Townsquare Media Inc

Previous wording

Townsquare is a community-focused digital media and digital marketing solutions company with market leading local radio stations, principally focused outside the top 50 markets in the United States. Our integrated and diversified products and solutions enable local, regional and national advertisers to target audiences across multiple platforms, including digital, mobile, social, video, streaming, e-commerce, radio and events. Our assets include a subscription digital marketing solutions business (“Townsquare Interactive”), providing website design, creation and hosting, search engine optimization, social platforms and online reputation management as well as other monthly digital services for approximately 23,300 small to medium sized businesses; a robust digital advertising division (“Townsquare Ignite,” or “Ignite”), a powerful combination of a) an owned and operated portfolio of more than 400 local news and entertainment websites and mobile apps along with a network of leading national music and entertainment brands, collecting valuable first party data and b) a proprietary digital programmatic advertising technology stack with an in-house demand and data management platform; and a portfolio of 349 local terrestrial radio stations in 74 U.S. markets strategically situated outside the Top 50 markets in the United States. Our portfolio includes local media brands such as WYRK.com, WJON.comand NJ101.5.com, and premier national music brands such as XXLmag.com, TasteofCountry.com, UltimateClassicRock.com, and Loudwire.com.

Current wording

Townsquare is a community-focused digital media and subscription digital marketing solutions company with market leading local radio stations, principally focused outside the top 50 markets in the United States. Our integrated and diversified products and solutions enable local, regional and national advertisers to target audiences across multiple platforms, including digital, mobile, social, video, streaming, e-commerce, radio and events. Our assets include a subscription digital marketing solutions business (“Townsquare Interactive”), providing a business management platform, website design, creation and hosting, search engine optimization, social platforms and online reputation management as well as other monthly digital services for approximately 23,575 small to medium sized businesses; a robust digital advertising division (“Townsquare Ignite,” or “Ignite”), a powerful combination of a) an owned and operated portfolio of more than 400 local news and entertainment websites and mobile apps along with a network of leading national music and entertainment brands, collecting valuable first party data and b) a proprietary digital programmatic advertising technology stack with an in-house demand and data management platform; and a portfolio of 349 local terrestrial radio stations in 74 U.S. markets strategically situated outside the Top 50 markets in the United States. Our portfolio includes local media brands such as WYRK.com, WJON.comand NJ101.5.com, and premier national music brands such as XXLmag.com, TasteofCountry.com, UltimateClassicRock.com, and Loudwire.com.

Previous wording

Current economic challenges, including high and sustained inflation and rising interest rates have caused and could continue to cause economic uncertainty and volatility. These factors could result in advertising and subscription digital marketing solutions cancellations, declines in the purchase of new advertising by our clients, declines in the addition of new digital marketing solutions subscribers, and increases to our operating expenses. We monitor economic conditions closely, and in response to observed or anticipated reductions in revenue, we may institute precautionary measures to address the potential impact to our consolidated financial position, consolidated results of operations, and liquidity, including wage reduction efforts and controlling non-essential capital expenditures.

Current wording

Current economic challenges, including high and sustained inflation and interest rates have caused and could continue to cause economic uncertainty and volatility. These factors could result in advertising and subscription digital marketing solutions cancellations, declines in the purchase of new advertising by our clients, declines in the addition of new digital marketing solutions subscribers, and increases to our operating expenses. We monitor economic conditions closely, and in response to observed or anticipated reductions in revenue, we may institute precautionary measures to address the potential impact to our consolidated financial position, consolidated results of operations, and liquidity, including wage reduction efforts and controlling non-essential capital expenditures.

Previous wording

•Net revenue decreased $3.5 million, or 3.4%, primarily driven by a $3.3 million decrease in our Subscription Digital Marketing Solutions net revenue and a $0.5 million decrease in our Broadcast Advertising net revenue, partially offset by a $0.4 million increase in our Digital Advertising net revenue.

