Townsquare Media expects digital segment to drive $50M revenue in 5 years amid remnant headwinds

Earnings Call Insights: Townsquare Media (TSQ) Q3 2025

MANAGEMENT VIEW

* Bill Wilson, CEO, stated that "Townsquare's third quarter results met the total net revenue and adjusted EBITDA guidance that we provided on our last call, reflecting our team's hard work in the current macroeconomic environment." He emphasized the company's digital-first local media strategy and its ability to deliver strong cash flow from operations through deliberate expense management.
* Wilson highlighted that the company's digital revenue expanded to 55% of total net revenue in the first nine months of 2025, with digital segment profit increasing 4% year-over-year and a profit margin of 26%.
* The CEO pointed out that the Townsquare Ignite digital advertising business experienced "two very different trends," with direct-to-client sales showing strong growth, but significant declines in remnant revenue due to AI-driven changes in online audience behavior. He noted, "In the third quarter, the negative indirect trends were enough to offset growth, leading to a slight overall digital advertising revenue decline of less than 2% year-over-year."
* Wilson discussed the third-party media partnership model in the programmatic business, saying "this strategy will be a meaningful component of our digital advertising growth in future years" and expects the division to reach at least $50 million in revenue within five years at a 20% profit margin.
* On Townsquare Interactive, Wilson said, "segment profit has increased plus 19% year-over-year, an increase of $3 million," with profit margins expanding to 33%. He mentioned slower revenue growth due to a smaller sales team but expressed confidence in a return to growth in 2026.
* For broadcast local radio, Wilson acknowledged an 8% year-over-year decline in net revenue excluding political, but noted, "we have consistently outperformed the industry in 2025, gaining local and national broadcast market share according to Miller Kaplan estimates."
* Stuart Rosenstein, CFO, stated, "Third quarter net revenue, excluding political, declined 4.5% year-over-year and 7.4% in total to net revenue of $106.8 million, within our guidance range of $106.5 million to $108.5 million. Third quarter adjusted EBITDA, excluding political, declined 2.1% year-over-year and 13.6% in total to $22 million, which was also within our guidance range of $22 million to $23 million."

OUTLOOK

* Wilson indicated continued digital advertising headwinds in Q4, particularly from remnant inventory, and expects Q4 digital advertising revenue to be muted.
* For Townsquare Interactive, management expects Q4 revenue to be roughly in line with Q3's $18.6 million, with profit margins remaining above 30% in Q4 and into 2026.
* Broadcast segment performance is anticipated to show a slight improvement ex-political in Q4 but will face a large decline due to lighter than forecasted political revenue.
* Rosenstein provided full-year 2025 guidance of $426 million to $430 million in revenue and adjusted EBITDA of $88 million to $90 million, revising previous expectations downward due to steeper declines in search engine traffic and lower political revenue.

FINANCIAL RESULTS

* Net revenue for Q3 2025 was $106.8 million, matching guidance.
* Adjusted EBITDA was $22 million, also within guidance.
* Townsquare Ignite's digital advertising revenue declined 1.6% year-over-year, with segment profit margins contracting to 21.5%.
* Townsquare Interactive's Q3 net revenue decreased 2.3% year-over-year, but segment profit increased 21% to a 33% profit margin.
* Broadcast advertising net revenue declined 8.1% excluding political, with segment profit margins increasing from 25% to 28% year-over-year.
* The company reported a net loss of $5.5 million or ($0.36) per diluted share for the quarter.
* Cash flow from operations in the first nine months was $18 million. The company reduced outstanding debt by $17 million since February.

Q&A

* Michael Kupinski, NOBLE Capital Markets, asked about stabilization in core broadcast advertising. Wilson responded that broadcast revenue is expected to improve to "mid-single digits" decline in 2026 and "low single digits" in 2027, with continued strong margins.
* Kupinski inquired about maintaining margins amid revenue declines. Wilson replied, "We will be able to continue to do that and take out expenses in line with wherever the revenue comes in."
* Kupinski asked about government shutdown advertising impact. Wilson noted, "We have seen canceled orders and things like that... we've seen that throughout the year with the Dodge cutbacks in health services."
* Kupinski followed up on the Phoenix office and Western expansion for Townsquare Interactive. Wilson stated that the Phoenix office is "doing exactly what we expected it to and are quite pleased with it," contributing to improved talent acquisition and operational performance.
* Patrick Sholl, Barrington Research, inquired about Interactive segment profit margin sustainability. Wilson expects "to continue to be in the low 30% margins over the next couple of years," with potential for expansion after 2027.
* Sholl asked about Ignite trends between own markets and third-party sales. Wilson detailed that owned and operated digital properties were "up 10%" in Q3, while programmatic was "up high single digits," and remnant revenue is expected to stabilize in late 2026.

SENTIMENT ANALYSIS

* Analysts demonstrated a neutral tone, focusing on margin sustainability, digital trends, and regional expansion, without overt skepticism or enthusiasm.
* Management maintained a confident and measured tone in prepared remarks, but addressed challenges and outlooks with caution and specificity in Q&A. Wilson used phrases like "we are quite confident" and "I could not be more appreciative of our team," yet acknowledged headwinds and revised guidance openly.
* Compared to the previous quarter, both analysts and management maintained similar sentiment, though management's language was slightly more cautious due to revised guidance and digital headwinds.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for full-year revenue and adjusted EBITDA was revised downward in Q3 due to sharper declines in remnant digital revenue and lower political spending, while Q2 maintained the original range.
* Digital revenue growth slowed from 4% in the first six months to 2% in the first nine months year-over-year, and digital segment profit growth decelerated from 9% to 4%.
* Townsquare Interactive's profit margin remained strong, but revenue declined in Q3 versus growth in Q2.
* Broadcast segment continued to outperform the industry, with margin improvements despite ongoing revenue declines.
* Management's confidence in long-term digital growth remained, but near-term caution increased due to macro and industry-specific headwinds.

RISKS AND CONCERNS

* Significant decline in remnant digital advertising revenue due to AI-related changes in search engine traffic, expected to persist through the first half of 2026.
* Lower-than-expected political advertising revenue in Q4, reducing overall revenue and profit outlook.
* Ongoing secular decline in broadcast radio advertising, though Townsquare outperforms industry trends.
* Management is mitigating risks through expense management, investment in digital capabilities, and debt reduction.

FINAL TAKEAWAY

Townsquare Media management emphasizes its transformation into a digital-first local media company, with digital now representing the majority of both revenue and profit. While remnant digital revenue has faced acute headwinds from industry-wide shifts in search engine traffic, core direct digital and programmatic businesses continue to show resilience and growth. The company remains confident in its long-term digital strategy, expects stabilization in digital advertising by the second half of 2026, and targets substantial growth in its media partnership model to $50 million in annual revenue within five years, all while managing costs and maintaining strong profit margins across the business.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/tsq/earnings/transcripts]

MORE ON TOWNSQUARE MEDIA

* Townsquare Media, Inc. (TSQ) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4841436-townsquare-media-inc-tsq-q3-2025-earnings-call-transcript]
* Townsquare Media reports Q3 mixed results; initiates Q4 and updates FY outlook [https://seekingalpha.com/news/4519167-townsquare-media-reports-q3-mixed-results-initiates-q4-and-updates-fy-outlook]
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* Historical earnings data for Townsquare Media [https://seekingalpha.com/symbol/TSQ/earnings]
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