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EARNINGS CALL TRANSCRIPT
EARNINGS CALL TRANSCRIPT 2024 - Q3
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Operator

Good morning, and welcome to Townsquare Media’s Third Quarter 2024 Conference Call. As a reminder, today’s call is being recorded, and your participation implies consent to such recording. At this time, all participants are in a listen-only mode, a brief question-and-answer session will follow the formal presentation.

[Operator Instructions] With that, I would like to introduce the first speaker for today’s call, Claire Yenicay, Executive Vice President..

Claire Yenicay Executive Vice President of Investor Relations & Corporate Communications

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 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.

We may also discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted operating income by segment, which we may refer to as profit in our remarks. 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 referenced some of those slides during our discussion this morning. At this time, I’d like to turn the call over to Bill Wilson..

Bill Wilson Chief Executive Officer & Director

Thank you, Claire, and thank you all for joining us this morning. It’s great to reconnect with everyone.

We are very pleased to share with you that Townsquare’s third quarter results are directly in line with the expectations we shared with you on our last call, reflecting sequential improvement in revenue growth rates across each of our three business segments.

In addition, we return to net revenue growth with net revenue increasing slightly year-over-year, a small step but a meaningful one, and one we can and will continue to build upon as we forecast that Q4 net revenue growth will be equal to or greater than Q3’s growth rate.

Adjusted EBITDA declines also continue to moderate in the third quarter and, again, matched our expectations that we laid out on our last call.

As always, our differentiated business model generated meaningful cash in the third quarter and we applied that cash to repurchase $11 million of our bonds below par over $1 million of our stock and also pay our $3 million high yielding quarterly dividends.

Our third quarter net revenue of $115 million was up slightly compared to the prior year and at the midpoint of our guidance range. Importantly, it was the fourth quarter of sequential improvement in net revenue growth and we anticipate sequential improvement in the fourth quarter as well.

As you may recall, I projected on our last earnings call that third quarter broadcast net revenue would be flat to up 1%, and I’m glad to report even with political coming in under our expectations in Q3, that broadcast advertising performs right in line with that forecast, up slightly year-over-year and a sequential improvement from Q2’s growth rate.

We’re also very pleased to share that, as anticipated, our digital revenue returned to growth in the third quarter and contributed to 52% of our total net revenue in the third quarter. Townsquare Interactive delivered sequential quarterly revenue growth, which I’m pleased to report was better than we forecasted on our last call.

I had also projected that Q3’s Digital Advertising net revenue would grow plus 4% and it did slightly better than that growing at plus 5%, a significant acceleration from the plus 1% revenue growth in the first half of the year.

A main driver of our Digital Advertising momentum is the very strong digital programmatic advertising growth rates that I projected, which did in fact deliver meaningfully, as our digital programmatic advertising grew at a strong plus 10% year-over-year, again, sequential improvement from Q2.

In essence, just like we’ve done all year, we executed and delivered on what we said we would do. While simultaneously building value for our shareholders through debt reduction and share repurchases, and paying a high yielding dividend. Townsquare’s digital platform sets us apart from others in local media.

As highlighted on Slide 12, 52% of our total revenue is digital revenue in both the third quarter and through the first 9 months of 2024, more than 2 times the industry average and, more impressively, more than half of our total profit was digital profit in the same periods. This highlights a point we often make and can’t state enough.

Townsquare is no longer the radio broadcast company it was when it was founded in 2010, nor the company it was when we went public a decade ago. Townsquare has evolved and transformed into a digital first local media company that is truly distinguished from our local media peers, validating our focus on markets outside of the top 50 U.S.

cities with a world-class team and a unique and differentiated strategy, assets, platforms, and solutions. I’m also thrilled to announce that Townsquare Ignite has been recognized as one of the best and brightest companies to work for in the nation for the third year in a row by the National Association for Business Resources.

I could not be more proud of Todd Lawley and the entire Townsquare Ignite team, not only for being recognized as one of the best and brightest companies, but also for their standout execution and performance in accelerating our digital programmatic advertising growth.

Overall, we owe our Digital Advertising success to our sophisticated digital products and proven solutions, which are entirely in-house, giving us 100% control of the client relationship, starting with the client pitch, then campaign design, media buying and optimization and ongoing reporting and insights, which we believe translates to a better customer experience, higher average spend, and higher client retention rates.