Current wording

•Net revenue decreased $3.0 million, or 2.5%, primarily driven by a $2.8 million decrease in our Subscription Digital Marketing Solutions net revenue and a $0.6 million decrease in our Other net revenue, partially offset by a $0.4 million increase in our Digital Advertising net revenue.

Previous wording

•Operating income increased $2.4 million, or 56.7%, for the three months ended March 31, 2024. The increase was primarily due to a $6.9 million decrease in non-cash impairment charges and a $1.4 million decrease in direct operating expenses, partially offset by a $3.5 million decrease in net revenue, a $1.2 million increase in transaction and business realignment costs and a $1.1 million increase in stock-based compensation.

Current wording

•Operating loss increased $16.5 million, or 342.6%, for the three months ended June 30, 2024. The increase was primarily due to a $6.4 million increase in non-cash impairment charges, a $6.2 million increase in stock-based compensation and the $3.0 million decrease in net revenue discussed above.

Previous wording

•Broadcast Advertising reported an operating income of $5.5 million, as compared to operating loss of $3.6 million for the three months ended March 31, 2023. The increase of $9.1 million is primarily due to a decrease in non-cash impairment charges of $6.9 million and a decrease in direct operating expenses of $2.1 million. The Digital Advertising segment reported operating income of $6.7 million for the three months ended March 31, 2024, which represents a decrease of $3.2 million, as compared to operating income of $9.9 million for the same period in 2023. The decrease is primarily due to an increase of $3.5 million in direct operating expenses. Subscription Digital Marketing Solutions reported operating income of $4.3 million, a decrease of $0.9 million from the three months ended March 31, 2023.

Current wording

•Broadcast Advertising reported an operating loss of $15.4 million for the three months ended June 30, 2024, as compared to an operating loss of $5.7 million for the three months ended June 30, 2023. The increase of $9.7 million is primarily due to an increase in non-cash impairment charges of $11.6 million, partially offset by a decrease in direct operating expenses of $1.4 million. The Digital Advertising segment reported operating income of $8.8 million for the three months ended June 30, 2024, which represents a decrease of $5.4 million, as compared to operating income of $14.1 million for the same period in 2023. The decrease is primarily due to an increase of $3.7 million in direct operating expenses and a non-cash goodwill impairment charge of $1.8 million. Subscription Digital Marketing Solutions reported operating income of $4.6 million, a decrease of $0.9 million from the three months ended June 30, 2023 due to the decrease in net revenue discussed above, partially offset by a $2.1 million decrease in direct operating expenses.

Previous wording

Net revenue for the three months ended March 31, 2024 decreased $3.5 million, or 3.4%, as compared to the same period in 2023. Our Subscription Digital Marketing Solutions net revenue decreased $3.3 million, or 15.3%, as compared to the same period in 2023 due to a reduction in net subscribers. Our Broadcast Advertising net revenue decreased $0.5 million, or 1.0%, as compared to the same period in 2023, due to decreases in the purchase of advertising by our clients. These decreases were partially offset by an increase in our Digital Advertising net revenue of $0.4 million, or 1.3%, due to purchases of new advertising.

Current wording

Net revenue for the three months ended June 30, 2024 decreased $3.0 million, or 2.5%, as compared to the same period in 2023. Our Subscription Digital Marketing Solutions net revenue decreased $2.8 million, or 12.9%, as compared to the same period in 2023 due to a reduction in net subscribers. Our Other net revenue decreased $0.6 million due to fewer live events. Our Broadcast Advertising net revenue decreased $0.1 million, or 0.2%, as compared to the same period in 2023, essentially flat. These decreases were partially offset by an increase in our Digital Advertising net revenue of $0.4 million, or 1.0%, due to purchases of new advertising.

