Entravision Communications Corp (EVC) 2011 Q2 法說會逐字稿

Hello, this is the Chorus Call operator. Welcome to the Entravision Communications Corporation's second quarter 2011 earnings conference call. As a reminder, all participants will be in a listen only mode. (Operator Instructions) For your information, this conference is being recorded. I would now like to turn the conference over to Walter Ulloa, Chairman and Chief Executive Officer. Mr. Ulloa, please, go ahead.

Thank you, Valerie. Good afternoon, everyone and welcome to Entravision's second quarter 2011 earnings conference call. Joining me today is Chris Young, our Executive Vice President and Chief Financial Officer, and Philip Wilkinson, our President and Chief Operating 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 the property of Entravision Communications Corporation. Any redistribution and retransmission or rebroadcast of this call in any form without the express written consent of Entravision Communications Corporation is strictly prohibited. Also this call will include certain 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 in a Form 8-K. We delivered a solid second quarter performance given the challenging comparisons from a year ago period and what remains a choppy economic environment. Last year we benefited from approximately $5 million in incremental World Cup, political and census revenue which was partially offset by core revenue growth in our June broadcast of CONCACAF Gold Cup soccer matches in the quarter. We are starting to see some of the initial benefits of the 2010 census data as our sales teams and advertisers factor in the strong growth of the US Hispanic population.

In addition, a number of key advertising categories continue to show improvement including the auto segment which was up across all our divisions. We are executing on our operating plan and costs remain under control. We are well positioned to capitalize on the operating leverage in our business model as the advertising market improves. Our television and radio stations remain leaders in their markets, regardless of language, and our assets are in some of the most attractive Hispanic markets in the United States. Providing a compelling value proposition for advertisers to reach Latino consumers. Turning to our financial results for the quarter, our consolidated revenue was $50.3 million, down 6% versus the same period in 2010. Excluding incremental World Cup, political, and census revenue from last year, total revenue was approximately up 1%. Operating expense increased 2% to $31.8 million in the quarter. Consolidated adjusted EBITDA decreased 18% to $15.6 million versus last year and free cash flow decreased 30% to $5 million.

In our television division, total revenue was down 5% in the quarter. Excluding retransmission fees our television revenue fell 9% for the second quarter. Local revenue fell 2% and national revenue was down 17%. Adjusting for last year's second quarter 2010 World Cup, census and political billing, local TV revenue was up 2% while national was down 2%. Incremental World Cup totaled $2 million, census added $600,000, while political contributed $300,000 in the second quarter of 2010. Almost $3 million of non returning revenue in the second quarter for our television division. We recorded growth in 5 of our top 10 advertising categories in the quarter led by automotive, travel and leisure, healthcare which were up 16%, 17%, and 13% respectively. The events in Japan earlier this year and subsequent inventory issues were not enough to keep Entravision's TV group from recording its fifth consecutive double-digit growth quarter in the automotive category.

Automotive television revenue grew 16% in the quarter, in second quarter 2011 compared to the prior year behind significant gains from both Ford and General Motors. Another strong sign was our TV group experienced growth in all three auto tiers. Tier one grew 55%, tier two dealer association improved 7%, while our local dealers tier three increased by 9% over the prior year. The television division was impacted by continuing softness in the national telecom category. In particular Verizon wireless. The service category was off 13%, primarily driven by second-quarter census investments and the fast food category saw a decline of 17% as a result of last year's World Cup advertising by McDonald's, Jack-in-the-Box and Subway.

We successfully added 46 new advertisers who invested $10,000 or more in the second quarter. New clients included USDA Centers for Disease Control, American Signature Furniture, NAPA Auto Parts, and David Moss Volkswagen, just to name a few. In June, we broadcast 17 matches from the CONCACAF Gold Cup which was hosted by the United States. This event was a tremendous ratings success for our television stations group, and was supported by a number of national and local advertisers including Comcast, Jack-in-the-Box, BPR Co., Mattress Firm and Valvoline. Turning to our television ratings performance, our Univision television stations extended their ratings leadership positions in the May 2011 sweeps. Among adults 18 to 34 regardless of language, six of our Univision television stations were ranked number one or two sign on to sign off. Additionally, five of our Univision television stations were either number one or two among all adults 18 to 49.

