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| 8-K - 8-K - Townsquare Media, Inc. | a930168-kforpressrelease.htm |
IMMEDIATE RELEASE
TOWNSQUARE REPORTS THIRD QUARTER 2016 RESULTS
Greenwich, CT - November 8, 2016 - Townsquare Media, Inc. (NYSE: TSQ) (“Townsquare,” the “Company,” “we,” “us,” or “our”) announced today financial results for the third quarter ended September 30, 2016.
“In the third quarter, net revenue and Adjusted EBITDA increased 28% and 32% over the prior year, respectively, and net income decreased 4%. Excluding the impact of a one-time impairment charge, net income increased 12% over the prior year,” commented Steven Price, Chairman and Chief Executive Officer of Townsquare. “On a pro forma basis, our Local Marketing Solutions segment continued its positive momentum by delivering another quarter of solid growth, with net revenue increasing approximately 4% over the prior year period. These results were offset by a decline in our Entertainment segment due primarily to exceptionally poor weather at four of our largest fairs. Excluding those fairs, Townsquare’s pro forma net revenue and Adjusted EBITDA increased approximately 2% and 3%, respectively.”
Third Quarter Highlights
As compared to the third quarter of 2015 on an actual basis:
•Net revenue increased 27.9%
•Net income decreased 3.6%
•Adjusted EBITDA increased 32.4%
As compared to the third quarter of 2015 on a pro forma basis:
•Net revenue was approximately flat
•Local Marketing Solutions net revenue increased 3.8%
•Entertainment net revenue decreased 4.5%
•Net income decreased 31.7%
•Adjusted EBITDA decreased 2.1%
Diluted net income and diluted Adjusted Net Income Per Share were $0.58 and $0.67, respectively
Year to Date Highlights
As compared to the first nine months of 2015 on an actual basis:
•Net revenue increased 21.1%
•Net income increased 155.7%
•Adjusted EBITDA increased 6.5%
As compared to the first nine months of 2015 on a pro forma basis:
•Net revenue increased 2.2%
•Local Marketing Solutions net revenue increased 5.1%
•Entertainment net revenue decreased 2.4%
•Net income increased 134.1%
•Adjusted EBITDA increased 0.5%
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.
1
Quarter Ended September 30, 2016 Compared to the Quarter Ended September 30, 2015
Net Revenue
Net revenue for the quarter ended September 30, 2016 increased $36.2 million, or 27.9%, to $165.8 million, as compared to $129.6 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 $3.1 million, or 3.6%, to $89.0 million and Entertainment net revenue increased $33.1 million, or 76.0%, to $76.8 million.
Pro forma net revenue decreased $0.3 million, or 0.2%, to $165.8 million, as compared to $166.0 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 pro forma net revenue increased $3.3 million, or 3.8%, to $89.0 million and Entertainment pro forma net revenue decreased $3.6 million, or 4.5%, to $76.8 million. Excluding political revenue, pro forma net revenue decreased $1.3 million, or 0.8%, to $164.4 million and Local Marketing Solutions pro forma net revenue increased $2.3 million, or 2.7%, to $87.7 million.
Net Income
Net income for the quarter ended September 30, 2016 decreased $0.6 million, or 3.6%, to $15.9 million, as compared to $16.5 million in the same period last year. The decrease was primarily related to a decrease in the net gain on sale of assets associated with the divestiture of our towers on September 1, 2015, and an impairment charge in the quarter ended September 30, 2016.
Pro forma net income for the quarter ended September 30, 2016 decreased $7.3 million, or 31.7%, to $15.9 million, compared to $23.2 million in the same period last year. The decrease was primarily related to a decrease in the net gain on sale of assets associated with the divestiture of our towers on September 1, 2015, and an impairment charge in the quarter ended September 30, 2016.
Adjusted EBITDA
Adjusted EBITDA for the quarter ended September 30, 2016 increased $10.9 million, or 32.4%, to $44.7 million, as compared to $33.7 million in the same period last year. The increase was primarily related to the Adjusted EBITDA contribution of NAME, which was acquired on September 1, 2015.
Pro forma Adjusted EBITDA for the quarter ended September 30, 2016 decreased $1.0 million, or 2.1%, to $44.7 million, compared to $45.6 million in the same period last year.
Nine Months Ended September 30, 2016 Compared to the Nine Months Ended September 30, 2015
Net Revenue
Net revenue for the nine months ended September 30, 2016 increased $69.1 million, or 21.1%, to $397.3 million, as compared to $328.2 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 $11.1 million, or 4.6%, to $250.9 million and Entertainment net revenue increased $58.0 million, or 65.6%, to $146.4 million.
