Townsquare (TSQ) Q4 Earnings In Line, Revenues Beat Estimates

Townsquare Media (NYSE:TSQ) reported fourth-quarter 2018 adjusted earnings of 26 cents per share, which surged 36.8% from the year-ago quarter. However, the figure was in line with the Zacks Consensus Estimate.

Pro forma revenues of $109 million increased 9.7% year over year and beat the consensus mark of $105 million. The pro forma figure includes revenue contribution from three radio stations in Princeton, NJ, which were acquired on Jul 2, 2018.

Moreover, excluding political revenues, net revenues increased 5.2% to $103.3 million. Political revenues (6.1% of advertising revenues) were $5.7 million compared with $1.2 million in the year-ago quarter.

Quarter Details

The year-over-year growth in revenues was driven by 9.9% increase in advertising revenues (85.4% of revenues) that totaled $93.1 million. The advertising business primarily comprises broadcast and digital advertising.

Townsquare’s stable broadcast business was a strong growth driver. The company’s investments in local business, including content, management and sales talent, increased broadcast revenues by 10%.

Moreover, partnership with Analytic Owl enabled Townsquare to provide valuable data to advertisers that helped them target the right audience.

Townsquare stated that clients connected to its attribution platform saw, on average, a 35% increase in new visitors to their websites in 2018.

Moreover, ratings improvement was noteworthy. Townsquare stated that ratings improved in markets like Buffalo, El Paso, Grand Rapids, Shreveport and Lansing. In fact, the company was ranked #1 in 30 out of the 51 Nielsen rated markets it competes in.

Townsquare Ignite, the company’s in-house proprietary digital programmatic advertising platform continued its momentum. Notably, the number of orders running per month increased from roughly 1000 on average in 2017 to approximately 1800 on average in 2018, generating more than 50% year-over-year revenue growth.

Moreover, Townsquare Interactive (12.4% of revenues) rallied 28.5% year over year to $13.5 million. Townsquare Interactive ended 2018 with approximately 15,350 subscribers. The business added approximately 850 net subscribers in the fourth quarter and nearly 3000 subscribers in the year.

However, Live Events (2.2% of revenues) declined 42.6% from the year-ago quarter to $2.4 million.

Pro forma adjusted EBITDA increased 6.4% from the year-ago quarter to $23.9 million. EBITDA margin contracted 70 basis points (bps) to 21.9% in the reported quarter.

Total operating expenses increased 27.7% year over year to $125.5 million. Investments in digital products and sales team related to Townsquare Interactive and Townsquare Ignite drove operating expenses.

Loss from operations was $16.6 million, against operating income of $1.1 million.

Balance Sheet

At the end of fourth-quarter 2018, cash in hand was $61.4 million. The company now has approximately $50 million in available capacity on its existing revolving credit facility.

As of Dec 31, 2018, Townsquare had $560.5 million of debt, representing 5.7x and 5.1x of gross and net leverage, respectively, based on 2018 pro forma adjusted EBITDA of $97.5 million.

Townsquare’s board also approved dividend of $0.075 per share, which will be payable on May 15, 2019, to shareholders of record as of Apr 2.

Guidance

For first-quarter 2019, Townsquare expects net revenues between $92 million and $94 million, representing approximately 3-5% increase year over year on a pro forma basis.

Adjusted EBITDA is estimated to increase approximately 1-7%. The figure is expected between $17.5 million and $18.5 million on a pro forma basis

For 2019, Townsquare expects net revenues between $445 million and $455 million, which represent pro-forma net revenue growth of approximately 2-5% year over year. Excluding political revenues, which is expected to decline roughly $7 million, revenue growth is likely to be 4-6%. Stable broadcast and live events revenues, and a continued double-digit growth in digital business are expected to drive growth.

Townsquare expects 2019 adjusted EBITDA between $94 million and $98 million. At midpoint, the guidance reflects year-over-year decline due to the loss of high margin political revenues in 2019.

Moreover, management expects Townsquare Ignite to generate $100 million in annual revenues within the next three to five years. For 2019, the business is expected to reach $50 million in annual revenues.

For Townsquare Interactive business, management expects to add more than 3000 net subscribers in 2019.

Zacks Rank & Stocks to Consider

Currently, Townsquare carries a Zacks Rank #3 (Hold).

AMC Networks (NASDAQ:AMCX) , Glu Mobile (NASDAQ:GLUU) and Zynga (NASDAQ:ZNGA) are stocks worth considering in the broader consumer discretionary sector. All the three stocks have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for AMC, Glu and Zynga are currently pegged at 7.2%, 15% and 22.5%, respectively.

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