Yahoo Finance

Stuart Rosenstein

Thank you, Bill, and good morning, everyone. It's great to speak to you today. We're pleased to report that our fourth quarter results met our revenue and adjusted EBITDA guidance and that our full year results met the guidance that we set out at the beginning of the year.
Fourth quarter net revenue increased 2.6% year-over-year, $117.8 million above the midpoint of our guidance range of $114.8 million to $118.8 million.
Full year net revenue declined 0.7% year-over-year to $451 million within our guidance set at the beginning of the year. In Q4, total political revenue was $7.2 million and for the full year, political revenue came in at $13.4 million.
Adjusted EBITDA returned to growth in the fourth quarter with and without the impact of political. Fourth quarter adjusted EBITDA increased 25.8% year-over-year to $31.2 million which was within our guidance range of $30.8 million to $31.8 million.
Full year adjusted EBITDA was approximately flat, increasing 0.4% or just under $400,000 year-over-year to $100.4 million. This was also within our guidance range that we set at the beginning of the year.
Townsquare for Ignite, a digital advertising segment, built momentum throughout the year and had a very strong end to 2024. A strengthen programmatic advertising led the fourth quarter digital advertising net revenue growth of 15.5% year-over-year. In total, full year digital advertising net revenue increased 5.5% year-over-year.
As Bill also noted, we expect strong digital advertising revenue growth rates to continue in 2025 with Q1 digital advertising growth in the high single digits.
In 2024, our digital advertising profit margin was approximately 26%, and we expect full year margins to remain in the mid-20s for this business going forwards, although there may be some variations from quarter to quarter depending on the timing of investments, particularly the timing of new hires, as well as the ramping of new media partnership agreements.
Townsquare Interactive, our digital subscription marketing solution segment, continued to demonstrate growth and recovery in the fourth quarter, just like it had all year. In the fourth quarter, as expected, Townsquare Interactive returned to year-over-year revenue growth, with net revenue increasing 1.9% as compared to the prior year.
In the fourth quarter, Townsquare Interactive's segment profit was close to flat year-over-year as profit declined by less than 1% or less than $50,000.
And as Bill mentioned, we are thrilled to share that we expect to return to very strong year-over-year segment profit growth in the first quarter of 2025 and for revenue growth rates to double from Q4 plus 2% to approximately 4% in Q1 of 2025.
For the full year, outscore interactive net revenue decreased 8.4% as compared to the prior year and profit decreased 7.9% year-over-year. Segment profit margins were strong at approximately 28% in 2024 despite our continued investment in the business 2025. We're very confident that our expectation that we will deliver both revenue and profit growth for our Townsquare interactive business.
Fourth quarter broadcast advertising net revenue decreased 4.1% as compared to the prior year. In the fourth quarter, broadcast segment profit increased 26.4% year-over-year due to the impact of high margin political revenue. For the full year, broadcast revenue declined 1.3% year-over-year, but broadcast segment profit increased 11.1% year-over-year, with margins at approximately 30%.
In 2025, we anticipate margins will be slightly lower due to the loss of high margin political revenue closer to the mid-20s. Our fourth quarter net income was $25 million or $1.42 per diluted share as compared to a net loss per diluted share of $0.14 in the prior period.
We'd like to remind you that any benefit or provision for income taxes included in the face of the income statement is for GAAP financial statement purposes only. We maintain significant tax attributes, including approximately $96 million of federal NOL carry forwards and other substantial tax shields related to the tax amortization of our intangible assets. We continue to believe that we will not be a material cash taxpayer until approximately 2028.
As Bill highlighted, and I would again like to emphasize, we consistently have strong cash flow generation. We generated $28.2 million of cash flow from operations in the fourth quarter and $48.8 million in 2024, ending the year with $33 million of cash.
In 2024, we repurchased approximately $24 million worth of shares or 2.3 million shares through our share buyback program, including the repurchase of $1.5 million of MSG shares at an accreted price on April 1st. Since 2021, we have repurchased 16.6 million shares at an average price of $7.30 per share while simultaneously reducing leverage over that period.
In 2024 we also bought back and retired $36 million of our bonds, including $12 million of bonds at or close to par in Q4. At the end of the year, our net leverage was 4.33 times the lowest leverage level since March of 2023.
Last month we completed the successful refinancing of our debt by entering into a $490 million credit agreement, including a $470 million term loan B and a $20 million revolving credit facility, both due in 2030. This offering replaced our existing bonds that were due in February of 2026.
At closing, we had approximately $480 million of debt, including the $470 million term loan, which has an interest rate of SOFR plus 500 basis points and $10 million drawn on our revolver, which has an interest rate of SOFR plus 375 basis points.
Assuming current SOFR rates, this implies an annual interest expense of approximately $45 million. This represents an increase in our annual interest expense of approximately $9 million per year from 2024. However, this delta will decline as we pay down our debt and if and when there are interest rate reductions over the next several years.
We will benefit from that as well. In addition, should market conditions permit, we always have the opportunity to replace our term loan in the future.
Overall, we are very pleased that our distinguished business model and successful digital strategy allowed us to successfully navigate a term loan market that was very wary of lenders with broadcast assets given their experience over the past decade.
As always, our number one priority is to invest in our local business through organic internal investments that support our revenue and profit growth, particularly our digital growth engine. We plan to continue to invest in our digital product technology, sales, content, and support teams, specifically in our Townsquare Interactive and Townsquare Ignite businesses, maintain a strong competitive advantage in markets outside the Top 50 cities.
In addition, we plan to use our excess cash flow to reduce our debt to both mandatory and voluntary debt repayments and of course support a high yielding dividend. I'm pleased to share that due to the confidence in our strategy and our consistent and strong cash generation, our board has approved an increase to our dividends.
The raised dividend of $0.20 per share equates to $0.80 per share on an annualized basis, which is an increase of 1.3% year-over-year and implies an annual payment of approximately $13 million based on our current share count and a dividend yield of approximately 10% based on our current share price.
The higher dividend will be payable on May 1st. The shareholders are record as of April 17th. We believe our strong cash flow characteristics will allow us to continue to invest in our business, support our newly increased dividends, and allow us to lever going forward.
Turning now to our first quarter and full year 2025 outlook. We expect the first quarter net revenue to be between $98 million and $100 million which at the midpoint is approximately flat year-over-year excluding political.
As previously detailed on this call, we expect Townsquare Ignite, our digital advertising business, to be up in high single digits. Townsquare Interactives to be up 4% and broadcast ex-political to decline more moderately than we experienced in Q4. We expect first quarter adjusted EBITDA to be between $17 million and $0.18 million.
As a reminder, in the first quarter, we typically have the lowest revenue of the year due to advertising cyclicality, so our margins are typically lower in our advertising segments in the first quarter as a result.
For the full year, we currently expect that our revenue will be between $435 million and $455 million. Embedded in this guidance is the loss of political revenue of $10 million to $11 million as we typically get between $2 million and $3 million of political revenue in non-election years.
As Bill outlined, we anticipate offsetting the loss of political revenue with growth in our digital business, including the return of year-over-year growth at Townsquare Interactive. We expect that our 2025 adjusted EBITDA will be between $90.98 million.
And with that, I will now turn the call back over to Bill.

