Q2 2025 Townsquare Media Inc Earnings Call

Good morning and welcome to Town Square. Media's second quarter, 2025 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.

If anyone should require operator assistance during the conference, please press *0 on your telephone keypad.

With that, I would like to introduce the first speaker for today's call, Claire Yenicay, Executive Vice President. You may begin.

Thank you, operator, and good morning to everyone. Thank you for joining us today for Town Square. Second quarter Financial update with me on the call today, our Bill Wilson, our CEO and Stu Rosenstein, our CFO and Executive Vice President.

Please note that during this call, we will be making 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 our 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 that are 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.

During this call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA. 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 also encourage all participants to go to our corporate website and download our investor presentation as Bill or reference, some of those slides during our discussion. This morning. At this time, I would like to turn the call over to Bill Wilson.

Thank you, Claire and thank you all for joining us today. It's great to reconnect with everyone.

We are very pleased to share with you this morning that our second quarter results met or exceeded the total, net revenue and adjusted ibida guidance that we provided on our last call.

We are proud that the execution of our digital first. Local media strategy has allowed us to deliver solid, and consistent results. While also producing strong cash flow, even during these uncertain and challenging macroeconomic times,

Due to our robust local presence and holistic set of local and digital marketing solutions available to our local clients, we were able to successfully navigate the revenue pressures caused by April's Liberation Day and achieve our total net revenue guidance, while continuing to carefully manage our expense space and deliver adjusted EBITDA above our second quarter guidance.

In the second quarter, our guidance was that total? Net revenue would be negative -2% to negative 4% year-over-year and it finished right in line with our expectations down at approximately negative, -2 with. And without political

We also provided guidance that second quarter adjusted ibida would be - 1% to negative 5% year-over-year and our actual evil to result was better at plus 1% year-over-year above the high end of our guidance and achieving year-over-year. Growth and excluding political are ibida, was plus 4% over Q2 2024.

Additionally, our net leverage ticked down to 4.58 times.

By now, it should be very clear. That town square has transformed from a legacy broadcast company into a digital first, local media company, and that our digital platform and digital execution sets us apart from others and local media.

In 2024, approximately 52% of our company's total net revenue.

And 50% of our total segment profit was generated from our digital Solutions.

In the first 6 months of 2025, our total digital Revenue group plus 4% year-over-year.

And as a result, our digital Revenue in the first half of 2025 expanded to be a very significant 55% of our total, net revenue.

Which has highlighted on slide 11 is industry-leading at more than twice the industry average.

Total digital segment profit increased, a very strong 9% year-over-year in the first six months of the year, with a strong profit margin of 27%.

And digital is year-to-date contribution. Grew to February 56% of our total segment process.

As we have consistently stated for many years,

Is and will continue to be Town squares growth engine and the area where we focus, the bulk of our investment Capital going forward.

Consistent with our strategy of being a digital first, local media company and further differentiating us from others and local media.

Let's dive into the results of our two digital divisions, starting with the fastest-growing business for Townsquare: Ignite, our digital advertising business.

Q2 was a challenging quarter of the board due to pause and concerns and advertising following April's, Liberation day announcement, as well. As Doge Cuts impacting government related advertising even impacting our consistent digital advertising growth engine.

Despite the challenging advertising Marketplace. However, we still delivered growth in the second quarter with digital advertising, Revenue increasing plus 2% year-over-year.

from January through April, our digital advertising segment delivered, strong mid to high single-digit Revenue, growth rates

The impact of Liberation day was felt in May onward as digital advertising campaigns are of longer duration and therefore, most of April was already booked by Liberation day.

although we didn't fight achieve the mid single digit growth rate that we had anticipated when we last reported an early May, we're pleased that we were still able to deliver growth in this division

Our programmatic business was the strongest component of digital advertising in the quarter making up, approximately 60% of the segment's revenue with strong organic growth opportunities and we expect it will continue to be our primary growth driver.

