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| 8-K - 8-K - Townsquare Media, Inc. | form8-kxearningsrelease.htm |
IMMEDIATE RELEASE
TOWNSQUARE REPORTS THIRD QUARTER 2015 RESULTS
Greenwich, CT - November 5, 2015 - Townsquare Media, Inc. (NYSE: TSQ) ("Townsquare," the "Company," "we," "us," or "our") announced today financial results for the third quarter ended September 30, 2015.
Townsquare's net revenue for the third quarter increased over the prior year period by 9.7% (excluding the acquisition of North American Midway Entertainment ("NAME")) and 7.1% including NAME and on a constant currency basis, driven by growth across each of its operating segments. "We believe our third quarter performance again demonstrates the strength of our diversified strategy,” commented Steven Price, Chairman and Chief Executive Officer of Townsquare. “Our results were in line with our guidance and our strong cash flow generation also allowed us to strengthen our balance sheet through the voluntary repayment of $20 million of our outstanding term loan debt.”
Third Quarter Highlights
As compared to the third quarter of 2014 on a pro forma basis:
•Net revenue increased 4.2%, and 5.1% excluding political revenue
•On a constant currency basis, net revenue increased 7.1% and 8.0% excluding political revenue
•Excluding NAME, net revenue increased 9.7%, and 11.0% excluding political revenue
• | Pro forma Adjusted EBITDA decreased 4.6%, and 1.7% on a constant currency basis, in line with guidance and in part due to the reduction in political revenue |
Year to Date Highlights
As compared to the first nine months of 2014 on a pro forma basis:
•Net revenue increased 5.3%, and 5.9% excluding political revenue
•On a constant currency basis, net revenue increased 6.6% and 7.3% excluding political revenue
•Excluding NAME, net revenue increased 8.0%, and 8.9% excluding political revenue
Mr. Price continued, “This was an exciting quarter for Townsquare as we completed the acquisition of NAME, the largest provider of rides, games and food concessions in North America. NAME fits squarely within our core stated strategy of providing affordable, family-friendly entertainment content. We see many benefits of a combined company, including leveraging our radio and digital assets to drive awareness and attendance to NAME’s fairs. The addition of NAME strengthens our position as an operator of market leading media and entertainment assets, focused on small and mid-sized markets, offering premium content and experiences to its audience and connecting advertisers with consumers, whether it be on-air, online, or on site."
Quarter Ended September 30, 2015 Compared to the Quarter Ended September 30, 2014
Net Revenue
Net revenue for the quarter ended September 30, 2015 increased $34.8 million, or 36.8%, to $129.6 million, as compared to $94.7 million in the same period last year. This was primarily due to a $30.2 million increase in Live Events net revenue, which was partially due to an increase in net revenue from the acquisition of NAME on September 1, 2015 and the acquisition of WE Fest on October 31, 2014. Local Advertising net revenue increased $0.6 million, or 0.7%, to $79.6 million, Live Events net revenue increased $30.2 million, or 376.0%, to $38.3 million and Other Media and Entertainment net revenue increased $4.0 million, or 52.1%, to $11.7 million.
Pro forma net revenue increased $6.7 million, or 4.2%, to $166.0 million, as compared to $159.3 million in the same period last year. As used in this release, the term “pro forma” means pro forma for the acquisitions of WE Fest and NAME on October 31, 2014 and September 1, 2015, respectively, as well as for the divestiture of certain of our towers on September 1, 2015. Local Advertising net revenue increased $0.6 million, or 0.7%, to $79.6 million, Live Events net revenue increased $2.1 million, or 2.8%, to $75.0 million and Other Media and Entertainment net revenue increased $4.1 million, or 55.8%, to $11.5 million. Excluding political revenue and on a constant currency basis, net revenue increased $12.3 million, or 8.0%, to $165.7 million. Local Advertising
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net revenue increased $1.8 million, or 2.3%, to $79.3 million, and Live Events net revenue increased $6.3 million, or 9.2%, to $75.0 million.
