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Town Square IPO

S

SirRoxalot

So, Town Square is contemplating an IPO.

"Townsquare Media now says that as of the end of the first quarter, its outstanding indebtedness would’ve been $485.3 million..."

"For the just-ended second quarter, it’s expecting net income to be somewhere between $11.5 million and $12.5 million."

Now, these ain't CC numbers, but it does lead to some questions. They own 312 radio stations, but are only making about $50-million per year in net income? OK, let's say that the other quarters are better, and they make $60-million per year in net income.

To put this in human terms, they have $60-grand left over at the end of the year, and owe $485-grand on the mortgage. Anybody want to plunk down $16 bucks per share on that company? BTW, you won't really have any voting rights with that stock, so you won't have any say in the "management equity compensation plan, related to its coming conversion from an LLC (limited liability company) to a Delaware corporation." Or any other executive compensation for that matter.
 
I drove thru Buf'lo 6/26 listening to 'YRK and...respectfully...disappointed by what I heard.

JPB had once referred to this station as a successor in spirit to the WKBW of our youth and at the time I agreed with that assessment. But what I heard that Friday in PM Drive sounded like a smaller-minded Townsquare was steering the ship. Going thru the motions...station could've been anywhere.

Granted it was just one snapshot of just one Townsquare station, but filtered thru what I've read here (dumping live staff) and elsewhere (firing people almost as quickly as CC/Cumulus, unrealistic and unfulfilled expectations re digital revenue, etc.) it just sounds to me like a once-confident company is losing its way.

Considering that TSQ was trading around $11/share yesterday (and hit a low of $9.93 an hour before the closing bell)...and as you note SirRox, they wanted $16/share...I don't think this ends well.

The Tom Taylor piece noted Pandora stock treaded water initially...but to the original question...

Pass.
 
It appears that Townsquare followed the time honored formula of stripping the company to the bone in order to pump up revenues so it would look better at the time of the IPO. Like others who have done this, they forgot that investing in content is what got them there in the first place. Several radio pros who were attracted to Townsquare in Buffalo because of the ratings have quietly move on - mostly to Entercom - because of the atmosphere there over the last 6-12 months. Personnel changes to the on-air staff, and format tweaks dictated by corporate have not exactly worked to their advantage. In short, they're spending less on the product, and getting less in return.

The IPO valuation must have been disappointing to those who saw $14-$16 per share as viable, and the performance on the market shows that even $11 may have been ambitious. Now let's see how Townsquare uses the influx of cash - to let Oaktree take money out of the radio business, or to reinvest in content in order to use their distribution platforms more effectively and increase revenue. I'm sure that Clear Channel is watching carefully, although it's hard to see any Clear Channel IPO as much more than a penny stock with their debt problems.
 
SirRoxalot said:
It appears that Townsquare followed the time honored formula of stripping the company to the bone in order to pump up revenues so it would look better at the time of the IPO. Like others who have done this, they forgot that investing in content is what got them there in the first place.
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Except that in fact Townsquare HAS invested in content. Lots of it. They are one of the few major owners that runs live and local air talent. They've invested heavily in new media, not only launching their own series of sites, but also buying AOL News. They have invested in a music festival for their country format. So they've done more than any medium sized owner has done, and certainly more than any small owner. I really don't know what you expect them to do.
 
Timing is everything. The TSQ IPO had the misfortune of coming out only days after an investors' call in which CCM did its song and dance. Wall Street doesn't seem impressed by the TSQ numbers. This could be a matter of Wall Street not being impressed by radio in general; content, new media or otherwise. Yes, Wall street may be warming to established broadcasting companies, such as CBS. It seems momentarily and cyclically pleased with television, but as wiser investment people have advised me, "especially with broadcast and media, it's quarter-to-quarter, if not day to day." TSQ isn't CBS. More lipstick and fattening before big buyers take the leap of faith.
 
