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Operator
Good morning and welcome to Town Square's year end 2020 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.
Claire Yenneke
Thank you, Operator, and good morning to everyone. Thank you for joining us today for Town Square's fourth quarter and year-end 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 that 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, 2020, filed with the SEC. We may also discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, and adjusted operating income, which we may refer to as profit in our remarks. 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. I would also encourage all participants to go to our corporate website at www.townsquaremedia.com and download our investor presentation, as Bill will reference some of those slides during our discussion this morning. At this time, I would like to turn the call over to Bill Wilson.
Bill Wilson
Thank you, Claire, and thank you all for joining us this morning. 2020 was an incredibly challenging and turbulent year, but it was also an extremely rewarding year. Over the past 12 months, I've continually thanked the entire Town Square team for their hard work, best effort, and dedication. Our team worked tirelessly and with great passion throughout the pandemic to help our company by helping local advertisers and businesses, as well as by keeping our local communities informed and entertained at a time when both needed it the most. We would not be reporting our strong finish to the year without the amazing and inspiring effort of our entire Town Square team across the country. As we said internally throughout 2020, we strived to perform the best when it mattered the most. Perform the best for our own team members our clients, our communities, and our partners. I'm proud to say that our fourth quarter financial results reflect that performance as they exceeded our goals and expectations. And as we look at 2021, we believe that we will continue to see strong improvement and strong results in our business. My goal for Q4, as outlined on our Q3 earnings call, was to cut our revenue declines by half from negative 15% in Q3 to to negative 7.5% in Q4. I am very proud that we outperformed this goal, reducing our net revenue year-over-year decline to just negative 3.2% in the fourth quarter. It is also important to note that we experienced sequential net revenue improvement on an ex-political basis in each month of Q4 as compared to the prior year as our business continued to rebound, each month better. Impressively, Because we outperformed fourth quarter revenue expectations and carefully managed expenses, we delivered year-over-year growth of plus 8.4% in fourth quarter adjusted EBITDA. Let me say that again. In the face of all the challenges of the pandemic during Q4, as COVID cases and deaths were rising, the TownSquare team was able to increase adjusted EBITDA by plus 8.4% over fourth quarter of 2019. to $27 million, which also represented a plus 54% increase from Q3 2020 adjusted EBITDA. Clearly, our business rebounded quite nicely and consistently, starting in Q2 and continuing through Q4. And I am glad to report that this strong rebound is currently continuing into Q1 2021. Just as important, if not more important than our 2020 financial results, was the acceleration of Town Square's transformation into a premier local media and digital marketing solutions company. Although we are very proud of our roots and DNA in local radio, and we are proud to call it radio, not audio, we became a digital-first company in 2020, which was reflected in our digital revenue and digital profit growth in 2020. Later in the call, Stu will highlight the new capital structure that we put in place at the beginning of this year. But what was very eye-opening to me during our bond offering process was the lack of clear understanding of our digital strategy, our digital assets, and our consistent year-over-year digital revenue and profit growth ever since we became a public company. To that end, we have updated our investor presentation to better reflect and communicate the vision of our TownSquare transformation and our digital first orientation. And I wanted to share a few highlights from that presentation with you this morning. As you will see on the opening slide of the presentation, we have updated our company description to more accurately reflect Town Square. It now reads, Town Square is a community-focused digital media, digital marketing solutions, and radio company focused outside the top 50 markets in the United States. Our assets include Town Square Interactive, a digital marketing services subscription business providing websites, search engine optimization, social platforms, and online reputation management for SMBs. Town Square Ignite, a proprietary digital programmatic advertising technology with an in-house demand and data management platform. And Town Square Media, our portfolio of 322 local terrestrial radio stations with corresponding local news and entertainment websites and apps, along with a network of national music brands. As you are aware, we have three financial segments, advertising, Town Square Interactive, and live events. And I thought it would be helpful if I quickly walk you through slide five of our investor deck as it breaks down the key operating components behind those three segments. Our advertising segment is composed of digital advertising and broadcast advertising. Given digital advertising is growing faster, plus 5% in Q4 2020 versus Q4 2019, I will start there. Our digital advertising is made up of primarily two solutions. The first is Ignite, which is our digital programmatic technology platform. The second is Amped, which is monetizing our owned and operated digital brands. On the far left column of slide five, you will see the revenue specifics for Ignite, which in 2020 was $53 million in digital advertising revenue, an increase of plus 11% versus 2019. As we have previously stated, this solution has a normalized