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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ______
Commission file number 001-36558
Townsquare Media, Inc.
(Exact name of registrant as specified in its charter)
Delaware
27-1996555
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
One Manhattanville Road
Suite 202
Purchase,
New York
10577
(Address of Principal Executive Offices, including Zip Code)
(203) 861-0900
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.01 par value per shareTSQThe New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒   No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No ☒
As of May 5, 2021, the registrant had 16,326,189 outstanding shares of common stock consisting of: (i)14,674,552 shares of Class A common stock, par value $0.01 per share; (ii) 815,296 shares of Class B common stock, par value $0.01 per share; and (iii) 836,341 shares of Class C common stock, par value $0.01 per share.



TOWNSQUARE MEDIA, INC.

INDEX


1


PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
TOWNSQUARE MEDIA, INC.
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share and Per Share Data)
(unaudited)


March 31,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$20,118 $83,229 
Accounts receivable, net of allowance of $6,894 and $7,051, respectively
45,730 58,634 
Prepaid expenses and other current assets10,793 12,428 
Total current assets76,641 154,291 
Property and equipment, net109,500 111,871 
Intangible assets, net280,881 281,160 
Goodwill157,947 157,947 
Investments16,729 11,501 
Operating lease right-of-use assets47,569 48,290 
Other assets1,315 2,948 
Restricted cash494 494 
Total assets$691,076 $768,502 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$15,733 $9,056 
Deferred revenue
8,636 8,847 
Accrued compensation and benefits
7,890 12,462 
Accrued expenses and other current liabilities24,706 21,427 
Operating lease liabilities, current7,289 7,517 
Financing lease liabilities, current
65 64 
Accrued interest9,031 6,350 
Liabilities of discontinued operations 33 
Total current liabilities73,350 65,756 
Long-term debt, less current portion (net of deferred finance costs of $9,881 and $2,369, respectively)
540,119 543,428 
Deferred tax liability9,310 10,326 
Operating lease liability, net of current portion43,225 44,661 
Financing lease liabilities, net of current portion114 130 
Other long-term liabilities3,254 3,446 
Total liabilities669,372 667,747 
Stockholders’ equity:
Class A common stock, par value $0.01 per share; 300,000,000 shares authorized; 14,674,552 and 14,436,065 shares issued and outstanding, respectively
147 144 
Class B common stock, par value $0.01 per share; 50,000,000 shares authorized; 815,296 and 2,966,669 shares issued and outstanding, respectively
8 30 
Class C common stock, par value $0.01 per share; 50,000,000 shares authorized; 836,341 and 1,636,341 shares issued and outstanding, respectively
8 17 
    Total common stock163 191 
    Additional paid-in capital296,758 369,672 
    Accumulated deficit(279,151)(272,602)
    Non-controlling interest3,934 3,494 
Total stockholders’ equity21,704 100,755 
Total liabilities and stockholders’ equity$691,076 $768,502 

See Notes to Unaudited Consolidated Financial Statements
2


TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in Thousands, Except Per Share Data)
(unaudited)


Three Months Ended March 31,
20212020
Net revenue$88,761 $93,433 
Operating costs and expenses:
Direct operating expenses, excluding depreciation, amortization, and stock-based compensation64,527 71,550 
Depreciation and amortization4,729 5,284 
Corporate expenses4,134 6,390 
Stock-based compensation1,062 524 
Transaction costs4,715 1,027 
Business realignment costs190 1,711 
Impairment of long-lived and intangible assets 79,060 
Net loss (gain) on sale and retirement of assets593 (2)
    Total operating costs and expenses79,950 165,544 
    Operating income (loss)8,811 (72,111)
Other expense (income):
Interest expense, net10,155 8,129 
Loss on extinguishment and modification of debt5,997  
Other (income) expense, net(337)227 
  Loss from operations before tax(7,004)(80,467)
  Income tax benefit(895)(20,890)
Net loss$(6,109)$(59,577)
Net (loss) income attributable to:
     Controlling interests$(6,549)$(60,154)
     Non-controlling interests$440 $577 
Basic (loss) income per share:
    Attributable to common shares$(0.35)$(3.27)
    Attributable to participating shares$ $0.08 
Diluted loss per share$(0.35)$(3.27)
Weighted average shares outstanding:
     Basic attributable to common shares18,602 18,582 
     Basic attributable to participating shares6,823 8,978 
     Diluted18,602 18,582 
Cash dividend declared per share$ $0.075 

See Notes to Unaudited Consolidated Financial Statements
3


TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in Thousands, Except Share Data)
(unaudited)
Shares of Common Stock
Class AClass BClass C
SharesSharesSharesWarrantsCommon
Stock
Additional
Paid-in Capital
Accumulated DeficitNon-
Controlling
Interest
Total
Balance at January 1, 202114,436,065 2,966,669 1,636,341 8,977,676 $191 $369,672 $(272,602)$3,494 $100,755 
Net (loss) income— — — — — — (6,549)440 (6,109)
Repurchase of securities (1)
(1,595,224)(2,151,373)— (8,814,980)(38)(81,912)— — (81,950)
Stock-based compensation— — — — — 1,062 — — 1,062 
Common stock issued under exercise of stock options1,022,283 — — — 10 7,936 — — 7,946 
Issuance of restricted stock11,428 — — — — — — — — 
Conversion of common shares800,000 — (800,000)— — — — — — 
Balance at March 31, 202114,674,552 815,296 836,341 162,696 $163 $296,758 $(279,151)$3,934 $21,704 

(1) On March 9, 2021, the Company repurchased all outstanding securities held by certain affiliates of Oaktree Capital Management L.P. (“Oaktree”), including 1,595,224 shares of Class A Common Stock, 2,151,373 shares of Class B Common Stock and 8,814,980 warrants. For further discussion on the repurchase, see Note 9, Stockholders' Equity, in our Notes to Consolidated Financial Statements.