Previous wording

Direct operating expenses for the three months ended March 31, 2024 decreased by $1.4 million, or 1.8%, as compared to the same period in 2023. Our Subscription Digital Marketing Solutions direct operating expenses decreased by $2.8 million, or 17.3% as compared to the same period in 2023 due to lower compensation and promotional costs. Our Broadcast Advertising direct operating expenses decreased $2.1 million, or 5.6%, primarily driven by lower compensation. These decreases were partially offset by a $3.5 million, or 14.8%, increase in our Digital Advertising direct operating expenses as compared to the same period in 2023 primarily driven by higher inventory costs and headcount related expenses.

Current wording

Direct operating expenses for the three months ended June 30, 2024 decreased by $0.1 million, or 0.2%, as compared to the same period in 2023. Our Subscription Digital Marketing Solutions direct operating expenses decreased by $2.1 million, or 14.1% as compared to the same period in 2023 due to lower compensation costs and bad debt. Our Broadcast Advertising direct operating expenses decreased $1.4 million, or 3.5%, primarily driven by lower compensation. These decreases were partially offset by a $3.7 million, or 13.9%, increase in our Digital Advertising direct operating expenses as compared to the same period in 2023 primarily driven by higher inventory costs and bad debt. Other direct operating expenses decreased $0.4 million, or 7.7%, due to a decrease in live events during the period, as compared to the same period a year ago.

Previous wording

Stock-based compensation expense for three months ended March 31, 2024 increased $1.1 million, or 62.0%, as compared to the same period in 2023, due to grants during the fourth quarter of 2023 and the first quarter of 2024 and $0.7 million in expense recognized related to the cash settlement of options. For further discussion, see Note 9, Stockholders' Equity, in the Notes to Unaudited Consolidated Financial Statements.

Current wording

Stock-based compensation expense for three months ended June 30, 2024 increased $6.2 million, or 295.3%, as compared to the same period in 2023, primarily due to $3.8 million in expense recognized for the cash settlement of options, $1.8 million of expense recognized for the stock bonus program and due to grants during the fourth quarter of 2023 and the first quarter of 2024. For further discussion, see Note 9, Stockholders' Equity, in the Notes to Unaudited Consolidated Financial Statements.

Previous wording

Transaction and business realignment costs for the three months ended March 31, 2024 increased $1.2 million as compared to the same period in 2023, primarily due to local market operational cost reduction efforts.

Current wording

Transaction and business realignment costs for the three months ended June 30, 2024 increased $1.3 million as compared to the same period in 2023, primarily due to local market operational cost reduction efforts.

Previous wording

Impairment of Intangible and Long-Lived Assets

Current wording

Impairment of Intangible Assets, Investments, Goodwill and Long-Lived Assets

Previous wording

The Company incurred a $1.3 million impairment charges related to FCC licenses in one of our 74 local markets during the three months ended March 31, 2024, as compared to impairment charges of $8.2 million in 15 of our 74 local markets in the same period a year ago.

Current wording

The Company incurred a $28.4 million impairment charges related to FCC licenses in 26 of our 74 local markets during the three months ended June 30, 2024, as compared to impairment charges of $16.6 million in 20 of our 74 local markets in the same period a year ago.

Previous wording

Unfavorable changes in key assumptions utilized in the impairment assessment of our FCC licenses may affect future testing results. For example, keeping all other assumptions constant, a 100-basis point increase in the weighted average cost of capital as of the date of our last quantitative assessment would cause the estimated fair values of our FCC licenses to decrease by $29.5 million which would have resulted in an additional impairment charge of $4.6 million as of March 31, 2024. Further, a 100-basis point decline in the long-term revenue growth rate would cause the estimated fair values of our FCC licenses to further decrease by $15.4 million which would have resulted in a further impairment charge of $5.7 million as of March 31, 2024. Assumptions used to estimate the fair value of our FCC licenses are also dependent upon the expected performance and growth of our traditional broadcast operations. In the event broadcast revenue experiences actual or anticipated declines, such declines will have a negative impact on the estimated fair value of our FCC licenses, and the Company could recognize additional impairment charges, which could be material.

