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spk01: Good morning, ladies and gentlemen. Welcome to the Cumulus Media Quarterly Earnings Conference Call. I will now turn it over to Colin Jones, Executive Vice President of Strategy and Development. Sir, you may proceed.
spk03: Thank you, Operator. Welcome, everyone, to our second quarter 2023 Earnings Conference Call. I'm joined today by our President and CEO, Mary Berner, and our CFO, Frank Lopez-Balboa. Before we start, please note that certain statements in today's press release and discussed on this call may constitute forward-looking statements under federal securities laws. Actual results may differ materially from the results expressed or implied in forward-looking statements. These statements are based on management's current assessments and assumptions, and they're subject to a number of risks and uncertainties as discussed in our filings with the SEC. In addition, we will also use certain non-GAAP financial measures. We believe the supplementary information is useful to investors, although it should not be considered superior to the measures presented in accordance with GAAP. A full description of these risks, as well as financial reconciliations to non-GAAP terms, are in our press release and SEC filings. The press release can be found in the investor relations portion of our website, and our Form 10-Q was also filed with the SEC shortly before this call. A recording of today's call will be available for about a month via a link in our website. With that, I'll now turn it over to our President and CEO, Mary Berner. Mary?
spk02: Thanks, Colin, and good morning, everyone. In the second quarter, we generated revenue in line with expectations, while EBITDA exceeded expectations. While continued softness, primarily in the national advertising market, drove an overall revenue decline, we continue to deliver strong growth in our digital marketing services business, with digital revenue comprising 18% of total revenue. We also executed additional cost reductions, which benefited EBITDA and improved our balance sheet through free cash flow generation and additional debt buybacks. Simultaneously, we retired approximately 10% of our shares outstanding through a tender offer. More specifically during the quarter, we drove significant growth in our digital marketing services businesses, increasing revenue 21% year over year, while also investing further in the business to help fuel its future growth. We executed an additional $5 million of annualized non-revenue impacting fixed cost reduction, bringing the total to $15 million this year and $105 million since 2019. And we continue to support and benefit from our Best Among Peers liquidity position and balance sheet, generating $12 million of cash from operations, signing a highly accretive $10 million asset sale, retiring over 32 million face value of debt at a discount, bringing our net debt down to its lowest level in over a decade, and completing an equity tender offer for $5.7 million. These actions, once again, demonstrate our ability to maximize performance during difficult times by aggressively and relentlessly leveraging our platform to optimize areas that we can control and mitigate downside where we cannot. This proven skill set is serving us well as we make the best of the current tough ad environment and will drive what we believe will be a strong rebound in performance when the app environment improves. Along the way, we continue to have the financial flexibility, net leverage, and liquidity profile to remain optimistic and opportunistic in deploying capital for the benefit of our shareholders. On our last call, we described our business mix in some detail to help you to understand how the current softness in the national market in particular affects us. To reiterate, our national businesses, primarily consisting of the Westwood One Network, national spot, national podcasting, and national streaming, make up approximately 45% of our total revenue. And our local businesses, primarily consisting of local spot, local digital marketing services, local podcasting, and local streaming, make up approximately 50% of our total revenue. We continue to see macro-driven challenges across all our national ad channels with many national advertisers experiencing inflationary pressure and uncertainty in their own end markets that cause them to either reduce their spending or stay on the sidelines completely. While weakness among national advertisers has been broad-based, we did see some differentiation with categories such as retail and financial, particularly hard hit in the quarter, while others such as telecom and consumer packaged goods showed improvement year over year. This trend for the consumer packaged goods category is encouraging as we found success in leveraging Westwood One's unique position as the largest radio broadcast network to drive increased spending with top advertisers, and not just in Q2, but on a forward-looking basis as well. Similar to our national broadcasting business, in the second quarter in the national podcasting business also experienced revenue weakness, impacted by the decrease in spending for direct response to advertisers. That said, our podcast audience growth continues to be robust, up 19% in Q2. And in fact, not only are we a top five podcast network, but we represent what were six of the top 30 news talk shows on Apple in the quarter, dominating the category. With these audience trends, we are seeing a substantial increase in impressions that we will be able to monetize more fully when that national podcast revenue environment ultimately improves. Our local businesses continue to perform