On August 18, 2015, Townsquare Media made waves with the acquisition of the largest provider of rides, games, and food concessions in North America for approximately $75.5 million. The company, then led by Steven Price, had big plans to greatly expand its Live Events portfolio in an effort to diversity beyond its ownership of radio stations in such markets as Boise, Idaho and Buffalo, New York.
On Thursday, Townsquare officially said farewell to North American Midway Entertainment (NAME) — an investment that proved to bring more harm than good, and a transition of Mr. Price out of his CEO role.
NAME’s new custodian is North American Fairs LLC, an entity owned by Danny Huston — the one known for his 25-year ownership of the Indiana State Fair Midway, not the actor who portrayed “General Erich Ludendorff” in the 2017 film Wonder Woman.
Townsquare brought in its best barbers to cut the deal with Huston’s group — NAME is being sold to NAF for $23.5 million.
But, the deal does include a provision allowing Townsquare to collect 15% residual interest in any future proceeds of a sale of NAME in the next 10 years.
Thus, the sale of NAME may not be a fire sale, but more of an important liquidation designed to bring fast cash for growth in a sector it has committed to doubling-down in: Radio.
Officially, Townsquare expects to hold the net cash proceeds from the sale on its balance sheet, pending reinvestment.
You can bet that reinvestment will be in broadcast media properties on the FM and/or AM dial.
Townsquare hinted at a major shift away from live events in November 2017, following the naming of Bill Wilson and Dhruv Prasad as co-CEOs, with Price shifting to a role as Executive Chairman of the Board one month earlier.
With Q3 2017 heavily impacted by its Entertainment unit, Wilson announced a “strategic review” of the division. Meanwhile, Townsquare’s the Local Marketing Solutions arena, which includes Townsquare’s collection of small- and medium-market radio stations, saw a net revenue jump to $90.48 million, from $89 million in Q3 2016.
In a harbinger of things to come, Prasad said in Townsquare’s Q3 ’17 conference call with financial analysts that “Local Marketing Solutions is the core of our business, and the strength of our local products and services have allowed us to deliver consistent growth for the 15th consecutive quarter.”
While talk swirled in brokers circles that Townsquare was ripe for a transaction that would see it pare down its radio stations or exit ownership altogether, Prasad proved true to his word when he told RBR+TVBR in December 2017 at the Bank of America Merrill Lynch 2017 Leveraged Finance Conference in Boca Raton, Fla., that Townsquare was committed to radio.
“Radio is the biggest of those three models, and is the underpinning of everything that we do,” he said. “It is the foundational cornerstone of our company.”
To prove his point, Townsquare started 2018 as a buyer. It acquired WOUR-FM in Utica, N.Y. from Ed Levine’s Galaxy Communications in February, following the closing of the acquisition of a cluster of radio stations in Pittsfield, Mass., in September 2017. In mid-March, Townsquare spent $17 million to acquire stalwart Top 40 WPST-FM 94.5, a Class B 50kw facility in Langhorne, Pa.; Sports WNJE-AM 920 “The Jersey,” a Class B station in Trenton, and Flemington-licensed WCHR-AM 1040, an inspirational station that carries on a format heard originally on the 94.5 MHz facility; from Connoisseur Media.
With no more NAME, Townsquare Q2 and full-year 2018 guidance looks a little different. Also, starting with its Q2 2018 earnings report, Townsquare will consolidate its reporting into a single reporting segment.
This is significant, as it will mark the elimination of its Local Marketing Solutions and Entertainment segment classifications — making comparisons tricky.
The Entertainment division saw a small increase in net revenue during Q1 2018, to $13.7 million from $12.3 million. Townsquare’s Local Marketing Solutions grew to $80.6 million from $76.1 million in the quarter.
For Q2, Townsquare expects net revenue of between $114 and $118 million.
That’s a dip from $140.7 million seen in Q2 2017. But, without NAME, is not as worrisome as it may appear to be: Townsquare took a $38 million impairment charge entirely related to NAME in Q1 2018.
Q2 adjusted EBITDA is forecast to land between $25 and $27 million.
Excluding NAME, for FY2018 Townsquare expects to report net revenue of between $413 and $421 million, and adjusted EBITDA of between $93 and $95 million.