Townsquare Media, Inc.

Good morning and welcome to Town Square Media's fourth 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 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 the first speaker for today's call, Claire Yenike, Executive Vice President. Please go ahead.

Thank you, Operator, and good morning to everyone. Thank you for joining us today for Town Square's fourth quarter and year-end 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 under the state private 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. During this call, we will discuss segment profit, which we previously referred to as adjusted operating income by segment. You may also discuss certain non-GAAP financial measures, including adjusted EBITDA. 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. In addition, our annual shareholder letter is now available on our website. 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 fourth quarter results met our previously issued guidance, and that our full year results met the guidance that we issued at the start of 2024. And as always, our differentiated strategy and business model generated meaningful cash flow consistently throughout the year. We ended 2024 with $33 million of cash on our balance sheet, and generated $49 million of cash flow from operations in 2024. Importantly, we also completed a successful refinancing of our debt last month, extending our maturities until 2030. I am extremely proud of the Town Square team's performance over the past several years. In essence, we have continuously executed on our differentiated digital first strategy and delivered on what we said we would do. while simultaneously building value for our shareholders through debt reduction and share repurchase, while also paying a high yielding dividend. We delivered solid and consistent results in 2024 as we built momentum throughout the year, driven in part due to the pickup in political advertising in our presidential election year, but also importantly due to the sequential improvement in both of our two digital business divisions. By now, it should be very clear that Townsquare's digital platform sets us apart from others in local media. As highlighted on slide 12, in 2024, digital revenue contributed 52% of our total net revenue, more than two times the industry average, and digital contributed 50% of our total segment profit. Digital is and digital will continue to be Townsquare's growth engine and the area where we focus the bulk of our investment capital going forward. consistent with our strategy of being a digital first local media company. Let's dive into our two digital divisions results, starting with the fastest growing business for Town Square, which is Ignite, our digital advertising business. In 2024, Town Square's digital advertising net revenue increased plus 5.5% year over year to $159 million and grew to 35% of our total company's net revenue. Our digital advertising segment is composed of our owned and operated portfolio of local and national websites and mobile apps and our programmatic business, which contribute approximately 40% and 60% respectively of the segment's revenue. The success of our O&O digital business is due to our focus on super serving our communities with high quality, hyper local content, which has allowed us to build a large and at scale and engaged digital audience of over 70 million monthly unique visitors to our owned and operated websites and mobile apps. With the deep skill set of our digital product and engineering team, we have developed a multitude of digital advertising solutions for our clients, bringing national scale and sophistication to our size markets. including high-impact solutions that are not available on programmatic exchanges, such as site takeovers, first impression full site coverage, mobile interstitials, sponsored social mentions and endorsements, etc., etc., etc. In addition, we have the unique ability to collect and analyze first-party data from our digital audience. allowing us to provide detailed and unique insights about consumer behaviors, audience interest, and purchase intent that drive real results with strong ROI for our clients, giving us a true strategic advantage over our local competition. As a result of the strength of our local original content and brands, combined with this powerful first-party data, We are confident that our owned and operated digital advertising business will continue to be a growth driver for our company moving forward. That being said, we are most excited about our digital programmatic business, which has been and will continue to be the largest growth driver for our company for the foreseeable future, particularly when factoring in the potential of the third-party media partnership model that we launched in 2024. Our digital advertising programmatic platform provides our customers with precise, targeted solutions, giving them the ability to reach a high percentage of their online audience across desktop, mobile, connected TV, email, paid search, and social media platforms utilizing display, video, and native executions. We essentially act as a full-service digital agency for our clients. from design and creative services to buying inventory, optimizing a campaign, and providing real-time reporting and analytics and insights, therefore providing a level of service that is often not available in the markets that we operate in. In addition, we are simply able to offer a more cost-effective campaign to our clients than most of our competitors, given our scale across our 74 market footprint and our in-house proprietary demand-side trading desk, that is integrated with more than 15 digital advertising buying platforms, with access to all major advertising exchanges, and therefore more than 250 billion impressions per day. Given our own momentum and success in the digital programmatic advertising space, we elected to explore an additional avenue of growth, which capitalizes on the knowledge, expertise, and competitive advantages we hold. White labeling our digital programmatic advertising solutions to others in local media, In 2024, we created the Media Partnership Division, and we have since announced strategic partnerships with great companies like Summit Media and Steel City Media, who operate local media properties across 11 combined markets. While this is currently a modest-sized opportunity in the context of our overall digital advertising division for 2025, we are very excited about what these and other potential partnerships represent. which we believe is the opportunity to become the chosen provider of digital programmatic advertising to broadcasters and digital agencies and others in local media in cities outside of the top 50. While early, we believe this