Q1 2021 Townsquare Media Inc Earnings Call
[music].
Good morning, and welcome to the town squares first quarter 2021 conference call.
As a reminder, today's call is being recorded and your participation and place consensus at recording.
At this time all participants are in a listen only mode. A brief question and answer session will follow the presentation.
If anyone should require operator sits and during the conference. Please press star zero from your telephone keypad.
With that I would like to introduce the first speaker for todays call Claire get and K Executive Vice President.
Thank you operator, and good morning to everyone and thank you for joining us today for town squares first quarter financial update with me and the call today are Bill Wilson, our CEO and Stuart Rosenstein, our CFO and executive Vice President.
Please note that during this call we may make statements that provide information other than historical information, including statements relating to the company's future expectations plans and prospects.
These statements are considered forward looking statements under the safe Harbor provision of the private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from these statements.
These statements reflect the company's beliefs based on current conditions, but are subject to certain risks and uncertainties, including those that are detailed in the Companys annual report on form 10-K for the year ended December 31, 2020 filed with the SEC.
We may also discuss certain non-GAAP financial measures, including adjusted EBITDA adjusted net income and adjusted operating income, which we may refer to as profit and our remarks, such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly yearend and current reports available on our website.
I would also encourage all participants to go to our corporate website at Www Dot town square and media Dot com and download our investor presentation as Bill will reference some of these slides during our discussion. This morning at this time I would like to turn the call over to Bill Wilson.
Thank you Claire and thank you all for joining us this morning.
'twenty one is off to a strong start and I feel incredibly optimistic about where we are today and most importantly, the future of town square the.
The economy is on fire Q1, GDP growth is at a 15 year high and the government continues to provide economic stimulus and states have further relax restrictions across the country, all but ensuring strong growth for the remainder of 2021.
These events and the resulting optimism have positively impacted our business as well.
And I am proud to announce this morning that our first quarter financial results exceeded our goals and expectations and in many cases, even exceeded levels, we achieved and the pre COVID-19 first quarter of 2019.
Once again, we exceeded our previously issued guidance range for both Q1 net revenue and Q1 adjusted EBITDA.
I'd like to draw your attention to slide six of our Investor presentation, where we outlined first quarter performance.
And our last earnings call. We provided numerous data points to help set expectations for Q1, and I am thrilled to share that we delivered on each and everyone.
From my perspective, although each is important the most significant data point is the outperformance and net revenue and the outperformance and adjusted EBITDA and.
And the first quarter of 2021, we had expected net revenue, excluding political and live events to decline and negative 2% to negative 3% as compared to Q1 and 2020 and in fact, it came in slightly better and negative one 6% and was slightly above Q1, and 2019 revenue levels.
We anticipated that adjusted EBITDA would increase plus 16% to plus 22% over the first quarter of 2020.
And it not only exceeded that expected growth by increasing 30%, but also exceeded Q1 2019 pro forma adjusted EBIT levels by plus 7%.
So let me say that again, our first quarter net revenue, excluding live events and our first quarter adjusted EBIT, both exceeded 2019 levels and.
Incredible.
We are on the verge of a full financial recovery to pre COVID-19 levels and what are the key drivers is our strong digital performance.
Although we are very proud of our routes and DNA and local radio and we are proud to call. It local radio channel.
And square became a digital first company and 2020.
Reflected and our strong and transformational digital revenue and digital profit growth, which increased and strength in Q1, 2020 one to.
And to demonstrate that fact as you can see on slide nine and the first quarter digital revenue growth accelerated to plus 13%.
For the double 2000, Twenty's full year revenue growth of plus 6%.
Our digital revenue totaled a $167 million over the 12 months ending March 31 2021.
Contributing nearly 49% of our total net revenue in the first quarter of 2021.
I'd like to spend a little time, providing additional color on our digital solutions. This morning, as they drove town squares transformation and are truly a meaningful differentiator to other local media competitors and our markets.
Our digital solutions can be broken down into three buckets.
It sounds square ignite and town square, and which are our digital advertising solutions.
And town square interactive, which is our digital marketing subscription solution.
I'll start with town square interactive our largest digital solution contributing approximately 21% of our total company net revenue and approximately 30% of our total company adjusted EBIT in Q1, and thus town square Interactive is reported as one segment and our financials.
