Townsquare (TSQ) Q3 2026 Earnings Call Transcript

DATE

Wed, Nov. 4, 2026

CALL PARTICIPANTS

• Executive Vice President, Investor Relations and Corporate Communications - Claire Yenicay
• Chief Executive Officer - Bill Wilson
• CFO and Executive Vice President - Stuart Rosenstein

TAKEAWAYS

• Net Revenue -- $110.9 million, representing a 3.9% increase year over year and exceeding the guidance range of $108 million to $110 million.
• Adjusted EBITDA -- $22.6 million, an increase of 2.7% year over year, landing within the guided range of $22.5 million to $23.5 million.
• Digital Advertising Revenue -- $45.3 million, growing 12.7% year over year and accounting for 41% of total net revenue.
• Programmatic Revenue -- grew 22.5% year over year, driven by the Townsquare Ignite platform which represents roughly 70% of digital advertising revenue.
• Townsquare Interactive Revenue -- $17.1 million, a decrease of 8.5% year over year as sales velocity remained below internal expectations.
• Broadcast Advertising Revenue -- $47.2 million, an increase of 0.4% year over year supported by political spending.
• Ex-Political Broadcast Revenue -- decreased 5.2% year over year, reflecting continued softness in the traditional media environment for small and medium-sized businesses.
• Political Revenue -- $2.9 million in the third quarter, which contributed to a year-to-date total of $4.9 million.
• Full-Year Political Guidance -- raised to approximately $11 million from the previous forecast of $8 million due to spending in competitive state races.
• Townsquare Interactive Segment Profit Margin -- 36% for the quarter, expanding from 33% in the prior year due to operational improvements and AI-driven efficiencies.
• Digital Advertising Segment Profit Margin -- 18.7%, down from 21.5% in the third quarter of 2025 due to the scaling of the lower-margin Media Partnership division.
• Net Loss -- $4 million, or $0.23 per diluted share, which included an $8.1 million noncash impairment charge.
• Adjusted Net Income -- $0.12 per diluted share, compared to $0.05 in the same period last year.
• Total Debt -- $467.5 million at the end of the quarter, including the full drawdown of the company's revolver to enhance liquidity.
• Net Leverage Ratio -- 5.43x as of Sept. 30.
• Dividend Suspension -- expected to preserve approximately $14 million in cash annually to support financial flexibility and debt service.
• Interest Expense Impact -- a $1.2 million annualized increase for every 25 basis point rise in interest rates due to floating rate debt instruments.
• Cash Flow from Operations -- $12.9 million generated during the first nine months of 2026.
• Federal NOL Carryforwards -- $121 million, which management expects will prevent the company from being a material cash taxpayer until late 2028.
• Full-Year 2026 Revenue Guidance -- raised to a range of $430 million to $432 million.
• Full-Year 2026 Adjusted EBITDA Guidance -- narrowed to a range of $87 million to $89 million.
• Fourth Quarter Revenue Guidance -- projected between $107 million to $109 million.
• Fourth Quarter Adjusted EBITDA Guidance -- projected between $23 million to $25 million.
• Media Partnerships Revenue Target -- $50 million at a 20% profit margin within the next four years.

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RISKS

• Wilson stated, "Traditional media advertising remains incredibly soft, particularly for local businesses in our small- and medium-sized markets, where SMBs continue to feel the pressure from higher operating expenses across the board," noting that this pressure is most evident in the broadcast business.
• Wilson warned that the sequential revenue decline for Townsquare Interactive from the third quarter to the fourth quarter is projected to be larger than the decline seen from the second quarter to the third quarter.
• Rosenstein stated, "the higher rate environment will put real pressure on our interest costs going forwards," explaining that each 25 basis point increase adds $1.2 million in annualized interest expense.
• Wilson indicated that cost management can only offset so much of the headwinds facing the broadcast segment.