Eight of our Univision television affiliates are number one or two in early local news. In early network news, eight of our Univision television stations were ranked either one or two in their markets regardless of language. In late local news, six of our Univision television stations were ranked number one or two in their markets again regardless of language. And six of our TeleFutura stations, are the number two ranked Spanish-language station behind our Univision affiliates in their markets in adults 18 to 34 and 18 to 49. In Entravision markets combined our Univision and TeleFutura affiliates aired 41 of the top 50 Spanish language programs among adults 18 to 34, adults 18 to 49 and adults 25 to 54 in the May sweeps. The number the number one Spanish-language program in Entravision markets was the Univision prime time novella Triunfo del Amor. In June, Entravision aired the Gold Cup soccer tournament held here in the United States. It included teams from North America, Central America and the Caribbean.

Among adults 18 to 34, the closing ceremonies along with the average audience of the matches themselves ranked in the top 20 programs among all broadcast networks in our local people meter markets. For the final match between Mexico and the United States, among all households, our Las Vegas and Washington, DC television stations won their time period regardless of language. And in Denver, Orlando, Tampa and Washington DC the match was the highest rated program in its time period among all broadcast stations regardless of language in adults and males 18 to 34, 18 to 49 and 25 to 54.

Turning to our radio division, revenues were down 8% in the second quarter. Local revenue decreased 5% and national was down 14% over second quarter last year. During the second quarter of 2010, we booked $1.2 million incremental World Cup, $186,000 in political and $342,000 in census revenue. Over $1.7 million of non returning revenue for our radio division in the second quarter. Excluding these items in second quarter 2010 and excluding Gold Cup dollars from second quarter this year, revenue increased 1.5% over the second quarter of 2010 for radio. When you exclude these one-time only events, we saw positive growth in April of 3%, and 2% in June, May saw a decrease in spending at 1%. We recorded revenue growth in three of our top five categories in the second quarter.

The automotive category was our top radio revenue category in the quarter ended up plus 16%. Tier one automotive revenue increased 74%. This increase was propelled by ad spending from both Ford and General Motors. We saw a slight dip in tier 2 automotive spending with a 3% decrease. Local car dealerships tier 3 increased 7% in the quarter. We saw a number of new auto dealership advertise with us during the quarter for the first time including Metro Nissan, and North Hollywood Toyota in Los Angeles, Chatman Ford in Phoenix, and Greenway Dodge in Orlando. Other top categories in the second quarter for our radio division for travel and leisure which saw a 6% increase retail increased by 9%, and finance experienced a 10% gain. The services category, which was our second-largest category decreased by 26% which was caused by the weight-loss centers and the census not returning in the quarter.

In the quarter we added 45 new advertisers. We spent more than $10,000 in our radio division. Which represented slightly over $1 million for the quarter. New advertisers include Kraft Foods, Bolero Marketing, Guerrero Tortillas, Kellogg, Mott's and [Su Casa DenTal]. Los Angeles is always a key focus for our radio division. Among adults 18 to 34, our cluster share of listeners increased another 2% over the last quarter. In the second quarter of 2011, the EBC LA radio cluster generated a 4% increase in total revenue for the quarter. Beating the market growth for by over 4 points which was flat over the prior year. If you back out census, World Cup, and political, from Q2, of 2010, and Gold Cup from 2011, our LA cluster would have posted a 39% increase.

We also beat our Spanish language counterparts by 7 points. The overall Spanish language radio sector in Los Angeles was down 3% in the quarter. Entravision Los Angeles radio continues to perform much better than our peers on every level. Local sales have improved with new incentive and initiatives in place. Such as our realigned sales team and focus on new direct business. In addition, our intensive cold call strategies and the training of our account executives take advantage of exciting new commission incentives helps grow new business. Nationally, we have implemented strategies to further target differences in our cluster formats and we are aggressively targeting advertisers who still should be spending more with our radio division.

