Claire Yenicay - EVP, IR and Corporate Communications Steven Price - Chairman and CEO Stuart Rosenstein - EVP and CFO.

David Bank - RBC Capital Markets Rachel - Macquarie Research Michael Kupinski - Noble Financial James Goss - Barrington Research.

Greetings and welcome to the Townsquare Media Third Quarter 2015 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ms. Claire Yenicay, Executive Vice President, Investor Relations and Corporate Communications for Townsquare Media. Thank you. You may begin..

Thank you, operator, and good morning to everybody. Thank you for joining us today for Townsquare's third quarter financial update. With me on the call today are Steven Price, our Chairman and CEO, and Stuart Rosenstein, our CFO and Executive Vice President.

Today, we are going to provide an update on our third quarter and year-to-date financial results as well as provide a brief update on some recent developments at our Company.

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 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 those projections.

These statements reflect the Company's beliefs based on current conditions but are subject to certain risks and uncertainties that are detailed in the Company's annual report on Form 10-K filed with the SEC and we incorporate these by reference for this call.

We may also discuss certain non-GAAP financial measures including direct profit and adjusted EBITDA and make certain pro forma adjustments. Such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly and year-end reports available on our Web-site.

At this time, I would like to turn the call over to Steven Price..

Thank you, Claire. Good morning everyone and thank you for joining us today. The third quarter was an exciting time for Townsquare. We delivered solid financial results for the third quarter that were in line with guidance we had previously provided.

In addition, we completed the acquisition of North American Midway Entertainment or NAME, we completed the sale of 43 of our towers to Vertical Bridge, and we repaid $20 million of our debt by the end of the quarter.

Due to the acquisition of NAME mid-third quarter, our reported results are not aligned with the guidance that we provided on our second quarter earnings call, since we now include NAME in our results.

So, in order to analyze our results on an apples to apples basis, I'm pleased to report that the Company's third quarter net revenue excluding NAME increased 9.7% year-over-year, at the high end of our guidance of mid to high single-digit revenue growth.

Excluding NAME, third quarter adjusted EBITDA increased 2% excluding political, which was also in line with guidance of flat to low single-digit growth. On a pro forma basis, which would include NAME, the Company's third quarter net revenue grew 4.2% year-over-year or 7.1% on a constant currency basis.

Our third quarter pro forma adjusted EBITDA decreased 4.6% year-over-year or 1.7% on a constant currency basis, again in line with guidance. We are providing our results with and without a constant currency adjustment due to the acquisition of NAME which generates approximately 30% of its annual revenue in Canada.

Shifting now to our segment results, in the third quarter, Local Advertising revenue increased 0.7% and Local Advertising revenue excluding political increased 2.3%.

Our New Jersey markets, which we had talked about were a drag on our local advertising results in the first half of the year, have shown significant improvement and are no longer having a negative impact on our results.

We continue to see room for improvement in our Local Advertising business across the Company, but we are pleased with our results so far this year and have continued to gain market share. In markets measured by Miller Kaplan where we also operate, we significantly outperformed the market.

In the third quarter, net revenue in those markets was down 1.2%, while Townsquare revenue in those markets was up 4.3%, thereby gaining market share. On a pro forma basis, including the results of NAME, Live Events revenue grew 2.8% over the prior year period or 9.2% on a constant currency basis to $75 million.

Pro forma Other Media and Entertainment net revenue grew 56% in the third quarter of 2015. Third quarter growth within Other Media and Entertainment was driven largely by our national digital business and our national digital marketing services offering.

These digital businesses are performing very well, both financially and operationally, and both had their best quarter ever. For example, for the first time ever, our YouTube channels crossed over 225 million lifetime views, over 160 million views year to date. Additionally, total minutes of video consumed is over 310 million minutes year to date.

Our social platforms continued to scale as well with our brands, now having over 11 million Facebook fans. Additionally, we have over 2.5 million consumers in our database. Our Web-sites as measured by comScore in September reach and engage 64 million unique visitors in the United States.

