Q2 2020 Townsquare Media Inc Earnings Call
The next available conference specialist will be with you momentarily.
[noise].
Welcome to the Vivek Comfort Center next available conference specialist will be with you momentarily.
[music].
[laughter].
[music].
Welcome to the Vivek Conference Center next available conference specialist will be with you momentarily.
[music].
Welcome to the Vivek Comfort Center next available conference specialist will be with you momentarily.
[music].
Welcome to the Vivek Conference Center next available conference specialist will be with you momentarily.
[music].
Welcome to the Vivek Conference Center next available conference specialist will be with you momentarily.
[music].
No.
Welcome to the Vivek Conference Center next available conference specialist will be with you momentarily.
Counts in fact I have your first unless they please.
Yes that stay this.
Well company the workforce.
Hi, It all at all I E R.
Well company are you looking for drilling.
For the Townsquare media earnings call.
I'll try and you're right there's standby.
Good.
We previously highlighted the year started off at a very strong no continue our momentum from an excellent 2019 with January and February pro forma net revenue, plus 6% and plus 7% respectively compared to those months last year. However, the onset of the cobot 19 pandemic brought with it.
Significant advertising in live event cancellations, which are back redid, our strong revenue growth as we ended Q1 with revenue up only plus 0.5% on a pro forma basis.
As I shared on our Q1 earnings call at that time I expected that in Q2, our net revenue would be down negative, 36% and townsquare interactive with growth plus 10%.
We actually finished slightly better as net revenue in Q2 was negative 35% and Townsquare interactive revenue grew plus.
10.5%.
Of our three reporting segments advertising has had the most significant negative impact to our overall result, given its relative size for reference advertising accounted for approximately 82% of our total net revenue in 2019.
Although revenue in our live events segment declined nearly 100% in the second quarter compared to last year. The segment only represented less than 5% of total revenue in 2019.
As a result, it's the client had a smaller topline revenue impact and the decline in our advertising business. Therefore, let's dig into our advertising results first.
Advertising was hit the hardest in the month of April with significant order cancellations and limited new business written as the majority of Americans were understand home orders and many businesses were temporarily close.
As businesses began to reopen subject to state and county reopening plans in May we began to see less advertising cancellations and more business being generated and bought.
Finally in June our material improvement began to take hold across our markets.
In total advertising revenues showed sequential improvement throughout the second quarter declining negative 42% in April negative, 41% in may and narrowing the declined significantly to negative 30% in June as compared to the same ones in 2019.
Broadcast advertising took the brunt of the cancellations as advertisers were less likely to cancel their digital campaigns as consumers have remain heavily engaged online throughout the crisis.
Broadcast revenues declined negative 52% in April and improved to negative 35% by June translating to a negative 45% broadcast declined in Q2 compared to the prior year.
Digital advertising revenues declined only negative 18% in Q2.
The sequential improvement in advertising that we experienced in the second quarter has continued to date in Q3 with each week getting stronger.
In July advertising revenue improved from june's negative, 30% to negative 24% with broadcast revenue declines narrowing from Jews negative, 35% to negative, 29% and digital advertising revenue declines narrowing from June negative, 16% to negative 10% driven by.
Until declines in advertising cancellations.
In addition July was our strongest new advertising business month of the year defined as business from an advertiser that has not advertise would tell square in the last 13 months.
We expect August will be better than July based on our current revenue booked and therefore expect Q3 advertising will be materially better than Q2 for both broadcast and digital advertising revenue.
As you would expect the regions impacted most by the pandemic and the resulting restrictions took the biggest it an AD revenues for example in the New York Tristate area net revenue declined by over 53% in April and did not see material improvements throughout the second quarter with June still off negative 52%.
However, as infection rates dropped and restrictions were lifted revenue rebounded quickly with July revenue improving to negative 35% and August currently pacing negative, 25%, which is 27 points better than only two months earlier.
New England in Michigan experienced similar declines in April, but improved faster than the Tri state area with June revenue improving to negative, 31% in new England and negative 37% in Michigan.
That trend continues in July with new England's off negative 21% in July and currently pacing negative 20% in August and Michigan off negative 27% in July and currently pacing down negative 24% in August.
At the opposite ends of the spectrum in states with the least restrictions such as Iowa, and the Dakotas. The revenue decline wasn't as severe down negative 28% in April improving to negative 21% in June and negative 9% in July and currently pacing even for August.
I know many investors are curious how we are faring in states, where the outbreak has been most severe in the summer months.
Thank fully we do not have any local exposure to current hot spots like Florida, California, and Arizona. However, we do have significant presence in Texas, although smaller cities and not in major cities as you know our footprint is concentrated on small and midsize markets.