Pro forma net revenue increased $8.4 million, or 2.2%, to $397.3 million, as compared to $388.9 million in the same period last year. Local Marketing Solutions pro forma net revenue increased $12.1 million, or 5.1%, to $250.9 million and Entertainment pro forma net revenue decreased $3.7 million, or 2.4%, to $146.4 million. Excluding political revenue, pro forma net revenue increased $5.8 million, or 1.5%, to $393.6 million and Local Marketing Solutions pro forma net revenue increased $9.4 million, or 4.0%, to $247.2 million.
Net Income
Net income for the nine months ended September 30, 2016 increased $12.2 million, or 155.7%, to $20.1 million, as compared to $7.9 million in the same period last year.
Pro forma net income for the nine months ended September 30, 2016 increased $11.5 million, or 134.1%, to $20.1 million, compared to $8.6 million in the same period last year.
Adjusted EBITDA
Adjusted EBITDA for the nine months ended September 30, 2016 increased $5.0 million, or 6.5%, to $81.9 million, as compared to $76.9 million in the same period last year.
Pro forma Adjusted EBITDA for the nine months ended September 30, 2016 increased $0.4 million, or 0.5%, to $81.9 million, compared to $81.5 million in the same period last year.
Liquidity and Capital Resources
As of September 30, 2016, we had a total of $38.4 million of cash on hand and $50.0 million of available borrowing capacity under our revolving credit facility. As of September 30, 2016, we had $581.3 million of outstanding indebtedness, representing 5.6x and 5.3x gross and net leverage, respectively, based on pro forma Adjusted EBITDA for the twelve months ended September 30, 2016 of $103.0 million.
2
The table below presents a summary, as of November 7, 2016, 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 | 13,735,690 | One vote per share. | ||
Class B common stock | 3,022,484 | 10 votes per share.2 | ||
Class C common stock | 1,636,341 | 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 Tuesday, November 8, 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 13647595. 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 November 15, 2016. To access the replay, please dial 1-844-512-2921 (U.S. & Canada) or 1-412-317-6671 (International) and enter confirmation code 13647595. 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 309 radio stations and more than 325 local websites in 66 U.S. markets, a digital marketing solutions company serving approximately 10,200 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 XXLmag.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
investors@townsquaremedia.com
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TOWNSQUARE MEDIA, INC.
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share and Per Share Data)
(unaudited)
September 30, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash | $ | 38,413 | $ | 33,298 | |||
Accounts receivable, net of allowance of $1,487 and $2,114, respectively | 65,420 | 60,143 | |||||
Prepaid expenses and other current assets | 13,551 | 9,766 | |||||
Total current assets | 117,384 | 103,207 | |||||
Property and equipment, net | 139,329 | 133,943 | |||||
Intangible assets, net | 514,560 | 517,979 | |||||
Goodwill | 292,953 | 292,953 | |||||
Investments | 4,313 | 5,049 | |||||
Other assets | 7,343 | 7,580 | |||||
Total assets | $ | 1,075,882 | $ | 1,060,711 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 12,192 | $ | 9,549 | |||
Current portion of long-term debt | 658 | 171 | |||||
Deferred revenue | 14,498 | 17,496 | |||||
Accrued expenses and other current liabilities | 24,332 | 29,958 | |||||
Accrued interest | 9,203 | 4,910 | |||||
Total current liabilities | 60,883 | 62,084 | |||||
Long-term debt, less current portion (net of deferred finance costs of $8,421and $9,962, respectively) | 572,187 | 588,657 | |||||
Deferred tax liability | 48,551 | 35,233 | |||||
Other long-term liabilities | 10,620 | 11,297 | |||||
Total liabilities | 692,241 | 697,271 | |||||
Stockholders’ equity: | |||||||
