Good morning and welcome to Townsquare's First Quarter 2019 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] And with that, I would like to introduce the first speaker for today's call, Claire Yenicay, Executive Vice President. Thank you. Please go ahead.

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 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 adjusted operating income 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 Bill Wilson.

Thank you, Claire. Good morning, everyone, and thank you for joining us. Today I'll discuss Townsquare's strong financial performance to start 2019. As I shared on our last call, 2018 was a transformative year for Townsquare, as we had a renewed focus on our local markets and corresponding investments, which drove strong local revenue growth, particularly within our digital businesses. As I trust O&O at this point, we proudly focused on markets outside of the top 50 cities in the U.S. where we are confident that our marketing and advertising solutions are differentiated and enable us to aspire to be not only the number one radio broadcaster but also the number one local media company in the markets we choose to operate in. To that end, we kicked off the year continuing with the positive momentum we built throughout last year and as a result 2019 is off to an excellent start with our teams across the company executing our Local First strategy with renewed passion and excitement. For the first quarter, Townsquare's net revenue increased 6.5% over the prior year and our first quarter adjusted EBITDA increased 8.3% despite our strategic decision to reduce our live events revenue, which declined approximately 9%. I am pleased to share that these strong results place our revenue at the very high end of our previously provided Q1 guidance, while exceeding our EBITDA guidance quite nicely. Given the strength of our profit performance in Q1, coupled with our strong outlook for Q2 and the second half of 2019, you'll hear from Stu later on our call that we are raising our full year adjusted EBITDA guidance. In addition to raising our EBITDA guidance, it is worth noting that in Q1 our digital revenue was over 1/3 or over 33% of our total net…

Thank you, Bill and good morning everyone. As a reminder, over the past 18 months we've completed several divestitures and discontinued certain portions of our Live Events business, as we reoriented the business to our local media platform. The results of these Live Events businesses have been reclassified to discontinued operations for the current and historical periods and these results could be found in our quarterly filings on Form 10-Q. In the first quarter of 2019, discontinued operations also includes the results of our music festival portfolio which was an asset held for sale as of the end of the first quarter. All of the financial results we will discuss today are related to continuing operations. Unless otherwise stated the first quarter results I will also discuss today are pro forma for the acquisition of three radio stations in Princeton, New Jersey as if they have occurred at the beginning of the reporting and comparison periods. Please refer to the tables included in our earnings release which provide GAAP results and pro forma results, as well as our non-GAAP performance measures. For the quarter ended March 31, 2019, net revenue increased 4.7% to $93.7 million as compared to the first quarter of 2018. This was at the high-end of our previously issued guidance range of $92 million to $94 million. Excluding political revenue, which declined approximately $400,000 as compared to the prior year, total net revenue increased 5.1%. Beginning this quarter, we've segmented our business into three segments: Townsquare Interactive, Advertising and Live Events. Townsquare Interactive net revenue increased 31.6% in the first quarter to $14.2 million compared to that of the first quarter of 2018. Direct operating expenses for Townsquare Interactive increased 30.2% in the first quarter due to our continued investment in our product and sales teams to…

Thanks, Stu, and thank you, everyone, who dialed in this morning. Townsquare has outstanding dedicated employees all over this great country and it is an honor to work with them each and every day. Their hard work is not only gratifying, but critical for us to accomplish our lofty goals. Our teams across the country are transforming what began as a portfolio of strong brands of traditional radio stations into a multi-platform premier local media and marketing solutions company. Their effort, passion and commitment is directly driving our strong growth. I could not be more proud of their work each and every day. We believe our performance in 2018 and Q1 2019 continues to validate that our decision in the fall of 2017 to rearrange the company to a Local First strategy was the right move. In summary, we are extremely pleased with our great start to the year as well as our Q2 pacings and our current outlook for the full year 2019 which in turn gives us the confidence to raise our adjusted EBITDA guidance for the full year. I look forward to continuing to connect with our investors as the year progresses, addressing any questions that you may have and sharing our impressive story with all who are interested. As always, please do not hesitate to call us to further discuss the business or ask us any questions. And with that we're now happy to open the call for questions. Operator will you please open the lines.

Thank you. [Operator Instructions] Our first question comes from the line of Michael Kupinski with Noble Financial. Please proceed with your question.