Bill Wilson

Thank you, Stuart. And thanks to everyone for taking the time to be updated on Townsquare's Q4 and full year results this morning. Greatly appreciated. I want to conclude today's call by again highlighting some of the more relevant accomplishments we achieved with the Townsquare team's hard work in 2024.
Number 1, 2024 net revenue and adjusted EBITDA both met the guidance that we initiated at the start of the year. Number 2, we executed the successful turnaround of Townsquare Interactive, which is now supported by a more efficient and scalable business model.
Number 3, we expanded Townsquare Airact's addressable target customer base through the introduction of a new SaaS offering. And we also launched our media partnership division of Townsquare Ignite, our digital advertising business, opening the door to grow third party revenue streams outside of our market footprint.
Number 4, approximately 52% of our company's total net revenue and 50% of our total segment profit now come from our digital businesses. Number 5, we generated $49 million of operating cash flow in 2024 and efficiently repurchased both debt and equity while maintaining a high yielding dividend, therefore delivering attractive current returns to our shareholders.
And finally, number 6, we refinance our outstanding debt, successfully navigating term loan lender market that has experienced bad outcomes in the radio industry over the past decade, thus extending our maturities until 2030.
In the words of Peter Drucker, the best way to predict the future is to create it. As always, we are going to create our own opportunities, not wait for them to show up or present themselves. We create opportunities and overcome challenges. It's the Townsquare away.
And given 2024, we are confident in our ability to continue to deliver attractive current returns to our shareholders in the form of a high yielding dividend while also focusing on the financial health of the company by reducing our net debt levels through strong cash generation and debt reduction.
And again, I'd like to take this opportunity to thank the entire Townsquare team for their passionate hard work each day in partnering and helping their clients and communities.
With that operator at this time, please open the line for any and all questions.