Class A common stock, par value $0.01 per share; 300,000,000 shares authorized; 13,735,690 and 9,946,354 shares issued and outstanding at September 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 September 30, 2016 and December 31, 2015, respectively | 30 | 30 | |||||
Class C common stock, par value $0.01 per share; 50,000,000 shares authorized; 1,636,341 and 4,894,480 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 49 | 49 | |||||
Total common stock | 184 | 179 | |||||
Additional paid-in capital | 361,844 | 361,186 | |||||
Retained earnings | 21,214 | 1,391 | |||||
Accumulated other comprehensive (loss) income | (410 | ) | 44 | ||||
Non-controlling interest | 809 | 640 | |||||
Total liabilities and stockholders’ equity | $ | 1,075,882 | $ | 1,060,711 | |||
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TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in Thousands, Except Per Share Data)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net revenue | $ | 165,756 | $ | 129,568 | $ | 397,345 | $ | 328,202 | |||||||
Operating costs and expenses: | |||||||||||||||
Direct operating expenses, excluding depreciation, amortization and stock-based compensation | 114,646 | 89,728 | 297,144 | 233,331 | |||||||||||
Depreciation and amortization | 5,686 | 4,784 | 17,812 | 12,068 | |||||||||||
Corporate expenses | 6,450 | 6,119 | 18,320 | 17,985 | |||||||||||
Stock-based compensation | 206 | 2,875 | 663 | 4,278 | |||||||||||
Transaction costs | 256 | 1,125 | 606 | 1,297 | |||||||||||
Net (gain) loss on sale of assets | (426 | ) | (11,909 | ) | 287 | (11,895 | ) | ||||||||
Total operating costs and expenses | 126,818 | 92,722 | 334,832 | 257,064 | |||||||||||
Operating income | 38,938 | 36,846 | 62,513 | 71,138 | |||||||||||
Other expenses (income): | |||||||||||||||
Interest expense, net | 8,294 | 8,527 | 25,740 | 27,334 | |||||||||||
Impairment on investment | 4,236 | — | 4,236 | — | |||||||||||
Cancellation and (repurchase) of debt | — | 288 | (461 | ) | 30,305 | ||||||||||
Other expense (income), net | 52 | 33 | (351 | ) | 117 | ||||||||||
Income before income taxes | 26,356 | 27,998 | 33,349 | 13,382 | |||||||||||
Provision for income taxes | 10,493 | 11,543 | 13,269 | 5,530 | |||||||||||
Net income | $ | 15,863 | $ | 16,455 | $ | 20,080 | $ | 7,852 | |||||||
Net income attributable to: | |||||||||||||||
Controlling interests | $ | 15,816 | $ | 16,454 | $ | 19,823 | $ | 7,418 | |||||||
Non-controlling interests | 47 | 1 | 257 | 434 | |||||||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.86 | $ | 0.94 | $ | 1.10 | $ | 0.45 | |||||||
Diluted | $ | 0.58 | $ | 0.60 | $ | 0.74 | $ | 0.28 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 18,395 | 17,532 | 18,208 | 17,427 | |||||||||||
Diluted | 27,372 | 27,610 | 27,280 | 27,841 | |||||||||||
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TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Thousands)
(unaudited)
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income attributable to: | |||||||
Controlling interests | $ | 19,823 | $ | 7,418 | |||
Non-controlling interests | 257 | 434 | |||||
Net income | $ | 20,080 | $ | 7,852 | |||
Adjustments to reconcile net income to net cash from operating activities: | |||||||
Depreciation and amortization | 17,812 | 12,068 | |||||
Amortization of deferred financing costs | 1,203 | 1,326 | |||||
Deferred income tax expense | 13,269 | 5,488 | |||||
Provision (recovery) for doubtful accounts | 1,083 | (153 | ) | ||||
Stock-based compensation expense | 663 | 4,278 | |||||
(Repurchase) and cancellation of debt | (461 | ) | — | ||||
Amortization of bond premium | — | (424 | ) | ||||
Write-off of deferred financing costs | 338 | 9,348 | |||||
Write-off of bond premium | — | (6,779 | ) | ||||
Impairment on investment | 4,236 | — | |||||
Net loss (gain) on sale of assets | 287 | (11,895 | ) | ||||
Changes in assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (9,430 | ) | (4,838 | ) | |||
Prepaid expenses and other assets | (2,828 | ) | (2,222 | ) | |||
Accounts payable | (887 | ) | 665 | ||||
Accrued expenses | (8,821 | ) | (4,298 | ) | |||
