Townsquare Media, Inc. Class A Stock

Good morning, and welcome to Townsquare Media's Second Quarter 2026 Conference Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. [Operator Instructions]

And with that, I would like to introduce the first speaker for today's call, Claire Yenicay, Executive Vice President.

Thank you, operator, and good morning to everyone. Thank you for joining us today. With me on the call 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 that are subject to certain risks and uncertainties, including those that are detailed in the company's annual report on Form 10-K filed with the SEC.

During this call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. Such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly, year-end and current reports available on our website. I would also encourage all participants to go to our corporate website and download our investor presentation, as Bill will reference some of those slides during our discussion this morning. At this time, I would like to turn the call over to Bill Wilson.

Thank you, Claire, and good morning, everyone. Thank you for joining us today. We are very pleased to share that our second quarter performed as we anticipated and telegraphed on our last earnings call. In Q2, we met the total net revenue and adjusted EBITDA guidance we provided, reflecting the continued execution of our digital-first local media strategy, the strength of our differentiated digital platform and the disciplined way our teams continue to manage the business.

In the second quarter, Digital Advertising revenue accelerated meaningfully from Q1. Our media partnership business continued its impressive growth, Townsquare Interactive delivered another quarter of record-setting profitability and our broadcast business continued to generate significant cash flow while outperforming the industry.

For many years, we've talked about transforming Townsquare from a traditional broadcast company into a digital-first local media company. Today, that transformation is no longer aspirational. It's simply who we are. Digital now represents approximately 59% of our total segment profit and approximately 57% of our total net revenue on a year-to-date basis. Levels we believe remain unmatched among our local media peers.

As highlighted on Slide 10, our competitors have only, on average, 31% of their revenue coming from digital sources. That differentiation is the result of more than a decade of strategic decisions and investment in our technology, products, people and proprietary platforms rather than simply relying on third-party vendors and traditional media assets. Those investments are increasingly translating into stronger operating performance and expanding competitive advantages for us.

As we've consistently said for many years, digital is Townsquare's growth engine, but I think it's fair to say today that we have evolved beyond a single digital growth engine. We now have multiple scalable digital businesses, each serving different customer needs, each generating attractive margins and each contributing to the long-term growth of our company.

Our Digital Advertising business, Townsquare Ignite, continues to lead that growth. Second quarter Digital Advertising revenue increased plus 11% year-over-year, representing a meaningful acceleration from Q1's plus 7% year-over-year growth and one of the strongest quarterly performances we've delivered in recent years. This growth was driven by strategic execution across our numerous specialized verticals as well as our media partnership business. It represented a full funnel strategy that captured greater share from our large client base and a concentrated effort to maximize owned and operated opportunities with our most engaged audiences.

As we've discussed previously, we believe our Digital Advertising platform is differentiated because we're much more than a digital reseller. We operate as a full-service digital marketing partner for local businesses, combining campaign strategy, creative development, sophisticated audience targeting, campaign optimization and omnichannel reporting into a single solution for our customers. Just as importantly, our local sales teams continue to execute at an exceptionally high level. Their ability to combine the trusted relationships they've built in our local markets with an increasingly sophisticated suite of digital products continues to differentiate Townsquare from both traditional local competitors and national digital platforms.

Our customers aren't simply buying Digital Advertising inventory. They're buying measurable business outcomes, and that continues to drive healthy client retention, larger average customer spend and continued market share gains. One area I'm especially excited about is the continued momentum of our media partnership business. Just over 2 years ago, this business did not exist. Today, we have 16 media partners, contributing 41 incremental markets beyond our owned and operated footprint of 74 markets. And thus, we now provide digital programmatic advertising in 115 markets across the United States. We expect that media partnership revenue, which was approximately $6 million in 2025, will more than double in 2026.

One major point of differentiation for this business is that our best-in-class sales talent integrates directly into our partners' local markets, leading 4-legged calls, mentoring sales teams by leveraging more than a decade of proven sales strategies to drive incremental digital revenue while simultaneously protecting our high-margin radio business. We also manage campaign strategy, creative development, media buying, optimization and customer support.

Notably, this strategy has delivered 100% retention rate of our media partners client base over the past 2 years. Key of this model is that it allows us to expand well beyond our own market footprint with very little incremental capital investment while generating attractive returns for shareholders and importantly, attractive returns for our media company partners. Perhaps most importantly, it validates something we believe for many years that the capabilities that we've built internally are valuable not only to our own advertisers, but increasingly to other local media companies as well.

I'm also very excited to report that we've completed our first licensing deal for our proprietary technology with one of our media partners, SummitMedia, further demonstrating that our partners see substantial value in our tech platform to the point of licensing it for their own use. SummitMedia's decision to adopt our in-house developed CRM software for their own sales team is strong third-party validation of our innovation and further differentiates us from the competition.

Beyond creating a new recurring revenue stream, this deepens our integration into our partners' operations, making us an even more strategic and indispensable partner through a true 360-degree relationship. In addition to our current 16 partners, we expect that number to grow in the coming years as more and more media companies reach out to us to discuss replacing their current third-party solutions with our more comprehensive digital platform. We believe our media partnership business has a long runway for growth, and we continue to target $50 million of revenue at a 20% profit margin within the next 4 years.

Given the growth and scale we've achieved to date and the significant long-term opportunity we see ahead, we've added a slide to our investor presentation highlighting our media partnership business, which you can now find on Slide 12. Our team's performance in the second quarter demonstrates just how resilient and diversified our Digital Advertising platform has become. Our programmatic revenue, which now represents approximately 70% of our year-to-date Digital Advertising revenue, increased by plus 27% year-over-year in the second quarter. In addition, the direct sales of our local owned and operated digital websites and mobile apps increased at a high single-digit year-over-year growth rate, just as we expected.

Another positive note, which we have outlined on previous calls is that our digital audience and, therefore, our digital revenue, which is only approximately 6% of our year-to-date Digital Advertising revenue, has sequentially stabilized in 2026. And in Q3, we'll begin to lap the dramatic year-over-year audience and associated revenue declines that started last August 2025. Due to the moderation of this headwind, but more importantly, given the continued strength of our Digital Advertising solutions directly sold by our local sales teams, we expect Q3 Digital Advertising revenue will accelerate yet again with growth expected to be stronger than Q2's plus 11%.

Let me now turn to our second digital business, Townsquare Interactive, our subscription-based digital marketing solutions SaaS-based business. As we've discussed over the past several quarters, our focus at Townsquare Interactive has been on building a business capable of delivering durable, profitable long-term growth rather than simply maximizing short-term revenue. I'm pleased to report that those efforts continue to produce strong profit results. During the second quarter, Townsquare Interactive performed exactly as I telegraphed on our last call and once again delivered record segment profit margins, reaching nearly 38% profit margins, reflecting the operational improvements we've made over the past several years.

While revenue has sequentially stabilized, yet remained below where we ultimately expect it to be as we continue rebuilding our sales organization over the next 12 months, the quality of the business has never been stronger. We spent considerable time restructuring our customer service organization and leveraging artificial intelligence throughout the business to improve operational efficiency. At the same time, we've intentionally increased productivity expectations across our sales organization, creating a stronger and more efficient, although temporarily smaller sales force.

The result is a business that is generating meaningfully higher profitability while positioning itself for future revenue growth. Importantly, customer retention remains healthy. Our service offering continues to resonate with small- and medium-sized businesses as evidenced by our current churn returning to historically low levels, and we continue to see a significant long-term addressable market.

We remain very confident that Townsquare Interactive is well positioned to return to sustainable revenue growth while maintaining substantially stronger profitability than we've historically produced. And we still continue to expect to return to sequential monthly revenue growth by the end of the year and potentially as early as Q3. Together, Townsquare Ignite and Townsquare Interactive continue to demonstrate the strength of our digital-first strategy. One business is delivering strong top line and profit acceleration in 2026, while the other continues to improve profitability and operating efficiency, and we expect to return to revenue growth later this year. Both are benefiting from the investments we've made in technology, automation and AI over the past several years.

Turning to Broadcast. It too performed exactly as we expected and shared on our last call. As we've consistently said, we continue to view local radio as an extremely valuable strategic asset. It delivers unmatched local reach, deep relations with our audiences and trusted partnerships with thousands of local advertisers across our markets. While we continue to expect advertising dollars to gradually shift from traditional media towards digital, our strategy has never been to simply defend broadcast. Instead, our objective has been to leverage the strength of our local brands and sales relationships to capture the share shift ourselves.

Although Broadcast continues to operate in a challenging advertising environment, we once again outperformed the industry, according to Miller Kaplan estimates, in the year-to-date period, and our teams remain highly disciplined in managing expenses. And as a result, we continue to generate strong Broadcast profitability and meaningful cash flow despite ongoing industry headwinds. The combination of a durable broadcast cash flow business and multiple growing digital businesses creates a financial profile that we believe is unique within local media.

As we look ahead to the balance of 2026, I remain very optimistic about our outlook. Digital Advertising has accelerated meaningfully during the first half of the year and will continue to do so in Q3. Townsquare Interactive is delivering record profitability while positioning itself for future sequential revenue growth. Broadcast continues to generate healthy margins and cash flow despite a challenging secular environment.

Most importantly, I believe the investments we've made over the past decade are producing exactly the type of business we set out to build, a diversified digital-first local media company with multiple scalable growth platforms, recurring revenue, strong cash generation and significant opportunities to create long-term shareholder value.

With that, I'll turn the call over to Stu to review our financial results and our outlook in more detail. All yours, Stu, take it away.

Thank you, Bill, and good morning everyone. It's great to speak to you today. We are very pleased to report that our second quarter results met our revenue and adjusted EBITDA guidance. Second quarter net revenue was approximately flat year-over-year at $115.4 million, above the midpoint of our guidance range of $114 million to $116 million. Political revenue was $1.3 million in the second quarter and $2 million in the year-to-date period. Through June, 2026's political revenue is 2% greater than 2022's political revenue of $1.9 million.

Second quarter adjusted EBITDA was also above the midpoint of our guidance range of $24 million to $25 million, coming in at $24.8 million. This represented a year-over-year decline of 6.2%. We had another very impressive quarter at Townsquare Ignite, our Digital Advertising segment, where revenue growth rates meaningfully strengthened from 6.8% year-over-year in Q1 of 2026 to strong year-over-year revenue growth of 11% in Q2 of 2026.

As Bill noted, looking ahead to the third quarter, we expect Digital Advertising revenue growth to further strengthen and be even higher than Q2's growth rate. As expected and previously projected, Townsquare Interactive, our subscription Digital Marketing Solutions segment's Q2 net revenue declined 8.5% year-over-year to $17.2 million. Importantly, TSI revenue stabilized in the quarter at approximately $5.7 million of revenue in each month of Q2.

We expect Q3's revenue to be roughly flat on a sequential basis and expect to return to month-over-month revenue growth by year-end. We're pleased to share that Townsquare Interactive segment profit margins increased year-over-year to 37.6%, representing the strongest profit margin in Townsquare Interactive's history. We're very confident that our profit margins will exceed 2025's record-setting profit margins for the remainder of 2026 due to the efficiencies and cost savings, including those enabled by AI that have been implemented.

Broadcast advertising net revenue declines moderated slightly as compared to 2025 with and without political. In the second quarter, total Broadcast revenue declined 5.5% and 7.2% excluding political revenue, each as compared to the prior year. We believe that Broadcast ex political declines will be in line with this result in the third quarter as well. As a reminder, this is compared to the consistent 8% ex political broadcast revenue declines we experienced in each quarter of 2025.

Broadcast segment profit margins were 30% in the third quarter. We expect that our Broadcast segment profit margins will be in the high 20s for the remainder of the year, averaging out to the mid-20s for the full year, which is consistent with 2025 profit margins.

In the second quarter of 2026, we had non-cash impairment charges of $26.6 million related to our FCC licenses and $35.2 million in the year-to-date period. The impairments in the first quarter were caused by an increase in the discount rate used in our calculations due to rising debt yields of our broadcasting peers. While the impairments in the second quarter were driven by decreases in third-party industry broadcast revenue forecast.

Given the way that these non-cash impairments are mathematically determined, we expect the value of our FCC licenses to continue to be written down regularly over time. These write-downs of decade-old purchase price calculations have no bearing on our cash position, our operating revenue, operating expenses, our profitability or the company's future prospects. They are nothing more than non-cash accounting charges affecting only the historically recorded purchase price allocations made when we bought our radio station assets roughly a decade or more ago.

Our second quarter net loss was $41.8 million or $2.36 per diluted share. The loss was primarily driven by the FCC non-cash impairment charges of $26.6 million and an $18 million income tax expense taken for financial statement purposes only. Adjusted net income per share was $0.21 per share as compared to adjusted net income per share of $0.22 in the prior year period.

We'd like to remind you that any benefit or provision for income taxes included on the face of the income statement is for GAAP financial statement purposes only. We maintain significant tax attributes, including approximately $121 million of federal NOL carryforwards and other substantial tax shields related to the tax amortization of our intangible assets. We continue to believe that we will not be a material cash taxpayer until approximately the end of 2028.

One of our business model's strongest attributes is our consistent cash flow generation. In the first 6 months of 2026, we generated $7.8 million of cash flow from operations. We ended the quarter with $462 million of debt outstanding. As of June 30, our net leverage was 5.44x. We anticipate our net leverage will tick back down in the second half of 2026 as EBITDA returns to year-over-year growth.

As always, our #1 priority is to invest in our local businesses through organic internal investments that support our revenue and profit growth, particularly our digital growth engine. We plan to continue to invest in our digital product technology, sales, content and support teams, specifically in our Townsquare Interactive and Townsquare Ignite businesses to maintain our strong competitive advantage in our markets outside the top 50 cities.

In addition, we plan to use our excess cash flow to reduce our debt through both mandatory and voluntary debt repayments and, of course, support our high-yielding dividend. Our Board has approved our next quarterly dividend payable on November 2 to shareholders of record as of October 26. The dividend of $0.20 per share equates to $0.80 per share on an annualized basis and implies an annual payment of approximately $14 million based on our current share count and a dividend yield of approximately 13% based on our current share price.

As we mentioned on our last earnings call, it's both management's and the Board's belief that our current share price does not reflect the inherent value of Townsquare. Therefore, we are not concerned about the implied dividend yield as we believe it will come down as and when our business is better understood by investors and our business returns to consistent profit growth.

Turning now to the third quarter. We expect third quarter net revenue to be between $108 million and $110 million, which at the midpoint represents low single-digit year-over-year growth. We expect third quarter adjusted EBITDA to be between $22.5 million and $23.5 million, which at the midpoint represents mid-single-digit year-over-year growth. For the full year, we are narrowing our guidance range to be more precise now that we are at the halfway point. We expect net revenue will be between $425 million and $431 million, and we expect adjusted EBITDA will be between $87 million and $90 million. Importantly, this guidance is within the ranges we provided at the start of the year.

As a reminder, embedded in this guidance is forecasted political revenue of approximately $8 million, which is in line with the $7.5 million of political revenue we received during the 2022 election cycle. And with that, I will now turn the call back over to Bill.

Thank you, Stu. Great job. Before we open the line for questions, I'd like to leave you with a few final thoughts. At Townsquare, we've spent more than a decade transforming this company into a digital-first local media business. Quarter after quarter, that strategy continues to deliver results. Today, digital represents the majority of our profit and the majority of our revenue and the driver of our future growth. At the same time, our Broadcast business continues to generate meaningful cash flow and strengthen the local relationships that remain at the core of our company. Together, these businesses create a differentiated model that we believe positions Townsquare exceptionally well for the future.

I'm particularly encouraged by the momentum we're seeing across our digital platform. Digital Advertising accelerated again in the second quarter. Our media partnership business continues to expand into new markets through a highly scalable capital-light model, further increasing our confidence of our Partnership division growing to $50 million in revenue and $10 million in profits within 4 years and then growing meaningfully from there. And Townsquare Interactive is delivering record profitability while positioning itself for the next phase of growth. These are all businesses that we believe have substantial runway ahead of them.

Just as importantly, our disciplined approach to expense management, capital allocation and balance sheet improvement continues to provide us with the flexibility to invest in our highest return opportunities while creating long-term value for our shareholders. Our strategy is working. Our competitive position continues to strengthen. And I remain incredibly proud of the execution, passion and commitment of our Townsquare teammates across the country, whose dedication make these results possible every quarter.

We believe our best days remain ahead of us, and we remain focused on executing our strategy, strengthening our competitive position and creating sustainable long-term shareholder value. With that, operator, please open the line for all questions.

