Good morning. And welcome to Townsquare Media’s First Quarter 2023 Conference Call. As a reminder, today’s call is being recorded and your participation implies consent to do such recording. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation.

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

Thank you, operator. And good morning to everyone. Thank you for joining us today for Townsquare’s first quarter financial update. With me on the call today are Bill Wilson, our CEO; and Stuart Rosenstein, our CFO and Executive Vice President.

Please note that, during this call, we may make statements that provide information other than historical information, including statements relating to the company’s future expectations, plans and prospects.

These statements are considered forward-looking statements under the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from these statements.

These statements reflect the company’s beliefs based on current conditions, but are subject to certain risks and uncertainties, including those that are detailed in the company’s annual report on Form 10-K filed with the SEC.

We may also discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income and adjusted operating income, which we may refer to as profit 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 will reference some of those slides during our discussion this morning. At this time, I would like to turn the call over to Bill Wilson..

Thank you, Claire. And thank you all for joining us this morning. We are pleased to share our first quarter results with you today.

Although we face the same headwinds that have impacted the entire media sector, our first quarter results demonstrate the strength of our Digital Advertising platform and solutions and validate our Digital First Local Media strategy with a focus exclusively on local markets outside of the top 50.

Townsquare’s, first quarter net revenue and adjusted EBITDA exceeded the guidance we provided on our last call, due to growth in local revenue, revenue that we control, and in particular the strength of our Digital Advertising solutions.

In the first quarter, we had anticipated that total net revenue would be flat to up plus 2% year-over-year, and it finished above guidance at plus 3%.

We had expected that first quarter adjusted EBITDA would decline negative 16% to negative 21% year-over-year, and the actual result was also better at negative 12% year-over-year, approximately $1 million over the high end of our guidance.

It is worth noting that while many media companies have not yet returned to 2019 levels, both our revenue and our profit results are above our pre-COVID 2019 performance. In 2022, approximately 50% of our company’s total net revenue and 50% of our total adjusted operating income were derived from our digital solutions.

In the first quarter of 2023, our digital revenue grew plus 8% year-over-year, and as a result, our digital revenue in Q1 2023 grew to be 54% of our total net revenue. Total digital profit also increased plus 8% year-over-year with a profit margin of 28%. And its first quarter contribution grew to be 63% of our total adjusted operating income.

This point bears repeating, 54% of our revenue and 63% of our profit came from digital sources, a new milestone for our company and quite frankly for the industry, this milestone was achieved due to the strength and resiliency of our Digital Advertising solutions with first quarter revenue plus 15% year-over-year.

Historically for Townsquare and for the advertising industry at large, Digital Advertising outperforms other forms of advertising during an economic downturn.

For example, and as I shared on our last earnings call following the shutdown of businesses across the country, due to COVID-19 pandemic in 2020, Townsquare’s Digital Advertising revenue rebounded quickly, returning to growth by the fourth quarter of 2020.

Digital Advertising across the United States increased plus 14.3% year-over-year in 2020 according to S&P Global Market Intelligence, while all other forms of traditional advertising including outdoor, cinema, print, radio, and television declined. Townsquare’s digital platform sets us apart from our local media peers.

As highlighted on Slide 11 with 54% digital revenue, we are approximately 2.5 times the industry average and therefore better situated than our competitive set during a downturn.

As anticipated Townsquare Interactive, our subscription digital marketing solutions offering, outlined on Slide 13, faced challenges in the first quarter, which as I noted on our last call, we expect will continue throughout 2023. Townsquare Interactive net revenue decline 1% year-over-year in the first quarter.

As a reminder, our target clients are independent SMBs with less than $5 million in annual revenue. Unfortunately, this demographic in particular is vulnerable to the current macroeconomic environment, battling high inflation, labor shortages, higher wages, higher interest rates, et cetera.

This has contributed to a period of higher attrition among our subscribers. In addition, and as we mentioned on our last call, we also faced issues related to employee turnover in our customer service operations at Townsquare Interactive due to our return to work mandate in 2022.

