Entravision Communications Corporation (EVC) Earnings Call Transcript

Welcome to Entravision's Second Quarter 2026 Earnings Call. I am Roy Nir, Vice President of Financial Reporting and Investor Relations. Joining me today to discuss our results are Michael Christenson, our Chief Executive Officer and Chair of the Board; and Mark Boelke, our Chief Financial Officer and Chief Operating Officer. Before we begin, I would like to inform you that this call will contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ. Please refer to Entravision's SEC filings for a list of risks and uncertainties that could impact actual results. The press release is available on the company's Investor Relations page and was filed with the SEC on Form 8-K. Additional information may also be found on our quarterly report on Form 10-Q, which was also filed today. [Operator Instructions] We will try to answer any questions that relate to the topics contained in today's call. I will now turn the call over to Michael Christenson.

Thank you, Roy, and thank you for joining this call today. We appreciate your interest in Entravision and your support. As you saw in our press release, on a consolidated basis, Entravision revenue increased 126% to $228 million in 2Q '26 compared to 2Q '25. We produced operating income of $37 million in 2Q '26 compared to operating income of $6 million in 2Q '25. We report our results for 2 segments: Media and Advertising Technology & Services. For those of you new to Entravision, this is our third year with this segment reporting. We started with the third quarter of 2024. Now for our Media segment. Our revenue increased 1% to $45 million -- I'm sorry, decreased 1% to $45 million in 2Q '26 compared to 2Q '25. Our Media segment incurred an operating loss of $3 million in 2Q '26 compared to a breakeven result in 2Q '25. Our 2Q '26 results included a 1% increase in local advertising revenue and a 19% decrease in national advertising revenue. These numbers exclude political revenue. Local advertising revenue is from our sellers working with local advertisers selling broadcast and digital marketing solutions. National advertising revenue is produced by our partners, primarily Televisa, Univision selling our broadcast to national advertisers and agencies. Our local advertising operations had 3% higher monthly active advertisers in 2Q '26 compared to 2Q '25 but a 1% decrease in revenue per monthly active advertiser. Our operational priorities for our Media segment are to grow monthly active advertisers and revenue per monthly active advertiser. Let me provide some additional context for these media results. We've been executing several important revenue-focused operational initiatives during 2025 and that have continued through the first half of 2026 and will continue through the second half of 2026. First, we increased the size of our local sales team. Our analysis convinced us that we could increase revenue with a larger team on the field. Second, we developed the capability of our local sales team to sell digital marketing solutions to local advertisers, search, social, streaming video, streaming audio and our own digital properties. And this required extensive training and the addition of digital product specialists. Third, we expanded the amount of local news programming that we produce. This is the most important way we can serve our local audience. And then finally, fourth, we developed a direct sales capability for political campaign advertising. In addition, as we discussed on prior calls, we had 2 additional new business projects underway in 2Q '26. Our Alta Vision multicast television network and our partnership with Hemisphere Media for our WAPA Orlando station. All of these initiatives require investments. Our team has worked hard to fund these investments by reducing expenses in areas other than direct selling and content production, including corporate expenses. So although we produced an operating loss in our Media segment in 2Q '26, our Media operating expenses in 2Q '26 were less than $2 million higher than our Media operating expenses in 2Q '25, and they were lower than our Media operating expenses in 4Q '24. Nevertheless, as we have discussed on prior calls, we are committed to growing our Media business and earning a profit. So we acknowledge that we have more work to do to improve our operating performance and profitability in our media business. Now let me answer 2 questions that come up in all of our discussions with shareholders and analysts. First, our political revenue outlook. There are 85 days until election day, and we are working hard to directly engage with campaigns to convince them that they must win the Latino vote to win their race and that Entravision is the best way to communicate with the Latino voter. We have many important races underway across all of our markets, but there are 9 critical races where the Latino vote will clearly determine the outcome and where we Entravision are very well positioned. These are the Texas U.S. Senate race, the governor's races in California, Nevada and Texas, and the House races in Texas 15, Texas 23, Texas 28, Texas 34 and Florida 9. The total spend on these 9 races and the allocation of that spend to Spanish language media will determine how well we do compared to prior election years. The second question is on the status of our Televisa, Univision affiliation renewal. There's nothing new to report at this time. This agreement runs through December 31, 2026, so we still have time. We've been partners for 3 decades, and our goal is to renew this agreement. Now turning to our Advertising Technology & Services segment. ATS revenue was $183 million in 2Q '26 compared to $55 million in 2Q '25. We had more monthly active customers and more revenue per monthly active customer. We continued to invest in our ATS segment in 2Q '26 to grow revenue and operating profits. Our #1 priority for our ATS segment, a strategic and operational priority, which has been the #1 priority really for 2024, 2025 and now 2026 has been to invest to build more powerful AI capabilities into our platform. We continue to invest in our product team and our engineering team to continue to improve the technology. In addition, we continue to invest in our infrastructure capabilities. Our infrastructure costs will grow as our revenue grows, but we're very focused on generating operating leverage. So that infrastructure costs will grow at a lower pace than revenue. We've also invested to increase the capacity of our sales and customer service organizations. The combination of these investments in ATS increased operating expenses by $14 million in 2Q '26 compared to 2Q '25. That is $56 million on an annualized basis. Operating profit for ATS was $40 million in 2Q '26 compared to $5 million in 2Q '25. So to summarize, in Media, we're investing in revenue-focused initiatives. We increased our local sales capacity, and we expanded our digital sales and digital sales operations capabilities, more sellers, more digital. In ATS, we are investing to add more engineers to advance our technology and to increase our sales and customer service capacity, more technology, better technology and more selling. We believe these investments will help us build a stronger company. So now I'd like to ask Mark to share more details with you about our financial results in 2Q '26.

