Good morning. And welcome to Townsquare's third quarter 2017 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. [Operator Instructions] With that, I would like to introduce the first speaker for today's call, Claire Yenicay, Executive Vice President. Madam, you may proceed.

Thank you, operator. And good morning to everyone. Thank you for joining us today for Townsquare's third quarter financial update. With me on the call today are Steven Price, our Executive Chairman; Bill Wilson and Dhruv Prasad, our co-Chief Executive Officers; 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 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 those projections. These statements reflect the company's beliefs based on current conditions, but are subject to certain risks and uncertainties that are detailed in the company's annual report on Form 10-K filed with the SEC, and we incorporate these by reference for this call. We may also discuss certain non-GAAP financial measures, including adjusted EBITDA, and make certain pro forma adjustments. Such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly and year-end reports available on our website. At this time, I would like to turn the call over to Steven Price.

Thank you, Claire. Good morning, everyone. And thank you for joining us on this morning's call. As you all know, I was recently named Executive Chairman, and two long-tenured senior executives at our company, Bill Wilson and Dhruv Prasad, were appointed co-CEOs. Bill and Dhruv have both been with Townsquare since 2010, the year our company was formed, and they have been intimately involved with all of our key strategic initiatives and decisions over the past several years. They are the ideal candidates to lead the company on a day-to-day basis. In my new role as Executive Chairman, I will continue to help direct our long-term strategy, alongside Bill, Dhruv and our Board of Directors. I am pleased to have them both join me, and Stuart, today to discuss our third quarter results. We have accomplished some great things over the past few years. When we launched Townsquare in 2010, we did so with approximately 60 radio stations and nearly 100% broadcast revenue. Over the course of seven years, we took those radio stations and built a local media company, encompassing 317 radio stations across the country, a digital content business with more than 50 million unique visitors per month, a digital marketing solutions business with approximately 12,000 subscribers and a diverse Live Events platform. Our core local business is performing well and on plan for the year. Townsquare's future is bright. And I'm confident that our business is in the right set of hands with Bill and Dhruv. With that, I'll turn the call over to Bill.

Good morning, everyone. It's a pleasure to speak with you today and I look forward to meeting many of you in the future. I'm very excited to work with Steven and Dhruv in my new role as co-CEO of Townsquare and I have great confidence in the future of this company. Prior to my new role, I was our Chief Content and Digital Officer, where I focused on strategies to create and distribute live, local and compelling content across our numerous platforms. Over the last several years, not only have we significantly grown the digital audience of our brand's websites and mobile apps, but we have also built a large-scale audience for our brands on social platforms, video platforms and via Live Events, which reflects our strategy to be the center of information, entertainment and commerce in each of our local markets. Townsquare's core business premise is to monetize these deep audience relationships by connecting our audiences to local celebrities and social influencers they trust, information they need, products and services they want, and things that matter most to them. I am excited to lead the premier local advertising and marketing solutions company serving the heartland of America. I came to Townsquare from AOL, where I was President of AOL Media, in 2010 because I believed there was an opportunity to build a meaningful digital business in small and mid-sized markets. Since joining Townsquare, we have made great strides in capturing that opportunity. For example, we organically built profitable growing digital businesses with Townsquare Ignite and with Townsquare Interactive. Today, I believe – even more strongly – there is still a significant upside to our digital opportunities in our current market portfolio, as well as other markets that share the same characteristics. Additionally, I'm very confident in the continued organic growth of our core multi-platform Local Advertising and Marketing Solutions business. In our new roles, Dhruv and I will share leadership responsibilities and have joint oversight across all divisions and operations of the company. However, in order to make sure we continue to move quickly and ensure efficient decision-making, I will focus day-to-day on our Local Marketing Solutions business where, as you know, we recently promoted Erik Hellum to COO, Local Media and the continued evolution of our digital strategy and operations. Similarly, on a day-to-day basis, Dhruv will focus on finance, HR, corporate strategy and M&A, external communications and investor relations, and continue to oversee our Live Events division. Now, I will hand it over to Dhruv to discuss our third quarter results.