Shares of Common Stock
Class AClass BClass C
SharesSharesSharesWarrantsCommon
Stock
Additional
Paid-in Capital
Accumulated
Deficit
Non-
Controlling
Interest
Total
Balance at January 1, 202014,314,092 3,011,634 1,636,341 8,977,676 $190 $367,540 $(188,034)$2,740 $182,436 
Net (loss) income— — — — — — (60,154)577 (59,577)
Dividend declared— — — — — — (2,098)— (2,098)
Stock-based compensation— — — — — 524 — — 524 
Common stock issued under exercise of stock options5,646 — — — — 49 — — 49 
Issuance of restricted stock10,482 — — — — — — — — 
Cash distributions to non-controlling interests— — — — — — — (1)(1)
Balance at March 31, 202014,330,220 3,011,634 1,636,341 8,977,676 $190 $368,113 $(250,286)$3,316 $121,333 

See Notes to Unaudited Consolidated Financial Statements
4


TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Thousands)
(unaudited)
Three Months Ended March 31,
20212020
Cash flows from operating activities:
Net loss$(6,109)$(59,577)
Adjustments to reconcile loss from continuing operations to net cash flows from operating activities
     Depreciation and amortization4,729 5,284 
     Amortization of deferred financing costs328 379 
     Lease related amortization2,502 2,759 
     Net deferred taxes and other(1,016)(21,010)
     Provision for doubtful accounts350 802 
     Stock-based compensation expense1,062 524 
     Loss on extinguishment and modification of debt5,997  
     Trade activity, net(3,652)(2,410)
     Impairment of long-lived and intangible assets 79,060 
     Net loss (gain) on sale and retirement of assets593 (2)
     Gain on insurance recoveries(225) 
     Gain on lease settlement(233) 
     Other3  
Changes in assets and liabilities, net of acquisitions:
   Accounts receivable12,212 8,732 
   Prepaid expenses and other assets3,115 (481)
   Accounts payable6,461 (1,238)
   Accrued expenses(5,992)(5,009)
   Accrued interest2,681 4,572 
   Other long-term liabilities(3,356)(2,875)
Net cash provided by operating activities - continuing operations 19,450 9,510 
      Net cash used in operating activities - discontinued operations(33)(175)
Net cash provided by operating activities19,417 9,335 
Cash flows from investing activities:
   Purchase of property and equipment(1,860)(5,626)
   Purchase of investments(128)(400)
   Proceeds from insurance recoveries225  
   Proceeds from sale of assets316 2 
Net cash used in investing activities(1,447)(6,024)
Cash flows from financing activities:
   Repayment of term loans(272,381) 
Repurchase of 2023 Notes (273,416) 
Proceeds from the issuance of 2026 Notes550,000  
Prepayment fee on 2023 Notes(4,443) 
   Deferred financing costs(8,133) 
   Repurchase of Oaktree securities(80,394) 
Transaction costs related to securities repurchase(242) 
Borrowings under the revolving credit facility 50,000 
   Dividend payments (2,067)
   Proceeds from stock options exercised7,946 49 
   Cash distribution to non-controlling interests (1)
   Repayments of capitalized obligations(18)(10)
      Net cash (used in) provided by financing activities(81,081)47,971 
  Cash and cash equivalents and restricted cash:
      Net (decrease) increase in cash, cash equivalents and restricted cash(63,111)51,282 
      Beginning of period83,723 85,161 
      End of period$20,612 $136,443 
5


TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in Thousands)
(unaudited)
Three Months Ended March 31,
20212020
Supplemental Disclosure of Cash Flow Information:
   Cash payments:
Interest$7,150 $3,437 
Income taxes70  
Supplemental Disclosure of Non-cash Activities:
Dividends declared, but not paid during the period$ $2,098 
Investments acquired in exchange for advertising (1)
5,100 1,400 
Property and equipment acquired in exchange for advertising (1)
912  
Accrued capital expenditures283 892 
Accrued financing fees1,043  
Accrued transaction costs for securities repurchased1,312  
Supplemental Disclosure of Cash Flow Information relating to Leases:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$2,773 $2,701 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
$1,067 $1,156 
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents$20,118 $135,949 
Restricted cash494 494 
$20,612 $136,443 

(1) Represents total advertising services to be provided by the Company in exchange for equity interests and property and equipment acquired during the three months ended March 31, 2021. As the advertising services are performed, revenue related to the services provided is reflected as a component of Trade activity, net within net cash provided by operating activities. As of March 31, 2021, $3.0 million in advertising services remain to be provided in future periods in exchange for equity interests acquired during the three months ended March 31, 2021. Refer to Note 6, Investments, in the accompanying Notes to Consolidated Financial Statements for additional information related to our investments.


