Q2 2022 Townsquare Media Inc Earnings Call

Good morning, and welcome to the town squares second quarter 2022 conference call. As a reminder, today's call is being recorded and your participation implies consent to do such recording at this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation if anyone should require.

Operator assistance during the conference. Please press Star zero on your telephone keypad with that I would like to introduce the first speaker for today's call Claire <unk> Executive Vice President. Thank you you may begin your presentation at this time.

Thank you operator, and good morning to everyone. Thank you for joining us today for <unk> second quarter financial update with me on the call today are Ed Bastian, our CEO 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 and safe Harbor provision 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.

Subject to certain risks and uncertainties, including those that are detailed in the company's annual report on Form 10-K filed with the SEC.

May also discuss certain non-GAAP financial measures, including adjusted EBITDA adjusted net income and adjusted operating income, which we may refer to as profit in her remarks.

Such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly yearend and current reports available on our website I would also encourage all participants to go to our corporate website and download our investor presentation at double reference some of those slides during our discussion this morning.

I would like to turn the call over to Delaware.

Thank you Claire and thank you all for joining us.

My goal on this morning's call. In addition to sharing a record setting Q2 results and strong outlook is to clearly distinguish town square from others in the local media and radio broadcasting industries.

Cause quite simply town square is very different today, and most importantly, moving forward from the rest.

As our country could currently be in a recession based on the first half of the year GDP data released last week.

Or if one believes our country may potentially enter a recession over the coming months or quarters.

It is important to remember that town square is a digital first local media company focused exclusively on markets outside of the top 50.

Approximately 50% of our revenue comes from digital solutions, which historically performed better during a downturn than broadcast advertising.

And approximately 40% of that digital revenue is non advertising based digital subscription revenue, which town square grew even during the worst of Covid.

Another key differentiator not only are we focused on markets outside of the top 50, but we selectively pick markets with stabilizing institutions, such as state capitals for universities and army bases, which have lower unemployment rates compared to national averages and economy is less susceptible to recession shocks.

Additionally, because we are not in large markets. The majority over 90% of our advertising revenue is local advertising, which historically has been less volatile the national advertising, particularly during an economic downturn.

Overall, we believe that we are very well positioned to perform during a downturn or a recession no matter the duration and severity I believe which is supported by our 'twenty 'twenty performance during the worst of Covid.

We are encouraged by our strong record setting second quarter results.

The increased guidance that we will be issuing today for Q3 and for the full year.

Today, we're also reaffirming our expectation that town square will deliver record setting best ever profit in 2022.

Our second quarter financial results reflect strong revenue and profit growth and as a result, we set an all time record high for both revenue and adjusted EBITDA.

As outlined on slide 19 in the Investor deck. These.

These results exceeded our second quarter revenue guidance and met our second quarter EBIT guidance.

The town square team is very proud of our Q2 results, which clearly demonstrate the strength and differentiation we have in our digital businesses as well as in our legacy cash cow broadcast business.

Second quarter net revenue increased a very strong plus 14% year over year to $121.9 million above our guidance range of $117 million to $121 million.

Second quarter, adjusted EBITDA increased plus 7% year over year to $32.4 million within our guidance range of $32 million to $33 million.

Digital revenue growth actually accelerated in Q2 from plus 16% year over year in the first quarter to plus 21% year over year in the second quarter.

Q2, digital profit increased plus 11% year over year with Q2 profit margin of 30% slightly better than Q1's digital profit margin of 29%.

In total 50% of our June year to date revenue and 50% of our June year to date profit came from our digital businesses.

Let me repeat that as it is a clear differentiator for our company.

It was also a meaningful driver of our performance during the last recession.

50% of our June year to date profit came from our digital solutions for local businesses.

During the COVID-19 recession, our digital business held up remarkably well as did the overall digital industry.

Town squares digital advertising revenue declined for only one quarter during the initial shutdown to the economy in Q2, 'twenty 'twenty and returned to growth by Q3 2020.

Likewise, according to S&P Global estimates digital advertising increased plus 15% in the United States in 2020.

Helpful tailwind to have at our backs and then and one that can be expected to continue.

Town Square interactive our digital marketing solutions subscription business grew revenue profit and subscribers during every quarter of 2020.

