ENTRAVISION COMMUNICATIONS CORP 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview With the sale of our EGP business during the second quarter of 2024, as discussed in more detail in Note 8 to Notes to Condensed Consolidated Financial Statements, we identify ourselves as a media and advertising technology company, which is the basis that is now used for internal management reporting and how our CEO evaluates our business. As a result, effective July 1, 2024, we have realigned our operating segments, and for financial reporting purposes, we report in two segments – media and advertising technology & services – consistent with our current operational and management structure. Our media segment consists of sales of advertising through various media, including television, radio and digital. We own and/or operate 49 primary television stations and 44 radio stations (37 FM and 7 AM), reaching and engaging U.S. Latinos. Our advertising technology & services segment consists of programmatic ad services through Smadex, our demand side programmatic ad platform, and Adwake, which includes BCNMonetize, our mobile growth solutions business. Our net revenue for the three-month period ended September 30, 2024 was $97.2 million. Of this amount, revenue generated by our media segment accounted for approximately 62%, and revenue generated by our advertising technology & services segment accounted for approximately 38%, of total revenue. Prior to the sale of our EGP business during the second quarter of 2024, our advertising technology & services segment accounted for the majority of our revenue. With the sale of our EGP business, we anticipate that net revenue in terms of total dollars will be significantly lower in future periods, at least for the foreseeable future. As a result, cash flow from operations will be materially and adversely affected in future periods. Highlights During the third quarter of 2024, we realigned our operations into two segments consistent with the way our recently-appointed CEO now evaluates our business, reassigned the responsibilities of certain personnel and made management changes consistent with our new operating structure. Our revenue grew by double digits in the third quarter of 2024 compared to the comparable period of 2023, driven primarily by growth of political advertising revenue and Smadex. Relationship with TelevisaUnivision Our network affiliation agreement with TelevisaUnivision provides certain of our owned stations the exclusive right to broadcast TelevisaUnivision’s primary Univision network and UniMás network programming in their respective markets. We also generate revenue under a marketing and sales agreement with TelevisaUnivision, which give us the right to manage the marketing and sales operations of TelevisaUnivision-owned Univision affiliates in three markets – Albuquerque, Boston and Denver. Under our proxy agreement with TelevisaUnivision, we grant TelevisaUnivision the right to negotiate the terms of retransmission consent agreements with multichannel video programming distributors, or MVPDs, for our Univision- and UniMás-affiliated television station signals. Revenue generated from retransmission consent agreements represents payments from MVPDs for access to our television station signals so that they may rebroadcast our signals and charge their subscribers for this programming. The term of each of these current agreements expires on December 31, 2026 for all of our Univision and UniMás network affiliate stations. TelevisaUnivision also owns approximately 10% of our common stock on a fully-converted basis. For more information regarding these agreements and the stock that TelevisaUnivision owns, see Note 2 to Notes to Condensed Consolidated Financial Statements. Critical Accounting Policies For a description of our critical accounting policies, please refer to “Application of Critical Accounting Policies and Accounting Estimates” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 10-K. Recent Accounting Pronouncements For further information on recently issued accounting pronouncements, see Note 2 to Notes to Condensed Consolidated Financial Statements. 28 Three- and Nine-Month Periods Ended September 30, 2024 and 2023 The following table sets forth selected data from our operating results for the three- and nine-month periods ended September 30, 2024 and 2023 (in thousands): Three-Month Period Nine-Month Period Ended September 30, % Ended September 30, % 2024 2023 Change 2024 2023 Change Statements of Operations Data: Net Revenue $ 97,156 $ 77,420 25 % $ 257,986 $ 218,787 18 % Cost of revenue 26,801 21,393 25 % 73,883 57,910 28 % Direct operating expenses 35,617 28,702 24 % 99,174 84,160 18 % Selling, general and administrative expenses 17,112 11,946 43 % 45,809 37,363 23 % Corporate expenses 6,930 13,292 (48 )% 29,989 35,836 (16 )% Depreciation and amortization 3,882 4,733 (18 )% 13,049 11,948 9 % Change in fair value of contingent consideration (650 ) (100 ) 550 % (630 ) 621 * Impairment charge - 989 (100 )% - 989 (100 )% Foreign currency (gain) loss (121 ) 269 * 120 1,274 (91 )% 89,571 81,224 10 % 261,394 230,101 14 % Operating income (loss) 7,585 (3,804 ) * (3,408 ) (11,314 ) (70 )% Interest expense (4,087 ) (4,346 ) (6 )% (12,648 ) (12,464 ) 1 % Interest income 646 1,068 (40 )% 1,801 2,396 (25 )% Dividend income - - - 10 32 (69 )% Realized gain (loss) on marketable securities (1 ) (33 ) (97 )% (110 ) (94 ) 17 % Loss on debt extinguishment - - - (91 ) (1,556 ) (94 )% Income before income (loss) taxes 4,143 (7,115 ) * (14,446 ) (23,000 ) (37 )% Income tax benefit (expense) (14,984 ) 1,012 * (173 ) 3,055 * Net income (loss) from continuing operations (10,841 ) (6,103 ) 78 % (14,619 ) (19,945 ) (27 )% Net income (loss) from discontinued operations, net of tax (1,139 ) 8,822 * (77,931 ) 22,716 * Net income (loss) attributable to common stockholders $ (11,980 ) $ 2,719 * $ (92,550 ) $ 2,771 * Other Data: Capital expenditures $ 1,051 $ 3,577 4,844 17,660 Net cash provided by operating activities 61,922 69,117 Net cash provided by (used in) investing activities (28,127 ) (13,926 ) Net cash provided by (used in) financing activities (49,261 ) (55,244 ) Consolidated Operations Net Revenue. Net revenue increased to $97.2 million for the three-month period ended September 30, 2024 from $77.4 million for the three-month period ended September 30, 2023. This increase was primarily attributable to an increase of $11.1 million in advertising revenue from our media segment, and an increase of $8.7 million in advertising revenue from our advertising technology & services segment. Net revenue increased to $258.0 million for the nine-month period ended September 30, 2024 from $218.8 million for the nine-month period ended September 30, 2023. This increase was primarily attributable to an increase of $10.2 million in advertising revenue from our media segment, and an increase of $29.0 million in advertising revenue from our advertising technology & services segment. Cost of revenue. Cost of revenue increased to $26.8 million for the three-month period ended September 30, 2024 from $21.4 million for the three-month period ended September 30, 2023. This increase was primarily attributable to an increase of $2.0 million 29 in cost of revenue from our media segment, and an increase of $3.4 million in cost of revenue from our advertising technology & services segment. Cost of revenue increased to $73.9 million for the nine-month period ended September 30, 2024 from $57.9 million for the nine-month period ended September 30, 2023. This increase was primarily attributable to an increase of $4.2 million in cost of revenue from our media segment, and an increase of $11.8 million in cost of revenue from our advertising technology & services segment. Direct Operating Expenses. Effective July 1, 2024, with the realignment of our operations and reassignment of certain responsibilities, certain costs that were previously included as corporate expenses, primarily salaries, are now included in direct operating expenses and in selling, general and administrative expenses. Direct operating expenses increased to $35.6 million for the three-month period ended September 30, 2024, from $28.7 million for the three-month period ended September 30, 2023. This increase was primarily attributable to an increase of $5.1 million in direct operating expenses in our media segment and an increase of $1.8 million in direct operating expenses in our advertising technology & services segment. Direct operating expenses increased to $99.2 million for the nine-month period ended September 30, 2024, from $84.2 million for the nine-month period ended September 30, 2023. This increase was primarily attributable to an increase of $10.4 million in direct operating expenses in our media segment and an increase of $4.6 million in direct operating expenses in our advertising technology & services segment. Selling, General and Administrative Expenses. Effective July 1, 2024, with the realignment of our operations and reassignment of certain responsibilities, certain costs that were previously included as corporate expenses, primarily salaries, are now included in direct operating expenses and in selling, general and administrative expenses. Selling, general and administrative expenses increased to $17.1 million for the three-month period ended September 30, 2024 from $11.9 million for the three-month period ended September 30, 2023. This increase was primarily attributable to an increase of $2.2 million in selling, general and administrative expenses in our media segment and an increase of $3.0 million in selling, general and administrative expenses in our advertising technology & services segment. Selling, general and administrative expenses increased to $45.8 million for the nine-month period ended September 30, 2024 from $37.4 million for the nine-month period ended September 30, 2023. This increase was primarily attributable to an increase of $3.6 million in selling, general and administrative expenses in our media segment and an increase of $4.9 million in selling, general and administrative expenses in our advertising technology & services segment. Corporate Expenses. Effective July 1, 2024, with the realignment of our operations and reassignment of certain responsibilities, certain costs that were previously included as corporate expenses, primarily salaries, are now included in direct operating expenses and in selling, general and administrative expenses. Corporate