profit margin of approximately 30%. We believe our success with Town Square Ignite is multifaceted, yet one strong differentiator for us is that we have our own solution. The entire ad tech and offering is in-house. We own and control the customer relationship from end to end, from creating the right message and creative to the activation and optimization of the client campaigns to the detailed in-depth client reporting, which leads to a better customer experience and higher client retention rates. Town Square Ignite is, in essence, a client's full-service digital agency. Moving one column over to AMPS, which is digital advertising our owned and operated network of digital brands made up of over 340 websites and 350 mobile apps, which together delivered a highly engaged audience of 58 million unique visitors on a monthly basis in 2020, an all-time record set during the pandemic. In 2020, the digital advertising revenue generated by AMPT was $39 million, which Combined, Ignite and Amped generated $92 million in digital advertising revenue in 2020. The remaining component of our advertising segment is our 322 local radio stations, which in 2020 generated $185 million in ex-political broadcast revenue. As we detailed throughout 2020, broadcast revenue ex-political declined as much as 51% in April 2020, and was down negative 46% for Q2 overall compared to 2019. That improved in Q3 to negative 29% and improved again in Q4 to negative 19%. According to Metrics, published by Miller Kaplan, in 2020, we outperformed the industry in local radio spot sales by 180 basis points and total spot sales by 120 basis points in our markets that they measure and track. Additionally, we also outperform the industry in total revenue in the markets surveyed by Miller Kaplan, which includes both total spot revenue and total digital revenue. Thus, as it relates to our advertising segment, I trust that it's clear that we have an at-scale and quickly growing digital advertising component and a mature, strong broadcast advertising component. I expect post-COVID that our broadcast advertising revenue will return to 2019 levels while digital advertising revenue will accelerate its current growth rate. And to back up that belief, I am very pleased to share that our expectation in Q1 is that year-over-year digital advertising revenue growth will accelerate from plus 5% in Q4 2020 to plus 10% in Q1 2021. It is also worth pointing out that in Q1 2020, digital advertising revenue was over $3 million higher than Q1 2019. As it relates to broadcast advertising ex-political, our current expectation is that our negative 19% decline in Q4 2020 will improve to negative 13% in Q1 2021. In total, our advertising segment continued the path of sequential improvement to close out 2020, narrowing revenue declines from negative 38% year-over-year in Q2 to negative 17% in Q3 and negative 4% in Q4. Our improvement was broad-based across the segment, a sequential improvement on nearly every revenue line. The third component of our digital solutions is our digital monthly subscription business, Town Square Interactive. Town Square Interactive was built to be a recession-resistant subscription business, and in 2020, it delivered on that promise. growing revenue, profit, and subscribers throughout the pandemic, a truly impressive accomplishment. Town Square Interactive provides an important and valuable resource for small business owners, which translated to strong financial results for Town Square. In 2020, Town Square Interactive net revenue increased plus 14% and profit increased plus 10% over a prior year. In the fourth quarter, TSI's net revenue growth accelerated to plus 16%. and profit growth accelerated to plus 24%, each as compared to the prior year. Town Square Interactive generated strong profit margins throughout the year, with 2020 margins of 30% translating to $21.1 million of profit for Town Square Interactive. We added approximately 3,750 net subscribers in 2020, setting an all-time record. And now we have added 850 or more net subscribers per quarter for 11 consecutive quarters. We ended the year with approximately 22,750 subscribers. At the end of 2020, approximately 57% of our subscribers are outside of our local market footprint. We are able to accomplish this because we have an approximately 200-person inside sales team based within TSI's headquarters in Charlotte. which houses a total team of TSI personnel of approximately 600 people. What an amazing team. We believe that Town Square Interactive is still incredibly, incredibly under-penetrated within our local market footprint, and importantly, as well as within our additional local markets of similar size and demographics. Town Square Interactive's addressable market is significant. If you would turn to slide 10 of our investor presentation, I would like to take the opportunity to walk you through it. There are a little over 28 million businesses nationwide. Given that we focus on markets outside the top 50 cities, that eliminates over 16.5 million businesses, which gets us to 11.5 million businesses. We then put a few additional important filters on the SMBs we target for Town Square Interactive. The first filter is businesses with 20 or fewer employees. The second filter is companies with annual revenue of $5 million or less. We then exclude certain types of businesses we have determined over the years are not ideal fit for our solutions, which include real estate agents, banks, and other types of businesses. And lastly, we include only privately independently owned businesses. After applying all of those filters, that equates to over 8.8 million target customers for TownSquare Interactive, At a $300 per month ARPU, that equates to an estimated $32 billion total addressable market for Town Square Interactive. Incredible. In fact, we are planning on adding a second location for Town Square Interactive in the western U.S. in order to capture this opportunity. Our original timeline for opening this location in 2020 was sidelined when the pandemic