Townsquare Media ($TSQ) One Hour Analysis: High Yielding Radio Company with Differentiated Digital Strategy Provides Stability and Opportunity for Investors
Market Data:
Cash: $33M
Debt: $465
Net Debt: $432
S/O: 16.1
Price: $8.10
Enterprise Value: $560M
2025 EPS $0.82
2026 EPS $1.34
2027 EPS $0.84
2025 EBITDA $93M
2026 EBITDA $107M
2027 EBTIDA $98M
PE Ratio 2025 EPS: 9.9X
PE Ratio 2026 EPS: 6.0X
EV/EBITDA 2025: 6.0X
EV/EBITDA 2026:5.2X
Summary:
Radio + Differentiated digital strategy business model provides stability and opportunity.
· Radio station ownership is outside of the Top 50 markets (45% of Total Revenue)
Owns 344 radio stations in 74 markets.
Reduces competition in digital landscape from large companies.
Fills gap of local news void from streaming companies.
Relatively stable revenue over last 5 years.
Digital Advertising + Digital Marketing Solutions (55% of Total Revenue)
Townsquare Ignite - (35% of Total Revenue)
Digital advertising business.
$159M 2024 net revenue.
$41M 2024 segment profit (26% profit margin).
Owns and operates over 400 local websites.
Owns and operates 10 national websites & 380 mobile apps.
Creates or curates over 20,000 pieces on content a month.
Offers programmatic technology platform.
Unique audience has grown for 1M in 2011 to 70M in 2024.
Townsquare Interactive (17% of Total Revenue)
Subscription based all-in-one SAAS digital marketing services.
$75M 2024 net revenue.
$21M 2024 subscription profit (28% profit margin).
400+ employees 120+ sales team.
60% of subscribers are OUTSIDE Townsquare local markets.
Management is aligned with shareholders and has shown good governance with company’s free cash flow.
Management owns 29% of the outstanding shares.
Since 2021 the company has significantly reduced its share count and warrant overhang.
The company has repurchased 16.2 million shares for an average price of $7.19.
The company repurchased over 12M shares/warrants from Oaktree and 3M shares from MSG.
Reduced warrants outstanding from 9M to ZERO.
Since 2021 repurchased $81M of debt.
2026 debt maturity has been addressed.
In February the company refinanced the Feb 2026 notes that had a face value of approximately $480M.
The notes were retired with a new $470M Term Loan B and a $20M revolving credit facility that matures in 2030. The term loans carry an interest rate of SOFR +500 basis points (Interest rate of 9.25%).
Business Background
Townsquare Media, originally known as Regent Communications, emerged from bankruptcy on April 27, 2010. Regent Communications had filed for Chapter 11 bankruptcy protection on March 1, 2010, with a pre-arranged plan for reorganization. Following the completion of this plan, the company emerged from bankruptcy and was subsequently renamed Townsquare Media by its new leadership and majority owner, Oaktree Capital Management. Townsquare Media became a public company on July 24, 2014, when it completed its initial public offering (IPO) on the New York Stock Exchange under the symbol "TSQ." The IPO involved the sale of 8,333,333 shares of Class A common stock at a price of $11.00 per share.
Business Description
Management Elevator Pitch
Recent Guidance:
Additional commentary on guidance:
Turning now to our first quarter and full year 2025 outlook. We expect first quarter net revenue to be between $98 million and $100 million which at the midpoint is approximately flat year-over-year excluding political. As previously detailed on this call, we expect Townsquare Ignite, our Digital Advertising business, to be up in high-single-digits. Townsquare Interactives to be up 4% and Broadcast ex political to decline more moderately than we experienced in Q4.
So we expect our Digital Advertising to continue to operate in the high-single-digits in terms of revenue growth when you're looking at a three to five year model. And then Townsquare Interactive, as I said on the profit side, I expect $2.5 million to $3 million(increase) this year. I expect not to be at the full $10 million (YOY increase) that historical level of top line revenue this year. I think that will be more modest as we're, as I said earlier, one of the great benefits of rebuilding the whole business over the last, I'd say, twelve months is the efficiency we're creating. So although we'll be back at normal profit levels for Townsquare Interactive, I believe our revenue will be definitely muted from that $10 million normal number. But when you think about 2026 and onward, I would think about our top line revenue growth at Townsquare Interactive at $10 million and profit growth returning to that $3 million that we historically did year in and year out for almost a decade.
