Townsquare Media Inc (TSQ) (Q2 2026) Earnings Call Highlights: Digital Advertising Accelerates ...

Negative Points

• Townsquare Interactive revenue declined 8.5% YoY in Q2, with sales force still 40% below peak levels and rebuilding expected to take until 2027.

• Broadcast advertising revenue declined 5.5% YoY in Q2 (7.2% ex-political), with continued secular pressure and national/agency business down high teens.

• Non-cash impairment charges of $26.6 million in Q2 and $35.2 million YTD related to FCC licenses, with expectations of continued write-downs.

• Net leverage remains elevated at 5.44x, though expected to tick down in H2 as EBITDA returns to growth.

• Political revenue forecast of $8 million for 2026 is modest, with some share shifting to digital and competitive races not fully materializing.

• Digital remnant revenue, though only 6% of digital advertising, has been a headwind due to AI search impacts, with stabilization only recently achieved.

• Q2 adjusted EBITDA declined 6.2% YoY, reflecting ongoing broadcast weakness and Interactive revenue declines.

• Net loss of $41.8 million in Q2, driven by impairments and a non-cash income tax expense of $18 million.

• Broadcast segment profit margins expected to average mid-20s for the full year, consistent with 2025 but below Q2's 30% level.

• Company expects FCC license values to continue to be written down regularly, which may weigh on reported earnings.

Q & A Highlights

Q: Can you provide an update on how AI search is impacting your business, given that it is at an all-time high, and how that might look as we go through Q3 and beyond? A: Bill Wilson (CEO): Our audience has actually grown from Q4 2025 into the first half of the year, driven by direct sources like newsletters and mobile apps, as well as social traffic. The remnant piece of our digital advertising is now just 6% of the total, while programmatic digital advertising, which grew 27% in the quarter, is now approximately 70% of our digital advertising. We are seeing sequential stability in our audience and modest growth overall. Search volumes continue to come down, but other traffic sources are climbing. This stability in remnant revenue, which will lap in August, is one of the reasons our Q3 digital advertising outlook is even stronger than Q2's plus 11% growth.

Q: What is the percentage of Ignite customers originating through relationships with broadcast operations, and how is the business scaling nationwide across 115 markets? A: Bill Wilson (CEO): The media partnership division, which started in early 2024, has grown from $1 million in revenue in 2024 to $6 million in 2025, and we expect to more than double that to over $12 million in 2026. We now have 16 media partners contributing 41 incremental markets beyond our owned and operated footprint of 74 markets. The inbound interest is extremely strong, with dozens of new inquiries monthly. Each partner from 2025 has doubled or more than doubled their own digital advertising revenue by partnering with us. We also completed our first software licensing deal with Summit Media, who licensed our in-house developed CRM software called Blueprint, creating a new recurring revenue stream and deepening our integration into partners' operations.

Q: Is there any gating factor in terms of capacity for the media partnerships business? A: Bill Wilson (CEO): The greatest gating factor is our own internal team members and how many people we can deploy and dedicate to our partners. The model is unique because we treat partners as if they are another market of Townsquare, with our salespeople doing four-legged calls alongside partners' AEs in these 41 markets. It requires other personnel like media buyers, data scientists, and reporting teams. The only gating factor is how quickly we can scale and build our team, which we are doing aggressively. This capital-light model gives us confidence that within four years we will reach $50 million in revenue through this division at a 20% profit margin, representing $10 million in incremental profit.

Q: SiriusXM said they see opportunities in media and local markets and are looking to expand there. Any concerns about their plans? A: Bill Wilson (CEO): No concern at all. We are hyperlocal, and our bread and butter is the strength of our local brands. We reach on average 50% of the adult population in our 74 markets just through our AM/FM signal, which is incredibly powerful. SiriusXM would have inconsequential reach in our markets. Our broadcast performance ex-political is moderating slightly from last year, down 7% in the first two quarters compared to 8% last year. Our local direct selling of broadcast traditional advertising is actually down only low single-digits year-over-year, while our national network business was down high teens and agency business was down aggressively. These national and agency pieces are now the minority of our business, whereas three years ago they were the majority.

Q: Political advertising seems to be trending a little light. Is it a function of not being in competitive markets or a secular issue with dollars being allocated to other mediums? A: Bill Wilson (CEO): There are definitely more dollars going to digital, which is true in political as it is in advertising generally. Roughly 70% of all local media dollars are being spent in digital. Through the first half of the year, we are up about 2% over 2022, which was our benchmark. We expect $8 million in political revenue for the full year, in line with the $7.5 million from the 2022 election cycle. We are well situated in markets like Michigan, Maine, and Texas with tight races. We believe we are on the trajectory to hit our $8 million goal, and we are not seeing any less political or share shift that we didn't anticipate going to digital.

Q: Could you talk about the overall opportunity in providing software solutions to your media partners and if that could be meaningfully incremental to the $50 million target? A: Bill Wilson (CEO): I believe it can be a meaningful contribution to overall revenue and profitability. We are talking to the other 16 partners about licensing our CRM, and we have other tools we utilize internally for sales teams and customer service that are sophisticated solutions. Over the next three to five years, the ability to license more of our own tech to partners is a meaningful opportunity that will contribute to that $50 million goal plus some. Putting aside the revenue, it's about how intertwined the partners become with us. As we license more technology, they become even more ingrained in our company, which is a double wina revenue opportunity and a way to deepen relationships for the future longevity of the business.

Q: On Interactive, could you provide more color on subscriber trends and where the restructuring of the sales teams is being felt most immediately? A: Bill Wilson (CEO): We are incredibly proud of the Townsquare Interactive team. Our profit margin went from roughly 33% in Q2 of 2025 to 38% now, and we expect to be in that zone for the entire year. Our churn is back to historically low levels. We rebuilt our customer service organization from the ground up over the last two years, which was disruptive but added close to $4 million in profit last year. This year, our focus was redoing the sales piece, and we are seeing increased sales velocity both in and outside our markets. Revenue stabilized in Q2 at approximately $5.7 million per month for April, May, and June. We expect sequential revenue growth by the end of 2026, potentially as early as Q3. Our sales force declined by 40% from its highest level, and we are building it back judiciously, not expecting to get back to historical levels until 2027.

Q: Can you elaborate on the Q2 financial results and the outlook for the rest of 2026? A: Stuart Rosenstein (CFO): Second quarter net revenue was approximately flat year-over-year at $115.4 million, above the midpoint of our guidance. Adjusted EBITDA was $24.8 million,

For the complete transcript of the earnings call, please refer to the full earnings call transcript .