Good morning and welcome to Townsquare’s Third Quarter 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. Please go ahead.

Thank you, operator, and good morning to everyone. Thank you for joining us today for Townsquare’s third quarter financial update. With me on the call today are 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, 2019, filed with the SEC. We may also discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted operating income, which we may refer to as profit in our remarks to make certain pro forma adjustments. 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 website. 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. I’d like to start this call by acknowledging the hard work and dedication of the entire Townsquare team. Our team continues to impress me each and every day with their passion for what they do and their dedication to their local communities and to our company, as well as their adaptability during these challenging times. Our team's focus and commitment to do their job with their best effort each day, despite the circumstances, whether it be the challenges of the pandemic or the hurricanes that swept through our Louisiana markets twice, by super serving our audience and our local advertisers, has resulted in a significant improvement of our business each month since the pandemic hit as hard as in April. I'm proud to say that our third quarter financial results exceeded our goals and expectations, and as we look out to the fourth quarter, and into 2021, we believe that we will continue to see strong improvement in our business, absent any significant external disruptions. As I shared on our Q2 earnings call, my goal for Q3 was to improve our net revenue to close to negative 20% year-over-year from Q2's negative 35% year-over-year decline. In fact, our net revenue far exceeded this goal, with net revenue negative 15% year-over-year in Q3, an improvement of 20 percentage points. This led to a material increase in adjusted EBITDA from $2.1 million in Q2 to $17.5 million in Q3. We experienced sequential net revenue improvement throughout Q3, as our business continued to pick up pace with net revenue declining negative 21% in July, negative 16% in August and ending the quarter at a much improved negative 9% in September as compared to the same months in 2019. Our better-than-anticipated third…

Thank you, Bill, and good morning, everyone. As a reminder, in 2019, we sold our Bridal Exposition Live Events, so our year-to-date 2019 results and year-to-date 2020 growth rates are presented pro forma for the sale of these Events, unless otherwise stated. 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. As Bill mentioned, our third quarter financial results exceeded our original expectations, as the performance of our Advertising and Townsquare Interactive segments improved throughout the quarter and political revenue reached new heights. In total, third quarter net revenue decreased 15.3% over the prior year period to $95.3 million and third quarter adjusted EBITDA decreased 37.8% to $17.5 million. This has marked a significant improvement from second quarter revenue in adjusted EBITDA declines of approximately 35% and 93% respectively. In the third quarter, Townsquare Interactive subscription business experienced sequential revenue improvement throughout each month of this quarter. This translated to subscription revenue growth of 14.5% in Q3 and 13.7% in the first nine months of the year, compared to the prior year. In addition, Townsquare Interactive continues to generate healthy profit margins with the Q3 margin of 30.2% equaling $5.5 million of profit in the third quarter, and over $15 million of profit in the first nine months of 2020. Importantly and impressively, Townsquare Interactive grew net revenue and subscribers in each and every month of 2020, demonstrating its resilience as well as its importance to our SMBs. Third quarter Advertising net revenue declined 17.2%, as compared to the prior year period, a significant improvement from Q2's decline of 37.5%. Each month saw a sequential improvement, and we ended Q3 with advertising net revenue declining only 10.2% in September, compared to that of the…

Thanks, Stu, and thank you to everyone who has dialed in this morning. 2020 has been a challenging year, but one of the things our team has noted with great pride is that even with all of the challenges during the pandemic, we did not need to alter our core strategy, rather the pandemic has allowed us to separate from our local media peers by executing our existing strategy and placing a spotlight on the resulting success. Our focus on underserved small and medium sized local markets, our investment and commitment to local-first, and our investment in world-class personnel, technology and infrastructure had allowed us to build a strong digital platform with best of breed products, services and solutions, including a recurring digital subscription business, which together brings digital revenue to 44% of our total revenue. All of this contributed to our ability to mitigate revenue declines, and manage quite effectively through this downturn. We want to ensure all of our stakeholders that we will continue to carefully manage through this crisis, however long it may last, and whatever turns it may take. As we have stated on earlier calls, our goal has been to balance cost reductions with our opportunity for long-term growth. We want to be best-positioned to emerge from this downturn more quickly and more efficiently than our competitors. And we believe that this strategy together with our diversified and differentiated in-house proprietary product offering ensures that we will be. This call was a bit shorter than our last two calls, and that is because we wanted our Q3 results to speak for themselves, and we hope you agree that they do. However, we are always available to further discuss our great company. So, please do not hesitate to reach out and call us. Be well. And as we say internally, stay Townsquare strong. And with that, operator, please open the call for any questions.

[Operator Instructions]. Our first question comes from the line of Michael Kupinski with NOBLE Capital Markets. Please proceed with your question.

