Townsquare Media, Inc.

Good morning and welcome to Town Square's year-end 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 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 your first speaker for today's call, Claire Yenneke, Executive Vice President.

Thank you, Operator, and good morning to everyone. Thank you for joining us today for Town Square's year-end 2021 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 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. In addition, we also issued our annual shareholder letter today, also available on our website, which we encourage you all to read. At this time, I would like to turn the call over to Bill Wilson.

Good morning, and thank you for joining us. I'm proud to share some very important updates with you today. This morning, there are five key things that I'd like you to know. One, our strong conclusion to 2021. Two, our great start to this year and our 2022 full year guidance. Three, our new financial reporting segments. which provide more detail on our strong digital businesses. Four, that our board of directors has approved up to a $50 million stock buyback program. And five, that we have fully transformed to a digital first local media company. And that Town Square is the only local media company focused principally on markets outside the top 50 cities in the United States. As we sit here in March, 2022, I can truly say that Town Square has come a long way from where we began in 2010 as a pure radio broadcaster. If you would join me in turning to slide number five, you will see that the transformation we have executed is pretty remarkable. We started in 2010 with 60 local radio stations, less than 1 million unique visitors to our websites, no social or video platform to speak of, and nearly all of our revenue and all of our profit came from terrestrial radio spot sales. Fast forward to today. We now own a portfolio of over 340 local and national news and entertainment websites and mobile apps that generate over 60 million unique visitors on average per month. Our social platforms have over 40 million followers, and our YouTube platform has over 3.5 billion lifetime views. We have organically built a subscription digital marketing solutions business that now supports approximately 26,800 subscribers. We have also organically built a digital programmatic advertising platform that has access to more than 250 billion impressions per day. We have created a data management platform with rich and valuable first-party data for 15 million user profiles. And our 60 radio stations have grown to 322 local radio stations. Today, nearly 50% of our revenue and 50% of our profit comes from our digital solutions that did not exist a mere decade ago. You don't have to look closely to see that we are no longer the radio broadcaster of 2010, and that we have fully transformed to a digital-first local media company. However, many investors continue to perceive us as a radio company. And while it is true that we have many market-leading local radio stations, radio is only a component of our business. We view local radio as an extremely valuable asset with significant and attractive cash flow properties, unparalleled consumer reach, and an important and trusted local connection to our audience, and thus a component of our multi-platform diverse local media business. But radio is not our primary growth driver, nor has it been for some time. Our growth engine has been digital, and it will be digital for a long time. And as our company has evolved, so has our reporting structure. So you can see on slide seven, I'm very pleased to share that we have resegmented our business to provide much more greater clarity and information on our digital businesses to our existing and prospective investors. Importantly, this resegmentation will highlight the profit characteristics of our digital platform, which is essentially equal to our broadcast platform, each with profit margins of approximately 30%. It is our hope and our expectation that given this new more detailed information, Town Square will begin to get credit for being a digital first local media company and will be afforded a sum of the parts valuation that gives credit to our digital assets, credit which to date we have not yet received. Before I share our 2021 results with you, I do want to highlight an important fact. Town Square is the only local media company of scale focused principally on markets outside of the top 50 in the United States. Not just the only radio company, the only local media company of scale focused principally on markets outside the top 50. This is a vital differentiator for our company and our team, translating directly into our strong financial results. As outlined on slide eight, These markets outside the top 50 offer a more competitive landscape with very limited focus from larger media players, digital marketing solutions providers, and digital programmatic providers. These markets are all too often starved of high-quality local content. In many of our markets, we are one of the very few creators and suppliers of local news and information. As traditional news outlets like local television stations and local newspapers have shrunk, shut down, or never even existed. Since 2004, approximately 2,000 newspapers have closed in the United States, a majority in our size markets. Frequently, Town Square has filled that void by producing local original content at scale, and today we are one of the largest publishers of local content in the United States, and our digital audience has grown tremendously. This in turn provides us with an incredibly valuable first-party data that we not only use for advertising on our owned and operated brands, but we also leverage for our digital programmatic solutions. Being a publisher at scale provides a meaningful competitive advantage to our digital programmatic solution. These competitive dynamics combine with our investment in world-class technology and infrastructure to create best of breed products and services have contributed to our strong financial performance. I'm proud to announce that our year-end financial results exceeded our expectations and also set company records. Please turn to slide 18, which highlights that our 2021 net revenue increased a very strong plus 13% year over year to $418 million. And more importantly, is 99.8% of 2019's net revenue excluding live events. As a result, we exceeded and beat our previously issued revenue guidance. 2021 adjusted EBITDA of $105.1 million increased plus 69% year-over-year and exceeded and beat our previously issued guidance and was an all-time company record. Importantly and impressively, 2021 adjusted EBITDA of $105 million was also 3% higher than 2019 EBITDA. TownSquare is one of a few select companies with radio assets that has returned to 2019 adjusted EBITDA levels, which we first achieved back in Q4 of 2020 and in each and every quarter of 2021. That is yet just another reason why we should not be valued as a radio company. In 2021, our total digital revenue increased plus 19% to $199 million, or 48% of our total company net revenue. And our total digital profit increased plus 29% to $61 million. That equates to a profit margin of 31%. which, as you can see on slide 7, is approximately equal to our 2021 broadcast advertising profit margin. I'm excited to share with you that we are raising our outlook for future growth of our digital business. If you turn to slide 9, you'll see a clear argument for why being a digital-first local media company is the obvious path. In 2021, radio advertising was less than 10% of all advertising spend in the United States. according to industry