Form 8-K Townsquare Media, Inc. For: Aug 04

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August 4, 2016 6:54 AM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
__________________
 
FORM 8-K 
__________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): August 4, 2016
Townsquare Media, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation
or organization)
333-197002
(Commission
File Number)
27-1996555 
(I.R.S. Employer
Identification No.)
240 Greenwich Avenue
Greenwich, Connecticut 06830
(203) 861-0900
 
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
__________________ 
Check the appropriate box below if Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 435 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a - 12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e4(c))




Item 2.02 - Results of Operations and Financial Condition.

On August 4, 2016, Townsquare Media Inc. (the "Company") issued a press release announcing operating results for the three and six months ended June 30, 2016. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

The Company uses the “Equity Investors” section of its website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Investors are urged to monitor the Company's website for announcements of material information relating to the Company.

Item 9.01 - Financial Statements and Exhibits

(d) Exhibits


Number                        Exhibit

99.1                        Press release, dated August 4, 2016


2



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
TOWNSQUARE MEDIA, INC.

 
 
 
 
By:
/s/ Stuart Rosenstein
 
 
Name: Stuart Rosenstein
 
 
Title: Executive Vice President and Chief Financial Officer

Date: August 4, 2016


3



Exhibit Index


Number                    Exhibit

99.1                    Press release, dated August 4, 2016


4



IMMEDIATE RELEASE

TOWNSQUARE REPORTS SECOND QUARTER 2016 RESULTS

Greenwich, CT - August 4, 2016 - Townsquare Media, Inc. (NYSE: TSQ) (“Townsquare,” the “Company,” “we,” “us,” or “our”) announced today financial results for the second quarter ended June 30, 2016.

“We are pleased to report solid results for the first half of 2016, with pro forma net revenue and Adjusted EBITDA increasing approximately 4% over the prior year, with strength in our Local Marketing Solutions segment,” commented Steven Price, Chairman and Chief Executive Officer of Townsquare. “In the second quarter, we delivered net revenue growth of 16.7% over the prior year. On a pro forma basis, net revenue increased 2.1%, which was in line with our expectations, and Adjusted EBITDA increased 4.1%, which exceeded our guidance. In addition, we were able to strengthen our balance sheet through the repurchase of $17 million of Unsecured Senior Notes.”

Second Quarter Highlights
As compared to the second quarter of 2015 on a pro forma basis:
•
Net revenue increased 2.1%
•
Local Marketing Solutions net revenue increased 3.5%
•
Entertainment net revenue approximately flat
•
Adjusted EBITDA increased 4.1%
•
Diluted net income and diluted Adjusted Net Income Per Share of $0.20 and $0.22, respectively

Year to Date Highlights
As compared to the first half of 2016 on a pro forma basis:
•
Net revenue increased 3.9%
•
Local Marketing Solutions net revenue increased 5.8%
•
Entertainment net revenue approximately flat
•
Adjusted EBITDA increased 3.9%

Segment Reporting
We have two reportable segments, Local Marketing Solutions, which provides broadcast and digital products and solutions to advertisers and businesses within our local markets, and Entertainment, which provides live event experiences and music and lifestyle content directly to consumers, and promotion, advertising and product activations to local and national advertisers. Prior to the second quarter of 2016, the Company reported its results in two reportable segments, Local Advertising and Live Events, and reported the remainder of its business in its Other Media and Entertainment category. The prior Local Advertising segment, together with the Company’s digital marketing and e-commerce solutions, which were previously part of the Other Media and Entertainment category, are now reported within Local Marketing Solutions. The Live Events segment, together with the Company’s national digital assets which were previously part of the Other Media and Entertainment category, are now reported within Entertainment.

Quarter Ended June 30, 2016 Compared to the Quarter Ended June 30, 2015

Net Revenue
Net revenue for the quarter ended June 30, 2016 increased $19.6 million, or 16.7%, to $137.2 million, as compared to $117.5 million in the same period last year. This was driven primarily by the net revenue contribution of North American Midway Entertainment ("NAME"), which was acquired on September 1, 2015. Local Marketing Solutions net revenue increased $2.6 million, or 3.0%, to $86.7 million and Entertainment net revenue increased $17.1 million, or 51.2%, to $50.5 million.