We are very confident in our ability to continue to grow this business and capitalize on our competitive advantages on our local markets.

Owning our tech platforms in-house combined with the breadth of our digital solutions and the amount of quality of our first party data pools is a competitive advantage in any size market yet in cities outside the top 50. It is a significant difference maker driving our digital advertising to be the strongest growth engine in the company.

We are most excited and confident about our digital programmatic business, where we have unlimited growth opportunities, particularly when factoring in the potential of the third-party partnership model, which I’ll discuss shortly.

Programmatic makes up about 60% of our Digital Advertising segment today and continues to be the fastest growing revenue stream in our company.

Given our momentum and success as we discussed on our last earnings call, we are exploring another avenue of growth in the digital programmatic advertising space, which capitalizes on the knowledge, expertise and competitive advantages we hold in markets outside of the top 50, white labeling our digital programmatic advertising solution to third-party local broadcasters in markets where we do not overlap.

Earlier this year, we created Townsquare Ignite’s media partnership division and launched a trial to white label our programmatic platform with a single broadcaster in a single Nevada market. The insights we learned and the success we had from this trial gave us the confidence to continue down this path.

And last month, I’m thrilled to say we announced a strategic partnership with SummitMedia and excellent broadcaster who operates local media properties across 9 markets. We expect to finish their onboarding by year’s end, including providing world class training for their sales team.

While this is currently a monetized opportunity in the context of our overall Ignite division, which this year will be over $155 million in revenue with very healthy digital profit margins, especially in the initial year, we expect sales from this media partnership to ramp throughout 2025.

We are very excited about what this and potential partnerships represent, which we believe is the opportunity to become the chosen provider of digital programmatic advertising to broadcasters and digital agencies in cities outside of the top 50.

Under this model, Townsquare handles all of the creative buying, optimization and customer support of the digital campaigns, so why partner with third parties instead of entering those markets ourselves? Well, instead of using our capital to acquire new markets to deploy our digital assets, this partnership model allows us to enter new markets and accelerate our digital revenue growth without deploying capital, we are then free to deploy our capital in other ways, such as debt pay down or equity buybacks or increasing our dividend payments.

While early, we believe this media partnership initiative has the potential to be a significant difference maker and revenue and profit growth driver in 2026 and beyond. As we’re currently in discussions with numerous other broadcasters about potentially partnering with us.

Looking to Q4, we expect our Digital Advertising revenue growth to further accelerate from Q3’s plus 5% revenue growth to approach plus 15% in Q4. Let me say that again. We expect Q4’s Digital Advertising revenue growth to approach plus 15% in Q4, which if accomplished would be triple Q3’s growth rate.

This strong growth rate will be driven by what we expect to be very strong growth rates in programmatic digital advertising revenue, coupled with the improvement of our National Digital business.

I am also extremely pleased to share that Townsquare Interactive, our Subscription Digital Marketing Solutions business continues along its path of recovery as sequential revenue growth accelerated in the third quarter.

In Q3, Townsquare Interactive’s net revenue decline of negative 6% year-over-year was slightly ahead of expectations I shared with you on our last call, and importantly, the decline represented less than half of Q2’s negative 13% decline, a meaningful improvement.

Townsquare Interactive’s third quarter profit declined and expected a negative 11% year-over-year as we managed expenses such that our third quarter profit margin of 27% was only a slight decline from Q3 2023’s 28%. We are pleased to share that Townsquare Interactive’s fourth quarter net revenue is expected to return to year-over-year revenue growth.

We are also very pleased with Townsquare Interactive’s new and improved product offering, which I described at length and in detail on our last call. We strongly believe that our new SaaS business management platform is a very powerful and will be a difference maker as we grow and continue to scale the Townsquare Interactive business.

We are not only helping SMBs with their digital presence, we are also helping them operate their business more effectively. We’re bringing sophisticated national scale to smaller markets and we’re proud to partner with our clients to do so.

In the long-term, we are confident that we have a long sustainable runway ahead of us with approximately 24,000 subscribers at the end of Q3, which approximately 59% of those are outside our local media footprint and an addressable market of nearly 9 million target customers.