research, while digital advertising contributed over 50%. And by 2025, digital advertising is expected to make up close to 75% of all advertising dollars in the United States. Similarly, digital revenue will represent the majority of our company's revenue in the very near future. We had previously forecasted that we would reach $250 million of digital revenue by 2024. but we now believe we will easily eclipse that goal. In 2024, we are confident that our digital business will grow to $275 million from $199 million in 2021, representing an annual growth rate in the double digits. Our new subscription digital marketing solutions segment is the same as our previous TownSquare Interactive segment. TownSquare Interactive, presented on slide number 13, had a record-setting year, adding the most net subscribers in our history with approximately 4,050 net subscriber additions in 2021. Since we organically developed and launched Town Square Interactive in 2012, its revenue has grown double digits versus the prior year each and every quarter. even during the worst of COVID 2020. And since reaching profitability in 2014, profit has grown each and every quarter as well. In 2021, Town Square Interactive's net revenue increased plus 16% year over year to approximately $82 million. And profit also increased plus 16% year over year to $24 million, a 30% profit margin. This business is a significant differentiator versus other local media companies because it is a monthly recurring subscription-based model. What's most exciting about our Town Square Interactive business is that there is still so much upside to capture. On our previous calls, I walked you through the addressable market for Town Square Interactive, which is outlined again on slide number 14. I won't go into the details again, but it is worth noting that the total addressable market is $32 billion, which translates to just under 9 million customers. The takeaway is we are just getting started. With approximately 26,800 subscribers at the end of 2021, and with increasing net ads each year, we are still only capturing a small fraction of the addressable market today. As part of our growth plans for Town Square Interactive, we plan to open a second Town Square Interactive location in the Western United States in Q2 2022. We're actually in the final stages of negotiating a lease currently. This gives us a number of benefits. It will allow us to better serve our West Coast clients with sales and service operating in the same time zone. But most importantly, it will greatly expand our talent pool. One of our company's biggest investments every year is in our sales and service personnel, so being able to tap into West Coast employment market will be very, very beneficial. We're often asked about the expenses associated with opening this second location, and they are largely limited to additional personnel and the new lease. However, we are very well versed in profitability scaling of Town Square Interactive, as we have already done with our existing operations in Charlotte. starting from scratch and building to more than 650 employees, 26,800 subscribers, and $82 million of revenue while maintaining strong, profitable margins. Our new digital advertising segment, marketed externally as Town Square Ignite, is presented on slide 15. This segment includes our owned and operated digital properties, our proprietary digital programmatic advertising platform, and our in-house demand and data management platform collecting valuable first-party data. We have experienced very strong growth in this segment, supported both by general industry trends and our investment in digital personnel and product development, plus our commitment to creating original local content. For example, we believe one key to our success is that we have made significant investments in organically building our own digital platforms. including our in-house content management system and our in-house programmatic solution, which leads to better customer experiences and therefore higher client retention rates. In addition, the investment in our original content strategy has contributed to a larger and more engaged online audience that is spending more time consuming content on our websites and mobile apps, and a stable radio audience both total number of listeners and, importantly, time spent listening. In 2021, our online audience grew to an all-time high of 60 million unique visitors per month, driven by local relevant content created by our local DJs, who are also digital content creators and are truly the original social influencers. Our investment in our digital products and personnel have translated into strong financial results. In 2021, digital advertising revenue increased plus 20 percent to $117 million, and digital advertising profit increased plus 40 percent to $37 million, a 32 percent profit margin. Importantly, the success of our digital platform does not come at the expense of our broadcast platform. The opposite is actually true. The better we do digitally, the better we do in our local broadcast business because the digital solutions we provide to local SMBs encourages them to trust us with their broadcast marketing budget as well. You can see that clearly in our Miller Kaplan local broadcast advertising results on slide number 19 as we continue to gain market share in local radio advertising. In 2021, we outperformed the industry in local radio spot sales by 9.1 percentage points and total spot sales by 4.2 percentage points in our markets at Miller Kaplan Measures. Additionally, last year, Town Square also outperformed the industry in total revenue, which includes both total spot revenue and total digital revenue by 5.1 percentage points. In 2021, our broadcast advertising revenue increased year-over-year by plus 7%, and more importantly, plus 14%, excluding political revenue. And our broadcast advertising profit increased plus 64% year-over-year, as 2021 margins recovered to 31%. Our digital solutions benefit our radio solutions, and our radio platform and reach supercharge our digital solutions. In the long term, we view radio as an extremely valuable asset with significant cash flow properties, unparalleled reach, and an important local connection to our audience. But it is a mature cash cow business, and our growth will continue to be driven primarily by our digital platform and solutions for local businesses. I also wanted to point out that we generated $61 million of cash from operations in 2021 which we applied to significantly accretive share repurchase and refinancing of our debt, with the remainder of our cash held on our balance sheet. We ended the year with 4.7 times net leverage, a significant year-over-year improvement of 2.7 times. And we continue to make reducing net debt a priority. In fact, Stu will update you on a potentially advantageous refinancing opportunity that will be available to us shortly in February 2023. Our success is 100% tied to the effort, hard work, and passion of our incredible Town Square team, who have fully embraced our transformation to a digital-first local media company, and who super serve their local communities and their local businesses each and every day. In fact, at the start of the year, we launched an employee stock purchase plan so that every employee has the opportunity to have a stake in our company's success. In addition, I'm pleased to share that as of January 1st, 2022, we have reinstated the 401 company match, which was paused in 2020 in response to the pandemic. Now, I'll turn the call over to Stu, who will break down our strong results and our outlook for 2022 in much greater detail for everyone. Stu, take it away.