Town Square and interactive provides digital marketing solutions on a monthly subscription basis to approximately 23006 hundred small and mid sized local businesses across the U S, including but importantly, not limited to the markets and which we operate radio stations.
Town square and interactive is a complete solution.
Offering mobile enabled website development and hosting services E Commerce solutions search engine organic traffic and online directory optimization services online reputation monitoring social media management.
Appointment scheduling services email marketing services website re targeting and much more.
Because town square interactive provides such an important and valuable resource for small business owners. This business is in essence recession resistant delivering revenue profit and subscriber growth each quarter since the start of the pandemic.
And the first quarter of 2021, Houseware interactive added approximately 850 net subscribers.
Net revenue increased plus 15% and profit increased plus 30% over the prior year period.
All at a profit margin of 31%.
And the second quarter, we expect house square interactive net revenue growth to accelerate to plus 18% year over year.
We are often asked what differentiates and houseware interactive from its competitors and the answer is threefold first we have a significant strategic advantages by being local.
Our local feet on the street sales teams have longstanding local relationships that we've cultivated and our local markets across the country.
This local presence and depth of contact allowed us launched houseware interactive and 2012.
And quickly build a critical mass of customers that would not have been possible without the efforts of and the advantages we derive from our local sales team.
At the same time, while we were able to incubate this product and our local radio markets. We have also proven that we can very successfully provide our town square interactive solutions outside of our radio markets.
With now 57% of our current client base residing outside of our radio markets today.
Second it is important to highlight that house square and interactive is a full service solution and not a self service model. Our typical customer is a small business with less than 20 employees.
Most of the time, they do not have the internal resources, nor the expertise to handle web site production and digital presence management.
Our full service solution delivered at an attractive price and without the significant setup fees charged by some of our competitors and.
Dresses this market opportunity head on.
Finally, and continuing with the important theme of customer service.
We believe task for interactive delivers a better customer experience through its end to end control and ownership we.
We do not outsource any aspect of our solution sounds great Interactive was originally built from the content management system, we organically developed to operate our own branded media websites built from the ground up by town squares World class product and engineering team.
What town square interactive rebuild the client's website, including its design photos creative and messaging and then importantly, we provide dedicated customer service. Following its launch so that we are confident we are addressing the customer's needs.
And our markets, we sometimes compete with other local media companies, who go to market with a similar pitch with one vitally important difference.
While their sales reps may generate the lead and sell the service. These companies most often outsourced fulfillment through a third party because they do not actually own the product they are simply white labeling someone else's service.
Not only does that give up margin points as the business scales, but these companies simple who lose the critical touch point of ongoing customer interaction.
This leads to inefficient communication poor customer service and ultimately low retention.
We believe that <unk> interactive our customer service is best in class and.
It reinforces and local sales relationship and our local markets and leads to significant higher retention rates and the rest of the industry.
And given these distinct advantages there was so much upside.
Town Square interactive is still incredibly incredibly underpenetrated within our local market footprint and importantly, within additional local markets of similar size and demographics.
I would like to take the opportunity. This morning to walk you through the opportunity and greater detail given its importance as well as the scale.
If you return to slide 12, our investment presentation and I appreciate it.
Here you will see there are little over 28 million businesses nationwide.
Given that we had town square focused on markets outside the top 50 cities that eliminates over $16 5 million businesses, which gets us to <unk>.
About $11 5 million businesses. We then put a few additional very important filters on the Smbs, we target for town square interactive. The first filter is businesses with 20 or fewer employees and the second filter as companies with annual revenues of $5 million or less. We then exclude certain types of businesses. We have determined they are not the ideal fit for our solutions, including real.
Estate agents banks and other types of businesses and lastly, we include only privately independently owned businesses.
After applying all of those filters that equates to over $8 8 million target customers for town square interactive.
And a $300 per month <unk> that equates to an estimated $32 billion total addressable market for town square interactive of which we have only captured a small fraction today there is incredible incredible upside.
As I noted on our last call. We are planning to add a second town square interactive location and the western United States to capture this opportunity once the pandemic has and America's rearview mirror fully most likely in Q1 2022.
On a trailing 12 month basis town square and interactive generated $73 million of net subscription revenue and a 31% profit margin, therefore, delivering $22 $5 million of profit.