Thanks, Bill. I am very excited to work with you, Steven, Stuart, Erik and the rest of our senior management team and the employees that drive our business forward every day. Turning now to our third quarter results, in total, and as a result of issues in our Entertainment segment, which we will discuss in a few minutes, third quarter net revenue of $164.1 million fell just short of our guidance and represented a 1% decline from the prior year. Excluding political, revenue was approximately flat to the prior year. Third quarter adjusted EBITDA of $39.7 million also fell short of guidance and represented a decline of $5 million or 11.1% over the prior year. As we will discuss, our Local Marketing Solutions segment has remained on plan throughout the year and has delivered strong growth, even in the absence of political revenue. However, our Entertainment segment has had a difficult year and those challenges continued in the third quarter. We believe the important takeaway for investors is that our Local Marketing Solutions segment delivered its 15th consecutive quarter of positive organic revenue growth in the third quarter despite the loss of political revenue. Third quarter revenue in this segment increased 1.7% over the prior year and 3% excluding political revenue. Overall, our markets are performing well and we're pleased with our Local Marketing Solutions results this year. Our multi-platform Local Advertising Solutions, our track record of product innovation and our experienced sales force have helped us to drive industry-leading growth in our LMS segment and great results for our customers. In 2017, key developments have included the launch of our individual station mobile apps, which are now available for roughly two-thirds of our stations and will soon be available for all of our stations; the ramp up of our…

Thank you, Dhruv. And good morning, everyone. For the quarter ended September 30, 2017, net revenue was $164.1 million as compared to $165.8 million in the third quarter of 2016. In the year-to-date period, net revenue was $393.2 million as compared to $397.3 million in the prior-year period. This represents a decline of 1% year-over-year in both periods. Excluding political revenue, net revenue was nearly flat in both periods. Local Marketing Solutions net revenue increased by 1.7% or $1.5 million in the third quarter. For the year-to-date period, Local Marketing Solutions net revenue increased $6.1 million or 2.4% over the prior-year period. Political revenue declined approximately $1 million in the third quarter from $1.3 million in the third quarter of 2016 to $200,000 in the third quarter of 2017. Excluding political revenue, Local Marketing Solutions net revenue increased 3% or $2.6 million in the third quarter and $8.6 million or 3.5% in the year-to-date period compared to the prior-year periods. Third quarter Entertainment net revenue declined $3.1 million to $73.6 million, a decrease of approximately 4% from the prior year. Year-to-date, net revenue declined $10.3 million to $136.2 million or approximately 7% from the prior-year period. As Dhruv discussed earlier, the decrease in our Entertainment net revenue was largely driven by the decline in our Fun Run series and the decline of our National Digital revenue. Excluding those properties, Entertainment net revenue would have been flat to the prior year. Total direct operating expenses increased 2.9% in the third quarter and 0.9% in the year-to-date period compared to the prior year periods. The increase in expense was driven by increases across both segments in the third quarter. Local Marketing Solutions expenses increased approximately 4% or $2.2 million in the third quarter, largely due to an increase in headcount-related expenses needed…

Thanks, Stu. And thank you to everyone who dialed in this morning. Bill and I are both very excited to lead Townsquare going forward and we are confident that we can continue to grow our business and deliver value to our stakeholders. To summarize our near-term objectives, they are, one, to drive further growth in our Local Marketing Solutions segment where we continue to see strong ROI and great results. Two, to implement corrective action for our Entertainment segment. And three, to return capital to shareholders in the back half of 2018. We're also looking forward to the opportunity to further develop relationships with many of you on this call and to discuss our strategic plan for Townsquare. And with that, we are now happy to open the call up for questions. Operator, will you please open up the lines?

Yes, thank you. [Operator Instructions] Our first question is from Michael Kupinski with NOBLE Financial. Please state your question.