Question and Answer Session

Operator

(Operator Instructions)
Michael Kupinski, Noble Financial Capital Markets.

Michael Kupinski

Thank you. Thanks for taking the question. Good morning. Congratulations first of all, on your solid Q4. I have a couple of questions here. I was wondering if you can add a little bit more color on Townsquare Interactive. I may have missed this, but I was wondering if you provided the number of subscribers, you ended Q4 with and where you see subscriptions heading in Q1 2025?

Bill Wilson

Good morning, Michael. Great to hear from you and thank you for dialling in.
So in terms of interactive, as you just said, and we just noted in the conclusion of our prepared remarks, couldn't be more proud of the turnaround at Townsquare Interactive, as we said exactly a year ago that there'd be three signs of a turnaround 1 subscriber growth returning, then month over month revenue growth, and then year-over-year revenue growth, and then profit growth.
And really proud of the team ending the year with year-over-year revenue growth. We started subscriber growth back in Q1 and then we started month over month sequential revenue growth again back in Q1 and then ending in Q4 with that year-over-year revenue growth. We stopped disclosing subscribers, I believe it back in Q2, but what I would share with you is as we started in looking at Q1, we shared this morning that we expect our revenue growth rate year-over-year to at least double Q4's growth rate.
So obviously if we were at 2% in Q4, we expect a minimum of 4% growth in revenue in Q1. Probably most importantly is we expect really strong profit growth in Q1. I think we've managed this business incredibly well for over a decade.
We noted that profit growth in Q1, we expect to be up 20%, which would imply about a million dollars of incremental profit year-over-year in Q125 versus Q124. On a full year basis, as Michael, we traditionally generated $2.5 million to $3 million in profit year in and year out, and we expect this year to get back into that level on a full year profit basis of $2.5 million to 3 million.
So things are, I'd say, close to firing on all cylinders, I think we shared that we brought in a new head of customer service from Open table back last summer leading into the fall. That individual has had an impact right away but is still continuing to fine tune our offering on the service side and continues to make improvements, so.
Really proud of the turnaround. I think most importantly, we've talked at great length what transpired, so I won't repeat all that, but we lost the number of subscribers in '23 and then started ending in Q1 of '24 and just feel very well positioned not only for this year, but more importantly over the next 5 to 10 years. We believe we've built a more scalable and efficient model, and we also have the SaaS-based offering which is really broadening our target audience.
So just extremely bullish when we're thinking about the next 3 to 5 years at Townsquare Interactive. So I'll toss it back to you, Michael.

Michael Kupinski

Yeah, and as a follow up bill, I know that in the past Townsquare Interactive subscriptions roughly were $300 a month, and I was wondering if you kind of give us a sense of what subscriptions are now that you have enhanced your product offerings and interactive?

Bill Wilson

Yes, so you are correct. Our ARPU is roughly $300 per subscriber. That is continuing today.
That is, we have some offerings that go well over $400 but with the SaaS-based offering, we are with this broadening of the target market that we're so excited about. There's great businesses that have a great website and don't need a new website, but we're helping them with our SaaS-based tools operate their business more effectively and efficiently as well as helping them convert web traffic to customers, which is obviously incredibly a strong attribute for this offering.
Sometimes that would be under $300. So, on average, the ARPU continues to be $300 and that's what we expect over the coming years. At some point, could that raise definitely, but when I think about the next two years, I would assume a $300 ARPU going forward.