Demonstrating its resilience to a downturn and its vital importance to local businesses in our markets.

Our digital business was a key reason that during the COVID-19 recession, our company's total adjusted EBITDA returned to growth by the end of 'twenty 'twenty and in 2020. One we delivered an all time high EBITDA and have continued to set new revenue and profit records in Q1, 2022 and again this quarter in Q2 'twenty two.

'twenty two.

I shared these data points to highlight that although it is unclear if a recession is going to occur over the coming year. If one were to occur town square is very well positioned to navigate a recession and returned to record setting revenue and profit post the potential recession, as we demonstrated quite well in 2020 one.

Now I'm going to provide detailed results of our digital platform as a reminder of the extremely valuable and quite differentiated digital assets and businesses, we have a town square.

Our digital advertising segment market externally as town square ignite as presented on slide 15.

In the second quarter digital advertising net revenue increased a very strong plus 25% year over year.

Digital advertising profit increased plus 12% year over year with a 30% profit margin.

Even given all the macro concerns in Q2.

Our Q2 digital advertising revenue growth actually accelerated from Q1 with strength in all three months of the quarter.

Additionally, based on our current pacing, we expect strong digital advertising revenue growth to continue in the third quarter.

On a trailing 12 month basis as of June 30th we generated $129 million of digital advertising net revenue and $39 million of digital advertising profit, which equated to a 30% profit margin a key component of our digital advertising success is this significant.

Audience that we reach and the high quality local and relevant content, we produce curated to our local audiences.

With the closing of our Cherry Creek acquisition at the end of Q2, our digital advertising portfolio includes now over 400, local and National News and entertainment websites and mobile apps that generate over 60 million monthly unique visitors and have over 40 million followers across social platforms and have generated over.

3.5 billion lifetime views across our Youtube platform.

Town Square is one of the largest producers of local content in the United States Importantly, filling a news and information void that exists in small markets across the United States due to the decline of local news providers.

In addition, another key component of our success and differentiation is our our organically built digital programmatic advertising platform that has access to more than 250 billion impressions per day.

And our proprietary data management platform with rich and valuable first party data with over 15 million user profiles.

We use this incredibly valuable first party data collected from our own audience for advertising on both our owned and operated brands and our digital programmatic solutions.

Being a large add scale publisher with first party data is a significant significant competitive advantage in digital advertising.

Especially in the programmatic business as we are able to more effectively target our customers desired and valuable audience.

Although we believe it is unlikely that cookies will be eliminated entirely any alumina on cookies or a third party tracking will make publish our own first party data like ours, even more critical for successful digital advertising campaigns.

Another benefit for town square.

On slides 12 through 14, we highlight the additional valuable component of our digital business, which is town square interactive our subscription digital marketing solutions business with.

With a monthly recurring subscription based model that generates a substantial profit.

This business is a significant differentiator for us versus other local media companies and provides a resilient subscription growth vehicle in good or bad economic environments.

Since we organically developed and launched town square interactive in 2012 is subscription revenue has grown double digits versus the prior year, each and every quarter, even during COVID-19 recession of 2020.

And since reaching profitability in 2014 subscription profit has grown each and every quarter as well.

In the second quarter of this year, our consistent and strong growth streak continued <unk>.

Town Square interactive Q2 subscription revenue increased.

Plus 14% year over year, and subscription profit increase plus 10% year over year, and we added approximately 1150 net subscribers in the quarter.

On a trailing 12 month basis as of June 30th Town Square interactive had $87 million of subscription revenue.

And $25 million of subscription profit a 29% profit margin.

We have identified a huge addressable market, which we have outlined on slide 13 of nearly 9 million target customers across the United States.

With approximately 29000 subscribers at the end of the second quarter. We have significant significant runway ahead of us I'm pleased to announce that in June we signed a lease for a second town square interactive location in Phoenix.

Atwood as we've discussed previously this is an important component of our town square interactive growth plan as it will greatly enhance our recruiting universe and allow us to access the west coast talent pool, while still growing our employee based on the east coast to date, we have hired over 20 employees for our west coast location and in 2022.

We have added over 50 employees to our Charlotte location, which now is home to over 700 town square team members.

The new space in Phoenix is currently being built out and we expect to physically move into the new location in March of 'twenty twenty-three.