hit, but we plan to open this location once the pandemic is fully in America's rearview mirror. With our existing subscriber base, current sales momentum, and significant market opportunity, I am confident in reaffirming our expectation that Town Square Interactive will achieve $100 million in annual net revenue at roughly a 30% profit margin within two to three years. The next slide I will turn your attention to is arguably the most important one, slide number seven, which clearly demonstrates Town Square's transformation into a digital-first company in 2020. Even during a pandemic and the resulting recession, we have been able to grow our profitable digital revenue from $99 million in 2017 to $162 million in 2020. Pre-pandemic, our digital revenue was growing plus 27% in 2019. And although I am very proud of our plus 6% digital growth last year during a pandemic, I am confident post-pandemic we will again return to strong double-digit revenue growth. With $162 million of profitable digital revenue in 2020, that translated to 44% of our total revenue coming from digital, even in a political year. On slide 7, in addition to noting the consistent year-in and year-out growth of our digital revenue since 2016, You can also see a comparison to other broadcasters who have already reported their 2020 results. No other company listed is above 20%, and TownSquare is at 44%. And important to note, our digital growth is 100% organic, as we have built all of our digital solutions in-house with one of our greatest assets, which is our product and engineering team, truly world-class. It is just a matter of time before our digital revenue will be over 50% of our total revenue, Yet we believe that will just be a pit stop to 60%, 70%, 80%, et cetera, given the continued digital revenue growth of Town Square. The last slide from our investor presentation I will highlight is slide number six, which spotlights the net revenue ex-political, ex-live event recovery by quarter in 2020, along with our digital growth and, importantly, our year-over-year profit growth in Q4 2020. As you can see, starting on the top row, net revenue ex political ex live events was negative 31% in Q2, negative 16% in Q3, and negative 9% in Q4 compared to the prior year periods. Given our current outlook, I expect in Q1 2021, we will reduce that further to negative 2% to negative 3% year over year. We believe Town Square is on the verge of a full revenue recovery. In the middle row, you will see our digital revenue results. Town Square Interactive Revenue is plus 14% in 2020 versus 2019, and currently we are expecting plus 15% in Q1 2021. Town Square Ignite Revenue is plus 11% in 2020 versus 2019, and our current expectation is that improves in Q1 2021 to plus 12%. And take it all together, Our digital revenue grew plus 6% in 2020 to comprise 44% of our total company revenue, and our current expectation is to double that and have plus 12% growth in digital revenue in Q1 2021. On the bottom row, we have outlined adjusted EBITDA for each quarter of 2020, with the highlight being plus 8% growth in Q4 2020 over Q4 2019. That is the result the TownSquare team is most proud of, adjusted EBITDA growth of plus 8% during the depths of the pandemic. As you can also see on slide number six, we are expecting adjusted EBITDA growth in Q1 2021 of plus 16% to plus 22% growth over Q1 2020, and also profit growth over Q1 2019. Thanks for allowing me to go through a few of the slides in our investor presentation. I do highly encourage all current and potential investors to review the presentation in full detail on their own. And, of course, please reach out to me if you have any questions. Before I hand the call over to Stu, I'd like to outline our strong position as we begin 2021. We materially narrowed our year-over-year revenue declines throughout 2020 from negative 35% in Q2 to negative 3% in Q4. We also returned to adjusted EBITDA growth of plus 8% in Q4. and we enhanced our operating leverage through careful expense and cash management that allowed us to generate positive cash flow from operations in 2020. At the end of the year, we also addressed our balance sheet, which Stu will discuss in much greater detail shortly, replacing our debt with a single tranche of 6.875% paper that does not mature until 2026. And finally and importantly, we were able to address the large equity overhang that Oak Tree Capital's majority ownership of Town Square presented. On March 9th, 2021, we repurchased 100% of Oaktree's outstanding shares and warrants in Town Square for $6.40 per security. As you are all very well aware, Oaktree has been a long-time investor of the company, and this transaction represents a natural conclusion to their investment. We previously announced in January that we would repurchase a minimum of 10 million shares. And I'm very, very pleased we instead repurchased and retired all 12.6 million shares and warrants of Oaktree, representing 26% more than we previously committed to buying. This resolves the significant overhang of Oaktree's long-dated investment, which we have often heard from current and prospective investors is an impediment to investing and building a position in Town Square. Based on current share counts, the transaction is accretive, on a free cash flow per share and adjusted earnings per share basis in excess of 70%. At 10 million shares, the repurchase would have been accreted by approximately 50%. The aggregate purchase price of the share repurchase was $80 million and was funded with cash on hand. Following the repurchase, the company has 16.1 million shares outstanding, inclusive of common stock and warrants. Since we announced the share buyback on January 25th, we have seen TownSquare's stock price increase by 34% through March 12th, a 65% premium to the buyback price, evidence the market's support of this transaction, and more importantly, TownSquare's future. With that, I'll turn the call over to Stu, who's going to discuss our financial results in much, much greater detail. Take it away, Stu.
