UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-K

Overview of Townsquare’s Performance

Townsquare is a community-focused digital and broadcast media and marketing solutions company principally focused outside the top 50 markets in the U.S. The company’s primary sources of revenue are the sale of digital and broadcast advertising solutions, as well as subscription digital marketing solutions for small and medium-sized businesses.

For the year ended December 31, 2024, Townsquare reported a 0.7% decrease in net revenue compared to the prior year, driven by declines in Subscription Digital Marketing Solutions and Broadcast Advertising revenue, partially offset by growth in Digital Advertising revenue. Operating income increased significantly due to a decrease in non-cash impairment charges and lower direct operating and corporate expenses.

Financial Performance Highlights

• Net revenue decreased $3.2 million, or 0.7%, to $450.9 million. Subscription Digital Marketing Solutions net revenue decreased 8.4%, Broadcast Advertising net revenue decreased 1.3%, and Other net revenue decreased 19.5%, partially offset by a 5.5% increase in Digital Advertising net revenue.

• Excluding political advertising revenue, net revenue decreased 3.0% to $437.6 million, with Broadcast Advertising net revenue down 6.1% and Digital Advertising net revenue up 5.1%.

• Operating income increased $40.8 million to $21.7 million, driven by a $52.9 million decrease in non-cash impairment charges and a $3.6 million decrease in direct operating and corporate expenses, partially offset by a $9.1 million increase in stock-based compensation and a $3.7 million increase in transaction and business realignment costs.

• Broadcast Advertising segment operating income increased $52.8 million to $19.0 million, Digital Advertising segment operating income decreased $7.6 million to $37.3 million, and Subscription Digital Marketing Solutions segment operating income decreased $2.9 million to $18.4 million.

Macroeconomic Factors and Risks

Townsquare faces risks related to new or changing privacy legislation, its status as a smaller reporting company, market volatility for its Class A common stock, and corporate social responsibility. The company also notes that current economic challenges, including high inflation and interest rates, have caused economic uncertainty and could result in advertising and subscription cancellations, declines in new advertising purchases, and increases in operating expenses.

Segment Performance

Digital Advertising

• Net revenue increased $8.3 million, or 5.5%, driven by increased purchases of new advertising.
• Direct operating expenses increased $13.5 million, or 13.0%, primarily due to higher inventory and compensation costs, as well as an increase in bad debt.
• Segment profit decreased $5.2 million, or 11.3%, due to the increase in expenses.

Subscription Digital Marketing Solutions

• Net revenue decreased $6.9 million, or 8.4%, due to a reduction in net subscribers.
• Direct operating expenses decreased $5.0 million, or 8.6%, primarily driven by lower compensation costs and bad debt expense.
• Segment profit decreased $1.8 million, or 7.9%, due to the decline in revenue.

Broadcast Advertising

• Net revenue decreased $2.8 million, or 1.3%, due to decreases in advertising purchases by clients.
• Direct operating expenses decreased $8.9 million, or 5.7%, primarily due to lower compensation costs.
• Segment profit increased $6.2 million, or 11.1%, as the decrease in expenses offset the decline in revenue.

Other

• Net revenue decreased $2.0 million, or 19.5%, due to the elimination of low-profit events.
• Direct operating expenses decreased $2.0 million, or 20.3%, due to the event eliminations.
• Segment profit increased $0.04 million, or 16.6%.

Impairment and Other Charges

• The company recorded $37.7 million in impairment charges related to intangible assets, investments, goodwill, and long-lived assets, down from $90.6 million in the prior year.
• The impairment charges were primarily driven by increases in the discount rate and decreases in third-party forecasts of broadcast revenues.
• The company also recorded $4.4 million in non-cash goodwill impairment charges related to its National Digital and Live Events reporting units.
• During 2024, the company recognized a $4.0 million gain on the sale of one of its investments and a $0.2 million unrealized gain on another investment.

Liquidity and Capital Resources

Townsquare enjoys strong cash flow generation due to the limited capital needs of its operations. During 2024, the company recorded $17.4 million in capital expenditures, representing 3.9% of net revenue. The company also benefits from certain tax attributes that have historically limited its cash tax payments.

In 2018, Townsquare began paying quarterly cash dividends, which it resumed in 2023 after suspending them in 2020 due to the COVID-19 pandemic. The company paid a quarterly dividend of $0.1875 per share in 2023 and increased it to $0.1975 per share in 2024. Any future dividend payments will be at the discretion of the board of directors.

Outlook and Risks

Townsquare faces risks related to new or changing privacy legislation, which could hinder the growth of its digital properties. The company is also subject to risks as a smaller reporting company, including reduced disclosure obligations. Volatility in the public market for its Class A common stock and risks related to corporate social responsibility are additional concerns.

The company’s financial performance and outlook could be materially affected by current economic challenges, including high inflation and interest rates, which could lead to advertising and subscription cancellations, declines in new advertising purchases, and increases in operating expenses. Townsquare closely monitors economic conditions and may institute precautionary measures, such as wage reduction efforts and controlling non-essential capital expenditures, in response to observed or anticipated reductions in revenue.

Overall, Townsquare’s diversified portfolio of digital and broadcast media assets, focus on local markets, and strong cash flow generation position the company to navigate the current economic environment. However, the company remains vigilant to the risks and uncertainties that could impact its financial performance and long-term growth.