See Notes to Unaudited Consolidated Financial Statements

6


TOWNSQUARE MEDIA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Basis of Presentation

Description of the Business

Townsquare Media, Inc. (together with its consolidated subsidiaries, except as the context may otherwise require, "we," "us," "our," "Company," or "Townsquare") is a community-focused digital media, digital marketing solutions and radio company focused outside the Top 50 markets in the U.S. Our assets, as of March 31, 2021, include Townsquare Interactive, a digital marketing services subscription business providing web sites, search engine optimization, social platforms and online reputation management for approximately 23,600 small to medium sized businesses; Townsquare IGNITE, a proprietary digital programmatic advertising technology with an in-house demand and data management platform; and Townsquare Media, our portfolio of 322 local terrestrial radio stations in 67 cities with corresponding local news and entertainment websites and apps including legendary brands such as WYRK.com, WJON.com, and NJ101.5.com along with a network of national music brands including XXLmag.com, TasteofCountry.com, UltimateClassicRock.com and Loudwire.com.

The COVID-19 pandemic has materially and adversely impacted the U.S. economy and financial markets, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors, and there continues to be uncertainty as to the timing of stabilization and recovery. The effects of the COVID-19 pandemic began to impact our operations in early March 2020, and included significant advertising cancellations and material declines in the purchase of new advertising by our clients. Declines in forecasted traditional broadcast revenue in the markets in which we operate, the impact of the COVID-19 pandemic on market and economic conditions, and the corresponding impacts to our risk premium, contributed to approximately $107.1 million impairments to the carrying values of our FCC license intangible assets throughout the year ended December 31, 2020, of which $78.4 million was recognized during the three months ended March 31, 2020. Additionally, we canceled nearly all live events beginning in March 2020. At the end of the first quarter of 2020, we reduced our workforce through the termination or layoff of approximately 135 full-time employees.

During the three months ended March 31, 2021 we experienced a recovery in advertising revenue, following the sequential improvements observed during each of the third and fourth quarters of 2020, however, revenue continues to remain below the levels we experienced during the same period a year ago, prior to the COVID-19 pandemic. In the first quarter of 2021, we continued to maintain precautionary measures that were instituted in 2020 to address the potential impact to our consolidated financial position, consolidated results of operations, and liquidity, including wage reduction efforts such as the temporary suspension of the Company’s match on employee contributions to the Company’s defined contribution plan, the deferral of the payment of certain payroll taxes until December 31, 2021 and 2022 under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and controlling non-essential capital expenditures. Additionally, our board of directors determined to cease payment of quarterly cash dividends, following the payment of our 2020 first quarter dividend of $2.1 million, paid on May 15, 2020.

The full extent of the COVID-19 pandemic impact will depend on future actions and outcomes, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the short-term and long-term economic impact of the outbreak (including the continued effect on advertising activity, consumer discretionary spending and our employees in the markets in which we operate), further actions taken to mitigate the impact of the pandemic, and the pace of continued economic and financial market recovery when the COVID-19 pandemic subsides, among others.

Basis of Presentation

The accompanying Unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Annual Report on Form 10-K"). The accompanying unaudited interim Consolidated Financial Statements include the consolidated accounts of the Company and its wholly-owned subsidiaries, with all significant intercompany balances and transactions eliminated in consolidation. These financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. All adjustments (consisting only of normal, recurring
7


adjustments) necessary for a fair presentation of results of operations and financial condition as of the end of the interim periods have been included. The results of operations and cash flows for the three months ended March 31, 2021 and the Company’s financial condition as of such date are not necessarily indicative of the results of operations or cash flows that can be expected for, or the Company’s financial condition as of, any other interim period or for the fiscal year ending December 31, 2021. The Consolidated Balance Sheet as of December 31, 2020 is derived from the audited Consolidated Financial Statements at that date.

Use of 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, the Company evaluates its significant estimates, including those related to assumptions used in 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 and investments, the present value of leasing arrangements, share-based payment expense and the calculation of allowance for doubtful accounts and income taxes. The Company bases its 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.

Actual amounts and results may differ materially from these estimates under different assumptions or conditions.

Note 2. Summary of Significant Accounting Policies

Except as stated below, there have been no significant changes in the Company’s accounting policies since December 31, 2020. For the Company's detailed accounting policies please refer to the Consolidated Financial Statements and related notes thereto included in the Company's 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 16, 2021.

Recently Adopted Accounting Standards

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, which clarifies certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Currently, the Company accounts for its equity securities under the measurement alternative election of ASC 321, whereby the Company can elect to measure an equity security without a readily determinable fair value, that does not qualify for the practical expedient to estimate fair value (net asset value), at its cost minus impairment, if any. The ASU also allows the use of a qualitative assessment when analyzing impairment of equity securities without readily determinable fair values. The Company adopted this standard effective January 1, 2021, which did not have a material impact on the Company’s Consolidated Financial Statements.