Claire
Thank you, Bill, and good morning, everyone. We ended the year with strong fourth quarter financial results that exceeded our original expectations, driven by continued improvement in our advertising and Town Square interactive segments, as well as a record amount of political revenue. In total, fourth quarter net revenue decreased only 3.2% over the prior year period to $108.5 million, a 13.8% improvement from Q3 of 2020's net revenue. 2020 annual net revenue declined 13.9% versus the prior year to $371.3 million. Political revenue, which was a record-setting $9.3 million in the fourth quarter and $16 million in 2020, exceeded 2016's presidential year political revenue by 78%. Excluding political revenue, fourth quarter net revenue declined 10.2%, and full-year revenue declined 17% as compared to the prior year periods. In the fourth quarter, Town Square Interactive's subscription business continued to improve as TSI's fourth quarter subscription revenue increased 16.3% over the prior year, up from 14.5% in Q3. In 2020, TSI's subscription revenue increased 14.4% over the prior year to $70.4 million, In addition, Town Square Interactive continues to deliver profit growth, with 2020 profit increasing 10.1% versus the prior year to $21.1 million, which corresponds to a 30% profit margin. Importantly and impressively, Town Square Interactive grew net revenue and subscribers in each and every month of 2020, demonstrating its resilience and, we believe, its importance to SMBs. In the fourth quarter, Advertising net revenue declined 4.5% or 12.9% excluding political revenue as compared to the prior year period. This representing a meaningful improvement from Q3's year-over-year decline of 17.2% and 21.4% excluding political. Our digital advertising solutions net revenue increased approximately 5% in the fourth quarter as compared to the prior year period and achieved growth in the full year period as well. The net revenue growth of our digital advertising solutions was led by Town Square Ignite, which was up 11% for the full year. Broadcast advertising net revenue improved materially in the fourth quarter from the third quarter, narrowing declines from down 45% in the second quarter to down 23% in the third quarter and only down 7% in the fourth quarter, each as compared to the prior year periods. Excluding political, we saw the same trends in broadcast advertising. from negative 46% in the second quarter to down only 29% in the third quarter and down 19% in the fourth quarter. Once again, live events net revenue declined nearly 100% versus the prior year in the fourth quarter, as we are still not hosting live events due to the pandemic. Fortunately, we pruned and right-sized our live events portfolio in 2018 and 2019 to align with Bill's local first strategy, resulting in a largely variable cost basis, Therefore, live events Q4 direct operating expenses decreased approximately 93% versus the prior year period, and the loss was minimal for the quarter, totaling approximately $123,000. For the year, live events net revenue declined 86% to $2.5 million, almost entirely generated in the first quarter pre-pandemic, and live events direct operating expenses declined 84% compared to the prior year period. resulting in a positive adjusted operating income of $240,000, nearly a 10% profit margin. In total, fourth quarter direct operating expenses decreased 4.5% compared to the fourth quarter of the prior year. This was driven by live event expense decreases, as well as 5% decrease in advertising direct operating expenses, partially offset by an increase in Town Square Interactive's direct operating expenses, of 13%. The full year had similar trends, with total direct operating expenses declining 6% year-over-year, driven by the declines in advertising and live events expenses that were partially offset by growth in TSI expenses. Declines in advertising direct operating expenses were driven by our cost reduction efforts enacted earlier this year due to the pandemic and reduction of the variable expenses such as sales commission. Perhaps the most important number that we'll report today is adjusted EBITDA. Due to our improved revenue performance and careful expense management, adjusted EBITDA returned to year-over-year growth in the fourth quarter, increasing 8.4% to $27 million. This is a 54.4% improvement from Q3 2020 adjusted EBITDA of $17.5 million. In 2020, adjusted EBITDA declined 39.3% to $62.1 million, but importantly, was positive in each quarter of 2020. Due to the prepayment that we made in the first half of the year to our term loans and the repurchase of a portion of our bonds, as well as lower LIBOR rates, interest expense for the fourth quarter declined approximately 6.2%, or $500,000, compared to the prior year period, and 7.2% or $2.4 million in the full-year period. For the fourth quarter, net income from continuing operations was $4.5 million, or 15 cents per diluted share, as compared to net loss from continuing operations of $78.2 million, or $4.28 per diluted share in the fourth quarter of 2019. For 2020, the net loss from continuing operations was $80.6 million, or $4.46 per diluted share. Net loss was driven by approximately $107 million of non-cash impairment charges to our intangible assets, and specifically our FCC licenses, primarily due to the impact of the COVID-19 pandemic. I'd like to telegraph that we expect the value of these FCC licenses to continue to be reduced over the coming years. This is a result of the fact that we no longer include 100% of our revenue streams when supporting the value of our FCC intangible assets. We no longer include the digital revenue and profit of Town Square Interactive and Town Square Ignite, our largest digital revenue streams. These digital revenue streams continue to outpace our radio spot sales. This formulaic trend will continue. This write-down of the decades-old purchase price calculations has no bearing on our cash position, operating revenues, operating expenses, our profitability, or our future prospects. They are nothing more than the non-cash accounting charges affecting only the purchase price allocations made when we bought our radio station assets back in the 2010 through 2013 periods. Adjusted net income per share, which adjusts for non-recurring items and is detailed in our earnings release, was $0.28 per share in 2020. We'd like to remind you that the provision for income taxes included on the face of our income statement is for GAAP financial statement purposes only. We maintain significant tax attributes, including $168 million of federal net operating loss carry forwards and other substantial tax yields related to the tax amortization of our intangible assets. We continue to believe that we will not be a material cash taxpayer until approximately the year 2026. In 2020, we generated positive cash flow from continued operations of approximately $31.9 million and $60.4 million prior to interest payments, demonstrating Town Square's strong cash flow generation ability and our careful expense management during the pandemic. In 2020, CapEx declined $4.7 million, or 24%, compared to the prior year. we ended the year with $83.2 million of cash on our balance sheet, a reduction of less than $2 million from the year ended 2019. This despite reducing long-term debt by $14.7 million, making $4.2 million of payments to our dividends prior to eliminating the quarterly dividend, and also