Good morning. Welcome to Townsquare Second Quarter 2016 Conference Call. As a reminder, today’s call is being recorded and your participation implies consent to such recording. [Operator Instructions] With that, I would like to introduce the first speaker for today’s call, Claire Yenicay, Executive Vice President. Ma'am, you may proceed.

Thank you, operator and good morning to everyone. Thank you for joining us today for Townsquare’s second quarter financial update. With me on the call today are Steven Price, our Chairman and 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 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 projections. These statements reflect the company’s beliefs based on current conditions that 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 direct profit, adjusted EBITDA, adjusted net income and adjusted EPS 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 Web site. 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 today. Before I get into details of the second quarter, I wanted to take a brief step back. Half way through the year, I feel good about where our Company is today. Overall, we are, where we expected to be, both operationally and financially. And we remain on track to meet the 2016 plan we outlined to you earlier this year. Moving on to 2Q results, we are pleased to share another quarter of good performance. We are again delivering results that are in line or above our expectations. In the second quarter and on a pro forma basis, net revenue increased 2.1% over the prior year to $137.2 million within our guidance. And adjusted EBITDA increased 4.1% over the prior year to $25.3 million, exceeding our guidance of $24 million to $25 million. Our second quarter results can be summarized by two key things, solid performance across our local markets, and a predicted short-term dynamic in the music festival environments. In the second quarter, local marketing solutions, which include our local broadcast and local digital solutions, grew net revenue by 3.5% over the prior year period. On a year-to-date basis, this segment has grown nearly 6% over the prior year period. Overall, our markets are performing well and we are pleased with the results so far this year. However, despite otherwise strong local performance, we continue to see weakness in national, which is advertising through our rep firm and which is largely out of our control. Fortunately, national represents a smaller percent of our local marketing solutions business. Excluding national, our local marketing solutions net revenue increased approximately 5% in the second quarter and nearly 7.5% in the year-to-date period compared to the same period last year.…

Thank you, Steven, and good morning, everyone. I’d first like to address the recent changes we’ve made to our reporting segment. Prior to this quarter, we had two reportable operating segments, local advertising and live events. And we reported the remainder of our business in another media and entertainment category. We’ve created two new segments that align with our business has evolved and is operated today. In the process, we’ve eliminated the other media and entertainment category, which was composed primarily of two businesses, Townsquare Interactive or Digital Marketing Solutions business, and Townsquare Media, our National Digital business. We will now include Townsquare Interactive together with our other local broadcast and local digital offering and a new reporting segment named Local Marketing Solutions. This segment includes all of the products and services that are offered by our local sales team to the local advertisers and businesses in our market. Our second segment is now called Entertainment and includes our Live Event business along with our National Digital business. Please visit our Web site for supplemental disclosure regarding historical revenue by segment for 2015 and 2016. As a reminder, our second quarter and year-to-date results discussed today are on a pro forma basis, meaning that they are pro forma for all material M&A activity completed by June 30, as if they had occurred at the beginning of the reporting and comparison period. We had no such transactions in 2016. So the transactions that are relevant to the pro forma results are the acquisition of NAME, which we acquired on September 1 of last year and the divestiture of 43 of our towers, which also was completed last year September 1, 2015. Please refer to the tables that we have provided in our earnings release. It provides GAAP results with a bridge…

Thanks, Stu, and thank you to everyone who dialed in this morning. In summary, we believe we had a solid first half of the year and believe the second half of the year will be strong as well. As illustrated by our reaffirming full-year guidance, we also expect to generate significant free cash flow in the second half of year, as the third quarter is our largest in terms of both revenue and EBITDA, which will help get us to our near-term net leverage target of 5 times. As always, we are only a phone call away. So please don't hesitate to call us with any questions or just to check in. And with that, we're now happy to open the call for questions. Operator, will you please open-up the lines.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is for the line of Kyle Evans with Stephens. Please proceed with your question.

Hi. Good morning. Thanks for taking my question.

Hi, Kyle.

