Townsquare Media, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Digital-First Strategy: Townsquare has transformed into a digital-first local media company. Digital revenue in the first 9 months of 2025 was 55% of total net revenue, with digital segment profit up 4% y-o-y and margin 26%. Digital is the growth engine, with focus on markets outside top 50 U.S. cities.
• Townsquare Ignite Details: Programmatic business growing strongly with high single-digit revenue growth in Q3. Media partnerships with 6 signed, expected to contribute $6M in top-line revenue in 2025 at 20% margin. Direct sales of local owned and operated digital properties up ~10% in Q3 and YTD. Headwinds from AI impact on online audience leading to decline in search traffic and remnant revenue.
• Townsquare Interactive: Profit growth continuing, with 21% y-o-y profit increase in Q3. Margin improvement due to customer service restructuring, sales structure changes, and AI deployment. Short-term revenue muted due to smaller sales team, but confident in returning to growth in 2026 with profit margins above 30%.
• Broadcast Radio: Viewed as cash cow with strong cash flow. Outperformed industry in 2025, managing expenses to maintain profit margin. Expecting slight improvement in ex-political broadcast performance in Q4, but total decline due to political comps and lighter political revenue this year.

Segment Performance

• Townsquare Ignite (Digital Advertising): In Q3, digital advertising had a slight overall decline of less than 2% y-o-y. Programmatic business (60% of segment revenue) had high single-digit growth. Direct sales of local owned and operated digital properties were up ~10% y-o-y. Remnant revenue, which accounted for 13% of digital advertising revenue in 2024, declined 50% y-o-y in Q3 2025, from $5M to $2.5M. Excluding remnant, Q3 digital advertising revenue would have increased +5% y-o-y.
• Townsquare Interactive (Subscription-Based Digital Marketing Solutions): Q3 revenue decreased ~2% y-o-y, but segment profit increased 21% y-o-y. Year-to-date profit margin was 33%, up from historical 28% due to customer service restructuring, sales structure changes, and AI deployment. Revenue expected to be roughly in line with Q3 in Q4, with confidence in returning to growth in 2026.
• Broadcast Local Radio: Ex-political broadcast advertising net revenue declined 8% y-o-y in Q3. Ex-political broadcast profit margin expanded from 25% in Q3 2024 to 28% in Q3 2025, driven by expense management. Total net revenue for Q3 was $106.8M, within guidance range of $106.5M-$108.5M. Adjusted EBITDA was $22M, within guidance range of $22M-$23M.

Guidance

• Third quarter results met revenue and adjusted EBITDA guidance. Full year 2025 net revenue guidance revised due to remnant revenue decline (expected $5.5M decline in second half) and lower political revenue (expected over $3M vs. under $2M). Fourth quarter net revenue expected between $105M-$109M, adjusted EBITDA between $21.5M-$23.5M. Full year 2025 net revenue expected $426M-$430M, adjusted EBITDA $88M-$90M.

Risks

• AI Impact: Decline in search traffic due to AI affecting web publishers, leading to significant drop in remnant revenue.
• Macro Uncertainties: Government shutdowns, interest rate fluctuations, and overall economic uncertainty impacting advertising spend.
• Political Revenue Variability: Fluctuations in political advertising revenue affecting broadcast segment performance.

Question and Answer

• Q: First, on the broadcasting side, when do you think we'll see stabilization on core advertising? And what's needed for stabilization? A: Bill Wilson expects core radio (ex-political) to move to low to mid-single digits decline in 2026, low single digits in 2027 and beyond. Factors include improved macro environment and resolution of uncertainties like government shutdowns.
• Q: You've maintained impressive margins. Is there much to cut there? A: Bill Wilson states there is opportunity to cut costs, with AI solutions being deployed to increase efficiency and productivity, helping maintain strong margins despite revenue declines.
• Q: On Interactive's profit margin expectations and Ignite's trends, including remnant revenue impact on guidance? A: Bill Wilson explains that Interactive is expected to remain in low to mid-30% margins in the next 18-24 months, with room for expansion later. For Ignite, remnant revenue decline was the main driver of guidance revision, with programmatic business performing well but offset by indirect revenue headwinds.