While we build out the new office space, we are arranging for temp space for our existing west coast employees to work out of which should be ready by labor day.

As we have previously stated we are confident that we were able to scale and operate the second location at strong profit margins, given our history and experience of launching and operating our town square interactive location in Charlotte.

As a reminder, and as highlighted on slide 29, our entire digital platform was developed organically by our own very very talented product design and engineering team.

This team of what is one of town squares key strengths and allows us to retain our competitive edge there.

Fact that our digital products and solutions are developed manage and continuously refined in house and are not outsourced is a significant significant competitive advantage that grants us the ability to fully control the customer experience from point of sale to execution of reporting which also enhances our customer satisfaction.

Therefore, our customer retention importantly.

Importantly, these solutions in house.

Also enhances our digital profit margins.

In total we expect and we reaffirm that our digital revenue will grow from $216 million of digital revenue on a trailing 12 month basis as of June 30th.

To a minimum of $275 million of digital revenue by 'twenty 'twenty four.

On a trailing 12 month basis, our digital profit was $65 million, representing a 30% profit margin.

It is our strong belief that our digital platform is not appropriately valued for its growth and margin profile.

As we train in line are often grouped in with radio broadcasters, who are not digital first companies.

<unk> differentiated digital businesses.

And have far less digital revenue and profit.

This was one factor that led us to re segment the business at the end of last year.

It is our expectation that given this more detailed information.

Town square will over time get credit and value for being a digital first local media company.

And we will be afforded a sum of the parts valuation that gives credit to our digital assets and strong digital profit.

That being said, we continue to love our cash cow local broadcast business.

With the closing of the Cherry Creek acquisition in the second half of June .

We now own 357 local radio stations across 74 markets and importantly, all outside of the top 50 markets.

We view local radio as an extremely valuable asset with significant and attractive cash flow properties unparalleled consumer reach and important trusted local connection to our audience and communities and that's a key component of our multi platform diverse local media business.

We also view radio as a mature cash cow business and not our primary growth driver.

In the second quarter, our broadcast advertising increased plus 1% with continued strong headwinds from the auto industry overcome by strength in a number of categories, including entertainment contracting construction and political we expect auto headwinds to continue as we do not anticipate auto advertising to recover until at the earliest sometime in 'twenty.

Twenty-three and potentially not until 2024.

I'm aware, there's been a lot of concern about an advertising slowdown and articles recently referencing standard media index reporting a 3% AD spend decline in June versus prior year for.

For town square.

We actually saw strength in June with advertising up plus 9% over prior year. Additionally, specifically in broadcast June was also stronger than May.

Insistent with what we also experience with digital advertising as well with June being stronger than May.

These are additional and important data points that demonstrate our differentiation.

Our radio platform is symbiotic with our digital platform, our digital solutions benefit our radio solutions and our radio platform and strong audience reads Supercharge, our digital solutions.

It is because of this and our digital first local media strategy that we believe the Cherry Creek acquisition was a great use of capital.

We are pleased that we are able to close this acquisition a bit earlier than expected and the integration is going extremely well, we are bringing our large scale sophisticated digital platform solutions and expertise to the Cherry Creek markets and expect to significantly increase their digital revenue and margin profiles to match ours over the coming years.

With their heritage strong local brands many of which are number one in their format combined with their strong and talented local teams. We are confident that we will have a long term stable broadcast base from which to inject our digital growth engine now I'll turn the call over to Stu who will go through our very strong year to date results.

And provide our increase Q3 and full year outlook for everyone Stu take it away.

Thank you Bill and good morning, everyone I hope everyone has been enjoying this summer so far we.

We started this year with strong first quarter financial results and that strength accelerated in our second quarter with growth across all of our segments second quarter net revenue increased strongly growing 13, 6% over the prior year period to $121 $9 million above our guidance range of 100 <unk>.

<unk> to $121 million.

At $121 $9 million of revenue. This is the highest quarterly revenue we have ever achieved.

And at June year to date period net revenue increased 13, 3% year over year as Bill mentioned, we closed the Cherry Creek Radio station acquisition on June 17th So our second quarter and year to date results include less than two weeks of contribution from the acquired assets, which is an immaterial amount.