1


Pro forma net revenue increased $2.8 million, or 2.1%, to $137.2 million, as compared to $134.3 million in the same period last year. As used in this release, the term “pro forma” means pro forma for the acquisition of NAME and the divestiture of 43 of our towers on September 1, 2015. Local Marketing Solutions net revenue increased $2.9 million, or 3.5%, to $86.7 million and Entertainment net revenue decreased $0.1 million, or 0.2%, to $50.5 million. Excluding political revenue, net revenue increased $2.2 million, or 1.7%, to $136.2 million and Local Marketing Solutions net revenue increased $2.4 million, or 2.8%, to $85.7 million.

Adjusted EBITDA
Adjusted EBITDA for the quarter ended June 30, 2016 decreased $3.4 million, or 11.8%, to $25.3 million, as compared to $28.6 million in the same period last year. The decrease was primarily related to the seasonality of NAME, whose results are not included in the quarter ended June 30, 2015.

Pro forma Adjusted EBITDA for the quarter ended June 30, 2016 increased $1.0 million, or 4.1%, to $25.3 million, compared to $24.2 million in the same period last year.

Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015

Net Revenue
Net revenue for the six months ended June 30, 2016 increased $33.0 million, or 16.6%, to $231.6 million, as compared to $198.6 million in the same period last year. This was driven primarily by the net revenue contribution of NAME, which was acquired on September 1, 2015. Local Marketing Solutions net revenue increased $8.1 million, or 5.3%, to $161.9 million and Entertainment net revenue increased $24.9 million, or 55.5%, to $69.7 million.

Pro forma net revenue increased $8.7 million, or 3.9%, to $231.6 million, as compared to $222.9 million in the same period last year. Local Marketing Solutions net revenue increased $8.8 million, or 5.8%, to $161.9 million and Entertainment net revenue decreased $0.1 million, or 0.1%, to $69.7 million. Excluding political revenue, net revenue increased $7.1 million, or 3.2%, to $229.2 million and Local Marketing Solutions net revenue increased $7.2 million, or 4.7%, to $159.5 million.

Adjusted EBITDA
Adjusted EBITDA for the six months ended June 30, 2016 decreased $5.9 million, or 13.8%, to $37.2 million, as compared to $43.2 million in the same period last year. The decrease was primarily related to the seasonality of NAME, whose results are not included in the same period last year.

Pro forma Adjusted EBITDA for the six months ended June 30, 2016 increased $1.4 million, or 3.9%, to $37.2 million, compared to $35.8 million in the same period last year.

Liquidity and Capital Resources
As of June 30, 2016, we had a total of $17.6 million of cash on hand and $50.0 million of available borrowing capacity under our revolving credit facility. As of June 30, 2016, we had $581.3 million of outstanding indebtedness, representing 5.6x and 5.4x gross and net leverage, respectively, based on pro forma Adjusted EBITDA for the twelve months ended June 30, 2016 of $103.9 million.
 
The table below presents a summary, as of August 3, 2016, of our outstanding common stock and securities convertible into common stock, excluding options issued under our 2014 Omnibus Incentive Plan.

2


Security
 
Number Outstanding1
Description
Class A common stock
 
10,477,551
One vote per share.
Class B common stock
 
3,022,484
10 votes per share.2
Class C common stock
 
4,894,480
No votes.2
Warrants
 
8,977,676
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 $898.3
Total
 
27,372,191
 
 
 
 
 
1  Each of the shares of common stock listed below, including the shares of Class A common stock issuable upon exercise of the warrants, have equal economic rights.
2  Each share converts into 1 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.
Conference Call
Townsquare Media, Inc. will host a conference call to discuss certain second quarter 2016 financial results on Thursday, August 4, 2016 at 8:00 a.m. Eastern Time. The conference call dial-in number is 1-877-407-0784 (U.S. & Canada) or 1-201-689-8560 (International) and the confirmation code is 13640952. A live webcast of the conference call will also be available on the investor relations page of the Company's website at www.townsquaremedia.com.