This has largely been addressed but did contribute to an increase in client attrition year-to-date. Although challenging these issues caused us to take a step back and analyze the fundamentals of our service platform, highlighting a number of opportunities that we believe we can improve upon moving forward.

Since the start of the year and continuing currently, we have made a number of important changes to our customer service platform that we believe will be very beneficial to our clients and thus client retention in the long term, but the changes will contribute to a muted financial performance for Townsquare Interactive in 2023.

Despite the short-term pressure on Townsquare Interactive’s top line, which is facing negative 7% in the second quarter, we are still incredibly confident in the long-term growth prospect of the business, and as such, continue to invest in its long-term future.

The second Townsquare Interactive office in Phoenix is now open and we continue to grow our team there while simultaneously growing our team in Charlotte.

With an addressable market of nearly nine million target customers as outlined on Slide 14, a superior product offering, a customer service team built for future growth and a huge market opportunity, I am very, very confident that Townsquare Interactive is geared for long-term, profitable growth and success.

Just be aware that in 2023, it will be a reset year for us at Townsquare Interactive with 2024 returning to strong top line and strong bottom line growth.

Our Digital Advertising solutions segment, outlined on Slide 12, was once again our largest growth driver with first quarter revenue increasing plus 15% year-over-year, impressive in any environment and even more impressive in the current macro environment.

First quarter profit growth outpaced revenue growth at plus 23% year-over-year due in part to an increase in average order size.

In addition, due to an increasing online audience, which grew to an all-time high of 84 million average unique visitors per month in the first quarter and higher engagement, we have been able to more efficiently monetize our audience, enhancing our profit margins in digital advertising.

We are a success in Digital Advertising to our sophisticated digital products and solutions, which are entirely in-house, giving us one hundred percent control of the client relationship from the first client pitch, to campaign design, media buying and optimization to ongoing reporting and insights, which we believe translates to a better customer experience and higher client retention rates.

In addition, we have the unique ability to collect and analyze first party data from our audience of 84 million monthly unique visitors to our portfolio of over 400 local news and entertainment websites, 390 mobile apps, and our 10 leading national music and entertainment websites.

This leads to detailed and unique insights about consumer behaviors, audience interest and purchase intent, that drive real results with strong ROI for our clients and give us a strategic advantage over our local competition.

Another key factor driving our strong Digital Advertising success is our focus on markets outside of the top 50 cities of the United States. This is a significant differentiator for our broadcast business and most importantly for our digital businesses.

Because we are not in large top 50 markets, we face significantly less competition from large media players, digital marketing solutions players and digital programmatic providers, and importantly, the competitors we do face rarely have in-house solutions and instead utilize out-of-house third party vendors.

The fact that we own our own tech platforms in-house combined with the breadth of our digital solutions is a competitive advantage in any size market. Yet in cities outside the top 50, it is a significant difference maker, which is driving our Digital Advertising to be the strongest growth engine in the company.

In addition, the majority over 90% of our advertising revenue is local advertising, which historically is less volatile than national advertising, particularly during an economic downturn. For example, national broadcast advertising revenue continued to be extremely weak in the first quarter with revenue down approximately 30% compared to prior year.

No doubt that hurts, but that decline doesn’t hurt as much as others because national broadcast advertising now accounts for approximately 5% of our total revenue. In contrast, our local broadcast advertising performed much better as it was positive in Q1.

We are confident that favorable industry trends, together with our in-house, full suite of marketing solutions, strategic footprint focus on small- to mid-size markets, investment in our original content strategy, and our first-party data advantage will continue to drive strong digital advertising growth.

To reinforce that point, even with the current challenging macroeconomic conditions, in Q2, our digital advertising continues to perform very well and is pacing up low-double digits.

I would also like to share a bright spotlight on the fact that our business continues to generate strong cash flows including $9 million of cash flow from operations in the first quarter.

We ended the quarter with $42 million of cash on hand, down only $1 million from year end, even after repurchasing $12 million of our bonds on the open market at a price below par and also making our $19 million interest payment during the first quarter. And as a reminder, our next interest payment is not due until August.

In addition, our Board of Directors approved a dividend of $0.1875 per share payable on August 1st, which equates to $0.75 per share on an annual basis, which today would be approximately 8% yield.