Accrued interest | 4,293 | 540 | |||||
Other long-term liabilities | (677 | ) | 3,084 | ||||
Net cash provided by operating activities | 40,160 | 14,040 | |||||
Cash flows from investing activities: | |||||||
Payments for acquisitions, net of cash received | (1,941 | ) | (74,149 | ) | |||
Acquisition of intangibles | — | (332 | ) | ||||
Purchase of property and equipment | (16,826 | ) | (9,935 | ) | |||
Proceeds from insurance settlement | 451 | 450 | |||||
Proceeds from sale of assets | 1,626 | 18,953 | |||||
Net cash used in investing activities | (16,690 | ) | (65,013 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from stock offering and option exercises | — | 14 | |||||
Offering costs | — | (92 | ) | ||||
Repayment of long-term debt | (17,460 | ) | (553,552 | ) | |||
Proceeds from the issuance of long-term debt | — | 620,000 | |||||
Debt financing costs | — | (11,348 | ) | ||||
Proceeds from sale of minority interest in subsidiary | 50 | — | |||||
Cash distributions to non-controlling interests | (138 | ) | (208 | ) | |||
Repayments of capitalized obligations | (127 | ) | (118 | ) | |||
Net cash (used in) provided by financing activities | (17,675 | ) | 54,696 | ||||
Net effect of foreign currency exchange rate changes | (680 | ) | (126 | ) | |||
Net increase in cash | 5,115 | 3,597 | |||||
Cash: | |||||||
Beginning of period | 33,298 | 24,462 | |||||
End of period | $ | 38,413 | $ | 28,059 | |||
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TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in Thousands)
(unaudited)
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Supplemental Disclosure of Cash Flow Information: | |||||||
Cash payments: | |||||||
Payments to redeem long-term debt prior to contractual maturity | $ | — | $ | 27,735 | |||
Interest | 19,881 | 25,863 | |||||
Income taxes | 1,910 | 573 | |||||
Purchase obligations: | |||||||
Capital lease | 525 | — | |||||
Barter transactions: | |||||||
Barter revenue – included in net revenue | $ | 17,360 | $ | 11,368 | |||
Barter expense – included in direct operating expenses | 10,598 | 10,066 | |||||
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TOWNSQUARE MEDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS BY SEGMENT
(in Thousands)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Statement of Operations Data: | |||||||||||||||
Local Marketing Solutions net revenue | $ | 89,003 | $ | 85,949 | $ | 250,914 | $ | 239,773 | |||||||
Entertainment net revenue | 76,753 | 43,619 | 146,431 | 88,429 | |||||||||||
Net revenue | 165,756 | 129,568 | 397,345 | 328,202 | |||||||||||
Operating Costs and Expenses: | |||||||||||||||
Local Marketing Solutions direct operating expenses | 55,773 | 53,534 | 164,826 | 155,846 | |||||||||||
Entertainment direct operating expenses | 58,873 | 36,194 | 132,318 | 77,485 | |||||||||||
Direct operating expenses, excluding depreciation, amortization and stock-based compensation | 114,646 | 89,728 | 297,144 | 233,331 | |||||||||||
Depreciation and amortization | 5,686 | 4,784 | 17,812 | 12,068 | |||||||||||
Corporate expenses | 6,450 | 6,119 | 18,320 | 17,985 | |||||||||||
Stock-based compensation | 206 | 2,875 | 663 | 4,278 | |||||||||||
Transaction costs | 256 | 1,125 | 606 | 1,297 | |||||||||||
Net (gain) loss on sale of assets | (426 | ) | (11,909 | ) | 287 | (11,895 | ) | ||||||||
Total operating costs and expenses | 126,818 | 92,722 | 334,832 | 257,064 | |||||||||||
Operating income | 38,938 | 36,846 | 62,513 | 71,138 | |||||||||||
Other expense (income): | |||||||||||||||
Interest expense, net | 8,294 | 8,527 | 25,740 | 27,334 | |||||||||||
Impairment on investment | 4,236 | — | 4,236 | — | |||||||||||
Cancellation and (repurchase) of debt | — | 288 | (461 | ) | 30,305 | ||||||||||
Other expense (income), net | 52 | 33 | (351 | ) | 117 | ||||||||||
Total other expense | 12,582 | 8,848 | 29,164 | 57,756 | |||||||||||
Income before income taxes | 26,356 | 27,998 | 33,349 | 13,382 | |||||||||||
Provision for income taxes | 10,493 | 11,543 | 13,269 | 5,530 | |||||||||||