A replay of the conference call will be available through August 11, 2016. To access the replay, please dial 1-877-870-5176 (U.S. & Canada) or 1-858-384-5517 (International) and enter confirmation code 13640952. A web-based archive of the conference call will also be available at the above website for thirty days after the call.

About Townsquare Media, Inc.
Townsquare is a media, entertainment and digital marketing solutions company principally focused on small and mid-sized markets across the U.S. Our assets include 310 radio stations and more than 325 local websites in 66 U.S. markets, a digital marketing solutions company serving approximately 9,400 small to medium sized businesses, approximately 550 live events with nearly 18 million attendees each year in the U.S. and Canada, and one of the largest digital advertising networks focused on music and entertainment reaching more than 60 million unique visitors each month. Our brands include iconic local media assets such as WYRK, KLAQ, K2 and NJ101.5; acclaimed music festivals such as Mountain Jam, WE Fest and the Taste of Country Music Festival; unique touring lifestyle and entertainment events such as the America on Tap craft beer festival series, the Insane Inflatable 5K obstacle race series and North American Midway Entertainment, North America’s largest mobile amusement company; and leading tastemaker music and entertainment owned and affiliated websites such as XXL.com, TasteofCountry.com, Loudwire.com, JustJared.com and BrooklynVegan.com. For more information, please visit www.townsquaremedia.com.

Forward-Looking Statements
Except for the historical information contained in this press release, the matters addressed are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, written, oral or otherwise made, represent the Company’s expectation or belief concerning future events. Without limiting the foregoing, the words “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “strives,” “goal,” “estimates,” “forecasts,” “projects” or “anticipates” and similar expressions are intended to identify forward-looking statements. By nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statement. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. See “Risk Factors” and “Forward-Looking Statements” included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission on or about the date hereof, for a discussion of factors that could cause our actual results to differ from those expressed or implied by forward-looking statements. Townsquare Media, Inc. assumes no responsibility to update any forward-looking statement as a result of new information, future events or otherwise.

Investor Relations
Claire Yenicay
(203) 900-5555

3


TOWNSQUARE MEDIA, INC.
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share and Per Share Data)
(unaudited)



June 30,
2016
 
December 31,
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
17,608

 
$
33,298

Accounts receivable, net of allowance of $2,157 and $2,114, respectively
62,214

 
60,143

Prepaid expenses and other current assets
16,153

 
9,766

Total current assets
95,975

 
103,207

Property and equipment, net
137,848

 
133,943

Intangible assets, net
514,384

 
517,979

Goodwill
292,953

 
292,953

Investments
5,049

 
5,049

Other assets
7,397

 
7,580

Total assets
$
1,053,606

 
$
1,060,711

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
15,376

 
$
9,549

Current portion of long-term debt
700

 
171

Deferred revenue
18,642

 
17,496

Accrued expenses and other current liabilities
25,854

 
29,958

Accrued interest
4,619

 
4,910

Total current liabilities
65,191

 
62,084

Long-term debt, less current portion (net of deferred finance costs of $8,814 and $9,962, respectively)
571,795

 
588,657

Deferred tax liability
38,071

 
35,233

Other long-term liabilities
10,820

 
11,297

Total liabilities
685,877

 
697,271

Stockholders’ equity:
 
 
 
    Class A common stock, par value $0.01 per share; 300,000,000 shares authorized; 10,477,551 and
      9,946,354 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
105

 
100

    Class B common stock, par value $0.01 per share; 50,000,000 shares authorized; 3,022,484
       shares issued and outstanding at both June 30, 2016 and December 31, 2015, respectively
30

 
30

    Class C common stock, par value $0.01 per share; 50,000,000 shares authorized; 4,894,480
       shares issued and outstanding at both June 30, 2016 and December 31, 2015, respectively
49

 
49

    Total common stock
184

 
179

    Additional paid-in capital
361,638

 
361,186

    Retained earnings
5,398

 
1,391

    Accumulated other comprehensive (loss) income
(303
)
 
