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

Michael Kupinski - Noble Financial Leo Kulp - RBC Capital Markets Jim Goss - Barrington Research Barry Lucas - Gabelli & Company Kyle Evans - Stephens.

Good morning. And welcome to Townsquare’s Third Quarter 2016 Conference Call. As a reminder, today’s call is being recorded and your participation implies consent to such recording. At this time all participant are in a listen-only mode and 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. Ma'am, you may proceed..

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 Steven Price, our Chairman and 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 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 projections.

These statements reflect the company’s beliefs based on current conditions that 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, adjusted EBITDA, adjusted net income and adjusted EPS 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 website.

townsquaremedia.com 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. Happy Election Day to everybody. In the third quarter our local marketing solutions segment posted another strong outcome with pro forma net revenue growing 3.8% over the prior year period.

The segment performed very well this year as demonstrated by the year-to-date pro forma revenue growth rate of 5.1% over the prior year period. Our results in the segment continues to be driven by strength in our local products and offering, which have offset the drag we have experienced from both energy markets and national.

As we previously mentioned, national represents only a small percentage of our local marketing solutions segment, so that our strength in local is able to overcome the negative national trend we've experienced this year.

In the third quarter, our results were negatively impacted by unusually poor weather in our carnival footprint, particularly at four of our largest fairs.

Unfortunately this caused us to slightly miss the guidance that we had previously provided to you on both a net revenue and EBITDA basis, despite a strong performance in our local marketing solution segment.

Excluding the results of those four fairs, Townsquare's pro forma net revenue and adjusted EBITDA increased 1.6% and 2.7% respectively compared to the third quarter of 2015. Without these exclusion, net revenue was approximately flat and adjusted EBITDA decreased 2.1%.

Entertainment net revenue declined by 4.5% in the third quarter, largely due to poor weather at some of our largest NAME events, with the third quarter been the most significant for NAME in terms of both revenue and cash flow, our third quarter entertainment results are significantly affected by the success of NAME.

Unfortunately, we had an abnormally high number of poor weather days in the third quarter among the worst years in NAME's operating history. At our top 15 third quarter fairs within one out of every three days experienced poor weather, as compared to a less than one in five days in 2015.

A way of example, 12 of the 17 days of the Indiana state fair were impacted by poor weather conditions versus only five the previous year, leading to a significant decline in both attendance at the fair, as well as ride revenue. At four of our largest fairs poor weather accounted for 60% of the total fair days versus only 24% the prior year.

However, I would point out, it prevents where weather was comparable or better than the prior year, revenue increased approximately 10% which we believe validates the underlying stability of the business.

Although this outcome hurt our third quarter results, we're still confident in the health of the fair business and confident that we can grow this business in the long-term, despite the impact inclement weather can have on any one particular quarter.

In fact, despite the weather issue in the third quarter, we expect NAME'S full year 2016 revenue and EBITDA to increase year-over-year. Now, that we've owned the business for an entire year and operated NAME for entire season, it will be helpful to take a step back and share what we've learned to date.

We maintain our belief that while weather may impact results in a particular quarter as it did in for the third quarter, over the long-term the impact of weather will balance itself out.

In 2016 we tested a number concepts, one of our largest test was the launch of our first self promoted fair in Rockford, Illinois in July, which went very well for the first year event.

Importantly, this first year fair outperformed the heritage fair it was located just 30 miles away, leading us to believe that this is a viable growth strategy moving forward. Currently evaluating the market opportunity, as well as next year's scheduling limitations to determine where and when we can launch other self promoted fairs in 2017.

We executed marketing agreement in a handful of locations, including Shreveport, Louisiana in Tyler, Texas. We leveraged NAME's Canadian footprint to successfully break the Insane Inflatable 5K race to eight new locations this year and we hosted our first Craft Beer Festival at a NAME venue.

We've also moved virtually all of the fairs advanced ticket sale to our proprietary event held ticketing platform. We recently hired a senior entertainment sales executive to live event sponsor sales and we're excited to have him on board and leading this effort.

We are still in the process of developing sponsorship opportunities and we're hopeful that we will begin to gain traction on this in 2017. Overall, and despite unfortunate weather conditions in the third quarter, we still believe in the underlying rationale of the NAME acquisition and are confident in its long-term success.

As I'm sure you're aware, the Madison Square Garden Company became a Townsquare shareholder during the third quarter by purchasing GE's approximately 12% stake in our company. We're very excited about this development, and encouraged that one of the world's foremost entertainment companies is supporting our operating strategy.