We remain very confident with our current capitalization and strength of our balance sheet with $42 million of cash on hand at quarter end, a fixed interest rate of 6.875%, no maturities until 2026 and net leverage of 4.29 times at the end of the first quarter.

And we are pleased that we can generate attractive current cash returns for our equity shareholders. Overall, we continue to believe that we are very well positioned to perform during a downturn or recession, no matter the duration and severity.

A belief which is supported by our 2020 performance during the worst of COVID as well as our rebound to record profits in 2021, which was then topped again in 2022 with record revenue and record profits and the ongoing strength of our digital advertising platforms and solutions.

And now I'd like to turn the call over to Stu to go over our results in even more detail as well as to provide you our second quarter guidance. Take it away, Stu..

Thank you, Bill, and good morning everyone. It's great to speak to you this morning. We're pleased to report that we exceeded our net revenue and adjusted EBITDA guidance due to strong growth in local advertising revenue, and in particular digital advertising revenue.

First quarter net revenue increased 2.9% over the prior year period to $103.1 million, which was above our guidance of $100 million to $102 million. First quarter adjusted EBITDA declined 11.9% year-over-year to $19.4 million above our guidance of $17.5 million to $18.5 million.

Of note, both net revenue and adjusted EBITDA remain above pre-COVID 2019 levels, an accomplishment which has not been achieved by many of our local media peers. First quarter Broadcast Advertising net revenue decreased in line with our expectations with a decline of 4.8% year-over-year.

Broadcast profit margins dipped to approximately 19% in the first quarter, in part due to revenue declines and in part due to seasonality. Our first quarter Broadcast profit margins are typically the lowest for the year.

As we expected and noted on our last call national broadcast revenue declines were significant in the first quarter with revenue down approximately 30% year-over-year and continue to be meaningfully down in the second quarter pacing down approximately 20%.

Local broadcast has proven to be much more resilient as has historically been the case, and thus first quarter local broadcast growth was able to partially offset the national broadcast declines. We expect a similar outcome in the second quarter with total broadcast revenue currently projected to be down in the mid-single digits again.

Townsquare Interactive are Subscription Digital Marketing Solutions segment had a challenging quarter, which we expect will be the case for the remainder of 2023 as Bill discussed earlier. In the first quarter, net revenue decreased 1.3% as compared to the prior year, and profit decreased 12.1% year-over-year.

Given our long-term growth prospects at Townsquare Interactive we continue to invest in our sales and support teams and we do have some incremental expenses such as the rent of the second location in Phoenix. This led to our profit margin dropping slightly to 26% in the first quarter.

Additionally, it's worth noting revenue is currently pacing down 7% in Q2. As we have shared on our last call, we expect margins at Townsquare Interactive to be suppressed in 2023 as we continue to invest for future growth while we ramp the newly open Phoenix location.

Townsquare Ignite our digital advertising segment was again the largest driver of growth in the first quarter with net revenue increasing 15.4% year-over-year and profit increasing 22.9% year-over-year.

This segment's profit margin expanded to 30% in Q1 as compared to 28% in the prior year period due to the increase of average order sizes and more efficient monetization of our owned and operated websites. We expect digital advertising segment will continue to be the biggest driver of our revenue and profit growth in 2023 and beyond.

Our other category which is comprised of Live Events activity generated $1.9 million of revenue in the first quarter, an increase of $1 million year-over-year and profit of approximately $500,000, which was an increase of approximately $400,000 year-over-year.

The increase was due to hosting more events in the first quarter of 2023 than the prior year. In the first quarter of 2023, we took a non-cash impairment charge to our FCC licenses of $8.2 million.

As I covered on previous calls given the way these non-cash impairments are determined, we expect the value of our FCC licenses to continue to be written down over time.

The first quarter impairment was caused by rising interest rates and declining third-party broadcast advertising projections, both of which are factored into the assumption that we use to evaluate the FCC licenses for impairment.

This write down of decade old purchase price calculations has no bearing on our cash position, operating revenue, operating expenses, our profitability or future prospects.