relatively better than national, led by our strong growth in our digital marketing services business, which, as I noted, was up 21% for the quarter. Local spot, which makes up approximately 80% of our total spot revenue, was down 7%. in Q2 consistent with our pacing guidance from last quarter's call. Five, local revenue came in 5% lower year over year. With local advertising, while we saw some downward pressure among most categories, auto remains an area of growth with the pace of that growth increasing each month during the quarter. April was up 2%, May was up 10%, and June was up 14%. Our local sales force is exceedingly well positioned to capitalize on automotive advertising, given our deep and longstanding relationships with auto decision makers, as well as their ancillary digital products, including our digital marketing services capabilities that we are now also bringing to bear in those discussions. Local digital marketing services was the brightest spot for us this quarter. As I've mentioned previously, this business is one that we continue to lean into heavily, as we believe it represents a tremendous market opportunity with strong incremental contribution margins. Specifically, we have leveraged our differentiated go-to-market strategy, which centers on a versatile and well-connected beat on the street sales team, offering a full suite of integrated audio and digital marketing solutions to drive significant growth in this $15 billion market, which is growing 5% to 10% a year. This sales approach not only leads to higher sales conversion, given the high-touch nature of the sales process, but it also allows us to bring in new clients and add and roll out new products as advertiser needs evolve. To that last point, we've been very successful with our suite of digital presence products. We call that Cumulus Boost, which was rolled out last year. We now have well over 500 active clients, and nearly half of those new Cumulus Boost clients are altogether new to Cumulus, meaning they didn't previously buy radio or digital from us. And of those, nearly half have expanded from their initial order to also buy additional teamless products. Thus far, our growth in digital marketing services has been generated on a completely organic basis with limited investment. However, as I mentioned, given our success so far and the size of the opportunity, we are making investments to further drive growth. Increasing the size of our digital marketing services sales organization with pure play digital sellers is one of our top priorities as we have found we can generate very quick returns from our refined and well-executed sales strategy. For example, initial testing has resulted in a tripling of monthly run rate digital revenue. So to that end, we have already hired or are in the process of hiring new sellers, which will triple our digital sales force by the end of third quarter. Additionally, because of our unrelenting focus on enhancing both the efficiency and margins of the digital services and products that we offer, we have built a team to take over certain responsibilities which were formerly outsourced to our white label partners. All in all, we are very optimistic about the growth trajectory that we expect for our digital marketing services business, particularly as we continue to ramp up our investments in this area. Meanwhile, we continue to aggressively reduce costs. During the third quarter, we executed an additional $5 million of annualized cost reductions, adding to the $100 million of reductions that we've already made since 2019. And finally, we remained laser-focused on maintaining our best among peers balance sheet and liquidity position through strong working capital management and disciplined capital allocation. In the second quarter, we bolstered our cash balance by generating $12 million of cash flow from operations, and announced the $10 million sale of WDRQ in Detroit, which we expect to close shortly. Between this sale and the sale of WFASFM earlier this year, we generated over 17 million of gross sale proceeds this year alone with the disposal of assets with negligible EBITDA. We also completed an equity tender offer for $5.7 million during the quarter. bringing us to a total of $39 million of shares repurchased out of our $50 million authorization, equivalent to approximately 22% of the total shares outstanding at year end 2021. In parallel, we were able to complete discounted debt buybacks, retiring 32.3 million face value of debt for 23.8 million of cash. Since announcing this capital allocation strategy in Q2 of last year, And combined with our last excess cash flow sweep of 12.5 million, we have retired 125 million in face value of debt. Before I turn the call over to Frank, who will give you more color on the quarter and our current Q3 pacing, I wanted to close by reiterating a couple of points. Pre-pandemic, our management team successfully executed an operational turnaround while right-sizing an inherited overextended balance sheet through restructuring. And since the pandemic, this team has driven best among peers performance on cost takeout, EBITDA margin recovery, free cash flow conversion, net leverage reduction, and cash generation. And in this particular cycle, we are intently focused on positioning the company to take advantage of the eventual recovery of high margin national advertising, investing in our digital marketing services business to develop a market-leading position in that space, reducing fixed costs to further enhance operating leverage, and generating substantial long-term value from shareholder value from opportunistic deployment of capital. And with that, I'll turn it over to you, Frank.