TheBigA said:
Except that in fact Townsquare HAS invested in content. Lots of it. They are one of the few major owners that runs live and local air talent. They've invested heavily in new media, not only launching their own series of sites, but also buying AOL News. They have invested in a music festival for their country format. So they've done more than any medium sized owner has done, and certainly more than any small owner. I really don't know what you expect them to do.
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How much have they invested in their core product - RADIO? There's considerably less live and local than there was two years ago, and they've cut some people with big salaries and replaced them with virtual unknowns. The rest is lipstick on the pig. They own radio in small and medium markets, but the sheer number of stations doesn't make them a "small owner". They're follow the Clear Channel model of "cut the core, and pump up the rest of the product" including digital and non-traditional income (like their country music festival). In the grand scheme of things, the profit realized doesn't make up for what they've lost in their core business. It may fool some investors, but the bottom line isn't robust enough to get bankers excited.
 
SirRoxalot said:
How much have they invested in their core product - RADIO? There's considerably less live and local than there was two years ago, and they've cut some people with big salaries and replaced them with virtual unknowns.
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You have a different idea of "investing." Almost all of the staff in Buffalo is unchanged. Everyone there continues to get regular salary increases and benefits have stayed the same, even though costs have increased. Radio sales aren't increasing because they can't raise spot rates or increase the number of spots per hour due to compatition. So their growth area is online. The online are is growing at a much faster rate than on-air. That's a fact.

But I asked you a question: What do you want them to do? How many people do they have to hire in order for you to feel they've "invested in the core product?" Give me a list.

Investors don't care about on-air vs. online. Online business is seen by investors as more valuable than traditional radio, which is why so many radio-only stocks are stagnant. The only on-air stock that has increased is CBS, and that's because of a combination of on-air, TV, cable, and online.
 
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Sorry, but you're simply wrong. WJYE is considerably different over the last couple of years. WYRK staff has had minor changes on air, but programming on all their stations has been affected by top-down homogenization of the formats. WYRK is the one affected least because it's the only country station in town. WBLK is the only urban station, and any fluctuation in numbers has more to do with diary placement than changes in reported listening, and won't likely change unless PPM gets to Buffalo.

I don't expect Townsquare to add numbers at this point because they all follow the Clear Channel model of trying to "cut your way to prosperity." There are some smarter companies out there - like CBS - who realize that talent is what differentiates radio from the other music sources.

Some businesses see online as more valuable than traditional radio for several reasons:

1. Loss of sales talent. Farid Suleman was the one who voiced the opinion that "Radio sells itself. All we need are order-takers." Well, if you have access to the Hungerfords, and go back 10 years, you'll find just how badly that idea worked out in WNY.

2. Bland programming. The more that radio resembles online, the less reason people have to seek it out - especially when you're still running 6-8 minute commercial sets. Even "free" online (where the listening pays for the delivery bandwidth) has a much lighter commercial load.

3. Is anybody making online delivery profitable? Bob Pitman thinks that iHeart Radio is worth billions. Well, where is iHeart radio without the content of thousands of radio stations? Why isn't it digging into that mountain of debt that Clear Channel keeps kicking down the road at ever higher interest rates? It's the shiny bauble used to mesmerize those who Clear Channel owes those billions to into thinking that they have an actual solution to their debt problem other than bankruptcy. Investors would do better to look at profits, not the delivery system, when determining where to put there money. OTA radio is much healthier than digital.
 
SirRoxalot said:
I don't expect Townsquare to add numbers at this point because they all follow the Clear Channel model of trying to "cut your way to prosperity."
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If that was actually Clear Channel's model, they wouldn't still be $20 billion in debt after five years. So the fact is that's NOT Clear Channel's model.

SirRoxalot said:
There are some smarter companies out there - like CBS - who realize that talent is what differentiates radio from the other music sources.
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The CBS model is very similar to what Townsquare is doing, with a combination of mostly live & local on-air, coupled with an aggressive online presence.

SirRoxalot said:
2. Bland programming. The more that radio resembles online, the less reason people have to seek it out - especially when you're still running 6-8 minute commercial sets. Even "free" online (where the listening pays for the delivery bandwidth) has a much lighter commercial load.
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Except that's not what Townsquare is doing. If they were, WYRK and WBLK wouldn't be top rated, and other companies would be jumping into country and urban formats. WYRK is doing exactly what CBS and other country stations around the country are doing, and it's why the country format is so successful in so many similar markets, like Rochester, Albany, and Syracuse, regardless of ownership. The reason people seek on-air is because radio stations provide a CURATED music list, that is constantly updated, using omni-present free devices that are easy to operate, with unique exclusive content they can't get online.