There are nothing more than the non-cash accounting charges affecting only the purchase price allocations made when we bought these radio station assets roughly a decade or more ago. Our net income declined $4.7 million to a net loss of $1.9 million or $0.14 per share. The decline was largely due to the $8 million non-cash impairment charges.

As Bill highlighted, and I would again like to emphasize, we consistently have strong cash flow generation. We generated $9.4 million of cash flow from operations in the first quarter of 2023, up 9% year-over-year and ended the quarter with $41.8 million of cash.

At the end of the first quarter our net leverage remained at the lowest net leverage in our company's history, which is 4.29 times. We repurchase approximately $12.2 million of our bonds at a price below par in the first quarter.

As always, our number one priority to invest in our local business to organic, internal investments that support our revenue and profit growth particularly our digital growth engine.

We plan to continue to invest in our digital product technology, sales, content and support teams, specifically in our Townsquare Interactive and Townsquare Ignite businesses in order to maintain our strong competitive advantage in our markets outside the Top 50 cities.

As Bill mentioned earlier, our Board has approved a dividend payable on August 1st to shareholders of record as of June 30th.

The dividend of $0.1875 per share, which equates to $0.75 per share on an annualized basis implies an annual payment of approximately $13 million and a dividend yield of approximately 8% based on current shares outstanding and our current share price.

We believe our strong cash flow characteristics will allow us to continue to invest in the business and support our new dividend. We'd like to remind you that any benefit or provision for income taxes included on the face of the income statement is for GAAP financial statement purposes only.

We maintain significant tax attributes including more than $100 million of federal NOL carryforwards and other substantial tax shields related to the tax amortization of our intangible assets. We continue to believe that we will not be a material cash taxpayer until approximately 2026. Turning to our second quarter outlook.

We expect second quarter net revenue to be between $120 million and $122 million. We anticipate that double-digit digital advertising revenue growth will be offset by mid-single digit declines in Broadcast Advertising led by steep national declines and a negative 7% decline in Townsquare Interactive.

We expect second quarter adjusted EBITDA to be between $28 million and $29 million. For the full year we are reaffirming our expectations that revenue will be between $450 million and $470 million. We are also reaffirming our expectation that 2023 adjusted EBITDA will be between $100 million and $110 million.

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

Thank you, Stu, and thank you to everyone who joined us this morning. We greatly appreciate it.

In closing, I want to reiterate that although we are navigating a number of macroeconomic headwinds in 2023 we are confident in our digital first local media strategy, our focus on markets outside of the Top 50 in the United States, and the long-term profitable growth potential of our digital platform.

In fact, if we were to achieve the midpoint of our profit guidance, our full year profit would be the second best in the company's history with last year being its best ever. In addition, our strong cash generation will allow us to continue to reward shareholders via our dividend.

As always, we wouldn't have the confidence in our long-term success without the Townsquare team's effort, passion and commitment that is directly driving our growth and innovation each day. I could not be more appreciative of our team and their tremendous work. And again, thanks to each of you for taking the time to be updated on our Q1 results.

Operator, at this time please open the line for any and all questions..

Thank you. [Operator Instructions] Your first question comes from the line of Michael Kupinski from Noble Capital Markets. Please go ahead..

Thank you for taking the questions. First of all, congratulations on your industry leading performance. So regarding Townsquare Interactive I was wondering if you can, Bill, in the last quarter you indicated that you gave up some rate in that segment. I was wondering if there was a way to quantify the revenue impact from that.

And then also in terms of the Townsquare Interactive revenue mix; how much of the revenue mix is actually coming from in-market versus your out of market opportunities? And then is there any difference in terms of client retention in-market versus your out of market?.

Well, good morning Michael, and thank you for the accolades in terms of the quarter. We're feeling quite confident going into the rest of the year, even with the macro conditions, and growing plus three is a little bit below our standards, but still Q1 was the highest revenue ever for the company, so we're proud of that.

In terms of your questions, a couple in there. So as you noted we shared on our last call that this would really be a, I'd call it almost a reset year for Townsquare Interactive, given the macro environment and the fact that we target clients less than $5 million in revenue.

And we've been very transparent about that in our investor deck for about three years now. And obviously those clients are facing significant challenges with high inflation, higher wages, obviously higher interest and all of those things.