spk07: Thank you, Mary. Second quarter revenue was down 11% in line with the pacing commentary that we gave in our last earnings call. while EBITDA came in at approximately 31 million. The weakness in the national advertising environment remained the main factor driving the decline in total revenue. On a relative basis, our businesses generating revenue from local advertisers continue to outperform those dependent on national advertisers. Regarding EBITDA, our results benefited from continued cost reductions. From a category perspective, telecom and consumer packaged goods were our top performing national categories, while our weakest were professional services and retail. General services and auto were our top performing major local spot categories, while financial, sports betting, and travel were some of our weakest. Our local digital businesses consisting of digital marketing services, local streaming, and local podcasting were up in the mid-teens. Turning to expenses, total expenses in the quarter decreased by approximately 12 million year over year, driven by fixed cost reductions as well as by lower variable costs and lower revenue. As Mary mentioned, the impact of the fixed cost reduction that we executed in the quarter is approximately $5 million on an annualized basis, adding to the $100 million of reductions that we mentioned on our last earnings call. We do want to point out a couple of one-time items impacting the income savings this quarter. First, content cost reductions included a one-time $2 million reduction from an acquisition-related earn-out. Additionally, we recorded a $9.1 million non-cash impairment charge related to real estate which is reflected as a year-over-year variance within the corporate expense line. As always, we will continue to be aggressive in pursuing cost reductions to mitigate the top-line impacts of the current environment. Moving to the balance sheet, we generated approximately $12 million of cash from operations this quarter. In addition, we announced a highly accretive asset sale for $10 million, which will have a de minimis impact on EBITDA and which we expect to close shortly. We remain opportunistic on non-core asset sales. Our consistently strong cash reserves have allowed us to support the continued execution of our capital return and debt reduction strategy. During the quarter, we repurchased $5.7 million of shares, bringing our total share repurchases to date to $39 million. At this point, we have repurchased approximately 22% of the shares that were outstanding when we initiated the buyback program. Additionally, we retired approximately 32 million face value bonds at an average price of 74, bringing total debt reduction since the beginning of the year to $39 million and $125 million since the beginning of last year. This reduction in debt has largely offset the approximately 500 basis point increase in short-term rates increase since last year. As a reminder, we have reduced net debt by over $420 million or 42% since 2019. Looking ahead, we continue to see weakness in the national advertising market. As a reminder, we are facing a difficult political comp in the second half. As last year, we generated 4.5 million and 8.3 million of political revenue in the third and fourth quarters respectively. As a result on a total company basis, we are currently pacing down in the low double digits for the third quarter. Within that pacing, the general trends we've been experiencing remain with our local businesses significantly outperforming our national businesses. As Mary said, we remain focused on leveraging the ultimate recovery of national advertising, investing in growth areas, reducing costs, and opportunistically deploying capital. With that, we can now open the line for questions. Operator?
spk01: Absolutely. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question comes from the line of Dan Bay with Diwali Securities. You may proceed.
spk05: Thank you for taking the questions. So just looking at your experience over the last couple of quarters, really over the last year with national advertising, especially on Um, the Westwood one network, um, clearly where a lot of the challenges are concentrated right now. I think a big reason for that is the relatively short term nature of campaign commitments, how easily they can sort of be dialed up and down. Just wondering if you think it makes sense as we get to a point of recovery to try and lock in campaigns longer term, maybe, you know, more of like an upfront process you see on the TV side, or do you think that would just be a non-starter with, with advertising and agency clients?
