Good morning, and welcome to Townsquare’s First Quarter 2021 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.

Thank you, operator, and good morning to everyone. Thank you for joining us today for Townsquare’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, but are subject to certain risks and uncertainties, including those that are detailed in the company’s annual report on Form 10-K for the year ended December 31, 2020 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 Web site. I would also encourage all participants to go to our corporate Web site at www.townsquaremedia.com and download our investor presentation, as Bill will reference some of these 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. 2021 is off to a strong start and I feel incredibly optimistic about where we are today and most importantly, the future of Townsquare. The economy is on fire. Q1 GDP growth is at a 15-year high. The government continues to provide economic stimulus and states have further relaxed restrictions across the country, all but ensuring strong growth for the remainder of 2021. These events and the resulting optimism have positively impacted our business as well. I'm proud to announce this morning that our first quarter financial results exceeded our goals and expectations, and in many cases, even exceeded levels we achieved in the pre-COVID first quarter of 2019. Once again, we exceeded our previously issued guidance range for both Q1 net revenue and Q1 adjusted EBITDA. I'd like to draw your attention to Slide 6 of our investor presentation where we outline first quarter performance. On our last earnings call, we provided numerous data points to help set expectations for Q1 and I am thrilled to share that we delivered on each and every one. From my perspective, although each is important, the most significant data points is the outperformance in net revenue and the outperformance in adjusted EBITDA. In the first quarter of 2021, we had expected net revenue excluding political and live events to decline negative 2% to negative 3% as compared to Q1 2020. And in fact, it came in slightly better at negative 1.6% and was slightly above Q1 2019 revenue levels. We anticipated that adjusted EBITDA would increase plus 16% to plus 22% over the first quarter of 2020. And it not only exceeded that expected growth by increasing 30% but also exceeded Q1 2019 pro forma adjusted EBITDA levels by plus…

Thank you, Bill, and good morning, everyone. At times during this call, Bill and I will or will have referenced pro forma results. Those relate to our growth in the first quarter of 2021 as compared to Q1 of 2019. As a reminder, in 2019, we sold our Bridal exposition live events, which generated $726,000 of net revenue and $354,000 of adjusted EBITDA in the first quarter of 2019. We kicked off 2021 with strong first quarter financial results that exceeded our expectations, driven by continued revenue improvement in our advertising and Townsquare Interactive segments, and capital expense management. In total, first quarter net revenue decreased 5% over the prior year period to $88.8 million. Political and live events net revenue were a significant component of the year-over-year revenue decline. Political revenue declined by approximately $900,000 from $1.3 million in the first quarter of 2020 to approximately $400,000 in the first quarter of 2021. We had two months of live events activity in 2020 before COVID hit. That generated $2.4 million of live events’ net revenue for the quarter as compared to less than $10,000 of live events’ net revenue in 2021. Excluding political and live events, first quarter net revenue decreased only 1.6% over the prior year period to $88.3 million and was slightly above Q1 2019 revenue levels. This exceeded our previously issued revenue guidance range of $87 million to $88 million. Consistent with its performance throughout 2020, Townsquare Interactive subscription business generated revenue, profit and subscriber growth in the first quarter of 2021. With the addition of approximately 850 net subscribers during the first three months of this year, first quarter net revenue increased 14.9% and profit increased 30.4%, each as compared to the prior year's periods. Townsquare Interactive’s first quarter profit margin was 31%. Advertising net…

