# Townsquare Media, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Townsquare Media, Inc.](/companies/tsq.md) (CIK 1499832)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 06:04 ET
- Period: 2023-09-30
- Accession: 0001499832-23-000109
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1499832/000149983223000109/tsq-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1499832/000149983223000109/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $115.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $339.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$10.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$11.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $9.3m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $28.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $17.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $9.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$37.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$42.6m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 16,277,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 16,897,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $39.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $11.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $16.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $38.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $113.3m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $657.3m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $64.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $644.9m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $499.1m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-09-30 | $12.4m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 45,225 characters.

The following management’s discussion and analysis is intended to provide the reader with an overall understanding of our financial condition, results of operations, cash flows and sources and uses of cash. This section also includes general information about our business and a discussion of our management’s analysis of certain trends, risks and opportunities in our industry. In addition, we also provide a discussion of accounting policies that require critical judgments and estimates. This discussion should be read in conjunction with our Unaudited Consolidated Financial Statements and related notes appearing elsewhere in this quarterly report.

### Note About Forward-Looking Statements

This report includes estimates, projections, statements relating to our business plans, objectives and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements often discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” “intend,” “seek,” “believe,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include the impact of general economic conditions in the United States, or in the specific markets in which we currently do business including supply chain disruptions, inflation, labor shortages and the effect on advertising activity, industry conditions, including existing competition and future competitive technologies, the popularity of radio as a broadcasting and advertising medium, cancellations, disruptions or postponements of advertising schedules in response to national or world events, our ability to develop and maintain digital technologies and hire and retain technical and sales talent, our dependence on key personnel, our capital expenditure requirements, our continued ability to identify suitable acquisition targets, and consummate and integrate any future acquisitions, legislative or regulatory requirements, risks and uncertainties relating to our leverage and changes in interest rates, our ability to obtain financing at times, in amounts and at rates considered appropriate by us, our ability to access the capital markets as and when needed and on terms that we consider favorable to us and other factors discussed in this section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and under “Risk Factors” in our 2022 Annual Report on Form 10-K, as well as other risks discussed from time to time in our filings with the SEC. Many of these factors are beyond our ability to predict or control. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. The forward-looking statements included in this report are made only as of the date hereof or as of the date specified herein. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

### Format of Presentation

Townsquare is a community-focused digital media and digital marketing solutions company with market leading local radio stations, principally focused outside the top 50 markets in the United States. Our integrated and diversified products and solutions enable local, regional and national advertisers to target audiences across multiple platforms, including digital, mobile, social, video, streaming, e-commerce, radio and events. Our assets include a subscription digital marketing services business (“Townsquare Interactive”), providing website design, creation and hosting, search engine optimization, social platforms and online reputation management as well as other monthly digital services for approximately 25,750 small to medium sized businesses; a robust digital advertising division (“Townsquare Ignite,” or “Ignite”), a powerful combination of a) 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 354 local terrestrial radio stations in 74 U.S. markets strategically situated outside the Top 50 markets in the United States. Our portfolio includes local media brands such as *WYRK.com, WJON.com* and *NJ101.5.com,* and premier national music brands such as *XXLmag.com, TasteofCountry.com, UltimateClassicRock.com,* and *Loudwire.com.*

We believe that our diversified product offering substantially differentiates us from our competition. This diversification allows us to provide superior solutions to our advertisers and engaging experiences for our audience, underpins our growth strategy and, we believe, helps to mitigate the risks associated with advertising revenue dependency.

The Company has identified three operating segments, which are Subscription Digital Marketing Solutions, Digital Advertising and Broadcast Advertising. The remainder of our business is reported in the Other category.

### Subscription Digital Marketing Solutions

Our Subscription Digital Marketing Solutions segment encompasses Townsquare Interactive, our subscription digital marketing solutions business. Townsquare Interactive offers digital marketing solutions, on a subscription basis, to small and medium-sized business (“SMBs”) in markets outside the top 50 across the United States, including but importantly not limited to the markets in which we operate radio stations. We offer a variety of digital marketing solutions, which enables SMBs to choose the optimal features for their specific business.

### Digital Advertising

Our Digital Advertising segment, marketed externally as Townsquare Ignite, is a combination of our owned and operated digital properties, our proprietary digital programmatic advertising platform, and an in-house demand and data management platform collecting valuable first party data.