Current wording

Unfavorable changes in key assumptions utilized in the impairment assessment of our FCC licenses may affect future testing results. For example, keeping all other assumptions constant, a 100-basis point increase in the weighted average cost of capital as of the date of our last quantitative assessment would cause the estimated fair values of our FCC licenses to decrease by $18.9 million which would have resulted in an additional impairment charge of $16.4 million as of June 30, 2024. Further, a 100-basis point decline in the long-term revenue growth rate would cause the estimated fair values of our FCC licenses to further decrease by $9.5 million which would have resulted in a further impairment charge of $8.4 million as of June 30, 2024. Assumptions used to estimate the fair value of our FCC licenses are also dependent upon the expected performance and growth of our traditional broadcast operations. In the event broadcast revenue experiences actual or anticipated declines, such declines will have a negative impact on the estimated fair value of our FCC licenses, and the Company could recognize additional impairment charges, which could be material.

Previous wording

We recognized a provision for income taxes of $0.2 million for the three months ended March 31, 2024, as compared to an income tax benefit of $1.6 million for the same period in 2023. Our effective tax rate for the three months ended March 31, 2024 and 2023 was approximately 11.8% and 44.8%, respectively. The decrease in the effective tax rate for the three months ended March 31, 2024, is primarily driven by discrete items for the period, including gain on sale of investment.

Current wording

We recognized a provision for income taxes of $18.8 million for the three months ended June 30, 2024, as compared to an income tax benefit of $6.5 million for the same period in 2023. Our effective tax rate for the three months ended June 30, 2024 and 2023 was approximately (62.7)% and 70.7%, respectively. The effective tax rate and income tax provision for the three months ended June 30, 2024 is primarily driven by an increase in the valuation allowance for interest expense carryforwards resulting from the non-cash impairment charges and an increase in non-deductible compensation costs recorded during the three months ended June 30, 2024.

Previous wording

During the three months ended March 31, 2023, the Company voluntarily repurchased an aggregate $12.2 million principal amount of its 2026 Notes below par, plus accrued interest. The Company wrote-off approximately $0.1 million of unamortized deferred financing costs, recognizing a total net gain of $0.8 million in connection with the voluntary repurchases of its 2026 Notes during the three months ended March 31, 2023. The Company did not repurchase any of its 2026 Notes during the three months ended March 31, 2024.

Current wording

During the six months ended June 30, 2024, the Company voluntarily repurchased an aggregate $13.7 million principal amount of its 2026 Notes below par, plus accrued interest. The Company wrote-off approximately $0.1 million of unamortized deferred financing costs, recognizing an immaterial net gain for the three and six months ended June 30 2024. During the six months ended June 30, 2023, the Company voluntarily repurchased an aggregate $12.9 million principal amount of its 2026 Notes below par plus accrued interest. The Company wrote-off approximately $0.1 million of unamortized deferred financing costs, recognizing a total net gain of $0.8 million in connection with the voluntary repurchases of its 2026 Notes.

Previous wording

Net cash provided by operating activities was $1.7 million for the three months ended March 31, 2024, as compared to $9.4 million for the same period in 2023. This decrease was primarily due to changes in working capital balances particularly prepaid and accrued expenses.

Current wording

Net cash provided by operating activities was $10.7 million for the six months ended June 30, 2024, as compared to $31.4 million for the same period in 2023. This decrease was primarily due to changes in working capital balances, particularly prepaid and accrued expenses.

Previous wording

Net cash used in investing activities was $0.3 million for the three months ended March 31, 2024 as compared to $0.2 million for the same period in 2023. The increase in net cash used in investing activities was primarily due to cash proceeds of $3.0 million related to the sales of digital assets in 2023 that did not reoccur in 2024 and a $0.8 million increase in purchases of property and equipment, partially offset by a $3.7 million increase in proceeds from sale of assets and investment related transactions.