SirRoxalot said:
3. Is anybody making online delivery profitable? Bob Pitman thinks that iHeart Radio is worth billions.
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One of the problems with IHeart is that it's a digital music delivery service. So it has to pay digital royalties, like Pandora. Townsquare doesn't have such a system, other than online streaming of over-the-air. Townsquare's online business is text content, which is content they own. They don't pay royalties on text, but they have to pay staffers to create the content. Still, even with the personnel costs, the online news services is a huge profit center for Townsquare, a business other radio companies don't have.
 
SirRoxalot said:
So, Town Square is contemplating an IPO.

"Townsquare Media now says that as of the end of the first quarter, its outstanding indebtedness would’ve been $485.3 million..."

"For the just-ended second quarter, it’s expecting net income to be somewhere between $11.5 million and $12.5 million."

Now, these ain't CC numbers, but it does lead to some questions. They own 312 radio stations, but are only making about $50-million per year in net income? OK, let's say that the other quarters are better, and they make $60-million per year in net income.

To put this in human terms, they have $60-grand left over at the end of the year, and owe $485-grand on the mortgage. Anybody want to plunk down $16 bucks per share on that company? BTW, you won't really have any voting rights with that stock, so you won't have any say in the "management equity compensation plan, related to its coming conversion from an LLC (limited liability company) to a Delaware corporation." Or any other executive compensation for that matter.
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First thing: "net income" is what's left over after operating expenses, amortization, depreciation and interest payments. In other words, they paid the debt service and still are making $12 million or so each quarter. That's quite good, in fact.

Think of the debt more like a home mortgage; you owe a lot more than you make a year, but you can pay the interest and a bit of principal and in the end, you own the property. If Townsquare has favorable rates, they may be paying in the 6% to 8% range for the use of someone else's money. That would make the annual debt service around $30 million, give or take. At certain anniversaries, they likely have to service principal, and are apparently cash flowing enough to meed those obligations as well, with money left over.
 
Once again, you fail to read and/or understand the full response before you comment.

Clear Channel hasn't tried to cut their way to prosperity? Tell that to the HUNDREDS of former employees. That's simply BS. Then again, you've never let facts get in the way of you opinions. They're the post child for the concept that you CAN'T cut your way to prosperity.

WYRK and WBLK are dominant because they have no direct format competition in this market. Buffalo, Rochester, and Albany have ONE dominant country station, and they've been around for a long time. The conventional wisdom is that they'd be tough and expensive to really challenge. That view may be changing as a variety of country formats evolves, but neither of the other major operators see enough upside to challenge them directly because the stations they are are doing "well-enough". As far as "curated content" is concerned, more and more is cookie-cutter music and imaging supplied by corporate. Local input is more and more limited.

Entercom and Cumulus don't want to spend the money necessary to really challenge WYRK or WBLK. Entercom is already outselling them despite having fewer FMs. Cumulus isn't looking to spend any money, and the revenue is apparently "good enough". They've got a lot of other markets with a lot more problems. Townsquare - and Cumulus - have actually lost sales talent because of their "top down" management practices. Neither is attracting new talent effectively.

As far as "text" is concerned, there is NO Townsquare presence in Buffalo. You might as well equate that with Clear Channel Outdoor. It has no effect in this market.
 
SirRoxalot said:
Clear Channel hasn't tried to cut their way to prosperity? Tell that to the HUNDREDS of former employees. That's simply BS. Then again, you've never let facts get in the way of you opinions. They're the post child for the concept that you CAN'T cut your way to prosperity.
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You've assumed their goal in cutting staff was to achieve "prosperity." That's YOUR take on their model. I'm saying it's obviously not correct. Just because they've cut a lot of staff doesn't mean anything, other than they've made changes in staffing. But as I've pointed out, they're still hiring lots of people, so their "model" isn't strictly about cutting.

SirRoxalot said:
WYRK and WBLK are dominant because they have no direct format competition in this market.
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Format competition isn't the same as no competition. They have lots of competition. Buffalonians have chosen to listen to WYRK instead of other radio stations or media platforms, even though YOU feel the programming is "bland." Perhaps that's a comment on your neighbors. They clearly love the station, engage consistently with the on-air hosts through social media, local concerts, and telephone. That's possible because of their heritage local staff, who are familiar to the population.