Michael Kupinski

Thank you for that bill. And one quick, another question here. In the past you've provided some revenue, goals I guess for interactive and also for Ignite, and you largely achieved that for Ignite. I was just wondering if you plan to update your three-to-five-year outlook for in terms of revenues for interactive and Ignite, much like you did in the past?

Bill Wilson

For sure. I mean, we couldn't be more proud of, but you know I appreciate your comments at the beginning of your question. Q4 was just a great quarter and great momentum going into 2025. Having our digital advertising accelerate to almost 16%. It was 15.5%. Digital advertising growth was incredibly strong. We benefited from strong programmatic. We benefited from our owned and operated properties. We talked at great length on prior earnings calls about the news deserts and the service that we're providing and filling the void of newspapers going away.
So again, with digital advertising, we're not only betting from the strength of programmatic, but importantly the strength of our owned and operated. So, we expect our digital advertising to continue to operate in the high single digits in terms of revenue growth when you're looking at a three-to-five-year model.
And then Townsquare Interactive, as I said on the. Profit side, I expect $2.5 million to $3 million this year. I expect not to be at the full $10 million historical level of top line revenue this year. I think that'll be more modest as we're, as I said earlier, one of the great benefits of rebuilding the whole business over the last, I'd say 12 months is the efficiency we're creating. So although we'll be back at normal profit levels for Townsquare Interactive, I believe our revenue will be.
Definitely muted from that $10 million normal number, but when you think about 2026 and onward, I would think about a top line revenue growth Townsquare Interactive at $10 million and profit growth returning to that $3 million that we historically did year in year out for almost a decade.
So and then as when we spoke about on the call, we may be different than others in the space because we obviously have a very differentiated business model being a digital first local media company, particularly operating outside of the Top 50 cities which we continue to hammer is really a completely different business overall, even in radio, but having a differentiated digital strategy is a core attribute for us.
So we view broadcast as a mature cash cow business. We talked about them on our prepared remarks, the great attributes of radio. It's obviously the number one reach medium. Tremendous cash flow. The fact that we generated $40 million $49 million of cash flow for operations we're incredibly proud of for 2024. But we do expect broadcast to continue to decline, and that is in our five-year model.
We've been saying this for many years, and we've been able to moderate the expense space to have a very strong profit margin in the broadcast side. The great news for us, and we continue to try to highlight is, when people do stop advertising on radio for whatever reason, they're switching to digital advertising, and when they're switching to digital advertising, they're switching to us.
And that's one of the reasons you saw the explosive growth of digital advertising in Q4 at 15.5%. also for us, which I think is unlike others, given the fact that we have so many of our digital solutions built in-house with our tremendous product and engineering and technology team that we couldn't be more proud of, that our margins on the digital advertising side are actually slightly higher than our broadcast ex-political margins.
So when somebody does decide to stop advertising on broadcasts, if they do decide that and they switched to our digital advertising solutions, we actually make more profit as an outcome. So we, I think if you look at the last three to five years, we've managed the broadcast decline quite well from an expense base and then we obviously our future is in digital advertising, digital solutions and we continue to ramp that and we're really proud, as you just said in Q4 digital overall digital revenue increased 11%.
So we go into 2025 with a lot of momentum and we're quite excited about the next three to five years, but I'll toss it back to you in case you have questions outside of interactive.

Michael Kupinski

One last question and I promise, obviously we have a new administration and an FCC now looking at the regulations and lifting ownership caps and so forth, and I was just wondering if you have some thoughts in terms of that prospect in radio.
And then whether or not, given that that prospect, whether you would be a buyer of radio, I know that you just said that it's a mature business, but it sounds like you get benefits in other ways. I was wondering if you would be interested in looking at M&A, in that light.