Hi. Could you -- Steve, you mentioned that the -- that there was a national piece in the new local segment that was soft in the quarter and that’s something that you control, because its ad reps. Could you cite that piece for us please?

Yes. So it's not new in our local segment. In our local markets, as you know, we have local advertising and then we have national advertising. And historically in the radio business going back, probably since the beginning there is rep firm that represents the radio industry, and individual companies on behalf of client. So historically the radio industry doesn't have direct relationships with either national agencies and national clients. They go to the rep firm, which represents them. And that piece has been slow -- slow for us this year and for others, the national advertising piece. And we’ve been talking with our rep firm about that and the strategies. It does look like sequentially its actually getting better throughout the year. Started the year, refers [ph] getting better, but that is a overall small percentage of our advertising and for the local segment. So it's not ….

Small like as in single digits, I mean …?

In its own, yes.

Okay.

Yes, maybe. Yes.

Maybe we could talk a little bit more about the festival shakeout. What do you think is driving that and why do you think you're seeing year-over-year ticket sale increases already?

Look I think like a lot of businesses, not only event space, but in general there are sort of evident flows. And the festival -- overall the festival space was half the last number of years and lots of people, lots of companies both bigger companies and rich individuals, started festivals. It was a fun thing to do. It was a sexy thing to do, whatever. So, it seems like everybody and his or her brother wanted to go start a festival. And therefore, the result was bidding up talent and more along the way. For whatever reason the festival attendance, I think probably if you look overall, maybe it was flattish for the festivals that existed, but there are a number of festivals probably about 10 that -- of what we will consider major festivals that were canceled this year by -- not by us, by other companies, because for whatever reason they saw that they weren't selling or they didn’t think they could or they thought ticket prices were high, which we think is a very good thing. We had talked about this if you go look at our prior earnings calls last year and even a year before, and even back, we've said that we're in the midst of while it wasn’t a bubble in the festival space, there was a lot of people in the festivals. We still think it's an unbelievably good business. We still think that the survivors are going to grow significantly. The Town Clocks [ph] will be in line as there is fewer of the festival, although still enough to [indiscernible] the population. So, it's we are sort of where we thought we'd be. And I think in general, we’ve seen by our early -- now it's on the early, but early…

That’s helpful. Thanks. One last one, or coming up on the magical third quarter for NAME, when you acquired that business, my recollection is that you push our expectations for any synergies into 2017. And you were going to kind of just run the business to the best of your ability on an as is basis in 2016. Is that still the case? I know you had one big win, but I wonder if you could give us an update on any kind of potential synergies that you might be seeing from NAME, especially now that we’re right in front of that third quarter?

Yes, it is exactly what we had said, Kyle, which is that we expect synergies in '17 and '18. This year was our first sort of full-year with NAME. We wanted to get it under our belt. The management team is still there, still working hard, still actually doing a fantastic job. We’ve done as we’ve done historically, a number of tests this year, the things that we hope to be synergies next year and we're still conducting those, small tests. And its, I would say, on plan from where we thought or maybe even slightly ahead of what we thought, some of the opportunities.

And are those tests taking some of your legacy events businesses and putting them inside or next to existing players?

Yes, among lots of other things. We test smart and dumb things along the way, because we never know what’s going to fit.

Correct.

So, yes.

Okay. Thank you.

Our next question is from the line of Michael Kupinski with Noble Financial. Please proceed with your questions.

Thank you very much. In terms of national, you may have said this, but was national down in the quarter?

So we don’t breakout individual line items, Mike.

Okay. And in terms of the NAME acquisition, I know that your -- when you acquired it, you indicated that you have your radio stations as a megaphone to drive attendance. And I was wondering is your thought on as you come up into critical quarter, do you think that attendance for your NAME businesses will actually improve in the quarter or no, just given the trends that you’re seeing so far?

I would say early, early, yes, but still early and as I said we're testing lots of different things in the different markets where there are fairs close to or approximate to where we have local markets. So we’re testing a bunch of different things. We will sort of testing at the end of year. I think on the margin it is helping.