As a reminder, programmatic platform provides our customers with precise targeted Solutions, giving them the ability to reach a high percentage of their potential customers across desktop, mobile connected, TV email, paid search, and social media platforms, utilizing display video, and Native executions.

We essentially act as a full-service digital Agency for our clients from providing campaign, strategies creative services to buying inventory optimizing campaigns and providing real-time reporting and analytics, as well as insights. Providing a level of service that is often not available in the markets we operate.

in addition, we are simply able to afford a more cost-effective campaign to our clients than most of our competitors, given our scale across our 74 Market Footprints and our in-house proprietary demand side trading desk is integrated with more than 15 digital advertising buying platforms with access to all major advertising exchanges, and therefore more than 250 billion in

Impressions per day.

Our local owned and operated digital business includes locally sold advertising ARCA traditional feed on the street selling of our own 400 local websites and mobile apps and that was strong in both the second quarter and year-to-date periods.

However, our overall, digital inventory has been negatively impacted by declining search engine traffic, which I'm sure you're aware of has been the case for all web Publishers at scale. And therefore any Remnant unsold in the inventory that we sell by exchanges was negatively impacted therefore by muting our strong directly sold local digital growth.

We continue to see these search referral Trends in Q3. Therefore we expect q3's. Digital advertising Revenue growth to be in line and consistent with q2's performance.

The digital Revenue that we sell directly to advertisers by by our in-house sales teams, both programmatic, digital Solutions, and our differentiated owned and operated digital Solutions. Continue to grow and improve from 22 to 23.

But Remnant Revenue tied directly to service traffic, will continue to decline, leading to an overall Q3 growth rate, roughly in line with q2's gross growth rate.

As we've shared previously on calls, we are confident that our third-party media, partnership model launched. An early 2024 will be a meaningful growth driver for our digital advertising business and future years.

I am very pleased to share with you that we added. We're not a media as our newest media partner. In total. We now have 6 local media Partners under this new division, reaching 19 increments that do not overlap with our own footprint and we have only scratched the surface of this opportunity.

Because of our media partnership strategy. We're able to enter new markets to offer programmatic digital Advertising Solutions without having to acquire radio broadcast Assets in order to do so.

In this Capital-like model, we've partnered with others in local media and handle all the major components of the digital advertising solution, including managing the creative.

And customer support of the digital campaigns. And very importantly, effectively training our partner sales team to sell our solutions.

In 2025, as I shared on our last call, I expect this initiative will add approximately 6 million dollars of Revenue at approximately a 20% margin for the full year.

And as I shared on our last two earnings calls, I expect that in five years or less, this division can grow to be at least $50 million in revenue.

For Town Square at an approximately, a 20% profit margin.

Ultimately our goal with this initiative is to become the chosen provider of digital programmatic advertising to broadcasters and digital agencies and local media outside of the major cities.

We are proud and honored to now have 6 strong Partners in this Division and we expect that number to grow in 2026 and Beyond.

Let's now turn to our second digital business, which is our subscription-based, digital Marketing Solutions, SAS business Townsquare Interactive

We are very pleased to share that we are having a fantastic profit year at Town Square interactive which we expect will continue for the remainder of the year.

in the first 6 months of 2025 segment profit has increased plus 19% year-over-year an increase of nearly $2 million

This is an excellent result as year-to-date profit margins. Expanded to 33% as opposed to the customary 28% profit margin. We're used to seeing

This increase in Townsquare Interactive profit margin is largely due to three causes.

Number 1: the restructuring of our customer service model in 2023 that allowed us to grow more efficiently.

Number 2, changes to our sales structure late last year, and early this year have led to both a smaller sales team which is temporary, but importantly, a more productive sales team. Let me elaborate a bit on that.

After careful evaluation, we determined that we needed to restructure our sales team to align culture and incentives with our goals, which is consistent and strong profit growth.

The restructure included changes to the compensation structure as well as the intentional reduction of sales Personnel correlated to raising the bar of Baseline level of sales, expectations.

