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spk02: Good morning and welcome to Town Square's first quarter 2021 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 listen-only mode. A brief question and answer session will follow the presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. With that, I would like to introduce the first speaker for today's call, Claire Yenneke, Executive Vice President.
spk00: Thank you, Operator, and good morning to everyone. Thank you for joining us today for Town Square's first 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 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 these slides during our discussion this morning. At this time, I would like to turn the call over to Bill Wilson.
spk05: Thank you, Claire, and thank you all for joining us this morning. 2021 is off to a strong start, and I feel incredibly optimistic about where we are today and most importantly, the future of Town Square. The economy is on fire. Q1 GDP growth is at a 15-year high. The government continues to provide economic stimulus, and states have further relaxed restrictions across the country, all but ensuring strong growth for the remainder of 2021. These events and the resulting optimism have positively impacted our business as well. I'm proud to announce this morning that our first quarter financial results exceeded our goals and expectations, and in many cases, even exceeded levels we achieved in the pre-COVID first quarter of 2019. Once again, we exceeded our previously issued guidance range for both Q1 net revenue and Q1 adjusted EBITDA. I'd like to draw your attention to slide six of our investor presentation, where we outlined first quarter performance. On our last earnings call, We provided numerous data points to help set expectations for Q1, and I am thrilled to share that we delivered on each and every one. From my perspective, although each is important, the most significant data points is the outperformance in net revenue and the outperformance in adjusted EBITDA. In the first quarter of 2021, we had expected net revenue excluding political and live events to decline negative 2% to negative 3% as compared to Q1 2020, And in fact, it came in slightly better at negative 1.6% and was slightly above Q1 2019 revenue levels. We anticipated that adjusted EBITDA would increase plus 16% to plus 22% over the first quarter of 2020. And it not only exceeded that expected growth by increasing 30%, but also exceeded Q1 2019 pro forma adjusted EBITDA levels by plus 7%. So let me say that again. Our first quarter net revenue excluding live events and our first quarter adjusted EBITDA both exceeded 2019 levels. Incredible. We are on the verge of a full financial recovery to pre-COVID levels. And one of the key drivers is our strong digital performance. Although we are very proud of our roots and DNA in local radio, and we are proud to call it local radio, Town Square became a digital first company in 2020. reflected in our strong and transformational digital revenue and digital profit growth, which increased in strength in Q1 2021. To demonstrate that fact, as you can see on slide 9, in the first quarter, digital revenue growth accelerated to plus 13%, more than double 2020's full-year revenue growth of plus 6%. Our digital revenue totaled $167 million over the 12 months ending March 31, 2021. contributing nearly 49% of our total net revenue in the first quarter of 2021. I'd like to spend a little time providing additional color on our digital solutions this morning as they drove Town Square's transformation and are truly a meaningful differentiator to other local media competitors in our markets. Our digital solutions can be broken down into three buckets, Town Square Ignite and Town Square Amped, which are our digital advertising solutions, and Town Square Interactive, which is our digital marketing subscription solution. I'll start with Town Square Interactive, our largest digital solution, contributing approximately 21% of our total company net revenue and approximately 30% of our total company adjusted EBITDA in Q1, and thus Town Square Interactive is reported as its own segment in our financials. Town Square Interactive provides digital marketing solutions, on a monthly subscription basis to approximately 23,600 small and mid-sized local businesses across the U.S., including, but importantly not limited to, the markets in which we operate radio stations. TownSquare Interactive is a complete solution, offering mobile-enabled website development and hosting services, e-commerce solutions, search engine organic traffic and online directory optimization services, online reputation monitoring, social media management, appointment scheduling services, email marketing services, website retargeting, and much more. Because Town Square Interactive provides such an important and valuable resource for small business owners, this business is, in essence, recession-resistant, delivering revenue, profit, and subscriber growth each quarter since the start of the pandemic. In the first quarter of 2021, Town Square Interactive added approximately 850 net subscribers, net revenue increased plus 15%, and profit increased plus 30% over the prior year period, all at a profit margin of 31%. In the second quarter, we expect Town Square Interactive net revenue growth to accelerate to plus 18% year over year. We are often asked What differentiates Town Square Interactive from its competitors? And the answer is threefold. First, we have a significant strategic advantage by being local. Our local feet on the street sales teams have longstanding local relationships that we have cultivated in our local markets across the country. This local