### Broadcast Advertising

Our Broadcast Advertising segment includes our portfolio of 354 local terrestrial radio stations. Our primary source of Broadcast Advertising net revenue is the sale of advertising on our local radio stations primarily to local and regional spot advertisers and also national spot and national network advertisers. We believe we are the largest and best-capitalized owner and operator of radio stations focused solely on markets outside the top 50 markets in the United States. Given the stability of radio’s audience, its broad reach and its relatively low cost as compared to competing advertising media such as television, we believe radio continues to offer an attractive value proposition to advertisers. The price point for radio advertising on a cost per thousand basis is lower than most other local media that deliver similar scale. This makes radio more affordable and accessible for the type of small and mid-sized businesses typically found in our local markets outside the top 50 markets in the U.S.

### Other

We report the remainder of our revenue in the Other category, and it includes revenue from our live events. Our primary source of live events net revenue is ticket sales. Our live events also generate substantial revenue through the sale of sponsorships, food and other concessions, merchandise and other ancillary products and services.

### Overall

We generate a majority of our advertising revenue by selling directly to local advertisers, as well as to local and regional advertising agencies which affords us the opportunity to better present our products, cross-sell products and more directly influence their advertising and marketing expenditure decisions. A significant percentage of our advertising revenue is generated from the sale of advertising to the automotive, financial services, health services, entertainment, and retail industries.

Our most significant expenses are sales personnel, programming, digital, marketing and promotional, engineering, and general and administrative expenses. We strive to control these expenses by closely monitoring and managing each of our local markets and through efficiencies gained from the centralization of finance, accounting, legal and human resources functions and management information systems. We also use our scale and diversified geographic portfolio to negotiate favorable rates with vendors where feasible.

A portion of our expenses are variable. These variable expenses primarily relate to sales costs, such as commissions and inventory costs, as well as certain programming costs, such as music license fees, and certain costs related to production. Other programming, digital, engineering and general and administrative expenses are primarily fixed costs.

### Seasonality

Our revenue varies throughout the year. Typically, we expect that our first calendar quarter will produce the lowest net revenue for the year, as advertising expenditures generally decline following the winter holidays. During even-numbered years, net revenue generally includes increased advertising expenditures by political candidates, political parties and special interest groups. Political spending is typically highest during the fourth quarter. Our operating results in any period may be affected by the incurrence of advertising and promotion expenses that typically do not have an effect on net revenue generation until future periods, if at all.

### Macroeconomic Indicators

Current economic challenges, including high and sustained inflation, rising interest rates, and supply chain disruptions have caused and could continue to cause economic uncertainty and volatility. These factors could result in advertising and subscription digital marketing solutions cancellations, declines in the purchase of new advertising by our clients, declines in the addition of new digital marketing solutions subscribers, and increases to our operating expenses. We monitor economic conditions closely, and in response to observed or anticipated reductions in revenue, we may institute precautionary measures to address the potential impact to our consolidated financial position, consolidated results of operations, and liquidity, including wage reduction efforts and controlling non-essential capital expenditures.

The extent of the impact of current economic conditions will depend on future actions and outcomes, all of which remain fluid and cannot be predicted with confidence (including effects on advertising activity, consumer discretionary spending and our employees in the markets in which we operate).

### OVERVIEW OF OUR PERFORMANCE

### Highlights of Our Financial Performance

Certain key financial developments in our business for the three months ended September 30, 2023 as compared to the same period in 2022 are summarized below:

- Net revenue decreased $5.5 million, or 4.6%, primarily driven by a $5.1 million decrease in our Broadcast Advertising net revenue and a $2.9 million decrease in our Subscription Digital Marketing Solutions net revenue, partially offset by a $2.0 million increase in our Digital Advertising net revenue.
- Operating income decreased $25.2 million, or 173.3%, for the three months ended September 30, 2023. The decrease was primarily due to a $20.7 million increase in non-cash impairment charges and the $5.5 million decrease in net revenue, partially offset by $2.7 million decrease in direct operating expenses, due in part to lower compensation.
- Broadcast Advertising reported an operating loss of $13.1 million, as compared to operating income of $5.8 million for the three months ended September 30, 2022. The decrease of $18.9 million is primarily due to an increase in non-cash impairment charges to our FCC licenses of $13.3 million, a decrease in net revenue of $5.1 million and a non-cash goodwill impairment charge of $2.8 million, partially offset by a decrease in direct operating expenses of $2.4 million. The Digital Advertising segment reported operating income of $11.4 million for the three months ended September 30, 2023, which represents an increase of $0.6 million, as compared to operating income of $10.9 million for the same period in 2022. The increase is primarily due to an increase in net revenue of $2.0 million, partially offset by an increase of $1.3 million in direct operating expenses. Subscription Digital Marketing Solutions reported operating income of $5.3 million, a decrease of $0.7 million from the three months ended September 30, 2022.