Since the start of the year.

we have not been able to fill vacancies quickly enough on our sales team to offset this attrition which has led to much smaller sales team and thus lower sales velocity overall

however,

Sales productivity has improved dramatically as the number of sales units and revenue per sales rep has increased as anticipated, generating higher profit with improved profit margins.

And the third cause of improved profit, margin is due to the business deploying, AI solutions to improve it efficiency. Thus we remain very confident that the changes we have made both to our customer service and sales models. Along with continued deployment of AI Solutions are setting Townsquare interactive up for the next decade of efficient and profitable growth and success.

However, as I just mentioned that, also highlighted our last call in May with a smaller sales teams, come smaller, sales velocity, and therefore, muted Revenue performance in the short term.

In the second quarter Townsquare interactive Revenue increased plus 1% year-over-year.

in the third consecutive quarter of year-over-year, Revenue growth,

We expect $23 million in revenue at Channel Square, interacted, to be roughly in line with Q2's $18.8 million. As we continue to backfill our sales team with more productive members, we currently expect Q4 revenue to increase over Q3 revenue.

Strong profit growth will continue in the second half of the year as we expect profit. Margins to remain above 30% and thus, as I mentioned on our May claw, I expect our profit performance at TSI in 2025 to be 1 of the best in the divisions, 12 year, history and setting us up for a strong 2026 and Beyond. As you have heard me, consistently State. I am very confident that Townsquare interactive is on crack and set up for long-term profitable growth and success. And I believe that our 2025 expected profit performance is great proof point of that.

Exactly, as we telegraphed on our last call, we declined negative 8% year-over-year in line with Q1's performance.

As we have stated for several years but I feel it was important to reinforce. We take the view that broadcast is a mature Cash, Cow business, that will continue to decline going forward as businesses will continue to share shift from traditional advertising to digital advertising.

Thankfully, we are often the beneficiary when sharing a curse as we offer the most comprehensive set of digital Advertising Solutions available. In our markets, Town Square is differentiated and different.

As a result of our talented team and organically building our own technology platforms and solutions over the past 15 years. In-house.

Town squares, digital profit. Margins are in line with our traditional broadcast profit margins and thus, our overall profit margin. Profile is stable as a result of the advertising share shift from broadcast to digital.

Despite broadcast Revenue, declines and Liberation day, and macro headwinds, we outperformed the industry in both first and second, quarter gating local and National broadcast market share, according to Miller Kaplan estimates.

In fact, in June our local market spot share as measured by Miller Kaplan increased to an all-time high of 39%.

With our differentiated local content on our local radio broadcast, we believe that we will continue to gain broadcast and total market share across our Market footprint while also generating a solid profit as we carefully manage expenses and maintain a strong broadcast profit margin.

In fact, in Q2, our broadcast prop and margin X political was approximately 30%, which is stronger than the Q2 2024 profit margin.

As we look out to the back half of 2025, we expect to see digital advertising Trends consistent with our Q2 performance with continued, strength, and programmatic and direct sales of our owns and operated 400 plus websites and mobile apps.

Partially offset by ongoing headwinds tied to audience size. As a result of declines in search referral traffic,

as I already noted, I expect, 2 3 Revenue at Town Square interactive to be in line with q2's revenue and I expect Q4 to grow over Q3

We anticipate similar ex-political performance in our broadcast, segments in Q3 and Q4 with declines, in line, with the first half of negative 8%. Although Q4 is currently pacing slightly better than the first 3 quarters of the year.

As a result, and as Stu will share, we are narrowing our full-year revenue and adjusted IBA guidance range.

And both yet will remain within the original parameters. We set at the start of the year.

In importantly, our business model continues to generate strong cash flow, which we have been applying towards organic investment in our business and Debt Pay down which we will continue to do for the remainder of the year.

And now, I'll hand the call over to student to discuss our financial results and guidance in more details.

All yours. Do take it away.

Thank you, Bill, and good morning, everyone. It's great to speak with you today, we're very pleased to report that once again, our second quarter results, met our Revenue guidance and exceeded our adjusted Eva dog guidance.

