Townsquare Media, Inc.

Good morning and welcome to Town Square Media's first quarter 2024 conference call. As a reminder, today's call has been 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. If anyone should require operator assistance during the conference, please press star zero on your telephone or keypad. With that, I would like to introduce the 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 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 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 the 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 this morning. It's great to reconnect with everyone. We're very pleased to share with you that Town Square's first quarter results met our previously issued guidance for both net revenue and adjusted EBITDA. We are building momentum throughout the year and anticipate delivering stronger financial results each quarter in 2024, ultimately setting us up for a strong 2025. In the first quarter, we again outperformed our competitors and gained market share, primarily due to our local focus and our differentiated digital platform. Additionally, we continue to generate strong cash flow, granting us the ability to invest in our digital growth engine and affording us financial flexibility. By now, I believe that our investors recognize that our digital business is a true differentiator for Town Square. As highlighted on slide 12, in Q1 2024, approximately 53% of our company's total net revenue came from our digital solutions, more than double the industry average. And 53% of our total adjusted operating income also came from our digital solutions. This highlights a point we often make and can't state enough. Town Square is no longer the radio broadcast company it was when it was founded in 2010. Town Square has evolved and transformed into a digital-first local media company that is truly distinguished from our local media peers. Validating our focus on markets outside the top 50 U.S. cities, with a world-class team and a unique and differentiated strategy, assets, platforms, and solutions. This critical point of differentiation has fortified my confidence in our business model and our path forward over the next number of years. But it's not me just saying that. I am very pleased to share that Boyer Research, founded in 1975 and now a leading firm providing in-depth, independent research on publicly traded U.S. companies, highlighted Town Square as their opportunity pick last month, publishing a comprehensive and very favorable report on TownSquare. I would encourage all of our current and prospective investors to read this report, which can be found by a link in the news section of our company website, as well as in our updated investor presentation. It is worth noting that the report derives an intrinsic value for TownSquare of $25.30 per share. Additionally, Jonathan Boyer asked me to be a guest on his podcast, The World According to Boyer, which was a lot of fun to do and can also be accessed on our website or on Boyer's research website or on your favorite podcasting platform. I am very pleased to share that in each of our main businesses, Ignite, Town Square Interactive, and Broadcast Advertising, Q1 performed better than Q4 as momentum continued to build for us. which we expect will continue for the remainder of 2024 and into 2025. As I stated what happened on our last call in March, our digital advertising net revenue returned to growth in Q1, with revenue increasing plus 1% over the prior year period. As also noted on our last call, our growth was driven by strength in our digital programmatic advertising revenue, as well as stability in our local digital advertising revenue base, which was partially offset by steep national digital advertising declines. We are really quite proud of our digital advertising business, which, when excluding national advertising revenue, would have grown at a mid-single-digit growth rate in the first quarter. Our local digital audience on our owned and operated websites has continued to grow, and that is due to the important role we play in our mid- and small-sized cities. Because of the dwindling availability of local news sources in small and mid-sized markets across the country, there is an expanding void of local information available in our communities, both online and on air. we have stepped in at town square to fill that void. Our local websites are in essence what people would have thought of a newspaper 10 years ago. This has led to our local digital audience to consistently grow. And in fact, we reached an all time high 70 million unique visitors to our local websites in March, a plus 16% year over year. Local audience growth combined with strong engagements metrics has enabled strong local digital revenue performance. However, We are most excited about our digital programmatic business, where we have unlimited growth potential and extreme confidence, and which will be the largest growth driver of our digital advertising business going forward. Programmatic make up about 60% of our digital advertising segment today and is the fastest growing revenue stream in our company. All in all, we owe our digital advertising success to our sophisticated digital products and solutions, which are entirely in-house. giving us 100% control of the client relationship, starting with the client pitch, then campaign design, media buying and optimization, and ongoing reporting and insights, which we believe translates to a better customer experience, higher average spend and higher client retention rates. In addition, we have the unique ability to collect, and analyze first-party data from our audience of over 75 million unique visitors to our portfolio of over 400 local news and entertainment websites, 400 mobile apps, and 10 leading national music and entertainment websites. This very large first-party data set allows us to provide detailed and unique insights about consumer behaviors, audience interest, and importantly, purchase intent that drive real results with strong ROI for our clients. giving us a true strategic advantage over our local competition. We are very confident in our ability to continue to grow this business and capitalize on our competitive advantage in our cities. Owning our tech platforms in-house, combined with the breadth of our digital solutions and quality of our first party data, is a competitive advantage in any size market. Yet in cities outside the top 50, it is a significant difference maker, driving our digital advertising to be the strongest growth engine in the company. Our Q1 digital advertising revenue performance improved from Q4, and we expect to have similar growth trends in Q2 as Q1, before improving more strongly in the second half of 2024. This is tied to ongoing national digital advertising revenue weakness, which we outlined in detail on our last call, which declined negative 29% year-over-year in the first quarter, and is pacing even worse in Q2, with an expected year-over-year revenue decline of over 30% in Q2, which is over a million dollars. These revenue declines are in large part due to significant changes to algorithms for Google and social media referrals that have negatively impacted our national audience. And as you have probably seen, we are not alone in feeling that impact. Fortunately, just as with our broadcast advertising, national is only a small portion of our digital advertising revenue business. And we anticipate that national digital revenue declines will begin to moderate meaningfully in the third and fourth quarters. leading to stronger results for this segment as a whole in the back half of 2024. Overall, we are confident that favorable industry trends, together with our in-house full suite of marketing solutions, our investment in our original content strategy, and