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Townsquare Reports Third Quarter 2017 Results

GREENWICH, Conn., Nov. 7, 2017 /PRNewswire/ -- Townsquare Media, Inc. (NYSE: TSQ) ("Townsquare," the "Company," "we," "us," or "our") announced today financial results for the third quarter ended September 30, 2017.

"The highlight of Townsquare's third quarter was, without a doubt, the strength of our Local Marketing Solutions segment, which delivered net revenue growth of 1.7%, and 3.0% excluding political revenue," commented Bill Wilson, Co-Chief Executive Officer of Townsquare. "However, challenges in our smaller business segment, Entertainment, offset these strong results, resulting in an overall decline to net revenue, net income and Adjusted EBITDA of 1.0%, 9.9% and 11.1%, respectively. Due to these challenges, we have begun a strategic review of our Entertainment business."

"We are very pleased with the success of our Local Marketing Solutions segment in particular the continued growth of Townsquare Interactive, our digital marketing solutions business, and Townsquare Ignite, our programmatic digital advertising platform," commented Dhruv Prasad, Co-Chief Executive Officer of Townsquare. "Local Marketing Solutions is the core of our business, and the strength of our local products and services have allowed us to deliver consistent growth for the 15th consecutive quarter."

In October 2017, Bill Wilson and Dhruv Prasad were appointed co-CEO's of Townsquare, succeeding Steven Price, who is now serving as Executive Chairman. "The promotion of Bill and Dhruv to co-CEO's was a well-planned transition, that allows for continuity and stability in our Company," commented Steven Price. "The Board and I have great confidence in the continuing management team, and I look forward to continuing to shape our strategic direction in my new role."

Third Quarter Highlights*

  • As compared to the third quarter of 2016:
    • Local Marketing Solutions net revenue increased 1.7%, and 3.0% excluding political revenue
    • Entertainment net revenue decreased 4.1%
    • Net revenue decreased 1.0%, and 0.3% excluding political revenue
    • Net income decreased 9.9%
    • Adjusted EBITDA decreased 11.1%
  • Diluted net income per share of $0.51

Year to Date Highlights*

  • As compared to the first nine months of 2016:
    • Local Marketing Solutions net revenue increased 2.4%, and 3.5% excluding political revenue
    • Entertainment net revenue decreased 7.0%
    • Net revenue decreased 1.0%, and 0.4% excluding political revenue
    • Net income decreased 16.1%
    • Adjusted EBITDA decreased 8.3%
  • Repaid $6.7 million of long-term debt

* See below for discussion of non-GAAP measures and reconciliations to GAAP measures.

Segment Reporting
We have two reportable segments, Local Marketing Solutions, which provides broadcast and digital products and solutions to advertisers and businesses within our local markets, and Entertainment, which provides live event experiences and music and lifestyle content directly to consumers, and promotion, advertising and product activations to local and national advertisers.

Quarter Ended September 30, 2017 Compared to the Quarter Ended September 30, 2016

Net Revenue
Net revenue for the quarter ended September 30, 2017 decreased $1.6 million, or 1.0%, to $164.1 million, as compared to $165.8 million in the same period last year. Local Marketing Solutions net revenue increased $1.5 million, or 1.7%, to $90.5 million and Entertainment net revenue decreased $3.1 million, or 4.1%, to $73.6 million, due to revenue declines in certain of our live events and in our national digital business. Excluding political revenue, net revenue decreased $0.5 million, or 0.3%, to $163.9 million and Local Marketing Solutions net revenue increased $2.6 million, or 3.0%.

Net Income
Net income for the quarter ended September 30, 2017 decreased $1.6 million, or 9.9%, to $14.3 million as compared to $15.9 million in the same period last year.

Adjusted EBITDA
Adjusted EBITDA for the quarter ended September 30, 2017 decreased $5.0 million, or 11.1%, to $39.7 million as compared to $44.7 million in the same period last year.

Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016

Net Revenue
Net revenue for the nine months ended September 30, 2017 decreased $4.2 million, or 1.0%, to $393.2 million, as compared to $397.3 million in the same period last year. Local Marketing Solutions net revenue increased $6.1 million, or 2.4%, to $257.0 million and Entertainment net revenue decreased $10.3 million, or 7.0%, to $136.2 million, in part due to revenue declines in our live events business, including the prior year sale of certain live events, in addition to revenue declines in our national digital business. Excluding political revenue and the sale of certain live events, net revenue decreased $0.4 million, or 0.1%, to $392.0 million, Local Marketing Solutions net revenue increased $8.5 million, or 3.5%, to $255.8 million and Entertainment net revenue decreased $9.0 million, or 6.2%, to $136.2 million.