Second quarter, net revenue excluding political Decline, 1.6% year-over-year and 2.3% in total to net revenue of 115.4 million. On the higher side of a guidance range of 114 to 116 million.

Second quarter adjusted EBITDA increased, with and without political, to $26.4 million, which was above our guidance range of $25 to $26 million. This represented year-over-year adjusted EBITDA growth of 7% and 3.8% excluding political. We experienced margin expansion as adjusted EBITDA margins increased from 22.2% in Q2 of 2024 to 22.9% in Q2 of this year.

Town Square interactive are subscription, digital Marketing Solutions. Segments continue to demonstrate growth in the second quarter as expected. And we previously, telegraphed Town, Square, interactive's, Q2 net revenue, increased 1.4% year-over-year. We're thrilled to share that as expected Town Square interactive delivered. Another quarter of very strong profit growth in the second quarter with Q2 segment profit, increasing 15% year-over-year.

Or segment profit growth of approximately 800,000 dollars.

We expect Town Square interactives profit. Margin to remain above 30%.

in 2025, we are very confident in our expectation that we will deliver strong profit growth for Our Town Square interactive business, which is very beneficial after the profit losses in 2023 and 2024

As Bill noted, we're very pleased with this town. Square Anthrax is strong performance profit performance.

Q2 broadcast advertising, net revenue decreased in line with our expectations, which was similar to first quarter broadcast Revenue decline in the second quarter broadcast Revenue, declined 7.8%, excluding political and 9.2% in total. He just compared to the prior year importantly broadcast, segment profit margins increased year-over-year to approximately 30% with and without political, as we continue to work hard, to manage our broadcast expense base in the face of Revenue declines,

Our second quarter, net income was $2 million or 9 cents per diluted share as compared to net loss of $3.26 per diluted share in the prior year period.

We'd like to remind you that any benefit or provision for income taxes, including on the face and income statement is for gaap. Financial statement purposes only, we maintain significant tax attributes. Including approximately 96 million of federal nol carry forwards and other substantial tax Shields related to the tax ammunition of our intangible assets. We continue to believe that we will not be a material cash taxpayer until approximately 2028

as Bill highlighted and I would again like to emphasize we consistently generate strong cash flow.

We generate a $10 million of cash flow from operations in the first half of 2025, roughly equal to the prior year.

In the second quarter, we repaid another million dollars of debt including the 7 million balance on the revolver. Our first amortization payment of 2.9 Million

Since the February refinancing we have repaid 13 million of our debt.

In addition, our cash this year has been used to fund 29 million of interest payments. 7 million dollars of dividend payments and 28 million of fees associated with our February refinancing

With 467 million of total debt outstanding and $3 million of cash at June 30th, our net leverage ticked down to 4.58 times.

As always, our number 1 priority is to invest in our local businesses, through organic internal Investments that support our revenue and profit growth, particularly our digital growth engines.

We plan to continue to invest in a digital product. Technology, sales content support teams specifically, Our Town Square interactive and digital ignite businesses to maintain our strong competitive advantage in markets outside the top 50 cities.

In addition, we plan to use our excess cash flow to reduce our debt, through both mandatory and voluntary debt repayments and of course, support our high yielding dividend.

Our board has approved. Our next quarterly dividend payable on November 3rd to shareholders of record as of October 27th.

The dividend of 20 cents per share, equates to 80 cents, per share on an annualized basis, and implies an annual payment of approximately 13 million.

Based on our current share of account.

And a dividend yield of approximately 12% based on current share prices.

We believe our strong cash flow characteristics will allow us to continue to invest in our business support. Our dividend and allow us to De de-lever going forwards.

Turning. Now, to a third quarter Outlook, we expect third quarter, net revenue to be between 106.5 million, and 108.5 million as previously detailed on this fall. We expect Town Square ignite, our digital advertising business to grow in line with q2's growth rate. Town Square interactive to have a approximately, the same Revenue in Q3 as it generated in Q2 with continued strong, profit performance and broadcast Revenue, ex-political to decline in line with q1 and q2's performance.

