Local multimedia company Townsquare Media has just put its first year as a publicly traded company into the history books with a strong gain in value, and Seeking Alpha thinks it is going to build on this success. SA also questioned the conventional wisdom on radio in general.
The key to the company’s future, suggests SA, is its debt management.
If it is successful in reducing debt, SA believes it will be a machine when it comes to generating free cash flow.
SA stated, “We believe the business will de-lever their balance sheet over the next two years driving much higher earnings with a lower risk profile. The free cash generation expected over the next two years should add other flexibility as well including strong expansion of radio station assets focusing on the small markets.”
This is in keeping with statements Townsquare has made to RBR+TVBR in the past. It is always open to acquisitions, but only if they make immediate financial sense, preferring instead to make the most of its operational strategy.
Seeking Alpha noted the conventional wisdom that satellite and digital audio platforms are making AM and FM radio obsolete, and countered that radio’s continued almost universal reach contradicts that opinion. I also added that in its opinion, radio will continue to be the leader in in-vehicle listening.
But even if other platforms begin taking share from AM and FM, SA believes that Townsquare’s mid- to small-market strategy makes it relatively immune, stating that “…the internet-based competitors … are not going to call on Great Falls, Montana for ad sales.”
SA had high praise for the company’s overall strategy. It said, “While radio stations provide a solid cash flow generation business, we think the real growth story is within the ancillary businesses they own and are pursuing. The complementary (and growing) live events platform provides a mechanism to utilize their radio assets in order to promote their live events. The beauty of the business model is that they overlap their radio station footprint and their live events business so that each feeds off the other. The symbiotic relationship allows for much faster growth in addition to promoting the other’s brand. Townsquare’s other advantage of owning these live events assets includes the utilization of their internal sales force to sell sponsorship space for the events.”
SA also praised the company’s digital strategy, which includes the use of local and national websites and the provision of general digital services to the local business community.
SA provided estimates on results for Townsquare’s units. It sees radio advertising increasing from $303M in 2014 to $333M by 2017; live events from $41M to $82M; and other media from $30M to $59M. EBITDA is expected to grow from $57M to $135M over the same period.