Bill Wilson

Yeah, no, great question, Michael. Appreciate all the insights and perspective.
So you are correct. If you go back for the last number of years, you've heard us talk about our perspective that deregulation is going to happen, it needs to happen. It's a must. The laws and regulations are antiquated and make no sense in today's media landscape is our view.
So we've always taken the position going to happen. It's just a matter of when with the new SEC chairperson, we are extremely excited about the comments he's been making as recently as last week, deregulating, I believe, television as well as radio assets which are long overdue, as I just said. So, we believe that will happen.
We believe that we are the best positioned acquire of radio assets particularly for markets outside the Top 50, that's we've been, we're very consistent. We stick to our knitting, we've had many opportunities over the last 15 years to acquire assets, broadcast assets in the Top 50 markets, and we've always passed on that, it's served us well.
I think it's one of the reasons we have had the success we have in diversifying our company into a digital first company with over 50% of our revenue and profit being in digital. So, I do believe the landscape will change. I do believe we're the natural choir of broadcast assets. When we talk about our last asset, I think on our last earning call we talked about Cherry Creek.
In June of this year that'll be coming up on three years. We bought Cherry Creek and we've doubled the cash flow in under three years, and that's because the broadcast business declined modestly and we grew the digital business so aggressively, which is our Townsquare model, and that proved true again with Cherry Creek just like it did with prior acquisitions.
That said, I would like to highlight the success we're having with Lignite’s media partnership. We have three partners. One, we have not disclosed because they've asked us not to, and then 2, we have disclosed, which is Summit Media and Steel City.
We couldn't be more excited about. The progress we're making in Q1 of '25, we believe that'll be just under about a million dollars in top line revenue. We've said on the year we believe the media partnership division could be $7 million to $8 million of top line at a 20% profit margin. But more importantly, when you think about '27, 2028, we believe this is a $50 million division, top line and $10 million profit to us, and there's a lot of conversations and partners that we're talking to.
So we have two avenues, it's great to have choices. We could acquire assets and we've demonstrated every time we've acquired assets the ability to manage the cash flow of the broadcast business yet grow profit through our digital advertising and digital marketing solutions.
So we could take that path and particularly with de-reg there's a I believe there'll be a lot of opportunities for acquisitions or swaps and other strategic moves which are quite exciting. But if we chose not to go that route, as we detailed, I think on a couple of our earnings calls in 2024. We can keep our capital, utilize it to continue to deleverage, which is a main priority for us over the next couple of years, and sign up more media partnerships and still generate, a 20% margin in our digital advertising partnerships with those companies.
So it's great to have choices. It's great to have multiple paths for digital growth, and that's what we have here at Townsquare. So, thank you, Michael, for the questions. I appreciate it as always.

Michael Kupinski

Thank you, Bill. That's all I have, thanks.

Operator

Patrick Shaw with Barrington Research.

Patrick Shaw

Hi, good morning. I was curious within your guidance.
So the, I guess both for the first quarter maybe to clarify and also for the full year, are you expecting kind of an improvement in the trends on ex-political growth for radio?

Bill Wilson

Good morning, Patrick. Always great to hear from you. So, I would say, taking a step back again, just to reiterate it for the benefit of repetition, we believe our broadcast business is a mature cash cow business. We love the cash flow characteristics. We love the fact that it reaches 50% of the adult population and on average in our 74 markets, the fact that it helps us drive tremendous audience to our owned and operated 400 local websites and mobile apps.
I won't go through all of the tremendous attributes of our broadcast business. That said, we expect, and we've been saying this for many years now, that broadcast ex-political is going to decline. And when we talk about our guidance for 2025, we believe that decline will be in line with 2024. So in 2024, broadcast ex-political declined roughly 6%, and that's what we expect for our full year 2025 as well as roughly in Q1 as well, what we're obviously our growth engine for the company is and will continue to be our digital advertising and digital marketing solutions.
So as I said, I think we did it on the call, but if not, we believe our digital advertising this year will grow in the high single digits. And then as I just noted on the Townsquare Interactive, I noted $2.5 million to $3 million of profit and call it $5.5 million to $6 million of revenue for Townsquare Interactive. In 11, we expect, as you can tell from our guide, in essence, ex-political revenue in the midpoint is roughly flat, and we expect our digital revenue to be could be approaching 55% of our total revenue.
So as we've said, when you take the long term perspective and have a long term view, we've transformed the company, we continue to manage the declining broadcast business. We continue to invest in our digital ignite advertising business or square. Interactive business and when you think about 2, 3, 4 years out, we believe we'll be 75% to 80% digital revenue and profit.
So going back to your original question, Patrick, implied in the guidance is that broadcast will decline in line with last year's decline with roughly 6% could that moderate in the out years and be more low single digits. Definitely a potential opportunity, but when you think about the last several years, we've always Initiated guidance and provided guidance on the year beginning call here in March and we've always hit that guidance and we're quite proud of that.
And so we want to be realistic and conservative and that's what we think we are here with the guidance so could broadcast perform better this year. It's definitely a possibility, but in terms of our strategic plans, we believe we're well situated even with a broadcast business that's in decline given the strength of our digital assets, given the strength of our teams outside the Top 50 cities. So I'll turn it back to you, Patrick, for any follow-up questions.

