Townsquare Media, Inc. — Q1 2021 Form 10-Q
Business context and reporting period. Unaudited results for the three months ended March 31, 2021, compared with Q1 2020. Townsquare operates local radio and digital advertising, Townsquare Interactive subscription services, and live events, primarily in small and mid-sized U.S. markets. The company reported a gradual advertising recovery from the pandemic downturn, but revenue remained below the prior-year quarter.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Net revenue | $88.8 million | $93.4 million |
| Operating income (loss) | $8.8 million | $(72.1) million |
| Net loss | $(6.1) million | $(59.6) million |
| Diluted loss per share | $(0.35) | $(3.27) |
| Cash from operating activities | $19.4 million | $9.3 million |
| Cash and cash equivalents, March 31 | $20.1 million | $135.9 million |
Revenue declined 5.0%. Direct operating expenses fell 9.8%, and operating margin was approximately 9.9%; the comparison with Q1 2020 is heavily affected by $79.1 million of prior-year impairment charges. Interest expense rose to $10.2 million from $8.1 million, and Q1 2021 included $6.0 million of debt extinguishment and modification losses. No dividend was declared in Q1 2021; the company had discontinued quarterly cash dividends after its 2020 first-quarter payment.
Segments: Advertising revenue fell 6.4% to $69.8 million; Townsquare Interactive revenue rose 14.9% to $19.0 million, supported by approximately 850 net subscriber additions; Live Events revenue was approximately $7,000 versus $2.4 million, reflecting the lack of scheduled events. Segment operating income was $14.7 million for Advertising and $5.4 million for Interactive; Live Events recorded a $0.1 million operating loss.
Liquidity, debt, and material changes
Operating cash flow was $19.4 million and investing activities used $1.4 million. Cash declined $63.1 million from year-end, principally reflecting the $80.4 million Oaktree securities repurchase; excluding that cash consideration, management said cash increased $17.3 million. The company reported $45.7 million in receivables and $540.1 million of debt net of financing costs ($550.0 million principal). Management estimated approximately $37.8 million of debt service over the next 12 months and stated that available resources should meet requirements for at least one year.
In January, Townsquare issued $550.0 million of 6.875% senior secured notes due 2026, using proceeds and cash on hand to repay its term loans and 2023 notes and terminate its revolving facility. The notes are secured, carry restrictive covenants, and were reported in covenant compliance at quarter-end. The company also repurchased all Oaktree-held shares and warrants for $80.4 million and agreed to pay Oaktree an additional $4.5 million in settlement installments during 2021.
Outlook, risks, and unusual items
Management reported sequential advertising improvement but said revenue remained below pre-pandemic levels. Some live events were scheduled for Q2 2021, with continued uncertainty about event scheduling. No numerical earnings or revenue guidance was provided. COVID-19-related risks include advertising demand, consumer spending, and event restrictions; management continued cost controls, deferred certain payroll taxes under the CARES Act, and limited non-essential capital spending.
No FCC-license impairment was recorded in Q1 2021, but management warned further broadcast revenue declines could lead to material charges. Its sensitivity analysis estimated that a 100-basis-point increase in the discount rate, all else equal, would reduce license fair value by $55.1 million and have produced a $5.6 million impairment. Most notably, management said disclosure controls were ineffective because material weaknesses in IT access controls, revenue-recognition controls, income-tax controls, and period-end financial reporting controls had not been remediated.
Investor verification points
- Track whether advertising and Interactive growth continue, and whether live events resume as planned.
- Review cash generation, the remaining $4.5 million settlement payments, and debt service under the 2026 notes.
- Assess FCC-license valuation assumptions and any subsequent impairment indicators.
- Monitor remediation and testing of the disclosed material weaknesses in internal controls.
- Confirm the sustainability of management’s liquidity outlook amid pandemic-related uncertainty and the absence of a revolving credit facility.