Townsquare Media, Inc.

Good morning and welcome to Town Square's third quarter conference call. As a reminder, today's call is being recorded and your participation implies consent to such recording. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. With that, I would like to introduce the first speaker for today's call, Claire Yenneke, Executive Vice President. Please go ahead.

Thank you, Operator, and good morning to everyone. Thank you for joining us today for Town Square's third quarter financial update. With me on the call today are Bill Wilson, our CEO, and Stuart Rosenstein, our CFO and Executive Vice President. Please note that during this call, we may make statements that provide information other than historical information, including statements relating to the company's future expectations, plans, and prospects. These statements are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995, and are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These statements reflect the company's beliefs based on current conditions, but are subject to certain risks and uncertainties, including those that are detailed in the company's annual report on Form 10-K for the year ended December 31, 2019, filed with the SEC. We may also discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted operating income, which we may refer to as profit in our remarks. and make certain pro forma adjustments. Such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly, year-end, and current reports available on our website. At this time, I would like to turn the call over to Bill Wilson.

Thank you, Claire, and thank you all for joining us this morning. I'd like to start this call by acknowledging the hard work and dedication of the entire Town Square team. Our team continues to impress me each and every day with their passion for what they do and their dedication to their local communities and our company, as well as their adaptability during these challenging times. Our team's focus and commitment to do their job with their best effort each day, despite the circumstances, whether it be the challenges of the pandemic or the hurricanes that swept through our Louisiana markets twice, by super-serving our audience and our local advertisers, has resulted in a significant improvement of our business each month since the pandemic hit us hardest in April. I'm proud to say that our third quarter financial results exceeded our goals and expectations. And as we look out to the fourth quarter and into 2021, we believe that we will continue to see strong improvement in our business absent any significant external disruptions. As I shared on our Q2 earnings call, my goal for Q3 was to improve our net revenue to close to negative 20 percent year-over-year from Q2's negative 35 percent year-over-year decline. In fact, our net revenue far exceeded this goal, with net revenue negative 15 percent year-over-year in Q3, an improvement of 20 percentage points. This led to a material increase in adjusted EBITDA from 2.1 million in Q2 to 17.5 million in Q3. We experienced sequential net revenue improvement throughout Q3 as our business continued to pick up pace, with net revenue declining negative 21% in July, negative 16% in August, and ending the quarter at a much improved negative 9% in September as compared to the same months in 2019. Our better-than-anticipated third quarter results were driven by gains in both our TownSquare Interactive and advertising segments. Gains, which I am pleased to say, are continuing into the fourth quarter. I have spent the last two calls talking in depth about how Town Square Interactive, our digital marketing solution subscription business, has outperformed during this crisis and its recession-resistant qualities. Today, I'll keep my highlights on Town Square Interactive brief and let the impressively strong results of this recurring subscription business speak for itself. As a tremendous resource for our local clients, Town Square Interactive has delivered revenue, profit, and subscriber growth throughout the pandemic, and Q3 was no different. Third quarter net revenue increased plus 14.5% over prior year, an improvement from Q2's net revenue increase of plus 10.5%. In addition, Town Square Interactive added approximately 1,150 net subscribers in Q3, ending the quarter with approximately 21,900 net subscribers, the 10th consecutive quarter of 850 or more net subscriber ads, and the most quarterly net subscriber ads in nearly six years. Let me repeat that. In the middle of a pandemic, we added more quarterly net subscribers than than any quarter since 2015. Amazing. Our Q3 net revenue for Town Square Interactive was $18.2 million. And based on our current subscriber base, Town Square Interactive's run rate annual net revenue is over $79 million as of the end of Q3. And therefore, I am confident in reaffirming our expectation of Town Square Interactive achieving $100 million in annual net revenue within two to three years. In addition, Town Square Interactive continues to generate healthy profit margins with Q3 margin of 30.2%, translating to $5.5 million of profit in the third quarter and over $15 million of profit in the first nine months of 2020. Looking to Q4, I expect Town Square Interactive's Q4 revenue growth to improve from Q3's 18.2 million, which was an increase of 2.3 million in Q3 2020 compared to Q3 2019, to over 18.8 million, which would be an increase of over 2.7 million in Q4 2020 compared to Q4 2019, and thus plus 17% growth in Q4 year over year. Given a pace of approximately 850 net subscriber ads per quarter, we expect to reach 30,000 subscribers in approximately 29 months or less. When we reach 30,000 subscribers, we expect our run rate net revenue at that point would be roughly $110 million on an annualized basis. This also reinforces our expectation that Town Square Interactive will reach $100 million in annual net revenue with approximately a 30 percent profit margin within two to three years. In total, our third quarter digital revenue increased plus 7 percent over the prior year period, and digital revenue accounted for 44 percent of our total net revenue. We believe this serves as a clear differentiator between Town Square and others in local media. Town Square's digital assets be it our digital audience to our websites and apps, our video, social, mobile, and programmatic advertising solutions, or our robust subscription digital marketing services, and our ability to generate digital revenue proves out the fact that although we are proud of our roots and DNA in radio, Town Square is not limited to being just a radio or audio company, but rather at this point can and quite honestly should be classified as a premier local media and digital marketing solutions company. And we believe our diversification has enabled us to rebound more quickly than others in the radio broadcast industry from the COVID-19 pandemic downturn. Our advertising segment, which is composed of both our broadcast and digital advertising solutions, also improved greatly as its revenue decline improved to negative 17% year-over-year in Q3, a 20-point improvement from Q2's