Townsquare Media Q3 2024 Earnings Call Transcript

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Provided by Quartr
November 7, 2024

Key Takeaways

  • Townsquare reported Q3 net revenue of $115 million, a slight year-over-year increase with sequential improvement across all three segments, and forecasts Q4 net revenue growth equal to or exceeding Q3’s pace.
  • Digital revenue now represents 52% of total net revenue; digital advertising grew 5% in Q3, with programmatic up 10%, and the company expects digital ad growth to approach 15% in Q4.
  • Townsquare launched a white-label programmatic partnership with Summit Media across nine markets, aiming to expand its digital programmatic platform without deploying new capital and ramp revenues in 2025.
  • National broadcast advertising revenue, which rose slightly in Q3, is expected to decline by more than 20% in Q4, underscoring the broadcast segment’s status as a mature cash cow facing ongoing headwinds.
  • Strong Q3 cash flow enabled the repurchase of $11 million of bonds below par, $1 million of stock, and payment of a $3 million dividend; year-to-date Townsquare has bought back $24 million in shares and $36 million in bonds while maintaining an ~8% dividend yield.
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Earnings Conference Call
Townsquare Media Q3 2024
00:00 / 00:00

There are 6 speakers on the call.

Operator

Good morning and welcome to Townsquare Media's Third Quarter 2024 Conference Call. As a reminder, today's call is being recorded and your participation implies consent to such recording. At this time, all participants are in listen only mode. A brief question and answer session will follow the formal presentation. With that, I would like to introduce the first speaker for today's call, Claire Yenicay, Executive Vice President.

Speaker 1

Thank you, operator, and good morning to everyone. Thank you for joining us today for Townsquare's 3rd quarter financial update. With me on the call today 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.

Speaker 1

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 ks filed with the SEC. We may also discuss certain non GAAP financial measures, including adjusted EBITDA and adjusted operating income by segment, which we may refer to as profit in our remarks. 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 discussion this morning. At this time, I'd like to turn the call over to Bill Wilson.

Speaker 2

Thank you, Claire, and thank you all for joining us this morning. It's great to reconnect with everyone. We are very pleased to share with you that Townsquare's 3rd quarter results are directly in line with the expectations we shared with you on our last call, reflecting sequential improvement in revenue growth rates across each of our 3 business segments. In addition, we returned to net revenue growth with net revenue increasing slightly year over year, a small step, but a meaningful one and one we can and will continue to build upon as we forecast that Q4 net revenue growth will be equal to or greater than Q3's growth rate. Adjusted EBITDA declines also continued to moderate in the 3rd quarter and again matched our expectations that we laid out on our last call.

Speaker 2

As always, our differentiated business model generated meaningful cash in the Q3 and we applied that cash to repurchase $11,000,000 of our bonds below par, over $1,000,000 of our stock and also pay our $3,000,000 high yielding quarterly dividend. Our 3rd quarter net revenue of $115,000,000 was up slightly compared to the prior year and at the midpoint of our guidance range. Importantly, it was the Q4 of sequential improvement in net revenue growth and we anticipate sequential improvement in the 4th quarter as well. As you may recall, I projected on our last earnings call that Q3 broadcast net revenue would be flat to up 1%. And I'm glad to report, even with political coming in under our expectations in Q3, that broadcast advertising performed right in line with that forecast, up slightly year over year and a sequential improvement from Q2's growth rate.

Speaker 2

We're also very pleased to share that as anticipated, our digital revenue returned to growth in the 3rd quarter and contributed to 52% of our total net revenue in the 3rd quarter. Townsquare Interactive delivered sequential quarterly revenue growth, which I'm pleased to report was better than we forecasted on our last call. I had also projected that Q3's digital advertising net revenue would grow plus 4% and it did slightly better than that growing at plus 5%, a significant acceleration from the plus 1% revenue growth in the first half of the year. A main driver of our digital advertising momentum is the very strong digital programmatic advertising growth rates that I projected, which did in fact deliver meaningfully as our digital programmatic advertising grew at a strong plus 10% year over year, again sequential improvement from Q2. In essence, just like we've done all year, we executed and delivered on what we said we would do, while simultaneously building value for our shareholders through debt reduction and share repurchases and paying a high yielding dividend.