SUMMARY

Townsquare Media, Inc. (NYSE:TSQ) reported third quarter revenue growth driven by digital advertising performance and political spending, which offset softness in the broadcast segment. Management announced the suspension of the quarterly dividend to preserve approximately $14 million in annual cash flow for debt service and liquidity. The company noted that sequential revenue growth for the subscription digital marketing segment is no longer expected in 2026 due to muted sales velocity. Strategic initiatives include the expansion of the programmatic digital advertising footprint and the implementation of AI-driven operational efficiencies to maintain margins.

• Management reported that the Media Partnerships division has 18 media partners, adding 48 incremental markets for a total programmatic footprint of 122 markets.
• The company noted that digital revenue now accounts for 57% of total net revenue and 56% of total segment profit, levels that management believes are unmatched by local media peers.
• CEO Wilson stated, "Our digital audience has been stable at roughly 20 million unique visitors per month for the past 2 quarters."
• Management indicated that they are adding sellers aggressively to the Townsquare Interactive division to address a 25% headcount deficit in the inside call centers.
• The company is evaluating sales leaseback transactions and facility consolidations as part of its strategy to maximize cash flow.
• Management highlighted that direct sales of local owned and operated websites and mobile apps grew north of 10% in the third quarter.

INDUSTRY GLOSSARY

• Townsquare Ignite: The company's programmatic digital advertising platform.
• Townsquare Interactive: A subscription-based digital marketing solutions business serving small and medium-sized enterprises.
• Programmatic Advertising: The automated buying and selling of online advertising space.
• NOL Carryforwards: Net operating loss carryforwards, a tax attribute that allows companies to use past losses to offset future taxable income.
• Miller Kaplan: A third-party data provider that tracks and estimates market share and revenue in the broadcast industry.
• Remnant Revenue: Revenue generated from selling unsold or leftover advertising inventory through indirect channels.

Full Conference Call Transcript

Operator: Good morning, and welcome to Townsquare Media Third Quarter 2026 Earnings Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording [Operator Instructions]. With that, I would like to introduce the first speaker for today's call, Claire Yenicay, Executive Vice President, Investor Relations and Corporate Communications. Please go ahead.

Claire Messner: Thank you, operator, and good morning to everyone. Thank you for joining us today. With me on the call 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 and subsequent quarterly reports on Form 10-Q filed with the SEC. During this call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA, excluding political, adjusted net income per share and net leverage. 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 call this morning. At this time, I would like to turn the call over to Bill Wilson.

Bill Wilson: Thank you, Claire, and good morning, everyone. Thank you for joining us today. Townsquare's third quarter net revenue increased plus 4% year-over-year and exceeded the guidance range we provided on our last call. And adjusted EBITDA increased plus 3% year-over-year and came in within our guidance range. These results were driven by the strength of our differentiated Digital Advertising platform, upside to our political revenue expectations, and most importantly, the hard work of our teams in what remains a challenging advertising environment. On our last call, we told you that Digital Advertising will accelerate once again in the third quarter, and I'm proud to say that our team delivered exactly that.

Digital Advertising revenue increased plus 13% year-over-year in Q3, up from plus 11% in Q2 and plus 7% in Q1. And our Media Partnerships business is stronger than it's ever been with 18 media partners, more in the pipeline and revenue more than doubling year-over-year. At the same time, I want to be candid about the environment we are operating in. Traditional media advertising remains incredibly soft, particularly for local businesses in our small- and medium-sized markets, where SMBs continue to feel the pressure from higher operating expenses across the board. That pressure is most evident in our Broadcast business, which I'll discuss in more detail shortly.

Higher interest rates are adding further pressure for our local clients as well as for Townsquare. Because our term loan and revolver are floating rate instruments, the September quarter point rate increase alone will add approximately $1.2 million of annualized interest expense going forward. Further rate increases are possible and each would add to our interest expense. In addition, I had previously shared with you that I expected our digital subscription SaaS business, Townsquare Interactive, to return to sequential month-over-month revenue growth by year-end. It is now apparent we will not achieve that expectation. In fact, we now project that sequential Interactive revenue decline from Q3 to Q4 will be larger than the decline we saw from Q2 to Q3.

