Panic at Townsquare

Townsquare reported god-awful revenue numbers yesterday.

The Local Marketing Solutions part of the company was only up 1.7% and everything else was down.

Adjusted EBITDA which is the new phony ebidta is off 11% -- and that’s not GAAP EBITDA (general accepted accounting practices). 

“Fake EBITDA” is a common ploy of underperforming radio companies like Cumulus and iHeart as well.

The one thing that made Townsquare different from other radio companies was their small business segment and entertainment were down.  Entertainment which is their events business is down 4%. 

Townsquare’s radio properties are in very small markets that cannot be relied upon to deliver performance to a company obsessed with anything but radio.

Panic has set in and Townsquare as we know it is on its way out. 

  • Two CEOs – When have you ever heard of a significant company being operated by co-CEOs and yet that’s what is going on at Townsquare right now.  Chief content and digital officer Bill Wilson and former live events VP Dhruv Prasad.  Former CEO Steve Price who came up with the initial everything but radio concept was kicked upstairs to the board in a meaningless position. 
  • No buyers and they need to sell – Townsquare put itself up for sale earlier this year and no buyers have come forward.  Part of the problem is the markets Townsquare stations are in.  The other, as we learned once again yesterday, is that the entertainment business is not a sound business. 
  • Expect Townsquare to sell its entertainment and live events assets – If they don’t, the division’s underperformance will sink the stock which was down $1.02 at closing yesterday and is barely at $9.  A year ago it peaked at $12 and has generally not made it above $14 -- not much growth for investors.  The company is conducting a strategic review of its entertainment division which is code for finding a way to sell it.
  • Local Townsquare stations are going to take the financial hit – That’s where the cutbacks have to happen while the board tries to get out of the entertainment business.  This will be painful.  Some of Townsquare’s better markets that it acquired from Lew Dickey at Cumulus – Poughkeepsie, Sioux Falls – have even slipped.  Morning personalities will have to be cut either in salary or laid off.  This company is not in any condition to operate business as usual because it’s can’t perform and can’t sell itself.

Just as Cumulus declares a victory every time it underperforms, so does Townsquare.

One of their CEOs put Townsquare’s dismal performance like this with a big helping of fairy dust:  "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."

There’s panic at Townsquare because there appears to be no way out of this crisis.

It’s bad enough that the radio industry revenue is trending downward but the one company, Townsquare, that hedged its position on radio by also becoming an events marketing company lost that bet.

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