expenses decreased to $6.9 million for the three-month period ended September 30, 2024 from $13.3 million for the three-month period ended September 30, 2023. This decrease was primarily due to a decrease of $2.0 million in salaries and bonus expense, a decrease of $2.0 million in non-cash stock-based compensation, a decrease of $0.4 million in professional services expense, and a decrease of $2.5 million in corporate expenses due to the realignment of our operations as noted above. This decrease was partially offset by an increase of $0.6 million in audit fees. Corporate expenses decreased to $30.0 million for the nine-month period ended September 30, 2024 from $35.8 million for the nine-month period ended September 30, 2023. This decrease was primarily due to a decrease of $0.5 million in salaries and bonus expense, a decrease of $1.1 million in non-cash stock-based compensation, a decrease of $2.7 million in professional services expense, and a decrease of $2.5 million in corporate expenses due to the realignment of our operations as noted above. This decrease was partially offset by an increase of $1.1 million in severance expense. Depreciation and amortization decreased to $3.9 million for the three-month period ended September 30, 2024 compared to $4.7 million for the three-month period ended September 30, 2023, primarily due to fully amortized intangible assets. Depreciation and amortization increased to $13.0 million for the nine-month period ended September 30, 2024 compared to $11.9 million for the nine-month period ended September 30, 2023. Of this increase, $0.5 million was attributable to the acquisition of BCNMonetize, which did not fully contribute to our financial results in the comparable prior period, and $0.6 million was attributable to depreciation expense related to our new corporate headquarters. Change in fair value of contingent consideration. As a result of the change in fair value of the contingent consideration, we recognized income of $0.7 million for the three-month period ended September 30, 2024, primarily related to an earnout of a past acquisition, and we recognized income of $0.1 million for the three-month period ended September 30, 2023, related to the acquisition of BCNMonetize. As a result of the change in fair value of the contingent consideration, we recognized income of $0.6 million for the nine-month period ended September 30, 2024, primarily related to an earnout of a past acquisition, and we recognized an expense of $0.6 million for the nine-month period ended September 30, 2023, related to the acquisition of BCNMonetize. 30 Foreign currency (gain) loss. We had a foreign currency gain of $0.1 million for the three-month period ended September 30, 2024 compared to a foreign currency loss of $0.3 million for the three-month period ended September 30, 2023. Foreign currency gains and losses are primarily due to currency fluctuations that affect our operations located outside the United States. We had a foreign currency loss of $0.1 million for the nine-month period ended September 30, 2024 compared to a foreign currency loss of $1.3 million for the nine-month period ended September 30, 2023. Foreign currency gains and losses are primarily due to currency fluctuations that affect our operations located outside the United States. Interest Expense, net. Interest expense, net increased to $3.4 million for the three-month period ended September 30, 2024 from $3.3 million for three-month period ended September 30, 2023. This increase was primarily due to lower interest income, partially offset by a lower interest rate on our debt and a lower principal balance due to prepayments totaling $20 million, which were made in the first half of 2024. Interest expense, net increased to $10.8 million for the nine-month period ended September 30, 2024 from $10.1 million for the nine-month period ended September 30, 2023. This increase was primarily due to a higher interest rate on our debt and lower interest income. Gain (loss) on debt extinguishment. We recorded a loss on debt extinguishment of $0.1 million for the nine-month period ended September 30, 2024 due to prepayments totaling $20.0 million under our 2023 Credit Facility. We recorded a loss on debt extinguishment of $1.6 million for the nine-month period ended September 30, 2023 due to the refinancing of our previous credit facility with our 2023 Credit Facility. Realized gain (loss) on marketable securities. For each of the three-month periods ended September 30, 2024 and 2023 we recorded a de minimis amount of realized gain and loss, respectively, related to our available for sale securities. For each of the nine-month periods ended September 30, 2024 and 2023 we recorded $0.1 million of realized loss, related to our available for sale securities. Income Tax Expense or Benefit. Income tax expense for the three-month period ended September 30, 2024 was $15.0 million. The effective tax rate for the three-month period ended September 30, 2024 was different from our statutory rate due to foreign and state taxes, changes in valuation allowances on deferred tax assets, non-deductible executive compensation, changes in the fair value of the contingent consideration liability, and non-taxable non-territorial