Good morning and welcome to Townsquare’s Year-end 2020 Conference Call. As a reminder, today’s call is being recorded and your participation implies consent to such recording. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] With that, I would like to introduce the first speaker for today’s call, Claire Yenicay, Executive Vice President.

Thank you, operator, and good morning to everyone. Thank you for joining us today for Townsquare’s fourth quarter and year-end financial update. With me on the call today are Bill Wilson, our CEO; and Stuart Rosenstein, our CFO and Executive Vice President. Please note that during this call, we may make statements that provide information other than historical information, including statements relating to the company’s future expectations, plans and prospects. These statements are considered forward-looking statements under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These statements reflect the company’s beliefs based on current conditions, but are subject to certain risks and uncertainties, including those that are detailed in the company’s annual report on Form 10-K for the year ended December 31, 2020 filed with the SEC. We may also discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income and adjusted operating income, which we may refer to as profit in our remarks. Such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly, year-end and current reports available on our website. I would also encourage all participants to go to our corporate website at www.townsquaremedia.com and download our investor presentation, as Bill will reference some of those slides during our discussion this morning. At this time, I would like to turn the call over to Bill Wilson.

Thank you, Claire, and thank you all for joining us this morning. 2020 was an incredibly challenging and turbulent year. But it was also an extremely rewarding year. Over the past 12 months, I've continually thank the entire Townsquare team for their hard work, best effort and dedication. Our team worked tirelessly and with great passion throughout the pandemic to help our company, by helping local advertisers and businesses as well as by keeping our local communities inform and entertain at a time when both needed at the most. We would not be reporting our strong finish to the year without the amazing and inspiring effort of our entire Townsquare team across the country. As we said internally, throughout 2020, we strived to perform the best when it mattered the most. Perform the best for our own team members, our clients, our communities and our partners. I'm proud to say that our fourth quarter financial results reflect that performance as they exceeded our goals and expectations. And as we look at 2021, we believe that we will continue to see strong improvement and strong results in our business. My goal for Q4, as outlined on our Q3 earnings call was to cut our revenue declines by half, from negative 15% in Q3 to negative 7.5% in Q4. I am very proud that we outperform this goal, reducing our net revenue year-over-year decline to just negative 3.2% in the fourth quarter. It is also important to note that we experienced sequential net revenue improvement on an ex political basis in each month of Q4 as compared to the prior year as our business continued to rebound each month better impressively, because we outperformed fourth quarter revenue expectations and carefully managed expenses. We delivered year-over-year growth of plus 8.4% in fourth quarter…

Thank you, Bill, and good morning, everyone. We ended the year with strong fourth quarter financial results that exceeded our original expectations, driven by continued improvement in our advertising, and Townsquare Interactive segments as well as a record amount of political revenue. In total, fourth quarter net revenue decreased only 3.2% over the prior year period to $108.5 million, a 13.8% improvement from Q3 of 2020's net revenue. 2020 annual net revenue declined 13.9% versus the prior year to $371.3 million. Political revenue, which was a record setting $9.3 million in the fourth quarter and $16 million in 2020, exceeded 2016's Presidential year political revenue by 78%. Excluding political revenue, fourth quarter net revenue declined 10.2% and full year revenue declined 17% as compared to the prior year periods. In the fourth quarter, Townsquare Interactive subscription business continue to improve as TSI's fourth quarter subscription revenue increased 16.3% over the prior year, up from 14.5% in Q3. In 2020, TSI subscription revenue increased 14.4% over the prior year to $70.4 million. In addition, Townsquare Interactive continues to deliver profit growth with 2020 profit increasing 10.1% versus the prior year to $21.1 million, which corresponds to a 30% profit margin. Importantly and impressively, Townsquare Interactive grew net revenue and subscribers in each and every month of 2020, demonstrating its resilience and we believe it's importance to SMBs. In the fourth quarter, Advertising net revenue declined 4.5% or 12.9% excluding political revenue as compared to the prior period. This representing a meaningful improvement from Q3's year-over-year decline of 17.2% and 21.4% excluding political. Our digital advertising solutions net revenue increased approximately 5% in the fourth quarter as compared to the prior year period, and achieved growth in the full year period as well. The net revenue growth of our digital advertising solutions…