Adjusted EBITDA
Adjusted EBITDA for the quarter ended September 30, 2015 increased $7.1 million, or 26.5%, to $33.7 million, as compared to $26.7 million in the same period last year. The increase was primarily due to the acquisitions of NAME on September 1, 2015 and WE Fest on October 31, 2014.
Pro forma Adjusted EBITDA for the quarter ended September 30, 2015 decreased $2.2 million, or 4.6%, to $45.6 million, compared to $47.8 million in the same period last year. On a constant currency basis, Adjusted EBITDA decreased $0.8 million, or 1.7%.
The decrease in pro forma Adjusted EBITDA was consistent with our previously issued guidance and was primarily related to a reduction in political revenue, as well as ongoing investments in certain key areas, including investments in new and existing live events, given the opportunities we see ahead.
Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014
Net Revenue
Net revenue for the nine months ended September 30, 2015 increased $48.0 million, or 17.1%, to $328.2 million, as compared to $280.2 million in the same period last year. This was primarily due to a $40.6 million increase in Live Events net revenue, partially due to an increase in net revenue from the acquisition of NAME on September 1, 2015 and the acquisition of WE Fest on October 31, 2014. Local Advertising net revenue increased $0.8 million, or 0.4%, to $223.2 million, Live Events net revenue increased $40.6 million, or 114.2%, to $76.1 million and Other Media and Entertainment net revenue increased $6.6 million, or 29.6%, to $28.9 million.
Pro forma net revenue increased $19.5 million, or 5.3%, to $388.9 million, as compared to $369.4 million in the same period last year. Local Advertising net revenue increased $0.8 million, or 0.4%, to $223.2 million, Live Events net revenue increased $12.0 million, or 9.6%, to $137.8 million and Other Media and Entertainment net revenue increased $6.6 million, or 31.0%, to $28.0 million. Excluding political revenue and on a constant currency basis, net revenue increased $26.5 million, or 7.3%, to $387.9 million. Local Advertising net revenue increased $3.1 million, or 1.4%, to $222.1 million, and Live Events net revenue increased $16.8 million, or 13.8%, to $137.8 million.
Adjusted EBITDA
Adjusted EBITDA for the nine months ended September 30, 2015 increased $5.5 million, or 7.6%, to $76.9 million, as compared to $71.4 million in the same period last year. The increase was primarily due to the acquisitions of NAME on September 1, 2015 and WE Fest on October 31, 2014.
Pro forma Adjusted EBITDA decreased $2.8 million, or 3.3%, to $81.5 million, compared to $84.3 million in the same period last year. On a constant currency basis, Adjusted EBITDA decreased $1.6 million, or 1.9%. The decrease in pro forma Adjusted EBITDA was primarily related to a reduction in political revenue, as well as ongoing investments in certain key areas, including investments in new and existing live events, given the opportunities we see ahead. In addition, the Company incurred public company expenses which did not exist in the full prior year period.
Liquidity and Capital Resources
As of September 30, 2015, we had a total of $28.1 million of cash on hand and the total amount of revolving credit capacity available to us was $50.0 million under our credit facility. As of September 30, 2015, we had $598.8 million of outstanding indebtedness and $570.7 million of outstanding indebtedness net of cash, representing 5.7x and 5.4x gross and net leverage, respectively, based on the trailing twelve month pro forma Adjusted EBITDA of $105.5 million as of September 30, 2015.
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The table below presents a summary, as of September 30, 2015, of our outstanding common stock and securities convertible into common stock, excluding options issued under our 2014 Omnibus Incentive Plan.