Thank you and congratulations on your impressive quarter. Just a couple of questions. In terms of your cost reductions, your previous cost reductions, how much of those were permanent and how much do you -- as we think about Q4, how much of those operating expenses are going to flow through Q4 and maybe just give us some color on what your thoughts are on OpEx?

Sure. Hey, Micheal. Good morning. It's Bill. I'll have to Stu step-in and take that question for you.

Hey, Michael. How are you? The majority of our -- the majority of the cost questions are going to be permanent. We will add back sales folks and investment in our digital products as time goes by. And when we feel comfortable the pandemic is in our rearview mirror, we think that we'll probably bring back the 401(k) match, but things like the dividend and all the permanent head-step reductions that we made, that we feel make us a stronger company, we're not going to bring back.

Got you. And in terms of TSI, really impressive there. How many of those subscribers are in-market to your stations versus out of market, and how does that compare to maybe the year earlier results?

Yes. Michael, it's Bill again. So, thank you for the recognition of the Townsquare Interactive’s strength throughout the pandemic, and quite honestly, year-after-year. In terms of the subscriber growth, given the size of our inside sales team in Charlotte, each quarter we're adding more out of radio market clients and in-radio market clients. It's approaching 60:40, 60% outside our markets, 40% in our markets, but it hasn't hit that threshold yet. I think it's like 57% to be exact outside of our markets. But on a quarterly basis, we're adding more and more outside of our markets, which we expect. On prior calls, as you may recall, Michael, we talked about the addressable market of what we call the perfect SMBs that meet our profile of under $5 million in revenue, under 24 employees, population size of 1.5 million or less, there's 500 of those SMBs in our radio markets, our 67 radio markets, there's 8 million of those outside of our radio markets that fit the criteria that I just described. So our expectation is, as we approach that 30,000 subscriber base we talked about on the call and over a $100 million in annual revenue, we'll be adding more out of market TSI subscribers than in market.

And Bill, the subscriber growth is really extraordinary. I was just wondering, is there any particular differences with the new subscribers added, like such as the business size, the number of locations of businesses or I mean, are we seeing -- or is it very similar to what we -- the types of businesses that you had before?

It's very similar to the types of businesses before. Obviously we’ve had the benefit of -- had really started this business organically in 2012, learned a lot for many years, and really I'd say perfected may be too strong a word, but really understand the SMB and what we can provide through Townsquare Interactive and really the ideal customer set. So, they haven't changed quite at all. And as we talked about during the pandemic, I think not only our company, but if you look at other companies like Wix or other publicly traded companies in this space, they've really done well because the pandemic has shown the value and importance of having a strong digital marketing presence, and that's why Townsquare Interactive is performing so well. I think it's, A, our talented team; and B it's more clear than ever the need for this service. And when you think about the scale we can provide, at an average price point of only $300 per month, and us to be able to in essence guarantee traffic to a SMB’s website, is a quite a valuable -- value proposition. So, we're really moderating investment in Townsquare Interactive just to keep the margins at 30%. Annualized that's what we target and we moderate that investment, as Stu just said in sales people and customer service people to obtain that. But the opportunity is vast. At one point, we could accelerate that investment. We're not going to do that during this pandemic. But I think on prior public earnings calls we talked about a second location out West, which post pandemic are still very much part of our plans.

Then a last question. In terms of the sequential improvement in advertising, can you give us a sense of maybe the categories that you're seeing strength? I understand that some are saying financial services are showing some improved strength. What are you seeing in terms of what's driving the sequential improvement in advertising?

Yes, one of the things I'm most proud of from the team perspective, as I talked about in the last call, the team has adapted quite remarkably throughout the company in terms of the daily challenges, and obviously, as we were facing significant advertiser cancellation in March and April and May, and then you look at -- I'll start with the negatives for Q3, entertainment, and travel and auto and food, particularly entertainment, travel, auto, and food, those categories really are categories that we've done quite well with. So our account executives throughout our 67 markets had to really prospect and reach out to industries and categories that may not have been categories that we excelled at in the past. And that's why one of the things I'm most proud of is the new business generation, you're getting clients to advertise with us who are new advertisers to our platform is quite important, obviously, as you've got no events and you've got restricted travel and all those things. So to answer your question, what we saw strength was in insurance, healthcare, recruiting, education -- and education, for example, and healthcare are -- typically are our largest categories and through the pandemic those have been our fastest growing categories.

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

Thanks and good morning. No doubt you're aware that, as we were all being preparing for this call, the big news has been that the Pfizer vaccine was determined to be more than 90% effective nanopar with measles and smallpox without major side effects, which is a big game changer. And so I have a number of questions for you with regard to that. First, you just mentioned $330 a month, great value, is our pricing flexibility with TSI. What do you think the impact will be on each of your business operations as this -- the prospect of a vaccine and probably multiple vaccines would be more of a reality? And how would your strategy be adjusted and how quickly is any of this likely to occur?

