Townsquare Media, Inc.

Good morning and welcome to Town Square Media's 3rd Quarter 2024 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. With that, I would like to introduce the first speaker for today's call, Claire Yenneke, Executive Vice President.

Thank you, Operator, and good morning to everyone. Thank you for joining us today for Town Square's third 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 but 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 by segment, 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'd 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 are very pleased to share with you that Town Square's third quarter results are directly in line with the expectations we shared with you on our last call, reflecting sequential improvement in revenue growth rates across each of our three business segments. In addition, we return to net revenue growth, with net revenue increasing slightly year over year. A small step, but a meaningful one. and one we can and will continue to build upon, as we forecast that Q4 net revenue growth will be equal to or greater than Q3's growth rate. Adjusted EBITDA declines also continued to moderate in the third quarter, and again, matched our expectations that we laid out on our last call. As always, our differentiated business model generated meaningful cash in the third quarter, and we applied that cash to repurchase $11 million of our bonds below par over $1 million of our stock and also pay our $3 million high yielding quarterly dividends. Our third quarter net revenue of $115 million was up slightly compared to the prior year and at the midpoint of our guidance range. Importantly, it was the fourth quarter of sequential improvement in net revenue growth and we anticipate sequential improvement in the fourth quarter as well. As you may recall, I projected on our last earnings call that third quarter broadcast net revenue would be flat to up 1%. And I'm glad to report, even with political coming in under our expectations in Q3, that broadcast advertising performed right in line with that forecast, up slightly year over year, and a sequential improvement from Q2's growth rate. We're also very pleased to share that, as anticipated, our digital revenue returned to growth in the third quarter, and contributed to 52% of our total net revenue in the third quarter. Town Square Interactive delivered sequential quarterly revenue growth, which I'm pleased to report was better than we forecasted on our last call. I had also projected that Q3's digital advertising net revenue would grow plus 4%, and it did slightly better than that, growing at plus 5%, a significant acceleration from the plus 1% revenue growth in the first half of the year. A main driver of our digital advertising momentum is the very strong digital programmatic advertising growth rates that I projected, which did in fact deliver meaningfully as our digital programmatic advertising grew at a strong plus 10% year over year. Again, sequential improvement from Q2. In essence, just like we've done all year, we executed and delivered on what we said we would do. while simultaneously building value for our shareholders through debt reduction and share repurchases and paying a high-yielding dividend. TownSquare's digital platform sets us apart from others in local media. As highlighted on slide 12, 52% of our total revenue is digital revenue in both the third quarter and through the first nine months of 2024, more than two times the industry average. And more impressively, more than half of our total profit was digital profit in the same periods. 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, nor the company it was when we went public a decade ago. 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 of the top 50 U.S. cities, with a world-class team and a unique and differentiated strategy, assets, platforms, and solutions. I'm also thrilled to announce that Town Square Ignite has been recognized as one of the best and brightest companies to work for in the nation for the third year in a row by the National Association for Business Resources. I could not be more proud of Todd Lawley and the entire Town Square Ignite team, not only for being recognized as one of the best and brightest companies, but also for their standout execution and performance in accelerating our digital programmatic advertising growth. Overall, we owe our digital advertising success to our sophisticated digital products and proven 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. We are very confident in our ability to continue to grow this business and capitalize on our competitive advantages on our local markets. Owning our tech platforms in-house, combined with the breadth of our digital solutions and the amount of quality of our first-party data pools 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. We are most excited and confident about our digital programmatic business, where we have unlimited growth opportunities, particularly when factoring in the potential of the third-party partnership model, which I'll discuss shortly. Programmatic makes up about 60% of our digital advertising segment today and continues to be the fastest-growing revenue stream in our company. Given our momentum and success, as we discussed on our last earnings call, we are exploring another avenue of growth in a digital programmatic advertising space, which capitalizes on the knowledge, expertise, and competitive advantages we hold in markets outside of the top 50. White labeling our digital programmatic advertising solution to third-party local broadcasters in markets where we do not overlap. Earlier this year, We created Town Square Ignite's Media Partnership Division and launched a trial to white label our programmatic platform with a single broadcaster in a single Nevada market. The insights we learned and the success we had from this trial gave us the confidence to continue down this path. And last month, I'm thrilled to say we announced a strategic partnership with Summit Media, an excellent broadcaster who operates local media properties across nine markets. We expect to finish their onboarding by year's end, including providing world-class training for their sales team. While this is currently a modest-sized opportunity in the context of our overall Ignite division, which this year will be over $155 million in revenue with very healthy digital profit margins, especially in the initial year we expect sales from this media partnership to ramp throughout 2025, we