Townsquare Media, Inc.: Form 10-Q for the period ended Sep 30, 2024

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 2023 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 subscription 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 solutions business (“Townsquare Interactive”), providing a business management platform, website design, creation and hosting, search engine optimization, social platforms and online reputation management as well as other monthly digital services for 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 349 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 349 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, to a lesser extent, 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 and interest rates 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, 2024 as compared to the same period in 2023 are summarized below:

• Net revenue increased $0.2 million, or 0.2%, primarily driven by a $1.9 million increase in our Digital Advertising net revenue, partially offset by a $1.2 million decrease in our Subscription Digital Marketing Solutions net revenue and a $0.6 million decrease in our Other net revenue.
• Operating income increased $25.8 million for the three months ended September 30, 2024. The increase was primarily due to a $29.0 million decrease in non-cash impairment charges, partially offset by a $2.5 million increase in direct operating expenses.
• Broadcast Advertising reported operating income of $12.7 million for the three months ended September 30, 2024, as compared to an operating loss of $13.1 million for the three months ended September 30, 2023. The increase of $25.8 million is primarily due to a decrease in non-cash impairment charges of $26.5 million, partially offset by an increase in direct operating expenses of $1.1 million. The Digital Advertising segment reported operating income of $10.4 million for the three months ended September 30, 2024, which represents a decrease of $1.0 million as compared to operating income of $11.4 million for the same period in 2023. The decrease is primarily due to an increase of $2.8 million in direct operating expenses, partially offset by a $1.9 million increase in net revenue. Subscription Digital Marketing Solutions reported operating income of $4.4 million, a decrease of $0.9 million from the three months ended September 30, 2023 due to a $1.2 million decrease in net revenue, partially offset by a $0.5 million decrease in direct operating expenses.

Certain key financial developments in our business for the nine months ended September 30, 2024, as compared to the same period in 2023 are summarized below:

• Net revenue for the nine months ended September 30, 2024 as compared to the same period in 2023, decreased $6.3 million, or 1.8%, primarily driven by a $7.2 million decrease in our Subscription Digital Marketing Solutions net revenue and a $1.3 million decrease in Other net revenue. These decreases were partially offset by a $2.7 million increase in our Digital Advertising net revenue.
• Operating income increased $11.6 million for the nine months ended September 30, 2024, primarily due to a $29.4 million decrease in non-cash impairment charges, partially offset by a $7.8 million increase in stock-based compensation, $6.3 million decrease in net revenue, and a $2.9 million increase in transaction and business realignment costs.

Consolidated Results of Operations

Three months ended September 30, 2024 compared to three months ended September 30, 2023

The following table summarizes our historical consolidated results of operations:

($ in thousands)

** 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, 2024 and 2023 (in thousands):

30

Net Revenue

Net revenue for the three months ended September 30, 2024 increased $0.2 million, or 0.2%, as compared to the same period in 2023. Our Digital Advertising net revenue increased $1.9 million, or 4.7%, as compared to the same period in 2023 due to purchases of new advertising. Our Broadcast Advertising net revenue increased $0.2 million, or 0.3%, essentially flat. These increases were partially offset by a decrease in our Subscription Digital Marketing Solutions net revenue of $1.2 million, or 5.8%, due to a reduction in net subscribers as compared to the same period in 2023. Our Other net revenue decreased $0.6 million due to the elimination of low profit events in 2024.

Direct Operating Expenses

Direct operating expenses for the three months ended September 30, 2024 increased by $2.5 million, or 3.0%, as compared to the same period in 2023. Our Digital Advertising direct operating expenses increased $2.8 million, or 10.2%, due to higher inventory costs and bad debt. Our Broadcast Advertising direct operating expenses increased $1.1 million, or 2.8%, primarily driven by higher bad debt and employee benefits expenses. These increases were partially offset by a $0.8 million, or 39.9%, decrease in Other direct operating expenses due to a decrease in live events during the period and a $0.5 million, or 3.7%, decrease in Our Subscription Digital Marketing Solutions direct operating expenses due to lower compensation, partially offset by higher software costs, each as compared to the same period a year ago.

Stock-based Compensation

Stock-based compensation expense for three months ended September 30, 2024 increased $0.5 million, or 22.0%, as compared to the same period in 2023, primarily due to $0.9 million expense recognized for the stock bonus program, partially offset by stock option grants that vested prior to the third quarter of 2024. For further discussion, see Note 9, Stockholders' Equity, in the Notes to Unaudited Consolidated Financial Statements.

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

The Company incurred no impairment charges related to its FCC licenses during the three months ended September 30, 2024, as compared to impairment charges of $23.6 million in 24 of our 74 local markets in the same period a year ago.

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 100-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 $21.1 million which would have resulted in an additional impairment charge of $3.3 million as of September 30, 2024. 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 $10.5 million which would have resulted in a further impairment charge of $9.0 million as of September 30, 2024. Finally, a 100-basis point decline in operating profit margins would result in a decrease in the estimated fair values of our FCC licenses of $10.3 million which would result in an impairment charge of $9.0 million.