Certain key financial developments in our business for the nine months ended September 30, 2023, as compared to the same period in 2022 are summarized below:

- Net revenue for the nine months ended September 30, 2023 as compared to the same period in 2022, decreased $3.4 million, or 1.0%, primarily driven by a decrease of $10.7 million in our Broadcast Advertising net revenue and a $4.9 million decrease in our Subscription Digital Marketing Solutions net revenue. These decreases were partially

offset by a $10.5 million increase in our Digital Advertising net revenue and a $1.8 million increase in Other net revenue.

- Operating income decreased $58.5 million, or 123.8%, for the nine months ended September 30, 2023. Operating income decreased primarily due to a $45.5 million increase in non-cash impairment charges, a $3.7 million increase in direct operating expenses and a decrease in net revenue of $3.4 million.

### Consolidated Results of Operations

### Three months ended September 30, 2023 compared to three months ended September 30, 2022

The following table summarizes our historical consolidated results of operations:

*($ in thousands)*

| Statement of Operations Data: | Three Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | $115,104 | $120,635 | $(5,531) | (4.6)% |
| Operating costs and expenses: |  |  |  |  |
| Direct operating expenses, excluding depreciation, amortization, and stock-based compensation | 81,323 | 83,985 | (2,662) | (3.2)% |
| Depreciation and amortization | 4,717 | 4,467 | 250 | 5.6% |
| Corporate expenses | 6,604 | 5,744 | 860 | 15.0% |
| Stock-based compensation | 2,350 | 722 | 1,628 | 225.5% |
| Transaction and business realignment costs | 161 | 1,004 | (843) | (84.0)% |
| Impairment of intangible assets, investments, goodwill and long-lived assets | 30,970 | 10,300 | 20,670 | 200.7% |
| Net gain on sale and retirement of assets | (362) | (119) | (243) | 204.2% |
| **Total operating costs and expenses** | **125,763** | **106,103** | **19,660** | **18.5%** |
| **Operating (loss) income** | **(10,659)** | **14,532** | **(25,191)** | **(173.3)%** |
| Other expense (income): |  |  |  |  |
| Interest expense, net | 9,343 | 9,967 | (624) | (6.3)% |
| Gain on repurchases of debt | (430) | — | (430) | \*\* |
| Other income, net | (547) | (508) | (39) | 7.7% |
| **(Loss) income from operations before tax** | **(19,025)** | **5,073** | **(24,098)** | **(475.0)%** |
| Income tax provision | 17,478 | 2,275 | 15,203 | 668.3% |
| **Net (loss) income** | **$(36,503)** | **$2,798** | **$(39,301)** | **(1,404.6)%** |

\*\* not meaningful

#### Segment Results

The following table presents the Company's reportable segment net revenue and direct operating expenses for the three months ended September 30, 2023 and 2022 (in thousands):

|  | Net Revenue Three Months Ended September 30, 2023 | 2022 | $ Change | % Change | Direct Operating Expenses Three Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Subscription Digital Marketing Solutions | $20,257 | $23,188 | $(2,931) | (12.6)% | $14,498 | $16,744 | $(2,246) | (13.4)% |
| Digital Advertising | 39,009 | 36,989 | 2,020 | 5.5% | 27,271 | 25,949 | 1,322 | 5.1% |
| Broadcast Advertising | 54,179 | 59,293 | (5,114) | (8.6)% | 37,510 | 39,889 | (2,379) | (6.0)% |
| Other | 1,659 | 1,165 | 494 | 42.4% | 2,044 | 1,403 | 641 | 45.7% |
| **Total** | **$115,104** | **$120,635** | **$(5,531)** | **(4.6)%** | **$81,323** | **$83,985** | **$(2,662)** | **(3.2)%** |

31

#### Net Revenue

Net revenue for the three months ended September 30, 2023 decreased $5.5 million, or 4.6%, as compared to the same period in 2022. Our Broadcast Advertising net revenue decreased $5.1 million, or 8.6%, as compared to the same period in 2022, due to decreases in the purchase of advertising by our clients. Our Subscription Digital Marketing Solutions net revenue decreased $2.9 million, or 12.6%, as compared to the same period in 2022 due to a reduction of net subscribers. These decreases were partially offset by an increase in our Digital Advertising net revenue of $2.0 million, or 5.5%, due to purchases of new advertising, and an increase in our Other net revenue of $0.5 million, or 42.4%.