spk02: Oh, hi, Dan. Thanks for the question. We do have an upfront process for the network. It's a little bit of a soft process, but generally locked in, you know, maybe two-thirds of the business. But unlike TV, there's an out clause within a month of when the product runs. And what we're seeing is advertisers are either pulling out at the last minute or are sitting on the sidelines and waiting to advertise later. We give everything we've got to get people to commit up front. But I think we're seeing, you know, the fact that it's networking particularly is well positioned. It's the biggest audio network in the country, top reach vehicle, you know, great brand building vehicle. And we don't see any reason that it doesn't bounce back eventually. But we are seeing that, you know, everyone else like us, everyone's keeping an eye on the interest rates and inflation and banking issues and, you know, recession talk. And as that, you know, dies down, we think it will get better.
spk05: A follow-up on retail being relatively soft in the quarter. I think that's in contrast to what a lot of the digital advertising players have seen in terms of retail being fairly strong so far. Just maybe retail media being sort of one of the hotter digital media, you know, Maybe just talk through why you don't think that's sort of a permanent shift over from kind of linear to digital and why you think those retailers will come back to the linear radio and television longer term.
spk07: Hi, Dan. It's Frank. I'll take that question. Look, as Mary discussed, there are a lot of factors impacting the national advertising market and i think one of the things that we're definitely seeing is that as interest rates go up we're seeing companies particularly larger companies trying to protect their eps performance and they're allocating uh they're allocating their dollars very judiciously in certain areas so from our perspective when we think not only about retail but broader national advertising Thinking about the reach that we have broadly to our local businesses, as well as our network business, it's really a question of time for that money to come back. And from the discussions we're having with our clients broadly, we're not hearing anything about a permanent reallocation of advertising dollars to other medium. It's clearly a competitive market. We are taking advantage of some of that to our digital businesses as well. But as far as we can tell right now, it's really a timing issue as opposed to permanent reallocation of dollars.
spk05: For me, just you sold two stations this year for decent numbers. Whether you view those as kind of unique one-off situations or whether that's, you know, strategic sales of stations being a lever you more actively pursue moving forward.
spk07: Look, we are very judicious in our portfolio, and we take a point of view that if there are assets that make sense in our portfolio, we will pursue them from an acquisition perspective. Although, as you know, we've been more in an investor mode as opposed to an acquisition mode. Although, we have a balance sheet right now that we can look at acquisitions when it makes sense. These transactions are one-off transactions. We have over 400 stations. We have lots of stations and many clusters, and if there are one-off opportunities where it makes sense to sell them, we'll do that. And these two stations generate a gross value of $17 million, and the EBITDA that we're losing from that is really de minimis. So in terms of the accretion, as we talk about, our earnest call is really significant. If there are more of those, we would actually obviously take advantage of the opportunity and use that to continue to reduce debt and potentially buy back equity.
spk05: Any questions? I'll turn it over.
spk07: Thanks, Jim.
spk01: Thanks, Jim. Thank you. The next question comes from the line of Ivy Steiner with J.P. Morgan. Your line is now open.
spk04: Thank you, and good morning. A few questions here. One, if I could start on the pacings, please. I think you said download double digits. I just want to Clarify, does that factor in the political headwind you mentioned, or does that hit later in the quarter and kind of not in the pacing numbers? And what I really want to try and get into is if we strip out political, is local getting better at all sequentially? And then I've got a couple more. Thank you.
spk07: Sure. Well, at the last year, most of our political dollars kicked in after our earnings call. So it's not really included in our pacing. But if you look at last year's results, the political dollars we had last year contributed just approximately 200 basis points in terms of revenues. So that will come in later in the quarter. With regard to local, we talked about in our last call that our local spot business, which is excluding national within our spot business, was down 7%. With the green shoots that Mary talked about in the auto category, we would expect the third quarter hopefully to be better than what we saw in the second quarter. Now, that's obviously dependent on the other categories, but the growth that we have with auto, which is a big category for us and was a very big category back in 2019, is helping drive that performance. But to be clear, within the local spot business, It's still down versus last year, but that's going to help us close the gap a little bit.