If you were to value this business on a standalone basis, one comparable company to look to would be wix, which trades at 17 times trailing revenue multiple.
If you applied a similar or even a discount and multiple to town square interactive that would suggest evaluation north of where town square as a whole trades today.
With our existing subscriber base, our competitive advantages and our significant market opportunity I am very confident and reaffirming our expectation that town square and interactive will achieve $100 million and annual net revenue at roughly a 30% profit margin within two to three years.
So thats town square and interactive, which is our digital marketing solution and now I'd like to briefly cover our digital advertising solutions.
The first is ignite our digital programmatic technology platform. The second is amped monetizing our owned and operated digital brands.
Let's start with ignite, which if you turn to slide five as on the and the first column on the left hand side.
It sounds square ignite combines first and third party audience data to hyper target audiences for our local and regional advertisers providing them the ability to reach their target customer with the right message at the right time.
Ignite was one of our strongest performing digital advertising solutions, and 2020 growing plus 11% over 2019.
And that strength continued into 2021.
As ignites net revenue increased plus 12% and the first quarter as compared to the prior year and was plus 45% greater than Q1 and 2019 revenue levels.
We expect that ignite second quarter, net revenue will accelerate and increase the plus 30% or more compared to Q2 2020.
We believe our success with town square ignite is multifaceted yet.
Yet one strong differentiator for us, which is similar to town square interactive is we own the solution the entire AD Tech and offering is in house, we own and control the customer relationship from end to end for.
From creating the right message and creative.
To the activation and optimization of the client campaigns to the detailed in depth client reporting which leads to a better customer experience and therefore higher client retention rates.
Town square ignite is and in essence, our clients full service digital agency.
Moving one column over on slide five to the right. Our next digital solution is town square and which is digital advertising on our owned and operated network of digital brands made up of over 340 websites and 350 mobile apps, which together delivered a highly engaged audience of $57 million.
<unk> visitors on a monthly basis over the trailing 12 month period.
And the first quarter.
Square Amps net revenue increased plus 11% over the prior year period, and was plus 15% greater than Q1 2019 revenue levels.
We also expect town square and <unk> second quarter, net revenue will accelerate and increased by plus 45% or more compared to 2020.
In total.
Our first quarter digital advertising revenue, including a night and amped increased plus 12% over the prior year and plus 31% over 2019 levels.
We expect our digital advertising second quarter net revenue to increase approximately plus 40% compared to Q2, 2020 and over plus 15% compared to Q2 2019 levels.
These growth rates clearly demonstrate that town square is now a digital first company and.
As you can see on slide nine our transformation into a digital company is in a class of its own.
As of March 31, our digital revenue totaled $167 million over the trailing 12 month period.
Over the next three years, we expect to grow our digital revenue to $250 million.
Which will be well above 50% of our company's total revenue.
However, local radio remains a core aspect of our local media offering and.
And radios recovery is a component to achieving a full financial recovery to 2019 levels and growing from there.
Broadcast advertising on our 322 local radio stations was the most impacted by the pandemic, but has been gaining ground each quarter since its trough of negative 45% and our second quarter of 2020.
And the first quarter of 2021 broadcast revenue, excluding political declined negative 11% versus the prior year period, a significant improvement from Q4 2000, twenty's decline of negative 19%.
And full year 2020 decline of negative 26% to demonstrate our progress of the broadcast recovery I'll turn your attention to metrics published by Miller Kaplan.
In Q1, 2020, one town square outperformed the industry and local radio spot sales by 570 basis points and total spot sales by 390 basis points in our markets that Miller Kaplan measures.
Additionally, town square also outperformed the industry and total revenue, which includes both total spot revenue and total digital revenue by 270 basis points.
If you single out March 2021 since March 2020 was the first month impacted by the pandemic town.
Town squares local spot revenue increased plus nine 8%.
And while the industry was down negative <unk>, 8% and the market's measured and tracked by Miller Kaplan.
And excluding town square the industry was down negative five 7%.
And from a total net revenue perspective town squares Miller Kaplan markets were up plus 12, 6% and March while the industry was up plus 6% and up only two 1% excluding town square.
The Miller Kaplan results demonstrate that town square is outperforming its peers, not only and digital but also in broadcast and.
And the second quarter and the back half of 2021, we expect our broadcast revenue to post significant year over year gains as our comps against pandemic depressed revenue levels.