SirRoxalot said:
As far as "text" is concerned, there is NO Townsquare presence in Buffalo. You might as well equate that with Clear Channel Outdoor. It has no effect in this market.
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You obviously don't understand what I mean by text. Townsquare owns 8 music format news websites, including four they bought from AOL. Those 8 news websites provide unique text (meaning print) content that is constantly updated. This is IN ADDITION to the local station websites. For country fans, they own www.theboot.com and www.tasteofcountry.com. Those two sites have their own staffs who provide music news for country fans, and those two sites are the #1 source of country music news in the USA, beating cmt.com. As I said, the music news sites get over 1 million unique visits a month, making them extremely profitable.
 
The 8 news websites have little effect on radio in this market. One million visits a month split among 8 nationwide websites doesn't qualify any of them as a "large" site. "Extremely" profitable is at best an exageration. Just what do you consider "extremely" profitable, considering that the company as a whole is only making maybe $60-million per year for ALL operations, including 312 radio stations?

Country and urban are hot formats, and they're the ones that have built an audience over decades in this market that will erode more slowly than more music-intensive formats - assuming that they don't whack several of their major talents as they did with WJYE.

Lastly, if you think that there's been a net gain in jobs at Clear Channel, you are obviously are deluded. Have you seen their profitability lately - or more precisely LACK of profitability at Clear Channel? Argue if you want, but it doesn't change reality. Sorry, but no reasonable person is selling what you're buying.
 
SirRoxalot said:
The 8 news websites have little effect on radio in this market.
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That's not the point, but how have you reached that conclusion?

SirRoxalot said:
One million visits a month split among 8 nationwide websites doesn't qualify any of them as a "large" site.
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Sorry...that was a low figure. A year ago they reported 52 million unique visitors per month. That was before adding the AOL Music sites. 52 million unique visitors puts them among the Top 20 of all web sites in the world, according to Quantcast. My point is that this is revenue that other radio companies like Entercom or Cumulus don't have.

SirRoxalot said:
Lastly, if you think that there's been a net gain in jobs at Clear Channel, you are obviously are deluded.
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Did I say that? No. But YOU said they're "cutting their way to prosperity." What do you mean by "prosperity?" That statement is completely false, and you know it.
 
SirRoxalot said:
The 8 news websites have little effect on radio in this market. One million visits a month split among 8 nationwide websites doesn't qualify any of them as a "large" site. "Extremely" profitable is at best an exageration. Just what do you consider "extremely" profitable, considering that the company as a whole is only making maybe $60-million per year for ALL operations, including 312 radio stations?]
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"Extremely profitable" is a term used, generally, in relation to the start up or acquisition costs of an enterprise. I'll see if I still have the prospectus where it breaks some of this out.

For 2014 Townsquare is projected to have an EBITDA of $68 million and net income of $12 million, per Morningstar. That is up from $47 million EBITDA and $6 million net profit in 2012. Interest expense for this year will be $40 million, meaning an interest rate that averages around $9 on the debt. They have a considerable tax loss carry-forward so they have no current tax liability at the Federal level.

The Townsquare stations are, for the most part, in smaller markets. At a $68 million EBITDA, and even taking out 15% for the news sites, the average station is pushing off close to $200 k in cash, which is pretty good for smaller markets. Since they have clusters in nearly all the markets they are in, that means cluster cash flow averages about $1 million... also quite significant today.
 
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I simply don't think that it would be difficult to find a company with more upside and better numbers if I was going to invest some of my IRA.
 
TheBigA said:
A year ago they reported 52 million unique visitors per month.
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I assume that should be visits, and not visitors. Otherwise that's 1/6 of the U.S. population and four times the traffic of Drudge for example. In any case ... say it is visits:

If each visit includes 3-4 pages viewed -- not an unlikely number -- then that's 156,000,000 to 208,000,000 page views a month. If they are getting about $1.50-2.00 CPM (not unreasonable with the DoubleClick ads they are using, and not counting any direct sales) then that's $225-400K a month or $2.5-5 million a year. Not too shabby.

Even on the low end of an average of two page views per visit and $1 CPM, it's still over $1.2 million a year, and that's being unreasonably conservative in both page views and CPM.
 
Quite often the sites are "skinned" with advertising, and I don't think that's from DoubleClick. I think that's direct sales.
 
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