Net Income
Net income for the nine months ended September 30, 2017 decreased $3.2 million, or 16.1%, to $16.8 million, as compared to $20.1 million in the same period last year.

Adjusted EBITDA
Adjusted EBITDA for the nine months ended September 30, 2017 decreased $6.8 million, or 8.3%, to $75.1 million, as compared to $81.9 million in the same period last year.

Liquidity and Capital Resources
As of September 30, 2017, we had a total of $53.3 million of cash on hand and $50.0 million of available borrowing capacity under our revolving credit facility. As of September 30, 2017, we had $571.9 million of outstanding indebtedness, representing 5.7x and 5.2x gross and net leverage, respectively, based on Adjusted EBITDA for the twelve months ended September 30, 2017 of $100.0 million.

The table below presents a summary, as of November 7, 2017, of our outstanding common stock and securities convertible into common stock, excluding options issued under our 2014 Omnibus Incentive Plan.

Security


Number Outstanding1

Description

Class A common stock


13,819,639

One vote per share.

Class B common stock


3,022,484

10 votes per share.2

Class C common stock


1,636,341

No votes.2

Warrants


8,977,676

Each warrant is exercisable for one share of Class A common stock, at
an exercise price of $0.0001 per share. The aggregate exercise price for
all warrants currently outstanding is $898.3

Total


27,456,140






1 Each of the shares of common stock listed below, including the shares of Class A common stock issuable upon exercise of the warrants, has equal economic rights.

2 Each share converts into 1 share of Class A common stock upon transfer or at the option of the holder, subject to certain conditions, including compliance with FCC rules.

3 The warrants are fully vested and exercisable for shares of Class A common stock, subject to certain conditions, including compliance with FCC rules.

Conference Call
Townsquare Media, Inc. will host a conference call to discuss certain third quarter 2017 financial results on Tuesday, November 7, 2017 at 8:00 a.m. Eastern Time. The conference call dial-in number is 1-877-407-0784 (U.S. & Canada) or 1-201-689-8560 (International) and the confirmation code is 13672538. A live webcast of the conference call will also be available on the equity investor relations page of the Company's website at www.townsquaremedia.com.

A replay of the conference call will be available through November 14, 2017. To access the replay, please dial 1-844-512-2921 (U.S. & Canada) or 1-412-317-6671 (International) and enter confirmation code 13672538. A web-based archive of the conference call will also be available at the above website for thirty days after the call.

About Townsquare Media, Inc.
Townsquare is a radio, digital media, entertainment and digital marketing solutions company principally focused on being the premier local advertising and marketing solutions platform in small and mid-sized markets across the U.S. Our assets include 317 radio stations and more than 325 local websites in 67 U.S. markets, a digital marketing solutions company (Townsquare Interactive) serving approximately 12,000 small to medium sized businesses, a proprietary digital programmatic advertising platform (Townsquare Ignite), and approximately 550 live events with nearly 18 million attendees each year in the U.S. and Canada. Our brands include iconic local media assets such as WYRK, KLAQ, K2 and NJ101.5; acclaimed music festivals such as Mountain Jam, WE Fest and the Taste of Country Music Festival; unique touring lifestyle and entertainment events such as the America on Tap craft beer festival series and North American Midway Entertainment, North America's largest mobile amusement company; and leading tastemaker music and entertainment owned and affiliated websites such as XXLmag.com, TasteofCountry.com, Loudwire.com and BrooklynVegan.com. For more information, please visit www.townsquaremedia.com, www.townsquareinteractive.com and www.townsquareignite.com.

Forward-Looking Statements
Except for the historical information contained in this press release, the matters addressed are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "estimate," "expect," "forecast," "outlook," "potential," "project," "projection," "plan," "intend," "seek," "believe," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other words and terms. By nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statement. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. See "Risk Factors" and "Forward-Looking Statements" included in our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on or about the date hereof, for a discussion of factors that could cause our actual results to differ from those expressed or implied by forward-looking statements. Townsquare Media, Inc. assumes no responsibility to update any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Financial Measures and Definitions
In this press release, we refer to Adjusted EBITDA, Adjusted EBITDA Less Interest, Capex and Taxes, Adjusted Net Income and Adjusted Net Income Per Share, which are financial measures that have not been prepared in accordance with generally accepted accounting principles in the United States ("GAAP").