For example, we expect broadcast revenues to be up almost 50% or greater in Q2, and although it will take some time, our expectation is to fully recover back to 2019 broadcast levels.
That is what our town square team is focused on internally, we are measuring our progress by our comps for 2019, rather than and pandemic depressed 2020 levels.
Live events remains the only part of our business that through Q1, and 2021 Hasnt had the opportunity to recover as live events have been canceled for the past year due to the pandemic. However.
However, starting in the second quarter, we have begun to schedule a handful of live events and markets that have loosened restrictions for.
For example, <unk>.
Last week, we hosted the Redbird Barbecue Festival and Tyler, Texas. It was a huge success setting an all time revenue and all time profit record.
As states continue to relax restrictions on public events, we are optimistic that we will be able to deliver and schedule and more events as the year progresses before returning to a normal schedule of live events in 2022.
For Q2, we are expecting to generate roughly $1 million of live events net revenue at a high 20% profit margin.
Before I hand, the call over to Stuart I would like to reiterate our strong operating and financial position.
Our business continues to improve each and every quarter. So.
So much so that we feel it is most relevant to compare our financial results to pre COVID-19 2019 levels.
As we believe we are on the verge of a full revenue and EBIT recovery.
We successfully refinanced our capital structure with a single tranche of $6 87, 5% paper that does not mature until 2026, eliminating any near term maturities at a better than expected rate.
Through careful expense and cash management, we built a significant cash balance that allowed us to take advantage of the opportunity to repurchase 100% of Oaktree capital shares and town square at a significant discount.
Transaction, which was very very accretive to our shareholders.
Further the permanent actions that we took last year to reduce our expense base and cash outflows have enhanced our operating leverage moving forward.
With that I'll turn the call over to Stu who's going to discuss our financial results and much much greater detail.
To take it away.
Thank you Bill and good morning, everyone at times during this call Bill and I will always have referenced pro forma results.
And those relate to our growth in the first quarter of 2021 as compared to Q1 of 2019.
As a reminder, and 2019, we sold up Brian and Exposition live events, which generated $726000 of net revenue and $354000 of adjusted EBITDA and the first quarter of 2019.
We kicked off 2021 with strong first quarter financial results that exceeded our expectations driven by continued revenue improvement and our advertising and town square interactive segments and cancel expense management.
And total first quarter net revenue decreased 5% over the prior year period to $88 $8 million.
Political and live events net revenue were a significant component of the year over year revenue decline political revenue declined by approximately $900000 from $1 $3 million and the first quarter of 2020 to approximately $400000 and the first quarter of 2021.
We had two months of live events activity in 2020 before COVID-19 hit.
Net generated $2 $4 million of live events net revenue for the quarter as compared to less than $10000 of live events net revenue in 2021.
Excluding political and live events first quarter net revenue decreased only one 6% over the prior year period to $88 3 million and was.
Slightly above Q1 2019 revenue levels. This.
This exceeded our previously issued revenue guidance range of $87 million to $88 million.
Consistent with its performance throughout 2020 town square and interactive subscription business generated revenue profit and subscriber growth and the first quarter of 2021.
With the addition of approximately 850 net subscribers during the first three months of this year first quarter net revenue increased 14, 9% and profit increased 34%.
Each as compared to the prior year's periods.
Town Square interactive first quarter profit margin was 31%.
Advertising net revenue continued to show improvement on an ex political basis with first quarter net revenue ex political declining five 3% year over year as compared to a decline of 12, 9% and the fourth quarter of 2020.
21, 4% and the third quarter and a low of 38, 2% and the second quarter.
Total first quarter advertising net revenue, including political declined six 4% as compared to the prior year period.
Our digital advertising solutions net revenue increased approximately 12% and the first quarter as compared to the prior year period, driven by town square at night, which also grew at a rate of 12% and the quarter and our digital advertising solutions, which grew at a rate of 11%.
Broadcast advertising net revenue, excluding political improved materially and the first quarter from the fourth quarter of 2020, narrowing declines from 19% and the fourth quarter to 11% and the first quarter of 2021, each as compared to the prior year periods.
Including political broadcast advertising net revenue declined 13%.
Once again live events net revenue declined nearly 100% versus the prior year and the first quarter as we did not host Annie live events due to the pandemic.
