Townsquare Media (TSQ) 10-K2021 FY Annual report

In this Annual Report on Form 10-K (“Annual Report”) of Townsquare Media, Inc. (together with its consolidated subsidiaries, except as the context may otherwise require, “we,” “us,” “our,” “Company,” or “Townsquare”) we rely on and refer to information and statistics regarding our industry, the size of certain markets and our position within the sectors in which we compete. Some of the market and industry data contained in this Annual Report is based on independent industry publications or other publicly available information. Other information is based on our good faith estimates, which are derived from our review of internal surveys, as well as independent sources listed in this Annual Report. Our management’s knowledge and experience in the markets in which we operate, and information obtained from our customers, suppliers and other contacts in the markets in which we operate are additional sources of information included in this Annual Report. Although we believe that this information is reliable as of its respective dates, it involves uncertainties and is subject to change, including as a result of the factors discussed under “Forward-Looking Statements” and “Risk Factors” in this Annual Report.

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. In addition, our names, logos and website names and addresses are owned by us or licensed by us. We also own or have the rights to copyrights that protect the content of our products. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this Annual Report are listed without the ©, ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, trade names and copyrights. This Annual Report may include trademarks, service marks or trade names of other companies. Our use or display of other parties’ trademarks, service marks, trade names or products is not intended to, and does not imply a relationship with, or endorsement or sponsorship of us by, the trademark, service mark or trade name owners.

This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Annual Report are forward-looking statements. Forward-looking statements often discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” “intend,” “seek,” “believe,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms. For example, all statements we make relating to our estimated and projected earnings, revenue, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies, or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to a variety of risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

Further, many of the factors discussed in the section entitled “Risk Factors” are more likely to occur and be further intensified due to the impact of the COVID-19 pandemic. While we believe that our expectations reflected in forward-looking statements are reasonable, we caution that it is difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations are disclosed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report, as well as other risks discussed from time to time in our filings with the SEC. We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the way we expect and you should not rely upon forward-looking statements as a prediction of future events. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance.

The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. The forward-looking statements included in this Annual Report are made only as of the date hereof or as of the date specified herein. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.

We believe that our diversified product offering substantially differentiates us from our competition. This diversification allows us to provide superior solutions to our advertisers and engaging experiences for our audience, underpins our growth strategy and, we believe, helps to mitigate the risks associated with advertising revenue dependency.

In our markets, we are among the largest providers of original local content available to consumers. The quality and availability of our original local content distinguishes our brands from other local offerings, attracting large and loyal audiences. Several of our competitors, particularly in print media, have reduced the amount of original local content they produce or created pay-walls that restrict access to their content. According to research conducted by UNC School of Media and Journalism, approximately 2,000 newspapers have closed in the United States since 2004. We believe these trends will continue and further amplify the attractiveness of our offerings as we fill this expanding void in our communities, both online and on-air. We believe that our focus on providing original local news, entertainment, music and lifestyle media experiences to our audience is a key driver of our powerful reach and engagement metrics. In 2021, we set new company records reaching more than 60 million unique visitors per month, on average, across our digital platform, 11 million listeners on a weekly basis across our radio platform, and 40 million social media followers across our local and national media brands. We believe the investment in our original content strategy has contributed to a larger and more engaged online audience that is spending more time-consuming content on our websites and mobile apps, and a stable radio audience, in terms of both number of listeners and, importantly, time spent listening.

The local media industry is an important medium for advertisers to reach local consumers and for consumers to engage with relevant local content and events. According to S&P Global Market Intelligence, local advertising spending across all U.S. major media categories was forecasted to be $98.0 billion in 2021. Since 2016, U.S. local advertising has increased at a 4.6% compound annual growth rate and is projected to grow at a 6.6% compound annual growth rate through 2025.

Townsquare was founded in 2010 with 60 radio stations in 13 markets with a vision of becoming the number one local media company in each of our markets. Through a series of acquisitions, we built our radio platform to 321 radio stations across 67 local markets. Since 2010, we have leveraged our radio platform to penetrate these local markets and organically build a full and comprehensive suite of digital advertising and marketing solutions that meet our customers’ needs to grow their business. Our significant radio reach and audience engagement provided a powerful foundation from which we were able to build and grow our digital solutions, including websites, mobile applications, a social media presence, online radio streams, subscription digital marketing solutions, and a robust programmatic owned

Radio is a component of our business. However, according to S&P Global Market Intelligence, radio advertising was less than approximately 6% of all advertising dollars spent in the United States in 2021, while digital advertising solutions contributed over 60%. According to S&P Global Market Intelligence, it is estimated that digital advertising will grow to represent nearly 75% of all advertising spend in 2025. Therefore, while radio will continue to be a component of our local offering, we do not expect it to be our primary growth driver. Our growth engine is and will be digital, and we now consider ourselves a “Digital First” company.

The Company has identified three segments, which are Subscription Digital Marketing Solutions, Digital Advertising, Broadcast Advertising, and the remainder of our business is reported in an Other category. The Subscription Digital Marketing Solutions segment includes our subscription digital marketing solutions business, Townsquare Interactive. The Digital Advertising segment, which we market externally as Townsquare Ignite, includes digital advertising on our owned and operated digital properties and our digital programmatic advertising platform. The Broadcast Advertising segment includes our local, regional and national advertising products and solutions delivered via terrestrial radio broadcast, and other miscellaneous revenue that is associated with our broadcast advertising platform. The Other category includes our owned and operated live events.

Our Digital revenue, comprised of our Subscription Digital Marketing Solutions segment and our Digital Advertising segment, was $198.6 million in 2021 and $167.3 million in 2020. Our organically developed, flexible and customized content management system, digital advertising products and delivery capabilities, mobile applications, digital marketing solutions capabilities, digital programmatic advertising platform, data management and analytics and strategic insights platform, and online video content allow us to deliver world-class products in markets outside the top 50 in the U.S. As such, we believe we offer superior solutions for advertisers and audiences alike as compared to many of our local competitors.

We offer a variety of digital marketing solutions, which enables SMBs to choose the optimal features for their specific business. These solutions primarily include:

We believe our Townsquare Interactive offerings represent an attractive value and provide strong return on investment for our SMB clients as compared to the competition, such as self-serve platforms or others that charge a significant upfront fee in addition to hourly customer service rates. Our pricing is transparent and fixed on a monthly basis, providing for unlimited customer service. Some features which differentiates our offerings include:

We target SMBs outside the top 50 markets in the U.S., outside and within our 67 local media market footprint. As of December 31, 2021, approximately 58% of our total subscriber base was located in markets outside of our local media footprint. Our Charlotte, NC-based inside sales team of approximately 200 sellers target private, independently owned SMBs outside of the top 50 markets, with less than 20 employees and less than $5 million of annual revenue. We believe this customer profile represents the ideal potential customer for our product, and we believe the addressable market for such potential subscribers of Townsquare Interactive is approximately 8.8 million SMBs which translates to a $32 billion Total Addressable Market (“TAM”) value. We also leverage our local sales teams in our 67 markets, who enjoy trusted and long-standing local relationships and heritage brand recognition, to sell Townsquare Interactive solutions within our market footprint.

Our Digital Advertising segment, marketed externally as Townsquare Ignite, is a combination of our owned and operated digital properties, our proprietary digital programmatic advertising platform, and an in-house demand and data management platform collecting valuable first party data. We generated Digital Advertising revenue of $116.8 million in 2021 and $97.0 million in 2020.

Our primary source of Broadcast Advertising net revenue is the sale of advertising on our local radio stations to local, regional and national spot advertisers, and national network advertisers. Our Broadcast Advertising segment revenue was $214.9 million in 2021 and $201.5 million in 2020.

Despite the growth of alternative media choices, terrestrial radio has experienced negligible audience fragmentation over the past 50 years and remains a significant component of daily media exposure. According to Nielsen, terrestrial radio broadcasts reached approximately 85% of American adults ages 18+ each week as of December 2021, a level that has remained largely consistent since 1970. Given the stability of radio listenership and the population growth in the U.S., more people listen to radio on a weekly basis today than 10, 20 and even 30 years ago. The challenge for the radio industry overall has been time spent listening to radio and, unlike the industry overall, Townsquare’s time spent listening to our radio stations has been stable. We believe that our ability to maintain stable audience and time spent listening levels to our radio stations is driven by our focus on markets outside of the Top 50, where there is less competition and less local content available in our communities, and our investment in our original content strategy, which takes the form of investing in local talent and resources to support our local talent.

Given the stability of radio’s audience, its broad reach and its relatively low cost as compared to competing advertising media such as television, we believe radio continues to offer an attractive value proposition to advertisers. The price point for radio advertising on a cost per thousand basis is lower than most other local media that deliver similar scale. This makes radio more affordable and accessible for the type of small and mid-sized businesses typically found in our local markets outside the top 50 markets in the U.S.

In the year ended December 31, 2021, we generated approximately 84% of our net revenue from a broad array of local and regional advertisers in a number of industries, including automotive dealers, banking and mortgage service providers, furniture and home furnishings retailers, food and beverage service providers, healthcare service providers and media and telecommunications service providers. We generate a majority of our advertising revenue by selling directly to local advertisers, as well as to local and regional advertising agencies which affords us the opportunity to better present our products, cross-sell products and more directly influence their advertising and marketing expenditure decisions.

No single customer accounted for more than approximately 1% of revenue in any of the years ended December 31, 2021 and 2020. For the year ended December 31, 2021, no advertising category, market, or state represented more than 20% of revenue. A significant percentage of our advertising revenue is generated from the sale of advertising to the automotive, financial services, health services, entertainment, and retail industries.

Our most significant expenses are sales personnel, programming, digital, marketing and promotional, engineering, and general and administrative expenses. We strive to control these expenses by closely monitoring and managing each of our local markets and through efficiencies gained from the centralization of finance, accounting, legal and human resources functions and management information systems. We also use our scale and diversified geographic portfolio to negotiate favorable rates with vendors where feasible.

A portion of our expenses are variable. These variable expenses primarily relate to sales costs, such as commissions and inventory costs, as well as certain programming costs, such as music license fees, and certain costs related to production. Other programming, digital, engineering and general and administrative expenses are primarily fixed costs.

Our business enjoys strong cash flow generation owing to the relatively limited capital needs of our operations. During the year ended December 31, 2021, we recorded $12.4 million of capital expenditures, which represented 3.0% of net revenue during the same period. In addition, we benefit from certain tax attributes that generate tax deductions which have historically limited the amount of cash taxes we pay.

The principal features of our growth strategy are:

We plan to continue to invest in the personnel supporting our digital growth, including our digital product technology, sales, content, and support teams, specifically in our Townsquare Interactive and Townsquare Ignite businesses. We have continually grown our digital team, including during the COVID-19 pandemic, which has allowed us to grow the number of subscribers and advertising clients we support on our digital platforms. In addition, we intend to open a second, west-coast based location for Townsquare Interactive to further support growth in that subscription

We are committed to growing our local sales force, training our sales personnel and investing in our business to allow us to deepen relationships with our advertisers, including developing new digital products that will allow our content, and our advertisers, to reach a broader audience more frequently and in more locations. Over time, we believe we can capture a greater share of the digital advertising expenditure in our markets across all mediums and across industries, including but not limited to, digital, radio, print, outdoor, direct mail, and broadcast and cable television.

Our audience reach, our direct relationship with local advertisers in our markets, and our tech capabilities position us to launch and monetize new products and services, further diversifying and growing our digital revenue. We have invested in world-class technology and infrastructure to create best of breed products and services to serve our clients and engage our loyal audience. In the past, we have organically built and introduced a variety of new products, including our subscription digital marketing solutions platform (Townsquare Interactive), various new offerings for Townsquare Interactive, our programmatic digital advertising platform (Townsquare Ignite), as well as mobile applications for individual stations and brands. We have also organically built and introduced a new data and analytics tool and a data management platform that enhance our ability to create and deliver effective targeted broadcast and digital advertising campaigns for our clients. In addition to delivering revenue growth, these products and services frequently appeal to potential customers in our markets who may not access our heritage radio products, thereby leveraging our digital solutions to increase our overall customer base and revenue market share. We intend to continue to develop new products and offerings and to better monetize our audiences.