Assumptions used to estimate the fair value of our FCC licenses are also dependent upon the expected performance and growth of our traditional broadcast radio operations. In the event broadcast radio 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.

During the third quarter of 2024, in connection with an interim goodwill impairment assessment, the Company concluded that the carrying amount of the Live Events reporting unit exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charges of $1.7 million for the three months ended September 30, 2024. An interim impairment assessment was considered necessary as a result of continuing declines in revenue and profit. Following the non-cash goodwill impairment charge recognized during the three months ended September 30, 2024, the Live Events reporting unit had no goodwill as of September 30, 2024. 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. For further discussion, see Note 5, Goodwill and Other Intangible Assets, in the Notes to Unaudited Consolidated Financial Statements.

During the three months ended September 30, 2024, the Company recorded an impairment charge of $0.2 million related to one of its equity securities, which is measured at cost minus impairment. The Company recorded impairment charges of $4.4 million related to one of its investment securities during the same period in 2023. For further discussion, see Note 6, 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):

Provision (benefit) provision for income taxes

We recognized a benefit for income taxes of $5.1 million for the three months ended September 30, 2024, as compared to an income tax provision of $17.5 million for the same period in 2023. Our effective tax rate for the three months ended September 30, 2024 and 2023 was approximately 82.6% and 91.9%, respectively. The effective tax rate and income tax provision for the three months ended September 30, 2024 is driven by the valuation allowance for interest expense carryforwards resulting from non-cash impairment charges and an increase in certain non-deductible compensation costs recorded during the three months ended September 30, 2024.

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, 2024 compared to nine months ended September 30, 2023

The following table summarizes our historical consolidated results of operations:

($ in thousands)

** 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, 2024 and 2023 (in thousands):

33

Net Revenue

Net revenue for the nine months ended September 30, 2024, decreased $6.3 million, or 1.8%, as compared to the same period in 2023. Our Subscription Digital Marketing Solutions net revenue for the nine months ended September 30, 2024 decreased $7.2 million, or 11.5% as compared to the same period in 2023 due primarily to a reduction of net subscribers, as compared to the same period in 2023. Our Other net revenue decreased $1.3 million, or 15.3%, due to the elimination of low profit events in 2024. Our Broadcast Advertising net revenue decreased $0.4 million, or 0.3%, essentially flat. These decreases were offset by an increase in our Digital Advertising net revenue of $2.7 million, or 2.4%, due to purchases of new advertising during the nine months ended September 30, 2024.

Direct Operating Expenses

Direct operating expenses for the nine months ended September 30, 2024, increased by $0.9 million, or 0.4%, as compared to the same period in 2023. Our Digital Advertising direct operating expenses increased $10.0 million, or 12.9%, due to higher inventory and compensation costs, as well as an increase in bad debt. This increase was partially offset by a $5.5 million, or 11.9%, decreases in our Subscription Digital Marketing Solutions direct operating expenses due to lower compensation costs and bad debt; a $2.4 million, or 2.1%, decrease in our Broadcast Advertising direct operating expenses primarily driven by lower compensation costs; and a $1.2 million, or 15.2%, decrease in our Other direct operating expenses due to a decrease in live events during the period, each as compared to the same period in 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 nine months ended September 30, 2024, decreased $1.1 million, or 6.1%, as compared to the same period in 2023, primarily due to lower compensation.

Stock-based Compensation

Stock-based compensation expense for the nine months ended September 30, 2024, increased $7.8 million, or 125.8%, as compared to the same period in 2023 due to $4.6 million in expense recognized related to the cash settlement of options, $2.6 million of expense recognized for the stock bonus program and due to grants during the fourth quarter of 2023 and the first quarter of 2024. For further discussion, see Note 9, 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, 2024 increased $2.9 million as compared to the same period in 2023, primarily due to local market operational cost reduction efforts.

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

The Company recorded total impairment charges of $29.7 million related to FCC licenses in 26 of our 74 local markets during the nine months ended September 30, 2024, as compared to impairment charges of $48.4 million to FCC licenses in 32 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. For further discussion, see Note 5, Goodwill and Other Intangible Assets, in the Notes to Unaudited Consolidated Financial Statements.

During the third quarter of 2024, in connection with an interim goodwill impairment assessment, the Company concluded that the carrying amount of the Live Events reporting unit exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charges of $1.7 million for the three months ended September 30, 2024. During the second quarter of 2024, in connection with an interim goodwill impairment assessment, the Company concluded that the carrying amounts of the National Digital and Live Events reporting units exceeded their fair values, resulting in the recognition of a non-cash goodwill impairment charges of $1.8 million and $0.9 million, respectively. In total, the company recorded $4.4 million of non-cash goodwill impairment charges for the nine months ended September 30, 2024. Interim impairment assessments were considered necessary as a result of declines in revenues and profit and increases in the weighted average cost of capital. For further discussion, see Note 5, Goodwill and Other Intangible Assets, in the Notes to Unaudited Consolidated Financial Statements.