income. Income tax benefit for the three-month period ended September 30, 2023 was $1.0 million. The effective tax rate for the three-month period ended September 30, 2023 was different from our statutory rate due to foreign and state taxes, changes in valuation allowances on deferred tax assets, non-deductible executive compensation, changes in the fair value of the contingent consideration liability, and non-taxable non-territorial income. Income tax expense for the nine-month period ended September 30, 2024 was $0.2 million. The effective tax rate for the nine-month period ended September 30, 2024 was different from our statutory rate due to foreign and state taxes, changes in valuation allowances on deferred tax assets, non-deductible executive compensation, changes in the fair value of the contingent consideration liability, and non-taxable non-territorial income. Income tax benefit for the nine-month period ended September 30, 2023 was $3.1 million. The effective tax rate for the nine-month period ended September 30, 2023 was different from our statutory rate due to foreign and state taxes, changes in valuation allowances on deferred tax assets, non-deductible executive compensation, changes in the fair value of the contingent consideration liability, and non-taxable non-territorial income. Our management periodically evaluates the realizability of the deferred tax assets and, if it is determined that it is more likely than not that the deferred tax assets are, or are not, realizable, adjusts the valuation allowance accordingly. Valuation allowances are established and maintained for deferred tax assets on a “more likely than not” threshold. The process of evaluating the need to maintain a valuation allowance for deferred tax assets and the amount maintained in any such allowance is highly subjective and is based on many factors, several of which are subject to significant judgment calls. Based on our analysis, we determined that it was more likely than not that our deferred tax assets would be realized for all jurisdictions with the exception of certain of our digital operations and certain U.S. Foreign Tax Credit carryovers. As a result of historical losses from our digital operations primarily in Spain, Uruguay, Mexico and Argentina, certain U.S. Foreign Tax Credit carryovers and capital losses due to sale of subsidiaries management has determined that it is more likely than not that deferred tax assets of $31.6 million at September 30, 2024 will not be realized and therefore we have established a valuation allowance in that amount on those assets. The Organization for Economic Co-operation and Development (“OECD”) Pillar 2 guidelines address the increasing digitalization of the global economy, re-allocating taxing rights among countries. The OECD, many other member states and various other governments have adopted, or are in the process of adopting, Pillar 2 which calls for a global minimum tax of 15% to be effective for tax years beginning in 2024. The OECD guidelines published to date include transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax. The Company is monitoring developments and evaluating the impacts these new rules will have on its tax rate, including eligibility to qualify for these safe harbor rules. Segment Operations Earlier this year, our recently appointed CEO, who is also our chief operating decision maker, led a thorough review of our operations, cost structure, digital strategy and organization of our business. This review led to the decision to sell the enterprises comprising our EGP business - the largest business unit of what was then our digital segment . Those sales were completed during the 31 second quarter of 2024. Our EGP business generated 73%, and 70% of consolidated revenue for the year ended December 31, 2023 and the six-month period ended June 30, 2024, respectively. The sale of our EGP business allows us to focus our operations on the products and services we sell instead of the type of advertising medium in which we sell them, which had been our historic operational approach. We have realigned our management structure accordingly. With the sale of our EGP business, we identify ourselves and operate as a media and advertising technology company, which is the basis that is now used for internal management reporting and how our CEO evaluates our business. As a result, effective July 1, 2024, we have realigned our operating segments into two segments – media and advertising technology & services – consistent with our current operational and management structure. Our media segment consists of sales of advertising through various media, including television, radio and digital. We own and/or operate 49 primary television stations and 44 radio stations (37 FM and 7 AM), reaching and engaging U.S. Latinos. Our advertising technology & services segment consists of programmatic ad services through Smadex, our demand side programmatic ad platform, and Adwake, which includes BCNMonetize, our mobile growth solutions business. Our reportable segments are the same as our operating segments. Prior periods have been recast to conform to this presentation. Media Net Revenue. Net revenue in our media segment increased to $59.8 million for the three-month