We expect third quarter adjusted, Evita to be between 22 and 23 million.

For the full year as Bill highlighted given the impact Liberation day had on Advertising growth in 2025, we are now narrowing, our Revenue range so that Revenue will be between 435 million and 440 million which is still within our original Revenue guide.

As a result, we are also narrowing our adjusted. Evitar range to be between 90 million and 94 million.

Embedded in this guidance is the loss of political revenue of $10 to $11 million, as we typically get between $2 and $3 million in political revenue in non-election years. And with that, I will now turn the call back over to Bill.

Thank you, stu well done. As always and thanks to everyone for taking the time to be updated on Town. Square's. Q2 results this morning. We greatly appreciate it.

I'd like to close today's call by reiterating our confidence in our digital first local media strategy, our focus on markets outside of the top 50 in the United States. The strength of our digital Solutions and the long-term profitable growth potential of our digital platforms.

It is also worth noting and highlighting, just a few of our successes in Q2, as well as year to date.

Our differentiated digital advertising platform continues to deliver growth in the face of uncertainty and macro volatility.

For mature Cash Cow broadcast, the advertising platform continues to generate a solid profit, and Q2 broadcast profit margins are actually up year-over-year due to solid expense management.

Townsquare interactive is driving incredible, profit growth in 2025, with margins, north of 30%.

We continue to generate strong cash flow and after refinancing our debt in February, which extended our maturity profile to 2030, we have already repaid 13 million of our debt through June.

On maintaining our high-yielding dividend, delivering attractive current returns to our shareholders.

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, and future dividend payments.

As always, we wouldn't have the confidence in our long-term success without the Townsquare team's effort, passion and commitment. That is directly driving our growth and Innovation each and every day.

I could not be more appreciative of our team and their tremendous work.

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

Thank you, ladies and gentlemen, will not begin the question and answer session. Should you have a question, please? Press the star followed by the 1 on your touchtone phone. You will hear a prompt that your hand has been raised.

Should you wish to decline from the polling process? Please press the star followed by the 2. If you are using a speaker-phone, please lift the handset. Before pressing any Keys 1 moment, please for your first question.

In your first question comes from Michael Kahn, Conventi from Neuville Capital. Please go ahead.

All right, good morning everyone. Thank you for taking my questions. I was wondering, uh, bill can you provide a little more color on the search engine referral traffic trends that you were talking about, uh, do you think that this is going to change the trajectory of the digital advertising Outlook that you have, you know, in your presentation regarding, you know the outlook for over the course of the next several years.

Hey, good morning, Michael. And as always, thank you for the question. Um, yes, so the great news for us is that our direct sales in digital advertising is very strong. Um, our programmatic is, uh, was close to double digits High single digits and as I noted, um, earlier our direct sales of our owned and operated 400 plus local, uh, websites and mobile apps is strong as well, uh, in the high single digits. Um, and patient quite well for the back half of the year is both programmatic and and direct sales of our own owned and operated websites. Um,

As we noted, the referral traffic, and I'm sure you've been seeing this uh, across the board at any uh publisher at scale. Um the search engine traffic referral has come down and it's come down more meaningfully in Q2 and Q3. And what we expect in Q4 than the beginning of the year, I'm sure you've seen when you go into, uh, Google or other search engines. There's the AI results.

Of our owned and operated and the direct sales, there are strong. The Remnant or indirect, uh, has come down but as it relates to the next 2 to 3 years, we're still very confident in our growth trajectory of digital advertising. It'll still be the fastest growing part of our company with a really strong, um, profit margin. So I'll, I'll pause there. Michael, and turn it back to you for any follow-ups on that or other questions you may have.

No, I really appreciate all the color there, just overall, it just seems like your Q3 guide is a little softer than what you have hoped, I think, um, is that just advertisers seem to be a little bit hesitant or are they cutting back due to economic uncertainty? I was just trying to give a, you know, since you have kind of a little read on the local economies that was just wondering, if you can kind of give us your color and what you are hearing from advertisers in general.

