Good afternoon and welcome to the Entravision’s Second Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today’s event is being recorded. At this time, I would like to turn the conference call over to Walter Ulloa, Chairman and CEO. Sir, please go ahead.

Thank you, Jamie. Good afternoon, everyone, and welcome to Entravision’s second quarter 2020 earnings conference call. I hope everyone is staying healthy and safe in these difficult times. Joining me on the call today is Chris Young, our 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 risk and uncertainties that could impact actual results. This call is the 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 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 affected by the COVID-19 pandemic and the resulting economic crisis, which caused revenue declines across all of our business segments, compared to the prior year period. We anticipate a continued adverse economic environment due to the pandemic for the balance of 2020. Accordingly, we continue to manage our cost structure in a most efficient manner in order to align our operations most effectively with the challenges we are presently facing. I’ll walk you through the various expense saving steps we have undertaken later in my remarks. Looking beyond the difficult business environment, our balance sheet today continues to be among the strongest in the industry with approximately $138 million in cash and marketable securities on the books versus a total debt of approximately $216.8 million. At the end…

Thank you, Walter and good afternoon everyone. As Walter has discussed, net revenue for the quarter was down 35% to $45.1 million, compared to $69.2 million in the same quarter of last year. Operating expenses decreased 24% to $33 million and consolidated adjusted EBITDA decreased 86% to $1.7 million. For our TV division, revenues in the second quarter decreased 29% to $27 million. Political revenue totaled $1.3 million in retransmission consent revenue, totaled $9.4 million, representing an increase of 3%. Radio net revenue for the quarter was down 53% to $6.8 million, compared to $14.4 million in the same quarter last year. The decrease in our radio segment was primarily due to decreases in both national and local advertising revenue. Digital net revenue for the quarter declined 32% to $11.4 million, compared to $16.8 million in the same quarter of last year. SG&A expenses decreased 20% to $10.9 million for the 3 months period ended June 30, 2020, from $13.5 million in the prior year period. Direct operating expenses decreased 25% to $22.1 million compared to $29.7 million in the prior year period. The decrease on both line items was primarily due to our ongoing cost-cutting costs to bring our operations in line with a difficult economic environment. Corporate expenses for the quarter were down 17% to $5.4 million, compared to $6.5 million in the prior year. Tax expense was actually a benefit of $5.3 million for the quarter, while cash taxes paid was $322,000. Earnings per share for the quarter were a positive $0.03, compared to a loss of $0.19 per share in the same quarter of last year. Net cash interest expense was $1.3 million for the quarter, compared to $2.5 million in the same quarter of last year. Cash capital expenditures for the quarter were $3 million, compared to $7.9 million in the prior year period. We anticipate that our capital expenditures will be approximately $7.5 million for the full year 2020. Turning to our balance sheet, as of June 30, 2020, our total debt was $216.8 million, and our trailing 12-month consolidated adjusted EBITDA was $32 million. Cash and marketable securities on the books was $134.4 million as of June 30, 2020. Net of $75 million of unrestricted cash on the books, our total leverage as defined in our 2017 credit agreement was 4.43x as of June 30. Net of total cash and marketable securities, our total net leverage was 2.58x. This concludes our formal remarks. Walter and I will now be happy to take your questions. Jamie, I will hand it over to you.

[Operator Instructions] Our first question today comes from Michael Kupinski from NOBLE Capital Markets. Please go ahead with your question.

Thank you and thanks for taking the questions. First of all, congratulations on managing through a very difficult environment and actually overachieving my cash flow expectation and actually showing positive cash flow. I know that must have been a real struggle, and a lot of sacrifices there. So my question is, as we kind of look into Q3, your pacing numbers are actually a little bit better than what I was expecting pretty much across the board. In your Q3 TV pacing number, how much are you anticipating or maybe you are political in that number and then also maybe for radio as well?

For television, I believe the pace that we – that I gave you was minus 8%.

Right.

But core would be minus 14% for the quarter.

Yes, taking up.

Taking up political, yes.

Got it. Yes, yes. And then the same for radio, because, actually, radio in the second quarter actually had better political, I mean, it was a few hundred thousand dollars, but it was a little bit better than what I was expecting. Are you seeing radio kind of with political in there as well?

We are seeing certainly radio with political, not as much political certainly as our television business. But Chris, do you have that pivot information?

Well, I have got a total radio pacing at a minus 33%, and I have got core radio at just – minus 33%, and I have got core radio, I think, it’s not minus 38%.

That’s correct, minus 38%. A couple of points...