We generally provide a larger proportion of live and local content on-air and more original local content online relative to other local media companies in our markets. We believe such live, local, and original content is more engaging to our audience and differentiates our offerings in an increasingly crowded media landscape, mitigating the threat of audience attrition. Many competing audio media offerings, including Spotify, Pandora and SiriusXM, do not offer any local content in our markets. We intend to continue providing audiences with this differentiated local content and enjoy the advantages it provides us with our audience and our advertisers.

Our branding strategy is fundamental to growing our audience and revenue. Across our markets, we have a large portfolio of distinct local and national brands that resonate with and appeal to our audiences. Many of our brands have several decades of heritage in our markets. Consumers associate our brands with high quality, locally-relevant content and entertainment. We intend to continue to invest in marketing and promotions to support our brands and to actively participate in community events to increase our local market presence.

Our various media products and marketing services offerings share common, largely fixed-cost operating infrastructure, resulting in significant economies of scale. We also negotiate vendor contracts with key suppliers on a centralized basis, which further reduces costs. As a result, as we grow our revenue, a significant majority of each incremental dollar of revenue is converted into incremental earnings and cash flow.

The local media industry is very competitive. The success of each of our digital and radio properties depends largely upon our ability to attract audiences, to develop competitive products and solutions, and to price our products attractively relative to our local media competitors, as well as our ability to attract and retain sales, digital, content and leadership talent, and the overall demand for advertising within individual markets. We compete directly for audiences and advertising revenue with other radio broadcasters, satellite radio, cable television, broadcast television, print, and digital media operators, streaming music and video service providers and podcasters, amongst others. In addition, we compete for advertising revenue with a broader set of competitors in the advertising industry, including search and social media companies. We attempt to improve our competitive position, maximize our audience and grow our revenue by focusing on high quality, differentiated original local content and by providing innovative and effective advertising integrations for our customers, many of whom we have supported for many years, and managing our sales efforts to attract a larger share of advertising and marketing dollars from each customer.

The market for digital marketing solutions is highly fragmented, dynamic and competitive. Our competitors for Townsquare Interactive include large internet marketing providers, web development and hosting providers, yellow page publishers, newspaper and television companies, as well as other local small and medium-sized business marketing providers. While some of our competitors enjoy greater name recognition, longer operating histories and larger marketing budgets, as well as substantially greater financial, technical and other resources, we believe we compete favorably and our products meet and exceed customer requirements and provide a strong return on investment due to our secure, reliable and integrated technology platform, cost-effective customer acquisition strategies, customer service and support, brand awareness and reputation, and overall customer satisfaction.

We mitigate these competitive pressures by focusing on markets outside the top 50 in the United States, where there are fewer and less well-capitalized digital marketing solutions providers and local media competitors. For example, in 43 of our 67 local markets, we do not compete against any of the five largest English language national radio competitors, as measured by number of radio stations owned. Many competing audio media offerings, including Spotify, Pandora and SiriusXM, do not offer local content in our markets or have any local sales personnel. We believe this competitive landscape contributes to our success as we operate strong brands with deep local heritage, allowing our brands to gain a greater share of the local audience, and greater share of advertising and digital marketing expenditures in our markets than what is generally achieved by local media companies operating in larger markets. In addition, the small and mid-sized markets we operate in are generally supported by stable, locally significant institutions such as universities, military bases, state capitals, regional medical centers and retail hubs. We believe these stabilizing institutions further reduce the volatility of advertising spending in our markets.

Another significant mitigant to the competitive pressures we face in our markets is our talented local leadership who have strong local roots, connection to our communities and multi-platform sales and content skills. We have built a team of in-house recruiters that is crucial to our ability to identify and recruit highly skilled employees to our Company. In addition, we invest a significant amount of resources in training our employees so that they are fully equipped to execute our Digital First strategy and grow market share.

Our revenue varies throughout the year. Typically, we expect that our first calendar quarter will produce the lowest net revenue for the year, as advertising expenditures generally decline following the winter holidays. However, due to the COVID-19 pandemic, the seasonality of our net revenue was materially impacted and our second quarter produced our lowest net revenue for 2020. During even-numbered years, net revenue generally includes increased advertising expenditures by political candidates, political parties and special interest groups. Political spending is typically highest during the fourth quarter. Our operating results in any period may be affected by the incurrence of advertising and promotion expenses that typically do not have an effect on net revenue generation until future periods, if at all.

The U.S. economy and financial markets may continue to experience volatility due to the COVID-19 pandemic, including as a result of the development of COVID-19 variants, vaccination rates and government legislative and regulatory responses. The effects of the COVID-19 pandemic began to impact our operations in early March 2020, and included significant advertising cancellations and material declines in the purchase of new advertising by our clients. Declines in forecasted traditional broadcast revenue in the markets in which we operate, the impact of the COVID-19 pandemic on market and economic conditions, and the corresponding impacts to our risk premium, contributed to approximately $107.1 million impairments to the carrying values of our FCC license intangible assets during the first half of 2020, of which $28.7 million and $78.4 million was recognized during the three months ended June 30, 2020 and March 31, 2020, respectively. Additionally, we canceled nearly all live events beginning in March 2020. At the end of the first quarter of 2020, we reduced our workforce through the termination or layoff of approximately 135 full-time employees.

As local public health conditions improved, we experienced recoveries throughout 2021 in advertising revenue, following the sequential improvements we observed during each of the third and the fourth quarters of 2020. Throughout 2021, we continued the precautionary measures that were instituted in 2020 to address the potential impact to our consolidated financial position, consolidated results of operations, and liquidity, including wage reduction efforts such as the temporary suspension of the Company’s match on employee contributions to the Company’s defined contribution plan, the deferral of the payment of certain payroll taxes until December 31, 2021 and 2022 under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and controlling non-essential capital expenditures. Additionally, our board of directors determined to cease payment of quarterly cash dividends, following the payment of our 2020 first quarter dividend of $2.1 million, paid on May 15, 2020. Effective January 1, 2022, we reinstated our match on employee contributions to the Company’s defined contribution plan at twenty-five cents for each dollar contributed up to the first 4% of eligible compensation (for a total match of 1% of employee contributions).

The full extent of the COVID-19 pandemic impact will depend on future actions and outcomes, all of which remain fluid and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the short-term and long-term economic impacts of the COVID-19 pandemic (including the continued effect on advertising activity, consumer discretionary spending and our employees in the markets in which we operate). Further actions taken to mitigate the impact of the pandemic, and the pace of continued economic and financial market recovery when the COVID-19 pandemic subsides, among others.

Our most important core value is “You Matter.” We are not just a company; we are a team. "You Matter" means that every employee has an impact on our success, and it is our obligation to provide each employee with the tools, resources and leadership required to succeed and achieve our goals. We believe that if we work together to train, develop and reward our employees in ways that acknowledge performance, abilities and contributions, we will all grow together and share our individual and collective success.

Our ability to identify, hire, develop, motivate and retain our talent is critical to the future success and continued growth of our business. As such, we seek to provide a desirable work environment with competitive compensation and benefits packages, and create a collaborative culture that is focused on a team mentality and gives each individual the means to succeed and contribute to the company’s overall success. In addition, we have built a team of in-house recruiters that is crucial to our ability to identify and recruit highly skilled employees to our company.

In addition to competitive compensation packages, we offer a variety of health and insurance benefits, including:

Race, background, age, gender, sexual orientation, religion, physical ability, perspective and life experience are all important elements of each and every one of our team members are. We embrace this diversity because we care about our team members and because these individual perspectives contribute a wealth of knowledge, talent and experience that ultimately benefit the company. We have work to do, but our goal is for everyone in the company to be seen, heard and valued. We will accomplish this through increased awareness and empathy around the challenges faced by one another and by making diversity part of our culture and not just an initiative. To this end, we created a Diversity and Inclusion Council in 2020. Townsquare's mission is to enhance the communities we serve and use our influential voices to improve and support all members of those communities.

Our radio stations and local websites, together with our employees, play a vital role in the communities we serve. During weather and other emergencies, government officials rely on our radio stations to disseminate critical, occasionally life-saving, information. Our radio stations, local websites, and mobile apps also routinely support charity and community events through on-air and digital promotions to bolster fundraising activities and emergency relief efforts.

After the COVID-19 pandemic sent a significant portion of our work force to work from home in early 2020, most of the Company’s local market team members returned to work in the office in the summer of 2020, while most of our Townsquare Interactive employees returned to work in Q1 2022. Due to the nature of Townsquare Interactive products and services, remote operations have not had a material impact on results to date. The health and safety of our team and our communities is of utmost importance, so we have implemented health and safety policies in each of our locations that are in accordance with applicable law. In addition, we continue to encourage flexible work policies to support our employees during the COVID-19 pandemic and the unique challenges that have been presented.

As of December 31, 2021, we employed 2,340 full and part-time employees. None of our employees are covered by collective bargaining agreements and we consider our relations with our employees to be satisfactory.

We employ individuals in a large variety of roles. On occasion, in order to protect our interests, we enter into employment agreements with certain of our employees, including members of the senior management team, product leaders, local market presidents and selected sales personnel and local media personalities. We do not believe that the loss of any one these individuals, excluding certain key members of our senior management, would have a material adverse effect on our financial condition or results of operations, taken as a whole. Our risks related to losing key members of our senior management are more fully described in the section titled “Risk Factors.”

The ownership, operation and sale of radio stations, including those licensed to us, are subject to the jurisdiction of the FCC, which acts under authority of the Communications Act of 1934, as amended (the “Communications Act”). The Telecommunications Act of 1996 amended the Communications Act and directed the FCC to change certain of its broadcast rules. Among its other regulatory responsibilities, the FCC issues permits and licenses to construct and operate radio stations; assigns broadcast frequencies; determines whether to approve changes in ownership or control of radio station licenses; regulates transmission equipment, operating power and other technical parameters of radio stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of radio stations; regulates some forms of radio broadcast content; and has the authority under the Communications Act to impose penalties for violations of its rules.

The following is a brief summary of certain provisions of the Communications Act and relevant FCC rules and published policies (collectively, the “Communications Laws”). This description does not purport to be comprehensive and reference should be made to the Communications Laws, public notices, and decisions issued by the FCC for further information concerning the nature and extent of federal regulation of radio stations. Failure to observe the provisions of the Communications Laws can result in the imposition of various sanctions, including monetary forfeitures and the grant of a “short-term” (less than the maximum term) license renewal. For particularly egregious violations, the FCC may deny a radio station’s license renewal application, revoke a radio station’s license, or deny applications in which an applicant seeks to acquire additional broadcast properties.

Radio broadcast licenses are generally renewed for terms of eight years. Licenses are renewed by filing an application with the FCC. Petitions to deny license renewal applications may be filed by interested parties, including members of the public. While we are not currently aware of any facts that would prevent the renewal of our licenses to operate our radio stations, there can be no assurance that any of our licenses will be renewed for a full term.

Each class of FM station has the right to broadcast with a certain amount of power from an antenna located at a certain height. The most powerful FM radio stations are Class C FM radio stations, which may operate with the equivalent of up to 100 kilowatts of effective radiated power (“ERP”) at an antenna height of up to 1,968 feet above average terrain. These radio stations typically provide service to large areas that cover one or more counties. There are also Class C0, C1, C2 and C3 FM radio stations which may operate with progressively less power and/or antenna height. Class B FM stations operate with the equivalent of up to 50 kilowatts ERP at an antenna height of up to 492 feet above average terrain. Class B radio stations typically serve large metropolitan areas and their outer suburban areas. There are also Class B1 radio stations that can operate with up to 25 kilowatts ERP at an antenna height of up to 328 feet above average terrain. Class A FM radio stations may operate with the equivalent of up to 6 kilowatts ERP at an antenna height of up to 328 feet above average terrain, and generally serve smaller cities and towns or suburbs of larger cities.