period ended September 30, 2024 from $48.7 million for the three-month period ended September 30, 2023. This increase was primarily due to an increase of $9.2 million in broadcast advertising revenue, driven by political advertising revenue, an increase of $2.7 million in digital advertising revenue, and an increase of $0.4 million in other revenue, partially offset by a decrease of $0.4 million in spectrum usage rights revenue and a decrease of $0.9 million in retransmission consent revenue. Net revenue in our media segment increased to $154.8 million for the nine-month period ended September 30, 2024 from $144.6 million for the nine-month period ended September 30, 2023. This increase was primarily due to an increase of $6.3 million in broadcast advertising revenue, driven by political advertising revenue, an increase of $6.3 million in digital advertising revenue, and an increase of $0.7 million in other revenue, partially offset by a decrease of $1.2 million in spectrum usage rights revenue and a decrease of $1.9 million in retransmission consent revenue. In general, most of our media operations face declining audiences, which we believe is present across the broadcast industry, competitive factors with the other major Spanish-language broadcasters, and changing demographics and preferences of audiences, particularly younger audiences, in terms of the media they prefer to view, including streaming and social media. We anticipate that these changes in viewer habits will persist at least for the foreseeable future and possibly permanently. Additionally, we have previously noted a trend for advertising to move increasingly from traditional media, such as television and radio, to new media, such as digital media, and we expect this trend will also continue. Cost of revenue . Cost of revenue in our media segment increased to $4.9 million for the three-month period ended September 30, 2024 from $2.8 million for the three-month period ended September 30, 2023, primarily due to the increase in digital advertising revenue. Cost of revenue in our media segment increased to $11.9 million for the nine-month period ended September 30, 2024 from $7.7 million for the nine-month period ended September 30, 2023, primarily due to the increase in digital advertising revenue. Direct Operating Expenses. Direct operating expenses in our media segment increased to $29.2 million for the three-month period ended September 30, 2024 from $24.1 million for the three-month period ended September 30, 2023, primarily due to an increase of $2.3 million in salaries, primarily associated with the expansion of our news programming in anticipation of this year's election cycle, an increase of $1.3 million in corporate expenses due to the realignment of our operations as noted above, and an increase of $1.2 million in other costs associated with the increase in revenue. The remaining increase was due to other items which were individually immaterial. Direct operating expenses in our media segment increased to $82.4 million for the nine-month period ended September 30, 2024 from $72.0 million for the nine-month period ended September 30, 2023, primarily due to an increase of $6.9 million in salaries, primarily associated with the expansion of our news programming in anticipation of this year's election cycle, an increase of $1.3 million in corporate expenses due to the realignment of our operations as noted above, an increase of $0.6 million in ratings services, and an increase of $1.2 million in other costs associated with the increase in revenue. The remaining increase was due to other items which were individually immaterial. Selling, General and Administrative Expenses. Selling, general and administrative expenses in our media segment increased to $10.9 million for the three-month period ended September 30, 2024 from $8.7 million for the three-month period ended September 30, 2023, primarily due to an increase of $0.7 million in salaries and other employee benefits, and an increase of $1.2 million in corporate expenses due to the realignment of our operations as noted above. The remaining increase was due to other items which were individually immaterial. 32 Selling, general and administrative expenses in our media segment increased to $30.6 million for the nine-month period ended September 30, 2024 from $27.0 million for the nine-month period ended September 30, 2023, primarily due to an increase of $2.0 million in salaries and other employee benefits, and an increase of $1.2 million in corporate expenses due to the realignment of our operations as noted above. The remaining increase was due to other items which were individually immaterial. Advertising Technology & Services Net Revenue. Net revenue in our advertising technology & services segment increased to $37.4 million for the three-month period ended September 30, 2024 from $28.7 million for the three-month period ended September 30, 2023. The increase was primarily due to increases in advertising revenue from Smadex and Adwake, which includes BCNMonetize. Net revenue in our advertising technology & services segment increased to $103.2 million for the nine-month period ended September 30, 2024 from $74.2 million for the nine-month period ended September 