In December 2019, the FASB issued ASU 2019-12, Accounting Standards Update 2019-12-Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted this standard effective January 1, 2021, which did not have a material impact on the Company’s Consolidated Financial Statements.

Recently Issued Standards That Have Not Yet Been Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which adds a new Topic 326 to the Codification and removes the thresholds that
8


companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. The guidance will remove all recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the company expects to collect over the instrument's contractual life. The new guidance is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption, either of the entire standard or only the provisions that eliminate or modify requirements, is permitted. The Company expects to adopt the new guidance in the first quarter of 2023. The Company is continuing to assess the impact on its Consolidated Financial Statements, if any.

Note 3. Revenue Recognition

The following tables present a disaggregation of our revenue by reporting segment and revenue from political sources and all other sources (in thousands) for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31, 2021
AdvertisingTownsquare InteractiveLive EventsTotal
Net Revenue (ex Political)$69,318 $18,997 $7 $88,322 
Political439   439 
Net Revenue$69,757 $18,997 $7 $88,761 
Three Months Ended March 31, 2020
AdvertisingTownsquare InteractiveLive EventsTotal
Net Revenue (ex Political)$73,208 $16,527 $2,370 $92,105 
Political1,328   1,328 
Net Revenue$74,536 $16,527 $2,370 $93,433 

Revenue from contracts with customers is recognized as an obligation until the terms of a customer contract are satisfied; generally, this occurs with the transfer of control as we satisfy contractual performance obligations over time. Our contractual performance obligations include the broadcast of commercials on our owned and operated radio stations, digital sales of internet-based advertising campaigns, digital marketing solutions, and the operation of live events. Revenue is measured at contract inception as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Our contracts are at a fixed price at inception and do not include any variable consideration or financing components by normal course of business practice. Sales, value add, and other taxes that are collected concurrently with revenue producing activities are excluded from revenue.

The primary sources of net revenue are the sale of advertising on our radio stations, owned and operated websites, third party websites, radio stations’ online streams, and mobile applications. We offer precision customer targeting solutions to advertisers through Townsquare Ignite, our digital programmatic advertising platform. We also offer on a subscription basis under the brand name Townsquare Interactive, digital marketing solutions to small and mid-sized local and regional businesses in small and mid-sized markets across the United States, including the markets in which we operate radio stations. In addition, we offer a diverse range of live events which we create, promote, and produce. These include concerts, expositions and other experiential events within and beyond our markets. Our live events also generate net revenue through the sale of sponsorships, food and other concessions, merchandise and other ancillary products and services.

Political net revenue includes the sale of advertising on our owned and operated radio stations from contracts with political advertisers. Contracted performance obligations under political contracts consist of the broadcast of advertisements across our locally owned and operated radio stations. Management views political revenue separately based on the episodic nature of election cycles and local issues calendars.

Our net revenue varies throughout the year. Historically our first calendar quarter produces the lowest net revenue for the year, as advertising expenditures generally decline following the winter holidays. However, due to the COVID-19 pandemic, the seasonality of our net revenue for the year ended December 31, 2020 was materially impacted and our second quarter produced our lowest net revenue for 2020. During even-numbered years, net revenue generally includes increased advertising expenditures by political candidates, political parties and special interest groups. Political spending is typically
9


highest during the fourth quarter. Our operating results in any period may be affected by incurring advertising and promotion expenses that typically do not have an effect on net revenue generation until future periods, if at all.

Net revenue for broadcast commercials and digital advertisements are recognized as the commercials are broadcast and the contractual performance obligations for Townsquare services are satisfied. We measure progress towards the satisfaction of our contractual performance obligations via the output produced in accordance with the contractual arrangement. We recognize the associated contractual revenue as the delivery takes place and the right to invoice for services performed is met.

Our advertising contracts are short-term (less than one year) and payment terms are generally net 30-60 days for local customer contracts and net 60-90 days for national agency customer contracts. Our billing practice is to invoice customers on a monthly basis for services delivered to date (representing the right to invoice). Our contractual arrangements do not include rights of return and do not include any significant judgments by nature of the products and services.

Net revenue from digital subscription-based contractual performance obligations is recognized ratably over time as our performance obligations are satisfied. Subscription-based service fees are typically billed in advance of the month of service at a fixed monthly fee that is contractually agreed upon at contract inception. The measure of progress in such arrangements is the number of days of successful delivery of the contracted service.

Live events net revenue is recognized as events are conducted and our contractual performance obligations are satisfied. Our live events include mostly single day events, but some are multi-day in duration. We measure progress towards the satisfaction of contractual performance obligations on a daily basis, measured by the successful delivery of the event and honoring customer admissions and vendor event commitments. Live event ticket purchase prices are due at the point of purchase and are nonrefundable. Live event tickets are often sold in advance of the events; in the case of advanced ticket sales, we defer the recognition of consideration received until we satisfy the future performance obligation. Live event contractual arrangements do not include any variable consideration, financing components, or significant judgments.