#### Direct Operating Expenses

Direct operating expenses for the three months ended September 30, 2023 decreased by $2.7 million, or 3.2%, as compared to the same period in 2022. Our Broadcast Advertising direct operating expenses decreased $2.4 million, or 6.0%, driven by lower compensation. Our Subscription Digital Marketing Solutions direct operating expenses decreased by $2.2 million, or 13.4% as compared to the same period in 2022 due to lower compensation and promotional costs. These decreases were partially offset by a $1.3 million, or 5.1%, increase in our Digital Advertising direct operating expenses as compared to the same period in 2022 primarily driven by higher inventory costs and headcount related expenses to support revenue growth, and a $0.6 million, or 45.7% increase in our Other operating expenses due to an increase in live events held during 2023.

#### Corporate Expenses

Corporate expenses are of a general corporate nature or managed on a corporate basis. These costs (net of allocations to the business segments) primarily represent corporate stewardship and administration activities. Corporate expenses for the three months ended September 30, 2023 increased $0.9 million, or 15.0%, as compared to the same period in 2022 primarily due to higher compensation.

#### Stock-based Compensation

Stock-based compensation expense for three months ended September 30, 2023 increased $1.6 million, or 225.5%, as compared to the same period in 2022, due to grants during the fourth quarter of 2022 and the first quarter of 2023. For further discussion, see Note 10, *Stockholders' Equity,* in the Notes to Unaudited Consolidated Financial Statements.

#### Transaction and Business Realignment Costs

Transaction and business realignment costs for the three months ended September 30, 2023 decreased $0.8 million as compared to the same period in 2022, primarily due to the Cherry Creek acquisition during 2022.

#### Impairment of Intangible Assets, Investments, Goodwill and Long-Lived Assets

The Company recorded total impairment charges of $23.6 million related to FCC licenses in 24 of our 74 local markets during the three months ended September 30, 2023, as compared to impairment charges of $10.3 million to FCC licenses in eight of our 74 local markets in the same period a year ago. The impairment charges were primarily driven by an increase in the discount rate applied in the valuation of our FCC licenses due to an increase in the weighted average cost of capital, decreases in third-party forecasts of broadcast revenues and an increase in the estimate of initial capital costs due to rising prices. During the three months ended September 30, 2023, the Company concluded that the carrying amount of the Local Advertising reporting unit exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of $2.8 million. An interim impairment assessment was considered necessary as a result of declines in traditional broadcast revenue and the increase in the weighted average cost of capital. Following the non-cash goodwill impairment charge recognized during the three months ended September 30, 2023, the Local Advertising reporting unit had no goodwill as of September 30, 2023.

Unfavorable changes in key assumptions utilized in the impairment assessment of our FCC licenses may affect future testing results. For example, keeping all other assumptions constant, a 50-basis point increase in the weighted average cost of capital as of the date of our last quantitative assessment would cause the estimated fair values of our FCC licenses to decrease by $14.0 million which would have resulted in an additional impairment charge of $9.7 million as of September 30, 2023. Further, a 100-basis point decline in the long-term revenue growth rate would cause the estimated fair values of our FCC licenses to further decrease by $17.3 million which would have resulted in a further impairment charge of $13.4 million as of September 30, 2023. Assumptions used to estimate the fair value of our FCC licenses are also dependent upon the expected performance and growth of our traditional broadcast operations. In the event broadcast revenue experiences actual or anticipated declines, such declines will have a negative impact on the estimated fair value of our FCC licenses, and the Company could recognize additional impairment charges, which could be material.

For further discussion, see Note 6, *Goodwill and Other Intangible Assets,* in the Notes to Unaudited Consolidated Financial Statements.

During the three months ended September 30, 2023, the Company recorded an impairment charge of $4.4 million related to certain of its equity securities, which are measured at cost minus impairment. There were no impairment charges recorded for the three months ended September 30, 2022. For further discussion, see Note 7, *Investments,* in the Notes to Unaudited Consolidated Financial Statements.

#### Interest Expense, net

The following table illustrates the components of our interest expense, net for the periods indicated (in thousands):

|  | Three Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| 2026 Notes | $8,849 | $9,127 |
| Capital leases and other | 311 | 337 |
| Deferred financing costs | 619 | 504 |
| Interest income | (436) | (1) |
| **Interest expense, net** | **$9,343** | **$9,967** |

#### Gain on repurchase of debt

During the three months ended September 30, 2023, the Company voluntarily repurchased an aggregate $14.2 million principal amount of its 2026 Notes below par plus accrued interest. The Company wrote-off approximately $0.1 million of unamortized deferred financing costs, recognizing a total net gain of $0.4 million in connection with the voluntary repurchases of its 2026 Notes.