During the nine months ended September 30, 2024, the Company recorded total impairment charges of $1.8 million related to certain of its equity securities, which are measured at cost minus impairment. The Company recorded an impairment charge of $13.6 million related to certain of its investment securities during the same period in 2023. For further discussion, see Note 6, 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):

Gain on repurchases of debt

During the nine months ended September 30, 2024, the Company voluntarily repurchased an aggregate $24.7 million principal amount of its 2026 Notes below par, plus accrued interest. The Company wrote-off approximately $0.2 million of unamortized deferred financing costs, recognizing an immaterial net gain for the nine months ended September 30, 2024.

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

In February of 2024, one of the Company’s investees announced the completion of its acquisition. The Company recognized a $4.0 million gain on this transaction during the nine months ended September 30, 2024. 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.

Unrealized Gain on Investment

Other expense (income), net includes unrealized gains related to measuring the fair value of one of the Company's investees. During the nine months ended September 30, 2024 the Company recorded an unrealized net gain of $0.2 million, as compared to an unrealized loss of $0.5 million during the nine months ended September 30, 2023. See Note 6, Investments, in our Notes to Consolidated Financial Statements for further discussion related to this investment.

Insurance Recoveries

During the nine months ended September 30, 2024, the Company recorded total insurance recoveries of $0.3 million related to construction and flood damages in two of its local markets, as compared to insurance recoveries of $0.7 million during the nine months ended September 30, 2023 related to hurricane damages incurred in the Shreveport, LA market.

Provision for income taxes

We recognized a provision for income taxes of $13.9 million for the nine months ended September 30, 2024, as compared to $9.4 million for the same period in 2023. Our effective tax rate for the period was approximately 63.0% for the nine months ended September 30, 2024 as compared to 29.5% for the nine months ended September 30, 2023. The effective tax rate and income tax provision for the nine months ended September 30, 2024 is driven by the valuation allowance for interest expense carryforwards resulting from the non-cash impairment charges and an increase in certain non-deductible compensation costs recorded during the nine months ended September 30, 2024.

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):

Operating Activities

Net cash provided by operating activities was $20.6 million for the nine months ended September 30, 2024, as compared to $39.0 million for the same period in 2023. This decrease was primarily due to changes in working capital balances, particularly prepaid and accrued expenses.

Investing Activities

Net cash used in investing activities was $7.6 million for the nine months ended September 30, 2024 as compared to net cash used in investing activities of $0.4 million for the same period in 2023. The increase in net cash used in investing activities was primarily due to cash proceeds of $3.0 million related to the sales of digital assets in 2023 that did not reoccur in 2024, a $2.4 million increase in purchases of property and equipment and a $1.4 million decrease in proceeds from the sale of assets and investment related transactions.

Financing Activities

Net cash used in financing activities was $52.2 million for the nine months ended September 30, 2024, as compared to $44.0 million for the same period in 2023. The increase in net cash used in financing activities was primarily due to higher repurchases of common stock in the amount of $6.9 million and a $3.0 million increase in dividend payments for the nine months ended September 30, 2024, as compared to the same period a year ago. These increases were partially offset by a $1.8 million increase in proceeds from the exercise of stock options for the nine months ended September 30, 2024, as compared to the same period in 2023.

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, 2024, we had $476.7 million of outstanding indebtedness, net of deferred financing costs of $2.2 million.

Based on the terms of our 2026 Notes, as of September 30, 2024, we expect our debt service requirements to be approximately $32.9 million over the next twelve months. See Note 7, Long-Term Debt, in our Notes to Consolidated Financial Statements for additional information related to our 2026 Notes.

As of September 30, 2024 we had $21.8 million of cash and cash equivalents, and $57.7 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, 2024 and December 31, 2023, 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 July 22, 2024 the board of directors approved a dividend of $0.1975 per share. The $3.0 million dividend was paid on November 1, 2024. On October 28, 2024 the board of directors approved a dividend of $0.1975 per share. The dividend will be paid to holders of record as of January 21, 2025, on February 1, 2025.

On April 1, 2024, the Company repurchased 1.5 million shares of the Company’s Class A common stock in the aggregate amount of $14.6 million from MSG National Properties, LLC (“MSG”). The shares were retired upon repurchase. Additionally, the company repurchased 0.8 million shares of Class A common stock for approximately $8.9 million during the nine months ended September 30, 2024.

In late March of 2024, the Company launched a program that offered certain holders a cash settlement of options that were granted in July 2014 following the completion of the Company's initial public offering. These options were approaching their expiration date in July 2024. The cash settlement amount paid to each holder was indexed to the closing price of the Company's Class A common stock, as reported on the New York Stock Exchange consolidated tape, as of the date prior to each respective cash settlement election date less the respective option exercise price. A total of $11.5 million was paid in connection with the cash settlement of 3.2 million options during the nine months ended September 30, 2024.

During the nine months ended September 30, 2024, the Company voluntarily repurchased an aggregate $24.7 million in principal amount of its 2026 Notes, below par.

Our anticipated uses of cash in the near term include working capital needs, interest payments, dividend payments, share repurchases, 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 2023 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.

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, 2024.

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, 2024 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.

Please refer to Part I, Item 1A, “Risk Factors,” in our 2023 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.