The Entravision LA radio cluster led the radio division in digital sales again and expects to continue the trend. The digital revenue numbers that have not taken into consideration the incremental share of radio dollars absorbed by our LA radio team by putting together creative advertisement and marketing solutions for local and national advertisers. We generated ratings growth in a number of markets and time periods. Entravision radio reached 41% of all Hispanic persons and 43% of all Hispanic adults 18 to 34 in the first quarter Arbitron results released to date. Our Cornerstone Afternoon Drive program, [Avaseno De la Triplate] continues to be a huge access among all competitors regardless of language.

Our morning drive show (inaudible) has Arbitron results from only three Entravision stations at this point. Among those Stockton's KMIX is number one in the time period, regardless of language with a 13.1 share and Denver's KXPK FM is number two in the time period regardless of language. With a 10.1 share up 44% since the Winter 2011 survey. In Phoenix, we aired in (inaudible) and Phoenix with [Com puc Quate] and AM Drive which finished number five in the market regardless of language with a 5.9 share up 44% over this time last year. We have strategically positioned our digital efforts at an integral part of our sales platform.

We now provide our advertising clients a multi channel approach that incorporates new media to engage with our audience with traditional media, social media, online and mobile. This makes our model far more compelling, unique and richer terms of the new 360 marketing programs we can now implement for advertisers. Interactive creates new opportunities for growth. Equally important, it also supports our broadcasting core. It broadens and deepens our relationship with current clients. It helps to minimize churn, and provides opportunities to attract new clients that historically have not used our television or radio assets.

Although still less than 2% of our total revenue, we continue to make significant progress with our interactive and digital initiatives. I am pleased to announce that our interactive division year-over-year growth every quarter has seen year-over-year growth every quarter for the last three years in a row. Second quarter was another record quarter for interactive. Interactive revenue grew 45% over the 2010 comparable period. And we had our best quarter ever. We completed launching in all our television markets our new 2.0 effort. The new sites better feature our local content, are more engaging for our users and allow for multi-platforms indication of video content beyond our sight. As a result of the Digital First Initiative, we are now publishing every month over 3300 local news video stories.

This represents an Increase of 746% on the amount of video content we published on the Internet over the same period last year. The growth in content availability has increased visitors and paid views on our best TV sites over 300%. As a result, we observed a 7000% increase over the same period last year on the amount of online video TV news stories our audience is consuming on a monthly basis. This tremendous growth in online engagement creates a new revenue opportunities available for our online video entities entrants. [Busca], our local Latino digital marketplace keeps growing. Since inception of this new online product in March of 2010 we have 600 new Busca advertisers and we have sold over $1 million in pure incremental Busca revenue.

During the second quarter, we have seen visitors to the Busca sites increase by 50% over last quarter. June was our best Busca month ever with over $80,000 in Busca sales sold in a single month. Our radio streaming operations online and mobile keep growing as well. Total listener hours is above 1.2 million per month, a growth of 51% over the last six months. Our streaming [pume] grew to 325,000 monthly listeners, a 92% increase over the last six months. Our streaming revenue continues to grow as well. We also ramped up our social media efforts and launched Facebook and Twitter profiles for all our local station websites. We now have more than 200,000 followers in our social media channels which represent a growth of 40% over the previous quarter.

Social media is a complete new platform that allows us to interact and expand our audience as well as a new advertising opportunity to offer our clients. We revamped our mobile platform to include MMS, multimedia messaging services which complement our texting capability. We also partnered with the biggest US text mobile aggregator for carrier connectivity. Advertisers like Jiffy Lube, Pizza Hut, Live Nation, AEG, WWE, Bud Light, Freeway Insurance, and Auto Club of Southern California now trust us to handle their mobile campaigns. We had our best mobile quarter ever with $115,000 in mobile campaigns. This is a growth of 300% over a similar period last year. Our mobile opt-in database grew 50% over the last quarter and 200% over the same period last year. These initiatives reflect our ongoing commitment to be a multiplatform provider and we are pleased with the progress. Development and positive feedback we receive from our partners, advertisers and audience on each of these products so far.