presence and depth of contact allowed us to launch Town Square Interactive in 2012 and quickly build a critical mass of customers that would not have been possible without the efforts of and the advantages we derive from our local sales team. At the same time, while we were able to incubate this product in our local radio markets, we have also proven that we can very successfully provide our Town Square Interactive solutions outside of our radio markets, with now 57% of our current client base residing outside of our radio markets today. It is important to highlight that Town Square Interactive is a full-service solution and not a self-service model. Our typical customer is a small business with less than 20 employees. Most of the time, they do not have the internal resources nor the expertise to handle website production and digital presence management. Our full-service solution, delivered at an attractive price and without the significant setup fees charged by some of our competitors, addresses this market opportunity head-on. Finally, and continuing with the important theme of customer service, we believe Town Square Interactive delivers a better customer experience through its end-to-end control and ownership. We do not outsource any aspect of our solution. Town Square Interactive was originally built from the content management system we organically developed to operate our own branded media websites, built from the ground up by Town Square's world-class product and engineering team. With Towsquare Interactive, we build the client's website, including its design, photos, creative, and messaging. And then, importantly, we provide dedicated customer service following its launch so that we are confident we are addressing the customer's needs. In our markets, we sometimes compete with other local media companies who go to market with a similar pitch, with one vitally important difference. While their sales reps may generate the lead and sell the service, These companies most often outsource fulfillment to a third party because they do not actually own the product. They are simply white-labeling someone else's service. Not only does that give up margin points as the business scales, but these companies typically lose the critical touchpoint of ongoing customer interaction. This leads to inefficient communication, poor customer service, and ultimately low retention. We believe at Townsville Interactive our customer service is best in class. It reinforces the local sales relationship in our local markets and leads to significant higher retention rates than the rest of the industry. And given these distinct advantages, there is so much upside. Town Square Interactive is still incredibly, incredibly underpenetrated within our local market footprint and, importantly, within additional local markets of similar size and demographics. I would like to take the opportunity this morning to walk you through the opportunity in greater detail, given its importance as well as its scale. If you would turn to slide 12 of our investment presentation, I appreciate it. Here you will see there are a little over 28 million businesses nationwide. Given that we at Town Square focus on markets outside the top 50 cities, that eliminates over 16.5 million businesses, which gets us to about 11.5 million businesses. We then put a few additional very 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 revenues of $5 million or less. We then exclude certain types of businesses we have determined are not the ideal fit for our solutions, including 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 Town Square Interactive. At a $300 per month ARPU, that equates to an estimated $32 billion total addressable market for Town Square Interactive, of which we only capture a small fraction today. There is incredible, incredible upside. As I noted on our last call, We are planning to add a second TownSquare Interactive location in the Western United States to capture this opportunity once the pandemic is in America's rear view mirror fully, most likely in Q1 2022. On a trailing 12-month basis, TownSquare Interactive generated $73 million of net subscription revenue at a 31% profit margin, therefore delivering $22.5 million of profit. If you were to value this business on a standalone basis, One comparable company to look to would be Wix, which trades at 17 times trailing revenue multiple. If you applied a similar or even a discounted multiple to Town Square Interactive, that would suggest a valuation north of where Town Square as a whole trades today. With our existing subscriber base, our competitive advantages, and our significant market opportunity, I am very 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. So that's Town Square Interactive, which is our digital marketing solution. Now I'd like to briefly cover our digital advertising solutions. The first is Ignite, our digital programmatic technology platform. The second is Amped, monetizing our owned and operated digital brands. Let's start with Ignite. which if you turn to slide five is in the first column on the left-hand side. Town Square Ignite combines first and third party audience data to hyper-target audiences for our local and regional advertisers, providing them the ability to reach their target customer with the right message at the right time. Ignite was one of our strongest performing digital advertising solutions in 2020, growing plus 11% over 2019. That strength continued into 2021 as Ignite's net revenue increased plus 12% in the first quarter as compared to the prior year and was plus 45% greater than Q1 2019 revenue levels. We expect that Ignite's second quarter net revenue will accelerate and increase to plus 