#### Provision for income taxes

We recognized a provision for income taxes of $17.5 million for the three months ended September 30, 2023, as compared to $2.3 million for the same period in 2022. Our effective tax rate for the three months ended September 30, 2023 and 2022 was approximately (91.9)% and 44.8%, respectively. The effective tax rate and income tax provision for the three months ended September 30, 2023 is primarily the result of the non-cash impairment charges recorded for the period and the corresponding increase in the valuation allowance for deferred tax assets.

Our effective tax rate may vary significantly from period to period and can be influenced by many factors. These factors include, but are not limited to, changes to statutory rates in the jurisdictions where we have operations and changes in the valuation of deferred tax assets and liabilities. The difference between the effective tax rate and the federal statutory rate of 21%, primarily relates to certain non-deductible items, state and local income taxes and the valuation allowance for deferred tax assets.

### Consolidated Results of Operations

### Nine months ended September 30, 2023 compared to nine months ended September 30, 2022

The following table summarizes our historical consolidated results of operations:

*($ in thousands)*

| Statement of Operations Data: | Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | $339,445 | $342,801 | $(3,356) | (1.0)% |
| Direct operating expenses, excluding depreciation, amortization, and stock-based compensation | 245,301 | 241,581 | 3,720 | 1.5% |
| Depreciation and amortization | 14,496 | 13,546 | 950 | 7.0% |
| Corporate expenses | 18,911 | 15,892 | 3,019 | 19.0% |
| Stock-based compensation | 6,228 | 2,430 | 3,798 | 156.3% |
| Transaction and business realignment costs | 764 | 2,280 | (1,516) | (66.5)% |
| Impairment of intangible assets, investments, goodwill and long-lived assets | 65,697 | 20,197 | 45,500 | 225.3% |
| Net gain on sale and retirement of assets | (703) | (338) | (365) | 108.0% |
| **Total operating costs and expenses** | **350,694** | **295,588** | **55,106** | **18.6%** |
| **Operating (loss) income** | **(11,249)** | **47,213** | **(58,462)** | **(123.8)%** |
| Other expense (income): |  |  |  |  |
| Interest expense, net | 28,215 | 30,038 | (1,823) | (6.1)% |
| Gain on repurchases of debt | (1,249) | (108) | (1,141) | \*\* |
| Other (income) expense, net | (6,451) | 1,886 | (8,337) | \*\* |
| **(Loss) income from operations before income taxes** | **(31,764)** | **15,397** | **(47,161)** | **(306.3)%** |
| Income tax provision | 9,380 | 4,939 | 4,441 | 89.9% |
| **Net (loss) income** | **$(41,144)** | **$10,458** | **$(51,602)** | **(493.4)%** |

\*\* not meaningful

#### Segment Results

The following table presents the Company's reportable segment net revenue and direct operating expenses for the nine months ended September 30, 2023 and 2022 (in thousands):

|  | Net Revenue Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change | Direct Operating Expenses Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Subscription Digital Marketing Solutions | $63,086 | $68,021 | $(4,935) | (7.3)% | $45,703 | $48,513 | $(2,810) | (5.8)% |
| Digital Advertising | 113,842 | 103,379 | 10,463 | 10.1% | 77,666 | 73,058 | 4,608 | 6.3% |
| Broadcast Advertising | 153,822 | 164,520 | (10,698) | (6.5)% | 113,858 | 113,875 | (17) | \*\* |
| Other | 8,695 | 6,881 | 1,814 | 26.4% | 8,074 | 6,135 | 1,939 | 31.6% |
| **Total** | **$339,445** | **$342,801** | **$(3,356)** | **(1.0)%** | **$245,301** | **$241,581** | **$3,720** | **1.5%** |

34

#### Net Revenue

Net revenue for the nine months ended September 30, 2023, decreased $3.4 million, or 1.0%, as compared to the same period in 2022. Our Digital Advertising net revenue for the nine months ended September 30, 2023, increased $10.5 million, or 10.1%, due to purchases of new advertising and our Other net revenue increased $1.8 million, or 26.4%, due to an increase in live events held during the period, as compared to the same period a year ago.

Our Broadcast Advertising net revenue decreased $10.7 million, or 6.5%, due to decreases in the purchase of new advertising by our clients. Our Subscription Digital Marketing Solutions net revenue for nine months ended September 30, 2023 decreased $4.9 million, or 7.3% as compared to the same period in 2022 due in part to a reduction of net subscribers.