We are only scratching the surface with our existing subscriber base, superior product offering, including our new business management platform and a significant market opportunity of nearly 9 million target customers, as outlined on Slide 15. I am confident that Townsquare Interactive is set up for long-term profitable growth and success.

Another positive development in the third quarter was at our Broadcast Advertising revenue increase slightly year-over-year, a sequential improvement from the first half’s growth rate. Unfortunately, national Broadcast Advertising revenue reversed course from Q2’s flat performance and was a headwind in the third quarter.

Looking to Q4, national will not only once again be a meaningful decline, but also much steeper with an expected national decline in excess of 20% in the quarter. Overall, we continue to outperform the industry in the third quarter gaining broadcast market share according to Miller Kaplan estimates.

I am very proud of our team achieving this market share growth as it demonstrates the benefits and importance of our differentiated local content of our local radio broadcast. In the third quarter, we generated $3.7 million of political revenue, which is behind Q3 2020’s $4.5 million.

Based on what is currently on the books today, we now believe we will be under our initial expectations of $14 million to $16 million in political revenue.

We view local radio as a mature cash cow business, yet an extremely valuable asset with significant cash flow properties, unparalleled consumer reach, and an important local connection to our audience. We believe Townsquare ability to drive profitable sustainable digital growth is the key differentiator for our company.

Digital is and will continue to be our growth engine and we will continue to invest in our digital businesses to fuel further profitable growth. One last point I’d like to make before handing it over to Stu is a very important aspect of our business model, our significant cash flow generation.

We continue to generate strong cash flow, granting us the ability to invest in our digital growth engine and affording us financial flexibility as evidenced by our ongoing debt and share buybacks in the open market.

Year-to-date through October, we used our cash to repurchase $24 million of our shares, buyback and retire $36 million of our bonds and execute an $11 million option buyback at an attractive price to avoid shareholder dilution, all while investing in our digital growth engine and rewarding our shareholders with a very attractive dividend yield.

With $22 million of cash on hand at the end of September and net leverage of 4.86 times as of September 30, we remain very confident in our current capitalization and strength of our balance sheet and we are pleased that we can continue to deliver attractive cash returns for our equity shareholders.

As I shared on our last call, S&P Global upgraded their rating of our bonds from B2B plus in June, citing our performance and credit metrics.

As we’re gearing up for our upcoming refinancing, which we’re looking forward to updating while we report year-end in March, we are building momentum and set up for a solid 2025 and, more importantly, long-term success.

As we say internally, how high is high, and now Stu will go through our results in even more detail as well as provide an update on our guidance. All yours, Stu, take it away..

Stuart Rosenstein Executive Vice President & Chief Financial Officer

Thank you, Bill, and good morning, everyone. It’s great to speak to you today. We’re pleased to report that our third quarter results met our revenue and adjusted EBITDA guidance.

Third quarter net revenue returned to growth in the quarter and revenue increased 0.2% or just over $200,000 year-over-year to $115.3 million just above the midpoint of our guidance range of $114 million to $116 million. That’s a sequential improvement from first and second quarter revenue declines.

In Q3, political revenue was $3.7 million and through September political revenue was $6.2 million, which is approximately 93% of 2020 $6.7 million.

Although, we expect to record the second highest amount of political revenue in Townsquare’s history in 2024, we no longer expect that that will reach our initial political revenue estimates of $14 million to $16 million.

Based on the political revenue on our books today, we anticipate that this revenue stream will be just north of $13 million for the full year, still a very strong outcome, but less than the 85% of 2020’s all-time high of $16 million, which we were hoping to achieve again this year.

Excluding political, third quarter net revenue declined 2.5% year-over-year, a sequential improvement from Q2’s 3.4% decline. Third quarter adjusted EBITDA declined 6.3% year-over-year to $25.5 million, also within our guidance range of $25 million to $27 million.

Third quarter adjusted EBITDA declines also reflects sequential improvement from the first and second quarter.

Townsquare Ignite, our Digital Advertising segment is building a lot of momentum and demonstrated stronger growth rates in the third quarter as strength in programmatic advertising, which as Bill noted was up 10% year-over-year, offset ongoing weakness in National Digital Advertising, which declined $1.2 million in Q3 as compared to the prior year.