30% or more compared to Q2 2020. We believe our success with Town Square Ignite is multifaceted, yet one strong differentiator for us which is similar to Town Square Interactive, is we own the 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, therefore, higher client retention rates. Town Square Ignite is, in essence, a client's full-service digital agency. Moving one column over on slide five to the right, our next digital solution is Town Square Amped, which is digital advertising on 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 57 million unique visitors on a monthly basis over the trailing 12-month period. In the first quarter, Town Square Amps net revenue increased plus 11% over the prior year period and was plus 15% greater than Q1 2019 revenue levels. We also expect Town Square Amps second quarter net revenue will accelerate and increase by plus 45% or more compared to 2020. In total, Our first quarter digital advertising revenue, including in night and AMT, increased plus 12% over the prior year and plus 31% over 2019 levels. We expect our digital advertising second quarter net revenue to increase approximately plus 40% compared to Q2 2020 and over plus 15% compared to Q2 2019 levels. These growth rates clearly demonstrate that Town Square is now a digital-first company. As you can see on slide 9, our transformation into a digital company is in a class of its own. As of March 31st, our digital revenue totaled $167 million over the trailing 12-month period. Over the next three years, we expect to grow our digital revenue to $250 million which will be well above 50% of our company's total revenue. However, local radio remains a core aspect of our local media offering, and radio's recovery is a component to achieving a full financial recovery to 2019 levels and growing from there. Broadcast advertising on our 322 local radio stations was the most impacted by the pandemic. but has been gaining ground each quarter since its trough of negative 45% in the second quarter of 2020. In the first quarter of 2021, broadcast revenue, excluding political, declined negative 11% versus the prior year period, a significant improvement from Q4 2020's decline of negative 19% and full year 2020 decline of negative 26%. To demonstrate our progress of the broadcast recovery, I'll turn your attention to metrics published by Miller Kaplan. In Q1 2021, Town Square outperformed the industry in local radio spot sales by 570 basis points and total spot sales by 390 basis points in our markets that Miller Kaplan measures. Additionally, Town Square also outperformed the industry in total revenue, which includes both total spot revenue and total digital revenue by 270 basis points. If you single out March 2021, since March 2020 was the first month impacted by the pandemic, Town Square's local spot revenue increased plus 9.8%, while the industry was down negative 0.8% in the markets measured and tracked by Miller Kaplan. And excluding Town Square, the industry was down negative 5.7%. From a total net revenue perspective, Town Square's Miller Kaplan markets were up plus 12.6% in March, while the industry was up plus 6%. and up only 2.1% excluding Town Square. The Miller Kaplan results demonstrate that Town Square is outperforming its peers not only in digital, but also in broadcast. In the second quarter and the back half of 2021, we expect our broadcast revenue to post significant year-over-year gains as it comps against pandemic-depressed revenue levels. For example, we expect broadcast revenue to be up almost 50% or greater in Q2 And although it will take some time, our expectation is to fully recover back to 2019 broadcast levels. That is what our Town Square team is focused on. Internally, we are measuring our progress via comps to 2019 rather than pandemic-depressed 2020 levels. Live events remains the only part of our business that through Q1 2021 hasn't had the opportunity to recover, as live events have been canceled for the past year due to the pandemic. However, starting in the second quarter, we have begun to schedule a handful of live events in markets that have loosened restrictions. For example, last week we hosted the Red Dirt Barbecue Festival in Tyler, Texas. It was a huge success, setting an all-time revenue and all-time profit record. As states continue to relax restrictions on public events, We are optimistic that we will be able to deliver and schedule more events as the year progresses before returning to a normal schedule of live events in 2022. For Q2, we are expecting to generate roughly $1 million of live events net revenue at a high 20% profit margin. Before I hand the call over to Stu, I'd like to reiterate our strong operating and financial position. Our business continues to improve each and every quarter. so much so that we feel it is most relevant to compare our financial results to pre-COVID 2019 levels as we believe we are on the verge of a full revenue and EBITDA recovery. We successfully refinanced our capital structure with a single tranche of 6.875% paper that does not mature until 2026, eliminating any near-term maturities at a better-than-expected rate. Through careful expense and cash management, we built a significant cash balance that allowed us to take advantage of the opportunity to repurchase 100% of Oak Tree's capital shares in Town Square at a significant discount, a transaction which was very, very accretive to our shareholders. Further, the permanent actions that we took last year to reduce our expense base and cash outflows have enhanced our operating leverage moving forward. With that, I'll turn the call over to Stu, who is going to discuss our financial results in much, much greater detail. Stu, take it away.