We're also hopeful that we will be able to build a strong partnership with MSG and will be mutually beneficial to both parties in the future. I'm very encouraged by early results and we're working on a number of projects and work streams as we speak.

Regarding our balance sheet, we are still targeting a near-term leverage goal of five times on net basis. As of September 30, our total and net leverage was 5.6 times and 5.3 times respectively. 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 period. We had no such transactions in 2016.

So the transactions that are relevant to the pro forma results are the acquisition of NAME, which we acquired on September 1 of 2015 and the divestiture of our 43 towers, which also was completed on September 1 of last year.

Please refer to the tables that we have provided in our earnings release, which provides 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 basis for these completed acquisitions.

For the quarter ended September 30, 2016, net revenue was $165.8 million, down approximately $300,000 or 0.2% from the same period last year. This represented a miss to our previously issued revenue guidance. Local marketing solutions net revenue increased approximately $3.3 million in the third quarter 2016, that’s an increase of 3.8% to $89 million.

For the year-to-date period, local marketing solutions net revenue increased $12.1 million or 5.1% over the prior year period.

Political revenue increased $1 million to $1.3 million in the third quarter of 2016, which was slightly below our expectations and was also less than the amount booked in the quarter of 2012, the last presidential election year.

Excluding political revenue, local marketing solutions increased approximately $2.3 million or 2.7% in the third quarter and $9.4 million or 4% in year-to-date period compared to 2015. Third quarter entertainment net revenue declined $3.6 million to $76.8 million, a decline of approximately 4.5% year-over-year.

Year-to-date, entertainment net revenue declined approximately $3.7 million or 2.4% to $146.4 million over the prior year. Total direct operating expenses were approximately flat in the third quarter of 2016 and increased 2.7% in year-to-date period.

The increase in expense was driven by increases in local marketing solutions expenses in both periods, the largest due to an increase in headcount related expense needed to support our revenue growth. These expense increases were offset by declines in entertainment expenses in both periods.

Adjusted EBITDA of the third quarter of 2016 was $44.7 million, down approximately $1 million from the prior year period. This was slightly below our previously issued guidance of $45 million to $47 million.

For the nine months ended September 30, adjusted EBITDA increased approximately $400,000 or 0.5% to $81.9 million and margins were approximately flat year-over-year.

On an as reported basis, depreciation and amortization expense for the quarter increased $900,000 or approximately 19% primarily relating to depreciation on property and equipment acquired through the acquisition of NAME and the amortization of capitalized software development costs.

Also on an as reported basis, interest expense for the third quarter 2016 decreased approximately $200,000 or approximately 2.7% due to lower total debt balance outstanding following the repayment of approximately $18 million of bonds in the first half of this year.

For the third quarter 2016, we reported net income of $0.58 per diluted share or net income of $15.9 million as compared to net income of $0.60 per diluted share in the third quarter of 2015 on an as reported basis. Adjusted net income, which excludes approximately $4 million of one-time items was $18.3 million or $0.67 per diluted share.

As a reminder, we are not a material cash tax payer and believe that we will not become a taxpayer until approximately 2020. We maintain significant tax attributes including $98 million of NOL carryforwards and other substantial tax shields related to the tax amortization of our intangible asset.

We ended the quarter with a cash balance of $38.4 million and had revolver capacity of an additional $50 million. Total debt at the end of the quarter was $581.3 million. We believe we have sufficient liquidity available for us to operate our business over the next 12 months and service our debt in the ordinary course.

As of September 30, 2016, our total and net leverage was 5.6 and 5.3 times respectively, based on pro forma adjusted EBITDA for the 12 months ended September 30 of $103 million and as of today, the company has approximately 27.4 million shares outstanding inclusive of warrants. Turning now to our outlook for the remainder of 2016.

Like others, we've seen a slight business slowdown in recent months and going into the fourth quarter. We believe this is principally results from the consumer and small business uneasiness, given the election cycle in the overall political climate. We hope the passing of the election restore sense of stability to our markets.

We still expect to see positive fourth quarter net revenue growth of approximately 4% to 7% over the prior year to between $117 million and $121 million and to see positive fourth quarter adjusted EBITDA growth of approximately 14% to 19% over the prior year to between $24 million and $25 million.

For the full year 2016 this translates to an expected net revenue of $514 million to $518 million and adjusted EBITDA of $106 million to $107 million. Our revised forecast also incorporates a lower amount of political revenue then we had originally anticipated.