The combination of our premium content and category-leading brands which scaled across Web, social, mobile and video along with valuable information and insights on our audience has enabled us to secure our first seven-figure digital advertising partnership in the quarter.

Our digital marketing services business had record sales in Q3 in combination with lower churn. As a result, distribution grew to approximately 7,400 live clients as of September 30, a 60% increase from a year ago. Taking a step back, I'd like to provide a brief summary on our acquisition of NAME which closed on September 1 in the quarter.

NAME entertains more than 15 million people annually as the owner and operator of more than 200 live concessions and games on Midway at approximately 150 fairs per year across the United States and Canada. We're very excited about this acquisition and we believe its addition makes Townsquare an even stronger company.

This acquisition is a clear demonstration of our stated M&A strategy. As the largest operator of mobile amusement parks in North America, NAME fits seamlessly as a new vertical within our Live Events segment.

NAME offers affordable, family-friendly, outdoor entertainment to consumers often in and around small and midsized markets in a manner which is similar to Townsquare's own Live Events offerings.

Fund runs, concerts, children's events, comedy shows, expos and the like are other forms of affordable family entertainment that Townsquare offers and are not all that different from a carnival or a state fair.

We see many benefits to the combined company, including the ability for us to use our megaphone, our ability to speak to our on-air and online audience to drive awareness and attendance at NAME's fairs. Approximately half of NAME's fairs are located within 100 miles of Townsquare markets.

We have proven we have the ability to drive awareness and attendance within such a radius. Our success with the Taste of Country Music Festival at Hunter Mountain is just one example. NAME has strong relationships with the fair boards and delivers on excellent products and service year after year.

NAME has not lost a major contract in the past 15 years. Given these relationships plus Townsquare capabilities, we believe that Townsquare could offer fair boards additional services. These services could include talent buying, digital marketing services and event production services to name a few.

We also see the opportunity to bring other Townsquare events, whether it'd be fund runs, craft beer festivals, expos or concerts, to existing fairs in partnership with the fair boards.

We also believe we can create new fairs near Townsquare markets and invest in concessions and additional rides, all of which are generally higher-margin incremental revenue opportunities.

The combined company will maintain its position as an operator of market-leading media and entertainment assets, focused on small and midsized markets, offering premium content and experiences with audience and connecting advertisers with consumers, whether it'd be on-air, online or on-site.

We will continue to operate the business following the same core philosophies that we use today. We'll be further diversified in terms of geography and revenue and will be less reliant on advertising. With that, I will now turn the call over to Stu for further details on our financial results..

Thank you, Steven, and good morning everyone. As a reminder, our third quarter and year-to-date results discussed today are on a pro forma basis, meaning that they are pro forma for all material M&A activity completed by September 30 as if they had occurred at the beginning of the reporting and comparison periods.

The transactions that are relevant to the pro forma results are the acquisition of WE Fest which we acquired in the fourth quarter of 2014, the acquisition of NAME which we acquired on September 1 of this year, and the divestiture of 43 of our towers which was also completed on September 1 of this year.

Please refer to the tables that we have provided in our earnings release which provide GAAP results with a bridge to our pro forma results as well as our non-GAAP performance measures. Unless otherwise stated, all of the financial results discussed will be on a pro forma for these completed acquisitions.

For the quarter ended September 30, 2015, net revenue equalled $166 million, up $6.7 million or an increase of 4.2% from the same period last year. For the nine months ended September 30, 2015, net revenue increased 5.3% or $19.5 million over the prior year period.

As Steven mentioned, it is now relevant for us to look at our results on a constant currency basis due to the NAME acquisition. On a constant currency basis, net revenue increased 7.1% in the third quarter and 6.6% in the nine months ended September 30 of this year. As evidenced, the Canadian-U.S. dollar exchange rate hurt us in 2015.

One important thing to note is that the currency risk we face is translational, not transactional. This means that both revenue and expenses are incurred in Canadian dollars and our only risk is in translating the currency when we consolidate our financial results or repatriate funds back to the U.S.