Security | Number Outstanding1 | Description | |
Class A common stock | 9,941,143 | 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 | 9,508,878 | 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 $951.3 | |
Total | 27,366,985 | ||
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. | |||
Segment Reporting
We have two reportable operating segments, which are Local Advertising and Live Events, and report the remainder of our business in an Other Media and Entertainment category. Our Local Advertising segment is composed of broadcast, digital and mobile advertising on our stations, streams, websites and mobile application. Our Live Events segment is composed of a diverse range of live events, which we create, promote and produce, including musical concerts, multi-day music festivals, fairs, consumer expositions and trade shows, athletic events, lifestyle events and other forms of entertainment. The Other Media and Entertainment business principally includes digital marketing services, national digital assets and other revenue.
Conference Call
Townsquare Media, Inc. will host a conference call to discuss certain third quarter 2015 financial results on Thursday, November 5, 2015 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 13622647. A live webcast of the conference call will also be available on the equity investor relations page of the Company's website at www.townsquaremedia.com.
A replay of the conference call will be available through November 12, 2015. To access the replay, please dial 1-877-870-5176 (U.S. & Canada) or 1-858-384-5517 (International) and enter confirmation code 13622647. 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 Media, Inc. is an integrated and diversified media and entertainment and digital marketing services company that owns and operates market leading radio stations, digital and social properties and live events in small and mid-sized markets across the United States, delivering national scale and expertise to the communities it serves on a local level. The Company owns and operates 309 radio stations, over 325 search engine and mobile-optimized local websites in 66 small and mid-sized U.S. markets, making Townsquare the third largest owner of radio stations in the United States by number of radio stations owned, and approximately 650 live events. The Company supplements its local offerings with the nationwide reach of our owned, operated and affiliated music and entertainment websites, which, on a combined basis, attracted one of the largest audiences among music-focused digital advertising networks as of September 2015 as well as certain large scale live events. For more information, please visit www.townsquaremedia.com.
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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, 2014, filed with the Securities and Exchange Commission on March 16, 2015, 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 (Messner)
(203) 900-5555
investors@townsquaremedia.com
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TOWNSQUARE MEDIA, INC.
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share and per Share Data)
(unaudited)
September 30, 2015 | December 31, 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash | $ | 28,059 | $ | 24,462 | |||
Accounts receivable, net of allowance of $1,837 and $3,350, respectively | 66,310 | 61,151 | |||||
Prepaid expenses and other current assets | 11,253 | 7,553 | |||||
Total current assets | 105,622 | 93,166 | |||||
Property and equipment, net | 129,827 | 96,247 | |||||
Intangible assets, net | 522,855 | 505,839 | |||||
Goodwill | 293,202 | 242,300 | |||||
Deferred financing costs, net | 10,310 | 9,636 | |||||
Investments | 813 | 484 | |||||
Other assets | 7,633 | 413 | |||||