spk04: Okay, thank you. And then on the cost side, performance this quarter was better than we were expecting. I know you called out on the content side, I think, a $2 million one-time benefit. I just want to confirm I heard that correctly. But anything else in that line, and I guess what's driving the year-over-year decline, and is that how we should think about it for the back?
spk07: Right. Yes, I mean, we did want to highlight the one-time benefit such that it's now modeled on forward. And the cost savings is something that's clearly very real and it's hard to achieve. And every quarter we're asked the question, is there more? And every quarter we say we'll continue to look at our cost base. I think the incremental improvements on costs or reduction in costs By definition, it will probably be smaller as we have a smaller cost base. But having said that, the areas that we continue to focus on are reengineering the business, technical efficiencies, people efficiency, there are opportunities to consolidate markets where it makes sense to do so, business process improvements, and these are things which is in our DNA from a continuous basis. And so we're pleased with this incremental $5 million. So $15 million in fixed cost annualized reduction is a big number compared to what we've already done. And we'll continue to do that. I would expect that the incremental reductions from here on out probably will be more modest. But having said that, we've said that before, we continue to find costs. So that's something we'll always do. And I'll remind everyone. The operating leverage that we created in the business is significant by reducing fixed costs by over 105 million with a rebound of high margin national and of course next year political. Then we're set up well for significantly better EVA down improvement as the market recovers.
spk04: Okay, that's great, thank you. And then just on the Detroit station that you sold, Can we assume that's all going to debt repayment? And if I can add on to that, I guess from my seat, why buy any equity at all?
spk07: That will, that will, I'm sorry, I cut you off. We were delayed.
spk04: My question was, my question was just confirming that proceeds, albeit small, but $10 million still get the C, will that go to debt repayment? And then relatedly, why would you buy any more equity when You've got opportunities at these levels to buy back your bonds. Thanks.
spk07: Right. Well, as you know, we did take advantage of the opportunities in the second quarter on debt reduction, and we did a significant amount while still preserving a lot of cash on the balance sheet. With regard to those proceeds, they'll go on the balance sheet of cash, and we can use that for investments, debt reductions, or equity repurchases. And as we've said in previous quarters, we really don't talk about our plans ahead of time, and we'll be able to report on the third quarter in terms of our capital allocation plans. Having said that, and I'll reiterate, and I mentioned this on the earnings call, on the call that, on my script, is that by having reduced gross debt by $125 million since being in the last year, Not only is that great from a leverage perspective, but as we manage our cash flow, it's immunized a lot of the increase in short-term rates. And to the extent we continue to focus on that, that will accrue the benefits to all stakeholders. And then if and when the Fed starts lowering rates, which some people think will be next year, then it will turbocharge the cash flow generation from the debt reduction strategies we've implemented.
spk04: I appreciate that answer, and I don't think it's lost on anybody that you've done a really pretty good job chipping away at absolute debt levels here. There's obviously pushback on eventual refinance, and I think we have time for that. But if I can end it on this question, curious as to your thoughts on, given everything that's going on, and you're implying hopefully next year is a little better, but what's the right leverage to drive this business to? Obviously, we're going in a different direction this year, but where do you want to be to give yourself the maximum flexibility? I appreciate the time. Thank you.
spk07: Sure. Well, we made a strategic decision to change our financial leverage targets last year to achieve a level of below three and a half times. Previously, that number that we had mentioned was to get to below four times. As you know, there are competitors in our industry that have much higher leverage numbers and have higher leverage targets than they indicated recently. Our leverage will go up by virtue of EBITDA being challenged this year and will trend down nicely next year with the recovery, although we're not giving guidance. As we This is an industry, I believe, and we believe, that with some of the challenges that we've had from the top line, it should have less financial leverage in the business. So the first step that we made, and we recognized that, was to get down to three and a half times leverage. And as you know, we were very close to that at the end of last year. And as we continue to reduce that, we'll revisit to the board what that means. right leverage number should be going forward. I can't give you what the number is, but I wouldn't be surprised if it's not three and a half. It could be lower than that, but stay tuned on that. We have a lot of wood to chop to get the recovery and reduce the debt. But again, you mentioned about the debt refinancing. Our net debt is less than $600 million. It's half the debt that we had coming out of restructuring. So the markets are not great right now, but in terms of the quantum debt that we have to refinance when the market improves in our leverage, improve them in that leverage perspective, I think we'll be in a good position to take advantage of that.