spk03: Thank you, Bill, and good morning, everyone. At times during this call, Bill and I will or will have referenced pro forma results. Those relate to our growth in the first quarter of 2021 as compared to Q1 of 2019. As a reminder, in 2019, we sold our bridal exposition live event. which generated $726,000 of net revenue and $354,000 of adjusted EBITDA in the first quarter of 2019. We kicked off 2021 with strong first quarter financial results that exceeded our expectations, driven by continued revenue improvement in our advertising and Town Square interactive segments and careful expense management. In total, first quarter net revenue decreased 5% over the prior year period to $88.8 million. Political and live events net revenue were a significant component of the year-over-year revenue decline. Political revenue declined by approximately $900,000, from $1.3 million in the first quarter of 2020 to approximately $400,000 in the first quarter of 2021. We had two months of live events activity in 2020 before COVID hit. That generated $2.4 million of live events net revenue for the quarter as compared to less than $10,000 of live events net revenue in 2021. Excluding political and live events, first quarter net revenue decreased only 1.6% over the prior year period to $88.3 million and was slightly above Q1 2019 revenue levels. This exceeded our previously issued revenue guidance range of $87 to $88 million. Consistent with its performance throughout 2020, Town Square Interactive's subscription business generated revenue, profit, and subscriber growth in the first quarter of 2021. With the addition of approximately 850 net subscribers during the first three months of this year, first quarter net revenue increased 14.9%, and profits increased 30.4%. each as compared to the prior year's periods. Town Square Interactive's first quarter profit margin was 31%. Advertising net revenue continued to show improvement on an ex-political basis, with first quarter net revenue ex-political declining 5.3% year-over-year as compared to a decline of 12.9% in the fourth quarter of 2020, 21.4% in the third quarter, and a low of 38.2% in the second quarter. Total first quarter advertising net revenue, including political, declined 6.4% as compared to the prior year period. Our digital advertising solutions net revenue increased approximately 12% in the first quarter as compared to the prior year period, driven by Town Square Ignite, which also grew at a rate of 12% in the quarter, and our AMP digital advertising solutions, which grew at a rate of 11%. Broadcast advertising net revenue, excluding political, improved materially in the first quarter from the fourth quarter of 2020, narrowing declines from 19% in the fourth quarter to 11% in the first quarter of 2021, each as compared to the prior year periods. Including political, broadcast advertising net revenue declined 13%. Once again, live events net revenue declined nearly 100% versus the prior year in the first quarter, as we do not host any 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, our live events Q1 direct operating expenses decreased approximately 96% versus the prior year period, and the loss was minimal for the quarter, totaling approximately $60,000. As Bill mentioned, We have scheduled a handful of second quarter events and are optimistic that we will produce more events in the second half of 2021 and return to a normalized schedule in 2022. In total, first quarter direct operating expenses decreased by 9.8% compared to the first quarter of the prior year. This was driven by $6.3 million or an 11% decrease in advertising direct operating expenses as well as the live events expense decrease of $1.8 million or 96.4%. That was partially offset by an increase in Town Square Interactive direct operating expenses of $1.1 million or 9.1%. Declines in advertising direct operating expense were driven primarily by our cost reduction efforts enacted last year due to the pandemic and the reduction of variable expenses such as sales commissions. For the first quarter, corporate expenses declined $2.3 million, or 35.3%, as compared to