Total assets | $ | 1,070,262 | $ | 948,085 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 10,663 | $ | 6,747 | |||
Current portion of long-term debt | 164 | 1,293 | |||||
Deferred revenue | 13,842 | 14,299 | |||||
Accrued expenses and other current liabilities | 29,305 | 21,339 | |||||
Accrued interest | 9,785 | 9,245 | |||||
Total current liabilities | 63,759 | 52,923 | |||||
Long-term debt, less current portion, (inclusive of bond premium of $0 and $7,203, respectively) | 598,641 | 538,383 | |||||
Net deferred tax liability | 34,708 | 11,644 | |||||
Other long-term liabilities | 11,497 | 973 | |||||
Total liabilities | 708,605 | 603,923 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Class A common stock, par value $0.01 per share; 300,000,000 shares authorized and 9,941,143 and 9,457,242 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | 100 | 95 | |||||
Class B common stock, par value $0.01 per share; 50,000,000 shares authorized and 3,022,484 shares issued and outstanding at both September 30, 2015 and December 31, 2014 | 30 | 30 | |||||
Class C common stock, par value $0.01 per share; 50,000,000 shares authorized and 4,894,480 shares issued and outstanding at both September 30, 2015 and December 31, 2014 | 49 | 49 | |||||
Total common stock | 179 | 174 | |||||
Additional paid-in capital | 361,679 | 351,984 | |||||
Accumulated deficit | (1,021 | ) | (8,439 | ) | |||
Accumulated currency translation adjustment | (74 | ) | — | ||||
Non-controlling interest | 894 | 443 | |||||
Total liabilities and stockholders’ equity | $ | 1,070,262 | $ | 948,085 | |||
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TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in Thousands, Except Per Share Data)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net revenue | $ | 129,568 | $ | 94,747 | $ | 328,202 | $ | 280,175 | |||||||
Operating costs and expenses: | |||||||||||||||
Direct operating expenses, excluding depreciation, amortization and stock-based compensation | 89,741 | 61,608 | 233,367 | 191,338 | |||||||||||
Depreciation and amortization | 4,784 | 4,249 | 12,068 | 12,967 | |||||||||||
Corporate expenses | 6,106 | 6,487 | 17,949 | 17,411 | |||||||||||
Stock-based compensation | 2,875 | 37,580 | 4,278 | 37,739 | |||||||||||
Transaction costs | 1,125 | 63 | 1,297 | 81 | |||||||||||
Net (gain) loss on sale of assets | (11,909 | ) | 222 | (11,895 | ) | 86 | |||||||||
Operating income (loss) | 36,846 | (15,462 | ) | 71,138 | 20,553 | ||||||||||
Other expenses: | |||||||||||||||
Interest expense | 8,527 | 11,708 | 27,334 | 35,910 | |||||||||||
Net loss on debt extinguishment | 288 | — | 30,305 | — | |||||||||||
Other expense, net | 33 | 35 | 117 | 72 | |||||||||||
Income (loss) before income taxes | 27,998 | (27,205 | ) | 13,382 | (15,429 | ) | |||||||||
Provision for income taxes | 11,543 | 6,379 | 5,530 | 6,561 | |||||||||||
Net income (loss) | $ | 16,455 | $ | (33,584 | ) | $ | 7,852 | $ | (21,990 | ) | |||||
Net income (loss) attributable to: | |||||||||||||||
Controlling interests | $ | 16,454 | $ | (33,584 | ) | $ | 7,418 | $ | (22,409 | ) | |||||
Non-controlling interests | 1 | — | 434 | 419 | |||||||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.94 | $ | 0.45 | |||||||||||
Diluted | $ | 0.60 | $ | 0.28 | |||||||||||
Pro forma C Corporation data (unaudited): | |||||||||||||||
Historical loss before income taxes | $ | (27,205 | ) | $ | (15,429 | ) | |||||||||
Pro forma income tax benefit | (10,583 | ) | (6,002 | ) | |||||||||||
Pro forma net loss | $ | (16,622 | ) | $ | (9,427 | ) | |||||||||
Pro forma net loss per share: | |||||||||||||||
Basic | $ | (1.17 | ) | $ | (0.94 | ) | |||||||||
Diluted | $ | (1.17 | ) | $ | (0.94 | ) | |||||||||
Weighted average shares outstanding: | Pro Forma | Pro Forma | |||||||||||||
Basic | 17,532 | 14,209 | 17,427 | 10,024 | |||||||||||