The area served by an AM radio station is determined by a combination of frequency, transmitter power, antenna orientation and soil conductivity. The effective service area of an AM radio station is determined based on the radio station’s power, operating frequency, antenna patterns and its day/night operating modes. The area served by an FM radio station is determined by a combination of transmitter power and antenna height, with radio stations divided into eight classes according to these technical parameters, as set forth above.

The following table sets forth, as of March 7, 2022, the number of our owned and operated radio stations by market, excluding booster stations, FM translators, and all stations operated under Time Brokerage Agreements (“TBAs”).

The Communications Laws prohibit the assignment or transfer of control of a broadcast license without the prior approval of the FCC. In determining whether to grant an application for assignment or transfer of control of a broadcast license, the Communications Act requires the FCC to find that the assignment or transfer would serve the public interest. The FCC considers a number of factors in making this determination, including (i) compliance with various rules limiting common ownership of media properties, (ii) the financial and “character” qualifications of the assignee or transferee (including those parties holding an “attributable” interest in the assignee or transferee), (iii) compliance with the Communications Act’s foreign ownership restrictions, and (iv) compliance with other Communications Laws, including those related to content and filing requirements.

As discussed in greater detail below, the FCC may also review the effect of proposed assignments and transfers of broadcast licenses on economic competition and diversity. See “Antitrust and Market Concentration Considerations.”

The Communications Act restricts us from having more than one-fourth of our equity owned or voted by non-U.S. persons, foreign governments or non-U.S. entities, without prior approval from the FCC.

The Communications Laws also restrict the number of radio stations one person or entity may own, operate or control in a local market.

None of these rules requires any change in our current ownership of radio stations. The Communications Laws could limit the number of additional radio stations that we may acquire in the future in our existing markets as well as new markets.

The FCC generally applies its rules and its broadcast multiple ownership rules by considering the “attributable” or cognizable interests held by a person or entity. With some exceptions, a person or entity will be deemed to hold an attributable interest in a radio station if the person or entity serves as an officer, director, partner, stockholder, member, or, in certain cases, a debt holder of a company that owns that station. Whether that interest is attributable and thus subject to the FCC’s multiple ownership rules is determined by the FCC’s attribution rules. If an interest is attributable, the FCC treats the person or entity who holds that interest as an “owner” of the radio station in question, and that interest thus counts against the person in determining compliance with the FCC’s ownership rules.

With respect to a partnership (or limited liability company), only the interest of a general partner (or managing member) is attributable if the entity’s organizational documents include certain terms. With respect to a corporation, officers, directors and persons or entities that directly or indirectly hold 5.0% or more of the corporation’s voting stock (20.0% or more of such stock in the case of insurance companies, investment companies, bank trust departments and certain other “passive investors” that hold such stock for investment purposes only) generally are attributed with ownership of the radio stations, television stations and daily newspapers owned by the corporation. As discussed below, participation in an LMA or a Joint Sales Agreement (“JSA”) also may result in an attributable interest. See “Local Marketing and Joint Sales Agreements.”

The following interests generally are not attributable:

In April 2021, the U.S. Supreme Court upheld the FCC’s 2017 decision to eliminate certain media ownership restrictions, including the ban on common ownership of newspapers and radio stations within the same market and the radio/television cross-ownership rule. On June 4, 2021, the FCC’s Media Bureau adopted an Order implementing these rule changes, which became effective June 30, 2021. On June 4, 2021, the FCC’s Media Bureau also issued a Public Notice to refresh the record in its latest proceeding to review the broadcast ownership rules. The Bureau sought comment on a number of matters, including the three structural ownership rules that remain in place following the Supreme Court’s decision – the local radio ownership rule, the local television ownership rule, and the dual network rule – and several diversity proposals. The comment period closed in August 2021, and the proceeding remains open.

The Communications Act requires broadcasters to serve the “public interest.” To satisfy that obligation, broadcasters are required by the Communications Laws to present content that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from audiences concerning a radio station’s content may be filed at any time and will be considered by the FCC both at the time they are filed and in connection with a licensee’s renewal application. FCC rules also require broadcasters to provide equal employment opportunities (“EEO”) in the hiring of new personnel, to abide by certain procedures in advertising employment opportunities, to make information available on employment opportunities on their websites (if they have one), and to maintain certain records concerning their compliance with EEO rules. The FCC will entertain individual complaints concerning a broadcast licensee’s failure to abide by the EEO rules and also conducts random audits on broadcast licensees’ compliance with EEO rules. We have been the subject of several EEO audits. To date, none of those audits has disclosed any major violation that would have a material adverse effect on our operations. Radio stations also must follow provisions in the Communications Laws that regulate a variety of other activities, including political advertising, the broadcast of obscene or indecent content, sponsorship identification, the broadcast of contests and lotteries, and technical operations (including limits on radio frequency radiation).

A number of radio stations, have entered into LMAs (also known as Time Brokerage Agreements) or Joint Sales Agreements (“JSAs”). In a typical LMA, the licensee of a radio station makes available, for a fee, airtime on its radio station to a party which supplies content to be broadcast during that airtime and collects revenue from advertising aired during such content. A typical JSA authorizes one radio station to sell another radio station’s advertising time and retain the revenue from the sale of that airtime. A JSA typically includes a periodic payment to the radio station whose airtime is being sold (which may include a share of the revenue being collected from the sale of airtime). LMAs and JSAs are subject to compliance with the antitrust laws and the Communications Laws, including the requirement that the licensee must maintain independent control over the radio station and, in particular, its personnel, content and finances. The FCC has held that such agreements do not violate the Communications Laws as long as the licensee of the radio station receiving content from another station or whose time is being sold by another station maintains ultimate responsibility for, and control over, radio station operations and otherwise ensures compliance with the Communications Laws.

A radio station that brokers more than 15.0% of the weekly content hours, or sells more than 15.0% of the weekly advertising time of another radio station in its market, will be considered to have an attributable ownership interest in that radio station for purposes of the FCC’s ownership rules. In that situation, a radio station may not enter into a LMA that allows it to program more than 15.0% of the weekly content hours of another radio station that it could not own under the FCC’s multiple ownership rules. In addition, a station cannot have a JSA with another station in the same market if the FCC’s ownership rules would otherwise prohibit common ownership of the radio stations.

Potential future acquisitions, to the extent they meet specified size thresholds, will be subject to applicable waiting periods and possible review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), by the Department of Justice (“DOJ”) or the Federal Trade Commission (“FTC”), either of whom can be required to evaluate a transaction to determine whether that transaction should be challenged under the federal antitrust laws. Transactions are subject to the HSR Act only if the acquisition price or fair market value of the radio stations to be acquired is above $101.0 million, effective February 23, 2022. Our acquisitions have not met this threshold. Acquisitions that are not required to be reported under the HSR Act may still be investigated by the DOJ or the FTC under the antitrust laws before or after consummation. At any time before or after the consummation of a proposed acquisition, the DOJ or the FTC could take such action under the antitrust laws as it deems necessary, including seeking to enjoin the acquisition or seeking divestiture of the business acquired or certain of our other assets. The DOJ has reviewed numerous radio station acquisitions where an operator proposes to acquire additional radio stations in its existing markets or multiple radio stations in new markets and has challenged a number of such transactions. Some of these challenges have resulted in consent decrees requiring the sale of certain radio stations, the termination of LMAs or other relief. In general, the Department of Justice has more closely scrutinized radio mergers and acquisitions resulting in local market shares in excess of 35.0% of local radio advertising revenue, depending on format, signal strength and other factors. There is no precise numerical rule, however, and certain transactions resulting in more than 35.0% revenue shares have not been challenged, while certain other transactions may be challenged based on other criteria such as audience shares in one or more demographic groups as well as the percentage of revenue share. We estimate that we have more than a 35.0% share of radio advertising revenue in many of our markets.

The DOJ enforces the antitrust laws in the broadcasting industry and there can be no assurance that one or more of any future acquisitions will not be the subject of an investigation or enforcement action by the DOJ. Similarly, there can be no assurance that the DOJ, the FTC or the FCC will not prohibit such acquisitions, require that they be restructured, or require that we divest radio stations we already own in connection with an acquisition. In addition, private parties may under certain circumstances bring legal action to challenge an acquisition.

As part of its review of certain radio station acquisitions, the DOJ has stated publicly that it believes that commencement of operations under LMAs, JSAs and other similar agreements customarily entered into in connection with radio station ownership assignments and transfers prior to the expiration of the waiting period under the HSR Act could violate the HSR Act. Accordingly, our policy is not to commence operation under an LMA, a JSA, or similar agreement of any affected radio station to be acquired until the waiting period under the HSR Act has expired or been terminated.

Townsquare Media, LLC, a Delaware limited liability company, was formed on February 26, 2010. In connection with our initial public offering, on July 25, 2014, Townsquare Media, LLC, converted to Townsquare Media, Inc., a Delaware corporation.

The U.S. economy and financial markets continue to experience volatility due to the COVID-19 pandemic. Our business, results of operations and financial condition were adversely affected by the COVID-19 pandemic in 2020 and 2021. The COVID-19 pandemic and measures taken to contain it have subjected our business, results of operations, financial condition, stock price and liquidity to a number of material risks and uncertainties, all of which may continue, including, but not limited to:

Taken individually, or together in any combination, the above could cause a material adverse effect on our business, financial condition, results of operations, and liquidity, although the extent of the potential effect will depend on future actions and outcomes, which are uncertain and cannot be predicted with confidence, including the development and severity of COVID-19 variants, the short-term and long-term economic impact of the pandemic (including consumer discretionary spending, supply chain disruptions, inflation, labor shortages, and the effect on advertising activity), the actions taken to mitigate the impact of the virus, including the rates and effectiveness of vaccines, and the pace of economic and financial market recovery, among others. Further, many of the Risk Factors described in this report are more likely to occur and be further intensified as a result of the impact of the COVID-19 pandemic.

Because a substantial majority of our net revenue is generated from the sale of local, regional and national advertising on our digital properties and radio stations, and to a lesser extent, at our live events, a downturn in the economy, prolonged supply chain disruptions or labor shortages, a significant increase in inflation rates, or reduction in consumer confidence in the U.S. economy may have a material adverse impact on our business, financial condition and results of operations, as advertisers generally reduce their spending during such periods. Furthermore, because a substantial portion of our revenue is derived from local advertisers, our ability to generate advertising revenue in specific markets (including concentrations in and around the Northeast, Upper Midwest, Texas and the Mountain West) could be adversely affected by local or regional economic downturns. A downturn in the U.S. economy could also adversely affect our advertising revenue and our results of operations.

In addition, a significant percentage of our advertising revenue is generated from the sale of advertising to the automotive, financial services and retail industries. These industries, among others, have been adversely affected by prior downturns in the economy, and may be adversely affected by any future downturns in the economy, and a significant decrease in advertising revenue from advertisers in these industries in the future could have a material adverse effect on our business, financial condition and results of operations.

A decline in attendance at or reduction in the number of concerts, expositions and other experiential events and other forms of entertainment may have an adverse effect on revenue and operating income from our live events business. In addition, during periods of economic slowdown and recession, many consumers have historically reduced their discretionary spending and advertisers have reduced their advertising expenditures. Consumer discretionary spending is sensitive to many factors such as employment, fuel and energy prices, inflation and general economic conditions, and as a result, the risks associated with our live events business may become more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in attendance at our live events. The impact of economic slowdowns on our business is difficult to predict, but they may result in reductions in ticket sales, sponsorships and our ability to generate revenue from live events or grow our live events business.