In total, third quarter Digital Advertising net revenue increased 4.7% year-over-year, an improvement from Q1 and Q2’s performance. As Bill also noted, we expect Q4 Digital Advertising revenue growth overall to almost triple approaching 15%.

Digital Advertising profit margins remain strong in the mid-20s in the third quarter, and at 26.5% were equal to Q2’s profit margin.

Townsquare Interactive, our Subscription Digital Marketing Solution segment continued to demonstrate growth and recovery in the third quarter, growing net revenue by 3% from Q2 to Q3 due to previous subscriber losses in 2023 and Q1 202, net revenue and profit declined on a year-over-year basis.

As Bill mentioned, we are thrilled to share that we expect to return to year-over-year revenue growth in the fourth quarter. In the third quarter, net revenue decreased 5.8% as compared to the prior year, and profit decreased 11% year-over-year. Margins were strong at approximately 27% in Q3, despite our continued investment in the business.

Third quarter Broadcast Advertising net revenue increased slightly, up 0.3% as compared to the prior year, which again was sequential improvement from the first and second quarter declines. Third quarter Broadcast profit declined 5.4% year-over-year, but margins remain strong at 29%.

In September year-to-date period, Broadcast Advertising profit is up 5% year-over-year. Our other category, which is comprised of live events activity generated $1 million of revenue in the third quarter, a decline of 37% year-over-year or approximately $600,000.

The other category had a small loss of less than $200,000, which was an improvement from the loss of approximately $400,000 in the prior year period. As a reminder, our live events activity should not be viewed as a growth driver or revenue center for Townsquare, but rather a marketing arm of the company.

Our third quarter net income was $11.3 million or $0.63 per diluted share as compared to a net loss per diluted share of $2.27 in the prior year period. We would 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 more than $100 million of federal NOL tax 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 2026.

As Bill highlighted, and I would again like to emphasize, we consistently have strong cash flow generation. We generated $9.9 million of cash flow from operations in the third quarter and $20.6 million of cash flow from operations in the first 9 months of 2024, ending the quarter with $22 million of cash.

During the first 9 months of the year, we repurchased approximately $24 million worth of shares or 2.3 million shares throughout our ongoing share buyback program, including the repurchase of $1.5 million of MSG shares at an accretive price on April 1.

Since 2021, we have repurchased 16.6 million shares and an average price of $7.30, while simultaneously reducing leverage over that period.

Year-to-date through October, we have also bought back and retired $36 million worth of bonds, including approximately $11 million of bonds below par in Q3 plus an additional $12 million at or close to par in October. We anticipate refinancing our existing debt prior to February 1, and look forward to sharing that outcome with you on our next call.

At the end of the third quarter, our net leverage was 4.86 times. As always, our number one priority is to invest in our local business through organic internal investments that support our revenue and profit growth, particularly on a 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 markets outside the top 50 cities.

Our Board has approved our next quarterly dividend payable on February 1 to shareholders of record on January 21. The dividend of $0.1975 per share, which we raised by 5% earlier this year, equates to $0.79 per share on an annualized basis.

That implies an annual payment of approximately $13 million based on our current share count and a dividend yield of approximately 8% based on our current share price.

We believe our strong cash flow characteristics will allow us to continue to invest in our business, support our dividend, and give us flexibility to opportunistically pursue debt and share repurchases as circumstances allow.

We are reaffirming that our 2024 full year results will come in within our original guidance ranges for both net revenue and adjusted EBITDA. We expect fourth quarter net revenue to be between $114.8 million and $118.8 million. This implies a year-over-year revenue growth of flat to 3.5%.

We expect fourth quarter adjusted EBITDA to be between $30.8 million and $31.8 million. This implies that Townsquare’s 2024 full year revenue will be between $448 million and $452 million, and adjusted EBITDA will be between $100 million and $101 million, both within our original guidance ranges.

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

Bill Wilson Chief Executive Officer & Director

Thank you, Stu, and thanks to each of you for taking the time to be updated on Townsquare’s Q3 results this morning. We greatly appreciate it. I want to conclude today’s call by again highlighting the progress we have made in 2024.