Fortunately, we pruned and right sized our live events portfolio and 2018 and 2019 to align with sales local first strategy, resulting in a largely variable cost basis. Therefore, our live events Q1 direct operating expenses decreased approximately 96% versus the prior year period and the loss was minimal for the <unk>.
Order totaling approximately $60000.
As Bill mentioned, we have scheduled the handful of second quarter events and are optimistic that we will produce more events and the second half of 2021 and returned to a normalized scheduled in 2022.
And total first quarter direct operating expenses decreased by nine 8% compared to the first quarter of the prior year. This was driven by $6 $3 million and 11% decrease and advertising direct operating expenses as well as the live events expense decrease of $1 8 million or <unk> 96 four.
And that was partially offset by an increase in town square interactive direct operating expenses of $1 $1 million and nine 1%.
Declines in advertising direct operating expense was driven primarily by our cost reduction efforts and enacted last year due to the pandemic and the reduction of variable expenses such as sales commissions.
For the first quarter corporate expenses declined $2 $3 million with 35, 3% as compared to the prior year, primarily due to a decline and professional fees for the full year. We currently anticipate corporate expense will decline by approximately $5 million to $6 million.
For the second quarter and a row adjusted EBITDA increased over the prior year with first quarter adjusted EBITDA, increasing 29, 7% over the prior year period to $20 $1 million. This.
This exceeded our previously issued guidance range of $18 million to $19 million and as Bill previously discussed we're extremely proud of the fact that first quarter. Adjusted EBITDA also exceeded the first quarter of 2019 pro forma adjusted EBITDA of $18 $8 million.
On January six we completed our previously announced sale of $550 million of senior secured notes the proceeds of which were used to repay our outstanding term loans and our six 5% senior notes in their entirety.
The offering was very well received and was significantly oversubscribed, which allowed us to exceed our original pricing expectations.
New notes, which mature on February one 2026 bearing an interest rate of six 875% and they're currently trading well above par.
In total our annual interest expense will increase by approximately $9 million due to the higher interest rate and and the first quarter interest expense increased by approximately $2 million as compared to the prior year How's.
However from a cash outflow perspective, this increase and annual interest expense is almost entirely offset by last year's elimination of the dividend, which totaled $8 million per year.
In connection with the refinancing we recognized a $6 million loss on the extinguishment and modification of the old day.
This charge contributed to a net loss for the first quarter of $6 1 million was <unk> 35 per diluted share as compared to a net loss of $59 6 million.
And with three $3 and 2007 per diluted share and the first quarter of 2020 <unk>.
Adjusted net income per share, which adjusts for nonrecurring items, such as the loss on extinguishment and modification of debt and as detailed on our earnings release was <unk> 17 per diluted share from the first quarter of 2021 as compared to <unk> <unk> per share and the prior year period.
Wed like to remind you that any benefit or provision for income taxes included on the face of our income statement is for GAAP financial statement purposes, only we maintain significant tax attributes, including $168 million of federal NOL carryforwards, and other substantial tax shields related to the tax amortization of intangible assets.
We continue to believe that we will not be a material cash taxpayer until the year 2026.
And the first quarter of 2021, we generated positive cash flow from continuing operations of approximately $19 4 million a $10 million increase from the prior year period.
And we used approximately $80 million during the quarter to repurchase 100% of Oaktree capital and equity interest and town square and a significantly accretive transaction and we incurred approximately $14 million of fees associated with the issuance of our senior notes.
We continue to carefully manage our capital expenditures, which declined 67% year over year to $1 $8 million and the first quarter of 2021.
In total we ended the quarter with approximately $20 million of cash on the balance sheet give.
And given our strong cash generation abilities, we are confident and operating the business at these cash levels.
Going forward, our capital allocation priorities will be to invest and our local business to organic internal investments and to reduce our net leverage with a medium term net leverage goal and the low four times.
Turning to our second quarter outlook, we expect second quarter net revenue to increase approximately 36% to 40% to be between $101 million and $104 million as.
Third to the second quarter of 2019, which we believe is a more relevant comparison. This represents a decline of 8% to 11%. We expect second quarter adjusted EBITDA to be between 28% and $29 million, which is a $26 million to $27 million improvement over the second quarter of 2020.