Okay.

But it is early.

And in terms of your marketing solutions, you indicated that your thoughts were that you’re going to be adding in that area. Can you give us some thoughts about how much and where headcount is right now and then where do you think you will take it in the next quarter or maybe by the balance of the year?

Headcount wise?

Yes.

[Indiscernible]?

Yes.

Yes, we don't breakout specific numbers. But we've net net added people and we expect to do that in -- for certain parts of our business in certain business lines, in our markets throughout the rest of the year. I mean we’ve done that since we began in the last four or five years.

And I know that political advertising is not a big factor for you, but do you have any thoughts on how things are -- or how much contribution you might get from that just looking at the journal landscape? Is it going to be helpful to you in the third and fourth quarters and -- just some thoughts on that?

Yes. Well, I wish I knew. We don't give specific guidance. We have hoped for a good year, in a presidential year, but also in a year where there is some competitive House and Senate races. In the last presidential election year, we did about $10 million of political revenue. In an event year, it's not a presidential year, historically we’ve done about $8 million. And then in a odd year, so a nonpolitical year, it's anywhere $2 million to $4 million. So, you know if we did what we did last time, $10 million in the last presidential cycle, that sort of a good target. But I would say one other thing is we -- our local markets are not in states named Ohio, Pennsylvania, and Florida or Virginia, where historically have been the big dollars for presidential money.

Right.

So, we are in some that -- some states that hopefully people think will be presidential swing states, maybe Michigan, maybe Colorado, Island, New Hampshire, but the bulk of what we get historically has been a Governor's race in Montana, a Senate race. So there is a Senate race in Louisiana, there is a Senate race [indiscernible] race this year in New Hampshire. Our competitive House races in Upstate, New York. We tend to get more of our political revenue from those kind of races than from the presidential packs.

And in terms of your thoughts as you go into next year where you indicated that you may consider paying a dividend, once you get to 5 times leverage or below. Some radio companies have indicated they are or either initiated a dividend when their leverage was below that at like 4 times or below. What is the rationale in terms of return of capital once you hit the 5 times leverage? Can you just kind of explain your thought process on that?

What we’ve said is when we did our road show, when we refinanced our debt is that at some point we would look to return capital to shareholders as one of the two principal capital allocation priority, along with growth initiative. And we’ve said we wouldn’t do that when we’re in the 5. We could, and if you look at our free cash flow yield now, which is I hope you follow analyst estimates, it's over 20% some. So it's not that we don't have free cash flow after interest, after capital, after taxes. We are not really paying taxes as you know till 2020. So, we could, but we just thought it was prudent given what we’ve said to not really think about it. Although we could change our mind, our Board change its mind, until we're below 5 times. I don't know if the magic number is 4 times, 5 times. I think as you know because you've been at this longer than I have, you have to go look at where you are with your free cash flow, what are your other opportunities for capital allocation, lots of factors. But enough people -- and the people have asked shall I [indiscernible] when we get below 5 times, it's something moving to the -- moving to your 4 will have a discussion with our Board and begin to think about what’s the right use for our capital.

Thanks for that color. And then, in terms of the M&A environment right now, can you give us any thoughts on what you’re seeing out there or not seeing out there?

Yes, I would say, it really hasn’t changed. There's not much out there. So it's not a huge topic in the industry or huge topic here. Obviously, we think, we look, we strategize all the time, but in terms of lots of groups or clusters hanging out the first sales line, we really haven't seen that.

Okay. That's all I’ve. Thank you.

Okay. Thanks.

The next question is from the line of Jim Goss of Barrington Research. Please proceed with your question.

Thanks. I’m wondering in terms of consideration of a, maybe a couple of new music fests, if one of them might be the WE too, if you will, something on a grander scale where you’ve the facilities you’ve talked about that for a while. Just wondering if that’s in the mix?

It's one of the things we're looking at and thinking about.

Okay.