30, 2023. The increase was primarily due to increases in advertising revenue from Smadex and Adwake, which includes BCNMonetize. BCNMonetize, which we acquired in May 2023, did not fully contribute to our financial results in the comparable prior period. Cost of revenue . Cost of revenue in our advertising technology & services segment increased to $21.9 million for the three-month period ended September 30, 2024 from $18.6 million for the three-month period ended September 30, 2023, primarily due to the increase in digital advertising revenue. Cost of revenue in our advertising technology & services segment increased to $62.0 million for the nine-month period ended September 30, 2024 from $50.2 million for the nine-month period ended September 30, 2023, primarily due to the increase in digital advertising revenue. We have previously noted a trend on a global basis in our advertising technology & services operations whereby revenue is shifting more to programmatic revenue. As a result, advertisers are demanding more efficiency and lower cost from intermediaries like us. In response to this trend, we have been offering our programmatic purchasing platform, Smadex, to advertisers. The digital advertising industry remains dynamic and is continuing to undergo rapid changes in technology, customer expectation and competition. We expect this trend to continue and possibly accelerate. We must continue to remain vigilant to meet these dynamic and rapid changes including the need to further adjust our business strategies accordingly. No assurances can be given that such strategies will be successful. Direct operating expenses . Direct operating expenses in our advertising technology & services segment increased to $6.4 million for the three-month period ended September 30, 2024 from $4.6 million for the three-month period ended September 30, 2023, primarily due to an increase of $0.8 million in cloud infrastructure expenses associated with the increase in revenue, an increase of $0.5 million in salaries, and severance expense of $0.4 million. Direct operating expenses in our advertising technology & services segment increased to $16.8 million for the nine-month period ended September 30, 2024 from $12.2 million for the nine-month period ended September 30, 2023, primarily due to an increase of $2.9 million in cloud infrastructure expenses, an increase of $1.0 million in salaries, and severance expense of $0.4 million. Selling, general and administrative expenses . Selling, general and administrative expenses in our advertising technology & services segment increased to $6.3 million for the three-month period ended September 30, 2024, from $3.3 million for the three-month period ended September 30, 2023, primarily due to an increase of $1.9 million in salaries and severance expense of $0.9 million. Selling, general and administrative expenses in our advertising technology & services segment increased to $15.2 million for the nine-month period ended September 30, 2024, from $10.3 million for the nine-month period ended September 30, 2023, primarily due to an increase of $4.0 million in salaries and severance expense of $0.9 million. Liquidity and Capital Resources While we have a history of operating losses in some periods and operating income in other periods, we also have a history of generating significant positive cash flows from our operations. We had net loss attributable to common stockholders of $15.4 million for the year ended December 31, 2023, and net income attributable to common stockholders of $18.1 million and $29.3 million for the years ended December 31, 2022 and 2021, respectively. We had positive cash flow from operations of $75.2 million, $78.9 million and $65.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. We had positive cash flow from operations of $61.9 million for the nine-month period ended September 30, 2024. For at least the next twelve months, we expect to fund our working capital requirements, capital expenditures and payments of principal and interest on outstanding indebtedness, with cash on hand and cash flows from operations. We currently believe that our cash position is capable of meeting our operating and capital expenses and debt service requirements for at least the next twelve months from the issuance of this report. We believe that our position is strengthened by cash and cash equivalents on hand, in the amount of $90.3 million, and available for sale marketable securities in the additional amount of 33 $2.8 million, as of September 30, 2024. Our liquidity is not materially affected by the amounts held in accounts outside the United States. On March 4, 2024, we received a communication from Meta that it intended to wind down its authorized sales partner, or ASP, program globally and end its relationship with all of its ASPs, including us, by July 1, 2024. As a result, we conducted a thorough review of our digital strategy, operations and cost structure, and during the second quarter of 2024 made the decision to dispose of the operations of EGP, our digital commercial partnerships business, which was completed during the second quarter of 2024. The disposition of our EGP business, the largest business unit of what was then our digital segment, will