Thank you, Stu, and thank you to everyone who dialed in this morning. I am very, very proud of the results we delivered in 2020 in the face of unprecedented challenges, and the solid foundation we have built together as a Townsquare team. As we have stated on earlier calls, our goal during this pandemic has been to balance cost reductions with the opportunity for long-term growth. We want to be the best position 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. Our agenda and focus has not changed since I became the CEO in October 2017. We want to continue to be the best-in-class and entertaining and informing our audiences and communities, while super serving local businesses with world class marketing and advertising solutions to help them grow their businesses. Our goal is to be the best and largest local media company serving markets outside the top 50 in the U.S. To maximize our potential, we want to continue to work and collaborate on being the easiest company to work with from an external perspective, treating clients and partners like friends and the best to work for from an internal perspective. Our DNA is local radio. And when we just say as I get this question a lot from investors, particularly over the past year, for our own company and our listeners and our communities, it's not audio. It is truly local companionship, providing local information, local entertainment and local personalities. And that is why we love it. And that is why we call it local radio. But although our DNA and roots are in local radio, and we still love and embrace…

Yes. First of all, congratulations on your solid quarter. It was really good. Anyway, you may have already mentioned this, but what was political in Q4, and then since we're on the subject of political, there's a number of broadcasters that have indicated that they felt that given the races that we're likely to see, particularly in the Senate and gubernatorial races in 2022, that they expect political to be above 2020 levels. And I was wondering if you have any preliminary thought on that as well?

Thank you, Michael. It's Bill. Hope you’re well. In Q4, our Political revenue was $9.3 million. So for the full year that was $16 million, which was by far and away our largest year ever. As you may recall, on average in a political year, we do about $10 million in revenue, I think we did $9 million in 2019, roughly. And in a awful year, we expect $2 million to $3 million. So we do not expect anywhere near in 2020 levels, 2021. In 2021, we expect again $2 million to $3 million. For context, our expectation in Q1 for Political is a few $100,000, call it $400,000 in Q1. So definitely quite different than those who own assets may be in Georgia and some of those other critical states that you mentioned.

Got you. You provided discussing your Interactive business in the midst of the pandemic. Are you back at full fare as of before? And if so, how much of the Q4 revenues came from price increases? And then, if you can give us a little labor on Q1 revenue estimates, I know that you're saying 15% plus growth in TSI, does that include the prospect of adding another 100 -- 850 subs or more in the quarter? I'm just wondering, can you give us some flavor on that?

Sure. Thank you, Michael. Yes, Townsquare Interactive couldn't be more pleased with team's performance throughout the pandemic. As we've said, every quarter posted revenue and profit gains year-over-year. As you just alluded to on our Q3 earnings call, we highlighted that in the -- particularly in the depths of the pandemic, April, May, June, some of the markets that we're in were hit later. In the summer, we provided discounts to Townsquare Interactive customers. We believe that was the right thing to do. For some of them, it was in essence a couple months free. For others, it was taking it down substantially. The great thing is 86% of those who we gave discounts to remained in business and then continued back at their regular rate post that discount. So that increase of 16% in Q4 that you noted for Townsquare Interactive was the return to full pricing. For the year, we were up 14% $70 million in revenue, $21 million in profit. So really pleased. As you know, Michael, pretty much every year for the last 5 years, we've added $10 million top line approximately and $3 million bottom lines at Townsquare Interactive. So as we go into Q1, to your question about what we expect in terms of net ads, we expect 850 net ads in Q1 as we had in Q4. It's obviously a little less days with February and some holidays in Q1. So that's where we expect to be and that would equate to a increase of 15% in revenue year-over-year for Townsquare Interactive. And then as we noted at the end of the call, in terms of total revenue, net revenue ex Live Events, ex Political, we're expecting and we are focused on a full revenue recovery in Q1 of '21, we're expecting to be down just a couple of percentage points off of '20. And our real goal moving forward, and when we talk in future calls coming up for q1, we're going to be comping ourselves at least internally and externally against 2019. So net revenue, ex Live Events, we're hoping to give you also a couple of percentage points off of 2019 levels in Q1, and Townsquare Interactive is definitely a part of that, as is our total digital offering.