As a result of these challenges, we have taken steps to further enhance our liquidity and financial flexibility, including the decision, together with our Board, to suspend our dividend. Stu will walk through this in more detail. Now let me turn to what's working well. For many years, we've talked about transforming Townsquare from a traditional broadcast company into a digital-first local media company, and our results continue to show that we have done exactly that. Year-to-date, digital represents approximately 57% of our total net revenue and 56% of our total segment profit, levels that we believe remain unmatched among our local media peers.

As highlighted on Slide 10, our peers generate on average only 32% of their revenue from digital sources. That gap is not an accident. It is a result of more than a decade of strategic decisions and investment in our technologies, in our products, in our people and our proprietary platforms. It is also a big part of why we are better positioned than most in local media to navigate difficult macro environments. Let's now turn to our largest growth engine, Townsquare Ignite, our Digital Advertising business, which represented 41% of our total net revenue in the third quarter.

Townsquare Ignite had an excellent third quarter with revenue of $45.3 million, up plus 13% year-over-year, one of our strongest quarterly growth rates in recent years on a materially higher base of revenue than years past. The primary driver of our Digital Advertising growth continues to be our programmatic business, which represents approximately 70% of our Digital Advertising revenue. Programmatic revenue increased over 20% year-over-year in the third quarter, and we expect similar strong programmatic revenue growth to continue in the fourth quarter, resulting in full year 2026 programmatic revenue growth north of plus 20%. These are outstanding results, and they are the direct reflection of what makes our platform different. We are much more than a digital reseller.

We operate as a full-service digital marketing partner for local businesses and agencies, combining campaign strategy, creative development, sophisticated audience targeting, campaign optimization and unified reporting into a single solution. Our customers aren't simply buying Digital Advertising inventory, they're buying measurable business outcomes. In an advertising environment where every marketing dollar is being scrutinized, that accountability matters more than ever, and we believe it is a key reason we continue to take share and drive outsized growth. One area I am especially excited about is our Media Partnerships business, which continues to build momentum.

We now have 18 media partners, up from 16 when we spoke last quarter, contributing 48 incremental markets beyond our owned and operated footprint of 74 markets, bringing our digital programmatic footprint to 122 markets across the U.S. Our recent partnership announcements include Midlands Media Group in South Carolina and Lakes Media Networks serving Southside Virginia and Northern North Carolina. We expect that our Media Partnerships revenue, which was approximately $6 million in 2025, will be over $13 million and thus more than double revenue in 2026.

What continues to set our Media Partnership business apart is that our best-in-class sales talent integrates directly into our partners' local markets, leading 4-legged calls and mentoring their sales teams while we simultaneously manage campaign strategy, creative development, media buying, optimization and customer support. That approach helps our partners drive incremental digital revenue, removing the post-sale burden from sellers while protecting their high-margin radio business. It is why we have maintained a 100% retention rate of our media partners. Last quarter, we also announced that we have started licensing our CRM software to one of our media partners, further enhancing the relationship and building additional recurring revenue streams.

And importantly, in today's environment, this is a capital-light model that allows us to expand well beyond our owned market footprint with very little incremental investment. We continue to see a long runway for this business and targets $50 million of revenue at a 20% profit margin within the next 4 years. In addition, direct sales of our local owned and operated websites and mobile apps grew north of 10% in the third quarter. And as we anticipated on our last call, in the third quarter, we began to lap the significant declines in search referral traffic and associated remnant revenue that started in August of 2025.