We define Adjusted EBITDA as net income (loss) before the deduction of income taxes, other (income) expense (net), interest expense, cancellation and (repurchase) of debt, transaction costs, stock-based compensation, net (gain) loss on sale of assets, impairment of FCC licenses, impairment on investment and depreciation and amortization. Adjusted EBITDA Less Interest, Capex and Taxes is defined as Adjusted EBITDA less net cash interest expense, capital expenditures and cash paid for taxes. Adjusted Net Income is defined as net income (loss) before the deduction of income taxes, transaction costs, net (gain) loss on sale of assets and cancellation and (repurchase) of debt. Adjusted Net Income Per Share is defined as Adjusted Net Income divided by the weighted average shares outstanding. These measures do not represent, and should not be considered as alternatives to, net income (loss) or cash flows from operations, as determined under GAAP. In addition, these non-GAAP measures may not be comparable to similarly-named measures reported by other companies. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are set forth in the tables below.

We use Adjusted EBITDA to facilitate company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting interest expense), taxation and the age and book depreciation of facilities and equipment (affecting relative depreciation expense), which may vary for different companies for reasons unrelated to operating performance. We use Adjusted Net Income and Adjusted Net Income Per Share to assess total company operating performance on a consistent basis. We believe that this measure, when considered together with our GAAP financial results, provides management and investors with a more complete understanding of our business operating results, including underlying trends, by excluding the effects of transaction costs, net (gain) loss on sale of assets and cancellation and (repurchase) of debt. Further, while discretionary bonuses for members of management are not determined with reference to specific targets, our Board of Directors may consider Adjusted EBITDA, Adjusted EBITDA Less Interest, Capex and Taxes, Adjusted Net Income and Adjusted Net Income Per Share when determining discretionary bonuses.

Investor Relations
Claire Yenicay
(203) 900-5555
investors@townsquaremedia.com


TOWNSQUARE MEDIA, INC.

CONSOLIDATED BALANCE SHEETS

(in Thousands, Except Share and Per Share Data)

(unaudited)



September 30,
2017


December 31,
2016

ASSETS




Current assets:




Cash

$

53,299



$

51,540


Accounts receivable, net of allowance of $1,658 and $1,433, respectively

65,710



59,642


Prepaid expenses and other current assets

13,888



11,445


Total current assets

132,897



122,627






Property and equipment, net

146,524



139,607


Intangible assets, net

512,823



513,915


Goodwill

296,081



292,953


Investments

7,470



4,313


Other assets

9,128



7,290


Total assets

$

1,104,923



$

1,080,705






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

12,453



$

10,602


Current portion of long-term debt

5



6,901


Deferred revenue

14,124



17,213


Accrued expenses and other current liabilities

23,493



25,813


Accrued interest

9,172



4,622


Total current liabilities

59,247



65,151


Long-term debt, less current portion (net of deferred financing costs of $7,123 and $8,006, respectively)

564,818



564,315


Deferred tax liability

62,974



50,967


Other long-term liabilities

9,597



10,221


Total liabilities

696,636



690,654






Stockholders' equity:




Class A common stock, par value $0.01 per share; 300,000,000 shares authorized; 13,819,639 and
13,735,690 shares issued and outstanding, respectively

138



137


Class B common stock, par value $0.01 per share; 50,000,000 shares authorized; 3,022,484 shares
issued and outstanding, respectively

30



30


Class C common stock, par value $0.01 per share; 50,000,000 shares authorized; 1,636,341 shares
issued and outstanding, respectively

17



17


Total common stock

185



184


Additional paid-in capital

366,863



365,434


Retained earnings

40,759



24,450


Accumulated other comprehensive loss

(415)



(722)


Noncontrolling interest

895



705


Total stockholders' equity

408,287



390,051


Total liabilities and stockholders' equity

$

1,104,923



$

1,080,705


TOWNSQUARE MEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in Thousands, Except Per Share Data)

(unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016









Net revenue

$

164,112



$

165,756



$

393,192



$

397,345










Operating costs and expenses:








Direct operating expenses, excluding depreciation, amortization and stock-based
compensation

118,027



114,646



299,762



297,144


Depreciation and amortization

6,550



5,686



19,776



17,812


Corporate expenses

6,391



6,450



18,375



18,320


Stock-based compensation

200



206



571



663


Transaction costs

218



256



606



606


Net (gain) loss on sale and retirement of assets

(52)



(426)



662



287


Total operating costs and expenses

131,334



126,818



339,752



334,832


Operating income

32,778



38,938



53,440



62,513










Other expense (income):