Going forward, we continue to see digital as a growth driver. We have built this interactive business from the ground up and we will continue leveraging the mass reach of our broadcast television and radio assets to drive traffic to our online and mobile interactive properties creating engagement, new opportunities for advertisers, and growth for the Company. Finally we are creating content that can be seen worldwide. We now are exploring opportunities for growth beyond our traditional broadcasting markets in the US and evaluating the opportunity to enter the vast expanding pan regional Latin American online market.

In conclusion, we are executing on our strategic plan and remain well positioned to capitalize on the continued growth of the Hispanic market and an improving economy. We are proactively managing our business with a keen focus on expense controls while continuing to make investments in our stations, employees and digital initiatives that will position us for future growth. The recently released 2010 census information points out the fact that 50,000 Latino US citizens are turning 18 every month. When you consider the US Latino population growth within key battleground states of Florida, Nevada, New Mexico, Colorado, and Virginia it is likely that the Latino voter electorate for these key states will play a decisive role in the 2012 presidential election. In fact, in July we received political advertising orders totaling almost $200,000 for our Univision television stations that broadcast into five aforementioned battleground states. We believe these political advertising expenditures, almost 15 months before the 2012 November election are a strong indication of our political advertising prospects for the coming quarters and the significant importance of the US Latino, voters electorate. I will now turn the call over to Chris Young for a review of our financial information.

Thank you, Walter and good afternoon everybody. As Walter has discussed, net revenue for the quarter was $50.3 million down 6%. Operating expenses increased 2% to $31.8 million and consolidated adjusted EBITDA decreased 18% to $15.6 million. Net revenue for the quarter was down 6% to $50.3 million compared to $53.4 million in the same quarter of last year. Television net revenue was down 5% to $33.1 million for the quarter compared to $34.8 million in the same quarter of last year. Radio net revenue was down 8% to $17.1 million for the quarter compared to $18.6 million in the same quarter of last year. The decrease in net revenue at both divisions was primarily attributable to non recurring advertising revenue from World Cup, census and political in 2010. Partially offset by an increase in the retransmission revenue. Excluding census, political, and incremental World Cup and retransmission revenue, Ford TV advertising for the quarter was up 0.5% and Ford radio advertising was up 1.5% over the prior year period. Retransmission consent revenue for the quarter was $4.4 million compared to $3.3 million in the same quarter of last year.

Operating expenses for the quarter were up 2% to $31.8 million compared to $31.1 million in the same quarter of last year. Excluding non-cash compensation expense, operating expenses for the quarter were up 2% to $31.6 million compared to $30.9 million in the same quarter of last year. Operating expenses for the TV division were down 1%. Operating expenses for the radio division were up 8%. The increase was primarily attributable to the consolidation of Lotus Entravision Reps acquired in January of this year. Excluding the impact of LER, radio operating expenses were up 3%.

Corporate expenses for the quarter were up 8% to $3.8 million compared to $3.5 million in the same quarter of last year. Excluding non-cash compensation expense corporate expenses for the quarter increased to $3.5 million from $3.2 million an increase of $0.3 million or 9%. The increase primarily attributable to audit, legal, and interactive expenses. Free cash flow which we define as consolidated digested EBITDA less CapEx, cash interests, cash taxes plus interest income was $5 million or $0.06 per share. Cash interest expense for the quarter was $8.9 million. Cash CapEx for the quarter was $1.5 million. CapEx for the year will be approximately $8 million. Turning to our balance sheet, as of June 30, our total debt was $400 million and our trailing 12 month EBITDA as adjusted was $61.1 million. Our total debt to EBITDA as adjusted was 6.6 times versus a maximum leverage covenant in the revolving credit facility of 7 times at 6/30/2011. Cash on the books was $75.3 million as of June 30. Net of cash on the books, our total net leverage was 5.3 times. This concludes our formal remarks. Walter, Phillip, and I would be happy to take your questions at this point.