making a $28.5 million interest payments throughout the year. On January 6th, we completed our previously announced $550 million senior secured notes offering, the proceeds of which were used to repay our outstanding term loans and our 6.5% senior notes in their entirety. The offering was very well received and was significantly oversubscribed. This allowed us to exceed our original pricing expectations. The new notes, which mature on February 1st, 2026, bear an interest rate of 6.875%, and are currently trading well above par. Last week, we completed our buyback of Oak Tree's stock of Town Square at $6.40 per share. As Bill previously mentioned, we completed the repurchase of 100% of their ownership interest in our company. Following the transaction, we had approximately $27.5 million of cash on hand, which we anticipate will continue to grow throughout the year. Given our strong cash generation abilities, we are confident operating the business at these cash levels. Going forward, our capital allocation priorities will be to invest in a local business to organic internal investments and to reduce our net leverage, with the medium-term net leverage goal in the low four times. Prior to the pandemic, we were well on a path to achieving our net leverage goal. Although achievement of that goal has been delayed, it is still a primary focus We're confident in our ability to achieve it given our assets' strong cash generation characteristics. We'll continue to evaluate local media acquisitions as and when they arrive, but we will have a very high bar in order to transact. As a reminder, our M&A criteria target local media assets that capture the number one or number two radio revenue share in the market. These have to be located in healthy, stable markets that are outside of the top 50 markets. They have to have lower economic volatility and some stabilizing institutions, such as universities, military bases, or state capitals. In addition, we would only acquire local media properties that we believe would fuel our local growth and allow us to deploy our digital playbook. Turning to our first quarter outlook, we expect first quarter net revenue to decline approximately 2% to 3% and political to be between $87 million and $88 million, an improvement from Q4's ex-political, ex-live events net revenue decline of 9%. As a reminder, in Q1 2020, we had $2.4 million of live events net revenue and $1.3 million of political revenue. We expect first quarter adjusted EBITDA to be between $18 and $19 million, which is an approximately 16% to 22% improvement over the first quarter of 2020 and represents growth over 2019's adjusted EBITDA, ex-live events. And with that, I will now turn the call back over to Bill.
Bill Wilson
Thank you, Stu, and thank you to everyone who dialed in this morning. I am very, very proud of the results we delivered in 2020 in the face of unprecedented challenges and the solid foundation we have built together as a TownSquare team, As we have stated on earlier calls, our goal during this pandemic has been to balance cost reductions with the opportunity for long-term growth. We want to be the best position to emerge from this downturn more quickly and more efficiently than our competitors, and we believe that this strategy, together with our diversified and differentiated in-house proprietary product offering, ensures that we will be. Our agenda and focus has not changed since I became the CEO in October 2017. We want to continue to be the best in class in entertaining and informing our audiences and communities while super serving local businesses with world-class marketing and advertising solutions to help them grow their businesses. Our goal is to be the best and largest local media company serving markets outside the top 50 in the U.S. To maximize our potential, we want to continue to work and collaborate on being the easiest company to work with from an external perspective treating clients and partners like friends, and the best to work for from an internal perspective. Our DNA is local radio. And let me just say, as I get this question a lot from investors, particularly over the past year, for our own company and our listeners and our communities, it's not audio. It is truly local companionship, providing local information, local entertainment, and local personalities. And that is why we love it, and that is why we call it local radio. But although our DNA and roots are in local radio, and we still love and embrace local radio, in 2020, we became a digital-first company, and our revenue growth in digital revenue and digital profits during a pandemic and resulting recession demonstrated that fact. Our Town Square team performed the best when it mattered the most. Our team kept moving forward continually through 2020. Even though at times it does not always feel like it, but as we shortly close out Q1 and move into Q2 2021, we believe our flywheel is clearly moving forward and gaining greater momentum each month and each quarter. Over the next couple of months, the large majority of Americans who choose to be vaccinated will be able to do so. As you are aware, over 100 million vaccines have been administered. And based on last Thursday's announcement, every American adult that wants to get vaccinated by May will be able to do so. Clearly great and meaningful progress in the last 30 days. In addition, our government, again, has passed extensive 2021 stimulus measures for working-class Americans as well as SMBs. I believe the combination of government stimulus and a readily available vaccine will propel our economy to great strength in 2021 and 2022 which will also support growth in our own Town Square business. As we continue to execute our local first strategy in 2021, we remain confident about the future of Town Square and our revenue and profit growth prospects, and we hope that you share in our enthusiasm. As I shared earlier, in Q1 2021, we expect to be on the verge of a full revenue recovery back to 2019 levels. As a reminder, I hope and expect to be only a percentage point or two from Q1 2019 revenue levels X live events. Therefore, as you hear us discuss our business recovery moving forward, our primary focus will be to compare our 2021 results to 2019 levels, as any comparisons to 2020 pandemic depressed levels will be, in our view, somewhat irrelevant. And that is what the Town Square team is 100% focused on, returning to 2019 levels. And once 2019 levels are accomplished, then continually growing from there. In the words of Drake, one of the biggest artists in the world, we'll see what's about to happen next, so stay tuned. Be well, and as we say internally, stay Town Square strong. And with that, operator, please open the calls for any questions.
Operator
Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Your first question comes from the line of Michael Kopinski with Noble Capital Markets. Please proceed with your question.
Michael Kopinski
Yeah, first of all, congratulations on your solid quarter. It was really good. Anyway, you may have already mentioned this, but what was political in Q4? And then since we're on the subject of political, there's a number of broadcasters that have indicated that they felt that given the races that we're likely to see, particularly in the Senate, gubernatorial races in 2022, that they expect political to be above 2020 levels. And I was wondering if you had any preliminary thoughts on that as well.