#### Direct Operating Expenses

Direct operating expenses for the nine months ended September 30, 2023, increased by $3.7 million, or 1.5%, as compared to the same period in 2022. Our Digital Advertising direct operating expenses for nine months ended September 30, 2023 increased $4.6 million, or 6.3%, due to higher inventory and compensation costs due to the increase in revenue, and our Other direct operating expenses increased $1.9 million, or 31.6%, due to an increase in live events during the period, as compared to the same period a year ago.

These increases were offset by a decrease of $2.8 million, or 5.8% in our Subscription Digital Marketing Solutions direct operating expenses for nine months ended September 30, 2023, as compared to the same period in 2022. The decrease was primarily driven by decreases in promotional expenses and lower compensation. Our Broadcast Advertising direct operating expenses were essentially flat, driven by higher medical expenses and music license fees offset by lower compensation.

#### Corporate Expenses

Corporate expenses are of a general corporate nature or managed on a corporate basis. These costs (net of allocations to the business segments) primarily represent corporate stewardship and administration activities. Corporate expenses for the nine months ended September 30, 2023 increased $3.0 million, or 19.0%, as compared to the same period in 2022 primarily due to higher compensation.

#### Stock-based Compensation

Stock-based compensation expense for the nine months ended September 30, 2023, increased $3.8 million, or 156.3%, as compared to the same period in 2022 due to grants during the fourth quarter of 2022 and the first quarter of 2023. For further discussion, see Note 10, *Stockholders' Equity,* in the Notes to Unaudited Consolidated Financial Statements.

#### Transaction and Business Realignment Costs

Transaction and business realignment costs for the nine months ended September 30, 2023 decreased $1.5 million as compared to the same period in 2022, primarily due to the Cherry Creek acquisition during 2022.

#### Impairment of Intangible Assets, Investments, Goodwill and Long-Lived Assets

The Company recorded total impairment charges of $48.4 million related to FCC licenses in 32 of our 74 local markets during the nine months ended September 30, 2023, as compared to impairment charges of $15.5 million to FCC licenses in eight of our 74 local markets in the same period a year ago. The impairment charges were primarily driven by increases in the discount rate applied in the valuation of our FCC licenses due to an increase in the weighted average cost of capital, decreases in third-party forecasts of broadcast revenues and an increase in the estimate of initial capital costs due to rising prices. During the nine months ended September 30, 2023, the Company concluded that the carrying amount of the Local Advertising reporting unit exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of $2.8 million. An interim impairment assessment was considered necessary as a result of declines in traditional broadcast revenue and the increase in the weighted average cost of capital. Following the non-cash goodwill impairment charge recognized during the three months ended September 30, 2023, the Local Advertising reporting unit had no goodwill as of September 30, 2023. For further discussion, see Note 6, *Goodwill and Other Intangible Assets,* in the Notes to Unaudited Consolidated Financial Statements.

During the nine months ended September 30, 2023, the Company recorded an impairment charge of $13.6 million related to certain of its equity securities, which are measured at cost minus impairment. The Company recorded an impairment charge of $1.2 million related to one of our investments during nine months ended September 30, 2022. For further discussion, see Note 7, *Investments,* in the Notes to Unaudited Consolidated Financial Statements. During the nine months ended September 30, 2022, we recorded a $2.6 million impairment charge resulting from changes in the fair value of the Company's digital assets. For further discussion, see Note 6, *Goodwill and Other Intangible Assets,* in the Notes to Unaudited Consolidated Financial Statements.

#### Interest Expense, net

The following table illustrates the components of our interest expense, net for the periods indicated (in thousands):

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| 2026 Notes | $26,874 | $27,877 |
| Capital leases and other | 1,010 | 803 |
| Deferred financing costs | 1,567 | 1,359 |
| Interest income | (1,236) | (1) |
| **Interest expense, net** | **$28,215** | **$30,038** |

#### Gain on repurchase of debt

During the nine months ended September 30, 2023, the Company voluntarily repurchased an aggregate $27.1 million principal amount of its 2026 Notes below par plus accrued interest. The Company wrote-off approximately $0.3 million of unamortized deferred financing costs, recognizing a total net gain of $1.2 million in connection with the voluntary repurchases of its 2026 Notes.

#### Other expense (income), net

#### Realized Gain on Investment

During the nine months ended September 30, 2023, one of the Company's investments was acquired in a private transaction. The Company recognized a $5.2 million gain on the transaction, based on total consideration received in the amount of $6.0 million. See Note 7, *Investments*, in our Notes to Consolidated Financial Statements for further discussion related to this investment.