have a material effect on our results of operations in that total revenue from our advertising technology & services operations is expected to be significantly lower than it was prior to the disposition of our EGP business. As a result, cash flow from operations will be materially and adversely affected in future periods, which could also adversely affect our liquidity. To the extent that our then-current liquidity is insufficient to fund our business activities or if we do not remain in compliance with our financial covenants under the 2023 Credit Agreement, whether as a direct or indirect result of the disposition of our EGP business or otherwise, we may be required to seek additional equity or debt financing in the future to satisfy capital requirements. There is no guarantee that any such capital would be available to us on favorable terms, or at all. The failure to obtain any required capital could have a material adverse effect on our operations and financial condition. Credit Facility On March 17, 2023, we entered into the 2023 Credit Facility, pursuant to the 2023 Credit Agreement, by and among us, Bank of America, N.A., as Administrative Agent, and the other financial institutions party thereto as Lenders (collectively, the “Lenders” and individually each a “Lender”). The 2023 Credit Agreement amended, restated and replaced in its entirety our previous credit agreement (the "2017 Credit Agreement"). For detailed information regarding certain terms of our 2023 Credit Agreement and Credit Facility, see Note 2 to Notes to Condensed Consolidated Financial Statements. In March 2024, we made a prepayment of $10.0 million, of which $8.75 million was applied to the upcoming quarterly principal payments in 2024 under the Term A Facility, and $1.25 million was applied to the Revolving Credit Facility. In June 2024, we made an additional prepayment of $10.0 million, of which $4.9 million was a mandatory prepayment as a result of the EGP disposition. The prepayment was applied to the quarterly principal payments in 2025 under the Term A Facility. Consolidated EBITDA Consolidated EBITDA is a non-GAAP measure. The most directly comparable GAAP financial measure to consolidated EBITDA is net income (loss) attributable to common stockholders. We use the term “consolidated EBITDA” because that term is defined in our 2023 Credit Agreement. Under the terms of our 2023 Credit Agreement, consolidated EBITDA is a measure that governs several critical aspects of our 2023 Credit Facility, including, among other things, financial covenants with which we must comply and financial ratios which we must maintain in order to borrow funds needed for the operation of our business and with respect to the interest rates that we pay on our 2023 Credit Facility. For example, our 2023 Credit Agreement contains a total net leverage ratio financial covenant. The total net leverage ratio, or the ratio of consolidated total debt (net of up to $50.0 million of unrestricted cash) to trailing-twelve-month consolidated EBITDA, affects both our ability to borrow from our Revolving Credit Facility and our applicable margin for the interest rate calculation. Under our 2023 Credit Agreement, our maximum total leverage ratio may not exceed 3.25 to 1.00. In addition, our 2023 Credit Agreement contains an interest coverage ratio financial covenant (calculated as set forth in the 2023 Credit Agreement), with a minimum permitted ratio of 3.00 to 1.00. Therefore, we believe that it is important to disclose consolidated EBITDA to our investors to understand our compliance with these, and certain other, terms of our 2023 Credit Agreement. While many in the financial community and we consider consolidated EBITDA to be important, it should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance and liquidity prepared in accordance with accounting principles generally accepted in the United States of America, such as operating income (loss), net income (loss) and cash flows from operating activities. Consolidated EBITDA has certain limitations because it excludes and includes several important financial line items as noted above. Therefore, we consider both non-GAAP and GAAP measures when evaluating our business. Consolidated EBITDA is also used to make executive compensation decisions. A reconciliation of this non-GAAP measure to its most directly comparable GAAP financial measure follows (in thousands): 34 Nine-Month Period Ended September 30, 2024 2023 Net income (loss) attributable to common stockholders $ (92,550 ) $ 2,771 Net income (loss) attributable to redeemable noncontrolling interest - discontinued operations (2,779 ) 1 Net income (loss) attributable to noncontrolling interest - discontinued operations — (342 ) Interest expense 12,648 12,464 Interest expense - discontinued operations 219 324 Interest income (1,801 ) (2,396 ) Interest income - discontinued operations (731 ) (1,059 ) Dividend income (10 ) (32 ) Realized gain (loss) on marketable securities 110 94 (Gain) loss on debt extinguishment 91 1,556 Income tax expense 173 (3,055 ) Income tax expense - discontinued operations (770 ) 2,017 Amortization of syndication contracts 339 358 Payments on syndication contracts (337 ) (366 ) Non-cash stock-based compensation 