Bill Wilson
Thank you, Michael. It's Bill. Hope you are well. In Q4, our political revenue was $9.3 million. So for the full year, that was $16 million, which was by far and away our largest year ever. As you may recall, on average in a political year, we do about $10 million in revenue. I think we did $9 million in 2019, roughly. And in an off-political year, we expect $2 to $3 million. So we do not expect anywhere near 2020 levels, 2021. In 2021, we expect, again, $2 to $3 million. For context, our expectation in Q1 for political year is a few hundred thousand dollars, call it $400,000 in Q1. So definitely quite different than those who own assets maybe in Georgia and some of those other critical states that you mentioned.
Michael Kopinski
Gotcha. You provided a discount in your interactive business in the midst of the pandemic. Are you back at full fare as of Q4? And if so, how much of the Q4 revenues came from price increases? And then if you can give us a little bit, flavor on Q1 revenue estimates. I know that you're saying 15% plus growth in TSI. Does that include the prospect of adding another 150 subs or more in the quarter? I'm just wondering if you can give us some flavor on that.
Bill Wilson
Sure. Thank you, Michael. Yeah, Townsville Interactive couldn't be more pleased with that team's performance throughout the pandemic. As we've said, every quarter posted revenue and profit gains year over year. As you just alluded to on our Q3 earnings call, we highlighted that particularly in the depth of the pandemic, April, May, June, some of the markets that we're in were hit later in the summer. We provided discounts to Town Square Interactive customers. We believe that was the right thing to do for some of them. It was, in essence, a couple months free. For others, it was taking it down substantially significantly. The great thing is 86% of those who we gave discounts to remained in business and then continued back at their regular rate post that discount. So that increase of 16% in Q4 that you noted for Town Square Interactive was the return to full pricing. For the year, we were up 14%, $70 million in revenue, $21 million in profit. So really pleased. As you know, Michael, pretty much every year for the last five years we've added 10 million top line approximately and 3 million bottom line to Town Square Interactive. So as we go into Q1, to your question about what we expect in terms of net ads, we expect 850 net ads in Q1 as we had in Q4. There's obviously a little less days with February and some holidays in Q1. So that's where we expect to be, and that would equate to an increase of 15% in revenue year over year for Town Square Interactive. And then as we noted at the end of the call, in terms of total revenue, you know, net revenue, ex-live events, ex-political, you know, we're expecting and we're focused on a full revenue recovery. In Q1 of 21, we're expecting to be down just a couple percentage points off of 20. And our real goal moving forward, and when we talk in future calls coming up for Q1, we're going to be comping ourselves at least internally and externally against 2019. So net revenue, ex-live events, we're hoping to be also a couple percentage points off of 2019 levels and Q1s, and Town Square Interactive is definitely a part of that, as is our total digital offering.
Michael Kopinski
That's terrific. One final question. In terms of live events, what are you planning in terms of 2021? Are you kind of making plans now to kind of ramp that back up in the second half this year, or what are your thoughts on live events?
Bill Wilson
Yes, we're obviously very cautiously optimistic. As I noted earlier on the call, The rapid change in terms of the vaccine distribution in the last 30 days from what we're seeing ourselves, but also from what we're hearing from our communities and our clients has really changed the mindset, which is great for our overall business in terms of optimism with now 100, I think it's 107 million vaccines distributed as of yesterday. Certain states, including Connecticut and Mississippi and others, are now starting to say as of April 5th, Mississippi already, I know Connecticut this morning announced April 5th, any adult will be able to get vaccinated, so no restrictions for different classes, which I think you'll continue to see those states move to that. So as it relates to live events, interesting, we have actually applied for some permits during the pandemic with the expectation that we'd get the permit but then delay the actual event date. And we actually got approval for an event in Texas in May, which right now we would be planning. That would be our first live event of any size. We'd obviously practice the appropriate health protocols. But that would be our first. We're expecting a little bit in Q2, very few, you know, literally a handful. And then my expectation, to your point, is the back half of the year. It doesn't return to normal. But in 2019, we did $16 million in revenue. Maybe we get to, you know, $5 million for the year type of thing and then return to full growth in 2022 for live events. You've probably seen some companies like Live Nation and others already announce outdoor shows this summer. So we're definitely cautiously optimistic. The numbers I just provided you could definitely improve as we head into the back half of the year.
Michael Kopinski
Great. And congratulations again. I'll let others ask questions. Thank you.
Bill Wilson
Thank you, Michael. Appreciate it. Be well.
Operator
Your next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question.
Jim Goss
Thanks much. Do you plan any changes in your financial strategies following the Oak Tree exit? And in particular, does this provide any greater opportunity to achieve that dramatic decrease in your overall leverage that you're targeting?
Bill Wilson
Yes. So good to hear from you, Jim. Thanks for asking the question. I'll try to stew in a minute, but as you know, we were very focused and continue to be focused on delevering, and we made much progress from 2017 to 2019. We ended, I believe, 2019 in roughly the mid-fours in terms of net leverage. and our goal was to be in the low fours, and we were progressing steadily there, and quite honestly, we're very confident we would have achieved that this year. Obviously, the pandemic set us back from an EBITDA perspective, really happy with our new capital structure and the tranche of bonds that we talked about on the call, and fully expect and are focused on delevering again back to the mid-fours and then down from there. Obviously, that's going to take some time. We're going to happen primarily through EBITDA growth, which, as we just alluded to, with Q4 EBITDA growth in 2020. We're quite pleased with that with plus 8% growth, and we obviously just indicated our expectation for Q1 21 EBITDA growth, which was quite strong as well over 20. Stu, anything else you would add as it relates to leverage and the capital structure?