That being said, we will continue to monitor the forward exchange rates and try to manage this risk more effectively going forward. Local Advertising revenue for the third quarter equalled $79.6 million for an increase of $600,000 or 0.7% from the prior year's quarter.

This included approximately $300,000 of political advertising revenue in this quarter versus $1.6 million in the third quarter of last year. Excluding political, Local Advertising revenue increased 2.3% or approximately $1.8 million in the quarter.

For the year to date period, Local Advertising revenue increased $800,000 or 0.4% over the prior year period. Excluding political, it increased $3.1 million or 1.4%. Live Events revenue increased for the quarter $6.3 million or 9.2% to $75 million over the same period last year on a constant currency basis.

Note that the acquisition of NAME has shifted our seasonality slightly, resulting in the third quarter becoming the largest revenue quarter for both Live Events and Townsquare as a company. That's followed closely by our second quarter. For the year to date period, Live Events revenue increased 13.8% or $16.8 million on a constant currency basis.

Other Media and Entertainment revenue equalled $11.5 million for the quarter. This was an increase of $4.1 million or 55.8% over the quarter ended September 30, 2014. In the year to date period, Other Media and Entertainment revenue increased $6.6 million or 31% over the prior year period.

This increase is primarily reflective of the strength across our national digital assets and our digital marketing services offering. Total direct operating expenses increased 8.9% in the third quarter or 12% on a constant currency basis as compared to the same period last year, largely driven by an increase in our Live Events operating expenses.

As we have discussed on previous calls, we've been making investments in our Live Events business this year, particularly the talent and production at our current music events. While the third quarter doesn't have as many music events as the second quarter, it's still a large component of our third quarter live events activity.

Overall, we believe these investments will drive both revenue and cash flow growth in future periods. This resulted in third quarter total direct profit of $51.7 million, a decrease of $2.6 million or $1.2 million on a constant currency basis.

Direct profit for the year to date period of $99.4 million represents a $2.3 million increase or a $1 million decrease on a constant currency basis. Corporate expense decreased approximately $400,000 in the quarter and was up approximately $500,000 in the year to date period.

The year to date increase was primarily driven by new public company cost, while the lower corporate expense in the third quarter was due to lower compensation costs. Adjusted EBITDA for the quarter ended September 30, 2015 was $45.6 million, down approximately $800,000 or 1.7% on a constant currency basis.

Excluding the currency adjustment, adjusted EBITDA for the quarter was down $2.2 million or 4.6%. For the year to date period, adjusted EBITDA was $81.5 million, down approximately $1.6 million or 1.9% from the prior year period on a constant currency basis and down approximately $2.8 million or 3.3% without a constant currency adjustment.

As Steven mentioned earlier, excluding the NAME acquisition, our EBITDA results were in line with the guidance we previously provided to you.

On an as-reported basis, depreciation and amortization expense for the quarter increased $500,000 or approximately 13%, primarily related to the depreciation on property and equipment acquired through the acquisition of NAME and our software development costs.

Also on an as-reported basis for the quarter ended September 30, 2015, interest expense decreased $3.2 million or approximately 27% due to lower average interest rates as a result of our refinancing.

For the third quarter of 2015, we reported net income of $16.5 million compared to a net loss of $33.6 million in the third quarter of 2014, resulting in basic net income per share of $0.94 and diluted net income per share of $0.60 for the third quarter of 2015.

Importantly, we would like to emphasize that the 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 over $60 million of NOL carryforwards and other substantial tax shields related to the tax amortization of our intangibles.

We continue to believe that we will not be a material taxpayer for the next three years. To finance a portion of the NAME acquisition, we issued $45 million of additional term loans which, as a reminder, bear an interest rate of LIBOR plus 3.25 with a 1% floor. We elected to pay down $20 million of our term loan at the end of the third quarter.