Net income | $ | 15,863 | $ | 16,455 | $ | 20,080 | $ | 7,852 | |||||||
8
The following table summarizes pro forma net revenue and direct operating expenses broken out by segment for the three months and nine ended September 30, 2016 and 2015, respectively (dollars in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Statement of Operations Data: | |||||||||||||||
Local Marketing Solutions net revenue | $ | 89,003 | $ | 85,707 | $ | 250,914 | $ | 238,812 | |||||||
Entertainment net revenue | 76,753 | 80,341 | 146,431 | 150,090 | |||||||||||
Net revenue | 165,756 | 166,048 | 397,345 | 388,902 | |||||||||||
Operating Costs and Expenses: | |||||||||||||||
Local Marketing Solutions direct operating expenses | 55,773 | 53,484 | 164,826 | 155,619 | |||||||||||
Entertainment direct operating expenses | 58,873 | 60,810 | 132,318 | 133,827 | |||||||||||
Direct operating expenses, excluding depreciation, amortization and stock-based compensation | 114,646 | 114,294 | 297,144 | 289,446 | |||||||||||
Direct Profit | $ | 51,110 | $ | 51,754 | $ | 100,201 | $ | 99,456 | |||||||
The following table reconciles on a GAAP basis net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted Net Income for the three and nine months ended September 30, 2016 and 2015, respectively(dollars in thousands):
Actual | Actual | ||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 15,863 | $ | 16,455 | $ | 20,080 | $ | 7,852 | |||||||
Provision for income taxes | 10,493 | 11,543 | 13,269 | 5,530 | |||||||||||
Income before taxes | 26,356 | 27,998 | 33,349 | 13,382 | |||||||||||
Transaction costs | 256 | 1,125 | 606 | 1,297 | |||||||||||
Impairment on investment | 4,236 | — | 4,236 | — | |||||||||||
Net (gain) loss on sale of assets | (426 | ) | (11,909 | ) | 287 | (11,895 | ) | ||||||||
Cancellation and (repurchase) of debt | — | 288 | (461 | ) | 30,305 | ||||||||||
Adjusted income before taxes | 30,422 | 17,502 | 38,017 | 33,089 | |||||||||||
Provision for income taxes | 12,111 | 7,216 | 15,127 | 13,672 | |||||||||||
Adjusted Net Income | $ | 18,311 | $ | 10,286 | $ | 22,890 | $ | 19,417 | |||||||
Adjusted Net Income Per Share: | |||||||||||||||
Basic | $ | 1.00 | $ | 0.59 | $ | 1.26 | $ | 1.11 | |||||||
Diluted | $ | 0.67 | $ | 0.37 | $ | 0.84 | $ | 0.70 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 18,395 | 17,532 | 18,208 | 17,427 | |||||||||||
Diluted | 27,372 | 27,610 | 27,280 | 27,841 | |||||||||||
9
The following table reconciles on a GAAP basis net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Direct Profit, Adjusted EBITDA and Free Cash Flow for the three and nine months ended September 30, 2016 and 2015, respectively (dollars in thousands):
Actual | Actual | ||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 15,863 | $ | 16,455 | $ | 20,080 | $ | 7,852 | |||||||
Provision for income taxes | 10,493 | 11,543 | 13,269 | 5,530 | |||||||||||
Interest expense, net | 8,294 | 8,527 | 25,740 | 27,334 | |||||||||||
Transaction costs | 256 | 1,125 | 606 | 1,297 | |||||||||||
Depreciation and amortization | 5,686 | 4,784 | 17,812 | 12,068 | |||||||||||
Corporate expenses | 6,450 | 6,119 | 18,320 | 17,985 | |||||||||||
Stock-based compensation | 206 | 2,875 | 663 | 4,278 | |||||||||||
Impairment on investment | 4,236 | — | 4,236 | — | |||||||||||
Cancellation and (repurchase) of debt | — | 288 | (461 | ) | 30,305 | ||||||||||
Other(a) | (374 | ) | (11,876 | ) | (64 | ) | (11,778 | ) | |||||||
Direct Profit | 51,110 | 39,840 | 100,201 | 94,871 | |||||||||||
Corporate expenses | (6,450 | ) | (6,119 | ) | (18,320 | ) | (17,985 | ) | |||||||
Adjusted EBITDA | $ | 44,660 | $ | 33,721 | $ | 81,881 | $ | 76,886 | |||||||
Net cash interest expense | (3,308 | ) | (3,232 | ) | (19,881 | ) | (25,863 | ) | |||||||
Capital expenditures | (4,410 | ) | (4,123 | ) | (16,826 | ) | (9,935 | ) | |||||||
Cash paid for taxes | (1,095 | ) | (33 | ) | (1,910 | ) | (573 | ) | |||||||
Free Cash Flow | $ | 35,847 | $ | 26,333 | $ | 43,264 | $ | 40,515 | |||||||
(a) Other includes net (gain) loss on sale of assets and other (income) expense, net.