Political revenue picked up some steam in the second quarter coming in at $1.5 million ahead of Q2, 2000, Eighteen's $1.3 million.

Though the first half of the year, we have generated $1 $9 million of political revenue with 94% of 2000 Eighteen's political spend through the first half of that year as we all know the majority of political spending occurs in the fourth quarter and we still believe that political revenue for 2022 has the potential to exceed two.

Eighteens political revenue of $10 million.

Second quarter, adjusted EBITDA increased six 8% year over year to $32.4 million.

That's within our guidance range of $32 million to $33 million and just like revenue $32.4 million of EBITDA is the highest quarterly EBITDA town square has ever achieved.

And the first six months of the year adjusted EBITDA increased 8% year over year.

Excluding the impact of political revenue adjusted EBITDA increased four 8% in the second quarter and six 9% in the year to date period.

Our subscription digital marketing solution segment again delivered another consistently strong quarter of net revenue profit and subscriber growth.

In the second quarter net revenue increased 13, 7% as compared to the prior year supported by the addition of 1150 net subscribers town.

Town Square interactive second quarter profit increased nine 8% year over year to $6 $7 million.

At a 29% profit margin.

In a year to date period net revenue increased 14, 3% and profit increased eight 6% as compared to the prior year and we added 2200 net subscribers.

Our digital advertising segment was the largest driver of growth in the second quarter and the year to date periods with net revenue increasing 25, 4% in Q2, and 21, 4% year to date digital.

Advertising profit increased 11, 8% in Q2, and 12, 4% year to date.

This business operated at a 30% margin in Q2 and 29% year to date.

In total digital revenues composed of our subscription digital marketing solution segment, and our digital advertising segment increased year over year by 27% in the second quarter and 18, 4% in the first six months of the year.

In total digital revenue represented 50% of our total net revenue and total profit through the first half of the year at $216 million of revenue for the trailing 12 months ended June 30th.

We are well on our way to our goal of generating a minimum of $275 million of digital revenue in 2024.

Even with the increased internal investments to leverage the market opportunity.

And our differentiated digital solutions, we expect our digital margins to continue to be in the high 20% range.

What kids to advertising net revenue increased 1% in the second quarter and 4% year to date as compared to the prior year.

Cash profit margins improved to 34% in Q2 and were approximately 30% in the first six months of the year.

Our other category, which is comprised of live event activity had its largest quarter in three years with $4.8 million of revenue and $874000 of profit at a margin of 18%.

There was significant improvement Q2 live events revenue was still only 90% of Q2 2019 as revenue and we expect to remain below 2019 levels for the remainder of this year.

As a reminder, a live events are not a material part of our business nor a growth vehicle for our company, but rather act as a profitable marketing arm of the company, providing yet another way for us to connect with our audience and communities and allow advertisers to do the same.

In a normal operating year live events revenue and profits will be less than 5% of our total company's revenue and profit.

Second quarter net income decreased $5 2 million to $4 $9 million or 24 cents per diluted share as compared to $10 1 million or 50 cents per diluted share in the second quarter of 2021.

Adjusted net income, which excludes one off items and as detailed in the schedule to our earnings release was $13 $2 million was 71 cents per diluted share for the second quarter of 2022 as compared to $10 million or <unk> 53 cents per diluted share in the prior year period.

And the first six months of the year net income increased $3 $7 million year over year.

We'd 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 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.

Here until approximately the year 2026.

And the first six months of 2022, we generated positive cash flow from operations of approximately $23 million, which was an $8 $1 million decrease from the prior year period.

This was entirely due to the timing of our interest payments.

At this time last year, we had only paid $7 million of interest payments as compared to $19 $5 million in the current year.

Prior to interest payments, we generated positive cash flow from operations of $42 $5 million or $4 $2 million increase from the prior year period.

In the second quarter, we closed on the $18 $75 million acquisition of Cherry Creek, and we repurchased and retired $19 $2 million of our bonds at or below par ending the second quarter with $22 $8 million of cash and $538 million of total debt.

Based on the trailing 12 month, adjusted EBITDA of $109 $1 million as of June 30, our net leverage has declined to 4.65 times.

Our primary capital allocation priority after internal investment to grow our digital business is to reduce net leverage to approximately four times. We believe this is achievable at the end of this year.