In fact, our digital audience has been stable at roughly 20 million unique visitors per month for the past 2 quarters. And importantly, our indirect or remnant revenue was flat year-over-year in Q3, and we expect the same in Q4. With that headwind now largely behind us, the underlying strength of our direct sold digital business is emerging in our reported results, and we expect that to be even more evident in 2027 and beyond. For the full year 2026, we expect Digital Advertising to deliver approximately plus 10% year-over-year revenue growth, led by our programmatic business, which on a full year basis will be up over 20% year-over-year.

Let me now turn to our second digital business, Townsquare Interactive, our subscription-based digital marketing solutions SaaS business. Third quarter revenue was $17.1 million, roughly in line with the second quarter at approximately $5.7 million of revenue per month and down negative 8.5% year-over-year. Profitability remains very strong with segment profit margins of 36% in the quarter, representing year-over-year margin expansion, which reflects the operational improvements we made in our customer service organization and the efficiencies we continue to capture through AI. As I already noted on our last call, we said that we expected Townsquare Interactive to return to sequential monthly revenue growth by the end of this year.

It is now evident we will not achieve that expectation, and that is disappointing. Thankfully, our churn levels remain low, but sales velocity has been muted and below our own expectations and that lower sales volume is why we will not return to sequential revenue growth in 2026. Turning to Broadcast. Local radio remains a valuable strategic asset with unmatched local reach, deep relationships with our audiences and trusted partnerships with thousands of local advertisers across our markets. However, the environment for traditional media remains difficult. In the third quarter, total Broadcast revenue increased plus 0.4% year-over-year, supported by political. Excluding political, Broadcast revenue declined negative 5.2%.

While that is a moderation from the negative 7% declines we saw in the first half of the year, we do not view it as a turning point. In the fourth quarter, we expect ex political Broadcast revenue declines to return to roughly the declines we saw in the first half of 2026, if not slightly worse, partly because political is crowding on other inventory given its strength in October. We do not see a catalyst for meaningful improvement in our Broadcast business in the near term, and we are planning the business accordingly. Political revenue is tracking meaningfully ahead of our forecast.

As a reminder, we originally forecasted $8 million of political revenue, and now we expect over $11 million, driven by significant spending in tight races in Maine, Iowa, Michigan, Texas, Montana and others. Despite the Broadcast ex-political headwinds, we once again outperformed the industry according to Miller Kaplan estimates and as a result, gained Broadcast share. Our teams continue to manage expenses tightly, but cost management can only offset so much. Year-to-date, Townsquare adjusted EBITDA, excluding political, declined negative 9% or approximately $6 million, driven primarily by Broadcast segment profit, excluding political. Broadcast still generates meaningful profit and cash flow, but that contribution is shrinking and is a key reason we are taking the actions Stu will discuss.

As we look ahead, I want to be clear about how we are thinking about the business. Our Digital Advertising platform is performing exceptionally well. At the same time, we are planning for continued pressure in Broadcast, a higher interest rate environment and a delayed return to sequential revenue growth at Townsquare Interactive. That is why we are taking the steps necessary to improve our liquidity so that we are well positioned regardless of how our traditional broadcast business and the interest rate environment evolve. With that, I'll turn the call over to Stu to review our financial results, our liquidity and our outlook in more detail. Stu, over to you.

Stuart Rosenstein: Thank you, Bill, and good morning, everyone. Third quarter net revenue exceeded our guidance range and adjusted EBITDA was within our guidance range. Third quarter net revenue increased 3.9% year-over-year to $110.9 million, above our guidance range of $108 million to $110 million. Excluding political, net revenue increased 1.4% year-over-year. Political revenue was $2.9 million in the third quarter and $4.9 million in the year-to-date period. As Bill mentioned, political is performing ahead of our expectations. Through September, 2026's political revenue is 38% greater than 2022's political revenue of $3.5 million through the same period. Third quarter adjusted EBITDA was $22.6 million within our guidance range of $22.5 million to $23.5 million.