[Operator Instructions] Your first question comes from the line of Michael Kupinski from NOBLE Capital Markets.

Congratulations on a good quarter. A couple of things. Bill, I know that you talked a little bit in the past about AI and you gave some guidance and thoughts about Q3. I was just wondering, can you give us an update on how AI search is now that it's at an all-time high? How that might look like as we kind of go not just through Q3, but going forward?

Yes, Michael. Thank you for that. As we detailed in great detail, I think, on our year-end call back in March and then reiterated it on our May call. The great news is that our audience has actually grown from Q4 of 2025 into the first half of the year. That's because we're getting more and more traffic from either direct sources like our newsletters and our mobile apps that people have downloaded as well as through social traffic, including Facebook and X and other means. So we feel great. As I shared on the call as well, the remnant piece of our Digital Advertising is now just 6% of our total Digital Advertising, while our programmatic Digital Advertising, which grew 27% in the quarter, is now 70% approximately of our Digital Advertising.

So we see sequentially now stability in our audience after having declined because of that AI search hit that a lot of at-scale publishers faced, but we also see some modest growth overall. So search volumes continue to come down, but our other sources of traffic, including what I just outlined in terms of direct and social continue to climb. And as an end result, we're seeing audience growth. We're seeing stability in our remnant revenue, which will lap in August. And that's one of the reasons that our Q3 Digital Advertising outlook is even stronger than our plus 11% in Q2. So a lot of positives on the Digital Advertising front. We're selling our owned and operated websites and mobile apps incredibly well. And I think it just speaks to the benefits of having at-scale publisher, tremendous amount of first-party data and just a full funnel solution set that we believe is quite differentiated vis-a-vis others in the marketplace.

And it's really -- I mean, we obviously pivoted based on the AI search issues that all publishers face and I couldn't be more proud of the team leaning in, really throwing out the old playbook, generating a new playbook and executing at a very high level. And then as we talked about, on the flip side of the challenge of AI in terms of search volumes, the team has really embraced building AI tools internally as well as utilizing AI tools externally that are available to create tremendous efficiency throughout our organization and to be able to target customers better, to be able to serve customers better just to operate much more efficiently.

So the negative, I think, is much more outweighed by the positive of what we've come. And I think we've proven that we've got a different playbook to maintain, if not grow, our audience over time. I couldn't be more proud of the team, but I'll turn it back to you, Michael.

Obviously, on Ignite, that business is scaling nationwide. I think you mentioned 115 markets, which is just incredible. What is the percent of Ignite? And I'm sure that it's kind of transitioning. What percentage of customers are originating through relationships by the broadcast operations? I would assume that it's kind of moving beyond just the broadcast now at this juncture.

Yes. So I mean, I couldn't be more proud. We added Slide 12 to the investor deck just because the size and scale of this business and what we expect over the next decade is quite substantial. Couldn't be more proud of the partners that we've already partnered with. We're honored to be partners with them. As a recap for everybody on the call, this division really started in the beginning of '24. So we're just literally just over 2 years old. We have $1 million in revenue in 2024, $6 million in revenue through our media partners last year. And as I've shared since the beginning of the year, our expectation is that we've more than doubled that $6 million to over $12 million, and we're on that trajectory to do so.

Probably more importantly than the revenue piece is our partners are scaling incredibly quickly beyond my expectation, not because of the appetite from others, just I think we've been able to scale this quicker than I thought internally. So we're now at 16 partners. We with this capital-light model, where we're entering, in essence, 41 incremental markets to Townsquare's own footprint of 74. So as you just said, we're now in 115 markets, providing very sophisticated, differentiated digital programmatic solutions.

So as I shared on our last call, the inbound interest in partnering with Townsquare from other companies to help their digital advertising couldn't be more strong. I mean we're literally fielding dozens and dozens of new inquiries on a monthly basis. So that's just continuing to validate our own beliefs and how differentiated this is for ourselves. But we're seeing each partner that we had in 2025 has doubled or more than doubled their own digital advertising revenue partnering with us. So it's great for our partners, and it's great for us.

The other thing I'd highlight, we mentioned it very briefly on the call, but I think it's a significant development that will really help us and our partners over the next 5 years. We entered into our first software licensing deal with SummitMedia. They licensed our CRM that we utilized and built in-house for our own sales team. It's called Blueprint. And they're now -- they had a CRM to a third-party. Once they saw our CRM and all of the things it can do, not only in terms of managing the customer database, but things like lead flow, we're able to provide our AEs leads automatically based on geo, based on ZIP code, so forth and so on, including marketing spend. It's a very sophisticated CRM and prospecting tool.

So it's really nice that we've got partners now interested in licensing our tech stack. So I couldn't be more proud of the entire Townsquare team. As you said, Ignite itself is literally on fire, our Digital Advertising overall and then programmatic growing 27% in the quarter. Expecting that similar type of growth in Q3 on the programmatic side and then continued strength in the Media Partnership division.

So mostly radio companies, to your point, we are speaking to television operators currently. We haven't announced any deals on that front. We are also talking to some outdoor and smaller newspaper companies. So time will tell who else we partner with, but we're honored by those who've chosen to partner with us to date, and we look forward to scaling the number of partners over the next several years, Michael.

Bill, is there any gating factors in terms of the capacity or anything like that, in terms of those media partnerships?

The greatest gating factor is our own internal team members and how many people we can deploy and dedicate to our partners. The model is quite unique because we treat these partners as if they're another market of Townsquare like we're integrated into their operation quite extensively. Our salespeople are the people who do all the sales calls with our partners. So there -- we're doing 4-legged calls in these 41 markets right alongside the partners' AEs. So really, it's about how many salespeople that we have internally who perfected the solution set that we can deploy against partners. It's other personnel like media buyers, our data scientists, our reporting team.

So it's simply just adding people to our team, but when we deploy to our partners, we're really utilizing what I would call the SEAL team, just the best of the best. So the only gating factor is how quickly we can scale and build our team, which we're doing quite aggressively right now. I'm quite proud of the team. So that's really the gating factor. It simply -- there's not -- the investment on our side is into people. So that's a real capital-light model that allows us to scale and give us confidence that within 4 years, we'll be at $50 million in revenue through this division at a 20% profit margin, so $10 million in incremental profit. But more importantly, we think that's just the starting point. We see this continuing to scale from there. That was just the initial goal that we set a year ago. So the gating factor, Michael, is just how quickly we can add to our team, which we're doing quite aggressively right now and couldn't be more proud of that.

And just a couple of quick questions here. SiriusXM said in their Q2 that they see opportunities in media and local markets and are looking to expand there. I was just wondering any concerns, any thoughts about their plans?

I didn't hear the name of the company. Can you say it again?

SiriusXM.

No, no concern. I saw some of the things that happened with Audacy licensing some of their stations. But I think that speaks to Sirius is obviously a real national play. Our bread and butter and one of the reasons we love radio and we embrace radio as the highest reach medium in the United States. The emotional connection is unparalleled. We believe our brands and the strength of our brands is one of the reasons our digital business is as differentiated and strong as it is. So we are hyperlocal. We're hyperlocal if you go to any one of our mobile apps or websites, and we're hyperlocal on our radio station broadcast.

And as we've talked about in great detail over the last several years, from just a pure radio standpoint; a, we're gaining share; b, we're reaching on average in our 74 markets, 50%, 5-0, of the adult population just through our AM/FM signal. So that is incredibly powerful. Obviously, SiriusXM has nowhere near that type of reach and it would be inconsequential reach in our markets. So not concerned at all. I couldn't be more proud of our content contributors, what we call the original social influencers. We talked about our Broadcast performance ex political is moderating slightly from last year. Each quarter, as Stu mentioned, we were down last year, negative 8%. We're now in the first 2 quarters, negative 7%. I think what's not evident based on those numbers is the strength we're seeing in our local direct, selling broadcast traditional advertising to local clients. That is actually getting close to, I'd say, even on the year.

We're right now down low single digits year-over-year. What really -- the reason that we're at negative 7% versus mid to low single digits is our national network business was down high teens and our agency business was down as well pretty aggressively. So those pieces of our Broadcast business specifically, our national network and local agency are now the minority of our business, where 3 years ago, they were the majority of our Broadcast business.

So we're quite -- as we look out over the next 3 to 5 years and the strength of our local direct, the strength of our local brands and the strength of the reach in radio, we think we're again, we treat it as a cash cow business. We love radio, and we love the cash characteristics. We love the emotional connection, but we're not concerned by SiriusXM. It's kind of similar to Spotify, right? Spotify is a great music service, but that's not the value proposition that we're providing over our AM/FM signals to our local communities, particularly, as you know, Michael, but for the benefit of everybody on the call, in our markets, what I would classify the majority of them at their news deserts. Newspapers have literally stopped serving these communities.

So we've moved in. We've hired a lot of people who used to work in the newspaper to provide on-air content as well as online content that's hyperlocal, and that's serving us quite well. So I'll turn it back to you, Michael, if you have any other questions.

I just have one quick question, and I'm sorry for taking so much time here. Political advertising, it seems to be trending a little light. I would have expected it would be kind of competitive races and so forth. Is it just a function of not being in competitive markets? Or do you think that there's a secular issue that maybe dollars are being allocated to other mediums, including digital?

There's definitely more dollars and more dollars going to digital. I think that's obviously true in political. It's obviously true in advertising in general. Roughly 70% of all local media dollars are being spent in digital. That's why we're quite proud of the fact that we now are a digital-first local media company. I think that's now undeniable with 59% of our profit coming from digital and 57% of our revenue coming from digital. So that, I believe, is a factor in political as it is in the overall advertising. As it relates to our political, as Stu said a few minutes ago, through the first half of the year, we're up about 2% over 2022, which was our benchmark. In 2022, we did about $7.5 million in political.

As we've said consistently since the beginning of the year and reiterated by Stu earlier, our expectation is $8 million for the full year. So we don't -- we're actually quite pleased where we sit today. Obviously, a lot of the political dollars are going to be being placed in the future months. Obviously, Michigan, obviously, a lot of headlines this week around the primary there on the Democratic side. So we have great markets in Michigan, Flint, Kalamazoo, Grand Rapids, Battle Creek, Lansing. And we're also in Maine, and there's obviously a tight Senate race with Collins and a lot of disruption in that race. And also Texas, where we have a dozen markets throughout, including El Paso and Tyler and so on.

So we're well situated in terms of the map as well as the issue money. And as we sit here today, on August 6, we believe we're on the trajectory of that $8 million goal that we set in the beginning of the year. But we're not seeing any less political or share shift that we didn't anticipate going to digital. And we think we're actually seeing some of -- you may have seen the Supreme Court ruling around lowest average unit rate, which we think will create even more demand over time and have more of a crowd out effect on TV. Obviously, TV continues to get a tremendous amount of political dollars, which is interesting just given how much the audience has declined. But we are well positioned to hit our political goal. Did that answer your question, Michael?

[Operator Instructions] Your next question comes from the line of Patrick Sholl from Barrington Research.

If I could first follow-up on the media partnership side. You mentioned providing the CRM product to SummitMedia. Can you just maybe talk about like the overall opportunity in providing kind of software solutions to some of your media partners and if that could be meaningfully incremental to that $50 million target with the existing partner set?

Did I cut you off, Patrick? Or was that the question?

No, go ahead.

Okay. Great. Thank you, and thanks for joining us this morning. Always appreciate that, Patrick. Yes, as I said, just couldn't be more proud of our Media Partnership division. And although it's obviously scratching the surface with our first software licensing deal with Summit, they've been a tremendous partner from the beginning with us. And as they saw throughout the organization, as their account executives in addition to their executive team were given visibility into all the tool sets we have. The -- quite honestly, I think we talked about this on an earlier call, really blown away by our capabilities and the solutions that our amazing technology team in-house has built.

So I believe it can be a meaningful contribution to the overall revenue and profitability because not only are we talking to the other 16 partners about licensing our CRM, but we have other tools that we utilize internally for our sales teams as well as for other aspects of our business including customer service, that are real sophisticated solutions that we provided to our partners, not on a license level, but just given visibility of like, hey, this is how we go to market. This is how we prospect for new clients. This is how we do our client needs assessment. This is how we do our reporting. And a lot of that is now software-based and that we can license to others.

So we have great data about our clients that we have built through some AI tools, some third-party attribution as well. So I think over the next 3 to 5 years, the ability to license more and more of our own tech to our partners is a meaningful opportunity that will contribute to that $50 million goal plus some. The other thing I would highlight, Patrick, is putting aside the revenue of this incremental software licensing opportunity is really the -- how intertwined the partners become with us. As I mentioned on the prepared remarks, we're quite proud of the 16 partners who have chosen to partner with us for their digital advertising. But now -- and we haven't had any attrition. We're getting -- quite honestly, one of the greatest referral sources is them telling others in the industry what a great partner we are, and we appreciate and thank them for that.

But as we license more and more technology to these partners, they become even more ingrained to our company. So I think it's a double win. There's a revenue opportunity, a profit opportunity. But I would argue even more importantly for the future longevity of this business, we become more intertwined. And our solutions, we believe, are one of the reasons that we're having outpaced digital success, right, at 59% of the total company and the growth rate of growing Digital Advertising plus 11% in Q2 with programmatic up plus 27%.

So I think that's the second part of it. I think having these partners more ingrained with us and really looking at us as almost like an extension of their team is also highly differentiated and important. So I'll turn it back to you, Patrick, if you have any other questions.

Sure. And on Interactive, could you provide like just a little bit more color on like the subscriber trends, whether within your own markets or outside your own markets and where kind of the restructuring of the sales team is being felt most immediately?

Yes. Thank you, Patrick. I couldn't be more proud of the Townsquare Interactive team. I continue to be down there in Charlotte. We have an office in Phoenix as well. And just the fact that our profit margin last Q2 of '25, we were roughly 33% profit margin. Now we're sitting at 38% profit margin. And as Stu said, we expect to be in that zone for the entire year, is quite incredible. As I mentioned in the prepared remarks, our churn is back to historically low levels. I couldn't be more proud of attacking -- for the last 2 years, we really attacked our -- how we were serving our customers and rebuilt that entirely from the ground up. And we knew it would be disruptive, and that's why it was a shaky year in 2024 for us, but we added close to $4 million in profit last year.

And then our focus this year was really redoing the sales piece of the equation from top to bottom. And that's having great success. We're seeing increased sales velocity in our market. We're seeing increased sales velocity per seller outside of our market. And as Stu mentioned, we had revenue stability in Q2. So after having a long time declining sequentially as well as year-over-year, in Q2, our monthly revenue at Townsquare Interactive was approximately $5.7 million for April, May and June.

And as I shared this at the beginning of the year, I said I expected to see sequential revenue growth by the end of the year, and we're still expecting that by the end of 2026 and potentially in Q3, but if not in Q3, by the end of the year. And that's a combination. Really for us, the only reason the revenue is not growing quicker is that -- I know you know this, Patrick, but as a reminder for everybody on the call, our sales force declined by 40% from its highest level, and we're building that back. And we're building it back quite nicely, but we're building it back judiciously, so we're onboarding new people appropriately.

So as I shared on our last earnings call, I don't expect to get back to the level of salespeople until 2027 in terms of where we want to be and where we were historically. But as a result, we're seeing stability on the revenue side, and that, in essence, implies stability on the subscriber side and then therefore, growth in the back half of the year as we return to sequential growth.

So we're -- I couldn't be more proud of the Townsquare Interactive team. They're doing a tremendous amount of outbound marketing, e-mail marketing, text-based marketing and now digital marketing using data from the CRM that we deployed a few years ago to our Townsquare Interactive clients and doing things like lookalike Digital Advertising targeting for our clients. So more and more value proposition for those clients and churn at a historically low level.

And it's just a matter of how quickly we add salespeople, which we're doing quite nicely now, but you'll see sequential revenue growth towards the end of the year and then future revenue growth next year. So let me know if that answered your question, Patrick, on Interactive. Any other questions, Patrick?

Thank you. There are no further questions at this time. I would like to turn the call back to Bill Wilson for closing comments. Sir, please go ahead.

Thank you, Constantine. Thank you, everybody, for joining this morning to get updated not only on our Q2 results, but importantly, what our outlook is for the rest of the year and onward into 2027. I couldn't be more proud and thankful of the Townsquare team overall, and we look forward to updating everybody in 3 months from now. So I hope everybody has a great day. Thank you for joining this morning.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.