media partnership initiative has the potential to be a significant difference maker and revenue and profit and growth driver in 2026 and beyond, as we're currently in discussions with numerous other partners in local media about potentially partnering with us to be their programmatic digital advertising solution. S&P Global Market Intelligence' latest forecasts project that digital advertising in the United States will increase at a plus 8.9% CAGR through 2029. We are confident that these favorable industry trends together with our in-house suite of marketing solutions, third-party media partnerships platform, investment in our original content strategy, and our first-party data advantage will continue to drive strong digital advertising growth during the same period. Throughout 2024, our digital advertising business gained momentum, As first half digital advertising revenue growth was plus 1% in 2024, which grew to plus 5% in Q3 2024 and accelerated in Q4 2024 to a very strong plus 15.5% revenue growth. Looking to Q1 of 2025, we expect strength in digital advertising revenue will continue with year-over-year growth rates in the high single digits. This growth will be driven by very strong growth rates in programmatic digital advertising revenue. Let's now turn to our second digital business, which is our subscription-based digital marketing solution SaaS business, TownSquare Interactive. One of the biggest accomplishments in 2024 was achieving a turnaround at TownSquare Interactive. Due to both internal and external factors, which we have described at length on earlier calls and which have since been addressed, we lost more than 7,000 subscribers from 2023 through Q1 of 2024. At the start of 2024, we outlined our path to improvement. First, we returned to subscriber growth, then month-over-month revenue growth, and eventually profit growth. I'm proud to say that we have hit these targets and then some. Within the first quarter of 2024, we had achieved subscriber and month-over-month revenue growth. And in Q4 of 2024, we proudly returned to year-over-year revenue growth. We are pleased to share that we expect Q1 2025 segment profit at Town Square Interactive will increase on a year-over-year basis for the first time in two years. and we expect strong year-over-year, full-year segment profit growth in 2025 for Town Square Interactive of $2 to $3 million. We also launched the Business Management Platform, a SaaS-based or software-as-a-service offering for Town Square Interactive in early 2024. This platform provides a suite of digital solutions which assist SMBs in identifying, converting, and communicating with their clients. Previously, Towsquare Interactive was positioned primarily as a web design and SEO company, which served us well for many years. And although these services are still part of our core offering today, we recognize it was time to evolve. Today, there are many SMBs who already have a strong web presence but need help in other areas. And our new business management platform can be sold to clients who already have an established website that they're happy with and or those who already have dedicated resources to SEO. We believe that our new SaaS business management platform is a very powerful tool 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. In 2024, Town Square Interactive's net revenue declined negative 8% as compared to prior year. Yet, what is important to highlight is that the Interactive's year-over-year growth rates improved each quarter in 2024. from negative 15% in Q1 to negative 13% in Q2 to negative 6% in Q3. And finally, returning to revenue growth of plus 2% in Q4 2024. In addition, I am very proud of the fact that we manage expenses such as Town Square Interactive segment profit margin actually increased 10 basis points to 28.4%. And the revenue growth will continue in Q1 2025. We anticipate TSI will double Q4's revenue growth rate from plus 2% in Q4 to approximately plus 4% in Q1. And as I said earlier, we expect very strong year-over-year segment profit growth in Q1 for Towson Square Interactive as well, with profit expected to increase approximately 20%, and thus approximately $1 million in the first quarter of 2025. In the long term, we are confident that we have a long, sustainable runway ahead of us. With an addressable market of nearly 9 million target customers, as outlined on slide 15, we are only scratching the surface. With our existing subscriber base, superior product offering, including our new business management platform, and a huge market opportunity, I am confident that TownSquare Interactive is on track and set up for long-term profitable growth and success. Thankfully, we strategically built a diverse product and service platform, and the strength of digital advertising offset the recovery last year at Town Square Interactive. In total, our digital revenue grew plus 1% year-over-year to $234 million, and importantly, generated $62 million of segment profit, representing a 27% profit margin, a digital margin much higher than most in local media. We believe Town Square's ability to drive profitable, sustainable digital growth is a key differentiator for our company. Thus, I am happy to report that in Q4 of 2024, our total digital revenue grew approximately plus 11% year over year. 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. However, radio is not a growth driver, and in 2024, broadcast advertising net revenue declined negative 1% year over year and negative 6% year over year, excluding political revenue. In fact, we take the view that broadcast is a mature cash cow business that will continue to decline going forward as businesses will continue to share ship from traditional advertising to digital advertising. Thankfully, we are often the beneficiary in that case, as we often have the most comprehensive set of digital advertising solutions available in our markets. It is our view that as broadcast revenue declines going forward, we will continue to generate a solid profit as we carefully manage expenses to maintain a strong broadcast profit margin. In 2024, despite broadcast revenue declines, our broadcast segment profit margins increased to approximately 30%. due to both cost reductions and high margin political revenue. But even excluding political revenue, we also experienced an increase in broadcast profit margin in 2024. Because of the powerful combination of Town Square's digital, plus radio, plus local investment, I believe that our flywheel will continue to blaze forward and gain momentum. And now, Stu will go through our results in even more detail, including providing details on our successful refinancing last month of our debt, as well as provide 2025 guidance for revenue and profit. All yours, Sue. Take it away.