This represented year-over-year growth of 2.7% compared to $22 million in the third quarter of 2025. Excluding political, adjusted EBITDA declined 7.9% year-over-year. Townsquare Ignite, our Digital Advertising segment had a strong quarter with revenue growth accelerating for the third consecutive quarter from 6.8% year-over-year in Q1 to 11% in Q2 to 12.7% in Q3 or $45.3 million. Programmatic revenue increased 22.5% year-over-year in the quarter, and we expect programmatic growth to continue to be our largest driver of growth over the coming years. Third quarter Digital Advertising segment profit margins were 18.7% compared to 21.5% in Q3 of 2025, due in large part to the strong growth of our Media Partnership division.

Townsquare Interactive, our Subscription Digital Marketing Solutions segment's Q3 net revenue declined 8.5% year-over-year to $17.1 million. On a sequential basis, revenue was stable at approximately $5.7 million per month, consistent with the second quarter. We're very disappointed that we will not return to sequential revenue growth by year-end as we had expected. As Bill noted, churn is low, but sales velocity is not where we expect nor where we need it to be. However, Townsquare Interactive segment profit margin was 36% in both the third quarter and year-to-date periods, and we expect Q4's profit margin to be similar.

Third quarter Broadcast Advertising net revenue increased 0.4% year-over-year in total to $47.2 million and declined 5.2% excluding political, each as compared to the prior year. As Bill noted, we currently project strong political in Q4, but believe that Broadcast ex political will decline more in Q4 than Q3. Broadcast segment profit margins were 31% in the third quarter, and we expect Broadcast segment profit margins for the full year to be in the mid- to high 20s. Other revenue, which consists primarily of our live events was $1.3 million in the third quarter, an increase of $0.5 million year-over-year.

Our third quarter net loss was $4 million or $0.23 per diluted share, including an $8.1 million noncash impairment charge as compared to the net loss of $5.5 million or $0.36 per diluted share in the prior period. Adjusted net income per diluted share was $0.12 as compared to $0.05 in the prior year period. We'd like to remind you that any benefit or provision for income taxes included in the face of the income statement is for GAAP financial statement purposes only. We maintain significant tax attributes, including approximately $121 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 the end of 2028. Our business model continues to generate positive cash flow. And in the first 9 months of 2026, we generated $12.9 million of cash flow from operations. In the third quarter, we drew down on the remaining balance available on our revolver, ending the quarter with $467.5 million of debt outstanding and $4.6 million of cash on our balance sheet. As of September 30, our net leverage was 5.43x. We were in compliance with our covenants under the credit agreement as of September 30. Now I'd like to spend a moment on interest rates.

As Bill mentioned, the higher rate environment will put real pressure on our interest costs going forwards. Because our term loan and revolver are floating rate instruments, the recent 25 basis point increase adds approximately $1.2 million of annualized interest expense at our current debt balance and any future increase of the same size would have a similar impact. Given rising interest rates, continued softness in advertiser demand across Middle America and continued pressure on our Broadcast business, we've been working with the Board on ways to maximize cash flow. As always, we remain laser-focused on managing expenses and enhancing liquidity.

We already have several initiatives underway, including using AI where appropriate to reduce costs and improve productivity, consolidating our facilities and pursuing sales leaseback transactions where available. As Bill mentioned, together with the Board, we've concluded that it is prudent to suspend the dividend to preserve cash and financial flexibility in the near term. This decision reflects continued declines in our traditional Broadcast division and Townsquare Interactive's slower-than-expected recovery, which we no longer expect to return to sequential revenue growth in 2026. Suspending the dividend will preserve approximately $14 million of cash per year.

We will use that cash for general corporate liquidity and service our debt as well as to opportunistically pursue higher return opportunities, including Broadcast M&A, given the FCC deregulation that we continue to expect to be coming in the future months, potential share repurchases, given that we believe our stock price is suppressed and incremental investment in our digital businesses, particularly our digital growth engine, Townsquare Ignite, as well as Media Partnerships where we see the highest returns. Turning now to the fourth quarter.