And when you think about two, three, four years out, we believe we'll be 75% to 80% Digital revenue and profit. Note: Digital Revenue growth as a 13% CAGR since 2014.
Radio + Differentiated digital strategy business model provides stability and opportunity.
Radio Segment
o Largest operator of radio stations below the Top 50 markets.
o Owns 344 stations in cities like Waterloo, IA and Poughkeepsie, NY.
o Clustered in Texas, Northeast, Upper Midwest and Mountain West, with average city population of around 300,000.
o In spite of intense competition for music listeners from Spotify, Sirius XM and streaming services like Amazon Music revenue and operating profits have been relatively stable.
o Management considers radio the “cash cow” that finances the digital growth and dividend.
o New FCC Chairman provides wild card optionality for acquisitions or sale of radio stations.
Operating margin is at high end of industry average.
Digital Segment
Townsquare Ignite
Digital advertising and programmatic services.
These include an owned and operated portfolio of more than 400 local news and entertainment websites and mobile apps along with a network of leading national music and entertainment brands, collecting valuable first party data and (b) a proprietary digital programmatic advertising technology stack with an in-house demand and data management platform; and a portfolio of 344 local terrestrial radio stations in 74 U.S. markets.
The portfolio includes websites such as TastofCountry.com, UltimateClassicRock.com and Loudwire.com
Revenue has increased each of the last three years. Management has guided to a HSD increase in revenue in 2025.
However, the operating margin has declined almost 500bps as company has invested to support further growth and wrote off bad debt. This decline cost the company $8M in potential operating profits in 2024.
Business improved throughout the year. YOY revenue growth accelerated each quarter and increased 15% YOY in Q4.
What is a digital programmatic advertising platform?
Annual
Quarterly
Townsquare Interactive
Subscription digital marketing services providing website design, creation and hosting, search engine optimization, social platforms and online reputation management. Targets SMB with less than $5M in annual revenue and fewer than 20 employees.
ARPU $300 a month.
Since 2022 total subscribers declined almost 7,000 to 24,000 at year end 2024. As a result, revenue declined from $90M to $75M.
High employee turnover due to back-to-work mandates and SMB inflation/challenging business conditions have been discussed as reasons for the decline.
#1 reason for cancellations is client goes out of business.
Q4 revenue increased 2.1% YOY. First increase since 2022.
Management has guided to a $3M increase in revenue in 2025. While this is an encouraging sign, history has shown that when the economy weakens, this division suffers the most.
Since ARPU is relatively stable at $300 a month, revenue growth has to come from an increase in subscribers. Guidance implies an approximately 1,000 subscribers increase in 2025. We believe this could be the growth that is most at risk in a weakening economy.
The long-term algorithm is $10M a year increase in revenue (3,000-3,200 net new subscribers a year) and $3M in incremental operating profits.
Annual
Quarterly
Capital Allocation is Very Shareholder Friendly
One of the larger risks of investing in companies that generate significant free cash flow is that management ends up squandering that cash flow on value destroying share buybacks and/or acquisitions. We have invested in many companies that were struggling with turning around the business and still took the free cash flow to buy back stock (instead of reducing debt or distributing the cash to shareholders) at significantly higher prices (looking at you Bloomin’ Brands).
TSQ management has taken a balanced approach to allocating its free cash flow and the strategy has been relatively successful. Since 2021, the company has reduced the overhang of Oaktree’s equity position it acquired in bankruptcy and Madison Square Garden’s position. The company has also retired $81M worth of debt. Last year the company initiated a dividend (which it just increased) that returns approximately $12M a year to shareholders or about a 10% yield at current prices.
Share Buybacks Have Reduced a Large Overhang of Stock and Cleaned Up the Capital Structure.
As the result of the bankruptcy restructuring in 2010, Oaktree Capital Management acquired 47% of the total shares outstanding. The combination of owning 8.6 Class A shares and 2.1 Class B shares gave Oaktree 77.8% of the voting power. In 2016, Madison Square Garden Company (MSG) acquired a 12% stake (3.2 million shares) in the company.