44

    Non-controlling interest
812

 
640

Total liabilities and stockholders’ equity
$
1,053,606

 
$
1,060,711


4


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



Three Months Ended 
 June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net revenue
$
137,157

 
$
117,516

 
$
231,589

 
$
198,634

 
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
Direct operating expenses, excluding depreciation, amortization and stock-based compensation
105,594

 
82,297

 
182,498

 
143,603

Depreciation and amortization
6,003

 
3,613

 
12,126

 
7,284

Corporate expenses
6,313

 
6,603

 
11,870

 
11,866

Stock-based compensation
204

 
1,403

 
457

 
1,403

Transaction costs
181

 
125

 
350

 
172

Net loss on sale of assets
1,079

 
21

 
713

 
14

    Total operating costs and expenses
119,374

 
94,062

 
208,014

 
164,342

    Operating income
17,783

 
23,454

 
23,575

 
34,292

Other expenses (income):
 
 
 
 
 
 
 
Interest expense, net
8,881

 
8,246

 
17,446

 
18,807

Repurchase and cancellation of debt
(427
)
 
30,017

 
(461
)
 
30,017

Other expense (income), net
44

 
36

 
(403
)
 
84

     Income (loss) before income taxes
9,285

 
(14,845
)
 
6,993

 
(14,616
)
Provision (benefit) for income taxes
3,683

 
(6,111
)
 
2,776

 
(6,013
)
Net income (loss)
$
5,602

 
$
(8,734
)
 
$
4,217

 
$
(8,603
)
 
 
 
 
 
 
 
 
Net income (loss) attributable to:
 
 
 
 
 
 
 
     Controlling interests
$
5,451

 
$
(9,132
)
 
$
4,007

 
$
(9,036
)
     Non-controlling interests
151

 
398

 
210

 
433

 
 
 
 
 
 
 
 
Net income (loss) per share:
 
 
 
 
 
 
 
     Basic
$
0.31

 
$
(0.50
)
 
$
0.23

 
$
(0.50
)
     Diluted
$
0.20

 
$
(0.50
)
 
$
0.15

 
$
(0.50
)
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
     Basic
18,365

 
17,374

 
18,114

 
17,374

     Diluted
27,438

 
17,374

 
27,238

 
17,374

 
 
 
 
 
 
 
 



5


TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Thousands)
(unaudited)
 
Six Months Ended
June 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net income (loss) attributable to:
 
 
 
Controlling interests
$
4,007

 
$
(9,036
)
Non-controlling interests
210

 
433

Net income (loss)
$
4,217

 
$
(8,603
)
Adjustments to reconcile net income (loss) to net cash from operating activities:
 
 
 
Depreciation and amortization
12,126

 
7,284

Amortization of deferred financing costs
809

 
917

Deferred income tax expense (benefit)
2,776

 
(6,013
)
Provision for doubtful accounts
1,272

 
15

Stock-based compensation expense
457

 
1,403

Repurchase and cancellation of debt
(461
)
 
—

Amortization of bond premium
—

 
(424
)
Write-off of deferred financing costs
339

 
9,061

Write-off of bond premium
—

 
(6,779
)
Net loss on sale of assets
713

 
14

Changes in assets and liabilities, net of acquisitions:
 
 
 
Accounts receivable
(5,050
)
 
(2,013
)
Prepaid expenses and other assets
(5,511
)
 
(2,976
)
Accounts payable
5,642

 
1,754

Accrued expenses
(3,147
)
 
(3,717
)
Accrued interest
(291
)
 
(4,338
)
Other long-term liabilities
(477
)
 
17

Net cash provided by (used in) operating activities   
13,414

 
(14,398
)
Cash flows from investing activities:
 
 
 
   Payments for acquisitions, net of cash received
(373
)
 
(6,606
)
   Acquisition of intangibles
—

 
(32
)
   Purchase of property and equipment
(12,416
)
 
(5,812
)
   Proceeds from insurance settlement
451

 
450

   Proceeds from sale of assets
1,162

 
80

Net cash used in investing activities
(11,176
)
 
(11,920
)
Cash flows from financing activities:
 
 
 