#### Sale of Digital Assets

During the nine months ended September 30, 2023, the Company sold its digital assets with a carrying value of $2.1 million, recognizing a gain on the sale of $0.8 million. For further discussion, see Note 6, *Goodwill and Other Intangible Assets,* in the Notes to Unaudited Consolidated Financial Statements.

#### Insurance Recoveries

During the nine months ended September 30, 2023, the Company recorded total insurance recoveries of $0.7 million related to hurricane damages incurred in the Shreveport, LA market.

#### Unrealized Loss on Investment

Other expense (income), net includes unrealized losses related to measuring the fair value of one of the Company's investees. During the nine months ended September 30, 2023 the Company recorded an unrealized net loss of $0.5 million, as compared $1.9 million during the nine months ended September 30, 2022. See Note 7, *Investments,* in our Notes to Consolidated Financial Statements for further discussion related to this investment.

#### Other

During the nine months ended September 30, 2023, the Company received approval for the reimbursement of $1.5 million for satellite dish equipment modifications required by the FCC related to the use of the 3.7-4.2 GHz band (C-band) spectrum.

#### Provision for income taxes

We recognized a provision for income taxes of $9.4 million for the nine months ended September 30, 2023, as compared to $4.9 million for the same period in 2022. Our effective tax rate for the period was approximately (29.5)% for the nine months ended September 30, 2023 as compared to 32.1% for the nine months ended September 30, 2022. The effective tax rate and income tax provision for the nine months ended September 30, 2023 is primarily the result of the non-cash impairment charges recorded for the period and the corresponding increase in the valuation allowance for deferred tax assets.

Our effective tax rate may vary significantly from period to period and can be influenced by many factors. These factors include, but are not limited to, changes to statutory rates in the jurisdictions where we have operations and changes in the valuation of deferred tax assets and liabilities. The difference between the effective tax rate and the federal statutory rate of 21.0%, primarily relates to certain non-deductible items, state and local income taxes and the valuation allowance for deferred tax assets.

### Liquidity and Capital Resources

The following table summarizes our change in cash and cash equivalents (in thousands):

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Cash and cash equivalents | $37,955 | $27,046 |
| Restricted cash | 501 | 495 |
| Cash provided by operating activities | 38,964 | 32,106 |
| Cash used in investing activities | (400) | (35,354) |
| Cash used in financing activities | (44,021) | (20,210) |
| **Net decrease in cash and cash equivalents and restricted cash** | **$(5,457)** | **$(23,458)** |

### Operating Activities

Net cash provided by operating activities was $39.0 million for the nine months ended September 30, 2023, as compared to $32.1 million for the same period in 2022. This increase was primarily due to lower prepaid expenses.

### Investing Activities

Net cash used in investing activities was $0.4 million for the nine months ended September 30, 2023 as compared to $35.4 million for the same period in 2022. The decrease in net cash used in investing activities was primarily due to the purchase of digital assets of $5.0 million and payment for the Cherry Creek acquisition of $18.4 million during 2022 that did not reoccur in the same period in 2023. During the nine months ended September 30, 2023, the Company received cash proceeds of $7.3 million and $3.0 million related to sales of assets and investment related transactions and digital assets, respectively.

### Financing Activities

Net cash used in financing activities was $44.0 million for the nine months ended September 30, 2023, as compared to $20.2 million for the same period in 2022. The increase in net cash used in financing activities was primarily due to $14.6 million paid for the repurchase of 1.5 million shares of Class C common stock from MSG National Properties, LLC, higher repurchases of 2026 Notes and dividend payments of $6.3 million in 2023, partially offset by an increase in proceeds from stock options exercised.

### Sources of Liquidity and Anticipated Cash Requirements

We fund our working capital requirements through a combination of cash flows from our operating, investing, and financing activities. Based on current and anticipated levels of operations and conditions in our markets and industry, we believe that our cash on hand and cash flows from our operating, investing, and financing activities will enable us to meet our working capital, capital expenditures, debt service, and other funding requirements for at least one year from the date of this report. Future capital requirements may be materially different than those currently planned in our budgeting and forecasting activities and depend on many factors, some of which are beyond our control. We have focused on and will continue to monitor our liquidity in response to current and future economic challenges and uncertainty.

As of September 30, 2023, we had $499.1 million of outstanding indebtedness, net of deferred financing costs of $4.5 million.

Based on the terms of our 2026 Notes, as of September 30, 2023, we expect our debt service requirements to be approximately $34.6 million over the next twelve months. See Note 8, *Long-Term Debt*, in our Notes to Consolidated Financial Statements for additional information related to our 2026 Notes.