Good morning, and welcome to the Townsquare Media First Quarter 2026 Earnings Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. [Operator Instructions]

With that, I would like to introduce the first speaker for today's call, Claire Yenicay, Executive Vice President.

Thank you, operator, and good morning to everyone. Thank you for joining us today. With me on the call 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 company's annual report on Form 10-K filed with the SEC.

During this call, we may make certain non-GAAP financial measures, including adjusted EBITDA. Such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly, year-end and current reports available on our website. I would also encourage all participants to go to our corporate website and download our investor presentation, as Bill will reference some of those 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 today. It's great to speak with you this morning. We're pleased to share our first quarter results with you today, which demonstrate the strength of our digital advertising platform and validate our digital-first local media strategy with a focus on local markets outside of the Top 50. We are proud to share that our first quarter results met the guidance that we provided on our last call and that we're currently seeing ongoing improvement in digital advertising trends and pacing in Q2 and the back half of 2026. And as a result of our digital-first strategy, we are also reaffirming the full year net revenue and adjusted EBITDA guidance that we provided on our last earnings call.

By now, it should be very clear that Townsquare has transformed from a legacy broadcast company into a Digital First Local Media Company and that our digital platform and digital execution sets us apart from others in local media. In 2025, approximately 55% of our company's total net revenue and 56% of our total segment profit was generated from our digital solutions. In the first quarter of 2026, our digital revenue grew to be a very significant 59% of our total net revenue in the quarter, an all-time high. And as highlighted on Slide 10, is roughly 2x our competitors, as on average they have only 30% of their revenue coming from digital sources.

Even more importantly, our digital profit contributed a very significant 63% of our total profit in the first quarter, also an all-time high. As we have consistently stated for many years, digital is and digital will continue to be Townsquare's growth engine and the area where we focus the bulk of our investment capital going forward, consistent with our strategy of being a Digital First Local Media Company focusing on markets outside the Top 50 in the United States and further differentiating us from others in local media.

Now let's dive into our fastest-growing business, digital advertising, which we call Townsquare Ignite, the larger of our 2 digital segments. As I stated what happened on our last call, our digital advertising net revenue increased high single digits in the first quarter, with revenue increasing plus 7% over the prior year, a significant improvement from 2025's digital advertising growth of approximately plus 2%.

Our first quarter digital advertising revenue growth of plus 7% was driven by the same trends that we have seen for the past several quarters and have also discussed at length previously. Strong digital advertising related to our direct-to-client sales and declines in our indirect revenue, also known as remnant revenue, which will moderate in Q3. The strong growth of our direct-to-client sales is made up of two revenue streams: number one, our programmatic digital advertising platform; and number two, the direct local sales of our owned and operated or O&O digital properties, both of which are performing quite well.

First, our digital programmatic business, which make up approximately 65% of the Digital Advertising segment's 2025 revenue, delivered a very impressive and strong first quarter revenue results of plus 21% year-over-year. We believe that this part of our business has very strong organic growth opportunities, supported by our best-in-class digital offering, strong industry tailwinds and a great and excellent leadership team. We expect it will continue to be our primary growth driver in 2026 and beyond.

Our third-party media partnership model, which is a component of our programmatic business, has been progressing quite well since its beta launch in early 2024. This strategy will be a meaningful component of our digital advertising growth in future years. In 2025, media partnership revenue was approximately $6 million, and we had 6 local media partners. In Q1, we roughly doubled revenue from Q1 2025 and for the full year are on track to approximately double the $6 million we generated in 2025.

As a reminder, through this capital-light model, we partner with other local media companies and handle all the major components of their digital advertising campaigns, including managing the creative, buying and optimizing the inventory, providing customer support of the digital campaigns and importantly, training our partner sales teams to sell our solutions. Therefore, we can enter new markets to offer programmatic digital advertising solutions without having to acquire radio broadcast assets to do so, freeing up our capital for other purposes. I expect that in 4 years, this division will grow to be $50 million in revenue for Townsquare at an approximately 20% profit margin.

Ultimately, our goal with this initiative is to become the chosen provider of digital programmatic advertising to broadcasters and digital agencies in local markets outside of major cities. On our last earnings call, we announced that we are up to 11 partners to start 2026, and I'm pleased to share that since then, we have added 2 more partners.

Looking ahead to the second quarter, our programmatic digital advertising business continues to fire on all cylinders with revenue expected to be up over 20% year-over-year again. Our local teams are selling digital advertising better than ever, while at the same time, our media partnership division is performing extremely well, and as I noted previously, is on pace to nearly double revenue in 2026. Second, the direct sales of our local O&O digital assets, which includes our local salespeople selling the inventory of our own 400-plus local websites and mobile apps, was up plus 10% in Q1 2026 as expected and continues to show consistent and strong growth in Q2.

We owe our success here to the sophisticated digital advertising solutions that have been developed by our skilled digital product and engineering team. The hard work of our local content teams is continuing to drive our audience even in the face of AI search traffic-related headwinds, and of course, the dedication of our local sales teams. Revenue generated from remnant inventory on our own mobile apps and websites, as I outlined on numerous previous earnings calls, declined negative 40% year-over-year to $12 million approximately in 2025 from approximately $20 million in 2024.

Our expectation remains the same as we shared on our last call for the full year. Remnant indirect revenue will decline from approximately $12 million in 2025 to approximately $9 million in 2026, with most of the year-over-year decline occurring in the first 7 months of 2026. As a reminder, this approximately $3 million year-over-year revenue decline is close to 100% profit margin for Townsquare. I'd like to emphasize that Remnant revenue represents a small portion, approximately 8% of our total digital advertising revenue today.

In the first quarter of 2026, indirect remnant digital advertising revenue declined negative 37% year-over-year, but importantly, very importantly, grew sequentially over Q4 2025, a very positive and important development. Thankfully, our strong direct digital advertising revenue growth more than offset the declines in this quarter. Looking ahead to Q2, we expect similar year-over-year remnant revenue declines to Q1, yet important, stability, if not slight growth quarter-over-quarter in Q2. I'd like to take the time to highlight why we are seeing our digital audience stabilizing even in the face of lower search engine referrals.

A meaningful portion of our audience and traffic is driven by social media as well as direct visits to our websites from our loyal audience as well as traffic from our local e-mail newsletters and our mobile app alerts and other sources of organic traffic. And we're leaning into this, developing new traffic strategies, new audience strategies, building new content publishing tools and reinvigorating our team. We shared early promising signs on our last call that in January, unique visitors increased month-over-month, reaching our highest audience level since July of 2025. That trend, I'm happy to report continued through the first quarter as our audience of 25 million unique visitors on average per month in Q1 was larger than our audience in Q4, which was approximately 20 million.

This is early proof point that even with the impact of AI on search engine traffic, we are in a very differentiated position given our focus on hyperlocal content, coupled with the power of social media platforms to stop the decline and we believe grow our online audience once more, just like we have in Q1. As I highlighted earlier, the majority of our digital advertising segment is our programmatic business. In addition to directly selling of our owned and operated properties, which continues to deliver very strong and healthy profitable revenue margins, and therefore, we expect Q2 digital advertising revenue overall will continue to perform incredibly well with growth accelerating from Q1's plus 7%, all due to the strength of the results from our direct local sales teams as we are still very confident in our full year digital advertising revenue forecast of high single digits growth given our momentum today.

At Townsquare Interactive, our Subscription Digital Marketing Solutions business, we once again delivered very strong profit margins in the first quarter despite anticipated revenue declines. In the first quarter, Townsquare Interactive revenue declined exactly as I expected and outlined on our last call at negative 8% year-over-year, driven by slower overall sales velocity due to a smaller sales force. However, first quarter segment profit margins expanded by 1.5 percentage points year-over-year, driven largely by three factors: one, the restructuring of our customer service model in 2023 that allows us to grow more efficiently; two, changes to our sales structure at the end of 2024 and early 2025 that have led both to a temporary smaller sales team, but very importantly, a more productive sales team with much higher ROI; and three, efficiencies gained from AI.

We are very proud of how our Townsquare Interactive team has embraced AI and leveraged its usage for meaningful cost savings and improvements in efficiency across the business from helping to create websites to assisting with customer service. In the meantime, we remain committed to our plan to rebuild our sales team to prior level, but acknowledge that it will take some time to do so. We expect Q2 revenue at Townsquare Interactive will decline in line with Q1's performance at approximately negative 8% year-over-year. Yet importantly, quarter-over-quarter, the results of the revenue will decline be -- much smaller and expected to be in the low single digits at approximately negative 2% quarter-over-quarter.

We are also restating our belief that based on our current forecast, we may see a return to month-over-month revenue growth as early as Q3 2026, which I shared on our last call as well. In the meantime, we expect that strong profit margins will continue throughout 2026, just as we delivered in 2025. Importantly, we believe the addressable market for Townsquare Interactive, which in our estimation is nearly 9 million target customers remains as attractive as ever.

Now turning to our third and final business segment, Broadcast Radio. As you are all aware, at Townsquare, we view local radio as an extremely valuable asset with significant cash flow properties, unparalleled consumer reach and an important local connection to our audience and our clients. However, radio is not a growth driver for Townsquare. And in 2025, broadcast advertising net revenue, excluding political, declined negative 8% year-over-year. We saw a slight moderation in those declines in the first quarter with broadcast net revenue declining negative 6.9%, excluding political and negative 6.6% in total.

In Q2 2026, we are currently forecasting similar year-over-year declines for ex-political broadcast revenue. Despite broadcast revenue declines, we outperformed the industry in our broadcast business again in the first quarter, gaining local and national broadcast market share according to Miller Kaplan estimates.

With our differentiated local content and strong local brands, we believe that we will continue to gain broadcast and total market share across our market footprint, while also generating a solid profit as we carefully manage expenses to maintain a strong broadcast profit margin. In the long term, it is our belief that our differentiated digital platform will deliver strong growth to offset future core broadcast revenue declines.

And now I'll hand it over to Stu to discuss our financial results and guidance in more detail. All yours, Stu, take it away.

Thank you, Bill, and good morning, everyone. It's great to speak to you today. We're very pleased to report that our first quarter results met our revenue and adjusted EBITDA guidance. And as Bill highlighted, in Q1, 63% of our segment profit was generated from our two digital divisions, the highest profit percentage ever for Townsquare. First quarter net revenue declined 1.9% year-over-year to net revenue of $96.8 million within our guidance range of $96 million to $98 million. First quarter adjusted EBITDA declined 9.7% year-over-year to $16.4 million, which was also within our guidance range of $16 million to $17 million.

We had a very impressive quarter at Townsquare Ignite, our digital advertising segment, where revenue growth rates rebounded sequentially very significantly from a slight year-over-year decline in Q4 2025 to strong year-over-year revenue growth of 6.8% in Q1 of 2026. As Bill noted, looking ahead to the second quarter, we expect digital advertising revenue growth to further strengthen and be even higher than Q1's growth rate. As expected and we previously projected, Townsquare Interactive, our Subscription Digital Marketing Solutions segment's Q1 net revenue declined 7.9% year-over-year. We are pleased to share that as expected and consistent with recent performance, Townsquare Interactive segment profit margins increased year-over-year to 33.7%.

We remain very confident in our expectation that profit margins will be in line with 2025 profit margins for the remainder of 2026 due to the efficiencies and cost savings that have been implemented. Broadcast advertising net revenue declines moderated slightly in the first quarter as we foreshadowed our last earnings call. In the first quarter, total broadcast revenue declined 6.6% and 6.9%, excluding political revenue, each as compared to the prior year. We believe that this trend will continue in the second quarter as well. This is compared to the consistent negative 8% ex-political broadcast revenue declines we experienced in each quarter of 2025. Broadcast segment profit margins dipped to approximately 19% in the first quarter, in part due to revenue declines and in part due to seasonality.

Our first quarter broadcast profit margins are typically the lowest for the year. We expect that our Broadcast segment profit margins will return to the mid- to high 20s for the remainder of the year, averaging out to the mid-20s for the full year, consistent with 2025 profit margins. Our first quarter net income was $3 million or $0.16 per diluted share as compared to a net loss of $0.12 per diluted share in the prior year period. We'd like to remind you that any benefit or provision for income taxes included in the face of the income statement is for GAAP financial statement purposes only. We maintained significant tax attributes, including approximately $121 million of federal NOL carryforwards and other substantial tax shields related to the tax amortization of our intangible assets.

We continue to believe that we will not be a material cash taxpayer until approximately the end of 2028. One of our business model's strongest attributes is our consistent cash flow generation. In the first quarter, we generated $4.2 million of cash flow from operations, more than the cash flow from operations generated in the first quarters of both 2025 and 2024. We ended the quarter with $457 million of debt outstanding and $2 million of cash on our balance sheet. As of March 31, our net leverage was 5.27x. and I'd like to remind you that since our term loan is a floating rate instrument, each 0.25 point interest cut translates to roughly $1.1 million of annualized interest reduction based on our current debt balance.

As always, our #1 priority is to invest in our local businesses through organic internal investments that support our revenue and profit growth, particularly our digital growth engine. We plan to continue to invest in our digital product technology, sales, content and support teams, specifically in our Townsquare Interactive and Townsquare Ignite business to maintain our strong competitive advantage in markets outside the Top 50 cities. In addition, we plan to use our excess cash flow to reduce our debt through both mandatory and voluntary debt repayments and, of course, support our high-yielding dividend.

Our Board has approved our next quarterly dividend payable on August 3 to shareholders of record as of July 27. The dividend of $0.20 per share equates to $0.80 per share on an annualized basis and implies an annual payment of approximately $14 million based on the share count and a dividend yield of approximately 12% based on our current share price. As we mentioned on our last earnings call, it is both management and the Board's belief that our current share price does not reflect the inherent value of Townsquare. Therefore, we are not concerned about the implied dividend yield as we believe it will come down as and when our business is better understood by investors and our business returns to growth.

Turning now to the second quarter. We expect second quarter net revenue to be between $114 million and $116 million, which at the midpoint is approximately flat on a year-over-year basis. We expect second quarter adjusted EBITDA to be between $24 million and $25 million. For the full year, we are reaffirming our expectations that our revenue will be between $420 million and $440 million. And that adjusted EBITDA will be between $87 million and $93 million. Embedded in this guidance is forecasted political revenue of approximately $8 million, which is in line with the $7.5 million of political revenue we received during the 2022 election cycle.

And with that, I will now turn the call back over to Bill.

Thank you, Stu, and thanks to everyone for taking the time to be updated on Townsquare's first quarter results this morning. We greatly appreciate it. Each and every year, our business mix continues to shift to be a greater percentage of both digital profit and revenue, as I highlighted earlier. In Q1, 59% of our total revenue was generated from our differentiated digital solutions and importantly, 63% of our total profit was digital profit, each our highest percentages ever. And we want to reiterate that we are very confident in the future success of our differentiated digital platform, including the following highlights to start 2026.

Number one, our digital advertising revenue has returned to high single-digit revenue growth in Q1 and will only strengthen throughout the year due to the consistent strength of our programmatic offering and the success of our media partnership division as well as the strong revenue growth of the direct sales of our local digital O&O properties and the stabilization of our online audience and remnant revenue that I outlined earlier. Number two, Townsquare Interactive's very strong profit margins, coupled with our current forecast of sequential revenue improvement in the back half of the year. And number three, lastly and most importantly, we are confident in our ability to build shareholder value for our investors through long-term net revenue, profit and cash flow growth, net leverage reduction and consistent future quarterly dividend payments at the current rate.

Our success is a direct result of the passion, creativity and relentless execution of our team members across the company. From our local market teams who continue to build deep connections with their communities and deliver results for our clients to our digital product and engineering teams who are driving innovation and advancing our platform forward each day. I am continually impressed by what this team accomplishes together. We remain confident in our strategy, focused on execution and are very excited about the opportunities ahead.

With that, operator, at this time, please open the line for any and all questions.

[Operator Instructions] Your first question comes from Patrick Sholl with Barrington Research.

I was just wondering if you could dive into a little bit more on some of the drivers that you see contributing to potentially improving month-over-month revenue in Interactive starting, I guess, in the second half of the year.

Patrick, thank you for the question. Yes, I actually just spent a week down with the team in Charlotte for Townsquare Interactive, where they're headquartered along with their secondary office in Phoenix. And as I talked about 8 weeks ago on our prior call for year-end '25, we're seeing continued improvement in our churn. So our churn, as I mentioned on our last call, was returning to our historical low levels and has only improved in Q1 from last year.