Speaker 2

Townsquare's digital platform sets us apart from others in local media. As highlighted on Slide 12, 52% of our total revenue is digital revenue in both the 3rd quarter and through the 1st 9 months of 2024, more than 2 times the industry average and more impressively more than half of our total profit was digital profit in the same periods. This highlights a point we often make and can't state enough. Townsquare is no longer the radio broadcast company it was when it was founded in 2010, nor the company it was when we went public a decade ago. Townsquare has evolved and transformed into a digital first local media company that is truly distinguished from our local media peers, validating our focus on markets outside of the top 50 U.

Speaker 2

S. Cities with a world class team and a unique and differentiated strategy, assets, platforms and solutions. I'm also thrilled to announce that Townsquare Ignite has been recognized as one of the best and brightest companies to work for in the nation for the 3rd year in a row by the National Association For Business Resources. I could not be more proud of Todd Lawley and the entire Townsquare Ignite team, not only for being recognized as one of the best and brightest companies, but also for their standout execution and performance in accelerating our digital programmatic advertising growth. Overall, we owe our digital advertising success to our sophisticated digital products and proven solutions, which are entirely in house, giving us 100% control of the client relationship, starting with the client pitch, then campaign design, media buying and optimization and ongoing reporting and insights, which we believe translates to a better customer experience, higher average spend and higher client retention rates.

Speaker 2

We are very confident in our ability to continue to grow this business and capitalize on our competitive advantages in our local markets. Owning our tech platforms in house combined with the breadth of our digital solutions and the amount of quality of our first party data pools is a competitive advantage in any size market. Yet in cities outside the top 50, it is a significant difference maker, driving our digital advertising to be the strongest growth engine in the company. We are most excited and confident about our digital programmatic business, where we have unlimited growth opportunities, particularly when factoring in the potential of the 3rd party partnership model, which I'll discuss shortly. Programmatic makes up about 60% of our digital advertising segment today and continues to be the fastest growing revenue stream in our company.

Speaker 2

Given our momentum and success, as we discussed on our last earnings call, we are exploring another avenue of growth in a digital programmatic advertising space, which capitalizes on the knowledge, expertise and competitive advantages we hold in markets outside of the top 50. White labeling our digital programmatic advertising solution to 3rd party local broadcasters in markets where we do not overlap. Earlier this year, we created Townsquare Ignite's media partnership division and launched a trial to white label our programmatic platform with a single broadcaster in a single Nevada market. The insights we learned and the success we had from this trial gave us the confidence to continue down this path. And last month, I'm thrilled to say we announced a strategic partnership with Summit Media, an excellent broadcaster who operates local media properties across 9 markets.

Speaker 2

We expect to finish their onboarding by year's end, including providing world class training for their sales team. While this is currently a modest sized opportunity in the context of our overall Ignite division, which this year will be over $155,000,000 in revenue with very healthy digital profit margins, especially in the initial year, we expect sales from this media partnership to ramp throughout 2025. We are very excited about what this and potential partnerships represent, which we believe is the opportunity to become the chosen provider of digital programmatic advertising to broadcasters and digital agencies in cities outside of the top 50. Under this model, Townsquare handles all of the creative, buying, optimization and customer support of the digital campaigns. So why partner with 3rd parties instead of entering those markets ourselves?

