Good morning, and welcome to Townsquare Media's Second Quarter 2025 Conference Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. 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 Townsquare's second quarter financial update. With me on the call today are Bill Wilson, our CEO; and Stu Rosenstein, our CFO and Executive Vice President. Please note that during this call, we may make statements that provide information other than historical information, including statements relating to the company's future expectations, plans and prospects. These statements are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These statements reflect the company's beliefs based on current conditions but are subject to certain risks and uncertainties, including those that are detailed in the company's annual report on Form 10-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 will 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 EBITDA 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 base 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 approximately negative 2% with and without political. We also provided guidance that second quarter adjusted EBITDA would be negative 1% to negative 5% year-over-year, and our actual EBITDA 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, our EBITDA was plus 4% over Q2 2024. Additionally, our net leverage ticked down to 4.58x. By now, it should be very clear that Townsquare 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 in 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 grew 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 as highlighted on Slide 11, is industry-leading at more than 2x the industry average. Total digital segment profit increased a very strong plus 9% year-over-year in the first 6 months of the year, with a strong profit margin of 27%. Digital's year-to-date contribution grew to 56% of our total segment profit. As we have consistently stated for many years, digital is and will continue to be Townsquare's 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 in local media. Let's dive into the results of our 2 digital divisions, starting with the fastest-growing business for Townsquare, Ignite, our digital advertising business. Q2 was a challenging quarter across the board due to pauses and concerns in 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, 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 quite achieve the mid-single-digit growth rate that we had anticipated when we last reported in 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, our 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, e-mail, 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 footprint 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 impressions per day. Our locally owned and operated digital business includes locally sold advertising, aka, traditional feet-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. Therefore, any remnant unsold inventory that we sell via exchanges was negatively impacted, thereby 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 our in-house sales teams both programmatic digital solutions at our differentiated owned and operated digital solutions continue to grow and improve from Q2 to Q3, but remnant revenue tied directly to search traffic will continue to decline, leading to an overall Q3 growth rate roughly in line with Q2's growth rate. As we've shared previously on calls, we are confident that our third-party media partnership model launched in early 2024 will be a meaningful growth driver for our digital advertising business in future years. I am very pleased to share with you that we added Renda Media as our newest media partner. In total, we now have 6 local media partners under this new division, reaching 19 incremental markets 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-light model, we partner with others in local media and handle all the major components of the digital advertising solution, including managing the creative, buying, optimization, 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 of revenue at approximately a 20% margin for the full year. As I shared on our last 2 earnings calls, I expect that in 5 years or less, this division can grow to be at least $50 million of revenue for Townsquare at 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 SaaS business, Townsquare Interactive. We are very pleased to share that we are having a fantastic profit year at Townsquare 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's profit margin is largely due to 3 causes. Number one, the restructuring of our customer service model in 2023 that allowed us to grow more efficiently. Number two, 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 includes 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 a 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. The third cause of improved profit margin is due to the business deploying AI solutions to improve 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 and also highlighted on our last call in May, with the 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, marking the third consecutive quarter of year-over-year revenue growth. We expect Q3 revenue at Townsquare Interactive to be roughly in line with Q2’s $18.8 million and 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%. Thus, as I mentioned on our May call, I expect our profit performance at TSI in 2025 to be one of the best in the division's 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 track and set up for long-term profitable growth and success, and I believe that our 2025 expected profit performance is a great proof point of that. Turning to our third and final business segment, broadcast local radio. As you're all aware, we view local radio as an extremely valuable asset with significant cash flow properties, unparalleled consumer reach and an important local connection to our audience and clients. However, radio is not a growth driver for Townsquare. In the second quarter, broadcast advertising net revenue, excluding political, performed exactly as we telegraphed on our last call and declined negative 8% ex-political year-over-year and in line with Q1's performance. As we have stated for several years, but I feel it is 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 share shifting occurs as we often have the most comprehensive set of digital advertising solutions available in our markets. Townsquare 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, Townsquare's 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, gaining local and national broadcast market share according to Miller Kaplan estimate. 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 to maintain a strong broadcast profit margin. In fact, in Q2, our broadcast profit margin ex-political was approximately 30%, which is stronger than 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 in programmatic and direct sales of our owned 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 Q3 revenue at Townsquare 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 segment 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 EBITDA guidance range and both yet will remain within the original parameters we set at the start of the year. Importantly, our business model continues to generate strong cash flow, which we have been applying towards organic investment in our business and debt paydown, which we will continue to do for the remainder of the year. Now I'll hand the call over to Stu to discuss our financial results and guidance in more details. All yours, Stu, take it away.