And as we're sitting here today in Q2, it's pacing even better than Q1. So that's extremely well. As we outlined on our last call, the team is deploying a lot of tools, internal tools for efficiency that are utilizing AI, so that's helping our profit margin. As I said earlier, our profit margin in Q1 expanded to 33.7% versus Q1 of '25 of 32.5%. So we're able to scale more effectively. We're really serving our customers better than we ever have. Therefore, the churn is coming down. Our really only hurdle, which I've outlined really over the last several calls, is getting back to the level of our sales personnel in terms of size of sales team at Townsquare Interactive.

We outlined the changes we made in the beginning of '25 which created a lot more revenue per salesperson, but we shrunk our sales team over the course of 2025. We're now building that up, but it is going to take time. So the combination of lower churn, greater efficiency in utilizing a lot of AI tools and growing back our sales team, we expect to see month-over-month revenue growth in the back half of '26. As I outlined on the prepared remarks, in Q2, we expect to decline again about negative 8% year-over-year as we did in Q1 from a revenue perspective. But on a sequential quarter-over-quarter basis, you'll see improvement to about negative 2% revenue decline quarter-over-quarter.

So hopefully, that gives you a sense, Patrick, why we're so confident. I definitely walked away from that trip last week, incredibly confident not only about the back half of this year, but more importantly, as we look over the next 3 to 5 years for Townsquare Interactive. So I'll turn it back to you for any follow-up questions.

Sure. I was just kind of curious on like the reduction in churn that you mentioned, maybe just talk about like some of what you're seeing with regards to the macro environment with the increase in energy prices. And also, I realize that you're utilizing AI tools in the selling process, but maybe just the ability of the potential client base to utilize AI tools for some of the services and just how that's contributing to churn as well?

Yes. So I think we -- as you know, but for the benefit of everybody on the call, we redid our entire customer service model starting in '23 that really bled into and continued in 2024. So our satisfaction rate from our customers, how quickly we're able to -- quickly any task that they call up and ask us to do. The marketing we're doing, I think we've outlined on these calls. We're doing a lot more outbound marketing, e-mail marketing, text-based marketing, even digital advertising marketing, utilizing the data that they're capturing in the CRM that we deployed a few years ago. So all of those components are helping customer satisfaction, which is bringing down churn.

We moved from a one-to-one model to a pooled model. So that's created a lot more customer satisfaction. It was very disruptive in the beginning as we outlined, and churn spiked as a result of that in '23 and '24, but now we're back to historically low levels. And as I just mentioned, Q1 churn better than 2025 and as we're sitting here in May, Q2 is pacing from a churn perspective to be even lower than Q1. Then you asked about the macro environment. And clearly, that's having an impact, particularly in advertising. We're seeing advertising being placed later in month or shorter runs. That's definitely apparent to us in the broadcast side as well as our digital advertising side. Even though our digital advertising is going incredibly well, I would say it's on fire from a direct sold perspective, which we could talk more about. But clearly, as energy prices are impacting particularly small- and medium-sized businesses, we're seeing that.

With all of that said, we mentioned on the broadcast side, we had very slight moderation in the decline. Last year, we declined negative 8% ex-political throughout the year and full year '25, that moderated to negative 7% ex-political in Q1. But we clearly are hearing from our customers, particularly as the conflict in the Middle East continues and gas prices continue to go up month-over-month, that's a strain on them, and they're obviously watching their advertising budget and their expenses overall. They're still spending. But as I just noted, they may be spending quicker to the flight time, not booking as far in advance, and we're seeing that.

And I think as hopefully, the conflict resolves over the coming months, that will be a tailwind if and when that occurs, particularly for our advertising segment. It really hasn't bled over to Townsquare Interactive. I think the advertising component is very different than the digital marketing solutions component. But obviously, we expect hopefully a resolution and that will even be a greater tailwind for our advertising business for not only digital but broadcast as well. So I'll turn it back to you, Patrick.

[Operator Instructions] Your next question comes from Michael Kupinski with NOBLE Capital Markets.

A couple of questions here. Your white label digital media partnership business seems to have gained some traction. But so far, it's been with some smaller operators. And I was just wondering, do you believe that the service could be attractive to larger station groups? Or do you think it's more likely that you will see more singles and doubles from that partnership arrangement?

Thank you, Michael. Yes, we couldn't be more proud of our programmatic business. As we outlined, our digital advertising, 65% now of our total digital advertising is programmatic. In Q1, that grew 21% year-over-year. Even stripping out the success of media partnerships, we would be close to 20% growth year-over-year in Q1 as well without that. But that said, this division is on fire. Shaun, who's been leading that with Todd, has been doing an amazing job. We had 6 partners in 2025. As we outlined previously, we grew from $1 million in 2024 in revenue to $6 million in revenue last year. And I expect that to, if not double, get close to it. But based on our current pacing, I think we'll more than double the $6 million in revenue, and we operate that at a 20% profit margin.

And as you know, Michael, but for the benefit of everybody on the call, we expect that to be in 4 years or less, $50 million in revenue at a 20% profit margin. So last year, we had 6 media partners, now we have 13. I think the success we've had with each one of our partners, and we're proud and honored to be partnered with them has become really well known in the industry. We're close to doubling everybody's revenue in terms of what we forecast for '26 for the existing partners versus what they did in '25. So they're obviously quite pleased. We're quite pleased.

And getting to your specific question, the majority of these are small operators. One thing I would highlight is some of them are in the Top 50 markets, which are not the footprint of our owned radio stations and digital footprints. And we've had great success actually in the Top 50 markets with those partners, and that's a testament to them as well as utilizing our platform. Confidentially, we obviously can't discuss who we've been speaking to, but our pipeline is literally dozens and dozens of local media companies, primarily radio, but there's also some television, outdoor, print and other legacy media companies who have seen what we've done for ourselves, now have heard from partners what we're doing for them. And therefore, our inbound queue of media partners has grown quite nicely and continues to do so.

Some of those, to your question is, "Hey, are there opportunities if you're a larger media company?" The answer is yes. Obviously, we're a large media company. Our programmatic division in Q1 is up over 20%. And as I said, in Q2, it is pacing above 20% again. So clearly, the solutions we have are tremendous for all size operators. And although we haven't announced any larger ones that have, say, 70, 80, 90-plus properties or either radio stations or television stations, that is clearly an opportunity. If those conversations continue and result in a partnership, I can't say with certainty, but I can tell you with certainty that the solutions we're deploying for these smaller operators clearly work for larger operators as well. And we're quite excited that our Q2 pacing in programmatic up over 20% again like it was in Q1 and that our direct sold owned and operated, which was up 10% in Q1 is again trending quite nicely in Q2 at that level as well.

So our digital advertising, for all intents and purposes, is firing on all cylinders, and we couldn't be more excited about media partnerships as well as our own organic efforts in that space. So Michael, I'll turn it back to you.

Yes. Bill, you indicated that you're in the Top 50 markets now in that business. And historically, you've always said that, that wasn't the area that you would play in. And so it seems like a big opportunity for you. Can you just kind of tell us about the opportunities that you're seeing in some of the Top 50 markets? Is that now an area that you feel comfortable in playing in at this point?

Yes. I don't think -- from where we -- thank you, Michael, you are correct. But the partners that we're having like Steel City and others in the Top 50 markets, we're seeing real strong penetration in those markets. We're seeing shifting market share for those companies in terms of digital growth in the programmatic space. And in the larger markets, at times, we do see larger revenue spends -- client spends per month on average than maybe outside of the Top 100 markets. So clearly, the good news is our solutions work in the Top 50 markets.

From an acquisition standpoint, our stance still is that we'd be more interested in markets outside the Top 50. I think we're more highly differentiated across the board in local radio, in our owned and operated content for our digital websites and mobile apps as well as our Townsquare Interactive solutions. So as it relates to potential acquisitions, be it swaps or incremental markets or incremental stations, our viewpoint is still to focus outside the Top 50. But as we're talking to media partners, there are many who have properties in the Top 50, and we put them in touch with our existing partners, and they're hearing how well our solutions are working.

So we are quite confident playing in the digital advertising space in the Top 50. We know it's working quite well for our partners. Yet I don't think at this point in time, we'd be interested in acquiring properties in the Top 50. So hopefully, that gives you some color, but I'll turn it back to you, Michael.

Yes. I mean first of all, congratulations on executing your digital strategy. On your O&O digital advertising in Q1 and outlook is pretty impressive, given the reports out there that digital advertising is kind of slowing for some radio operators, how much visibility do you have into the second half on digital advertising demand trends, particularly from your local advertisers?

Yes. I appreciate that, Michael. I appreciate you using the word impressive because we're quite pleased and proud of our digital advertising growth. So in terms of the back half, we're seeing even actually greater strength in Q2 than Q1. That's true in our programmatic space. That's true in our owned and operated space. And as I mentioned, it was great in Q1 that our online audience grew from $20 million in Q4 to $25 million in Q1 this year. So a nice improvement in our audience. And that, as I said, also helped us from a remnant standpoint, although it's only 8% of our digital advertising, that was obviously a headwind and there was a lot of concern from investors if that would continue. That's why we outlined that we expect that $12 million last year to go to $9 million in revenue this year and that be lapped in August. So it's really the first 7 months.

So as we lap that, our owned and operated digital growth is projected to be actually nicely higher, quite higher in the back half of the year than the front half of the year. So that also bleeds into the calculation of overall digital advertising. We expect to be stronger in Q2 and the back half of the year than Q1, although we grew obviously plus 7% in Q1, which was nice after growing on average 2% full year last year. So real acceleration and improvement in our digital advertising business. And as your question is, we expect the back half to be even stronger than how we're starting this year with all the momentum that we're seeing.

And if I could slip one more in. On your Townsquare Interactive, where are you in terms of getting your sales force to your steady-state sales force level, like what percent of your goal are you at this point?

We still have quite a ways to go. We've actually just started beefing up or increasing the size of our recruiting team. The recruiters we do have are doing quite nicely and bringing in talent. But as we said, I think we said it on the year-end call or maybe the Q4 call, our sales force was down 40% in terms of size of sales team. So that is going to take us -- we will not get back to those levels until 2027. That said, based on the lowering of churn and based on the fact that we are incrementally quarter-over-quarter growing our sales team, we have the opportunity in the back half of 2026 to see month-over-month revenue growth. And combining that with the performance of customer service and the lower churn, we're seeing really strong profit margins as well.

So I don't expect us to get back to our goal until 2027. That said, with our trajectory right now of churn and adding salespeople as well as we're still seeing higher revenue per sales rep than we historically have, I believe we have an opportunity in the back half of '26 to grow month-over-month revenue. So as I said, I just spent the week in Charlotte. I couldn't be more confident, more energized. Sometimes, obviously, the internal view may not always be apparent on the outside. But as we look at the next 3 to 5 years for Townsquare Interactive, I'm very confident they're getting back to their mojo of the early 2020, 2021, 2022 type of financial performance, and that will be more evident, I think, as we go into 2027 and beyond. So feeling quite good.

Obviously, the fact that 63% of our total profit is driven by our 2 digital businesses is the highest ever for the company. And the 59% of total revenue coming from these 2 digital divisions is the highest ever as well. We're feeling quite well positioned. As you know, Michael, we don't operate this on a quarter-over-quarter or year-to-year basis. But as we look at the next 5-year, we feel like we're incredibly well situated from an organic standpoint. And then to your questions about media partnership and our success with the 13 current partners, the pipeline that we have, coupled with -- we're playing in some of the Top 50 markets through these partners, couldn't be more excited about the momentum we have right now. So thank you for the question, and I'll turn it back to you in case you have any others.

There are no further questions at this time. I will now turn the call over to Bill for closing remarks.

Thank you, operator, and thank you all for joining us this morning to hear about not only our Q1 results, but importantly, how we're looking at the full year as well as the next few years. As Stu said, we had more cash flow from operations in Q1 2026 than we did in Q1 '25 or Q1 '24. We're feeling quite confident about how well we're situated for not only this year but the next several years. And I'm really proud of our Townsquare team. The innovation, the momentum, the excitement that the team is building is remarkable.

And I just want to thank them and thank you for joining us this morning and look forward to regrouping in a few months and updating you on the back half of the year and how that's coming together for us. Feeling quite confident. I hope everybody has a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Good morning, and welcome to Townsquare Media Fourth Quarter 2025 Earnings Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. [Operator Instructions] With that, I would like to introduce the first speaker for today's call, Claire Yenicay, Executive Vice President. Please go ahead.

Thank you, operator, and good morning to everyone. Thank you for joining us today for Townsquare's fourth quarter financial update. With me on 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 that are subject to certain risks and uncertainties, including those that are detailed in the company's annual report on Form 10-K filed with the SEC.

During this call, we will make certain non-GAAP financial measures, including adjusted EBITDA. Such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly, year-end and current reports available on our website. I would also encourage all participants to go to our corporate website and download our investor presentation, as Bill will reference some of those slides during our discussion this morning. In addition, our annual shareholder letter is now available on our website. At this time, I would like to turn the call over to Bill Wilson.

Thank you, Claire, and thank you all for joining us today. It's great to speak with you this morning. We're very pleased to share with you today that Townsquare's fourth quarter results and therefore, our full year results for 2025 met the total net revenue and adjusted EBITDA guidance that we provided on our last call. Reflecting our team's hard work in the current environment. We are proud that the execution of our Digital First Local Media strategy allowed us to deliver excellent results for our clients, while also outperforming competitors and gaining market share in 2025.

In addition, we produced strong cash flow from operations due to the thoughtful and deliberate management of our expense base and executed a refinancing of a challenging environment that was unforgiven to the broadcast media companies, extending our maturity profile through 2030 and granting us ample one way to execute our growth strategy.

Due to our strong cash flow characteristics, we were able to pay down debt throughout the year while also maintaining a high-yielding dividend for our shareholders and organically investing in our business for future growth.

Before diving into our results, I'd like to take a minute to address our dividend. I bring this up because due to the stock price performance at year-end, our dividend yield spike, causing some investors to contact us and express concern about the dividend safety.

To be transparent, we do not pay too much attention to the implied dividend yield as we believe the underlying strength of our digital advertising business and its differentiation is not reflected in the current stock price, making the dividend yield a somewhat irrelevant metric at times.

With that backdrop on context, I'm pleased to share that management, along with our Board of Directors remain confident in the strong cash flow generation that our business model delivers and therefore, in our ability to support our dividend at its current rate.

Now back to our results. By now, it should be very clear that Townsquare has transformed from a legacy broadcast company into a digital first local media company and that our digital platform and digital execution sets us apart from others in local media.

In 2025, approximately 55% of our company's total net revenue came from digital which is up from 52% in 2024. And in 2025, 56% of our total segment profit was generated from our digital solutions, which is up from 50% in 2024.

As highlighted on Slide 10, this is industry-leading at 2x our competitors as, on average, they only have 30% of their revenue coming from digital sources. As we have consistently stated for many years, digital is and digital will continue to be Townsquare's growth engine and the area where we focus the bulk of our investment capital going forward, consistent with our strategy of being a digital-first local media company focusing on markets outside the top 50 in the United States and further differentiating us from others in local media.

Our digital growth engine is comprised of 2 segments: Digital advertising which we call Townsquare Ignite and subscription digital marketing solutions, which we call Townsquare Interactive. While we expect [ bolt-on ] to deliver long-term profitable growth with strong profit margins, we expect that our digital advertising business, and more specifically, our digital programmatic business, will be our leading growth vehicle.

In 2025, our digital advertising business started the year with strong revenue growth rates. In fact, revenue grew plus 8% year-over-year in Q1 of 2025. As the year progressed, however, we were faced with two very different trends. Digital advertising related to our direct-to-client sales were very healthy and strong, but were largely offset by a decline in indirect revenue, also known as remnant revenue driven by a significant deterioration in our online audience trends on our local and national websites, which you may recall, we went into great detail on our last earnings call.

All in all, 2025 digital advertising revenue increased plus 2% year-over-year. This growth was driven by: one, our programmatic digital advertising platform; and two, the direct local sales of our Owned and Operated or O&O digital properties.

First, our digital programmatic business, which made up approximately 65% of our digital advertising segment 2025 revenue to deliver strong full year revenue results of plus 9% year-over-year for digital programmatic. We believe this part of our business has very strong organic growth opportunities supported by our best-in-class digital offering, strong industry tailwinds and a great leadership team. We expect programmatic will continue to be our primary growth driver in 2026 and beyond.