Thank you. ( Operator Instructions ). James Dix of Wedbush.

Good afternoon guys. A couple questions. First, I apologize if I missed it. But did you give a number as to how much soccer-related revenue you got this second quarter? And how that is split out between TV and radio?

We did not break out these soccer revenue in the Q2. Philip, do you have that number?

I believe it as $700,000. I believe it was $100,000 in radio and $600,000 in TV for the Copa De Oro which was in June, which is different from the Copa de America which was in July.

Do you have an assumption as to how much of that is incremental? It seems to me you did some work on your World Cup advertisers last year. But I just want to make sure that I am looking at it correctly as to how much you really think is incremental when you look at the advertisers you had in the second quarter.

You know James, we are still sticking with the 50% incremental from last year's World Cup, and we feel it is roughly 50% on the June dollars for Copa de Oro on the TV side, 70%, 75% on the radio side.

Okay. In terms of the third quarter outlook, any sense as to if you just look at the core. Is that changing much versus the second quarter if you stripped out the various items you talked about was up slightly for both TV and radio, is that changing much?

We roughly, as you say, strip out. We scrub out all the non-returning and take into account the political that Walter talked about, the census dollars that we're not returning, of course. And the incremental World Cup. We actually looked at about a point and a half core growth in Q2 for radio and just about a point in core growth for TV. We are seeing improvement in both of those divisions in core growth in Q3 based on what we are calculating.

Okay. Is there anything in particular accounting for that, like fewer supply chain disruptions or is it more broad-based?

As mentioned earlier, we had a pretty decent run so far, we continued to see the auto category which is now by the way, on the TV side, is 15%, and the radio is getting close to that again at one time it was low 20's. But it has improved significantly quarter after quarter for the last 2 years, we are up 16% overall TV and radio. That was primarily driven by domestic, of course the imports were off because of the Tsunami and the supply chain. That is slowly changing and the imports have more cars on the lot. And that means more advertising. But I think that is one of the biggest drivers. Service is absent what we lost from census, is a big category for us. It continues to grow. We saw retail improve overall between the 2 combined, with the 2 divisions up 6%. Travel and leisure up.

We still struggle again as Walter pointed out with the telecom. The 2 big ones. The 2 mammoths, Verizon and AT&T, and that hasn't changed, and we are seeing that continue in to the third quarter. We are particularly excited about how the tier 1 automobile businesses has improved and we're -- to see 55% growth year-over-year in our local car dealers is a very positive thing.

Okay.

James, keep in mind also on the radio front for Q3 as you are modeling this out, we ran -- last year we ran the concert Reventon. We decided not to run the 1 big concert in the third quarter as we have done historically. We have broken that out in to a bunch of mini concerts across the year. That was about good for about $1.1 million in revenue, net revenue, in the quarter for radio and about $950,000 in expense that won't be recurring.

Okay.

For filing purposes.

And then the other smaller events not worth really --

Yes. It's really not worth -- don't move the needle on an individual basis.

One last 1, $75 million on the balance sheet, I know I've heard some more TV stations coming on the market among others, just any thoughts as to use of capital, and whether the M&A pipeline looks any more interesting now or not?

There's certainly plenty of stuff out there and are continuing to work on a couple of projects in particular. So, clearly that is a possible use of cash as we get deeper in the process with these deals we will make those decisions accordingly.

Okay great. Thank you.

Thanks, James.

David Joyce of Miller Tabak & Company.

You mentioned that you are starting to see some census benefits in your discussions with advertisers, is there anything to quantify or provide color on yet? When would those start being reflected in your results?

Well I think it is fair to say we should start to see some of the impact of the census results in the fourth quarter and beyond. And then Nielsen and Arbitron will start including the new census numbers in their and the universe estimates in September I believe. So certainly from there we will flow better ratings and as a result more revenue.

