Townsquare Media, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Townsquare's second quarter results met or exceeded total net revenue and adjusted EBITDA guidance. Execution of digital-first local media strategy has delivered solid results and strong cash flow.
• Digital solutions: In 2024, ~52% of total net revenue and 50% of total segment profit came from digital solutions. H1 2025 total digital revenue grew +4% YOY, with digital revenue in H1 2025 at 55% of total net revenue, industry-leading. Digital segment profit +9% YOY H1 2025 with 27% profit margin.
• Ignite: Programmatic was the strongest component of digital advertising in Q2. Media partnership model launched in early 2024 with 6 local media partners, reaching 19 incremental markets, expected to be a growth driver.
• Townsquare Interactive: Restructured customer service model in 2023 and sales structure in late 2024/early 2025, along with AI deployment, driving profit growth. Q2 segment profit +15% YOY with 33% margin.
• Broadcast: Gained market share despite revenue declines, managed expenses to maintain ~30% profit margin ex-political in Q2.

Segment Performance

• Ignite (Digital Advertising): Q2 digital advertising revenue grew +2% YOY. Programmatic made up ~60% of the segment's revenue with strong organic growth. Local owned and operated digital business was strong, but remnant unsold inventory via exchanges was negatively impacted by declining search engine traffic. Q3 expected to have growth inline with Q2.
• Townsquare Interactive: Q2 revenue +1% YOY, segment profit +15% YOY. Profit margin above 30% in 2025. Q3 revenue expected to be inline with Q2's $18.8M, and Q4 revenue expected to grow over Q3.
• Broadcast local radio: Q2 broadcast advertising net revenue ex-political declined -8%, but profit margin ex-political was ~30%, stronger than Q2 2024. Gained local and national broadcast market share, with local market spot share in June at an all-time high of 39%.

Guidance

• Q3 net revenue expected between $106.5M and $108.5M.
• Q3 Townsquare Ignite growth inline with Q2's performance, Townsquare Interactive revenue inline with Q2's $18.8M, Broadcast ex-political decline inline with prior quarters.
• Full-year 2025 revenue range narrowed to $435M-$440M, adjusted EBITDA range narrowed to $90M-$94M, both within original parameters set at the start of the year.

Risks

• Macro economic uncertainties impacting advertising spend.
• Declining search engine traffic negatively impacting remnant digital inventory sales.
• Government advertising cuts (DOGE cuts) impacting revenue in 2025, affecting both broadcast and digital advertising.

Question and Answer Q: Michael Kupinski asked about the search engine referral traffic trends and if it would change the digital advertising outlook.

A: Bill Wilson responded that search engine referral traffic has come down, muting indirect revenue, but programmatic (60% of digital advertising) had no impact. He expects this to be a temporary setback and remains bullish on digital advertising's long-term growth trajectory.

Q: Patrick Sholl asked if the magnitude of the referral traffic headwind is similar to the change in social media referral traffic algorithm.

A: Bill Wilson stated it's similar to past algorithm changes on social media, but search engine traffic plateaued and started growing again, expecting a similar trend with search engine referral traffic over time but decline continuing into late 2025.

Q: Michael Kupinski followed up on the Phoenix office update and government advertising contribution.

A: Bill Wilson mentioned the Phoenix office has ~40 employees, serving as a talent pool and benefiting from West Coast time zone. Government advertising cuts (DOGE cuts) impacted revenue by several million dollars, affecting both broadcast and digital advertising.