year-over-year decline of negative 38%. Our improvement was broad-based across the segment, with broadcast advertising revenue improving from its low of negative 52% year-over-year in April to end at negative 45% in Q2, and finally improved to negative 23% in Q3, ending the quarter with revenue declines of only negative 14% in September. Broadcast revenue improvement was driven by new local business generation and improvement in national revenue, which is a very small part of our business, yet was one of the hardest hit revenue streams during the downturn, with national broadcast revenue down negative 65% in the month of May as compared to the prior year. And, of course, strength in political, which I'll touch on in a few minutes. Digital advertising revenue, which has been more resilient than broadcast advertising revenue throughout the pandemic, given the strength of our digital online audience and their engagement, actually increased in the third quarter as compared to the prior year, something we are incredibly proud of. Amped revenue, which is advertising revenue associated with our owned and operated local websites, increased an impressive plus 9 percent in the third quarter compared to the prior year period. This revenue growth, was supported by the popularity of our local websites as more and more people engage with our brands online to obtain information specific to their local community. With an average of 34 million people coming to our local websites each month during the third quarter, up an incredibly plus 84% versus Q3 of 2019. As we have highlighted on previous earnings calls, as local newspapers and local TV stations have reduced their coverage and investment in local news in our size markets, the resulting coverage for the 67 cities that we serve locally has greatly diminished over the past five to 10 years. Town Square has, through our websites and mobile apps, stepped in to fill that void, which the COVID-19 pandemic has magnified. As a result, we are not only experiencing an all-time record number of people visiting our websites this year, but we are also experiencing an all-time record level of engagement more visits per month, more article reads per visit, et cetera, which is one of the numerous reasons why our digital advertising solutions are performing so strongly as more people than ever engage with our brands online to obtain information specific to their local community. To that point, as I highlighted on our last call, Google provided Town Square a $260,000 grant for the creation of two news outlets, serving the great cities of Tuscaloosa, Alabama, and Portsmouth, New Hampshire. We launched the Tuscaloosa thread in early August, and its first month reached over 93,000 unique visitors. Incredible. And in Portsmouth, New Hampshire market, in partnership with Google, we have recently launched the Seacoast Current brand, www.seacoastcurrent.com, one of the many silver linings of the pandemic, has been the clear evidence that our local brands and our 67 markets are beloved by their communities and are where the local audience turns to be informed and entertained across our broadcast and digital platforms. Town Square Ignite, our proprietary in-house technology platform and digital programmatic offering, increased revenue a very strong plus 10% in the third quarter and plus 7.5% for the first nine months of 2020 compared to the same periods of 2019, making Town Square Ignite our fastest-growing advertising solution for both periods. We believe that Ignite will continue to be among our fastest-growing advertising solutions for the next several years and remain confident in our estimate that Town Square Ignite's annual advertising revenue will reach 100 million in the next two to three years. Touching now on political, Suffice it to say, like Drake, political revenue has been on fire this year. In the third quarter, political revenue was 4.5 million, more than three times what we booked in Q3 2016 during the previous presidential election cycle. Based on what is currently on the books today, we expect 2020 political revenue to be approximately 16 million, which is roughly 75 percent more than we booked in all of 2016. Improvement in our advertising business has continued thus far in Q4, in part due to the strength of political, the strength of digital, as well as the strength in new advertising business. In fact, October was our strongest new advertising business month of the year. Defined as business from an advertiser, excluding political, that has not advertised with Townscore in the last 13 months. And although the political surge is now behind us, our current forecast points to Q4 advertising revenue improving over Q3 with and without political revenue, given our expectation of continued strong rebound in broadcast and impressive year-over-year growth in digital advertising in Q4. The last point I want to touch on briefly before handling the call over to Stu is a very important one, and that is to highlight our strong cash generation ability and liquidity position. In the third quarter, cash flow provided by continuing operations was positive $12 million and positive $24 million in the first nine months of 2020. and that is after making approximately $17 million of cash interest payments in 2020. We ended the quarter with $79 million of cash on the balance sheet, and we also have access to our $50 million undrawn revolver, and our business has recovered to the point that we are not concerned about our liquidity and ability to meet our cash obligations going forward given current market circumstances. Looking forward, If there were to be another wave of state shutdowns and a subsequent further downturn in advertising revenue, we are confident that we would be able to manage through it efficiently and effectively as we have done to date and come out on the other side of this pandemic even further differentiated from our local media competitors. I trust that I have provided a very thorough, in-depth perspective on not only Q3 results, but also what we are currently expecting in Q4. As you would expect, we will not be providing formal guidance for the fourth quarter given the COVID-19 pandemic. That said, our goal in Q4 is to improve net revenue from negative 15% decline in Q3 to half that or negative 7.5% decline in Q4 as compared to last year. And we are confident we can achieve that given our talented team, the strength and continued growth of Town Square Interactive's subscriber base, and continued improvement in our broadcast and digital advertising revenue, as well as the strength of political net revenue, which we estimate will be approximately $9 million in Q4. As was the case in Q2 and Q3, where we had no material event revenue, we expect the same in Q4. and we are comping against $2 million in live event revenue in Q4 2019. We also expect to continue to see sequential improvement in adjusted EBITDA as we begin to approach prior year profit levels and expect to build cash once again in the fourth quarter. With that, I'll turn the call over to Stu, who is going to discuss our financial results in much greater detail. Take it away, Stu.