Q4 2023 Earnings Summary
- Strong recovery and growth expected in Townsquare Interactive (TSI): The CEO expressed confidence that TSI is back on track, expecting to return to net subscriber growth in Q2 2024, and month-over-month revenue growth in Q2 or no later than Q3 2024. They have introduced new solutions for clients, including a robust CRM, texting and email marketing, QuickBooks integration, and appointment setting, which have broadened their target customer base and are driving the rebound in TSI. , ,
- Benefiting from the deprecation of cookies due to strong first-party data: With Google's implementation of cookie deprecation, Townsquare, as an at-scale publisher with a large audience, is well-positioned to benefit. The CEO mentioned that as cookies go away, it's an advantage for publishers with first-party data, positively impacting their owned and operated properties and programmatic business.
- Strong performance and growth in Townsquare Ignite digital advertising: Townsquare Ignite was the strongest growth driver, with digital advertising growing 7% last year. Key growth components include programmatic advertising, up low double digits in 2023, and local owned and operated digital advertising, up low double digits. The company expects continued improvement in digital advertising in Q1 and Q2 2024, with programmatic and streaming TV being significant growth areas.
- Townsquare Interactive (TSI) experienced significant subscriber losses in 2023, losing over 6,500 subscribers, which led to a negative impact of over $3 million in revenue for Q1 2024, a decline of 15% to 16% year-over-year. Management acknowledges that these losses will continue to pressure revenue and profit growth throughout 2024.
- The company's national digital advertising business is facing challenges, with national owned and operated (O&O) advertising expected to be down over 25% in Q1 2024, resulting in a revenue decline of over $1 million. This decline is attributed to changes in algorithms from Google and social media platforms, negatively affecting their national brands like XXL and Taste of Country.
- Townsquare recorded significant non-cash impairment charges of $24.9 million in Q4 2023 and $90.6 million for the full year, primarily related to FCC licenses. These impairments were caused by rising interest rates and decreases in third-party broadcast revenue forecasts, which may indicate underlying issues in the broadcast segment.
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Townsquare Interactive Rebound
Q: What drives your optimism for Townsquare Interactive's outlook?
A: Bill Wilson expressed strong optimism for Townsquare Interactive (TSI), noting that despite last year's challenges, they expect a turnaround in 2024. TSI lost over 6,650 subscribers in 2023, with the highest churn in Q2, but churn has decreased modestly and consistently since then [0]. Wilson expects subscriber growth in Q2, possibly even in Q1, and revenue growth to occur in Q2 [0]. The optimism is not limited to Phoenix; it's broad-based, driven by improved client service and investments in the business [0]. -
Ignite Growth Drivers
Q: What are the specific growth components within Ignite performing well?
A: Bill Wilson highlighted that digital advertising continues to be the growth engine, with Ignite's programmatic revenue up low double digits in 2023 [4]. The best-performing segments are social and streaming TV, allowing them to compete with cable and television brands [4]. Local owned and operated (O&O) advertising is up low double digits, while programmatic continues to grow [4]. However, their national O&O business faced challenges due to algorithm changes, impacting revenue [4]. -
Impact of Cookie Deprecation
Q: How does Google's cookie deprecation affect your business?
A: As an at-scale publisher, the deprecation of cookies positively impacts Townsquare's owned and operated (O&O) and programmatic businesses because they capture first-party data [1]. Digital advertising grew 7% last year, increasing $10 million on a full-year basis [1]. Programmatic revenue was up low double digits in 2023 [1]. While national O&O business declined due to algorithm changes, local websites and O&O are up low to mid-single digits, and programmatic continues to be up high single digits [1]. -
Noncash Charges and Interest Rates
Q: Will falling interest rates change the noncash impairment charges?
A: Stuart Rosenstein explained that if interest rates decrease, it will be less of a drain on the calculation of noncash impairment charges [2]. Another factor was BIA's industry forecast reduction for broadcast in '24, which unfairly impacted their calculations [2]. He emphasized that these are noncash charges that do not affect future revenues, expenses, or cash flow generation [2]. -
Impairment Charges and M&A
Q: Do impairment charges make acquiring broadcast properties easier?
A: Rosenstein stated that impairment charges do not factor into their valuation of businesses when considering M&A [3]. They focus on current cash flow, infrastructure, and how they can enhance markets by rolling out their digital playbook [3]. -
TSI Staffing Challenges Resolved
Q: How are you addressing staffing challenges at TSI?
A: Bill Wilson acknowledged that staffing issues related to the back-to-work mandate in 2023 are now behind them [4]. Some employees chose not to return to the office, impacting the service organization [4]. However, new hires and returning staff now see the benefits of the company culture, and TSI is once again being recognized as one of the best places to work in Charlotte [4]. This positions them well for the anticipated rebound in TSI [4]. -
New TSI Offerings
Q: Are there new services at TSI to raise ARPU?
A: Over the past six months, TSI introduced new solutions such as a robust CRM, text and email marketing capabilities, integration with QuickBooks, and appointment setting for contractors [4]. While not necessarily raising ARPU, these products broaden the target customer base and are expected to contribute to the rebound in Q2 [4].