Okay. Yes. Okay. And can you just give us your thoughts about political, I guess, for the balance of the year? What you are – I understand that there’s been some presidential money being booked, but it seems like it’s in specific markets. I was wondering if you can just give us your thoughts about the balance of the year in terms of political?

Well, we had a huge first quarter political, well surpassing our budgets. Our Q2 political was about $1.2 million and was slightly under what we have budgeted. Q3, we have got certainly a much larger number than Q2 to achieve. But we feel pretty good about it right now. And of course, Q4 will be the biggest quarter of the year for political. But we feel pretty good. We feel like we are going to certainly achieve our budgets for the year. So far, we are on track to do that. So on we go.

And in terms of the cost cutting you indicated that you can reduce cost, fixed and variable cost in Q4 and indicated what your thoughts were about Q3. What would be the trigger in terms of further action in terms of cost cutting? I mean, are – I am just trying to understand in terms of modeling. What – how we should look at the pace of revenues versus your expenses? I am just trying to understand how you determine to pull back the throttle on the expenses even further if you need to, that sort of thing? Or whether or not we could see some variable cost kind of move back in? What’s going to be the trigger there?

Well, as you pointed out, Michael, we made some pretty severe cuts in Q2. And those cuts have followed us into Q3. Revenue will determine how we manage our expenses going – as we move through the rest of the year. I mean, I think, that’s the best information I can give you. Chris, do you have any comments?

Yes. I don’t think it’s the right call to draw line in the sand saying if we hit this threshold, variable expenses will start to creep in. we are operating at a barebones level right now. When the environment starts feeling better and we start feeling more confident about everything, is when we will start to factor in some incremental expense with the revenue return.

I will point out, Michael, that even though we have made these cuts and they have been severe and certainly deep, I feel that we are operating efficiently, and we are addressing all the needs of our clients and customers. And so I think our people are operating at one of the highest levels that we have ever operated as a company. So I am certainly pleased to see that.

I think my last question is your positive cash flow in the second quarter. Did I hear right that you canceled your stock repurchase program? Given the fact that you are cash flow positive, Q3 is actually pacing better than expected, what are your thoughts in terms of capital allocation, that sort of thing?

So the stock buyback program has been canceled. We were active earlier in the year, but that has since been canceled. We did cut the dividend. Right now, we are in cash conservation mode, Michael. So we should – with de minimis CapEx this year, we are not a big taxpayer, we should be able to generate some significant free cash flow conversion as far as whatever incremental EBITDA we are able to generate. So that’s what we are focused on right now in this difficult environment. And I think our cash balance for the moment is a safety net that we are just trying to protect.

Thank you and be well everyone.

Thank you, Michael.

You too, Michael.

[Operator Instructions] Our next question comes from Aaron Watts from Deutsche Bank. Please go ahead with your question.

Hi. Walter. Hi. Chris. Thanks for having me on.

Hi. Aaron.

Thank you.

So you are in a unique position where you have prevalence over both TV and radio stations. And I am just – so obviously, radio was hit harder than TV as people were stuck at home and maybe not in their cars. As you look ahead kind of to what you are seeing in the third quarter, it seems, as though, obviously, TV is pacing stronger than radio, even stripping out political. What’s your expectation as traffic patterns return to more normal? What you’ll see in radio advertising? And do you expect radio to close the gap with what you are seeing on the television side in the months ahead?

Well, we certainly expect the radio to improve. I mean, as you can tell from our – the information we shared with everyone, it’s – the pace for radio has improved, certainly has improved in third quarter versus the second quarter. We believe that that improvement will continue through the quarter. Local is – has rebounded better than national in our radio business. But national is now starting to come alive. Our – the rep that we work with is starting to show some positive information as they pass to us. And so we feel pretty confident as we move through the rest of the quarter that radio will continue to improve. And television is, as you pointed out, it’s faring better than radio and it did in the second quarter. And television is being fueled by both local and national as opposed to radio, which is mostly driven by local right now. But national is starting to come alive in radio.

Okay, great. Thank you very much.

Thanks, Aaron.

Thank you.

And ladies and gentlemen, with that, we will conclude today’s question-and-answer session. I would like to turn the conference call back over to management for any closing remarks.

Thank you, Jamie and thank you everyone for participating in our second quarter investor conference call. We look forward to sharing with all of you our third quarter results in early November. Have a great day, be safe and thank you.

Ladies and gentlemen, with that, we will conclude today’s conference call. We do thank you for joining. You may now disconnect your lines.