12,422 17,053 Depreciation and amortization 13,049 11,948 Depreciation and amortization - discontinued operations 3,958 8,388 Change in fair value of contingent consideration (630 ) 621 Change in fair value of contingent consideration - discontinued operations (12,568 ) (9,560 ) Impairment charge — 989 Impairment charge - discontinued operations 49,438 — Non-recurring cash severance and restructuring charge 4,849 612 Other operating (gain) loss - discontinued operations 45,139 — EBITDA attributable to redeemable noncontrolling interest - discontinued operations (167 ) (736 ) EBITDA attributable to noncontrolling interest - discontinued operations — (230 ) Consolidated EBITDA (1) $ 30,092 $ 41,420 (1) Consolidated EBITDA is presented in accordance with the definition provided in our 2023 Credit Facility. Cash Flow Net cash flow provided by operating activities was $61.9 million for the nine-month period ended September 30, 2024, compared to $69.1 million for the nine-month period ended September 30, 2023. The decrease in cash flow from operating activities was primarily due to a decrease in net income after adjusting for non-cash items. Significant non-cash items in the nine-month period ended September 30, 2024 included the loss on sale related to the EGP business of $45.1 million, impairment charges of $49.4 million, depreciation and amortization expense of $17.0 million, non-cash stock based compensation of $12.4 million, income related to the change in fair value of contingent consideration of $13.2 million, deferred income taxes of $3.3 million, and income attributable to redeemable noncontrolling interest of $2.8 million. Significant non-cash items in the nine-month period ended September 30, 2023 included depreciation and amortization expense of $20.3 million, non-cash stock based compensation of $17.1 million, and income related to the change in fair value of contingent consideration of $8.9 million. We expect to have positive cash flow from operating activities for the 2024 year. The decrease in cash flow provided by operating activities was partially offset by increase in net changes in our working capital of $49.1 million for the nine-months periods ended September 30, 2024 compared to $35.5 million for the nine-months periods ended September 30, 2023. The net changes in working were primarily due to the timing of cash payments to publishers in the EGP business and timing of collections in the EGP business. Net cash flow used in investing activities was $28.1 million for the nine-month period ended September 30, 2024, compared to $13.9 million for the nine-month period ended September 30, 2023. The increase in cash flow used in investing activities was primarily due to net cash divested in the sale of the EGP business of $43.0 million for the nine-month period ended September 30, 2024 compared to $6.9 million spent on the purchase of businesses for the nine-month period ended September 30, 2023, and a reduction in proceeds from the sale of marketable securities to $10.4 million for the nine-month period ended September 30, 2024 compared to $38.1 million for the nine-month period ended September 30, 2023. The increase in cash flow used in investing activities was partially offset by a reduction in capital expenditures to $6.3 million for the nine-month period ended September 30, 2024 compared to $19.9 million for the nine-month period ended September 30, 2023 as a result of the build out of our corporate headquarters in the prior year period, no spend on purchases of marketable securities for the nine-month period ended September 30, 2024 compared to $11.4 million for the nine-month period ended September 30, 2023, and proceeds from a loan receivable associated with the sale of the EGP business of $10.7 million for the nine-month period ended September 30, 2024 compared to the issuance of a loan receivable of $13.6 million for the nine-month period ended September 30, 2023. We anticipate that our capital expenditures will be approximately $7.0 million during the full year 2024. The amount of our anticipated capital expenditures may change based on 35 future changes in business plans and our financial condition and general economic conditions. We expect to fund capital expenditures with cash on hand and net cash flow from operations. Net cash flow used in financing activities was $49.3 million for the nine-month period ended September 30, 2024, compared to $55.2 million for the nine-month period ended September 30, 2023. The decrease in cash flow used in financing activities was primarily due to payments of contingent consideration of $14.3 million for the nine-month period ended September 30, 2024 compared to $35.1 million for the nine-month period ended September 30, 2023, distributions to noncontrolling interest of $1.1 million for the nine-month period ended September 30, 2024 compared to $3.4 million for the nine-month period ended September 30, 2023, and payments of $1.8 million of debt issuance costs for the nine-month period ended September 30, 2023 as a result of the refinancing of our credit facility. The decrease in cash flow used in financing activities was partially offset by $20.0 million of debt prepayments during the nine-month period ended September 30, 2024. 36