I actually saw yesterday the National Federation of Independent Businesses, the NFIB said that in April the optimism for small businesses was the lowest ever – were the lowest since January 2013. So obviously the lowest in the last decade.

So I share that just in that the conditions for the, I call them, almost micro small, really small businesses is challenging. So as you just asked and noted on our Q1 – on our end of year call in March about eight weeks ago, we shared that we were giving discounts to customers who were struggling. So that impacted the revenue slightly.

I'd put that almost marginally. I would characterize it as that. I'd say the revenue declined overall as it relates – it was only 1%, but as we guided for Q2 negative 7 is more in line with we're seeing more of these businesses just struggling given the macro conditions and given the higher cost of operating their business.

And we're seeing businesses in essence tick-up in terms of number of businesses closing. And as we've shared, again, transparently for a number of years, our number one reason businesses cancel with Townsquare Interactive is actually because they go out of business and can't pay their bills.

We've also seen a tick-up in credit card declines, which again is indicating of these businesses struggling to meet their day to day. So I'd say the discounts we provided – provided a little marginal decline.

Really, the decline was a tick-up in client attrition in Q1, and as we also noted on the call I think in some ways it's a blessing in disguise where it gave us an opportunity, take a step back, really attack everything we were doing or at least challenge everything we were doing, and out of that challenge we saw some opportunities to improve our customer service strategy and we've been doing that since the beginning of this year and really accelerated some of that change in March and April.

And we're not fully through it, but I think we'll be through it by the end of this quarter. And depending on the macro conditions, I think our business will return to normal in Q4 or in 2024 at the latest. Your other question was around the mix of clients. It is roughly 60:40, 40% in our markets, 60% out of our markets.

And the retention rate is roughly the same. There's really no difference in geography in-market, out of out of market verticals. It's pretty similar. We're pretty quantitative in terms of how we analyze the business and the retention rates are similar across in-market, out of market as well as verticals.

So I'll talk to back to you, Michael, in case you had any other questions on interactive or other, any other parts of our business..

Just two more. A number of companies have indicated that they're already seeing presidential political coming in.

I was wondering if you can just give us your thoughts about whether or not you're seeing that and if that's being booked and how political shaping up maybe for the second half? And then the last question I have is regarding the cash position, obviously you retain a very healthy cash position and you are generating a lot of free cash flow.

Is there a level of cash that you feel that you need to retain liquidity and due to the economic uncertainty or do you think that now would be time to be more aggressive in maybe buying back bonds given that they're trading below par?.

Yes. Thank you Michael. Appreciate the questions as always. So presidential political dollars for us, we have not seen an uptick yet. I obviously am following what's happening in local media, particularly on the TV side there you're seeing some political early dollars. We have not yet seen that.

Our expectation for the full year is anywhere from $2.25 million to $3 million of political. So it's pretty modest. All indications for next year are quite strong. So we're quite optimistic for 2024 in terms of the political revenue going in there.

In terms of the cash position, as you noted we couldn't be more pleased with our strong free cash flow and we generated $9 million of cash flow from operations in Q1, as Stu said $42 million of cash on hand after purchasing $12 million of bonds, and we had our interest payment of $19 million, and lowest net leverage ever at 4.29 and actually lowest total leverage at 4.57.

So in terms of your question, in terms of what we're comfortable with given the macro conditions now, I would say anywhere between $20 million to $25 million we're comfortable operating the business at. So we have a lot of flexibility to your point.

Even after paying such a high yielding dividend to also continue to buy back bonds if we so choose to as well as that's probably our – after internal investment and continuing to support the dividend would be our next priority in terms of cash allocation.

The other thing I would just note because Stu mentioned our broadcast profit margins tick down in Q1 because we continue to believe strongly in our broadcast business with particularly in markets outside the Top 50, just the companionship and local connection.

But I did want to share that – that 19% profit margin, we expect that to return to pretty normal levels in Q2 onward. I would say high-20% margin. So again, it just talks about the high leverage that we have in terms of cash flow operations and continuing to be opportunistic in the bond market as you noted, Michael.