Diluted | 27,610 | 14,209 | 27,841 | 10,024 | |||||||||||
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TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Thousands) (unaudited)
Nine Months Ended September 30, | |||||||
2015 | 2014 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 7,852 | $ | (21,990 | ) | ||
Adjustments to reconcile net income (loss) to net cash from operating activities: | |||||||
Depreciation and amortization | 12,068 | 12,967 | |||||
Amortization of deferred financing costs | 1,326 | 2,529 | |||||
Deferred income tax benefit | 5,488 | 6,287 | |||||
(Recovery of) provision for doubtful accounts | (153 | ) | 1,267 | ||||
Stock-based compensation expense | 4,278 | 37,739 | |||||
Non-cash interest expense | — | 1,797 | |||||
Amortization of bond premium | (424 | ) | (1,272 | ) | |||
Write-off of deferred financing costs | 9,348 | — | |||||
Write-off of bond premium | (6,779 | ) | — | ||||
Net (gain) loss on sale of assets | (11,895 | ) | 86 | ||||
Changes in assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (4,838 | ) | (7,078 | ) | |||
Prepaid expenses and other assets | (2,222 | ) | 2,092 | ||||
Accounts payable | 665 | (795 | ) | ||||
Accrued expenses | (4,298 | ) | (7,527 | ) | |||
Accrued interest | 540 | 9,085 | |||||
Other long-term liabilities | 3,084 | 30 | |||||
Net cash provided by operating activities | 14,040 | 35,217 | |||||
Cash flows from investing activities: | |||||||
Payments for acquisitions, net of cash received | (74,149 | ) | (4,222 | ) | |||
Acquisition of intangibles | (332 | ) | (210 | ) | |||
Purchase of property and equipment | (9,935 | ) | (11,087 | ) | |||
Proceeds from insurance settlement | 450 | — | |||||
Proceeds from sale of assets | 18,953 | 402 | |||||
Net cash used in investing activities | (65,013 | ) | (15,117 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from stock option exercises and stock offering | 14 | 98,157 | |||||
Offering costs | (92 | ) | (10,045 | ) | |||
Repayment of long-term debt | (553,552 | ) | (123,462 | ) | |||
Proceeds from the issuance of long-term debt | 620,000 | — | |||||
Debt financing costs | (11,348 | ) | (368 | ) | |||
Cash distributions to non-controlling interests | (208 | ) | — | ||||
Repayments of capitalized obligations | (118 | ) | (112 | ) | |||
Net cash provided by (used in) financing activities | 54,696 | (35,830 | ) | ||||
Net effect of foreign currency rate changes | (126 | ) | — | ||||
Net increase (decrease) in cash | 3,597 | (15,730 | ) | ||||
Cash: | |||||||
Beginning of period | 24,462 | 45,647 | |||||
End of period | $ | 28,059 | $ | 29,917 | |||
Supplemental Disclosure of Cash Flow Information: | |||||||
Cash payments: | |||||||
Payments to redeem long-term debt prior to contractual maturity | $ | 27,735 | $ | — | |||
Interest | 25,863 | 23,737 | |||||
Income taxes | 573 | 384 | |||||
Barter transactions: | |||||||
Barter revenue – included in net revenue | $ | 11,368 | $ | 9,342 | |||
Barter expense – included in direct operating expenses | 10,066 | 8,402 | |||||
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TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF INCOME BY SEGMENT
(in Thousands)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
($ in thousands) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Statement of Operations Data: | |||||||||||||||
Local Advertising net revenue | $ | 79,577 | $ | 78,997 | $ | 223,161 | $ | 222,319 | |||||||
Live Events net revenue | 38,255 | 8,036 | 76,127 | 35,548 | |||||||||||
Other Media and Entertainment net revenue | 11,736 | 7,714 | 28,914 | 22,308 | |||||||||||
Net revenue | 129,568 | 94,747 | 328,202 | 280,175 | |||||||||||
Operating Costs and Expenses: | |||||||||||||||
Local Advertising direct operating expenses | 48,941 | 47,828 | 143,065 | 140,815 | |||||||||||