Following this voluntary debt repayment, we ended the quarter with a cash balance of $28.1 million and had a revolver capacity of $50 million. We believe we have sufficient liquidity available to us to operate our business over the next 12 months and service our debt in the ordinary course.

As of September 30, 2015, our total and net leverage was 5.7x and 5.4x respectively. Finally, as of today, the Company has approximately 27.4 million shares outstanding inclusive of warrants.

Turning now to our guidance for the year, we are reaffirming our previous guidance of full year net revenue growth in the mid to high single digits over the prior year and full year adjusted EBITDA growth in the low single digits over the prior year, excluding the impact of political.

In order to be consistent with prior guidance we previously provided and provide an apples-to-apples comparison, this guidance excludes the NAME acquisition. This results in total net revenue excluding NAME in the $407 million to $411 million range and total adjusted EBITDA excluding NAME in the $93.5 million to $95.5 million range.

We do not expect NAME to have a meaningful impact on EBITDA in the fourth quarter, given the seasonality of the business. On our fourth quarter earnings call, we expect to provide guidance on a pro forma basis inclusive of the NAME acquisition. And with that, I'll now turn the call back over to Steven..

Thanks, Stu, and thank you to everyone who dialled in to the call this morning. In summary, we are pleased to be able to share another strong quarter with you.

As we've stated in the past, we believe in making operating and investment decisions based on both near term and long term results, and work hard so that our investments will ultimately build shareholder value. If anyone would like to discuss our performance, our NAME acquisition or anything else, please reach out to Stu, Claire, or myself.

And with that, we're now happy to open the call for questions.

Operator, will you please open up the lines?.

[Operator Instructions] Our first question comes from the line of David Bank with RBC Capital Markets. Please proceed with your question..

So I have a couple of questions, but first is kind of a housekeeping one.

On the updated EBITDA guidance for the year, ex NAME, we appreciate, that helps the modeling, I think previously you've given guidance in terms of growth and now you are giving an absolute number, and if I'm doing the math right, it looks like the low end of the current guidance is coming in slightly below the prior kind of ex-political growth guidance.

And I just want to make sure I'm reading that right. And if I am, is there anything that was driving that from the expense side, and if I'm not, can you just tell me that I'm not? That's the first question.

Second one is, Steven, you talked about your share gains versus your Miller Kaplan markets, and it's interesting there as you highlighted your 4.3% growth. I can't help, it's your growth or your market's growth, but I think it's your growth versus Miller Kaplan's which were a couple of hundred basis points lower.

But when I look at your Local Advertising business, it's not growing anywhere kind of near that 4% growth you are seeing in Miller Kaplan market.

So is that about your Miller Kaplan markets are way outgrowing your non-Miller Kaplan markets or your kind of radio business materially outperforming your other local advertising businesses, where again I didn't have an answer on.

And lastly, Steven talked about 100 miles, I think you said 50% of – half of the festivals are within like 100 miles of where you have stations for the acquisition.

What's the kind of magic number about 100 miles? Is there some kind of market research that told you that's how long people will drive to a carnival or something? I'm just kind of curious how you came up with that as the magic number..

On your first question, no, I think you're wrong on the guidance, and if you want to take it off-line, you can talk to Claire and Stu. We reaffirmed guidance. So it's well within our guidance numbers. I think our guidance was total year ex-political EBITDA low single digit growth, and I think this equates to something like 1.6% to 3.8%.

So [indiscernible] but I don't think that's the case. On the second point, in the Miller Kaplan markets, those markets overall revenue were down and we were up 4%, so clearly outperforming the market in those markets.

Overall, our Local Advertising business, which we said in the third quarter grew 2.3% ex-political, so part of the difference may be political. So the 4% growth, that includes political. And then Miller Kaplan always counts certain things differently. We send them all our numbers and they figure it out.

It tends also to be that some of our better performing markets were some of our slightly bigger markets which tended to be in the Miller Kaplan. Miller Kaplan isn't a majority of our market. It's probably I don't know a third, I'm making that up, a third of our market or a quarter of our market. So it's just a benchmark to see how we are comparing.