And it represents a 4% to 7% decline as compared to the second quarter of 2019, we believe it's more relevant to evaluate our Q2 guidance, excluding live events, which generated revenue and profit of $6 3 million and $1 6 million, respectively, and the second quarter of 2019.
Excluding live events, we expect second quarter net revenue to be down only 46% as compared to 2019 levels and adjusted EBITDA to be down 3% on the low and but slightly above 2019 levels on the high end.
And with that I will now turn the call back over to Bill.
Thank you Sue and thank you to everyone, who dialed in this morning, let.
And let me conclude today's call by repeating what I said at the opening I am very proud of our town square team and I am very proud of our year to date performance and I am incredibly optimistic about <unk> future.
As I shared earlier this morning as well as on our last earnings call. We were on the verge of a full recovery back to 2019 levels.
As a digital first company the growth and our digital revenue and digital profit has accelerated our path to recovery and is continually propelling us forward each and every day.
Therefore, as you hear us discuss our financial results moving forward. Our primary focus will be to compare our 2021 results for 2019 levels as any comparisons for the 2020 pandemic depressed levels will be and our view somewhat irrelevant.
And that is what the town square team is 100% focused on returning to 2019 levels and once the town square team achieves our 2019 levels, we will grow consistently from there.
Although we are not providing formal full year 2021 guidance.
I will share with you this morning, and full transparency that our internal goal is to reach and then exceed $395 million and net revenue and.
And $90 million and adjusted EBITDA and.
And based on our performance year to date.
I believe that we will achieve those goals.
Once we achieve our Q2 adjusted EBIT guide, we would be over 50% to that 90 million adjusted EBIT goal through the first half of 2021.
And I'd like to reiterate that we expect that our total digital net revenue will increase to $250 million within three years as.
As we say internally how high is high.
Be well and as we also say internally stay town square strong and with that operator. Please open the call for any questions.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one from your telephone keypad and a confirmation tone will indicate your line is and the question queue.
And you May press Star two if you would like to remove for your question from the queue.
For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
One moment please poll for questions.
Thank you and our first question today and will be coming from the line of Michael Kaplinsky with Noble capital. Please proceed with your questions.
First of all congratulations on your quarter, but I do have a question can you just kind of repeat your Q2 guide because it's.
Accounts exceptional and I was just wondering.
In terms of what you were talking about and full year 2021 revenues. It seems like on the pace of what you are looking at Q2 debt that.
Your thoughts on full year 'twenty, one is really very conservative.
Can you just kind of go over that again.
Sure Hey, Michael it's good to hear your voice this morning, and thank you for the congrats it's bill I'll start and then I'll, let studio and with any color.
Our Q2 net revenue guide was $101 million from $104 million, which would be up 36% to 40%.
And then as to outline.
Excluding live events that would be GAAP.
I believe it still did you say negative for to negative 6% roughly.
Yes Bill.
So that's our revenue guide and then our EBIT guide was for Q2 2000 $8 million to $29 million and as stew said, obviously up materially from 2020, we're really as you've noted focused on getting back to 2019 levels. So off of 2019 levels that would either be down slightly negative 3% on the low end and actually above.
2019 levels.
On the high and at $29 million.
And then for you all year.
Yeah, Yeah, Yeah, and then on the full year guidance was 395 million and then achieve.
Achieved $90 million and adjusted EBITDA, and hopefully, we achieve that and as I noted growth from there.
Okay.
One thing that's awesome.
Just a couple of questions here, so it sounds square interactive.
<unk> grew really nicely and the year earlier second quarter and I believe at the time, you said that some of the growth was due to changes in business strategy and spike.
Restaurants shifting towards take outs and so forth where are you seeing the growth and town square interactive now.
And what types of business trends are you seeing that.
And you're seeing this resurgence and acceleration and the rate of growth.
The acceleration is quite phenomenal the team and that's.
The only office and our company who is.
Still partially remote because of.
The guidelines we have.
You know Michael we have over 600 people based in Charlotte and their reopening on July one and their performance throughout this pandemic each and every quarter has been inspiring and what I think is probably worth.
Repeating his town square interactive and is now 21% of our total company revenue and Q1 and 30% of our total adjusted EBIT in Q1, and as you noted and and the first quarter, we grew 15%, but in Q2, we guided that accelerating two plus 18% growth in terms of the category.
And it continues to get more and more diversified.
And I noted on the call but for for for.
