Cumulus Media Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 28, 2023

There are 8 speakers on the call.

Operator

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.

Speaker 1

Thank you, operator. Welcome everyone to our Q2 2023 earnings conference call. I'm joined today by our President and CEO, Mary Boerner and our CFO, Frank Lopez Balboa. Before we start, please note that certain statements in today's press release and discussed on this 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.

Speaker 1

These statements are based on management's current assessments and assumptions, and they are subject to a number of risks and uncertainties as discussed in our filings with the SEC. And CEO. 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 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.

Speaker 1

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?

Speaker 2

Thanks, Collin, and good morning, everyone. In the Q2, 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 to execute 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.

Speaker 2

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 $5,000,000 of annualized of nonrevenueimpactingfixedcostreduction, bringing the total to $15,000,000 this year $105,000,000 since 2019. And we continue to support and benefit from our best among peers liquidity position and balance sheet, generating $12,000,000 of cash from operations, signing a highly accretive $10,000,000 asset sale, retiring over $32,000,000 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 $5,700,000 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.

Speaker 2

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 to 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.

Speaker 2

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 broadcast business broadcasting business, in the Q2 in the national podcasting business also experienced revenue weakness, impacted by the decrease in spending for direct response advertisers. That said, our podcast audience growth continues to be robust, up 19% in Q2. And in fact, not only are we a top 5 podcast network, but we represent what were 6 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 the national when that national podcast revenue environment ultimately improves.

Speaker 2

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. Of Global 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%.

Speaker 2

Our local sales force is exceedingly well positioned to capitalize on automotive advertising, given our deep and long standing relationships with auto decision makers as well as our 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 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 feet on the street sales team offering a full suite of integrated audio and digital marketing solutions to drive significant growth in this $15,000,000,000 market, which is growing 5% to 10% a year. This sales approach not only leads to higher sales conversion given 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.

Speaker 2

For that last point. We've been very successful with our suite of digital presence products. We call that Cumulus Boost, which rolled was rolled out last year. We now have well over 500 active clients and nearly half of those, new Qumulus Boost clients are altogether new to Qumulus, 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 Qumulus products.

Speaker 2

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 in the process of New Sellers, which will triple our digital sales force by the end of Q3.

Speaker 2

Additionally, because of our unrelenting focus on enhancing both of the digital services and products that we offer. We have built a team to take over certain 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 Q3, we executed an additional $5,000,000 of annualized cost reductions, adding to the $100,000,000 of reductions that we've already made since 2019.

Speaker 2

And finally, we remain laser focused on maintaining our best among peers balance of the balance sheet and liquidity position through strong working capital management and disciplined capital allocation. In the Q2, we bolstered our cash balance by generating $12,000,000 of cash flow from operations and announced the $10,000,000 sale of WDRQ in Detroit, which we expect to close shortly. Between this sale and the sale of WFAS FM earlier this year, We generated over $17,000,000 of gross sale proceeds this year alone with the disposal of assets with negligible EBITDA. We also completed an equity tender offer for $5,700,000 during the quarter, bringing us to a total of $39,000,000 of shares repurchased out of our $50,000,000 authorization, equivalent to approximately 22% of the total shares outstanding at year end 2021. In parallel, we were able to complete the discounted debt buybacks, retiring $32,300,000 face value of debt for 23 $800,000 of cash.

Speaker 2

Since announcing this capital allocation strategy in Q2 of last year and combined with our last Excess Cash Flow Sweep of $12,500,000 We have retired $125,000,000 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 rightsizing and 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.

Speaker 2

And with that, I'll turn it over to you, Frank.

Speaker 3

Thank you, Mary. 2nd 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 $31,000,000 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.

Speaker 3

From a category Telecom and Consumer Packaged Goods were our top performing national categories, while our weakest were professional services and retail. Dental 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 $12,000,000 year over year, driven by fixed cost reductions as well as by lower variable costs and lower revenue.

