Сontinued Digital Evolution Has Contributed To The Best Quarter Ever For Townsquare Media

Unique ability to bring national products, technology, and practices to small and mid-sized markets and successful digital evolution helped Townsquare Media Inc TSQ in Q2 2021, meet or exceed their expectations as the business continues to improve.

Traditionally, advertising, the biggest part of the revenue, is $323M LTM 6/30/21 and comprises two components: traditional broadcast radio $199M LTM and digital advertising $104M LTM.

The recurring monthly digital marketing subscription business, building and hosting SMBs websites, with almost 25 000 subscribers, has been growing consistently and giving $76M LTM in revenue at a 31% operating income margin.

The biggest differentiator with competitors such as Godaddy Inc. GDDY and Wix.Com Ltd WIX or any other provider for that matter is that Townsquare Media guarantees local organic traffic. Their national scale and expertise allow them to develop market-leading products and services, and provide training and support to their local markets.

Another important digital component is monetizing the owned and operated (O&O ) properties, which gave $45M LTM net revenue. “Proprietary in-house Content Management System (CMS) and website/app platforms customized for shareability, SEO, ease of use, and syndication of content around the portfolio help us produce 30K pieces of local content on a monthly basis,” said Townsquare Media’s CEO Bill Wilson on the Sidoti Virtual Investor Conference on Wednesday, August 18, 2021. “We are one of the biggest producers of local content in the United States.”

Live events monetize the audience relationship while also delivering strong marketing for Townsquare Media brands and compete for audiences and sponsorships with both national competitors, such as Live Nation Entertainment Inc. LYV and AEG Presents LLC, and a variety of local or regional competitors, promoters and event marketing companies. Live events were canceled due to the COVID-19 pandemic for the majority of this period.

Investing in local content also allowed the company to stabilize Time Spent Listening by the audience, which is declining within the industry every year. Stuart Rosenstein, Townsquare Media’s Chief Financial Officer, explains “all of our excess free cash flow will be used to invest in our digital business and at some point when the high-yield market corrects itself we have the ability to go out and purchase up to $65M a year of our bonds and retire them annually.”

Net revenue for the quarter ended June 30, 2021, increased $33.3 million, or 44.9%, to $107.3 million, as compared to $74.1 million in the same period last year.  At the same time, the company has succeeded in containing the growth of the most significant expenses as sales, programming, digital, marketing and promotional, engineering, and general and administrative by closely monitoring and managing each of its local markets, and through efficiencies gained from the centralization of finance, accounting, legal, and human resources functions and management information systems. Thereby, direct operating expenses, excluding depreciation, amortization, and stock-based compensation increased by only 11% and corporate expenses decreased by 28% which resulted in a net income of $10 million unlike the loss of $27 million in the Q2 last year.

Q2 Adjusted EBITDA increased to $30M, setting an all-time record, and exceeded Q2 2019’s Adjusted EBITDA by +5% (when excluding Live Events).

Townsquare Interactive net subscription revenue increased $3.3 million in Q2 2021, or 19.7%, to $20.2 million; approximately 1,350 net subscribers were added, achieving an all-time record high number of quarterly net subscribers.

The company has a unique and differentiated solution, strategy, and story because it focuses on markets outside the top 50 markets in the United States. The thesis of the company is to take traditional broadcast assets in the radio space to transform the company to be a digital first company with the primary growth drivers and revenue and profits being digital over time. No company focusing on the top 50 can bring all of these solutions to bear to help a local business grow and help people in the local community.

Considering that the management of the company expects double-digit digital revenue growth in FY 2021, reaching $190M, that Q3’21 net revenue and adjusted EBITDA will approach Q3’19 levels and that historically, the company’s last calendar quarter produces the highest net revenue, it can be assumed that the company will be able to end the year with a profit with a focus on full financial recovery, led by their digital solutions.

However, Townsquare operates in a highly competitive industry, which is subject to rapidly changing technology and evolving standards. Some competitors are larger, with longer operating histories, established customer bases,  greater brand recognition and have substantially more financial,  technical,  marketing,  and related resources, which could provide them with certain advantages in competing against Townsquare. The competitors may develop services, advertising options, or venues that are equal or superior to those Townsquare media provides or that achieve greater market acceptance and brand recognition than Townsquare achieves.

The company faces substantial competition for advertising revenue in various markets from free and paid newspapers, magazines, websites, digital platforms and applications, television, radio, other forms of media, direct marketing, and online advertising networks and exchanges.

Townsquare may not be able to compete successfully against current and future competitors, and, therefore, to maintain or increase its current revenue. The business, results of operations, and financial condition will be harmed or adversely affected if they fail to meet these competitive pressures.

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