Interest expense, net

8,230



8,294



24,474



25,740


Impairment on investment



4,236





4,236


Repurchase of debt







(461)


Other expense (income), net

139



52



189



(351)


Income before income taxes

24,409



26,356



28,777



33,349


Provision for income taxes

10,116



10,493



11,929



13,269


Net income

$

14,293



$

15,863



$

16,848



$

20,080










Net income attributable to:








Controlling interests

$

14,192



$

15,816



$

16,309



$

19,823


Noncontrolling interests

101



47



539



257










Net income per share:








Basic

$

0.77



$

0.86



$

0.91



$

1.10


Diluted

$

0.51



$

0.58



$

0.60



$

0.74










Weighted average shares outstanding:








Basic

18,478



18,395



18,459



18,208


Diluted

27,994



27,372



28,221



27,280



TOWNSQUARE MEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in Thousands)

(unaudited)



Nine Months Ended
September 30,


2017


2016

Cash flows from operating activities:




Net income attributable to:




Controlling interests

$

16,309



$

19,823


Noncontrolling interests

539



257


Net income

$

16,848



$

20,080


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

19,776



17,812


Amortization of deferred financing costs

1,232



1,203


Deferred income tax expense

11,929



13,269


Provision for doubtful accounts

1,744



1,083


Stock-based compensation expense

571



663


Trade receivable, net

(7,256)



(6,762)


Repurchase of debt



(461)


Write-off of deferred financing costs

83



338


Impairment on investment



4,236


Net loss on sale and retirement of assets

662



287


Changes in assets and liabilities, net of acquisitions:




Accounts receivable

(5,094)



(2,668)


Prepaid expenses and other assets

(4,242)



(2,828)


Accounts payable

(694)



(887)


Accrued expenses

(5,749)



(8,821)


Accrued interest

4,580



4,293


Other long-term liabilities

(622)



(677)


Net cash provided by operating activities

33,768



40,160


Cash flows from investing activities:




Purchase of property and equipment

(18,169)



(16,826)


Payments for acquisitions, net of cash received

(5,496)



(1,941)


Payment for investment

(807)




Acquisition of intangibles

(150)




Proceeds from insurance settlement



451


Proceeds from sale of assets

282



1,626


Net cash used in investing activities

(24,340)



(16,690)


Cash flows from financing activities:




Repayment of long-term debt

(6,662)



(17,460)


Deferred financing costs

(432)




Proceeds from sale of noncontrolling interest in subsidiary



50


Proceeds from exercise of employee stock options

346




Cash distributions to noncontrolling interests

(349)



(138)


Repayments of capitalized obligations

(615)



(127)


Net cash used in financing activities

(7,712)



(17,675)


Net effect of foreign currency exchange rate changes

43



(680)


Net increase in cash and restricted cash

1,759



5,115


Cash and restricted cash:




Beginning of period

51,540



33,298


End of period

$

53,299



$

38,413



TOWNSQUARE MEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in Thousands)

(unaudited)



Nine Months Ended
September 30,


2017


2016

Supplemental Disclosure of Cash Flow Information:




Cash payments:




Interest

$

18,575



$

19,881


Income taxes

1,924



1,910






Purchase obligations:




Capital lease

$



$

525






Equity issued in respect of acquisitions:




Common stock, joint venture acquisition

$

513



$






Non-cash investment:




Investments

$

2,350



$

3,500



TOWNSQUARE MEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS BY SEGMENT

(in Thousands)

(unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016

Statement of Operations Data:








Local Marketing Solutions net revenue

$

90,478



$

89,003



$

257,012



$

250,914


Entertainment net revenue

73,634



76,753



136,180



146,431


Net revenue

164,112



165,756



393,192



397,345


Operating Costs and Expenses:








Local Marketing Solutions direct operating expenses

58,001



55,773



172,741



164,826


Entertainment direct operating expenses

60,026



58,873



127,021



132,318


Direct operating expenses, excluding depreciation, amortization and
stock-based compensation

118,027



114,646



299,762



297,144


Depreciation and amortization

6,550



5,686



19,776



17,812


Corporate expenses

6,391



6,450



18,375



18,320


Stock-based compensation

200



206



571



663


Transaction costs

218



256



606



606


Net (gain) loss on sale and retirement of assets

(52)



(426)



662



287


Total operating costs and expenses

131,334



126,818



339,752



334,832


Operating income

32,778



38,938



53,440



62,513


Other expense (income):