Yes. First of all, congratulations on a great quarter. How many are -- if we just kind of backed out Ignite out of the ad business, I was wondering if you can just give us a sense of what core radio is doing outside of the program -- programmatic side of that business? And if you can just kind of give us some thoughts on how the categories are might be -- the biggest categories might be performing especially as we heading -- are heading to the second quarter?

Good morning, Michael. Thank you and thanks for your kind words. In terms of broadcast overall as we noted on the call in Q1, it was overall stable. So our advertising growth was not only driven by our Ignite business as you mentioned the programmatic solutions, but also our digital O&O solutions as well. In terms of categories, in Q1 we saw strength and entertainment food and beverage health services real estate. We saw a slight decline in retail, education, financial services, particularly in mortgage. That would be how the categories look but going back to your first question broadcast stable and really strong growth in all of our digital solutions.

Got you. And then in terms of the FTEs in your Interactive business at this point where was that a year earlier and where is it today? And can you indicate what you're hiring plans for Interactive might be this year to drive the growth in that business?

Yeah. So our FTEs over the past 12 months have grown over 100 net ads in Townsquare Interactive and we expect that grow to continue over the next 12 months. And as we noted on the call, we obviously had 30% revenue growth we also had 30% profit growth and our operating margin for TSI is also 30%. So as you and I've discussed in the past one of the things moving to the segment was to show the strong profit growth over subscription business. So we expect our margins to continue to be about 30% but we'll continue to add about 100 people over the next year.

And just going back quickly on the Ignite business obviously that -- you indicated that -- at one point that you thought that that business could grow significantly to $100 million in revenues over the next three to five years as well. Is there an opportunity you can be breaking that out? Or do you think that that's just so integral to the radio business that you're going to continue to keep that liberty of business.

We think in an essence as an advertising solutions, as we look at it and as one ecosystem for advertising clients. Something -- anything could happen in the future but as we evaluate and look at the business today that's how we do it. So to your point on the call we noted that this year we expect Ignite to approach $50 million in annual revenue and over the next three to five years to be $100 million just like TSI.

Got you. And then just a housekeeping -- quick question on housekeeping what was political on a pro forma basis? Last year heard it about $700,000 in the first quarter of last year is that the right number?

Yeah, Michael. The $700,000 in the first quarter of last year. It's about -- quarter this year.

Got you. Okay. That's all I have. Thank you.

Thank you, Michael.

Thank you. Our next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question.

Thanks. Starting off the intended sale of proceed -- use of the sale proceeds, originally it'll be to de-leverage but do you have any other goals or financial elements in line with that Stu?

Yes Jim. Thanks. Yeah, first use of cash is to pay our dividends then to invest in our digital operations as Bill had mentioned. We're going our staff for both Ignite and TI by 100 people this year. And then third pay down debt.

Okay. And if you do have $100 million each from TSI and that Ignite that's about 40% and $0.5 billion revenue base you'd have. What is a sustainable growth rate of those subcomponents, because it would seem like that would obviously bias upward the gross potential?

Yeah. I think as we noted today we're over 20% growth over third of our revenues digital at this point and we expect strong double-digit growth for a long time period. That's how we get to not only the $100 million, but we see that growth continuing past that five-year trend based on the competitive dynamics we see in our local markets.

And maybe lastly, Ignite revenues involve mostly I assume your internal operations, but possibly somewhat other non-related parties, and if so what share of revenues are -- do those represent? And would those be broken out as a separate item?

In essence Ignite is our digital programmatic. It's all in-house in terms of our buying and optimizing of inventory. So we have not only the personnel but a technology stack. So not exactly sure, I understand your question in terms of third-parties.

Okay. I was thinking you might have also use that platform to outsource some others in other markets but I guess you're not doing that at the moment.

Yeah. It's a great -- it's actually a great point Jim. That's one of the clear differentiators for us is the majority of our competitors that we do see be it in the newspaper space or other broadcasters or even small agencies are white labeling a third-party where our real differentiation is this is all in-house for us and gives us great control not only of the campaigns, but also the reporting and the customer service.

Okay. Thanks very much. Appreciate it.

Thank you, Jim.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Wilson for any final comments.

Thank you operator and thanks everybody for dialing in. I hope our call today helped reinforce why we believe Townsquare is best described as a premier local media and digital marketing solutions company today. We're proud of our strong Q1 results and even more importantly confident for the full year. And thank you for dialing in. If you have any questions please reach out. Have a great day.

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