We expect fourth quarter net revenue to be between $107 million and $109 million, including approximately $6 million of political revenue as compared to the $4 million of political revenue we received during the fourth quarter of the 2022 election cycle. We expect fourth quarter adjusted EBITDA to be between $23 million and $25 million. For the full year, we are raising our net revenue guidance to $430 million to $432 million from the $425 million to $431 million range on our last call. We're narrowing our adjusted EBITDA guidance to $87 million and $89 million from our prior guidance range of $87 million to $90 million.

Both ranges remain within the guidance we provided at the start of the year. Embedded in our full year guidance is forecasted political revenue of approximately $11 million, which is meaningfully better than our original projection of $8 million. And with that, I will now turn the call back over to Bill.

Bill Wilson: Thank you, Stu. Before we open the lines for questions, I'd like to leave you with a few final thoughts. Our third quarter results reflect both the strength of our Digital Advertising platform and the real challenges facing traditional media. Total net revenue grew plus 4% and exceeded our guidance. Digital Advertising revenue accelerated for the third straight quarter to plus 13% year-over-year growth. And our Media Partnership business now at 18 partners is stronger than it ever has been and continues to expand our reach through a highly scalable capital-light model. We remain confident in our path to $50 million of Media Partnership revenue and a $10 million of profit within 4 years.

At the same time, we are being realistic. Broadcasting continues to decline and the macro advertising environment is not where we'd like it to be and higher interest rates are pressuring our cash flow. But we are not standing still by any measure. We are focusing our investment on the businesses with the strongest growth potential, staying disciplined on expenses and taking the steps necessary to enhance our liquidity, which will ultimately benefit all of our stakeholders. As always, I want to thank our Townsquare teammates across the country. Their execution, passion and commitment are what makes these results possible every quarter, and I could not be prouder of the work they are doing.

We believe Townsquare is well positioned for the long term, and we remain focused on executing our strategy and creating sustainable shareholder value. With that, operator, we'd be happy to take any and all questions.

Operator: [Operator Instructions] Your first question comes from the line of Michael Kupinski from NOBLE Capital Markets.

Jacob Mutchler: It's Jacob Mutchler on for Michael this morning. My first question is around the Digital Advertising business. Just curious, the business continues to generate strong revenue growth, but it hasn't translated to improvement in segment profit margin. Just curious, how should we be thinking about the long-term margin potential of this segment as that business continues to scale?

Bill Wilson: Jacob, thank you for joining our call. Yes, as you highlighted, our Digital Advertising revenue is incredibly strong at plus 13% in Q3. In Q1, we were just under 7%; in Q2, we were at 11%. So obviously, accelerated quite nicely. As we noted earlier, our programmatic revenue was up almost 23%. Our locally sold mobile websites and apps was up double digits. And for the first time in quite a while, our remnant or indirect Digital Advertising revenue was flat year-over-year after being down 40% in both Q1 and Q2. Your question around margin is exactly right.

So as we highlighted at the beginning of the year, we expected our margins in Digital Advertising to compress primarily for -- as our Media Partnerships continue to scale. We operate that at a lower-margin business. We target about 20% there. And we've been doing an incredible amount of investment in our teams and technology in that division. So in Q3, our margin was just under 19%, and that's down from mid-20s in 2025. So I think as we look at it moving forward, I would target roughly a 20% margin when you're looking at a full year basis overall for Digital Advertising.

You'll note on slide -- in the investor deck on Slide 6, our Digital Advertising now is equal in terms of our overall Broadcast revenue, and our margin is going to be roughly 20% in the Digital Advertising space, Jacob. But I'll turn it back to you in case you have other questions.

Jacob Mutchler: Got you. And then for the Interactive business, could you provide just a little bit of additional color on what's driving the weakness in sales volume and what needs to improve for Interactive to return to growth? And just also the long-term margin for that business, given the nice improvement from the prior year period in margin. So any additional color on that business would be helpful as well.