Thank you, Bill, and good morning, everyone. It's a pleasure to connect with you today. We're pleased to report that our second quarter results met our revenue guidance and exceeded our adjusted EBITDA guidance. In the second quarter, net revenue, excluding political, decreased 1.6% year-over-year and 2.3% in total, reaching $115.4 million, which is at the higher end of our guidance range of $114 million to $116 million. Adjusted EBITDA for the second quarter rose, both with and without political, to $26.4 million, surpassing our guidance range of $25 million to $26 million. This marks year-over-year adjusted EBITDA growth of 0.7% and 3.8% when excluding political, along with margin expansion, as adjusted EBITDA margins increased from 22.2% in Q2 of 2024 to 22.9% in Q2 of this year. Townsquare Interactive, our subscription digital marketing solutions segment, showed growth in the second quarter as anticipated. Townsquare Interactive's Q2 net revenue grew by 1.4% year-over-year. We're excited to announce that, as expected, Townsquare Interactive achieved another quarter of strong profit growth in Q2, with segment profit rising 15% year-over-year, an increase of about $800,000. Segment profit margins were solid at 33% in Q2 of 2025, and we expect Townsquare Interactive's profit margin to stay above 30% for the full year. We are confident in our expectation of delivering robust profit growth for Townsquare Interactive in 2025, which is beneficial following losses in 2023 and 2024. As Bill mentioned, we are very pleased with the strong profit performance from Townsquare Interactive. Q2 broadcast advertising net revenue decreased as we expected, similar to the decline in first quarter broadcast revenue. In the second quarter, broadcast revenue fell 7.8% excluding political and 9.2% overall, compared to the previous year. Importantly, broadcast segment profit margins increased year-over-year to approximately 30%, both with and without political, as we continue to work diligently to manage our broadcast expenses amidst declining revenue. Our second quarter net income was $2 million or $0.09 per diluted share compared to a net loss of $3.26 per diluted share during the same period last year. We want to remind you that any benefit or provision for income taxes shown on the income statement is for GAAP financial statement purposes only. We have maintained significant tax attributes, including approximately $96 million in federal NOL carryforwards and other substantial tax shields related to the amortization of our intangible assets. We believe we will not be a material cash taxpayer until around 2028. As Bill emphasized, we consistently generate strong cash flow, having generated $10 million from operations in the first half of 2025, roughly equal to the previous year. In the second quarter, we repaid another $10 million in debt, which included a $7 million balance on the revolver and our first amortization payment of $2.9 million. Since the refinancing in February, we have repaid $13 million of our debt. Moreover, our cash this year has funded $29 million in interest payments, $7 million in dividend payments, and $28 million in fees associated with refinancing in February. With $467 million in total debt outstanding and $3 million in cash as of June 30, our net leverage decreased to 4.58x. Our top priority remains investing in our local businesses through organic internal investments that enhance our revenue and profit growth, particularly in our digital growth areas. We intend to keep investing in our digital product technology, sales, content, and support teams, specifically our Townsquare Interactive and Digital Ignite businesses, to uphold our competitive advantage in markets outside the top 50 cities. Additionally, we plan to utilize our excess cash flow to pay down debt via both mandatory and voluntary repayments while also supporting our high-yielding dividend. Our Board has approved our upcoming quarterly dividend, which will be paid on November 3 to shareholders recorded by October 27. The dividend of $0.20 per share translates to $0.80 per share annually, suggesting an annual payment of about $13 million based on our current share count and a dividend yield of roughly 12% based on current share prices. We believe our robust cash flow characteristics will enable us to continue investing in our business, support our dividend, and facilitate debt reduction going forward. Turning to our outlook for the third quarter, we anticipate net revenue to range between $106.5 million and $108.5 million. As discussed earlier in this call, we expect Townsquare Ignite, our digital advertising business, to grow at the same rate as Q2. Townsquare Interactive is expected to generate approximately the same revenue in Q3 as in Q2, with continued strong profit performance, while we foresee a decline in broadcast revenue excluding political that aligns with the performance in Q1 and Q2. We anticipate third quarter adjusted EBITDA to range between $22 million and $23 million. For the full year, as Bill pointed out, considering the impact of Liberation Day on advertising growth in 2025, we are narrowing our revenue range to between $435 million and $440 million, still within our original revenue guidance. Consequently, we are also narrowing our adjusted EBITDA range to between $90 million and $94 million, also consistent with our original EBITDA guidance. As a reminder, this guidance reflects the expected loss of political revenue between $10 million and $11 million, as we usually receive between $2 million and $3 million in political revenue during non-election years.