Thank you, Stu, and thank you to everyone who dialed in this morning. Let me conclude today's call by repeating what I said at the opening. I am very proud of our Townsquare team and I am very proud of our year-to-date performance, and I am incredibly optimistic about Townsquare’s future. As I’ve shared earlier this morning as well as on our last earnings call, we are on the verge of a full recovery back to 2019 levels. As a Digital First company, the growth in our digital revenue and digital profit has accelerated our path to recovery and is continually propelling us forward each and every day. Therefore, as you hear us discuss our financial results moving forward, our primary focus will be to compare our 2021 results to 2019 levels, as any comparisons to the 2020 pandemic depressed levels will be in our view somewhat irrelevant. And that is what the Townsquare team is 100% focused on, returning to 2019 levels. And once the Townsquare team achieves our 2019 levels, we will grow consistently from there. Although we are not providing formal full year 2021 guidance, I will share with you this morning in full transparency that our internal goal is to reach and then exceed $395 million in net revenue and $90 million in adjusted EBITDA. And based on our performance year-to-date, I believe that we will achieve those goals. Once we achieve our Q2 adjusted EBITDA guide, we would be over 50% to that 90 million adjusted EBITDA goal through the first half of 2021. And I'd like to reiterate that we expect that our total digital net revenue will increase to $250 million within three years. As we say internally, how high is high? Be well, and as we also say internally, stay Townsquare strong. And with that, operator, please open the call for any questions.

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions]. Our first question today will be coming from the line of Michael Kupinski with NOBLE Capital. Please proceed with your questions.

First of all, congratulations on your quarter. But I do have a question. Can you just kind of repeat your Q2 guide, because it sounds exceptional, and I was just wondering in terms of what you were talking about in full year 2021 revenues, it seems like on the pace of what you're looking in Q2 that your thoughts on full year '21 is really very conservative? Can you just kind of go over that again?

Sure. Hi, Michael. It's good to hear your voice this morning and thank you for the congrats. It's Bill. I'll start and then I’ll let Stu fill in with any color. So our Q2 net revenue guide was 101 million to 104 million, which would be up 36% to 40%. And then as Stu outlined, excluding live events, that would be I believe -- Stu, did you say negative 4% to negative 6% roughly?

Yes, Bill.

That's our revenue guide. And then our EBITDA guide was for Q2 28 million to 29 million. And as Stu said, obviously up materially from 2020, as you noted, focused on getting back to 2019 levels. So off of 2019 levels, that would either be down slightly negative 3% on the low end and actually above 2019 levels on the high end at 29 million. And then on the full year guidance was 395 million and then achieved 90 million in adjusted EBITDA. And hopefully, we achieved that. And as I noted, grow from there.

That's amazing. That's awesome. So let's -- just a couple of questions here. So Townsquare interactive surprisingly grew really nicely in the year, earlier second quarter. And I believe at the time, you said that some of the growth was due to changes in business strategies, like restaurants shifting towards takeouts and so forth. Where are you seeing the growth in Townsquare Interactive now? What types of business trends are you seeing that you're seeing this resurgence and acceleration in the rate of growth?

Yes. The acceleration is quite phenomenal. The team -- that's the only office in our company who is still partially remote because of the guidelines. As you know, Michael, we have over 600 people based in Charlotte, and they're reopening on July 1, and their performance throughout this pandemic each and every quarter has been inspiring. What I think is probably worth repeating is Townsquare Interactive is now 21% of our total company revenue in Q1 and 30% of our total adjusted EBITDA in Q1. And as you noted, in the first quarter, we grew 15%. But in Q2, we guided that accelerating to plus 18% growth. In terms of the category, it continues to get more and more diversified. I think, and I noted on the call, but for yourself and others, I really pinpoint to Slide 9 in terms of our digital growth, but also Slide 12 in terms of the total addressable market for Townsquare Interactive is $32 billion after you account for all the businesses that we stripped out, we only focus on businesses outside the top 50 DMAs. And then the other filters I outlined in terms of number of employees and annual revenue. So we're still just scratching the surface in our view. That's why we not only reaffirmed $100 million in two to three years with Townsquare Interactive, but also I think for the first time put out a overall digital number of $250 million in digital over the next three years, which would be up 50% from where we are today at a trailing 167 million. So that business continues to really propel our company forward, but it's also nice to see our digital advertising also growing 12% in Q1, which is up 31% over 2019 levels. And as we noted on the call, we expect that to grow 40%. So I think what you're seeing overall as we pivoted to become a Digital First company, clearly, our digital is driving our results. And although as I noted broadcast is still lagging 2019 levels, and we expect that to continue in Q2. It's less and less relevant because it's a smaller piece of our business and we're managing the expense base there in line with the revenue base. So I continue to believe that broadcast will recover to 2019 levels. It's going to take some time. But almost irregardless, as long as we manage that to a proper profit level, digital is going to be the propeller for our company every year moving forward. So I'll turn it back to you, Michael, for your other questions.