In Texas, where restrictions were implemented later and we're also lifted earlier than their counterparts in the northeast. The hardest hit month was may where revenue declined negative 45%, but quickly rebounded to negative 20 per 7% in June as restrictions were lifted.
August is currently pacing negative, 22%, which is nowhere near as bad as what the northeast experienced in Q2 during the worst of their outbreak.
From a category perspective auto and entertainment experienced the largest declines in the second quarter as did furniture stores fast food and dentist.
There were some bright spots as well with revenue increases in education insurance groceries and state government.
Currently we are seeing new business surge in a number of categories, including contractors and builders healthcare banks home repair hardware as well as education and training.
Political revenue came in at 886000 in the second quarter first our 950000 expectation based on some primary is moving from Q2 to Q3.
However, political revenue has roared back in Q3 currently we have 1.9 million a political revenue booked for Q3, 42% more than we booked and all of Q3 2016.
In July alone political revenue was five times greater than July 2016.
Partially due to the primary dates pushed back as I mentioned earlier, but also increases and pack spending because of these trends. We still believe that 2020 will be a strong political year, and we expect to generate approximately 10 million and political for the year, which would exceed 2000 sixteen's political of 9 million.
Our live events net revenue declined nearly 100% in the second quarter as we cancelled or postponed are scheduled live events due to the pandemic.
Fortunately after streamlining our live event business in 2018, and 19, we now have a significantly smaller events footprint that is concentrated to our local radio markets and their brands and as a result, our expense base is largely variable. So I'll go live event second quarter revenue declined nearly 100% to 32000 dollar.
<unk> expenses declined 98%, resulting a small second quarter losses of only $62000.
And for the first six months or the Euro live events segment is still cash flow positive with approximately a half a million dollars of adjusted operating income, which I also referred to as profit.
Given our largely variable expense base in live events, even if we were to generate no more live events revenue for the remainder of 2020, we expect our live events division to approximately breakeven on an EBITDA and cash flow basis for the year, given our strong expense management.
Going forward, we're proceeding very cautiously and operating only a handful of small events that do not involve large crowds and abide by all state and local guidelines as you would expect for the foreseeable future. We do not plan to producer operate any live events involving mass gatherings of people.
We continue to prioritize the health and safety of our employees and our communities and while we look forward to proceeding with our approximately 200 heritage local live events in our local markets and we look forward to seeing our audiences in our communities in person again, we will not do so until we were confident that it's safe and prudent.
As it became apparent in mid March that the Kobin 19 pandemic was going to have a severe impact on our business and in particular, our advertising a live events revenue base.
Reacted quickly to enact cost reductions that would help mitigate the near term pain, we expected to experience as a result of these actions during the second quarter, we realized approximately 1.7 million a monthly fixed cost savings related to the reduction in our workforce temporary hiring freezes the temporary suspension of our foreign one k.
Contribution matching program and various other cost saving measures we deemed prudent.
In the second quarter direct operating expenses declined by 11.2 million were approximately 15% as compared to the prior year period, partially offsetting the decline in revenue.
We enacted the maximum amount of expense reductions that we felt would not hurt our long term growth opportunities.
Our goal was to minimize personnel layoffs. So that we would have a talented although slightly leaner world class team in place and ready to hit the ground running as states reopen for business.
Therefore, we did not cut as deeply as we could have and not all of these cost reductions are permanent and we expect that some of these expenses will return as business ramps up.
For example, we have already started strategically hiring again.
In addition, we did not reduce either our townsquare interactive or Townsquare ignite teams and instead focused on a large number of the head count reductions at corporate rolls or support functions. However, I believe the steps, we've taken where the right ones.
And that we are well positioned not just to prevail through this pandemic, but most importantly to be one of the best positioned local media companies on the other side of this pandemic whenever that may be months or quarters from now.
Now I'd like to switch directions, and focus on some financial highlights of the second quarter first and foremost as our digital marketing solutions subscription business Townsquare interactive.
Townsquare interactive was built to be a recession resistant subscription business and we believe is proving to be sell delivering revenue profit and subscriber growth throughout the pandemic a truly impressive accomplishment.
During this pandemic to Townsquare interactive team became a tremendous resource for our local clients by not only powering their online communication strategy.
But also by sharing relevant and timely information with them for example, providing important information about government stimulus plans and how to apply for assistance.
In addition, the team helped restaurants adapter websites to use online ordering curbside pickup platforms, how professional services or health and fitness companies adapter web sites for online scheduling and virtual classes and helped retailers adapter web sites to allow for ecommerce for those that did not offer prior to the coven 19 pandemic.