Since 2021, the company was able to repurchase all of the shares of Oaktree and MSG for approximately $7.03 per share. In fact, since 2021, the company has repurchased 16.2 million shares for an average price of $7.19. The Oaktree shares were purchased at a 39% discount to the market price. As a result of its share repurchase activities, the company has retired 9M warrants, 2M Class B shares and 1.1M Class C shares.
Management continues to hold 29% of the shares outstanding and MSD Capital (Michael Dell’s investment firm) owns 7.6% of the shares outstanding.
Debt Refinancing Extends Debt Maturity Four Years, But at a Cost of Higher Interest Expense
In February, the company refinanced it debt with a new $490M credit agreement. The agreement included a $470M Term Loan B and a $20M revolving credit facility. This facility allowed the company to pay off its existing bonds that were set to mature in February of 2026. The new debt matures in Feb of 2030 and contains an interest rate of SOFR plus 500 basis points (approximately 9.25%). As a result of the higher interest rate, the company will pay approximately $45M in annual interest costs, which was a $9M increase over 2024. The company plans to continue to pay down debt and could eventually replace the Term Loan with fixed rate debt in the future.
Historical Financials
CEO Shareholder Letters are a Must Read
CEO Bill Wilson (joined Townsquare in 2010 from AOL and has been CEO since 2019) writes an annual letter to shareholders that is thoughtful, insightful and full of industry perspective. This year’s letter is no different. Here are a few excerpts from this year’s letter.
Excerpts from 2024 letter:
Concerns
While small town focus in Texas and Mountain West does provide some opportunity for population growth, the exposure to the Northeast and Upper Midwest could be a drag on potential growth.
SMB focus could result in more subscriber losses if economy weakens. While the company admits the loss of some of the nearly 7M subscribers in the Interactive division where self-inflicted, It is concerning that the company lost such a large number of subscribers in a relatively benign economic backdrop.
The competition from Spotify, Sirius XM and the music streaming companies will only continue to intensify, limiting any growth in the radio division and more than likely resulting in more cost cutting to attempt to preserve margins.
If FCC ownership rules change, the company could pursue a large acquisition, which would significantly increase leverage.
Summary
Over 55% of total revenue now comes from non-traditional radio broadcast digital sources. This is the highest in the industry by a factor of 2.5X. It is important to understand that many other radio companies count podcasting in their digital revenue. We believe that Townsquare’s digital revenue has a more sustainable competitive advantage relative to podcasting revenue.
Focus on non-Top 50 DMA’s reduces competition and provides an opportunity for the company to provide local news and fill the vacuum left by the closure of over 2,100 papers since 2004. The company creates or curates over 20,000 pieces on content per month.
The Interactive division, which has struggled, provides a differentiated revenue stream from most of its peers. Q4 ’24 showed positive YOY growth for the first time in seven quarters.
While EBITDA has been relatively stable at approximately $100M since 2021, rising interest costs have contributed to the reduction in CFO from $61M to $49M.
Debt refinancing reduces near term liquidity risk, but at a cost of a $9M increase in interest expense.
Management owns 29% of the company and has reduced debt and shares/warrants outstanding significantly since 2021.
Recently raised the dividend to $0.80 per share ($13M annually), appears to be secure. Even with a modest decline in cash flow ($35-$40M estimated for 2025) the dividend is well covered. The extension of the 2026 debt maturity to 2030 reduces the need to purchase debt in 2025-2029, freeing up additional cash flow for stock repurchases or cash build.
Guidance of $90M-$98M in EBITDA implies another relatively stable year.
We believe that until Townsquare Interactive shows sustained improvement in subscribers and revenue growth, it will be difficult for the stock to increase significantly in value. Management did give guidance for this division to grow revenue 4% in 2025.
Potential easing of ownership rules at the FCC is a wild card.
Using very simple back of the envelope calculations of 6X EV/EBITDA multiple for radio and 10X EV/EBITDA multiple for digital and 50/50 split of $100M in EBITDA between the two, gets to a stock price over $22.50 a share. If the stock could trade for just 50% of that, the stock would increase 50%. The stock did trade over $12 per share in 2021, 2022, 2023 and 2024.
Investors are being “paid to wait”. Hopefully they are getting paid to wait for a higher valuation due to improving revenue and earnings and not a reallocation of the cash used to pay the dividend to fund stock buybacks (looking at you Wendy’s).
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