The acquisition of broadcast rights is highly competitive, and we may be adversely impacted by certain exclusive content rights held by our competitors. We sometimes enter into broadcast rights contracts in the ordinary course of business for both the acquisition and distribution of media content and products, including contracts for both the acquisition and distribution of content rights for sporting events and other programs, and contracts relating to content produced by third parties on our radio stations. If we are unable to renew these contracts, as they expire, on acceptable terms, we may lose these rights, the related content and the related revenue. Even if these contracts are renewed, the cost of obtaining content rights may increase (or increase at faster rates than in the past) or the revenue from distribution of content may be reduced (or increase at slower rates than in the past). The impact of broadcast rights contracts and the terms of the contracts on our results will depend on a number of factors beyond our control, including the strength of advertising markets, effectiveness of marketing efforts, the size of audiences, and the related contract expenses and costs. There can be no assurance that revenue from content based on these rights will exceed the cost of the rights plus the other costs of producing and distributing the content.

Approximately 0.8% and 4.3% of our net revenue for the years ended December 31, 2021 and 2020, respectively, consisted of political advertising revenue. Political advertising revenue from elections, which is generally greater in even-numbered years and especially the years in which the U.S. President is elected, has the potential to create fluctuations in our operating results on a year-to-year basis. For example, during 2021, we had political advertising revenue of $3.5 million, as compared to $16.0 million in 2020. In addition, political advertising revenue is dependent on the level of political ad spend and competitiveness of local, state and national elections within each local market.

The increasing number of digital media options available on the internet, through social networking platforms and through mobile and other devices distributing news and other content is expanding consumer choice significantly. Faced with a multitude of media choices and a dramatic increase in accessible information, consumers may place greater value on when, where, how and at what price they consume digital content than they do on the source or reliability of such content. The popularity of news aggregation websites and customized news feeds (often free to users) may reduce our traffic levels by creating a disincentive for the audience to visit our websites or use our mobile applications. In addition, the undifferentiated presentation of some of our content in aggregation with other content may lead audiences to fail to distinguish our content from the content of other providers. Our reputation for quality journalism and content are important in competing for revenue in this environment and are based on consumer and advertiser perceptions. If consumers fail to differentiate our content from other content providers in digital media, or if the quality of our journalism or content is perceived as less reliable, we may not be able to increase our online traffic sufficiently or retain a base of frequent visitors to our local and national digital properties.

Online traffic is also driven by internet search results, including search results provided by Google, the primary search engine directing traffic to our websites. Search engines frequently update and change the methods for directing search queries to websites or change methodologies or metrics for valuing the quality and performance of internet traffic on delivering cost-per-click advertisements. Any such changes could decrease the amount of revenue that we generate from online advertisements. The failure to successfully manage search engine optimization efforts across our business could result in a significant decrease in traffic to our various websites, which could result in substantial decreases in conversion rates and repeat business, as well as increased costs if we were to replace free traffic with paid traffic, any or all of which would adversely affect our business, financial condition and results of operations.

We may not be able to create sufficient advertiser interest in our digital properties or to maintain or increase the advertising rates of the inventory on our digital properties. Even if we maintain traffic levels, the market position of our brands may not be enough to counteract a significant downward pressure on advertising rates.

The radio broadcasting and digital advertising industries are subject to technological change, evolving industry standards and the emergence of new media technologies and trends. We may not have the resources to acquire new technologies or to introduce new services that could compete with these new technologies and may allow us to adapt to new trends. Various new media technologies and services have been or are being developed or introduced, including:

The radio broadcasting industry historically has grown despite the introduction of new technologies for the delivery of entertainment and information, including the introduction of new technologies used in automobiles, as a result, in part, of a growing population, greater use of the automobile and increased commuter times. We cannot guarantee that this historical growth will continue. Some of the technologies, particularly satellite digital audio radio service and internet radio, compete for the consumer’s attention in the car, workplace, outdoors and elsewhere.

We use studios, satellite systems, transmitter facilities and the internet to originate and/or distribute our content. We rely on third-party contracts and services to operate our origination and distribution facilities. These third-party contracts and services include, but are not limited to, electrical power, satellite downlinks, telecom circuits and internet connectivity. Distribution may be disrupted due to one or more third parties losing their ability to provide particular services to us, which could adversely affect our distribution capabilities. A disruption can be caused as a result of any number of events such as local disasters (accidental or environmental), such as weather events or wildfires (which may increase in frequency due to climate change), various acts of terrorism, war or armed conflict, power outages, major telecom and internet connectivity failures or satellite failures. Our ability to distribute content to our radio station audience and/or network affiliates may be disrupted for an undetermined period of time until alternate facilities are engaged and put on-line. Furthermore, until we fix issues that arise or third-party services resume when applicable, the inability to originate or distribute content could have a material adverse effect on our business, financial condition and results of operations.

The leadership, skills and experience of our senior management team are critical to our operations, and the loss of one or more members of our senior management team could have a material adverse effect on our business, financial condition and results of operations, including impairing our ability to execute and evolve our business strategy. We believe that our future success will depend greatly on our continued ability to attract, retain and motivate highly skilled and qualified personnel.

Future success and growth in our digital businesses depends upon our continued ability to develop and maintain technology and identify, hire, develop, motivate and retain highly skilled technical and sales talent. Competition for employees with these skill sets is intense and our continued ability to compete effectively depends, in part, upon our ability to attract new employees. We will also need to be able to balance the costs of recruiting and retaining these employees with profitable growth. If we are unable to do so, our business, financial condition or results of operations may be adversely affected.

The success of our radio stations is significantly impacted by our on-air talent, and we compete for on-air talent with other radio stations and radio station groups, radio networks, and other providers of syndicated content and other media such as broadcast television, cable television, satellite television, the internet and satellite radio. Our employees and other on-air talent are subject to change and may be lost to competitors or for other reasons, and the contracts we have with certain talent generally are limited in duration. Any adverse changes in particular programs or on-air talent in a particular market could have a negative impact on our ratings and generally could have a material adverse effect on our ratings and our ability to attract advertisers, which could negatively impact our business, financial condition or results of operations adversely affect revenues in that particular market.

We pay royalties to song composers and publishers through four professional rights organizations (“PROs”), which currently are Broadcast Music, Inc. (“BMI”), the American Society of Composers, Authors and Publishers (“ASCAP”), SESAC, Inc. (“SESAC”) and Global Music Rights, Inc. (“GMR”), for the performance of music on our radio stations and websites. We also pay royalties to Sound Exchange for music streamed on our websites. Royalty rates are subject to adjustment and it is possible that our royalty rates associated with obtaining rights to use musical compositions and sound recordings in our programming content could increase as a result of private negotiations, regulatory rate-setting processes, or administrative and court decisions. In addition, the emergence of one or more new PROs could increase the royalties we pay.

From time to time, Congress considers legislation that could require that radio broadcasters pay performance royalties to record labels and recording artists. The proposed legislation has been the subject of considerable debate and activity by the radio broadcast industry and other parties that could be affected. We cannot predict whether any proposed legislation will become law. The proposed legislation would add an additional layer of royalties to be paid directly to record labels and artists. It is currently unknown what proposed legislation, if any, will become law, however such an additional royalty could have an adverse effect on our business, financial condition and results of operations.

The Department of Justice has been considering whether to reform or terminate the long-standing consent decrees that govern music licensing by ASCAP and BMI. Additionally, there has been litigation concerning whether these consent decrees require full-work licensing, resulting in a ruling by a federal appeals court that they do not. The reformation or termination of these consent decrees and the resolution of the full-work licensing issue each could lead to the increase of our royalty rates associated with obtaining rights to use musical compositions and sound recordings in our programming content.

We have a significant amount of indebtedness. As of December 31, 2021, we had $541.5 million of outstanding indebtedness, net of deferred financing costs of $8.5 million, with annual cash interest expense requirements of approximately $38.0 million. Our substantial level of indebtedness increases the risk that we may be unable to generate

For example, it could:

The occurrence of extraordinary events, such as terrorist attacks, natural disasters, contagious disease outbreaks or pandemics (for example, the COVID-19 pandemic), intentional or unintentional mass casualty incidents or similar events may substantially impact our operations in specific, geographic areas, as well as nationally, may directly affect our employees, including our key employees, and may decrease the use of and demand for advertising, and the attendance at our live events, which may decrease our revenue or expose us to substantial liability. The occurrence of future terrorist attacks, military actions by the U.S., contagious disease outbreaks or pandemics or other unforeseen similar events cannot be predicted, and their occurrence can be expected to negatively affect the economies where we do business in general and specifically in the market for advertising or live events. In addition, an act of God or a natural disaster, such as a weather event or wildfire, which may increase in frequency due to climate change, could adversely impact any one or more of the markets where we do business, thereby impacting our business, financial condition and results of operations.

We invest significant capital and employee resources in our digital businesses, including our subscription digital marketing solutions business, Townsquare Interactive, and our programmatic digital advertising business. These digital business lines are subject to significant competition, rapidly changing technology, and evolving standards. As we continue to grow these lines of business and to expand into new markets, we will also face new sources of competition, including, in certain of these markets, from companies with longer operating histories, established customer bases, greater brand recognition and more financial, technical, marketing, and related resources. We will need to cultivate new relationships with customers, third party providers and other partners in each of these markets. We may not be able to compete successfully against current and future competitors, and our business, results of operations and financial condition will be harmed if we fail to meet these competitive pressures. In addition, there can be no assurance that our digital technologies we use or develop will be adequate, or that we will be able to establish our proprietary right to the technologies we rely upon.

The ability to grow Townsquare Interactive depends in large part on maintaining and expanding our subscriber base. To do so, we must convince prospective subscribers of the benefits of our technology platform and existing subscribers of the continuing value of our products and services. Most of our contracts with subscribers are terminable upon short or no notice. The digital marketing solutions sector is highly competitive. We believe our solutions are well positioned to serve the SMBs in markets outside the top 50 upon which we focus. However, if our net subscriber base decreases, our business, financial condition and operating results will be adversely affected.

We operate in a highly competitive industry. Our radio operations compete for audiences and advertising market share with other radio stations and radio station groups, radio networks, other syndicated content and other media such as broadcast television, newspapers, magazines, cable television, satellite television, the internet, internet radio, digital platforms and applications, satellite radio, outdoor advertising, mobile devices and other portable digital audio players. We also compete for advertising dollars with other large digital companies, such as Facebook, Google and Amazon. Any adverse change in a particular market or in the relative market positions of the radio stations located in a particular market, or any adverse change in audiences’ preferences could have a material adverse effect on our ratings or revenue. Other radio broadcasting companies may enter the markets in which we operate or may operate in the future, offer syndicated content that competes with our content, or try to acquire distribution rights of media content and products or on-air talent that we use or have under contract, and these companies may be larger and have more financial resources than we do.

In addition, from time to time, other radio stations may change their format or content, or a radio station may adopt a format to compete directly with us for audiences and advertisers. These tactics could result in lower ratings,

Competition for advertising is generally based on audience levels and demographics, price, service and advertising results. It has intensified as a result of the continued development of digital media and in recent years, advertisers have shifted dollars toward digital, putting downward pressure on our broadcast revenue. If this trend continues, we may experience a decline in broadcast revenue as a result. In addition, competition from all of these media and services affects our ability to attract and retain advertisers and consumers and to maintain or increase our advertising rates.

Digital media and radio content production and distribution is an inherently risky business because the revenue derived from the production and distribution of digital media content or a radio program, and the licensing of rights to the intellectual property associated with the content or program, depend primarily upon their acceptance by the public, which is difficult to predict. The commercial success of content or a program also depends upon the quality and acceptance of other competing programs released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors, all of which are difficult to predict.

Ratings for broadcast radio stations and traffic or visitors to a particular website are also factors that are weighed when advertisers determine which outlets to use and in determining the advertising rates that the outlet receives. Poor ratings or traffic levels can lead to a reduction in pricing and advertising revenue. For example, if there is an event causing a change of programming at one of our radio stations, there could be no assurance that any replacement programming would generate the same level of ratings, revenue or profitability as the previous programming. In addition, changes in ratings methodology and technology could adversely impact our ratings and negatively affect our advertising revenue. In each market, there has been a compression in the relative ratings of all radio stations in the market, enhancing the competitive pressure within the market for advertising dollars. Because of the competitive factors we face, we cannot assure investors that we will be able to maintain or increase our current audience ratings and advertising revenue, which could have an adverse impact on our business, financial condition and results of operations.