Townsquare interactive provides a true important and valuable resource for small business owners, which translated to strong financial results for town square.
Second quarter net revenue increased plus 10.5% as compared to Q2 of 2019, ending the quarter with approximately 20750 net subscribers. In addition, a plus 900 net subscribers during the quarter up from Q1's, plus a 50 and the ninth consecutive quarter.
850, or more net subscriber ads.
Our Q2 revenue for Townsquare interactive was 16.9 million.
And based on our current subscriber base Townsquare interactive is run rate annual revenue is over 70 million at the end of Q2, and therefore I am confident in reaffirming our expectation of Townsquare interactive achieving $100 million an annual net revenue within two to four years.
In addition, Townsquare interactive continues to generate a strong profit with a healthy profit margin of 30.5% in Q2, and that's over $5 million a profit in the second quarter and close to 10 million in the first six months of a year.
As we begin Q3, we are continuing to see growth with July T. assigned net revenue plus 13% and we expect Townsquare interactive subscriber base to continue to grow strongly each month for the rest of 2020.
It took townsquare interactive 57 months to achieve our first 10000 subscribers. Thus averaging 175 net subscriber adds per month during that time period.
And then took only 44 months for us to reach the next 10000 subscribers, which equated to an average of 227 net subscribers added per month during that time period.
Given the pace of 850 net subscriber adds a quarter or 283 net subscriber adds per month, we expect we will reach 30000 subscribers and approximately 35 months or less.
When we reach 30000 subscribers, we expect our revenue at that point will be roughly $110 million on an annualized spaces.
This also reinforces our expectation that Townsquare interactive will reach 100 million an annual net revenue within two to four years and most likely in three years or less.
We believe another financial highlight of the second quarter also serves as a clear differentiator between Townsquare and others in local media.
In the second quarter digital revenue accounted for more than 48% of our total net revenue.
This was driven not only by Townsquare interactive strength, but also by our digital advertising solutions faring better than our broadcast advertising solutions during the pandemic.
That is in part due to the popularity of Townsquare ignite our digital programmatic advertising solution, which was one of our strongest advertising products in the second quarter.
While overall digital advertising revenue decline negative 18% in Q2 revenue from Townsquare Ignite solutions only declined 11.6% in Q2 compared to the prior period.
And it has entered positive pacing territory in July and that's I expect ignite to be up mid to high single digits for Q3 over prior year.
We remain confident in our estimate that annual Townsquare ignite advertising revenue reached $100 million in the next two to four years.
Additionally, given the strength of our online audience growth and their engagement, which increased our digital AD impressions on our own sites digital display advertising on our owned and operated sites and apps only declined negative 10% in Q2, and we expect in Q3 will return to prior year levels, if not higher.
In my opinion.
This proves that Townsquares digital assets beat our digital audience to our websites and apps, our video social mobile and programmatic advertising solutions or our robust digital marketing subscription services are a real differentiator for our company.
And proves out the fact that although we are proud of our roots and DNA in radio Townsquare is not limited to being just a radio or audio company, but rather at this point, Ken and quite honestly should be classified as a premier local media and digital marketing solutions company.
And we believe our diversification will enable us to rebound more quickly than others in the radio broadcast industry from this cobot 19 pandemic downturn.
The third and final financial highlight I will point out today is a very important one and therefore Stuart will spend some more time on it in a bit and what I'm, referring to is our cash generation ability as we forecasted in shared with you on our last earnings call. Our cash flow from operations was positive in the second quarter, even with revenue decline.
The negative 35% during one of the most severe advertising pullbacks, we have ever experienced cash flow provided by continuing operations was positive $2.3 million into second quarter.
And approximately 12 million in the year to date period and that is after making nearly 16 million of cash interest payments in 2020.
And based on our current knowledge visibility and expectations and as a result of our expense reductions and prudent cash management, we strongly believe that our liquidity position today is sufficient to sustain our business at the current advertising levels for the better part of the next three years, even if our revenue does not improve.
However, we are prepared for and in fact, we believe we're we're doing the work necessary for business through cover more quickly and you're seeing that in our sequential revenue improvement through Q2 ends in July and currently in August.
I Trust that I provided a very thorough in depth perspective, not only on our Q2 results, but also what we're currently seeing in July and August.
Looking ahead to Q3, I wanted to be very direct and transparent.
Although we have seen sequential improvement in our advertising business and Townsquare interactive subscription business continues to grow.
We still have a long way to go to fully recover and then resume our industry leading revenue growth that we generated in 2019.