Our third-party media partnership model, which is a component of our programmatic business, has been progressing quite, quite nicely since its beta launch in early of 2024. This strategy will be a meaningful component of our digital advertising growth in future years.

In 2025, media partnerships revenue was approximately $6 million, and we had six local media partners. As a reminder, through this capital-light model, we partner with other local media companies and handle all the major components of their digital advertising campaigns, including managing the creative, buying and optimizing the inventory providing customer support of the digital campaigns and importantly, training our partner sales teams to sell our solutions. Therefore, we can enter new markets to offer programmatic digital advertising solutions without having to acquire radio broadcast assets to do so, bringing up our capital for other purposes.

I expect that in 4 years, this division can grow to be $50 million in revenue for Townsquare at an approximate 20% profit margin. Ultimately, our goal with this initiative in division is to become the chosen provider of digital programmatic advertising to broadcasters and digital agencies in local markets outside of major cities.

We are proud and honored to share that in addition to the six strong partners we had in this division in 2025, we have now signed agreements with five additional parties, bringing the total to 11 media partners, and we are excited to start working with them.

In total, our programmatic digital business, which again now makes up 65% of our digital advertising segment is on a roll and firing on all cylinders as we start 2026, and with revenue up a strong approximately 20% year-over-year in Q1. Again, in Q1 '26, we're up approximately 20% in our programmatic digital advertising business.

Our local teams are selling digital advertising better than ever, while at the same time, our media partnership division is on pace to nearly double revenue in 2026.

Second, the direct sales of our local O&O digital assets, which include our local salespeople selling the inventory on our owned 400-plus local mobile apps and local websites was also quite strong in 2025. And growing plus 9% year-over-year, driven by increases in both number of clients and average monthly spend.

In Q1 2026 Sales of our local O&O digital assets is projected to be over plus 10%. With the deep skill set of our digital product and engineering team, we have developed a multitude of digital advertising solutions for our clients, creating national scale and sophistication to our size markets, including high-impact solutions that are not available on programmatic exchanges, such as site takeovers, first impression full site coverage, mobile interstitials, sponsored social mentions, endorsements and so much more.

In addition, we have the unique ability to collect and analyze first-party data from our digital audience, allowing us to provide detailed and unique insights about consumer behaviors, audience interest and purchase intent that drive real results with strong ROI for our clients, giving us a true strategic advantage over our local competition. We're especially proud of the success of our local sales team and what they've done to drive direct sales growth and they continue to do so, a conviction that is currently supported by our first quarter forecast, which has Q1 revenue for our direct sold O&O digital advertising up over 10% year-over-year.

Now to address the digital advertising headwinds created by the emergence of which we also detailed on our last earnings call. For clarity, AI is negatively impacting the revenue that we get by selling excess or remnant digital inventory are owned and operated websites programmatically, AKA impressions that were unsold by our local sales team due to the fact that we now have less excess digital inventory available to be sold.

In 2025, our digital audience decreased as referrals from search engines such as Google declined significantly as again, we addressed on earlier earnings calls. Unique visitors to [ O&O ], local and national websites and mobile apps was, on average, approximately 40 million people per month in 2025, a decline of approximately 45% as compared to the approximately $70 million per month in 2024.

As we have previously shared, this is an industry-wide issue impacting publishers of all sizes to a significant degree.

Revenue generated from remnant inventory on our websites which, as a reminder, is almost 100% profit margin revenue for us, declined approximately 40% year-over-year to approximately $12 million in 2025 and this was from approximately $20 million in 2024. Therefore, remnant indirect digital revenue declined from being approximately 13% of our total digital advertising revenue to now being just 8% in 2025.

Importantly, our direct digital advertising sales were not impacted by the decline in audience. As I've already shared, direct sales of our local O&O websites increased plus 9% in 2025 year-over-year and is now pacing up over plus 10% in Q1 2026. This is because, although the declines of our audience are material, we have so much excess or unsold digital inventory due to the huge scale of our audience that we are nowhere near close to touching the amount of digital advertising we can sell directly.

This meaningful and unforeseen drag on our otherwise strong digital advertising performance significantly muted our overall revenue and profit growth rates in 2025. In fact, excluding the revenue from remnant inventory sold programmatically, 2025 digital advertising revenue overall would have increased plus 8% year-over-year for Townsquare.

We have been asked if we believe that our digital audience and therefore, our indirect digital advertising revenue will go to 0 and also if that then impacts our direct digital advertising revenue. And the answer is, without a doubt, no.

Why is that? Quite simply, it's because there are other drivers of digital audience to our websites and mobile apps that are not tied to Google and other search engine, providing us a [ floor ]. A meaningful portion of our traffic is driven by social media as well as direct visits to our websites and mobile apps from our lot audience as well as traffic from our local e-mail newsletters as well as traffic from mobile alerts and many other sources of organic traffic. And we're leaning into this, developing new traffic strategies, building new content publishing tools and reinvigorating our team.

Early signs are very, very promising. In January, the unique visitors to our websites increased month-over-month, although still down year-over-year, they also reached our highest audience level in January since July of 2025. This is an early proof point that even with the impact of AI and search engine traffic we are in a differentiated position given our focus on hyper local content, coupled with the power of our social media platforms to stop the decline, and we believe grow our online audience once more.

As we have outlined on our last earnings call, the year-over-year comparison for remnant indirect revenue will be quite negative through August of this year. We forecast Q1 and Q2 remnant revenue to be down approximately 40% year-over-year in each quarter. And then for Q3 and Q4 2026, we expect remnant revenue to be approximately flat year-over-year.

For the full year 2026, our expectation is that the approximately $12 million of remnant indirect revenue declined to approximately $9 million in 2026 and thus, approximately a $3 million decline. And again, this is close to 100% profit margin for Townsquare.

The positive news is that with our online audience to our owned and operated properties growing in January over December, we forecast that revenue will be up over 10% in Q1 2026 versus Q4 2025. On a sequential basis, at a minimum, we expect that the revenue decline we experienced throughout 2025 will subside substantially and quite possibly, we could have ongoing quarter-over-quarter growth like we are experiencing Q1 2026 versus Q4 of 2025. A very positive development and one that I foreshadowed on our last call during our Q&A session.

So again, although our Q1 remnant revenue is down approximately 40% year-over-year, I'd like to emphasize that it represents only a small portion, approximately 8% of our total digital advertising revenue today. In fact, the majority of our digital advertising segment including and especially our programmatic business continues to deliver very strong and healthy profitable revenue growth, and we expect that Q1 2026 digital advertising revenue overall will be up high single digits given the strength of our direct sales results.

In addition, even with the decline of an estimated $3 million of indirect remnant revenue, our full year forecast is for digital advertising to also be up high single digits for 2026. The which is a significant acceleration from 2025 plus 2% growth.

Again, in 2026 full year, we expect our digital advertising in total to be up high single digits versus 2025 full year plus 2% growth.

At Townsquare Interactive, our subscription digital marketing solutions business, we are proud to share that we delivered the highest segment profit margin in its history as well as the best profit growth since 2019 and the second strongest year-over-year profit improvement ever. With year-over-year segment profit growing nearly plus $4 million versus the prior year or plus 17%, nearly raising the past 2 years of profit declines at Townsquare Interactive.

Our strong profit performance at Townsquare Interactive is largely due to three factors: One, the restructuring of our customer service model in 2023 that allows us to grow more efficiently. Number two, changes to our sales structure at the end of 2024 and early 2025 that has led both to a temporarily smaller sales team down approximately 40% and but very importantly, a more productive sales team with much higher ROI. And finally, number three, efficiency gains from AI. We are very proud of how our Townsquare Interactive team has embraced AI and leveraged its usage for meaningful cost savings and improvement in efficiency across the business from helping to create websites to assisting with customer service. However, as I just mentioned, with a much smaller sales team from slower sales velocity and therefore, muted revenue performance at Townsquare Interactive in the short term.

In 2025, Townsquare Interactive net revenue declined negative 0.7% year-over-year, and we expect year-over-year declines in revenue to continue short term as we rebuild our sales teams. And it is absolutely our plan to rebuild our sales team at prior levels as we still have the utmost confidence in our service offering and the addressable market for Townsquare Interactive which in our estimation is nearly 9 million target customers as outlined on Slide 14.

We expect Q1 revenue at Townsquare Interactive will decline approximately 8% and based on current forecast, we could see a return to quarter-over-quarter revenue growth as early as Q3 2026. In the meantime, we expect that strong profit margin will continue throughout 2026 and just as we delivered in 2025.

I'd like to emphasize that we remain very confident that the changes we have made to both our customer service and our sales model, along with our continued deployment of AI solutions combined with the future growth of our sales teams are setting Townsquare Interactive up for the next decade of efficient and profitable growth and success.

Now turning to our third and final business segment, broadcast radio. As you are all aware, at Townsquare, we view local radio as an extremely valuable asset with significant cash flow properties, unparalleled consumer reach and an important local connection to our audience and to our clients. However, Radio is not a growth driver for Townsquare. And in 2025, broadcast advertising net revenue, excluding political, declined negative 8% year-over-year and negative 12.6% in total.

Despite broadcast revenue declines and macro headwinds, we outperformed the industry again in 2025, gaining local and national broadcast market share according to Miller Kaplan estimates.

In Q1 2026, we are currently forecasting a very slight improvement in the ex political performance in our Broadcast segment versus Q4 and full year 2025. With our differentiated local content at our local radio broadcast combined with being able to offer clients marketing solutions powered by the combination of digital plus radio, we believe that we will continue to gain broadcast market share and total market share across our market footprint while also generating a solid profit as we carefully manage expenses to maintain a strong broadcast profit margin.

In fact, we were able to manage broadcast expenses in 2025, such that despite revenue declines, Broadcast segment profit margins were approximately 26% and in both 2024 and 2025 when excluding the impact of political revenue. In the long term, it is our belief that our differentiated digital platform will deliver strong growth to offset future core broadcast revenue declines. And now I'll hand it over to Stu to discuss our financial results and guidance in more details. Paul, yours to take it away, please.

Thank you, Bill, and good morning, everyone. It's great to speak to you today. We are very pleased to report that our fourth quarter results met our revenue and adjusted EBITDA guidance. Fourth quarter net revenue declined 4.5% year-over-year, excluding political and 9.6% in total to net revenue of $106.5 million, which was within our guidance range of $105 million to $109 million.

Full year net revenue declined 2.8% year-over-year, excluding political, and 5.2% in total to $427.4 million. Fourth quarter adjusted EBITDA, excluding political, declined 17% year-over-year and 30.9% in total to $21.5 million, which was also within our guidance range of $21.5 million to $23.5 million. Full year adjusted EBITDA, excluding political, declined 3% and 12.2% in total.

I would also like to highlight that when excluding the impact of political in 2024 and 2025, adjusted EBITDA margins were flat at 20.3% in each year as we thoughtfully managed our expense base to manage the declines in broadcast and the high-margin digital headwinds.

Townsquare Ignite, our digital advertising segment experienced slight revenue declines in the fourth quarter as weakness in the remnant digital advertising revenue offset continued growth in the direct sales of our programmatic offering and our owned and operated digital portfolio. In total, fourth quarter digital advertising revenue declined 1% year-over-year, a slight improvement from Q3 declines. For the year, this translated to modest growth on our digital advertising revenue of 1.6% year-over-year. As Bill also noted, we expect strength in direct digital advertising sales to offset the ongoing headwinds from remnant revenue in Q1, with Q1 digital advertising revenue growth accelerating over Q4.

In 2025, our digital advertising profit margin declined to approximately 22% due to the loss of high-margin digital revenue that we have described in length. As a result, going forward, we expect digital advertising margins to remain in the low 20s.

As expected and as we previously projected, Townsquare Interactive, our subscription Digital Marketing Solutions segment's Q4 net revenue decreased 5.6% year-over-year and 0.7% for the full year period. We are thrilled to share that as expected and consistent with performance all year, Townsquare Interactive delivered another quarter of very strong profit growth, with Q4 segment profit increasing 12% year-over-year.

In 2025, total segment profit at Townsquare Interactive increased an impressive 17.4% year-over-year, representing segment profit growth of $3.7 million, which represented an all-time high profit margin for the segment of 33.6%. In 2026, we're very confident in our expectation that profit margins will remain in line with 2025 profit margins due to the efficiencies and cost savings that have been implemented.

Forecast advertising net revenue declines on an ex political basis were consistently down approximately 8% year-over-year for the quarter of 2025 and therefore, for the full year as well, as 2025 was not a political year, the declines were more meaningful on a total basis. In the fourth quarter, total broadcast revenue declined 17.8%, and for the year, total broadcast revenue declined 12.6% each as compared to the prior year. Importantly, Broadcast segment profit margins were approximately flat in 2024 and 2025 when excluding political at approximately 26% each year. We're very proud of how our team is working diligently to manage our broadcast expense base in the face of revenue declines.

Our fourth quarter net loss was $4.8 million or $0.32 per diluted share. In 2025, our net loss improved $1.2 million year-over-year to a net loss of $9.8 million. I'd like to remind you that any benefit or provision for income taxes included on the face of the income statement is for GAAP financial statement purposes only. We maintained significant tax attributes, including approximately $121 million of federal NOL carryforwards and other substantial tax yields related to the tax amortization of our intangible assets. We continue to believe that we will not be a material cash taxpayer until approximately the end of 2028.

As Bill highlighted, and I would again like to emphasize, we consistently have strong cash flow generation. We generated $31 million of cash flow from operations in 2025. Cash flow from operations before cash interest payments was $83 million, which was only down 2% or $2 million lower than the previous year despite the year-over-year decline in adjusted EBITDA.

In 2025, following the February 2025 refinancing, we repaid $23 million of our outstanding debt, including $6 million of term loans, which we purchased at a discount in the open market during the third quarter. In addition, our cash this year has been used to fund $52 million of interest payments, $13 million of dividend payments and $28 million of fees associated with our February refinancing. For clarity, our current annualized interest expense is approximately $39 million. With $457 million of total debt outstanding and $5 million of cash at year-end on our balance sheet, our net leverage was 5.14x, and I'd like to remind you that since our term loan is a floating rate instrument, each 25-point interest rate cut translates to approximately $1.1 million of annualized interest reduction based on our current debt balance.

As always, our #1 priority is to invest in our local businesses through organic internal investments that support our revenue and profit growth, particularly our digital growth engine. We plan to continue to invest in our digital product technology, sales, content and support teams, specifically in our Townsquare Interactive and Townsquare Ignite businesses to maintain our strong competitive advantages in our markets outside the top 50 cities.

In addition, we plan to use our excess cash flow to reduce our debt through both mandatory and voluntary debt repayments and of course, support our high-yielding dividend.

Speaking of our dividend, our Board has approved our next quarterly dividend payable May 4 to shareholders of record as of April 27. The dividend of $0.20 per share equates to $0.80 per share on an annualized basis and implies an annual payment of approximately $13 million based on our current share count and a dividend yield of approximately 11% and based on our current share price.

As Bill mentioned, it's both management and the board's belief that our current share price does not reflect the inherent value of Townsquare. Therefore, we are not concerned about the implied dividend yield as we believe it will come down as and when our business is better understood by investors and our business returns to growth. As Bill also highlighted at the top of the call this morning, our plan is to continue to support our dividend at the current rate.

Importantly, Townsquare management team and Board of Directors collectively own 16% of the company's equity, ensuring that our interests remain closely aligned with those of our fellow stakeholders as we work to build long-term value.

Turning now to first quarter and full year 2026 outlook. We expect first quarter net revenue to be between $96 million and $98 million, which represents low single-digit year-over-year declines. We expect first quarter adjusted EBITDA to be between $16 million and $17 million.

As a reminder, in the first quarter, we typically have the lowest revenue of the year due to advertising cyclicality, so our margins are typically lower in our advertising segments in the first quarter as a result. For the full year, we currently expect that our revenue will be between $420 million and $440 million. Embedded in this guidance is the forecasted political revenue was approximately $8 million, which is in line with the $7.5 million of political revenue we received during the 2022 election cycle. We hope this is a conservative estimate -- but as political has come in below expectations over the past few years, we believe this approach is prudent. We expect that our 2026 adjusted EBITDA will be between $87 million and $93 million. And with that, I will now turn the call back over to Bill.

Thank you, Stu, and thanks to everyone for taking the time to be updated on Townsquare's year-end 2025 results this morning. We greatly appreciate it. As we begin 2026, there are also many areas of strength across Townsquare worth highlighting. Number one, our digital advertising revenue will be returning to high single-digit revenue growth in Q1 and driven by the strength of our programmatic offering and the success of our media partnership division as well as the strong consistent revenue growth of the direct sales of our local digital O&O properties. And as I detailed earlier, we are already seeing early signs of month-over-month online audience stabilization and thus remnant revenue stabilization.