So I think that was your last question. If so, thank you for that..

Thank you..

If you have any others, happy to take them..

Nope, that's it. Thank you..

Have a great day..

Thank you. Your next question comes from the line of Jim Goss from Barrington Research. Please go ahead..

Thank you and good morning. I would complement you on the slide deck that is always there, but it does frame where you've been and where you're headed in a context of a tougher environment to get through. So I think it's always worth looking at.

But I do want to ask a little more about TSI and you made some comments about the employee turnover due to the return to work order? And I was wondering if you'd talk about whether you'd likely pick some of those employees back if they decided they weren't being subsidized by the government? Or if you're bringing in new people what the training time is and the getting up to speed time is to get the staff where you need it to be?.

Appreciate it, Jim. Always good to hear from you. Appreciate the feedback on the slide deck and the investor presentation.

We spend time on it and to your point, particularly when you started as a legacy broadcast business with the mission of diversifying your business, we really wanted to talk about where we started and what we are today, which is a digital first local media company and importantly, really the only company not just in broadcast TV or radio but in local media principally focused outside the Top 50.

And I think the combination of being digitally minded from day one in 2010 when the company was formed to then being incredibly disciplined and staying to our knitting and being outside the Top 50 markets.

We've talked about on prior earnings call the hedgehog concept of doing something you are passionate about, but probably just as importantly or more importantly, is doing something you are completely differentiated and that can make you a lot of money. And that's what we feel like we're doing at Townsquare.

We're completely differentiated in these markets outside the top 50 with these incredibly strong solutions to help local businesses grow. So, pivoting to your Townsquare Interactive question, which I appreciate, you are correct. I think one of the things we try to do on these calls as well as our follow-ups is to be incredibly transparent.

And we shared the last time that given our return to mandate work order it really had the – the only impact that it had from a company-wide perspective was really at Townsquare Interactive. I think that's because in Charlotte it's our largest office with over 600 employees there.

And again, the other thing I would share, Jim, I think I shared this on the last call, it was a mandate in that if you were a top performer, you did not have to return to work as everybody else did it. It was really for people who may not have been tenured or not yet have achieved that top performance standpoint.

So, we would not, in essence, therefore to be specific to your question, take them back, because these are people who needed more training, needed more hands-on coaching and working remotely, you can clearly do that. For us we found it becoming a much more effective coaching in person or at least a hybrid role.

And these individuals who chose not to stay did not want to even come in for a hybrid role. So, that's my answer as it relates to, would we take them back. If they would come in for coaching and do a hybrid role, and they were good performers, we would. But otherwise if they wanted to be remote 24x7, we wouldn't.

The other question you asked was, how long does it take given we are rehiring these people who have left, because our headcount continues to increase? I would say roughly a 100 days. Some people obviously are earlier adopters and maybe day 60, 65, 70. But when we bring somebody on, we spend a lot of time training.

I think it's one of our differentiations not only at Townsquare Interactive, but across the company, the investment in dollars, and time and personnel for coaching and trainers, quite honestly I think, is second to none. So we do invest quite a bit in that and it serves us well.

I think that's one of the things we pride ourselves on is investing on our people and being patient. And it's really proving out. I mean, you look at our Digital Advertising growing 15% and our content contributors being the original social influencers and our 360 strategy and it's kind of like a flywheel.

We've been talking about it for 12 years, but now our owned and operated audience at 84 million unique visitors is just incredible, allows us to have that first party data and having everything in-house is a clear differentiator. So Jim, I'll turn it back to you in case you have other questions..

Okay. Well one about radio. You drew a distinction between larger markets, smaller markets, of course. Within the group you do operate within.

Is there a lot of difference between the really smaller markets versus the mid-size markets? And does that guide any M&A consideration?.

a) our broadcast results, because I think, our broadcast results are performing quite well from an industry perspective. Obviously national is only 5% of our total broadcast advertising revenue.

So, although it hurts, as I said on the call, it doesn't hurt nearly as much as if you are in double digits national or if you are in 20%, 25%, 30% of your business being national advertising. We recognize we want to control what we control and we are very fortunate that that's local. And that local broadcast advertising continues to perform well.