As you would expect future results are dependent on the continued success of businesses opening over the next few weeks and months in quarters and whether there is a second stage of that pandemic in the fall or winter.
Although we will not be providing formal guidance given the continued uncertainty of the cobot 19 pandemic.
Our goal in Q3 is to improve net revenue from negative 35% in Q2.
To close to negative 20% in Q3 as compared to last year.
As was the case in Q2, where we had no material event revenue. We expect the same in Q3, and we are comping against 3.6 million in live event revenue in Q3 2019.
However, we're confident that when we emerge on the other side of this pandemic, we will be a stronger and in my view one of the best position local media companies in the us for topline organic revenue growth and bottom line profit growth.
With that I'll turn the call over to Sue is going to discuss our financial result in much greater detail take it away Stu.
Thank you Bill and good morning, everyone. As a reminder, 2019, we filled up bridal exposition either then.
Our year to date 2019 result in year to date 2020 growth rates are presented pro forma the sale of visa them.
Unless otherwise stated.
Please refer to tables included in our earnings release, which provide GAAP results and pro forma results as well as our non-GAAP performance measures.
Our second quarter financial results were in line with our expectations with net revenue decreasing 34.5% over the prior period to $71.1 million and adjusted EBITDA of $2.1 million.
As reported on a first quarter conference call.
April and May net revenues declined 36, and 37% respectively.
Compared to the prior period.
Good finished at negative 31% versus the prior year, marking a significant improvement as we began to benefit from businesses reopening across the country.
Second quarter advertising net revenue declined 37.5%.
As to the prior year.
April was our worst month in terms of advertising cancellation, and we saw sequential improvement throughout the quarter.
In April May and June advertising, net revenue declined, 42%, 41% and 30% respectively compared the same months at 2019.
Our digital advertising solutions fared better than our broadcasting advertising solutions during the second quarter and continue to do so in the third quarter.
Our townsquare ignite advertising solution with one of a best performing advertising product in the second quarter and year to date period, and net revenue from ignite appetite actually increase in year to date period by approximately 6%.
Houseware interact with continued to demonstrate its worth noting.
Second quarter, net revenue, increasing 10.5% year over year.
Subscriber base grew by approximately 900 net subscribers in the quarter outpacing prior quarters.
Because of the pandemic, we cancelled or postponed second quarter lighter than.
LTM net revenue declining nearly 100% post the prior year.
Fortunately our live events cost basis is largely variable if we do not Hosea then we did not incur many of these expenses.
Therefore, while second quarter net revenue for live event decreased nearly 100% versus the prior year period.
Direct operating expenses increased approximately 98% versus the prior year period and were approximately breakeven for the quarter with a lot of approximately $60000.
And your day period live events net revenue declined 78% and live event direct operating expenses declined 76%, resulting in a positive adjusted operating income of half a million dollars.
In total second quarter direct operating expenses decreased by 14.8% compared to the second quarter over the prior year.
This was driven by the live events expense increase.
Well, the 13.3% decrease in advertising direct operating expenses.
Partially offset by an increase in Townsquare interactive direct operating expenses of 14.3%.
The declines in advertising direct operating expense.
Driven by cost reduction efforts, we announce on our last earnings call and that Bill discussed earlier.
Including quite headcount reduction temporary high hiring freezes reduction of variable expenses, such as sales Commission and music license fees and various other measures. These reductions were partially offset by increases in medical expenses related towards self insurance plan bad debt expense and music license fees.
Due to bad debt reduction as well as declining interest rate interest expense for the second quarter declined approximately 7%.
Hundred $34000 compared to the prior year period.
And 6% or $1.1 billion and year to date.
During the second quarter 2020, as result of the Cobot 19 pandemic the assumptions that we used to evaluate our FCC licenses corn Pamela were negatively impacted.
Typically the discount rate, we use increase because of cold it impact on market economic conditions.
This translated to a higher risk premium and therefore higher weighted average cost of capital.
As a result, we took a noncash impairment charge for Hepc light.
Of $28.7 million in the second quarter.
In total and primarily the result of cold in 19 pandemic, we recorded approximately $170 million of non cash impairment charges going tangible assets in the first six months of 2020.
I'd like to telegraph that we expect a valuable FCC licenses it continued to be reduced over the coming years. This as a result of the fact that we no longer include 100% of our revenue streams once according to value.
Intangible assets.
No long include the revenue and profit of Townsquare interactive what Townsquare ignite our largest digital web.
As these digital revenue streams.
Outpace our radio spots sales this formulaic trend will continue.