Interest expense, net

8,230



8,294



24,474



25,740


Impairment on investment



4,236





4,236


Repurchase of debt







(461)


Other expense (income), net

139



52



189



(351)


Total other expense

8,369



12,582



24,663



29,164


Income before income taxes

24,409



26,356



28,777



33,349


Provision for income taxes

10,116



10,493



11,929



13,269


Net income

$

14,293



$

15,863



$

16,848



$

20,080



The following table reconciles on a GAAP basis net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted Net Income for the three and nine months ended September 30, 2017 and 2016, respectively (dollars in thousands):


Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016

Net income

$

14,293



$

15,863



$

16,848



$

20,080


Provision for income taxes

10,116



10,493



11,929



13,269


Income before taxes

24,409



26,356



28,777



33,349


Transaction costs

218



256



606



606


Impairment on investment



4,236





4,236


Net (gain) loss on sale and retirement of assets

(52)



(426)



662



287


Repurchase of debt







(461)


Adjusted income before taxes

24,575



30,422



30,045



38,017


Provision for income taxes

10,184



12,111



12,454



15,127


Adjusted Net Income

$

14,391



$

18,311



$

17,591



$

22,890










Adjusted Net Income Per Share:








Basic

$

0.78



$

1.00



$

0.95



$

1.26


Diluted

$

0.51



$

0.67



$

0.62



$

0.84










Weighted average shares outstanding:








Basic

18,478



18,395



18,459



18,208


Diluted

27,994



27,372



28,221



27,280


The following table reconciles on a GAAP basis net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA and Adjusted EBITDA Less Interest, Capex and Taxes for the three and nine months ended September 30, 2017 and 2016, respectively (dollars in thousands):


Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016

Net income

$

14,293



$

15,863



$

16,848



$

20,080


Provision for income taxes

10,116



10,493



11,929



13,269


Interest expense, net

8,230



8,294



24,474



25,740


Transaction costs

218



256



606



606


Depreciation and amortization

6,550



5,686



19,776



17,812


Stock-based compensation

200



206



571



663


Impairment on investment



4,236





4,236


Repurchase of debt







(461)


Other(a)

87



(374)



851



(64)


Adjusted EBITDA

39,694



44,660



75,055



81,881


Net cash interest expense

(3,261)



(3,308)



(18,575)



(19,881)


Capital expenditures

(5,817)



(4,410)



(18,169)



(16,826)


Cash paid for taxes

(583)



(1,095)



(1,924)



(1,910)


Adjusted EBITDA Less Interest, Capex and Taxes

$

30,033



$

35,847



$

36,387



$

43,264



(a) Other includes net loss on sale and retirement of assets and other expense (income), net.

The following table reconciles net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA on a quarterly basis for the twelve months ended September 30, 2017 (dollars in thousands):


Quarter Ended


Twelve
Months
Ended


December 31,
2016


March 31,
2017


June 30,
2017


September 30,
2017


September 30,
2017

Net income (loss)

$

3,211



$

(3,008)



$

5,563



$

14,293



$

20,059


Provision (benefit) for income taxes

3,771



(1,997)



3,810



10,116



15,700


Interest expense, net

8,332



8,254



7,990



8,230



32,806


Transaction costs

238



199



190



218



845


Depreciation and amortization

6,164



6,390



6,836



6,550



25,940


Stock-based compensation

3,591



188



183



200



4,162


Repurchase of debt

(85)









(85)


Other(a)

(317)



31



732



87



533


Adjusted EBITDA

$

24,905



$

10,057



$

25,304



$

39,694



$

99,960



(a) Other includes net gain (loss) on sale of assets and other expense (income), net.

Reconciliation of Net revenue to Net revenue, excluding political revenue


Three Months Ended
September 30,

%

Nine Months Ended
September 30,

%


2017


2016

Change

2017


2016

Change

Consolidated:









Net revenue

$

164,112



$

165,756


(1.0)%

$

393,192



$

397,345


(1.0)%

Less: Political revenue

209



1,331



1,241



3,697



Net revenue, excluding political revenue

$

163,903



$

164,425


(0.3)%

$

391,951



$

393,648


(0.4)%










Local Marketing Solutions Segment:









Net revenue

$

90,478



$

89,003


1.7%

$

257,012



$

250,914


2.4%

Less: Political revenue

209



1,331



1,241



3,697



Net revenue, excluding political revenue

$

90,269



$

87,672


3.0%

$

255,771



$

247,217


3.5%

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SOURCE Townsquare Media, Inc.