And for yourself and others I really pinpoint to slide nine in terms of our digital growth, but also slide 12 in terms of the total addressable market for <unk> Interactive is $32 billion. After you account for all the businesses that we strip out we only focus on business is outside the top 50, <unk> and then the other filters as I outlined in terms of.
And number of employees and annual revenues. So we're still just scratching the surface and our view that's why we not only reaffirm the $100 million and two to three years with sales grew interactive, but also I think for the first time and put out a overall digital number $250 million and digital.
Over the next three years, which would be up 50% from where we are today at a trailing $167 million. So that business continues to.
Really propel our company forward, but it's also nice to see our digital advertising also growing 12% and Q1, which is up 31% over 2019 levels and as we noted on the call. We expect that to grow 40%. So I think what youre seeing overall as we pivoted to become a digital first company clearly.
Our digital is driving our results and although as I noted broadcast is still lagging 2019 levels and we expect that to continue in Q2.
It's less and less relevant because it's a smaller piece of our business and we're managing the expense base there and.
And what the revenue base. So I continue to believe that broadcast will recover to 2019 levels, it's going to take some time.
But almost irregardless as long as we manage that to a per.
Profit level digital is going to be the propellant for our company every year moving forward. So I'll turn it back to you Michael for your other questions. Yes, just a quick couple of quick ones here regarding your experience and pilot, Texas for live events.
And you think that the success was in terms of.
And of the more people just wanting to get out or was there other strategies that you have done and then if you can kind of give us a sense on what type of recovery.
And that you are planning and the second half and if you could give us some thoughts about the margin of that as well.
Yes.
So.
And our view, it's clearly pent up demand it was not only a great success and Tyler protects us last week for our Red debt dirt barbecue and music Festival. It was actually an all time record and revenue and our all time record and profit and we.
We didn't have to spend any any external marketing dollars. Because obviously you have the megaphone of our radio stations. There. So what we're seeing is pent up demand. We also went on sale Friday morning for a festival taste of Fort Collins, and Fort Collins, Colorado, which is food as well as music headliner this year and Nelly and spin dock.
And we had the best.
Single day ticket sales of that event's history. So.
And we anticipate as we continue to announce more live events and.
In Q2, as well as the back half of the year, although there'll be much more limited than in 2019 level, we think theyre going to have tremendous success, given that pent up demand and everything we're hearing from our consumer base and then as Steven noted on the call. We expect in 2022 to get back to a full schedule of live events roughly 200 recurring annual live events.
Importantly in our local markets affiliated and connected to our radio stations and communities. The margins right now are actually a little bit higher traditionally they have been and a high teens as you as you probably know our live event business and 2019 was roughly for those who may not remember roughly $16 million and about 116, one 6 million and profit.
Right now, we're actually operating and anticipating a higher profit margin in this year.
This pent up demand that we're seeing so call it anywhere from the low <unk> to the high Twenty's.
Great. Thank you that's all I have I'll, let others ask questions. Thank you.
Youre welcome and thank you Mike will be well.
As a reminder, and ask a question you May press Star one.
Question comes from the line of Jim Goss with Barrington Research. Please proceed with your questions.
Okay.
Thanks.
I'd like to keep going a little bit on the live events.
It seems you're at a start over.
Basis, you can be more selective in terms of which eventually reduce.
And you point as to how you would make the choices as to which ones you have.
Go after share.
Should they be specific ones like for Tyler, Texas are or will they be ones that could be used across the country and your various markets and the profitability of the key is it.
Sort of reinforcing the local radio and the local digital sales.
How do you think about you know.
Reinvigorating that business yes.
Yes, Jim good to hear from you as always.
So a couple of things that student noted on the call. We did a tremendous amount of pruning of our live event business and 2017, 18, and 19 and is selling our carnival business selling our multi day music festivals that werent affiliated or associated with our local market. So at this point I anticipate that we will continue with the <unk>.
Majority if not all of the live events that we did in 2019 back and we're back and full service and 22022.
In terms of things that we focus on.
Look at clearly the financials of it being revenue and profit, but also as you as you noted the importance to the community and it's really a profitable marketing division for us its very small vis vis what it was in the past with under $20 million and revenue, but its so strategically important and it's so important not only to.
For our listeners and communities, but for those small businesses and regional businesses and our markets back and provide activations.
