Townsquare Media(US:TSQ)2025-11-10 14:02Financial Data and Key Metrics Changes - Total net revenue for Q3 2025 was $106.8 million, within the guidance range of $106.5-$108.5 million, reflecting a decline of 7.4% year-over-year [23] - Adjusted EBITDA for Q3 2025 was $22 million, also within the guidance range of $22-$23 million, representing a decline of 13.6% year-over-year [24] - Adjusted EBITDA margins, excluding political revenue, improved slightly from 20% in Q3 2024 to 20.5% in Q3 2025 [26] Business Line Data and Key Metrics Changes - Digital advertising revenue declined by 1.6% year-over-year in Q3 2025, impacted by weakness in remnant indirect digital advertising revenue [24][26] - Townsquare Interactive's revenue decreased approximately 2.3% year-over-year in Q3 2025, but segment profit increased by 21% year-over-year, with profit margins at 33% [25][26] - Broadcast advertising net revenue, excluding political, declined by 8.1% year-over-year in Q3 2025, but profit margins increased from 25% in Q3 2024 to 28% in Q3 2025 [19][26] Market Data and Key Metrics Changes - Digital revenue grew by 2% year-over-year in the first nine months of 2025, contributing to 55% of total net revenue [6] - The digital segment profit margin was 26%, up slightly year-over-year, with digital's contribution to total segment profits growing to 55% [6] - The company is experiencing significant declines in search traffic, with 45 of the top 50 U.S. news websites seeing year-over-year declines in search traffic [13] Company Strategy and Development Direction - The company is focused on being a digital-first local media company, with plans to invest heavily in digital solutions and markets outside the top 50 in the U.S. [7] - Townsquare Ignite, the digital advertising business, is expected to continue as the primary growth driver, despite current challenges in indirect revenue [8] - The company aims to grow its third-party media partnership model, which is expected to contribute approximately $6 million in revenue this year at a 20% profit margin [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment and the impact of AI on audience trends, which have negatively affected remnant revenue [15] - The company expects Q4 digital advertising revenue to be muted due to ongoing headwinds, but remains confident in the strength of its programmatic business [15] - Full-year revenue guidance has been revised down due to declines in search engine traffic and lower-than-expected political revenue [31] Other Important Information - The company generated $18 million of cash flow from operations in the first nine months of 2025, with a net loss of $5.5 million in Q3 2025 [28][26] - The board approved a quarterly dividend of $0.20 per share, equating to an annualized payment of approximately $13 million [30] - The company has reduced its outstanding debt by $17 million since February 2025, with a net leverage of 4.71 times [29] Q&A Session Summary Question: When will core advertising stabilize? - Management noted that core advertising is currently in a secular decline, but expects slight improvement in Q4 and stabilization in 2026, projecting low to mid-single-digit declines [40][42] Question: Is there room for margin cuts given high margins? - Management confirmed that there are opportunities for further efficiency improvements through AI solutions, maintaining healthy profit margins despite revenue declines [43][45] Question: Impact of government-related advertising? - Management indicated that there has been no positive impact from government shutdown-related advertising, with some cancellations noted [48][50] Question: Progress of the Phoenix office and Townsquare Interactive? - Management expressed satisfaction with the Phoenix office's performance and the overall growth in profit for Townsquare Interactive, expecting continued strong profit margins [52][54] Question: Long-term profitability expectations for Interactive? - Management expects to maintain low 30% margins over the next couple of years, with potential for expansion in 2027 and beyond [60][61] Question: Trends in Ignite's digital advertising? - Management confirmed that excluding remnant revenue, digital advertising increased by 5% in Q3, with owned and operated platforms up 10% [64][70]