And our -- and a lot of our team is up there this weekend.

Okay. So -- and you haven't gone any further in terms of whether it's another country or another genre, classic Rock or whatever or two appealed in another crowd?

We haven't. Although I suspect if it's a place that we do -- by the way this could change, but [indiscernible] place that we’re doing a country music festival. If we launched a second festival at the same location, it's probably likely that it would be a different genre as opposed to a second country festival.

Then in terms of -- so far the WE Fest numbers have held up pretty well, so you’re pleased with how that major one is continued at?

We are.

Okay. And in terms of live events, in general, could you talk about the mix by key category, if you will? It seems like over the past couple of years you’ve sort of moved to have clusters of travel, events that would travel and I'm wondering if there's a big concentration right now intercepts, help to create the efficiency of getting the right thing done and then probably take new markets.

Yes, I mean, we do so many events that it varies by quarter. It happens with the second quarter. It has a lot of our music events, music festivals, which is why we highlighted it on this call. But we have 18 or 19 different types of events. Obviously, we’ve our music festivals. We have our Carnivals, but then we have as you know beer festivals and fun run and kid fun run and bridal expos, etcetera, etcetera. So there's no huge concentration except what you know you identified. Obviously NAME is big one, the music festival. The other -- there the other types of events, it sort of depends upon what the markets want to do, where we route different things. So I don't think there's any particular concentration and we're constantly thinking about new events. So, we own a couple of food and wine festivals. The next weekend if anyone is in Colorado, I will be out at Steamboat, because we own the Steamboat Food and Wine Festival. So that's for example one of the things that we do, food wine, food travel, all the -- lots of the family right at the core. It's fun, affordable, family-based entertainment.

Okay.

And the more ideas you have, the more will think about it and try to roll it out across the network.

Maybe in terms of radio, originally I think the thesis for the whole Company and the strategy was probably to do a certain amount of rollup and them leverage the positions in the local markets. And then, it seems like multiples were fairly high in the radio space relative to what you could buy them for and on accretive basis. I assume that's still pretty much the case or do you see change in the M&A market that might work to your advantage?

Yes, so we haven't seen sellers opening up the floodgates saying, hey we want to go sell our business at 6, 7, whatever times. It's been pretty quiet. I’m sure if you went to some local customers and you had said or some families said, hey I will pay 11 times, I’m sure you could find things to go by. But there's sort of been that either people are happy who are families or whoever owns the business is happy with the way things are performing or just think there's too big a gap between either. Right now we’re the public company, [indiscernible] trading or where they think they want be. So to the extent that, I mean, we settle all along and we maintain this, we like buying local radio stations, building up with their dominant clusters in markets that makes sense for us and then using that to continue to grow that business and build out other businesses on the back of that. And if we could find radio station to buy, that fit that criteria, we would go do it. We just haven't in the past two years.

Okay. I guess the good side is that if your core business is so healthy that others don't want to really sell, that's not a horrible thing either. But anyway, thank you very much.

Yes. Thanks so much.

Thank you. [Operator Instructions] Our next question is from the line of Leo Kulp with RBC. Please go ahead with your question.

Thank you. Good morning, guys. Just two quick more strategic questions, I guess. One is, on the local side. There seems to be kind of acceleration in some of the larger media companies looking to leverage their local sales force to sell digital products, kind of like where you guys do with Townsquare Interactive. I guess, most notably it's been net acquiring which local. Do you see this as a major threat to your local digital business? I guess, more importantly do you see this potentially accelerating the share shift away from traditional local media to digital busbar advertisers? And then the second question -- okay, sorry.

No, go ahead Leo.

Second question was just around it sounds like the Galaxy phones are going to have the FM chip enabled. Can you just provide us with you updated thoughts around the issues and opportunities with the broader rollout of the FM chip?