Yes, obviously exciting news for not only our country, but the world with Pfizer announcing earlier this morning that their vaccine is -- as you just noted, 90% effective which is in line with measles and other vaccines. So quite great news for everybody, on a personal level, including the economy and our business. How quickly that is going to be distributed? In that release, they expected review by the end of the month of November, and possible distribution in the first quarter. So I don't know when it will be distributed, but I would expect distribution of this vaccine or quite honestly I believe there'll be many others in the first half of 2021. We have as you know, moderated our expense reductions to make sure that we can capitalize on long-term growth prospects. So although this was hard to do, we did limit the full time reduction workforce 6% in early April, which although was hard decision, it was moderating the scope of what we were facing, and that's why our EBITDA in Q2 was roughly 2 million, and we were glad to see that bounce back so strongly in Q3. And we've seen sequential improvement across our revenue lines every single month, not only quarter-to-quarter, but literally every single month, be it broadcast, be it digital advertising, be it Ignite and everything we touched on. So, our expectation is, whenever a vaccine does get widely distributed, and assuming obviously people take it, we will return back to our 2019 growth levels, which as you may recall, were high single-digit revenue growth approaching double-digit and double-digit EBITDA growth. So, that's what our expectation is post a vaccine and a post-COVID world. And we believe regardless of how long this pandemic last, and whatever turns it may take, if there's incremental cases spiking as we've seen over the last four weeks, with cases increasing and in certain markets hospitalizations increasing, we actually haven't seen those spikes lessen our recovery month-to-month, which I think is a testament to our team's adaptability, answering Michael's question and being more, I think prepared if things do change. But as it relates to a vaccine and what that means for our business, we clearly expect it to return to 2019 growth levels for revenue and profit. And as I mentioned earlier, things that we put on hold like a second location for Townsquare Interactive out West, we would quickly ramp that up and therefore accelerate that businesses march to $100 million in revenue at a 30% profit margin. I know you had other questions, Jim. So, I'll turn it back to you.

No, that's great. And I'm wondering like listener trends tended to be -- to -- there were bump ups to some extent with the in-home but radio tends to lean in the current type of situation. I wonder what you -- how do you expect that to balance out, even though radio maybe is well less important business as you become more of a digital company? And then the Live Events that have been mothballed I imagine they could be restart quickly. Do you think you'd probably start to think about putting some of those numbers back into your model for 2021 with this sort of news that we hoped would come but necessarily no. And then, I guess with the cost cuts that you and Mike were just discussing, that does seem to build in some better possibilities, than maybe you've been able to achieve, because now you have a better idea of what you really need and what you have been -- and any other enhancement in that question would be great.

Jim, I'll take them and if I missed any of them, just let me know. So, as it relates to Live Events, I think you know me well enough that I'm conservative in terms of our modeling. So even with this news, I would be modeling no mass gatherings of people for 2021. With this news, could that be accelerated, and we start to do Live Events next summer, into the fall? I clearly think that's a possibility. But as it relates to modeling and forecasting, we're conservative in that regard. So, we'll still plan on no Live Event revenue for 2021, and hopefully we'll have surprises to the upside. Given that our Live Event business, as you know, we were thankfully sold our NAME carnival business, we sold our music festival business, anything that was not core to our local markets and really almost like a brand extension at this point, we're getting great brand extension for our local radio station. We're getting great client activation opportunities. That said, it's still a very small part of our company. It's less than $20 million in revenue. I think last -- 2019 was roughly $16 million in revenue, roughly $3 million in profits. So, although important strategically a very, very small part of our business. The great news is we have a variable workforce and our ability to then as you said, take it from a mothball scenario to actually executing, we can do that within 60 days. And we have a wonderful -- extremely talented woman, Ashley, who runs that force, has been with us for many, many years. So I feel very confident whenever a vaccine is distributed, and it's safe to have mass gatherings of people, 60 days later, we can be up and running for our Live…

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

Thank you operator and thank you everybody for dialing in this morning and taking a few minutes of your Monday morning to hear about updates from our company. As Jim just said, we're obviously opportunistic about the news that Pfizer released this morning, but more importantly to you and us is -- or just as importantly is, we couldn't be more confident in where we are -- how we are recovering and where we are heading as company and just want to take the opportunity to thank the Townsquare's team for their tremendous adaptability and ability to concur our everyday challenges, and perform as well as we are during this pandemic and just thank the team and be safe, be well and as we say at Townsquare, stay Townsquare strong, and until next time. Thank you, operator.

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