Speaker 3

As Mered mentioned, the impact of the fixed cost reduction that we executed in the quarter is approximately $5,000,000 on an annualized basis, adding to the $100,000,000 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 statement this quarter. 1st, content cost reductions included a one time $2,000,000 reduction from an acquisition related earnout. Additionally, we recorded a $9,100,000 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.

Speaker 3

Moving to the balance sheet. We generated approximately $12,000,000 of cash from operations this quarter. In addition, we announced a highly accretive asset sale for $10,000,000 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.

Speaker 3

During the quarter, we repurchased $5,700,000 of shares, bringing our total share repurchases to date to $39,000,000 At this point, we have repurchased approximately 22% of the shares that were outstanding when we initiated the buyback program. Additionally, we retired approximately $32,000,000 face value bonds at an average price of $74,000,000 bringing total debt reduction since the beginning of the year to 39,000,000 and $125,000,000 since the beginning of last year. This reduction in debt has largely offset the approximately 500 basis point increase in short term of Investor Relations. As a reminder, we have reduced net debt by over $420,000,000 or 42% since 2019. Looking ahead, we continue to see weakness in the national advertising market.

Speaker 3

As a reminder, we are facing a difficult political comp in the second half. As last year we generated $4,500,000 $8,300,000 of clinical revenue in the 3rd and 4th quarters respectively. As a result, on a total company basis, we are currently pacing down in the low double digits for the 3rd 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.

Speaker 3

With that, we can now open the line for questions. Operator?

Speaker 2

Absolutely.

Operator

The first question comes from the line of Dan Day with B. Riley Securities. You may proceed.

Speaker 4

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 the Westwood One network, clearly where a lot of the challenges are concentrated right now. I think a big reason for that is the 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 more of like upfront process you see on the TV side or Do you think that would just be a nonstarter with advertising agency clients?

Speaker 2

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 locks in maybe 2 thirds of the business. But unlike TV, there's an out clause within a month When the product runs and what we're seeing is as advertisers are either pulling out at the last minute or are sitting on the sidelines and waiting to advertise later.

Speaker 2

So we put everything we give everything we've got to get people to commit upfront. But I think we're seeing the fact that it's networking is particularly is well positioned. It's the biggest audio network in the country, top of REACH vehicle, great brand building REACH vehicle. And we don't see any reason that doesn't bounce back eventually. But we are seeing that everyone else like us, everyone keeping an eye on the interest rates and inflation and banking issues and recession talk.

Speaker 2

And as that dives down, we think it will get better.

Speaker 4

A follow-up on retail being relatively soft in the quarter. I think that's in contrast To like kind of what a lot of the digital advertising players have seen in terms of retail being fairly strong so far. Just you maybe Retail media being sort of one of the hotter digital media. Maybe just talk through why You don't think that sort of a sort of 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.

Speaker 3

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 their dollars very judiciously in certain areas.

Speaker 3

So from our perspective, when we think not only about retail, With broader national advertising, thinking about the reach that we have broadly through 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 for our digital businesses as well.

Speaker 3

But as far as we can tell right now, it's Really a timing issue as opposed to permanent reallocation of dollars.

Speaker 4

For me, just you sold 2 stations this year for decent number. Whether you view those as kind of unique one off situations or whether that's strategic sales of stations being a lever you more actively

Speaker 3

Look, we are very good issues 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 a divestiture mode as opposed to an acquisition mode. Although we look 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.

Speaker 3

We have lots of stations in many clusters and there are one off where it makes sense to sell them and we'll do that. And these two stations generate a gross value of 17,000,000 and the EBITDA that we're losing from that is really de minimis. So in terms of the accretion, as we talk about in our earnings 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 buyback equity.

Speaker 4

Questions. I'll turn it over.

Speaker 3

Thanks, Dan.

Speaker 2

Thanks, Dan.

Operator

Thank you. The next question comes from the line of Ivy Feiner with JPMorgan. Your line is now open.

Speaker 5

Thank you and good morning. A few questions here. One, if I could start on the pacings, please. I want to clarify, does that factor in the political headwind you mentioned or does that hit later in the quarter and And what I really want to try and get into is if we strip out political, is

Speaker 3

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 on our last call that our local spot business, which is excluding national within our spot business, was down 7%.