are very excited about what this and potential partnerships represent. which we believe is the opportunity to become the chosen provider of digital programmatic advertising to broadcasters and digital agencies in cities outside of the top 50. Under this model, Town Square handles all of the creative, buying, optimization, and customer support of the digital campaigns. So why partner with third parties instead of entering those markets ourselves? Well, instead of using our capital to acquire new markets to deploy our digital assets, this partnership model allows us to enter new markets and accelerate our digital revenue growth without deploying capital. We are then free to deploy our capital in other ways, such as debt pay down or equity buybacks or increasing our dividend payments. While early, We believe this media partnership initiative has the potential to be a significant difference maker and revenue and profit growth driver in 2026 and beyond, as we're currently in discussions with numerous other broadcasters about potentially partnering with us. Looking to Q4, we expect our digital advertising revenue growth to further accelerate from Q3's plus 5% revenue growth to approach plus 15% in Q4. Let me say that again. We expect Q4's digital advertising revenue growth to approach plus 15% in Q4, which if accomplished would be triple Q3's growth rate. This strong growth rate will be driven by what we expect to be very strong growth rates in programmatic digital advertising revenue, coupled with the improvement of our national digital business. I am also extremely pleased to share that TownSquare Interactive, our subscription digital marketing solutions business, continues along its path of recovery as sequential revenue growth accelerated in the third quarter. In Q3, TownSquare Interactive's net revenue decline of negative 6% year over year was slightly ahead of expectations I shared with you on our last call. And importantly, the decline represented less than half of Q2's negative 13% decline, a meaningful improvement. Town Square Interactive's third quarter profit declined an expected negative 11% year over year, as we managed expenses such that our third quarter profit margin of 27% was only a slight decline from Q3 2023's 28%. We are pleased to share that Town Square Interactive's fourth quarter net revenue is expected to return to year over year revenue growth. We are also very pleased with Town Square Interactive's new and improved product offering, which I described at length and in detail on our last call. We strongly believe that our new SaaS business management platform is a very powerful and will be a difference maker as we grow and continue to scale the Town Square interactive business. We are not only helping SMBs with their digital presence, we are also helping them operate their business more effectively. We're bringing sophisticated national scale to smaller markets, and we're proud to partner with our clients to do so. In the long term, we are confident that we have a long, sustainable runway ahead of us. With approximately 24,000 subscribers at the end of Q3, which approximately 59% of those are outside 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, including our new business management platform, and a significant market opportunity of nearly 9 million target customers, as outlined on slide 15, I am confident that TownSquare Interactive is set up for long-term, profitable growth and success. Another positive development in the third quarter was that our broadcast advertising revenue increased slightly year over year, a sequential improvement from the first half's growth rate. Unfortunately, national broadcast advertising revenue reversed course from Q2's flat performance and was a headwind in the third quarter. Looking to Q4, national will not only once again be a meaningful decline, but also much steeper. with an expected national decline in excess of 20% in the quarter. Overall, we continue to outperform the industry in the third quarter, gaining broadcast market share according to Miller Kaplan estimates. I am very proud of our team achieving this market share growth as it demonstrates the benefits and importance of our differentiated local content of our local radio broadcast. In the third quarter, We generated $3.7 million of political revenue, which is behind Q3 2020's $4.5 million. Based on what is currently on the books today, we now believe we will be under our initial expectations of $14 million to $16 million in political revenue. We view local radio as a mature cash cow business, yet an extremely valuable asset with significant cash flow properties, unparalleled consumer reach, and an important local connection to our audience. We believe Town Square's ability to drive profitable, sustainable digital growth is the key differentiator for our company. Digital is and will continue to be our growth engine, and we will continue to invest in our digital businesses to fuel further profitable growth. One last point I'd like to make before handing it over to Stu is a very important aspect of our business model, our significant cash flow generation. We continue to generate strong cash flow, granting us the ability to invest in our digital growth engine and affording us financial flexibility as evidenced by our ongoing debt and share buybacks in the open market. Year to date through October, we used our cash to repurchase $24 million of our shares, buyback and retire $36 million of our bonds, and execute an $11 million option buyback at an attractive price to avoid shareholder dilution. all while investing in our digital growth engine and rewarding our shareholders with a very attractive dividend yield. With $22 million of cash on hand at the end of September and net leverage of 4.86 times as of September 30th, we remain very confident in our current capitalization and strength of our balance sheet, and we are pleased that we can continue to deliver attractive cash returns for our equity shareholders. As I shared on our last call, S&P Global upgraded their rating of our bonds from B to B-plus in June, citing our performance and credit metrics. As we're gearing up for our upcoming refinancing, which we're looking forward to updating when we report year-end in March, we are building momentum and set up for a solid 2025 and, more importantly, long-term success. As we say internally, how high is high? And now, Stu will go through our results in even more detail, as well as provide an update on our guidance. All yours, Stu. Take it away.