Claire
No, that really covers it all. The one thing I would like to mention is that, you know, are we – our cutting out a dividend permanently basically offsets the small increase that we have in our new capital structure. So from a reduction of leverage standpoint, we're not really facing an increase in interest expense.
Jim Goss
Maybe just to follow on with what you just said, Stu, with the dividend, is there any likelihood that it could be restored, or do you think once you've gotten to this point, maybe that's a lower priority?
Claire
That's a good question, Jim. We don't believe management is not in favor, and we don't think we will bring the dividend back. For a company of our size, we think deleveraging and increasing our internal businesses and growing our digital businesses is much more important and much more valuable to the equity in this company.
Jim Goss
Okay. Secondly, Bill, I think we talked maybe a year or two ago, as Ignite was becoming more prominent, that it's got such good reception that perhaps you could even extend it to other markets, either as a sale of technology, licensing of technology, or acting as an agent for other markets where you didn't compete. Have you gone forward in that at all? Great question, Jim.
Bill Wilson
Yes, so for those who may not be as familiar with the Town Square transformation, we originally were selling Town Square Interactive, our subscription business, only within our markets. After a few years of success in our markets, we took our website and reputation and everything around Town Square Interactive outside of our markets and having built an inside sales team that is world-class in Charlotte of roughly 200 sellers who have been selling Town Square Interactive subscription services, digital marketing solutions for, in essence, the last five years. As you just noted, Jim, we have shared publicly that during the pandemic, we started to test selling Ignite, which is digital programmatic advertising, outside of our local market footprint. Up until the pandemic, we were only selling Ignite through our world-class local sales team in our 67 local markets. But given the success, and particularly in markets outside the top 50, we saw a significant competitive advantage with our Ignite. The fact that it's all in-house, the amount of inventory we see across the Internet, our opportunity to optimize that, our opportunity to actually come up with the right message for the client and then build the creative, as I noted on this call, we in essence became a full-service digital agency this year. And so we did start selling Ignite through a test of our Charlotte-based inside sales team. And I couldn't be more pleased with the early test results. It is early, so I just want to be cautious that it is, in essence, a team that started with two people in the first half of the year. We built that to eight people in the second half of the year. And we think that just as we had success with Townsend Interactive being sold outside of our local market footprint, we're confident we'll be able to do the same with Ignite. I would expect in 2021 that could approach $5 million in revenue for Ignite outside of our markets. And then from there, we would start to really scale this with a larger team and also put in place selling Ignite in our second town square location as we build that out west at the end of the year. So Really quite amazing opportunity for us on a dual front in terms of digital advertising and Ignite, as well as continuing our Town Square Interactive, which I obviously on this call went to great lengths to outline the market opportunity of 8.8 million SMBs that fit our target profile. So back to your question, Jim. Yes, Ignite being sold outside our markets. We are and have started in the last eight months doing that and expect to accelerate that through 21 and 22.
Jim Goss
Okay. And final question. Do you have an aggregate EBITDA margin target you're hoping to achieve? And sort of on a related basis, could you discuss the process of phasing in some of the necessary costs and expenses that you may have been cutting back during the pandemic?
Bill Wilson
Sure. I'll let Stu step in. But, you know, a lot of, you know, as a reminder, we determined in conjunction with the board, When the pandemic really hit full throttle back in March and April, we made the conscious decision to make some cuts, but they were very, I'd say, small compared to what others may have done. As you may recall, we laid off roughly 6% of our full-time workforce, which was about 150 people, which were primarily corporate-related and support roles. So you'll see our corporate expenses. coming down in Q1 21 and throughout 21. But as Sue said, we're going to continue to invest and we didn't cut in our really core advertising and Town Square interactive areas because we wanted to be well situated for growth. And I think that's one of the reasons, quite honestly, we're outperforming so well and on the verge of a full revenue recovery because we were able to not make those cuts and be well situated for the rebound. But, Stu, do you want to talk about what expenses remain out and what you expect coming in as we move forward?
Claire
Yeah. So, Jim, as you recall, we mentioned overall we probably approximately cut about $30 million of OPEX and non-OPEX cash out of the business on an annual basis. And we cut about 10%. We fired about 10% of our full-time employee base. We've started adding them back. to our digital businesses and our broadcast business where it makes sense. A lot of the types of cost savings we hope to bring back, like the matching of the 401 employee contribution match, so of the approximately $30 million of cash out-the-door savings, permanently we'll probably keep between $15 to $20 million of that, so almost two-thirds of it. We're probably, you know, from answering your question on the gross profit margins, you know, as you see in Q4, you know, our EBITDA margin is almost 24.9%, almost hit back 25%. And we're going to comp, as Bill had mentioned, ourselves. We're going to, you know, plan to be back into the, you know, the low to mid-20% gross profit margins on an EBITDA basis going forward. We're going to comp ourselves to, you know, 2019 levels.