Thank you, Mike. I'll start by reviewing the performance of each of our 2 reporting segments: Media and Advertising Technology & Services. In our Media segment, second quarter revenue was $45.1 million, which was down 1% compared to the second quarter of 2025. This decrease was primarily due to decreases in broadcast advertising revenue and spectrum usage rights revenue, partially offset by increases in digital advertising revenue and retransmission consent revenue. We have undertaken initiatives focused on increasing our media advertising revenue, and we are seeing progress in these initiatives, particularly in local digital ad sales and national television ad sales and an increase in the number of monthly active advertisers. Let's look at total operating expenses for the Media business, which is the sum of direct operating expenses plus selling, general and administrative expenses as those 2 line items are reported in our segment results. Media segment total operating expense in the second quarter increased $1.6 million compared to second quarter '25, an increase of 4% primarily due to increased compensation expense versus the prior year period. The Media segment had an operating loss of $3.3 million in Q2 '26. This was compared to an operating profit of $0.4 million in Q2 '25 and an operating loss of $5.2 million in the previous quarter Q1 '26. One of our goals in the Media segment is to optimize our organizational structure and expenses to be aligned with revenue and to generate profit, as Mike noted. We continue to work on achieving this goal, and we remain focused on providing compelling content, growing revenue and increasing operational efficiency to reduce operating expenses during 2026 and beyond. Now I'll turn to our Ad Tech & Services segment, or ATS. Second quarter revenue for the ATS business was $182.8 million. This was an increase of 230% compared to second quarter '25 and a sequential increase of 18% from the prior quarter, first quarter '26. We had a higher number of monthly active accounts and higher revenue per monthly active account. We have had success executing our strategies in the ATS business including strengthening the AI capabilities that are a core part of our technology platform and expanding the ATS sales team and geographic sales coverage. ATS total operating expenses increased 85% in the second quarter '26 compared to second quarter '25, as Mike indicated, an increase of $13.9 million. The ATS expense increase was primarily related to the increase in revenue. For example, the expense of cloud computing expenses has been increased -- has increased as a result of processing more transactions on additional revenue as well as our investment in stronger AI capabilities in our ad tech platform. There was an increase in sales commission and performance compensation as a result of the revenue increase and achievement of other performance metrics. And the ATS business has also hired additional sales, engineering and ad operations staff in recent quarters in order to drive future growth and expand into new geographic territories. One of our goals for the ATS business is to continue to grow revenue and generate positive operating leverage, and the ATS revenue increase exceeded the expense increase in terms of percentage and absolute dollars. Operating profit for the ATS segment was $40.0 million in Q2 '26. This was an increase of 673% versus Q2 '25 and a sequential increase of 17% from the previous quarter, Q1 '26. Let's talk about second quarter ATS results in the context of full year 2026. As we stated, ATS revenue in Q2 increased 230% versus Q2 '25 and 18% versus Q1 '26. Q2 performance was exceptional. We do not expect to repeat the same level of performance over the next 2 quarters of 2026, and we currently expect a decrease in revenue sequentially from Q2 to Q3. We do expect Q3 and Q4 to have significant year-over-year growth, more than 100% growth. However, one of our priorities is to win larger clients. That will lead to some variability in ATS quarterly results. Ad spend on our platforms by our largest clients can be variable for various reasons, and these clients can have a meaningful impact on ATS results in any given quarter. We believe our core ATS business is strong, and we continue to see overall growth in the number of active monthly accounts and revenue per account as we execute on our strategic and operational priorities in the ATS business. Combining our 2 operating segments. On a consolidated basis, revenue for second quarter 2026 was $227.9 million, up 126% compared to second quarter 2025. The 2 segments together generated a consolidated segment operating profit of $36.7 million in Q2 '26 compared to $5.5 million in Q2 '25. The increase was a result of operating profit in the ATS segment partially offset by an operating loss in the Media segment. We had consolidated operating income of $30.0 million in Q2 '26 compared to an operating loss of $0.8 million in Q2 '25. Corporate expenses in second quarter '26 were $6.6 million, a 3% increase compared to second quarter '25 or about $0.2 million primarily due to an increase in noncash stock-based compensation. We have taken significant steps to reduce corporate expenses over the past few years. And for additional context, looking back 1 additional year to 2024, corporate expense in Q2 '26 was 39% lower than corporate expense in Q2 '24. Entravision's balance sheet remains strong with over $83 million in cash and marketable securities at the end of Q2 '26. Our strategy regarding allocation of cash is, first, reduce debt and maintain low leverage; and second, return capital to our shareholders, primarily through dividends. In second quarter '26, we made a debt payment of $5 million, reducing our credit facility indebtedness to about $158 million at the end of the quarter. We remain committed to reducing our debt and maintaining a strong balance sheet. In addition, we paid $4.6 million in dividends to stockholders in the second quarter or $0.05 per share. For the third quarter of 2026, our Board of Directors has approved a $0.05 dividend per share payable on September 30, 2026, to stockholders of record as of September 9 -- sorry, September 16 and for a total payment of approximately $4.6 million. We'd like to thank you all for joining our call today. And at this time, Mike and I would like to open the call for questions from the investment community. Roy, I'll turn it back over to you.