That's terrific. One final question. In terms of Live Events, what are you planning in terms of 2021? Are you kind of making plans now to kind of ramp that back up in the second half of this year? Or what are your thoughts on Live Events?

Yes, we're obviously very cautiously optimistic. As I noted earlier on the call, the rapid change in terms of the vaccine distribution in the last 30 days from what we're seeing ourselves, but also from what we're hearing from our communities and our clients has really changed the mindset which is great for our overall business in terms of optimism with now 100 -- I think it's 107 million vaccines distributed as of yesterday. Certain states, including Connecticut and Mississippi and others are now starting to say as of April 5. Mississippi already I know Connecticut this morning announced April 5, any adult will be able to get vaccinated, so no restrictions for different classes, which I think you'll continue to see those states move to that. So as it relates to Live Events, interesting, we have actually applied from some permits during the pandemic, with the expectation that we'd get the permits, but then delay the actual event date. And we actually got approval for a event in Texas in May, which right now we would be planning, that would be our first live event of any size, we'd obviously practice the appropriate health protocols, but that would be our first. We're expecting a little bit in Q2, very few, literally a handful. And then my expectation to your point is the back half of the year doesn't return to normal. But in 2019, we did $16 million in revenue, maybe we get to $5 million for the year or type of thing and then return to full growth in 2022 for Live Events. You've probably seen some companies like Live Nation and others are already announced outdoor shows this summer. So we're definitely cautiously optimistic. The numbers I just provided, you could definitely improve as we head into the back half of the year.

Great and congratulations again. I'll let others ask questions. Thank you.

Thank you, Mike. I appreciate [indiscernible].

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

Thanks much. Do you plan any changes in your financial strategies following the Oaktree exit? In particular, does this provide any greater opportunity to achieve those that dramatic decrease in your overall leverage that you're targeting?

Yes. I mean, it's good to hear from you, Jim. Thanks for asking the question. I'll turn it to Stu in a minute. But as you know, we were very focused and continue to be focused on delevering and we made much progress from 2017 to 2019. We ended, I believe, 2019 in roughly the mid 4s in terms of net leverage. And our goal was to be in the low 4s, and we were progressing steadily there. And quite honestly, we're very confident we would have achieved that this year. Obviously, the pandemic set us back from a EBITDA perspective. Really happy with our new capital structure and the tranche of bonds that we talked about on the call and fully expect and are focused on delevering again, back to the mid 4s, and then down from there. Obviously, that's going to take some time where it's going to happen primarily through EBITDA growth, which, as we just alluded to, with Q4 EBITDA growth in 2020, we're quite pleased with that with plus 8% growth. Then we obviously just indicated our expectation for Q1 '21 EBITDA growth, which was quite strong as well over '20. Stu, anything else you would add as it relates to leverage and the capital structure?

No, that really covers it all. The one thing I would like to mention is that, are we -- putting out a dividend permanently basically offsets the small increase that we have in our new capital structure. So from a reduction of leverage standpoint, we're not really facing an increase in interest expense.

Maybe just to follow on what you just said Stu, with the dividend, is there any likelihood that it could be restored? Or do you think once you've gotten to this point, maybe that's a lower priority until we [multiple speakers]?

We don't think -- that's a good question, Jim. We don't believe management is not in favor and we don't think we will bring the dividend back. For a company of our size, we think deleveraging and increasing our internal businesses and growing our digital businesses is much more important and much more valuable to the equity in this company.