   Offering costs
—

 
(99
)
   Repayment of long-term debt
(17,460
)
 
(532,751
)
   Proceeds from the issuance of long-term debt
—

 
575,000

   Debt financing costs
—

 
(9,775
)
   Proceeds from sale of minority interest in subsidiary
50

 
—

   Cash distributions to non-controlling interests
(88
)
 
(58
)
   Repayments of capitalized obligations
(84
)
 
(78
)
Net cash (used in) provided by financing activities   
(17,582
)
 
32,239

Net effect of foreign currency exchange rate changes
(346
)
 
—

Net (decrease) increase in cash
(15,690
)
 
5,921

Cash:
 
 
 
Beginning of period
33,298

 
24,462

End of period
$
17,608

 
$
30,383


6


TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in Thousands)
(unaudited)
 
Six Months Ended
June 30,
 
2016
 
2015
Supplemental Disclosure of Cash Flow Information:
 
 
 
   Cash payments:
 
 
 
Payments to redeem long-term debt prior to contractual maturity
$
—

 
$
27,735

Interest
16,573

 
22,631

Income taxes
815

 
540

   Purchase obligations:
 
 
 
Capital lease
525

 
—

   Barter transactions:
 
 
 
Barter revenue – included in net revenue
$
9,732

 
$
6,965

Barter expense – included in direct operating expenses
6,818

 
6,390



7


TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS BY SEGMENT
(in Thousands)
(unaudited)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Statement of Operations Data:
 
 
 
 
 
 
 
   Local Marketing Solutions net revenue
$
86,704

 
$
84,149

 
$
161,911

 
$
153,824

   Entertainment net revenue
50,453

 
33,367

 
69,678

 
44,810

Net revenue
137,157

 
117,516

 
231,589

 
198,634

Operating Costs and Expenses:
 
 
 
 
 
 
 
   Local Marketing Solutions direct operating expenses
54,889

 
52,338

 
109,053

 
102,312

   Entertainment direct operating expenses
50,705

 
29,959

 
73,445

 
41,291

Direct operating expenses, excluding depreciation, amortization and stock-based compensation
105,594

 
82,297

 
182,498

 
143,603

Depreciation and amortization
6,003

 
3,613

 
12,126

 
7,284

Corporate expenses
6,313

 
6,603

 
11,870

 
11,866

Stock-based compensation
204

 
1,403

 
457

 
1,403

Transaction costs
181

 
125

 
350

 
172

Net loss on sale of assets
1,079

 
21

 
713

 
14

Total operating costs and expenses
119,374

 
94,062

 
208,014

 
164,342

Operating income
17,783

 
23,454

 
23,575

 
34,292

Other expense (income):
 
 
 
 
 
 
 
   Interest expense, net
8,881

 
8,246

 
17,446

 
18,807

   Repurchase and cancellation of debt
(427
)
 
30,017

 
(461
)
 
30,017

   Other expense (income), net
44

 
36

 
(403
)
 
84

Total other expense
8,498

 
38,299

 
16,582

 
48,908

Income (loss) before income taxes
9,285

 
(14,845
)
 
6,993

 
(14,616
)
Provision (benefit) for income taxes
3,683

 
(6,111
)
 
2,776

 
(6,013
)
Net income (loss)
$
5,602

 
$
(8,734
)
 
$
4,217

 
$
(8,603
)


8


The following table summarizes pro forma net revenue and direct operating expenses broken out by segment for the three months and six ended June 30, 2016 and 2015, respectively (dollars in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Statement of Operations Data:
 
 
 
 
 
 
 
Local Marketing Solutions net revenue
$
86,704

 
$
83,777

 
$
161,911

 
$
153,104

Entertainment net revenue
50,453

 
50,572

 
69,678

 
69,749

Net revenue
137,157

 
134,349

 
231,589

 
222,853

Operating Costs and Expenses:
 
 
 
 
 
 
 
Local Marketing Solutions direct operating expenses
54,889

 
52,254

 
109,053

 
102,135

Entertainment direct operating expenses
50,705

 
51,243

 
73,445

 
73,017

Direct operating expenses, excluding depreciation, amortization and stock-based compensation
105,594