the prior year, primarily due to a decline in professional fees. For the full year, we currently anticipate corporate expense will decline by approximately $5 to $6 million. For the second quarter in a row, adjusted EBITDA increased over the prior year, with first quarter adjusted EBITDA increasing 29.7% over the prior year period to $20.1 million. This exceeded our previously issued guidance range of $18 to $19 million. And as Bill previously discussed, we're extremely proud of the fact that first quarter adjusted EBITDA also exceeded the first quarter of 2019's pro forma adjusted EBITDA of $18.8 million. On January 6th, we completed our previously announced sale of $550 million of senior secured notes, the proceeds of which were used to repair our outstanding term loans and our 6.5% senior notes in their entirety. The offering was very well received and was significantly oversubscribed, which allowed us to exceed our original pricing expectations. The new notes, which mature on February 1, 2026, bear an interest rate of 6.875%, and they are currently trading well above par. In total, our annual interest expense will increase by approximately $9 million due to the higher interest rate, and in the first quarter, interest expense increased by approximately $2 million as compared to the prior year. However, from a cash outflow perspective, this increase in annual interest expense is almost entirely offset by last year's elimination of the dividend, which totaled $8 million per year. In connection with the refinancing, we recognize the $6 million loss on the extinguishment and modification of the old debt. This charge contributed to our net loss for the first quarter of $6.1 million or 35 cents per diluted share as compared to a net loss of $59.6 million or $3.27 per diluted share in the first quarter of 2020. Adjusted net income per share, which adjusts for non-recurring items such as the loss on extinguishment and modification of debt, and is detailed on our earnings release, was 17 cents per diluted share in the first quarter of 2021 as compared to five cents per share in the prior year period. We'd like to remind you that any benefit or 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 NOL 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 the year 2026. In the first quarter of 2021, we generated positive cash flow from continuing operations of approximately $19.4 million, a $10 million increase from the prior year period. We used approximately $80 million during the quarter to repurchase 100% of Oak Tree Capital's equity interest in Town Square in a significantly accretive transaction, and we incurred approximately $14 million of fees associated with the issuance of our senior notes. We continue to carefully manage our capital expenditures, which declined 67% year over year to $1.8 million in the first quarter of 2021. In total, we ended the quarter with approximately $20 million of cash on the balance sheet. 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 our local business through organic, internal investments, and to reduce our net leverage with a medium-term net leverage goal in the low four times. Turning to our second quarter outlook, we expect second quarter net revenue to increase approximately 36% to 40% to be between $101 million and $104 million. As compared to the second quarter of 2019, which we believe is a more relevant comparison, this represents a decline of 8% to 11%. We expect second quarter adjusted EBITDA to be between $28 and $29 million, which is a $26 to $27 million improvement over the second quarter of 2020. And it represents a 4% to 7% decline as compared to the second quarter of 2019. We believe it's more relevant to evaluate our Q2 guidance, excluding live events, which generated revenue and profits of $6.3 million and $1.6 million, respectively, in the second quarter of 2019. Excluding live events, we expect second quarter net revenue to be down only 46% as compared to 2019 levels, and adjusted EBITDA to be down 3% on the low end, but slightly above 2019 levels on the high end. And with that, I will now turn the call back over to Bill.