Speaker 2

Well, instead of using our capital to acquire new markets to deploy our digital assets, this partnership model allows us to enter new markets and accelerate our digital revenue growth without deploying capital. We are then free to deploy our capital in other ways such as debt pay down or equity buybacks or increasing our dividend payments. While early, we believe this media partnership initiative has the potential to be a significant difference maker and revenue and profit growth driver in 2026 and beyond, as we're currently in discussions with numerous other broadcasters about potentially partnering with us. Looking to Q4, we expect our digital advertising revenue growth to further accelerate from Q3's plus 5% revenue growth to approach plus 15% in Q4. Let me say that again.

Speaker 2

We expect Q4's digital advertising revenue growth to approach plus 15% in Q4, which if accomplished would be triple Q3's growth rate. This strong growth rate will be driven by what we expect to be very strong growth rates in programmatic digital advertising revenue, coupled with the improvement of our national digital business. I am also extremely pleased to share that Townsquare Interactive, our subscription digital marketing solutions business continues along its path of recovery as sequential revenue growth accelerated in the Q3. In Q3, Townsquare Interactive's net revenue decline of negative 6% year over year was slightly ahead of expectations I shared with you on our last call. And importantly, the decline represented less than half of Q2's negative 13% decline, a meaningful improvement.

Speaker 2

Townsquare Interactive's 3rd quarter profit declined an expected negative 11% year over year as we manage expenses such that our 3rd quarter profit margin of 27% was only a slight decline from Q3 2023's 28%. We are pleased to share that Townsquare Interactive's 4th quarter net revenue is expected to return to year over year revenue growth. We are also very pleased with Townsquare Interactive's new and improved product offering, which I described at length and in detail on our last call. We strongly believe that our new SaaS business management platform is a very powerful and will be a difference maker as we grow and continue to scale the Townsquare Interactive business. We are not only helping SMBs with their digital presence, we are also helping them operate their business more effectively.

Speaker 2

We're bringing sophisticated national scale to smaller markets and we're proud to partner with our clients to do so. In the long term, we are confident that we have a long sustainable runway ahead of us. With approximately 24,000 subscribers at the end of Q3, which approximately 59% of those are outside our local media footprint and an addressable market of nearly 9,000,000 target customers, we are only scratching the surface. With our existing subscriber base, superior product offering, including our new business management platform and a significant market opportunity of nearly 9,000,000 target customers as outlined on Slide 15, I am confident that Townsquare Interactive is set up for long term profitable growth and success. Another positive development in the Q3 was that our broadcast advertising revenue increased slightly year over year, a sequential improvement from the first half's growth rate.

Speaker 2

Unfortunately, national broadcast advertising revenue reversed course from Q2's flat performance and was a headwind in the Q3. Looking to Q4, national will not only once again be a meaningful decline, but also much steeper with an expected national decline in excess of 20% in the quarter. Overall, we continue to outperform the industry in the Q3, gaining broadcast market share according to Miller Capulet estimates. I am very proud of our team achieving this market share growth as it demonstrates the benefits and importance of our differentiated local content of our local radio broadcast. In the Q3, we generated $3,700,000 of political revenue, which is behind Q3 2020's $4,500,000 Based on what is currently on the books today, we now believe we will be under our initial expectations of $14,000,000 to $16,000,000 in political revenue.

Speaker 2

We view local radio as a mature cash cow business, yet an extremely valuable asset with significant cash flow properties, unparalleled consumer reach and an important local connection to our audience. We believe Townsquare's ability to drive profitable sustainable digital growth is the key differentiator for our company. Digital is and will continue to be our growth engine and we will continue to invest in our digital businesses to fuel further profitable growth. One last point I'd like to make before handing it over to Stu is a very important aspect of our business model, our significant cash flow generation. We continue to generate strong cash flow, granting us the ability to invest in our digital growth engine and affording us financial flexibility as evidenced by our ongoing debt and share buybacks in the open market.