Live Events direct operating expenses | 31,185 | 6,751 | 65,152 | 28,948 | |||||||||||
Other Media and Entertainment direct operating expenses | 9,615 | 7,029 | 25,150 | 21,575 | |||||||||||
Direct operating expenses, excluding depreciation, amortization and stock-based compensation | 89,741 | 61,608 | 233,367 | 191,338 | |||||||||||
Depreciation and amortization | 4,784 | 4,249 | 12,068 | 12,967 | |||||||||||
Corporate expenses | 6,106 | 6,487 | 17,949 | 17,411 | |||||||||||
Stock-based compensation | 2,875 | 37,580 | 4,278 | 37,739 | |||||||||||
Transaction costs | 1,125 | 63 | 1,297 | 81 | |||||||||||
Net (gain) loss on sale of assets | (11,909 | ) | 222 | (11,895 | ) | 86 | |||||||||
Operating income (loss) | 36,846 | (15,462 | ) | 71,138 | 20,553 | ||||||||||
Other expense: | |||||||||||||||
Interest expense | 8,527 | 11,708 | 27,334 | 35,910 | |||||||||||
Net loss on debt extinguishment | 288 | — | 30,305 | — | |||||||||||
Other expense, net | 33 | 35 | 117 | 72 | |||||||||||
Total other expense | 8,848 | 11,743 | 57,756 | 35,982 | |||||||||||
Income (loss) before income taxes | 27,998 | (27,205 | ) | 13,382 | (15,429 | ) | |||||||||
Provision for income taxes | 11,543 | 6,379 | 5,530 | 6,561 | |||||||||||
Net income (loss) | $ | 16,455 | $ | (33,584 | ) | $ | 7,852 | $ | (21,990 | ) | |||||
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The following table summarizes pro forma net revenue and direct operating expenses broken out by segment for the three and nine months ended September 30, 2015 and 2014, respectively (dollars in thousands):
Pro Forma | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Statement of Operations Data: | |||||||||||||||
Local Advertising net revenue | $ | 79,577 | $ | 78,997 | $ | 223,161 | $ | 222,319 | |||||||
Live Events net revenue | 74,977 | 72,927 | 137,788 | 125,743 | |||||||||||
Other Media and Entertainment net revenue | 11,494 | 7,377 | 27,953 | 21,339 | |||||||||||
Net revenue | 166,048 | 159,301 | 388,902 | 369,401 | |||||||||||
Operating Costs and Expenses: | |||||||||||||||
Local Advertising direct operating expenses | 48,941 | 47,828 | 143,065 | 140,815 | |||||||||||
Live Events direct operating expenses | 55,800 | 50,225 | 121,493 | 105,554 | |||||||||||
Other Media and Entertainment direct operating expenses | 9,566 | 6,947 | 24,925 | 21,347 | |||||||||||
Direct operating expenses, excluding depreciation, amortization and stock-based compensation | 114,307 | 105,000 | 289,483 | 267,716 | |||||||||||
Direct Profit | $ | 51,741 | $ | 54,301 | $ | 99,419 | $ | 101,685 | |||||||
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The following tables reconcile both on a GAAP and 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 nine months ended September 30, 2015 and 2014, respectively (dollars in thousands):
Actual | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income (loss) | $ | 16,455 | $ | (33,584 | ) | $ | 7,852 | $ | (21,990 | ) | |||||
Provision for income taxes | 11,543 | 6,379 | 5,530 | 6,561 | |||||||||||
Net loss on debt extinguishment | 288 | — | 30,305 | — | |||||||||||
Interest expense | 8,527 | 11,708 | 27,334 | 35,910 | |||||||||||
Transaction costs | 1,125 | 63 | 1,297 | 81 | |||||||||||
Depreciation and amortization | 4,784 | 4,249 | 12,068 | 12,967 | |||||||||||
Corporate expenses | 6,106 | 6,487 | 17,949 | 17,411 | |||||||||||
Stock-based compensation | 2,875 | 37,580 | 4,278 | 37,739 | |||||||||||
Other(a) | (11,876 | ) | 257 | (11,778 | ) | 158 | |||||||||
Direct Profit | 39,827 | 33,139 | 94,835 | 88,837 | |||||||||||
Corporate expenses | (6,106 | ) | (6,487 | ) | (17,949 | ) | (17,411 | ) | |||||||
Adjusted EBITDA | $ | 33,721 | $ | 26,652 | $ | 76,886 | $ | 71,426 | |||||||
(a) Other includes net (gain) loss on sale of assets and other expense, net.