This write down of decade old purchase price calculation has no bearing on our cash position operating revenue operating expenses profitability or company's future prospects.
There are nothing more than a noncash accounting charge affecting only the purchase price allocations that we made when we bought a radio station back in 2010 through 2013.
For the second quarter net loss from continuing operations was $26.8 million or net loss of $1.46 per diluted share as compared to net income from continuing operation of $9.9 million were 34 cents per diluted share in the second quarter 2019.
The decrease was primarily due to declining net revenue driven by the cobot 19 pandemic and the previously discussed noncash impairment charge.
We'd like to remind you that provision for income taxes included on the face of the income statement, it's with GAAP financial statement purposes on.
We maintain significant tax attributes, including $191 million, a federal and all carryforwards now that substantial tax shields related to tax related to the tax amortization of intangible assets. We continue to believe that will not be material cash taxpayer until approximately 2026.
Until a balance sheet as of June Thirtyth, a total debt balance was $545.8 million.
Total cash balance was $70 million, implying a net leverage as of June Thirtyth of 6.7 times based on a trailing 12 months adjusted EBITDA of $70.7 million.
During the second quarter, we generated positive cash flow from continuing operations of approximately $2.3 million.
And $14.7 million prior to interest payment demonstrating our assets strong cash flow generation ability.
Also during the second quarter, we repaid the higher outstanding amount on the revolver, which we had drawn down at the end of Q1 as a quick question every measure as pandemic first begin to hit on markets and we repaid $9.9 million a term loan balance due to a 2019 excess cash flow payment requirement.
I also want to highlight that we repurchased $4.7 million above 6.5% April 2023 unsecured notes at a 25% discount at face value and retire them.
We also paid $2.1 million of dividend payments during the second quarter.
As a reminder, going forward our board has elected not to continue our quarterly dividend.
In the second quarter, we also limited capital expenditures with total spend declining by $1.2 million, what 30% year over year.
In 2020, we expect an approximately 15% reduction to our capital expenditures were savings of approximately $3 million as compared to 2019.
In addition, we are experiencing cash savings by deferring payroll taxes until 2021 in 2022 under the cares.
In total our cash balance declined by almost $50 million in the first six months of 2020.
Fight, reducing long term debt by $14.7 billion, making $4.2 million of dividend payment and paying $15.7 million of interest payments.
These data points demonstrate the strength of our cash flow from operations.
In the near term, we anticipate holding cash on the balance sheet in order to preserve flexibility. During this pandemic. However, our long term goal remains the same to reduce net leverage the four times, which we had been on track to achieve by the end of 2020 quite to the impact of the for them.
As we discussed on our last earnings call based on modeling various revenue projections, we believe that even if business remains at the same levels that we've seen today, we have sufficient liquidity to meet our cash needs for the better part and the next two years.
Ill now turn the call back over to Bill.
Thank you stew and thank you to everyone who dialed in this morning.
I was recently asked what I was most proud of a townsquare.
Number one by far is my pride in our town square team.
Having invested the time to visit each of our 67 markets in our office locations a minimum of once a year over the past 10 years.
I had the privilege of spending a lot of time with our local teams over the past decade.
Yes, I knew prior to this pandemic, how strong and talented our team was well what struck a chord with me. During this time is their passion for what they do each day and their commitment to their communities and their commitment to our company. It is unparalleled it is inspiring and as a result, it is a true honor to serve as their leader and I'll, let the team though that.
Often and repeatedly.
Number two I will also extremely proud of our diversified and differentiated product offering with 48% of our Q2 2020 revenue coming from digital products and solutions, which has allowed us to whether this downturn more efficiently and effectively than if we did not have a diversified revenue foundation.
One of the things our teams noted with great pride that even with all of the challenges and unknowns. During this pandemic. We had townsquare have not had to alter our core strategy, but rather the pandemic placed a spotlight on the need to double down on executing our existing long term strategy.
Number three is pride in our cash flow generation ability and our liquidity position that's doing I outlined in detail on this call.
We want to ensure all of our stakeholders that we're carefully managing through the crisis.
First and foremost by considering the health and wellbeing of our employees and our local communities above all and secondly by taking well thought out cost reductions to our business that will help mitigate the near term paying that we expect in 2020.
As I stated earlier, our goal is to balance cost reductions with our opportunity for long term growth, we want to be position to emerge from this downturn more quickly and more efficiently than our competitors and we believed that this strategy together with our diversified a differentiated product offering ensures that we will be.
As always please do not hesitate to call us as I look forward to speaking with our investors at every opportunity.
Be well and as we say internally stay townsquare strong and with that operator, please open the call for questions.