Speaker 2

Year to date through October, we used our cash to repurchase $24,000,000 of our shares, buyback and retire $36,000,000 of our bonds and execute an $11,000,000 option buyback at an attractive price to avoid shareholder dilution, all while investing in our digital growth engine and rewarding our shareholders with a very attractive dividend yield. With $22,000,000 of cash on hand at the end of September and net leverage of 4.86 times as of September 30, we remain very confident in our current capitalization and strength of our balance sheet and we are pleased that we can continue to deliver attractive cash returns for our equity shareholders. As I shared on our last call, S and P Global upgraded their rating of our bonds from B2B plus in June, citing our performance and credit metrics. As we're gearing up for our upcoming refinancing, which we're looking forward to updating when we report year end in March, we are building momentum and set up for a solid 2025 and more importantly long term success. As we say internally, how high is high.

Speaker 2

And now Stu will go through our results in even more detail as well as provide an update on our guidance. All yours Stu, take it away.

Speaker 3

Thank you, Bill, and good morning everyone. It's great to speak to you today. We're pleased to report that our 3rd quarter results met our revenue and adjusted EBITDA guidance. 3rd quarter net revenue returned to growth in the quarter and revenue increased 0.2% or just over $200,000 year over year to $115,300,000 just above the midpoint of our guidance range of $114,000,000 to $116,000,000 That's a sequential improvement from 1st and second quarter revenue declines. In Q3, political revenue was $3,700,000 and through September, political revenue was $6,200,000 which is approximately 93% of 20 20 $6,700,000 Although we expect to record the 2nd highest amount of political revenue in Townsquare's history in 2024, we no longer expect that that will reach our initial political revenue estimates of $14,000,000 to $16,000,000 Based on the political revenue on our books today, we anticipate that this revenue stream will be just north of $13,000,000 for the full year, still a very strong outcome, but less than the 85% of 2020's all time high of $16,000,000 which we were hoping to achieve again this year.

Speaker 3

Excluding political, 3rd quarter net revenue declined 2.5% year over year, a sequential improvement from Q2's 3.4% decline. 3rd quarter adjusted EBITDA declined 6.3% year over year to $25,500,000 also within our guidance range of $25,000,000 to $27,000,000 3rd quarter adjusted EBITDA declines also reflect sequential improvement from the 1st and second quarter. Townsquare Ignite, our digital advertising segment, is building a lot of momentum and demonstrated stronger growth rates in the 3rd quarter as strength in programmatic advertising, which as Bill noted was up 10% year over year, offset ongoing weakness in national digital advertising, which declined $1,200,000 in Q3 as compared to the prior year. In total, Q3 digital advertising net revenue increased 4.7 percent year over year, an improvement from Q1 and Q2's performance. As Bill also noted, we expect Q4 digital advertising revenue growth overall to almost triple, approaching 15%.

Speaker 3

Digital advertising profit margins remained strong in the mid-20s in the 3rd quarter and at 26.5% were equal to Q2's profit margin. Townsquare Interactive, our subscription digital marketing solutions segment, continued to demonstrate growth and recovery in the 3rd quarter, growing net revenue by 3% from Q2 to Q3 due to previous subscriber losses in 2023 and Q1 2024. Net revenue and profit declined on a year over year basis. As Bill mentioned, we are thrilled to share that we expect to return to year over year revenue growth in the Q4. In the Q3, net revenue decreased 5.8% as compared to the prior year and profit decreased 11% year over year.

Speaker 3

Margins were strong at approximately 27% in Q3 despite our continued investment in the business. 3rd quarter broadcast advertising net revenue increased slightly, up 0.3% as compared to the prior year, which again was sequential improvement from the 1st and second quarter declines. 3rd quarter broadcast profit declined 5.4% year over year, but margins remained strong at 29%. In September year to date period, broadcast advertising profit is up 5% year over year. Our other category, which is comprised of live events activity, generated $1,000,000 of revenue in the 3rd quarter, a decline of 37% year over year or approximately $600,000 The other category had a small loss of less than $200,000 which was an improvement from the loss of approximately $400,000 in the prior year period.