The last point I'll make before I turn it back to you for follow ups as we do as you noted and have a number of events like our beer Fest and other is that run across dozens of our market. So we get the benefit of that expertise and scale for a single concept, but running across dozens of markets. So those are continuing.
Already announced some of those for Q2 and Q3 and the demand on those as well from what we're hearing from not only our consumers, but clearly the vendors to they've been waiting to get out and interact with their client base. After a 13 14 months of the pandemic. So I expect anybody and the live event business to really bad.
And quite a bit over the next 18 to 36 months based on what we see as tremendous pent up demand.
And maybe more and more about the lack of events.
And you noted you expect to get back into the flow and 2022 do you have any range of sort of a normalized range of revenue and EBITDA, we should be considering for that event for.
And.
And I don't know if youll achieve it totally and 2022 a bit is there a target you have in mind.
And 2022, I expect to grow from 2019 levels to congrats and better off top of my head I think it was $16 million and revenue and one.
<unk> was a $3 2 million and profits due for 2019, our live events.
Yes $3 million three.
$3 million, so I expect us Jim to definitely return to those levels in 2022 and quite honestly based on what I just shared with you in terms of what we're seeing with pent up demand I think theres, a very strong likelihood that will grow.
Double digits on the revenue and double digits on the <unk>.
<unk> line and 2022.
Okay. Thank.
Thank you and amendment and the TSA area.
Talked about a new office and.
I'm wondering if you could share.
And what share of target.
Your target market is now available with the operations you currently have.
What you think you might be able to achieve lifts and new office, what are the costs and timeframe and so in terms of establishing new office is there a maturation phase that you have to go through and.
And I'll take you opened the door and everything flows and so on.
Yes.
How soon do you get to that point, yes.
And so we're currently planning.
We're at we're actually looking at real estate now.
Heading up that initiative and we expect as we sit here today to open that office in Q1 of 2022 that could slightly move up are slightly move back, but that's our expectation on our planning. It's a good point you make in terms of just open the doors and all of a sudden you have 600 people like we have and Charlotte.
Day, but that said we've been very opportunistic during the pandemic and.
And obviously people working more virtually and remotely to be hiring staff already for that location, even though we don't have and office. So we already have hired dozens of people.
Obviously youre not going into office can we don't have one but theyre based out on the west coast.
So I believe we will scale quite quickly and 2022 once we open the office because we continue we plan to continue to hire throughout 2021, and then in terms of your question about the addressable market I mean, as I noted at and that the Investor Slide we have literally $8 8 million.
Town square interactive customers and we are under 25000 subscribers today. So it truly is just scratching the surface and Thats. Why we are also seeing a acceleration of our growth and as I. Just noted I'm just really proud that <unk> interactive is literally 30% of the total company's adjusted EBIT and Q1 so.
Speaks to the market opportunity and our view.
And lastly is there any churn figure available.
And regarding Tsi and <unk> as it's trended since you indicated recession resistant which seems to be.
And is.
Other numbers, we have to look at and how those have trended.
Yes, so we don't disclose the specific churn rate for competitive reasons, just like we don't disclose our our average minute rate, but we had publicly shared on these calls.
The trends so what I can share with you is we believe based on our Intel.
People, we've hired and other data points from publicly comparable companies that we have if not best best in class churn and what I can share with you specifically the town square interactive is that our churn rate currently is at the lowest levels since the beginning of the business and 2012.
For it couldnt be more pleased with our customer service, which we highlighted on this earnings call given the importance not only to.
And also interactive, but also to ignite and AMT and just our overall business in terms of customer service is something that we put at the as a tenant and principal of Super serving our customers. So.
Our churn right now is the low as it's ever been and Houseware Interactive history, which is obviously given the pandemic and given the challenges that smbs have faced over the past 14 months and.
Incredible Testament to the team.
Alright, that's great. Thanks, I appreciate it.
Thank you, Jim and be well.
Thank you at this time, we've reached the end of our question and answer session and I will turn the call over to Bill Wilson for closing remarks.
Thank you Rob and thank you everybody, who dialed in this morning to get updated on town squares progress couldn't be more pleased and more proud of the team and look forward to reconnecting with you and update you on our Q2 results shortly so be well be strong take care. Thank.
Thank you operator.
Youre welcome. Thank you everyone. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.