves in to make sure that we're producing the proper margin. But we remain confident in the business. We continue to look forward -- to answer your other question, we continue to look for those tuck-ins that will enhance our, I'll call it, Headway platform. Smadex was one. We're looking perhaps at the supply side platform that would also give us more -- create a more robust digital platform just overall. So we have great confidence in the business and -- part of the process here of -- back to growth.

And I was just wondering, Walter, I know that you've set parameters on how much you think that digital revenues would contribute to total company revenues, do you have any thoughts in terms of updating that prospect or your goals for the digital segment going forward?

Well, I'll just answer it this way. We want -- I mean, our goal is to get our digital business to 30% of total revenue, and we're certainly headed in that direction. We've had a bit of a -- track here in the first half, but we expect to get back to that target here in the second half. That said, we're also being -- I said we're being careful in terms of the business that we take to make sure that -- the campaigns that we engage in are going to give us the right margins.

Got you. And then in terms of just in -- on the TV side, if I could turn to that for a second. The pacing data that you gave, the 2% growth for TV, does that include the spectrum agreements, service agreements as well?

It does, Michael. It includes all revenue streams, multicast, one-offs with the mobile telecom and advertising and retrans.

Got you. And in terms of just the core business, what are you seeing -- is auto the problem? Because I know that auto as a percent of total advertising revenues tend to be higher for you than even some of the English language TV stations. And can you just kind of give us your thoughts on where auto is -- what auto is doing? And as a percent of total revenues, more particularly as -- how big of a category is it now for you?

Auto, for the second quarter, as a category for TV was down 1%, Michael, which is basically flat and kind of in line with, I think, where the rest of the industry ended up. And it's representing about 31% of our total TV business. So it's kind of consistent with what we've seen historically as far as that total percentage is concerned. For Q3, the auto is pacing at a minus 3. Like a 2-point drop, but still relatively resilient compared to what I think is happening in the industry in general as far as the sector is concerned. Everyone knows that cars are coming down, but the spending seems to be pretty consistent quarter in, quarter out.

Got you. And in spite of some weak revenues, you guys have been kind of generating some pretty strong cash flow, and this is a reflection of your expense reduction efforts. How do you see that in the second half? Can you just kind of give us some thoughts on when you might start to cycle against some of the expense costs that you've already taken beginning last year?

Sure. I'll just break it out segment by segment and give you some high-level color. I mean, radio, generally speaking for the second half of the year should be kind of in the flattish range. They are cycling up against that change that we made back in the second quarter of last year. And the same goes for TV, by those range, if you blend both Q3 and Q4 together. For digital -- yes, just to follow up on that point, digital, we should be seeing slightly easier comps on the expense side, so flat to slightly negative.

And Chris, I think that you may have mentioned that there was some further opportunity -- that there might be some further opportunity to cut cost in the radio and maybe in other areas. Have those initiatives already been factored into your thoughts on the expenses? Or is that a prospect that might be a positive surprise?

No, that's still -- all of that work is still on paper. We've not finalized any decisions on that front yet, Michael, but we're still optimistic that there are more expense savings to come.

[Operator Instructions]. We have a question from Mr. Gordon Hodge from Tracker Research.

Just had a couple of questions. One, I apologize, but Walter I -- my phone I think got garbled when you were giving out the audio pacings and the digital pacings, and I was wondering if you wouldn't mind repeating those.

So digital for third quarter?

Third quarter.

Yes, the third quarter.

Yes, it's pacing at minus 14.

And then audio?

Oh, audio is minus 14 as well.

Oh, it was. Okay. Very good. So I guess, a couple of things. One, just I was wondering on retrans. Given that innovation was back on DISH in, I believe, the full second quarter, I was just curious on the retrans trends for you. Is that a function of your arrangement with Univision? It -- the fact that it's flat rather than up a little bit. Or is that a function of sub-losses elsewhere?