spk05: Thank you, Stu, and thank you to everyone who dialed in this morning. Let me conclude today's call by repeating what I said at the opening. I am very proud of our Town Square team, and I am very proud of our year-to-date performance. And I am incredibly optimistic about Town Square's future. As I shared earlier this morning, as well as on our last earnings call, we are on the verge of a full recovery back to 2019 levels. As a digital-first company, the growth in our digital revenue and digital profit has accelerated our path to recovery and is continually propelling us forward each and every day. Therefore, As you hear us discuss our financial results moving forward, our primary focus will be to compare our 2021 results to 2019 levels, as any comparisons to the 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 the Town Square team achieves our 2019 levels, we will grow consistently from there. Although we are not providing formal full-year 2021 guidance, I will share with you this morning in full transparency that our internal goal is to reach and then exceed $395 million in net revenue and $90 million in adjusted EBITDA. And based on our performance year to date, I believe that we will achieve those goals. Once we achieve our Q2 adjusted EBITDA guide, we would be over 50% to that $90 million adjusted EBITDA goal through the first half of 2021. And I'd like to reiterate that we expect that our total digital net revenue will increase to $250 million within three years. As we say internally, how high is high? Be well. And as we also say internally, stay Town Square strong. And with that, operator, please open the call for any questions.
spk02: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 from your telephone keypad. and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd 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 keys. One moment, please, while we poll for questions. Thank you, and our first question today will be coming from the line of Michael Kopinski with Noble Capital.
spk04: Please receive your questions. Well, first of all, congratulations on your quarter, but I do have a question. Can you just kind of repeat your Q2 guide? Because it sounds exceptional. And I was just wondering, in terms of what you were talking about in full year 2021 revenues, it seems like on the pace of what you're looking in Q2, that your thoughts on full year 21 is really very conservative. Can you just kind of go over that again?
spk05: Sure. Hey, Michael, it's good to hear your voice this morning, and thank you for the congrats. It's Bill. I'll start, and then I'll let Stu fill in with any color. So our Q2 net revenue guide was $101 million to $104 million, which would be up 36% to 40%. And then as Stu outlined, excluding live events, that would be, I believe, Stu, did you say negative 4% to negative 6% roughly?
spk03: Yes, Bill.
spk05: So that's our revenue guide. And then our EBITDA guide was for Q2, $28 to $29 million. And as Stu said, you know, obviously up materially from 2020, we're really, as you noted, focused on getting back to 2019 levels. So off of 2019 levels, that would either be down slightly negative 3% on the low end and actually above 2019 levels on the high end at $29 million.
spk04: Yeah. Yeah. Yeah.
spk05: Yeah, and then on the full-year guidance, it was $395 million, and then achieved $90 million and adjusted at EBITDA, and hopefully we achieved that, and as I noted, grow from there.
spk04: That's amazing. That's awesome. So just a couple questions here. So Town Square Interactive surprisingly grew really nicely in the year earlier, second quarter, and I believe at the time you said that some of the growth was due to changes in business strategies like you know, restaurants shifting towards takeouts and so forth. Where are you seeing the growth in Town Square Interactive now? What types of business trends are you seeing that you're seeing this resurgence and acceleration in the rate of growth?
spk05: Yeah, the acceleration is quite phenomenal. The team, that's the only office in our company who is still partially remote because of COVID. the guidelines, we have, as you know, Michael, we have over 600 people based in Charlotte and they're reopening on July 1st and their performance throughout this pandemic each and every quarter has been inspiring. You know, what I think is probably worth repeating is Town Square Interactive is now 21% of our total company revenue in Q1 and 30% of our total adjusted EBIT in Q1. And as you noted in the first quarter, we grew 15%, but in Q2, we guided that accelerating to plus 18% growth. In terms of the categories, it continues to get more and more diversified. I think, and I noted it on the call, but for yourself and others, I really pinpoint to slide nine in terms of our digital growth, but also slide 12 in terms of the total addressable market for Townscrew Interactive is $32 billion after you account for all the businesses that we strip out. We only focus on businesses outside the top 50 DMAs, and then the other filters I outlined in terms of number of employees and annual revenues. So we're still just scratching the surface in our view. That's why we not only reaffirmed the $100 million in two to three years with Townscrew Interactive, but also I think for the first time put out an overall digital number of $250 million in digital over the next three years, which would be up 50% from where we are today at a trailing $167 million. So that business continues to – really propel our company forward. But it's also nice to see our digital advertising also growing 12% in Q1, which is up 31% over 2019 levels. And as we noted on the call, we expect that to grow 40%. So I think what you're seeing overall is we pivoted to become a digital-first company. Clearly, our digital is driving our results. And although, as I noted, broadcast is still lagging 2019 levels, and we expect that to continue in Q2, it's less and less relevant because it's a smaller piece of our business and we're managing the expense base there in line with the revenue base. So I continue to believe that broadcast will recover to 2019 levels. It's going to take some time, but almost irregardless, as long as we manage that to a proper profit level, digital is going to be the propeller for our company every year moving forward. So I'll turn it back to you, Michael, for your other questions.