Speaker 3

As a reminder, our live events activity should not be viewed as a growth driver or revenue center for Townsquare, but rather a marketing arm of the company. Our 3rd quarter net income was $11,300,000 or $0.63 per diluted share as compared to a net loss per diluted share of $2.27 in the prior year period. We would like to remind you that any benefit or provision for income taxes included on the face of the income statement is for GAAP financial statement purposes only. We maintain significant tax attributes, including more than $100,000,000 of federal NOL tax carry forwards 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 2026.

Speaker 3

As Bill highlighted, and I would again like to emphasize, we consistently have strong cash flow generation. We generated $9,900,000 of cash flow from operations in the 3rd quarter and $20,600,000 of cash flow from operations in the 1st 9 months of 2024, ending the quarter with $22,000,000 of cash. During the 1st 9 months of the year, we repurchased approximately $24,000,000 worth of shares or 2,300,000 shares throughout our ongoing share buyback program, including the repurchase of 1,500,000 of MSG shares an accretive price on April 1. Since 2021, we have repurchased 16,600,000 shares at an average price of $7.30 while simultaneously reducing leverage over that period. Year to date through October, we've also bought back and retired $36,000,000 worth of bonds, including approximately $11,000,000 of bonds below par in Q3, plus an additional $12,000,000 at or close to par in October.

Speaker 3

We anticipate refinancing our existing debt prior to February 1 and look forward to sharing that outcome with you on our next call. At the end of the Q3, our net leverage was 4.86 times. As always, our number one priority is to invest in our local business through organic internal investments that support our revenue and profit growth, particularly on a digital growth engine. We plan to continue to invest in our digital product technology, sales, content and support teams, specifically in our Townsquare Interactive and Townsquare Ignite businesses to maintain our strong competitive advantage in markets outside the top 50 cities. Our Board has approved our next quarterly dividend payable on February 1 to shareholders of record on January 21.

Speaker 3

The dividend of $0.1975 per share, which we raised by 5% earlier this year, equates to $0.79 per share on an annualized basis. That implies an annual payment of approximately $13,000,000 based on our current share count and a dividend yield of approximately 8% based on our current share price. We believe our strong cash flow characteristics will allow us to continue to invest in our business, support our dividend and give us flexibility to opportunistically pursue debt and share repurchases as circumstances allow. We are reaffirming that our 2024 full year results will come in within our original guidance ranges for both net revenue and adjusted EBITDA. We expect 4th quarter net revenue to be between $114,800,000 $118,800,000 This implies a year over year revenue growth of flat to 3.5%.

Speaker 3

We expect 4th quarter adjusted EBITDA to be between $30,800,000 $31,800,000 This implies that Townsquare's 2024 full year revenue will be between $448,000,000 $452,000,000 and adjusted EBITDA will be between $100,000,000 $101,000,000 both within our original guidance ranges. And with that, I will now turn the call back over to Bill.

Speaker 2

Thank you, Stu, and thanks to each of you for taking the time to be updated on Townsquare's Q3 results this morning. We greatly appreciate it. I want to conclude today's call by again highlighting the progress we have made in 2024. Our differentiated in house digital advertising platform has demonstrated that even in the face of extreme national advertising weakness, we can deliver strong growth and continue to find new avenues of growth that will capitalize on our strengths, including the new partnership model I discussed earlier. Townsquare Interactive has returned to sequential revenue growth and we expect to return to year over year revenue growth in Q4.

Speaker 2

Our mature cash cow broadcast advertising platform continues to gain market share and generate a solid profit. We have efficiently repurchased debt and equity this year, while maintaining a high yielding dividend delivering attractive current returns to our shareholders. We retain financial flexibility moving forward and we are well positioned to execute our refinancing in the coming months. Most importantly, we are confident in our ability to build shareholder value for our investors through long term net revenue, profit and cash flow growth, net leverage reduction, future dividend payments and potential future share repurchases. And again, I'd like to take the opportunity to thank the entire Townsquare team for their passion and hard work each day in partnering and helping their clients and communities.