Our live events business depends in part on our ability to anticipate the tastes of consumers and to offer events that appeal to them. Since we rely on unrelated parties to perform at certain of our live events, any lack of availability of popular artists could limit our ability to generate revenue. In addition, our live events business typically plans and makes certain commitments to future events up to 18 months in advance of the event, and often agrees to pay an artist or other service providers or venues a fixed guaranteed deposit amount prior to our receiving any revenue as is standard in the live events industry. Therefore, if the public is not receptive to the event, or we or an artist cancel the event, we may incur a loss for the event depending on the amount of the fixed guaranteed or incurred costs relative to any revenue earned, as well as revenue we could have earned at the event. For certain events, we have cancellation insurance policies in place to cover a portion of our losses but this coverage may not be sufficient and is subject to deductibles. Furthermore, consumer preferences change from time to time, and our failure to anticipate, identify or react to these changes could result in reduced demand for our live events, which would adversely affect our business, financial condition and results of operations.

We may continue to grow in part by acquiring radio stations, digital properties, live events or other businesses in the future. We cannot predict whether we will be successful in pursuing these acquisitions or what the consequences of these acquisitions will be. Any acquisitions in the future may be subject to various conditions, such as compliance with FCC and antitrust regulatory requirements.

The FCC requirements include:

The antitrust regulatory requirements include:

Completion of any acquisition may be approved by regulatory authorities subject to our compliance with certain conditions. These conditions may be onerous, and may include the requirement that we divest certain assets, which may include radio stations we already own or we propose to acquire. We cannot be certain whether we would be willing to satisfy any of these conditions or whether they can be satisfied, the timing thereof, or the potential impact on us any such conditions may have. In addition, the FCC has in the past asserted the authority to review levels of local radio market concentration as part of its acquisition approval process, even where proposed assignments would comply with the numerical limits on local radio station ownership in the FCC’s rules and the Communications Act.

We cannot be certain that we will be able to successfully integrate any future acquisitions or manage the resulting business effectively, or that any acquisition will achieve the benefits that we anticipate. In addition, we are not certain that we will be able to acquire properties at valuations as favorable as those of previous acquisitions. Depending upon the nature, size and timing of potential future acquisitions, we may be required to raise additional financing or issue additional securities in order to consummate additional acquisitions. Our debt agreements, as may be in place at any time, may not permit us to consummate an acquisition or access the necessary additional financing because of certain covenant restrictions. Furthermore, we cannot be certain that additional capital will be available to us or, if available, that capital would be on terms acceptable to our management team.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. GAAP. As a public company, we are required to comply with the Sarbanes-Oxley Act and other rules that govern public companies. In particular, we are required to certify our compliance with Section 404 of the Sarbanes-Oxley Act, which requires us to furnish annually a report by management on the effectiveness of our internal control over financial reporting.

Management performed its assessment of the effectiveness of our internal control over financial reporting as of December 31, 2020 and had concluded that our internal control over financial reporting was not effective as of December 31, 2020 due to material weaknesses described under “Item 9A. Controls and Procedures” in this Annual Report. During 2021, management took steps to remediate all previously identified material weaknesses as of December 31, 2021.

Remediation efforts place a significant burden on management and add increased pressure to our financial resources and processes. If we identify material weaknesses in our internal control over financial reporting in the future, our business may be harmed. Such harm may include: (i) failure to accurately report our financial results, to prevent fraud or to meet our SEC reporting obligations on a timely basis or at all; (ii) material misstatements in our Consolidated Financial Statements and harm to our operating results and investor confidence; and (iii) a material adverse effect on the trading price of our stock. In addition, the foregoing could subject us to sanctions or investigations by the NYSE, the SEC or other regulatory authorities, and result in the breach of covenants in our debt agreements, any of which could have a material adverse impact on our operations, financial condition, results of operations, liquidity and our stock’s trading price.

Further, there are inherent limitations in the effectiveness of any control system, including the potential for human error and the possible circumvention or overriding of controls and procedures. Additionally, judgments in decision-making can be faulty and breakdowns can occur because of a simple error or mistake. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies or procedures.

Under Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 350, “Intangibles-Goodwill and Other,” goodwill and indefinite-lived intangibles, including FCC licenses, are not amortized but instead are tested for impairment at least annually, or more frequently if events or circumstances indicate that there may be an impairment. Impairment is measured as the excess of the carrying value of the goodwill or intangible asset over its fair value. Intangible assets that have finite useful lives continue to be amortized over their useful lives and are also measured for impairment if events or circumstances indicate that they may be impaired. Impairment losses are recorded as operating expenses.

As of December 31, 2021, our FCC licenses and goodwill comprised approximately 37.9% and 21.7% of our consolidated total assets, respectively. The valuation of intangible assets is subjective and based on estimates rather than precise calculations. If actual future results are not consistent with the assumptions and estimates used, we may be exposed to impairment charges in the future. The fair value measurements for both our goodwill and indefinite-lived intangible assets use significant unobservable inputs which reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk.

Given the current economic environment and the potential negative impact on our business, there can be no assurance that our estimates and assumptions regarding the period and strength of the current economic recovery, made for the purpose of our non-amortizable intangible fair value estimates, will prove to be accurate.

Interim and/or annual impairment testing, as applicable, could result in future impairment losses. The fair value of FCC licenses and goodwill is primarily dependent on the expected future cash flows of our business. If actual market conditions and operational performance underlying the intangible assets were to deteriorate, or if facts and circumstances change that would more likely than not reduce the estimated fair value of the FCC licenses or goodwill below their adjusted carrying amounts, the Company may be required to recognize additional non-cash impairment charges in future periods, which could have a material impact on the Company’s business, financial condition and results of operations.

Technologies have been developed that can block the display of our ads and that provide tools to users to opt out of our advertising products. Most of our revenue from our digital businesses are derived from fees paid to us by advertisers in connection with the display of ads on web pages for our users. As a result, such technologies and tools could adversely affect our operating results.

A security breach or cyber-attack of our computer systems could interrupt or damage our operations or harm our reputation. A security breach could occur both from external sources, including malicious attacks and third-party service provider vulnerabilities, as well as internal sources, such as employee error, failures in our security measures or vulnerabilities in our networks or code base. Any security breaches of our computer systems, including repeated or

The number and scale of cyber-attacks causing significant business disruptions, such as global ransomware attacks, are increasing and could pose a risk to our ability to deliver our services and operate our business. Any future ransomware or other cyber-attack could disrupt our service delivery for an indeterminate period of time, as well as compromise or destroy personal and business-critical data and information within our control. Recovering from such an attack may require significant resources to restore business operations and our services, including personnel time and capital costs. In some cases, recovery of such data may not be possible. If a security breach results in the exposure or unauthorized disclosure of personal information, we could incur additional costs associated with data breach notification and remediation expenses, investigation costs, regulatory penalties and fines, and legal proceedings. Our insurance coverage may not be adequate to cover all the costs related to such breaches or attacks.

We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure online transmission of confidential consumer information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments may result in a compromise or breach of the algorithms that we use to protect sensitive customer transaction data. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend capital and other resources to protect against such security breaches or cyber-attacks or to alleviate problems caused by such breaches or attacks. Our security measures are designed to protect against security breaches and cyber-attacks but may not be adequate, implemented properly, or appropriately complied with internally to prevent a security breach or cyber-attack. No network or system can ever be completely secure. Our failure to prevent such security breaches and cyber-attacks could subject us to liability, adversely affect our results of operations and damage our reputation.

Select business operations, including online advertising, analytics engines and data storage, rely on partnerships with third party service providers, the operations, practices, and processes of which are outside our control. Despite due diligence in engaging these third parties and efforts to contractually protect our interests, we cannot guarantee that these third parties will adequately protect the personal information that we share with, or that is collected on our behalf by, such third parties or that such third parties will fully or sufficiently comply with all applicable data protection laws and contractual obligations. The failure of our third-party service providers to adequately protect the personal information we process could result in a security breach of such personal information, potentially exposing us to the liability of a data breach or mishandling of personal information. Even where personal information is not involved, a successful cyber-attack on one of our third-party service providers could result in a disruption to our operations and impact revenues.

Under recent developments in data protection laws, particularly the European Union’s General Data Protection Regulation (“GDPR”), we may be liable for the compliance of any third parties engaged to process personal information on our behalf with applicable data protection laws. More recently, California enacted the California Consumer Privacy Act (the “CCPA”) that, among other things, requires covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information and, in some cases, delete such personal information. If any of our third-party service providers fail to comply with applicable laws, we may face additional exposure and liability on behalf of such providers. While we attempt to control against such outcomes through our vetting of third-party service providers and with appropriate contractual obligations, we cannot ensure our third-party service providers will fully comply with all such obligations. Moreover, the regulatory landscape

We rely on third parties to provide the technologies that we use to deliver content, advertising, and services. There can be no assurance that these providers will continue to license their technologies or intellectual property to us on reasonable terms, or at all. Providers may change the fees they charge users or otherwise change their business model in a manner that slows the widespread acceptance of their technologies. In order for our services to be successful, there must be a large base of users of the technologies necessary to deliver our content, advertising and services. We have limited or no control over the availability or acceptance of those technologies, and any change in the licensing terms, costs, availability, or user acceptance of these technologies could adversely affect our business.

Certain of our products and services depend on the ability of our audience to access the internet, and certain of our products require significant bandwidth to work effectively. Currently, this access is provided by companies that have significant market power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies and government-owned service providers. Some of these providers may take measures that could degrade, disrupt, or increase the cost of, access to certain of our products by restricting or prohibiting the use of their infrastructure to support or facilitate our offerings, or by charging increased fees to us or our audience to provide or access our offerings. Such interference could result in a loss of existing audience and advertisers, and increased costs, and could impair our ability to attract new audience and advertisers, thereby harming our revenue and growth.

The radio industry is subject to extensive regulation by the FCC under the Communications Act. Our radio stations depend upon maintaining their broadcasting licenses issued by the FCC, which are currently issued for a maximum term of eight years and are renewable. Interested parties may challenge a renewal application. On rare occasions, the FCC has revoked licenses, not renewed them, or renewed them with significant qualifications, including renewals for less than a full term of eight years. In the last renewal cycle, the FCC granted all of the license renewal applications that were filed for our radio stations. Our latest license renewal cycle began in 2019. We have now filed all of the required applications for this renewal cycle. 70% of those applications have been granted, all for full eight-year terms. The rest remain pending. We cannot be certain that our pending or future license renewal applications will be approved, or that the renewals will not include conditions or qualifications that could adversely affect our business, financial condition and results of operations, result in material impairment or adversely affect our liquidity and financial condition. If any of our FCC licenses are not renewed, it would prevent us from operating the affected radio station and generating revenue from it. Further, the FCC has a general policy restricting the transferability of a radio station license while a renewal application for that radio station is pending. In addition, we must comply with extensive FCC regulations and policies governing the ownership and operation of our radio stations. FCC regulations limit the number of radio stations that a licensee can own in a market, which could restrict our ability to consummate future transactions. The FCC’s rules governing our radio station operations impose costs on our operations and changes in those rules could have an adverse effect on our business. The FCC also requires radio stations to comply with certain technical requirements to limit interference between two or more radio stations. If the FCC relaxes these technical requirements, it could impair the signals transmitted by our radio stations and could have a material adverse effect on our business.

The FCC’s rules prohibit the broadcast of obscene material at any time and indecent material between the hours of 6 a.m. and 10 p.m. Broadcasters risk violating the prohibition against broadcasting indecent material because of the vagueness of the FCC’s definition of indecent material, coupled with the spontaneity of live content. The FCC vigorously enforces its indecency rules against the broadcasting industry as a whole and violations of these rules may result in fines or, in some instances, revocation of an FCC license. The FCC’s focus on the indecency regulatory scheme, against the broadcast industry generally, may encourage third parties to oppose our license renewal applications.