For all customer contracts, we evaluate whether we are the principal (i.e., report revenue on a gross basis) or the agent (i.e., report revenue on a net basis). Generally, we report revenue for advertising placed on Townsquare properties on a gross basis (the amount billed to our customers is recorded as revenue, and the amount paid to our publishers is recorded as a cost of revenue). We are the principal because we control the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory, being primarily responsible to our customers, having discretion in establishing pricing, or a combination of these factors. We also generate revenue through agency relationships in which revenue is reported net of agency commissions. Agency commissions are calculated based on a stated percentage applied to gross billing revenue for advertisers that use agencies.

No impairment losses arose from any contracts with customers during the three months ended March 31, 2021 and 2020.

The following tables provides information about receivables, contract assets and contract liabilities from contracts with customers (in thousands):

March 31,
2021
December 31, 2020
Receivables$45,730 $58,634 
Short-term contract liabilities (deferred revenue)$8,636 $8,847 
Contract Acquisition Costs$4,983 $4,824 

March 31,
2020
December 31, 2019
Receivables$57,944 $67,463 
Short-term contract liabilities (deferred revenue)$8,795 $8,086 
Contract Acquisition Costs$4,186 $4,037 

We receive payments from customers based upon contractual billing schedules; accounts receivable are recognized when the right to consideration becomes unconditional. Payment terms vary by the type and location of our customers and the
10


products or services offered. Payment terms for amounts invoiced are typically net 30-60 days. The term between invoicing and when payment is due is not significant.

We record contract liabilities as deferred revenue in the accompanying consolidated balance sheets when cash payments are received or due in advance of satisfying our performance obligations. Our contract liabilities include cash payments received or due in advance and digital subscriptions in which payment is received in advance of the service and month. These contract liabilities are recognized as revenue as the related performance obligations are satisfied. As of March 31, 2021, and December 31, 2020, the balance in the contract liabilities was $8.6 million and $8.8 million, respectively. The decrease in the contract liabilities balance at March 31, 2021 is primarily driven by $5.8 million of recognized revenue, offset by cash payments received or due in advance of satisfying our performance obligations for the three months ended March 31, 2021. For the three months ended March 31, 2020, we recognized $5.9 million that was previously included in our deferred revenue balance. No significant changes in the time frame of the satisfaction of contract liabilities have occurred during the three months ended March 31, 2021.

We capitalize certain contract acquisition costs consisting primarily of commissions paid when contracts are signed (previously such costs were expensed as incurred). Our capitalized contract acquisition costs include amounts related to sales commissions paid for signed contracts with perceived durations exceeding one year. For these contracts, we defer the related sales commission costs and amortize such costs to expense in a manner that is consistent with how the related revenue is recognized over the duration of the related contracts. We have evaluated the average customer contract duration (initial term and any renewals) to determine the appropriate amortization period for these contractual arrangements. For contracts with a duration of less than one year, we expense these costs when incurred. Deferred commissions are recognized in prepaid expenses and other current assets in the accompanying consolidated balance sheets. As of March 31, 2021 and December 31, 2020, we had a balance of $5.0 million and $4.8 million, respectively, in deferred costs and recognized $0.9 million and $0.8 million of amortization for the three months ended March 31, 2021 and 2020, respectively. No impairment losses have been recognized or changes made to the time frame for performance of the obligations related to deferred contract assets during the three months ended March 31, 2021and 2020, respectively.

Arrangements with Multiple Performance Obligations

In contracts with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligations are distinct within the context of the contract at contract inception. When multiple performance obligations are identified, we identify how control transfers to the customer for each distinct contract obligation and determine the period when the obligations are satisfied. If obligations are satisfied in the same period, no allocation of revenue is deemed to be necessary. In the event performance obligations within a bundled contract do not run concurrently, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or by using expected cost-plus margins. Performance obligations that are not distinct at contract inception are combined.

Practical Expedients and Exemptions

We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed as amounts related to those performance obligations with expected durations of greater than one year are at a fixed price per unit and do not include any upfront or minimum payments requiring any estimation or allocation of revenue.    

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Note 4. Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

March 31, 2021December 31, 2020
Land and improvements
$20,626 $21,512 
Buildings and leasehold improvements
54,913 54,471 
Broadcast equipment
91,037 90,324 
Computer and office equipment
20,504 20,480 
Furniture and fixtures
21,785 21,657 
Transportation equipment
20,206 19,918 
Software development costs
31,771 30,721 
Total property and equipment, gross
260,842 259,083 
Less accumulated depreciation and amortization
(151,342)(147,212)
Total property and equipment, net
$109,500 $111,871 

Depreciation and amortization expense for property and equipment was $4.4 million and $5.1 million for the three months ended March 31, 2021 and 2020, respectively. There were no impairment charges related to long-lived assets for the three months ended March 31, 2021 and $0.6 million in impairment charges related to long-lived assets for the three months ended March 31, 2020 within the San Angelo, TX market. During the three months ended March 31, 2021 the Company sold a portion of land in Portsmouth, NH, recognizing a $0.6 million net loss on sale. The Company had no material right of use assets related to its finance leases as of March 31, 2021 and December 31, 2020.

Note 5. Goodwill and Other Intangible Assets

Indefinite-lived assets consist of FCC broadcast licenses and goodwill. For goodwill impairment testing, the Company has selected December 31st as the annual testing date. In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. As of December 31, 2020, the fair values of our National Digital, Townsquare Ignite, Analytical Services, Townsquare Interactive and Live Events reporting units were in excess of their respective carrying values by approximately 138%, 231%, 795%, 300% and 118%, respectively. The local advertising businesses reporting unit had no goodwill as of December 31, 2020.