Our differentiated in-house Digital Advertising platform has demonstrated that even in the face of extreme national advertising weakness, we can deliver strong growth and continue to find new avenues of growth that will capitalize on our strengths, including the new partnership model I discussed earlier.

Townsquare Interactive has returned to sequential revenue growth and we expect to return to year-over-year revenue growth in Q4. Our mature cash cow broadcast advertising platform continues to gain market share and generate a solid profit.

We have efficiently have repurchased debt and equity this year, while maintaining a high yielding dividend, delivering attractive current returns to our shareholders. We retain financial flexibility moving forward and we are well positioned to execute our refinancing in the coming months.

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, future dividend payments, and potential future share repurchases.

And, again, I’d like to take the opportunity to thank the entire Townsquare team for their passion and hard work each day in partnering and helping their clients and communities. With that, operator, at this time, please open the line for any and all questions..

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Michael Kupinski from Noble Capital Markets. Your line is open..

Michael Kupinski

Couple of questions here. Bill, you indicated that National Digital was strong, but that national broadcast spot deteriorated.

And I’m wondering do you think that there’s a shift in national to digital, first of all, and I was just wondering in terms of the national broadcast spot, what do you think that ever comes back?.

Bill Wilson Chief Executive Officer & Director

Hey, good morning, Michael. Thank you for the initial question, and I’ll throw it back to you for your additional questions. So in terms of National Digital, actually in Q3, it still was – I think as Stu noted, it was down over $1 million. So what we noted is National Digital, thankfully is plateauing in Q4 based on our current forecast.

So in Q4, we expect flat to slight growth in National Digital, which has been a major drive of decline year-to-date through Q3. We did share in terms of broadcast that national was performing much better in Q2 through the first half of the year was down, call it, mid-single-digits that continued in Q3.

And we were quite surprised that in Q4, as I noted, national is currently pacing over 20% down. So that obviously is an unwelcome development.

And that is obviously baked into our guide and one of the reasons still within the initial guidance range for EBITDA, but between being under our political expectations by $3 million and that national pressure on broadcast we tighten the range to $100 million to $101 million.

I think your major question is, do you think national is, advertisers are switching from broadcast to digital. What I would say is, clearly, I’m sure you heard this from others as well, is there was a lot of uncertainty going into the election. We definitely saw broadcasters, I’d say, slow to commit starting after Labor Day right through the election.

Now, obviously with the election behind us and certainty moving forward we expect our overall broadcast business to improve. Obviously, there was so much clutter, radio is the number one reach medium, so it’s tremendous asset for brand awareness, but with all the clutter of political people were holding back, which is understandable.

So, overall, I do expect there is some switch in general from broadcast to digital. As you know, we’re one of the local first media company focused on digital.

We believe that broadcast, although an incredibly valuable asset with tremendous cash flow properties and connections to the community, and we believe we wouldn’t have the success that we’ve had over the last 10-plus-years in our digital efforts without that community connection that radio provides.

But for many years we’ve said, “Hey, this is a traditional cash cow business and we expect it to decline.” And if you even go back to the beginning of the year when we started the year we said, “Hey, we believe our broadcast business will be a slow decliner and that’ll continue for the out years.” And that’s exactly what’s transpired this year right in line with our expectations.

So your last question there was does national ever recover and grow again from a broadcast perspective, that’s not our expectation. Is it possible? Clearly, that’s possible. But we believe broadcast is a traditional cash cow and will continue to a slow decline and not return to growth..

Michael Kupinski

On the core of broadcasting side ex-political there was a sequential decline.

Can you maybe add some color on what you’re seeing and maybe the tone of advertising local, you talked about national, but just talk a little bit maybe about local and maybe as we go into December getting outside of the political noise, what you’re seeing?.

Bill Wilson Chief Executive Officer & Director

Yeah. Perfect. You’re exactly right. So in the first half of the year, ex-political was a slow decliner. And that was obviously driven by some of that national being down negative mid-single-digit. With national now, as we just described, broadcasting going down even further in Q4, ex-political in Q3 was down about 5% for broadcast.

And as we look at the rest of the year, I expect that softness to continue partially because of that national decline that I just me mentioned of over 20% broadcast decline in Q4 currently forecasted. And then as I just noted, locals definitely a little suppressed.