And as I also noted earlier, we are also currently forecasting a very slight improvement in the ex political performance in our Broadcast segment versus the negative 8% ex political declines in each quarter of 2025. Townsquare Interactive profit margins remained very strong at all-time highs, and we expect to see sequential revenue improvement towards the back half of the year.

And lastly and most importantly, we are confident in our ability to build shareholder value for our investors through long-term net revenue, profit and cash flow growth, net leverage reduction and consistent future quarterly dividend payments at the current rate.

As always, we wouldn't have the confidence in our long-term success without the Townsquare's team's effort, passion and commitment that is directly driving our growth and innovation each and every day. We are building a more focused, more digital, more resilient Townsquare and we believe that the strong foundation we have built over the past 16 years positions us well for the years ahead. I could not be more appreciated by our team and their tremendous work each day. With that, operator, at this time, please open the line for any and all questions.

[Operator Instructions] Your first question comes from Patrick Sholl with Barrington Research.

You touched on AI earlier. I was just curious to the extent to which you're seeing some of your clients on the Townsquare Interactive side, use those type of tools to kind of self-serve just on their own solutions for those types of services.

Patrick, thank you for the question. Always good to hear from you. Yes, we're quite proud of how the company overall and really specifically the furthest along as Townsquare Interactive in terms of deploying AI tools for greater efficiency. And that's why, as you saw in 2025, the highest profit margin that we've ever operated Townsquare Interactive that. It was around low 30s, I think 33% versus traditionally a couple of years ago, we were in about 28%. And we expect that to continue for the full year 2026. So quite proud of the Townsquare Interactive team and where we're operating currently on a full year picture. And as I said earlier, we're expecting to return to quarter-over-quarter revenue growth towards the end of 2026 while still continuing to operate at a very high profit margin.

Specifically, to your question about clients, not necessarily what we're doing not seeing that for Townsquare Interactive clients. Just as a reminder for everybody on the call, I know you're aware of this, Patrick. But we're targeting businesses with less than $10 million in annual revenue less than 20 employees, and we have in the investor deck, how large a TAM that is in terms of the target market. And these are businesses that are looking for help to operate all of their digital marketing solutions. So it's not just having a website is really not what we're about. It's really helping them operate their business and grow their business and reach more customers.

And as I've outlined out in prior earnings call, at this point, every one of our clients is using our CRM. So we're able to collect off-line information about their clients as well as, obviously, online information about their clients and then you ongoing text-based marketing, e-mail marketing as well as digital advertising and marketing on their behalf.

So we're not seeing clients, the target market for us are not those who want to do a self-service. That's always been there. Even prior to AI, we talked about this for over a decade now. There was always GoDaddy and Wix and Squarespace and all these other I would call freemium models where you can have a web presence for free and then a la carte add services. That's not the value proposition for Townsquare Interactive. It's really an average ARPU of $300. We're handling all of your digital marketing solutions and helping you really operate your business much more effectively. So we haven't seen AI have any negative impact at Townsquare Interactive. If anything, as I outlined on the call. it's helping us really improve our marketing as well as our profit margin from 28% to 33% to 34%. So we feel quite bullish on Townsquare Interactive as we go into 2026 and beyond. But I'll turn it back to you for any follow-ups, Patrick.

Yes, just on the digital advertising side, on the media partnerships. Can you maybe talk a little bit about like how -- like what stage and sort of ramping up the partnerships that you launched in 2025 are and kind of how you expect that the 2026 new partners to sort of start to flow through?

I appreciate that, Patrick. As I outlined in the prepared remarks, I couldn't be more bullish on our digital advertising business in 2026 and most importantly, over the next 5 years. We've detailed in great detail in the last few calls about the headwinds of the remnant piece. And as I outlined on the call, that is now starting to subside. We have growth in our unique visitors in January as well as February versus Q4 of 2025. And therefore, as I mentioned on the last call, our remnant indirect revenue went from $20 million to $12 million -- $20 million in '24 to $12 million and '25. And on a full year '26 basis, we expect that now to only decline to roughly $9 million. So it will be a $3 million headwind is our expectation for full year '26. .

But all of that said, in Q1, our digital advertising is up and pacing over 7% versus prior year. And just to put that in perspective, in 2025, that was 1.6% growth. So -- and in Q4, we were actually slightly negative in digital advertising because of the renin issue. So to be up and pacing over 7% in Q1, and we expect that to be high single digits on a full year basis. We couldn't be more bullish about our Ignite digital advertising segment. The team is just, quite honestly, on fire.

Our programmatic division last year, just what we're doing, which is 65% of our digital advertising on the programmatic side was up 9% in '25. And as I mentioned on the call, in Q1 is up over 20%, [ 2-0 ]. And our direct sold of our owned and operated websites and mobile apps in 2025 was up 9% and is up currently over 10% in Q1 2026. So a lot of momentum, I couldn't be more proud of the team and what we're doing there.

Specifically to your question on media partnerships, it's been -- it's interesting how this ebb and flows, like it's gone extremely well from the beginning, but the number of partners, particularly over the last 6 months, who are inbound reaching out to our team has really accelerated. So as I mentioned, we had six partners in 2025, and they're great partners each and every one of them. We now have signed 11, we'll probably add a 12 throughout 2026, but the pipeline is quite robust.

So we did roughly $1 million in 2024 with our media partners. As you may recall, [indiscernible] was really the initial launch. Last year, that was $6 million on an annualized basis. And this year, we expect that to roughly double, and that's really organic growth from our existing six partners as we onboard more people. We operate that media partnership division at roughly a 20% profit margin, as you may recall, and I expect that to be a $50 million business within 4 years. And I think the proof point of our performance in '25 and what we expect in '26 is a good indication of that.

In terms of the new partners, we don't really expect a lot of revenue in '26. We'll be onboarding them now, which means a lot of training and really minimal revenue from the incremental [ five ], for the original [ six ]that we had in '25, I think every one of them or almost every one of them has doubled their revenue versus before they approached and partnered with us. As you may recall, each of these companies that we are honored to be working with, they've all been doing programmatic digital advertising before us. They were using other people in this space and they move to us because of what we can do and how differentiated it is and all the tools and solutions we provide and having lived the book and run the playbook that we're asking and helping them run. So it's quite differentiated. And each one of those businesses is almost or over doubled their revenue with us in their first year versus what they were doing annualized prior to coming with us.

So again, the media partnership division on fire, but most importantly, our entire Ignite division with $161 million in revenue last year, $36 million in profit is trending up in Q1 over 7% first prior year. And on a full year basis, we expect to be high single-digit growth versus 2025. So I'll turn it back to you, Patrick, to see if you have any other questions on Ignite or any other Townsquare related questions.

The next question comes from Michael Kupinski with Noble Capital Markets.

Thank you, and good morning, everyone. I'm really happy to hear that revenue trends are improving. I was just wondering if you can talk a little bit about what's driving the slight improvement in broadcast advertising outside of political and I was just wondering, have you seen any disruptions in and around the geopolitical issues and more and so forth?

Thank you, Michael. Always great to hear from you. Yes, we're quite pleased at how the year has started for 2026 for Townsquare. And even more excited about the full year. Our revenue trends are slightly improving ex political and broadcast, as you just mentioned, I just highlighted the high single-digit growth on a Q1 as well as full year basis for digital advertising and our strong profit margins highest ever, will continue in Towns Interactive and have revenue growth returning quarter-over-quarter in the back half of the year.

So clearly, the geopolitical environment has not been favorable, yet we're seeing a significant improvement in our business in '26 versus '25. So therefore, God willing, this geopolitical situation is handled and there's an off ramp sooner than later. And we expect when that does happen, whenever that does happen, we'll see even a greater improvement in each of these businesses, but particularly digital advertising and broadcast will be most impacted from the geopolitical environment.

Townsquare Interactive is really secluded from that to a large degree. And as I mentioned, programmatic and digital advertising up over 20% in Q1, direct sold over our owned and operated mobile sites and websites is up over 10%. So -- and that's with this geopolitical situation. So I think we'll continue to work through the challenges in the environment, but we couldn't be more pleased with the improved revenue picture in 2026 versus '25. And as to your question, I do expect as that gets off ramped and resolved that our advertising business will even pick up pace from where it is today, which we're quite pleased with. So I'll turn it back to you for any other follow-ups, Michael.

That's really encouraging. Do you see opportunities to expand interactive services into new verticals or markets? And is there a bifurcation in markets such as West Coast versus East Coast? I'm just wondering if you can give us some additional color there.

Yes. No. I mean we're -- our [ Infra ] Townsquare Interactive for those who recall is our SaaS-based subscription business. We're very diversified in terms of types of customers and everything from lawyers, doctors to contractors and so forth and so on. So it's a very diversified client base. It's completely diversified from a location standpoint, it is all U.S.-based businesses. So we're not international there.

As you may recall, the large majority of our clients are outside of our local market footprint because of our call center. And the team is operating at a high level. And it's really about our revenue growth will come back as we build the sales team, and we've outlined that in quite amount of detail. But team is operating at a high level, doing quite well diversified and really helping these businesses navigate and operate at a much more efficient scale than they have previously. So quite bullish on Townsquare Interactive. And as I outlined on the digital advertising side, as well as what you just said, it's nice to see.

Although a slight broadcast improved from last year's performance ex political. And as I believe the geopolitical situation subsides, our broadcast business will improve even more in 2026. So -- but as it relates to Townsquare Interactive quite diversified, not West Coast versus East Coast, all over the U.S. and performing quite nicely as we begin the year, Michael.

Got you. Your third-party media partnerships, I want to follow up on Patrick's question. What is the primary gating issue for significantly accelerating this business, both for you, if you have one now and for your target companies.

So the only reason we're not scaling quicker right now, and I believe we will continue to scale and maybe even increase the rate of acceleration as we go into 2027 is one of the key differentiators for us and why so many local companies via media companies and now more and more local agencies are coming to us for this solution is our ability to train the sales team. We've actually lived this playbook for over a decade and performed at quite a high level.

And so it's not only for them about revenue diversification, but we're doing hand-to-hand sales training in their markets with their team going on 4-legged sales coral. So we're taking the best of the best in digital sales and marketing and partnering with each of these companies, not only to train them and then leave, but more importantly, we're actually going on all the sales calls. So it is somewhat labor-intensive. That's why we're also operating this at roughly a 20% margin. that's the gating factor. It's hard to hire somebody new from the outside of Townsquare and then deploy them to a partner. We're really taking people who've been with us over a decade who excel in digital marketing and advertising with clients and using our best of the best, what we would call the ninjas of the company and deploying them not only for our own teams, but for these media partners.

And as I said, I believe this will be a $50 million division within 4 years. We're quite pleased that we went from 1 million in '24 in revenue to $6 million last year. And I'm quite confident that we'll nearly double, if not more than double in 2026. And that's really what the existing six partners that we had in '25. And as I highlighted, we've already added an additional five to be at 11 now. We haven't onboarded all of the new five, and we will be doing so.

So we're quite bullish on Ignite overall, as you can hear and what we said in terms of pacing up high single digits in Q1, and we expect that to continue for the full year. And our immediate Partnership division, I think, is incredibly differentiated versus others. And that's why more and more people are reaching out proactively to us for us to really white label and handle all of their digital advertising solution and help them grow.

And quite pleased that, as I said to Patrick, not only is this helping our company where each one of these partners has, if not double, nearly doubled their revenue versus before they came to us on an annualized basis. So again, our Ignite division is quite honestly firing on all cylinders. The headwinds of remnant is starting to subside, and we'll lap that in August. And even with that headwind through now through August, we're pacing up high single digits versus prior year. So media partnership, a key component of that, I couldn't be more proud of our team. and really honored to be working with our partners, Michael, so I'll turn it back to you.

Yes. One final question. Obviously, this goes to capital allocation. I know that I appreciate you addressed the free cash flow that you have and the fact that the dividend is secure and so forth, obviously, the depressed stock price kind of limits you in terms of making acquisitions. Are you kind of disappointed that I know in the past, you indicated that radio could lead to build your digital business in many markets. And obviously, there's a lot of stations on the market. Has your thoughts changed in terms of making radio acquisitions and getting foothold into some of these markets where you can expand your digital operations. Have your thoughts kind of changed on that now given the fact that your digital business is now kind of or expanding into markets that you're currently not in? I mean, do you need to think about acquisitions and radio to kind of grow their base business? Have your thoughts changed there?

It's a great question, Michael. I appreciate that. Obviously, we're very well -- I think we sit in the catbird seat in that if we don't do any acquisitions, we are in a great place of revenue and profit growth for the next 5 years. The media partnership division where we're white labeling our digital advertising, which we just walked through, really allows us to, as opposed to acquiring incremental radio stations, partner with others who already have sales teams in these markets that were primarily not in -- and then to grow, as I just outlined, we believe that's a $50 million revenue business within 4 years at a 20% profit margin without having to deploy any capital other than hiring more and more people to support the division, which is quite nice.

That said, as we've demonstrated for the last 16 years since Townsquare was founded, when we do acquire radio stations, we're able to diversify the revenue base quite substantially from broadcast advertising to digital advertising and digital marketing solutions. So last year, 56, [ 5-6 ] of our segment profit was from our two digital businesses, and that was up 6 points from 2024. So 2025, we had 56% of our company's profit from digital businesses, and that was only 50% in '24. When I say only, we're obviously leading in terms of local media in that space and 55% of our revenue last year from digital.

So we have demonstrated over and over and consistently that we can take traditional media assets and radio and diversify the revenue and profit base quite aggressively and quite successfully.

So we have been having many conversations and in essence, war gaming, what we believe will be happening later this year with FCC and commission a car, where the ownership caps we believe will be loosened and maybe even in markets 100 and below go away completely.

So again, I think we sit in the best seat because we don't have to do acquisitions to grow. We're going to grow organically. We have the benefit of this media partnership division, which we're growing through other markets and other companies and helping them without deploying capital.

But that said, we could either acquire radio stations for cash or do swaps or other interesting potentials for us. And those are some of the conversations we've been having particularly in a world where deregulation has.

Going back to your point, which I appreciate you highlighting our dividend is secure. I think as Stu mentioned on the call, in 2025, we had Cash flow from operations was 83, [ 8-3 ], $83 million before cash interest payments and we are quite confident in maintaining the dividend, which is over 11% today. And we believe, and we're quite confident and patient that over time, as more and more investors understand our growth trajectory in our business that the stock price will increase, and therefore, the dividend yield will come down. So we actually don't even pay any attention to the dividend yield.

But in terms of capital allocation, our #1 priority, Michael, is to delever. Our goal is to get into the low 3s over the next several years. And in the meantime, we sit in a great situation where we can grow organically quite nicely. And we've also proven that if we were to acquire other radio markets that we can diversify that revenue base and grow our overall profit. So that's how we're looking currently at capital allocation, and I think a lot of interesting things can happen, not only for Townsquare over the next 18 months. Specifically in the radio division, but I think for the industry overall, because I do believe deregulation will happen, and that will be great for our overall business and the ability to scale. So I'll turn it back to you in case you have any other questions, Michael.

At this time, we have reached the end of the question-and-answer session. Let me turn the call over to Bill Wilson for closing remarks. Please go ahead.

Thank you, operator, and I appreciate everybody taking the time this morning to start the week and get updated on Townsquare, most importantly, how we're looking at 2026 and the momentum that we have across our company, but in particular, our digital businesses with Ignite and what I've been sharing in terms of what we're experiencing as we start the year in Q1 and what we expect for the full year basis in terms of high single-digit revenue growth versus last year and with Townsquare Interactive continuing to operate at that 33%, 34% profit margin and returning to revenue growth in the back half of the year.

So just sitting quite nicely, I would encourage everybody to read the annual shareholder letter. I believe Claire mentioned that at the top of the call. But I would encourage everybody to go to our corporate website at Townsquare Media and download the shareholder letter. And we really look forward to getting back together it will be, I think, 7 to 8 weeks from now and update everybody on Q1 and importantly, our continued confidence and momentum for 2026 and beyond. So thank you, everybody. I hope everybody has a great day.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, and welcome to Townsquare Media's Third Quarter 2025 Conference Call. As a reminder, today's call is being recorded, and your participation implies consent to the recording. [Operator Instructions] With that, I would like to introduce the first speaker for today's call, Claire Yenicay, Executive Vice President. Please go ahead.