Yeah, you're correct. It is it is I'd say they're cautious, um, but still spending, um, placing more uh, short term or or in months, um, versus out months. Um, we've definitely been seeing that since April and that continues. So, um, I'd say probably the biggest change from the beginning of the year, when we provided our guidance. Um, on the year end 2024 call is the search engine, uh, traffic and the impact to our indirect, um, Remnant revenue and, and that's muted our overall digital advertising growth. Um, so I would have expected, uh, in

Q3 on a normal standpoint, uh, mid to high single-digit, digital advertising growth. And as I just said, in Q2, we grew 2% because of the search engine referral headwind and we expect the same in queue, um, 3. But we have so many other Tailwind when, when you're thinking longer term, obviously, our programmatic business, uh, from just straight up organic growth is doing, extremely well. As I just noted, you know, up close to double digit growth in Q2 and pacing. Uh, onwards and then obviously, with the media Partnerships division. Um, you know, I I noted on our last call as well as just reiterated. Now we expect about 6 million dollars of total revenue there this year, so very modest. Um, as it relates to our overall digital advertising, but we obviously just noted we we signed up another partner renza broadcasting uh adding another 6 markets. So we're in 19 markets, we've got great Partners. The majority of these partners are not yet, generating Revenue, we're in essence. Um, we've got some

Who we've talked about in Prior calls and steel city. Um, and those are the 2 primary ones, who are generating 2025 revenue, and these other ones will come on board in 2026. And as I noted thinking over the next 5 years, we're very confident that this media partnership division, um, could be at a minimum of $50 million of Topline Revenue at a 20% profit margin. So adding 10 million dollars of profit over that time. So our overall, um perspective on digital advertising,

Long term which was your original question is incredibly bullish. And as always, there's going to be challenges that come up and right now that challenge is the indirect Remnant sales. Um and I think based on us being a significant, local publisher at scale. Some of this will work itself over time, but in terms of 2025, I'd say you are correct. It's it's muted. The overall health and growth of our direct sales and digital advertising until you peel back the evidence. Uh, onion and see why that is. So I'll turn it back to you.

Well uh bill you just answered 4 5 and 6 of my questions so I appreciate that very much. I'll let others, I let others ask questions. Thank you. Thank you, Michael. As always have a great day,

Thank you. And your next question comes from Patrick Shaw, from bington research, please go ahead.

Hi. Uh, thanks for taking the question. Uh, do you think it's just asked? Uh, another question about the the, um, kind of like the referral traffic, uh, headwind just a couple years ago. I think you had, uh, kind of a Sim. Well, just a is that is the magnitude of this kind of similar in size to. I think the change in like social media referral traffic algorithm and is it kind of a similar impact?

With the search engine referral traffic over time, but I do expect it to continue to decline through the remainder of this year, and potentially into the beginning of next year, um, with this change in terms of AI and search engines. And I think we'll find other ways as we always have. Because when you think about it, just taking a macro step back. Uh, we're 1 of the largest Publishers of local content in the United States. And as we've talked about consistently on these calls, um, for many years now, uh, these are really news deserts. These 74 markets that were in uh I'd say they're significantly underserved uh from a journalistic and news and information and entertainment. Um standpoint. Uh as we've talked about previously, many of our markets, don't have a local television station, a large percentage. Um have had newspapers completely go away. Um not only stop printing but actually don't even have a an online presence. So uh, I share all of that because we are

And I've shared this before we we have the largest local audience uh in our markets. We Believe from an online perspective that is incredibly differentiated. It's 1 of the reasons that we continually talk about what a difference. It is operating outside the top 50 markets and what a major point of differentiation and major competitive Advantage for Town Square. That is so I still believe given that we are. You know, we have we've talked about this before we reached 70% of the adult population through a mobile and uh, mobile apps and websites. And that

That's still consistent even with this drop in search engine referral traffic. Um, you know, we've talked about the fact that we reached 50% 50 of people just through our am and FM broadcasts on average in our 74 markets. So the emotional connection the scale and reach is unparalleled. Um, so I do think going back to your original question that although this search engine referral traffic is definitely down, which is impacting, our indirect Revenue, which is muting our overall digital advertising performance of our, our direct sales team. Uh, I do believe that, uh, at some point, I don't think it'll be this year, but I do think it will Plateau and then we'll be able to grow it again. Simply because not only, we have a talented team, but we are literally in many of our markets, the primary source of news and information for that community. So they will find us um, because we are there to serve them. And that's, you know, a core part of town Square's Mission. So I'll turn it back to you, Pat.