For 2016, we now estimate approximately $8.7 million to $8.9 million of political revenue falling short of our $10 million budget, which as a reminded is equal to the political revenue generated during the 2012 presidential election. This revenue shortfall is close to a very high margin for the EBITDA line as well.

While a bit of a disappointment this election cycle has been unpredictable and we believe our results back up quite well against dollars. And with that, I will now turn the call back over to Steven..

Thanks, Stu. And thank you to everyone who dialed in this morning. As always we are only a phone call away. So please do not hesitate to call us with any questions or just to check in. We very much appreciate your continued support. And with that, we are now happy to open the call for questions. Operator, will you please open up the lines..

Yes, thank you. [Operator Instructions] Thank you. Our first question comes from the line of Michael Kupinski with Noble Financial. Please go ahead with your question..

Thank you. Thanks for taking the question. Good morning..

Hey, Mike..

A couple question on the – hi.

A couple questions on the entertainment side, the 2% pro forma growth, excluding those four events, would you be a little bit surprised that it was only 2% because I know that there were a number of initiatives, particularly driven by sponsorships and as well as your promotion on your radio stations for some of the attendance and so forth.

What do you think in terms as you kind of get the ball rolling on those things, what do you the pro forma revenue growth opportunities might be for the entertainment division?.

Well, we hired a new – on sponsorship we hired a new person who runs sponsorship about six weeks ago. So when we had done the NAME acquisition, we said that – we thought sponsorship would be another '17 not a '16 event. So, didn't really expect material differences in sponsorship in the third quarter.

So what was the other party your question?.

Well, in terms of - I think part of the acquisition you had hope that you would be able to drive attendance through a promotion on your radio stations and so forth.

I was just wondering how you feel that might be going or if you really got that ramped up at this point?.

We have and as I said in the – I mean, the good news is a non-weather affected event, so the ones that were sort of flatter up attendants with 10% up year-over-year, '16 versus '15, and then advanced in the third quarter. So I do think that our marketing efforts paid dividend and I think that will continue into next year. So we feel good about it.

Obviously, we think that entertainment should grow more than 2% on a pro forma basis in a quarter. As we said in the second quarter, this is sort of to extent been a perfect storm in the event - in the entertainment and event business.

We still had some of the festivals, exploring our big festivals in the third quarter and we talked about what was on going on the festival landscape at our second quarter call. So you know, that said, we're up, we're happy. But you know, with that, but you know, we expect to do better..

And could you remind me, you had obviously indicated that you had a test of increasing the number of festivals and so forth, and enhancing the entertainment venue.

Could you just – have you determined what you might do next year related to that in terms of the number of events or whether you know if that that is on the budget for next year at this point?.

Well, you know, we constantly look at the set of assets that we have and in some cases will shrink a number of events and in some cases we'll grow it depending upon which segment is doing well.

We're right in the middle of planning right now, so it’s little hard to say what the number of events and certainly number events by category for us is going to be in '17..

But in terms of NAME at this point you haven’t determined whether or not you're going to actually – you are actually going to increase the number events for NAME?.

Yes, in NAME as I talked about you know, we did a one of our - what we call self promoted event. This year was one of our test, it did well and we're you know, we will do a few more next year.

We're balancing what their contractual commitments are with fair boards, what the geographies – what that is, what the open dates and trying to, you know, based on that figuring out where we can do.

But we think we can do a small handful of our own self promoted event, which is typically what we do right in, since for last five years when we do something, we'll do a test, then we'll do a few more and then we'll roll it out.

You know, its sort of crawl, walk, walk faster, run strategy and we'll do that with the self promoted event and frankly everything else we do..

Okay. Perfect. Thanks you..

Okay..

Our next question is from the line of Leo Kulp with RBC Capital Markets. Please proceed with your question..

Good morning, guys..

Hey, Leo..

Apologies, if I missed this, but can you provide an update on what you're seeing kind of broadly in the event space and sort of what – what's the competition, what trends of the competition may have been like this quarter?.

I don’t think it was a – I don’t think we've seen anything different from a competitive landscape in the third quarter in our events space. The events space in the third quarter other than WE Fest and a few other things skews you know, the majority to NAME and that’s not a real competitive issue, that unfortunately was a weather issue.

The good news is the fairs where weather wasn’t a factor relates to add revenue increased to approximately 10% year-over-year. So I don't think we've seen anything different in the competitive landscape in the third quarter or this year frankly, other than in the festival space, which we talked about on the second quarter..

Right.