The board has authorized a $50 million three year stock repurchase program and we sincerely believe our stock is undervalued today, our priority is to reduce net leverage in the near term. We will continue to invest in our business in order to drive revenue and profit growth, which is reflected in our EBITDA guidance.

Turning to a third quarter outlook, we expect third quarter net revenue to increase and be between 120 and $127 million, which represents growth of 8% to 14% over the prior year we.

We expect third quarter adjusted EBITDA to be between 30 million and $32 million, that's a year over year increase of 3% to 10%.

Importantly, this guidance represents all time highs for Q3 revenue and Q3 EBITDA.

For the full year 2022, we're raising our net revenue and adjusted EBITDA guidance as a result of the continued strength in our business as demonstrated by our Q2 results and our Q3 outlook and the Cherry Creek acquisition.

Our increased revenue guidance is now 465 million to $480 million, representing a year over year increase of 11% to 15% and we set an all time high revenue record.

Our increased adjusted EBITDA guidance is now $116 million to $121 million, which is a year over year increase of 10% to 15% and would also be an all time high adjusted EBITDA record.

And with that I will now turn the call back over to Bill.

Thank you Sue and thank you to everyone who joined US. This morning, we greatly appreciate it.

I am proud to share our strong performance in Q2, and the first half of the year.

And I am incredibly optimistic about our long term future.

Our digital platform contributing 50% of our revenue and profit today continues.

<unk> continues to distinguish our company with its steady profitable growth and subscription characteristics.

With at least $275 million of digital revenue expected by 'twenty 'twenty four we expect our consistently strong digitally fuels growth to continue.

Due to our competitive strengths, our strong cash generation and with net leverage down to 4.65 times today and declining towards four times by the year end, we believe town square is very well positioned to face any negative headwinds that may or may not arrive and if they do we will come out the <unk>.

And even stronger just like we did through the Covid recession.

As always I'm extremely proud of our town square team and their hard work, which is clearly the driving force behind our strong financial performance.

As we say internally how high is high thanks again to all of them. Please do not hesitate to reach out if you have any more questions about town square.

Operator at this time, please open the line for any and all questions.

At this time there'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

From a indicate your line is in the question queue. You may start to move to a question from the queue for participants using speaker equipment and may be necessary for you to pick up your handset before pressing starkey one moment, while we poll for questions are.

Our first question comes from the line of Michael a couple of Netscape.

Capital markets. You May proceed with your question. Thank.

Thank you for taking the question and congratulations on your strong quarter.

I was just wondering if you can talk a little bit about what you might be hearing from your advertisers, particularly on the broadcast side and maybe on the digital side as well just in terms of what are their concerns. What are what are you seeing in terms of Ah you know just what are you hearing could since you're so close to your advertising community.

Thank you Michael It's bill good morning, good to hear from you I think as we noted in the script to date, we haven't seen any meaningful impact or advertising pullback.

In June was actually stronger than may.

Obviously consumer spending is continues to be strong manufacturing data you know you've been released yesterday continues to be strong.

In our view.

The uncertainty almost when the war broke out earlier in the year late Q1, and then I'll talk about inflation and high gas prices, we saw more hesitancy from our advertisers in terms of just discussions because it was a little bit more unknown and I think.

Potentially a little murkier at that point and then we saw June actually accelerate at every month in the quarter get better. So right now we're feeling quite good obviously, our local broadcast is pacing up nicely for Q3 and Q4 for the rest of the year you know, we our digital advertising, which was up 25%.

And in Q2, we continue to see strength in Q3, as well and obviously our revenue guide of 8% to 14% growth demonstrates that and our revenue guide for the year being up 11% to 15%. So there's definitely a education and discussion with advertisers like there always is but with the consumer spending being.

As strong as it is our advertising business as well as our overall business for the Q3 in the back half of the year is looking quite nice and I think that's probably a testament to our continued and consistent strength in digital you know one of the things we noted on the call as well as even in the last recession.

Digital advertising grew 15%. So obviously, we've been treating our broadcast business for a few years now as a mature cash cow business. As we noted on our end of year 2021 update we've pretty much returned to broadcast levels of 2019 outside of auto nationals, and some supply chain impacted.