Bill Wilson: My pleasure. Thank you for the question, Jacob. So as we noted, very disappointing that we're not returning to sequential revenue growth in Q4. That was definitely my expectation as we were -- started the year and had that expectation even when we spoke on our last call. In Q3, as you noted, our profit margin is incredibly strong all through the year. In Q3, it was over 36%. And a year ago, that was 33%. So we're quite confident that our profit margin will continue to be in that 35%, 36% margin, which is a nice improvement from prior year.

As I also noted, before I get to your question about the sales velocity is, churn is at historically low levels. It may even be the lowest level we've ever had. So the change in our customer service model that we've outlined in prior calls is performing exceptionally well and the service team down at Charlotte and out in Phoenix is performing quite well. As we've been very transparent, our biggest challenge in our Interactive division is building back our sales team. We had lost roughly 40% of our sellers based on changes we made at the beginning of 2025. So we're coming up on 2 years of that. And we need more sellers, which we're adding aggressively.

Even though the margins are strong, we're continuing to, particularly over the last 5 months, adding a lot of sellers. So there's 2 things that need to happen to return to sequential revenue growth in this division. One, more sellers; and two, more sales per seller. And the team is very focused on that, and I'm confident that, that will happen in 2027, but I'm disappointed it didn't happen by the end of this year. So I'll turn it back to you, Jacob, if you have any follow-ups on that or anything else.

Operator: Your next question comes from the line of Patrick Sholl from Barrington Research.

Patrick Sholl: Maybe just following up on Interactive. I was wondering if you could provide like any sort of color on what -- if there's any sort of like breakdown between the in-market selling versus the out-of-market selling? And if there's any sort of detail around like what alternatives some of your potential small business customer base or the target market is going with as opposed to Interactive?

Bill Wilson: Got you. So our in-market sales are pretty consistent over the last 18 months. So the real crux of what's holding us back from where we want to be and where we will ultimately end up is the -- inside call centers. So they're the ones who are calling out of market, out of our traditional 74 markets where we operate and have local sales teams. So as you may recall, Patrick, that team was down about 40% in total headcount. It's still down about 25%. We're building back. So we've added roughly a couple of dozen sellers net over the past, call it, 100 days.

And our recruiting, we have a nice inside recruiting team that recruits our talent, and they've done a good job in bringing more and more people in. As we've been very transparent for years, a seller when they're hired takes about 9 to 12 months to fully ramp and be profitable. So that's -- it's still delayed from where we thought it would be, but we're very confident as we go into 2027 that we will return to sequential revenue growth, but that is obviously delayed now. In terms of alternatives, the business has really morphed into a SaaS-based business, and we're really helping businesses run their business more effectively. We introduced the CRM a few years ago.

We're helping them with marketing and advertising and payments and appointment setting and really just helping them run their business more effectively. We're looking at ways to deploy AI and some of the tools we've built in-house for our SMBs. As you know, there's always been a tremendous amount of alternatives that people can do in terms of building an online presence, and that's still the case. There's dozens and dozens of different choices out there in the marketplace. So that dynamic really hasn't changed in the last 24 months. Our issue has been that, I call it a self-inflicted wound.

We think it was the right thing to do just like we had elevated churn, as you may recall, in '23 and '24 because we changed things quite dramatically on the service side, but we felt it was the right thing to be more efficient and have better customer service. I think both of those things ended up being 100% accurate because our -- helped our margins go from what was 28% to now 36% and our churn levels at historically low levels from -- and down materially from where we were in 2024.

So I share that in the same context that I think the same thing is going to happen and quite confident it will in the sales side. It's just been taking longer than I would have liked to; A, build the team up to the level we want; and two, have greater sales velocity per salesperson. But I'm confident both will happen. It's just going to take a little longer than we anticipated. So Patrick, I'll turn it back to you if you have any follow-ups or other questions.