 
103,497

 
182,498

 
175,152

Direct Profit
$
31,563

 
$
30,852

 
$
49,091

 
$
47,701


The following table reconciles on a GAAP basis net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted Net Income for the three and six months ended June 30, 2016 and 2015, respectively(dollars in thousands):
 
Actual
 
Actual
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Net income (loss)
$
5,602

 
$
(8,734
)
 
$
4,217

 
$
(8,603
)
  Provision (benefit) for income taxes
3,683

 
(6,111
)
 
2,776

 
(6,013
)
Income (loss) before taxes
9,285

 
(14,845
)
 
6,993

 
(14,616
)
  Transaction costs
181

 
125

 
350

 
172

Net loss on sale of assets
1,079

 
21

 
713

 
14

Repurchase and cancellation of debt
(427
)
 
30,017

 
(461
)
 
30,017

Adjusted income before taxes
10,118

 
15,318

 
7,595

 
15,587

  Provision for income taxes
4,013

 
6,306

 
3,014

 
6,412

Adjusted Net Income
$
6,105

 
$
9,012

 
$
4,581

 
$
9,175

 
 
 
 
 
 
 
 
Adjusted Net Income Per Share:
 
 
 
 
 
 
 
     Basic
$
0.33

 
$
0.52

 
$
0.25

 
$
0.53

     Diluted
$
0.22

 
$
0.52

 
$
0.17

 
$
0.53

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
     Basic
18,365

 
17,374

 
18,114

 
17,374

     Diluted
27,438

 
17,374

 
27,238

 
17,374





9


The following table reconciles on a GAAP basis net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Direct Profit and Adjusted EBITDA for the three and six months ended June 30, 2016 and 2015, respectively (dollars in thousands):
 
Actual
 
Actual
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Net income (loss)
$
5,602

 
$
(8,734
)
 
$
4,217

 
$
(8,603
)
  Provision (benefit) for income taxes
3,683

 
(6,111
)
 
2,776

 
(6,013
)
  Interest expense, net
8,881

 
8,246

 
17,446

 
18,807

  Transaction costs
181

 
125

 
350

 
172

  Depreciation and amortization
6,003

 
3,613

 
12,126

 
7,284

  Corporate expenses
6,313

 
6,603

 
11,870

 
11,866

  Stock-based compensation
204

 
1,403

 
457

 
1,403

Repurchase and cancellation of debt
(427
)
 
30,017

 
(461
)
 
30,017

  Other(a)
1,123

 
57

 
310

 
98

Direct Profit
31,563

 
35,219

 
49,091

 
55,031

  Corporate expenses
(6,313
)
 
(6,603
)
 
(11,870
)
 
(11,866
)
Adjusted EBITDA
$
25,250

 
$
28,616

 
$
37,221

 
$
43,165

(a) Other includes net loss on sale of assets and other (income) expense, net.

The following table reconciles on a pro forma basis net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Direct Profit and Adjusted EBITDA for the three and six months ended June 30, 2016 and 2015, respectively (dollars in thousands):
 
Pro Forma
 
Pro Forma
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Net income (loss)
$
5,602

 
$
(12,597
)
 
$
4,217

 
$
(14,691
)
  Provision (benefit) for income taxes
3,683

 
(9,743
)
 
2,776

 
(11,362
)
  Interest expense, net
8,881

 
8,496

 
17,446

 
16,958

  Transaction costs
181

 
125

 
350

 
172

  Depreciation and amortization
6,003

 
6,525

 
12,126

 
13,076

  Corporate expenses
6,313

 
6,603

 
11,870

 
11,866

  Stock-based compensation
204

 
1,403

 
457

 
1,403

Repurchase and cancellation of debt
(427
)
 
30,017

 
(461
)
 
30,017

  Other(a)
1,123

 
23

 
310

 
262

Direct Profit
31,563

 
30,852

 
49,091

 
47,701

  Corporate expenses
(6,313
)
 
(6,603
)
 
(11,870
)
 
(11,866
)
Adjusted EBITDA
$
25,250

 
$
24,249

 
$
37,221

 
$
35,835

(a) Other includes net loss on sale of assets and other (income) expense, net.