Speaker 2

With that, operator, at this time, please open the line for any and all questions.

Operator

Thank you. Our first question comes from the line of Michael Kupinski from NOBLE Capital Markets. Your line is open.

Speaker 4

Couple of questions here. Bill, you indicated that national digital was strong and but that national broadcast spot deteriorated. And I'm wondering, do you think that there's a shift in national to digital, 1st of all? And I was just wondering in terms of the national broadcast spot, do you think that ever comes back?

Speaker 2

Hey, good morning, Michael. Thank you for the initial question and I'll throw it back to you for your additional question. So in terms of National Digital, actually in Q3, it still was I think as Stu noted, it was down over $1,000,000 So what we noted is National Digital, thankfully, is plateauing in Q4 based on our current forecast. So in Q4, we expect flat to slight growth in National Digital, which has been a major drive of decline year to date through Q3. We did share in terms of broadcast that national was performing much better in Q2 through the first half of the year was down, call it, mid single digits.

Speaker 2

That continued in Q3. And we were quite surprised that in Q4, as I noted, National is currently pacing over 20% down. So that obviously is an unwelcome development, and that is obviously baked into our guide. And one of the reasons still within the initial guidance range for EBITDA, but between being under our political expectations by $3,000,000 and that national pressure on broadcast, we tightened the range to $100,000,000 to $101,000,000 I think your major question is, do you think national is advertisers are switching from broadcast to digital? What I would say is, clearly, I'm sure you heard this from others as well, there was a lot of uncertainty going into the election.

Speaker 2

We definitely saw broadcasters, I'd say slow to commit starting after Labor Day, right through the election. Now obviously with the election behind us and certainty moving forward, we expect our overall broadcast business to improve. Obviously, there was so much clutter. Radio is the number one reach medium, so it's tremendous asset for brand awareness. But with all the clutter of political people we're holding back, which is understandable.

Speaker 2

So overall, I do expect there is some switch in general from broadcast to digital. As you know, we're one of the local first media company focused on digital. We believe that broadcast, although an incredibly valuable asset with tremendous cash flow properties and connections to the community, and we believe we wouldn't have the success that we've had over the last 10 plus years in our digital efforts without that community connection that radio provides. But for many years, we've said, hey, this is a traditional cash cow business and we expect it to decline. And if you even go back to the beginning of the year when we started the year, we said, hey, we believe our broadcast business will be a slow decliner, and that will continue for the out years.

Speaker 2

And that's exactly what's transpired this year, right in line with our expectations. So your last question there was, does National ever recover and grow again from a broadcast perspective? That's not our expectation. Is it possible? Clearly, that's possible.

Speaker 2

But we believe broadcast is a traditional cash cow and will continue to slow decline and not return to growth.

Speaker 4

On the core broadcast and side ex political, There was a sequential decline. Can you maybe add some color on what you're seeing and maybe the tone of advertising, local? You talked about national, but just talk a little bit maybe about local and maybe as we go into December, getting outside of the political noise, what you're seeing?

Speaker 2

Yes, perfect. You're exactly right. So in the first half of the year, ex political was a slow decliner and that was obviously driven by some of that national being down negative single mid single digits. With national now, as we just described, broadcasting going down even further in Q4, ex political in Q3 was down about 5% for broadcast. And as we look out to the rest of the year, I expect that softness to continue, partially because of that national decline that I just mentioned of over 20% broadcast decline in Q4 currently forecasted.

Speaker 2

And then as I just noted, local is definitely a little suppressed. Our expectation is that was really driven by the election and the clutter. And that's why from, in essence, October through yesterday, we saw some additional softness in core. But we expect now with the election behind us to see that uptick not only through the rest of this year, but into next year. But overall, I still expect ex political to be declining probably a little bit more than Q3 because national was down in Q3, but no way it was single digits, mid single digits.

