Townsquare Media is recovering faster than management expected from the pandemic. Total 2021 revenue is now on track to hit $410 million, $15 million higher than the company forecast in first quarter, and 95% of 2019 levels. CEO Bill Wilson attributes the turnaround to the company’s “digital first” strategy with a heightened focus on local. “Just one year after the start of the pandemic, we are back on track, our flywheel continues to pick up momentum and we are setting all-time high adjusted EBITDA records,” he said Tuesday morning.
During its second quarter earnings call, Wilson said the company’s “digital first” strategy acknowledges digital as its growth engine – both today and in the future. “It means that our first priority for internal investment will be towards fueling our digital platforms, in terms of personnel, product development and physical expansion,” he explained. For content teams that means what gets distributed online is just as important as what goes out over the air. For sales, it means offering both digital and broadcast solutions – the company doesn't have a separate digital sales team – while educating local businesses on the importance of having a strong digital presence and online storefront, and how Townsquare can help them do that.
“Digital first also means that digital revenue will represent the majority of our company’s revenue in the near future and we have two digital solutions that will get us there,” Wilson offered. Digital Advertising Solutions, which include Townsquare Ignite (programmatic ad sales, including third party solutions) and Townsquare Amped (inventory on its owned and operated sites and apps).
The other piece is Townsquare Interactive, which sells digital marketing services to 24,950 monthly subscribers. Revenue from these two digital streams totaled $180 million in the twelve months ended June 30 and contributed 47% of total net revenue in the first half. Consider that just four years ago, digital revenue was under $100 million and only 25% of company revenue. Wilson forecast continued double-digit revenue from digital to hit $190 million in 2021 and more than $250 million within three years.
‘A True Differentiator’
In what Wilson calls “a true differentiator for Townsquare,” 20% of total revenue, and nearly one quarter of total earnings, come from a monthly recurring subscription business – Townsquare Interactive.
The unit is poised to grow from $76 million of revenue on a trailing twelve-month basis today, to over $100 million of annual revenue within two to three years, the company said. Since launching in 2012, billings at the division have grown by double digits over the prior year every quarter, even during the worst of the pandemic, Wilson said. Underscoring how the unit has helped diversify revenue streams, roughly 57% of its current subscription client base resides outside Townsquare’s radio markets.
The company applies a bunch of filters when determining which local businesses to target as potential Townsquare Interactive clients. That narrows the prospect list to 8.8 million target customers. “At $300 per month, that equates to an estimated $32 billion total addressable market for Townsquare Interactive, of which we are only capturing a small fraction today. There is incredible, incredible upside,” Wilson said.
To grow its client base, a second Townsquare Interactive location in the western U.S. is planned to open in the first half of 2022. The company has already begun recruiting dozens of workers for the new center, Wilson said, with plans for an employee base close in size to its Charlotte, NC location, which is currently staffed with 600 employees.
On Track To Fully Recover
Townsquare says it is now on track to fully recover to at least $102 million in full year 2021 earnings, which would equal 2019’s pro forma number, and is $12 million higher than it forecast last quarter. As Inside Radio reported this morning, Townsquare set an all-time company record high of adjusted earnings in Q2, which clocked in at $30.3 million, compared to $2.1 million in the same period last year. That beat its previous record set in in Q2 2019.
While digital has been the primary growth engine, Townsquare’s broadcast revenue jumped 54% from a year ago during the depths of the recession in Q2 2020, when broadcast revenue was down 45%. “As a digital first company, the primary driver of our recovery to 2019 revenue levels has been our digital business,” Wilson said. He pointed to a 50% increase in digital revenue in the quarter, bolstered by a 20% jump in Townsquare Interactive revenue, and what he called the company’s fastest growing revenue stream – Townsquare Ignite, which is expected to reach $100 million in revenue within two to three years, at a roughly 30% profit margin. The other key digital component is Townsquare Amped, which generated $45 million of revenue for the 12 months ended June 30.