Thank you.
This time will be conducting a question and answer session. If you'd like to ask the question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Q you May press start to if you'd like to remove your question from the Q.
<unk> expense using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we pull for questions.
Your first question comes from line of Michael Kupinski with noble.
Capital markets. Please proceed with your question.
Thank you and thanks for taking the questions and thanks, Thanks for all the detail on by the way as well.
I know that you gave the digital revenue progress in the quarter did you give townsquare interactive specifically for them on the sequential month to month improvement in the quarter.
Hey, Michael It's Bill good morning, Hope you're well.
Yes, what we noted on the call was as in Q2. It was growth of 10.5%. Obviously now 900 net adds which is up from our trailing.
Quarterly average of age 50, and we also noted that in July we saw that increased to 13%. So we didn't give specific month over month in the quarter, but we did highlight that July is improved from the Q2 growth of 10.5 to 13 and expect that growth rate to continue in Q3.
Okay got it Jeff in terms of expenses I know that you talked about some of those being permanent is our percentage in terms of what you're anticipating to be permanent expense reductions.
So we noted as you know 1.7 million monthly a little over a million of that was tied to our workforce reduction that we did.
I believe was on April 1st.
I would say probably in the one to 1.3 million would be more permanent and then things like before one K. company match and other things that are tied to revenue would be more temporary so I'd say roughly $1.2 million a month would be permanent.
And I know that you're you're guiding event is virtually zero, probably likely to be virtually there all the third quarter, but are you planning any why did that revenue in the fourth quarter at this point.
Currently not in terms of our planning I'm expecting no live event revenue already materiality for the rest of this year. We're currently plotting and looking at what that will look out at the beginning of next year, but in terms of modeling in planning we are expecting no material library revenue in Q3 or Q4.
And if I'm looking at this right corporate expenses worked showed sequential quarterly uptick in the second quarter. I was just wondering what the run rate or what should we look forward in terms of corporate expenses in Q3 and going forward.
Sure I think that was mostly tied to our audit, but I'll turn that over to Steve.
Hi, Mike, Yes, so we had it big increase in legal costs audit and professional fees when we.
Change the auditors.
Going forwards, we expected to come back down and being a little bit less than last year.
Gotcha, and I guess doesn't tell you about nebulous question, but any kind of hard to address but if you look at just generally the pandemic and how how things affected you was there something that you've learned from this pandemic that maybe.
Maybe some of this given good you've had before or opportunities that you may.
We had seen now that present themselves.
You know that maybe you may have not looked at before and maybe up a past recession or something like that I'm. Just wondering if there's something different about this pandemic that may have.
So a light on opportunities or misgivings at the company that you would like you characterize shape.
Yes, no I appreciate that Michael I wouldn't I would say as I noted on the prepared remarks that.
Based on our strategy of revenue diversification with really focus on first and foremost starting 10 years ago. When the company was formed building a digital audience and our success in doing that as I noted on the last couple of calls the fact that newspapers and television stations in our size markets in particular, but potentially across America.
But definitely at our size markets outside the top 50.
I have really been cut backs severely.
When we started in 2010 the majority of newspapers were published seven days a week and all of our markets are now there's many markets you actually don't have the physical newspaper local news coverage has been cut back so we've come in and fill that void from a digital audience perspective, and as I noted it was I'd say a a nice.
Complement that Google provided us a 260000 dollar grant to start to news operations and want to Tuscaloosa, Alabama, and one in Portsmouth, New Hampshire.
And then obviously as we noted obvious our digital revenue based on our increase in audience and impressions as held up quite nicely and ends.
Spectrum to be positive in Q3's on our owned and operated networks and then obviously ignite and Townsquare interactive or really recovering much more strongly what I would say is I'd say throughout the company in terms of particularly the Salesforce Dot pandemic has I'd say as shown on China light on the breadth of our solution.
And we noted it just in a sentence, but it's actually really transformed I'd say some of our go to market strategy and that we during this pandemic actually had the highest I'm out of new business that we've ever had meaning clients who hadnt.
Orders with us in the last 13 months and why that is because obviously as we noted on our last call. We experienced a tremendous amount of cancellations. We gave all the data on the last call in April and then we started to rebound sequentially each month, but as our Salesforce experience that they then we're able to prospect and do client needs assessment with cash.
Degrees that they've traditionally may not have called on it and I think thats why we are recovering as as nicely as we are even though we're still down as we as we noted and expect to be down in Q3 in a low 20%. It's really combat account executive perspective, I'd say reopened the rise to the opportunity that we have solutions for every type of business.