Our expectation is that was really driven by the election and the clutter, and that’s why – from, in essence, October through yesterday, we saw some additional softness in core. But, we expect now with the election behind us to see that uptick not only through the rest of this year, but into next year.

But, overall, I still expect ex-political to be declining probably a little bit more than Q3, because national was down in Q3, but no way it was mid-single-digits. So national going from mid-single-digits to over 20% decline in Q4 is putting a lot of pressure on that core broadcast ex-political in Q4.

Does that answer your question, Michael, as it relates to core broadcasting and political?.

Michael Kupinski

It does. I have one last question. The SummitMedia partnership is really exciting and Ignite is really, obviously, one of your bright spots is just really growing well. Were there any contributions from Summit in Q3? I know it’s ramping you said until next year.

And then, when do you anticipate meaningful revenue contributions from Summit to start to kick in? And I was wondering in terms of the cost, are there costs associated with this agreement and when do those ramp.

And then, if you could just finally talk a little bit about the margin profile for the white label business and how that affects the overall margins for the Ignite business?.

Bill Wilson Chief Executive Officer & Director

No, great questions, Michael, and thank you as always for all of your questions. We’re quite pleased, tremendously pleased with our digital programmatic advertising as well as our Digital Advertising overall. As we noted, first half Digital Advertising growth was plus 1% that accelerated to plus 5% in Q3, and now we expect approaching plus 15%.

So triple Q3’s growth rate in Q4, and that’s being driven by two things. One, that National Digital business that we described we believe now will be flat to slightly up in Q4 and our digital programmatic business is simply on fire.

I couldn’t be more proud of Todd and his team, Kelly, Matt, Erin, Elyse, Justin, Billy, Tony, J.C., Kate, Kathy, just so many people driving this differentiation. And we’ve been talking about it for years, as you know, on this call as well as in other meetings about our differentiation of our tech stack, our first-party data.

And, I think, we’re starting to see that flywheel and that momentum really pick up in Digital Advertising, which is nice to see. And that, in essence, has caused others in the broadcast space, be it TV and radio broadcasters.

And quite honestly, since our last call, a lot more local agencies, including local digital agencies approaching us and saying, “Hey, is there a way for us to benefit from this expertise and differentiation that you’ve built in your Digital Advertising business?” And as I shared in the beginning of the year, we created the media partnership business.

We started with one broadcaster in one market, tested that as a trial. That’s gone tremendously well and gave us the confidence to then partner with SummitMedia, and Carl Palmer is just a tremendous partner in this endeavor. And as it relates to your specific questions, no material revenue in Q3.

There is a few hundred thousand dollars expected in Q4, but we would still be growing or approaching plus 15% even without that few hundred thousand dollars of media partnership revenue. In terms of the cost, it’s really our personnel. We’re partnering with them. We’re treating them almost like they were part of our company.

So our buying team, our creative team, our digital campaign managers, our optimization, our reporting. We are doing all of that in conjunction for Summit sales teams and their clients, so the cost is really our personnel and our expertise.

And that’s one of the reasons I think so many – we’re getting now dozens of inbound calls and partnership opportunities that is quite exciting. The good news for us is Digital Advertising for many years has been the fastest growing part of our company.

Programmatic is the main driver of that, yet our O&O is very healthy, because of the first-party data. As I noted on in the prepared remarks, 60% of our Digital Advertising is now programmatic.

So now you factor in this potential really significant media partnership opportunity, where we can really become the chosen provider of digital programmatic advertising to broadcasters and local agencies, and it’s quite exciting. Again, we need to prove success and then continue on.

So the margin profile, which was your last question about this exciting media partnership division is slightly compressed from our overall margin. So our Digital Advertising margins have been quite strong.

I would put this down maybe in the high-teens in terms of margin, because we obviously have other variables to support that and make sure that Summit is benefiting from the partnership just as we are. And most importantly, the campaigns and the advertising we’re running is working for the clients.

That is our North Star regardless if that’s broadcast advertising, regardless if that’s digital advertising or Townsquare Interactive. So we’re quite pleased with Digital Advertising, as you noted. We’re also quite pleased that we had sequential improvement across all three of our business segments.