Thank you. Um, just a, a kind of a question on like the

I guess overall macro environment in in your markets. Um, you you talked about

the local advertisers being more cautious. I'm just curious like with your advertising Partners who are also interactive subscribers that you, you had mentioned in your guidance with the expected revenues from that to be flat sequentially.

I think just looking longer a little further out,

I guess. Can you just talk about like the confidence of like

Inflecting back into growth or is there kind of a risk of you know this macro these macro challenges kind of creating a little bit more of a headwind on the top line for that segment again.

Yeah, no, I'm a great question, Pat. So I'm very confident that, uh, we will be returning to growth. Um, on the revenue side, you know, we're very proud of the team as I said, this will be the from a Town Square interactive for perspective. This will be if not the highest, uh, 1 of the largest, uh, year-over-year increases in profit, uh, in the divisions, you know, 12 plus year history. Um, so even with this uh, muted Revenue performance. Uh, the profit performance is incredibly strong, and I expect in 2026 for that Revenue to return back to normal standards of, you know, we were on average doing 7 to 10 million in revenue. And, and based on some of the AI technology and tools we've deployed, uh, as I noted in, in a prepared remarks. I, you know, we're operating at a very, uh, healthy profit margin in the low 30s, uh, where we historically have been at, like, on an annual basis 207 to 28%, profit margin. So, uh, looking in the out years, I

I think we have a good potential possibility of still being at 30 plus profit margin with this with increased Revenue growth. So, all of that feels quite good and bullish for interactive, you know, I I noted on this call as well as last call some of this was very purposeful, you know, we we made a conscious decision to raise the sails criteria and quota for our sales rep at Town Square Interactive.

Productive with higher Roi and that's driving that profit performance. So going to your overall question like where does interactive sit in? Are we concerned that if this macro situation? We're we're navigating now um we're already seeing green shoots and it's really about just building up our sales team which will take time but 2026 will be a revenue growth and obviously we're coming off great momentum of profit growth in 2025, at Town Square active. I'll just take, you know, you asked specifically about interactive obviously Michael's last question, uh, was about the environment. So I will also share that. In addition to the cautiousness, the good news is there's still placing dollars, obviously advertisers, um, obviously digital advertising, the direct sales, as I said, was, you know, High single digits muted down because of the remnant, uh, piece. So, we still seeing that. We we also, we didn't talk about this, uh, in the prepared marks, I didn't mention this with Michael's question, but with Doge there was significant advertising Cuts. So

Things like the New Jersey Department of Motor Vehicles. Things like many of our markets were placing like health and community service ads, all of those got cut.

When the Doge Cuts came. So, we're talking about millions and millions of dollars, uh, broadcast and digital advertising. That was actually either already placed. Or we knew was coming based on what happens each year that didn't come back. So again, that has a 2025 impact when you're looking at views of the 2024, and, you know, the broadcast decline that we had of negative 8X political. I think that again, Works itself out in 2026, by just replacing that with other dollars, be it broadcast or digital. So, um, that also has muted the 2025 Revenue performance, uh, but long term. We continue to, uh, be very bullish on the transformation of the company. Uh, we're glad obviously for the last decade, our growth has been driven by Tesla interactive, and Town Square ignite and we love our broadcast business. We we talk about the connection. The reach obviously broadcast now uh is the number 1, reach medium cord, cutting continues to accelerate. So there's so many tail.