The Company considered whether any events have occurred or circumstances have changed from the last quantitative analysis performed as of December 31, 2020 that would indicate that the fair value of the Company's reporting units may be below their carrying amounts. Based on such analysis, the Company determined that there have been no indicators that the fair value of its reporting units may be below their carrying amounts as of March 31, 2021.

There were no changes in the carrying value of the Company's goodwill during the three months ended March 31, 2021.

The following table represents goodwill by segment (in thousands):

AdvertisingTownsquare
Interactive
Live EventsTotal
Balance at March 31, 2021
$76,964 $77,000 $3,983 $157,947 

FCC licenses represent a substantial portion of the Company’s total assets. The FCC licenses are renewable in the ordinary course of business, generally for a maximum of eight years. The fair value of FCC licenses is primarily dependent on the future cash flows of the radio markets and other assumptions, including, but not limited to, forecasted revenue growth rates, profit margins and a risk-adjusted discount rate.

The Company evaluates its FCC licenses for impairment annually or more frequently if events or changes in circumstances indicate that the assets might be impaired. Due to continued declines in forecasted traditional broadcast
12


revenue in the markets in which we operate in, as they begin to recover from the COVID-19 pandemic, the Company quantitatively evaluated the fair value of its FCC licenses at March 31, 2021.

The key assumptions used in applying the direct valuation method are summarized as follows:

March 31, 2021
Discount Rate10.1%
Long-term Revenue Growth Rate0.0%
LowHigh
Mature Market Share*20.5 %96.0 %
Operating Profit Margin18.0 %48.0 %

* Market share assumption used when reliable third-party data is available. Otherwise, Company results and forecasts are utilized.

Based on the results of the impairment assessment of our FCC licenses as of March 31, 2021 we had no impairment charge for the three months ended March 31, 2021.

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 would cause the estimated fair values of our FCC licenses to decrease by $55.1 million as of March 31, 2021, which would have resulted in an impairment charge of $5.6 million for the three months ended March 31, 2021. 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 that our broadcast revenue experiences further actual or anticipated declines, including as a result of the COVID-19 pandemic, 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.

The following tables present details of intangible assets as of March 31, 2021 and December 31, 2020, respectively (in thousands):

March 31, 2021
Weighted Average Useful Life (in Years)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Intangible Assets:
FCC licenses
Indefinite$277,013 $— $277,013 
Customer and advertising relationships
26,540 (4,956)1,584 
Leasehold interests
111,085 (978)107 
Tower space
2454 (441)13 
Trademarks
92,761 (1,261)1,500 
Software licenses
3853 (189)664 
Total
$288,706 $(7,825)$280,881 

13


December 31, 2020
Weighted Average Useful Life (in Years)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Intangible Assets:
FCC licenses
Indefinite$277,013 $— $277,013 
Customer and advertising relationships
36,540 (4,793)1,747 
Leasehold interests
111,085 (970)115 
Tower space
3454 (439)15 
Trademarks
92,761 (1,218)1,543 
Other intangibles
3853 (126)727 
Total
$288,706 $(7,546)$281,160 

Amortization expense for definite-lived intangible assets was $0.3 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

Estimated future amortization expense for each of the five succeeding fiscal years and thereafter as of March 31, 2021 is as follows (in thousands):

2021 (remainder)$836 
20221,112 
2023848 
2024179 
2025179 
Thereafter 714
$3,868 

Note 6. Investments

Long-term investments consist of minority holdings in companies that management believes are synergistic with Townsquare. As management does not exercise significant control over operating and financial policies of the investees, the investments are not consolidated or accounted for under the equity method of accounting. The initial valuation of the equity securities was based upon an estimate of market value at the time of investment or upon a combination of a valuation analysis using observable inputs categorized as Level 2 and performing a discounted cash flows analysis, using unobservable inputs categorized as Level 3 within the ASC 820 framework. In accordance with ASC 321, Investments - Equity Securities, the Company measures its equity securities at cost minus impairment, as their fair values are not readily determinable and the investments do not qualify for the net asset value per share practical expedient. The Company monitors its investments for any subsequent observable price changes in orderly transactions for the identical or a similar investment of the same investee, at which time the Company would adjust the then current carrying values of the related investment. Additionally, the Company evaluates its investments for any indicators of impairment.

During the three months ended March 31, 2021, the Company made investments in one business for $1.0 million and acquired an additional $4.2 million interest in an existing investee. There were no impairment charges or fair value adjustments recorded for the three months ended March 31, 2021 and 2020, respectively.