Thank you, operator, and good morning to everyone. Thank you for joining us today for Townsquare's third quarter financial update. With me on 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 company's annual report on Form 10-K filed with the SEC.

During this call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA. Such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly, year-end and current reports available on our website. I would also encourage all participants to go to our corporate website and download our investor presentation, as Bill will reference some of those 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 today. It's great to reconnect with everyone. We are pleased to share with you this morning that Townsquare's third quarter results met the total net revenue and adjusted EBITDA guidance that we provided on our last call, reflecting our team's hard work in the current macroeconomic environment. Despite numerous headwinds that we have encountered, we are proud that the execution of our digital-first local media strategy has allowed us to deliver excellent results for our clients while also producing strong cash flow from operations due to the thoughtful and deliberate management of our expense base.

In the third quarter, our guidance was that total net revenue would be $106.5 million to $108.5 million, and it finished right in line with $106.8 million. We also provided guidance that third quarter adjusted EBITDA would be between $22 million and $23 million, and it came in right at $22 million. Importantly, due to our strong expense management, adjusted EBITDA margins, excluding political, actually improved year-over-year despite ex political revenue declines. By now, it should be very clear that Townsquare has transformed from a legacy broadcast company into a digital-first local media company and that our digital platform and digital execution sets us apart from others in local media.

In 2024, approximately 52% of our company's total net revenue and 50% of our total segment profit was generated from our digital solutions. In the first 9 months of 2025, our digital revenue grew plus 2% year-over-year. And as a result, our digital revenue expanded to a very significant 55% of our total net revenue, which as highlighted on Slide 11, is industry-leading at more than 2x the industry average. Total digital segment profit increased plus 4% year-over-year in the first 9 months of the year with a strong profit margin of 26%, up slightly year-over-year, and digital's year-to-date contribution grew to the 55% of our total segment profits. As we have consistently stated for many years, digital is and will continue to be Townsquare's growth engine and the area we focus the bulk of our investment capital going forward, consistent with our strategy of being a digital-first local media company, focusing on markets outside the top 50 in the United States and further differentiating us from others in local media.

Let's first dive into the results of our 2 digital divisions, starting with Townsquare Ignite, our digital advertising business. In Q3, we're seeing 2 very different trends play out in our digital advertising business. Digital advertising related to our direct-to-client sales remains very healthy, including strong revenue growth. However, these gains are offset in the short-term by significant deterioration in online audience trends that have significantly impacted our indirect or also known as remnant revenue on both our local and national websites, which we discussed on our last call. In the third quarter, the negative indirect trends were enough to offset growth, leading to a slight overall digital advertising revenue decline of less than 2% year-over-year.

Let's start with the positives before diving into and detailing the headwinds. First, our digital programmatic business, which makes up approximately 60% of our digital advertising segment revenue, continues to deliver strong results with high single-digit revenue growth in the third quarter. We believe that this part of our business has very strong organic growth opportunities, and we expect it will continue to be our primary growth driver going forward. As a reminder, our programmatic platform provides our customers with precise targeted solutions, giving them the ability to reach a high percentage of their potential customers across desktop, mobile, connected TV, e-mail, paid search and social media platforms, utilizing display, video and native executions. We essentially act as a full-service digital agency for our clients. From providing campaign strategies, creative services to buying inventory, optimizing campaigns and providing real-time reporting and analytics and insights, providing a level of service that is often not available in the markets we operate.

In addition, we are simply able to offer a more cost-effective campaign to our clients than most of our competitors, given our scale across our 74 market footprint, our first-party data and our in-house proprietary demand-side trading desk that is integrated with more than 15 advertising buying platforms with access to all major digital advertising exchanges and therefore, more than 250 billion impressions per day. Second, our third-party media partnership model, which is a component of this programmatic business has been progressing quite well since its beta launch in early 2024. This strategy will be a meaningful component of our digital advertising growth in future years -- although in 2025, it's still small, adding approximately $6 million of revenue this year at approximately 20% profit margin.

As a reminder, and as we've shared on previous calls, through this capital-light model, we partner with others in local media and handle all the major components of the digital advertising solution, including managing the creative, buying the inventory, optimizing the inventory and customer support of the digital campaigns, and importantly, effectively training our partner sales team to sell our solutions. Therefore, we can enter new markets to offer programmatic digital advertising solutions without having to acquire radio broadcast assets to do so, freeing up our capital for other purposes. I expect that in approximately 5 years, this division can grow to be at least $50 million in revenue for Townsquare and approximately 20% profit margin. Ultimately, our goal with this division is to become the chosen provider of digital programmatic advertising to broadcasters and digital agencies in local markets outside of major cities. We are proud and honored to currently have 6 strong partners in this division, and we expect that number to grow in 2026 and beyond.

And third, direct sales of our local owned and operated digital properties, which includes locally sold advertising, aka traditional feet on the street selling our own inventory on our own 400 local websites and mobile apps was quite strong in both the third quarter and year-to-date periods, up approximately 10% year-over-year. Given the overall weak advertising environment, we're especially proud of the success of our local sales team and what they've been doing in driving direct sales growth, and we believe that they will continue to drive this growth going forward.

Now to address the digital advertising headwinds that have been created from the emergence of AI and its subsequent impact on content creators and their corresponding online audience. As I'm sure you're aware, this is an industry-wide issue among web publishers of scale. For example, publishers including well-known names like Forbes, Daily Mail, Washington Post and CNN are seeing major drops in traffic to their websites. In fact, in August, 45 of the top 50 U.S. news websites experienced year-over-year declines in search traffic with the 4 publishers I just mentioned averaging declines in search traffic of over 40% year-over-year in July.

As we detail on Slide 13, both our local and national websites are also experiencing meaningful declines in our search engine traffic, leading to declines in our overall digital inventory. This impacts our ability to monetize any remnant inventory unsold by our direct sales team, digital inventory that we have historically sold via programmatic bidding engines. Although a much smaller part of our digital advertising segment, the declines have been significant. For context, revenue from remnant inventory on our websites was approximately $20 million in 2024 and accounted for 13% of our digital advertising revenue. In the third quarter of this year, this revenue stream declined 50% year-over-year, going from $5 million in Q3 2024 to only $2.5 million in Q3 2025 and thus a decline of $2.5 million, which is very high-margin revenue and an acceleration from Q2's decline of approximately 25% thus creating a drag on our performance and causing our digital advertising revenue to decline negative 2% year-over-year in the third quarter as opposed to the slight growth we originally expected when we last spoke.

Important to highlight that excluding revenue from remnant inventory sold programmatically, Q3 digital advertising revenue would have increased plus 5% year-over-year. Unfortunately, we continue to see these search referral trends in Q4 and believe this headwind will exist through at least the first half of 2026 before remnant revenue stabilizes at a lower run rate. As a result, we expect Q4's digital advertising revenue to be again be muted. And again, I'd like to emphasize that while it's a meaningful drag in the short-term, it represents only a small portion of our business and the majority of our segment, including our programmatic business, which represents 60% of our digital advertising revenue, continues to deliver very healthy revenue growth.

Let's now turn to our second digital business, which is our subscription-based digital marketing solutions SaaS business, Townsquare Interactive. We are pleased to share that our fantastic profit performance has continued in the third quarter, and we again expect strong profit growth in the fourth quarter. In the first 9 months of 2025, segment profit has increased plus 19% year-over-year, an increase of $3 million. This is an excellent result as year-to-date profit margins expanded to 33% as opposed to the customary 28% profit margin we've delivered over the past few years. As we detailed on our last call, the increase in Townsquare Interactive's profit margin is largely due to 3 causes: number one, the restructuring of our customer service model in 2023 that allows us to grow more efficiently. Number two, changes to our sales structure late last year and early this year have led to both a smaller sales team, which is temporary, but very importantly, a more productive sales team. And finally, number 3, the deployment of AI solutions to improve efficiency.

Thus, we remain very confident that the changes we have made to both our customer service and sales models, along with the continued deployment of AI solutions are setting Townsquare Interactive up for the next decade of efficient and profitable growth and success. However, as I just mentioned and also highlighted on our last call, with a smaller sales team comes slower sales velocity and therefore, muted revenue performance in the short-term. In the third quarter, Townsquare Interactive's revenue decreased approximately negative 2% year-over-year and was just in line with Q2's total revenue as expected and shared on our last call. We expect Q4 revenue at Townsquare Interactive to be roughly in line with Q3's $18.6 million, and we are confident that we will return to revenue growth during calendar year 2026 once we have reached previous sales staffing levels.

In the meantime, we expect that strong profit growth will continue in Q4 and 2026 as we expect profit margins to remain above 30% in Q4 and above our historical levels next year. We look forward to sharing our strong full year profit results next quarter as we expect our profit performance at TSI in 2025 to be one of the best in the division's 12-year history. As you have heard me consistently state, I am very confident that Townsquare Interactive is on track and set up for long-term profitable growth and success, and I believe that 2025 expected profit performance is a great proof point of that.

Turning to our third and final business segment, broadcast local radio. As you're all aware, we view local radio as an extremely valuable asset with significant cash flow properties, unparalleled consumer reach and an important local connection to our audience and our clients. However, radio is not a growth driver for Townsquare. And in the third quarter, broadcast advertising net revenue, excluding political, performed exactly as we telegraphed on our last call and declined negative 8% ex-political year-over-year, in line with our performance through the first half of the year. Despite broadcast revenue declines and macro headwinds, we have consistently outperformed the industry in 2025, gaining local and national broadcast market share according to Miller Kaplan estimates. With our differentiated local content on our local radio broadcast, combined with being able to offer clients marketing solutions powered by the combination of digital and radio, we believe that we will continue to gain broadcast and total market share across our market footprint while also generating a solid profit as we carefully manage expenses to maintain a strong broadcast profit margin.

In fact, in Q3, our broadcast profit margin expanded significantly year-over-year when excluding political from 25% in Q3 2024 to 28% in Q3 2025. As we close out 2025, we expect to see digital advertising trends consistent with our Q3 performance with continued strength in programmatic and direct sales of our owned and operated 400-plus websites and mobile apps, offset by ongoing headwinds tied to the decline in search referral traffic. As I already noted, I expect Q4 revenue at Townsquare Interactive to be in line with Q3's revenue. We anticipate a slight improvement in ex-political performance in our Broadcast segment in Q4. Although on a total basis, we will see a large decline due to the significant political comp we had in Q4 of last year, coupled with lighter than forecasted fourth quarter political revenue this year. As a result of that, and as Stuart will share shortly, our full year revenue and adjusted EBITDA guidance will be revised. Importantly, our business model continues to generate strong cash flow from operations, which we have been applying towards organic investment in our business and debt paydown as well as rewarding our shareholders with current returns in the form of a dividend, which we will continue to do.

And now I'll hand it over to Stuart to discuss our financial results and guidance in more detail. Stuart, please take it away.

Thank you, Bill, and good morning, everyone. It's great to speak to you today. We're very pleased to report that our third quarter results met our revenue and EBITDA guidance. Third quarter net revenue, excluding political, declined 4.5% year-over-year and 7.4% in total to net revenue of $106.8 million, within our guidance range of $106.5 million to $108.5 million. Third quarter adjusted EBITDA, excluding political, declined 2.1% year-over-year and 13.6% in total to $22 million, which was also within our guidance range of $22 million to $23. I would like to highlight that when excluding the political impact in 2024 and 2025, adjusted EBITDA margins expanded slightly from 20% in the third quarter of 2024 to 20.5% in the third quarter of 2025 as we thoughtfully managed our expense base.

Townsquare Ignite, our digital advertising segment, experienced slight revenue declines in the third quarter as accelerated weakness in remnant indirect digital advertising revenue offset continued growth in the direct sales of our programmatic offering and our owned and operated digital portfolio. In total, third quarter digital advertising revenue declined 1.6% year-over-year. Third quarter digital advertising segment profit margins were impacted by the same forces and as a result, margins contracted year-over-year to 21.5%. As expected and we previously projected, Townsquare Interactive, our subscription Digital Marketing Solutions segment's third quarter net revenue decreased 2.3% year-over-year. We are thrilled to share that as expected and consistent with performance all year, Townsquare Interactive delivered another quarter of very strong profit growth with Q3 segment profit increasing 21% year-over-year with segment profit growth of approximately $1.1 million. Segment profit margins were very strong at 33% in Q3 2025. And for the full year, we expect Townsquare Interactive's profit margin to remain above 30%.

In 2025, we are very confident in our expectation that we will deliver strong profit growth for our Townsquare Interactive business, which is very beneficial after the profit losses in 2023 and 2024. Q3 broadcast advertising net revenue decreased in line with our expectations, which was similar to declines in the first half of the year on an ex-political basis. In the third quarter, broadcast revenue declined 8.1%, excluding political and 13.8% in total, each as compared to the prior year. Importantly, broadcast segment profit margins meaningfully increased year-over-year when excluding political from 25% in the third quarter of 2024 to 28% in the third quarter of this year. We're very proud of how our team is working diligently to manage our broadcast expense base in the face of revenue declines.

Our third quarter net loss was $5.5 million or $0.36 per diluted share. In the first 9 months of the year, net loss improved $31 million year-over-year, primarily due to the reduction in noncash impairment charges in 2025. We'd like to remind you that any benefit or provision for income taxes included on the face of the income statement is for GAAP financial statement purposes only. We maintain significant tax attributes, including approximately $96 million of federal NOL carryforwards and other substantial tax shields related to the tax amortization of our intangible assets. We continue to believe that we will not be a material cash taxpayer until approximately the year 2028. As Bill highlighted, and I would again like to emphasize, we consistently have strong cash flow generation. We generated $18 million of cash flow from operations in the first 9 months of 2025. Cash flow from operations before cash interest payments was $59 million and was 5% or $3 million higher than the previous year.

In the third quarter, we repaid $9 million of our term loan, including $6 million, which we purchased at a discount in the open market and our second amortization payment of $2.9 million. Since the February refinancing, we have reduced our outstanding debt by $17 million as of the end of the third quarter. In addition, our cash this year has been used to fund $41 million of interest payments, $10 million of dividend payments and $28 million of fees associated with our February refinancing. With $463 million of total debt outstanding and $3 million of cash on hand at September 30, our net leverage is 4.71x. And I'd like to highlight that since our term loan is a floating rate instrument, the 2 recent interest rate cuts totaling 50 basis points translates to roughly $2.3 million of annualized interest reduction based on the current debt balances.

As always, our #1 priority is to invest in our local business through organic internal investments that support our revenue and profit growth, particularly our digital growth engine. We plan to continue to invest in our digital product technology, sales, content and support teams, specifically in our Townsquare Interactive and Townsquare Ignite businesses to main our strong competitive advantage in these markets outside the top 50 cities. In addition, we plan to use our excess cash flow to reduce our debt through both mandatory and voluntary debt repayments and, of course, support our high-yielding dividend. Our Board has approved our next quarterly dividend payable on February 2 to shareholders of record as of January 26. The dividend of $0.20 per share equates to $0.80 per share on an annualized basis and implies an annual payment of approximately $13 million based on our current share count and a dividend yield of approximately 13% based on our current share price. For our full year outlook, due to much steeper-than-expected declines in our search engine traffic and its related indirect revenue, coupled with much lower-than-forecasted political revenue, we expect that our net revenue will come in lighter than previously expected. As these are both very high-margin revenue streams, this also impacts our adjusted EBITDA guidance, but due to our strong expense management to a much lesser degree.

Specifically, for the fourth quarter, we expect net revenue to be between $105 million and $109 million. We expect fourth quarter adjusted EBITDA to be between $21.5 million and $23.5 million. As a reminder, in the fourth quarter of 2024, we generated $7.2 million of political revenue versus our current forecast of less than $1 million of political revenue in the fourth quarter of 2025. This guidance implies that Townsquare's 2025 full year revenue will be between $426 million and $430 million, with political revenue of less than $2 million as compared to $3 million we generated in 2023, the last nonpolitical year. We expect full year adjusted EBITDA will be between $88 million and $90 million.

And with that, I will now turn the call back over to Bill.