our first-party data advantage will continue to drive strong digital advertising growth for Town Square. As I shared on our last call, we have been asked if we still believe in the growth strategy and addressable market of Town Square Interactive given last year's challenges. And the answer is yes, without a doubt, unquestionably so. To that point, I am very pleased, so pleased this morning to share with you today that TalentSquare Interactive, our subscription digital marketing solutions business, is firmly on the path to recovery and growth after attacking our 2023 challenges head on. As I shared the last time we were together, the first sign of the rebound at TalentSquare Interactive is the return to subscriber growth. The second sign of the rebound is month-over-month revenue growth. And given our continued ongoing aggressive investment in Town Square Interactive, the third sign of returning to strength is month-over-month profit growth. Therefore, I'm pleased to share with you that ahead of my own expectation, in March, Town Square Interactive grew net subscribers for the first time in 17 months and generated month-over-month revenue growth as well. This very positive trend continued in April, and we expect this momentum to not only continue, but to grow in Q2 and onward. I am very proud of our Town Square Interactive team. It is also worth noting that net subscriber losses were better than I laid out on our last call, which was when I was expecting subscriber losses in Q1 to be roughly 50% of Q4's losses. Yet subscriber losses actually declined 60% in Q1 24 as compared to Q4. And as I just shared, we added net subscribers in March, earlier than we originally expected, and again, we did that in April. It is also good to note that our poof of new sales is increasing. In the first quarter, Town Square Interactive's net revenue declined negative 15% year over year, exactly in line with the expectations that I shared with you on our last call. The positive development is that on a quarter-over-quarter basis, net revenue declined less than 5%. because we returned to month over month revenue growth in March. Town Square Interactive's first quarter profit declined negative 10% year over year, also in line exactly with the expectations we outlined on our last call. And we managed expenses very well such that we grew our profit margin from 26% in Q1 of 2023 to 28% in Q1 of 2024. Looking ahead to Q2, we expect to see net subscriber growth for the quarter which will drive continued month-over-month revenue growth trends. Month-over-month profit growth will be dependent on how aggressive we can continue to invest in the businesses in Charlotte and Phoenix, yet we still anticipate a return to month-over-month profit growth in Q4 of 2024. Also, as I detailed on the last call, even though we are now back on a positive path of consistent growth at Town Square Interactive, given the loss of over 7,000 subscribers from Q1 23 through Q1 of 24, as you would expect year over year revenue and profit comparisons will still look very negative with that context provided. We expect town square interactive second quarter net revenue to decline approximately 13%, which reflects last year's challenges, not the subscriber and month over month revenue growth we are currently delivering. In the long term, we are confident that we have a long, sustainable runway ahead of us. With over 23,000 subscribers at the end of Q1, approximately 58% of which are outside of our local media footprint, and an addressable market of nearly 9 million target customers, we are only scratching the surface. With our existing subscriber base, superior product offering, and a huge market opportunity of nearly 9 million target customers, as outlined on slide 15, I am confident that Town Square Interactive is on track and set up for long-term profitable growth and success. I am also very pleased to share with you that our broadcast advertising revenue declines have stabilized and first quarter revenue declined just 1%, an improvement from Q4's negative 2.5% decline. Similar to last year's trends, local outperformed national in the first quarter as national declined negative 9% year over year. Thankfully, Just like our digital business, our national broadcast exposure is limited, with less than 10 percent of our total revenue coming from broadcast national marketplace. Overall, we outperformed the industry in the first quarter, gaining local and national broadcast market share, according to Miller Kaplan. I am very proud of our team in achieving this market share growth, as it demonstrates the benefits and importance of differentiated local content on our local radio broadcast. No better team of content contributors and our sales teams. Political is off to a slow start for us and the industry overall due to the lackluster primary season. Our first quarter political revenue of $1.1 million is only 80% of our political revenue in Q1 of 2020. However, we remain very optimistic in our full year estimation of $14 million to $16 million of political revenue as compared to the all-time high of $16 million recorded in the 2020 political season. Industry specialists are predicting record political expenditures in 2024, benefiting Town Square, especially in our Michigan, Montana, Arizona, New Jersey, and New Hampshire markets, where they expect close races for governorship, House and Senate seats. We believe Town Square's ability to drive profitable, sustainable digital growth is a key differentiator for our company. Digital is and will continue to be our growth engine. and we will continue to invest in our digital business to fuel further profitable growth. We view local radio as an extremely valuable asset with significant cash flow properties, unparalleled consumer reach, and an important local connection to our audience. In fact, we would have never achieved the success we've had in building an at-scale differentiated digital audience and resulting digital advertising and digital marketing solutions businesses if it wasn't for a continued strong local radio presence and performance. Our traditional AM FM over the air broadcast continues to reach on average one out of every two adults in our markets. Very, very powerful and very, very important. And because of the powerful combination of town squares, digital plus radio plus live events, plus local investment, we believe that our flywheel will continue to blaze forward and gain momentum. I would also like to shine a bright, bright spotlight on a very important aspect of our business model, our significant cash flow generation. Due to our strong cash flow characteristics, we are afforded financial flexibility to build shareholder value. Over the past several years, we have retired $46 million of debt. We have repurchased over 16 million shares. And we also initiated a dividend and then raised it by 5% after the first year, all while continuing to invest in our digital growth engine. In April, using cash on hand, we were able to execute a very accretive share repurchase from MSG and an 11% discount to the pre-announcement share price and execute an option buyback at an attractive price point, thereby avoiding shareholder dilution. Stu will discuss both of these attractive transactions shortly in more detail. With $28 million of cash on hand at the end of April and net leverage of 4.6 times as of March 31st, we remain very confident in our current capitalization and the strength of our balance sheet. And we are pleased that we can continue to deliver attractive current cash returns for our equity shareholders. As we say internally, how high is high? And now, I'd like to turn the call over to Stu, who will go through our results in even more detail, as well as provide you with our second quarter guidance. Stu, take it away.