So it's really a function of last year's $9.1 million, Gordon. We had some true-up payments totaling about -- those are actually high as your comp. Now going forward, the comps get easier because we took about, call it, almost, almost $1 million a quarter out in both Q3 and Q4 that we now have back in to the full extent of the $1 million, call it $800 million because there's some sub-losses, but it should have some meaningful growth year-over-year for the back end of the year.

Okay, terrific. And then last two. I guess, one, Walter, I'm wondering if you could just expound a little bit on the change in the way that local markets are being managed and organized? I think that was announced yesterday. Maybe just talk us through a little bit what's changing and sort of what the approach is at the local level?

Well, we've made a few changes here in the last couple of months, starting with the naming of Karl Myer as -- our Media Group revenue. Karl is doing a great job. In fact, he did -- Karl has elevated Eddie Melendez to be President of Local Media. And Eddy is -- his responsibility is to oversee our, I'll call it, 10 largest markets for local and as well as both broadcast local and digital local. And then we just -- Juan Navarro, who used to work with us a few years back, just returned to the company. And Juan is going to be responsible for, I'll call it, our mid to smaller markets. And so Juan will report to Eddie, Eddie reports to Karl. And then, of course, Claudia Santana is -- oversees our national and she'll report to Karl as well and as well Carina Serna and -- who overseas sales and marketing, and Alejandro Martin Del Campo, who oversees our research and business intelligence. Also, Jessica Martinez, who overseas our local digital effort will report to Eddie Melendez. So we're very pleased with the -- Karl has restructured the broadcast and local digital sales effort. I think we're going to be on the right -- we're on the right track now, and we expect longer results in this.

Have they made any concrete changes to the way the sales are done? Is it -- are they combining? Is it a multimedia sales approach? Or is there any change there? Or is it too early to talk about that?

No. Certainly, there's definitely more emphasis on multimedia, more holistic approach to local sales, combining digital with broadcast, certainly, in many cases, leading with digital. So there's definitely a greater emphasis on -- and then combining that with the other -- with our other marketing solutions like television and radio ops.

Okay. Terrific. And then last question, just as it relates to M&A, you made a small acquisition in the -- I guess, post the second quarter, just to be curious, it's quite small, I know, but just be curious what the plan is for that. And then there are a number of sort of opportunities arising, one of which is with Univision. And I'm just curious if you think there might be some opportunity if they were to sell off the parts as opposed to sell off the entire company, whether you -- that would present some opportunity for you?

Well, we have a close working relationship with Univision. We certainly understand their, I'll call it, group platform, well, their local TV and -- the process has just started in terms of whatever strategic alternatives they're going to seek. We're just going to certainly monitor it. And if there's an opportunity along the way for us to increase our -- particularly our television portfolio of Univision affiliates and UniMás affiliates, we'll see.

And then any comments on the Texas acquisition?

The TV acquisition. Yes, we just made the announcement. We're filing with the FCC. We'll going to wait for the FCC to rule on that and give us the green light. We do have plans for it but I think we want that process to play itself through before we announce what the plans are, Gordon.

And we have a follow-up question from Mr. Michael Kupinski from NOBLE Capital Markets.

Just one other question. Some of the broadcasters that have already reported have indicated that they were actually seeing political being booked even for the presidential election. I was wondering if you have any visibility on political. Certainly, the prospect for you in the fourth quarter maybe with some primary dollars kind of maybe that might flow in. Are you seeing political being booked at this point? Or is it still a little too early?

No, not yet, Michael, it's still early. We do have -- don't have it in our budgets for sure, but we do have expectations that we'll see fourth quarter political. As you know, the California primary has been moved up to March. So we -- and that's going to be a very competitive primary, certainly in California, if everyone's California could decide the running presidential nominee. So we expect to see some political in the fourth quarter.

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, Nancy, and thank you, everyone, for participating on our second quarter 2019 investor conference call. We look forward to speaking to all of you in November when we will announce our third quarter results.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Enjoy the rest of your day.