And in either event, even if you looked at our local advertising ex-political or with political, we're [seamlessly] [ph] beating the market, and that was just an indication of that. On the third point, over the last three, four years or so we've been building up our Live Events business, we've done lots of tests, as you know we have talked about.

We tested lots of things. And in general, for one of our events, about a two hour drive is where generally – other than a larger music festival or a full day-long or multi-day destination, that's about as long as someone will drive.

So when we did the NAME acquisition and we worked with, we actually had a consulting firm who helped us look at the overall fair industry, this business, the amusement industry, and we and they came up with a benchmark looking at our numbers of 100 miles, and that's what we measured it against.

That's what we did when we thought about some of our other events..

Thank you so much. Thanks for the clarity behind all the numbers, guys..

Our next question comes from the line of Amy Yong with Macquarie Capital. Please proceed with your question..

This is Rachel for Amy actually.

How would you go about ranking M&A priorities going forward? Is ticketing something that makes sense or are there other adjacent businesses that you'd be more interested in?.

So we look at the businesses that – we don't have a specific priority, oh, we have to focus on buying radio stations or we have to go focus on buying an event or a ticketing business or a digital business. We know what fits. We've done a lot of acquisitions, we know what fits with what we are doing.

We know what's available, what's a prudent price, what we could do with it. Ticketing is something that we've looked at, acquiring over the years. We actually have our own ticketing platform that we built organically over the past couple of years. It does some but by no means all of our events.

So I'm not sure we would need – and there are plenty events [indiscernible] that we partner with. So I'm not sure ticketing would be at the top of the list.

But the priorities are, what fits, what we think can grow and what makes sense prudently, and as we've talked about [indiscernible] at the end of the third quarter, given the amount of free cash flow we have to the extent that we can't find something that we think makes sense, we use our excess cash to delever..

Okay, perfect. Thank you..

Our next question comes from the line of Michael Kupinski with Noble Financial. Please proceed with your question..

Good quarter.

In terms of the 2.8% increase in Live Events in the quarter, what drove that number? Was there an increase in the number of events year-over-year or just better monetization of the events?.

It was not an increase in the number of events. We do shift the mix occasionally. So as we talked about with the number of events we have, we'll drop one, we'll add one, we'll move one from one market to another. So in this quarter it was more better monetizing the existing portfolio of events as opposed to any particular event.

And I would say that the 2.8% is on a reported basis. Some of NAME's business which actually affected this quarter is in Canada, 30% of the business in Canada. So on a constant currency basis, the growth was 9.2%..

Right, okay.

And in terms of, now that NAME is under your belt, have you been able to identify the number of additional events that you might be able to utilize the Company services? And I guess I'm also just curious, is there a way to improve – I know this is a tough one, but is there a way to improve the profitability of the business during periods of the Company's traditional off-seasons?.

Very good question. Actually both are good questions. On the first one, I would say we are in that process candidly August, September and into October tend to be busy seasons, particularly August and September for NAME.

So we didn't spend a lot of time pulling the management team there off running the business to go through a bunch of greenfield exercises, which we've been doing a little bit internally and with one or two people there, but we're actually sitting down with a full plan for 2016 and 2017 with them shortly.

So we have some ideas but I wouldn't say we have locked in all of the new things that we can go do. And as we said when we made the acquisition, I'm not sure just given the lead time and wanting to do it right from what we've seen, a lot of them will be in 2016.

I think what we've done in other situations like when we started the craft beer festivals and Insane Inflatable, we might do a few tests in 2016 and really look to figure out what works in launching 2017 and beyond. So we think it's as big or bigger opportunity as when we did our diligence before we bought NAME and it's right on schedule.

We never thought it was going to materially impact 2016. The second question was, can we mitigate the off-season? It's tough in NAME because those tend to be outdoor events. So it's stuff that you can do it in warmer weather places, it's tough to put a Ferris wheel or a rollercoaster indoors.