spk04: Yeah, just a couple quick ones here. Regarding your experience in Tyler, Texas, for live events, do you think that the success was in terms of, you know, the more people just wanting to get out, or was there other strategies that you have done? And then if you can kind of give us a sense on what type of recovery or events that you're planning in the second half, and if you could give us some thoughts about the margin of that as well.
spk05: Yes. So in our view, it's clearly pent-up demand. It was not only a great success in Tyler, Texas, last week for our Red Debt Dirt Barbecue and Music Festival, it was actually an all-time record in revenue and an all-time record in profit. And we didn't have to spend any external marketing dollars because we obviously have the megaphone of our radio stations there. So what we're seeing is pent-up demand. We also went on sale Friday morning yesterday. for a festival, Taste of Fort Collins in Fort Collins, Colorado, which is food as well as music. Headliners this year are Nelly and Spin Doctors. And we had the best single-day ticket sales of that event's history. So we anticipate as we continue to announce more live events in Q2 as well as the back half of the year, although they'll be much more limited than 2019 levels, we think they're going to have tremendous success given that pent-up demand and everything we're hearing from our consumer base. And then, as Stu noted on the call, we expect in 2022 to get back to a full schedule of live events, roughly 200 recurring annual live events, importantly, in our local markets, affiliated and connected to our radio stations and communities. The margins right now are actually a little bit higher. Traditionally, they've been in the high teens, as you probably know. Our live event business in 2019 was roughly, for those who may not remember, roughly $16 million and about $1.6 million in profit. Right now, we're actually operating and anticipating a higher profit margin in this year based on this pent-up demand that we're seeing. So call it anywhere from the low 20s to the high 20s.
spk04: Great. Thank you. That's all I have. I'll let others ask questions. Thank you. You're welcome. Thank you, Michael. Be well.
spk02: Thank you. As a reminder, to ask a question, you may press star 1. The next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question.
spk01: Thanks. I'd like to keep going a little bit on the live events. It seems you're at a start-over basis. You could be more selective in terms of which events you would use. can you point us to how you would make the choices as to which ones you would go after? Like, should they be specific ones like the Tyler Texas, or will they be ones that could be used across the country in your various markets? And is profitability the key? Is it sort of reinforcing the local radio and the local digital ad sales? You know, how do you think about, you know, reinvigorating that business.
spk05: Yes, Jim, good to hear from you as always. So a couple things. As Stu noted on the call, we did a tremendous amount of pruning of our live event business in 2017, 18, and 19. We were selling our carnival business, selling our multi-day music festivals that weren't affiliated or associated with our local markets. So at this point, I anticipate that we will continue with the large majority, if not all of the live events that we did in 2019 when we're back in full service in 2022. In terms of things that we focus on, we look at clearly the financials of it being revenue and profit, but also, as you noted, the importance to the community, and it's really a profitable marketing division for us. It's very small vis-a-vis what it was in the past with under $20 million in revenue, but it's so strategically important, and it's so important not only to our listeners and communities, but to those small businesses and regional businesses in our markets that can provide activations. The last point I'll make before I turn it back to you for follow-ups is we do, as you noted, have a number of events like our Beer Fest and others that run across dozens of our markets. So we get the benefit of that expertise and scale for a single concept, but running across dozens of markets. So those are continuing. We've already announced some of those for Q2 and Q3, and the demand on those as well from what we're hearing from not only our consumers, but clearly the vendors too. They've been waiting to get out and interact with their client base after 13, 14 months of the pandemic. So I expect anybody in the live event business to really benefit quite a bit over the next 18 to 36 months based on what we see as tremendous pent-up demand.