Yes, just a quick -- couple of quick ones here. Regarding your experience in Tyler, Texas for live events, do you think that the success was in terms of that more people just wanting to get out or was there other strategies that you have done? And then if you can kind of give us a sense on what type of recovery or events that you're planning in the second half, and if you can give us some thoughts about the margin of that as well?

Yes. So in our view it’s clearly pent-up demand. It was not only a great success in Tyler, Texas last week for our Red Dirt Barbecue and Music Festival. It was actually an all-time record in revenue and an all-time record in profit. And we didn't have to spend any external marketing dollars because obviously we have the megaphone of our radio stations there. So what we're seeing is pent-up demand. We also went on sale Friday morning for a festival, Taste of Fort Collins in Fort Collins, Colorado, which is food as well as music. Headliners this year are Nelly and Spin Doctors and we had the best single day ticket sales of that event’s history. So we anticipate as we continue to announce more live events in Q2 as well as the back half of the year, although there will be much more limited than 2019 levels, we think they're going to have tremendous success given that pent-up demand and everything we’re hearing from our consumer base. And then as Stu noted on the call, we expect in 2022 to get back to full schedule of live events, roughly 200 recurring annual live events, importantly in our local markets, affiliated and connected to our radio stations and communities. The margins right now are actually a little bit higher. Traditionally, they've been in the high teens, as you probably know. Our live event business in 2019 was roughly -- for those who may not remember, roughly 16 million and about 1.6 million in profit. Right now, we're actually operating and anticipating a higher profit margin in this year based on this pent-up demand that we're seeing. So call it anywhere from the low 20s to the high 20s.

Great. Thank you. That's all I have. I’ll let others ask questions. Thank you.

You’re welcome. Thank you, Michael. Be well.

Thank you. [Operator Instructions]. The next question comes from the line of Jim Goss with Barrington Research. Please proceed with your questions.

Thanks. I’d like to keep going a little bit on the live events. It seems you're at a start over basis. You can be more selective in terms of which events you would use. Can you point us to how you would make the choices as to which ones you would go after? Like should they be specific ones like Tyler, Texas or will they be ones that could be used across the country in your various markets? And is profitability the key? Is it sort of reinforcing the local radio and the local digital ad sales? How do you think about reinvigorating that business?

Yes. Jim, good to hear from you as always. So a couple of things. As Stu noted on the call, we did a tremendous amount of pruning of our live event business in 2017, '18 and 19, is selling our carnival business, selling our multi-day music festivals that weren't affiliated or associated with our local markets. So at this point, I anticipate that we will continue with the large majority, if not all of the live events that we did in 2019 when we're back in full service in 2022. In terms of things that we focus on, we look at clearly the financials of it being revenue and profit, but also as you noted, the importance to the community. And it's really a profitable marketing division for us. It's very small vis-à-vis what it was in the past with under 20 million in revenue. But it's so strategically important. And it's so important not only to our listeners and communities, but to those small businesses and regional businesses in our markets that can provide activations. The last point I'll make before I turn it back to you for follow ups is we do, as you noted, have a number of events like our beer fest and others that run across dozens of our markets. So we get the benefit of that expertise and scale for a single concept, but running across dozens of markets. So those are continuing. We've already announced some of those for Q2 and Q3, and the demand on those as well from what we're hearing from not only our consumers, but clearly the vendors too, they've been waiting to get out and interact with their client base after 13, 14 months of the pandemic. So I expect anybody in the live events business to really benefit quite a bit over the next 18 to 36 months based on what we see as tremendous pent-up demand.