Current wording

Net cash used in investing activities was $4.0 million for the six months ended June 30, 2024 as compared to net cash provided by investing activities of $2.4 million for the same period in 2023. The increase in net cash used in investing activities was primarily due to cash proceeds of $3.0 million related to the sales of digital assets in 2023 that did not reoccur in 2024, a $1.5 million increase in purchases of property and equipment and a $1.8 million decrease in proceeds from the sale of assets and investment related transactions.

Previous wording

Net cash used in financing activities was $5.8 million for the three months ended March 31, 2024, as compared to $10.8 million for the same period in 2023. The increase in net cash used in financing activities was primarily due to $3.2 million in dividend payments, and $4.3 million for repurchases of common stock during the three months ended March 31, 2024, partially offset by $11.2 million in voluntary repurchases of our 2026 Notes in 2023, as compared to no repurchases during the three months ended March 31, 2024. Additionally, proceeds from the exercise of stock options increased $2.0 million for the three months ended March 31, 2024, as compared to the same period a year ago.

Current wording

Net cash used in financing activities was $39.2 million for the six months ended June 30, 2024, as compared to $27.6 million for the same period in 2023. The increase in net cash used in financing activities was primarily due to higher repurchases of common stock in the amount of $6.6 million, a $3.0 million increase in dividend payments and higher voluntary repurchases of our 2026 Notes in the amount of $1.6 million for the six months ended June 30, 2024, as compared to the same period a year ago. These increases were partially offset by a $0.5 million increase in proceeds from the exercise of stock options for the six months ended June 30, 2024, as compared to the same period in 2023.

Previous wording

As of March 31, 2024, we had $500.1 million of outstanding indebtedness, net of deferred financing costs of $3.5 million.

Current wording

As of June 30, 2024, we had $487.1 million of outstanding indebtedness, net of deferred financing costs of $2.9 million.

Previous wording

Based on the terms of our 2026 Notes, as of March 31, 2024, we expect our debt service requirements to be approximately $34.6 million over the next twelve months. See Note 7, Long-Term Debt, in our Notes to Consolidated Financial Statements for additional information related to our 2026 Notes.

Current wording

Based on the terms of our 2026 Notes, as of June 30, 2024, we expect our debt service requirements to be approximately $33.7 million over the next twelve months. See Note 7, Long-Term Debt, in our Notes to Consolidated Financial Statements for additional information related to our 2026 Notes.

Previous wording

As of March 31, 2024 we had $56.6 million of cash and cash equivalents, and $53.9 million of receivables from customers, which historically have had an average collection cycle of approximately 55 days. We had restricted cash of $0.5 million at March 31, 2024 and December 31, 2023, that was held as collateral in connection with certain agreements. From time to time, such restricted funds could be returned to us or we could be required to pledge additional cash.

Current wording

As of June 30, 2024 we had $28.5 million of cash and cash equivalents, and $60.5 million of receivables from customers, which historically have had an average collection cycle of approximately 55 days. We had restricted cash of $0.5 million at June 30, 2024 and December 31, 2023, that was held as collateral in connection with certain agreements. From time to time, such restricted funds could be returned to us or we could be required to pledge additional cash.

Previous wording

In late March of 2024, the Company launched a program that offered certain holders a cash settlement of options that were granted in July 2014 following the completion of the Company's initial public offering. These options were approaching their expiration date in July 2024. The cash settlement amount to be paid to each holder was indexed to the closing price of the Company's Class A common stock, as reported on the New York Stock Exchange consolidated tape, as of the date prior to each respective cash settlement election date less the respective option grant price. A total of $11.4 million was paid in connection with the cash settlement of 3.2 million options in April of 2024.

Current wording

In late March of 2024, the Company launched a program that offered certain holders a cash settlement of options that were granted in July 2014 following the completion of the Company's initial public offering. These options were approaching their expiration date in July 2024. The cash settlement amount paid to each holder was indexed to the closing price of the Company's Class A common stock, as reported on the New York Stock Exchange consolidated tape, as of the date prior to each respective cash settlement election date less the respective option grant price. A total of $11.4 million was paid in connection with the cash settlement of 3.2 million options during the first half of 2024.