Patrick Sholl: Sure. Just a question on like the displacement from political for the core Broadcast Advertising. Of that displacement, how much is being kind of reallocated within the company? So I guess in like you -- those budgets are being spent with you through like Ignite or some other process? Or is it kind of more just generally lost?

Bill Wilson: For the most part, it's generally lost. Thankfully, most of our customers and clients are buying multi-tactics, and we offer a full funnel solution. So the majority of our clients are already buying a combination of Broadcast Advertising and Digital Advertising. So when we're getting crowded out, particularly obviously in October, that is crowding out and we're losing that broadcast money. So as we said on the call, Q1 and Q2 Broadcast ex political were down 7%, 6.9% in Q1, 7.2% in Q2. That improved modestly in Q3, a little bit better than we may have telegraphed on the last call.

But we shared on our last call that we were anticipating it to improve by at least 1 point, and that improved from negative 7% in the first half to negative 5%. So that's a nice 2-point increase. But as I alluded to, Q4 currently is pacing worse than the first half's negative 7%. And a big part of that is, October was pretty crowded out from a broadcast perspective for political, and we'll see where we go. We're hopeful that as we go into the new year, particularly with the midterms behind us and having that certainty, that will help us as we go into 2027.

But we'll obviously be able to update everybody on where we finalize Q4 and how 2027 is shaping up for Broadcast as well as our other 2 digital divisions in March. But hopefully, that gives you a sense -- to your question, we're in essence losing that Broadcast dollars. The Digital Advertising, we're already capturing as part of their spending overall. But I'd say the majority of that crowd out has lost the Broadcast dollars.

Patrick Sholl: And then, just when you try to preserve the cash flow of the Broadcast business. I guess how much room do you feel you have to reduce expenses while kind of being able to maintain the -- I guess, the overall quality of the product to keep your advertising share?

Bill Wilson: Yes. We believe we can take out expenses and keep the margins healthy. You look at our profit margins in the Broadcast business. And on a year-over-year basis, when you look at '25 to '24 and you look at '26 to '25, we've done quite a good job at preserving the margin there. So we'll be able to continue to right-size the expense base with the revenue trajectory of the Broadcast business. So we believe we can do that without affecting the underlying quality. And as you know, we really focus on local, local, local.

And we have the benefit of the fact that we've done a great job monetizing our digital audience, which is also driven by our local content contributors. We call them the original social influencers. Traditionally, you would call them DJs. So we have this, I think, competitive advantage where our local DJs we were able to leverage not only through an over-the-air broadcast, which as you know, Patrick, on average in our 74 markets, we reached 50% of the adult population. So that's incredible brand awareness, top of funnel solution for our advertisers.

But we're also able to get a return on the investment of our local content contributors through our mobile apps and our websites and our social platforms and all of that so that even though the Broadcast revenue is declining currently in Q3, a negative 5%, we're still able to protect the local side of things in large part because we have this digital platform that most other broadcasters clearly don't have at scale. I just mentioned that the AM/FM reaches 50% of the adult population. We reach more of that just through our digital platforms alone.

So hopefully, that gives you some color that we believe we can continue to take out expenses on the Broadcast side while protecting the profit margin there, and to your point, protecting the quality and the local aspect of our over-the-air broadcast. So I'll turn it back to you in case you have anything else.

Operator: Thank you, Patrick. There are no further questions at this time. I would now like to turn the call back over to Bill for final closing comments.

Bill Wilson: Thank you, Camilla, and thank you all for joining us this morning to get an updated on Townsquare's Q3 results as well as our outlook for the rest of the year. We look forward to updating you in March on where we finished the year and importantly, how we're trending for 2027 in each of our divisions, Broadcast, Ignite and Townsquare Interactive. We hope you have a great day. Thanks again for taking the time this morning.

Operator: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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