14


Note 7. Long-Term Debt

Total debt outstanding is summarized as follows (in thousands):

March 31,
2021
December 31,
2020
2026 Notes$550,000 $ 
2023 Notes 273,416 
Term Loans 272,381 
Debt before deferred financing costs$550,000 $545,797 
Deferred financing costs(9,881)(2,369)
Total long-term debt$540,119 $543,428 


On January 6, 2021, the Company completed the private offering and sale of $550.0 million aggregate principal amount of 6.875% senior secured notes due 2026 (the “2026 Notes”) at an issue price of 100.0%. The net proceeds from the 2026 Notes, together with cash on hand, were used to repay: (i) all outstanding borrowings under the 2015 senior secured credit facility, which included a seven year $275.0 million term loan facility (the "Term Loans") with $272.4 million principal amount outstanding and $2.1 million in accrued interest, (ii) redeem all of the outstanding $273.4 million of principal amount of 6.5% Unsecured Senior Notes due in 2023 (the “2023 Notes”), a prepayment premium of $4.4 million, and $5.1 million in accrued interest, and (iii) fees and expenses related thereto. The Company also terminated its revolving credit facility and all other obligations thereunder were repaid effective January 6, 2021. The 2026 Notes bear interest at a rate of 6.875% and mature on February 1, 2026. Interest on the 2026 Notes is payable semi-annually in cash in arrears on February 1 and August 1 of each year, commencing on August 1, 2021.

The Company incurred approximately $13.6 million of fees and expenses in connection with the issuance of the 2026 Notes, of which approximately $9.4 million were capitalized and are being amortized over the remaining term of the 2026 Notes using the effective interest method. The Company recognized a $4.9 million loss on the early extinguishment of debt during the three months ended March 31, 2021, comprised of a $3.1 million portion of the 2023 Notes prepayment premium and the write-off of $1.8 million of unamortized debt discount and deferred financing fees previously capitalized in connection with the senior secured credit facility and 2023 Notes. The Company recognized a $1.1 million loss on the modification of Terms Loans and 2023 Notes, which is primarily related to a portion of fees and expenses incurred related to the issuance of the 2026 Notes.

The Company’s obligations under the 2026 Notes are guaranteed by substantially all of its subsidiaries and assets. The Company may redeem the 2026 Notes in whole or in part, at its option, at a redemption price equal to 100% of the principal amount, subject to the following redemption prices, plus accrued and unpaid interest, if any to, but excluding, the redemption date:

PeriodPrice
Prior to February 1, 2023at an applicable make-whole premium
Beginning February 1, 2023103.438 %
Beginning February 1, 2024101.719 %
Beginning February 1, 2025 and thereafter100.000 %
At any time prior to February 1, 2023, the Company may redeem up to 40% of the aggregate principal amount of the 2026 Notes with the net cash proceeds of one or more equity offerings, at a price equal to 106.875% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Change of Control

If the Company experiences certain change of control events, holders of the 2026 Notes may require the Company to repurchase all or part of their 2026 Notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
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Certain Covenants

The 2026 Notes indenture contains restrictive covenants that limit the ability of the Company and its restricted subsidiaries to, among other things:

incur additional indebtedness;
declare or pay dividends, redeem stock or make other distributions to stockholders;
make investments; create liens or use assets as security in other transactions;
merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets;
enter into transactions with affiliates;
sell or transfer certain assets; and
agree to certain restrictions on the ability of restricted subsidiaries to make payments to the Company.

Certain of these covenants will be suspended if the 2026 Notes are assigned an investment grade rating by Standard & Poor’s Investors Ratings Services, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. and no event of default has occurred and is continuing.

The Company was in compliance with its covenants under the 2026 Notes indenture as of March 31, 2021.

As of March 31, 2021, based on available market information, the estimated fair value of the 2026 Notes was $583.7 million. The Company used Level 2 measurements under the fair value measurement hierarchy established under Fair Value Measurement (Topic 820).

Annual maturities of the Company's long-term debt as of March 31, 2021 are as follows (in thousands):

2021 (remainder)$ 
2022 
2023 
2024 
2025 
2026550,000 
$550,000 

Note 8. Income Taxes
The Company's effective tax rate for the three months ended March 31, 2021 and 2020 was approximately 12.8% and 26.0%, respectively. The decrease in the effective tax rate is primarily driven by discrete items for the period, including amounts due under the terms of the Settlement Agreement, as more fully discussed in Note 9, Stockholders' Equity, changes in the valuation allowance and stock options exercised and forfeited during the period. The 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 the statutory rates in the jurisdictions where the Company has 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.

Note 9. Stockholders' Equity

The table below presents a summary, as of March 31, 2021, of our authorized and outstanding common stock, and securities convertible into common stock, excluding options issued under our 2014 Omnibus Incentive Plan.

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Security
Par Value Per ShareNumber AuthorizedNumber OutstandingDescription
Class A common stock$0.01 300,000,000 14,674,552 
One vote per share.1
Class B common stock$0.01 50,000,000 815,296 
Ten votes per share.2
Class C common stock$0.01 50,000,000 836,341 
No votes.2
Warrants162,696 
Each warrant is exercisable for one share of Class A common stock, at an exercise price of $0.0001 per share. The aggregate exercise price for all warrants currently outstanding is $16.3
Total400,000,00016,488,885
1 Each of the shares of common stock, including the shares of Class A common stock issuable upon exercise of the warrants, have equal economic rights.
2 Each share converts into one share of Class A common stock upon transfer or at the option of the holder, subject to certain conditions, including compliance with FCC rules.
3 The warrants are fully vested and exercisable for shares of Class A common stock, subject to certain conditions, including compliance with FCC rules.