Furthermore, in recent years the FCC has increased its enforcement of regulations requiring a radio station to include an on-air announcement which identifies the sponsor of all advertisements and other matter broadcast by any radio station for which any money, service or other valuable consideration is received. Fines for such violations can be substantial as they are dependent on the number of times a particular advertisement is broadcast.

We cannot predict whether Congress will consider or adopt further legislation in this area. In the ordinary course of business, we or the FCC may receive complaints and we may become subject to FCC inquiries or proceedings related to our stations’ broadcasts or operations, and any resulting settlement with or fines from the FCC, revocation of any of our radio station licenses or denials of license renewal applications, could have a material adverse effect on our business, financial condition and results of operations.

In October 2015, the FCC released a First Report and Order and Further Notice of Proposed Rulemaking titled “Revitalization of AM Radio Service,” enacting several modifications to its technical rules for AM radio stations. One aspect of the FCC’s revitalization order was exclusive AM filing windows in 2016 to allow AM stations to move a FM translator up to 250 miles to rebroadcast that AM station’s signal, and windows in 2017 and 2018 exclusively for AM stations to apply for a new FM translator construction permit. As a result of these filing windows many broadcast companies, including our Company, have constructed and are operating FM broadcast translator stations, or have construction permits to do so in the future, and thereby rebroadcast certain of their AM stations in the FM band. We cannot predict at this time to what extent these FM broadcast translator stations will impact our Company.

In the course of our ordinary business operations, we may collect personal information and non-personal information that is critical or commercially-useful to our business, including personal information related to our employees, audience, advertisers, contractors, and customers. As a result of our digital expansion efforts and third-party partnerships, the volume, sensitivity, and business importance of the information we collect and use is increasing. We collect this information directly from individuals, through passive tracking technology such as “cookies” and indirectly through third parties engaged to provide services on our behalf. In addition to the risk that a security breach may compromise this information, this information may include personal information such as names, contact information, credit card information, geolocation and demographic information that is subject to specific data protection and privacy laws.

Regulatory enforcement actions and interpretations of new data protection and privacy laws and regulations may change how these requirements apply to our business and collection, use, storage, and disclosure of personal information, creating uncertainty regarding the continued viability of information-reliant business activities. Certain interpretations or implementation of new data protection and privacy laws, as well as the evolving legal and regulatory landscape, could harm our business, including negatively impacting the cost of doing business or our ability to engage in certain business practices. Furthermore, recent disclosures of major data breaches and company data collection, use and disclosure practices to which large segments of the consumer population have objected may result in both increased interest in U.S. federal data privacy legislation as well as changes to consumer privacy expectations and demands. Such shifts may restrict our ability to collect and/or process personal information in a particular way or derive economic value from personal, and even non-personal, information.

We have implemented and are implementing policies and procedures to comply with applicable data protection and privacy laws and regulations, but such measures may not always be effective, particularly as the legal landscape continues to evolve, and regulatory guidance is often ambiguous or inconsistent. Some of our internal processes are manual and rely on employees to follow and adhere to our policies and procedures, which can result in employee error and internal compliance failures. Any failure or perceived failure by us to comply with our policies or applicable data protection and privacy laws and regulations could result in regulatory enforcement actions against us, proceedings by governmental entities, consumers or others (including our contractual third parties), and loss in brand value and reputation. Such results could possibly require us to incur costs for defending against proceedings or paying regulatory fines or penalties and responding to such outcomes could consume considerable management focus and internal resources, decrease demand for our services, or increase the costs of, or otherwise limit, our ability to do business.

A variety of federal and state laws govern the collection, use, retention, sharing and security of consumer data that our digital properties use to operate certain services and to deliver certain advertisements to its customers, as well as the technologies used to collect such data. Not only are existing privacy-related laws in these jurisdictions evolving and subject to potentially disparate interpretation by governmental entities, new legislative proposals affecting privacy are

We are a smaller reporting company, as defined in the Exchange Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not applicable to smaller reporting companies, including reduced disclosure obligations regarding executive compensation. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We intend to take advantage of certain of these reporting exemptions until we are no longer a smaller reporting company. We will remain a smaller reporting company until the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $250 million or more.

We cannot assure you that the market price of our Class A common stock will not fluctuate significantly in response to a number of factors, many of which we cannot control, including those described under “Risks Related to Economic Conditions and Our Business” and the following:

Many of the factors above are beyond our control and may cause the market price of our common stock to decline, regardless of our financial performance and condition and prospects. Declines in our stock price may limit our

In addition, the stock market has experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs, and our resources and the attention of management could be diverted from our business.

Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our by-laws, or (iv) any other action asserting a claim against us that is governed by the internal affairs doctrine. This provision is not intended to apply to claims arising under the Securities Act and the Exchange Act. To the extent the provision could be construed to apply to such claims, there is uncertainty as to whether a court would enforce the provision in such respect, and our stockholders will not be deemed to have waived compliance with federal securities laws and the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

As a result of the economic circumstances and uncertainty created by the COVID-19 pandemic, our board of directors has determined to cease payment of quarterly cash dividends, with no intention of reinstating the dividend. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, including agreements governing our indebtedness, any potential indebtedness we may incur, restrictions imposed by applicable law and other factors our board of directors deems relevant. Accordingly, if you purchase shares, realization of a gain on your investment may depend on the appreciation of the price of our Class A common stock, which may never occur.

Not applicable.

The types of properties required to support our business include offices, radio station studios as well as transmitter and tower sites. In each of our markets our radio station studios and offices are generally co-located. Transmitter and tower sites are also generally co-located. The location of our towers is generally chosen so as to provide optimal signal coverage, within the confines of FCC broadcast rules.

As of December 31, 2021, we owned 45 facilities containing broadcast studios and 282 towers in our 67 markets. Where we do not own studios or towers, we lease these facilities. In addition, we lease various office facilities across the U.S. for our corporate, digital marketing solutions, and e-commerce operations, including a space in Purchase, New York for our principal corporate office. We also lease venues to host our live events from time to time.

We do not anticipate any difficulties in renewing any facility leases or in leasing alternative or additional space, if required. We own or lease substantially all of our other equipment, consisting principally of transmitting antennae, transmitters, studio equipment, certain live event production equipment and general office equipment. Where we do not own necessary equipment, we lease that equipment. In some cases, we lease the equipment in addition to our owned equipment.

We believe that our properties are generally in good condition and suitable for our operations; however, we continually look for opportunities to upgrade our operations. We continuously evaluate how to optimize our capital allocation as it relates to our properties.

Not applicable.

Shares of our Class A common stock, par value $0.01 per share, trade under the symbol “TSQ” on the NYSE. There is no established public trading market for our Class B common stock or our Class C common stock.

On March 7, 2022 the Company had 140 Class A common stockholders of record, 4 Class B common stockholders of record and 2 Class C common stockholders of record. A substantially greater number of holders are beneficial owners whose shares are held of record by banks, brokers and other financial institutions.

In 2018 the Company paid its first cash dividend of $0.075 per share, and paid equivalent dividends on a quarterly basis through the second quarter of 2020. Each quarterly dividend payment was approximately $2.1 million in the aggregate. The final dividend payment was made to shareholders of record as of April 2, 2020 on May 15, 2020. Due to the economic circumstances and uncertainty created by the COVID-19 pandemic, our board of directors determined to cease payment of quarterly cash dividends following the May 2020 dividend payment. Any future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with covenants in our current and future agreements governing our indebtedness, and will depend upon our results of operations, financial condition, capital requirements and other factors that our board of directors deems relevant.

In addition, since we are a holding company, substantially all of the assets shown on our Consolidated Balance Sheets are held by our subsidiaries. Accordingly, our earnings, cash flow and ability to pay dividends largely depend upon the earnings and cash flows of our subsidiaries and the distribution or other payment of such earnings to us.

None.

There were no repurchases of our common stock during the quarter ended December 31, 2021.

The following management’s discussion and analysis is intended to provide the reader with an overall understanding of our financial condition, results of operations, cash flows and sources and uses of cash. This section also includes general information about our business and a discussion of our management’s analysis of certain trends, risks and opportunities in our industry. In addition, we also provide a discussion of accounting policies that require critical judgments and estimates. This discussion should be read in conjunction with our Consolidated Financial Statements and related notes appearing elsewhere in this Annual Report. The following discussion contains forward-looking statements and our actual results could differ materially from those discussed in the forward-looking statements as a result of a number of factors, including those set forth in the sections entitled “Risk Factors” and “Forward-Looking Statements” and elsewhere in this Annual Report.

This report includes estimates, projections, statements relating to our business plans, objectives and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements often discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. See the section of this Annual Report titled, “Forward-Looking Statements” for further information regarding forward-looking statements.

Our primary sources of net revenue are the sale of digital and broadcast advertising solutions on our owned and operated websites, radio stations’ online streams and mobile applications, and on third party websites through our in-house digital programmatic advertising platform. Through our digital programmatic advertising platform, we are able to hyper-target audiences for our local, regional and national advertisers by combining first and third party audience and geographic location data, providing them the ability to reach a high percentage of their online audience. Ignite delivers these solutions across desktop, mobile, connected TV, email, paid search and social media platforms utilizing display, video and native executions. We also offer subscription digital marketing solutions through Townsquare Interactive to small and mid-sized local and regional businesses in markets outside the top 50 across the United States, including, but not limited to the markets in which we operate radio stations. Our digital marketing solutions include traditional and mobile-enabled website development and hosting services, e-commerce platforms, search engine and online directory optimization services, online reputation monitoring, social media management, and website retargeting.

Advertising revenue is highly correlated to changes in gross domestic product (“GDP”) as dollars spent on advertising has historically trended in line with, and in our experience often lags, changes in GDP. According to the U.S. Department of Commerce estimate as of January 27, 2022, U.S. GDP increased 5.7% for the year ended December 31, 2021.

We strive to maximize our net revenue by managing our digital and broadcast advertising inventory and adjusting prices based on supply and demand and by broadening our base of advertisers and subscribers. Our selling and pricing activity is based on demand for our advertising inventory and, in general, we respond to this demand by varying prices rather than by varying our target inventory levels. The optimal number of advertisements available for sale depends on the platform and in the case of our radio stations, their online streams and mobile applications, the programming format of a particular radio station. Each of our advertising products has a general target level of available inventory. We seek to broaden our base of local advertisers in each of our markets by providing a wide array of digital and broadcast solutions to help clients growth their business and achieve their goals.

Our advertising contracts are generally short-term. In the media industry, companies, including ours, sometimes utilize barter agreements that exchange advertising time for goods or services such as travel or lodging, instead of cash.

Our most significant expenses are sales personnel, programming, digital, marketing and promotional, engineering, and general and administrative expenses. We strive to control these expenses by closely monitoring and managing each of our local markets and through efficiencies gained from the centralization of finance, accounting, legal and human resources functions and management information systems. We also use our scale and diversified geographic portfolio to negotiate favorable rates with vendors where feasible.

A portion of our expenses are variable. These variable expenses primarily relate to sales costs, such as commissions and inventory costs, as well as certain programming costs, such as music license fees, and certain costs related to production. Marketing and promotions expenses are discretionary and are primarily incurred in an effort to maintain and/or increase our audience share. Other programming, digital, engineering and general and administrative expenses are primarily fixed costs.

Our business enjoys strong cash flow generation owing to the relatively limited capital needs of our operations. During the year ended December 31, 2021, we recorded $12.4 million of capital expenditures, which represented 3.0% of net revenue during the same period. In addition, we benefit from certain tax attributes that generate tax deductions which have historically limited the amount of cash taxes we pay.