Speaker 2

So national going from mid single digits to over a 20% decline in Q4 is putting a lot of pressure on that core broadcast ex political in Q4. So does that answer your question, Michael, as it relates to core broadcasting and political?

Speaker 4

It does. I have one last The Summit Media partnership is really exciting and Ignite is really obviously one of your bright spots is just really growing well. Were there any contributions from Summit in Q3? I know it's ramping you said until next year. And then when do you anticipate meaningful revenue contributions from Summit to start to kick in?

Speaker 4

And I was wondering, in terms of the cost, are there costs associated with this agreement and when do those ramp? And then if you could just finally talk a little bit about the margin profile for the white label business and how that affects the margins, the overall margins for the Ignite business?

Speaker 2

No, great questions, Michael, and thank you as always for all of your questions. We're quite pleased, tremendously pleased with our digital programmatic advertising as well as our digital advertising overall. As we noted, first half digital advertising growth was plus 1%. That accelerated to plus 5% in Q3 and now we expect approaching plus 15%. So triple Q3's growth rate in Q4 and that's being driven by 2 things.

Speaker 2

1, that national digital business that we described, we believe now will be flat to slightly up in Q4 and our digital programmatic business is simply on fire. I couldn't be more proud of Todd and his team, Kelly, Matt, Aaron, Elyse, Justin, Billy, Tony, JC, Kate, Cathy, just so many people driving this differentiation. And we've been talking about it for years, as you know, on this call as well as in other meetings about our differentiation of our tech stack, our first party data. And I think we're starting to see that flywheel and that momentum really pick up in digital advertisings, which is nice to see. And that in essence has caused others in the broadcast space, be it TV and radio broadcasters.

Speaker 2

And quite honestly, since our last call, a lot more local agencies, including local digital agencies, approaching us and saying, hey, is there a way for us to benefit from this expertise and differentiation that you've built in your digital advertising business? And as I shared in the beginning of the year, we created the media partnership business. We started with 1 broadcaster in 1 market, tested that as a trial. That's gone tremendously well and gave us the confidence to then partner with Summit Media. And Karl Palmer is just a tremendous partner in this endeavor.

Speaker 2

And as it relates to your specific questions, no material revenue in Q3. There is a few $100,000 expected in Q4, but we would still be growing or approaching plus 15% even without that few $100,000 of media partnership revenue. In terms of the cost, it's really our personnel. We're partnering with them. We're treating them almost like they were part of our company.

Speaker 2

So our buying team, our creative team, our digital campaign managers, our optimization, our reporting, we are doing all of that in conjunction for Summit sales teams and their clients. So the cost is really our personnel and our expertise and that's one of the reasons I think so many we're getting now dozens of inbound calls and partnership opportunities that is quite exciting. The good news for us is digital advertising for many years has been the fastest growing part of our company. Programmatic is the main driver of that, yet our O and O is very healthy because of the first party data. As I noted on in the prepared remarks, 60% of our digital advertising is now programmatic.

Speaker 2

So now you factor in this potential really significant media partnership opportunity where we can really become the chosen provider of digital programmatic advertising to broadcasters and local agencies and it's quite exciting. Again, we need to prove success and then continue on. So the margin profile, which was your last question about this exciting media partnership division, is slightly compressed from our overall margin. So our digital advertising margins have been quite strong. I would put this down maybe in the high teens in terms of margin because we obviously have other variables to support that and make sure that Summit is benefiting from the partnership just as we are.

Speaker 2

And most importantly, that the campaigns and the advertising we're running is working for the clients. That is our North Star regardless if that's broadcast advertising, regardless if that's digital advertising or Townsquare Interactive. So we're quite pleased with digital advertising, as you noted. We're also quite pleased that we had sequential improvement across all three of our business segments. But I'll toss it back to you, Michael, in case you have any follow ups.