Thats been I'd say, an eye opener for for us and really changed the way we were during training as well.
So I don't know that's exactly what you were looking at but that's really you know that.
There isn't something like we're doing completely differently. It's more the things we were doing I think shine brighter, particularly in our sales teams eyes.
And Bill can you just explained the Google opportunity is this a one time event or is it that and then if you could also talk a little bit about how it came about and whether there's a bigger opportunity there.
Thank you Michael.
So it came about because they actually have seen what we've done in places like St Cloud, Minnesota, which is about an hour and 20 minutes North Minneapolis, we have WJ Olin.
Which is a news talk stations, we have the same type of situation with K two radio in Casper and then obviously our premier station meet or do you want to one five net they've seen that we've been asked and filled the void that I described but really if you go to any one of those brands either on the web or or on an app. It will look to most to consumers like a newspaper.
Nave noted that and they have asked us to.
This on these two markets I described Tuscaloosa sportsmen, but part of the grant is our commitment to then share best practices and in essence, a playbook for the rest of the broadcast industry that was what they're asking what you. What you have done so well over the past decade and really during this last few years with newspapers cutting back.
As dramatically as they have well you share some of your learnings that how others, particularly in markets. We don't compete and can do that and that's how the Grand came about we have an amazing digital team from a content perspective, as well as an engineering perspective, and Google noted that in provided us $260000. It could be a future funds, we're not counting on that.
Because we believe just like Arden Court business.
They will be profitable on a short amount of time, but they that doesn't mean, there won't be future grants, but this is a onetime grant but they have expressed an interest in us continuing to really not only help the communities where in but help the industry overall.
Gotcha. Thanks, so much I appreciate it.
The well be safe Michael.
You too.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad one moment, please while we pull for questions.
Your next question comes from lineup, Jim Goss with Barrington Research. Please proceed with your question.
Hi, good morning.
One thing I was interested in what you were talking about was the.
How how you are helping some of the small businesses, who are clients of TSR <unk> two.
Create new business opportunities. One example of use was helping restaurants adapt website trendline ordering.
This this was an intriguing sort of a set of opportunities and I wonder if that is helping you in the process of gaining additional clients for the services and what is the process you're using to.
Attract attention on get new business by.
Publicizing the things you can do for them.
Great question, Jim Hope you are well unsafe.
Excellent so yeah to your point we've been.
Quite quite used for some time, but particularly during this pandemic what townsquare interactive.
And really super serving small and midsize businesses and being able to pivot. The fact that we do all of our technology in house not only for Townsquare interactive, but things like Townsquare ignite as a competitive advantage for us and allows us to build these type of solutions as well as a pen existing solutions I'm pretty.
Quickly and that was the case during this pandemic.
It broadens the opportunity in terms of who we could address clearly I think the pandemic for everyone. If you look at just the space for digital marketing services in general.
Has done quite well through the quarter. If you look at other public companies, who who focus on that just specifically and we've seen the same thing where clearly your online presence being found in search engines, but also importantly be able to communicate one by one to your customer base and not rely on social media, where you may pose something but it may not be seen by all your customers.
It is a critical important and therefore, that's why we highlighted to get to our first 10000 customers was 57 months to get to our 27 20000 customers was 44 months and we believe we'll get to 30000 in under 35 months and Thats, partially because the types of businesses.
In the universe.
It's really.
I detailed but probably a year ago on this earnings call untapped for US you know there's literally we've identified 8 billion smbs in markets, where the population less than 1.5 million with less than 25 employees with less than 5 million an annual revenue as the addressable market for us and yet we're sitting here at just under 21000.
So there's a lot of runway and we couldn't be more.
Excited about the opportunity for Townsquare interactive and as you've noted before you not operating at roughly a 30% profit margin with a long one way to go we're confident that we'll be at 100 million in two to four years and public work closely to three years.
Okay and on the.
The radio side.
I'm sure it's been more of a challenge given the unevenness of the recovery, that's sort of fits and starts to states coming forward and maybe backing up a little bit I'm wondering if you could talk about how that has played into what you were just discussing with the a large number of.
Maybe new categories coming up and.
The.
Hi, if there's a consistency or a variance between a the core radio side of the business and what ignite has been focused on terms of those categories.
Yes definitely great question, Jim So as we highlighted on the call, but just as a reminder, in terms of just straight broadcast so just.
Audio commercial over our heads up on broadcast in April we were down 52% for broadcast that slightly improved and made a 49%, but really took a nice step forward still a long way to go but June was negative 35%. So we're seeing that improvement. We also noted even in places like tech.