Thank you and good morning. In terms of your Entertainment business, have you been – have you seen any other impact on the level of attendance at your events, possibly related to impacts from concerns over security and things like that?

We have. As you know, the Las Vegas shooting occurred right at the beginning of the fourth quarter. so, we didn't see any impact in Q3 from the tragedy in Las Vegas. However, going into fourth quarter, for some of our major events, we have seen impact. And our outlook in that regard is reflected in our guidance for Entertainment for the year and for Q4.

Got you. And did that also affect sponsorships?

We haven't seen an impact on sponsorships.

Okay. And then…

I would also add to that. Going into next year, we haven't seen that affect pacing for our music festivals. In fact, most of our music festivals are – as you know, are rural settings where we have the land and we control the environment and we have security. And, historically, that hasn't been an issue and that wasn't the kind of issue in Vegas. And we've seen actually good pacing for the festivals going into next year.

Got you. And can you just describe – part of the strategy was that the company would be looking at additional M&A activity and rolling up a lot of these markets and getting economies from some of the smaller, rural markets. Can you describe your appetite for M&A at this point? It sounds like you are kind of shifting strategy to pare down debt. And if you are interested in further M&A, what is the current M&A environment like?

I would say, to Dhruv's comment on capital allocation, it has a number of attributes. First is, if we can make acquisitions where we get a high ROI, then it's – in conjunction with that, it's making sure that we are deleveraging, so that we can consider with the board a dividend in the back half of next year. And so, I would say if anything, our – in the last, I would say, six months, our appetite has shifted probably more to local market, local radio as opposed to some of the event type of things that we had looked at in the past. And part of it is because we've seen our LMS, our local business, has grown well and has been on plan. And we feel confident that we can go take local radio stations that fit our criteria, right? Dominant clusters, live and local personalities, small to mid-sized markets, good market share. If we can find stations like that – Pittsfield is a great example of that – we feel confident that we can roll out our digital, our marketing services and the local events revenue streams on top of that. So, we are actively looking at different radio opportunities, but more so than in the past and more so in connection with probably spending less time looking at bigger-event acquisitions. In terms of the market, it's about where it was, though I wouldn't say the floodgates have opened. There are some one-off kinds of things. Pittsfield was a good example. There are a few things like that. And there's a range, but I wouldn't say that we've seen a dramatic shift in the M&A market over the past few months or this year that either nothing is for sale or everything is for sale. I think it is sort of about where it was.

In terms of Local Marketing Solutions, obviously, one of your growthier areas, what is the opportunity with that? You are at currently 12,000 accounts. What is the addressable market? And what other types of products and services can you offer to keep that line item growing?

It is quite large. Our focus is small to mid-sized businesses, including very small businesses in our markets. There are something like 700,000 or 800,000 of those in our markets. Now, is everyone a perfect target for us? Not everyone. The big hospital probably needs a more complicated, or the big bank that wants to do banking – there are some business in town that – they really don't fit with what we are doing. But the vast majority of that number does need digital marketing solutions and that's what we offer. And we are balancing, prudently building up the business, building up customer service and adding sales reps sort of as fast as we can within the confines of the fact that it is an investment each time you add a sales rep because they are not profitable month one. It takes some lead time. So, we think that there is a lot of opportunity there. And we have been adding products all along. So, we added a mobile site just this year. We've added helping those clients do programmatic advertising. So, there's – we've been adding products to that Townsquare Interactive business and we still see a lot of runway there. Bill, would you add anything else?

No.

Got you, thank you. That's all I have.

Our next question is from Kyle Evans with Stephens. Please state your question.

Hi. Thanks. Good morning. Stuart, you referenced pacings in 4Q on the LMS side that were going to drive above 5% growth ex political. What are the key drivers of this growth? And I've got some follow-ups. Thanks.

I think it's our multi-product approach to the marketplace. We can go in and we can get clients to buy more than just 30-second spots. When you walk into a client and you can actually partner with them and help them achieve their goals, it makes a big difference.