As of September 30, 2023 we had $38.0 million of cash and cash equivalents, and $63.5 million of receivables from customers, which historically have had an average collection cycle of approximately 55 days. We had restricted cash of $0.5 million at September 30, 2023 and December 31, 2022, that was held as collateral in connection with certain agreements. From time to time, such restricted funds could be returned to us or we could be required to pledge additional cash.

On August 7, 2023, the board of directors approved a dividend of $0.1875 per share. The $3.1 million dividend was paid on November 1, 2023. On November 6, 2023, the board of directors approved a dividend of $0.1875 per share. The dividend will be paid to holders of record as of January 2, 2024 on February 1, 2024.

During the first half of 2023, the Company voluntarily repurchased an aggregate $27.1 million in principal amount of its 2026 Notes, below par.

On June 16, 2023, the Company repurchased 1.5 million shares of the Company’s Class C common stock in the aggregate amount of $14.6 million from MSG Entertainment Group, LLC ("MSG"). The shares were retired upon repurchase. Additionally, the Company repurchased approximately 0.2 million shares of Class A common stock for approximately $2.1 million, during the nine months ended September 30, 2023.

Our anticipated uses of cash in the near term include working capital needs, interest payments, dividend payments, other obligations, and capital expenditures. The Company believes that the cash generated by its operations should be sufficient to meet its liquidity needs for at least the next 12 months. However, our ability to fund our working capital needs, debt payments, dividend payments, other obligations, capital expenditures, and to comply with financial covenants under our debt agreements, depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions, increases or decreases in advertising spending, changes in the highly competitive industry in which we operate, which may be rapid, and other factors, many of which are beyond our control. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders, while the incurrence of debt financing would result in debt service obligations. Such debt instruments also could introduce covenants that might restrict our operations. We cannot assure you that we could obtain additional financing on favorable terms or at all.

Additionally, on a continuing basis, we evaluate and consider strategic acquisitions and divestitures to enhance our strategic and competitive position as well as our financial performance. Any future acquisitions, joint ventures or other similar transactions may require additional capital, which may not be available to us on acceptable terms, if at all.

We closely monitor the impact of capital and credit market conditions on our liquidity as it relates to our debt. We also routinely monitor the changes in the financial condition of our customers and the potential impact on our results of operations.

### Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements or transactions.

### Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our significant estimates, including those related to determining the fair value of assets and liabilities acquired in a business combination, impairment testing of intangible assets, valuation and impairment testing of long-lived tangible assets, the present value of leasing arrangements, share-based payment expense and the calculation of allowance for doubtful accounts and income taxes. We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the result of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our estimates may change, however, as new events occur and additional information is obtained, and any such changes will be recognized in the Consolidated Financial Statements. Actual results could differ from such estimates, and any such differences may be material to our financial statements.

We believe the accounting policies and estimates discussed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K reflects our more significant judgments and estimates used in the preparation of the Consolidated Financial Statements. There have been no material changes to the critical accounting policies and estimates as filed in such report.

### Recent Accounting Standards

For a discussion of accounting standards updates that have been adopted or will be adopted in the future, please refer to Note 2, *Summary of Significant Accounting Policies* of the Notes to Unaudited Consolidated Financial Statements included under Item 1.

## Controls and procedures

As filed, 2,582 characters.

#### Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), with the assistance of other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Our disclosure controls and procedures are intended to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Based on this review, our CEO and CFO have concluded that the disclosure controls and procedures were effective as of September 30, 2023.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect every misstatement. An evaluation of effectiveness is subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may decrease over time.

#### Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the three months ended September 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

#### Inherent Limitations on Effectiveness of Controls

There are inherent limitations in the effectiveness of any control system, including the potential for human error and the possible circumvention or overriding of controls and procedures. Additionally, judgments in decision-making can be faulty and breakdowns can occur because of a simple error or mistake. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Accordingly, the management of the Company, including its Chief Executive Officer and Chief Financial Officer, does not expect that the control system can prevent or detect all error or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies or procedures.

## Risk factors

As filed, 436 characters.

Please refer to Part I, Item 1A, “Risk Factors,” in our 2022 Annual Report on Form 10-K for information regarding known material risks that could affect our results of operations, financial condition and liquidity. In addition to these risks, other risks that we presently do not consider material, or other unknown risks, could materially adversely impact our business, financial condition and results of operations in a future period.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001499832-23-000109. Last ingested by Listed: Nov 4, 2026, 06:31 ET. No prices; not investment advice.