spk01: Okay. Maybe one more about the live events. You noted you expected to get back into the flow in 2022. Do you have any sort of a normalized range of revenue in EBITDA we should be considering for that event? And, you know, I don't know if you'll achieve it totally in 2022, but is there a target you have in mind?
spk05: In 2022, I expect to grow from 2019 levels. Stu can correct me, but off the top of my head, I think it was $16 million in revenue. Was it $3.2 million in profits, Stu, for 2019 on live events?
spk03: Yep, $3 million. $3 million.
spk05: So I expect us, Jim, to definitely return to those levels in 2022. And quite honestly, based on what I just shared with you in terms of what we're seeing with pent-up demand, I think there's a very strong likelihood that we'll grow double digits on the revenue and double digits on the profit line in 2022. Okay. Thank you.
spk01: And then on the PSA area, you talked about a new office. And I'm wondering if you could share what share of your target market is now available with the operations you currently have, what you think you might be able to achieve with a new office. What are the costs and timeframe in terms of establishing a new office? Is there a maturation phase that you have to go through? I don't think you open the door and everything flows in. So how soon do you get to that point?
spk05: Yeah, so we're currently planning. We're actually looking at real estate now. Stu's heading up that initiative. And we expect, as we sit here today, to open that office in Q1 of 2022. That could, you know, slightly move up or slightly move back, but that's our expectation and our planning. It's a good point you make in terms of you don't just open the doors and all of a sudden you have 600 people like we have in Charlotte today. But that said, we've been very opportunistic during the pandemic. and obviously people working more virtually and remotely to be hiring staff already for that location, even though we don't have an office. So we already have hired dozens of people who obviously are not going into an office because we don't have one, but they're based out on the West Coast. So I believe we will scale quite quickly in 2022 once we open the office because we plan to continue to hire throughout 2021. And then in terms of your question about the addressable market, I mean, As I noted on the investor slide, you know, we have literally 8.8 million target Town Square Interactive customers, and we have under 25,000 subscribers today. So it truly is just scratching the surface, and that's why we're also seeing an acceleration of our growth. And, you know, as I just noted, I'm just really proud that now Town Square Interactive is literally 30% of the total companies adjusted to EBITDA and Q1. So it speaks to the market opportunity in our view.
spk01: And lastly, is there any churn figure available regarding TSI as it's trended since you indicated it's recession resistant, which it seems to be? Are there numbers we ought to look at and how those have trended?
spk05: Yeah, so we don't disclose the specific churn rate for competitive reasons, just like we don't disclose our average minute rate. But we have publicly shared on these calls So what I can share with you is we believe, based on our intel of people we've hired and other data points from publicly comparable companies, that we have, if not best, best-in-class churn. What I can share with you specifically to Town Square Interactive is that our churn rate currently is at the lowest levels since the beginning of the business in 2012. We couldn't be more pleased with our customer service, which we highlighted on this earnings call, given the importance not only to Town Square Interactive, but also to Ignite and AMP and just our overall business in terms of customer service is something that we put as a tenet and principle of super serving our customers. So our churn right now is the lowest it's ever been in Town Square Interactive's history, which is obviously given a pandemic and given the challenges that SMBs have faced over the past 14 months, an incredible testament to the team.
spk01: All right. That's great. Thanks. I appreciate it.
spk05: Thank you, Jim. Be well.
spk02: Thank you. At this time, we've reached the end of our question and answer session, and I'll turn the call over to Bill Wilson for closing remarks.
spk05: Thank you, Rob, and thank you, everybody, who dialed in this morning to get updated on Town Square's progress. Couldn't be more pleased and more proud of the team and look forward to reconnecting with you and update you on our Q2 results shortly. So be well, be strong. Take care. Thank you, operator.
spk02: You're welcome. Thank you, everyone. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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