Townsquare Media, Inc. (NYSE:TSQ) Q4 2023 Earnings Call Transcript

To your second question, Jim, which I appreciate is digital advertising has been for many years and will continue to be the growth engine for Townsquare overall, growing 7% last year. We’re quite proud of that, growing $10 million full year revenue with our programmatic part, as you described, like, hey, can you kind of parse what’s going on there and what’s going well? Programmatic up year-over-year in the low double-digits for 2023 is quite strong. It’s stronger than the industry average. In terms of that area, what we’re seeing is social, streaming, television, those two are doing the best in terms of growth rates. I’m sure you’re familiar, Jim, we’ve talked about it previously, streaming TV is the greatest growth area in digital advertising.

Five years ago, we could not compete with cable and television brands. Today, not only are we competing with them, we’re share shifting business and winning business. And I think as we took on more creative resources, it’s one of the areas that I alluded to with Sun Sachs winning the NAB Digital Leadership Award. We’ve got a whole team focused on AI in the company. And one of the things we’ve already started deploying is artificial intelligence for our creative, for our audio broadcast spots, for our digital video spots, for our digital display spots all of those things. So the fact that we can now sell streaming TV, and I think in a differentiated way, is a real advantage for us. The other part of it that’s doing quite well in Townsquare Ignite, our digital advertising division, is monetizing our owned and operated properties, particularly local.

Local has been up low double-digits full year in 2023. I expect that to continue to be mid-single digits in 2024. I expect programmatic in 2024 to continue to be either high single-digits or low double-digits. Where we’ve struggled in the digital advertising front, and I was very transparent on the prepared remarks, is our national business like xxl.com or xxlmag.com and tasteofcountry.com, that was down over $4 million last year, over 25%. And we see that slightly improving in Q2, but still down 20%. So that will even itself out. We were confident just like as we face some obstacles in Townsquare Interactive last year. The reason national O&O is more challenged and having a setback while local continues to grow from an O&O perspective is really the change in algorithms from Google and others that has affected our national brands where there may be more plethora of content around hip-hop or country music, where as we’ve talked about in our local markets where we’re completely differentiated outside the top 50 cities in the US, it’s been quite sad as American citizens see the demise of newspapers and the investment in providing local news.

And as we’ve alluded to and there was actually a keynote at Borel this past Monday that Jared Willig did for us, we stepped in many years ago and filled that void. And that is one of the reasons that our digital advertising continues to grow as strongly as it does outpacing many in the industry is we’ve got the benefit of our programmatic up last year, low double-digits and also our local website and apps up low double-digits in digital advertising, and I encourage everybody on this call to spend time on our local mobile apps and local websites. They, in essence, are what people would think of a newspaper 5, 10, 15, 20 years ago. And a) it’s a great business for us. It’s highly profitable. It’s obviously increasing revenue quite nicely, as I said, in 2023, low double-digits, but it’s also serving an incredibly important mission of helping our communities be informed and entertained.

And that’s one of the things we’re proud of our broadcast business. We believe, as Stu said, being in the broadcast business outside of the top 50 markets is completely different in our view than being in the broadcast business in the top 50 markets. As I said on the call, we reached 50%, 5-0, one in two adults in the markets that we operate in, just simply over our AM/FM transmission. That is unlike the top 50 cities, which will be closer to maybe 25% for the number one market share. So couldn’t be more excited about digital advertising on our Ignite business. It clearly was a stand out for us in 2023. But as we go into 2024, we see improvement in our broadcast business, Q1 over Q4, Q2 over Q1 currently pacing, see improvement in Townsquare Ignite digital advertising in terms of Q4 over, I’m sorry, Q1 over Q4 as well and then Q2 over Q1 in terms of pacing right now.

And then clearly, huge bounce back with subscriber growth, revenue growth, profit growth in Townsquare Interactive. So although our guide, I’d say, is modest when you compare it to last year, we’re going to have a standout year in each three of these divisions, and we’re excited by that. And obviously, we’ve got the benefit of political. I’ll just touch on that. It wasn’t asked, but PQ Media, which is really a consultant in the space said that $14.6 billion of spend will happen in 2024. That is up more than 45% from 2020, which was $10 billion. They expect radio to get $769 million in political advertising. That’s an increase of 35% for 2020 just for radio. That’s an expected 35% increase in radio spend in political. For us, we’re very well positioned.