Yes, which you've seen some rollbacks and a lot of coverage in terms of where we're there. We were negative 45% may may for Texas was but was the low point versus April because they got hit a little bit later than the northeast we've seen that recover to roughly negative 22% in August and not going backward.
But still staying stable and growing so.
Broadcast is behaving that way and we expect a as we go through Q3, we'll see continued sequential improvement from that negative 35% on June because in July we were in the high Twentys at I. I think we're pacing to the mid Twentys now, whereas our digital advertising in Q2 was down only 18% so much much less and in July.
We're actually was down negative 10%. So this is digital advertising, putting aside our digital marketing subscription business. This is our advertising for our owned and operated properties that I described earlier, which had record traffic as well as ignite igniting Q3, Q2, I'm, sorry was down 11.6% Robbie actually paced positive into.
July and as I noted on the call in Q3, I believe will be up mid to high single digits. So anywhere from 6% to 8% for ignite and we are reaffirmed that we'll be at 100 million to try to four years, what it might just like Townsquare interactive. So broadcast is definitely coming coming back, but it's coming back more slowly and that's why I think it's.
So important that we have a diversified revenue base with almost half of our revenue now a digital that's clearly a differentiator for us as we go to market, but also provides us the financial stability and to be able to be EBITDA positive in a in a quarter that was down 35% overall as well as cash flow positive and be able to reaffirm that we've got to.
Entity for up to three years.
It's really based on our digital advertising differentiation in India and.
Because we've outlined we didn't talk about a lot today, but we've outlined in the past that in our size markets. We are the premier digital offering and when we do have brought up against competition. It's usually somebody who's third parties solution versus our own in house and that's why we're so aggressive an optimistic about our future growth opportunities as things return to north.
All in the future.
Yeah in terms of the AD categories that are you're working with them the ignite states versus core radio there yeah. So big difference in those.
I wouldn't say if there is a slight difference.
Like auto in particular got really hit hard or from a broadcasting perspective.
Well as entertainment and fast food and retail.
At the same time from ignite perspective, we've seen a lot of new clients coming in from auto first specifically ignite. We've also seen in general a lot of categories that weren't necessarily big spenders with us come through during this pandemic things like grocery stores.
Homebuilders home repair as well state governments, so definitely seen categories that we weren't necessarily either getting a lot of business out or focus on providing some of this new business growth that I alluded to on the call, which was quite honestly had a record level of new business, which I think again proves the tenacity and perseverance of our sales team.
In the midst of this a recovery.
Okay, maybe one last thing I know, you're very proud of your life in local heritage and the people that I wonder if there's a greater challenge in <unk>.
As class constrained times in terms of what you can do life in local is there any greater use of simulcasting or anything like that in certain of your markets to just a moderate the cost structure.
There's clearly a lever that's available to us, but it is not a lever that I'm planning on utilizing at this time or anytime in the near future. Even as we were down 35% in Q2 to 6% reduction in workforce that we did on April 1st was not tied to live in local but as I've shared before as much.
Our corporate and support functions because we honestly believe it's it's a differentiator for our company and many levels is also matter so much to our communities, but from a business perspective, they're not only providing the local on air content are on air DJ is our in essence as I've talked about in the past original social influencers and they're providing all of the local.
Content for our local radio station websites that is driving all of this traffic. So when we look at the assets and the talent that we have locally we look at it holistically and we not only look at the broadcast side, but as I noted also our our digital only know advertising.
It's actually trending positive in Q3, and we believe will be greater than last year. It that ties directly in across 100% correlated to our on air staff. So I, we could do reduction from syndicate more but we believe that flies in the face of our local first strategy and we believe it's a real differentiator that said there's been some.
Some press reports that we're looking at non personnel type expenses that would allow us to take some expenses out.
You may have seen Nielsen just exited nine smaller markets and we were in eight of those markets. So we no.
Realize those cost savings starting in the fall and we also expect that there'll be other Nielsen markets that we will not be in that we previously been and so those are moves that I'd make.
Before.
Touching our most of them I believe one of our most impressive assets, which is our on air talent in our team.
All right. Thank you very much appreciate.
You got to Jim Thank you Pete will be safe.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Mr. Bill Wilson for closing remarks. Thank you operator, and thank you everybody for dialing in this morning, hopefully we provide it really adept information and updates and we appreciate you taking the time.
I'm to.
Learn more about how we are navigating this pandemic and hopefully you see that we are confident in our recovery, particularly with almost half of our revenue Joel and our cash flow generation and just want to say, thank you would be safety well until next time. Thank you operator.
This concludes todays conference you may now disconnect. Thank you for your participation.
[music].