Townsquare Media posted better-than-expected financial results in third quarter, propelled by rising digital dollars, record-setting political ad sales and the biggest number of new advertisers to come on board in six years.
No division at the small and medium market specialist saw greater growth than Townsquare Interactive, the subscription-based digital marketing services unit, where net revenue jumped 14.5% year over year to $18.2 million, compared to Q2’s increase of 10.5%. The division is expected to put $79 million on the books for all of 2020. It added about 1,150 net subscribers during the quarter and has shown subscriber growth every month this year, solidifying a 10th consecutive quarter of 850 or more net subscriber additions. Surprisingly, TSI had the most quarterly subscriber adds in nearly six years. “In the middle of a pandemic, we added more quarterly net subscribers than any quarter since 2015,” CEO Bill Wilson told analysts during the company’s quarterly results call Monday. With a 30% margin, TSI delivered $5.5 million in profits during the quarter and the company reiterated its earlier forecast that TSI will reach $100 million in annual net revenue within 2 to 3 years.
The subscription based service – which builds websites, manages social media and provides SEO and other digital services to tens of thousands of subscribers, both in its local markets and increasingly outside them – posted a growth rate double that of the company’s total digital assets, which are up 7% year over year and accounted for 44% of total net revenue. That’s more than four-times the industry average of 10%, as estimated by Borrell Associates in February 2020.
“We believe this serves as a clear differentiator between Townsquare and others in local media,” Wilson said. “Townsquare’s digital assets… and our ability to generate digital revenue proves out the fact that although we are proud of our roots and DNA in radio, Townsquare is not limited to being just a radio or audio company but rather at this point can properly be classified as a premier local media and digital marketing solutions company.” The company’s diversified revenue streams, he added, “enabled us to rebound more quickly than others in the radio broadcast industry from the COVID-19 pandemic downturn.”
Ad revenues improved, too. Broadcast ad sales went from a -52% trough in April (-45% for all of Q2) to -23% in Q3. By September the decline had subsided to -14%. New local business and political were the main catalysts.
Digital ad revenues from the company’s local websites jumped 9% year over year in Q3, thanks to 34 million monthly website visitors, up a staggering 84%. Engagement is up, too, with visitors logging on more times per month and visiting more articles. The company attributes that growth to a thirst for news and consumers finding less of it in their local newspaper and TV outlets. “Townsquare has, through our websites and mobile apps, stepped in to fill that void, which the COVID-19 pandemic has magnified,” Wilson explained.
Townsquare Ignite, which sells digital programmatic advertising, jumped 10% year over year, making it the company’s fastest growing ad product.
Political Dollars Triple
Beyond digital, political played a major role in the Q3 rebound with $4.5 million in revenue, more than triple what the company booked in Q3 for the 2016 elections. And based on what's already in the pipeline, Townsquare expects to end the year with $16 million in political ad sales, 75% more than in 2016.
Across all revenue channels, each month in the quarter looked appreciably better than the last. After a 21% tumble in July, August fell 16% and September entered single-digit territory with a much improved 9% decline as compared to the same months in 2019.
Wilson called out “significant improvement of our business each month since the pandemic hit us hardest in April.” Net revenue decreased 15.3% to $95.4 million, compared to $112.6 million one year ago. That’s a major improvement over the 34.5% downturn experienced in Q2 and a significantly lower rate of decline than seen among radio companies that have reported Q3 results so far.
The pace is continuing into Q4 with October the strongest month for new ad business all year, defined as clients that haven’t bought in the last 13 months.
“Our focus on underserved small and mid-sized local markets, our investment and commitment to ‘Local First, and our investment in world class personnel, technology and infrastructure that allowed us to build a strong digital platform with best of breed products, services and solutions – including a recurring digital subscription business – which together brings digital revenue to 44% of our total revenue – all contributed to our ability to mitigate revenue declines and manage quite effectively through this downturn,” Wilson explained.