Okay. Could you provide the third and fourth quarter political revenue from radio and TV from last year?

Sure. I can pull it for you.

Political for TV in the third quarter?

It was $1.108 million for political for TV. For $477,000 for radio in the third quarter.

A total of about $1.6 million.

Right.

And the fourth?

$2.8 million for TV and $1.2 million for radio about $4 million total.

Good to see the retrans revenue up to $4.4 million. Is that truly contractual or were there any new stations coming online from new agreements?

No, it's contractual.

Have you had any discussions with Univision yet on reverse comp?

No. We have an agreement with Univision that extends to 2021. So any discussion with Univision that might be different than our current deal probably will not occur until then.

David, keep in mind the revenue that we book as retransmission consent revenue is already net of a sharing that Univision is participating in. It is not like they're getting the money first and sending the money to them. This deal was cut as an Entravision, Univision entity at single state they collect the money, they keep their share and they send the residuals to us. There's already reverse comp in those numbers.

That is an excellent point. Unlike the other broadcast networks, we have an arrangement with our network as it relates to retransmission fees.

Yes I recall that now. That's helpful. Thank you.

Thank you.

Bishop Cheen of Wells Fargo.

Hi, Walter, Chris, Philip. Thank you for all the details. So on my checklist here. You've got a lot of moving parts. You always got moving parts. Political, we sort of get a feel for that, ebbs and flows. Soccer sounds like the way you are building cup tournaments, there is always going to be a special event soccer tournament coming in Q2 and Q3. Maybe Q4. Correct me if I'm wrong, if I have the wrong impression. I think that is a good thing, by the way.

Well, we usually see soccer tournaments in the second and third quarter. World Cup is always -- starts in June and extends into July and then you have these other tournaments that Philip spoke about earlier, the Gold Cup and Copa America which are in the off-World Cup years and you see those in June and July as well.

Right. So for me to drill down and get core, I have to do like a 15 line model that I can't do yet but I will read the transcript and get all the pieces and check.

I think we did it for you. We backed out World Cup last year and political and census. As we flushed all those out we gave you just our straight billing on the books of returning business quarter to quarter.

That leads me to the expense side. I'm probably going to sound like a tea party person or something here. But it's just that the revenues are heading south but the expenses are heading north and in a business that is 70% fixed, but 30% variable, I just don't -- I'm trying to get my hands around why the expenses keep going up.

Well expenses for Q2 for TV were a minus one. That's kind of --

Right, that's good. But radio is just, I mean bipolar.

Talk radio was plus 8, you've got LER, which went from a plus 3 to a plus 8 and that was just kind of an acquisition event that we did that is a one-off situation.

And did that smooth itself out in the back half of 2011?

That will be there throughout the year.

That will be a benchmark that we will have to cycle up against until the first quarter of next year. You have also got, we talked about Reventon going away in the third quarter, we splintered that off. You have got about a point, point and a half of expense in Q2 with respect to 1 of those mini concerts that we put on here in LA. So that plus 3 is actually closer to a plus 2 -- plus 1 on the radio front, excluding that concert. So I think it's safe to say we've still got a good handle on expenses. Q3 expenses should not be any higher very low single digits from both divisions. Obviously it is a fixed expense model. So you've got variability to the tune of about 15% to 17% on what we bring in in revenue. Otherwise that fixed expense level should grow at basically low single digits for the foreseeable future.

Okay. And then how are your pacings looking like in the current Q3? How is auto, I am trying to go to some of the big key benchmarks that we look at.

We continue to see a challenging economic environment in the third quarter, again, we are facing some significant revenue from World Cup that is non-returning, political that is non-returning and then of course, as Chris spoke earlier about Reventon, over $1 million of revenue from Reventon that's not returning. So the non-returning items that I just mentioned plus a tough economy -- it's a challenge.

Okay. I can understand the events. What about the core? The spot business? I don't know if you can separate it out because all of your events have spot support. But if you had to say -- give us a feel for what you're seeing in just your core business in this Q3? Is it flat? Is it down? Is it single digits? Where do you think it is?