So we haven't as of yet spent a lot of time thinking about what you can do in the winter months. You also do need – these are people who work very hard from March to November out on the road a lot. They do need some downtime and the maintenance process has to happen. There are a bunch of operational things.

So the business couldn't be full steam ahead 12 months a year..

Okay, all right, perfect. That's all I have. Thank you..

[Operator Instructions] Our next question comes from the line of Jim Goss with Barrington research. Please proceed with your question..

A little bit more on the radio M&A market. Part of the thesis originally was smaller market radio rollout added in kind of accretive basis.

Are there lack of availabilities and acceptable prices right now and also are there potential deals and continual negotiation or is it a slow period right now in radio M&A domestically?.

I would say, unfortunately it's a slow period. We would like to buy radio stations in small to midsized markets, we would like to grow. We've been a bit quiet on that front. We have also said before we went public and when we went public that it would be prudent and we wouldn't overpay.

We did recently look at a small group, two or three markets, that we thought we did aggressive price on and missed. Turns out there was a family that wanted to – but we thought overpaid. But in general that's one isolated case. There is not a big pipeline right now of radio acquisitions that we're looking at. I wish there were. There aren't.

[There could be] [ph] something but I wouldn't say it's very active..

And to the extent that you've gotten into Canada with NAME, does that market open up to you at all or are the restrictive ownership considerations something that would rule out anything like that? And if not, is there some working partnership or regular set of ad spots that you can tie into for NAME with appropriate stations in those markets?.

So on the first, we haven't spent a lot of time looking at the Canadian radio M&A market to be candid. It hasn't been high on the priority list. Maybe it could be and should be. Maybe after the question, it will be, but it hasn't been. In terms of partnerships, the management team at NAME has partnerships at all of their 150 fairs with local media.

So they do lots of things with local radio stations and the like. And in fact, when we acquired NAME, the NAME folks probably could rattle off 10 or 15 DJs in our Company that they knew, that they had worked with, promoting the NAME events, having nothing to do with our acquisition, just sort of in the ordinary course.

When they go into a community, they search out the local radio stations to get publicity and promotion and the like..

Okay. I know in Canada I don't think you can take controlling interest or certain percentage interest if you are not a local.

But shifting over a little bit more to just NAME specifically, are there certain expense levels – I know you said I think 100 employees are full-time all year and then another 1,200 or something in the seasonal periods, so is there some continuing expense level we ought to be building in even when you are not generating revenues?.

Yes, over the course of the year, there are months where there are lots of revenues, particularly in the second and third quarters, and they are slower months and yet there are some fixed cost that goes throughout the year, and we can go give you a sense as we provide guidance for next year how we go build that in.

So it's generally the first half of the year is not profitable for NAME, and then it ramps and it becomes very profitable, and then it scales down. In that sense it's seasonal, and we'll build that into our forecast and our guidance for next year..

Okay.

And lastly, do you think you'll break out NAME separately in some segment accounting? I know it would fit so you wouldn't have to, but do you think you would voluntarily do something like that, or will it get so embedded that it would be tough to strip it out as well as might have been the case?.

I think probably it will be embedded and incorporated in our Live Events segment. As it is, I'm not sure we're a big enough company for four different segments..

That's true..

So we are trying to provide – but we really look to the analyst and investor community to tell us if our financials is transparent enough.

We thought, it is a live events, it fits with the other kind of live events we do, it fits squarely in that Live Events segment which we did start to breakout based on investor questions and requests, which we hadn't done when we went public but we shifted that last year to sort of provide that level of understanding of our Company.

So I think it will fit within Live Events, I think that's right where it should sit..

[Operator Instructions] We have come to the end of our time for questions. I'd like to turn the floor back to Mr. Price for any concluding remarks..

Thank you, operator, and thank you all for joining us. I know it's a super busy week in the markets and particularly in the media space, so we appreciate your time. And if anybody has any questions or suggestions or comments, don't hesitate to reach out. Thanks so much. Have a great day..

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..