Categories like furniture stores and appliance stores. So I think as we go forward you know our comps in broadcast are quite different than maybe others in the industry, who who have yet to return to those 2019 levels and obviously with 50% of our profits being digital and 50% of our revenue being digital even if a downturn were to occur that segment has.

Historically grown and we're quite differentiated and well positioned to continue to grow in a downturn.

Digitally even if they're one was to occur and I think we've proven that throughout 2020 and into 2020. One so from an advertiser standpoint, we are hearing less concerned today than earlier, but again, we're prepared for anything we're not you know rose colored glasses are feeling quite good as we sit here a month into Q3.

And bill how many of your just going back to your that the comments about the cookies. How many of your advertisers use first party data for your programmatic business versus what you would use for third party data.

So almost all of our owned and operated and programmatic in some way leverage our own first party data.

Across the board that that doesn't mean, we won't also have 10 third party data programmatically, because we will but it is a clear differentiator for us that allows us much greater insights into our target customer, whereas for them and that's really tied to the fact that you know I think we didn't noted on today's call, but as you know Michael we reached 70% seven zero per.

A scent of the adult population through our digital platform in the markets that we operate in so.

It's safe to say, we know more about the audiences that we're operating in and the communities that really anyone else be it TV or newspapers, so we bring that differentiation and competitive edge to our customer base and not only that but given we have our own data management platform that we're collecting first party data for customers coming to our mobile app.

Apps and websites, we actually allow that capability for advertisers. So we will put a a tracking code on a advertiser's site to allow them to collect first party data that we manage for them. So I think it continues to demonstrate hopefully our Q2 digital advertising being up 25% them.

Midstream, we are clearly differentiated in digital advertising in the markets outside the top 50, and we continue to see continued strength there and we're quite confident over time more and more people will recognize that diversification and differentiation of town square.

And final question.

You say you're differentiated from a lot of your radio peers, how much of your broadcast revenue comes from National.

So our overall national revenue is roughly 7% of our total revenue. So it is a it is a small part nationalised I'm sure everybody is aware did slow down in Q2, we actually started the year with strength in national in Q1.

Liberty.

Increases in Q1 and Q2.

We're down in national broadcast advertising in the back half of the year is pacing down on national advertising as well.

But as I noted in response to your first question. Our local broadcast is pacing up for Q3, and Q4 and given it's such a small part of our company.

In general it has a slight impact, but not a material impact.

Yeah, it's well below that of the industry averages thanks for that and congratulations on your quarter. Thank you.

Thank you Mike.

I think the other point outside of our digital differentiation, we are the only local media company.

We'll be focused on markets outside the top not just radio company, but if you think about newspapers TV outdoor town square is the only company truly focused on markets outside the top 50. So I think that's a that's one of the reasons in 2020, 2021 and as I think we sit here today youre going to see quite different results.

<unk> strategy moving forward for us than maybe others in local media.

Sure. Thank you.

Our next question comes from the line of Jim Goss with Barrington Research you May proceed with your question.

Thanks, I've got a couple also.

First you made a point that you're one of the largest producers of local content in the absence of a the same type of presence for newspapers. These days or are there any other monetization opportunities you are sensing might exist in this area, where you can take advantage of that are local.

Or is it just embellishing the existing.

Radio business as it stands.

So we yeah, we met our digital advertising on our owned and operated is quite strong. It's in line with our programmatic. So if we grew digital advertising, 25% in Q2 are owned and operated monetization of that audience as well as our programmatic was roughly equal in Q2, so that that's definitely a big driver as we continue to grow.

Only audience, but importantly, with a 70% penetration of adults in these markets that as I've I've shared as you know historically on this call you know it really our news desert. So I mean, it's kind of scary as that American that some of these markets are so underserved from a new assortment, we view it as almost a north star for us in a in a community mission to serve that.

We do quite well in monetizing that I think that does it.

Piece of your question is are there other ways. You think you can monetize that moving forward more aggressively than maybe we are today and that that is it's a very astute question, because we're looking more and more into newsletters for these local markets and monetization of newsletters as well as affiliate fees, where we're offering other products that arent.

Rising base, but provide an affiliate fee, where we don't take inventory risk. So given our large at scale digital audience. In these communities. There are future car views opportunities to monetize them. In addition to our strength in digital advertising today.

Okay. Thanks.