In December of 2021, the Company changed its reporting segments in order to reflect its strategic focus, organizational structure and the information reviewed by its CODM as a digital media and digital marketing solutions company with market leading radio stations. The Company has identified three segments, which are Subscription Digital Marketing Solutions, Digital Advertising and Broadcast Advertising, and the remainder of our business is reported in an Other category. The Subscription Digital Marketing Solutions segment includes our subscription digital marketing solutions business, Townsquare Interactive. The Digital Advertising segment, which we market externally as Townsquare Ignite, includes digital advertising on our owned and operated digital properties and our digital programmatic advertising platform. The Broadcast Advertising segment includes our local, regional and national advertising products and solutions delivered via terrestrial radio broadcast, and other miscellaneous revenue that is associated with our broadcast advertising platform. The Other category includes our owned and operated live events. We have presented segment information for the year ended December 31, 2020 in conformity with the current year’s segment information.

On January 6, 2021, the Company completed the private offering and sale of $550.0 million aggregate principal amount of 6.875% senior secured notes due 2026 (the “2026 Notes”) at an issue price of 100.0%. The net proceeds from the 2026 Notes, together with cash on hand, were used to repay: (i) all outstanding borrowings under the 2015 senior secured credit facility, which included a seven year $275.0 million term loan facility (the "Term Loans") with $272.4 million principal amount outstanding and $2.1 million in accrued interest, (ii) all of the outstanding $273.4 million of principal amount of 6.5% Unsecured Senior Notes due in 2023 (the “2023 Notes”), a prepayment premium of $4.4 million, and $5.1 million in accrued interest, and (iii) fees and expenses related thereto. The Company also terminated its revolving credit facility and all other obligations thereunder were repaid effective January 6, 2021.

The Company incurred approximately $13.6 million of fees and expenses in connection with the issuance of the 2026 Notes, of which approximately $9.4 million were capitalized and are being amortized over the remaining term of the 2026 Notes using the effective interest method. The Company recognized a $4.9 million loss on the early extinguishment of debt during the three months ended March 31, 2021, due to a $3.1 million portion of the 2023 Notes prepayment premium and the write-off of $1.8 million of unamortized debt discount and deferred financing fees previously capitalized in connection with the senior secured credit facility and 2023 Notes. The Company recognized a $1.1 million loss on the modification of Terms Loans and 2023 Notes during the three months ended March 31, 2021, which is primarily related to a portion of fees and expenses incurred related to the issuance of the 2026 Notes.

The U.S. economy and financial markets may continue to experience volatility due to the COVID-19 pandemic, the development of COVID-19 variants, vaccination rates and government legislative and regulatory responses to any of these factors. The effects of the COVID-19 pandemic began to impact our operations in early March 2020, and included significant advertising cancellations and material declines in the purchase of new advertising by our clients. Declines in forecasted traditional broadcast revenue in the markets in which we operate, the impact of the COVID-19 pandemic on market and economic conditions, and the corresponding impacts to our risk premium, contributed to approximately $107.1 million impairments to the carrying values of our FCC license intangible assets during the first half of 2020, of which $28.7 million and $78.4 million was recognized during the three months ended June 30, 2020 and March 31, 2020, respectively. Additionally, we canceled nearly all live events beginning in March 2020. At the end of the first quarter of 2020, we reduced our workforce through the termination or layoff of approximately 135 full-time employees.

As local public health conditions improved, we experienced recoveries throughout 2021 in advertising revenue, following the sequential improvements we observed during each of the third and the fourth quarters of 2020. Throughout 2021, we continued the precautionary measures that were instituted in 2020 to address the potential impact to our consolidated financial position, consolidated results of operations, and liquidity, including wage reduction efforts such as the temporary suspension of the Company’s match on employee contributions to the Company’s defined contribution plan, the deferral of the payment of certain payroll taxes until December 31, 2021 and 2022 under the Coronavirus Aid,

The full extent of the COVID-19 pandemic impact will depend on future actions and outcomes, all of which remain fluid and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the short-term and long-term economic impacts of the COVID-19 pandemic (including the continued effect on advertising activity, consumer discretionary spending and our employees in the markets in which we operate), further actions taken to mitigate the impact of the pandemic, and the pace of continued economic and financial market recovery when the COVID-19 pandemic subsides, among others.

See Part I, Item 1A., “Risk Factors” for additional information on the current and potential impacts of COVID-19 and related risks and uncertainties to our business, results of operations, financial condition, liquidity, and stock price. We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business.

The following table summarizes our historical consolidated results of operations:

The following table presents the Company's reportable segment net revenue and direct operating expenses for each of the years ended December 31, 2021 and 2020, respectively (in thousands):

Net revenue for the year ended December 31, 2021 increased by $46.6 million, or 12.6%, as compared to the same period in 2020. Our Digital Advertising revenue increased $19.9 million, or 20.5% as compared to 2020 and our Subscription Digital Marketing Solutions revenue increased $11.4 million, or 16.2% as compared to 2020, primarily due

Direct operating expenses for the year ended December 31, 2021 increased by $6.0 million, or 2.1%, when compared with the same period in 2020. Our Digital Advertising direct operating expenses increased $9.3 million, or 13.2%, as compared to the same period in 2020. The increase was primarily driven by increases in variable expenses such as advertising inventory costs and sales commissions. Subscription Digital Marketing Solutions direct operating expenses increased $8.1 million, or 16.5%, as compared to the same period in 2020. The increase was primarily driven by increases in headcount related expenses to support revenue and subscriber growth. Our Broadcast Advertising direct operating expenses for the year ended December 31, 2021 decreased $12.9 million, or 8.1%, as compared to the same period in 2020. This decrease was primarily driven by lower music license fees and lower provisions for bad debt.

Depreciation and amortization expense for the year ended December 31, 2021 decreased of $1.0 million or 5.0%, as compared to the same period in 2020 due to decreases in the amortization of software development costs as a result of the launch timing of new projects, and the disposal of certain long-lived assets previously utilized in the Live Events business in the third quarter of 2020.

Corporate expenses are of a general corporate nature or managed on a corporate basis. These costs (net of allocations to the business segments) primarily represent corporate stewardship and administration activities. Corporate expenses for the year ended December 31, 2021 decreased $2.3 million, or 8.7%, as compared to the same period in 2020, primarily due to lower compensation costs and professional fees.

Stock-based compensation expense for the year ended December 31, 2021 increased $1.6 million, or 78.4%, as compared to same period in 2020, primarily due to options granted in December of 2020.

Transaction costs for the year ended December 31, 2021 increased $1.8 million, or 68.1%, as compared to the same period in 2020 primarily due to the $4.5 million payment related to the Settlement Agreement, partially offset by fees incurred in 2020 to amend the Company's Term Loans.

Business realignment costs for the year ended December 31, 2021 decreased $2.2 million, or 72.6%, as compared to the same period in 2020, primarily as a result of $2.6 million in employee-related costs incurred in 2020 due to of headcount reductions in response to the COVID-19 pandemic that did not recur in 2021.

The Company recorded impairment charges of $1.7 million related to FCC licenses in 1 of our 67 local markets during the year ended December 31, 2021, as compared to $107.1 million of total impairment charges related to FCC licenses in the year ended December 31, 2020.

The $1.7 million impairment charge recorded during the year ended December 31, 2021 was driven by a change in the assumption for market revenue growth rates due to the availability of market data for the affected market. During the three months ended June 30, 2020, the Company recorded a $28.7 million impairment charge related to FCC licenses in 35 of our 67 local markets, primarily driven by changes in the market data utilized in determining the discount rate applied in the valuation of our FCC licenses which drove an increase in the weighted average cost of capital. The changes in data were driven by an increase in market volatility and industry bond yields, a direct result of the impact of the COVID-19 pandemic on market and economic conditions. During the three months ended March 31, 2020, the Company recorded a $78.4 million impairment charge related to FCC licenses in 46 of our 67 local markets due to declines in the purchase of advertising by our clients, primarily as a result of the COVID-19 pandemic.

Unfavorable changes in key assumptions utilized in the impairment assessment of our FCC licenses may affect future testing results. For example, keeping all other assumptions constant, a 150-basis point increase in the weighted average cost of capital as of the date of our last quantitative assessment performed as of December 31, 2021 would have caused the estimated fair values of our FCC licenses to decrease by $99.4 million which would have resulted in an additional impairment charge of $5.5 million. Assumptions used to estimate the fair value of our FCC licenses are also dependent upon the expected performance and growth of our traditional broadcast operations. In the event that our broadcast revenue experiences actual or anticipated declines, including as a result of the COVID-19 pandemic, such declines will have a negative impact on the estimated fair value of our FCC licenses, and the Company could recognize additional impairment charges, which could be material.

The Company also recorded total impairment charges of $2.0 million related to long-lived assets in certain markets, including the disposal of certain long-lived assets previously utilized in the Live Events business during the year ended December 31, 2020.

During the year ended December 31, 2021, the Company recognized a $0.6 million loss on the sale of a portion of land in Portsmouth, NH.

The primary component of Other expense (income) in the years ended December 31, 2021 and 2020 is interest expense, net. The following table illustrates the components of our interest expense, net for the periods indicated (in thousands):

During the year ended December 31, 2021, the Company recognized a $4.9 million and a $1.1 million loss on the early extinguishment and modification of debt, respectively. The $4.9 million loss on the early extinguishment of debt is comprised of a $3.1 million portion of the 2023 Notes prepayment premium and the write-off of $1.8 million of unamortized debt discount and deferred financing fees previously capitalized in connection with the senior secured credit facility and the 2023 Notes. The $1.1 million loss on the modification of debt was primarily related to a portion of fees and expenses related to the issuance of the 2026 Notes.

On May 19, 2020, the Company voluntarily repurchased $4.7 million of its 2023 Notes at a market price below par, plus accrued interest, which were then canceled, recognizing a net gain of $1.2 million during the year ended December 31, 2020.

We recognized an income tax provision of $10.4 million for the year ended December 31, 2021 as compared to an income tax benefit of $23.9 million for the same period in 2020. Our effective tax rate for the period was approximately 35.5% for the year ended December 31, 2021 as compared to 22.85% for the year ended December 31, 2021. The increase in the effective tax rate is primarily driven by the $4.5 million paid under the terms of the Settlement Agreement and an increase in non-deductible executive compensation.

Our effective tax rate may vary significantly from period to period, and can be influenced by many factors. These factors include, but are not limited to, changes to statutory rates in the jurisdictions where we have operations and changes in the valuation of deferred tax assets and liabilities. The difference between the effective tax rate and the federal statutory rate of 21%, primarily relates to certain non-deductible items, state and local income taxes, and the valuation allowance for deferred tax assets.

Net cash provided by operating activities was $61.1 million for the year ended December 31, 2021, as compared to $31.5 million for the same period in 2020. This increase was primarily related to: net income in 2021 of $18.8 million, as compared to a net loss of $80.6 million in 2020; higher accrued interest due to the timing of the February 1, 2022 interest payment on the 2026 Notes; partially offset by changes in accounts receivable in 2021, as compared to 2020 as a result of the COVID-19 pandemic and the impact on advertising revenue in the prior period and increases in payments for accrued expenses primarily due to the timing of payments.

Net cash used in investing activities was $10.6 million for the year ended December 31, 2021, as compared to $14.0 million for the same period in 2020. The decrease in net cash used in investing activities was primarily due to decreases in the purchase of property and equipment.

Net cash used in financing activities was $83.2 million for the year ended December 31, 2021, as compared to $18.9 million for the same period in 2020. Net cash used in financing activities during 2021 was due to: the repayment of $557.4 million of principal amount of the 2023 Notes and Term Loans, including total accrued interest of $7.2 million and a $4.4 million prepayment premium; cash consideration for the Company's repurchase of the outstanding shares and warrants of Oaktree in the amount of $80.4 million; offset by the issuance of $550.0 million of the 2026 Notes, net of fees and expenses and proceeds from stock option exercises. Net cash used by financing activities during the year ended December 31, 2020 included the required $9.9 million 2019 excess free cash flow payment on our Term Loan and the May 2020 voluntary repurchase of $4.7 million of our 2023 Notes for $3.6 million and dividends.