10


The following table reconciles on a pro forma basis net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Direct Profit and Adjusted EBITDA on a quarterly basis for the twelve months ended June 30, 2016 (dollars in thousands):
 
Quarter Ended
 
Twelve Months Ended
 
September 30, 2015
 
December 31, 2015
 
March 31, 2016
 
June 30, 2016
 
June 30, 2016
Net income (loss)
$
21,414

 
$
2,764

 
$
(1,384
)
 
$
5,602

 
$
28,396

  Provision (benefit) for income taxes
16,560

 
2,139

 
(907
)
 
3,683

 
21,475

  Interest expense, net
8,530

 
8,529

 
8,565

 
8,881

 
34,505

  Transaction costs
1,125

 
442

 
169

 
181

 
1,917

  Depreciation and amortization
6,769

 
5,508

 
6,123

 
6,003

 
24,403

  Corporate expenses
6,106

 
7,463

 
5,557

 
6,313

 
25,439

  Stock-based compensation
2,875

 
—

 
253

 
204

 
3,332

  Impairment FCC licenses
—

 
1,680

 
—

 
—

 
1,680

Cancellation and repurchase of debt
288

 
—

 
(34
)
 
(427
)
 
(173
)
  Other(a)
(11,926
)
 
28

 
(814
)
 
1,123

 
(11,589
)
Direct Profit
51,741

 
28,553

 
17,528

 
31,563

 
129,385

  Corporate expenses
(6,106
)
 
(7,463
)
 
(5,557
)
 
(6,313
)
 
(25,439
)
Adjusted EBITDA
$
45,635

 
$
21,090

 
$
11,971

 
$
25,250

 
$
103,946

(a) Other includes net loss on sale of assets and other (income) expense, net.

Non-GAAP Financial Measures and Definitions
We believe that our financial statements and the other financial data included herein have been prepared in a manner that complies, in all material respects, with generally accepted accounting principles in the United States, or GAAP, and are consistent with current practice with the exception of the presentation of certain non-GAAP financial measures, including Direct Profit and Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income Per Share (each as defined below).

We define Direct Profit as net income (loss) before the deduction of income taxes, other (income) expense (net), interest expense, repurchase and cancellation of debt, transaction costs, corporate expenses, net loss on sale of assets, impairment of FCC licenses, and depreciation and amortization. Adjusted EBITDA is defined as Direct Profit less corporate expenses (excluding stock-based compensation). Adjusted Net Income is defined as net income (loss) before the deduction of transaction costs, net loss on sale of assets and repurchase and cancellation of debt. Adjusted Net Income Per Share is defined as Adjusted Net Income divided by the weighted average shares outstanding. Direct Profit, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income Per Share do not represent, and should not be considered as alternatives to, net income (loss) or cash flows from operations, as determined under GAAP.

We use Direct Profit and Adjusted EBITDA to facilitate company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting interest expense), taxation and the age and book depreciation of facilities and equipment (affecting relative depreciation expense), which may vary for different companies for reasons unrelated to operating performance. In addition, we rely upon Direct Profit to analyze the performance of our segments, as it reflects all revenue and expenses directly attributable to our segments’ operations, including all corporate overhead expenses that are directly attributed to a segment and necessary to support its revenue, without regard to corporate overhead that is not directly attributable to a segment’s operations (such as expenses related to HR, finance, and accounting functions and expenses incurred in connection with an initial public offering). As a result, by removing these expenses, management can better analyze the factors that are, in fact, directly affecting the profitability of its core business segments at and within the segments. We use Adjusted Net Income and Adjusted Net Income Per Share to assess total company operating performance on a consistent basis. We believe that this measure, when considered together with our GAAP financial results, provides management and investors with a more complete understanding of our business operating results, including underlying trends, by excluding the effects of transaction costs, net loss on sale of assets and repurchase and cancellation of debt. Further, while discretionary bonuses for members of management are not determined with reference to specific targets, our Board of Directors may consider Direct Profit, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income Per Share when determining discretionary bonuses.




11

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