Speaker 3

With the green shoots that Mary talked about in the auto category, We would expect the Q3, hopefully to be better than what we saw in the Q2. 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. Thank

Speaker 5

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 $2,000,000 one, if I can 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 half of the year?

Speaker 3

Yes, I mean, we did want to highlight the one time benefit such that it's not modeled going 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 will probably be smaller as We have a smaller cost base.

Speaker 3

But having said that, the areas that we continue to focus on are reengineering the business, technical efficiencies, of People Efficiency, is there 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 $5,000,000 so $15,000,000 in the fixed cost annualized reduction is a big number Compared to what we've already done, we will continue to do that. I would expect that the incremental reductions in here and out Probably be more modest. But having said that, we've said that before and we continue to find costs. So that's something we'll always do.

Speaker 3

And I'll remind everyone, The operating leverage that we've created in the business is significant by reducing cost by over 100 fixed cost by over 105,000,000 With a rebound of high margin national and of course next year political, then we're set up well for Better EBITDA Improvement as the market recovers.

Speaker 5

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, I see why Bryant, any equity at all?

Speaker 3

That will I'm sorry, I cut you off. We were delayed.

Speaker 5

Thank you, Michael. My question was just confirming that proceeds albeit small, but $10,000,000 still Will that go to debt repayment and then why would you buy any more equity when you've got opportunities that

Speaker 3

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 as cash and they 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 I had a time and we'll be able to report on the Q3 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 $125,000,000 since the end of the last year.

Speaker 3

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, and then I'll turbocharge the cash flow generation from the debt reduction strategies to implement it.

Speaker 5

I appreciate that answer. And yes, I don't think it's lost on anybody that Jones:] Good job chipping away at absolute debt levels here. There's obviously pushback on Refinance and I think we have time for that. But ended on this question, curious as to your thoughts But what's the right leverage to drive this business? Where do you want to be to give yourself the maximum flexibility?

Speaker 3

Well, we made a strategic decision to change our financial leverage targets last year to achieve the level of below 3.5 times. Previously, That number that we had mentioned was to get to below 4 times. As you know, there are competitors in our industry that have much higher leverage numbers and have higher leverage targets than they said they've 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.

Speaker 3

So the first step that we made and then we recognize that was to get down to 3.5 times leverage. And as you know, We were very close to that at the end of last year. And as we continue to reduce debt, we'll revisit to the Board what that 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 3.5%. It could be lower than that, but Stay tuned on that.

Speaker 3

We have a lot of wood to chop to get the recovery and reduce the debt. But again, you mentioned The debt refinancing, our net debt is less than $600,000,000 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 and our leverage improve them in that leverage perspective. I think we'll be in a good position to take advantage of that.

Speaker 5

Appreciate the time. Thank you so much.

Operator

Thank you. The next question comes from the line of Michael Kupinski with Noble Capital Markets. Your line is now open.

Speaker 6

Thank you for taking the questions. I appreciate that. I'm trying to understand the cost cutting that the company has I was just wondering, has the company reduced its footprint in the markets, decreased local talent, Move toward more central programming. And if you've done that, was this done in smaller markets versus some of your larger markets. I'm just trying to understand the nature because obviously as Ivy said, you've cut costs Much more than what I'd expected as well.

Speaker 2

Yes, that's a great question. We have looked at cost cutting across multiple paths. So the last several years, we first thing we look for is efficiency. So we've consolidated both our traffic and our business manager functions, that reduce costs and enhance efficiency and outcomes actually. We are looking at it's really right now real estate contract costs.

Speaker 2

We focus a lot of contrast. Some 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. We've improved our programming for sure, but that's not an area of focus. So our fixed costs, we have a very, very disciplined process as to how we get at it.

Speaker 2

But I would characterize it really in 3 buckets, which is contracts, general contracts, real estate and that efficiency, looking for Ares efficiency, which is why we always think we're at the end of it and then we dig in again and we can We're very, very aggressive about it.

