Townsquare Media, Inc.

Thank you for standing by. This is the conference operator. Good morning and welcome to Town Square's first quarter 2022 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 formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. With that, I would like to introduce the first speaker for today's call, Claire Yenneke, Executive Vice President. Please go ahead.

Thank you, Operator, and good morning to everyone. Thank you for joining us today for Town Square's 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 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 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.

Thank you, Claire, and thank you all for joining us. I've been looking forward to our call this morning for quite some time as we've had an exciting start to the year. I'm pleased to be able to provide you an update on our strong Q1 performance, discuss the announcement of our Cherry Creek acquisition, as well as reaffirm our very strong outlook for the year, including our expectation of all-time high record-level profits for Town Square. Our first quarter financial results reflect strong growth and strong margins. And as a result, the TownSquare team exceeded our first quarter revenue and EBITDA guidance as outlined on slide 18. First quarter net revenue increased a very strong plus 13% year over year to $100.2 million, above our guidance range of $97.5 to $99.5 million. Importantly, we have now meaningfully surpassed 2019 levels with first quarter net revenue exceeding 2019's net revenue by plus 7%. Our first quarter adjusted EBITDA also increased double digits, up a robust plus 10% year-over-year to $22.1 million, also above our guidance range of $21 million to $22 million. And of course, that also exceeds 2019 levels, as we have now been above 2019 EBITDA levels for six straight quarters, since the fourth quarter of 2020. Now that we have successfully recovered and surpassed pre-COVID levels for both net revenue and adjusted EBITDA, it is no longer relevant to be comparing our results to 2019. Organically, Town Square is above 2019 pre-COVID revenue and EBITDA levels due largely to our consistent digital strength and our digital growth. In the first quarter of 2022, Our digital revenue and digital profit increased plus 16% and plus 11%, respectively, over the prior year. In total, 51% of our Q1 revenue and 55% of our Q1 profit came from our digital solutions. Let me repeat that as it is a clear differentiator for our company. 55% of our Q1 profit came from our digital solutions for local businesses. Despite this fact, too many investors continue to perceive us as a radio company. And in fact, we currently trade at a discount to other radio broadcasters who have far less digital revenue and digital profit. While it is true that we have great market-leading local radio stations that we love, 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 communities, and thus a component of our multi-platform diverse local media business. But radio is a mature cash cow business and radio is not our primary growth driver, nor has it been for some time. Our growth engine has been digital and it will continue to be digital moving forward. In order to demonstrate and reinforce that point, Let me briefly dive into our digital platform and its financial results as a reminder of the extremely valuable and quite differentiated digital assets we have at Town Square. First, it is extremely important to acknowledge that our entire digital platform has been developed organically by our own very talented product design and engineering team, many of whom have been with Town Square since day one. They are our digital backbone and have developed countless products and tools for Town Square, including our content management platform, our subscription digital marketing solutions platform, and our premium digital advertising products and solutions. I am very proud to announce that this team was just awarded with the NAB 2022 Pilot Technology Innovation Challenge Award for the creation of our own CRM. customer relationship management platform, which we call Blueprint. Blueprint is a true game changer that was built based on feedback from our own local markets, allowing both our managers and our salespeople to effectively manage and grow their business without the recurring cost of a third-party CRM. The fact that our digital products and solutions are in-house and are not outsourced is a significant, significant competitive advantage that grants us the ability to fully control the customer experience from the point of sale to execution and reporting, which enhances our customer retention. Having these solutions in-house also enhances our digital profit margins as evidenced by our results. Our digital advertising segment, marketed externally as Town Square Ignite, is presented on slide 15. This segment includes a portfolio of over 340 local and national news and entertainment websites and mobile apps that generate over 60 million monthly unique visitors, have over 40 million followers across social platforms, and generated over 3.5 billion lifetime views across our YouTube platform. We have organically built and sustained this audience through our focus and investment in creating high-quality local content curated to our local audiences. On average, we publish approximately 20,000 pieces of content each month across our portfolio, making us one of the largest producers of local content in the United States. In addition, we organically built a digital programmatic advertising platform that has access to more than 250 billion impressions per day and created a data management platform with rich and valuable first-party data with 15 million user profiles. We use this incredibly valuable first-party data collected from our own audience for advertising on both our owned and operated brands as well as on our digital programmatic solution. Being a large at-scale publisher with first-party data is a significant competitive advantage in digital advertising, especially in the programmatic business, as we are able to be more effectively targeting our customer's desired audience. As we prepare for a potential cookie-less world, publisher-owned first-party data becomes even more critical. Let me now highlight our digital financial performance, which continues to be very strong. In the first quarter, digital advertising net revenue increased plus 17% year over year, and digital advertising profit increased plus 13% year over year. On a trailing 