Thank you, Stuart, and thanks to everyone for taking the time to be updated on Townsquare's Q3 results this morning. We greatly appreciate it. I'd like to close today's call by emphasizing our confidence in our digital-first local media strategy and the long-term profitable growth potential of our digital platform. Direct digital advertising sales remain strong, and Townsquare Interactive is driving incredible profit growth in 2025 with margins north of 30%. Our mature cash cow broadcast advertising platform continues to generate a solid profit, and Q3 ex-political broadcast profit margins are actually up year-over-year due to solid expense management. We continue to generate strong cash flow. And after refinancing our debt in February, which extended our maturity profile to 2030, we have already reduced our outstanding term loan by $17 million through September, all while maintaining our high-yielding dividend, delivering attractive current returns to our shareholders. Most importantly, we are confident in our ability to build shareholder value for our investors through long-term net revenue, profit and cash flow growth, net leverage reduction and future dividend payments.

As always, we wouldn't have the confidence in our long-term success without the Townsquare team's effort, passion and commitment that is directly driving our growth and innovation each day. I could not be more appreciative of our team and their tremendous work.

With that, operator, at this time, please open the line for any and all questions.

[Operator Instructions] Our first question comes from the line of Michael Kupinski with NOBLE Capital Markets.

Just a couple of questions here. First, I want to start on the broadcasting side. I see that, obviously, we see core advertising kind of decline. And typically, in an off-election year, we would kind of get the core advertising up because of the displacement from political. And we should just see continued deterioration there, of course, secular headwinds. I get that. I was just wondering if and when do you think we'll see some stabilization on core advertising there? And I know it's not a main focus for you, but I was just wondering what do you think will take to see at least some stabilization on the core advertising front?

Thank you, Michael. Always good to hear from you. Yes, obviously, as you just noted, there's a secular decline currently in broadcast radio similar to broadcast television. From what we've heard and what we've seen from publicly reported companies, but what we've also heard about year-to-date is down low double digits for the industry. As we just reported this morning, just exactly what we telegraphed on our last call that Q3 would be down negative 8% ex-political, which is exactly where we were for Q1 and Q2. So, it came in directly where we thought. We also just noted in the prepared remarks that Q4 is pacing slightly better ex-political by 1 point, 1.5 points. So, it's not dramatic, but it is slightly improving. And it's also important to note that our broadcast profit margin is up year-over-year. So, in Q3 this year, our broadcast profit margin is 28%, which is actually up from Q3 2024, which was 25%, so a 3-basis point improvement. So clearly, we've always taken the view that, obviously, digital is our growth engine and that our broadcast business, which we love, and we don't think we'd have the success in our 2 digital divisions without the power of broadcast radio and the connection it has with our communities, it is a traditional cash cow, and it is, in our view, not our growth driver.

I would also highlight, and we're quite proud of this, is that our local sales team is increasing share. So, we -- if you look at Miller Kaplan, we're taking local spot share from our competitors in the 74 markets where we operate radio stations, and we're taking total spot share. So, in a declining market, we're in essence, doing better than the rest of the industry, which is evident in our negative 8% versus the industry's negative 11%. Going to the heart of your question, which was when do we expect "stabilization"? So again, we're seeing slight improvement in Q4. Obviously, the macro environment throughout 2025 has been incredibly challenging given the uncertainty. The uncertainty coming into the year, obviously, Liberation Day on April 2, we detailed quite specifically on our last call that the dramatic and instant impact that had on our advertising business in total and muted our digital advertising in Q2 and Q3 and obviously hurt our broadcast advertising. And then going into the longest government shutdown, uncertainty around interest rates, so forth and so on. So hopefully, with the developments last night in the government, hopefully reopening in short order, my expectation in 2026 is the current negative 8% moves to, call it, low to mid-single digits. I would probably guide to just be conservative mid-single digits in '26 in terms of broadcast. And then looking at '27 and beyond, and I'm talking about ex political because obviously, next year will be a great political year. We expect to be in low single digits. So that's what our expectation, Michael, is in terms of core radio -- so I'd call it, in '26, negative mid-single digits and then '27, '28 negative low single digits. And I'll turn it back to you for your other questions or any follow-ups on that.

You've been able to maintain some pretty impressive margins. Is there much to cut there? I mean, given that you have these pretty high margins, I mean, it's surprising that given the type of revenue declines that you had in core advertising, you still maintain some pretty healthy margins.

We appreciate you noting that, and we agree. And Stuart and his team as well as many others have done a great job. Quite honestly, the short answer is yes, we have a lot of opportunity. We talked about this on a couple of calls, but we're currently continuing to deploy AI solutions throughout our company that are providing efficiency as well as increased productivity. So, we're very proud of the fact that if you look at our broadcast profit margins ex-political, they're up and quite healthy, as you noted. And we are quite confident we'll be able to maintain that. We're profit margins up, as I just noted, to 28%, 3 basis points up from 25% in Q3 '25 on a decline of negative 8% ex-political is quite great work that our team has done, and I'm quite proud of. We will be able to continue to do that and take out expenses in line with wherever the revenue comes in. And I think we've proven that over the last several years, and we'll do the same moving forward. I'll turn it back to you, Michael.

Indicated that they have had some government-related advertising in Q4, like Medicare enrollment, things like that. Did you have any type of government-related shutdown advertising impact?

Are you saying you've heard from others that they've gotten incremental buys? Yes, we have not seen that. We have not seen incremental buys related to the government shutdown. We've seen softness as it relates to that talking to our local customers. National continues to be a significant headwind for us. It's a small part of our business, less than -- as we've talked about before, less than 10% of our broadcast business. But no, the short answer is we have not seen a positive impact or incremental buys based around the government shutdown or Medicare or anything around that.

Yes. No, I was actually -- it was the reverse that they were saying they had impact from advertisers.

Yes. We have seen that. We've seen canceled orders and things like that. And we've seen that throughout the year with the Dodge cutbacks in health services. So yes, the short -- if you're asking if we've seen a negative impact, the answer. Sorry, I misunderstood the question. The answer is yes.

And then final question, I don't want to take up too much time. A part of the attraction of the new office in Phoenix was in your Interactive segment was to focus on the West Coast expansion. I was just wondering if you could talk a little bit about your Interactive business on the west of the Mississippi. What were your goals on milestones? Could you just talk a little bit about your thoughts on how that office is kind of progressing?

Yes. So quite pleased with the progression of the Phoenix office as well as Townsquare Interactive SaaS-based subscription division of our company. I'll first speak about Phoenix and address that, and I'll just give a little color on Townsquare Interactive overall. So, the primary driver of opening the office was to be able to increase our talent pool, and that's why we picked Phoenix. It's been a great place to hire sales talent. And then after we hired sales talent, we started to add customer support focus as well as what we call subject matter expert, people who are great in design, people who are great in CRM and digital marketing for our Townsquare Interactive customers. So that office is doing exactly what we expected it to and are quite pleased with it. I'll just take a step back and just talk about Townsquare Interactive. So, we're quite pleased with the performance and really, really proud of the division. In Q3, we delivered 21% growth and profit. And year-to-date through September, we grew our profit 19%. So over $3 million in incremental profit in the first 9 months of the year. As I shared on our last call, I expect this to be our best profit growth year-over-year in the division's history. So, they've done a great job.

The profit margin has increased, which customarily, you may remember, Michael, that our TSI Townsquare Interactive profit margin of about 28%. Given our new service model, which we've outlined in detail on our earnings calls in the past, given the new sales paradigm where we put a higher level of revenue per salesperson in place as well as deployment of AI solutions, the customary 28% profit margin has improved to 33% year-to-date, and we expect that to hold in Q4. So, they're doing a tremendous job. The revenue in is essence stagnant, and we detailed why on the last call, but we really reduced our sales force quite substantially. I think on the last call, we talked about over 40%. But the profitability of each sales rep that remains as well as we add to the team moving forward is much, much higher. And therefore, that you've got this tremendous profit growth even though the revenue is stagnant. As we go into '26, the revenue growth will come back as we add more and more sellers and get back closer to our sales level in terms of number of sellers. And we believe we'll still be able to operate at a 30-plus percent profit margin even as we aggressively hire our sales team.

So just want to provide that color, after losing -- I think it was about $5 million in profit between 2023 and 2024 to now add back, call it, over $3 million, probably $3.5 million in '25 in incremental profit year-over-year. I think just speaks to the underlying strength of the division and how confident we are moving forward in Townsquare Interactive. And going back to your original question, that includes our operations in Phoenix. So, I'll turn it back to you, Michael, unless you don't have any other questions, we'll open it up to others, but I want to give you the opportunity for any follow-ups.

And the next question comes from the line of Patrick Sholl with Barrington Research.

Yes, you actually kind of answered, I think, most of the question I was going to ask about maybe longer-term expectations on profitability on Interactive. But is that sort of like in the low to mid-30s range kind of something you would expect to keep at going forward? Or do you think there'd be room for expansion from there? I guess, maybe like a time frame for getting to more -- yes, time frame for potential margin expansion at Interactive?

Yes. Great to hear from you, Patrick. Thank you for the questions, as always. I expect us to continue to be in the low 30% margins over the next couple of years, particularly with the aggressive investment. We want to build back the sales team. As I noted on our last call, we lost over 40%. And it was definitely the right thing, clearly by the profit growth. And so, in the short-term, I expect us to still live in that 32%, 33% profit margin area. But I believe there is room for margin expansion as we look out in '27 -- back half of '27, '28, '29. That's clearly an opportunity as we really rebuilt our service model and now our sales team with scale and efficiency in mind as well as obviously great customer service. So yes, I believe we'll be in this profit margin, call it, for the next 18 to 24 months, which is a huge improvement from the last several years, but that there is opportunity for margin expansion after that. And I'll turn it back to you, Patrick.

And then on Ignite, I think I heard you say that excluding the programmatic headwinds that it was up, I think, mid-single digits in Q3. If I have that wrong, please correct me. But just could you maybe talk about like the maybe different trends in that between the -- your own markets and the third-party selling or the third-party markets? And just maybe some of like the different macro trends in there versus any specific category issues.

No, great question. I'm glad you asked because if nobody did ask on the call, I was going to provide some color in the closing remarks. So, a very timely question, and I'm glad you asked it. So, you're exactly right. Without the remnant drag, so that's indirect sales. So, any unsold inventory that we've been customarily doing, if you remove that, and I'll talk about that specifically as well. Our Q3 digital advertising increased plus 5% versus the reported negative 1.7%. That 5% also includes online radio, streaming radio, which for us is not a high-growth area. It's a modest growth area. So then if you break it down, I know you know this, but for the benefit of everybody else on the call, our Ignite division, which is our digital advertising business is made up of programmatic, which is 60% of our digital advertising revenue. And then the remaining 40% is what we call owned and operated platforms. So digital advertising on our own properties that we own, like our mobile apps, our websites, our social platforms and so forth.

So specifically on our owned and operated, I couldn't be more proud of the Townsquare team. I mean they are just killing it. So, in Q3, it was up 10%. So digital advertising on our own properties which makes up 40% of our total digital advertising was up 10% in Q3 as well as up 10% year-to-date, which we're quite proud of. So, the remaining programmatic of 60%, which is really -- we're a full digital agency, which we talked about on the call, everything from creative, media buying, optimization, insights, leveraging our first-party data from our owned and operated, all the things we're doing there was up high-single digits in Q3. So again, great performance in programmatic at high-single digits and then up 10% on our owned and operated.

So then obviously, the question is what's happening in the indirect. So indirect, so this is unsold inventory that we would then make available to real-time bidding exchanges was quite healthy for us because we had such a large digital audience. As we noted on the call, this is not a phenomenon unique to Townsquare. This is happening to any web publisher at scale. So, in the prepared remarks, we said that audience trends based on AI, so if that's AI results at the top of Google, if that's people switching from Google to Perplexity or Cloud or whatever their -- ChatGPT, whatever their favorite or their -- whatever AI they're using. So, audience trends were down 40% on average to web publishers at scale based on search traffic. So that is quite, quite substantial. So, for Townsquare, our remnant revenue in 2024 was $20 million, and that was very, very high margin, over 90%. Could be over 95% profit margin. So that's a substantial number. That $20 million in 2025, we believe it will decrease $7.5 million. So go to about $12.5 million in 2025. So that's obviously down $7.5 million.

In the first half of the year, 2025, it was only down -- a little over $2 million. So, in the second half, we just said on the call, Q3 was down $2.5 million, which was a decline of 50% year-over-year. In Q4, we expect that to get slightly worse. So, the second half, we expect a decline in remnant of $5.5 million. So again, for a full year basis, that's down $7.5 million. So, this is the #1 reason by far that we had to adjust our revenue guide and our profit guide because our profit guide really declined 2% on the low end, 4% altogether. So, a range of 2% to 4%. We were not expecting a $5.5 million decline in remnant revenue, which again is over 95% profit margin. So, you're talking about over $5 million profit decline. We expected it to continue along the lines of the first half, and that accelerated from being down a little over $2 million in the first half to being down -- we expect $5.5 million in the second half. So that was the main driver of our change in guidance on the revenue line and the profit line.

To a small effect, as Stuart said in the prepared remarks, our political, we expected over $3 million and coming in under $2 million. Although it was a competitive race. New Jersey just didn't see the money that we expected. The good news is our partners at Cats, who drive a lot of our political along with our own team said overall in 2025, political was very healthy for broadcast radio. It just didn't line up with our market. So, we're quite bullish on 2026 political, but it just didn't come in. So, I digress to your original question, but I wanted to give a lot of color. So digital advertising Ignite, we couldn't be more proud of this division. It is the fastest-growing part of our company for the last several years. It will continue to be. Our media partnerships now have over 6 signed with many more in the pipeline. As I said in the prepared remarks, we expect $6 million of top line revenue from our media partnerships at a 20% margin. We're quite bullish on this division. As I noted, I think that could be $50 million over the next 5 years, top line at a 20% margin.

So going back to recap, without remnant, Q3 digital advertising would have been up plus 5% -- our owned and operated was up 10% direct sold in Q3 as well as year-to-date. And our programmatic division, which is 60% of our digital advertising was up high single digits and doing quite well. So, I gave a lot of detail. I thought it was important given the dynamics in indirect. We think that indirect remnant will stabilize in the back half of '26. So, we'll have a little bit of a comp issue in the first 6 months of '26, but stabilize in the back half of '26 and sets us up quite nicely for great growth in Interactive in '26 and great growth in Ignite in '26. Obviously, as I shared with Michael's questions about our broadcast and what we expect from a core perspective, we expect our broadcast business ex-political to improve in '26. And then obviously, we have the benefit of going from this year under $2 million in political revenue. We expect over $10 million next year. So, I think it sets us up quite nicely for a rebound into 2026. So long answer to your question, but I hope -- thank you for indulging me. I wanted to provide that color for everybody on the call, and I'll turn it back to you for any follow-ups or additional questions, Patrick.

So, I guess just the digital media partnerships, I think you said $6 million from that in the -- for the year is the expectation. I guess I was just kind of curious like how much of that came in Q3? And what that kind of implies for just your own market digital selling efforts?

Yes. And again, so our own market digital selling efforts, again, our owned and operated is up 10%. So that has nothing to do with media partners, up 10% Q3. So programmatic was up high-single digits. So, if you remove media partnerships, it would still be high-single digits, but down about 1.5 points less than if you removed it. And again, we have a strong pipeline. We're quite pleased with the 6 partners we have now. They're quite pleased with us. And as we detailed on our last few calls, we're taking this slowly because we're treating it like -- we treat as if we were acquiring a market and part of our own team. So, we want to make sure we put in all of the training, all of the sales training we detailed on our last calls. We're actually going in with our sales team and training the sales team of our partners there. And it's going quite well for them. We know that because we see the lift of where they were prior to being with us, and they were with other companies in the programmatic space, and they switched to us because of our robust capabilities and they're quite pleased with their own revenue and profit growth, and we're quite pleased in what we've done for them. And probably more importantly, what I just detailed is the future for this division growing from this year being $6 million in total to what we believe can be $50 million over 5 years, and we'll see nice, nice growth in '26 in that division as well. So, a little bit of -- the high single digits would we maintain in programmatic, but be about 1.5 points less without -- maybe even less than 1.5 points, maybe just over 1 point less with the media partnerships.

And we have no further questions at this time. I would like to turn it back to Bill Wilson for closing remarks.

Thank you, operator, and thank you all for joining us this morning to hear about not only our Q3 results, but probably more importantly, what we expect for the rest of year and even more telling is what we expect in 2026 to be a great year for Townsquare. So, we look forward to updating you again. It's going to be a little bit of time for our year-end report. But if anybody has any questions, as always, please reach out at any time we're available to you, and I hope you have a great day.

And that concludes today's conference call. Thank you all for joining. You may now disconnect.