Winds for us, from just the connectivity that the broadcast side. But we we treat that as a traditional cash cow and the cash flow generation is incredible as it is for the overall company. That's why we're able to reward our shareholders. While they're being incredibly patient to unlock the long-term value with, uh, High yielding dividends. So hopefully that gives you a sense of your question on Tesla interactive and our continued bullish, um, outlook for the out years including 2026 and then just a little bit more color on the macro and bye.

Environment including those Doge cuts. And and why we see where we are going into the back, half of the year, um, you know, we feel well situated while we're navigating these challenges. So Pat, I'll turn it back to you to see if you have any other follow-ups or additional questions.

Oh uh, thank you.

Excellent.

Thank you, and your next question comes from Michael Kavinsky, from noval Capital. Please go ahead.

Thank you. I just had a couple of quick follow-ups here bill. Um, in regards to, you know, the promise of this uh, of your Phoenix office was to kind of open up your West Coast and kind of you know since it was in a different time zone that you felt like, it could really Propel um, your business in the west coast and on, in some of the mountain states and so forth. And I was just wondering if maybe, you know, kind of give us an update on how the Phoenix offices. Um uh, you know, kind of working, you know, maybe the Staffing levels of the Phoenix office at this point and what your, you know, maybe your outlook and growth trajectory of that um, you know, might be at this point.

A great question, Michael. I'm glad you circled back around as always. Um, so fight pleased with the Phoenix office. Um, it was really twofold. Uh, you mentioned the time zone, uh, aspect and and, and super serving our work West Coast clients which, which is accurate. I'd say the, the, the larger reason and rationale for the Phoenix office was also, uh, recruiting and talent pool.

Went through a really challenging, uh, period in 23 and 24. We rebuilt the complete service model, we redid the sales, uh, compensation and quotas at the beginning of this year. And now we, as we look in the out years, uh, we feel quite well, positioned, for, uh, growth. And as I just said to Pat, you know, expecting that 7 to 10 million, Top Line to come back next year, uh, with roughly, 3 million, plus in profit. So, I'll pause there Michael.

And you mentioned the government, advertising a couple of times, can you is there a number that you had in terms of what, what did the government advertising contribute for instance in 2024?

Uh, several million dollars. You know, in the first half of the year, I, I I I didn't look at all of 24, but I, I was looking at year to or at least first half of 25. Um, and and that's come down several million dollars. And that's, that's impacted not only broadcast. Um, it has has impacted digital advertising as well because, uh, these like health and community. And as I mentioned, the Department of Health and traffic and Human Services, and all of these that in essence throughout the counties and the states, uh, you know, add up and that's definitely been, uh, something that we had to overcome. And we knew those weren't wouldn't be coming back because of the overall, uh, Doge cuts across the board. Um, so that, you know, it it's definitely impacted our broadcast, uh, exploited like a any negative 8, and it's definitely impacted digital advertising.

Izing. Uh, you know, we mentioned the search engine referral but the Doge Cuts cut, uh, muted our growth there, as well, because as I noted, our direct sales of our programmatic business and our direct sales of our owns and operated were high single digits. So, you know that I'd say, the health of that business is incredibly strong and the underpinning of our direct sales demonstrates, that it's these Doge cuts, and, and the search engine piece that's muting the growth. But quite honestly, as I said earlier, like, we're quite proud of the team at Town Square and and their tenacity and passion and, and even in this environment of uncertainty, uh, and cautiousness, and these Doge cuts and everything else. We still grew digital advertising, uh, and the direct sales team did that at, uh, High single digit rate. So, uh, quite pleased with them. So I'll turn it back to you Michael for any other. All right, comments or questions.

Uh, that's all I have. Thanks Bill. I appreciate it.

Always Michael. Thank you. Great to hear from you.

Thank you.

There are no further questions at this time. I'll now turn the call over to you Mr. Bill Wilson, please continue.

Thank you, operator. And again, thank you all for joining us this morning to be updated. Not only on q2's results. Uh, but also our outlook for the rest of the year and uh, we look forward to updating you again in 3 months. And if you have any questions in the meantime, as always do not hesitate to reach out, have a great day.

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