And any updated thoughts on you know where we are in terms of the shakeout met in that part of the industry?.

We'll see, I mean, I would say over the next 120 days, people will be putting their festival lineups and their ticket on sale to little bit sense as to who is actually doing festivals, who is cutting back and what it look like. We've heard rumors and stuff, but they’re just rumors and stuff. So I think we'll know, early in the first quarter..

Got it. Thank you very much..

Okay. Thanks..

[Operator Instructions] The next question is from the line of Jim Goss with Barrington Research. Please proceed with your question..

Thanks. I had one thought, I was wondering about was the - the impact of NAME with you know more than hundred percent of its profitability during one quarter and offsets in the other three you know, which will blend into your statements.

But I am wondering, are there acquisitions that you think you could make to sort of balance up the portfolio and offset whatever it costs for NAME in the off quarters and you know, continue to create a better balance over the course of the year?.

Sure. I mean, if there are interesting acquisition opportunities or things that we could do organically, they will beef up the other quarters, it will smoother out.

You know, to some extent, are we as a management team supposed to look at our business, just as a public company investor would or as an operator would, because if we look at it as the best way to run the business it doesn't really matter that a lot of NAME's profit is in the third quarter. That's when people are out and about.

So the fact that - and if you look at it, I mean, we're talking a lot about NAME, I don't have the math, what is NAME 10% of EBITDA, I mean, this is you know, 90% of our business of EBITDA is not NAME. So I understand we're spending a lot of time on a lot of questions talking about it, but its just one small piece of our business.

But if it is seasonal we always look at different ways to do - to lighten hat out and to spread it out. But it's not something that’s particular terrifying to us. We can manage through it and take the revenues when they are there..

Okay. Well, one of the theses for Townsquare was that radio is a stable and modestly improving business in the aftermath of the crash of '08. And then you can supplement it with some of these activities, I guess that would be the reason to focus on then.

Why don't you talk a little bit more about, basic trends in the radio business and how those seem to be developing right now, aside from political and by the way with political you would thankful if you are not a local TV broadcaster that get a lot tougher than you do at the moment in terms of….

Listen, we were happy by the way, so I think we'll get some political revenues today, so we're not done. But listen, our budget was $10 million, which is what we did in 2012, we'll come a little bit shy of $9 million, I think we said 7 to 8, 9.

So not a disaster, I mean, we've still got a lot of political revenue, we would still win a game – this game late. So we feel probably that’s better than most of about that. In general in our – and again, we don't separate radio from the rest of our local business. But as you can see our local business performed quite well in the quarter, up 4%.

So we feel that you know the there's still lots of local business. There were some headwinds, National was a headwind. Our energy market had been headwind increasingly throughout the year, which caused us almost 2 points of growth, 2 points of full company growth.

Our markets in Texas and some of our markets in Texas, Louisiana, which have been hit hard, we hope that come back as oil stabilizes. But you know we would have been up an extra 2 points other then that.

So, you know, there are some episodic headwinds, but nothing that secularly saying that local advertisers don't care about local solutions, whether they are radio, digital, and the like. So that’s what we've seen there.

There has been to reference, some unease and somewhat of you know, some business slow down, leading into the election and what we've seen for bookings and the like with some cancellations, fewer looking, general education both on consumers and small businesses, lots of people have mentioned that.

Anecdotally we talk to our local management universally focused on the general unease around the political climate in the election. Hopefully that will ease, but in general nothing really different..

May be.

And last thing that would be are you are you seeing local or are you seeing presence in smaller markets to be an advantage right now in terms of local radio ads and how is the competitive climate between, say other local options such as the publishing options in those sort of markets?.

Yes, what you see is in some of the results of the publishers, it looks print advertising is having a bit of tough stretch in the back half of the year. But we haven't seen anything really in or on our markets. We haven't seen anything, I would answer that question differently now than it would have a year ago.

We don't see any different kind of pressures. We still like being in small markets. It is a challenge when national advertising, some of national advertising is gone to some of the bigger market and that’s both sort of structural within how the national advertising and radio works, as well as you know, maybe advertisers and the like.

Good thing for us is national is a very small piece of our business, mid to high single digit kind of business. So it’s not as material as local..

And we feel okay, as long as Main Street is doing okay, we'll okay. Thanks for the question..

Thanks very much. Sure..

Our next question is from line of Barry Lucas with Gabelli & Company. Please proceed with your question..

Thanks. And good morning, Steve..

Hi, Barry..