Okay. And secondly, Bill, I think we talked maybe a year or two ago, as Ignite was becoming more prominent that it got such good reception that perhaps you could even extend into other markets, either as a sale as technology, lessing technology or acting as an agent for other markets where you either compete, or you -- have we gone forward and added all?

Great question, Jim. Yes, so for those who may not be as familiar with the Townsquare transformation, we originally were selling Townsquare Interactive, our subscription business only within our markets. After a few years, our success in our markets we took are website and reputation in everything around Townsquare Interactive outside of our markets and have built an inside sales team as world class in Charlotte of roughly 200 sellers, who had been selling Townsquare Interactive subscription services, digital marketing solutions for, in essence the last 5 years. As you just noted, Jim, we have shared publicly that during the pandemic, we started to test selling Ignite, which is digital programmatic advertising outside of our local market footprint. Up until the pandemic, we were only selling Ignite to our world class local sales team in our 67 local markets. But given the success, and particularly in markets outside the top 50, we saw a significant competitive advantage with our Ignite. The fact that it's all in-house, the amount of inventory we see across the internet, our opportunity to optimize that are often the opportunity to actually come up with the right message for the client and then build the creative. As I noted on this call, we in essence became a full service digital agency this year. And so we did start selling Ignite through a test of our Charlotte tastes [ph] inside sales team. And I couldn't be more pleased with the early test results. It is early, so I just want to be cautious that it is, in essence, a team that started with two people in the first half of the year, we built that to eight people in the second half of the year. And we think that just as we had success, with Townsquare Interactive being sold outside of our local market footprint, we're confident we'll be able to do the same with Ignite. I would expect in 2021, that could approach $5 million in revenue for Ignite outside of our markets. And then from there '20, we would start to really scale this with a larger team. And a -- also put in place selling Ignite in our second Townsquare location as we build that out west at the end of the year. So, really quite amazing opportunity for us on a dual front in terms of digital advertising and Ignite, as well as continuing our Townsquare Interactive, which I obviously on this call went to great lengths to outline the market opportunity of 8.8 million SMBs that fit our target profile. So back to your question, Jim, yes, Ignite being sold outside our markets. We are and have started in the last 8 months doing that and expect to accelerate that through '21 and '22.

Okay. And final question, do you have an aggregate EBITDA margin target you're hoping to achieve and sort of on a related basis to discuss the process of phasing in some of the necessary costs and expenses that you may have been cutting back during the pent up [ph]?

Sure. I'll let Stu step in, but a lot of -- as a reminder, we determined in conjunction with the Board. When the pandemic really hit full throttle back in March and April, we made the conscious decision to make some cuts. But they were very, I'd say, small compared to what others may have done. As you may recall, we laid off roughly 6% of our full time workforce, which was about 150 people which were primarily corporate related and support role. So you will see our corporate expense coming down in Q1 '21 and throughout '21. But as Stu said, we're going to continue to invest and we didn't cut in our really core advertising and Townsquare Interactive areas because we wanted to be well situated for growth. And I think that's one of the reasons quite honestly, we're not performing so well and on the verge of a full revenue recovery because we were able to not make those cuts and be well situated for the rebound. Stu, do you want to talk about what expenses remain out and what you expect coming in as we move forward?

Yes. So, yes, Jim, as you recall, we've mentioned overall, we probably proximately cut about $30 million of OpEx, non-OpEx cash out of the business on an annual basis. And we cut about 10%, we fire about 10% of our full time employee base. We've started adding them back to our digital businesses and our broadcast business where it makes sense. A lot of the types of -- a lot of the types of cost savings, we hope to bring back like the matching of the 401-K employee contribution match. So of the approximately $30 million of cash out the door savings permanently will probably be between $15 million to $20 million of that. So almost two thirds of this. We will probably from a gross -- answering your question on the gross profit margins. As you see in Q4, our EBITDA margin is playing almost 24.9%, almost hit back to 25%. And we're going to comp as Bill had mentioned, ourselves we are going to plan to be back into the low to mid 20% gross profit margins on an EBITDA basis going forward. We're going to comp ourselves to 2019 level.