One other you one of your slides you.

Had a.

But he had like Sirius XM, and Spotify and I hurt with the big Red slashed through it saying that a they don't have the same presence in your markets yet I suspect there is significant usage of any of those types of services.

In your existing markets I'm, just wondering if you might distinguish between.

And their usage and the AD competition.

No great question and just for those who are listening Jim is referring to slide eight of our investor deck, and we really talk about it more attractive competitive landscape in these markets outside the top 50 that is one of the contributing factors to our differentiated.

Results so there.

There is actually data showing that Sirius XM is used in markets outside the top 50 are less than in the markets to add in the top 50, but I think the broader point here for.

All research and our perspective is things like Spotify, and Pandora or Youtube or Apple music that in essence replaces what historically was you know.

Final record C d's, whatever your age demographic is and what you are.

With and then there is definitely you should.

But I think the key point Jim.

There was no local sales force and our markets of our size for X M or Spotify or Apple or Pandora. So a you know we have such strength in listenership in terms of even our a M best and I talked about the 70% penetration with our digital platforms in our markets, but just.

Looking at our am FM broadcasts and our markets, 50% on average five zero of the adult population listens to one of our a M. FM stations on a weekly basis. So it would be able to walk into a local advertiser, which as you know from a broadcast perspective is 90 plus percent of our business is and say buy advertising.

Rising on one of our radio stations are a collection of our radio stations, you're going to reach one into adults who live here that is incredibly powerful and obviously, we have one of the largest local sales teams in each of the markets. We operate it and usually larger than newspapers larger that outdoor larger than TV station, where Sirius XM Spotify and so forth.

<unk> not had really any salespeople in our market. So the combination of our market share of listenership and audience penetration with the strength of our amazing sales teams in our local markets, where people like X and don't have any local salespeople is a clear differentiator for us so hopefully that Ah that speaks to your question.

Yeah, yes.

And a couple of others Cherry Creek acquisition I Wonder if you could talk about a little bit more about it as a.

Sort of a template for other radio acquisitions and I Wonder if you can outline the expected timeframe for the transformation of that business to take advantage of the other opportunities that become more of your growth priorities yes.

No I think it was a great we couldn't be more excited.

With the acquisition I think I shared on the last call I visited each of the markets spend time with the teams and just incredibly impressed with the talent of our team that we acquired in terms of the people are the strength of the brands are there.

They are quintessential town square brands and team members, what they lacked and that's one of the driving forces of the acquisition was strength, our internal digital solutions and digital platform to extend our audience and obviously to do things like square interactive in our town squares Knight products.

They also had just like town squares I noted earlier I think in Michael's question, you know they had strength in broadcast where last year. They were back in 2019 levels, if not above 2019 levels in broadcast which again I think speaks to the fact that our radio broadcasting in markets outside the top 50 is quite a different business than markets in the type 50, so there.

They have great strength in broadcasting, but they lack those tools and platforms for digital so that is the template. So what you'll see and this is what we did when we acquired a few dozen markets from Cumulus and we've got a few markets from kind of sewer for the first 12 months, we will actually in there.

That's quite a bit of dollars into these acquisitions and that will be primarily the majority digital investments new personnel are not only on the sales side, but on the content side.

And then I think to your point when will we see the transformation, which we've seen already in town square when will you see that with the Cherry Creek assets I would say that in a period of anywhere as early as 18 months to 36 months, a year and a half to three years, you'll see a quite an acceleration of their digital business with stability in there.

<unk> gas business, which is the template that in essence, we've been running with town square for the last few years, so couldn't be more excited and as you also noted I think we've we've telegraphed. This on prior calls I think we are the natural acquirer of radio stations outside the top 50. So I think as you look out into the future we look forward to more opportunity.

These if they fit that Cherry Creek strengthened model, because we couldn't be more excited about that acquisition right now.

Okay. Thanks, I think I'll, let it go at that and congratulations I appreciate that Jeff good to hear from you.

Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to Mr. Bill Wilson for closing remarks.

Thank you Laura and thank you everybody for dialing in this morning I appreciate you dialing in to listen to our record setting results and our guidance for the full year. If you have any follow up questions. Please do not hesitate to reach out we are always available to you have a great day.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and go to the rest of your day.

Yeah.

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