12-month basis as of March 31st, we generated $121 million of digital advertising net revenue and $38 million of digital advertising profit, a 31% profit margin. The other critical component of our digital business is TownSquare Interactive, which is our subscription digital marketing solution segment discussed on slide number 13. This business is a significant differentiator for us versus other local media companies for two reasons. One, most local media companies don't offer their clients this service and solution. And two, Town Square Interactive is a monthly recurring subscription-based model that generates a substantial profit. On a trailing 12-month basis as of March 31st, Town Square Interactive had $85 million of subscription revenue, and $25 million of subscription profit, a 29% profit margin. We have consistently grown Town Square Interactive's revenue, profit, and net subscribers since its launch in 2012. And in the first quarter of 2022, net revenue at Town Square Interactive increased plus 15% year-over-year, and profit increased plus 7% year-over-year, and we added approximately 1,050 net subscribers. 200 more than the first quarter of 2021. This business has incredible upside due to its substantial addressable market of $32 billion, or nearly 9 million customers as outlined on slide number 14. With 27,850 subscribers at the end of the first quarter, we are only scratching the surface. As we have discussed, a key component of our Town Square Interactive Growth Plan is to open a second location and we are close to signing a lease for our new Phoenix location. We are planning some modifications to the office space and expect to physically move in during the second half of 2022. In the meantime, we continue to ramp our sales and support teams for both our legacy Charlotte office and our soon to be opened Phoenix office. As we have previously stated, we are confident that we will be able to scale and operate this second location at strong profit margins, given our history and experience from launching TSI organically in Charlotte a decade ago. In total, we expect that our digital revenue will grow from $206 million of digital revenue on a trailing 12 month basis as of March 31st, to a minimum of $275 million of digital revenue by 2024. On a trailing 12 month basis, our digital profit was $63 million a 31% profit margin, and we expect margins will continue to be very strong going forward. Importantly, we resegmented the business at the end of last year, highlighting the profit characteristics of our digital platform, essentially equal to our broadcast platform, each with profit margins of approximately 30%. It is our expectation that given this new and more detailed information, Town Square will begin to get credit and value 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 and strong digital profit, which, as I noted earlier, was 55% of our total profit in Q1, credit which, to date, we have not yet received. Last month, we announced the accretive acquisition of Cherry Creek Broadcasting. While it may seem counterintuitive to some to invest in more local radio stations, given that radio is a mature cash cow business, it is because of our digital-first local media strategy that this investment makes so much sense. We will bring our large-scale, sophisticated digital platform solutions and expertise to the Cherry Creek markets and team, which today generates only 15% of its revenue from digital solutions, the majority of which is outsourced, digital solutions, which generally lowers profit margins. Based on our own experience, we know that we can drive accelerated digital revenue growth at stronger and more profitable margins, such that within a few years, the Cherry Creek markets will be approaching a 50% digital revenue contribution and a 30% profit margin, just like Town Square has today in digital. At the same time, our acquisition strategy has always been to invest in market leading properties in markets outside the top 50 cities with stabilizing institutions such as four-year universities or military bases. This approach ensures that we will have an optimal competitive and economic landscape to launch our digital first local media strategy. The 35 stations in nine markets that we will be adding to our portfolio with this acquisition fit these criteria. With their heritage, Strong local brands, many of which are number one in their format, we are confident that we will have a long-term, stable broadcast base from which to inject our digital growth engine. And importantly, this furthers our ultimate goal of becoming the number one local media company in markets outside the top 50 cities in the United States. For example, this acquisition will greatly strengthen our existing competitive positions in the great states of Montana and Washington, where we already own radio stations today. From an economic standpoint, the acquisition also makes tremendous sense. The $18.75 million acquisition is immediately accretive, can be financed with cash on hand, and is net leverage neutral. Given our strong cash flow ability, It also does not impact our target net leverage goal of four times by the end of 2022. We expect the acquisition will close relatively soon following FCC approval. Our broadcast advertising business continues the post-COVID recovery growth, with net revenue increasing plus 8% and profit increasing plus 5% year over year, despite continued strong headwinds from the auto industry. We do not expect auto advertising to return to growth until sometime during 2023. Our digital solutions benefit our radio solutions, and our radio platform and reach supercharge our digital solutions. In the long term, we view local radio as an extremely valuable asset with significant cash flow properties, unparalleled reach, and an important local connection to our audience and communities. but local radio is a mature cash cow business. Our strong revenue and profit growth will continue to be driven primarily by our digital platform and solutions for local businesses. It's been a great start to the year and all credit is due to our incredible, 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. I look forward to growing our team with the acquisition of Cherry Creek and the addition of their stellar employees, many of whom I've already visited with and had the opportunity to meet and spend time with. Now, I'll turn the call over to Stu, who will break down our very strong results and outlook in much greater details for everyone. Stu, take it away.