The following table reconciles on a pro forma basis net income, 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, 2016 and 2015, respectively (dollars in thousands):
Pro Forma | Pro Forma | ||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 15,863 | $ | 23,210 | $ | 20,080 | $ | 8,579 | |||||||
Provision for income taxes | 10,493 | 15,272 | 13,269 | 5,868 | |||||||||||
Interest expense, net | 8,294 | 8,774 | 25,740 | 26,229 | |||||||||||
Transaction costs | 256 | 1,125 | 606 | 1,297 | |||||||||||
Depreciation and amortization | 5,686 | 6,017 | 17,812 | 16,577 | |||||||||||
Corporate expenses | 6,450 | 6,106 | 18,320 | 17,949 | |||||||||||
Stock-based compensation | 206 | 2,875 | 663 | 4,278 | |||||||||||
Impairment on investment | 4,236 | — | 4,236 | — | |||||||||||
Cancellation and (repurchase) of debt | — | 288 | (461 | ) | 30,305 | ||||||||||
Other(a) | (374 | ) | (11,926 | ) | (64 | ) | (11,663 | ) | |||||||
Direct Profit | 51,110 | 51,741 | 100,201 | 99,419 | |||||||||||
Corporate expenses | (6,450 | ) | (6,106 | ) | (18,320 | ) | (17,949 | ) | |||||||
Adjusted EBITDA | $ | 44,660 | $ | 45,635 | $ | 81,881 | $ | 81,470 | |||||||
(a) Other includes net (gain) loss on sale of assets and other (income) 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, 2016 (dollars in thousands):
Quarter Ended | Twelve Months Ended | ||||||||||||||||||
December 31, 2015 | March 31, 2016 | June 30, 2016 | September 30, 2016 | September 30, 2016 | |||||||||||||||
Net income (loss) | $ | 2,764 | $ | (1,384 | ) | $ | 5,602 | $ | 15,863 | $ | 22,845 | ||||||||
Provision (benefit) for income taxes | 2,139 | (907 | ) | 3,683 | 10,493 | 15,408 | |||||||||||||
Interest expense, net | 8,529 | 8,565 | 8,881 | 8,294 | 34,269 | ||||||||||||||
Transaction costs | 442 | 169 | 181 | 256 | 1,048 | ||||||||||||||
Depreciation and amortization | 5,508 | 6,123 | 6,003 | 5,686 | 23,320 | ||||||||||||||
Corporate expenses | 7,463 | 5,557 | 6,313 | 6,450 | 25,783 | ||||||||||||||
Stock-based compensation | — | 253 | 204 | 206 | 663 | ||||||||||||||
Impairment FCC licenses | 1,680 | — | — | — | 1,680 | ||||||||||||||
Impairment on investment | — | — | — | 4,236 | 4,236 | ||||||||||||||
Cancellation and (repurchase) of debt | — | (34 | ) | (427 | ) | — | (461 | ) | |||||||||||
Other(a) | 28 | (814 | ) | 1,123 | (374 | ) | (37 | ) | |||||||||||
Direct Profit | 28,553 | 17,528 | 31,563 | 51,110 | 128,754 | ||||||||||||||
Corporate expenses | (7,463 | ) | (5,557 | ) | (6,313 | ) | (6,450 | ) | (25,783 | ) | |||||||||
Adjusted EBITDA | $ | 21,090 | $ | 11,971 | $ | 25,250 | $ | 44,660 | $ | 102,971 | |||||||||
(a) Other includes net (gain) loss on sale of assets and other (income) expense, net.
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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, Adjusted EBITDA, Free Cash Flow, 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, cancellation and (repurchase) of debt, transaction costs, corporate expenses, stock-based compensation, net (gain) loss on sale of assets, impairment of FCC licenses, impairment on investment and depreciation and amortization. Adjusted EBITDA is defined as Direct Profit less corporate expenses (excluding stock-based compensation). Free Cash Flow is defined as Adjusted EBITDA less net cash interest expense, capital expenditures and cash paid for taxes. Adjusted Net Income is defined as net income (loss) before the deduction of income taxes, transaction costs, impairment on investment, net (gain) loss on sale of assets and cancellation and (repurchase) of debt. Adjusted Net Income Per Share is defined as Adjusted Net Income divided by the weighted average shares outstanding. Direct Profit, Adjusted EBITDA, Free Cash Flow, 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, Adjusted EBITDA and Free Cash Flow 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 (gain) loss on sale of assets and cancellation and (repurchase) 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, Free Cash Flow, Adjusted Net Income and Adjusted Net Income Per Share when determining discretionary bonuses.
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