We fund our working capital requirements through a combination of cash flows from our operating, investing, and financing activities. Based on current and anticipated levels of operations and conditions in our markets and industry, we believe that our cash on hand and cash flows from our operating, investing, and financing activities will enable us to meet our working capital, capital expenditures, debt service, and other funding requirements for at least one year from the date of this report. These historical sources of funds have been and could continue to be impacted by the COVID-19 pandemic. Future capital requirements may be materially different than those currently planned in our budgeting and forecasting activities and depend on many factors, some of which are beyond our control. In particular during the period of uncertainty related to the COVID-19 pandemic, we have focused on and will continue to monitor our liquidity.

As of December 31, 2021, we had $541.5 million of outstanding indebtedness, net of deferred financing costs of $8.5 million.

On January 24, 2021, the Company entered into a stock repurchase agreement with certain affiliates of Oaktree to repurchase at least 606,484 shares of the Company’s Class A common stock, par value $0.01 per shares, 2,151,373 shares of the Company’s Class B common stock, par value $0.01 per share, and 7,242,143 warrants to purchase Class A Common Stock. On March 9, 2021, the repurchase was consummated and the Company elected to repurchase all of the outstanding securities held by Oaktree, including 1,595,224 shares of Class A Common Stock, 2,151,373 shares of Class B Common Stock and 8,814,980 warrants for an aggregate purchase price of $80.4 million, or $6.40 per security. In connection with the closing under the stock repurchase agreement, on March 8, 2021, the Company and Oaktree entered into a settlement agreement (the “Settlement Agreement”), pursuant to which, among other things, the Company agreed to pay $4.5 million to Oaktree as follows: (i) $1.5 million on April 1, 2021; (ii) $1.0 million on July 1, 2021; (iii) $1.0 million on October 1, 2021; and (iv) $1.0 million on November 10, 2021. The Settlement Agreement also included customary mutual releases from claims, demands, and damages related to the stock repurchase agreement. The $4.5 million due under the terms of the Settlement Agreement is reflected as a component of transaction costs for the year ended December 31, 2021. All amounts due under the terms of the Settlement Agreement were paid as of September 30, 2021.

As of December 31, 2021, we had $50.5 million of cash and cash equivalents, $57.6 million of receivables from customers, which historically have had an average collection cycle of approximately 55 days. We had restricted cash of $0.5 million of December 31, 2021 and 2020, respectively, that was held as collateral in connection with certain agreements. From time to time, such restricted funds could be returned to us or we could be required to pledge additional cash.

Our anticipated uses of cash in the near term include working capital needs, interest payments, other obligations, and capital expenditures. The Company believes that the cash generated by its operations should be sufficient to meet its liquidity needs for at least the next 12 months. However, our ability to fund our working capital needs, debt payments, other obligations, capital expenditures, and to comply with financial covenants under our debt agreements, depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions, increases or decreases in advertising spending, changes in the highly competitive industry in which we operate, which may be rapid, and other factors, many of which are beyond our control. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders, while the incurrence of debt financing would result in debt service obligations. Such debt instruments also could also introduce covenants that might restrict our operations. We cannot assure you that we could obtain additional financing on favorable terms or at all.

Additionally, on a continuing basis, we evaluate and consider strategic acquisitions and divestitures to enhance our strategic and competitive position as well as our financial performance. Any future acquisitions, joint ventures or other similar transactions may require additional capital, which may not be available to us on acceptable terms, if at all.

We closely monitor the impact of capital and credit market conditions on our liquidity and our ability to refinance in the future. We also routinely monitor the changes in the financial condition of our customers and the potential impact on our results of operations.

In response to the ongoing challenges and uncertainty in the economy, financial markets, and the Company’s business brought on by the COVID-19 pandemic, we have maintained certain precautionary measures that were instituted in 2020 to address the potential impact to our consolidated financial position, consolidated results of operations, and liquidity. These precautionary measures included the temporary suspension of the Company’s match on employee contributions to the Company’s defined contribution plan, the deferral of the payment of certain payroll taxes until December 31, 2021 and 2022 under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and controlling non-essential capital expenditures. Additionally, our board of directors determined to cease payment of quarterly cash dividends, following the payment of our first quarter dividend of $2.1 million on May 15, 2020.

Below is a summary of additional liquidity matters. See the indicated Notes to Consolidated Financial Statements for additional details related to these and other matters affecting our liquidity and commitments.

Our Consolidated Financial Statements have been prepared in conformity with Generally Accepted Accounting Principles (“GAAP”), which requires us to make estimates and assumptions that affect the amounts and disclosures reported in our Consolidated Financial Statements and accompanying notes. Accounting estimates and assumptions described in this section are those we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties. For all of these estimates, we note that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment. Actual results could differ from such estimates. The following discussion summarizes our critical accounting estimates. Circumstances arising from the COVID-19 pandemic in the future may require our estimates to change, however, as new events occur and additional information is obtained, any such changes will be recognized in the consolidated financial statements. Actual results could differ from such estimates, and any such differences may be material to our financial statements. Significant accounting policies used in the preparation of our Consolidated Financial Statements are discussed in our Notes to Consolidated Financial Statements.

We reduce the carrying amount of accounts receivable by a valuation allowance that reflects our best estimate of the accounts that will not be collected. In addition to reviewing delinquent accounts receivable, we consider many factors in estimating our general allowance including historical data, collection experience, customer types, creditworthiness and economic trends. From time to time, we may adjust our assumptions for anticipated changes in any of those or other factors expected to affect collectability. We charge off account balances against the allowance when it is probable the receivable will not be recovered.

We allocate the total cost of acquisitions to the underlying identifiable net assets, based on their respective estimated fair values at the date of acquisition with limited exceptions allowed by GAAP. Acquisition costs are generally expensed as incurred and restructuring costs associated with a business combination are generally expensed subsequent to the acquisition date. Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including the amounts assigned to identifiable intangible assets. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. In addition, we may establish liabilities related to acquired liabilities and qualifying restructuring costs and contingencies based on assumptions made at the time of acquisition. We evaluate these reserves on a regular basis to determine the adequacies of the amounts.

Goodwill arising from an acquisition is tested on an annual basis, or when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. We have elected to perform our annual goodwill impairment testing as of December 31st. Recoverability of goodwill is evaluated by comparison of the fair value of a reporting unit with its carrying value. For purposes of testing the carrying value of the Company's goodwill for impairment, the fair value of goodwill for each reporting unit contains significant assumptions incorporating variables that are based on past experiences and judgments about future performance using industry information. These variables would include, but are not limited to: (1) forecasted revenue growth rates; (2) profit margin; (3) estimated capital expenditures and working capital requirements during the projection period; (4) risk-adjusted discount rate; and (5) expected growth rates in perpetuity to estimate terminal values. These variables are susceptible to changes in estimates, which could result in significant changes to the fair value of the goodwill. Impairment of goodwill is calculated by comparing the fair value as described above to the carrying value of goodwill.

We continually monitor and evaluate business and competitive conditions that affect our operations and reflect the impact of these factors in our financial projections. If permanent or sustained changes in business or competitive conditions occur, they can lead to revised projections that could potentially give rise to impairment charges.

We test for impairment of our indefinite-lived intangible assets on an annual basis, as of December 31st, or when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The most significant intangible asset we have is our FCC licenses, which have been deemed to have an indefinite life. The fair value of our FCC licenses is estimated to be the price that we would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date.

We evaluate the fair value of our FCC licenses at the unit of account level. Each market's broadcasting licenses are combined into a single unit of accounting, in our case geographic markets, for purposes of testing for impairments.

We utilize a discounted cash flow method to perform our impairment test. Under this method, the income that is attributable to each FCC license is isolated and is based upon modeling a hypothetical “greenfield” build-up to a “normalized” enterprise that, by design, lacks inherent goodwill and assumes that the only asset of the hypothetical start-up business is the license. It is assumed that rather than acquiring indefinite-lived intangible assets as part of a going concern business, the buyer hypothetically develops indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flow model which results in value that is directly attributable to the indefinite-lived intangible assets. The cash flows generated in the greenfield method are presumed to emanate from the one asset, or the FCC license, that exists at time zero. This cash flow stream is discounted to arrive at a value for the FCC license.

The key assumptions using the greenfield method are market revenue growth rates, market share, profit margin and duration and profile of the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average FCC license within a market. The projections incorporated into our license valuations take into consideration the then current economic conditions. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control.

We determine if an arrangement is a lease at inception. The most significant estimates we use in accounting for leases include:

We measure and recognize stock-based compensation expense related to stock-based transactions, including employee awards based on the fair value of the award on the grant date. The fair values of restricted stock awards are determined based on the fair market value of our common stock at the time of grant. We estimate the fair value of option awards using the Black-Scholes option-pricing model. This model requires assumptions including the fair value of our common stock, expected volatility, expected term of the award, expected dividend yield and risk-free interest rate. Stock-based compensation expense is recognized as the equity awards vest. We account for forfeitures as a reduction of compensation cost in the period when such forfeitures occur.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which

We evaluate the need for valuation allowances to reduce the deferred tax assets to realizable amounts. Management evaluates all positive and negative evidence and uses judgment regarding past and future events, including operating results, to help determine when it is more likely than not that all or some portion of the deferred tax assets may not be realized. When appropriate, a valuation allowance is recorded against deferred tax assets to offset future tax benefits that may not be realized. As of December 31, 2021, the Company has recorded $55.1 million of valuation allowance against its net operating losses and tax credit carry forwards.

On an ongoing basis, we evaluate our exposure related to contingencies and litigation and record a liability when available information indicates that a liability is probable and estimable. We also disclose significant matters that are reasonably possible to result in a loss that is expected to be material to our operations or financial results or are probable but not estimable.

This Item is not required as we are a Smaller reporting company.

The information in response to this item is included in our Consolidated Financial Statements, together with the reports thereon of BDO USA, LLP, beginning on page F-1 of this Annual Report on Form 10-K, which follows the signature page hereto.

None.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). A company’s internal control over financial reporting is a process designed by, or under the supervision of, its Chief Executive Officer and Chief Financial Officer, and effected by such company's board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis.

None.

Not Applicable

The information required by this item is incorporated herein by reference to the information in the 2022 Proxy Statement under the caption “Directors and Corporate Governance” and “Executive Officers.”

The information required by this item is incorporated herein by reference to the information in the 2022 Proxy Statement under the captions “Executive Compensation” and “Director Compensation.”

The information required by this item is incorporated herein by reference to the information in the 2022 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management.”

On January 27, 2021, an amendment to the Company’s 2014 Omnibus Incentive Plan (the “Plan”) was approved to increase the number of shares of common stock available for grant under the 2014 Incentive Plan from 12,000,000 shares to 27,000,000 shares.

In September 2021, the Company’s Board of Directors approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). The Plan constitutes a sub-plan under the Townsquare Media, Inc. 2014 Omnibus Incentive Plan. Under the 2021 ESPP, eligible employees may authorize payroll deductions of at least 3% but no more than 15% of their current compensation of each payday during six month offering periods which commence on January 1 and July 1. Contributions are subject to an annual limitation of $25,000, and are used to purchase shares of Class A common stock at 90% of the fair market value of the Class A common stock on either the first or last day of an offering period, whichever is lower. The total number of shares purchased during each offering period may not exceed 2,000 shares per eligible participant and the total aggregate discount price for any calendar year may not exceed an annual limitation of $600,000. The first offering period for the ESPP commenced on January 1, 2022.

The information required by this item is incorporated herein by reference to the information in the 2022 Proxy Statement under the captions “Directors and Corporate Governance,” “Executive Officers" and “Certain Relationships and Related Transactions.”

The information required by this item is incorporated herein by reference to the information in the 2022 Proxy Statement under the caption “Other Audit Committee Matters.”