But pivoting back to your original question, we don't see a lot of difference between a market like Grand Rapids, Michigan; and Kalamazoo, Michigan or Battle Creek, they're performing consistently across that. So market size for us really is not a big variance or an indicator of anything..

Okay. One last one. You draw the distinction that you generate with Ignite and your data and management capabilities within those markets.

Is there a business you can have relationship with smaller competitors outside of your markets that where you might share some of the things that make differentiate you in the markets which you do operate and possibly even have a sort of a rent with option to buy sort of model with some of those areas?.

Great question, Jim. It's something actually we've evaluated, we actually tested at one point. Our Digital Advertising has been for many years now and will continue to be for many years if not decades is performing incredibly well.

We actually made some adjustments in terms of personnel and organizational structure at the end of 2022, in the beginning of 2023 that has just compounded the positivity of this business, growing revenue 15% in Q1. But as Stu noted, we grew our profit 23%.

Our trailing 12-month profit, there is $45 million and 30% margin, which now Digital Advertising is the largest component of our operating income at 41%. So as you think about digital being 63% of all of our operating income and Digital Advertising being 41%, it is quite differentiated. So to your point about renting it, there is a couple things.

The short answer is we've evaluated and although it's an opportunity, we will continue to evaluate. We're not going to go there now.

One of the reasons is the benefit of our first party data, the fact that we've got 84 million unique visitors, we've got these trusted local influencers even though we're monetizing inventory across the internet, we're using these insights from our own first party data to help create campaigns that are successful outside of our footprint.

I don't want to get into the artificial intelligence discussion now because it's probably too early and we don't have enough time. But as I shared, I think, on the last call, we're starting to deploy certain pieces of artificial intelligence that although extremely early days are having outsized positive impact much more quickly than we recognize.

And I bring that up because one example of that is using AI to evaluate all of our campaigns for advertisers.

And then instead of starting from scratch each time looking at what performed the best from an ROI perspective, and we measure that return on investment based on the key performance indicators of the client that they described to us before we launch a campaign.

And now we're running that through AI and saying, okay, here are the, the top 5% or top 10% performing campaigns for auto or for real estate or financial services or lawyers [indiscernible], so forth, and so forth. And that's impacting not only our Digital Advertising, but we're deploying that across all of our full funnel solutions.

So we tested renting our solutions to third parties. What we found, quite honestly, going back to Michael Kupinski’s question, the training – even though we brought a trainer in, you need that day-to-day, you need that day-to-day leadership.

And when we partnered with other local media companies outside of our footprint, they just didn't have the strength and leadership that thankfully we have at Townsquare across our divisions across our local markets. I truly believe we have the best of the best leadership and that takes a lot of coaching, and leadership and motivation.

And we just didn't find that in the companies that we tested this with. So, right now we are testing if you roll back the clock ten years, Jim, you know that we used to sell Townsquare Interactive Solutions only in our local market footprint. Only after three, four years of success did we start to sell outside our footprint.

And I think that you will find with Ignite, we will start to test and we are testing now selling it outside of our local market footprint.

So, as opposed to today partnering with other radio companies, television companies, print companies, outdoor companies and so forth to offer Ignite, we're going to put salespeople in markets where we are not today and see how that goes over the next 18 months. So very astute question and hopefully I answered it for you.

Any other questions, Jim?.

No, that'll do it for now. And thanks a lot..

Thank you, Jim. Appreciate it..

Thank you. There are no further questions at this time. I'd now like to turn the call back over to Mr. Bill Wilson for any closing remarks..

Thank you very much, operator. And thank you to each and every one who dialled in today.

As hopefully you can tell we're quite confident not only for the rest of this year reaffirming our guidance, but probably most importantly, some of the things that we've done over the past six months we think are going to have outsized impact as we look to – 2024, and 2025 and onward.

And as we noted earlier, I think, our Digital First strategy combined with focus on outside the top 50 markets, and as you heard throughout this Q&A, our investment in our team, and our leadership and coaching, we couldn't be more confident moving forward. So thank you for joining us this morning.

We look forward to regrouping in three months from now. Everybody have a great day..

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day..