Yes, sure. So, I don’t think -- on your first point that more people offering digital marketing solutions is a competitive threat. There are lots of people who were doing that, everything from the store owners, niece or nephew, to the local IT person, who are the big national players, to some of the other media companies. So it's not new. The fact that the NetMonster [ph] gets deeper into that space, great. I think they're smart to want to go do that. It doesn't -- and to some extent I don't think it's an either or I’m going to go advertise - - if I’m a small business, I’m going to advertise. I don't think they say I'm going to either advertise on the local radio station or have a good search enabled Web site. This can be seen nicely on a mobile device. I think one typically may come out of their technology or marketing versus advertising budgets. So it's -- I mean as we try to make the case to our advertisers, okay once you have a good search enabled Web site now let's go advertise and drive people to that beautiful new Web site that people can actually find. So it's us, its complementary, which is to some extend why it was fairly that or as we evolve, maybe it’s a nicer way to say it makes sense to put everything in a local marketing solutions bucket, because that’s sort of how we run the business anyway. So, other people are getting in that space, good. I think we will do fine in our -- in and around our markets and I'm not the least that worry a bit, our competitive advantage won't hold up. In terms of the FM chip, candidly we haven't spent a ton of time thinking, [indiscernible] and lobbying on that. It's -- I view it as only upside. It's fantastic if that happens and if there was an FM chip in every phone, including Apple products. I think it would be better for the world, better for the consumer, better in terms of public safety, and clearly better for us. So to the extent that the FM chip get activated, a lot of -- in a lot of devices is there, they just don’t activate it. So to the extent that it is activated, I think it's a really, really good positive development for our industry.

Got it. Thank you very much.

Okay. Thanks.

The next question is from the line of Amy Yong with Macquarie. Please go ahead with your question.

Good morning Steve and Stu.

Hi.

You mentioned national and I was wondering if you could elaborate on what you’re seeing on the local side? How is visibility, any pockets of weakness or strength, any cancellations? And then, just on the acquisition, I know that there's not much that’s interesting to you right now, but you’ve meaningfully diversified away from radio and I was wondering if you comment on what you feel is the right revenue mix for your Company longer-term? Thanks.

Okay. I don’t like to say that we’ve diversified away from radio. I think we’ve continued to broaden the things that we do and diversified our revenue streams and our businesses. So it's not away from radio. I mean, I know it’s a fine nuance, but -- I think the right mix to some extent its sort of twofold. It's one on the client side, what offerings do our clients who are the advertisers think can help them meet the needs to bring in customers and sell their products and services. So, if it's make it up, if there was an advertiser that spent a $100 on radio last year and next year with us want to spend $110 all on event activation or all on digital products, good for them. That would change our mix, but it would allow us to keep the client and allow the client to have a good ROI for their dollars, by the same token [ph] if they did a $100 in radio and they want to do a $110 on radio and another $20 on digital, great. So, that’s on the organic side. On the acquisition side, we will see what's prudent and what we could acquire. It fits with what we're doing and make sense. In terms of good smart use of capital. So I don't have a particular strategy, oh we have to get to X, our Northstar is X. We wanted to have a broad enough product line and broad enough revenue streams that we could offer clients and we could be opportunistic on the acquisition side, regardless of the current environment, whatever the current environment might be. Your first question was on the ad -- in the ad market. I would say, we haven't seen particular categories that are markedly up or markedly down. I would say it was a good beginning of the year, not great. The market feels okay now, sort of similar. Seems to look better as we move later in the year to the back half of the year. If I'm looking today sort of sequentially, each month looks better, but again the further we get the smaller the numbers are, so it's hard to say. That’s on the local side. And on the national side, as we’ve said, well it started off and has been rough. It seems to be getting better month by month. So some of that maybe the environment, some of that maybe some of the strategies that we’ve taken, it's sort of hard to say.

Great. Thank you.

Okay. Thanks so much, Amy.

Thank you. At this time, I will turn the floor to Steven Price for closing remarks.

Great. Thank you everybody for spending time with us. We appreciate it. Again, if you have any questions, don't hesitate to give us a call. And we'll talk to you soon. Thanks so much.

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