Patrick Shaw

Yeah, on, going back to interactive.
Yeah, I was just kind of curious on how you manage that business now with like increased uncertainty on the economic environment and like the, I guess maybe like the risk there of like businesses kind of pulling back on some of their?
Yeah, some of their spending is in the light of it in response to like economic uncertainty and how you kind of manage that within both interactive and ignite?

Bill Wilson

Totally get it. A great question. And listen, when you're reading the headlines and you're following the media and you're hearing about 11 things from the administration in the morning and maybe something slightly different in the afternoon, it definitely creates a volatile environment. But that said what the advertising market overall is quite healthy, as we just said, we're expecting high singular digit growth rate in our digital advertising business and we're expecting to double the growth rate in interactive in Q1 versus Q4.
So even with that quote unquote economic uncertainty, we are performing extremely well, and I couldn't be more proud of the Townsquare team for doing so from going back to your original question, we're not seeing a negative impact from that economic uncertainty. I think the challenges that we faced and overcame in Townsquare Interactive were mostly self-inflicted.
We noted that in great detail in 2023. The beginning of '24 were their greater pressures because inflation was at 78 9%. Interest rates were much higher. Yes, it was definitely a more challenging time for particularly the businesses for Townsquare Interactive because as we've gone to great lengths to explain, the target market's $9 million and $0.32 billion TAM, but there's smaller companies that we target.
So in those more tough times with that high inflation and interest rates, it was tougher. But that said, We truly believe those setbacks that we faced over that 18 months were really self-inflicted, that if we would have performed at the level we're capable of, we would have overcame those economic conditions, and that's what we're doing now and we're quite proud of that, having an expected growth of roughly a million dollars in profit in Q1 is phenomenal.
We're just, couldn't be more proud of that Townsquare Interactive team, so. We are navigating the economic uncertainty, but the markets healthy. I mean, high single digit digital advertising as we're sitting here, almost the end of Q1, is very robust, and as we look at Q2, we're seeing increased pacing from we see March better than February and we see April better than March.
So we don't get monthly pacing or this and that. That's why we're trying to just give you a full year picture, but we're feeling quite good about the year. We're feeling incredibly confident about our differentiated digital strategy and the fact that we're a large at scale publisher, having, owned and operated at $70 million, having first party data, and then utilizing that leverage and assets for our programmatic business is quite unique.
I think that's why you see people like Summit and Steel City and many others turning to us and talking to us about powering their digital advertising. And then the interactive business again, we're set up for a great 2025, call it $2.5 million to $3 million of profit growth. So even in this time of economic uncertainty, we're performing quite well and the advertising business is quite healthy on the digital side.
Turn it back to you, Patrick.

Patrick Shaw

Okay, thank you.

Operator

Thank you and that concludes our question and answer session. I would like to turn it back to Bill Wilson for closing remarks.

Bill Wilson

Thank you, operator, and thank you all for joining us this morning. We're really excited about the upcoming year. We appreciate you taking the time. I, as Claire said at the top of the call, I would highly encourage you to read our annual shareholder letter that is available on our corporate website and was published this morning.
I would also encourage you to download the new investor presentation. And we look forward to talking to you soon. We'll be talking to you in the beginning of May to update you not only on Q1, but our progress through the year. So, thank you and have a great day. Happy Saint Patrick's Day.

Operator

Thank you ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.