Pro Forma | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income (loss) | $ | 23,210 | $ | (2,890 | ) | $ | 8,579 | $ | 1,423 | ||||||
Provision for (benefit from) income taxes | 15,272 | (1,840 | ) | 5,868 | 906 | ||||||||||
Net loss on debt extinguishment | 288 | — | 30,305 | — | |||||||||||
Interest expense, net | 8,774 | 8,805 | 26,229 | 26,321 | |||||||||||
Transaction costs | 1,125 | 63 | 1,297 | 81 | |||||||||||
Depreciation and amortization | 6,017 | 5,839 | 16,577 | 17,619 | |||||||||||
Corporate expenses | 6,106 | 6,487 | 17,949 | 17,411 | |||||||||||
Stock-based compensation | 2,875 | 37,580 | 4,278 | 37,739 | |||||||||||
Other(a) | (11,926 | ) | 258 | (11,663 | ) | 186 | |||||||||
Direct Profit | 51,741 | 54,302 | 99,419 | 101,686 | |||||||||||
Corporate expenses | (6,106 | ) | (6,487 | ) | (17,949 | ) | (17,411 | ) | |||||||
Adjusted EBITDA | $ | 45,635 | $ | 47,815 | $ | 81,470 | $ | 84,275 | |||||||
(a) Other includes net (gain) loss on sale of assets and other expense, net.
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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 September 30, 2015 (dollars in thousands):
Quarter Ended | Twelve Months Ended | ||||||||||||||||||
September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2015 | |||||||||||||||
Net income (loss) | $ | 23,210 | $ | (12,555 | ) | $ | (2,042 | ) | $ | 4,165 | $ | 12,778 | |||||||
Provision for (benefit from) income taxes | 15,272 | (8,777 | ) | (659 | ) | 5,477 | 11,313 | ||||||||||||
Interest expense | 8,774 | 8,742 | 8,713 | 8,797 | 35,026 | ||||||||||||||
Net loss on debt extinguishment | 288 | 30,017 | — | — | 30,305 | ||||||||||||||
Transaction costs | 1,125 | 125 | 47 | 136 | 1,433 | ||||||||||||||
Depreciation and amortization | 6,017 | 5,271 | 5,288 | 5,500 | 22,076 | ||||||||||||||
Corporate expenses | 6,106 | 6,602 | 5,240 | 7,585 | 25,533 | ||||||||||||||
Stock-based compensation | 2,875 | 1,403 | — | — | 4,278 | ||||||||||||||
Other (a) | (11,926 | ) | 23 | 239 | (90 | ) | (11,754 | ) | |||||||||||
Direct Profit | 51,741 | 30,851 | 16,826 | 31,570 | 130,988 | ||||||||||||||
Corporate expenses | (6,106 | ) | (6,602 | ) | (5,240 | ) | (7,585 | ) | (25,533 | ) | |||||||||
Adjusted EBITDA | $ | 45,635 | $ | 24,249 | $ | 11,586 | $ | 23,985 | $ | 105,455 | |||||||||
(a) Other includes net (gain) loss on sale of assets and other 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 (each as defined below).
We define Direct Profit as net income (loss) before the deduction of income taxes, other expense (net), interest expense, net loss on debt extinguishment, transaction costs, corporate expenses, net (gain) loss on sale of assets and depreciation and amortization. Adjusted EBITDA is defined as Direct Profit less corporate expenses (excluding stock-based compensation). Direct Profit and Adjusted EBITDA do not represent, and should not be considered as alternatives to, net (loss) income or cash flows from operations, as determined under U.S. generally accepted accounting principles, or 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. Further, while discretionary bonuses for members of management are not determined with reference to specific targets, our Board of Directors may consider Direct Profit and Adjusted EBITDA when determining discretionary bonuses.
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