Speaker 6

Got you.

Speaker 3

And if I can jump in if I can jump here, Michael, I can Give you just a couple of additional points. We do have a slimmer workforce than we did 3 years ago. And so when you look at The $105,000,000 of cost reductions, probably 40% of that has to do with Similar workforce and it's not and we emphasize this a lot. It's reducing costs without impacting revenues with more efficiencies. And we look at large markets, small markets, we look at the network, reduce the fixed cost base.

Speaker 3

And the key thing that we focus on is impacting when we look at costs is to really avoid impacting revenue. And who is an industry that continuously has to be reengineered. And that's why we keep on talking about the operating leverage.

Speaker 6

Got you. Thank you for that. The disparities in revenue, are there disparities between larger markets versus Small markets or the performance pretty evenly across your markets.

Speaker 3

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.

Speaker 3

So that's the trend that we're seeing now.

Speaker 2

Thank you.

Operator

Yes. I know

Speaker 2

Collin Jones. I'd add on the small market. I mean, also the area where we've lost success with our digital marketing service Because in small markets there are fewer competitors. And so our relationships

Speaker 3

Got you.

Speaker 6

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 3rd quarter, is it simply that the comps are just getting easier?

Speaker 3

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 previous 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 Q3 is still down versus last year. There's a sequential improvement in that compared to the Q2, but overall, I wouldn't say that there's a trend, an all clear trend yet on the national markets.

Speaker 6

Frank, would you describe it as stabilizing or would you say that it's still not it hasn't stabilized yet?

Speaker 3

I would describe it as uncertain. The Q4 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 Q4 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.

Speaker 6

Thank you. That's all I have. Thank you.

Speaker 2

Thank you.

Operator

Thank you. The final question comes from the line of Jim Goss with Barrington Research.

Speaker 7

You may proceed. Okay. Thank you. Along the line of The question we've already had. You've done had great success in retiring debt, reducing number of shares, Meaningful Cost Reductions.

Speaker 7

It seems like you've done all of the things that you can manage that are in your control. Is a big part of What you need now is an improvement in the industry or are there things under your further control that Can I enable you to perhaps participate in a stronger way either 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 saying?

Speaker 2

Yes. That's something we think about a lot. We are very, very disciplined about identifying and focusing on what we can to mitigate what we can't. And so specifically, we focused on, as you've heard, reducing our costs. 2nd bucket would be innovative, trying to be more innovative and creative in programming, for example.

Speaker 2

So, for example, our rating share, we're for another 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 double down on those areas, Especially the growth areas, you heard us talk about digital marketing services. So what we during these kinds of markets, we are laser focused and Extremely disciplined on what we can control. And that's why you've seen a big push on areas like digital marketing services.

Speaker 2

And then there are to mitigate the negative impact of what we can't control, which is the market right now. But again, as we said multiple times, we're confident that our operating leverage will move to our benefit 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.

Speaker 7

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 Salesforce in that area by the end of the Q3. And I know one of your smaller competitors has had significant success in it, I know you're aware.

Speaker 7

And you deal in somewhat bigger client levels Based on the market size that 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 cigar business.

Speaker 2

Yes. We see we have been very, very successful in training our radio native sellers to sell both radio and digital products to 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.

Speaker 2

So they go to their long standing relationships and they upsell radio with digital. And as we mentioned, that business It's already run rating at $40,000,000 So we did was we tested adding additional digital native sellers, so not radio sellers, who focused 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.

Speaker 2

So the way we look at that is given the fact that the business is run rating at 40,000,000 If we triple our sales efforts and each seller is able to just even double our monthly digital run rate, Those numbers add up really quickly as we become 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.

Speaker 7

Okay. Thank you very much. Appreciate it.

Operator

Thank you. Thank you. I would now like to pass the conference back over to the company for closing remarks.

Speaker 2

Thanks very much, everyone, and we look forward to talking with you again next quarter. Have a nice weekend.

Operator

That concludes today's conference call. Thank you for your participation. You may now disconnect your

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Cumulus Media Q2 2023
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