Who Wants To ‘Prudently Pursue’ Attractive Buys?

Townsquare Media on Monday (1/30) released its January 2017 Investor Presentation, and the 14-page PowerPoint highlights the media company’s “solid capital structure, attractive growth, diversified revenue base, and strong free cash flow.”

It also provides details regarding its plan to reduce its net leverage, and how it is seeking to grow primarily through what it considers “attractively valued acquisition opportunities.”

Townsquare’s assets include 309 radio stations in 66 medium- and small-sized markets across the U.S., including Albany, Buffalo, Poughkeepsie and Utica-Rome, N.Y.; Lawton, Okla.; Duluth and Rochester, Minn.; and Danbury, Conn. — the closest stations to Townsquare’s Greenwich, Conn., headquarters.

However, investors and Wall Street insiders have expressed a greater interest in Townsquare’s live events arm, which produces some 550 live events across North America each year.

To boost this side of Townsquare, the company in August 2016 added a little MSG to its plate: Madison Square Garden Company, owner of some of the nation’s top entertainment venues and three pro sports teams, acquired an approximately 12% common equity stake in Townsquare. MSG Co. in September 2013 entered into a joint venture with music industry giant Irving Azoff, creating Azoff MSG Entertainment, of which he serves as Chairman/CEO.

This is illustrated front-and-center in the investor presentation, noting that Townsquare’s key point of attraction is its national scale with a hyper-local focus, putting radio and digital content on par with digital marketing solutions and live events that may reach consumers other media may not, the company suggests.

“More and more, advertisers have been narrowing their focus to big markets, which often reside on the coasts, and largely ignore middle America,” Townsquare says. “Townsquare is an ‘and’ buy, not an ‘or’ buy, complementing big market advertising buys with little to no over audience overlap.” It highlighted strong community relationships between media and advertisers, and how Townsquare properties are located in “stable markets with lower economic volatility and stabilizing institutions such as universities, military installations and state capitals.”

Townsquare also details its current financial health: It has $299.2 million of secured debt, plus $282.1 million in senior unsecured notes due 2023, with pricing at 6.5%. The company presently has $38.4 million cash on hand, and sees to reduce its net leverage to 5.0x in the near to medium term.

SET TO SHOP, FOR THE RIGHT OPPORTUNITY

With 5.3x net leverage as of Sept. 30 and $43 million in free cash flow at that time, Townsquare is looking to “prudently pursue” attractively valued acquisition opportunities. It states a desire to “focus on assets that have strong brands and leading market share positions,” in particular those that would augment the growth of Townsquare’s digital and live events offerings. This would see the evaluation of assets “that provide natural extension to our core competency.”

Townsquare’s Q3 was good, aside from Mother Nature impacting its net income: Q3 results that missed the company’s own projections, as net income dipped 3.6%, from $16.5 million (60 cents per diluted share) to $15.9 million (58 cents), were due to poor weather.

The arrival of Townsquare Media’s latest investor presentation comes as the company revealed in an SEC filing that it is meeting with its lenders to discuss a possible reduction in the interest rate under its senior secured credit agreement.

The company did not elaborate on these discussions, but in the SEC filing reaffirmed its Q4 2016 guidance. Townsquare expects to report net revenue of between $117 million and $121 million, and adjusted EBITDA of between $24 million and $25 million. For the full year ended Dec.  31, 2016, Townsquare expects to report net revenue of between $514 million and $518 million, and adjusted EBITDA of between $106 million and $107 million.

Meanwhile, a New York-based class action law firm dedicated to representing shareholders nationwide is investigating Townsquare Media concerning possible breaches of fiduciary duty by its board of directors.

Purcell Julie & Lefkowitz — known as a Wall Street legal watchdog — is seeking queries from Townsquare shareholders about its investigation.

The law firm did not specify reasons for its investigation against Townsquare.

PJL partner Richard Lefkowitz did not respond to RBR + TVBR‘s requests for additional information and comment.

Claire Yenicay, Townsquare’s EVP/Investor Relations and Corporation Communications, was traveling and unavailable for immediate comment. However, a company representative gave RBR + TVBR‘s request for comment to its legal counsel.

Townsquare’s board of directors is comprised of its three key executives — Chairman/CEO Steven Price, EVP/CFO Stuart Rosenstein, and EVP & Chief Content and Digital Officer Bill Wilson; Oaktree directors B. James Ford, Stephen Kaplan and David Quick; Gary Ginsberg, EVP/Corporate Marketing & Communications at Time Warner Inc.; David Lebow, Chief Revenue Officer at YP; and Margaret M. Cannella. In 2009, after 30 years in investment banking in the U.S., Europe and Asia, Cannella retired from JPMorgan Chase & Co. as Managing Director and Head of Global Credit Research.