Townsquare Media, Inc. — Q1 2015 Form 10-Q
Business context and reporting period. The company operates radio stations, digital and social properties, and live events in small and mid-sized U.S. markets. At March 31, 2015, it owned 311 radio stations, more than 325 local websites, and approximately 500 live events across 66 markets. Results below cover the three months ended March 31, 2015, compared with the same period in 2014.
Financial performance and liquidity
| Metric | Q1 2014 | Q1 2015 |
|---|---|---|
| Net revenue | $79.2 million | $81.1 million |
| Operating income | $11.7 million | $10.8 million |
| Operating margin | 14.8% | 13.4% |
| Net income (loss) | $(0.5) million | $0.1 million |
| Cash provided by operating activities | $14.2 million | $20.0 million |
| Cash used in investing activities | $2.1 million | $5.8 million |
- Revenue grew 2.5%. Local Advertising revenue decreased 0.3% to $65.1 million; Live Events rose 5.1% to $8.2 million; and Other Media and Entertainment increased 29.0% to $7.9 million.
- Direct operating expenses rose 5.3% to $61.3 million, faster than revenue. Operating income fell 7.2%. Net interest expense decreased 12.6% to $10.6 million, helping the company move from a pretax loss to pretax income of $0.2 million. Tax expense was $0.1 million; the reported effective tax rate was approximately 43%.
- Q1 2015 net income was $131,000, of which $96,000 was attributable to controlling interests and $35,000 to non-controlling interests. Basic EPS was $0.01; diluted EPS was $0.00.
- Operating cash flow increased year over year, supported in part by a $9.7 million increase in accrued interest and an $8.6 million reduction in accounts receivable. Management also cited $3.7 million of cash generated by operations. Capital expenditures were $3.1 million.
- Cash was $38.2 million at March 31, 2015. Current assets were $100.1 million and current liabilities $62.8 million. Reported debt carrying value was $538.9 million, including $10.0 million drawn on the revolving facility; principal debt was approximately $532.2 million.
Material changes, outlook, and risks
- Local Advertising revenue was roughly flat overall: a $0.3 million decline in political advertising was partly offset by a $0.1 million increase in non-political advertising. Live Events growth reflected more events, attendance, and revenue per attendee. Other Media and Entertainment growth came from digital marketing services and national digital assets, partly offset by lower e-commerce revenue.
- Expenses increased across all three business categories. Live Events costs rose with the number and scale of events and added headcount for planned 2015 events. Corporate expenses rose 9.9%, primarily due to public-company costs. Depreciation and amortization declined 16.3%, primarily due to software development costs.
- Subsequent refinancing: On April 1, 2015, the company completed a refinancing after the reporting date. It issued $300 million of 6.5% senior notes due 2023 and entered a $275 million term loan facility, initially at 4.25%, plus a $50 million revolving facility that remained undrawn. Proceeds and cash on hand funded redemption of $410.9 million of 9% notes due 2019 and repayment of the prior credit facility. Management reported pro forma debt of $575.4 million and annual debt service of approximately $34.2 million, versus $532.2 million of debt and $42.8 million annual debt service before refinancing.
- Management said cash, operating cash flows, and available revolving capacity should be sufficient for working capital, capital expenditures, and debt service for at least 12 months. The company was in compliance with its prior credit-facility covenants at March 31, 2015.
- No specific financial guidance was provided. Management expects Q1 typically to be the lowest-revenue quarter, with Q2 and Q3 generally strongest; Live Events revenue is also seasonal, generally peaking in Q2. The filing notes sensitivity to economic and advertising conditions, competition and changes in radio demand, weather-related event disruptions, acquisition execution, regulation, and floating interest rates.
- Commitments included $48.1 million of minimum operating-lease payments and approximately $17.6 million owed under Nielsen agreements. The company reported ordinary-course litigation, with no expectation of a material adverse impact, and no material off-balance-sheet arrangements.
Important facts for investors to verify
- Whether revenue growth can outpace operating-cost growth and restore operating margins.
- How much operating cash flow reflects recurring operations versus working-capital timing, including accrued interest and receivable collections.
- The refinancing’s final borrowing costs, debt-service obligations, covenant headroom, and exposure to floating rates.
- Live Events performance through the seasonally stronger quarters, including event attendance, profitability, and weather-related exposure.
- Whether digital growth persists and offsets softness in local advertising and e-commerce.