Bishop, this is Philip. As Walter said, we are facing some headwinds and some tough calls but local to date is pacing positive, our nationals off and our retrans of course is double digit positive.

Okay so that was helpful. So local is up positive in a single digit number?

Yes, low single-digit and we are looking to improve on the Q2 core increases that we saw on TV, we gave you a 1 percentage point growth and we are looking to improve on that.

Okay. All right. And then M&A. You do have a lot of cash I'm sure you are trying to be careful, but M&A swings both ways. It's not just an acquisition you have some attractive assets you could sell at the right price, too. Is there any color or movement along those lines?

Not at this time. We get inquiries from time to time, but nothing that we are looking to divest at this time. That does not mean that at the right time, we might take a look at an opportunity, but nothing now.

All right. When we see the Q, we will see the full accreted -- on the bonds, so total debt will be right around $400 million without any discount?

That's correct.

So then in your covenant leverage, there's just a very small carve-out or add-back so that your leverage is I think you said [6.6] --

It is 6.6, the bank covenant leverage cap is seven times, you get somewhere in there. The bank agreements, it is a $50 million-dollar revolver it is not drawn. There are no maintenance covenants on the bond deal.

Right. Your total, total debt is $400 million on your balance sheet. Nothing in addition?

Nothing more. That's it.

Nothing else in addition to the bond?

That's right.

I think that is the end of my grand Inquisition. Thank you.

Thanks, Bishop.

( Operator Instructions ). [Ken Daggett] of Citi.

Hey, guys, a few questions for you. With the $75 million in cash, do you have any plans to utilize the 103 special call provision?

It is still an option, obviously there was a window that shut on us at the end of July. A new window opened up for potentially $40 million beginning 2 days ago on August 1, that will run for another year. So it's obviously 1 of several options that we have with respect to the use of cash, we are really not in a position to make that call as of right now, but it's obviously an option.

And then on the covenant, 6.6 versus the seven times covenant, that is a gross leverage covenant is that right.

It's a gross leverage covenant -- does not factor in cash.

So you said that there is no maintenance covenants on the bond, so if you are not drawing on the revolver, is that covenant non --

It is kind of a non event. If we bust a covenant with the deal I think that we've got about 800,000 in LC's outstanding, You go back to the bank group, it's a tiny bank group of 4 banks you want a relationship basis negotiate an amendment or you don't and you move on. It's really a non event from a corporate structure.

Okay great thanks.

Thank you.

Karl Hermann of Babson Capital.

Hey, guys, thanks for taking my question. In terms of the uses of cash at this point, I guess we should be under the expectation that the special call provision was not utilized during the month of July and if so, with cash building, are there small digital acquisitions out there, or where do you stand in terms of shareholder initiatives in different things?

The first part is that is right. We did not exercise our provision in the month of July. So that window has shut on us we have not exercised that right.

As Chris pointed out earlier, we continue to look at the potential acquisitions which would be additive to our business and strategic. That includes both broadcast and interactive.

Does that answer your question, Karl?

In terms of a potential share buyback or anything in that regard, any comments?

Well, share buyback, we've got a board approval for share buyback. We are limited as far as what we can do by the bond deal. We have got a restrictive payment basket that is in excess of $10 million. Not too far in excess of that number. So you are pretty limited as far as the share of buyback opportunities concerned we wanted to exercise our rights under the restrictive payments basket. I think if you are going to prioritize that I would put that pretty far down the list as far as potential uses of cash.

Good. Thanks, guys.

Thank you.

At this time there are no further questions. I would now like to take turn the conference back to management for any closing remarks.

Thank you Valerie and thank you, everyone. This concludes our second-quarter earnings report. We look forward to speaking to all of you in November when we will give our third quarter earnings results. Thank you.

Thank you for participated in the Entravision Communication Corporation Conference call. This concludes today's event. You may now disconnect an have a great evening.