I was hoping maybe you could provide a little bit of color on the - maybe more on the category basis, when you think about what's going on in the local markets with kind of a flat sour rate for auto, brick-and-mortar retailers having their own difficulties.

So we talked about geography, maybe you can talk a little bit more specifically about categories?.

Sure. And next time you should walkover and do it at our office. I would say auto was a tough category for us in this quarter. It was you know, among our worse performing, so was food and health services.

I would say retail was actually very strong for us, as were financial services probably our strongest and then political, obviously, you know that political and then entertainment had a good quarter. So I'm not sure what to make of all that data, you know its – I don’t know had a distillate in but that – and those were numbers.

I'm not sure what it actually mean and how we go plan, doing anything same or different based on that because we generally look at it as you said more market-by-market and you know we have 66 or 67 different story and we don’t aggregate up to say oh food is down therefore what we do because its mostly local, these only national advertisers, right, and most of these are local.

So it’s more of what's going on in West Texas and in West Texas there just not much is going because oil is down or what's going on in whatever, more building category, but that's the category information..

Okay. Thanks.

Maybe, I don’t know, its still probably early days with MSG, but at a high level, could you maybe talk about what kinds of things you could do together, whether it's a sponsorship or talent or branding or how do you see that evolving?.

Yes. I mean, we're thinking about it, we've had a number meeting with them, with different teams.

We've been really impressed by the folks at MSG and are excited about the overall partnership because it's a nice complementary footprint to ours and we've – listen, I don’t know where it will end up, maybe it will end up no where and you know, its not in our numbers.

But we felt everything exactly what you said about a potential joint sponsorship opportunities, to content opportunities, to maybe doing festival together, to maybe doing lots of different things. They have venues, lots of terrific venues and some content.

We produce lots of content, so could we do more things in their venues, we're talking about all different things. I don’t want to prejudge it by saying these two or three things will happen.

And like I said earlier, where the kind of company is, I'd like to try to do one or two things and do those and get the company to know each other and then a few more – as both saying hey, let's work on all you know ten of these things because it my experience if you try to work on ten of those things none of them happen, but if you pick a small few for a short period of time okay, then you can go build on that.

And that's what we've been thinking through with them..

Great. Thanks for that Steve..

Okay. Thanks, Barry..

Our next question is from the line of Kyle Evans with Stephens. Please proceed with your question..

Hi. Thanks.

Hey, Kyle..

Good morning.

Could you dive down a little bit into the auto weakness you said one of the worst, you might given the number to that?.

No, I mean it was you know, single digit..

Okay..

So, it wasn't you know, horrific. It was just down and I haven't - we haven't done, maybe folks here, I haven't done, so can't give any answer whether it was in particular region, you know there was a handful of folks who just aren't spending this year or doing something else, that could have that kind of effect. So it's not million of dollars….

Okay..

But its you know, was something that was noticed..

And what is auto contribution to overall core radio advertising?.

IT fluctuates between I would say 17% and 20%..

Okay.

Far and away your largest category, is that safe to say?.

I would say maybe not far our largest category..

Okay.

But not far and away?.

Yes..

Last question, I know you guys have various kinds of insurance for cancellation and injury in your events and I know that in certain cases, you do have insurance for inclement whether….

Yes..

Did any of that kick in, in this soft 3Q and as you’re thinking about that safety net changed as a result of the quarter? Thanks..

Yes, really good question. No insurance kicked off because if there are weather days, often that the fair is still open, because there is lots of thing to do – you know, attendance way down, I mean, instead of 60,000 people they may have 20,000 people or so.

And those people might not do ride, but they might go indoor to the rodeo or to the 4-H exhibits or the craft fairs or whatever. So in none of those cases did they trigger you know in insurance. We do talk and we are having discussions with our insurance carrier about of there are other things we can do to tweak it, so that it effect the rides.

But as of now that hasn’t been the case, and over time weather balances it out. So - but in terms of specific event like as I referenced the Indiana state fair where it rain most days you know, no..

What was – you've called that Indiana a couple times, what did the attendants do there year-over-year?.

I'd have to get back to you. I don't know..

I am just trying to get a sense for how back….

I don’t want to give you answer because I am not sure..

Okay. That’s fair. Okay. Thank you..

Thank you. At this time I would like to turn the floor back to Mr. Steven Price for closing remarks..

Great. Thank you all for taking time. I know it’s a busy day with the elections and lots of our instance stuff. So we appreciate your taking time and if anybody has follow-up just don’t hesitate to give us a call. Thank so much for joining..

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