Okay. And maybe one more about the live events. You noted you expect it to get back into the flow in 2022. Do you have any -- sort of a normalized range of revenue and EBITDA we should be considering for that event? And I don't know if you'll achieve it totally in 2022, but is there a target you have in mind?

In 2022, I expect it to grow from 2019 levels. Stu can correct me, but off the top my head I think it was 16 million in revenue and -- was it 3.2 million in profits, Stu, for 2019 on live events?

Yes, 3 million.

3 million. So I expect us, Jim, to definitely return to those levels in 2022. And quite honestly, based on what I just shared with you in terms of what we're seeing with pent-up demand, I think there's a very strong likelihood that we'll grow double digits on the revenue and double digits on the profit line in 2022.

Okay. Thank you. And then on the TSI area, you've talked about a new office and I'm wondering if you could share the -- what share of your target market is now available with the operations you currently have? What you think you might be able to achieve with a new office? What are the costs and timeframe and certain terms of establishing a new office? Is there a maturation phase that you have to go through? I don't think you open the door and everything flows in. So how soon do you get to that point?

Yes. So we're currently planning. We're actually looking at real estate now. Stu’s heading up that initiative. And we expect, as we sit here today, to open that office in Q1 of 2022. That could slightly move up or slightly move back, but that's our expectation on our planning. It's a good point you make in terms of you don't just open the doors and all of a sudden you have 600 people like we have in Charlotte today. But that said, we've been very opportunistic during the pandemic. And obviously people working more virtually and remotely to be hiring staff already for that location, even though we don't have an office. So we already have hired dozens of people who obviously are not going into an office because we don't have one, but they're based out on the West Coast. So I believe we will scale quite quickly in 2022 once we open the office, because we plan to continue to hire throughout 2021. And then in terms of your question about the addressable market, as I noted on the investor slide, we have literally 8.8 million target Townsquare Interactive customers and we have under 25,000 subscribers today. So it truly is just scratching the surface. And that's why we're also seeing an acceleration of our growth. And as I just noted, I'm just really proud that now Townsquare Interactive is literally 30% of the total company's adjusted EBITDA in Q1. So speaks to the market opportunity in our view.

And lastly, is there any churn figure available regarding TSI? And has it trended since you indicated it's recession resistant, which it seems to be, is – are there numbers we have to look at and how those have trended?

Yes. So we don't disclose the specific churn rate for competitive reasons, just like we don't disclose our average minute rate, but we have publicly shared on these calls the trend. So what I can share with you is we believe based on our intel of people we've hired and other data points from publicly comparable companies that we have, if not best, best-in-class churn. What I can share with you specifically to Townsquare Interactive is that our churn rate currently is at the lowest levels since the beginning of the business in 2012. So we couldn't be more pleased with our customer service, which we highlighted on this earnings call, given the importance not only to Townsquare Interactive, but also to Ignite and Amped and just our overall business in terms of customer service is something that we put as a tenant and principle of super serving our customers. So our churn right now is the lowest it's ever been in Townsquare Interactive’s history, which is obviously given the pandemic and given the challenges that SMBs have faced over the past 14 months, an incredible testament to the team.

All right, that's great. Thanks. I appreciate it.

Thank you, Jim. Be well.

Thank you. At this time, we've reached the end of our question-and-answer session and I'll turn the call over to Bill Wilson for closing remarks.

Thank you, Rob, and thank you everybody who dialed in this morning to get updated on Townsquare’s progress. I couldn't be more pleased and more proud of the team and look forward to reconnecting with you and update you on our Q2 results shortly. So be well, be strong. Take care. Thank you, operator.

You're welcome. Thank you, everyone. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.