Okay, thank you very much. Appreciate it.

Thank you, Jim.

The next question comes from the line of Dennis Leibowitz with Act II Partners. Please proceed with your question.

Thanks. With respect to the Oaktree deal, I was wondering, I saw that simultaneously, you, Bill, sold a block of stock. I don't know if it had been restricted and wondered if you could explain that. And also, what happens to the Board seats that Oaktree has?

I did not sell a block of stocks. I saw that listed on a Bloomberg terminal. I know we looked into that and I believe had to correct it. But just for the public record, I did not sell any stock. I can't remember the last time I'd sold any, nothing in '20, nothing in '21. Just so that is definitely a inaccurate data point. I'm glad you asked that. If anybody else was seeing that, that did not happen. Stu, do you want to take the overall question?

Yes. So from the -- from Oaktree leaving, there were a couple of ex Oaktree Partners, who decided to remain on the Board after they left Oaktree. They've been very supportive, very helpful. They're going to keep their seats. And as of this time, the managing director that's still at Oaktree is the only actual employee it's on the board. He hasn't told us, he's been super supportive. He was been in this business since the -- since day one. He may decide to come off down the road, but he hasn't. So there's been no predetermined. There's been no predetermined change in the Board seat [indiscernible] for that.

Okay. Thanks for the clarification.\

Excellent. Thank you, Dennis. Thanks for dialing in.

The next question is a follow-up from Michael Kupinski with NOBLE Capital Markets. Please proceed with your question.

Thank you. It's, Stu you mentioned the high bar in terms of radio acquisitions and the parameters. I was wondering, can you talk a little bit about the parameters that you might have for digital acquisitions, if you have an appetite there?

Sure, yes. I really defer to Bill, the only thing I have to say is we're going to have a high bar to digital because we can always kind of create it and develop it internally ourselves at much more economic basis as [indiscernible] Bill, this is your …

Yes, and I think Michael, two for Tuesday, I'm glad you came back with a follow-up.

I believe as we talked about on prior calls, we're going to be the natural acquire of broadcast stations outside the top 50 markets. And I believe that will happen post-pandemic as recovery. I still believe D reg will happen. I don't know if it will happen based on the ruling that's sitting with the supreme court now, but based on what we see day in and day out in our local communities. And in essence, the news deserts of journalism really receding and us moving into fill that void. I do think we will be an acquirer of local radio stations. As I noted on this call, although we became a digital first company in 2020. We love local radio. It's part of our DNA and we will continue and always will be part of local radio and serving our communities. As it relates to your question for digital acquisitions, as Stu said, the great thing about our business on the digital sizes, in addition to the growth is 100% organic. We built all these solutions are owned and operated and if that I took the time to walk through on this call of monetizing our own audience that we have built from 1 million in 2011 to 58 million in 2020, to ignite our digital programmatic offering to Townsquare Interactive, we literally have a world class product and development team. We actually added a dedicated slide in our investor deck to highlight that team. Thankfully, many of them of the 40 plus people, over half of them were with me at AOL and join me in 2010 when we came together to Townsquare. We had the benefit of working together for a long time. We've looked at acquisitions in the programmatic space as a tuck into Ignite. We've…

Right. Thanks for that color. Appreciate it.

You're welcome, Michael. Thank you.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Mr. Bill Wilson for closing remarks. End of Q&A:

Thank you, operator and thank you to everyone who dialed in today. And most of all, I want to thank our Townsquare team for their passionate, inspired and perseverance performance over the last 12 months that put us in this position of a full revenue recovery moving forward post-pandemic. I would also remind all of our shareholders that we put our annual shareholder on our website. So in addition to downloading our investor deck, which I encourage you to do, I would encourage you to also read our annual shareholder letter which is now available. Be safe, be well and talk to you soon. Take care.

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