Jim Goss
Okay.
Operator
Thank you very much.
Claire
Appreciate it.
Bill Wilson
Thank you, Jim.
Operator
Your next question comes from the line of Dennis Leibowitz with Act II Partners. Please proceed with your question.
Dennis Leibowitz
Thanks. With respect to the Oak Tree deal, I was wondering, I saw that simultaneously you, Bill, sold a block of stock. I don't know if it had been restricted. I wondered if you could Explain that, and also what happens to the board seats that Oak Tree has?
Bill Wilson
I did not sell a block of stocks. I saw that listed on a Bloomberg terminal, and I know we looked into that, and I believe had it corrected. But just for the public record, I did not sell any stock. I can't remember the last time I sold anything. Nothing in 20, nothing in 21, just so. That is definitely a problem. inaccurate data point. I'm glad you asked that if anybody else has seen that. That did not happen. Stu, do you want to take the overall question?
Claire
Yeah. So from Oaktree leaving, there were a couple of ex-Oaktree partners who decided to remain on the board after they left Oaktree. They've been very supportive, very helpful. They're going to keep their seats. And as of this time, you know, You know, the managing director that's still at Oak Tree is the only actual employee that's on the board. You know, he hasn't told us. You know, he's been super supportive. He's been in this business since day one. He may decide to come off down the road, but he hasn't. So there's been no predetermined, you know, there's been no predetermined change in the board seat.
Dennis Leibowitz
Thanks for the clarification.
Bill Wilson
Excellent.
Claire
Thank you, Dennis.
Bill Wilson
Thanks for dialing in.
Operator
Your next question is a follow-up from Michael Kopinski with Noble Capital Markets. Please proceed with your question.
Michael Kopinski
Thank you. Stu, you mentioned the high bar in terms of radio acquisitions and the parameters. I was wondering, can you talk a little bit about the parameters that you might have for digital acquisitions if you have an appetite there?
Claire
Sure. I really defer to Bill. The only thing I have to say is we're going to have a high bar because we can always kind of create it and develop it internally ourselves at much more economic, you know, basis. But, Bill, this is your.
Bill Wilson
Yeah, and I think, Michael, too, for Tuesday, I'm glad you came back with a follow-up. You know, I believe, as we talked about on prior calls, we're going to be the natural acquirer of broadcast stations outside the top 50 markets, and I believe that will happen post-pandemic as recovery. I still believe DREG will happen. I don't know if it will happen based on the ruling that's sitting with the Supreme Court now, but based on what we see day in and day out in our local communities and, in essence, the news deserts of journalism really receding and us moving in to fill that void, I do think we'll be an acquirer of local radio stations. As I noted on this call, although we became a digital first company in 2020, we love local radio. It's a part of our DNA and will continue and always will be part of local radio and serving our communities today. As it relates to your question for digital acquisitions, as Stu said, the great thing about our business on the digital side is in addition to the growth, it is 100% organic. We've built all of these solutions from our owned and operated AMP that I took the time to walk through on this call of monetizing our own audience that we have built from $1 million in 2011 to $58 million in 2020 to Ignite, our digital programmatic offering to Townscrew Interactive, We literally have a world-class product and development team. We actually added a dedicated slide in our investor deck to highlight that team. Thankfully, many of them, of the 40-plus people, over half of them were with me at AOL and joined me in 2010 when we came together to Townsquare. So we had the benefit of working together for a long time. We've looked at acquisitions in the programmatic space. as a tuck into Ignite. We've also looked at acquisitions for TalentScore Interactive. There's some companies that focus on certain verticals like spas or restaurants or doctors, things like that. The multiple on those businesses have been literally 10 times over plus revenue, so 10 times at a minimum revenue. And obviously, we believe it would be best for us to continue to grow organically and given the strong organic growth rate. And I think our hope and expectation as we continue to perform and execute and continue to, I think, educate our investor base on our digital subscription business, that our multiple goes up as a result of that. You know, I think at one point we were sharing the Wix comparable of, you know, 12, 13 times revenue. And with Town Square Interactive, 70 million in revenue ending last year, that would be you know, a $700 million market cap on a 10X just for that part of our business, and we're obviously valued well under that. So it's a high, high bar for digital acquisitions. We continue to see everything, thanks to Claire's great work, but I would not expect anything in the short term on that front, but I could see coming post-pandemic acquisitions in local media radio stations outside the top 50 markets as we go into 22 and 23.
Michael Kopinski
Great. Thanks for that, Colin. I appreciate it.
Bill Wilson
You're welcome, Michael. Thank you.
Operator
Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the call back to Mr. Bill Wilson for closing remarks.
Bill Wilson
Thank you, operator, and thank you, everyone who dialed in today. And most of all, I want to thank our TownSquare team for their passionate, inspired, and perseverance performance over the last 12 months that put us in this position of a full revenue recovery moving forward post-pandemic. I would also remind all of our shareholders that we put our annual shareholder on our website. So in addition to downloading our investor deck, which I encourage you to do, I would encourage you to also read our annual shareholder letter, which is now available. Be safe, be well, and talk to you soon. Take care.
Operator
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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