As I mentioned before, we are narrowing our guidance parameters, but both remain in line with the original parameters we set at the start of the year. Importantly, our business model continues to generate strong cash flow, which we have been applying towards organic investment in our business and debt paydown, which we will continue to do for the remainder of the year. Now I'll hand the call over to Stu to discuss our financial results and guidance in more detail. All yours, Stu, take it away. Thank you, Stu. Well done, as always. Thanks to everyone for taking the time to be updated on Townsquare'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. Our mature cash cow broadcast 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 see strong cash flow and after refinancing our January-February, which extended our maturity profile to 2030, we have already repaid $13 million of our debt through June, while 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.

Your first question comes from Michael Kupinski from Noble Capital.

I was wondering, Bill, can you provide a bit more insight into the trends in search engine referral traffic that you mentioned? Do you believe this will affect the trajectory of the digital advertising outlook you presented for the coming years?

Thank you for the question, Michael. The good news for us is that our direct sales in digital advertising are very strong. Our programmatic sales are nearing double digits, in high single digits. As I mentioned earlier, the direct sales from our owned and operated 400-plus local websites and mobile apps are also strong, pacing well at high single digits for the second half of the year. However, we've observed a decline in referral traffic from search engines, which has become more pronounced in the second and third quarters compared to the beginning of the year. The rise of AI results on platforms like Google has pushed organic links lower, creating challenges for all publishers. Consequently, our indirect revenue, which is revenue not generated by our sales team, saw a significant decline in the second quarter, and we expect that trend to persist for some time. Looking ahead to the next three to four years, I believe this will be a temporary setback. Programmatic advertising accounts for 60% of our total digital advertising. In the second quarter, we generated $42.5 million in digital advertising, with nearly $27 million from programmatic, which remains unaffected. The remaining 40% comes from our owned and operated properties, where direct sales are performing well. While indirect revenue has decreased, we remain confident in our digital advertising growth trajectory over the next two to three years. It will continue to be the fastest-growing segment of our company with robust profit margins. I'll pause here and turn it back to you for any follow-up questions.

I really appreciate the details provided. It appears that your Q3 guidance is somewhat softer than expected. Do you think this is due to advertisers being hesitant or reducing spending because of economic uncertainty? Since you have insights into local economies, could you share your perspective on what you are hearing from advertisers in general?