What's the unit pricing trend on those 30-second spots?

Our AMR has been holding really steady. Slightly increasing every quarter this year.

What is the target leverage you have to hit by the end of 2018 that could put us in capital return mode?

I would say in the 4s.

Got you. What is driving the weakness in your National Digital?

Hey, this is Bill. As Dhruv mentioned earlier, we made a strategic review of the business earlier in Q3. And we were driving top line revenue, but the cost of that revenue, because of the branded content, heavy video production, we decided to really focus programmatically there moving forward. Our audience is very strong, but much more profitable for us to grow programmatic moving forward.

Okay. How much of the business was branded content when you made that decision?

Our top line revenue was roughly 40%.

And I think you referenced flat Entertainment if you exed out Fun Run and, like, digital. I guess, given some new event wins for NAME, that seems light. You talked about the cost side and the headwinds you faced there, can you talk a little bit about what you saw on an event-by-event basis or same-event basis year-over-year for revenue in the NAME business?

Sure, I'll take that. So, as you know, we don't disclose event-by-event results. With that said, a portion of some of the new event wins that you are referencing hit in Q4 as opposed to in Q3. So, flat year-over-year. We had a lot of puts and takes over the course of the quarter. But as you referenced, we are flat year-over-year other than the Fun Run and the National Digital business.

Can you detail a few puts and takes just to help us get some perspective on that flat?

Sure. I would say, with respect to WE Fest, which was our largest music festival in Q3, that was the only music festival, only major music festival this year where we experienced a revenue decline from the prior year. We anticipated that and had invested in some key operating areas like our VIP services program and the infrastructure at WE Fest to drive growth there going forward.

Okay, thank you.

[Operator Instructions]. Our next question is from Barry Lucas with Gabelli & Company.

Close enough. Good morning. I'm going to come back to the leverage question. If the target is kind of into the 4s, is that a combination of additional EBITDA from acquisitions, divestitures? Or maybe put a different way, is there a target absolute debt or net debt level that you have in mind?

Yes. So, when we think about that, and Dhruv mentioned where we wanted to be towards the back half of next year in terms of thinking about returning capital to shareholders, he did not take into account acquisitions. So, that was – we will have a robust cash position at the end of the year. And as you know, we generate cash. And given some of the issues that we had, we expect our EBITDA will grow. So, it's sort of a combination of less gross or net debt, however you want to look at it, and improved EBITDA will get us into that, I don't know, mid 4s when our board has said, and we've stated since for a while, since we refinanced our debt that, in that mid 4 area, we would consider returning capital to shareholders.

Okay.

We can see it pass to that. To the extent that there are divestitures of certain pieces, that would help and maybe help accelerate that. Obviously, if there were interesting acquisitions that might – that you use cash, that might somewhat delay that. But our goal, as we've said, is to de-lever and to march towards that. So, we're going to be prudent when looking at acquisitions to do it in a manner that tries to meet all of the objectives.

Great. Could you talk a little bit about the timing of this process? I'm not sure how formally you've laid it out. But at what point in time might we expect to hear something substantive about the direction in which you are going?

Yes. Barry, this is Dhruv. I think you should expect to hear something more substantive from us as it relates to that process early next year.

Okay. And maybe last item. If we just think about NAME when the acquisition took place, where there any other parties that were looking at it or under-bidders?

We don't know. We do know – we had a relationship with the former owners and we talked to them. There had been processes in the past. We don't know if, at that moment, they were talking to a few other people or not. But we are thinking about lots of different pieces.

Okay. Thanks for that, Steve. Appreciate it.

Yeah. Thank you, Barry.

Ladies and gentlemen, we have reached the end of our question-and-answer session. I would like to turn the call back over to Dhruv for closing remarks.

Thank you, everyone, for dialing in this morning. We hope you have a great end of the year and happy Thanksgiving.

Thank you. This concludes today's conference. You may disconnect your lines at this time and thank you for your participation.