But I’ll toss it back to you, Michael, in case you have any follow-ups, otherwise, we’ll continue on..

Michael Kupinski

Thank you. Thanks for all the color. That’s all I have for now. I’ll let others ask questions. Thank you..

Bill Wilson Chief Executive Officer & Director

Thank you, Michael..

Operator

Our next question comes from the line of Patrick Sholl from Barrington Research. Please go ahead..

Patrick Sholl

Hi, good morning. I just had a question about maybe the debt refinancing. I was just wondering if the recent shift in interest rates changes how you are looking at approaching that..

Bill Wilson Chief Executive Officer & Director

Thank you, Patrick. Good to hear from you this morning and good morning as well. Our current expectation is that we will do a variable instrument. So, we’ll be doing a bank loan instead of our current bonds and that we would be doing that in the beginning of 2025.

Obviously, the Fed will be announcing their decision later today based on our partners in the banking industry, and I think the world at large, they expect another 25 basis point cut and then determine based on future data if there’s a cut in December or there’ll be a pause until Q1 of 2025.

So the interest rates, our expectation is between now and a year from now, they continue to come down. Obviously, the 10-year has gone up with the Trump trade and really spiked to where we were last August.

But in terms of the short-term and the 1-month, 3-month SOFR, that’s come down quite nicely, which lends itself to our refinancing in Q1 before our bonds become current in February. Stu, I’ll just pause there in case you want to add anything else for Patrick..

Stuart Rosenstein Executive Vice President & Chief Financial Officer

No, that is it. And as over the years, as interest rates come down, we’ll benefit from them. And as our leverage comes down with the bank loan, we’ll hopefully be able to reprice our spread in 6 months and going forward..

Patrick Sholl

Okay. And then maybe on the Digital Advertising side, you just mentioned in answering Mike’s question about the National Digital websites being a part of that improvement.

I was just wondering if there was like any specific like ad formats or different like inventory that you’re helping your local advertisers to access that were helping support that growth rate?.

Bill Wilson Chief Executive Officer & Director

Yeah. No, great question. So, there’s definitely been a lot of change in just digital media in terms of the algorithms and what Meta has done and what Google has done.

Some people have speculated that, that was leading up to the election, and you’re probably very familiar with if you go into a search engine, you’re getting a lot more Reddit content up the top versus other things in the past.

So very pleased that our National Digital business as we go into Q4 is no longer suffering those losses that we’ve experienced from a revenue as well as a profit perspective through the first 3 quarters. And that, to your point, is driven really by a few factors. One is social.

Our social footprint on our national is quite strong in terms of our brands like Taste of Country and XXL and Loudwire and so forth. We’re also seeing video advertising improvement. Our video, we have an amazing multichannel platform through YouTube, and that audience continues to grow across our national brands.

And so we’re seeing an increase in social advertising, video advertising as well as a nice, at least, plateau, if not growth in core display ads on the websites as well as the mobile apps.

And we’re also seeing the great news as we talked about this before, couldn’t be more proud of our content contributors locally who are not only driving that connection through our broadcast business, but for our O&O on our local websites.

And particularly with the demise of the newspaper industry, we are really serving a community function, but it’s a very healthy business, gives us great consumer insights. I believe we have more data on our consumers in our 74 markets than anyone else because of that digital audience that we have.

And, we’re now starting to get recover on the national side. And, hopefully, that answers your question in terms of why and some of the incremental formats of social and video growing more so than they have in the past, Patrick..

Patrick Sholl

Okay. Thank you. Yeah..

Bill Wilson Chief Executive Officer & Director

You’re welcome. Thanks, Patrick..

Operator

[Operator Instructions] There are no questions at this time. Mr. Wilson, please go ahead..

Bill Wilson Chief Executive Officer & Director

Thank you, operator, and thank you for all joining to get an update on Townsquare’s not only Q3 results, but as we look out at the rest of the year and, importantly, set up for a solid 2025. We look forward to updating you next March.

If you have any questions between now and then, please don’t hesitate to reach out to us, and have a great Thanksgiving and holiday season. Thank you all..

Operator

This concludes today’s conference call. You may now disconnect. Thank you, everyone..

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