Yes, you're correct. I'd say, they're cautious, but still spending, placing more short term or in month versus out months. We've definitely been seeing that since April, and that continues. I'd say, probably the biggest change from the beginning of the year when we provided our guidance on the year-end 2024 call is the search engine traffic and the impact to our indirect remnant revenue, and that's muted our overall digital advertising growth. I would have expected in Q3 on a normal standpoint, mid-to-high single-digit digital advertising growth. As I just said, in Q2, we grew 2% because of the search engine referral headwind, and we expect the same in Q3, but we have so many other tailwinds when you're thinking longer term. Obviously, our programmatic business from just straight up organic growth is doing extremely well, as I just noted, close to double-digit growth in Q2 and pacing onward. Then obviously, with the Media Partnership division, I noted on our last call as well as just reiterated now, we expect about $6 million of total revenue there this year. Very modest as it relates to our overall digital advertising, but we obviously just noted, we signed up another partner, Renda Broadcasting, 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, we've got Summit, who we've talked about in prior calls and Steel City. Those are the 2 primary ones who are generating 2025 revenue. These other ones will come on board in 2026. As I noted, thinking over the next 5 years, we're very confident that this media partnership division could be at a minimum of $50 million of top line revenue at a 20% profit margin, so adding $10 million of profit over that time. Our overall perspective on digital advertising long term, which was your original question, is incredibly bullish. As always, there's going to be challenges that come up. Right now, that challenges the indirect remnant sales. 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 muted the overall health and growth of our direct sales and digital advertising until you peel back the onion and see why that is.

Bill, you just answered 4, 5 and 6 of my questions. I appreciate that very much.

Your next question comes from Patrick Sholl from Barrington Research.

Could you clarify the current headwind with referral traffic? A couple of years ago, I think you mentioned a significant change in social media referral traffic algorithms. Is the impact now similar in magnitude?

It's always a pleasure to hear from you, Pat. You're right that about 18 months ago, social media platforms updated their algorithms, which has consistently impacted traffic to publishers like us. The positive aspect is that although our search engine traffic initially declined sharply, it eventually plateaued and began to grow again. I anticipate a similar trend with search engine referral traffic, although I do expect a continued decline until the end of this year and potentially into early next year due to changes in AI and search engines. However, I believe we will adapt as we have before. If we take a step back, we are one of the largest publishers of local content in the U.S., operating in 74 markets that are largely underserved in terms of journalism and news. Many of these areas lack local television stations, and a significant number have lost their newspapers entirely, including any online presence. I mention this because we believe we have the largest online local audience in our markets, which sets us apart. Operating outside of the top 50 markets gives Townsquare a significant competitive advantage. We consistently reach 70% of the adult population through our mobile apps and websites, even with the current drop in search engine and referral traffic. Additionally, we reach about 50% of people in our markets through AM and FM broadcasts. The emotional connection and scale we have are unmatched. Although search engine referral traffic is down and impacting our indirect revenue and the performance of our digital advertising team, I believe we will eventually see it plateau and grow again. This is due to our talented team and our role as the primary source of news and information in many of our communities. They will seek us out because we are dedicated to serving them, which is central to Townsquare's mission. I'll hand it back to you, Pat.

I have a question regarding the overall macro environment in your markets. You mentioned that local advertisers are being more cautious. I'm interested in the advertising partners who are also interactive subscribers. You indicated in your guidance that you expect revenues from that segment to be flat sequentially. Looking a bit further ahead, could you discuss the confidence in returning to growth? Or is there a risk that these macro challenges might create additional headwinds for that segment's top line?