The foregoing share totals include 312,605 shares of restricted Class A common stock, subject to vesting terms, but exclude 5,172,709 of Class A common stock and 3,670,509 of Class B common stock issuable upon exercise of stock options which have an exercise price between $4.79 and $9.63 per share, as of March 31, 2021. Additionally, the Company is authorized to issue 50,000,000 shares of undesignated preferred stock.

Stock Repurchase Agreement

On January 24, 2021, the Company entered into a stock repurchase agreement with certain affiliates of Oaktree Capital Management L.P. (“Oaktree”) to repurchase 606,484 shares of the Company’s Class A common stock, 2,151,373 shares of the Company’s Class B common stock, and 7,242,143 warrants to purchase Class A Common Stock, or such greater number of securities as the Company may elect. On March 9, 2021, the repurchase was consummated and the Company elected to repurchase all of the outstanding securities held by Oaktree, including 1,595,224 shares of Class A Common Stock, 2,151,373 shares of Class B Common Stock and 8,814,980 warrants for an aggregate purchase price of $80.4 million, or $6.40 per security.

In connection with the closing under the stock repurchase agreement, on March 8, 2021, the Company and Oaktree entered into a settlement agreement (the “Settlement Agreement”), pursuant to which, among other things, the Company agreed to pay $4.5 million to Oaktree as follows: (i) $1.5 million on April 1, 2021; (ii) $1.0 million on July 1, 2021; (iii) $1.0 million on October 1, 2021; and (iv) $1.0 million on November 10, 2021. The Settlement Agreement also includes customary mutual releases from claims, demands, and damages related to the stock repurchase agreement. The $4.5 million due under the terms of the Settlement Agreement is reflected as a component of transaction costs for the three months ended March 31, 2021.

Total consideration and fees in the aggregate amount of $81.9 million related to the repurchase of the shares and warrants from Oaktree are reflected as a reduction in capital during the three months ended March 31, 2021. The shares were retired upon repurchase.

Stock-based Compensation

The Company’s 2014 Omnibus Incentive Plan (the “2014 Incentive Plan”) provides grants of stock options, stock appreciation rights, restricted stock, other stock-based awards and other cash-based awards. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting or advisory services for the Company, are eligible for grants under the 2014 Incentive Plan. The purpose of the 2014 Incentive Plan is to provide incentives that will attract, retain and motivate high-performing officers, directors, employees and consultants by providing them with appropriate incentives and rewards either through a proprietary interest in our long-term success or compensation based on their performance in fulfilling their personal responsibilities.

On January 25, 2021, the Board of Directors determined that it was in the best interest of the Company and its stockholders to amend the Company’s 2014 Omnibus Incentive Plan to increase the number of shares of common stock available for grant under the 2014 Incentive Plan from 12,000,000 shares to 27,000,000 shares (the “Amendment”). Subsequently, on January 25, 2021, the Board of Directors submitted the Amendment to certain stockholders affiliated with Oaktree for approval. By written consent delivered to the Company on January 27, 2021, the Oaktree-affiliated stockholders,
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representing approximately 52.4% of the voting power of the Company, approved the Amendment. As of March 31, 2021, 16,519,382 shares were available for grant.

Stock Option Activity

During the first quarter of 2021, eligible option holders tendered 1,022,283 options to purchase 1,022,283 shares of Townsquare common stock.

The following table summarizes stock option activity during the three months ended March 31, 2021:

OptionsWeighted Average Exercise PriceWeighted Average Remaining Contractual Life (years)Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 202011,234,078 7.92 4.99$1,062 
  Exercised(1,022,283)7.77 — 2,520 
  Forfeited and expired(1,368,577)8.53 — — 
Outstanding at March 31, 20218,843,218 7.84 5.68$25,531 
Exercisable at March 31, 20215,482,177 8.68 3.71$11,257 

The maximum contractual term of stock options is 10 years.

For the three months ended March 31, 2021 and 2020, the Company recognized approximately $1.1 million and $0.5 million, respectively, of stock-based compensation expense with respect to options and shares of restricted stock granted. As of March 31, 2021, total unrecognized stock-based compensation expense related to our stock options and restricted stock was $7.2 million and $1.3 million, respectively, and is expected to be recognized over a weighted average period of 3.4 and 1.4 years, respectively.
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Note 10. Net Income (Loss) Per Share

Basic earnings (loss) per common share (“EPS”) is generally calculated as income available to common shareholders divided by the weighted average number of common shares outstanding. Diluted EPS is generally calculated as income available to common shareholders divided by the weighted average number of common shares outstanding plus the dilutive effect of common share equivalents. The Company has determined that our warrants are a participating security, as defined, in accordance with ASC Topic 260, Earnings Per Share. Although these warrants are subject to restrictions on exercise, they participate in the undistributed earnings of the Company and therefore, our presentation reflects the two-class method.

The following table sets forth the computations of basic and diluted net income (loss) per share for the three months ended March 31, 2021 and 2020 (in thousands, except per share data):

Three Months Ended March 31,
20212020
Numerator:
Net loss$(6,109)$(59,577)
Net income from non-controlling interest440