Speaker 2

Otherwise, we'll continue on.

Speaker 4

Thank you. Thanks for all the color. That's all I have for now. I'll let others ask questions. Thank you.

Speaker 2

Thank you, Michael.

Operator

Our next question comes from the line of Patrick Schall from Barrington Research. Please go ahead.

Speaker 5

Hi, good morning. I just had a question about maybe the debt refinancing. I was just wondering if the recent shift in interest rates changes how you are looking at approaching that?

Speaker 2

Thank you, Patrick. Good to hear from you this morning and good morning as well. Our current expectation is that we will do a variable instrument. So we'll be doing a bank loan instead of our current bonds and that we would be doing that in the beginning of 2025. Obviously, the Fed will be announcing their decision later today based on our partners in the banking industry.

Speaker 2

And I think the world at large, they expect another 25 basis point cut and then determine based on future data if there's a cut in December or there'll be a pause until Q1 of 2025. So the interest rates, our expectation is between now and a year from now, they continue to come down. Obviously, the 10 years gone up with the Trump trade and really spiked to where we were last August. But in terms of the short term and though at 1 month, 3 months SOFR, that's come down quite nicely, which lends itself to our refinancing in Q1 before our bonds become current in February. Stu, I'll just pause there in case you want to add anything else for Patrick.

Speaker 3

No, that is it. And as over the years as interest rates come down, we'll benefit from them. And as our leverage comes down with the bank loan, we'll hopefully be able to reprice our spread in 6 months and going forwards.

Speaker 5

Okay. And then maybe on the digital advertising side, you mentioned the you just mentioned in answering Mike's question about the national digital websites being part of that improvement. I was just wondering if there was like any specific like ad formats or different like inventory that you're serving helping your local advertisers access or helping support that growth rate?

Speaker 2

Yes. No, great question. So there's definitely been a lot of change in just digital media in terms of the algorithms and what Meta has done and what Google has done. Some people have speculated that that was leading up to the election and you're probably very familiar with if you go into a search engine, you're getting a lot more ready content up the top versus other things in the past. So very pleased that our national digital business as we go into Q4 is no longer suffering those losses that we've experienced from a revenue as well as a profit perspective through the 1st three quarters.

Speaker 2

And that to your point is driven really by a few factors. One is social. Our social footprint on our national is quite strong in terms of our brands like Taste of Country and Double XL and Loudwire and so forth. We're also seeing video advertising improvement. Our video, we have an amazing multi channel platform through YouTube and that audience continues to grow across our national brands.

Speaker 2

And so we're seeing an increase in social advertising, video advertising as well as a nice, at least plateau if not growth in core display ads on the websites as well as the mobile apps. And we're also seeing the great news as we talked about this before, couldn't be more proud of our content contributors locally who are not only driving that connection through our broadcast business, but for our O and O on our local websites. And particularly with the demise of the newspaper industry, we are really serving, A, a community function, but it's a very healthy business, gives us great consumer insights. I believe we have more data on our consumers in our 74 markets than anyone else because of that digital audience that we have. And now starting to get recover on the national side.

Speaker 2

And hopefully that answers your question in terms of why and some of the incremental formats of social and video growing more so than they have in the past, Patrick. Okay. Thank you. Yes. You're welcome.

Speaker 2

Thanks, Patrick.

Operator

There are no questions at this time. Mr. Wilson, please go ahead.

Speaker 2

Thank you, operator, and thank you for all joining to get an update on Townsquare's not only Q3 results, but as we look out at the rest of the year and importantly set up for a solid 2025. We look forward to updating you next March. If you have any questions between now and then, please don't hesitate to reach out to us and have a great Thanksgiving and holiday season. Thank you all.

Operator

This concludes today's conference call. You may now disconnect. Thank you, everyone.

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