spk04: Appreciate the time. Thank you so much.
spk01: Thank you. The next question comes from the line of Michael Kopinski with Noble Capital Markets. Your line is now open.
spk08: Thank you for taking the questions. I appreciate that. I'm trying to understand the cost cutting that the company has done. I was just wondering, has the company reduced its footprint in the markets, decreased local talent, moved toward more central programming? And if you've done that, was this done in smaller markets versus some of your more larger markets? I'm just trying to understand the nature because obviously, as Ivy said, you've cut costs a much more than what I've expected as well.
spk02: Yeah, that's a great question. We have looked at cost cutting across multiple paths. So the last several years, the first thing we look for is efficiency. So we've consolidated both our traffic and our business manager functions at reduced costs and at enhanced efficiency and outcomes, actually. We are looking, it's really right now real estate, contract costs. We focus a lot on contracts. Some, you know, consolidation of staffing, but not much of that. We have not done consolidation of programming because we believe that the local, live and local, is key to our strategy. You know, we've improved our programming for sure, but that's not an area of focus. So, you know, our fixed costs, we have a very, very disciplined process as to how we get at it. But I would characterize it really in three buckets, which is contracts, general contracts, real estate, and then efficiency, looking for areas of efficiency, which is why we always think we're at the end of it, and then we dig in again, and we're very, very aggressive about it.
spk07: And if I can jump in here, Michael, I can give you just a couple additional points. We do have a slimmer workforce than we did three years ago. And so when you look at the $105 million of cost reductions, probably 40% of that has to do with slimmer workforce. And we emphasize this a lot. It's reducing costs without impacting revenues with more efficiencies and And we look at large markets, small markets. We look at the network to reduce the fixed cost base. And the key thing that we focus on is impacting when we look at costs is to really avoid impacting revenue. And there's an industry that continuously has to be re-engineered. And that's why we keep on talking about the operating leverage.
spk08: Gotcha. Thank you for that. The disparities in revenue, are there disparities between larger markets versus smaller markets or the performance pretty evenly across your markets?
spk07: I'll take that. Okay. Sorry, Mary. So the smaller markets in general are performing better than the larger markets. The smaller markets, the diary markets have less exposure to national. than the PPM markets. So that's the trend that we're seeing now. Thank you.
spk02: I'd add on the small markets. It's also the area where we see most success with our digital marketing service products because in small markets there are fewer competitors. And so our relationship is a decade-long relationship and to go further. So that's one advantage of smaller markets would be with smaller.
spk08: Gotcha. And just the final question, in terms of the network business, can you talk a little bit about the tone of the business? There obviously was some sequential improvement in the quarter, and I was wondering if the tone of the business has improved in the third quarter, or is it simply that the comps are just getting easier?
spk07: I would say that the tone of the business really hasn't improved. The comps are getting a little bit easier, but just the broad weakness in the national markets are challenging. Having said that, in the last quarter we talked about our podcasting business and a lot of those advertising dollars are national in nature. So although the pacing in the third quarter is still down versus last year. There's a sequential improvement in that compared to the second quarter. But overall, I wouldn't say that there's a trend, an all clear trend yet on the national markets.
spk08: Frank, would you describe it as stabilizing or would you say that it still hasn't stabilized yet?
