Townsquare Media, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report. Townsquare is a local media and marketing company with digital advertising and subscription services, 352 radio stations in 74 markets, and live events.
Financial performance
Amounts in USD millions except per-share data. Changes are versus 2022.
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Net revenue | $454.2 | $463.1 | Down $8.8 (1.9%) |
| Operating income (loss) | $(19.1) | $55.6 | Down $74.7 |
| Net income (loss) | $(43.0) | $14.4 | Down $57.4 |
| Operating margin | (4.2%) | 12.0% | Down 16.2 percentage points |
| Cash provided by operating activities | $67.8 | $50.2 | Up $17.6 |
| Capital expenditures | $15.0 | $15.8 | Down $0.8 |
| Cash and cash equivalents at year-end | $61.0 | $43.4 | Up $17.6 |
| Long-term debt, net of financing costs | $499.7 | $524.4 | Down $24.8 |
Net interest expense was $37.2 million, compared with $39.8 million in 2022. Year-end accounts receivable were $60.8 million. Debt less cash was approximately $438.6 million, calculated from reported year-end debt and cash. The company reported a $6.1 million income tax benefit and diluted loss per share of $2.68.
Revenue mix and material changes
- Digital Advertising: $150.3 million, up 7.1% from $140.4 million, supported by increased advertising purchases. Excluding political advertising, revenue was $150.1 million, up 7.3%.
- Subscription Digital Marketing Solutions: $82.2 million, down 9.1% from $90.4 million, primarily due to fewer net subscribers. The company reported approximately 24,000 subscribers at year-end.
- Broadcast Advertising: $211.7 million, down 5.4% from $223.9 million, reflecting lower client advertising purchases. Excluding political advertising, revenue was $209.0 million, down 3.6%.
- Other, including live events: $10.0 million, up 18.6%, reflecting more events held.
- Combined digital revenue was $232.5 million, or 51% of total revenue, versus $230.8 million, or 50%, in 2022. Total revenue excluding political advertising fell 0.9% to $451.3 million; political revenue declined to $2.9 million from $7.5 million.
The operating loss was driven chiefly by $90.6 million of impairment charges, up $59.5 million year over year. These included $70.9 million of FCC-license impairments across 36 markets, compared with $26.1 million across nine markets in 2022; $14.5 million related to investments; and goodwill and other asset impairments. Direct operating expenses rose 1.3% to $329.2 million, while stock-based compensation increased $4.2 million to $8.0 million.
Cash, debt and capital allocation
- Operating cash flow rose to $67.8 million. Investing activities used $3.6 million, compared with $37.8 million in 2022, when the company funded the Cherry Creek acquisition and purchased digital assets. Financing activities used $46.6 million, including $25.6 million of 2026 note repurchases, $9.3 million of dividend payments, and stock repurchases.
- The company had $503.6 million principal amount of 6.875% senior secured notes outstanding at year-end, due February 1, 2026. It repurchased $27.1 million principal amount during 2023. Stated expected debt service for the following 12 months was approximately $34.6 million. The company said it was in compliance with debt covenants.
- Management said cash on hand and anticipated cash flows should meet working-capital, capital expenditure, dividend and debt-service needs for at least one year from the filing date, while noting dependence on operating performance, advertising demand, and economic conditions.
- The board reinstated quarterly dividends in 2023 at $0.1875 per share; on February 28, 2024, it approved an increase to $0.1975 per share. Future dividends remain discretionary and subject to debt covenants and other factors.
Outlook, risks and notable items
- No specific revenue, earnings or cash-flow guidance is provided. Management describes a “Digital First” strategy, prioritizing digital growth while continuing local radio and content investment, and says it may control non-essential spending or reduce wages if conditions warrant.
- Management cites sustained inflation and high interest rates as potential pressures on advertising, subscriber additions and operating costs. Other principal risks include competition and technology shifts, digital audience retention, subscriber churn, privacy and cybersecurity, AI-related uncertainty, key-personnel dependence, and FCC licensing and regulatory requirements.
- The $70.9 million FCC-license impairment was sensitive to valuation assumptions. Management estimated that a 50-basis-point increase in the discount rate could have caused an additional $9.9 million impairment, and a 100-basis-point reduction in long-term revenue growth could have caused an additional $14.0 million impairment.
- Live Events goodwill was impaired by $1.4 million after the company revised near-term revenue and margin expectations. The Local Advertising reporting unit’s remaining goodwill was fully impaired in the third quarter.
- Other unusual items included the $14.5 million investment impairment and a $5.2 million gain on an investee transaction. A separate investee acquisition announced in February 2024 is expected to produce an approximately $4.0 million gain. The filing reports no material pending litigation and no material legal proceedings resolved during fourth-quarter 2023.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective at year-end.
Important facts for investors to verify
- Whether digital advertising growth can offset continued weakness in broadcast advertising and subscription subscriber losses.
- Whether operating cash flow can support the 2026 debt maturity, interest, dividends and planned investment, and whether refinancing will be needed.
- How sensitive future FCC-license and goodwill valuations are to broadcast forecasts, discount rates and other assumptions.
- Whether the dividend and share-repurchase activity remains consistent with liquidity, debt covenants and the company’s capital needs.
- How subscriber trends, event performance, and any 2024 political advertising benefit affect results compared with the non-political 2023 revenue base.