Townsquare Media, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing, not a standalone Q4 filing; unaudited fourth-quarter results are shown separately below. Amounts are in U.S. dollars.
Business context
Townsquare is a community-focused radio and digital media company operating 322 radio stations and more than 330 local websites in 67 U.S. markets. Its three segments are Advertising, Townsquare Interactive (subscription digital marketing services), and Live Events. At year-end, Interactive served approximately 22,750 small and medium-sized businesses.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Net revenue | $371.3 million | $431.4 million |
| Operating loss | $75.0 million | $37.1 million |
| Net loss | $80.6 million | $65.7 million |
| Cash from operating activities | $31.5 million | $40.0 million |
| Capital expenditures | $14.9 million | $19.7 million |
| Cash and cash equivalents at year-end | $83.2 million | $84.7 million |
| Debt at year-end, net of financing costs | $543.4 million | $546.7 million |
The 2020 operating loss included $109.1 million of impairment charges, including $107.1 million for FCC licenses and $2.0 million for long-lived assets. There was no goodwill impairment in 2020; the 2019 operating loss included a $69.0 million goodwill impairment. FY2020 interest expense, net, was $31.4 million; cash interest paid was $28.5 million. The filing does not provide a clear consolidated operating margin or adjusted EBITDA measure in the supplied text.
At December 31, 2020, current assets were $154.3 million and current liabilities were $65.8 million. Receivables were $58.6 million, with an allowance for doubtful accounts of $7.1 million, up from $2.6 million a year earlier. Management stated that cash on hand and expected cash flows should cover working capital, capital expenditures, debt service and other needs for at least one year, while cautioning that COVID-19 could affect liquidity.
Material changes and Q4 results
- Full-year revenue fell $60.1 million, or 13.9%. Advertising revenue declined $54.3 million (15.4%) and Live Events revenue fell $14.6 million (85.5%). Interactive revenue rose $8.8 million (14.4%), supported by approximately 3,750 net additional subscribers.
- Excluding political advertising, revenue fell $73.0 million, or 17.0%. Political advertising increased to $16.0 million from $3.1 million in 2019.
- FY2020 quarterly results show Q4 revenue of $108.5 million, operating income of $21.3 million and net income from continuing operations of $4.5 million. In Q4 2019, revenue was $112.1 million, operating loss was $91.4 million and net loss from continuing operations was $78.2 million. The large year-over-year operating result difference primarily reflects the 2019 goodwill impairment; FY2020 FCC license impairments occurred in Q1 and Q2, with no impairment recorded in Q4.
- Operating cash flow declined $8.5 million year over year. Cash and cash equivalents declined by $1.4 million during 2020.
Outlook, financing, risks and unusual items
- COVID-19 materially reduced advertising demand and led to cancellation of nearly all scheduled live events beginning in March 2020. Advertising revenues partially recovered in the second half but remained materially below the comparable 2019 period. Interactive continued to grow. The filing gives no numerical revenue or earnings guidance.
- Management responded by cutting non-essential capital spending, laying off or terminating approximately 135 full-time employees, suspending the company match on employee retirement contributions, and ending quarterly dividends after the May 2020 payment.
- On January 6, 2021, the company issued $550.0 million of 6.875% secured notes due 2026; proceeds and cash on hand were used to repay the senior secured term loans and redeem the 6.5% notes due 2023. Management expected debt service of approximately $38.0 million over the following 12 months. A planned new asset-based revolver was not assured to close.
- After year-end, on March 9, 2021, the company repurchased Oaktree-affiliated securities for $80.4 million and agreed to pay a further $4.5 million under a settlement agreement. These transactions are subsequent events and were not reflected in year-end cash and debt balances.
- The company and its auditor reported that internal control over financial reporting was ineffective at December 31, 2020, with material weaknesses involving IT access controls, revenue recognition, income tax accounting and period-end financial reporting. The auditor issued an adverse opinion on internal controls but an unqualified opinion on the financial statements. Management said remediation was underway; weaknesses are not considered remediated until tested and operating effectively.
- Other key risks include high leverage and debt covenants, continued weakness in advertising or live events, further FCC license impairments, competitive and technology shifts, privacy and cybersecurity exposure, and FCC licensing and regulatory requirements. The filing reported no material pending litigation.
Investor facts to verify
- Whether advertising demand and live-event activity recovered after year-end, and how Interactive subscriber growth and customer retention developed.
- Post-refinancing debt balances, cash interest and debt-service costs, covenant headroom, and the status and terms of any new revolving credit facility.
- The liquidity impact of the $80.4 million Oaktree repurchase and $4.5 million settlement, and whether dividends remain suspended.
- Progress in remediating each material weakness and whether subsequent filings report effective controls.
- Sensitivity of FCC license values to broadcast revenue forecasts and discount rates; the filing estimates that a 100-basis-point increase in the discount rate would reduce license fair values by $56.2 million.