spk07: I would describe it as uncertain. The fourth quarter will be really interesting as we get to the end of the year because generally a lot of advertisers will start clearing out their budgets for the rest of the year and start planning for next year. And I think the fourth quarter will be the time for us to really give that answer. A lot of our business is still coming in within the quarter. And so we'll talk more about that, Michael, on our next earnings call.
spk08: Thank you. That's all I have. Thank you.
spk01: Thank you. Thank you. The final question comes from the line of Jim Goss with Barrington Research. You may proceed.
spk06: OK. Thank you. Along the line of the question we've already had, you've done and had great success in retiring debt, reducing number of shares. meaningful cost reductions. It seems like you've done all of the things that you can manage. They're in your control. Is a big part of what you need now an improvement in the industry or are there things under your further control that can enable you to perhaps participate in a stronger way? I know you talked about live and local being very important. I might hone in a little more on just how that's working overall and by market size or the mix between radio ad demand and the podcasting, which are sort of complementary products. How are you looking at the environment? And is it something, are there things that you need to, that are just out of your control and you need to benefit from? some improvement that is a little indeterminate, or are there things that are more in your control than I'm seeing?
spk02: Yeah, that's something we think about a lot. We are very, very disciplined about identifying and focusing on what we can control to mitigate what we can't. And so specifically, we focus on, as you've heard, reducing our costs. A second bucket would be innovative, trying to be more innovative and creative in programming, for example. So, you know, for example, our rating share, we're going on our 11th month of rating share improvement, and that includes a lot of different things that we've done on a programming basis. Developing new revenue ideas and employing them across the company. So we really doubled down on those areas, especially the growth areas. You heard us talk about digital marketing services. So what we what during these kinds of markets we are laser focused and extremely disciplined on what we can control um and that's why you've seen a big push on areas like digital marketing services um and then you know there are to mitigate the negative impacts of what we can't control which is the market right now um but you know again as we've said multiple times we're confident that our operating leverage will in order for our benefit when the up with the upswing and there will be an upswing so I think we're pretty good at this, we're pretty focused, and we're pretty confident that when things pop back with our operating leverage, we're going to see a nice benefit on the upswing.
spk06: Okay. And the other thing I wanted to ask about is what you just brought up, digital marketing services. I know you said you plan to lean into it more. I think you said you were going to triple your sales force in that area by the end of the third quarter. And I know one of your smaller competitors has had significant success in it, as I know you're aware. And you deal in somewhat bigger client levels based on the market sizes you reach into. I assume it's a little more competitive in the types of markets you're looking into, or maybe not. And just how far do you plan to go in that that would change the character of the company a little bit by getting into something that's a little more tangential and not exactly the same type of business that's a core business.
spk02: Yeah, we see, we, you know, we have been very, very successful in training our radio native sellers to sell both radio and digital products to, you know, both current customers and new ones. And generally their approach so far, and we do this across the company, there's more competition in larger markets, but there's a whole lot of opportunity across the country. And generally their approach has been to upsell radio with digital, so they go to their longstanding relationships and they upsell radio with digital. And as we mentioned, that business is already run rating at $40 million. So what we did was we tested adding additional digital native sellers, so not radio sellers, who focus only on digital, generally non-radio clients, And we've seen that in our early tests, a really nice payoff. And that gives us enough confidence that we're adding more direct sellers. We believe that if we add more direct sellers, we're going to see accelerated digital marketing services growth, both within the markets where we add those sellers, but then also on the whole. So the way we look at that is given the fact that the business is run rating at 40 million, if we triple our sales effort and each seller is able to just even double our double, our monthly digital run rate, those numbers add up really quickly as we work to become meaningful players in the market. So I would kind of wrap this up by saying there is a lot of opportunity. We operate generally in the mid and small-sized markets, and there is a lot of opportunity, and we're seeing it. So we're very, very bullish on this.
spk06: Okay. Thank you very much. Appreciate it.
spk01: Thank you. Thank you. I would now like to pass the conference back over to the company for closing remarks.
spk02: Thanks very much, everyone, and we look forward to talking with you again next quarter. Have a nice weekend.
spk01: That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.
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