Thank you, Mark. We will now begin the question-and-answer session. [Operator Instructions] Please hold as we review potential questions. Mike, the first question is from David Bastian from Kingdom Capital. The question is can you talk about new large customers showing up in AR and customer concentration. Any trends in Q3 or any other major ramps going?

Sure. Thank you for the question. We want to stick to what I would describe as required disclosure with respect to customers. As you may know, we have certain reporting obligations on size of customers relative to the business, size of customer receivables, so we obviously disclose what's necessary for SEC reporting purposes. But we do not want to get into the practice of discussing individual customers beyond that. For competitive reasons and business reasons, we want to keep that confidential. But as Mark said, one of our priorities for growing the business is to compete and win for larger customers. And given the size of our business, those large customers in and out can have an impact on the variability of our revenue. So what I can say is it is a priority to continue to compete for those customers, and we're prepared to accept that variability, but we're not going to get into the practice of discussing individual customers. Did I get all of it, Roy, or was more to the question?

Thank you, Mike. Yes. We'll now review any other potential questions. Please hold. At this time, we will conclude the Q&A session. We'd like to thank you for joining our call today. If we're unable to address or if you have any questions, please reach out to us at ir@entravision.com. We are committed to answering your questions, and we'll follow up with you. We also welcome our investors to connect with us through the Investor Relations page, investor.entravision.com, where you will have access to a transcript of this call, the press release containing our second quarter financial results and a copy of our quarterly report filed with the SEC on Form 10-Q. We look forward to speaking with you again when we report our third quarter results. Thank you very much. You may now disconnect.