Yes, that's a great question, Pat. I'm very confident that we will return to revenue growth. We're proud of the team, and this year is likely to see one of the largest year-over-year profit increases in the division's history. Despite the current revenue performance being subdued, our profit results are very strong. I anticipate that by 2026, our revenue will return to normal levels, which used to be between $7 million to $10 million on average. With the AI technology and tools we've implemented, we're maintaining a healthy profit margin in the low 30s, compared to our historical margin of about 27% to 28%. Looking ahead, I believe we can achieve a profit margin above 30% alongside increased revenue growth, which is encouraging for Interactive. I mentioned on this call and the previous one that our decisions were intentional. We consciously increased the sales criteria and quotas for our sales representatives at Townsquare Interactive, which led to a reduction in our lower-performing staff, with about one-third of the sales force reduced since January. We are now hiring back more productive team members with higher returns on investment, and those who remain are also performing significantly better, contributing to our profit growth. To address your broader question regarding the position of Interactive and whether we're worried about the current macroeconomic situation, we are beginning to see positive signs. Building up our sales team will take some time, but I expect 2026 to bring revenue growth. We are also benefiting from the profit growth momentum we experienced in 2025 at Townsquare Interactive. Regarding your inquiry about Interactive and the environment, despite some caution, there is still spending happening from advertisers. Digital advertising has shown high single-digit growth, but this has been tempered by the remnant segment. We did not cover this in the prepared remarks, but we faced significant advertising cuts related to DOGE, affecting various advertisers including the New Jersey Department of Motor Vehicles, as well as health and community service ads. These cuts amounted to millions in both broadcast and digital advertising that either had already been placed or was anticipated. This situation has impacted our 2025 performance compared to 2024 due to an 8% decline in broadcast revenue, but I believe this will resolve itself by 2026 as we look to replace those funds with other revenue sources. Long term, we remain positive about the company's transformation. Over the past decade, our growth has been largely driven by Townsquare Interactive and Ignite, and while we value our broadcast business, which continues to be a major reach medium amidst growing cord-cutting trends, we regard it as a reliable source of revenue. The cash flow generated remains impressive, allowing us to reward our shareholders while they wait patiently for the long-term value to be unlocked with high yields in dividends. I hope this addresses your questions regarding Townsquare Interactive and our optimistic outlook for the coming years, including 2026, and provides more insight into the macro environment and how we are positioned as we navigate these challenges.

Your next question comes from Michael Kupinski from Noble Capital.

I have a couple of quick follow-up questions, Bill. Regarding the promise of your Phoenix office to expand your presence on the West Coast and in the mountain states due to its different time zone, could you provide an update on how the Phoenix office is functioning, including its current staffing levels, and share your outlook and growth trajectory for that office?

Great question, Michael. I'm glad you asked about the Phoenix office. I'm quite pleased with it for a couple of reasons. You mentioned the time zone advantage for serving our West Coast clients, which is true. However, the main reason for establishing the Phoenix office was to tap into the local recruiting and talent pool. Our headquarters in Charlotte is our largest office with hundreds of employees, while in Phoenix, we're nearing 50 employees, currently around 40. We have both sales and service teams there now, and that has been growing rapidly over the past six months. The talent pool has been impressive, and the benefits from having a presence on the West Coast, both for talent and time zone purposes, are significant. Overall, I'm very satisfied with the Phoenix office and with Townsquare Interactive. As I mentioned, we faced a tough period in '23 and '24, but we've rebuilt our service model and adjusted our sales compensation and quotas at the start of this year. Looking ahead, we feel well positioned for growth, expecting a revenue increase of $7 million to $10 million next year, along with over $3 million in profit. I'll stop there, Michael.

You mentioned the government advertising a couple of times. Can you provide a number regarding what the government advertising contributed, for instance, in 2024?

Several million dollars. In the first half of this year, while I didn't review all of 2024, I did look into the first half of 2025, and that number has decreased by several million dollars. This decrease has affected not only broadcast but also digital advertising, particularly in sectors like health and community services. These figures, which compile across counties and states, have posed challenges for us, and we understood that these funds would not return due to the overall cuts. This situation has negatively affected our broadcast outside of political advertising, which saw a decline of 8 percent, and has similarly impacted digital advertising. While we mentioned the decline in search engine referrals, these cuts have also slowed our growth in that area. However, our direct sales within our programmatic business and our owned and operated segments remain strong, showing high single-digit growth. The strength of that business is clear, and the performance of our direct sales highlights that. It's the cuts and the search engine issues that have dampened our growth. Nevertheless, I am proud of the Townsquare team for their determination and dedication. Even amidst uncertainty, cautious spending, and these cuts, we still achieved growth in digital advertising, with our direct sales team contributing at a high single-digit rate. I am very pleased with their efforts.

There are no further questions at this time. I will now turn the call over to Mr. Bill Wilson. Please continue.

Thank you, operator. Again, thank you all for joining us this morning to be updated not only on Q2's results, but also our outlook for the rest of the year. We look forward to updating you again in 3 months. If you have any questions in the meantime, as always, do not hesitate to reach out. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may disconnect. Have a great day.