Townsquare Media, Inc. — Q2 2015 Form 10-Q
Business context and period. The company operates radio stations, digital properties and live events in 66 U.S. markets. This filing covers the quarter and six months ended June 30, 2015. Financial amounts below are in millions of dollars unless noted.
Financial performance
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $117.5 | $106.3 | $198.6 | $185.4 |
| Operating income | $23.5 | $24.3 | $34.3 | $36.0 |
| Net income (loss) | $(8.7) | $12.1 | $(8.6) | $11.6 |
| Interest expense | $8.2 | $12.1 | $18.8 | $24.2 |
- Revenue rose 10.6% in Q2 and 7.1% for the first half. Live Events drove most of the growth: Q2 revenue increased 50.4% to $29.7 million, while Local Advertising grew 0.6% to $78.5 million and Other Media and Entertainment grew 9.5% to $9.3 million.
- Operating income declined 3.6% in Q2 and 4.8% for the first half. Operating margin was approximately 20.0% in Q2 versus 22.9% a year earlier, and 17.3% for the first half versus 19.4%.
- Live Events expenses grew faster than revenue: up 70.3% in Q2 and 53.0% for the first half, reflecting investments in new events, talent and production. Management cited increased attendance and revenue per attendee as contributors to event revenue growth.
- Net loss included a $30.0 million debt-extinguishment loss tied to the April refinancing. Excluding that item, the reported results still reflect income taxes and other expenses; the filing does not provide a directly stated adjusted net income measure.
- Cash from operating activities was $(14.4) million for the first half, versus $8.6 million in 2014. Management said cash from operations would have been $13.3 million excluding the $27.7 million redemption-premium payment. Investing cash outflow was $11.9 million; financing cash inflow was $32.2 million. Cash increased $5.9 million to $30.4 million.
- At June 30, cash was $30.4 million, current assets $103.5 million and current liabilities $49.4 million. Debt was $574.6 million, including $2.9 million current; the $50 million revolver was undrawn. Management estimated next-12-month debt service of $34.5 million and stated liquidity would be sufficient for at least 12 months, subject to operating performance and market conditions.
Material changes, financing and outlook
- On April 1, the company refinanced prior debt with $300 million of 6.5% senior notes due 2023 and a $275 million term loan, initially bearing 4.25% interest based on then-current LIBOR, plus a $50 million revolving facility. The refinancing replaced 9% notes due 2019 and prior term and revolver borrowings. The company paid $27.7 million in redemption premiums; the reported extinguishment loss also included financing-cost and bond-premium write-offs.
- Book debt increased from $539.7 million at December 31, 2014 to $574.6 million at June 30, 2015. The term loan exposes the company to LIBOR rate changes; the notes are fixed rate.
- After quarter-end, the company agreed to sell 43 towers for approximately $22.8 million cash, subject to closing adjustments. It would lease back space for its existing antennas under a long-term arrangement. This was an agreement, not a completed sale as of the filing.
- No numerical earnings or revenue guidance is provided. Management notes seasonality: Q1 is generally weakest, Q2 and Q3 generally strongest, and Live Events revenue typically peaks in Q2. Advertising demand is sensitive to economic and industry conditions; live events face weather-related risks.
- Other matters to monitor include advertising competition and shifts to digital/mobile formats, acquisition integration and funding, debt covenant compliance, and possible impairment of goodwill or broadcast licenses if performance or market conditions deteriorate. The company reported no material off-balance-sheet arrangements and said ordinary-course legal matters were not expected to have a material adverse effect.
Investor verification checklist
- Track whether Live Events growth can translate into improved segment profitability as event spending rises.
- Confirm the tower sale closed, its net proceeds, and the effect of the associated lease and tower-marketing arrangements.
- Review cash generation, working-capital needs, debt service and compliance with debt covenants; assess exposure to LIBOR changes.
- Separate recurring operating trends from the $30.0 million refinancing-related charge when evaluating earnings comparisons.
- Assess local advertising trends, digital revenue growth, and the impact of seasonality and event-related risks.