Townsquare Media (TSQ) Bank of America Securities 2024 Leveraged Finance Conference summary

Advertising and broadcast trends

• Post-election, advertiser hesitancy eased, with placements increasing for December and Q1, aligning with prior guidance.

• National broadcast advertising remains in secular decline, now under 10% of revenue, with local advertising as the primary driver.

• Broadcast is managed as a cash cow, with a projected -2% to -4% CAGR ex-political, and expense moderation to maintain margins.

• Political advertising revenue in 2023 was $13 million, below expectations but still the second-best year; future cycles expected to rebound based on battleground state presence.

• Key advertising categories include auto, commercial real estate, retail, and entertainment, with no major shifts in category performance.

Digital growth and strategy

• Digital businesses now generate more revenue and profit than broadcast, with Ignite (digital ad) and Interactive (SaaS) as growth engines.

• Ignite leverages local content, first-party data, and programmatic advertising, with streaming TV and social video as major growth drivers.

• White-labeling programmatic offerings to other broadcasters, such as SummitMedia, could add $4 million revenue in 2024 and potentially $50 million by 2027-2028.

• Townsquare Interactive returned to subscriber and revenue growth in 2023, with profit growth expected in 2024 and a target of $10 million annual top-line growth post-2025.

• Digital segment margins are stable at 28%, with ongoing investment in technology and personnel to maintain profitability.

Financial outlook and capital allocation

• 2023 revenue guidance is $448-$452 million, with adjusted EBITDA of $100-$101 million; 2024 EBITDA expected to dip due to lower political revenue, then rebound on digital growth.

• Free cash flow is $35-$45 million annually, with maintenance CapEx at $12-$13 million per year.

• Debt reduced to $467 million, with plans to refinance to a bank loan in January 2024, targeting leverage below 4x and eventually 3-3.5x.

• Dividend increases of 5% annually are planned, with continued investment in digital and programmatic platforms.

• Not a material cash taxpayer until 2026 due to NOLs; effective tax rate expected to be 27%-28% thereafter.